Unassociated Document


    Exhibit
      10.2

     

    

      FIRST
        LIEN STOCK PLEDGE AND SECURITY AGREEMENT dated as of May 25, 2006, by and
        between Carrizo Oil & Gas, Inc., a Texas corporation (hereinafter
        referred to as the “Grantor”), in favor of JPMorgan Chase Bank, National
        Association, as administrative agent (in such capacity, the “Collateral
        Agent”), to secure the Indebtedness (as defined below) of the
        Grantor.

       

      A.  The
        Grantor, certain subsidiaries of Grantor, as Guarantors, the Lenders from
        time
        to time party thereto, and JPMorgan Chase Bank, National Association, as
        administrative agent are the parties to that certain Credit Agreement dated
        as
        of May 25, 2006 (as amended, restated, supplemented or otherwise modified
        from
        time to time, the “Credit Agreement).

       

      B.  Pursuant
        to the Credit Agreement (as defined below), the Grantor has agreed to enter
        into
        and execute this Agreement.

       

      NOW,
        THEREFORE, in consideration of the premises, the Grantor and the Collateral
        Agent (for the ratable benefit of the Secured Parties) do hereby agree and
        obligate themselves as follows:

       

      SECTION
        1.  Definitions.
        Any
        capitalized term defined in the Credit Agreement and not otherwise defined
        herein shall have the meaning given to such term in the Credit Agreement.
        In
        addition, the following terms shall have the following meanings when used
        in
        this Agreement:

       

      “Agreement”
shall
        mean this First Lien Stock Pledge and Security Agreement, as amended, restated,
        supplemented or otherwise modified from time to time, and any exhibits or
        attachments hereto.

       

      “CCBM”
shall
        mean CCBM, Inc., a Delaware corporation, and its successors and
        assigns.

       

      “Collateral”
shall
        have the meaning assigned to such term in Section 2(a) of this
        Agreement.

       

      “Collateral
        Agent”
shall
        have the meaning assigned to such term in the preamble to this
        Agreement.

       

      “Second
        Lien Collateral Agent”
shall
        have the meaning assigned to such term in the Intercreditor
        Agreement.

       

      “Grantor”
shall
        have the meaning assigned to such term in the preamble to this
        Agreement.

       

      “Indebtedness”
shall
        mean, at any time, (a) all obligations, indebtedness and liabilities, whether
        now existing or arising in the future, of the Grantor to the Secured Parties
        or
        any of them pursuant to a Swap Agreement or other commodity or price management
        

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

      

        transaction,
          (including all renewals, extensions, modifications, and substitution thereof
          and
          therefor), and (c) the indebtedness of the Grantor under the Credit Agreement,
          including principal, interest (including interest accruing during the pendency
          of any bankruptcy, insolvency, receivership or other similar proceeding,
          regardless of whether allowed or allowable in such proceeding), costs,
          expenses
          and reasonable attorneys’ fees and all other fees, charges, costs, expenses and
          indemnities for which the Grantor and/or any Guarantor is responsible under
          the
          Credit Agreement or under any of the other Loan Documents, whether primary,
          secondary, direct, contingent, fixed or otherwise (including monetary
          obligations incurred during the pendency of any bankruptcy, insolvency,
          receivership or other similar proceeding, regardless of whether allowed
          or
          allowable in such proceeding).

         

        “Intercreditor
          Agreement”
shall
          mean the Intercreditor Agreement dated as of July 21, 2005, as amended,
          restated, supplemented or otherwise modified from time to time, among the
          Grantor, CCBM, Hibernia National Bank as First Lien Collateral Agent and
          Credit
          Suisse, as Second Lien Collateral Agent as amended by that certain Amendment
          No.
          1 and Agreement dated as of May 25, 2006, by and among the foregoing parties
          and
          JPMorgan Chase Bank, National Association, as the New First Lien Collateral
          Agent.

         

        “New
          York UCC”
shall
          mean the Uniform Commercial Code as from time to time in effect in the
          State of
          New York.

         

        “Pinnacle
          Shares”
shall
          have the meaning assigned to such term in Section 6(f) of this
          Agreement.

         

        “Revised
          Article 9”
shall
          have the meaning assigned to such term in Section 9 of this
          Agreement.

         

        “Secured
          Parties”
shall
          mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral
          Agent,
          (d) each counterparty to any Swap Agreement with the Grantor or a Guarantor
          that
          either (i) is in effect on the Closing Date if such counterparty is the
          Administrative Agent or a Lender or an affiliate of the Administrative
          Agent or
          a Lender as of the Closing Date or (ii) is entered into after the Closing
          Date
          if such counterparty is the Administrative Agent or a Lender or an affiliate
          of
          the Administrative Agent or a Lender at the time such Swap Agreement is
          entered
          into, (e) the beneficiaries of each indemnification obligation undertaken
          by
          Grantor or any Guarantor under any Loan Document and (f) the successors
          and
          assigns of each of the foregoing.

         

        “Securityholders
          Agreement”
shall
          mean the Securityholders Agreement, dated as of June 23, 2003, by and among
          Pinnacle Gas Resources, Inc., a Delaware corporation, CCBM, Rocky Mountain
          Gas,
          Inc., a Wyoming corporation, each of the CSFB Parties (as defined therein),
          Peter G. Schoonmaker, a natural person, Gary Uhland, a natural person, each
          Shareholder (as defined therein) party thereto, the Grantor and U.S. Energy
          Corporation, a Wyoming corporation.

         

        “Stock
          Certificate”
shall
          have the meaning assigned to such term in Section 2(a) of this
          Agreement.

         

        
          
             

          

          
            2

            
              

            

          

          
             

          

        

        

          SECTION
            2.  Security
            Interest. (a)To
            secure
            the full and punctual payment and performance of all present and future
            Indebtedness, the Grantor hereby pledges, pawns, transfers and grants
            to the
            Collateral Agent (for the ratable benefit of the Secured Parties) a continuing
            security interest in and to all of the following property of the Grantor,
            whether now owned or existing or hereafter acquired or arising (collectively,
            the “Collateral”):

           

          1000
            shares of the capital stock of CCBM represented by Certificate No. 1, dated
            June 29, 2001 (the “Stock
            Certificate”),
            registered in the Grantor’s name, together with any additional shares of stock
            issued by CCBM to the Grantor hereafter as stock dividends, stock splits
            or
            otherwise, or shares received as a result of any merger or consolidation
            of
            CCBM, all cash, liquidation and other dividends now or hereafter declared
            thereon, all stock redemption payments and all other monies due or to
            become due
            thereunder, all stock warrants, options, pre-emptive rights, rights of
            first
            refusal, and other rights to subscribe to, purchase or receive any shares
            of
            common stock or other securities now or hereafter incident thereto or
            declared
            or granted in connection therewith, and all distributions (whether made
            in cash,
            instruments, income, or other property) made or to be made in connection
            therewith or incident thereto, and all proceeds of all or any of the
            foregoing,
            in whatever form.

           

          (b)  The
            security interest is granted as security only and shall not subject the
            Collateral Agent and/or the other Secured Parties to, or transfer or
            in any way
            affect or modify, any obligation or liability of the Grantor with respect
            to any
            of the Collateral or any transaction in connection therewith.

           

          SECTION
            3.  Delivery
            of Collateral.
            The
            Collateral Agent hereby accepts the delivery of the Collateral on behalf
            of the
            Secured Parties and on behalf of any future transferee of the Indebtedness.
            The
            Grantor will execute and deliver to the Collateral Agent all assignments,
            endorsements, powers and other documents reasonably requested at any
            time and
            from time to time by the Collateral Agent or the Secured Parties with
            respect to
            the Collateral and the rights
            and
            powers granted to the Collateral Agent or the other Secured Parties hereunder,
            and will deliver to the Collateral Agent any stock certificates representing
            stock dividends on, or stock splits of, any of the Collateral, together
            with a
            stock power fully executed in blank.

           

          SECTION
            4.  Representations.
            The
            Grantor has not performed any acts or signed any agreements which might
            prevent
            the Collateral Agent from enforcing any of the terms of this Agreement
            or which
            would limit any of such terms in any such enforcement. Other than the
            Second
            Lien Security Agreement, no security agreement or similar or equivalent
            document
            or instrument covering all or any part of the Collateral has been executed
            by
            the Grantor and remains in effect. No Collateral is in the possession
            of any
            Person (other than the Grantor) asserting any claim thereto or security
            interest
            therein, except that the Collateral Agent or its designee (prior to the
            transfer
            of the possession and control of the Stock Certificate to the Second
            Lien
            Collateral Agent pursuant to the Intercreditor Agreement) shall also
            be acting
            as a gratuitous bailee for the Second Lien Collateral Agent subject to
            the terms
            and conditions of the Intercreditor Agreement. The Grantor further represents
            and warrants as follows:

           

          
            
               

            

            
              3

              
                

              

            

            
               

            

          

        

        

          (a)  there
            are
            no outstanding options, warrants or similar rights with respect to the
            Collateral;

           

          (b)  the
            Grantor has the full power and authority to grant to the Collateral Agent
            a
            valid and enforceable perfected and continuing lien on and security interest
            in
            the Collateral pursuant to this Agreement;

           

          (c)  the
            Collateral delivered to the Collateral Agent is fully paid and nonassessable,
            duly and validly authorized and issued and, upon execution hereof, will
            be duly
            and validly pledged to the Collateral Agent in accordance with all provisions
            of
            applicable law;

           

          (d)  the
            Grantor has good and marketable title to, and is the legal and registered
            owner
            of, the Collateral, free and clear of all liens, except for the security
            interest created pursuant to this Agreement, and except for the lien
            and
            security interest granted to the First Lien Collateral Agent;

           

          (e)  upon
            the
            execution and delivery of this Agreement, and the delivery of the Stock
            Certificate to the Collateral Agent, the Collateral Agent (for the ratable
            benefit of the Secured Parties) shall have a valid and enforceable lien
            on and
            security interest in to the Collateral and and upon the delivery of the
            Stock
            Certificate to the Collateral Agent, such lien and security interest
            shall
            constitute a perfected security interest in such Collateral, superior
            to the
            rights and equitable interests of all other persons in the
            Collateral;

           

          (f)  the
            execution, delivery and performance of this Agreement by the Grantor
            and the
            granting of a valid and enforceable lien and security interest in the
            Collateral
            will not (i) violate any provision of any law, any judgment, order, rule or
            regulation of any court,
            arbitration
            panel, or other governmental authority, domestic or foreign, or other
            person,
            (ii) violate any provision of any indenture, agreement, mortgage, contract
            or other instrument to which the Grantor is a party or by which any of
            its
            properties, assets or revenues are bound, or be in conflict with, result
            in an
            acceleration of any obligation or a breach of or constitute (with notice
            or
            lapse of time or both) a default under, any such indenture, agreement,
            mortgage,
            contract or other instrument, or (iii) result in the creation or imposition
            of any lien on any of the properties, assets or revenues of the Grantor,
            except
            those in favor of the Collateral Agent as provided herein;

           

          (g)  this
            Agreement has been duly executed and delivered by the Grantor and constitutes
            the legal, valid and binding obligation of the Grantor enforceable against
            it in
            accordance with its terms, subject to applicable bankruptcy, insolvency,
            reorganization, moratorium or other laws affecting creditors’ rights generally
            and subject to general principles of equity, regardless of whether considered
            in
            a proceeding in equity or at law;

           

          (h)  no
            registration with or consent or approval of, or other action by, any
            governmental authority, domestic or foreign, or other person is required
            (other
            than such approvals or consents which may have been obtained) in connection
            with
            the execution, delivery and performance of this Agreement and the granting
            of
            the valid and enforceable lien and security interest in the Collateral
            in favor
            of the Collateral Agent;

           

        

        
          
             

          

          
            4

            
              

            

          

          
             

          

        

      

    


    (i)  the
      Collateral constitutes not less than 100% of the issued and outstanding capital
      stock of CCBM;

     

    (j)  the
      Grantor represents and warrants that until the Collateral Agent’s security
      interest in the Collateral is terminated by the Collateral Agent, that the
      Collateral shall at all times constitute not less than 100% of the issued and
      outstanding capital stock of CCBM. To the extent necessary, the Grantor agrees
      that it shall not approve or authorize any issuance of capital stock by CCBM
      if
      such issuance would reduce the Collateral below the 100% calculation mentioned
      in the preceding sentence;

     

    (k)  the
      Grantor represents and warrants that it is a corporation duly organized under
      the laws of its state of incorporation. As of the date hereof, the Grantor’s
      mailing address and the location of its principal place of business (if it
      only
      has one) or its chief executive office (if it has more than one place of
      business) is at 1000 Louisiana Street, Suite 1500, Houston, TX 77002. The
      Grantor also represents and warrants that it has not conducted business under
      any name during the past five years except the name in which it has executed
      this Agreement, which is the exact name as it appears in the Grantor’s
      organizational documents, as amended, as filed with the Grantor’s jurisdiction
      of organization. The Grantor represents and warrants that its Federal employer
      identification number is 76-041-5919. The Grantor agrees that it will notify
      the
      Collateral Agent in writing should the Grantor ever change its name, legal
      status, or change or obtain a new Federal employer identification number. The
      Grantor further agrees to notify the Collateral Agent in writing of any change
      in the Grantor’s mailing address or the location of the Grantor’s principal
      office; and

     

    (l)  the
      Grantor represents and warrants that it shall not execute any amendment to
      or
      modification of the Securityholders Agreement without first obtaining the prior
      written consent of the Collateral Agent.

     

    SECTION
      5.  Voting
      Rights. (a)
      So long
      as no Event of Default shall have occurred and be continuing, the Grantor shall
      have the right, from time to time, to exercise voting and other consensual
      rights to give approvals, ratifications and waivers pertaining to the
      Collateral, and the Collateral Agent upon receiving a written request from
      the
      Grantor accompanied by a certificate stating that no Event of Default has
      occurred will deliver to the Grantor (or as specified in such request) such
      proxies, approvals, ratifications, waivers and other instruments pertaining
      to
      the Collateral as may be specified in such request and be in form and substance
      satisfactory to the Collateral Agent.

     

    (b)  Upon
      the
      occurrence and during the continuance of an Event of Default, the Collateral
      Agent shall have the right, at the Collateral Agent’s option upon written notice
      to the Grantor (which notice shall be deemed to have been given upon the
      occurrence of an Event of Default under clause (g) or clause (h) of Article
      IX
      of the Credit Agreement), and to exercise the voting and other consensual rights
      to give approvals, ratifications and waivers and to take any other action with
      respect to all the Collateral with the same force and effect as if the
      Collateral Agent (for the ratable benefit of the Secured Parties) was the
      absolute and sole owner thereof, and the Grantor’s right to exercise such voting
      and other consensual rights shall, at the Collateral Agent’s option, cease and
      become vested in the Collateral Agent.

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    


    SECTION
      6.  Remedies
      upon Default. (a)  Upon
      the occurrence and during the continuance of an Event of Default, the Collateral
      Agent may exercise all rights of a secured party under the New York UCC and
      other applicable law (including the Uniform Commercial Code as in effect from
      time to time in any applicable jurisdiction) and, in addition, the Collateral
      Agent may, without being required to give any notice, except as herein provided
      or as may be required by mandatory provisions of law, (i) transfer the
      whole or any part of the Collateral into the name of the Collateral Agent or
      its
      nominee(s), (ii) sell the Collateral or any part thereof at a broker’s
      board or on a securities exchange or (iii) sell the Collateral or any part
      thereof at public or private sale, for cash, upon credit or for future delivery,
      and at such price or prices as the Collateral Agent may deem satisfactory.
      The
      Collateral Agent may be the purchaser of any or all of the Collateral so sold
      at
      any public sale (or, if the Collateral is of a type customarily sold in a
      recognized market or is of a type which is the subject of widely distributed
      standard price quotations, at any private sale). The Grantor will execute and
      deliver such documents and take such other action as the Collateral Agent deems
      necessary or advisable in order that any such sale may be made in compliance
      with law. Upon any such sale the Collateral Agent shall have the right to
      deliver, assign and transfer to the purchaser thereof the Collateral so sold.
      Each purchaser at any such sale shall hold the Collateral so sold to it
      absolutely and free from any claim or right of whatsoever kind, including any
      equity or right of redemption of the Grantor which may be waived, and the
      Grantor, to the extent permitted by law, hereby specifically waives all rights
      of redemption, stay or appraisal which it has or may have under any law now
      existing or hereafter adopted. The Grantor agrees that ten (10) days’ prior
      written notice of the time and place of any sale or other intended disposition
      of any of the Collateral constitutes “reasonable authenticated notification of
      disposition” within the meaning of Section 9-611(b) of the New York UCC (or any
      successor provision from time to time in effect) with respect to timeliness
      of
      notification, except that shorter or no notice shall be reasonable as to any
      Collateral which is perishable or threatens to decline speedily in value or
      is
      of a type customarily sold on a recognized market. The notice (if any) of such
      sale shall (A) in case of a public sale, state the time and place fixed for
      such sale, and (B) in the case of a private sale, state the day after which
      such sale may be consummated. Any such public sale shall be held at such time
      or
      times within ordinary business hours and at such place or places as the
      Collateral Agent may fix in the notice of such sale. At any such sale the
      Collateral may be sold in one lot as an entirety or in separate parcels, as
      the
      Collateral Agent may determine. The Collateral Agent shall not be obligated
      to
      make any such sale pursuant to any such notice. The Collateral Agent may,
      without notice or publication, adjourn any public or private sale or cause
      the
      same to be adjourned from time to time by announcement at the time and place
      fixed for the sale, and such sale may be made at any time or place to which
      the
      same may be so adjourned. In case of any sale of all or any part of the
      Collateral on credit or for future delivery, the Collateral so sold may be
      retained by the Collateral Agent until the selling price is paid by the
      purchaser thereof, but the Collateral Agent shall not incur any liability in
      case of the failure of such purchaser to take up and pay for the Collateral
      so
      sold and, in case of any such failure, such Collateral may again be sold upon
      like notice.

     

    
      
        (b)  As
          an
          alternative to exercising the power of sale herein conferred upon it, the
          Collateral Agent may proceed by a suit or suits at law or in equity to
          foreclose
          upon and to sell the Collateral or any portion thereof pursuant to a judgment
          or
          decree of a court or courts having competent jurisdiction or pursuant to
          a
          proceeding by a court-appointed receiver. Any sale pursuant to the provisions
          of
          this Section 6(b) shall be deemed to conform to the 

         

      

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

    


    commercially
      reasonable standards as provided in Section 9-610(b) of the New York
      UCC or its equivalent in other jurisdictions.

     

    (c)  The
      Grantor recognizes that the Collateral Agent may be unable to effect a public
      sale of all or part of the Collateral by reason of certain prohibitions
      contained in the Securities Act of 1933, as amended (the “Securities
      Act”),
      and
      applicable state securities laws, but may be compelled to resort to one or
      more
      private sales to a restricted group of purchasers who will be obligated to
      agree, among other things, to acquire all or a part of the Collateral for their
      own account, for investment, and not with a view to the distribution or resale
      thereof. If the Collateral Agent deems it advisable to do so for the foregoing
      or for other reasons, the Collateral Agent is authorized to limit the
      prospective bidders on or purchasers of any of the Collateral to such a
      restricted group of purchasers and may cause to be placed on certificates for
      any or all of the Collateral a legend to the effect that such security has
      not
      been registered under the Securities Act, and may not be disposed of in
      violation of any provision of the Securities Act, and to impose such other
      limitations or conditions in connection with any such sale as the Collateral
      Agent deems necessary or advisable in order to comply with the Securities Act
      or
      any other securities or other laws. The Grantor acknowledges and agrees that
      any
      private sale so made may be at prices and on other terms less favorable to
      the
      seller than if such Collateral were sold at public sale and that the Collateral
      Agent has no obligation to delay the sale of such Collateral for the period
      of
      time necessary to permit the registration of such Collateral for public sale
      under any securities laws. The Grantor agrees that a private sale or sales
      made
      under the foregoing circumstances shall be deemed to have been made in a
      commercially reasonable manner. If any consent, approval, or authorization
      of
      any federal, state, municipal or other governmental department, agency or
      authority should be necessary to effectuate any sale or other disposition of
      the
      Collateral, or any partial sale or other disposition of the Collateral, the
      Grantor will execute all applications and other instruments as may be required
      in connection with securing any such consent, approval or authorization and
      will
      otherwise use its best efforts to secure same. In addition, if the Collateral
      is
      disposed of pursuant to Rule 144 under the Securities Act, the Grantor
      agrees to complete and execute a Form 144, or comparable successor form, at
      the Collateral Agent’s request; and the Grantor agrees to provide any material
      adverse information in regard to the current and prospective operations of
      CCBM
      of which the Grantor has knowledge and which has not been publicly disclosed,
      and the Grantor hereby acknowledges that the Grantor’s failure to provide such
      information may result in criminal and/or civil liability.

     

    (d)  In
      addition, to the extent permitted by applicable law, the Grantor hereby
      unconditionally and irrevocably authorizes and instructs CCBM, upon the
      occurrence and continuance of an Event of Default, to transfer record ownership
      of the Collateral to the Secured Parties. Notice of said occurrence and
      continuance of an Event of Default to CCBM shall be the issuance of a written
      notification thereof by the Collateral Agent to CCBM.

     

    (e)  Application
      of Proceeds.
      All
      payments received by the Collateral Agent and/or the other Secured Parties
      hereunder shall be applied by the Secured Parties to payment of the Indebtedness
      in the following order unless a court of competent jurisdiction shall otherwise
      direct:

     

    FIRST,
      to
      payment of all costs and expenses of the Collateral Agent incurred in connection
      with the collection and enforcement of the Indebtedness or of any security
      

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

      interest
        granted to the Collateral Agent for the benefit of the Secured Parties in
        connection with any collateral securing the Indebtedness; and

       

      SECOND,
        to payment of that portion of the Indebtedness constituting accrued and unpaid
        interest and fees, to the Collateral Agent and the other Secured Parties
        in
        accordance with the amount of such accrued and unpaid interest and fees owing
        to
        each of them.

       

      (f)  Notwithstanding
        anything herein to the contrary, the Grantor and the Collateral Agent hereby
        acknowledge and agree, among themselves and for the benefit of Pinnacle,
        that
        (i) insofar and only insofar as the Pinnacle Shares (as defined below) are
        concerned, each agrees to be bound by the terms of the Securityholders
        Agreement, (ii) the Collateral Agent shall notify Pinnacle and the
        nonpledging Shareholder (as defined in the Securityholders Agreement) (using
        the
        names and addresses of such parties as provided in Section 9.5 of the
        Securityholders Agreement) of the date, time and location of any foreclosure
        upon pledged or encumbered Collateral at least 60 days prior to the
        foreclosure, (iii) that any notice of foreclosure shall be deemed to be an
        Involuntary Transfer subject to Section 5.6 of the Securityholders
        Agreement and (iv) if Pinnacle elects to purchase the shares of common
        stock of Pinnacle, par value $0.01 per share, held by the Grantor (the
“Pinnacle
        Shares”)
        pursuant to Section 5.6 of the Securityholders Agreement, the foreclosure
        shall not include the Pinnacle Shares and the Pinnacle Shares shall be sold
        and
        delivered by the Collateral Agent and the Grantor to the Persons entitled
        to
        purchase such Pinnacle Shares under Section 5.6 of the Securityholders
        Agreement in accordance with Section 5.6 of the Securityholders Agreement.
        If for any reason the pledged Collateral is foreclosed upon, the foreclosure
        shall be considered an Involuntary Transfer and the provisions of
        Section 5.6 of the Securityholders Agreement shall govern.

       

      SECTION
        7.  Limitation
        on Duty.
        Beyond
        the exercise of reasonable care in the custody thereof, the Collateral Agent
        shall have no duty as to any Collateral in its possession or control or in
        the
        possession or control of the Secured Parties or bailee or any income thereon.
        The Collateral Agent shall be deemed to have exercised reasonable care in
        the
        custody of the Collateral in its possession if the Collateral is accorded
        treatment substantially equal to that which it accords its own property,
        and
        shall not be liable or responsible for any loss or damage to any of the
        Collateral, or for any diminution in the value thereof, by reason of the
        act or
        omission of any broker or other Secured Party or bailee selected by the
        Collateral Agent in good faith. The Collateral Agent shall be deemed to have
        exercised reasonable care with respect to any of the Collateral in its
        possession if the Collateral Agent takes such action for that purpose as
        the
        Grantor shall reasonably request in writing; but no failure to comply with
        any
        such request shall, of itself, be deemed a failure to exercise reasonable
        care.

       

      SECTION
        8.  Appointment
        of the Collateral Agent.
        At any
        time or times, in order to comply with any legal requirement in any
        jurisdiction, the Secured Parties may appoint a bank or trust company or
        one or
        more other Persons with such power and authority as may be necessary for
        the
        effectual operation of the provisions hereof and may be specified in the
        instrument of appointment.

       

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

    


    SECTION
      9.  Revised
      Article 9.
      The
      Grantor hereby confirms that by signing this Agreement, the Grantor has
      authenticated this Agreement, within the meaning of Section 9 of the
      New York UCC and Revised Article 9 of the Uniform Commercial Code as
      now or hereafter in effect in any jurisdiction (“Revised
      Article 9”).
      This
      Agreement shall constitute full authorization in favor of the Collateral Agent
      to file appropriate financing statements, initial or “in lieu” financing
      statements, continuation statements, and statements of amendment, with or
      without the Grantor’s signature, as may be necessary or advisable to perfect and
      maintain the perfection and priority of the security interest granted to the
      Secured Parties in this Agreement, including any such filings containing such
      information required by Part 5 of Revised Article 9 for the sufficiency or
      filing office acceptance of any financing statement, continuation statement
      or
      amendment, including whether the Grantor is an organization, the type of
      organization and any organization number issued to the Grantor. The Grantor
      shall furnish such information to the Collateral Agent upon the Collateral
      Agent’s request. Any such financing statements, continuation statements or
      amendments may be signed by the Collateral Agent on the Grantor’s behalf. Any
      such filings by the Collateral Agent may be by delivery of originals or
      photocopies, by electronic communication, or such other authorized form of
      communication as may be permitted under then.

     

    SECTION
      10.  Expenses.
      In the
      event that the Grantor fails to comply with any provisions of the Credit
      Agreement or this Agreement, such that the value of any Collateral or the
      validity, perfection, rank or value of any security interest hereunder is
      thereby diminished or potentially diminished or put at risk, the Collateral
      Agent may upon reasonable prior notice, but shall not be required to, effect
      such compliance on behalf of the Grantor, and the Grantor shall reimburse the
      Collateral Agent for the costs thereof on demand. All insurance expenses and
      all
      expenses of protecting, storing, appraising, preparing for sale, handling,
      maintaining and shipping the Collateral, any and all excise, property, sales,
      and use taxes imposed by any federal, state or local authority on any of the
      Collateral, all expenses in respect of periodic appraisals and inspections
      of
      the Collateral to the extent the same may be reasonably requested from time
      to
      time, and all expenses in respect of the sale or other disposition thereof
      shall
      be borne and paid by the Grantor, and if the Grantor fails to promptly pay
      any
      portion thereof when due, the Collateral Agent may, at its option, but shall
      not
      be required to, pay the same and charge the Grantor’s account therefor, and the
      Grantor agrees to reimburse the Collateral Agent therefor on demand. All sums
      so
      paid or incurred by the Collateral Agent for any of the foregoing and any and
      all other sums for which the Grantor may become liable hereunder and all costs
      and expenses (including reasonable attorneys’ fees, legal expenses and court
      costs) incurred by the Collateral Agent in enforcing or protecting any of the
      rights or remedies under this Agreement, together with interest thereon until
      paid at the rate equal the then highest rate of interest (including default
      interest payable pursuant to Section 2.07 of the Credit Agreement) charged
      on the principal of any of the Indebtedness due under the Credit Agreement
      plus
      one percent, shall be additional Indebtedness hereunder and the Grantor agrees
      to pay all of the foregoing sums promptly on demand.

     

    SECTION
      11.  Termination.
      This
      Agreement shall terminate upon the satisfaction of all of the following
      conditions: (a) the payment in full of the Indebtedness, (b) the termination
      of
      the Credit Agreement (and all obligations of the Lenders thereunder), and (c)
      the termination of all obligations with respect to Swap Agreements (to the
      extent constituting Indebtedness). Upon request of the Grantor, the Collateral
      Agent shall deliver the remaining Collateral (if any) 

     

    
      
         

      

      
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    to
      the
      Grantor unless the Second Lien Obligations (as defined in the Intercreditor
      Agreement) are outstanding at such time.

     

    SECTION
      12.  Notices.
      Any
      notice or demand which, by provision of this Agreement, is required or permitted
      to be given or served to the Grantor, the Collateral Agent and/or CCBM shall
      be
      deemed to have been sufficiently given and served for all purposes if made
      in
      accordance with the Credit Agreement.

     

    SECTION
      13.  Amendment.
      Neither
      this Agreement nor any provisions hereof may be changed, waived, discharged
      or
      terminated orally or in any manner other than by an instrument in writing signed
      by the party against whom enforcement of the change, waiver, discharge or
      termination is sought.

     

    SECTION
      14.  Waivers.
      No
      course of dealing on the part of the Collateral Agent or the other Secured
      Parties, their officers, employees, consultants or agents, nor any failure
      or
      delay by the Collateral Agent or the other Secured Parties with respect to
      exercising any of its rights, powers or privileges under this Agreement shall
      operate as a waiver thereof.

     

    SECTION
      15.  Cumulative
      Rights.
      The
      rights and remedies of the Collateral Agent and the other Secured Parties under
      this Agreement shall be cumulative and the exercise or partial exercise of
      any
      such right or remedy shall not preclude the exercise of any other right or
      remedy.

     

    SECTION
      16.  Titles
      of Sections.
      All
      titles or headings to sections of this Agreement are only for the convenience
      of
      the parties and shall not be construed to have any effect or meaning with
      respect to the other content of such sections, such other content being
      controlling as to the agreement between the parties hereto.

     

    SECTION
      17.  Governing
      Law.
      This
      Agreement is a contract made under and shall be construed in accordance with
      and
      governed by the laws of the State of New York.

     

    SECTION
      18.  Successors
      and
      Assigns.
      All
      covenants and agreements made by or on behalf of the Grantor in this Agreement
      shall bind the Grantor’s successors and assigns and shall inure to the benefit
      of the Collateral Agent, the other Secured Parties and their successors and
      assigns. This Agreement is for the benefit of the Collateral Agent and the
      other
      Secured Parties and for such other Person or Persons as may from time to time
      become or be the holders of any of the Indebtedness, and this Agreement shall
      be
      transferable with the same force and effect and to the same extent as the
      Indebtedness may be transferable, it being understood that, upon the transfer
      or
      assignment by the Collateral Agent or the other Secured Parties of any of the
      Indebtedness, the legal holder of such Indebtedness shall have all of the rights
      granted to the Collateral Agent and the other Secured Parties under this
      Agreement. The Grantor specifically agrees that upon any transfer of the
      Indebtedness, the Collateral Agent or the other Secured Parties may transfer
      and
      deliver the Collateral to the transferee of such Indebtedness and the Collateral
      shall secure any and all of the Indebtedness in favor of such a transferee,
      that
      such transfer of the Collateral shall not affect the priority and ranking
      thereof, and that the Collateral shall secure with retroactive rank the then
      existing Indebtedness of the Grantor to the transferee and any and all
      Indebtedness thereafter arising. After any such transfer has taken place, the
      

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    
       

      Collateral
        Agent or the other Secured Parties shall be fully discharged from any and
        all
        future liability and responsibility to the Grantor with respect to the
        Collateral and the transferee thereafter shall be vested with all the powers,
        rights and duties with respect to the Collateral.

       

      SECTION
        19.  Counterparts.
        This
        Agreement may be executed in two or more counterparts, and it shall not be
        necessary that the signatures of all parties hereto be contained on any one
        counterpart hereof, each counterpart shall be deemed an original, but all
        of
        which when taken together shall constitute one and the same
        instrument.

       

      SECTION
        20.  INTERCREDITOR
        AGREEMENT GOVERNS.
        NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE ENCUMBRANCE AND SECURITY
        INTERESTS GRANTED TO THE COLLATERAL AGENT, FOR THE BENEFIT OF THE SECURED
        PARTIES, PURSUANT TO THIS AGREEMENT AND THE EXERCISE OF ANY RIGHT OR REMEDY
        BY
        THE COLLATERAL AGENT AND THE OTHER SECURED PARTIES HEREUNDER ARE ENTITLED
        TO THE
        BENEFITS OF THE INTERCREDITOR AGREEMENT. IN THE EVENT OF ANY CONFLICT OR
        INCONSISTENCY BETWEEN THE PROVISIONS OF THE INTERCREDITOR AGREEMENT AND THIS
        AGREEMENT, THE PROVISIONS OF THE INTERCREDITOR AGREEMENT SHALL
        CONTROL.

       

      SECTION
        21.  Custody
        of Collateral.
        The
        Collateral Agent hereby acknowledges receipt of the Stock Certificate and
        that
        the Second Lien Collateral Agent has appointed the Collateral Agent to act
        as
        gratuitous bailee for the Second Lien Collateral Agent, to hold the Stock
        Certificate on behalf of both the Collateral Agent as First Lien Collateral
        Agent and the Second Lien Collateral Agent pursuant to the Intercreditor
        Agreement and further acknowledges and agrees that this Agreement shall in
        all
        respects be subject to the terms and conditions contained in the Intercreditor
        Agreement.

       

      
        
           

        

        
          11

          
            

          

        

        
           

        

      


      IN
        WITNESS WHEREOF, the Grantor and the Collateral Agent have caused this Agreement
        to be duly executed as of the date first above written.

      

        GRANTOR:

        


        CARRIZO
          OIL & GAS, INC.,

        


        By:/s/
          Paul F. Boling   

        Name: Paul
          F. Boling

        Title: Vice
          President and Chief Financial Officer

        


        


        COLLATERAL
          AGENT:

        


        JPMORGAN
          CHASE BANK,

        NATIONAL
          ASSOCIATION

        


        By:
/s/
          Charles Kingswell-Smith______

        Name: Charles
          Kingswell-Smith

        Title: Senior
          Vice President


         

        
          
             

          

          
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