Revision


    EXHIBIT
      10.4

    
 

    EXECUTION
      COPY

    


    THIRD
      AMENDMENT TO 

    SECOND
      AMENDED AND RESTATED CREDIT AGREEMENT

    


    


    THIS
      THIRD AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT
      AGREEMENT
      is dated
      and effective as of July 21, 2005 (this "Third Amendment"), by and among
CARRIZO
      OIL & GAS, INC.,
      a Texas
      corporation (the “Borrower”), CCBM,
      INC., a
      Delaware corporation (the “Guarantor”), and HIBERNIA
      NATIONAL BANK,
      a
      national banking association, individually as a Lender and as Administrative
      Agent, and UNION
      BANK OF CALIFORNIA, N.A.,
      a
      national banking association, individually as a Lender and as
      Co-Agent.

     

    


    RECITALS:

    


    1. The
      Borrower, the Guarantor, the Agent, and the Lenders have heretofore entered
      into
      that certain Second Amended and Restated Credit Agreement dated as of
      September 30, 2004, as amended by First Amendment thereto dated as of
      October 29, 2004, and as further amended by Second Amendment dated as of April
      27, 2005 (as so amended, the "Agreement"), pursuant to which the Lenders
      established in favor of Borrower a Line of Credit as more fully described
      therein. 

    


    2. All
      Loans
      by the Lenders to the Borrower are guaranteed by the Guarantor.

    


    3. The
      parties desire to amend the Agreement as set forth herein.

    


    NOW,
      THEREFORE,
      the
      parties hereto, in consideration of the mutual covenants hereinafter set forth
      and intending to be legally bound hereby, do hereby amend and supplement the
      Agreement as follows:

    


    A. Defined
      Terms.
      Capitalized terms used herein which are defined in the Agreement are used herein
      with such defined meanings, as said definitions may be amended and/or
      supplemented by this Third Amendment.

    


    B. Revision
      to Defined Terms.

    


    1. The
      definitions for the terms “Consolidated Current Assets”, “Consolidated Current
      Liabilities”, “EBITDA”, “Facility A Borrowing Base Amount”, “Interest Expense”,
“Quarterly Reduction”, and “Tangible Net Worth” appearing in Section 1.1 of the
      Agreement are hereby deleted and restated as follows:

    


    "Consolidated
      Current Assets"
      shall
      mean the total of the Borrower’s consolidated current assets (excluding assets
      of 

     

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    Unrestricted
      Subsidiaries), including the amounts available for borrowing under the Facility
      A Borrowing Base Amount and the Facility B Borrowing Base Amount, determined
      in
      accordance with GAAP. Current assets will not include non-cash assets, if any,
      arising from the marking to market of Hedging Agreements pursuant to SFAS No.
      133 and related pronouncements.

     

    "Consolidated
      Current Liabilities"
      shall
      mean the total of the Borrower's consolidated current liabilities (excluding
      liabilities of Unrestricted Subsidiaries), excluding outstanding principal
      amounts due under the Commitments, determined in accordance with GAAP. Current
      liabilities will not include (i) the non-cash obligations, if any, arising
      from
      the marking to market of Hedging Agreements pursuant to SFAS No. 133 and related
      pronouncements, (ii) outstanding principal amounts due under the Line of Credit,
      and (iii) the non-cash effects, if any, of the non-cash stock option re-pricing
      accrual. 

    


    “EBITDA”
      shall
      mean the Borrower’s consolidated earnings determined in accordance with GAAP
      (excluding earnings of Unrestricted Subsidiaries) before interest expense,
      income taxes, depreciation, amortization, depletion,
      oil and gas asset impairment write downs, lease impairment expense, gains and
      losses from the sale of capital assets, and other non-cash charges. EBITDA
      shall
      not include non-cash effects of (i) the early extinguishment of long-term debt,
      (ii) CCBM, Inc.’s equity investment in Pinnacle, and (iii) stock option
      re-pricing expense.

    


    "Facility
      A Borrowing Base Amount"
      shall
      mean the amount available to Borrower at any time based upon the valuation
      of
      the Mortgaged Properties, projected oil and gas prices, underwriting factors,
      and any other factors deemed relevant by the Required Lenders in their sole
      and
      complete discretion, all as evaluated and determined by the Required Lenders
      in
      their sole and complete discretion on a quarterly basis on October 1, January
      1,
      April 1, and July 1. In addition, the Required Lenders, in their sole and
      complete discretion, may conduct one unscheduled Facility A Borrowing Base
      Amount redetermination subsequent to each quarterly redetermination, and the
      Borrower, at its option may request (and the Required Lenders shall promptly
      thereafter perform) one Facility A Borrowing Base Amount redetermination after
      each scheduled quarterly redetermination by the Required Lenders. The Facility
      A
      Borrowing Base Amount also is subject to mandatory Quarterly Reductions. The
      Required Lenders are not obligated under any circumstances to establish the
      Facility A Borrowing Base Amount based solely on oil and gas valuation data
      

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    for
      the
      Mortgaged Properties. The Facility A Borrowing Base Amount as of the Third
      Amendment Effective Date is $10,000,000.00. All of the foregoing determinations
      and valuations shall be in accordance with the Lenders’ normal practices and
      standards for oil and gas loans as may exist at the particular time of
      determination and valuation. The Facility A Borrowing Base Amount shall never
      exceed $75,000,000.00, and the sum of the Facility A Borrowing Base Amount
      and
      the Facility B Borrowing Base Amount shall never exceed
      $100,000,000.00.

    


    “Interest
      Expense”
      shall
      mean, for any period, total interest expense (including that portion
      attributable to capital lease obligations in accordance with GAAP and
      capitalized interest), net of interest income, of the Borrower and its
      Subsidiaries (other than Unrestricted Subsidiaries) on a consolidated basis
      with
      respect to all outstanding Obligations of the Borrower and its Subsidiaries
      (other than Non-Recourse Indebtedness and Obligations of Unrestricted
      Subsidiaries) to the extent the promissory notes, leases or other instruments
      or
      agreements evidencing such Obligations require the payment of such interest
      in
      cash during such period.

    


    “Quarterly
      Reduction”
      shall
      mean each quarterly reduction, if any, to the Facility A Borrowing Base Amount
      on the first day of each October, January, April and July based upon Lenders’
      redetermination of the Facility A Borrowing Base Amount. All such determinations
      and valuations shall be in accordance with the Lenders’ normal practices and
      standards for oil and gas loans as may exist at the particular time of
      determination and valuation. The Quarterly Reduction will be $0.00 on October
      1,
      2005. Thereafter, the Lenders will establish the Quarterly Reduction in
      connection with each redetermination of the Facility A Borrowing Base
      Amount.

    


    “Tangible
      Net Worth”
      means,
      with respect to any Person, the total assets of such Person (other than with
      respect to the Borrower, its Unrestricted Subsidiaries), on a consolidated
      basis, exclusive of (a) those assets classified as intangible, including,
      without limitation, goodwill, patents, trademarks, trade names, copyrights,
      franchises and deferred charges, (b) treasury stock and minority interests
      in
      any Person, (c) cash set apart and held in sinking or other analogous funds
      established for the purpose of redemption or other retirement of capital stock,
      (d) to the extent not already deducted from total assets, allowances for
      depreciation, depletion, obsolescence and/or amortization of properties,
      uncollectible 

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    accounts,
      and contingent but probable liabilities as to which an amount can be
      established, (e) deferred taxes and (f) all assets arising from advances to
      officers, former officers or sales representatives of such Person or any of
      its
      Subsidiaries (other than with respect to the Borrower, its Unrestricted
      Subsidiaries) made outside the ordinary course of business; less total
      liabilities of such Person and its Subsidiaries (other than with respect to
      the
      Borrower, its Unrestricted Subsidiaries), on a consolidated basis, all of the
      above being determined in accordance with GAAP and, with respect to the
      Borrower, excluding the effect of any cumulative after-tax amounts of ceiling
      test write-downs pursuant to Rule 4.10 of Regulation S-X promulgated by the
      Securities and Exchange Commission and any balance sheet impact arising from
      the
      early extinguishment of long-term debt.

    


    2. The
      following new definitions are hereby added to Section 1.1 of the
      Agreement:

    


    “Intercreditor
      Agreement”
      shall
      mean the Intercreditor Agreement dated as of July 21, 2005 among Borrower,
      the
      Guarantor, the Agent, as First Lien Collateral Agent, and Credit Suisse, as
      Second Lien Collateral Agent, as amended, modified or restated from time to
      time.

    


    “Second
      Lien Credit Agreement”
      shall
      mean the Second Lien Credit Agreement dated as of July 21, 2005 among Borrower,
      the Lenders party thereto, and Credit Suisse, as Administrative Agent and
      Collateral Agent, as amended, modified or restated from time to
      time.

    


    “Secured
      Second Lien Debt”
      shall
      mean the term loan indebtedness of the Borrower in an aggregate principal amount
      not to exceed $150,000,000.00 arising under the Second Lien Credit Agreement;
      provided that
      (i) if
      such indebtedness is secured by a mortgage lien on the Mortgaged Properties,
      such lien shall be subordinate and inferior to the Agent’s mortgage lien on the
      Mortgaged Properties, and (ii) the Required Lenders have reviewed and approved
      the documents evidencing such indebtedness, the Intercreditor Agreement, and
      the
      collateral therefor.

    


    “Third
      Amendment”
      shall
      mean that certain Third Amendment to Second Amended and Restated Credit
      Agreement dated as of July 21, 2005, by and among the Borrower, the Guarantor,
      the Agent, and the Lenders.

    


    “Third
      Amendment Effective Date”
      shall
      mean July 21, 2005.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    


    3. The
      following definitions appearing in Section 1.1 of the Agreement are hereby
      deleted: “Memorandum”, “Securities Purchase Agreement”, “Secured Subordinated
      Debt”, “Secured Subordinated Note Purchase Agreement”, and “Subordinated
      Promissory Notes”.

    


    C. Restatement
      of Section 6.4. Section
      6.4 of the Agreement is hereby deleted in its entirety and restated as
      follows:

    


    Section
      6.4. Engineering
      Fee.
      The
      Borrower shall pay to each Lender a fee of $2,500.00 for each determination
      of
      the Facility A Borrowing Base Amount. The Borrower hereby authorizes the Agent
      to debit its account maintained with Hibernia for collection of said fee.


    


    D. Deletion
      of Section 11.20.
      Section
      11.20 of the Agreement is hereby deleted in its entirety.

    


    E. Deletion
      of Section 11.22.
      Section
      11.22 of the Agreement is hereby deleted in its entirety.

    


    F. Restatement
      of Section 12.1(g).
      Part (g)
      of Section 12.1 of the Agreement is hereby deleted in its entirety and restated
      as follows:

    


    (g) as
      soon
      as available and in any event by September 15, December 15, March 15, and June
      15 of each year, an internally prepared engineering report dated as of the
      preceding September 1, December 1, March 1, and June 1, respectively, covering
      oil and gas properties included or to be included in any Borrowing Base Amount,
      in form and content reasonably satisfactory to the Required Lenders,
      and

    


    G. Restatement
      of Section 12.8(b). Part
      (b)
      of Section 12.8 of the Agreement is hereby deleted in its entirety and restated
      as follows:

    


    (b) Maximum
      Total Net Recourse Debt to EBITDA Ratio.
      The
      Borrower shall maintain as of the last day of each fiscal quarter ending during
      the period commencing on June 30, 2005 and continuing through June 30, 2006
      a
      ratio of Total Net Recourse Debt to EBITDA of not more than 3.50 to 1.0,
      calculated on a rolling four quarters basis. Commencing July 1, 2006 and
      continuing through September 30, 2006, the Borrower shall maintain as of the
      last day of each fiscal quarter a ratio of Total Net Recourse Debt to EBITDA
      of
      not more than 3.50 to 1.0, calculated on a rolling four quarters basis;
provided
      that if
      the ratio of Total Net Recourse Debt to EBITDA is greater than 3.25 to 1.0,
      but
      less 

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    than
      or
      equal to 3.50 to 1.0 as of such day, no additional Loans can be made until
      the
      next succeeding date as of which such ratio is calculated and the Borrower
      is in
      compliance with such ratio. Commencing October 1, 2006 and continuing through
      December 31, 2006, the Borrower shall maintain as of the last day of each fiscal
      quarter a ratio of Total Net Recourse Debt to EBITDA of not more than 3.25
      to
      1.0, calculated on a rolling four quarters basis; provided
      that if
      the ratio of Total Net Recourse Debt to EBITDA is greater than 3.00 to 1.0,
      but
      less than or equal to 3.25 to 1.0 as of such day, no additional Loans can be
      made until the next succeeding date as of which such ratio is calculated and
      the
      Borrower is in compliance with such ratio. Commencing on January 1, 2007 and
      thereafter, the Borrower shall maintain as of the last day of each fiscal
      quarter a ratio of Total Net Recourse Debt to EBITDA of not more than 3.00
      to
      1.0, calculated on a rolling four quarters basis. For purposes of this covenant,
      EBITDA shall not include the net revenue attributable to assets pledged to
      secure Non-Recourse Indebtedness. The term “Total Net Recourse Debt” shall mean,
      on any date of determination, the Borrower’s consolidated Debt excluding
      Non-Recourse Indebtedness and cash and cash equivalents and Debt of an
      Unrestricted Subsidiary on such date, less the amount of unrestricted cash
      and
      cash equivalents on hand at the Borrower and the Guarantors.

    


    H. Restatement
      of Section 12.8(c).
      Part (c)
      of Section 12.8 of the Agreement is hereby deleted in its entirety and restated
      as follows:

    


    Minimum
      Quarterly Debt Service Coverage Ratio. The
      Borrower shall maintain at the end of each quarter a Debt service coverage
      ratio
      (excluding Non-Recourse Indebtedness and Debt of Unrestricted Subsidiaries)
      of
      not less than 1.25 to 1.0. For purposes of this covenant, the non-cash effects,
      if any, of Hedging Agreements pursuant to SFAS 133 will not be included, nor
      will the effect, if any, of ceiling test write-downs pursuant to Regulation
      SX4.10 of the Securities and Exchange Commission be included. Debt service
      coverage shall be calculated based on GAAP as follows: the ratio of (a) the
      difference of (i) EBITDA for the quarter just ended (excluding EBITDA related
      to
      assets pledged to secure Non-Recourse Indebtedness), minus (ii) permitted cash
      dividends paid during the quarter just ended, divided by (b) the sum of (i)
      required principal paid in cash and interest expense (to the extent required
      to
      be paid in cash) on Debt (including the Indebtedness) during the quarter just
      ended, plus (ii) the positive difference, if any of (x) principal paid in cash
      and interest expense on Non-Recourse Indebtedness during the quarter just ended,
      

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    minus
      (y)
      positive EBITDA related to assets pledged to secure Non-Recourse Indebtedness
      during the quarter just ended.

    


    I. Restatement
      of Section 12.8(d). Part
      (d)
      of Section
      12.8 of the Agreement is hereby deleted in its entirety and restated as
      follows:

    


    (d) Minimum
      Shareholder’s Equity. The
      Borrower shall maintain as of the last day of each fiscal quarter a minimum
      shareholder’s equity of not less than: 

     

    Commencing
      on the Third Amendment Effective Date: $115,000,000.00 plus
      (i) 100% of all common and preferred equity contributed by shareholders
      of
      Borrower subsequent to March 31, 2005, plus
      (ii) 50%
      of all positive earnings occurring subsequent to March 31, 2005. For purposes
      of
      this covenant, the calculation of Borrower’s “shareholder’s equity” will exclude
      the effects, if any, of ceiling test write-downs pursuant to Regulation SX4.10
      of the Securities and Exchange Commission and any balance sheet impact arising
      from the early extinguishment of long-term debt and stock option re-pricing
      expense.

     

    J. Restatement
      of Section 12.8(e).
      Part (e)
      of Section 12.8 of the Agreement is hereby deleted in its entirety and restated
      as follows:

    


    (e) EBITDA
      to Interest Expense Ratio.
      The
      Borrower shall maintain (i) as of the last day of each fiscal quarter ending
      on
      or before September 30, 2006, a ratio of EBITDA for the four fiscal quarter
      period ending on such day to Interest Expense for such period of at least 2.75
      to 1.0, and (ii) as of the last day of each fiscal quarter thereafter, a ratio
      of EBITDA for the four fiscal quarter period ending on such day to Interest
      Expense for such period of at least 3.00 to 1.0.

    


    K. Restatement
      of Section 12.15.
      Section
      12.15 of the Agreement is hereby deleted in its entirety and restated as
      follows:

     

    Section
      12.15. Insurance.
      The
      Borrower shall maintain in effect all insurance required by this Agreement
      and
      the Collateral Documents, and the Borrower agrees to comply with the
      requirements of Section 11.6 above. The Borrower agrees to provide the Agent
      with certificates or binders evidencing such insurance coverage on an annual
      basis, and, if requested by the Agent, the Borrower further agrees to promptly
      furnish the Agent with copies of all renewal notices and copies of receipts
      for
      paid premiums. The Borrower shall provide the Agent with certificates or binders
      evidencing insurance coverage pursuant to all renewal or replacement policies
      of
      insurance no later than the fifteenth (15th) 

     

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    day
      before any such existing policy or policies should expire (or, in the event
      such
      certificates or binders are unavailable to the Borrower on such day, within
      one
      Business Day of receipt of such certificates or binders by the
      Borrower).

     

    L. Restatement
      of Section 12.18(a). Part
      (a)
      of Section 12.18 of the Agreement is hereby deleted in its entirety and restated
      as follows:

    


    Section
      12.18. Additional
      Mortgaged Properties.
      (a) The
      Borrower agrees to execute and deliver from time to time such documents as
      are
      reasonably requested by the Agent to provide that at least 90% of the net
      present value of the proved oil and gas reserves owned by the Borrower and
      each
      Guarantor, taken as a whole, are Mortgaged Properties.

    


    M. Addition
      of New Affirmative Covenant. Article
      XII of the Agreement is hereby amended and supplemented to include the following
      new affirmative covenant as Section 12.19:

    


    Section
      12.19. Third
      Amendment Post Closing Requirement.
      The
      Borrower covenants and agrees to deliver to the Agent (i) within sixty (60)
      days
      after Third Amendment Effective Date, mortgages, security agreements and/or
      deeds of trust as may be necessary to provide that at least 90% of the net
      present value of the proved oil and gas reserves owned by the Borrower and
      each
      Guarantor, taken as a whole, are Mortgaged Properties, and (ii) within ninety
      (90) days after the Third Amendment Effective Date, title opinion(s) from
      counsel to Borrower (or other title information reasonably acceptable to the
      Agent) covering the proved oil and gas reserves encumbered by the mortgages,
      security agreements and/or deeds of trust described in clause (i)
      above.

    


    N. Restatement
      of Section 13.4(r). Section
      13.4(r) of the Agreement is hereby deleted in its entirety and restated as
      follows:

    


    (r) Encumbrances
      affecting all or part of the Collateral that secure (i) Secured Second Lien
      Debt
      and other indebtedness referred to in Section 13.5(l) and such other obligations
      and liabilities related thereto, and (ii) all other Second Lien Obligations
      (as
      defined in the Intercreditor Agreement); provided
      that
      such Encumbrances shall be contractually junior to the Encumbrances created
      by
      the Collateral Documents on the terms set forth in the Intercreditor Agreement
      or on terms otherwise reasonably satisfactory to the Agent.

     

    O. Deletion
      of Section 13.5(e). Section
      13.5(e) of the Agreement is hereby deleted in its entirety.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    P. Restatement
      of Section 13.5(l). Part
      (l)
      of Section 13.5 of the Agreement is hereby deleted in its entirety and restated
      as follows:

    


    (l) Subject
      to the provisions of Sections 10.2 and 13.4(r), the indebtedness evidenced
      by
      the Secured Second Lien Debt, indebtedness arising under hedging agreements
      between the Borrower and any holder of such debt or any affiliate thereof,
      and
      guarantees executed by any Subsidiary of Borrower guaranteeing payment
      thereof.

     

    


    Q. Restatement
      of Section 13.6(b). Part
      (b)
      of Section 13.6 of the Agreement is hereby deleted in its entirety and restated
      as follows:

    


    (b) Investments
      in commercial paper maturing within 270 days from the date of acquisition
      thereof and having, at such date of acquisition, one of the two highest credit
      ratings obtainable from Standard & Poor’s Ratings Service or from Moody’s
      Investors Service, Inc.;

     

    R. Restatement
      of Section 13.6(f).
      Part (f)
      of Section 13.6 of the Agreement is hereby deleted in its entirety and restated
      as follows:

    


    (f) Loans
      or
      advances to employees in an aggregate amount for all employees of the Borrower
      and the Subsidiaries not in excess of $750,000 at any one time
      outstanding.

    


    S. Restatement
      of Section 13.10.
      Section
      13.10 of the Agreement is hereby deleted in its entirety and restated as
      follows:

    


    Section
      13.10. Commodity
      Transactions.
      The
      Borrower shall not enter into any speculative commodity transactions of any
      type
      or Hedging Agreement relating to the sale of aggregate Hydrocarbons production
      in excess of eighty-five percent (85%) of the total volume of such production
      projected in the most recent independent engineering report delivered to the
      Agent pursuant to Section 12.1(e) or as projected in the most recent internally
      prepared engineering report delivered to the Agent pursuant to Section 12.1(g),
      whichever is more recent, to come from the Borrower's proved developed reserves
      during the term of such Hedging Agreement (it being understood and agreed that
      for purposes of determining compliance with such 85% cap, the Borrower may
      in
      good faith take into account the pro forma effect on such projected production
      of new wells that are not included in 

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    the
      most
      recently delivered engineering report and may enter into Hedging Agreements
      affecting such new wells subject to compliance with such 85% cap).
      Notwithstanding the foregoing, the maximum duration of any permitted Hedging
      Agreement shall not exceed forty-eight (48) months; provided
      that,
      with respect to any Hedging Agreement with a duration in excess of 24 months,
      no
      more than 50% of the amount of the projected production to come from proved
      developed producing reserves may be subject to hedging arrangements pursuant
      to
      such Hedging Agreement during the period from and including the twenty-fifth
      month of such Hedging Agreement to and including the forty-eighth month of
      such
      Hedging Agreement.

    


    T. Deletion
      of Section 13.11.
      Section
      13.11 of the Agreement is hereby deleted in its entirety and restated as
      follows:

    


    Section
      13.11. Payments
      on Secured Second Lien Debt.
      Until
      such time as the Indebtedness arising under this Agreement is paid in full
      and
      the Lenders have no further obligation to the Borrower under this Agreement,
      and
      further subject to the terms and conditions of the Intercreditor Agreement,
      the
      Borrower agrees not to make any optional prepayments on the Secured Second
      Lien
      Debt, without first obtaining the prior written consent of the Required
      Lenders.

    


    U. Deletion
      of Section 13.12.
      Section
      13.12 of the Agreement is hereby deleted in its entirety.

     

    V. Restatement
      of Section 14.1(e).
      Part (e)
      of the Section 14.1 of the Agreement is hereby deleted in its entirety and
      restated as follows:

    


    (e) Default
      in Favor of Third Parties. Should
      the Borrower or the Guarantor (i) fail to pay Debt having a principal amount
      in
      excess of $1,000,000.00 in the aggregate (other than the amounts referred to
      in
      Section 14.1(a)), or any interest or premium thereon, when due (or, if permitted
      by the terms of the relevant document, within any applicable grace period),
      whether such Debt shall become due by scheduled maturity, by required
      prepayment, by acceleration, by demand or otherwise; or (ii) fail to perform
      any
      term, covenant or condition on its part to be performed under any agreement
      or
      instrument evidencing, securing or relating to Debt having a principal amount
      in
      excess of $1,000,000.00 in the aggregate, when required to be performed, and
      such failure shall continue after the applicable grace period, if any, specified
      in such agreement or instrument, if the effect of such failure is to


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    accelerate,
      or to permit the holder or holders of such Debt to accelerate, the maturity
      of
      such Debt.

    


    W. Revision
      to Section 14.1.
      The
      first sentence of the paragraph following part (h) of Section 14.1 of the
      Agreement is hereby deleted and restated as follows:

    


    Upon
      the
      occurrence of an Event of Default, the Line of Credit Loan Commitment will,
      at
      the option of the Lenders, either terminate or be suspended (including any
      obligation to make any further Facility Loans), and, at the Lenders' option,
      the
      Notes and all Indebtedness of the Borrower will become immediately due and
      payable, except that in the case of type described in the "Insolvency"
      subsection above, such acceleration shall be automatic and not optional.


    


    X. References
      to Secured Subordinated Debt. As
      of the
      Third Amendment Effective Date, all references in the Agreement (as amended
      by
      this Third Amendment) to “Secured Subordinated Debt” shall be deemed references
      to “Secured Second Lien Debt.”

    


    Y. Consent
      by Lenders to Secured Second Lien Debt. Subject
      to the terms and conditions of the Intercreditor Agreement, the Lenders do
      hereby permit (i) the Secured Second Lien Debt to be extended, (ii) the Borrower
      to grant the liens contemplated by the Second Lien Credit Agreement and the
      Loan
      Documents (as defined in the Second Lien Credit Agreement), and (iii) the
      execution of the guarantees contemplated by the Second Lien Credit Agreement.
      In
      addition, the Lenders authorize, ratify and confirm the Agent’s execution of the
      Intercreditor Agreement on behalf of the Lenders.

    


    Z. Confirmation
      of Related Documents. It
      is the
      intention of the parties that all of the liens, privileges, priorities, and
      equities existing and to exist under and in accordance with the terms of the
      Related Documents are hereby renewed, extended, and carried forward as security
      for the Indebtedness. In addition, the Guarantor hereby confirms its guaranty
      of
      the Indebtedness, which guaranty is evidenced by that certain Commercial
      Guaranty dated September 30, 2004 by Guarantor in favor of Agent.

    


    AA. Representations;
      No Default.
      On and
      as of the date of this Third Amendment, and after giving effect to this Third
      Amendment, the Borrower and the Guarantor confirm, reaffirm, and restate the
      representations and warranties set forth in the Agreement and the Loan
      Documents, except to the extent that such representations and warranties relate
      solely to a specified date; provided, that each reference to the Agreement
      herein shall be deemed to include the Agreement as amended by this Third
      Amendment. 

    


    BB. Payment
      of Expenses.
      The
      Borrower agrees to pay or reimburse the Lender for all reasonable legal fees
      and
      expenses of counsel to the Agent in connection with the transactions
      contemplated by this Third Amendment.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    CC. Amendments.
      The
      Agreement and this Third Amendment are credit or loan agreements as described
      in
      LA. R.S. 6:§1121, et seq. There are no oral agreements between the Agent and
      Lenders and the Borrower and/or Guarantor. The Agreement, as amended by this
      Third Amendment, and the other Loan Documents set forth the entire agreement
      of
      the parties with respect to the subject matter hereof and supersede all prior
      written and oral understandings between the Borrower, the Guarantor, the Agent,
      and the Lenders, with respect to the matters herein and therein set forth.
      The
      Agreement, as amended by this Third Amendment, cannot be modified or amended
      except by a writing signed and delivered by the Borrower, the Guarantor, the
      Agent and the Lenders.

    


    DD. Waiver
      of Defenses.
      In
      consideration of the Lenders’ execution of this Third Amendment, the Borrower
      and Guarantor do hereby irrevocably waive any and all claims and/or defenses
      to
      payment on any indebtedness arising under the Agreement and owed by any of
      them
      to the Lender that may exist as of the date of execution of this Third
      Amendment.

    


    EE. Governing
      Law: Counterparts.
      The
      Third Amendment shall be governed by and construed in accordance with the laws
      of the State of Louisiana. This Third Amendment may be executed in any number
      of
      counterparts, all of which counterparts, when taken together, shall constitute
      one and the same instrument.

    


    FF. Continued
      Effect.
      Except
      as expressly modified herein, the Agreement shall continue in full force and
      effect. The Agreement as amended herein is hereby ratified and confirmed by
      the
      parties hereto.

    


    GG. Reliance
      on Corporate Resolutions. The
      Borrower and the Guarantor hereby certify to the Lenders that the resolutions
      delivered in connection with the Agreement remain in effect, and that Paul
      F.
      Boling is authorized to execute this Third Amendment on behalf of Borrower
      and
      Guarantor.

    


    


    


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    IN
      WITNESS WHEREOF,
      the
      parties hereto have caused this Third Amendment to be executed and delivered
      as
      of the date hereinabove provided by the authorized officers each hereunto duly
      authorized.

    


    Borrower:

    


    CARRIZO
      OIL & GAS, INC.

    a
      Texas corporation 

    


    By:
      /s/
      Paul F. Boling 

    Name:
      Paul F. Boling

    Title:
      Vice President and Chief Financial Officer

    


    Guarantor:

    


    CCBM,
      INC.

    a
      Delaware corporation

    


    By:
      /s/
      Paul F. Boling 

    Name:
      Paul F. Boling

    Title:
      Vice President and Chief Financial Officer

    


    Agent:

    


    HIBERNIA
      NATIONAL BANK, as Agent

    


    By:
      /s/
      David R. Reid 

    Name:
      David R. Reid

    Title:
      Senior Vice President

    


    Lenders:

    


    HIBERNIA
      NATIONAL BANK

    


    By:
      /s/
      John Castellano 

    Name:
      John Castellano

    Title:
      Senior Vice President

    


    UNION
      BANK OF CALIFORNIA, N.A.

    


    By:
      /s/
      Scott Myatt 

    Name:
      Scott Myatt

    Title:
      Assistant Vice President