Exhibit 10.2 Stock Pledge & Security Agreement


    EXHIBIT
      10.2

     

     

    EXECUTION
      COPY

     

    SECOND
      LIEN STOCK PLEDGE AND SECURITY AGREEMENT dated as of July 21, 2005, by and
      between Carrizo Oil & Gas, Inc., a Texas corporation (hereinafter
      referred to as the “Grantor”),
      in
      favor of Credit Suisse, as collateral agent (in such capacity, the “Collateral
      Agent”),
      to
      secure the Indebtedness (as defined below) of the Grantor.

     

    A.
      The
      Grantor, CCBM, Inc., a Delaware corporation, the Lenders and Credit Suisse,
      as
      administrative agent (in such capacity, the “Administrative Agent”), and the
      Collateral Agent are the parties to that certain Second Lien Credit Agreement
      dated as of July 21, 2005.

     

    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 Second Lien Stock Pledge and Security Agreement, as amended, restated,
      supplemented or otherwise modified from time to time, and any exhibits or
      attach-ments 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.

     

    “Credit
      Agreement”
      shall
      mean the Second Lien Credit Agreement dated as of July 21, 2005, as amended,
      restated, supplemented or otherwise modified from time to time, among the
      Grantor, CCBM, the Administrative Agent, the Collateral Agent and the
      Lenders.

     

    “Discharge
      of First Lien Obligations”
      shall
      have the meaning assigned to such term in the Intercreditor
      Agreement.

     

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

     

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

        
           

        

      

    

    


    “First
      Lien Security Agreement”
      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 Hedging Agreement or other commodity or price
      management transaction, (b) obligations of the Grantor under Rate Management
      Transactions (including all renewals, extensions, modifications, and
      substitution thereof and therefor) and all cancellations, buy backs, reversals,
      terminations, or assignments of Rate Management Transactions, 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 Related 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, the First Lien Collateral Agent and the 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 Hedging 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 Hedging Agreement is
      entered into, (e) the beneficiaries of each indemnification obligation
      undertaken by any of the Grantor or any Guarantor under any Loan Document and
      (f) the successors and assigns of each of the foregoing.

     

    


    
      
        
        

      

      
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    “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.

     

    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 (or, prior to the Discharge of the First Lien Obligations,
      the
      First Lien Collateral Agent, acting as a gratuitous bailee for 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 (or, prior to the Discharge
      of
      the First Lien Obligations, to the First Lien Collateral Agent, acting as a
      gratuitous bailee for 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,
      prior to the Discharge of the First Lien Obligations, by the First Lien
      Collateral Agent, acting as a gratuitous bailee for the Collateral Agent)
or
      the
      Secured Parties with respect to
      the


     

    


    
      
        
        

      

      
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    Collateral
      and the rights
      and
      powers granted to the Collateral Agent or the other Secured Parties hereunder,
      and will deliver
      to the Collateral Agent (or,
      prior to the Discharge of the First Lien Obligations, to the First Lien
      Collateral Agent, acting as a gratuitous bailee for 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 (other than the
      First Lien Security Agreement and the Intercreditor Agreement) 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
      First 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
      (or, prior to the Discharge of the First Lien Obligations, the First Lien
      Collateral Agent, acting as a gratuitous bailee for the Collateral Agent) may
      have possession of Collateral as contemplated hereby. The Grantor further
      represents
      and
      warrants as follows:

     

    (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, the Collateral Agent (for the ratable
      benefit of the Secured Parties) shall have a valid and enforceable lien on
      and
      security interest in and to
      the
      Collateral; assuming that the First Lien Collateral Agent, acting as a
      gratuitous bailee for the Collateral Agent, has possession of the Stock
      Certificate, such lien and security interest shall constitute a perfected
      security interest in such Collateral, and except for the lien and security
      interest granted to the First Lien Collateral Agent, 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 

     

    


    
      
        
        

      

      
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    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;

     

    (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 76-0415919. 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

     

    
      
        
        

      

      
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    (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 Section 7.01(e) or (f)
      of
      the Credit Agreement), and subject to the terms of the Intercreditor Agreement,
      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.

     

    SECTION
      6.   Remedies
      upon Default. (a)  Subject
      to the terms of the Intercreditor Agreement, 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 

     

    


    
      
        
        

      

      
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    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)
        Subject
      to the terms of the Intercreditor Agreement, 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 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 

     

    


    
      
        
        

      

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

     

    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;

     

    THIRD,
      to
      payment of the principal outstanding under the Credit Agreement and any amount
      due by the Grantor to the Secured Parties under Rate Management Transactions
      (to
      the extent constituting Indebtedness); and

     

    FOURTH,
      to payment of any remaining Indebtedness.

     

    


    
      
        
        

      

      
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    (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.

     

    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 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

      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 Second Lien Credit Agreement (and all obligations of the Lenders
      thereunder), and (c) the termination of all obligations with respect to Hedging
      Agreements (to the extent constituting Indebtedness). Upon request of the
      Grantor, the Collateral Agent shall deliver the remaining Collateral (if any)
      to
      the Grantor unless the Discharge of First Lien Obligations has not
      occurred.

     

    
    

    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 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

       

      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
      Collateral Agent or the other Secured Parties shall be fully discharged from
      any
      and all future liability and responsibility to the 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

       

      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 SUBJECT TO
      THE
      PROVISIONS 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 that the First Lien Collateral Agent has
      physical possession of the Stock Certificate and that the Collateral Agent
      has
      appointed the First Lien Collateral Agent to act as gratuitous bailee for the
      Collateral Agent, to hold the Stock Certificate on its behalf 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.

     

    


    
      
        
        

      

      
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    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:   
                Chief Financial Officer

            


    

     

    
      	 	 	 
	 	 AGENT:
	 	 
	 	
              CREDIT
                SUISSE, CAYMAN ISLANDS BRANCH, as Collateral Agent,

            
	 	 	 
	 	by:  	
              /s/
                James Morgan

            
	 	
              
Name: 
              James Morgan
	 	Title:  
              Managing Director


    

    


    
      	 	 	 
	 	by:  	
              /s/
                Denise L. Alvarez

            
	 	
              
Name: 
              Denise L. Alvarez
	 	Title:   
              Associate


    

    


     

    
      
         

      

      
        13