Exhibit 10.5 - Subscription and Registration Rights Agreement


    Exhibit
      10.5

    
FORM
      OF

    SUBSCRIPTION
      AND REGISTRATION RIGHTS AGREEMENT

     

    This
      Subscription and Registration Rights Agreement (this “Agreement”), made as of
      the date set forth below by and between Carrizo Oil & Gas, Inc., a Texas
      corporation (the “Company”), and the undersigned (the “Subscriber” and, together
      with the other subscribers for Shares (as defined below), the “Subscribers”) is
      intended to set forth certain representations, covenants and agreements between
      the Company and the Subscriber with respect to the offering (the “Offering”) for
      sale by the Company of up to 1,350,000 shares (the “Shares”) of common stock,
      par value $0.01 per share (the “Common Stock”), as described in the Company’s
      Confidential Private Placement Memorandum dated July 25, 2006, as
      supplemented (the “Memorandum”), a copy of which has been delivered to the
      Subscriber. The Shares are being offered by the Company through Johnson
      Rice & Company, L.L.C., as the Company’s managing placement agent (the
“Placement Agent”).

     

    1.  Subscription.
      Subject
      to the terms and conditions hereof, the Subscriber hereby irrevocably subscribes
      for and agrees to purchase from the Company the number of Shares set forth
      under
      the Subscriber’s name on the signature page hereto at a purchase price of $[__]
      per share (the “Offering Price”), and the Company agrees to sell such Shares to
      the Subscriber at the Offering Price, subject to the Company’s right to sell to
      the Subscriber such lesser number of Shares as the Company may, in its sole
      discretion, deem necessary or desirable.

     

    2.  Delivery
      of Subscription Amount; Acceptance of Subscription; Delivery of
      Shares.
      The
      Subscriber understands, acknowledges and agrees that this subscription is made
      subject to the following terms and conditions:

     

    (a)  The
      Subscriber understands that separate subscription agreements may be executed
      with other Subscribers for any remaining Shares to be sold in the
      Offering;

     

    (b)  The
      Subscriber must be an institution that is (i) a “qualified institutional buyer”
within the meaning of Rule 144A under the Securities Act of 1933, as amended
      (the “Securities Act”), that (A) did not attend, participate in, listen to or
      view (in each case, whether in person or via webcast, whether live or via replay
      or other delayed transmission or otherwise) any investment conferences at which
      the Company made presentations (including the viewing or listening to the
      Company’s presentation for such conference) within the 30 days prior to the date
      on which such Subscriber was first contacted by the Company or the Agent in
      connection with the proposed purchase of Shares in the Offering and (B) has
      a
      prior substantive relationship with either the Company or the Agent prior to
      the
      date the Agent
      or the
      Company first contacted such Subscriber regarding the Offering or any such
      conference or presentation; or (ii) an “accredited investor” within the meaning
      of Rule 501(a)(1), (2), (3), (7) or (8) of Regulation D under the Securities
      Act
      that (A) is a current security holder of the Company or has been a security
      holder of the Company within the 12 months prior to the date the Agent or the
      Company first contacted such Subscriber regarding the Offering (but not, in
      either case, someone who only became a securityholder within 30 days of such
      date) and (B) has
      a
      prior substantive relationship with either the Company or the Agent prior to
      the
      date the Agent
      or the
      Company first contacted such Subscriber regarding the Offering.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (c)  Contemporaneously
      with the completion, execution and delivery of this Agreement, the Subscriber
      shall complete, execute and deliver, in accordance with the instructions set
      forth on Exhibit
      A
      attached
      hereto, the Certificate of Accredited Investor Status attached hereto as
Exhibit
      B
      or the
      Certificate of Qualified Institutional Buyer Status attached hereto as
Exhibit
      C.
      Contemporaneously with or prior to Closing (as defined below), the Subscriber
      shall wire to the Company to hold in a separate, non-interest-bearing account,
      immediately available United States funds in the amount equal to the Offering
      Price multiplied by the number of Shares for which the Subscriber has subscribed
      (the “Subscription Amount”) in accordance with the instructions set forth on
Exhibit
      A
      attached
      hereto;

     

    (d)  The
      Company is offering for sale up to 1,350,000 Shares at the Offering Price,
      for
      an aggregate of up to $[_____];

     

    (e)  The
      Subscriber shall have the right to cancel the Subscriber’s subscription and
      withdraw the proceeds representing the Subscription Amount at any time during
      the Offering if the Closing shall not have occurred prior to August 8,
      2006;

     

    (f)  The
      subscription for Shares shall be deemed to be accepted only when this Agreement
      has been signed by an authorized executive officer of the Company, on behalf
      of
      the Company. The deposit of the Subscription Amount for clearance will not
      be
      deemed an acceptance of this Agreement;

     

    (g)  The
      Subscriber understands and acknowledges that (i) the Company has the
      unconditional right, exercisable in its sole and absolute discretion, to accept
      or reject the Subscriber’s subscription for Shares, in whole or in part, (ii)
      subscriptions need not be accepted by the Company in the order received by
      the
      Company, (iii) all subscriptions are subject to prior sale, withdrawal,
      modification or cancellation of the Offering by the Company, (iv) no
      subscription shall be valid unless and until accepted by the Company, (v) the
      Subscriber’s subscription for Shares shall be deemed to be accepted by the
      Company only when this Agreement is signed by an authorized executive officer
      of
      the Company, on behalf of the Company, (vi) the Company shall have the right
      to
      allocate Shares among the Subscribers in any manner it may desire; provided,
      however, that no Subscriber shall be obligated to purchase more than the number
      of Shares set forth under its name on the signature page hereto without its
      prior written consent, and (vii) notwithstanding anything in this Agreement
      to
      the contrary, the Company shall have no obligation to issue Shares to any person
      to whom the issuance of Shares would constitute a violation of the Securities
      Act or any state securities laws;

     

    (h)  The
      payment of the Subscription Amount (or, in the case of rejection of a portion
      of
      the Subscriber’s subscription, the part of the payment relating to such rejected
      portion) will be returned promptly, without interest, if the Subscriber’s
      subscription is rejected in whole or in part or if the Offering is withdrawn
      or
      canceled;

     

    (i)  Certificates
      representing the Shares purchased will be issued in the name of each Subscriber
      as soon as reasonably practicable on or after Closing as set forth under Section
      3 hereof;

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    (j)  The
      Offering is being conducted on a “best efforts” basis, and the Company is not
      required to accept any minimum aggregate amount of subscriptions before
      conducting a Closing; and

     

    (k)  The
      representations and warranties of the Company and the Subscriber set forth
      herein shall be true and correct as of the date that the Company accepts this
      subscription.

     

    3.  Terms
      of Subscription.

     

    (a)  The
      subscription period will begin as of July 25, 2006 and will terminate at
      11:59 p.m. Eastern Time on July 27, 2006, unless extended by the
      Company, on one or more occasions for up to an additional 60 days (the
“Termination Date”), which extension may be effected without notice to the
      Subscribers. The purchase and sale of the Shares (the “Closing”) shall occur as
      soon as practicable after the execution of this Agreement by the Company and
      each of the Subscribers in the Offering at a time (the “Closing Date”) and
      location agreed upon by the Company and the Placement Agent. As soon as
      reasonably practicable on or after the Closing Date, the Company will deliver
      or
      cause to be delivered, one or more physical certificates representing the Shares
      purchased by each Subscriber.

     

    (b)  In
      consideration of the Placement Agent’s services rendered to the Company as its
      managing placement agent in connection with the Offering, the Company will
      pay
      the Placement Agent a fee equal to four percent (4%) of the gross proceeds
      received by the Company in connection with the sale of Shares in the Offering.
      The Subscriber understands that the Company will also reimburse up to $35,000
      of
      the Placement Agent’s expenses in connection with the Offering as previously
      agreed upon by the Company and the Placement Agent. 

     

    4.  Registration
      Rights.

     

    (a)  Within
      30
      days after the Closing Date, or within such 30-day period as extended by such
      additional number of days as are attributable to any delay caused by any act
      or
      failure to act by any of the Subscribers or their counsel, the Company shall
      use
      its commercially reasonable best efforts to prepare and file with the Securities
      and Exchange Commission (the “SEC”), a registration statement (the “Registration
      Statement”) and such other documents as may be necessary or appropriate in the
      opinion of counsel for the Company and shall use its commercially reasonable
      best efforts to have such Registration Statement declared effective as soon
      as
      practicable after the filing date in order to comply with the provisions of
      the
      Securities Act, so as to permit the registered resale or other disposition
      of
      the Shares for a period of two (2) years following the Closing Date by each
      and
      every holder of Shares sold in the Offering except for those holders who
      designate on the signature page hereto that they do not wish to have their
      Shares included in the Registration Statement. The Shares that are registered
      for resale under such Registration Statement are referred to herein as the
      “Offering Shares,” and the Subscribers who are eligible to sell their Shares
      under such Registration Statement, together with their respective affiliates,
      are hereafter referred to as “Offering Holders.” The Company will include in
      such Registration Statement (i) the information required under the Securities
      Act to be so included concerning the Offering Holders, as provided by the
      Offering Holders on the signature pages to this Agreement and the other
      Subscription and Registration Rights Agreements entered into in connection
      with
      the Offering, including the information specified by Items 507 and 508 of


     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    Regulation
      S-K under the Securities Act and any changes in such information that may be
      provided by the Offering Holders in writing to the Company from time to time,
      and (ii) a section entitled “Plan of Distribution,” substantially in the form of
Exhibit
      D
      attached
      hereto (with such changes thereto as may be required by the SEC or otherwise
      as
      may be required to comply with applicable law or regulation), that describes
      the
      various procedures that may be used by the Offering Holders in the sale of
      Offering Shares.

     

    (b)  In
      the
      event that the Company does not file a Registration Statement to register the
      Offering Shares with the SEC within thirty (30) days following the closing
      of
      the Offering, the Company will be required to pay liquidated damages to each
      Offering Holder equal to two percent (2%) of such Offering Holder’s purchase
      price ($[__] per Share) for the Offering Shares, and an additional two percent
      (2%) of such Offering Holder’s purchase price ($[__] per Share) for the Offering
      Shares for each additional 30-day period during which such Registration
      Statement is not filed (with such initial and subsequent 30-day periods being
      extended by such additional number of days as are attributable to any delay
      caused by any act or failure to act by any of the Subscribers or their counsel).
      In the event such Registration Statement is not declared effective under the
      Securities Act by the SEC within 120 days following the date on which it is
      filed with the SEC, the Company will be required to pay liquidated damages
      to
      each Offering Holder equal to two percent (2%) of such Offering Holder’s
      purchase price ($[__] per Share) for the Offering Shares, and an additional
      two
      percent (2%) of such Offering Holder’s purchase price ($[__] per Share) for the
      Offering Shares for each additional 30-day period during which such Registration
      Statement is not declared effective by the SEC (with such 120-day period and
      30-day periods being extended by such additional number of days as are
      attributable to any delay caused by any act or failure to act by any of the
      Subscribers or their counsel).

     

    (c)  Notwithstanding
      the foregoing provisions of this Section 4, the Company may voluntarily suspend
      the effectiveness of any such Registration Statement for a limited time or
      may
      otherwise require the discontinuance of offers and transfers under the
      Registration Statement, which in no event shall be longer than 30 days in any
      three-month period and no longer than 60 days in any twelve month period, if
      (i)
      the Company has been advised by counsel or underwriters to the Company that
      the
      offering of any Offering Shares pursuant to the Registration Statement would
      materially adversely affect, or would be improper in view of (or improper
      without disclosure in a prospectus), a proposed financing, a reorganization,
      recapitalization, merger, consolidation, or other transaction involving the
      Company or (ii) any event occurs that would cause any such Registration
      Statement to contain a material misstatement or omission or not to be effective
      and usable during the period that such Registration Statement is required to
      be
      effective and usable (in either case, a “Suspension”). If the Company shall
      require any Suspension in excess of the time periods set forth above, the
      Company will be required at the commencement of each 30-day period of Suspension
      in excess of the time periods permitted by the preceding sentence to pay
      liquidated damages to each Offering Holder equal to two percent (2.0%) of such
      Offering Holder’s purchase price ($[___] per share) for the Shares held by such
      Offering Holder at the termination of such Suspension by the Company. Any days
      for which the penalty in the foregoing sentence is payable shall not be counted
      towards any future Suspension periods permitted by the first sentence of this
      paragraph. The Company shall notify all Offering Holders of any Suspension
      and,
      upon receipt of such notice, each such Offering Holder will discontinue any
      offers or transfers sales of Offering Shares pursuant to the Registration
      Statement until such Offering Holder has received copies of a 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    supplemented
      or amended prospectus or until such Offering Holder is advised in writing by
      the
      Company that the then current prospectus may be used. In the event of a
      Suspension as described in clause (ii) above, the Company shall promptly notify
      the Offering Holders to that effect and, if requested, the Offering Holders
      shall immediately cease making offers or transfers of Offering Shares and return
      all prospectuses to the Company. The Company shall promptly file a supplement
      or
      an amendment to the Registration Statement or a document incorporated by
      reference into the Registration Statement to correct such misstatement or
      omission and use its commercially reasonable best efforts to cause any such
      amendment to be declared effective as soon as practicable thereafter. The
      Company shall promptly provide the Offering Holders with revised prospectuses
      and, following receipt of the revised prospectuses, the Offering Holders shall
      be free to resume making offers of the Offering Shares. Notwithstanding any
      provision contained herein to the contrary, the Company’s obligation to include,
      or continue to include, Offering Shares in the Registration Statement under
      this
      Section 4 shall terminate to the extent all such Offering Shares are eligible
      for resale under Rule 144(k) promulgated under the Securities Act.

     

    (d)  If
      and
      whenever the Company is required by the provisions of this Agreement to use
      its
      commercially reasonable best efforts to effect the registration of the Offering
      Shares under the Securities Act for the account of an Offering Holder, the
      Company will, in addition, as promptly as practicable:

     

    (i)  use
      commercially reasonable best efforts to prepare and file with the SEC, promptly
      upon the reasonable request of any Subscriber, such amendments and supplements
      to such Registration Statement and the prospectus used in connection therewith
      as may be necessary to keep such Registration Statement effective and to comply
      with the requirements of the Securities Act and the rules and regulations
      promulgated by the SEC thereunder relating to the sale or other disposition
      of
      the securities covered by such Registration Statement;

     

    (ii)  furnish
      to each Offering Holder such numbers of copies of a prospectus, complying with
      the requirements of the Securities Act, and such other documents as such
      Offering Holder may reasonably request in order to facilitate the public sale
      or
      other disposition of the Offering Shares owned by such Offering Holder, but
      such
      Offering Holder shall not be entitled to use any selling materials other than
      a
      prospectus and such other materials as may be approved by the Company, which
      approval will not be unreasonably withheld; and

     

    (iii)  if
      and
      while the Company is eligible to use Form S-3 and such Registration Statement
      is
      on Form S-1, use commercially reasonable best efforts to convert such
      Registration Statement on Form S-1 to Form S-3, as permitted by applicable
      rules
      of the SEC.

     

    (e)  At
      any
      time when a prospectus relating to the Offering is required to be delivered
      under the Securities Act:

     

    (i)  the
      Company will notify the Offering Holder, upon the awareness of an executive
      officer of the Company, if the prospectus included in such Registration


     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    Statement,
      as then in effect, includes an untrue statement of material fact or omits to
      state a material fact required to be stated therein or necessary to make the
      statements therein not misleading in light of the circumstances then existing.
      Upon receipt of such notice, the Offering Holders will make no further sales
      or
      other dispositions, or offers therefor, of Offering Shares under the
      Registration Statement until they receive from the Company copies of a new,
      amended or supplemented prospectus complying with the Securities Act or until
      the Company has filed an appropriate report with the SEC pursuant to the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”) or at such time
      if the Company is eligible to use Form S-3 that is incorporated by reference
      into the Prospectus, which filing shall be made as promptly as reasonably
      practicable; and

     

    (ii)  the
      Subscriber will notify the Company of the happening of any event relating to
      the
      Subscriber as a result of which the prospectus included in such Registration
      Statement, as then in effect, includes an untrue statement of material fact
      or
      omits to state a material fact required to be stated therein or necessary to
      make the statements therein not misleading in light of the circumstances then
      existing, and the Subscriber shall promptly make available to the Company
      information necessary to enable the Company to prepare a new, amended or
      supplemented prospectus or to file an appropriate report with the SEC pursuant
      to the Exchange Act which preparation or filing shall be made as soon as
      reasonably practicable. 

     

    (f)  
      The
      Subscriber agrees not to take any action with respect to any distribution deemed
      to be made pursuant to such Registration Statement that constitutes a violation
      of Regulation M under the Exchange Act or any other applicable rule, regulation
      or law. 

     

    (g)  The
      Subscriber acknowledges and agrees that in the event of sales under a
      Registration Statement pursuant to this Agreement, the Offering Shares sold
      pursuant to such Registration Statement are not transferable on the books of
      the
      Company unless the share certificate submitted to the transfer agent evidencing
      such Offering Shares is accompanied by a certificate reasonably satisfactory
      to
      the Company to the effect that (A) the Offering Shares have been sold in
      accordance with such Registration Statement and (B) the requirement of
      delivering a current prospectus has been satisfied.

     

    (h)  The
      Subscriber
      acknowledges
      and
      agrees that it will keep confidential all nonpublic information it receives
      in
      connection with this Agreement and
      that
      such information be neither used for the Subscriber’s personal benefit (other
      than in connection with the subscription) nor disclosed to any third party
      for
      any reason.
      This
      shall include, without limitation, the
      receipt of any notice of any suspension of the offering and sale of the Offering
      Shares pursuant to the provisions of Section 4(c) hereof in the event the
      Company notifies the Subscriber that such notice constitutes material nonpublic
      information; provided, however, that the number of days during which the
      Subscriber must keep confidential such information or any other information
      it
      receives from the Company in connection with this Agreement that the Company
      designates as material nonpublic information shall be counted toward the
      satisfaction of the 30- and 60-day periods of voluntary suspension set forth
      in
      Section 4(c) (with any such days prior to the date of effectiveness of the
      Registration Statement being counted toward the satisfaction of the voluntary
      suspension periods during the first 30 days or 12 months, as the case may be,
      following effectiveness). This Section 4(h) shall not apply to any information
      that is or 

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    becomes
      publicly available through no fault of the Subscriber or that the Subscriber
      is
      legally required to disclose by a governmental entity or other third party;
      provided, however, that if the Subscriber is requested or ordered to disclose
      any such information pursuant to any court or other government order or any
      other applicable legal procedure, it shall cooperate with the Company and
      provide the Company with prompt notice of any such request or order, unless
      the
      Subscriber is legally prohibited from providing such notice, in time sufficient
      to enable the Company to seek an appropriate protective order.

     

    (i)  Except
      as
      provided below in this Section 4, the expenses incurred by the Company in
      connection with action taken by the Company to comply with this Section 4,
      including, without limitation, all registration and filing fees, printing and
      delivery expenses, accounting fees, fees and disbursements of counsel to the
      Company, consultant and expert fees, premiums for liability insurance, if the
      Company chooses to obtain such insurance, obtained in connection with a
      registration statement filed to effect such compliance and all expenses,
      including counsel fees, of complying with any state securities laws, shall
      be
      paid by the Company; provided, however, that each Offering Holder shall bear
      its
      own selling expenses, brokerage fees, commissions and similar payments and
      transfer taxes attributable to the Offering Shares being sold by such Offering
      Holder and shall bear fees and expenses of its own counsel and other advisors,
      if any.

     

    (j)  In
      the
      event of any registration of Shares pursuant to this Section 4, the Company
      will, to the maximum extent permitted by law, indemnify and hold harmless each
      Offering Holder and each person, if any, who controls an Offering Holder within
      the meaning of Section 15 of the Securities Act (collectively, the “Holder
      Indemnified Parties”) against any losses, claims, damages, or liabilities, joint
      or several, to which any of such Holder Indemnified Parties may become subject
      under the Securities Act or otherwise, insofar as such losses, claims, damages
      or liabilities (or actions in respect thereof) are caused by any untrue
      statement of any material fact contained in the registration statement, any
      prospectus contained therein, or any amendment or supplement thereof, or arising
      out of or based upon the omission to state therein a material fact required
      to
      be stated therein or necessary to make the statements therein not misleading
      and
      will reimburse such Holder Indemnified Parties for any reasonable legal or
      other
      expenses they incur in connection with investigating or defending against any
      such loss, claim, damage, liability or action; provided, however, that the
      Company will not be liable to the extent that any such loss, claim, damage,
      expense or liability arises out of, or is based upon, an untrue statement or
      alleged untrue statement or omission or alleged omission so made in conformance
      with information that has been furnished in writing by such Holder Indemnified
      Party in accordance with Section 5(m) hereof; and, provided further, that the
      Company shall not be required to provide such indemnification if such loss,
      claim, damage or liability (or action in respect thereof) arises out of or
      is
      based upon an untrue statement or alleged untrue statement or omission or
      alleged omission made in any final prospectus and if, in respect to such
      statement, alleged statement, omission or alleged omission, a more current
      prospectus corrected such statement or omission and was delivered to the
      Offering Holder and a copy of such more current prospectus had not been sent
      or
      given at or prior to the confirmation of the sale with respect to which such
      loss, claim, damage, expense or liability relates. The indemnification provided
      for herein shall be applicable, regardless of whether any such losses, claims,
      damages, or liabilities result solely or in part from the active, passive or
      concurrent negligence or strict liability of the indemnitee.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (k)  In
      the
      event of any registration of Shares pursuant to this Section 4, the Subscriber
      will, to the maximum extent permitted by law, indemnify and hold harmless the
      Company, each of its directors, each of its officers who has signed the
      Registration Statement, and each person, if any, who controls the Company,
      within the meaning of the Securities Act (collectively, the “Company Indemnified
      Persons”), against any loss, claim, damage or liability of which the Company or
      any such Company Indemnified Person may be or become subject under the
      Securities Act or otherwise, insofar as such loss, claim, damage or liability
      (or action in respect thereof) is caused by any untrue statement of any material
      fact contained in the Registration Statement, such prospectus, or amendment
      or
      supplement thereof, or arises out of or is based upon the omission to state
      therein a material fact required to be stated therein or necessary to make
      the
      statements therein not misleading, or arises out of or is based on any failure
      by the Subscriber to comply with the covenants or agreements contained in this
      Agreement with respect to Offering Shares, in each case to the extent, but
      only
      to the extent, that such untrue statement or alleged untrue statement or
      omission or alleged omission relates to the information that has been furnished
      in writing by such Subscriber in accordance with Section 5(m) hereof and will
      reimburse such Company Indemnified Person for any reasonable legal or other
      expenses they incur in connection with investigating or defending against any
      such loss, claim, damage, liability or action. The indemnification provided
      for
      herein shall be applicable, regardless of whether any such losses, claims,
      damages, or liabilities result solely or in part from the active, passive or
      concurrent negligence or strict liability of the indemnitee.

     

    (l)  Promptly
      after receipt by a Company Indemnified Party or a Holder Indemnified Party
      as
      described in Section 4(j) or 4(k) hereof of notice of the commencement of
      any action, such indemnified party will, if a claim thereof is to be made
      against the indemnifying party pursuant thereto, notify the indemnifying party
      of the commencement thereof, but the omission to notify the indemnifying party
      will not relieve it from any liability which it may have to any indemnified
      party except to any extent to which the indemnifying party is actually
      prejudiced thereby. In case such action is brought against any indemnified
      party, and it notifies the indemnifying party of the commencement thereof,
      the
      indemnifying party will be entitled to participate in, and, to the extent that
      it may wish, jointly with any other indemnifying party, similarly notified,
      to
      assume the defense thereof, with counsel reasonably satisfactory to such
      indemnified party. An indemnified party shall not be liable for any settlement
      of an action or claim effected without its written consent (which shall not
      be
      unreasonably withheld or delayed). An indemnifying party who is entitled to,
      or
      elects to, assume the defense of a claim shall have the right to employ its
      counsel in such claim or action, unless in the reasonable judgment of any
      indemnified party a conflict of interest may exist between such indemnified
      party and any other of such indemnified parties with respect to such claim
      that
      makes the representation by such counsel inappropriate, in which case the
      indemnifying party shall select separate counsel for such indemnified party
      reasonably acceptable to such indemnified party; provided, however, that the
      indemnifying party will not be obligated to pay the fees and expenses of more
      than one counsel (other than local counsel as reasonably required) for all
      parties indemnified by such indemnifying party with respect to such
      claim.

     

    (m)  If
      the
      indemnification provided for in Section 4(j) or Section 4(k) hereof is
      unavailable to an indemnified party thereunder in respect to any losses, claims,
      damages, liabilities or expenses referred to therein, then each indemnifying
      party, in lieu of indemnifying such indemnified party, shall contribute to
      the
      amount paid or payable by such indemnified party 

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    as
      a
      result of such losses, claims, damages, liabilities or expenses in such
      proportion as is appropriate to reflect the relative fault of the Company,
      on
      the one hand, and all shareholders offering securities via the Registration
      Statement (the “Selling Shareholders”), on the other hand, in connection with
      the statements or omissions that resulted in such losses, claims, damages,
      liabilities or expenses, as well as any other relevant equitable considerations.
      The relative fault of the Company on the one hand and the Selling Shareholders
      on the other shall be determined by reference to, among other things, whether
      the untrue or alleged untrue statement of material facts or the omission or
      alleged omission to state a material fact relates to information supplied by
      the
      Company or by the Selling Shareholders and the parties’ relative intent,
      knowledge, access to information and opportunity to correct such statement
      or
      omission. The Company and the Selling Shareholders agree that it would not
      be
      just and equitable if contribution pursuant to this Section 4(m) were based
      solely on the number of entities from whom contribution was requested or by
      any
      other method of allocation that does not take account of the equitable
      considerations referred to above in this Section 4(m). The amount paid or
      payable by an indemnified party as a result of the losses, claims, damages,
      expenses and liabilities referred to above in this Section 4(m) shall be deemed
      to include any legal or other expenses reasonably incurred by such indemnified
      party in connection with investigating or defending any such action or claim,
      subject to the provisions of Section 4(l) hereof. No person guilty of fraudulent
      misrepresentation (within the meaning of Section 11(f) of the Securities Act)
      shall be entitled to contribution from any person who was not guilty of such
      fraudulent misrepresentation.

     

    (n)  Notwithstanding
      any other provision of this Agreement, the liability of the Subscriber for
      indemnification or contribution under this Agreement shall not exceed an amount
      equal to the number of Shares sold by the Subscriber under the Registration
      Statement multiplied by the net amount per Share received in such sale(s).
      The
      indemnification and contribution provided for under this Agreement shall remain
      in full force and effect regardless of any investigation made by or on behalf
      of
      the indemnified party or any officer, director or controlling person of such
      indemnified party and shall survive the transfer of securities.

     

    (o)  The
      Company agrees to file, within the time period provided by applicable rules
      of
      the NASDAQ Stock Market, a notification form relating to the listing the Shares
      on that market.

     

    (p)  The
      Subscriber acknowledges that the Company is a party to (a) that certain Amended
      and Restated Registration Rights Agreement dated as of December 15, 1999 with
      the purchasers named therein and (b) that certain Registration Rights Agreement
      dated as of February 20, 2002 with the purchasers named therein (the purchasers
      named in these two agreements, collectively, the “Prior Purchasers”) pursuant to
      which the Company has granted the Prior Purchasers certain registration rights
      and agreed upon specified restrictions to the Company’s grant of registration
      rights to subsequent shareholders. The Subscriber also acknowledges that the
      Company may grant purchasers (“Future Purchasers”) in a subsequent offering of
      additional shares of Common Stock certain registration rights prior to the
      filing of the Registration Statement. The Subscriber acknowledges and agrees
      that the Company may include the registrable securities of such Prior Purchasers
      and Future Purchasers and shares to be sold be the Company in the Registration
      Statement required by this Section 4 and that no Subscriber shall have the
      right
      to include its Offering Shares in any registration or underwriting initiated
      by


     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    the
      Prior
      Purchasers or, except as specifically contemplated by Section 4(a) hereof,
      by
      the Company.

     

    (q)  The
      Company agrees to use its commercially reasonable best efforts, upon resale
      of
      the Offering Shares (“Resold Shares”) by an Offering Holder pursuant to an
      effective Registration Statement, to deliver to such Offering Holder a
      certificate evidencing such Resold Shares free of any restrictive legends or
      to
      provide required letters of instruction within three business days of the
      Company’s receipt from the Offering Holder of notice of such resale; provided,
      that no such delivery relating to Resold Shares shall be required until the
      Company has received from the Offering Holder any reasonably required legal
      opinion, transfer taxes, if any, or any other such documentation.

     

    5.  Representations
      and Warranties of the Subscriber.
      The
      Subscriber hereby represents and warrants to, and covenants and agrees with,
      each of the Company and the Placement Agent as follows:

     

    (a)  The
      Subscriber is acquiring the Shares for its own account and for the purpose
      of
      investment and not with a view to, or for resale in connection with, any
      distribution or public offering thereof within the meaning of the Securities
      Act
      and applicable state securities laws.

     

    (b)  The
      Subscriber understands that:

     

    (i)  
      the
      Shares (A) and the offering relating to the Shares have not been registered
      under the Securities Act or any state securities laws, (B) will be issued in
      reliance upon an exemption from the registration and prospectus delivery
      requirements of the Securities Act pursuant to Section 4(2) and/or Regulation
      D
      thereof, (C) will be issued in reliance upon exemptions from the registration
      and prospectus delivery requirements of state securities laws which relate
      to
      private offerings, and (D) it will not have the protection of Section 11 of
      the
      Securities Act;

     

    (ii)  the
      Subscriber must therefore bear the economic risk of such investment indefinitely
      unless a subsequent disposition thereof is registered under the Securities
      Act
      and applicable state securities laws or is exempt therefrom;

     

    (iii)  such
      exemptions depend upon, among other things, the bona fide nature of the
      investment intent of the Subscriber expressed herein;

     

    (iv)  any
      transfer of participations in the Shares or any arrangement for an economic
      interest in the Shares to be held or owned by anyone other than the Subscriber
      will constitute a violation of this representation and will be null and void;
      and

     

    (v)  the
      Company is not assuming any obligation to repurchase or, except as expressly
      set
      forth herein, to register the transfer of any portion of the Shares under the
      Securities Act or under any state securities law;

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (c)  The
      Subscriber acknowledges that the certificates representing the Shares acquired
      by the Subscriber shall bear a restrictive legend substantially as follows
      and
      agrees to comply with the terms of the restrictive legend:

     

    “THE
      SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER
      UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND STATE SECURITIES LAWS, AND
      MAY
      NOT BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE
      DISPOSED OF UNLESS (I) REGISTERED UNDER THE APPLICABLE SECURITIES LAWS OR (II)
      AN OPINION OF COUNSEL, WHICH OPINION AND COUNSEL ARE BOTH REASONABLY
      SATISFACTORY TO THE COMPANY, HAS BEEN DELIVERED TO THE COMPANY AND SUCH OPINION
      STATES THAT THE SHARES MAY BE TRANSFERRED WITHOUT SUCH REGISTRATION.
      ADDITIONALLY, THE TRANSFER OF SUCH SHARES IS SUBJECT TO COMPLIANCE WITH THE
      TERMS OF AN AGREEMENT WITH THE COMPANY DATED JULY 25, 2006, AND NO TRANSFER
      OF SUCH SHARES WILL BE VALID WITHOUT SUCH COMPLIANCE. A COPY OF SUCH AGREEMENT
      WILL BE PROVIDED BY THE COMPANY UPON REQUEST.”

     

    (d)  The
      Subscriber will not sell or transfer the Shares unless:

     

    (i)  there
      is
      then in effect a Registration Statement under the Securities Act covering such
      proposed disposition and such disposition is made in accordance with such
      Registration Statement; or

     

    (ii)  it
      shall
      have notified the Company of the proposed disposition and shall have furnished
      the Company with an opinion of counsel, which opinion and counsel both are
      reasonably satisfactory to the Company, that such disposition is exempt from
      registration of such shares under the Securities Act or any applicable state,
      foreign or other securities laws.

     

    (e)  The
      Subscriber has knowledge, skill and experience in financial, business and
      investment matters relating to an investment of this type and is capable of
      evaluating the merits and risks of such investment and protecting the
      Subscriber’s interest in connection with the acquisition of the Shares. The
      Subscriber understands that the acquisition of the Shares is a speculative
      investment and involves substantial risks and that the Subscriber could lose
      the
      Subscriber’s entire investment in the Shares. Further, the Subscriber has
      carefully read and considered the matters set forth under the section entitled
      “Risk Factors” in the Memorandum and has taken full cognizance of and
      understands all of the risks related to the purchase of the Shares. To the
      extent deemed necessary by the Subscriber, the Subscriber has retained, at
      its
      own expense, and relied on, appropriate professional advice regarding the
      investment, tax and legal merits and consequences of purchasing and owning
      the
      Shares. The Subscriber has the 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    ability
      to bear the economic risks of the Subscriber’s investment in the Company,
      including a complete loss of the investment, and the Subscriber has no need
      for
      liquidity in such investment, which investment is not disproportionate to the
      Subscriber’s net worth.

     

    (f)  The
      Subscriber has been furnished by the Company all information (or has been
      provided by the Company access to all information) regarding the business and
      financial condition of the Company, its expected plans for future business
      activities, the attributes of the Shares and the merits and risks of an
      investment in the Shares which the Subscriber has requested or otherwise needs
      to evaluate the investment in the Company.

     

    (g)  The
      Subscriber is in receipt of and has carefully read and understands the following
      items:

     

    (i)  Annual
      Report on Form 10-K for the fiscal year ended December 31, 2005, filed by the
      Company with the SEC on April 10, 2006, as amended by that certain Form
      10-K/A filed by the Company with the SEC on April 11, 2006;

     

    (ii)  Definitive
      Proxy Statement on Schedule 14A filed by the Company with the SEC on May 1,
      2006;

     

    (iii)  Quarterly
      Report on Form 10-Q for the fiscal quarter ended March 31, 2006 filed by the
      Company with the SEC on May 10, 2006;

     

    (iv)  Current
      Reports on Form 8-K filed by the Company with the SEC on May 30, 2006 and
      June 20, 2006; and

     

    (v)  Confidential
      Private Placement Memorandum, dated July 25, 2006, the supplement thereto
      and the items attached thereto (the Memorandum, collectively with Attachments
      (A) through (E) thereto and together with all exhibits with those Attachments
      and incorporated by reference therein, the “Disclosure Documents”).

     

    (h)  In
      making
      the proposed investment decision, the Subscriber is relying solely on
      investigations made by the Subscriber and the Subscriber’s representatives, if
      any, and not on the Company, the Placement Agent or their respective counsel
      for
      an evaluation of the investment, tax and legal merits and consequences of
      purchasing and owning the Shares. The Subscriber acknowledges that the documents
      and other information listed in Section 5(g) hereof are the only information
      provided to the Subscriber by the Company or the Placement Agents and that
      the
      Subscriber is not relying on any other information in making the proposed
      investment decision. The offer to sell the Shares was communicated to the
      Subscriber in such a manner that the Subscriber was able to ask questions of
      and
      receive answers from the management of the Company concerning the terms and
      conditions of the proposed transaction.

     

    (i)  No
      securities were offered or sold to the Subscriber by means of any form of
      general solicitation or general advertising contemplated by Rule 502(c) under
      the Securities Act including, but not limited to, any advertisement, article,
      leaflet, public promotional meeting, notice or other communication published
      in
      any newspaper, magazine or similar media or broadcast over television or radio
      or presented at any seminar or meeting or any other form of general public
      advertising or solicitation. Without limiting the generality of the foregoing,
      the 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Subscriber
      confirms that it has a prior substantive relationship with either the Company
      or
      the Placement Agent that preexists the transactions contemplated hereby. No
      presentation or meeting at any investor conference or similar activity nor
      registration statement of the Company constituted a general solicitation as
      to
      the offering of Common Stock to Subscribers or played a role in Subscriber’s
      investment in the Shares. The Subscriber understands that the Company’s two
      prior Registration Statements on Form S-3 were withdrawn effective June 21,
      2006.

     

    (j)  The
      Subscriber acknowledges that statements the Company has made in the Disclosure
      Documents and other information the Subscriber has received, if any, including
      oral statements, include forward-looking statements about the Company’s future
      business operations, financial projections and other matters. Those statements
      speak only as of the date made, are not guarantees of future financial
      performance and involve known and unknown risks and other factors that could
      case actual results to be materially different from any future results expressed
      or implied by those statements.

     

    (k)  The
      Subscriber acknowledges that the Subscriber has been advised that:

     

    (i)  The
      Shares offered hereby have not been approved or disapproved by the SEC or any
      state securities commission nor has the SEC or any state securities commission
      passed upon the accuracy or adequacy of any representations by the Company.
      Any
      representation to the contrary is a criminal offense.

     

    (ii)  In
      making
      an investment decision, the Subscriber must rely on its own examination of
      the
      Company and the terms of the Offering, including the merits and risks involved.
      The Shares have not been recommended by any federal or state securities
      commission or regulatory authority. Furthermore, the foregoing authorities
      have
      not confirmed the accuracy or determined the adequacy of any representation.
      Any
      representation to the contrary is a criminal offense.

     

    (iii)  The
      Shares are “Restricted Securities” within the meaning of Rule 144 under the
      Securities Act, are subject to restrictions on transferability and resale and
      may not be transferred or resold except as permitted under the Securities Act
      and applicable state securities laws, pursuant to registration or exemption
      therefrom. The Subscriber is aware that the Subscriber may be required to bear
      the financial risks of this investment for an indefinite period of
      time.

     

    (l)  The
      Subscriber acknowledges and is aware that there has never been any
      representation, guarantee or warranty made by the Company or the Placement
      Agents or any officer, director,
      employee or agent or representative of the Company or the Placement Agents,
      expressly or by implication, as to (i) the approximate or exact length of time
      that the Subscriber will be required to remain an owner of the Shares; (ii)
      the
      percentage of profit and/or amount of or type of consideration, profit or loss
      to be realized, if any, as a result of this investment; or (iii) that the
      limited past performance (if any) or experience on the part of the Company,
      or
      any future expectations will in any way indicate the predictable results of
      the
      ownership of the Shares or of the overall financial performance of the
      Company.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (m)  The
      Subscriber agrees to furnish the Company and the Placement Agents such other
      information as the Company may reasonably request in order to verify the
      accuracy of the information contained herein and agrees to notify the Company
      and the Placement Agents immediately of any material change in the information
      provided herein that occurs prior to the Company’s acceptance of this Agreement.
      The Subscriber agrees that if the Subscriber is an Offering Holder, it will
      promptly furnish to the Company such information regarding such Offering Holder,
      the Offering Shares and the distribution proposed by such Offering Holder as
      the
      Company may reasonably request in writing or as shall be reasonably required
      in
      connection with any registration, qualification or compliance referred to in
      this Agreement.

     

    (n)  The
      Subscriber further represents and warrants that the Subscriber is
      either:

     

    (i)  an
      institution and an “accredited investor” within the meaning of Rule 501(a)(1),
      (2), (3), (7) or (8) of Regulation D under the Securities Act, as further
      described in the Certificate of Accredited Investor Status attached hereto
      as
Exhibit
      B,
      which
      shall be completed, executed and delivered by the Subscriber to the Company
      or
      the Placement Agent in accordance with the instructions set forth on
Exhibit
      A
      attached
      hereto, that (x) is a current security holder of the Company or has been a
      security holder of the Company within the 12 months prior to the date the
      Placement Agent or the Company first contacted the Subscriber regarding the
      Offering (but not in either case someone who only became a shareholder within
      30
      days of such date) and (y), in either case, has a prior substantive relationship
      with the Company in existence prior to the date the Placement Agent or the
      Company first contacted the Subscriber regarding the Offering; or

     

    (ii)  a
      “qualified institutional buyer” within the meaning of Rule 144A under the
      Securities Act, as further described in the Certificate of Qualified
      Institutional Buyer Status attached hereto as Exhibit
      C,
      which
      shall be completed, executed and delivered by the Subscriber in accordance
      with
      the instructions set forth in Exhibit
      A
      attached
      hereto, that (A) did not attend, participate in, listen to or view (in each
      case, whether in person or via webcast, whether live or via replay or other
      delayed transmission or otherwise) any investment conferences at which the
      Company made presentations (including
      the viewing or listening to the Company’s presentation for such conference)
within
      the 30 days prior to the date on which the Subscriber was first contacted by
      the
      Company or the Placement Agent in connection with the proposed purchase of
      Shares in the Offering and (B) has a prior substantive relationship with either
      the Company or the Placement Agent prior to the date the Placement Agent or
      the
      Company first contacted the Subscriber regarding the Offering or any such
      conference or presentation.

     

    (o)  As
      of the
      date of this Agreement, the Subscriber and its affiliates do not have, and
      during the 30-day period prior to the date of this Agreement the Subscriber
      and
      its affiliates have not entered into, any “put equivalent position” as such term
      is defined in Rule 16a-1 under the Exchange Act or short sale positions with
      respect to the Common Stock. Until the Registration Statement referred to in
      Section 4(a) hereof is declared effective, the Subscriber hereby agrees not
      to,
      and will cause its affiliates not to, enter into any such “put equivalent
      position” or short sale position (1) if that put equivalent or short sale
      position is covered with any 

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    of
      the
      Shares it purchases hereunder or (2) with respect to the Shares that does not
      comply with applicable law and regulation.

     

    (p)  If
      this
      Agreement is executed and delivered on behalf of a partnership, corporation,
      trust, estate or other entity (an “Entity”): (i) such Entity has the full legal
      right and power and all authority and approval required (a) to execute and
      deliver, or authorize execution and delivery of, this Agreement and all other
      instruments executed and delivered by or on behalf of such Entity in connection
      with the purchase of the Shares, (b) to delegate authority pursuant to power
      of
      attorney and (c) to purchase and hold the Shares; (ii) the party signing on
      behalf of such Entity has all authority to make the agreements contained herein
      on behalf of such Entity and the signature of the party signing on behalf of
      such Entity is binding upon such Entity; and (iii) such Entity has not been
      formed for the specific purpose of acquiring the Shares, unless each beneficial
      owner of such Entity is qualified as (A) an accredited investor within the
      meaning of Rule 501(a) of Regulation D promulgated under the Securities Act
      or
      (B) a qualified institutional buyer within the meaning of Rule 144A under the
      Securities Act, and, in each case, has submitted information substantiating
      such
      individual qualification.

     

    (q)  If
      the
      Subscriber is not a United States person, the Subscriber hereby represents
      that
      it has satisfied itself as to the full observance of the laws of its
      jurisdiction in connection with any invitation to subscribe for the Shares
      or
      any use of this Agreement, including, without limitation, (i) the legal
      requirements within its jurisdiction for the purchase of the Shares, (ii) any
      foreign exchange restrictions applicable to such purchase, (iii) any
      governmental or other consents that may need to be obtained and (iv) the income
      tax and other tax consequences, if any, that may be relevant to the purchase,
      holding, redemption, sale or transfer of the Shares. The Subscriber represents
      and warrants that the Subscriber’s subscription and payment for, and the
      Subscriber’s continued beneficial ownership of, the Shares will not violate any
      applicable securities or other laws of the Subscriber’s
      jurisdiction.

     

    (r)  If
      the
      Subscriber is a retirement plan or is investing on behalf of a retirement plan,
      the Subscriber acknowledges that investment in the Shares poses additional
      risks, including, without limitation, the inability to use losses generated
      by
      an investment in the Shares to offset taxable income.

     

    (s)  The
      Subscriber represents and warrants that it is not a broker-dealer or an
      affiliate of a broker-dealer.

     

    (t)  The
      Subscriber has not incurred and will not incur, directly or indirectly, any
      liability for brokerage or finders’ fees or agents’ commissions or any similar
      charges in connection with this Agreement or any transaction contemplated
      hereby.

     

    (u)  The
      Subscriber makes the foregoing representations and warranties with the intent
      that the Company and the Placement Agent and their respective counsel and the
      Company’s transfer agent rely upon them in determining the Subscriber’s
      suitability as an investor and in establishing an exemption from registration
      under the Securities Act and state securities laws for sale of the Shares to
      the
      Subscriber and of other shares to other persons, and the Subscriber understands
      that any inaccuracy of any of its representations and warranties herein could
      affect the Company’s ability to establish an exemption. The Subscriber will not


     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    take
      any
      position inconsistent with any of its representations and warranties. The
      Subscriber hereby agrees that such representations and warranties shall survive
      its purchase of the Shares. The Subscriber understands and agrees that the
      foregoing representations and warranties are for the benefit of the Company
      and
      the Placement Agent and may be waived by the Company in its discretion as to
      the
      Subscriber or any other subscriber for the Shares.

     

    (v)  The
      Subscriber acknowledges that it previously agreed, and the Subscriber hereby
      agrees, to keep confidential and not trade in the Company’s securities on the
      basis of the nonpublic information in the Confidential Private Placement
      Memorandum, including, but not limited to, the fact that the Company is
      considering transactions contemplated by this Agreement.

     

    6.  Representations
      and Warranties of the Company.
      The
      Company hereby represents and warrants to the Subscriber as
      follows:

     

    (a)  Each
      of
      the Company and its subsidiaries is duly incorporated, validly existing and
      in
      good standing under the laws of its state of incorporation, and is duly
      qualified to do business as a foreign corporation in all jurisdictions in which
      the failure to be so qualified would materially and adversely affect the
      business or financial condition, properties or operations of the Company. Each
      of the Company and its subsidiaries has all requisite corporate power and
      authority (i) to own and lease the properties and assets it currently owns
      and
      leases (if any) and it contemplates owning and leasing and (ii) to conduct
      its
      activities as such activities (if any) are currently conducted and as currently
      contemplated to be conducted.

     

    (b)  The
      authorized capital of the Company immediately prior to the Closing will consist
      of: (i) 10,000,000 shares of preferred stock, none of which are issued and
      outstanding, and (ii) 40,000,000 shares of Common Stock, 3,310,364 of which
      were
      issued and outstanding as of July 15, 2006.

     

    (c)  The
      Company has duly authorized the issuance and sale of the Shares in accordance
      with the terms of this Agreement (as described herein) by all requisite
      corporate action, including the authorization by the Company’s Board of
      Directors of the issuance and sale of the Shares in accordance herewith and
      the
      execution, delivery and performance of any other agreements and instruments
      executed in connection herewith. This Agreement constitutes a valid and legally
      binding obligation of the Company, enforceable in accordance with its terms,
      except (i) as limited by applicable bankruptcy, insolvency, reorganization,
      moratorium, and other laws of general application affecting enforcement of
      creditors’ rights generally, (ii) as limited by laws relating to the
      availability of specific performance, injunctive relief, or other equitable
      remedies, and (iii) to the extent the indemnification provisions contained
      herein may be limited by applicable federal or state securities
      laws.

     

    (d)  The
      Shares, when issued and paid for in accordance with this Agreement, will
      represent validly authorized, duly issued and fully paid and nonassessable
      shares of Common Stock of the Company, and the issuance thereof will not
      conflict with the Articles of Incorporation or Bylaws of the Company and will
      be
      in compliance in all material respects with all federal and state securities
      laws applicable to such issuance and sale.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (e)  The
      execution and delivery of this Agreement, the fulfillment of the terms set
      forth
      herein and the consummation of the transactions contemplated hereby will not
      conflict with, or constitute a breach of or default under, any agreement,
      indenture or instrument by which the Company is bound or any law, administrative
      rule, regulation or decree of any court or any governmental body or
      administrative agency applicable to the Company.

     

    (f)  As
      of the
      date of this Agreement, the Disclosure Documents do not contain any untrue
      statement of a material fact or omit to state any material fact required to
      be
      stated therein or necessary in order to make the statements therein, in the
      light of the circumstances under which they were made, not
      misleading.

     

    (g)  The
      Disclosure Documents that have been filed with the SEC, at the time they were
      filed with the SEC, complied in all material respects with the requirements
      of
      the Exchange Act, and, when read together and with the other information in
      the
      Disclosure Documents, do not contain an untrue statement of a material fact
      or
      omit to state a material fact required to be stated therein or necessary in
      order to make the statements therein, in the light of the circumstances under
      which they were made, not misleading.

     

    (h)  Subsequent
      to the dates as of which information is given in the Disclosure Documents,
      except as described therein, or in any SEC filing made after the date thereof,
      there has not been any material adverse change with regard to the assets or
      properties, results of operations or financial condition of the
      Company.

     

    7.  Survival;
      Indemnification.
      All
      representations, warranties and covenants contained in this Agreement and the
      indemnification contained in this Section 7 shall survive (i) the acceptance
      of
      this Agreement by the Company and (ii) changes in the transactions, documents
      and instruments described herein which are not material or which are to the
      benefit of the Subscriber. The Subscriber acknowledges and understands the
      meaning and legal consequences of the representations, warranties and covenants
      in Section 5 hereof and that the Company and the Placement Agent have relied
      upon such representations, warranties and covenants in determining the
      Subscriber’s qualification and suitability to purchase the Shares. The
      Subscriber hereby agrees to indemnify, defend and hold harmless the Company,
      the
      Placement Agent and their respective officers, directors, employees, agents
      and
      controlling persons from and against any and all losses, claims, damages,
      liabilities, expenses (including attorneys’ fees and disbursements), judgments
      or amounts paid in settlement of actions arising out of or resulting from the
      untruth of any representation of the Subscriber herein or the breach of any
      warranty or covenant herein by the Subscriber. Notwithstanding the foregoing,
      however, no representation, warranty, covenant or acknowledgment made herein
      by
      the Subscriber shall in any manner be deemed to constitute a waiver of any
      rights granted to it under the Securities Act or state securities
      laws.

     

    8.  Notices.
      All
      notices and other communications provided for herein shall be in writing and
      shall be deemed to have been duly given if delivered personally or sent by
      registered or certified mail, return receipt requested, postage prepaid, or
      sent
      by reputable overnight carrier, charges prepaid or upon confirmation if
      delivered by facsimile:

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (a)  if
      to the
      Company, to the following address:

     

    Carrizo
      Oil & Gas, Inc.

    1000
      Louisiana, Suite 1500

    Houston,
      Texas 77002

    Attn: Paul
      F.
      Boling

    Chief
      Financial Officer

    Fax: (713)
      358-6473

     

    (b)  if
      to the
      Subscriber, to the address set forth on the signature page hereto or at such
      other address as any party shall have specified by notice in writing to the
      others.

     

    (c)  if
      to the
      Placement Agents, to the following address:

     

    Johnson
      Rice & Company LLC

    639
      Loyola Avenue, Suite 2775

    New
      Orleans, LA 70113

    Attn: Joshua
      C.
      Cummings

    Phone: (504)
      584-1247

    Fax: (504)
      566-0742

     

    9.  Notification
      of Changes.
      The
      Subscriber agrees and covenants to notify the Company and the Placement Agents
      immediately upon the occurrence of any event prior to the consummation of the
      Offering that would cause any representation, warranty, covenant or other
      statement contained in this Agreement to be false or incorrect or of any change
      in any statement made herein occurring prior to the consummation of the
      Offering.

     

    10.  Assignability.
      This
      Agreement and the rights granted hereunder are assignable or transferable by
      the
      Subscriber only if (i) such transfer or assignment may otherwise be effected
      in
      accordance with applicable securities laws, (ii) such assignee or transferee
      acquires at least 50,000 Shares from the Subscriber (subject to appropriate
      adjustment for any stock splits, dividends, subdivisions, combinations,
      recapitalizations and the like) and (iii) the Subscriber notifies the Company
      in
      writing of the transfer or assignment, stating the name and the address of
      the
      transferee or assignee and identifying the securities with respect to which
      such
      registration rights are being transferred or assigned, and the assignee or
      transferee agrees in writing to be bound by the provisions of this Agreement.
      This Agreement and the rights granted hereunder may not be modified, waived
      or
      terminated except by an instrument in writing signed by the party against whom
      enforcement of such modification, waiver or termination is sought.

     

    11.  Binding
      Effect.
      Except
      as otherwise provided herein, this Agreement shall be binding upon and inure
      to
      the benefit of the Company, the Placement Agents, the Subscriber and their
      heirs, executors, administrators, successors, legal representatives and
      permitted assigns, and the agreements, representations, warranties and
      acknowledgments contained herein shall be deemed to be made by and be binding
      upon such heirs, executors, administrators, successors, legal representatives
      and permitted assigns.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    12.  Obligations
      Irrevocable.
      The
      obligations of the Subscriber shall be irrevocable, except with the consent
      of
      the Company, until the consummation or termination of the Offering or the
      rejection of the Subscriber’s subscription in whole by the Company.

     

    13.  Entire
      Agreement; Amendment.
      This
      Agreement constitutes the entire agreement of the Subscriber and the Company
      relating to the matters contained herein, superseding all prior contracts or
      agreements, whether oral or written. Except
      as
      expressly provided herein, neither this Agreement nor any term hereof may be
      amended, waived, discharged or terminated other than by a written instrument
      signed by the party against whom enforcement of any such amendment, waiver,
      discharge or termination is sought; provided, however, that any provisions
      hereof included in Section 4 hereof other than (j) through (n) or otherwise
      relating to registration rights may be amended, waived, discharged or terminated
      upon the written consent of the Company and the holders of a majority in
      interest of the aggregate of the then outstanding Offering Shares (or prior
      to
      their registration, the Shares) held by the Subscribers.

     

    14.  Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Texas, without regard to the principles of conflicts of law thereof
      that would require the application of the laws of any jurisdiction other than
      the State of Texas.

     

    15.  Severability.
      If any
      provision of this Agreement or the application thereof to the Subscriber or
      any
      circumstance shall be held invalid or unenforceable to any extent, the remainder
      of this Agreement and the application of such provision to other subscriptions
      or circumstances shall not be affected thereby and shall be enforced to the
      greatest extent permitted by law.

     

    16.  Headings.
      The
      headings in this Agreement are inserted for convenience and identification
      only
      and are not intended to describe, interpret, define, or limit the scope, extent
      or intent of this Agreement or any provision hereof. 

     

    17.  Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed and delivered shall be deemed to be an original and all of which
      together shall be deemed to be one and the same agreement.

     

    18.  Indemnity;
      Certain Remedies.

     

    (a)  THE
      INDEMNIFICATION RIGHTS PROVIDED FOR IN THIS AGREEMENT SHALL BE APPLICABLE
      WITHOUT REGARD TO THE CAUSE THEREOF INCLUDING, BUT NOT LIMITED, TO THE
      NEGLIGENCE OR STRICT LIABILITY OF ANY PERSON ENTITLED TO SUCH INDEMNIFICATION
      AND WHETHER SUCH NEGLIGENCE BE SOLE, JOINT, OR CONCURRENT, ACTIVE OR PASSIVE
      AND
      SHALL SURVIVE THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE CONSUMMATION
      OF THE TRANSACTIONS CONTEMPLATED HEREBY WITHOUT LIMIT, REGARDLESS OF ANY
      INVESTIGATION, INQUIRY OR EXAMINATION.

     

    (b)  Subject
      to the Subscriber’s right to specific performance, but otherwise notwithstanding
      anything to the contrary in this Agreement, the payment of cash as provided
      in
      Section 4(b) hereof
      shall
      be
      damages (and is not intended as a penalty) and shall be the Subscriber’s sole
      and exclusive remedy in the event of the registration default as described
      in


     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    that
      Section 4(b); provided, however, that if the foregoing remedy is deemed
      unenforceable by a court of competent jurisdiction then the Subscriber shall
      have all other remedies available at law or in equity.

     

    19.  Counsel.
      The
      Subscriber hereby acknowledges that the Company and its counsel, Baker Botts
      L.L.P., represent the interests of the Company and not those of the Subscriber
      in any agreement (including this Agreement) to which the Company is a
      party.

     

    


    [Signature
      page to follow]


    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the Subscriber has executed this Subscription and Registration
      Rights Agreement as of __________, 2006

     

     

     

    
      	 	 SUBSCRIBER
	 	 
	 	 
	 	 
	 	 Number of Shares: 
              ____________________________________
	 	 
	 	 Offering Price per Share: 
              $_______________________________
	 	 
	 	 Subscription Amount: 
              $_________________________________


    

    


    By:

    
      Name:___________________________________________

      Title:____________________________________________

      Address:_________________________________________

      ________________________________________________

      ________________________________________________

       

      
        	 	
                Please
                  designate name in which a stock certificate(s) representing Shares
                  

                purchased
                  are to be registered.

                 

                _____________________________________________________

              


      

       

       

      
        	 	
                Please
                  designate address for delivery of a stock certificate(s) representing
                  

                Shares
                  purchased (if different from above).

                 

                _______________________________________________________

                _______________________________________________________

                _______________________________________________________

              


      

       

       

      
        	 	
                Please
                  designate the individual to whom all correspondence concerning
                  the
                  

                Subscriber’s
                  subscription for Shares should be sent, along with such 

                individual’s
                  requested contact information.

              


      

      


      Name:___________________________________________________

      Address:_________________________________________________

      Telephone:
        ( __)____________________________________________

      Facsimile:
        ( __)_____________________________________________

      E-mail:____________________________________________________

       

    

    


    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    The
      name(s) of the natural person(s) who will have voting and investment power
      over
      the Shares purchased are as follows: ___________________________

    


    Please
      indicate the number of shares of the Company’s Common Stock currently owned by
      the Subscriber in additional to those being subscribed for in this Agreement
      and
      the date of such ownership. ___________________________

    


    Please
      describe the ultimate ownership of the entity that will be the registered owner
      of the Shares. ______________________________________________

    ________________________________________________________________________________________________________________________

    ________________________________________________________________________________________________________________________

     


    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    


    The
      Company hereby accepts the foregoing subscription subject to the terms and
      conditions hereof as of ___________, 2006

     

    
      	 	 	 
	 	
              Carrizo
                Oil & Gas, Inc.

            
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
              

              Name:
	 	Title:


    

     

     

    
      
        
        

      

      
        23