Document:

Exhibit 10.3 Commercial Guaranty

    EXHIBIT
      10.3

     

     

    EXECUTION
      COPY

    

    SECOND
      LIEN COMMERCIAL GUARANTEE (this
      “Agreement”)
      made
      and entered into as of July 21, 2005 by CCBM, Inc., a
      Delaware corporation (hereinafter referred to as the “Guarantor”),
      in
      favor of CREDIT SUISSE, as administrative agent (in such capacity, the
“Administrative
      Agent”)
      for
      the Lenders and as collateral agent (in such capacity, the “Collateral
      Agent”
      and,
      together with the Administrative Agent, the “Agent”)
      for
      the Secured Parties (as defined below), guaranteeing the Indebtedness (as
      defined below) of CARRIZO OIL & GAS, INC., a
      Texas
      corporation (hereinafter referred to as the “Borrower”).

     

    WITNESSETH:

     

    FOR
      VALUE
      RECEIVED, and in consideration of and for credit and financial accommodations
      extended, to be extended, or continued to or for the account of the above named
      Borrower, the undersigned Guarantor, hereby jointly, severally and solidarily,
      agrees as follows:

     

    SECTION
      1.   Definitions.
      Any
      capitalized term defined in the Credit Agreement (as defined below) 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:

     

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

     

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

     

    “Agreement”
      shall
      mean this Second Lien Commercial Guarantee, as amended, restated, supplemented
      or otherwise modified from time to time.

     

    “Borrower”
      shall
      have the meaning assigned to such term in the preamble to 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
      Borrower, the Guarantor, the Lenders, the Administrative Agent and the
      Collateral Agent.

     

    “Guarantor”
      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 Borrower to the Secured Parties
      or
      any of them pursuant to a Hedging Agreement or other commodity or price
      management transaction, (b) obligations of the Borrower 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
      Borrower 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
      Borrower 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).

     

    “Secured
      Parties”
      shall
      mean (a) the Lenders, (b) the Administrative Agent, (c) the Collateral Agent,
      (d) each counterparty to any Hedging Agreement with the Borrower 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 Borrower or any Guarantor under any Loan Document
      and
      (f) the successors and assigns of each of the foregoing.

     

    SECTION
      2.   Continuing
      Guarantee of the Borrower’s Indebtedness. The Guarantor
      hereby absolutely and unconditionally agrees to, and by these presents does
      hereby, guarantee the prompt and punctual payment when due of the
      Indebtedness.

     

    SECTION
      3.   Limitation
      on Liability. The
      liability of the Guarantor hereunder with respect to the Indebtedness shall
      be
      limited to the maximum amount of liability that can be incurred without
      rendering this Agreement, as it relates to the Guarantor, voidable under
      applicable law relating to fraudulent conveyance or fraudulent transfer, and
      not
      for any greater amount.

     

    SECTION
      4.   Joint
      and Several Liability. The
      Guarantor unconditionally guarantees, jointly with the other Guarantors (if
      any)
      and severally, as a primary obligor and not merely as a surety, the due and
      punctual payment and performance of the Indebtedness along with the Borrower
      to
      the same degree and extent as if the Guarantor had been and/or will be a
      co-borrower, co-principal obligor and/or co-maker of all of the Borrower’s
      Indebtedness. In the event that there is more than one guarantor under this
      Agreement, or in the event that there are other guarantors, endorsers or
      sureties of all or any portion of the Borrower’s Indebtedness, the Guarantor’s
      obligations and liabilities hereunder shall be on a “joint and several” basis
      along with such other guarantor or guarantors, endorsers and/or
      sureties.

     

    

    
      
        
        

      

      
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    SECTION
      5.   Duration;
      Cancellation of Agreement. This
      Agreement and the Guarantor’s obligations and liabilities hereunder shall remain
      in full force and effect until such time as all Indebtedness of the Borrower
      shall be paid, performed and/or satisfied in full, or until such time as this
      Agreement may be cancelled or otherwise terminated by the Agent under a written
      cancellation instrument in favor of the Guarantor (subject to the automatic
      reinstatement provision hereinbelow). Unless otherwise indicated under such
      a
      written cancellation instrument, the Agent’s agreement to terminate or otherwise
      cancel this Agreement shall only effect and shall be expressly limited to the
      Guarantor’s continuing obligations and liabilities to guarantee the prompt and
      punctual payment, performance and satisfaction of the Borrower’s Indebtedness
      incurred, originated and/or extended or committed to by the Agent and/or the
      Secured Parties after the date of such a written cancellation instrument; with
      the Guarantor remaining fully obligated and liable under this Agreement for
      the
      prompt and punctual payment, performance and satisfaction of any and all of
      the
      Borrower’s then outstanding Indebtedness together with continuing assessment of
      interest thereon) that was incurred, originated, extended or committed to prior
      to the date of such a written cancellation instrument. Nothing under this
      Agreement or under any other agreement or understanding by and between the
      Guarantor, the Agent, and the Secured Parties, shall in any way obligate, or
      be
      construed to obligate, the Agent and/or the Secured Parties to agree to the
      subsequent termination or cancellation of the Guarantor’s obligations and
      liabilities hereunder, it being fully understood and agreed by the Guarantor
      that the Agent and/or the Secured Parties may, within their sole and
      uncontrolled discretion and judgment, refuse to release the Guarantor from
      any
      of its obligations and liabilities under this Agreement for any reason
      whatsoever as long as any of the Borrower’s Indebtedness remains unpaid and
      outstanding.

     

    SECTION
      6.   Default
      of the Borrower. Upon
      failure by the Borrower to pay punctually any Indebtedness when due, whether
      at
      maturity, by acceleration, after notice of prepayment or otherwise, the
      Guarantor shall forthwith on demand pay the amount not so paid immediately
      following such demand by the Agent at its offices at Eleven Madison Avenue,
      New
      York, NY 10010. Other than the demand referred to in the immediately preceding
      sentence, the Guarantor hereby waives notice of acceptance of this Agreement
      and
      of any Indebtedness to which it applies or may apply. The Guarantor further
      waives presentation and demand for payment of the Borrower’s Indebtedness,
      notice of dishonor and of nonpayment, notice of intention to accelerate, notice
      of acceleration, protest and notice of protest, collection or institution of
      any
      suit or other action by the Agent in collection thereof, including any notice
      of
      default in payment thereof or other notice to, or demand for payment thereof
      on
      any party. To the fullest extent permitted by applicable law, the Guarantor
      waives any defense based on or arising out of any defense of the Borrower or
      any
      other Guarantor or the unenforceability of the Indebtedness or any part thereof
      from any cause, or the cessation from any cause of the liability of the Borrower
      or any other Guarantor, other than the indefeasible payment in full in cash
      of
      all the Indebtedness.

     

    SECTION
      7.   The
      Guarantor’s Subordination of Rights to the Secured Parties. In
      the
      event that the Guarantor should for any reason (i) make any payment
      for and
      on behalf of the Borrower under any of the Borrower’s Indebtedness, and/or
      (ii) make any payments to the Agent and/or the Secured Parties in total
      or
      partial satisfaction of the Guarantor’s obligations and liabilities
      hereunder, the Guarantor hereby agrees that any and all rights that the
      Guarantor may have or acquire to collect or to be reimbursed by the Borrower
      (or
      by any guarantor, endorser or 

     

    
      
        
        

      

      
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      surety
        of
        the Borrower’s Indebtedness), whether the Guarantor’s rights of collection or
        reimbursement arise by way of subrogation to the rights of the Secured Parties
        or otherwise, shall in all respects be subordinate, inferior and junior to
        the
        Agent’s and/or the Secured Parties’ rights to collect and enforce payment,
        performance and satisfaction of the Borrower’s then remaining Indebtedness,
        until such time as all of the Borrower’s Indebtedness is fully paid and
        satisfied. Upon the occurrence and continuance of an Event of Default any
        and
        all amounts owed by the Borrower to the Guarantor shall in all respects be
        subordinate, inferior and junior to the Agent’s and/or the Secured Parties’
        rights to collect and enforce payment, performance and satisfaction of the
        Borrower’s then remaining Indebtedness, until such time as all of the Borrower’s
        Indebtedness is fully paid and satisfied. The Guarantor further agrees to
        refrain from attempting to collect and/or enforce any of the Guarantor’s
        aforesaid rights against the Borrower (or any other guarantor, surety or
        endorser of the Borrower’s Indebtedness), arising by way of subrogation or
        otherwise, until such time as all of the Borrower’s then remaining Indebtedness
        in favor of the Secured Parties is fully paid and satisfied.

    

     

    SECTION
      8.   Additional
      Covenants. The
      Guarantor further agrees that the Agent and/or the Secured Parties may, at
      its/their sole option, at any time, and from time to time, without the consent
      of or notice to the Guarantor, or to any other party (except as may be required
      by the Loan Documents), and without incurring any responsibility to the
      Guarantor or to any other party (other than the Borrower to the extent provided
      in the Loan Documents), and without impairing or releasing the obligations
      of
      the Guarantor under this Agreement:

     

    (a)  discharge
      or release any party (including, but not limited to, the Borrower or any
      guarantor of the Indebtedness) who is or may be liable to the Agent and/or
      the
      Secured Parties for any of the Borrower’s Indebtedness;

     

    (b)  sell,
      exchange, release, surrender, realize upon or otherwise deal with, in any manner
      and in any order, any collateral directly or indirectly securing repayment
      of
      any of the Borrower’s Indebtedness;

     

    (c)  change
      the manner, place or terms of payment, or change or extend the time of payment
      of or renew, as often and for such periods as the Agent and/or the Secured
      Parties may determine, or after, any of the Borrower’s
      Indebtedness;

     

    (d)  settle
      or
      compromise any of the Borrower’s Indebtedness;

     

    (e)  subordinate
      and/or agree to subordinate the payment of all or any of the Borrower’s
      Indebtedness or the Agent’s and/or the Secured Parties’ security rights in
      and/or to any collateral directly or indirectly securing any such Indebtedness,
      to the payment and/or security rights of any other present and/or future
      creditors of the Borrower;

     

    (f)  apply
      any
      sums paid to any of the Borrower’s Indebtedness, with such payments being
      applied in such priority or with such preferences as the Agent and/or the
      Secured Parties may determine in its/their sole discretion, regardless of what
      Indebtedness of the Borrower remains unpaid;

     

    
      
        
        

      

      
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      (g)  take
        or
        accept any other security for any or all of the Borrower’s Indebtedness;
        and/or

       

    

    (h)  enter
      into, deliver, modify, amend or waive compliance with, any instrument or
      arrangement (other than this Agreement) evidencing, securing or otherwise
      affecting, all or any part of the Borrower’s Indebtedness.

     

    In
      addition, no course of dealing between the Agent and the Borrower, and/or the
      Secured Parties and the Borrower (or any other guarantor, surety or endorser
      of
      the Borrower’s Indebtedness), nor any failure or delay on the part of the Agent
      and/or the Secured Parties to exercise any of its/their rights and remedies,
      or
      any other agreement or agreements by and between the Agent and the Borrower
      and/or the Secured Parties and the Borrower (or any other guarantor, surety
      or
      endorser) shall have the affect of impairing or releasing the Guarantor’s
      obligations and liabilities to the Agent and the Secured Parties or of waiving
      any of the Agent’s and/or the Secured Parties’ rights and remedies. Any partial
      exercise of any rights and remedies granted to the Agent and/or the Secured
      Parties shall furthermore not constitute a waiver of any of the
      Agent’s
      and/or
      the Secured Parties’ other rights and remedies, it being the Guarantor’s intent
      and agreement that the Agent’s and the Secured Parties’ rights and remedies
      shall be cumulative in nature. The Guarantor further agrees that, should the
      Borrower default under any of its Indebtedness, any waiver or forbearance on
      the
      part of the Agent and/or the Secured Parties to pursue the rights and remedies
      available to the Agent shall be binding upon the Agent and the Secured Parties
      only to the extent that the Secured Parties specifically agree to such waiver
      or
      forbearance in writing. A waiver or forbearance on the part of the Agent and/or
      the Secured Parties as to one event of default shall not constitute a waiver
      of
      forbearance as to any other default.

     

    SECTION
      9.   No
      Release of the Guarantor. The
      Guarantor’s obligations and liabilities under this Agreement shall not be
      released, impaired, reduced or otherwise affected by, and shall continue in
      full
      force and effect, notwithstanding the occurrence of any event (other than
      performance hereunder), including without limitation any one of the following
      events:

     

    (a)  insolvency,
      bankruptcy, arrangement, adjustment, composition, liquidation, disability,
      dissolution or lack of authority (whether corporate, partnership or trust)
      of
      the Borrower (or any person acting on the Borrower’s behalf), or any other
      guarantor, surety or endorser of any of the Borrower’s
      Indebtedness;

     

    (b)  partial
      payment or payments of any amount due and/or outstanding under any of the
      Borrower’s Indebtedness;

     

    (c)  any
      payment of the Borrower or any other party to the Agent is held to constitute
      a
      preferential transfer or a fraudulent conveyance under any applicable law,
      or
      for any reason, the Agent and/or the Secured Parties are required to refund
      such
      payment or pay such amount to the Borrower or to any other
      person;

     

    (d)  any
      dissolution of the Borrower or any sale, lease or transfer of all or any part
      of
      the Borrower’s assets;

     

    
      
        
        

      

      
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    (e)  any
      failure of the Agent to notify the Guarantor of the acceptance of this Agreement
      or of the making of loans or other extensions of credit in reliance on this
      Agreement or of the failure of the Borrower to make any payment due by the
      Borrower to the Agent;

     

    (f)  application
      of any sums paid to any of the Borrower’s Indebtedness, with such payments being
      applied in such priority or with such preferences as the Agent and/or the
      Secured Parties may determine in its/their own discretion, regardless of what
      Indebtedness of the Borrower remains unpaid;

     

    (g)  any
      taking or acceptance of any other security for any or all of the Borrower’s
      Indebtedness;

     

    (h)  entering
      into, delivering, modifying, amending or waiving compliance with, any instrument
      or arrangement evidencing, securing or otherwise affecting, all or any part
      of
      the Borrower’s Indebtedness; and/or

     

    (i)  to
      the
      extent permitted by applicable law, any other act or omission that may or might
      in any manner or to any extent vary the risk of any Guarantor or otherwise
      operate as a discharge of any Guarantor as a matter of law or equity (other
      than
      the indefeasible payment in full in cash of all the Indebtedness).

     

    This
      Agreement and the Guarantor’s obligations and liabilities hereunder shall
      continue to be effective, and/or shall automatically and retroactively be
      reinstated if a release or discharge has occurred, as the case may be, if at
      any
      time any payment or part thereof to the Agent with respect to any of the
      Borrower’s Indebtedness is rescinded or must otherwise be restored by the Agent
      and/or the Secured Parties pursuant to any insolvency, bankruptcy,
      reorganization, receivership, or any other debt relief granted to the Borrower
      or to any other party. In the event that the Agent and/or the Secured Parties
      must rescind or restore any payment received by the Agent and/or the Secured
      Parties in satisfaction of the Borrower’s
      Indebtedness, any prior release or discharge from the terms of this Agreement
      given to the Guarantor shall be without effect, and this Agreement and the
      Guarantor’s obligations and liabilities hereunder shall automatically be renewed
      or reinstated and shall remain in full force and effect to the same degree
      and
      extent as if such a release or discharge was never granted. It is the intention
      of the Agent, the Secured Parties and the Guarantor that the Guarantor’s
      obligations and liabilities hereunder shall not be discharged except by the
      Guarantor’s full and complete performance of such obligations and liabilities
      and then only to the extent of such performance.

     

    SECTION
      10.   Enforcement
      of the Guarantor’s Indebtedness and Liabilities. The
      Guarantor agrees that, should the Agent and/or the Secured Parties deem it
      necessary to file an appropriate collection action to enforce the Guarantor’s
      obligations and liabilities under this Agreement, the Agent may commence such
      a
      civil action against the Guarantor without the necessity
      of first (i) attempting to collect the Borrower’s Indebtedness from the
      Borrower or from any other guarantor, surety or endorser, whether through filing
      of suit or otherwise, (ii) attempting to exercise against any collateral
      directly or indirectly securing repayment of any of the Borrower’s Indebtedness,
      whether through the filing of an appropriate foreclosure action 

     

    
      
        
        

      

      
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    or
      otherwise, or (iii) including the Borrower or any other guarantor, surety
      or endorser of any of the Borrower’s Indebtedness as an additional party
      defendant in such a collection action against the Guarantor. In the event that
      the Agent should ever deem it necessary to refer this Agreement to an
      attorney-at-law for the purpose of enforcing the Guarantor’s obligations and
      liabilities hereunder, or of protecting or preserving the Agent’s and/or the
      Secured Parties’ rights hereunder, the Guarantor agrees to reimburse the Agent
      and/or the Secured Parties for the reasonable fees of such an attorney. The
      Guarantor additionally agrees that the Agent and/or the Secured Parties shall
      not be liable for failure to use diligence in the collection of any of the
      Borrower’s Indebtedness or any collateral security therefor, or in creating or
      preserving the liability of any person liable on any such Indebtedness, or
      in
      creating, perfecting or preserving any security for any such
      Indebtedness.

     

    SECTION
      11.   Additional
      Documents. Upon
      the
      reasonable request of the Agent, the Guarantor will, at any time, and from
      time
      to time, duly execute and deliver to the Secured Parties any and all such
      further instruments and documents, and supply such additional information as
      may
      be reasonably necessary or advisable in the opinion of the Agent, to obtain
      the
      full benefits of this Agreement.

     

    SECTION
      12.   Transfer
      of Indebtedness. This
      agreement is for the benefit of the Secured Parties and for such other person
      or
      persons as may from time to time become or be the holders of any of the
      Borrower’s Indebtedness hereby guaranteed and this Agreement shall be
      transferable and negotiable, with the same force and effect and to the same
      extent as the Borrower’s Indebtedness may be transferable under Section 9.04 of
      the Credit Agreement, it being understood that, upon the transfer or assignment
      by the Secured Parties of any of the Borrower’s Indebtedness hereby guaranteed,
      the legal holder of such Indebtedness shall have all the rights granted to
      the
      Secured Parties under this Agreement.

     

    The
      Guarantor hereby recognizes and agrees that the Secured Parties may, from time
      to time, one or more times, transfer all or any portion of the Borrower’s
      Indebtedness to one or more third parties. Such transfers may include, but
      are
      not limited to, sales of a participation or syndication interest in such
      Indebtedness in favor of one or more third parties in accordance with Section
      9.04 of the Credit Agreement. The Guarantor specifically agrees and consents
      to
      all such transfers and assignments in accordance with Section 9.04 of the Credit
      Agreement and the Guarantor further waives any subsequent notice of and right
      to
      consent to any such transfers and assignments as may be provided under
      applicable New York law. The Guarantor additionally agrees that the purchaser
      of
      a syndication interest in the Borrower’s Indebtedness will be considered as the
      absolute owner of an interest in, or a percentage interest of, such Indebtedness
      and that such a purchaser shall have all of the rights granted to the purchaser
      under any agreement governing the sale of such a syndication interest and all
      rights of the Secured Parties from whom the syndication interest was purchased
      under the Credit Agreement. The Guarantor further waives any right of offset
      that the Guarantor may have against the Secured Parties and/or any purchaser
      of
      such a participation or syndication interest in the Borrower’s Indebtedness and
      the Guarantor unconditionally agrees that either the Secured 

     

    

    
      
        
        

      

      
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    Parties
      or such a purchaser may enforce the Guarantor’s obligations and liabilities
      under this Agreement, irrespective of the failure or insolvency of the Secured
      Parties or any such purchaser. The Guarantor further agrees that, upon any
      transfer, in accordance with Section 9.04 of the Credit Agreement, of all or
      any
      portion of the Borrower’s Indebtedness, the Secured Parties may transfer and
      deliver any and all collateral securing repayment of such Indebtedness
      including, but not limited to, any collateral provided by the Guarantor) to
      the
      transferee of such Indebtedness and such collateral (again, including but not
      limited to the Guarantor’s collateral) shall secure any and all of the
      Borrower’s Indebtedness in favor of such transferee. The Guarantor additionally
      agrees that, after any such transfer or assignment has taken place in accordance
      with Section 9.04 of the Credit Agreement, the Secured Parties shall be fully
      discharged from any and all liability and responsibility to the Borrower (and
      the Guarantor) with respect to such collateral, and the transferee thereafter
      shall be vested with all the powers and rights with respect to such
      collateral.

     

    SECTION
      13.   Right
      of Offset. As
      collateral security for the repayment of the Guarantor’s obligations and
      liabilities under this Agreement, the Guarantor hereby grants to each Secured
      Party, as well as its successors and assigns, a security interest in any and
      all
      deposit accounts (within the meaning of the Uniform Commercial Code) maintained
      with such Secured Party and all funds that the Guarantor may then have on
      deposit with or may then be in the possession or control of such Secured Party
      and its successors or assigns, and such Secured Party is hereby authorized
      to
      apply any such funds, upon the occurrence of an Event of Default under the
      Credit Agreement and the expiration of any applicable grace period allowed
      to
      cure the Event of Default, towards repayment of any of the Borrower’s
      Indebtedness that is due and payable at such time (whether at maturity, by
      acceleration, after notice of prepayment or otherwise) subject to this
      Agreement.

     

    SECTION
      14.   Construction. The
      provisions of this Agreement shall be in addition to and cumulative of, and
      not
      in substitution, novation or discharge of, any and all prior or contemporaneous
      guarantee or other agreements by the Guarantor, in favor of the Agent or
      assigned to the Agent by others, all of which shall be construed as
      complementing each other. Nothing herein contained shall prevent the Agent
      from
      enforcing any and all such guaranties or agreements in accordance with their
      respective terms.

     

    SECTION
      15.   Amendment. No
      amendment, modification, consent or waiver of any provision of this Agreement,
      and no consent to any departure by the Guarantor therefrom, shall be effective
      unless the same shall be in writing signed by the Agent, and then shall be
      effective only to the specific instance and for the specific purpose for which
      given.

     

    SECTION
      16.   Successors
      and Assigns Bound. The
      Guarantor’s obligations and liabilities under this Agreement shall be binding
      upon the Guarantor’s successors and assigns. The rights and remedies granted to
      the Agent and the Secured Parties under this Agreement shall also inure to
      the
      benefit of the Agent’s and the Secured Parties’ successors and assigns, as well
      as to any and all subsequent holder or holders of any of the Borrower’s
      Indebtedness subject to this Agreement.

     

    SECTION
      17.   Caption
      Heading. Caption
      headings of the sections of this Agreement are for convenience purposes only
      and
      are not to be used to interpret or to define their
      provisions. In this Agreement, whenever the context so requires, the singular
      includes the plural and the plural also includes the singular.

     

    
      
        
        

      

      
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    SECTION
      18.   Governing
      Law. THIS
      AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF
      THE
      STATE OF NEW YORK.

     

    SECTION
      19.   Severability. If
      any
      provision of this Agreement is held to be illegal, invalid or unenforceable
      under present or future laws effective during the term hereof, such provision
      shall be fully severable, this Agreement shall be construed and enforceable
      as
      if the illegal, invalid or unenforceable provision had never comprised a part
      of
      it, and the remaining provisions of this Agreement shall remain in full force
      and effect and shall not be affected by the illegal, invalid or unenforceable
      provision or by its severance herefrom. Furthermore, in lieu of such illegal,
      invalid or unenforceable provision, there shall be added automatically as a
      part
      of this Agreement, a provision as similar in terms to such illegal, invalid
      or
      unenforceable provision as may be possible and legal, valid and
      enforceable.

     

    SECTION
      20.   Information.
      The
      Guarantor assumes all responsibility for being and keeping itself informed
      of
      the Borrower’s and its financial condition and assets and of all other
      circumstances bearing upon the risk of nonpayment of the Indebtedness and the
      nature, scope and extent of the risks that the Guarantor assumes and incurs
      hereunder, and agrees that neither the Agent nor any other Secured Party will
      have any duty to advise such Guarantor of information known to it or any of
      them
      regarding such circumstances or risks.

     

    SECTION
      21.   INTERCREDITOR
      AGREEMENT GOVERNS.
      NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THE EXERCISE OF ANY RIGHT
      OR
      REMEDY BY THE 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.

     

    

    

    

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    

    IN
      WITNESS WHEREOF,
      the
      Guarantor has executed this Agreement in favor of the Agent for the ratable
      benefit of the Secured Parties on the day, month, and year first written
      above.

     

    

     

    
      	 	 	 
	 	GUARANTOR:
	 	 
	 	 CCBM,
              INC.
	 
 	 
 	 
 
	 	by:  	
              /s/
                Paul F. Boling

            
	 	
              
Name: 
              Paul F. Boling
	 	
              Title:  
                 Chief Financial OfficerRevision

    EXHIBIT
      10.4

    
 

    EXECUTION
      COPY

    

    THIRD
      AMENDMENT TO 

    SECOND
      AMENDED AND RESTATED CREDIT AGREEMENT

    

    

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

     

    

    RECITALS:

    

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

    

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

    

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

    

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

    

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

    

    B. Revision
      to Defined Terms.

    

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

    

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

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

     

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

    

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

    

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

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

    

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

    

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

    

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

    

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

    

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

    

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

    

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

     

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

     

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

    

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

    

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

     

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

     

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

     

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

    

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

    

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

    

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

    

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

    

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

     

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

    

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

     

    

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

    

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

     

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

    

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

    

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

    

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

    

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

    

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

    

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

     

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

    

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

    

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

    

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

    

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

    

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

    

    

    

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      remainder of this page was intentionally left blank.)

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

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

    

    Borrower:

    

    CARRIZO
      OIL & GAS, INC.

    a
      Texas corporation 

    

    By:
      /s/
      Paul F. Boling 

    Name:
      Paul F. Boling

    Title:
      Vice President and Chief Financial Officer

    

    Guarantor:

    

    CCBM,
      INC.

    a
      Delaware corporation

    

    By:
      /s/
      Paul F. Boling 

    Name:
      Paul F. Boling

    Title:
      Vice President and Chief Financial Officer

    

    Agent:

    

    HIBERNIA
      NATIONAL BANK, as Agent

    

    By:
      /s/
      David R. Reid 

    Name:
      David R. Reid

    Title:
      Senior Vice President

    

    Lenders:

    

    HIBERNIA
      NATIONAL BANK

    

    By:
      /s/
      John Castellano 

    Name:
      John Castellano

    Title:
      Senior Vice President

    

    UNION
      BANK OF CALIFORNIA, N.A.

    

    By:
      /s/
      Scott Myatt 

    Name:
      Scott Myatt

    Title:
      Assistant Vice President

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