Document:

EXHIBIT 10.35

                                 AMENDMENT NO. 6
                                 ---------------

                  AMENDMENT NO. 6 (this "Amendment"), dated as of May 30, 2006,
to that certain Credit and Guaranty Agreement, dated as of June 4, 2004, as
amended (the "Credit Agreement"; capitalized terms used herein and not defined
shall have the meaning set forth in the Credit Agreement), among MAAX
CORPORATION, a Nova Scotia unlimited company ("Company"), BEAUCELAND
CORPORATION, a Nova Scotia unlimited company ("Holdings"), CERTAIN SUBSIDIARIES
OF HOLDINGS, as Guarantors, the Lenders party thereto from time to time, GOLDMAN
SACHS CREDIT PARTNERS L.P., as Joint Lead Arranger and as Syndication Agent,
ROYAL BANK OF CANADA, as Administrative Agent (in such capacity, "Administrative
Agent") and as Collateral Agent, ROYAL BANK OF CANADA, ACTING THROUGH ITS
BUSINESS GROUP RBC CAPITAL MARKETS, as Joint Lead Arranger, and MERRILL LYNCH &
CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as Joint Lead Arranger
and as Documentation Agent.

                              W I T N E S S E T H :
                              - - - - - - - - - -

                  WHEREAS, pursuant to Section 10.5 of the Credit Agreement,
Company and Administrative Agent hereby agree to the amendments and waivers of
the Credit Agreement as set forth herein.

                  NOW, THEREFORE, in consideration of the foregoing, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

                  SECTION ONE - Amendments. Subject to the satisfaction of the
conditions set forth in Section Three hereof:

                  (i)      The definitions of Applicable Margin and Applicable
Revolving Commitment Fee Percentage in Section 1.1 of the Credit Agreement are
hereby amended and restated in their entirety to read:

                  "Applicable Margin" and "Applicable Revolving Commitment Fee
Percentage" mean (i) with respect to all Loans that are Eurodollar Rate Loans,
Canadian Eurodollar Rate Loans or BA Discount Rate Loans and the Applicable
Revolving Commitment Fee Percentage, (a) from the Closing Date until the date of
delivery of the Compliance Certificate and the financial statements for the
second fiscal quarter commencing after the Closing Date, a percentage, per
annum, determined by reference to the following table as if the Leverage Ratio
then in effect were in excess of 4.50:1.00; and (b) thereafter, a percentage,
per annum, determined by reference to the Leverage Ratio in effect from time to
time as set forth below:

<PAGE>

<TABLE>
<CAPTION>
==========================================================================================================
                           Applicable Margin                                      Applicable Revolving
      Leverage          for Tranche A Term Loans         Applicable Margin             Commitment
       Ratio              and Revolving Loans        for Tranche B Term Loans        Fee Percentage
----------------------------------------------------------------------------------------------------------
<S>                              <C>                           <C>                        <C>
     > 5.50:1.00                 2.75%                         3.00%                      0.50%
----------------------------------------------------------------------------------------------------------

     < 5.50:1.00                 2.50%                         3.00%                      0.50%
     -
     > 5.25:1.00
----------------------------------------------------------------------------------------------------------

    < 5.25:1.00                  2.50%                         2.75%                      0.50%
    -
    > 4.50:1.00
----------------------------------------------------------------------------------------------------------

    < 4.50:1.00                  2.25%                         2.75%                      0.50%
    -
    > 3.50:1.00
----------------------------------------------------------------------------------------------------------

    < 3.50:1.00                  2.00%                         2.50%                      0.40%
    -
    > 2.50:1.00
----------------------------------------------------------------------------------------------------------

    < 2.50:1.00                  1.75%                         2.50%                      0.35%
    -
==========================================================================================================
</TABLE>

and (ii) with respect to Loans that are Base Rate Loans or Prime Rate Loans, an
amount equal to (a) the Applicable Margin for Eurodollar Rate Loans as set forth
in clause (i)(a) or (i)(b) above, as applicable, minus (b) 0.75% per annum;
provided that notwithstanding the foregoing the Applicable Margin for all Loans
shall be calculated as if the Leverage Ratio in effect were in excess of
5.50:1.00 from June 1, 2006 until financial statements and a Compliance
Certificate related to a fiscal period ended after June 1, 2006 indicating a
Leverage Ratio less than or equal to 5.50:1.00 have been delivered pursuant to
Section 5.1(d). No change in the Applicable Margin or the Applicable Revolving
Commitment Fee Percentage shall be effective until three Business Days after the
date on which Administrative Agent shall have received the applicable financial
statements and a Compliance Certificate pursuant to Section 5.1(d) calculating
the Leverage Ratio. At any time Company has not submitted to Administrative
Agent the financial statements and a Compliance Certificate calculating the
Leverage Ratio as and when required under Section 5.1(d), the Applicable Margin
and the Applicable Revolving Commitment Fee Percentage shall be determined as if
the Leverage Ratio were in excess of 5.50:1.00 until such financial statements
and Compliance Certificate are delivered to Administrative Agent. Within one
Business Day of receipt of the financial statements and Compliance Certificate
calculating the Leverage Ratio under Section 5.1(d), Administrative Agent shall
give each Lender telefacsimile or telephonic notice (confirmed in writing) of
the Applicable Margin and the Applicable Revolving Commitment Fee Percentage in
effect from the day that is three Business Days after such receipt.

                  (ii)     The following definition is hereby added to Section
1.1 of the Credit Agreement:

                  "Amendment No. 6 Effective Date" has the meaning given to such
term in Amendment No. 6 to this Agreement.

                  "Applicable Fiscal Quarter" as defined in Section 8.2(a).

                  "Cure Amount" as defined in Section 8.2(a).

                  "Cure Right" as defined in Section 8.2(a).

                                      -2-
<PAGE>

                  "Not Otherwise Applied" means, with reference to any amount of
Cash proceeds of any transaction or event, that such amount (a) was not required
to be applied to prepay the Loans pursuant to Section 2.16 and (b) was not
previously applied in determining the permissibility of a transaction under the
Credit Documents where such permissibility was (or may have been) contingent on
receipt of such amount or utilization of such amount for a specified purpose
(including Sections 6.5(e), 6.7(f) and 6.9(h)). Company shall promptly notify
Administrative Agent of any application of such amount as contemplated by clause
(b) above.

                  "Kitchen Cabinet Business" means the business and assets of
Company and its Subsidiaries related to the manufacture and marketing of
semi-custom, stock and customized kitchen cabinets.

                  (iii)    Section 2.16(a) of the Credit Agreement is hereby
amended and restated to add the following after "Fiscal Year":

                  that do not involve the sale of any part of the Kitchen
Cabinet Business

                  (iv)     Section 2.17(b) is hereby amended by adding the
following after the semicolon in the clause first thereof:

                  provided, that notwithstanding the foregoing, prepayments of
Term Loans pursuant to Section 2.16(a) that result from sales of all or any part
of the Kitchen Cabinet Business shall be applied to prepay Term Loans on a pro
rata basis (in accordance with the respective outstanding principal amounts
thereof) and shall be further applied to the then next two scheduled
Installments of principal of the Tranche A Term Loans and Tranche B Term Loans
to the full extent thereof and thereafter shall be further applied on a pro rata
basis to the remaining scheduled Installments of principal of the Tranche A Term
Loans and Tranche B Term Loans to the full extent thereof;

                  (v)      Section 5.1(d) of the Credit Agreement is hereby
amended to add the following at the end thereof:

                  and, if such Compliance Certificate demonstrates an Event of
Default of any covenant under Section 6.8(a), (b) or (c), any of the Permitted
Holders and/or members of management of any Parent Company, Holdings or its
Subsidiaries may deliver, together with such Compliance Certificate, notice of
an intent to cure such Event of Default pursuant to Section 8.2 or evidence that
such Event of Default has been so cured; provided that the delivery of such a
notice shall in no way affect or alter the occurrence, existence or continuation
of any such Event of Default or the rights, benefits, powers and remedies of the
Administrative Agent and the Lenders under any Loan Document;

                  (vi)     Section 6.9 of the Credit Agreement is hereby amended
by:

                  (1) inserting the words "or proceeds of any capital
                      contribution made by Holdings to the common equity of the
                      Company utilizing (directly or indirectly) proceeds
                      received by MAAX Holdings from any issuance of Qualified
                      Capital Stock to, or capital contribution from, one or
                      more Permitted Holders or members of management of any

                                      -3-
<PAGE>

                      Parent Company, Holdings or its Subsidiaries" following
                      each reference to "Parent Company" in clause (h); and

                  (2) deleting the "and" at the end of clause (n) and deleting
                      the period at the end of clause (o) and replacing it with
                      the following:

                           ; and

                           (p) the sale of all or any part of the Kitchen
Cabinet Business.

                  (vii)    Section 8.1(c) of the Credit Agreement is hereby
amended by adding before the word "or" at the end thereof the following:

                  provided that any Event of Default under Section 6.8(a), (b)
or (c) may be cured pursuant to Section 8.2;

                  (viii)   A new Section, Section 8.2, entitled "Company's Right
to Cure" is hereby added to the Credit Agreement to read:

                  (a)      In the event of any breach of any covenant set forth
         in Section 6.8(a), (b) or (c) as of the last day of any Fiscal Quarter
         (the "Applicable Fiscal Quarter"), Company shall have the right to cure
         such breach as follows (the "Cure Right"):

                           (1)      At any time on or prior to the tenth (10th)
         day after the date on which financial statements are required to be
         delivered for the Applicable Fiscal Quarter (including as part of a
         Fiscal Year) hereunder (or with respect to the Fiscal Quarter ended May
         31, 2006, at any time on or prior to July 15, 2006), Company shall
         receive a cash contribution to its common equity capital from Holdings
         (the amount of such cash, the "Cure Amount"), which cash is Not
         Otherwise Applied and was received by Holdings upon issuance of
         Qualified Capital Stock to any Parent Company or one or more Permitted
         Holders and/or members of management of any Parent Company, Holdings or
         its Subsidiaries, or as a cash contribution to its common equity
         capital from MAAX Holdings utilizing the proceeds of the issuance by
         MAAX Holdings of Qualified Capital Stock to one or more Permitted
         Holders and/or members of management of any Parent Company, Holdings or
         its Subsidiaries;

                           (2)      Consolidated Adjusted EBITDA for the
         Applicable Fiscal Quarter shall be increased by an amount equal to the
         Cure Amount, and the covenants set forth in Section 6.8(a), (b) and (c)
         shall be recalculated after giving effect to such increase;

                           (3)      If, after giving effect to the foregoing
         recalculations, Company shall be in compliance with all covenants set
         forth in Sections 6.8(a), 6.8(b) and 6.8(c), Company shall be deemed to
         be in compliance with such covenants as of the relevant date of
         determination with the same effect as though there had been no failure
         to comply therewith at such date, and the applicable breach of such
         covenant(s) and the resulting Event of Default that had occurred shall
         be deemed cured for purposes of this Agreement; and

                                      -4-
<PAGE>

                           (4)      To the extent the Applicable Fiscal Quarter
         is included in a subsequent period of four Fiscal Quarters in
         calculating compliance with the covenants set forth in Sections 6.8(a),
         6.8(b) and 6.8(c), the Consolidated Adjusted EBITDA for the Applicable
         Fiscal Quarter as increased by the Cure Amount pursuant to clause (2)
         above shall be used in such calculation.

                  (b)      In each period of eight consecutive Fiscal Quarters,
         there shall be at least four consecutive Fiscal Quarters in which the
         Cure Right is not used and the Cure Right may be used no more than
         twice during each period of four consecutive Fiscal Quarters.

                  (c)      In no event will the Cure Amount for (i) the Fiscal
         Quarter ended May 31, 2006 be greater than U.S.$7.0 million and (ii)
         any other Fiscal Quarter be greater than 120% of the amount required
         for purposes of curing the non-compliance with the covenants set forth
         in Sections 6.8(a), 6.8(b) and 6.8(c).

                  (d)      The parties hereby acknowledge that this Section 8.2
         shall not result in any adjustment to any amounts other than the amount
         of the Consolidated Adjusted EBITDA referred to in Section 8.2(a).

                  SECTION TWO - Waivers. (a) The Lenders hereby waive any
Default or Event of Default caused solely by the failure of Company to comply
with Section 6.8(a), (b) or (c) as of the last day of the Fiscal Quarter ended
May 31, 2006; provided that (x) if on or prior to July 15, 2006 (1) MAAX
Holdings has not received at least U.S.$7.0 million in cash as proceeds from its
issuance of Qualified Capital Stock to, or as proceeds of a contribution to its
common equity from, one or more Permitted Holders and/or members of management
of any Parent Company, Holdings or its Subsidiaries, or (2) Holdings has not
received at least U.S.$7.0 million in cash from MAAX Holdings as a contribution
to its common equity, or (3) Company has not received at least U.S.$7.0 million
in cash from Holdings as a contribution to its common equity, then such waiver
shall be terminated and the failure of Company to comply with Section 6.8(a),
(b) or (c) as of the last day of the Fiscal Quarter ended May 31, 2006 shall
constitute an Event of Default and (y) until clause (x) is complied with, the
Total Utilization of Revolving Commitments shall not exceed Can$30.0 million.

                  (b)      The Lenders hereby waive any Default that may be
caused solely by the failure of Company to comply with Section 4.18(1) of the
Senior Subordinated Notes Indenture with respect to the filing of its annual
report for the Fiscal Year ended February 28, 2006, but only so long as no
"Event of Default" under and as defined in the Senior Subordinated Notes
Indenture results therefrom.

                  SECTION THREE - Conditions to Effectiveness. This Amendment
shall become effective (the date of such effectiveness, the "Amendment No. 6
Effective Date") when, and only when, (i) Administrative Agent shall have
received (x) counterparts of this Amendment executed by Company and
Administrative Agent and (y) consents to this Amendment from the Requisite
Lenders and (ii) Company shall have delivered, by wire transfer of immediately
available funds, to Administrative Agent, for the ratable account of each Lender
consenting hereto, a fee equal to (A) in Canadian Dollars, 0.125% of the
aggregate principal amount of Tranche A Term Loans plus the aggregate amount of
Revolving Commitments of such Lenders plus (B) in U.S. Dollars, 0.125% of the

                                      -5-
<PAGE>

aggregate principal amount of Tranche B Term Loans of such Lenders. The
effectiveness of this Amendment (other than Sections Six, Seven and Eight
hereof) is conditioned upon the accuracy of the representations and warranties
set forth in Section Four hereof.

                  SECTION FOUR - Representations and Warranties; Covenants. In
order to induce the Lenders to consent to this Amendment, the Company represents
and warrants to each of the Lenders and the Agents that after giving effect to
this Amendment, (x) no Event of Default or Default has occurred and is
continuing; and (y) the representations and warranties contained in the Credit
Agreement and in the other Credit Documents are true and correct in all material
respects (and any such representations and warranties that contain a materiality
or Material Adverse Effect qualification are true and correct in all respects)
on and as of the date hereof to the same extent as though made on and as of the
date hereof, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations and
warranties were true and correct in all material respects on and as of such
earlier date.

                  SECTION FIVE - Reference to and Effect on the Credit Agreement
and the Notes. On and after the effectiveness of this Amendment, each reference
in the Credit Agreement to "this Agreement", "hereunder", "hereof" or words of
like import referring to the Credit Agreement, and each reference in the Notes
and each of the other Credit Documents to "the Credit Agreement", "thereunder",
"thereof" or words of like import referring to the Credit Agreement, shall mean
and be a reference to the Credit Agreement, as amended or waived by this
Amendment. The Credit Agreement, the Notes and each of the other Credit
Documents, as specifically amended or waived by this Amendment, are and shall
continue to be in full force and effect and are hereby in all respects ratified
and confirmed. Without limiting the generality of the foregoing, the Collateral
Documents and all of the Collateral described therein do and shall continue to
secure the payment of all Obligations of the Credit Parties under the Credit
Documents. The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as an amendment or waiver of
any right, power or remedy of any Lender or any Agent under any of the Credit
Documents, nor constitute an amendment or waiver of any provision of any of the
Credit Documents.

                  SECTION SIX - Costs, Expenses and Taxes. Company agrees to pay
all reasonable costs and expenses of the Agents in connection with the
preparation, execution and delivery of this Amendment and the other instruments
and documents to be delivered hereunder, if any (including, without limitation,
the reasonable fees and expenses of Cahill Gordon & Reindel LLP) in accordance
with the terms of Section 10.2 of the Credit Agreement.

                  SECTION SEVEN - Execution in Counterparts. This Amendment may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Amendment by facsimile shall be effective as delivery of a manually executed
counterpart of this Amendment.

                  SECTION EIGHT - Governing Law. This Amendment shall be
governed by, and construed in accordance with, the laws of the State of New
York, without regard to the principles of conflicts of laws thereof to the
extent that the application of the laws of another jurisdiction would be
required thereby.

                            [SIGNATURE PAGES FOLLOW]

                                     - 6 -
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered as of the day and year first above
written.

                                    MAAX CORPORATION

                                    By: /s/ DENIS AUBIN
                                        -----------------------------------
                                        Name:  Denis Aubin
                                        Title: Executive Vice President and
                                               Chief Financial Officer

                                      -7-
<PAGE>

                                   ROYAL BANK OF CANADA, as Administrative Agent

                                   By: /s/ ANN HURLEY
                                       ------------------------------------
                                       Name:  Ann Hurley
                                       Title: Manager Agency

                                      -8-Exhibit
      10.1

     

    
      

      

    

     

    CREDIT
      AGREEMENT

    

    dated
      as
      of

    May
      25,
      2006

    

    among

    

    CARRIZO
      OIL & GAS, INC.

    as
      Borrower

    

    CERTAIN
      SUBSIDIARIES OF BORROWER,

    as
      Guarantors

    

    The
      Lenders Party Hereto

    

    JPMORGAN
      CHASE BANK, NATIONAL ASSOCIATION,

    as
      Administrative Agent

    

    J.P.
      MORGAN SECURITIES INC.,

    as
      Sole
      Bookrunner and Lead Arranger

    

    

    $200,000,000
      Senior Secured Revolving Credit Facility

    

     

    
      

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      TABLE
        OF CONTENTS

      
        

           

          
            	 	 	
                     Page

                  
	 	 	 
	 ARTICLE
                    I 	 DEFINITIONS	
                     1

                  
	 	 	
                     

                  
	 Section
                    1.01	Defined
                    Terms	
                     1

                  
	 Section
                    1.02.	 Types
                    of Loans and Borrowings	
                     23

                  
	 Section
                    1.03.	 Terms
                    Generally	
                     23

                  
	 Section
                    1.04.	 Accounting
                    Terms; GAAP	
                     23

                  
	 Section
                    1.05.	 Oil
                    and Gas Definitions	
                     23

                  
	 Section
                    1.06.	 Times
                    of Day	
                     23

                  
	 	 	
                     

                  
	 ARTICLE
                    II	 THE
                    CREDITS	
                     24

                  
	 	 	
                     

                  
	 Section
                    2.01.	 Commitments	
                     24

                  
	 Section
                    2.02.	 Termination
                    and Reduction of the Aggregate
                    Commitment	
                     24

                  
	 Section
                    2.03.	 Loans
                    and Borrowings	
                     24

                  
	 Section
                    2.04.	 Requests
                    for Borrowings	
                     25

                  
	 Section
                    2.05.	 Letters
                    of Credit	
                     26

                  
	 Section
                    2.06.	 Funding
                    of Borrowings	
                     30

                  
	 Section
                    2.07.	 Interest
                    Elections	
                     31

                  
	 Section
                    2.08.	 Repayment of
                    Loans; Evidence of Debt	
                     32

                  
	 Section
                    2.09.	 Optional
                    Prepayment of Loans	
                     33

                  
	 Section
                    2.10.	 Mandatory
                    Prepayment of Loans	
                     33

                  
	 Section
                    2.11.	 Fees	
                     34

                  
	 Section
                    2.12.	 Interest	
                     35

                  
	 Section
                    2.13.	 Alternate
                    Rate of Interest	
                     36

                  
	
                     Section
                      2.14.

                  	 Increased
                    Costs	
                     36

                  
	 Section
                    2.15.	 Break
                    Funding Payments	
                     38

                  
	 Section
                    2.16.	 Taxes	
                     38

                  
	 Section
                    2.17.	 Payments
                    Generally; Pro Rata Treatment; Sharing of
                    Set-offs	
                     39

                  
	 Section
                    2.18.	 Mitigation
                    Obligations; Replacement of Lenders	
                     41

                  
	 	 	 
	 ARTICLE
                    III 	 BORROWING
                    BASE	
                     42

                  
	 	 	 
	 Section
                    3.01.	 Reserve
                    Report; Proposed Borrowing Base; Conforming Borrowing
                    Base	
                     42

                  
	 Section
                    3.02.	 Scheduled
                    Redeterminations of the Borrowing Base; Procedures
                    and Standards	
                     43

                  
	 Section
                    3.03.	 Special
                    Redeterminations	
                     44

                  
	 Section
                    3.04	 Special
                    2006 Redetermination	
                     45

                  
	 Section
                    3.05.	 Potential
                    Monthly Reductions and Other
                    Adjustments	
                     45

                  
	 Section
                    3.06.	 Notice
                    of Redetermination	
                     45

                  
	 Section
                    3.07.	 Pinnacle
                    Equity Interests	
                     45

                  

          

        

      

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

       

      
        	 	 	
                 Page

              
	 	 	 
	 ARTICLE
                IV	 REPRESENTATIONS
                AND WARRANTIES	
                 45

              
	 	 	 
	 Section
                4.01.	 Organization;
                Powers	
                 46

              
	 Section
                4.02.	 Authorization;
                Enforceability	
                 46

              
	 Section
                4.03.	 Governmental
                Approvals; No Conflicts	
                 46

              
	 Section
                4.04.	 Financial
                Condition; No Material Adverse Change	
                 46

              
	 Section
                4.05.	 Properties	
                 47

              
	 Section
                4.06.	 Litigation
                and Environmental Matters	
                 47

              
	
                 Section
                  4.07.

              	 Compliance
                with Laws and Agreements	
                 48

              
	 Section
                4.08.	 Investment
                and Holding Company Status	
                 48

              
	 Section
                4.09.	 Taxes	
                 48

              
	 Section
                4.10.	 ERISA	
                 48

              
	 Section
                4.11.	 Disclosure	
                 48

              
	 Section
                4.12.	 Labor
                Matters	
                 49

              
	 Section
                4.13.	 Capitalization	
                 49

              
	 Section
                4.14.	 Margin
                Stock	
                 49

              
	 Section
                4.15.	 Title
                to Mortgaged Properties	
                 49

              
	 Section
                4.16.	 Insurance	
                 50

              
	 Section
                4.17.	 Solvency	
                 50

              
	 Section
                4.18.	 Deposit
                Accounts	
                 51

              
	 Section
                4.19.	 Pending
                Dispositions	
                 51

              
	 	 	 
	 ARTICLE
                V	 CONDITIONS	
                 51

              
	 	 	 
	 Section
                5.01.	 Effective
                Date	
                 51

              
	 Section
                5.02.	 Each
                Credit Event	
                 54

              
	 	 	 
	 ARTICLE
                VI	 AFFIRMATIVE
                COVENANTS	
                 55

              
	 	 	 
	 Section
                6.01.	 Financial
                Statements; Other Information	
                 55

              
	 Section
                6.02.	 Notices
                of Material Events	
                 57

              
	 Section
                6.03.	 Existence;
                Conduct of Business	
                 57

              
	 Section
                6.04.	 Payment
                of Obligations	
                 58

              
	 Section
                6.05.	 Maintenance
                of Properties; Insurance	
                 58

              
	 Section
                6.06.	 Books
                and Records; Inspection Rights	
                 58

              
	 Section
                6.07.	 Compliance
                with Laws	
                 59

              
	 Section
                6.08.	 Use
                of Proceeds and Letters of Credit	
                 59

              
	 Section
                6.09.	 Mortgages	
                 59

              
	 Section
                6.10.	 Title
                Data	
                 59

              
	 Section
                6.11.	 Swap
                Agreements	
                 60

              
	 Section
                6.12.	 Operation
                of Oil and Gas Interests	
                 60

              
	 Section
                6.13.	 Restricted
                Subsidiaries	
                 61

              
	 Section
                6.14.	 Pledged
                Equity Interests	
                 61

              
	 Section
                6.15.	 Production
                Proceeds and Bank Accounts	
                 61

              
	 Section
                6.16.	 Existing
                Swap Agreements	
                 62

              
	 	 	 
	 ARTICLE
                VII	 NEGATIVE
                COVENANTS	
                 62

              
	 	 	 
	 Section
                7.01.	 Indebtedness	
                 62

              

      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

       

      
        	
                 

              	 	
                 Page

              
	 Section
                7.02.	 Liens	
                 63

              
	 Section
                7.03.	 Fundamental
                Changes	
                 64

              
	 Section
                7.04.	 Dispositions	
                 65

              
	 Section
                7.05.	 Investments,
                Loans, Advances, Guarantees and
                Acquisitions	
                 66

              
	 Section
                7.06.	 Swap
                Agreements	
                 67

              
	 Section
                7.07.	 Restricted
                Payments	
                 68

              
	 Section
                7.08.	 Transactions
                with Affiliates	
                 68

              
	 Section
                7.09.	 Restrictive
                Agreements	
                 69

              
	 Section
                7.10.	 Disqualified
                Stock	
                 69

              
	 Section
                7.11.	 Amendments
                to Organizational Documents and Fiscal
                Year	
                 69

              
	 Section
                7.12.	 Financial
                Covenants	
                 69

              
	 Section
                7.13.	 Sale
                and Leaseback Transactions and other Off-Balance Sheet
                Liabilities	
                 70

              
	 Section
                7.14.	 Second
                Lien Facility Restrictions	
                 70

              
	 	 	 
	 ARTICLE
                VIII 	 GUARANTEE
                OF OBLIGATIONS	
                 70

              
	 	 	 
	 Section
                8.01.	 Guarantee
                of Payment	
                 70

              
	 Section
                8.02.	 Guarantee
                Absolute	
                 71

              
	 Section
                8.03.	 Guarantee
                Irrevocable	
                 71

              
	 Section
                8.04.	 Reinstatement	
                 71

              
	 Section
                8.05.	 Subrogation	
                 72

              
	 Section
                8.06.	 Subordination	
                 72

              
	 Section
                8.07.	 Payments
                Generally	
                 72

              
	 Section
                8.08.	 Setoff	
                 73

              
	 Section
                8.09.	 Formalities	
                 73

              
	 Section
                8.10.	 Limitations
                on Guarantee	
                 73

              
	 	 	 
	 ARTICLE
                IX	 EVENTS
                OF DEFAULT	
                 74

              
	 	 	 
	 ARTICLE
                X 	 THE
                ADMINISTRATIVE AGENT	
                 76

              
	 	 	 
	 ARTICLE
                XI 	 MISCELLANEOUS	
                 78

              
	 	 	 
	 Section
                11.01.	 Notices	
                 78

              
	 Section
                11.02.	 Waivers;
                Amendments	
                 79

              
	 Section
                11.03.	 Expenses;
                Indemnity; Damage Waiver	
                 80

              
	 Section
                11.04.	 Successors
                and Assigns	
                 81

              
	 Section
                11.05.	 Survival	
                 85

              
	 Section
                11.06.	 Counterparts;
                Integration; Effectiveness	
                 85

              
	 Section
                11.07.	 Severability	
                 85

              
	 Section
                11.08.	 Right
                of Setoff	
                 86

              
	 Section
                11.09.	
                 GOVERNING
                  LAW; JURISDICTION; CONSENT TO 

                SERVICE
                  OF PROCESS

              	
                 86

              
	 Section
                11.10.	 WAIVER
                OF JURY TRIAL	
                 87

              
	 Section
                11.11.	 Headings	
                 87

              
	 Section
                11.12.	 Confidentiality	
                 87

              
	 Section
                11.13.	 Interest
                Rate Limitation	
                 88

              

      

       

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

       

      
        	 	 	
                 Page

              
	 	 	 
	 Section
                11.14.	 USA
                PATRIOT Act	
                 88

              

      

       

      

      
        
          
          

        

        
          iv

          
            

          

        

        
          
          

        

      

    

    SCHEDULES:

    

    Schedule
      2.01 - Applicable Percentages and Initial Commitments

    Schedule
      4.06 -- Disclosed Matters

    Schedule
      4.13 - Capitalization

    Schedule
      4.15 - Title Exceptions

    Schedule
      4.18 -- Deposit and Investment Accounts

    Schedule
      6.10 - Title Comments

    Schedule
      7.01 -- Existing Indebtedness

    Schedule
      7.02 -- Existing Liens

    Schedule
      7.04 - Pending Dispositions

    Schedule
      7.08 - Transactions with Affiliates

    Schedule
      7.09 -- Existing Restrictions

    

    

    EXHIBITS:

    

    Exhibit
      A
      -- Form of Assignment and Assumption

    Exhibit
      B
      -- Form of Opinion of Borrower’s Counsel

    Exhibit
      C
      - Form of Counterpart Agreement

    Exhibit
      D
      - Form of Solvency Certificate

    Exhibit
      E
      - Form of Intercreditor Agreement Amendment

    

     

    
      
        
        

      

      
        v

        
          

        

      

      
        
        

      

    

    

      CREDIT
        AGREEMENT dated as of May 25, 2006, among CARRIZO OIL & GAS, INC., as
        Borrower, CERTAIN SUBSIDIARIES OF BORROWER, as Guarantors, the LENDERS party
        hereto, and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as Administrative
        Agent.

       

      

      The
        parties hereto agree as follows:

       

      Article
        I

      

      Definitions

       

      Section
        1.01. Defined
        Terms.
        As used
        in this Agreement, the following terms have the meanings specified
        below:

      

      “ABR”,
        when
        used in reference to any Loan or Borrowing, refers to whether such Loan,
        or the
        Loans comprising such Borrowing, are bearing interest at a rate determined
        by
        reference to the Alternate Base Rate. 

      

      “Acquisition”
means,
        the acquisition by the Borrower or any Restricted Subsidiary, whether by
        purchase, merger (and, in the case of a merger with any such Person, with
        such
        Person being the surviving corporation) or otherwise, of all or substantially
        all of the Equity Interest of, or the business, property or fixed assets
        of or
        business line or unit or a division of, any other Person primarily engaged
        in
        the business of producing Crude Oil or Natural Gas or the acquisition by
        such
        Person of property or assets consisting of Oil and Gas Interests.

       

      “Adjusted
        LIBO Rate”
means,
        with respect to any Eurodollar Borrowing for any Interest Period, an interest
        rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%) equal
        to
        (a) the LIBO Rate for such Interest Period multiplied by (b) the
        Statutory Reserve Rate. 

      

      “Adjustment
        Percentage”
means,
        at any date prior to August 1, 2007, the quotient, expressed as a percentage,
        of
        the Conforming Borrowing Base divided by the Borrowing Base.

      

      “Administrative
        Agent”
means
        JPMorgan Chase Bank, National Association, in its capacity as contractual
        representative of the Lenders hereunder pursuant to Article
        X
        and not
        in its individual capacity as a Lender, and any successor agent appointed
        pursuant to Article
        X.

      

      “Administrative
        Questionnaire”
means
        an Administrative Questionnaire in a form supplied by the Administrative
        Agent.

      

      “Advance
        Payment Contract”
means
        any contract whereby any Credit Party either (a) receives or becomes
        entitled to receive (either directly or indirectly) any payment (an
“Advance
        Payment”)
        to be
        applied toward payment of the purchase price of Hydrocarbons produced or
        to be
        produced from Oil and Gas Interests owned by any Credit Party and which Advance
        Payment is, or is to be, paid in advance of actual delivery of such production
        to or for the account of the purchaser regardless of such production, or
        (b) grants an option or right of 

       

      
        
          CARRIZO
            REVOLVING CREDIT AGREEMENT

           

        

        
          1

          
            

          

        

        
          Index

        

      

      

        refusal
          to the purchaser to take delivery of such production in lieu of payment,
          and, in
          either of the foregoing instances, the Advance Payment is, or is to be,
          applied
          as payment in full for such production when sold and delivered or is, or
          is to
          be, applied as payment for a portion only of the purchase price thereof
          or of a
          percentage or share of such production; provided
          that inclusion
          of the standard “take or pay” provision in any gas sales or purchase contract or
          any other similar contract shall not, in and of itself, constitute such
          contract
          as an Advance Payment Contract for the purposes hereof.

        

        “Affiliate”
means,
          with respect to a specified Person, another Person that directly, or indirectly
          through one or more intermediaries, Controls or is Controlled by or is
          under
          common Control with the Person specified.

        

        “Aggregate
          Commitment”
means
          the aggregate amount of the Commitments of all of the Lenders, provided
          that in
          no event shall the Aggregate Commitment exceed the Maximum Facility
          Amount.

        

        “Aggregate
          Credit Exposure”
means,
          as of any date of determination, the sum of the outstanding principal amount
          of
          the Loans of all Lenders as of such date, plus
          the
          aggregate LC Exposure of all Lenders as of such date.

        

        “Agreement”
means
          this Credit Agreement, dated as of May 25, 2006 as it may be amended,
          supplemented or otherwise modified from time to time.

        

        “Alternate
          Base Rate”
means,
          for any day, a rate per annum equal to the greatest of (a) the Prime Rate
          in effect on such day, (b) the Base CD Rate in effect on such day plus
          1% and
          (c) the Federal Funds Effective Rate in effect on such day plus 1⁄2 of 1%.
          Any change in the Alternate Base Rate due to a change in the Prime Rate
          or the
          Federal Funds Effective Rate shall be effective from and including the
          effective
          date of such change in the Prime Rate or the Federal Funds Effective Rate,
          respectively. 

        

        “Applicable
          Percentage”
means,
          with respect to any Lender, the percentage of the Aggregate Commitment
          represented by such Lender’s Commitment. The initial amount of each Lender’s
          Applicable Percentage is as set forth on Schedule 2.01. If the Aggregate
          Commitment has terminated or expired, the Applicable Percentages shall
          be
          determined based upon the Aggregate Commitment most recently in effect,
          giving
          effect to any assignments.

        

        “Applicable
          Rate”
means,
          for any day, with respect to any ABR Loan or Eurodollar Loan, or with respect
          to
          the Unused Commitment Fees payable hereunder, as the case may be, the applicable
          rate per annum set forth below under the caption “ABR Spread”, “Eurodollar
          Spread” or “Unused Commitment Fee Rate”, as the case may be, based upon the
          Borrowing Base Usage applicable on such date:

        

        
          	
                   

                  Borrowing
                    

                  Base
                    Usage

                	
                  Eurodollar
                    Spread

                	
                  ABR
                    Spread

                	
                  Unused
                    Commitment Fee Rate

                
	 	 	 	 
	
                  Greater
                    than or equal 

                  to
                    100% 

                	
                  300
                    b.p.

                	
                  175
                    b.p.

                	
                  50
                    b.p.

                

        

      

    

     

    
      
        CARRIZO
          REVOLVING CREDIT AGREEMENT

         

      

      
        2

        
          

        

      

      
        Index

      

    

     

    

      
        	
                 

                Borrowing
                  

                Base
                  Usage

              	
                Eurodollar
                  Spread

              	
                ABR
                  Spread

              	
                Unused
                  Commitment Fee Rate

              

      

      
        	
                Greater
                  than 90% 

                and
                  less than 100%

              	
                225
                  b.p.

              	
                100
                  b.p.

              	
                50
                  b.p.

              
	
                Greater
                  than 75% 

                and
                  less than or 

                equal
                  to 90%

              	
                200
                  b.p.

              	
                75
                  b.p.

              	
                50
                  b.p.

              
	
                Greater
                  than 50% 

                and
                  less than or 

                equal
                  to 75%

              	
                175
                  b.p.

              	
                50
                  b.p.

              	
                37.5
                  b.p.

              
	
                Less
                  than or equal 

                to
                  50%

              	
                150
                  b.p.

              	
                25
                  b.p.

              	
                37.5
                  b.p.

              

      

      

      Each
        change in the Applicable Rate shall apply during the period commencing on
        the
        effective date of such change and ending on the date immediately preceding
        the
        effective date of the next change.

       

      “Approved
        Counterparty”
means,
        at any time and from time to time, (i) any Person engaged in the business
        of
        writing Swap Agreements for commodity, interest rate or currency risk that
        is
        acceptable to the Administrative Agent or has (or the credit support provider
        of
        such Person has), at the time Borrower or any Restricted Subsidiary enters
        into
        a Swap Agreement with such Person, a long term senior unsecured debt credit
        rating of BBB+ or better from S&P or Baa1 or better by Moody’s and (ii) any
        Lender Counterparty.

      

      “Approved
        Fund”
has
        the
        meaning assigned to such term in Section
        11.04.

      

      “Approved
        Petroleum Engineer”
means
        Ryder Scott Company, L.P., Fairchild & Wells, Inc., DeGolyer and MacNaughton
        or any other reputable firm of independent petroleum engineers selected by
        the
        Borrower and acceptable to the Administrative Agent and the Required
        Lenders.

      

      “Assessment
        Rate”
means,
        for any day, the annual assessment rate in effect on such day that is payable
        by
        a member of the Bank Insurance Fund classified as “well-capitalized” and within
        supervisory subgroup “B” (or a comparable successor risk classification) within
        the meaning of 12 C.F.R. Part 327 (or any successor provision) to the
        Federal Deposit Insurance Corporation for insurance by such Corporation of
        time
        deposits made in Dollars at the offices of such member in the United States;
        provided
        that if,
        as a result of any change in any law, rule or regulation, it is no longer
        possible to determine the Assessment Rate as aforesaid, then the Assessment
        Rate
        shall be such annual rate as shall be determined by the Administrative Agent
        to
        be representative of the cost of such insurance to the Lenders.

      

      “Assignment
        and Assumption”
means
        an assignment and assumption entered into by a Lender and an assignee (with
        the
        consent of any party whose consent is required by Section
        11.04),
        and
        accepted by the Administrative Agent, in the form of Exhibit A or any other
        form approved by the Administrative Agent.

      

      
        
          CARRIZO
            REVOLVING CREDIT AGREEMENT

           

        

        
          3

          
            

          

        

        
          Index

        

      

    

    “Availability
      Period”
means
      the period from and including the Effective Date to but excluding the earlier
      of
      the Maturity Date and the date of termination of the Aggregate
      Commitment.

    

    “Base
      CD Rate”
means
      the sum of (a) the Three-Month Secondary CD Rate multiplied by the
      Statutory Reserve Rate plus (b) the Assessment Rate.

    

    “Board”
means
      the Board of Governors of the Federal Reserve System of the United States of
      America.

    

    “Borrower”
means
      Carrizo Oil & Gas, Inc., a Texas corporation, and its successors and
      permitted assigns.

    

    “Borrowing”
means
      Loans of the same Type, made, converted or continued on the same date and,
      in
      the case of Eurodollar Loans, as to which a single Interest Period is in
      effect.

    

    “Borrowing
      Base”
means,
      at any time an amount equal to the amount determined in accordance with
Section
      3.01,
      as the
      same may be redetermined, adjusted or reduced from time to time pursuant to
      Section
      3.02,
      Section
      3.03,
      Section
      3.04
      and
Section
      3.05,
      or as
      otherwise adjusted or redetermined pursuant to Section
      7.04;
      provided
      that in
      no event shall the Borrowing Base on any date exceed the Maximum Facility
      Amount.

    

    “Borrowing
      Base Deficiency”
means,
      as of any date, the amount, if any, by which the Aggregate Credit Exposure
      on
      such date exceeds the Borrowing Base in effect on such date; provided
      that,
      for purposes of determining the existence and amount of any Borrowing Base
      Deficiency, obligations under any Letter of Credit will not be deemed to be
      outstanding to the extent such obligations are secured by cash in the manner
      contemplated by Section
      2.05(j).

    

    “Borrowing
      Base Properties”
means,
      at any time, all proved Oil and Gas Interests of the Borrower and the Restricted
      Subsidiaries described in the most recent Reserve Report evaluated by the
      Lenders for purposes of establishing the Borrowing Base and any other property
      or assets of the Borrower or the Restricted Subsidiaries, including the Equity
      Interests of Pinnacle, which may, at the request of the Borrower and with the
      approval of the Lenders, in their sole and absolute discretion, be evaluated
      and
      included in the determination of the Borrowing Base.

    

    “Borrowing
      Base Usage”
means,
      as of any date and for all purposes, other than as set forth in the following
      proviso, the quotient, expressed as a percentage, of (i) the Aggregate Credit
      Exposure as of such date, divided
      by
      (ii) the
      Borrowing Base; provided
      that,
      with respect to the determination of the Applicable Margin prior to August
      1,
      2007, “Borrowing
      Base Usage”
means
      the quotient, expressed as a percentage, of (x) the quotient calculated pursuant
      to the foregoing clauses (i) and (ii), divided by (y) the Adjustment
      Percentage.

    

    “Borrowing
      Request”
means
      a
      request by the Borrower for a Borrowing in accordance with Section
      2.04.

    

    “Business
      Day”
means
      any day that is not a Saturday, Sunday or other day on which commercial banks
      in
      Chicago, Illinois are authorized or required by law to remain closed;

     

    
      
        CARRIZO
          REVOLVING CREDIT AGREEMENT

         

      

      
        4

        
          

        

      

      
        Index

      

    

    

      provided
        that,
        when used in connection with a Eurodollar Loan, the term “Business
        Day”
shall
        also exclude any day on which banks are not open for dealings in dollar deposits
        in the London interbank market.

      

      “Capital
        Lease Obligations”
of
        any
        Person means the obligations of such Person to pay rent or other amounts
        under
        any lease of (or other arrangement conveying the right to use) real or personal
        property, or a combination thereof, which obligations are required to be
        classified and accounted for as capital leases on a balance sheet of such
        Person
        under GAAP, and the amount of such obligations shall be the capitalized amount
        thereof determined in accordance with GAAP.

      

      “CCBM”
means
        CCBM, Inc., a Delaware corporation and its successors and permitted
        assigns.

      

      “Change
        in Law”
means
        (a) the adoption of any law, rule or regulation after the date of this
        Agreement, (b) any change in any law, rule or regulation or in the
        interpretation or application thereof by any Governmental Authority after
        the
        date of this Agreement or (c) compliance by any Lender or the Issuing Bank
        (or,
        for purposes of Section
        2.14(b),
        by any
        lending office of such Lender or by such Lender’s or the Issuing Bank’s holding
        company, if any) with any request, guideline or directive (whether or not
        having
        the force of law) of any Governmental Authority made or issued after the
        date of
        this Agreement.

      

      A
        “Change
        in Control”
shall
        be deemed to have occurred if (a) any “person” or “group” (within the meaning of
        Rule 13d-5 of the Securities Exchange Act of 1934 as in effect on the date
        hereof) other than the Permitted Investors shall own, directly or indirectly,
        beneficially or of record, shares representing more than 50% of the aggregate
        ordinary voting power represented by the issued and outstanding capital stock
        of
        the Borrower, (b) a majority of the seats (other than vacant seats) on the
        board
        of directors of the Borrower shall at any time be occupied by persons who
        were
        neither (i) nominated by the board of directors of the Borrower nor (ii)
        appointed by directors so nominated, or (c) any change in control (or similar
        event, however denominated) with respect to the Borrower or any Subsidiary
        shall
        occur under (and not be waived in accordance with) and as defined in the
        Second
        Lien Credit Agreement or any indenture or other loan or credit agreement
        or any
        other debt instrument evidencing any Material Indebtedness to which the Borrower
        or any Subsidiary is a party.

      

      “Charges”
has
        the
        meaning assigned to such term in Section
        11.13.

      

      “Code”
means
        the Internal Revenue Code of 1986, as amended from time to time.

      

      “Commitment”
means,
        with respect to each Lender, the commitment of such Lender to make Loans
        and to
        acquire participations in Letters of Credit hereunder, expressed as an amount
        representing the maximum aggregate amount of such Lender’s Credit Exposure
        hereunder, as such commitment may be (a) reduced from time to time pursuant
        to
Section
        2.02,
        and (b)
        reduced or increased from time to time pursuant to assignments by or to such
        Lender pursuant to Section
        11.04;
        provided
        that, no
        Lender’s Commitment shall exceed such Lender’s Applicable Percentage of the
        lesser of (x) the Maximum Facility Amount, and (y) the Borrowing Base. The
        initial amount of each Lender’s Commitment is set forth in Schedule 2.01, or in
        the 

       

      
        
          CARRIZO
            REVOLVING CREDIT AGREEMENT

           

        

        
          5

          
            

          

        

        
          Index

        

      

    

    Assignment
      and Assumption pursuant to which such Lender shall have assumed its Commitment,
      as applicable.

    

    “Competitor”
means
      (a) any Person who is actively engaged in the Subject Business and (b) any
      Affiliate of a Person identified in the preceding clause (a) (it being agreed
      that an investment firm shall not be deemed to Control a Person described in
      such clause (a) merely as a result of owning a minority interest in such Person
      if it does not otherwise control such Person).

    

    “Conforming
      Borrowing Base”
means,
      at any time an amount equal to the amount determined in accordance with
Section
      3.01,
      as the
      same may be redetermined, adjusted or reduced from time to time pursuant to
      Section
      3.02,
      Section
      3.03,
      Section
      3.04
      and
Section
      3.05
      or as
      otherwise adjusted or redetermined pursuant to Section
      7.04,
      provided
      that in
      no event shall the Conforming Borrowing Base exceed the Borrowing Base.

    

    “Consolidated
      Current Assets”
means,
      as of any date of determination, the total of the Borrower’s consolidated
      current assets (excluding assets of Unrestricted Subsidiaries), including all
      Unused Commitments, determined in accordance with GAAP. Current assets will
      not
      include non-cash assets, if any, arising from the marking to market of Swap
      Agreements pursuant to FASB Statement No. 133 and related
      pronouncements.

    

    “Consolidated
      Current Liabilities”
means,
      as of any date of determination, the total of the Borrower’s consolidated
      current liabilities (excluding liabilities of Unrestricted Subsidiaries),
      excluding current maturities of the Loans, determined in accordance with GAAP.
      Current liabilities will not include (a) non-cash obligations, if any, arising
      from the marking to market of Swap Agreements pursuant to FASB Statement No.
      133
      and related pronouncements or (b) the non-cash effects, if any, of any non-cash
      stock option re-pricing accrual.

    

    “Consolidated
      Current Ratio”
means,
      as of any date of determination, the ratio of Consolidated Current Assets to
      Consolidated Current Liabilities as of such date.

    

    “Consolidated
      EBITDAX”
means
      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’s equity
      investment in Pinnacle and (iii) stock option re-pricing expense.

    

    “Consolidated
      Subsidiaries”
means,
      for any Person, any Subsidiary or other entity the accounts of which would
      be
      consolidated with those of such Person in its consolidated financial statements
      in accordance with GAAP.

    

    “Control”
means
      the possession, directly or indirectly, of the power to direct or cause the
      direction of the management or policies of a Person, whether through the ability
      to exercise voting power, by contract or otherwise. “Controlling”
and
      “Controlled”
have
      meanings correlative thereto.

    

    
      
        CARRIZO
          REVOLVING CREDIT AGREEMENT

         

      

      
        6

        
          

        

      

      
        Index

      

    

     

    
      “Counterpart
        Agreement”
means
        a
        Counterpart Agreement substantially in the form of Exhibit C delivered by
        a
        Guarantor pursuant to Section
        6.13.
        

      

      “Credit
        Exposure”
means,
        with respect to any Lender at any time, the sum of the outstanding principal
        amount of such Lender’s Loans and its LC Exposure at such time.

      

      “Credit
        Parties”
means
        collectively, Borrower, and each Guarantor and each individually, a
“Credit
        Party”.

      

      “Crude
        Oil”
means
        all crude oil
        and
        condensate.

      

      “Default”
means
        any event or condition which constitutes an Event of Default or which upon
        notice, lapse of time or both would, unless cured or waived, become an Event
        of
        Default.

      

      “Defaulting
        Lender”
means
        any Lender that (a) has failed to fund any portion of the Loans or any
        participation in any Letter of Credit required to be funded by it hereunder
        within one Business Day of the date required to be funded by it hereunder,
        (b)
        has otherwise failed to pay over to the Administrative Agent or any other
        Lender
        any other amount required to be paid by it hereunder within one Business
        Day of
        the date when due, unless the subject of a good faith dispute, or (c) has
        been
        deemed insolvent or become the subject of a bankruptcy or insolvency
        proceeding.

      

      “Defensible
        Title”
means,
        with respect to the assets of the Borrower (a) the title of the Borrower
        to such
        assets is free and clear of all Liens of any kind whatsoever (except Permitted
        Liens) and (b) with respect to the Mortgaged Properties, the representations
        and
        warranties set forth in Section
        4.15
        are true
        and correct.

      

      “Designated
        Title Exceptions”
has
        the
        meaning assigned to such term in Section
        4.15.

      

      “Disclosed
        Matters”
means
        the actions, suits and proceedings and the environmental matters disclosed
        in
        Schedule 4.06.

      

      “Disposition”
or
        “Dispose”
means
        the sale, transfer, license, lease or other disposition (including any sale
        and
        leaseback transaction) of any property by any Person, including any sale,
        assignment, transfer or other disposal, with or without recourse, of any
        notes
        or accounts receivable or any rights and claims associated
        therewith.

      

      “Disqualified
        Stock”
means
        any Equity Interest which, by its terms (or by the terms of any security
        into
        which it is convertible or for which it is exchangeable), or upon the happening
        of any event, matures or is mandatorily redeemable, pursuant to a sinking
        fund
        obligation or otherwise, or is redeemable at the sole option of the holder
        thereof, in whole or in part, on or prior to the Maturity Date.

      

      “Dollars”
or
        “$”
refers
        to lawful money of the United States of America.

      

      
        
          CARRIZO
            REVOLVING CREDIT AGREEMENT

           

        

        
          7

          
            

          

        

        
          Index

        

      

    

    “Domestic
      Subsidiary”
means,
      with respect to any Person, a subsidiary of such Person that is incorporated
      or
      formed under the laws of the United States of America, any state thereof or
      the
      District of Columbia.

    

    “Effective
      Date”
means
      the date on which the conditions specified in Section
      5.01
      are
      satisfied (or waived in accordance with Section
      11.02).

    

    “Eligible
      Account”
has
      the
      meaning assigned to such term in Section
      6.15.

    

    “Engineered
      Value”
means,
      the value attributed to the Borrowing Base Properties for purposes of the most
      recent Redetermination of the Borrowing Base pursuant to Article
      III
      (or for
      purposes of determining the Initial Borrowing Base in the event no such
      Redetermination has occurred), based upon the discounted present value of the
      estimated net cash flow to be realized from the production of Hydrocarbons
      from
      the Oil and Gas Interests as set forth in the Reserve Report.

    

    “Environmental
      Laws”
means
      all laws, rules, regulations, codes, ordinances, orders, decrees, judgments,
      injunctions, notices or binding agreements issued, promulgated or entered into
      by any Governmental Authority, relating in any way to the environment,
      preservation or reclamation of natural resources, the management, release or
      threatened release of any Hazardous Material or to health and safety
      matters.

    

    “Environmental
      Liability”
means
      any liability, contingent or otherwise (including any liability for damages,
      costs of environmental remediation, fines, penalties or indemnities), of any
      Credit Party directly or indirectly resulting from or based upon
      (a) violation of any Environmental Law, (b) the generation, use,
      handling, transportation, storage, treatment or disposal of any Hazardous
      Materials, (c) exposure to any Hazardous Materials, (d) the release or
      threatened release of any Hazardous Materials into the environment or (e) any
      contract, agreement or other consensual arrangement pursuant to which liability
      is assumed or imposed with respect to any of the foregoing.

    

    “Equity
      Interests”
means
      shares of capital stock, partnership interests, membership interests in a
      limited liability company, beneficial interests in a trust or other equity
      ownership interests in a Person, and any warrants, options or other rights
      entitling the holder thereof to purchase or acquire any such equity
      interest.

    

    “ERISA”
means
      the Employee Retirement Income Security Act of 1974, as amended from time to
      time.

    

    “ERISA
      Affiliate”
means
      any trade or business (whether or not incorporated) that, together with any
      Credit Party, is treated as a single employer under Section 414(b) or (c)
      of the Code or, solely for purposes of Section 302 of ERISA and Section 412
      of
      the Code, is treated as a single employer under Section 414 of the
      Code.

    

    “ERISA
      Event”
means
      (a) any “reportable event”, as defined in Section 4043 of ERISA or the
      regulations issued thereunder with respect to a Plan (other than an event for
      which the 30-day notice period is waived); (b) the existence with respect
      to any Plan of an “accumulated funding deficiency” (as defined in
      Section 412 of the Code or Section 302 of 

     

    
      
        CARRIZO
          REVOLVING CREDIT AGREEMENT

         

      

      
        8

        
          

        

      

      
        Index

      

    

    

      ERISA),
        whether or not waived; (c) the filing pursuant to Section 412(d) of
        the Code or Section 303(d) of ERISA of an application for a waiver of the
        minimum funding standard with respect to any Plan; (d) the incurrence by
        any Credit Party or any of its ERISA Affiliates of any liability under
        Title IV of ERISA with respect to the termination of any Plan; (e) the
        receipt by any Credit Party or any ERISA Affiliate from the PBGC or a plan
        administrator of any notice relating to an intention to terminate any Plan
        or
        Plans or to appoint a trustee to administer any Plan; (f) the incurrence
        by any
        Credit Party or any of its ERISA Affiliates of any liability with respect
        to the
        withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or
        (g) the receipt by any Credit Party or any ERISA Affiliate of any notice,
        or the receipt by any Multiemployer Plan from any Credit Party or any ERISA
        Affiliate of any notice, concerning the imposition of Withdrawal Liability
        or a
        determination that a Multiemployer Plan is, or is expected to be, insolvent
        or
        in reorganization, within the meaning of Title IV of ERISA.

      

      “Eurodollar”,
        when
        used in reference to any Loan or Borrowing, refers to whether such Loan,
        or the
        Loans comprising such Borrowing, are bearing interest at a rate determined
        by
        reference to the Adjusted LIBO Rate.

      

      “Event
        of Default”
has
        the
        meaning assigned to such term in Article
        IX.

      

      “Excluded
        Taxes”
means,
        with respect to the Administrative Agent, any Lender, the Issuing Bank or
        any
        other recipient of any payment to be made by or on account of any obligation
        of
        the Borrower hereunder, (a) income or franchise taxes imposed on (or measured
        by) its net income by the United States of America, or by the jurisdiction
        under
        the laws of which such recipient is organized or in which its principal office
        is located or, in the case of any Lender, in which its applicable lending
        office
        is located, (b) any branch profits taxes imposed by the United States of
        America
        or any similar tax imposed by any other jurisdiction in which the Borrower
        is
        located and (c) in the case of a Foreign Lender (other than an assignee pursuant
        to a request by the Borrower under Section
        2.18(b)),
        any
        withholding tax that is imposed on amounts payable to such Foreign Lender
        at the
        time such Foreign Lender becomes a party to this Agreement (or designates
        a new
        lending office) or is attributable to such Foreign Lender’s failure to comply
        with Section
        2.16(e),
        except
        to the extent that such Foreign Lender (or its assignor, if any) was entitled,
        at the time of designation of a new lending office (or assignment), to receive
        additional amounts from the Borrower with respect to such withholding tax
        pursuant to Section
        2.16(a).
        

      

      “Existing
        Revolving Facility”
means
        that certain revolving credit facility evidenced by that certain Credit
        Agreement dated September 30, 2004, by and among the Borrower, CCBM, Hibernia
        National Bank, as Agent, Union Bank of California, as Co-Agent and the banks
        and
        other financial institutions from time to time a party thereto as lenders,
        and
        any promissory notes executed in connection therewith, security instruments
        and
        any other agreements executed in connection with such Credit Agreement as
        amended, modified, supplemented or restated from time to time.

      

      “FASB”
means
        Financial Accounting Standards Board.

      

      “Federal
        Funds Effective Rate”
means,
        for any day, the weighted average (rounded upwards, if necessary, to the
        next
        1/100 of 1%) of the rates on overnight Federal funds 

       

      
        
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            REVOLVING CREDIT AGREEMENT

           

        

        
          9

          
            

          

        

        
          Index

        

      

      

        transactions
          with members of the Federal Reserve System arranged by Federal funds brokers,
          as
          published on the next succeeding Business Day by the Federal Reserve Bank
          of
          New York, or, if such rate is not so published for any day that is a
          Business Day, the average (rounded upwards, if necessary, to the next 1/100
          of
          1%) of the quotations for such day for such transactions received by the
          Administrative Agent from three Federal funds brokers of recognized standing
          selected by it.

        

        “Financial
          Officer”
means
          the chief financial officer, principal accounting officer, treasurer or
          controller of any Credit Party.

        

        “Foreign
          Lender”
means
          any Lender that is organized under the laws of a jurisdiction other than
          that in
          which any Credit Party is located. For purposes of this definition, the
          United
          States of America, each State thereof and the District of Columbia shall
          be
          deemed to constitute a single jurisdiction.

        

        “GAAP”
means
          generally accepted accounting principles in the United States of
          America.

        

        “Gas
          Balancing Agreement”
means
          any agreement or arrangement whereby the Borrower or any Restricted Subsidiary,
          or any other party having an interest in any Hydrocarbons to be produced
          from
          Oil and Gas Interests in which the Borrower or any Restricted Subsidiary
          owns an
          interest, has a right to take more than its proportionate share of production
          therefrom.

        

        “Governmental
          Authority”
means
          the government of the United States of America, any other nation or any
          political subdivision thereof, whether state or local, and any agency,
          authority, instrumentality, regulatory body, court, central bank or other
          entity
          properly exercising executive, legislative, judicial, taxing, regulatory
          or
          administrative powers or functions of or pertaining to government.

        

        “Guarantee”
of
          or
          by any Person (in this definition, the “guarantor”)
          means
          any obligation, contingent or otherwise, of the guarantor guaranteeing
          or having
          the economic effect of guaranteeing any Indebtedness or other obligation
          of any
          other Person (the “primary
          obligor”)
          in any
          manner, whether directly or indirectly, and including any obligation of
          the
          guarantor, direct or indirect, (a) to purchase or pay (or advance or supply
          funds for the purchase or payment of) such Indebtedness or other obligation
          or
          to purchase (or to advance or supply funds for the purchase of) any security
          for
          the payment thereof, (b) to purchase or lease property, securities or
          services for the purpose of assuring the owner of such Indebtedness or
          other
          obligation of the payment thereof, (c) to maintain working capital, equity
          capital or any other financial statement condition or liquidity of the
          primary
          obligor so as to enable the primary obligor to pay such Indebtedness or
          other
          obligation or (d) as an account party in respect of any letter of credit
          or
          letter of guaranty issued to support such Indebtedness or obligation;
provided,
          that
          the term Guarantee shall not include endorsements for collection or deposit
          in
          the ordinary course of business.

        

        “Guaranteed
          Liabilities”
has
          the
          meaning assigned to such term in Section
          8.01.

        

        
          
            CARRIZO
              REVOLVING CREDIT AGREEMENT

             

          

          
            10

            
              

            

          

          
            Index

          

        

      

    

    “Guarantor”
      means
      CCBM and each other Restricted Subsidiary that hereafter executes and delivers
      to the Administrative Agent and the Lenders, a Counterpart
      Agreement.

    

    “Hazardous
      Materials”
means
      all explosive or radioactive substances or wastes and all hazardous or toxic
      substances, wastes or other pollutants, including petroleum or petroleum
      distillates, asbestos or asbestos containing materials, polychlorinated
      biphenyls, radon gas, infectious or medical wastes and all other substances
      or
      wastes of any nature regulated pursuant to any Environmental Law.

    

    “Hydrocarbons”
means
      all Crude Oil and Natural Gas produced from or attributable to the Oil and
      Gas
      Interests of the Credit Parties.

    

    “Indebtedness”
of
      any
      Person means, without duplication, (a) all obligations of such Person for
      borrowed money or with respect to deposits or advances of any kind, (b) all
      obligations of such Person evidenced by bonds, debentures, notes or similar
      instruments, (c) all obligations of such Person upon which interest charges
      are paid, (d) all obligations of such Person under conditional sale or
      other title retention agreements relating to property acquired by such Person,
      (e) all obligations of such Person in respect of the deferred purchase
      price of property or services (excluding current accounts payable incurred
      in
      the ordinary course of business), (f) all Indebtedness of others secured by
      (or for which the holder of such Indebtedness has an existing right, contingent
      or otherwise, to be secured by) any Lien on property owned or acquired by such
      Person, whether or not the Indebtedness secured thereby has been assumed,
      (g) all Guarantees by such Person of Indebtedness of others, (h) all
      Capital Lease Obligations of such Person, (i) all obligations, contingent
      or otherwise, of such Person as an account party in respect of letters of credit
      and letters of guaranty and (j) all obligations, contingent or otherwise, of
      such Person in respect of bankers’ acceptances. The Indebtedness of any Person
      shall include the Indebtedness of any other entity (including any partnership
      in
      which such Person is a general partner) to the extent such Person is liable
      therefore as a result of such Person’s ownership interest in or other
      relationship with such entity, except to the extent the terms of such
      Indebtedness provide that such Person is not liable therefor.

    

    “Indemnified
      Taxes”
means
      Taxes other than Excluded Taxes.

    

    “Indemnitee”
has
      the
      meaning assigned to such term in Section
      11.03.

    

    “Information”
has
      the
      meaning assigned to such term in Section
      11.12.

    

    “Initial
      Borrowing Base”
has
      the
      meaning assigned to such term in Section
      3.01.

    

    “Initial
      Reserve Reports”
means
      the reserve reports of Ryder Scott Company L.P., Fairchild & Wells, Inc. and
      DeGolyer and MacNaughton, in each case setting forth, among other things, (a)
      the oil and gas properties owned directly by the Borrower and CCBM (other than
      immaterial properties excluded consistent with past practice) as of December
      31,
      2005, (b) the proved reserves attributable to such oil and gas properties and
      (c) a projection of the rate of production and net income of such proved
      reserves as of December 31, 2005.

    

    
      
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          REVOLVING CREDIT AGREEMENT

         

      

      
        11

        
          

        

      

      
        Index

      

    

    “Intercreditor
      Agreement”
means
      an Intercreditor Agreement by and among the Administrative Agent, the Second
      Lien Agent, the Borrower and CCBM, dated July 21, 2005, as amended, modified,
      supplemented or restated from time to time.

    

    “Interest
      Election Request”
means
      a
      request by the Borrower to convert or continue a Borrowing in accordance with
      Section
      2.07.

    

    “Interest
      Payment Date”
means
      (a) with respect to any ABR Loan, the last day of each calendar month, and
      (b) with respect to any Eurodollar Loan, the last day of the Interest Period
      applicable to the Borrowing of which such Loan is a part and, in the case of
      a
      Eurodollar Borrowing with an Interest Period of more than three months’
duration, each day prior to the last day of such Interest Period that occurs
      at
      intervals of three months’ duration after the first day of such Interest
      Period.

    

    “Interest
      Period”
means
      with respect to any Eurodollar Borrowing, the period commencing on the date
      of
      such Borrowing and ending on the numerically corresponding day in the calendar
      month that is one, two, three or six months thereafter, as the Borrower may
      elect; provided,
      that
      (i) if any Interest Period would end on a day other than a Business Day, such
      Interest Period shall be extended to the next succeeding Business Day unless,
      in
      the case of a Eurodollar Borrowing only, such next succeeding Business Day
      would
      fall in the next calendar month, in which case such Interest Period shall end
      on
      the next preceding Business Day and (ii) any Interest Period pertaining to
      a
      Eurodollar Borrowing that commences on the last Business Day of a calendar
      month
      (or on a day for which there is no numerically corresponding day in the last
      calendar month of such Interest Period) shall end on the last Business Day
      of
      the last calendar month of such Interest Period. For purposes hereof, the date
      of a Borrowing initially shall be the date on which such Borrowing is made
      and
      thereafter shall be the effective date of the most recent conversion or
      continuation of such Borrowing. 

    

    “Issuing
      Bank”
means
      JPMorgan Chase Bank, National Association, in its capacity as the issuer of
      Letters of Credit hereunder, and its successors in such capacity as provided
      in
Section
      2.05(i).
      The
      Issuing Bank may, in its discretion, arrange for one or more Letters of Credit
      to be issued by Affiliates of the Issuing Bank, in which case the term “Issuing
      Bank” shall include any such Affiliate with respect to Letters of Credit issued
      by such Affiliate.

    

    “LC
      Disbursement”
means
      a
      payment made by the Issuing Bank pursuant to a Letter of Credit.

    

    “LC
      Exposure”
means,
      at any time, the sum of (a) the aggregate undrawn amount of all outstanding
      Letters of Credit at such time plus (b) the aggregate amount of all LC
      Disbursements that have not yet been reimbursed by or on behalf of the Borrower
      at such time. The LC Exposure of any Lender at any time shall be its Applicable
      Percentage of the total LC Exposure at such time.

    

    “Lender
      Counterparty”
means
      any Lender or any Affiliate of a Lender counterparty to a Swap Agreement with
      any Credit Party.

    

    
      
        CARRIZO
          REVOLVING CREDIT AGREEMENT

         

      

      
        12

        
          

        

      

      
        Index

      

    

    “Lenders”
means
      the Persons listed on Schedule 2.01 and any other Person that shall have
      become a party hereto pursuant to an Assignment and Assumption, other than
      any
      such Person that ceases to be a party hereto pursuant to an Assignment and
      Assumption.

    

    “Letter
      of Credit”
means
      any letter of credit issued pursuant to this Agreement.

    

    “LIBO
      Rate”
means,
      with respect to any Eurodollar Borrowing for any Interest Period, the rate
      appearing on Page 3750 of the Telerate (or on any successor or substitute page
      of such Service, or any successor to or substitute for such Service, providing
      rate quotations comparable to those currently provided on such page of such
      Service, as determined by the Administrative Agent from time to time for
      purposes of providing quotations of interest rates applicable to dollar deposits
      in the London interbank market) at approximately 11:00 a.m., London time, two
      Business Days prior to the commencement of such Interest Period, as the rate
      for
      dollar deposits with a maturity comparable to such Interest Period. In the
      event
      that such rate is not available at such time for any reason, then the
“LIBO
      Rate”
with
      respect to such Eurodollar Borrowing for such Interest Period shall be the
      rate
      at which dollar deposits of $5,000,000 and for a maturity comparable to such
      Interest Period are offered by the principal London office of the Administrative
      Agent in immediately available funds in the London interbank market at
      approximately 11:00 a.m., London time, two Business Days prior to the
      commencement of such Interest Period.

    

    “Lien”
means,
      with respect to any asset, (a) any mortgage, deed of trust, lien, pledge,
      hypothecation, encumbrance, charge or security interest in, on or of such asset,
      (b) the interest of a vendor or a lessor under any conditional sale
      agreement, capital lease or title retention agreement (or any financing lease
      having substantially the same economic effect as any of the foregoing) relating
      to such asset and (c) in the case of securities, any purchase option, call
      or similar right of a third party with respect to such securities.

    

    “Loan
      Documents”
means
      this Agreement, any promissory notes executed in connection herewith, Security
      Instruments, the Letters of Credit (and any applications therefore and
      reimbursement agreements related thereto), the Fee Letter, the Intercreditor
      Agreement and any other agreements executed in connection with this
      Agreement.

    

    “Loans”
means
      the loans made by the Lenders to the Borrower pursuant to this Agreement.

    

    “Material
      Adverse Effect”
means
      a
      material adverse effect on (a) the business assets, property, or condition
      (financial or otherwise) of the Borrower and its Restricted Subsidiaries taken
      as a whole, or (b) the validity or enforceability of any of the Loan Documents
      or the rights and remedies of the Administrative Agent or the Lenders under
      this
      Agreement and the other Loan Documents.

    

    “Material
      Gas Imbalance”
means,
      with respect to all Gas Balancing Agreements to which Borrower or any Restricted
      Subsidiary is a party or by which any Oil and Gas Interests owned by Borrower
      or
      a Restricted Subsidiary is bound, a net overproduced gas imbalance to Borrower
      and the Restricted Subsidiaries, taken as a whole, in excess of
      $5,000,000.

    

    
      
        CARRIZO
          REVOLVING CREDIT AGREEMENT

         

      

      
        13

        
          

        

      

      
        Index

      

    

    “Material
      Indebtedness”
means
      Indebtedness permitted under Section
      7.01(h)
      and any
      other Indebtedness (other than the Loans and Letters of Credit), or obligations
      in respect of one or more Swap Agreements, of the Borrower or any one or more
      of
      the Restricted Subsidiaries in an aggregate principal amount exceeding
      $5,000,000. For purposes of determining Material Indebtedness, the “principal
      amount” of the obligations of the Borrower or any Guarantor in respect of any
      Swap Agreement at any time shall be the maximum aggregate amount (giving effect
      to any netting agreements) that the Borrower or such Guarantor would be required
      to pay if such Swap Agreement were terminated at such time.

    

    “Material
      Sales Contract”
means,
      as of any date of determination, any agreement for the sale of Hydrocarbons
      from
      the Borrowing Base Properties to which the Borrower or any Restricted Subsidiary
      is a party if the aggregate volume of Hydrocarbons sold pursuant to such
      agreement during the twelve months immediately preceding such date equals or
      exceeds 10% of the aggregate volume of Hydrocarbons sold by the Borrower and
      the
      Restricted Subsidiaries, on a consolidated basis, from the Borrowing Base
      Properties during the twelve months immediately preceding such
      date.

    

    “Maturity
      Date”
means
      May 25, 2010.

    

    “Maximum
      Facility Amount”
means
      $200,000,000.

    

    “Maximum
      Liability”
has
      the
      meaning assigned to such term in Section
      8.10.

    

    “Maximum
      Rate”
has
      the
      meaning assigned to such term in Section
      11.13.

    

    “Monthly
      Reduction”
has
      the
      meaning assigned to such term in Section
      3.05.

    

    “Moody’s”
means
      Moody’s Investors Service, Inc.

    

    “Mortgaged
      Properties”
means
      the Oil and Gas Interests described in one or more duly executed, delivered
      and
      filed Mortgages evidencing a first and prior Lien in favor of the Administrative
      Agent for the benefit of the Secured Parties and subject only to the Liens
      permitted pursuant to Section
      7.02.
      

    

    “Mortgages”
means
      all mortgages, deeds of trust, amendments to mortgages, security agreements,
      assignments of production, pledge agreements, collateral mortgages, collateral
      chattel mortgages, collateral assignments, financing statements and other
      documents, instruments and agreements evidencing, creating, perfecting or
      otherwise establishing the Liens required by Section
      6.09.
      All
      Mortgages shall be in form and substance reasonably satisfactory to
      Administrative Agent.

    

    “Multiemployer
      Plan”
means
      a
      multiemployer plan as defined in Section 4001(a)(3) of ERISA.

    

    “Natural
      Gas”
means
      all natural gas, distillate or sulphur, natural gas liquids and all products
      recovered in the processing of
      natural
      gas (other than condensate) including, without limitation, natural gasoline,
      coalbed methane gas, casinghead gas, iso-butane, normal butane, propane and
      ethane (including such methane allowable in commercial ethane).

    

    
      
        CARRIZO
          REVOLVING CREDIT AGREEMENT

         

      

      
        14

        
          

        

      

      
        Index

      

    

    “Non-Consenting
      Lender”
has
      the
      meaning assigned to such term in Section
      2.18(c).

    

    “Non-Recourse
      Debt”
means
      Indebtedness of CCBM to Rocky Mountain Gas, Inc., and Indebtedness of the
      Borrower or any Guarantor for which the Borrower or such Guarantor, as the
      case
      may be, is not personally liable for payment of such Indebtedness.

    

    “Obligations”
means
      all obligations of every nature of the Borrower from time to time owed to the
      Administrative Agent, the Issuing Bank, the Lenders or any of them and the
      Lender Counterparties under any Loan Document or Swap Agreement (including,
      with
      respect to any Swap Agreement, obligations owed under any Swap Agreement to
      any
      Person that was a Lender Counterparty at the time such Swap Agreement was
      entered into), whether for principal, interest, reimbursement of amounts drawn
      under any Letter of Credit, payments for early termination of Swap Agreements,
      funding indemnification amounts, fees, expenses, indemnification or
      otherwise.

    

    “Off-Balance
      Sheet Liability”
of
      a
      Person means (i) any repurchase obligation or liability of such Person with
      respect to accounts or notes receivable sold by such Person, (ii) any liability
      under any Sale and Leaseback Transaction which is not a Capital Lease
      Obligation, (iii) any liability under any so-called “synthetic lease”
transaction entered into by such Person, (iv) any Material Gas Imbalance, (v)
      any Advance Payment Contract, or (vi) any obligation arising with respect to
      any
      other transaction which is the functional equivalent of or takes the place
      of
      borrowing but which does not constitute a liability on the balance sheets of
      such Person, but excluding from the foregoing clauses (iii) through (vi)
      operating leases and usual and customary oil, gas and mineral
      leases.

    

    “Oil
      and Gas Interest(s)”
means:
      (a) direct and indirect interests in and rights with respect to oil, gas,
      mineral and related properties and assets of any kind and nature, direct or
      indirect, including, without limitation, working, royalty and overriding royalty
      interests, mineral interests, leasehold interests, production payments,
      operating rights, net profits interests, other non-working interests,
      contractual interests, non-operating interests and rights in any pooled,
      unitized or communitized acreage by virtue of such interest being a part
      thereof; (b) interests in and rights with respect to Crude Oil, Natural Gas
      and
      other minerals or revenues therefrom and contracts and agreements in connection
      therewith and claims and rights thereto (including oil and gas leases, operating
      agreements, unitization, communitization and pooling agreements and orders,
      division orders, transfer orders, mineral deeds, royalty deeds, oil and gas
      sales, exchange and processing contracts and agreements and, in each case,
      interests thereunder), and surface interests, fee interests, reversionary
      interests, reservations and concessions related to any of the foregoing; (c)
      easements, rights-of-way, licenses, permits, leases, and other interests
      associated with, appurtenant to, or necessary for the operation of any of the
      foregoing; (d) interests in oil, gas, water, disposal and injection wells,
      equipment and machinery (including well equipment and machinery), oil and gas
      production, gathering, transmission, compression, treating, processing and
      storage facilities (including tanks, tank batteries, pipelines and gathering
      systems), pumps, water plants, electric plants, gasoline and gas processing
      plants, refineries and other tangible or intangible, movable or immovable,
      real
      or personal property and fixtures located on, associated with, appurtenant
      to,
      or necessary for the operation of any of the 

     

    
      
        CARRIZO
          REVOLVING CREDIT AGREEMENT

         

      

      
        15

        
          

        

      

      
        Index

      

    

     

    foregoing;
      and (e) all seismic, geological, geophysical and engineering records, data,
      information, maps, licenses and interpretations.

    

    “Organizational
      Documents”
means
      (a) with respect to any corporation, its certificate or articles of
      incorporation or organization, as amended, and its by-laws, as amended, (b)
      with
      respect to any limited partnership, its certificate of limited partnership,
      as
      amended, and its partnership agreement, as amended, (c) with respect to any
      general partnership, its partnership agreement, as amended, and (d) with respect
      to any limited liability company, its certificate of formation or articles
      of
      organization, as amended, and its limited liability company agreement or
      operating agreement, as amended.

    

    “Other
      Taxes”
means
      any and all present or future stamp or documentary taxes or any other excise
      or
      property taxes, charges or similar levies arising from any payment made
      hereunder or from the execution, delivery or enforcement of, or otherwise with
      respect to, this Agreement.

    

    “Participant”
has
      the
      meaning assigned to such term in Section
      11.04.

    

    “Payment
      Currency”
has
      the
      meaning assigned to such term in Section
      8.07.

    

    “PBGC”
means
      the Pension Benefit Guaranty Corporation referred to and defined in ERISA and
      any successor entity performing similar functions.

    

    “Permitted
      Disposition”
means
      any Disposition (a) of equipment which is worthless or obsolete, (b) of
      inventory (including Hydrocarbons sold as produced and seismic data) which
      is
      sold in the ordinary course of business, (c) of interests in oil and gas leases,
      or portions thereof (if released or abandoned but not otherwise sold or
      transferred), so long as no well situated on any such lease, or located on
      any
      unit containing all or any part thereof, is capable (or is subject to being
      made
      capable through commercially feasible operations) of producing Hydrocarbons
      or
      minerals in commercial quantities, (d) of cash and cash equivalents otherwise
      permitted under this Agreement, (e) constituting dividends and distributions
      permitted by Section
      7.07,
      (f)
      constituting Permitted Liens and (g) constituting investments, loans and
      advances permitted by Section
      7.05.

    

    “Permitted
      Encumbrances”
      means:

    

    (a) Liens
      for
      taxes, assessments, or other governmental charges not yet due or which are
      being
      contested in good faith by appropriate action promptly initiated and diligently
      conducted, if such reserves as shall be required by GAAP shall have been made
      therefore;

    

    (b) Liens
      of
      landlords, vendors, carriers, warehousemen, mechanics, laborers, material men
      and other Liens arising by law in the ordinary course of business for sums
      either not yet due or being contested in good faith by appropriate action
      promptly initiated and diligently conducted, if such reserve as shall be
      required by GAAP shall have been made therefore;

    

    (c) inchoate
      liens arising under ERISA to secure the contingent liabilities, if any,
      permitted by this Agreement;

    

    
      
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    (d) pledges
      and deposits made in the ordinary course of business in compliance with
      workmen’s compensation, unemployment insurance and other social security laws or
      regulations;

    

    (e) deposits
      to secure the performance of bids, trade contracts (other than for
      Indebtedness), leases (other than Capital Lease Obligations and oil, gas and
      mineral leases), statutory obligations, surety and appeal bonds, performance
      bonds and other obligations of a like nature incurred in the ordinary course
      of
      business;

    

    (f) zoning
      restrictions, easements, licenses, covenants, conditions, rights-of-way,
      restrictions on use of real property and other similar encumbrances incurred
      in
      the ordinary course of business and minor irregularities of title that, in
      the
      aggregate, are not substantial in amount and do not materially detract form
      the
      value of the property subject thereto or interfere with the ordinary conduct
      of
      the business of the Borrower or any Subsidiary;

    

    (g) deposits,
      encumbrances or pledges to secure payments of workmen’s compensation and other
      payments, public liability, unemployment and other insurance, old-age pensions
      or other social security obligations, or the performance of bids, tenders,
      leases, contracts (other than contracts for the payment of money), public or
      statutory obligations, surety, stay or appeal bonds, or other similar
      obligations arising in the ordinary course of business;

    

    (h) any
      Designated Title Exceptions which are incurred in the ordinary course of
      business and would not materially adversely affect the operations of the
      Borrower or otherwise in the aggregate have a Material Adverse
      Effect;

    

    (i) encumbrances
      arising out of judgments or awards in respect of which the Borrower shall in
      good faith be prosecuting an appeal or proceedings for review and in respect
      of
      which it shall have secured a subsisting stay of execution pending such appeal
      or proceedings for review; provided that the Borrower shall have set aside
      on
      its books adequate reserves, in accordance with GAAP, with respect to such
      judgment or award; and

    

    (j) Liens
      affecting the Borrower’s Equity Interests in an Unrestricted
      Subsidiary.

    

    “Permitted
      Investments”
      means:

    

    (a) investments
      in U.S. Government Securities;

    

    (b) investments
      in commercial paper maturing within 270 days from the date of acquisition
      thereof (other than commercial paper issued by the Borrower or an Affiliate
      of
      the Borrower) and having, at such date of acquisition, one of the two highest
      credit ratings obtainable from S&P or Moody’s;

    

    (c) investments
      in certificates of deposit, banker’s acceptances, repurchase agreements and time
      deposits maturing within one year from the date of acquisition thereof issued
      or
      guaranteed by or placed with, and money market deposit accounts issued or
      offered by, any domestic office of any commercial bank organized under the
      laws
      of the 

     

    
      
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        Index

      

    

     

    United
      States of America or any State thereof that has a combined capital and surplus
      and undivided profits of not less than $250,000,000;

    

    (d) investments
      in shares of funds registered under the Investment Company Act of 1940, as
      amended, that have assets of at least $100,000,000 and invest only in
      obligations described in clauses (a) through (c) above to the extent that such
      shares are rated by Moody’s or S&P in one of the two highest rating
      categories assigned by such agency for shares of such nature.

    

    “Permitted
      Investors”
means
      the directors, officers and other management employees of the Borrower that
      are
      shareholders of the Borrower on the Effective Date and their respective
      affiliates.

    

    “Permitted
      Liens”
means
      Liens permitted under Section
      7.02.

    

    “Person”
means
      any natural person, corporation, limited liability company, trust, joint
      venture, association, company, partnership, Governmental Authority or other
      entity.

    

    “Pinnacle”
means
      Pinnacle Gas Resources, Inc., a Delaware corporation and its successors and
      permitted assigns.

    

    “Plan”
means
      any employee pension benefit plan (other than a Multiemployer Plan) subject
      to
      the provisions of Title IV of ERISA or Section 412 of the Code or
      Section 302 of ERISA, and in respect of which any Credit Party or any ERISA
      Affiliate is (or, if such plan were terminated, would under Section 4069 of
      ERISA be deemed to be) an “employer” as defined in Section 3(5) of
      ERISA.

    

    “Pledge
      Agreement”
means
      a
      Pledge and Security Agreement in favor of the Administrative Agent for the
      benefit of the Secured Parties covering, among other things, the rights and
      interests of Borrower or any Restricted Subsidiary in the Equity Interest of
      each Restricted Subsidiary and otherwise in form and substance satisfactory
      to
      the Administrative Agent and the Required Lenders.

    

    “Prime
      Rate”
means
      the rate of interest per annum publicly announced from time to time by JPMorgan
      Chase Bank, N.A. as its prime rate in effect at its principal office in Chicago,
      Illinois, each change in the Prime Rate shall be effective from and including
      the date such change is publicly announced as being effective. 

    

    “Projections”
means
      (i) with respect to the Projections to be attached to the Solvency Certificate
      required under Section
      5.01(m),
      the
      Borrower’s forecasted cash flow projections for the remaining portion of the
      fiscal year ending December 31, 2006, and (ii) with respect to the Projections
      required under Section
      6.01(h),
      the
      Borrower’s forecasted cash flow projections for such fiscal year, in each case
      with respect to clauses (i) and (ii), prepared on a basis consistent with the
      historical financial statements described in Section
      4.04
      and
      after giving effect to the Transactions, together with appropriate supporting
      details and a statement of underlying assumptions, in form and substance
      reasonably satisfactory to the Administrative Agent.

    

    
      
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    “Redetermination”
means
      any Scheduled Redetermination, any Special Redetermination.

    

    “Redetermination
      Date”
means
      (a) with respect to any Scheduled Redetermination, each May 1 and
      November 1 of each year, commencing November 1, 2006, and (b) with
      respect to any Special Redetermination (other than the Special Redetermination
      set forth in the following clause (c)), the first day of the first month which
      is not less than twenty (20) Business Days following the date of a request
      for a
      Special Redetermination and (c) with respect to any Redetermination pursuant
      to
Section
      3.04
      or
Section
      7.04,
      the
      date notice of such Redetermination is delivered to the Borrower pursuant to
      Section
      3.06.

    

    “Register”
has
      the
      meaning assigned to such term in Section
      11.04.

    

    “Related
      Parties”
means,
      with respect to any specified Person, such Person’s Affiliates and the
      respective directors, officers, employees, agents and advisors of such Person
      and such Person’s Affiliates.

    

    “Required
      Lenders”
means,
      at any time, Lenders having Credit Exposures and Unused Commitments representing
      at least 66-2/3% of the sum of the Aggregate Credit Exposure and all Unused
      Commitments of all Lenders at such time or, if the Aggregate Commitment has
      been
      terminated, Lenders having Credit Exposures representing at least 66-2/3% of
      the
      sum of the Aggregate Credit Exposure of all Lenders at such time; provided
      that the
      Commitment of and the Credit Exposures held or deemed held by any Defaulting
      Lender shall be excluded for purposes of making a determination of the Required
      Lenders.

    

    “Reserve
      Report”
      means an
      unsuperseded engineering analysis of the Borrowing Base Properties, in form
      and
      substance reasonably acceptable to the Administrative Agent, prepared in
      accordance with customary and prudent practices in the petroleum engineering
      industry.

    

    “Restricted
      Payment”
means
      any dividend or other distribution (whether in cash, securities or other
      property) with respect to any Equity Interests in any Credit Party, or any
      payment (whether in cash, securities or other property), including any sinking
      fund or similar deposit, on account of the purchase, redemption, retirement,
      acquisition, cancellation or termination of any such Equity Interests in any
      Credit Party or any option, warrant or other right to acquire any such Equity
      Interests in any Credit Party.

    

    “Restricted
      Subsidiary”
means
      any Subsidiary that is not an Unrestricted Subsidiary.

    

    “S&P”
means
      Standard & Poor’s Ratings Group, a division of The McGraw Hill
      Corporation.

    

    “Sale
      and Leaseback Transaction”
means
      any sale or other transfer of any property by any Person with the intent to
      lease such property as lessee.

    

    “Scheduled
      Redetermination”
means
      any redetermination of the Borrowing Base pursuant to Section
      3.02.

    

    
      
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        Index

      

    

     

    “Second
      Lien Agent”
means,
      Credit Suisse in its capacity as contractual representative of the financial
      institutions and other Persons from time to time a party to the Second Lien
      Facility and any successor agent appointed pursuant to the terms of the Second
      Lien Facility Documents.

    

    “Second
      Lien Credit Agreement”
means
      that certain Second Lien Credit Agreement, dated July 21, 2005, by and among
      the
      Borrower, certain subsidiaries of the Borrower, as guarantors, the lenders
      party
      thereto and Credit Suisse, as Administrative Agent, as amended, modified,
      supplemented or restated from time to time to the extent permitted under this
      Agreement.

    

    “Second
      Lien Facility”
means
      the second lien term loan facility evidenced by the Second Lien Facility
      Documents. 

    

    “Second
      Lien Facility Documents”
means
      the Second Lien Credit Agreement and any promissory notes executed in connection
      therewith, security instruments and any other agreements executed in connection
      with such Second Lien Credit Agreement as the same may be amended, modified,
      supplemented or restated from time to time to the extent permitted under this
      Agreement.

    

    “Second
      Lien Loans”
means
      the term loans made under the Second Lien Facility.

    

    “Second
      Lien Obligations”
has
      the
      meaning assigned to such term in the Intercreditor Agreement.

    

    “Secured
      Party”
means
      the Administrative Agent, any Lender and any Lender Counterparty and shall
      include Lenders and Lender Counterparties to the extent that any Obligations
      owing to such Persons were incurred while such Persons were Lenders or Lender
      Counterparties.

    

    “Security
      Instruments”
means
      collectively, all Guarantees of the Obligations evidenced by the Loan Documents
      and all mortgages, security agreements, pledge agreements, collateral
      assignments and other collateral documents covering the Oil and Gas Interests
      of
      the Borrower and the Restricted Subsidiaries and the Equity Interests of the
      Restricted Subsidiaries and other personal property, equipment, oil and gas
      inventory and proceeds of the foregoing, all such documents to be in form and
      substance reasonably satisfactory to the Administrative Agent.

    

    “Special
      Redetermination”
means
      any redetermination of the Borrowing Base made pursuant to Section
      3.03
      or
Section
      3.04.

    

    “Statutory
      Reserve Rate”
means
      a
      fraction (expressed as a decimal), the numerator of which is the number one
      and
      the denominator of which is the number one minus the aggregate of the maximum
      reserve percentages (including any marginal, special, emergency or supplemental
      reserves) expressed as a decimal established by the Board to which the
      Administrative Agent is subject (a) with respect to the Base CD Rate, for new
      negotiable nonpersonal time deposits in dollars over $100,000 with maturities
      approximately equal to three months and (b) with respect to the Adjusted LIBO
      Rate, for Eurocurrency funding (currently referred to as “Eurocurrency
      Liabilities” in Regulation D of the Board). Such reserve 

     

    
      
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        Index

      

    

     

    percentages
      shall include those imposed pursuant to such Regulation D. Eurodollar Loans
      shall be deemed to constitute Eurocurrency funding and to be subject to such
      reserve requirements without benefit of or credit for peroration, exemptions
      or
      offsets that may be available from time to time to any Lender under such
      Regulation D or any comparable regulation. The Statutory Reserve Rate shall
      be adjusted automatically on and as of the effective date of any change in
      any
      reserve percentage.

    

    “Subject
      Business”
means
      the exploration, development, exploitation and production of Natural Gas and
      Crude Oil.

    

    “Subsidiary”
means,
      with respect to any Person (the “parent”)
      at any
      date, any corporation, limited liability company, partnership, association
      or
      other entity the accounts of which would be consolidated with those of the
      parent in the parent’s consolidated financial statements if such financial
      statements were prepared in accordance with GAAP as of such date, as well as
      any
      other corporation, limited liability company, partnership, association or other
      entity (a) of which securities or other ownership interests representing
      more than 50% of the equity or more than 50% of the ordinary voting power or,
      in
      the case of a partnership, more than 50% of the general partnership interests
      are, as of such date, owned, controlled or held, or (b) that is, as of such
      date, otherwise Controlled, by the parent or one or more subsidiaries of the
      parent or by the parent and one or more subsidiaries of the parent any
      subsidiary of the Borrower. Unless the context otherwise clearly requires,
      references herein to a “Subsidiary” refer to a Subsidiary of the Borrower. For
      the sake of clarity, Administrative Agent and each Lender acknowledge and agree
      that as of the Effective Date, Pinnacle is not a Subsidiary.

    

    “Swap
      Agreement”
means
      any agreement with respect to any swap, forward, future or derivative
      transaction or option or similar agreement involving, or settled by reference
      to, one or more rates, currencies, commodities, equity or debt instruments
      or
      securities, or economic, financial or pricing indices or measures of economic,
      financial or pricing risk or value or any similar transaction or any combination
      of these transactions; provided
      that no
      phantom stock or similar plan providing for payments only on account of services
      provided by current or former directors, officers, employees or consultants
      of
      the Credit Parties shall be a Swap Agreement.

    

    “Taxes”
means
      any and all present or future taxes, levies, imposts, duties, deductions,
      charges or withholdings imposed by any Governmental Authority. 

    

    “Three-Month
      Secondary CD Rate”
means,
      for any day, the secondary market rate for three-month certificates of deposit
      reported as being in effect on such day (or, if such day is not a Business
      Day,
      the next preceding Business Day) by the Board through the public information
      telephone line of the Federal Reserve Bank of New York (which rate will,
      under the current practices of the Board, be published in Federal Reserve
      Statistical Release H.15(519) during the week following such day) or, if
      such rate is not so reported on such day or such next preceding Business Day,
      the average of the secondary market quotations for three-month certificates
      of
      deposit of major money center banks in New York City received at approximately
      10:00 a.m., New York City time, on such day (or, if such day is not a
      Business Day, on the next preceding Business Day) by the Administrative Agent
      from three negotiable certificate of deposit dealers of recognized standing
      selected by it.

    

    
      
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        Index

      

    

     

    “Total
      Net Debt”
means,
      on any date of determination, the Borrower’s consolidated Indebtedness excluding
      Non-Recourse Debt and Indebtedness of any Unrestricted Subsidiary on such date,
      less the amount of unrestricted cash and cash equivalents on hand of the
      Borrower and the Guarantors as of such date.

    

    “Transactions”
means
      the execution, delivery and performance by the Credit Parties of this Agreement
      and the Loan Documents, the borrowing of Loans, the use of the proceeds thereof,
      the issuance of Letters of Credit hereunder, the repayment of all amounts
      outstanding under the Existing Revolving Facility and the amendment of the
      Intercreditor Agreement pursuant to an amendment in substantially the form
      of
      Exhibit E.

    

    “Type”,
      when
      used in reference to any Loan or Borrowing, refers to whether the rate of
      interest on such Loan, or on the Loans comprising such Borrowing, is determined
      by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

    

    “Unrestricted
      Subsidiary”
means
      (a) any Subsidiary that at the time of determination shall be designated an
      Unrestricted Subsidiary by the Board of Directors of the Borrower in the manner
      provided below and (b) any Subsidiary of an Unrestricted Subsidiary. The Board
      of Directors of the Borrower may at any time and from time to time designate
      any
      Subsidiary (including any newly acquired or newly formed Subsidiary but
      excluding CCBM or any other Subsidiary that owns or operates Oil and Gas
      Interests included in the Borrowing Base Properties or other interests of the
      type described in clauses (d) or (e) of the definition of Oil and Gas Interests
      relating to any Borrowing Base Properties)) to be an Unrestricted Subsidiary
      provided
      that (i)
      no Default or Event of Default has occurred or is continuing at the time of
      such
      designation and after giving effect to such designation, (ii) immediately after
      such designation, no Restricted Person has any Obligation to pay any
      Indebtedness of such Subsidiary, has in any way guaranteed any Indebtedness
      of
      such Subsidiary, or has any assets or properties (excluding a pledge of the
      Equity Interests in such Subsidiary) which are subject to any Lien securing
      any
      Indebtedness of such Subsidiary, and (iii) notice of any such designation is
      promptly given to the Administrative Agent in writing.

    

    “Unused
      Commitment”
means,
      with respect to each Lender at any time, such Lender’s Commitment at such time
      minus such Lender’s Credit Exposure at such time.

    

    “Unused
      Commitment Fee”
has
      the
      meaning assigned to such term in Section
      2.11(a).

    

    “U.S.
      Government Securities”
means
      direct obligations of, or obligations the principal of and interest on which
      are
      unconditionally guaranteed by, the United States of America (or by any agency
      thereof to the extent such obligations are backed by the full faith and credit
      of the United States of America), in each case maturing within one year from
      the
      date of acquisition thereof.

    

    “Withdrawal
      Liability”
means
      liability to a Multiemployer Plan as a result of a complete or partial
      withdrawal from such Multiemployer Plan, as such terms are defined in
      Part I of Subtitle E of Title IV of ERISA.

    

    
      
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        Index

      

    

    Section
      1.02. Types
      of Loans and Borrowings.
      For
      purposes of this Agreement, Loans may be classified and referred to by Type
      (e.g.,
      a
“Eurodollar Loan” or an “ABR Loan) and Borrowings also may be classified and
      referred to by Type (e.g.,
      a
“Eurodollar Borrowing” or an “ABR Borrowing”).

     

    Section
      1.03. Terms
      Generally.
      The
      definitions of terms herein shall apply equally to the singular and plural
      forms
      of the terms defined. Whenever the context may require, any pronoun shall
      include the corresponding masculine, feminine and neuter forms. The words
“include”, “includes” and “including” shall be deemed to be followed by the
      phrase “without limitation”. The word “will” shall be construed to have the same
      meaning and effect as the word “shall.” Unless the context requires otherwise
      (a) any definition of or reference to any agreement, instrument or other
      document herein shall be construed as referring to such agreement, instrument
      or
      other document as from time to time amended, supplemented or otherwise modified
      (subject to any restrictions on such amendments, supplements or modifications
      set forth herein), (b) any reference herein to any Person shall be construed
      to
      include such Person’s successors and assigns, (c) the words “herein”, “hereof”
and “hereunder”, and words of similar import, shall be construed to refer to
      this Agreement in its entirety and not to any particular provision hereof,
      (d)
      all references herein to Articles, Sections, Exhibits and Schedules shall be
      construed to refer to Articles and Sections of, and Exhibits and Schedules
      to,
      this Agreement and (e) the words “asset” and “property” shall be construed to
      have the same meaning and effect and to refer to any and all tangible and
      intangible assets and properties, including cash, securities, accounts and
      contract rights. 

     

    Section
      1.04. Accounting
      Terms; GAAP.
      Except
      as otherwise expressly provided herein, all terms of an accounting or financial
      nature shall be construed in accordance with GAAP, as in effect from time to
      time; provided
      that, if
      the Borrower notifies the Administrative Agent that the Borrower request an
      amendment to any provision hereof to eliminate the effect of any change
      occurring after the date hereof in GAAP or in the application thereof on the
      operation of such provision (or if the Administrative Agent notifies the
      Borrower that the Required Lenders request an amendment to any provision hereof
      for such purpose), regardless of whether any such notice is given before or
      after such change in GAAP or in the application thereof, then such provision
      shall be interpreted on the basis of GAAP as in effect and applied immediately
      before such change shall have become effective until such notice shall have
      been
      withdrawn or such provision amended in accordance herewith.

     

    Section
      1.05. Oil
      and Gas Definitions.
      For
      purposes of this Agreement, the terms “proved reserves,” “proved developed
      reserves,” “proved undeveloped reserves,” “proved developed non-producing
      reserves” and “proved developed producing reserves,” have the meaning given such
      terms from time to time and at the time in question by the Society of Petroleum
      Engineers of the American Institute of Mining Engineers.

     

    Section
      1.06. Times
      of Day.
      Unless
      otherwise specified, all references herein to times of day shall be references
      to Central time (daylight or standard, as applicable).

    

    
      
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    Article
      II

    

    The
      Credits

     

    Section
      2.01. Commitments.
      Subject
      to the terms and conditions set forth herein, each Lender agrees to make Loans
      to the Borrower from time to time during the Availability Period in an aggregate
      principal amount that will not result in (a) such Lender’s Credit Exposure
      exceeding such Lender’s Commitment or (b) the Aggregate Credit Exposure
      exceeding the Aggregate Commitment. Within the foregoing limits and subject
      to
      the terms and conditions set forth herein, the Borrower may borrow, prepay
      and
      reborrow Loans.

     

    Section
      2.02. Termination
      and Reduction of the Aggregate Commitment.

    

    (a) Unless
      previously terminated, the Aggregate Commitment shall terminate on the Maturity
      Date. 

    

    (b) The
      Borrower may at any time terminate, or from time to time reduce, the Aggregate
      Commitment; provided
      that (i)
      each reduction of the Aggregate Commitment shall be in an amount that is an
      integral multiple of $1,000,000 and not less than $1,000,000, and (ii) the
      Borrower shall not terminate or reduce the Aggregate Commitment if, after giving
      effect to any concurrent prepayment of the Loans in accordance with Section
      2.09
      and
Section
      2.10,
      the
      Aggregate Credit Exposure would exceed the Aggregate Commitment.

    

    (c) The
      Borrower shall notify the Administrative Agent of any election to terminate
      or
      reduce the Aggregate Commitment under paragraph (b) of this Section at
      least three Business Days prior to the effective date of such termination or
      reduction, specifying such election and the effective date thereof. Promptly
      following receipt of any notice, the Administrative Agent shall advise the
      Lenders of the contents thereof. Each notice delivered by the Borrower pursuant
      to this Section shall be irrevocable; provided
      that a
      notice of termination of the Aggregate Commitment delivered by the Borrower
      may
      state that such notice is conditioned upon the effectiveness of other credit
      facilities, in which case such notice may be revoked by the Borrower (by notice
      to the Administrative Agent on or prior to the specified effective date) if
      such
      condition is not satisfied. Any termination of the Aggregate Commitment shall
      be
      permanent. Each reduction of the Aggregate Commitment shall be made ratably
      among the Lenders in accordance with their respective Commitment.

     

    Section
      2.03. Loans
      and Borrowings.

    

    (a) Each
      Loan
      shall be made as part of a Borrowing consisting of Loans made by the Lenders
      ratably in accordance with their respective Commitments. The failure of any
      Lender to make any Loan required to be made by it shall not relieve any other
      Lender of its obligations hereunder; provided
      that the
      Commitments of the Lenders are several and no Lender shall be responsible for
      any other Lender’s failure to make Loans as required.

     

    
      
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      (b) Subject
        to Section
        2.13,
        each
        Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as
        the
        Borrower may request in accordance herewith. Each Lender at its option may
        make
        any Eurodollar Loan by causing any domestic or foreign branch or Affiliate
        of
        such Lender to make such Loan; provided
        that any
        exercise of such option shall not affect the obligation of the Borrower to
        repay
        such Loan in accordance with the terms of this Agreement. 

      

      (c) At
        the
        commencement of each Interest Period for any Eurodollar Borrowing, such
        Borrowing shall be in an aggregate amount that is an integral multiple of
        $100,000 and not less than $1,000,000. At the time that each ABR Borrowing
        is
        made, such Borrowing shall be in an aggregate amount that is an integral
        multiple of $100,000 and not less than $1,000,000; provided
        that an
        ABR Borrowing may be in an aggregate amount that is equal to the entire unused
        balance of the Aggregate Commitment or that is required to finance the
        reimbursement of an LC Disbursement as contemplated by Section
        2.05(e).
        Borrowings of more than one Type may be outstanding at the same time;
provided
        that
        there shall not at any time be more than a total of eight (8) Eurodollar
        Borrowings outstanding.

      

      (d) Notwithstanding
        any other provision of this Agreement, the Borrower shall not be entitled
        to
        request, or to elect to convert or continue, any Borrowing if the Interest
        Period requested with respect thereto would end after the Maturity
        Date.

       

      Section
        2.04. Requests
        for Borrowings.
        To
        request a Borrowing, the Borrower shall notify the Administrative Agent of
        such
        request by telephone (a) in the case of a Eurodollar Borrowing, not later
        than
        11:00 a.m., three Business Days before the date of the proposed Borrowing
        or
        (b) in the case of an ABR Borrowing, not later than 11:00 a.m., one
        Business Day before the date of the proposed Borrowing; provided
        that any
        such notice of an ABR Borrowing to finance the reimbursement of an LC
        Disbursement as contemplated by Section
        2.05(e)
        may be
        given not later than 10:00 a.m., on the date of the proposed Borrowing. Each
        such telephonic Borrowing Request shall be irrevocable and shall be confirmed
        promptly by hand delivery or telecopy (or transmit by electronic communication
        if arrangements for doing so have been approved by the Administrative Agent)
        to
        the Administrative Agent of a written Borrowing Request in a form approved
        by
        the Administrative Agent and signed by the Borrower. Each such telephonic
        and
        written Borrowing Request shall specify the following information in compliance
        with Section
        2.03:

      

      (i) the
        aggregate amount of the requested Borrowing;

      

      (ii) the
        date
        of such Borrowing, which shall be a Business Day;

      

      (iii) whether
        such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

      

      (iv) in
        the
        case of a Eurodollar Borrowing, the initial Interest Period to be applicable
        thereto, which shall be a period contemplated by the definition of the term
        “Interest Period”; and

      

      
        
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    (v) the
      location and number of the Borrower’s account to which funds are to be
      disbursed, which shall comply with the requirements of Section
      2.06.

    

    If
      no
      election as to the Type of Borrowing is specified, then the requested Borrowing
      shall be an ABR Borrowing. If no Interest Period is specified with respect
      to
      any requested Eurodollar Borrowing, then the Borrower shall be deemed to have
      selected an Interest Period of one month’s duration. Promptly following receipt
      of a Borrowing Request in accordance with this Section, the Administrative
      Agent
      shall advise each Lender of the details thereof and of the amount of such
      Lender’s Loan to be made as part of the requested Borrowing.

     

    Section
      2.05. Letters
      of Credit.

    

    (a) General.
      Subject
      to the terms and conditions set forth herein, the Borrower may request the
      issuance of Letters of Credit for its own or the account of any Restricted
      Subsidiary in a form reasonably acceptable to the Administrative Agent and
      the
      Issuing Bank, at any time and from time to time during the Availability Period.
      In the event of any inconsistency between the terms and conditions of this
      Agreement and the terms and conditions of any form of letter of credit
      application or other agreement submitted by the Borrower to, or entered into
      by
      the Borrower with, the Issuing Bank relating to any Letter of Credit, or such
      terms and conditions contain representations, defaults, covenants, or grants
      of
      security not found in this Agreement or any other Loan Document, such provisions
      shall be deemed ineffective and the terms and conditions of this Agreement
      shall
      control.

    

    (b) Notice
      of Issuance, Amendment, Renewal, Extension; Certain Conditions.
      To
      request the issuance of a Letter of Credit (or the amendment, renewal or
      extension of an outstanding Letter of Credit), the Borrower shall hand deliver
      or telecopy (or transmit by electronic communication, if arrangements for doing
      so have been approved by the Issuing Bank) to the Issuing Bank and the
      Administrative Agent (reasonably in advance of the requested date of issuance,
      amendment, renewal or extension) a notice requesting the issuance of a Letter
      of
      Credit, or identifying the Letter of Credit to be amended, renewed or extended,
      and specifying the date of issuance, amendment, renewal or extension (which
      shall be a Business Day), the date on which such Letter of Credit is to expire
      (which shall comply with paragraph (c) of this Section), the amount of such
      Letter of Credit, the name and address of the beneficiary thereof and such
      other
      information as shall be necessary to prepare, amend, renew or extend such Letter
      of Credit. If requested by the Issuing Bank, the Borrower also shall submit
      a
      letter of credit application on the Issuing Bank’s standard form in connection
      with any request for a Letter of Credit. A Letter of Credit shall be issued,
      amended, renewed or extended only if (and upon issuance, amendment, renewal
      or
      extension of each Letter of Credit the Borrower shall be deemed to represent
      and
      warrant that), after giving effect to such issuance, amendment, renewal or
      extension (i) the LC Exposure shall not exceed $10,000,000 and (ii) the
      Aggregate Credit Exposure shall not exceed the Aggregate
      Commitment.

    

    

      (c) Expiration
        Date.
        Each
        Letter of Credit shall expire at or prior to the close of business on the
        earlier of (i) the date one year after the date of the issuance of such
        Letter of Credit (or, in the case of any renewal or extension thereof, one
        year
        after such 

       

      
        
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        renewal
          or extension) and (ii) the date that is five Business Days prior to the
          Maturity Date; provided that any Letter of Credit with a one-year term
          may
          provide for the renewal thereof for additional one-year periods (which
          shall in
          no event extend beyond the date referred to in clause (ii) above);

         

        (d) Participations.
          By the
          issuance of a Letter of Credit (or an amendment to a Letter of Credit increasing
          the amount thereof) and without any further action on the part of the Issuing
          Bank or the Lenders, the Issuing Bank hereby grants to each Lender, and
          each
          Lender hereby acquires from the Issuing Bank, a participation in such Letter
          of
          Credit equal to such Lender’s Applicable Percentage of the aggregate amount
          available to be drawn under such Letter of Credit. In consideration and
          in
          furtherance of the foregoing, each Lender hereby absolutely and unconditionally
          agrees to pay to the Administrative Agent, for the account of the Issuing
          Bank,
          such Lender’s Applicable Percentage of each LC Disbursement made by the Issuing
          Bank and not reimbursed by the Borrower on the date due as provided in
          paragraph
          (e) of this Section, or of any reimbursement payment required to be refunded
          to
          the Borrower for any reason. Each Lender acknowledges and agrees that its
          obligation to acquire participations pursuant to this paragraph in respect
          of
          Letters of Credit is absolute and unconditional and shall not be affected
          by any
          circumstance whatsoever, including any amendment, renewal or extension
          of any
          Letter of Credit or the occurrence and continuance of a Default or reduction
          or
          termination of the Aggregate Commitment, and that each such payment shall
          be
          made without any offset, abatement, withholding or reduction
          whatsoever.

        

        (e) Reimbursement.
          If the
          Issuing Bank shall make any LC Disbursement in respect of a Letter of Credit,
          the Borrower shall reimburse such LC Disbursement by paying to the
          Administrative Agent an amount equal to such LC Disbursement not later
          than
          12:00 noon, on the date that such LC Disbursement is made, if the Borrower
          shall
          have received notice of such LC Disbursement prior to 10:00 a.m., on such
          date,
          or, if such notice has not been received by the Borrower prior to such
          time on
          such date, then not later than 12:00 noon, on (i) the Business Day that
          the
          Borrower receives such notice, if such notice is received prior to 10:00
          a.m.,
          on the day of receipt, or (ii) the Business Day immediately following the
          day
          that the Borrower receives such notice, if such notice is not received
          prior to
          such time on the day of receipt; provided
          that the
          Borrower may, subject to the conditions to borrowing set forth herein,
          request
          in accordance with Section
          2.04
          that
          such payment be financed with an ABR Borrowing in an equivalent amount
          and, to
          the extent so financed, the Borrower’s obligation to make such payment shall be
          discharged and replaced by the resulting ABR Borrowing. If the Borrower
          fails to
          make such payment when due, the Administrative Agent shall notify each
          Lender of
          the applicable LC Disbursement, the payment then due from the Borrower
          in
          respect thereof and such Lender’s Applicable Percentage thereof. Promptly
          following receipt of such notice, each Lender shall pay to the Administrative
          Agent its Applicable Percentage of the payment then due from the Borrower,
          in
          the same manner as provided in Section
          2.06
          with
          respect to Loans made by such Lender (and Section
          2.06
          shall
          apply, mutatis mutandis,
          to the
          payment obligations of the Lenders), and the Administrative Agent shall
          promptly
          pay to the Issuing Bank the amounts so received by it from the Lenders.
          Promptly
          following receipt by the Administrative Agent of any payment from the Borrower
          pursuant to this paragraph, the Administrative Agent shall distribute such
          payment to the Issuing Bank or, 

         

        
          
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          to
            the
            extent that Lenders have made payments pursuant to this paragraph to
            reimburse
            the Issuing Bank, then to such Lenders and the Issuing Bank as their
            interests
            may appear. Any payment made by a Lender pursuant to this paragraph to
            reimburse
            the Issuing Bank for any LC Disbursement (other than the funding of ABR
            Loans as
            contemplated above) shall not constitute a Loan and shall not relieve
            the
            Borrower of its obligation to reimburse such LC Disbursement.

          

          (f) Obligations
            Absolute.
            The
            Borrower’s obligation to reimburse LC Disbursements as provided in
            paragraph (e) of this Section shall be absolute, unconditional and
            irrevocable, and shall be performed strictly in accordance with the terms
            of
            this Agreement under any and all circumstances whatsoever and irrespective
            of
            (i) any lack of validity or enforceability of any Letter of Credit or
            this
            Agreement, or any term or provision therein, (ii) any draft or other
            document
            presented under a Letter of Credit proving to be forged, fraudulent or
            invalid
            in any respect or any statement therein being untrue or inaccurate in
            any
            respect, (iii) payment by the Issuing Bank under a Letter of Credit against
            presentation of a draft or other document that does not comply with the
            terms of
            such Letter of Credit, or (iv) any other event or circumstance whatsoever,
            whether or not similar to any of the foregoing, that might, but for the
            provisions of this Section, constitute a legal or equitable discharge
            of, or
            provide a right of setoff against, the Borrower’s obligations hereunder. Neither
            the Administrative Agent, the Lenders nor the Issuing Bank, nor any of
            their
            Related Parties, shall have any liability or responsibility by reason
            of or in
            connection with the issuance or transfer of any Letter of Credit or any
            payment
            or failure to make any payment thereunder (irrespective of any of the
            circumstances referred to in the preceding sentence), or any error, omission,
            interruption, loss or delay in transmission or delivery of any draft,
            notice or
            other communication under or relating to any Letter of Credit (including
            any
            document required to make a drawing thereunder), any error in interpretation
            of
            technical terms or any consequence arising from causes beyond the control
            of the
            Issuing Bank; provided
            that the
            foregoing shall not be construed to excuse the Issuing Bank from liability
            to
            the Borrower to the extent of any direct damages (as opposed to consequential
            damages, claims in respect of which are hereby waived by the Borrower
            to the
            extent permitted by applicable law) suffered by the Borrower that are
            caused by
            the Issuing Bank’s failure to exercise care when determining whether drafts and
            other documents presented under a Letter of Credit comply with the terms
            thereof. The parties hereto expressly agree that, in the absence of gross
            negligence or willful misconduct on the part of the Issuing Bank (as
            finally
            determined by a court of competent jurisdiction), the Issuing Bank shall
            be
            deemed to have exercised care in each such determination. In furtherance
            of the
            foregoing and without limiting the generality thereof, the parties agree
            that,
            with respect to documents presented which appear on their face to be
            in
            substantial compliance with the terms of a Letter of Credit, the Issuing
            Bank
            may, in its sole discretion, either accept and make payment upon such
            documents
            without responsibility for further investigation, regardless of any notice
            or
            information to the contrary, or refuse to accept and make payment upon
            such
            documents if such documents are not in strict compliance with the terms
            of such
            Letter of Credit. 

          

          (g) Disbursement
            Procedures.
            The
            Issuing Bank shall, promptly following its receipt thereof, examine all
            documents purporting to represent a demand for payment under a Letter
            of Credit.
            The Issuing Bank shall promptly notify the Administrative Agent

        

         

        
          
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      and
        the
        Borrower by telephone (confirmed by telecopy) of such demand for payment
        and
        whether the Issuing Bank has made or will make an LC Disbursement thereunder;
        provided
        that any
        failure to give or delay in giving such notice shall not relieve the Borrower
        of
        its obligation to reimburse the Issuing Bank and the Lenders with respect
        to any
        such LC Disbursement. 

      

      (h) Interim
        Interest.
        If the
        Issuing Bank shall make any LC Disbursement, then, unless the Borrower shall
        reimburse such LC Disbursement in full on the date such LC Disbursement is
        made,
        the unpaid amount thereof shall bear interest, for each day from and including
        the date such LC Disbursement is made to but excluding the date that the
        Borrower reimburses such LC Disbursement, at the rate per annum then applicable
        to ABR Loans; provided
        that, if
        the Borrower fails to reimburse such LC Disbursement when due pursuant to
        paragraph (e) of this Section, then Section
        2.12(c)
        shall
        apply. Interest accrued pursuant to this paragraph shall be for the account
        of
        the Issuing Bank, except that interest accrued on and after the date of payment
        by any Lender pursuant to paragraph (e) of this Section to reimburse the
        Issuing
        Bank shall be for the account of such Lender to the extent of such
        payment.

       

      (i) Replacement
        of the Issuing Bank.
        The
        Issuing Bank may be replaced at any time by written agreement among the
        Borrower, the Administrative Agent, the replaced Issuing Bank and the successor
        Issuing Bank. The Administrative Agent shall notify the Lenders of any such
        replacement of the Issuing Bank. At the time any such replacement shall become
        effective, the Borrower shall pay all unpaid fees accrued for the account
        of the
        replaced Issuing Bank pursuant to Section
        2.11(b).
        From
        and after the effective date of any such replacement, (i) the successor Issuing
        Bank shall have all the rights and obligations of the Issuing Bank under
        this
        Agreement with respect to Letters of Credit to be issued thereafter and (ii)
        references herein to the term “Issuing Bank” shall be deemed to refer to such
        successor or to any previous Issuing Bank, or to such successor and all previous
        Issuing Banks, as the context shall require. After the replacement of an
        Issuing
        Bank hereunder, the replaced Issuing Bank shall remain a party hereto and
        shall
        continue to have all the rights and obligations of an Issuing Bank under
        this
        Agreement with respect to Letters of Credit issued by it prior to such
        replacement, but shall not be required to issue additional Letters of
        Credit.

      

      (j) Cash
        Collateralization.
        If any
        Event of Default shall occur and be continuing, on the Business Day that
        the
        Borrower receives notice from the Administrative Agent or the Required Lenders
        (or, if the maturity of the Loans has been accelerated, Lenders with LC Exposure
        representing greater than 66-2/3% of the total LC Exposure) demanding the
        deposit of cash collateral pursuant to this paragraph, the Borrower shall
        deposit in an account with the Administrative Agent, in the name of the
        Administrative Agent and for the benefit of the Lenders, an amount in cash
        equal
        to the LC Exposure as of such date plus any accrued and unpaid interest thereon;
        provided
        that the
        obligation to deposit such cash collateral shall become effective immediately,
        and such deposit shall become immediately due and payable, without demand
        or
        other notice of any kind, upon the occurrence of any Event of Default with
        respect to the Borrower described in clause (h) or (i) of Article
        IX.
        Such
        deposit shall be held by the Administrative Agent as collateral for the payment
        and performance of the obligations of the Borrower under 

    

     

    
      
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      this
        Agreement. The Administrative Agent shall have exclusive dominion and control,
        including the exclusive right of withdrawal, over such account. Other than
        any
        interest earned on the investment of such deposits and interest at the rate
        per
        annum in effect for accounts of the same type maintained with the Administrative
        Agent at such time, which investments shall be made at the option and sole
        discretion of the Administrative Agent and at the Borrower’s risk and expense,
        such deposits shall not bear interest. Interest or profits, if any, on such
        investments shall accumulate in such account. Moneys in such account shall
        be
        applied by the Administrative Agent to reimburse the Issuing Bank for LC
        Disbursements for which it has not been reimbursed and, to the extent not
        so
        applied, shall be held for the satisfaction of the reimbursement obligations
        of
        the Borrower for the LC Exposure at such time or, if the maturity of the
        Loans
        has been accelerated (but subject to the consent of Lenders with LC Exposure
        representing 66-2/3% or more of the total LC Exposure), be applied to satisfy
        other obligations of the Borrower under this Agreement. If the Borrower is
        required to provide an amount of cash collateral hereunder as a result of
        the
        occurrence of an Event of Default, such amount (to the extent not applied
        as
        aforesaid) shall be returned to the Borrower within three Business Days after
        all Events of Default have been cured or waived.

       

      Section
        2.06. Funding
        of Borrowings.

      

      (a) Each
        Lender shall make each Loan to be made by it hereunder on the proposed date
        thereof by wire transfer of immediately available funds by 12:00 noon, to
        the
        account of the Administrative Agent most recently designated by it for such
        purpose by notice to the Lenders. The Administrative Agent will make such
        Loans
        available to the Borrower by promptly crediting the amounts so received,
        in like
        funds, to an Eligible Account of the Borrower designated by the Borrower
        in the
        applicable Borrowing Request; provided
        that ABR
        Loans made to finance the reimbursement of an LC Disbursement as provided
        in
Section
        2.05(e)
        shall be
        remitted by the Administrative Agent to the Issuing Bank.

       

      (b) Unless
        the Administrative Agent shall have received notice from a Lender prior to
        the
        proposed date of any Borrowing that such Lender will not make available to
        the
        Administrative Agent such Lender’s share of such Borrowing, the Administrative
        Agent may assume that such Lender has made such share available on such date
        in
        accordance with paragraph (a) of this Section and may, in reliance upon such
        assumption, make available to the Borrower a corresponding amount. In such
        event, if a Lender has not in fact made its share of the applicable Borrowing
        available to the Administrative Agent, then the applicable Lender and the
        Borrower severally agree to pay to the Administrative Agent forthwith on
        demand
        such corresponding amount with interest thereon, for each day from and including
        the date such amount is made available to the Borrower to but excluding the
        date
        of payment to the Administrative Agent, at (i) in the case of such Lender,
        the
        greater of the Federal Funds Effective Rate and a rate determined by the
        Administrative Agent in accordance with banking industry rules on interbank
        compensation or (ii) in the case of the Borrower, the interest rate applicable
        to ABR Loans. If such Lender pays such amount to the Administrative Agent,
        then
        such amount shall constitute such Lender’s Loan included in such
        Borrowing.

      

      
        
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    Section
      2.07. Interest
      Elections.

    

    (a) Each
      Borrowing initially shall be of the Type specified in the applicable Borrowing
      Request and, in the case of a Eurodollar Borrowing, shall have an initial
      Interest Period as specified in such Borrowing Request; provided that all
      Borrowings on the Effective Date shall be ABR Borrowings. Thereafter, the
      Borrower may elect to convert such Borrowing to a different Type or to continue
      such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest
      Periods therefor, all as provided in this Section. The Borrower may elect
      different options with respect to different portions of the affected Borrowing,
      in which case each such portion shall be allocated ratably among the Lenders
      holding the Loans comprising such Borrowing, and the Loans comprising each
      such
      portion shall be considered a separate Borrowing.

    

    (b) To
      make
      an election pursuant to this Section, the Borrower shall notify the
      Administrative Agent of such election by telephone by the time that a Borrowing
      Request would be required under Section
      2.04
      if the
      Borrower were requesting a Borrowing of the Type resulting from such election
      to
      be made on the effective date of such election. Each such telephonic Interest
      Election Request shall be irrevocable and shall be confirmed promptly by hand
      delivery or telecopy (or transmit by electronic communication, if arrangements
      for doing so have been approved by the Administrative Agent) to the
      Administrative Agent of a written Interest Election Request in a form approved
      by the Administrative Agent and signed by the Borrower.

    

    (c) Each
      telephonic and written Interest Election Request shall specify the following
      information in compliance with Section
      2.03:

    

    (i) the
      Borrowing to which such Interest Election Request applies and, if different
      options are being elected with respect to different portions thereof, the
      portions thereof to be allocated to each resulting Borrowing (in which case
      the
      information to be specified pursuant to clauses (iii) and (iv) below shall
      be
      specified for each resulting Borrowing);

    

    (ii) the
      effective date of the election made pursuant to such Interest Election Request,
      which shall be a Business Day;

    

    (iii) with
      respect to any Borrowing, whether the resulting Borrowing is to be an ABR
      Borrowing or a Eurodollar Borrowing; and

    

    (iv) if
      the
      resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be
      applicable thereto after giving effect to such election, which shall be a period
      contemplated by the definition of the term “Interest Period”.

    

    If
      any
      such Interest Election Request requests a Eurodollar Borrowing but does not
      specify an Interest Period, then the Borrower shall be deemed to have selected
      an Interest Period of one month’s duration.

    

    
      
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    (d) Promptly
      following receipt of an Interest Election Request, the Administrative Agent
      shall advise each Lender of the details thereof and of such Lender’s portion of
      each resulting Borrowing.

    

    (e) If
      the
      Borrower fails to deliver a timely Interest Election Request with respect to
      a
      Eurodollar Borrowing prior to the end of the Interest Period applicable thereto,
      then, unless such Borrowing is repaid as provided herein, at the end of such
      Interest Period such Borrowing shall be converted to an ABR Borrowing.
      Notwithstanding any contrary provision hereof, if an Event of Default has
      occurred and is continuing and the Administrative Agent, at the request of
      the
      Required Lenders, so notifies the Borrower, then, so long as an Event of Default
      is continuing (i) no outstanding Borrowing may be converted to or continued
      as a
      Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall
      be
      converted to an ABR Borrowing at the end of the Interest Period applicable
      thereto.

     

    Section
      2.08. Repayment of
      Loans; Evidence of Debt.

    

    (a) The
      Borrower hereby unconditionally promises to pay to the Administrative Agent
      for
      the account of each Lender the then unpaid principal amount of each Loan on
      the
      Maturity Date.

    

    (b) Each
      Lender shall maintain in accordance with its usual practice an account or
      accounts evidencing the indebtedness of the Borrower to such Lender resulting
      from each Loan made by such Lender, including the amounts of principal and
      interest payable and paid to such Lender from time to time
      hereunder.

    

    (c) The
      Administrative Agent shall maintain accounts in which it shall record
      (i) the amount of each Loan made hereunder, the Type thereof and the
      Interest Period applicable thereto, (ii) the amount of any principal or
      interest due and payable or to become due and payable from the Borrower to
      each
      Lender hereunder and (iii) the amount of any sum received by the
      Administrative Agent hereunder for the account of the Lenders and each Lender’s
      share thereof.

    

    (d) The
      entries made in the accounts maintained pursuant to paragraph (b)
      or (c) of this Section shall be prima facie
      evidence
      of the existence and amounts of the obligations recorded therein; provided
      that the
      failure of any Lender or the Administrative Agent to maintain such accounts
      or
      any error therein shall not in any manner affect the obligation of the Borrower
      to repay the Loans in accordance with the terms of this Agreement.

    

    (e) Any
      Lender may request that Loans made by it be evidenced by a promissory note.
      In
      such event, the Borrower shall prepare, execute and deliver to such Lender
      a
      promissory note payable to the order of such Lender (or, if requested by such
      Lender, to such Lender and its registered assigns) and in a form approved by
      the
      Administrative Agent; provided
      that any
      promissory note issued to evidence any Lender’s Loans shall be in a stated
      amount equal to such Lender’s Applicable Percentage of the Maximum Facility
      Amount. Thereafter, the Loans evidenced by such promissory note 

     

    
      
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    and
      interest thereon shall at all times (including after assignment pursuant to
      Section
      11.04)
      be
      represented by one or more promissory notes in such form payable to the order
      of
      the payee named therein (or, if such promissory note is a registered note,
      to
      such payee and its registered assigns).

     

    Section
      2.09. Optional
      Prepayment of Loans.

    

    (a) The
      Borrower shall have the right at any time and from time to time to prepay any
      Borrowing in whole and or in part, subject to prior notice in accordance with
      paragraph (b) of this Section. Any prepayment by the Borrower of any Borrowing
      shall be without premium or penalty, provided that the Borrower shall be
      obligated to pay any funding indemnification amounts due under Section
      2.15.

     

    (b) The
      Borrower shall notify the Administrative Agent by telephone (confirmed by
      telecopy or other electronic communication approved by the Administrative Agent)
      of any prepayment hereunder (i) in the case of prepayment of a Eurodollar
      Borrowing, not later than 11:00 a.m., three Business Days before the date of
      prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later
      than 11:00 a.m., one Business Day before the date of prepayment. Each such
      notice shall be irrevocable and shall specify the prepayment date and the
      principal amount of each Borrowing or portion thereof to be prepaid;
provided
      that, if
      a notice of prepayment is given in connection with a conditional notice of
      termination or reduction of the Aggregate Commitment as contemplated by
Section
      2.02,
      then
      such notice of prepayment may be revoked if such notice of termination or
      reduction is revoked in accordance with Section
      2.02.
      Promptly following receipt of any such notice relating to a Borrowing, the
      Administrative Agent shall advise the Lenders of the contents thereof. Each
      partial prepayment of any Borrowing shall be in an amount that would be
      permitted in the case of an advance of a Borrowing of the same Type as provided
      in Section
      2.03.
      Each
      prepayment of a Borrowing shall be applied ratably to the Loans included in
      the
      prepaid Borrowing. Prepayments shall be accompanied by accrued interest to
      the
      extent required by Section
      2.12.

     

    Section
      2.10. Mandatory
      Prepayment of Loans. 

    

    (a) Except
      as
      otherwise provided in Section
      2.10(b),
      in the
      event a Borrowing Base Deficiency exists, the Borrower shall, within ten (10)
      days after written notice from the Administrative Agent to the Borrower of
      such
      Borrowing Base Deficiency, notify the Administrative Agent that the Borrower
      intends to take one or more of the following actions: (i) provide the Secured
      Parties within thirty (30) days thereafter and by instruments reasonably
      satisfactory in form and substance to the Administrative Agent, with additional
      security consisting of Oil and Gas Interests with a value and quality
      satisfactory to the Lenders in their sole discretion sufficient to eliminate
      such Borrowing Base Deficiency, or (ii) within thirty (30) days thereafter,
      prepay, without premium or penalty (other than funding indemnification amounts
      due under Section
      2.15),
      the
      principal amount of the Loans in an amount sufficient to eliminate such
      Borrowing Base Deficiency, (iii) prepay, without premium or penalty, the
      principal amount of such Borrowing Base Deficiency in not more than six (6)
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    accrued
      interest thereon and to make the first such monthly payment on the 30th day
      after the Borrower’s receipt of notice of such Borrowing Base Deficiency or (iv)
      by a combination of such additional security and such prepayments to eliminate
      such Borrowing Base Deficiency.

     

    (b) If
      the
      Borrower or any Restricted Subsidiary Disposes of any Borrowing Base Properties
      at any time a Borrowing Base Deficiency exists or would exist after giving
      effect to such Disposition, the Borrower shall prepay the Borrowings in an
      amount sufficient to eliminate such Borrowing Base Deficiency on the date such
      Disposition is consummated; provided,
      however
      that amounts applied to the payment of Borrowings pursuant to this Section
      may
      be reborrowed subject to and in accordance with the terms of this Agreement.
      Amounts applied to the prepayment of Borrowings pursuant to this Section shall
      be first applied ratably to ABR Borrowings then outstanding and, upon payment
      in
      full of all outstanding ABR Borrowings, second, to Eurodollar Borrowings then
      outstanding, and if more than one Eurodollar Borrowing is then outstanding,
      to
      each such Eurodollar Borrowing beginning with the Eurodollar Borrowing with
      the
      least number of days remaining in the Interest Period applicable thereto and
      ending with the Eurodollar Borrowing with the most number of days remaining
      in
      the Interest Period applicable thereto, subject to the payment of any funding
      indemnification amounts required by Section
      2.15
      but
      without penalty or premium.

     

    Section
      2.11. Fees.

     

    (a) The
      Borrower agrees to pay to the Administrative Agent, for the account of each
      Lender, an unused commitment fee (the “Unused
      Commitment Fee”)
      equivalent to the Applicable Rate times the daily average of the Unused
      Commitment. Such Unused Commitment Fee shall be calculated on the basis of
      a
      year consisting of 360 days. The Unused Commitment Fee shall be payable in
      arrears on the last day of March, June, September and December of each year,
      commencing with the first such date to occur after the Effective Date, and
      on
      the Maturity Date for any period then ending for which the Unused Commitment
      Fee
      shall not have been theretofore paid. In the event the Aggregate Commitment
      terminates on any date other than the last day of March, June, September or
      December of any year, the Borrower agrees to pay to the Administrative Agent,
      for the account of each Lender, on the date of such termination, the total
      Unused Commitment Fee due for the period from the last day of the immediately
      preceding March, June, September or December, as the case may be, to the date
      such termination occurs.

    

    (b) The
      Borrower agrees to pay (i) to the Administrative Agent for the account of each
      Lender a participation fee with respect to its participations in Letters of
      Credit, which shall accrue at the same Applicable Rate used to determine the
      interest rate applicable to Eurodollar Loans on the average daily amount of
      such
      Lender’s LC Exposure (excluding any portion thereof attributable to unreimbursed
      LC Disbursements) during the period from and including the Effective Date to
      but
      excluding the later of the date on which such Lender’s Commitment terminates and
      the date on which such Lender ceases to have any LC Exposure, and (ii) to the
      Issuing Bank a fronting fee, which shall accrue at the rate or rates per annum
      separately agreed upon between the Borrower and the Issuing Bank on the average
      daily amount of the LC Exposure (excluding any portion 

     

    
      
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    thereof
      attributable to unreimbursed LC Disbursements) during the period from and
      including the Effective Date to but excluding the later of the date of
      termination of the Aggregate Commitment and the date on which there ceases
      to be
      any LC Exposure, as well as the Issuing Bank’s standard fees with respect to the
      issuance, amendment, renewal or extension of any Letter of Credit or processing
      of drawings thereunder. Participation fees and fronting fees accrued through
      and
      including the last day of March, June, September and December of each year
      shall
      be payable on the third Business Day following such last day, commencing on
      the
      first such date to occur after the Effective Date; provided
      that all
      such fees shall be payable on the date on which the Aggregate Commitment
      terminates and any such fees accruing after the date on which the Aggregate
      Commitment terminates shall be payable on demand. Any other fees payable to
      the
      Issuing Bank pursuant to this paragraph shall be payable within 10 days after
      demand. All participation fees and fronting fees shall be computed on the basis
      of a year of 360 days and shall be payable for the actual number of days elapsed
      (including the first day but excluding the last day).

     

    (c) Borrower
      agrees to pay to the Administrative Agent, for its own account, fees payable
      in
      the amounts and at the times separately agreed upon between the Borrower and
      the
      Administrative Agent.

    

    (d) All
      fees
      payable hereunder shall be paid on the dates due, in immediately available
      funds, to the Administrative Agent (or to the Issuing Bank, in the case of
      fees
      payable to it) for distribution, in the case of Unused Commitment Fees and
      participation fees, to the Lenders. Fees paid shall not be refundable under
      any
      circumstances.

     

    Section
      2.12. Interest.

    

    (a) The
      Loans
      comprising each ABR Borrowing shall bear interest at the Alternate Base
      Rate plus the Applicable Rate.

    

    (b) The
      Loans
      comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO
      Rate for the Interest Period in effect for such Borrowing plus the Applicable
      Rate.

     

    (c) Notwithstanding
      the foregoing, if any principal of or interest on any Loan or any fee or other
      amount payable by the Borrower hereunder is not paid when due, whether at stated
      maturity, upon acceleration or otherwise, such overdue amount shall bear
      interest, after as well as before judgment, at a rate per annum equal to (i)
      in
      the case of overdue principal of any Loan, 2% plus the rate otherwise applicable
      to such Loan as provided in the preceding paragraphs of this Section or (ii)
      in
      the case of any other amount, 2% plus the rate applicable to ABR Loans as
      provided in paragraph (a) of this Section.

    

    (d) Accrued
      interest on each Loan shall be payable in arrears on each Interest Payment
      Date
      for such Loan, upon termination of the Aggregate Commitment and on the Maturity
      Date; provided
      that (i)
      interest accrued pursuant to paragraph (c) of this Section shall be payable
      on
      demand, (ii) in the event of any repayment or prepayment of any Loan

     

    
      
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      (other
        than a prepayment of an ABR Loan prior to the end of the Availability Period
        at
        a time when no Borrowing Base Deficiency exists), accrued interest on the
        principal amount repaid or prepaid shall be payable on the date of such
        repayment or prepayment and (iii) in the event of any conversion of any
        Eurodollar Loan prior to the end of the current Interest Period therefor,
        accrued interest on such Loan shall be payable on the effective date of such
        conversion.

      

      (e) All
        interest hereunder shall be computed on the basis of a year of 360 days,
        except
        that interest computed by reference to the Alternate Base Rate at times when
        the
        Alternate Base Rate is based on the Prime Rate shall be computed on the basis
        of
        a year of 365 days (or 366 days in a leap year), and in each case shall be
        payable for the actual number of days elapsed (including the first day but
        excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO
        Rate
        or LIBO Rate shall be determined by the Administrative Agent, and such
        determination shall be conclusive absent manifest error.

       

      Section
        2.13. Alternate
        Rate of Interest.
        If prior
        to the commencement of any Interest Period for a Eurodollar
        Borrowing:

      

      (a) the
        Administrative Agent determines (which determination shall be conclusive
        absent
        manifest error) that adequate and reasonable means do not exist for ascertaining
        the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest
        Period; or

      

      (b) the
        Administrative Agent is advised by the Required Lenders that the Adjusted
        LIBO
        Rate or the LIBO Rate, as applicable, for such Interest Period will not
        adequately and fairly reflect the cost to such Lenders (or Lender) of making
        or
        maintaining their Loans (or its Loan) included in such Borrowing for such
        Interest Period;

      

      then
        the
        Administrative Agent shall give notice thereof to the Borrower and the Lenders
        by telephone or telecopy as promptly as practicable thereafter and, until
        the
        Administrative Agent notifies the Borrower and the Lenders that the
        circumstances giving rise to such notice no longer exist, (i) any Interest
        Election Request that requests the conversion of any Borrowing to, or
        continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective,
        and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
        Borrowing shall be made as an ABR Borrowing.

       

      Section
        2.14. Increased
        Costs.

      

      (a) If
        any
        Change in Law shall:

      

      (i) impose,
        modify or deem applicable any reserve, special deposit or similar requirement
        against assets of, deposits with or for the account of, or credit extended
        by,
        any Lender (except any such reserve requirement reflected in the Adjusted
        LIBO
        Rate) or the Issuing Bank; or

      

      
        
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    (ii) impose
      on
      any Lender or the Issuing Bank or the London interbank market any other
      condition affecting this Agreement or Eurodollar Loans made by such Lender
      or
      any Letter of Credit or participation therein;

    

    and
      the
      result of any of the foregoing shall be to increase the cost to such Lender
      of
      making or maintaining any Eurodollar Loan (or of maintaining its obligation
      to
      make any such Loan) or to increase the cost to such Lender or the Issuing Bank
      of participating in, issuing or maintaining any Letter of Credit or to reduce
      the amount of any sum received or receivable by such Lender or the Issuing
      Bank
      hereunder (whether of principal, interest or otherwise), then the Borrower
      will
      pay to such Lender or the Issuing Bank, as the case may be, such additional
      amount or amounts as will compensate such Lender or the Issuing Bank, as the
      case may be, for such additional costs incurred or reduction
      suffered.

     

    (b) If
      any
      Lender or the Issuing Bank determines that any Change in Law regarding capital
      requirements has or would have the effect of reducing the rate of return on
      such
      Lender’s or the Issuing Bank’s capital or on the capital of such Lender’s or the
      Issuing Bank’s holding company, if any, as a consequence of this Agreement or
      the Loans made by, or participations in Letters of Credit held by, such Lender,
      or the Letters of Credit issued by the Issuing Bank, to a level below that
      which
      such Lender or the Issuing Bank or such Lender’s or the Issuing Bank’s holding
      company could have achieved but for such Change in Law (taking into
      consideration such Lender’s or the Issuing Bank’s policies and the policies of
      such Lender’s or the Issuing Bank’s holding company with respect to capital
      adequacy), then from time to time the Borrower will pay to such Lender or the
      Issuing Bank, as the case may be, such additional amount or amounts as will
      compensate such Lender or the Issuing Bank or such Lender’s or the Issuing
      Bank’s holding company for any such reduction suffered.

    

    (c) A
      certificate of a Lender or the Issuing Bank setting forth (i) the amount or
      amounts reasonably necessary to compensate such Lender or the Issuing Bank
      or
      its holding company, as the case may be, as specified in paragraph (a) or
      (b) of this Section, and (ii) in reasonable detail the basis for, and the
      calculation of, such additional amount or amounts, shall be delivered to the
      Borrower and shall be conclusive absent manifest error. The Borrower shall
      pay
      such Lender or the Issuing Bank, as the case may be, the amount shown as due
      on
      any such certificate within 15 days after receipt thereof. 

    

    (d) Failure
      or delay on the part of any Lender or the Issuing Bank to demand compensation
      pursuant to this Section shall not constitute a waiver of such Lender’s or the
      Issuing Bank’s right to demand such compensation; provided
      that the
      Borrower shall not be required to compensate a Lender or the Issuing Bank
      pursuant to this Section for any increased costs or reductions incurred more
      than 180 days prior to the date that such Lender or the Issuing Bank, as the
      case may be, notifies the Borrower of the Change in Law giving rise to such
      increased costs or reductions and of such Lender’s or the Issuing Bank’s
      intention to claim compensation therefor; provided further
      that, if
      the Change in Law giving rise to such increased costs or reductions is
      retroactive, then the 180-day period referred to above shall be extended to
      include the period of retroactive effect thereof.

    

    
      
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    Section
      2.15. Break
      Funding Payments.
      In the
      event of (a) the payment of any principal of any Eurodollar Loan other than
      on
      the last day of an Interest Period applicable thereto (including as a result
      of
      an Event of Default), (b) the conversion of any Eurodollar Loan other than
      on
      the last day of the Interest Period applicable thereto, (c) the failure to
      borrow, convert, continue or prepay any Eurodollar Loan on the date specified
      in
      any notice delivered pursuant hereto (regardless of whether such notice may
      be
      revoked under Section
      2.09(b)
      and is
      revoked in accordance therewith), (d) the assignment of any Eurodollar Loan
      other than on the last day of the Interest Period applicable thereto as a result
      of a request by the Borrower pursuant to Section
      2.18,
      then,
      in any such event, the Borrower shall compensate each Lender for the loss,
      cost
      and expense attributable to such event. In the case of a Eurodollar Loan, such
      loss, cost or expense to any Lender shall be deemed to include an amount
      determined by such Lender to be the excess, if any, of (i) the amount of
      interest which would have accrued on the principal amount of such Loan had
      such
      event not occurred, at the Adjusted LIBO Rate that would have been applicable
      to
      such Loan, for the period from the date of such event to the last day of the
      then current Interest Period therefor (or, in the case of a failure to borrow,
      convert or continue, for the period that would have been the Interest Period
      for
      such Loan), over (ii) the amount of interest which would accrue on such
      principal amount for such period at the interest rate which such Lender would
      bid were it to bid, at the commencement of such period, for dollar deposits
      of a
      comparable amount and period from other banks in the Eurodollar market. A
      certifi-cate of any Lender setting forth any amount or amounts that such Lender
      is entitled to receive pursuant to this Section shall be delivered to the
      Borrower and shall be conclusive absent manifest error. The Borrower shall
      pay
      such Lender the amount shown as due on any such certificate within 15 days
      after
      receipt thereof.

     

    Section
      2.16. Taxes.

     

    (a) Any
      and
      all payments by or on account of any obligation of the Borrower hereunder shall
      be made free and clear of and without deduction for any Indemnified Taxes or
      Other Taxes; provided
      that if
      the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes
      from such payments, then (i) the sum payable shall be increased as
      necessary so that after making all required deductions (including deductions
      applicable to additional sums payable under this Section) the Administrative
      Agent, Lender or Issuing Bank (as the case may be) receives an amount equal
      to
      the sum it would have received had no such deductions been made, (ii) the
      Borrower shall make such deductions and (iii) the Borrower shall pay the
      full amount deducted to the relevant Governmental Authority in accordance with
      applicable law. 

     

    (b) In
      addition, the Borrower shall pay any Other Taxes to the relevant Governmental
      Authority in accordance with applicable law.

    

    (c) The
      Borrower shall indemnify the Administrative Agent, each Lender and the Issuing
      Bank, within 10 days after written demand therefor, for the full amount of
      any
      Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Lender
      or the Issuing Bank, as the case may be, on or with respect to any payment
      by or
      on account of any obligation of the Borrower hereunder (including Indemnified
      Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
      under this Section) and any penalties, interest and reasonable expenses arising
      therefrom or with respect thereto, 

     

    
      
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      whether
        or not such Indemnified Taxes or Other Taxes were correctly or legally imposed
        or asserted by the relevant Governmental Authority. A certificate as to the
        amount of such payment or liability delivered to the Borrower by a Lender
        or the
        Issuing Bank shall be conclusive absent manifest error. 

       

      (d) As
        soon
        as practicable after any payment of Indemnified Taxes or Other Taxes by the
        Borrower to a Governmental Authority, the Borrower shall deliver to the
        Administrative Agent the original or a certified copy of a receipt issued
        by
        such Governmental Authority evidencing such payment, a copy of the return
        reporting such payment or other evidence of such payment reasonably satisfactory
        to the Administrative Agent.

       

      (e) Any
        Foreign Lender that is entitled to an exemption from or reduction of withholding
        tax under the law of the jurisdiction in which the Borrower is located, or
        any
        treaty to which such jurisdiction is a party, with respect to payments under
        this Agreement shall deliver to the Borrower (with a copy to the Administrative
        Agent), at the time or times prescribed by applicable law, such properly
        completed and executed documentation prescribed by applicable law or reasonably
        requested by the Borrower as will permit such payments to be made without
        withholding or at a reduced rate.

      

      (f) If
        the
        Administrative Agent or a Lender determines, in its sole discretion, that
        it has
        received a refund of any Taxes or Other Taxes as to which it has been
        indemnified by the Borrower or with respect to which the Borrower have paid
        additional amounts pursuant to this Section
        2.16,
        it
        shall pay over such refund to the Borrower (but only to the extent of indemnity
        payments made, or additional amounts paid, by the Borrower under this
Section
        2.16
        with
        respect to the Taxes or Other Taxes giving rise to such refund), net of all
        out-of-pocket expenses of the Administrative Agent or such Lender and without
        interest (other than any interest paid by the relevant Governmental Authority
        with respect to such refund); provided, that the Borrower, upon the request
        of
        the Administrative Agent or such Lender, agrees to repay the amount paid
        over to
        the Borrower (plus any penalties, interest or other charges imposed by the
        relevant Governmental Authority) to the Administrative Agent or such Lender
        in
        the event the Administrative Agent or such Lender is required to repay such
        refund to such Governmental Authority. This Section shall not be construed
        to
        require the Administrative Agent or any Lender to make available its tax
        returns
        (or any other information relating to its taxes which it deems confidential)
        to
        the Borrower or any other Person. 

       

      Section
        2.17. Payments
        Generally; Pro Rata Treatment; Sharing of Set-offs.

      

      (a) The
        Borrower shall make each payment required to be made by it hereunder (whether
        of
        principal, interest, fees or reimbursement of LC Disbursements, or of amounts
        payable under Section
        2.14,
        Section
        2.15
        or
Section
        2.16,
        or
        otherwise) prior to 12:00 noon, on the date when due, in immediately available
        funds, without set-off or counterclaim. Any amounts received after such time
        on
        any date may, in the discretion of the Administrative Agent, be deemed to
        have
        been received on the next succeeding Business Day for purposes of calculating
        interest thereon. All such payments shall be made to the Administrative Agent
        at
        its offices at Mail Code IL1-0634, 21 South Clark 

       

      
        
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        Street,
          Chicago, Illinois, except payments to be made directly to the Issuing Bank
          as
          expressly provided herein and except that payments pursuant to Section
          2.14,
          Section
          2.15,
          Section
          2.16
          and
Section
          11.03
          shall be
          made directly to the Persons entitled thereto. The Administrative Agent
          shall
          distribute any such payments received by it for the account of any other
          Person
          to the appropriate recipient promptly following receipt thereof. If any
          payment
          hereunder shall be due on a day that is not a Business Day, the date for
          payment
          shall be extended to the next succeeding Business Day, and, in the case
          of any
          payment accruing interest, interest thereon shall be payable for the period
          of
          such extension. All payments hereunder shall be made in Dollars.

         

        (b) If
          at any
          time insufficient funds are received by and available to the Administrative
          Agent to pay fully all amounts of principal, unreimbursed LC Disbursements,
          interest and fees then due hereunder, such funds shall be applied (i) first,
          towards payment of interest and fees then due hereunder, ratably among
          the
          parties entitled thereto in accordance with the amounts of interest and
          fees
          then due to such parties, and (ii) second, towards payment of principal
          and
          unreimbursed LC Disbursements then due hereunder, ratably among the parties
          entitled thereto in accordance with the amounts of principal and unreimbursed
          LC
          Disbursements then due to such parties; provided that in the event such
          funds
          are received by and available to the Administrative Agent as a result of
          the
          exercise of any rights and remedies with respect to any collateral under
          the
          Security Instruments, the parties entitled to a ratable share of such funds
          pursuant to the foregoing clause (ii) and the determination of each parties’
ratable share shall include, on a pari
          passu
          basis,
          the Lender Counterparties and the actual aggregate amounts then due and
          owing to
          each Lender Counterparty by the Borrower or any Guarantor as a result of
          the
          early termination of any transactions under any Swap Agreements included
          in the
          Obligations (after giving effect to any netting agreements).

        

        (c) If
          any
          Lender shall, by exercising any right of set-off or counterclaim or otherwise,
          obtain payment in respect of any principal of or interest on any of its
          Loans or
          participations in LC Disbursements resulting in such Lender receiving payment
          of
          a greater proportion of the aggregate amount of its Loans and participations
          in
          LC Disbursements and accrued interest thereon than the proportion received
          by
          any other Lender, then the Lender receiving such greater proportion shall
          purchase (for cash at face value) participations in the Loans and participations
          in LC Disbursements of other Lenders to the extent necessary so that the
          benefit
          of all such payments shall be shared by the Lenders ratably in accordance
          with
          the aggregate amount of principal of and accrued interest on their respective
          Loans and participations in LC Disbursements; provided
          that (i)
          if any such participations are purchased and all or any portion of the
          payment
          giving rise thereto is recovered, such participations shall be rescinded
          and the
          purchase price restored to the extent of such recovery, without interest,
          and
          (ii) the provisions of this paragraph shall not be construed to apply to
          any
          payment made by the Borrower pursuant to and in accordance with the express
          terms of this Agreement or any payment obtained by a Lender as consideration
          for
          the assignment of or sale of a participation in any of its Loans or
          participations in LC Disbursements to any assignee or participant, other
          than to
          the Borrower or any Subsidiary or Affiliate thereof (as to which the provisions
          of this paragraph shall apply). The Borrower consents to the foregoing
          and
          agrees, to the extent it may effectively do so under applicable law, that
          any
          Lender acquiring a participation 

         

        
          
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          pursuant
            to the foregoing arrangements may exercise against the Borrower rights
            of
            set-off and counterclaim with respect to such participation as fully
            as if such
            Lender were a direct creditor of the Borrower in the amount of such
            participation.

           

          (d) Unless
            the Administrative Agent shall have received notice from the Borrower
            prior to
            the date on which any payment is due to the Administrative Agent for
            the account
            of the Lenders or the Issuing Bank hereunder that the Borrower will not
            make
            such payment, the Administrative Agent may assume that the Borrower have
            made
            such payment on such date in accordance herewith and may, in reliance
            upon such
            assumption, distribute to the Lenders or the Issuing Bank, as the case
            may be,
            the amount due. In such event, if the Borrower have not in fact made
            such
            payment, then each of the Lenders or the Issuing Bank, as the case may
            be,
            severally agrees to repay to the Administrative Agent forthwith on demand
            the
            amount so distributed to such Lender or Issuing Bank with interest thereon,
            for
            each day from and including the date such amount is distributed to it
            to but
            excluding the date of payment to the Administrative Agent, at the greater
            of the
            Federal Funds Effective Rate and a rate determined by the Administrative
            Agent
            in accordance with banking industry rules on interbank
            compensation.

          

          (e) If
            any
            Lender shall fail to make any payment required to be made by it pursuant
            to
Section
            2.05(d)
            or
Section
            2.05(e),
            Section
            2.06(b),
            Section
            2.17(d)
            or
Section
            11.03(c),
            then
            the Administrative Agent may, in its discretion (notwithstanding any
            contrary
            provision hereof), apply any amounts thereafter received by the Administrative
            Agent for the account of such Lender to satisfy such Lender’s obligations under
            such Sections until all such unsatisfied obligations are fully
            paid.

           

          Section
            2.18. Mitigation
            Obligations; Replacement of Lenders.

          

          (a) If
            any
            Lender requests compensation under Section
            2.14,
            or if
            the Borrower is required to pay any additional amount to any Lender or
            any
            Governmental Authority for the account of any Lender pursuant to Section
            2.16,
            then
            such Lender shall use reasonable efforts to (x) file any certificate
            or document
            reasonably requested by the Borrower or (y) designate a different lending
            office
            for funding or booking its Loans hereunder or to or (y) assign its rights
            and
            obligations hereunder to another of its offices, branches or affiliates,
            if, in
            the reasonable judgment of such Lender, such filing, designation or assignment
            (i) would eliminate or reduce amounts payable pursuant to Section
            2.14
            or
Section
            2.16,
            as the
            case may be, in the future and (ii) would not subject such Lender to
            any
            unreimbursed cost or expense and would not otherwise be disadvantageous
            to such
            Lender. The Borrower hereby agrees to pay all reasonable costs and expenses
            incurred by any Lender in connection with any such designation or
            assignment.

          

          (b) If
            any
            Lender requests compensation under Section
            2.14,
            or if
            the Borrower is required to pay any additional amount to any Lender or
            any
            Governmental Authority for the account of any Lender pursuant to Section
            2.16,
            or if
            any Lender defaults in its obligation to fund Loans hereunder, then the
            Borrower
            may, at its sole expense and effort, upon notice to such Lender and the
            Administrative Agent, require such Lender to assign and delegate, without
            recourse (in accordance with and subject to the restrictions 

           

          
            
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            contained
              in Section
              11.04),
              all
              its interests, rights and obligations under this Agreement to an assignee
              that
              shall assume such obligations (which assignee may be another Lender,
              if a Lender
              accepts such assignment); provided
              that (i)
              the Borrower shall have received the prior written consent of the Administrative
              Agent (and if a Commitment is being assigned, the Issuing Bank), which
              consent
              shall not unrea-sonably be withheld, (ii) such Lender shall have received
              payment of an amount equal to the outstanding principal of its Loans
              and
              participations in LC Disbursements, accrued interest thereon, accrued
              fees and
              all other amounts payable to it hereunder, from the assignee (to the
              extent of
              such outstanding principal and accrued interest and fees) or the Borrower
              (in
              the case of all other amounts) and (iii) in the case of any such assignment
              resulting from a claim for compensation under Section
              2.14
              or
              payments required to be made pursuant to Section
              2.16,
              such
              assignment will result in a reduction in such compensation or payments.
              A Lender
              shall not be required to make any such assignment and delegation if,
              prior
              thereto, as a result of a waiver by such Lender or otherwise, the circumstances
              entitling the Borrower to require such assignment and delegation cease
              to
              apply.

             

            (c) If
              in
              connection with any proposed amendment, modification, termination,
              waiver or
              consent with respect to any of the provisions of this Agreement or
              any other
              Loan Document as contemplated by Section
              11.02,
              the
              consent of Required Lenders shall have been obtained but the consent
              of one or
              more of such other Lenders (each a “Non-Consenting
              Lender”)
              whose
              consent is required has not been obtained or if any Lender is a Defaulting
              Lender; then, the Borrower may elect to replace such Non-Consenting
              Lender or
              Defaulting Lender, as the case may be, as a Lender party to this Agreement
              in
              accordance with and subject to the restrictions contained in, and consents
              required by Section
              11.04;
              provided
              that (i)
              the Borrower shall have received the prior written consent of the Administrative
              Agent (and if a Commitment is being assigned, the Issuing Bank), which
              consent
              shall not unrea-sonably be withheld, (ii) such Lender shall have received
              payment of an amount equal to the outstanding principal of its Loans
              and
              participations in LC Disbursements, accrued interest thereon, accrued
              fees and
              all other amounts payable to it hereunder, from the assignee (to the
              extent of
              such outstanding principal and accrued interest and fees) or the Borrower
              (in
              the case of all other amounts) and (iii) in the case of any such assignment
              resulting from a claim for compensation under Section
              2.14
              or
              payments required to be made pursuant to Section
              2.16,
              such
              assignment will result in a reduction in such compensation or payments.
              A Lender
              shall not be required to make any such assignment and delegation if,
              prior
              thereto, as a result of a waiver by such Lender or otherwise, the circumstances
              entitling the Borrower to require such assignment and delegation cease
              to
              apply.

             

            Article
              III

            

            Borrowing
              Base

            

            Section
              3.01. Reserve
              Report; Proposed Borrowing Base; Conforming Borrowing Base.
              During
              the period from the Effective Date until the first Redetermination
              after the
              Effective Date, the Borrowing Base shall be $40,000,000 (the “Initial
              Borrowing Base”)
              and
              the Conforming Borrowing Base shall be $35,000,000. As soon as available
              and in
              any event by March 1 and September 1 of each year, beginning September
              1, 2006,
              the Borrower shall deliver 

             

            
              
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              to
                the
                Administrative Agent and each Lender a Reserve Report, prepared as
                of the
                immediately preceding December 31 and June 30, respectively, in form
                and
                substance reasonably satisfactory to the Administrative Agent and
                prepared by an
                Approved Petroleum Engineer (or, in the case of any Reserve Report
                other than
                the Reserve Report due on March 1 of each year, by petroleum engineers
                employed
                by the Borrower or its Subsidiaries) together with such other information,
                reports and data concerning the value of the Borrowing Base Properties
                as the
                Administrative Agent shall deem reasonably necessary to determine
                the value of
                such Borrowing Base Properties. Simultaneously with the delivery
                to the
                Administrative Agent and the Lenders of each Reserve Report, the
                Borrower shall
                submit to the Administrative Agent and each Lender the Borrower’s requested
                amount of the Borrowing Base as of the next Redetermination Date
                and a
                certificate of the chief financial officer of the Borrower certifying
                that such
                requested amount does not exceed the maximum principal amount of
                Loans
                outstanding plus LC Exposure permitted under Section
                7.01
                of the
                Intercreditor Agreement together with reasonably detailed calculations
                of such
                maximum amount. Promptly after the receipt by the Administrative
                Agent of such
                Reserve Report and Borrower’s requested amount for the Borrowing Base, the
                Administrative Agent shall submit to the Lenders a recommended amount
                of the
                Borrowing Base and, with respect to any Redetermination prior to
                August 1, 2007,
                the Conforming Borrowing Base as of the next Redetermination Date;
                provided that
                no Redetermination of the Conforming Borrowing Base shall be required
                after
                August 1, 2007.

              

              Section
                3.02. Scheduled
                Redeterminations of the Borrowing Base; Procedures and Standards.
                Based
                in part on the Reserve Reports made available to the Administrative
                Agent and
                the Lenders pursuant to Section
                3.01,
                the
                Lenders shall redetermine the Borrowing Base on or prior to the next
                Redetermination Date and, if such Redetermination Date is prior to
                August 1,
                2007, the Conforming Borrowing Base (or such date promptly thereafter
                as
                reasonably possible based on the engineering and other information
                available to
                the Lenders). Any Borrowing Base or Conforming Borrowing Base which
                becomes
                effective as a result of any Redetermination shall be subject to
                the following
                restrictions: (a) such Borrowing Base shall not exceed the Maximum
                Facility
                Amount, (b) such Conforming Borrowing Base shall not exceed such
                Borrowing Base,
                (c) to the extent such Borrowing Base or Conforming Borrowing Base
                represents an
                increase in the Borrowing Base or the Conforming Borrowing Base in
                effect prior
                to such Redetermination, such Borrowing Base or Conforming Borrowing
                Base, as
                the case may be, must be approved by all Lenders, and (d) to the
                extent such
                Borrowing Base or Conforming Borrowing Base represents a decrease
                in the
                Borrowing Base or Conforming Borrowing Base in effect prior to such
                Redetermination or a reaffirmation of such prior Borrowing Base or
                Conforming
                Borrowing Base, such Borrowing Base or Conforming Borrowing Base
                must be
                approved by the Administrative Agent and Required Lenders. If a redetermined
                Borrowing Base or Conforming Borrowing Base is not approved by the
                Administrative Agent and Required Lenders within twenty (20) days
                after the
                submission to the Lenders by the Administrative Agent of its recommended
                Borrowing Base and Conforming Borrowing Base pursuant to Section
                3.01,
                or by
                all Lenders within such twenty (20) day period in the case of any
                increase in
                the Borrowing Base or Conforming Borrowing Base, the Administrative
                Agent shall
                notify each Lender that the recommended Borrowing Base and Conforming
                Borrowing
                Base, as the case may be, has not been approved and request that
                each Lender
                submit to the Administrative Agent within ten (10) days thereafter
                its proposed
                Borrowing Base and proposed Conforming Borrowing Base. Promptly following
                the
                10th
                day
                after the Administrative Agent’s request for each Lender’s proposed Borrowing
                Base and proposed Conforming Borrowing Base, the Administrative Agent
                

               

              
                
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                shall
                  determine the Borrowing Base and Conforming Borrowing Base for
                  such
                  Redetermination by calculating the highest Borrowing Base and highest
                  Conforming
                  Borrowing Base then acceptable to the Administrative Agent and
                  a number of
                  Lenders sufficient to constitute Required Lenders (or all Lenders
                  in the case of
                  an increase in the Borrowing Base or the Conforming Borrowing Base).
                  Each
                  Redetermination shall be made by the Lenders in their sole discretion,
                  but based
                  on the Administrative Agent’s and such Lender’s usual and customary procedures
                  for evaluating Oil and Gas Interests as such exist at the time
                  of such
                  Redetermination, and including adjustments to reflect the effect
                  of any Swap
                  Agreements of the Borrower and the Restricted Subsidiaries as such
                  exist at the
                  time of such Redetermination. The Borrower acknowledges and agrees
                  that each
                  Redetermination shall be based upon the loan collateral value which
                  each Agent
                  and each Lender in its sole discretion (using such methodology,
                  assumptions and
                  discount rates as the Administrative Agent and such Lender customarily
                  uses in
                  assigning collateral value to Oil and Gas Interests) to the Borrowing
                  Base
                  Properties at the time in question and based upon such other credit
                  factors
                  consistently applied (including, without limitation, the assets,
                  liabilities,
                  cash flow, business, properties, prospects, management and ownership
                  of the
                  Credit Parties) as the Administrative Agent and such Lender customarily
                  considers in evaluating similar oil and gas credits. It is expressly
                  understood
                  that the Administrative Agent and Lenders have no obligation to
                  designate the
                  Borrowing Base or the Conforming Borrowing Base at any particular
                  amounts,
                  except in the exercise of their discretion, whether in relation
                  to the Aggregate
                  Commitment or otherwise. If the Borrower does not furnish all information,
                  reports and data required to be delivered by any date specified
                  in this
Article
                  III,
                  the
                  Administrative Agent and Lenders may nonetheless designate the
                  Borrowing Base
                  and the Conforming Borrowing Base at any amounts which the Administrative
                  Agent
                  and Lenders in their reasonable discretion determine and may redesignate
                  the
                  Borrowing Base and the Conforming Borrowing Base from time to time
                  thereafter
                  until the Administrative Agent and Lenders receive all such information,
                  reports
                  and data, whereupon the Administrative Agent and Lenders shall
                  designate a new
                  Borrowing Base and a new Conforming Borrowing Base, as described
                  above.

                 

                Section
                  3.03. Special
                  Redeterminations.
                  In
                  addition to Scheduled Redeterminations, the Borrower shall be permitted
                  to
                  request a Special Redetermination of the Borrowing Base and the
                  Conforming
                  Borrowing Base once between each Scheduled Redetermination and
                  the Required
                  Lenders shall be permitted to request a Special Redetermination
                  at any time. Any
                  request by Borrower pursuant to this Section
                  3.03
                  shall be
                  submitted to the Administrative Agent and each Lender and at the
                  time of such
                  request (or within twenty (20) days thereafter in the case of the
                  Reserve
                  Report) Borrower shall (1) deliver to the Administrative Agent and each
                  Lender a Reserve Report prepared as of a date prior to the date
                  of such request
                  that is reasonably acceptable to the Administrative Agent and such
                  other
                  information which the Administrative Agent shall reasonably request,
                  and (2)
                  notify the Administrative Agent and each Lender of the Borrowing
                  Base requested
                  by Borrower in connection with such Special Redetermination. Any
                  request by
                  Required Lenders pursuant to this Section
                  3.03
                  shall be
                  submitted to the Administrative Agent and the Borrower. Any Special
                  Redetermination shall be made by the Administrative Agent and Lenders
                  in
                  accordance with the procedures and standards set forth in Section
                  3.02;
                  provided that no Reserve Report is required to be delivered to
                  the
                  Administrative Agent or the Lenders in connection with any Special
                  Redetermination requested by the Required Lenders pursuant to this
Section
                  3.03.

                 

                
                  
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                  Section
                    3.04. Special
                    2006 Redetermination.
                    In
                    addition to any Special Redetermination pursuant to Section
                    3.03,
                    the
                    Borrower shall deliver to the Administrative Agent, on or before
                    July 1, 2006,
                    an update of each of the Initial Reserve Reports as of June 1,
                    2006 which update
                    shall be prepared by petroleum engineers that are employees of
                    the Borrower and
                    shall set forth, in reasonable detail, any material changes in
                    the values
                    assigned to the Borrowing Base Properties since December 31,
                    2005. On or about
                    August 1, 2006, the Administrative Agent and the Lenders shall
                    make a Special
                    Redetermination of the Borrowing Base in accordance with the
                    procedures and
                    standards set forth in Section
                    3.02 based
                    on
                    the Initial Reserve Reports as adjusted by such update.

                   

                  Section
                    3.05. Potential
                    Monthly Reductions and Other Adjustments. 

                  

                  (a) In
                    the
                    event the Redetermination of the Borrowing Base pursuant to Section
                    3.04
                    is not
                    made on or prior to August 1, 2006 as a result of the Borrower
                    failing to comply
                    with the requirements of this Article
                    III
                    with
                    respect to such Redetermination on the dates required without
                    giving effect to
                    any grace or cure period provided in Article IX with respect
                    to any such
                    failure, the Borrowing Base shall be reduced by $1,750,000 on
                    August 1, 2006 and
                    on the first day of each month thereafter (the “Monthly Reduction”) until the
                    Borrowing Base is otherwise redetermined pursuant to this Article
                    III.

                  

                  (b) In
                    the
                    event the outstanding principal balance of the Indebtedness under
                    the Second
                    Lien Facility exceeds $150,000,000 at any time after the Effective
                    Date, the
                    Borrowing Base then in effect shall be reduced by $1.00 for every
                    $4.00 of such
                    additional Indebtedness as of the date such additional Indebtedness
                    is
                    incurred.

                   

                  Section
                    3.06. Notice
                    of Redetermination.
                    Promptly following any Redetermination of the Borrowing Base
                    or the Conforming
                    Borrowing Base, the Administrative Agent shall notify the Borrower
                    of the amount
                    of the redetermined Borrowing Base and Conforming Borrowing Base,
                    which
                    Borrowing Base and Conforming Borrowing Base shall be effective
                    as of the date
                    specified in such notice, and such Borrowing Base and Conforming
                    Borrowing Base
                    shall remain in effect for all purposes of this Agreement until
                    the next
                    Redetermination.

                   

                  Section
                    3.07. Pinnacle
                    Equity Interests.
                    In
                    connection with any Redetermination of the Borrowing Base and
                    at the request of
                    Borrower, the Lenders may, in their sole and absolute discretion,
                    consider
                    whether to attribute value to the Borrower’s investment in the Equity Interests
                    of Pinnacle in connection with such Redetermination and in the
                    event value is
                    attributed to the Borrowing Base for such Equity Interests, the
                    Borrower shall
                    cause such Equity Interests to be subject to a first and prior
                    Lien in favor of
                    the Administrative Agent, for the benefit of the Secured Parties,
                    pursuant to a
                    pledge agreement substantially similar to the Pledge Agreement
                    and take all
                    actions reasonably required to perfect such Lien.

                   

                  Article
                    IV

                  

                  Representations
                    and Warranties

                  

                  Each
                    Credit Party represents and warrants to the Lenders that (it
                    being understood
                    and agreed that with respect to the Effective Date such representations
                    and
                    warranties are 

                   

                

                
                  
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    deemed
      to
      be made concurrently with and after giving effect to the consummation of the
      Transactions):

     

    Section
      4.01. Organization;
      Powers.
      Each
      Credit Party is duly organized, validly existing and in good standing under
      the
      laws of the jurisdiction of its organization, has all requisite power and
      authority to carry on its business as now conducted and, except where the
      failure to do so, individually or in the aggregate, could not reasonably be
      expected to result in a Material Adverse Effect, is qualified to do business
      in,
      and is in good standing in, every juris-diction where such qualification is
      required. 

     

    Section
      4.02. Authorization;
      Enforceability.
      The
      Transactions are within each Credit Party’s corporate, limited liability company
      or partnership powers and have been duly authorized by all necessary corporate,
      limited liability company or partnership and, if required, stockholder action.
      This Agreement has been duly executed and delivered by each Credit Party and
      constitutes a legal, valid and binding obligation of each Credit Party,
      enforceable in accordance with its terms, subject to applicable bankruptcy,
      insolvency, reorganization, moratorium or other laws affecting creditors’ rights
      generally and subject to general principles of equity, regardless of whether
      considered in a proceeding in equity or at law.

     

    Section
      4.03. Governmental
      Approvals; No Conflicts.
      The
      Transactions (a) do not require any consent or approval of, registration or
      filing with, or any other action by, any Governmental Authority, except such
      as
      have been obtained or made and are in full force and effect (except for reports
      required to be filed by the Borrower with the SEC pursuant to the Securities
      Exchange Act of 1934), (b) will not result in a violation by the Borrower or
      any
      Restricted Subsidiary of any applicable law or regulation or the charter,
      by-laws or other Organizational Documents of the Borrower or any Restricted
      Subsidiary or any order of any Governmental Authority, (c) will not violate
      or
      result in a default under any indenture, agreement or other instrument
      evidencing Material Indebtedness or a Material Sales Contract binding upon
      the
      Borrower or any Restricted Subsidiary or any of their respective assets, or
      give
      rise to a right thereunder to require any payment to be made by the Borrower
      or
      any Restricted Subsidiary in excess of $5,000,000, and (d) will not result
      in
      the creation or imposition of any Lien on any asset of the Borrower or any
      Restricted Subsidiary other than Permitted Liens.

     

    Section
      4.04. Financial
      Condition; No Material Adverse Change.

     

    (a) The
      Borrower has heretofore furnished to the Lenders its consolidated balance sheet
      and statements of income, stockholders equity and cash flows (i) as of and
      for
      the fiscal year ended December 31, 2005, reported on by Pannell Kerr Forester
      of
      Texas, P.C., independent public accountants and (ii) as of and for the fiscal
      quarter and portion of the fiscal year ended March 31, 2006, certified by its
      chief financial officer. Such financial statements present fairly, in all
      material respects, the financial position and results of operations of the
      Borrower and its Consolidated Subsidiaries as of such dates and for such periods
      in accordance with GAAP, subject to year-end audit adjustments and the absence
      of footnotes
      in the
      case of the statements referred to in clause (ii) above.

    

    
      
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    (b) Since
      March 31, 2006, there has been no material adverse change in the business,
      assets, operations or condition, financial or otherwise, of the Borrower and
      its
      Restricted Subsidiaries, taken as a whole.

    

    (c) As
      of the
      Effective Date, the aggregate outstanding principal balance of the Second Lien
      Loans is $150,000,000.

     

    Section
      4.05. Properties.

     

    (a) Except
      as
      otherwise provided in Section
      4.15
      with
      respect to Oil and Gas Interests, the Borrower and each Restricted Subsidiary
      has good title to, or valid leasehold interests in, all real and personal
      property material to its business, except for minor defects in title that do
      not
      interfere with its ability to conduct its business as currently conducted or
      to
      utilize such properties for their intended purposes. 

    

    (b) The
      Borrower and each Restricted Subsidiary owns, or is licensed to use, all
      trademarks, trade names, copyrights, patents and other intellectual property
      material to its business, and the use thereof by the Borrower and such
      Restricted Subsidiaries, as the case may be, does not infringe upon the rights
      of any other Person, except for any such infringements that, individually or
      in
      the aggregate, could not reasonably be expected to result in a Material Adverse
      Effect.

     

    Section
      4.06. Litigation
      and Environmental Matters.

    

    (a) There
      are
      no actions, suits or proceedings by or before any arbitrator or Governmental
      Authority pending against or, to the knowledge of the Borrower, threatened
      against or affecting the Borrower or any Restricted Subsidiary, (i) as to
      which there is a reasonable possi-bility of an adverse determination and that,
      if adversely deter-mined, could reasonably be expected, individually or in
      the
      aggregate, to result in a Material Adverse Effect (other than the Disclosed
      Matters) or (ii) that involve this Agreement or the Transactions;
provided
      that no
      breach of this Section
      4.06
      shall
      occur if the same is discharged within 30 days after the date of entry thereof
      or an appeal or appropriate proceeding for review thereof is taken within such
      period and a stay of execution pending such appeal is obtained.

    

    (b) Except
      for the Disclosed Matters and except with respect to any other matters that,
      individually or in the aggregate, could not reasonably be expected to result
      in
      a Material Adverse Effect, neither the Borrower nor any Restricted Subsidiary
      to
      the Borrower’s knowledge (i) has failed to comply with any Environmental
      Law or to obtain, maintain or comply with any permit, license or other approval
      required under any Environmental Law, (ii) has become subject to any
      Environmental Liability, (iii) has received notice of any claim with
      respect to any Environmental Liability or (iv) knows of any basis for any
      Environmental Liability.

    

    (c) Since
      the
      date of this Agreement, there has been no change in the status of the Disclosed
      Matters that, individually or in the aggregate, has resulted in, or materially
      increased the likelihood of, a Material Adverse Effect.

    

    
      
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    Section
      4.07. Compliance
      with Laws and Agreements.
      The
      Borrower and each Restricted Subsidiary is in compliance with all laws,
      regulations and orders of any Governmental Authority applicable to it or its
      property and all indentures, agreements and other instruments binding upon
      it or
      its property, except where the failure to do so, individually or in the
      aggregate, could not reasonably be expected to result in a Material Adverse
      Effect. No Default has occurred and is continuing.

     

    Section
      4.08. Investment
      and Holding Company Status.
      Neither
      the Borrower nor any Restricted Subsidiary is (a) an “investment company”
as defined in, or subject to regulation under, the Investment Company Act of
      1940 or (b) a “holding company” as defined in, or subject to regula-tion
      under, the Public Utility Holding Company Act of 1935.

     

    Section
      4.09. Taxes.
      The
      Borrower and each Restricted Subsidiary has timely filed or caused to be filed
      all Tax returns and reports required to have been filed and has paid or caused
      to be paid all Taxes required to have been paid by it, except (a) Taxes
      that are being contested in good faith by appropriate proceedings and for which
      the Borrower or such Restricted Subsidiary, as applicable, has set aside on
      its
      books adequate reserves or (b) to the extent that the failure to do so
      could not reasonably be expected to result in a Material Adverse
      Effect.

     

    Section
      4.10. ERISA.
      No ERISA
      Event has occurred or is reasonably expected to occur that, when taken together
      with all other such ERISA Events for which liability is reasonably expected
      to
      occur, could reasonably be expected to result in a Material Adverse Effect.
      The
      present value of all accumulated benefit obligations under each Plan (based
      on
      the assumptions used for purposes of FASB Statement 87) did not, as of the
      date of the most recent financial statements reflecting such amounts, exceed
      by
      more than $500,000 the fair market value of the assets of such Plan, and the
      present value of all accumulated benefit obligations of all underfunded Plans
      (based on the assumptions used for purposes of FASB Statement 87) did not,
      as of the date of the most recent financial statements reflecting such amounts,
      exceed by more than $500,000 the fair market value of the assets of all such
      underfunded Plans.

    

    Section
4.11. Disclosure.
      All
      written information heretofore or contemporaneously herewith furnished by the
      Borrower to the Administrative Agent and/or the Lenders for the purposes of
      or
      in connection with this Agreement or any transaction contemplated hereby
      (excluding projections, estimates, and engineering reports) is, and all such
      information hereafter furnished by or on behalf of the Borrower to the
      Administrative Agent and/or the Lenders will be, true and accurate in every
      material respect on the date as of which such information is dated or certified;
      and none of such information is or will be incomplete by omitting to state
      any
      material fact necessary to make such information not misleading as of such
      date,
      in light of the circumstances under which the statements contained in such
      information were made, taken as a whole. To the best knowledge of the Borrower,
      the engineering reports delivered to the Administrative Agent and/or the Lenders
      in connection with this Agreement do not contain any material inaccuracies
      and/or omissions. The said engineering reports, however, are based upon
      professional opinions, estimates and projections and the Borrower does not
      warrant that such opinions, estimates and projections will ultimately prove
      to
      have been accurate. All other projections and estimates by the Borrower
      delivered hereunder or in connection herewith were prepared in good faith on
      the
      basis of the assumptions believed by the Borrower in good faith to be reasonable
      in light of the then current and foreseeable business conditions of the Borrower
      

     

    
      
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      and
        its
        Subsidiaries at the time of preparation thereof, it being understood by the
        Administrative Agent and the Lenders that actual results may vary from projected
        results.

       

      Section
        4.12. Labor
        Matters.
        There
        are no strikes, lockouts or slowdowns against the Borrower or any of its
        Restricted Subsidiaries pending or, to the knowledge of the Borrower, threatened
        that could reasonably be expected to have a Material Adverse Effect. The
        hours
        worked by and payments made to employees of the Borrower and its Restricted
        Subsidiaries have not been in violation of the Fair Labor Standards Act or
        any
        other Law dealing with such matters to the extent that such violation could
        reasonably be expected to have a Material Adverse Effect.

       

      Section
        4.13. Capitalization.
        Schedule 4.13 lists for the Borrower and each Restricted Subsidiary as of
        the
        Effective Date, its full legal name, its jurisdiction of organization, and
        its
        federal tax identification number and for each Restricted Subsidiary, the
        number
        of shares of capital stock or other Equity Interests outstanding and the
        owner(s) of such shares or Equity Interests.

       

      Section
        4.14. Margin
        Stock.
        Neither
        the Borrower nor any Restricted Subsidiary is engaged principally, or as
        one of
        its important activities, in the business of extending credit for the purpose
        of
        purchasing or carrying margin stock (within the meaning of Regulation T,
        U or X
        of the Board of Governors of the Federal Reserve System), and no part of
        the
        proceeds of any Loan will be used to purchase or carry any margin stock in
        violation of said Regulation T, U or X or to extend credit to others for
        the
        purpose of purchasing or carrying margin stock in violation of said Regulation
        T, U or X.

      

      Section
        4.15. Title
        to Mortgaged Properties.
        Except
        as set forth on Schedule 4.15 attached hereto, each Credit Party has Defensible
        Title to each Mortgaged Property having a book cost in excess of $200,000
        (except to the extent that (a) such assets have thereafter been disposed
        of in
        compliance with this Agreement or (b) leases for such property have expired
        pursuant to their terms), in each case free and clear of all Liens, except
        (i)
        Permitted Liens, (ii) obligations or duties to any municipality or public
        authority with respect to any franchise, grant, license or permit and all
        applicable laws, rules, regulations and orders of any Governmental Authority,
        (iii) all lessors’ royalties, overriding royalties, net profits interests,
        production payments, carried interests, reversionary interests and other
        burdens
        on or deductions from the proceeds of production, (iv) the terms and conditions
        of joint operating agreements and other oil and gas contracts, (v) all rights
        to
        consent by required notices to, and filing with or other actions by governmental
        or tribal entities, if any, in connection with the change of ownership or
        control of an interest in federal, state, trial or other domestic governmental
        oil and gas leases, if the same are customarily obtained subsequent to such
        change of ownership or control, but only insofar as such consents, notices,
        filings and other actions relate to the transactions contemplated by this
        Agreement, (vi) any preferential purchase rights, (vii) required third party
        consents to assignment, (viii) conventional rights of reassignment prior
        to
        abandonment and (ix) the terms and provisions of oil and gas leases, unit
        agreements, pooling agreements, and other documents creating interests
        comprising the oil and gas properties; provided,
        however,
        the
        exceptions described in clauses
        (i)
        through
(viii)
        inclusive above are qualified to include only those exceptions in each case
        which do not operate to (A) reduce the net revenue interest of any Credit
        Party
        below that set forth in the Reserve Report, (B) increase the proportionate
        share
        of costs and 

       

      
        
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        expenses
          of leasehold operations attributable to or to be borne by the working interest
          of any Credit Party above that set forth in the Reserve Report without
          a
          proportionate increase in the net revenue interest of such Credit Party
          or (C)
          increase the working interest of any Credit Party above that set forth
          in the
          Reserve Report without a proportionate increase in the net revenue interest
          of
          such Credit Party, and provided further
          that the
          foregoing defects, limitations, liens and encumbrances, whether individually
          material or not, do not in the aggregate create a Material Adverse Effect
          (the
          categories of exceptions in clauses
          (i)
          through
(viii),
          as so
          qualified and as any such exceptions may exist from time to time, being
          referred
          to as the “Designated
          Title Exceptions”).
          The
          Mortgages constitute legal, valid and perfected first Liens on the property
          interests covered thereby, subject only to Designated Title Exceptions,
          Permitted Liens, the Intercreditor Agreement, and matters disclosed on
          Schedule
          4.15. Further, (x) as of the Effective Date, all Oil and Gas Interests
          subject
          to mortgages pursuant to the Second Lien Credit Agreement are Mortgaged
          Properties and (y) the matters disclosed on Schedule 4.15 do not materially
          alter the net revenue interest or working interest of any Credit Party
          set forth
          in the Reserve Report.

         

        Section
          4.16. Insurance.
          The
          certificate signed by the Financial Officer that attests to the existence
          and
          adequacy of, and summarizes, the property and casualty insurance program
          maintained by the Credit Parties that has been furnished by the Borrower
          to the
          Administrative Agent and the Lenders as of the Effective Date, is complete
          and
          accurate in all material respects as of the Effective Date and demonstrates
          the
          Borrower’s and the Restricted Subsidiaries’ compliance with Section
          6.05.
          The
          Borrower maintains insurance with insurance companies in such amounts and
          against such risks as is usually carried by owners of similar businesses
          and
          properties in the same general areas in which the Borrower
          operates.

         

        Section
          4.17. Solvency.

        

        (a) Immediately
          after the consummation of the Transactions and immediately following the
          making
          of the initial Borrowing made on the Effective Date and after giving effect
          to
          the application of the proceeds thereof, (1) the fair value of the assets
          of the
          Credit Parties on a consolidated basis, at a fair valuation, will exceed
          the
          debts and liabilities, subordinated, contingent or otherwise, of the Credit
          Parties on a consolidated basis; (2) the present fair saleable value of
          the real
          and personal property of the Credit Parties on a consolidated basis will
          be
          greater than the amount that will be required to pay the probable liability
          of
          the Credit Parties on a consolidated basis on their debts and other liabilities,
          subordinated, contingent or otherwise, as such debts and other liabilities
          become absolute and matured; (3) the Credit Parties on a consolidated basis
          will
          be able to pay their debts and liabilities, subordinated, contingent or
          otherwise, as such debts and liabilities become absolute and matured; and
          (4)
          the Credit Parties on a consolidated basis will not have unreasonably small
          capital with which to conduct the businesses in which they are engaged
          as such
          businesses are now conducted and are proposed to be conducted after the
          date
          hereof.

        

        (b) The
          Credit Parties do not intend to, and do not believe that they will, incur
          debts
          beyond their ability to pay such debts as they mature, taking into account
          the
          timing of and amounts of cash to be received by it and the timing of the
          amounts
          of cash to be payable on or in respect of its Indebtedness.

        

        
          
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    Section
      4.18. Deposit
      Accounts.
      Except
      as set forth on Schedule 4.18 and other deposit and investment accounts
      maintained at financial institutions other than the Administrative Agent (the
      aggregate balance of which does not exceed $200,000 at any time for all such
      other deposit and investment accounts taken as a whole), no Credit Party has
      any
      deposit or investment accounts (and no Affiliate of any Credit Party has any
      deposit or investment account) into which proceeds of Hydrocarbon production
      from the Oil and Gas Interests included in the Borrowing Base Properties are
      deposited. From and after 60 days after the Effective Date, except for deposit
      and investment accounts maintained at financial institutions other than the
      Administrative Agent the aggregate balance of which does not exceed $200,000
      at
      any time, all proceeds of Hydrocarbon production from the Oil and Gas Interests
      included in the Borrowing Base Properties and all distributions and dividends
      on
      any Equity Interests owned by any Credit Party are deposited and maintained,
      from the date of receipt by any Credit Party, in a deposit or investment account
      subject to a first and prior perfected security interest in favor of the
      Administrative Agent for the benefit of the Secured Parties.

     

    Section
      4.19. Pending
      Dispositions.
      Except
      for the Oil and Gas Interests identified as the C&E Unit 1H, none of the Oil
      and Gas Interests or other properties listed on Schedule 7.04 are Borrowing
      Base
      Properties.

     

    Article
      V

    

    Conditions

     

    Section
5.01. Effective
      Date.
      The
      obligations of the Lenders to make Loans and of the Issuing Bank to issue
      Letters of Credit hereunder shall not become effective until the date on which
      each of the following conditions is satisfied (or waived in accordance with
      Section
      11.02):

    

    (a) The
      Administrative Agent (or its counsel) shall have received from each party hereto
      either (i) a counterpart of this Agreement signed on behalf of such party
      or (ii) written evidence satisfactory to the Administrative Agent (which may
      include telecopy transmission of a signed signature page of this Agreement)
      that
      such party has signed a counterpart of this Agreement.

     

    (b) The
      Administrative Agent shall have received a favorable written opinion (addressed
      to the Administrative Agent and the Lenders and dated the Effective Date) of
      (i)
      Baker Botts LLP, counsel for the Credit Parties, substantially in the form
      of
      Exhibit B, (ii) special Louisiana counsel for the Administrative Agent covering
      the enforceability and recordability of the Mortgages relating to Borrowing
      Base
      Properties in Louisiana and with respect to the foregoing clauses (i) and (ii)
      covering such other matters relating to the Credit Parties, this Agreement
      or
      the Transactions as the Administrative Agent shall reasonably request. The
      Credit Parties hereby request such counsel to deliver such
      opinions.

    

    (c) The
      Administrative Agent shall have received such documents and certificates as
      the
      Administrative Agent or its counsel may reasonably request relating to the
      organization, existence and good standing of each Credit Party, the
      authorization of the Transactions and any other legal matters relating to the
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      the
        Transactions, all in form and substance satisfactory to the Administrative
        Agent
        and its counsel.

      

      (d) The
        Administrative Agent shall have received a certificate, dated the Effective
        Date
        and signed by the President, a Vice President or a chief financial officer
        of
        the Borrower, confirming that the Borrower has (i) complied with the conditions
        set forth in paragraphs (a) and (b) of Section
        5.02,
        (ii)
        complied with the covenants set forth in Section
        6.05
        (and
        demonstrating such compliance by the attachment of an insurance summary and
        insurance certificates evidencing the coverage described in such summary)
        (iii)
        taken all actions necessary to cause the Loan Documents to be the “First Lien
        Loan Documents” under and as defined in the Intercreditor Agreement and the
        Obligations to be the “First Lien Obligations” under and as defined in the
        Intercreditor Agreement, and (iv) calculated that, based on the Initial Reserve
        Reports and as of the Effective Date after giving effect to the Transactions,
        the maximum principal amount of the Loans plus LC Exposure permitted under
        Section
        7.01
        of the
        Intercreditor Agreement is at least 120% of the Initial Borrowing Base and
        attached to such certificate reasonable detailed calculations demonstrating
        that
        such maximum principal amount exceeds the Initial Borrowing Base by such
        percentage.

      

      (e) The
        Administrative Agent, the Lenders and the Lead Arranger shall have received
        all
        fees and other amounts due and payable on or prior to the Effective Date,
        and,
        to the extent invoiced, reimbursement or payment of all out-of-pocket expenses
        required to be reimbursed or paid by the Borrower hereunder, including all
        fees,
        expenses and disbursements of counsel for the Administrative Agent to the
        extent
        invoiced on or prior to the Effective Date, together with such additional
        amounts as shall constitute such counsel’s reasonable estimate of expenses and
        disbursements to be incurred by such counsel in connection with the recording
        and filing of Mortgages and financing statements; provided,
        that,
        such
        estimate shall not thereafter preclude further settling of accounts between
        the
        Borrower and the Administrative Agent.

       

      (f) The
        Administrative Agent shall have received the Mortgages to be executed on
        the
        Effective Date pursuant to Section
        6.09
        of this
        Agreement, duly executed and delivered by the appropriate Credit Party, together
        with such other assignments, conveyances, amendments, agreements and other
        writings reasonably requested by the Administrative Agent, including, without
        limitation, UCC-1 financing statements, tax affidavits and applicable department
        of revenue documentation, creating first and prior Liens, subject to Permitted
        Encumbrances, in Oil and Gas Interests having an Engineered Value equal to
        or
        greater than (i) ninety percent (90%) of the Engineered Value of the proved
        developed producing and proved developed non-producing reserves included
        in the
        Borrowing Base Properties, (ii) fifty percent (50%) of the Engineered Value
        of
        all Borrowing Base Properties, in each case with respect to the foregoing
        clauses (i) and (ii), excluding any Oil and Gas Interests in the area known
        as
        the Camp Hill Field in Anderson County, Texas and (iii) fifty percent (50%)
        of
        the Engineered Value of the Borrower’s and each Guarantor’s Oil and Gas
        Interests, taken as a whole, in the area known as the Camp Hill Field in
        Anderson County, Texas.

      

      
        
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    (g) The
      Administrative Agent shall have received opinions of counsel and other evidence
      of title as the Administrative Agent shall deem reasonably necessary or
      appropriate to verify (i) the Credit Parties’ title to not less than fifty
      percent (50%) of the Engineered Value of the Borrowing Base Properties and
      (ii)
      the validity, perfection and priority of the Liens to be created by the
      Mortgages.

    

    (h) The
      Administrative Agent shall have received the Pledge Agreement to be executed
      on
      the Effective Date pursuant to Section
      6.14
      of this
      Agreement, duly executed and delivered by the appropriate Credit Party, together
      with such other assignments, conveyances, amendments, agreements and other
      writings, including, without limitation, UCC-1 financing statements and control
      agreements, creating first and prior Liens, subject to Permitted Liens, in
      all
      Equity Interests of each Restricted Subsidiary now or hereafter owned by
      Borrower or any Restricted Subsidiary.

     

    (i) On
      or
      prior to the Effective Date, the Administrative Agent shall have received a
      Borrowing Request acceptable to the Administrative Agent setting forth the
      Loans
      requested by the Borrower on the Effective Date, the Type and amount of each
      Loan and the accounts to which such Loans are to be funded; provided that all
      Borrowings on the Effective Date shall be ABR Borrowings.

    

    (j) If
      the
      initial Borrowing includes the issuance of a Letter of Credit, the
      Administrative Agent shall have received a written request in accordance with
      Section
      2.05
      of this
      Agreement.

    

    (k) The
      Administrative Agent shall have received such financing statements (including,
      without limitation, the financing statements referenced in clauses (f) and
      (h)
      above) as Administrative Agent shall specify to fully evidence and perfect
      all
      Liens contemplated by the Loan Documents, all of which shall be filed of record
      on or after the Effective Date in such jurisdictions as the Administrative
      Agent
      shall require in its sole discretion.

    

    (l) The
      Administrative Agent shall have received evidence or assurances satisfactory
      to
      it that the Existing Revolving Facility shall have been (or concurrently with
      the effectiveness of this Agreement and the funding of the initial Loans
      hereunder, will be) paid in full and that all Liens securing the Existing
      Revolving Facility, have been (or concurrently with the funding of the initial
      Loans, will be) released, and promptly after the Effective Date original
      executed instruments releasing and terminating any such Liens in a form suitable
      for filing in the applicable jurisdiction shall be delivered.

     

    (m) The
      Administrative Agent shall have received a Solvency Certificate in the form
      attached hereto as Exhibit D, dated the Effective Date, and signed by the Chief
      Financial Officer of the Borrower.

    

    (n) The
      Lenders shall have received from the Borrower (i) the financial statements
      described in Section
      4.04,
      (ii) a
      consolidated balance sheet of the Borrower and its Consolidated Subsidiaries
      as
      of and for the fiscal quarter and portion of the fiscal year ended March 31,
      2006, which balance sheet shall be prepared consistent in all respects

     

    
      
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      with
        the
        information previously provided by the Borrower to the Administrative Agent
        and
        the Lenders and otherwise in form and substance satisfactory to the
        Administrative Agent and (iii) the Projections.

      

      (o) The
        Administrative Agent, the Second Lien Agent and the Credit Parties shall
        have
        executed and delivered an amendment to the Intercreditor Agreement in the
        form
        attached hereto as Exhibit E.

      

      (p) Each
        Credit Party shall have obtained all approvals required from any
        Governmental Authority and all consents of other Persons, in each case that
        are
        necessary or advisable in connection with the Transactions and each of the
        foregoing shall be in full force and effect and in form and substance reasonably
        satisfactory to the Administrative Agent.

      

      (q) There
        shall not exist any action, suit, investigation, litigation or proceeding
        or
        other legal or regulatory developments, pending or threatened in any court
        or
        before any arbitrator or Governmental Authority that, in the reasonable opinion
        of Administrative Agent, singly or in the aggregate, materially impairs the
        Transactions, the financing thereof or any of the other transactions
        contemplated by the Loan Documents or that could reasonably be expected to
        have
        a Material Adverse Effect.

      

      (r) All
        partnership, corporate and other proceedings taken or to be taken in connection
        with the Transactions and all documents incidental thereto shall be reasonably
        satisfactory in form and substance to Administrative Agent and its counsel,
        and
        Administrative Agent and such counsel shall have received all such counterpart
        originals or certified copies of such documents as Administrative Agent may
        reasonably request.

      

      (s) The
        Borrower shall have delivered to the Administrative Agent a description of
        the
        sources and uses of funding for the Transactions that is consistent with
        the
        terms of the Loan Documents and otherwise satisfactory to the Administrative
        Agent.

      

      The
        Administrative Agent shall notify the Borrower and the Lenders of the Effective
        Date, and such notice shall be conclusive and binding. 

       

      Section
        5.02. Each
        Credit Event.
        The
        obligation of each Lender to make a Loan on the occasion of any Borrowing,
        and
        of the Issuing Bank to issue, amend, renew or extend any Letter of Credit,
        is
        subject to the satisfaction of the following conditions:

      

      (a) The
        representations and warranties of each Credit Party set forth in Loan Documents
        shall be true and correct in all material respects on and as of the date
        of such
        Borrowing or the date of issuance, amendment, renewal or extension of such
        Letter of Credit, as applicable except to the extent that such representations
        and warranties specifically refer to an earlier date, in which case they
        shall
        be true and correct in all material respects as of such earlier date and
        taking
        into account any amendments to the schedules or exhibits as a result of any
        disclosures made in writing by the Borrower to the Administrative Agent after
        the Effective Date and approved by the Administrative Agent and Required
        Lenders
        in writing.

      

      
        
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    (b) At
      the
      time of and immediately after giving effect to such Borrowing or the issuance,
      amendment, renewal or extension of such Letter of Credit, as applicable, no
      Default shall have occurred and be continuing.

    

    (c) At
      the
      time of and immediately after giving effect to such Borrowing or the issuance,
      amendment, renewal or extension of such Letter of Credit, as applicable, no
      Borrowing Base Deficiency exists or would be caused thereby.

    

    Each
      Borrowing and each issuance, amendment, renewal or extension of a Letter of
      Credit shall be deemed to constitute a representation and warranty by the
      Borrower on the date thereof as to the matters specified in paragraphs (a),
      (b)
      and (c) of this Section.

     

    Article
      VI

    

    Affirmative
      Covenants

    

    Until
      the
      Aggregate Commitment has expired or been terminated and the principal of and
      interest on each Loan and all fees payable hereunder shall have been paid in
      full and all Letters of Credit shall have expired or terminated and all LC
      Disbursements shall have been reimbursed, each Credit Party covenants and agrees
      with the Lenders that:

     

    Section
      6.01. Financial
      Statements; Other Information.
      The
      Borrower will furnish to the Administrative Agent and each Lender:

     

    (a) as
      soon
      as available and in any event within 120 days after the end of each fiscal
      year
      of the Borrower, the audited consolidated balance sheet and related statements
      of operations, stockholders’ equity and cash flows of the Borrower and its
      Consolidated Subsidiaries as of the end of and for such year, setting forth
      in
      each case in comparative form the figures for the previous fiscal year, all
      reported on by a firm of independent public accountants reasonably acceptable
      to
      Administrative Agent (without a “going concern” or like qualification or
      exception and without any qualification or exception as to the scope of such
      audit) to the effect that such consolidated financial statements present fairly
      in all material respects the financial condition and results of operations
      of
      the Borrower and its Consolidated Subsidiaries on a consolidated basis in
      accordance with GAAP consistently applied;

     

    (b) as
      soon
      as available and in any event within 45 days after the end of each fiscal
      quarter of the Borrower, the consolidated balance sheet and related statements
      of operations, stockholders’ equity and cash flows of the Borrower and its
      Consolidated Subsidiaries as of the end of and for such fiscal quarter and
      the
      then elapsed portion of the fiscal year, setting forth in each case in
      comparative form the figures for the corresponding period or periods of (or,
      in
      the case of the balance sheet, as of the end of) the previous fiscal year,
      all
      certified by one of its Financial Officers as presenting fairly in all material
      respects the financial condition and results of operations of the Borrower
      and
      its Consolidated Subsidiaries on a consolidated basis in accordance with GAAP
      consistently applied, subject to normal year-end audit adjustments and the
      absence of footnotes;

    

    
      
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    (c) concurrently
      with any delivery of financial statements under clause (a) or (b) above, a
      certificate in a form reasonably acceptable to Administrative Agent signed
      by a
      Financial Officer of the Borrower (i) certifying as to whether a Default
      has occurred and, if a Default has occurred, specifying the details thereof
      and
      any action taken or proposed to be taken with respect thereto, and
      (ii) setting forth reasonably detailed calculations demonstrating
      compliance with Section
      7.12;

     

    (d) promptly
      after the same become publicly available, copies of all periodic and other
      reports, proxy statements and other materials filed by the Borrower or any
      Subsidiary with the Securities and Exchange Commission, or any Govern-mental
      Authority succeeding to any or all of the functions of said Commission, or
      with
      any national securities exchange, or distributed by the Borrower to its
      share-holders generally, as the case may be;

    

    (e) as
      soon
      as available, and in any event no later than March 1 and September 1 of each
      year, the Reserve Reports required on such dates pursuant to Section
      3.01;

    

    (f) together
      with the Reserve Reports required under clause (e) above, (i) a report, in
      reasonable detail, setting forth the Swap Agreements then in effect, the
      notional volumes of and prices for, on a monthly basis and in the aggregate,
      the
      Crude Oil and Natural Gas for each such Swap Agreement and the term of each
      such
      Swap Agreement; (ii) a true and correct schedule of the Mortgaged Properties,
      (iii) the percentage of the Engineered Value of the Borrowing Base that the
      Mortgaged Properties represent and (iv) a description of the additional Oil
      and
      Gas Interests, if any, to be mortgaged by the Credit Parties to comply with
      Section
      6.09
      and the
      Engineered Value thereof;

    

    (g) as
      soon
      as available and in any event within 45 days after the end of each fiscal
      quarter of the Borrower, the following reports and information for such fiscal
      quarter: production reports for the Borrowing Base Properties, commodity prices,
      sales revenues, operating expenses for the Borrowing Base Properties and
      production taxes, in form reasonably acceptable to the Administrative
      Agent;

     

    (h) as
      soon
      as available and in any event within 60 days after the beginning of each fiscal
      year of the Borrower, Projections for such fiscal year on a month to month
      basis; and 

    

    (i) promptly
      following any request therefor, including any request made following the receipt
      by the Administrative Agent of notice of any Disposition pursuant to
Section
      7.04(c),
      such
      other information regarding the operations, business affairs and financial
      condition of any Credit Party, or compliance with the terms of this Agreement,
      as the Administrative Agent or any Lender may reasonably request, including
      information relating to any Borrowing Base Properties in connection with any
      Disposition pursuant to Section
      7.04(c).

    

    Documents
      required to be delivered pursuant to Section
      6.01(a),
      Section
      6.01(b)
      or
Section
      6.01(d)
      (to the
      extent any such documents are included in materials otherwise filed with the
      

     

    
      
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        Index

      

    

    

      Securities
        and Exchange Commission) may be delivered electronically and if so delivered,
        shall be deemed to have been delivered on the date (i) on which the
        Borrower posts such documents, or provides a link thereto on the Borrower’s
        website on the Internet at www.carrizo.cc;
        or
        (ii) on which such documents are posted on the Borrower’s behalf on the
        website of the Securities and Exchange Commission or any other Internet or
        intranet website, if any, to which each Lender and the Administrative Agent
        have
        access (whether a commercial, third-party website or whether sponsored by
        the
        Administrative Agent); provided
        that the
        Borrower shall notify the Administrative Agent, which shall then promptly
        notify
        each Lender (by telecopier or electronic mail) of the posting of any such
        documents, and the Borrower shall provide to the Administrative Agent by
        electronic mail electronic versions (i.e.,
        soft
        copies) of such documents. Notwithstanding anything contained herein, in
        every
        instance the Borrower shall be required to provide paper copies of the
        compliance certificate required by Section
        6.01(c)
        to the
        Administrative Agent, which shall then promptly furnish such compliance
        certificate to the Lenders. Except for such compliance certificates, the
        Administrative Agent shall have no obligation to request the delivery or
        to
        maintain copies of the documents referred to above, and in any event shall
        have
        no responsibility to monitor compliance by the Borrower with any such request
        for delivery, and each Lender shall be solely responsible for requesting
        delivery to it or maintaining its copies of such documents.

       

      Section
        6.02. Notices
        of Material Events.
        The
        Borrower will furnish to the Administrative Agent prompt written notice of
        the
        following:

      

      (a) the
        occurrence of any Default of which it has knowledge;

      

      (b) the
        filing or commencement of any action, suit or proceeding by or before any
        arbitrator or Governmental Authority of which it has knowledge against or
        affecting any Credit Party or any Affiliate thereof that, if adversely
        determined, could reasonably be expected to result in a Material Adverse
        Effect;

      

      (c) the
        occurrence of any ERISA Event that, alone or together with any other ERISA
        Events that have occurred, could reasonably be expected to result in liability
        of the Borrower and the Restricted Subsidiaries in an aggregate amount exceeding
        $500,000;

      

      (d) any
        written notice or written claim from any Governmental Authority to the effect
        that any Credit Party is or may be liable to any Person as a result of the
        release by any Credit Party, or any other Person of any Hazardous Materials
        into
        the environment, which could reasonably be expected to have a Material Adverse
        Effect; and 

      

      (e) any
        other
        development of which it has knowledge that results in, or could reasonably
        be
        expected to result in, a Material Adverse Effect.

      

      Each
        notice delivered under this Section shall be accompanied by a statement of
        a
        Financial Officer or other executive officer of the Borrower setting forth
        the
        details of the event or development requiring such notice and any action
        taken
        or proposed to be taken with respect thereto.

      

      Section
        6.03. Existence;
        Conduct of Business.
        The
        Borrower will, and will cause each Restricted Subsidiary to, do or cause
        to be
        done all things necessary to preserve, renew and keep 

       

      
        
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          Index

        

      

      

        in
          full
          force and effect (a) its legal existence and (b) except where the failure
          to do
          so could not reasonably be excepted to result in a Material Adverse Effect,
          the
          rights, licenses, permits, privileges and franchises material to the conduct
          of
          its business; provided
          that the
          foregoing shall not prohibit any merger, consolidation, liquidation or
          dissolution permitted under Section
          7.03.

         

        Section
          6.04. Payment
          of Obligations.
          The
          Borrower will, and will cause each Restricted Subsidiary to, pay its
          obligations, including Tax liabilities, that, if not paid, could reasonably
          be
          expected to result in a Material Adverse Effect before the same shall become
          delinquent or in default, except where (a) the validity or amount thereof
          is
          being contested in good faith by appropri-ate proceedings, (b) the Borrower
          or
          such Restricted Subsidiary has set aside on its books adequate reserves
          with
          respect thereto in accordance with GAAP and (c) the failure to make payment
          pending such contest could not reasonably be expected to result in a Material
          Adverse Effect.

         

        Section
          6.05. Maintenance
          of Properties; Insurance.
          The
          Borrower will, and will cause each Restricted Subsidiary and use commercially
          reasonable efforts to cause each operator of Borrowing Base Properties
          to, keep
          and maintain all property material to the conduct of its business in good
          working order and condition, ordinary wear and tear excepted. The
          Borrower shall maintain in effect all insurance required by this Agreement
          and
          the Collateral Documents, and the Borrower agrees to comply with the
          representations and warranties set forth in Section
          4.16.
          The
          Borrower agrees to provide the Administrative Agent with certificates or
          binders
          evidencing such insurance coverage on an annual basis, and, if requested
          by the
          Administrative Agent, the Borrower further agrees to promptly furnish the
          Administrative Agent with copies of all renewal notices and copies of receipts
          for paid premiums. The Borrower shall provide the Administrative Agent
          with
          certificates or binders evidencing insurance coverage pursuant to all renewal
          or
          replacement policies of insurance no later than the seventh 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 of the Borrower).

        

        Section
          6.06. Books
          and Records; Inspection Rights.
          The
          Borrower will keep proper consolidated books of record and account in accordance
          with GAAP. Upon reasonable prior notice, the Borrower shall allow the
          Administrative Agent’s employees and agents access to its books and records and
          properties during normal business hours to perform field audits from time
          to
          time (provided,
          that so
          long as no Event of Default has occurred and is continuing, there may be
          no more
          than two such field audits in any calendar year). The Borrower shall pay
          all
          reasonable costs and expenses associated with such field audits. The Borrower
          shall provide the Administrative Agent with such other information as the
          Administrative Agent may reasonably request from time to time, subject
          in all
          cases to any confidentiality restrictions that may be applicable to the
          Borrower
          and its Subsidiaries and to any confidentiality restrictions that the Borrower
          reasonably imposes on the Persons receiving such information; provided,
          however,
          that
          neither the Borrower nor any of its Subsidiaries shall be required to disclose
          to the Administrative Agent or any agents or representatives thereof any
          information which is the subject of attorney-client privilege or attorney’s work
          product privilege properly asserted by the applicable Person to prevent
          the loss
          of such privilege in connection with such information; and provided,
          further,
          that
          the Borrower will use commercially reasonable efforts to furnish such
          information (excluding information covered by confidentiality restrictions
          in
          agreements relating 

         

        
          
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            Index

          

        

        

          to
            seismic, geologic or geophysical data or similar technical and business
            matters
            relating to the exploration for oil and gas), which requirement shall
            be
            satisfied if the Administrative Agent is offered the opportunity to review
            such
            confidential information by executing or otherwise becoming a party to
            the
            confidentiality restrictions on substantially the same terms (including
            any
            standstill provisions) as are applicable to the Borrower.

           

          Section
            6.07. Compliance
            with Laws.
            The
            Borrower will, and will cause each Restricted Subsidiary to, comply with
            all
            laws, rules, regulations and orders of any Governmental Authority applicable
            to
            it or its property, except where the failure to do so, individually or
            in the
            aggregate, could not reasonably be expected to result in a Material Adverse
            Effect.

           

          Section
            6.08. Use
            of
            Proceeds and Letters of Credit.
            The
            proceeds of the Loans will be used only (a) repay all of the outstanding
            principal balance of and accrued unpaid interest on the Existing Revolving
            Facility, (b) to satisfy reimbursement obligations with respect to Letters
            of
            Credit, (c) to pay the fees, expenses and transaction costs of the Transactions,
            (d) to finance the working capital needs of the Borrower and the Restricted
            Subsidiaries, including capital expenditures, and (e) for general corporate
            purposes of the Borrower and the Guarantors, in the ordinary course of
            business,
            including the exploration, acquisition and development of Oil and Gas
            Interests.
            No part of the proceeds of any Loan will be used, whether directly or
            indirectly, for any purpose that entails a violation of any of the regulations
            of the Board, including Regulations T, U and X. Letters of Credit will
            be issued
            only to support general corporate purposes of the Borrower and the
            Subsidiaries.

           

          Section
            6.09. Mortgages.
            From
            time to time as requested by the Administrative Agent and in any event
            to the
            extent required under the Intercreditor Agreement and no later than sixty
            (60)
            days after the Effective Date, the Borrower will, and will cause each
            Guarantor
            to, execute and deliver to the Administrative Agent, for the benefit
            of the
            Secured Parties, Mortgages in form and substance reasonably acceptable
            to the
            Administrative Agent together with such other assignments, conveyances,
            amendments, agreements and other writings, including, without limitation,
            UCC-1
            financing statements (each duly authorized and executed, as applicable)
            as the
            Administrative Agent shall reasonably deem necessary or appropriate to
            grant,
            evidence and perfect a valid first priority Lien, subject only to Permitted
            Liens, in (a) not less than eighty percent (80%) of the Engineered Value
            of all
            Borrowing Base Properties (excluding any Oil and Gas Interests in the
            area known
            as the Camp Hill Field in Anderson County, Texas) and (b) not less than
            eighty
            percent (80%) of the Engineered Value of the Borrower’s and each Guarantor’s Oil
            and Gas Interests in the area known as the Camp Hill Field in Anderson
            County,
            Texas.

          

          Section
            6.10. Title
            Data.
            As soon
            as available and in any event no later than six months after the Effective
            Date,
            the Borrower will, and will cause each Guarantor to, deliver to the
            Administrative Agent such opinions of counsel and other evidence of title
            as the
            Administrative Agent shall deem reasonably necessary or appropriate to
            verify
            (i) such Credit Party’s title to not less than seventy-five percent (75%) of the
            Engineered Value of the Borrowing Base Properties (excluding any Oil
            and Gas
            Interests in the area known as the Camp Hill Field in Anderson County,
            Texas),
            (ii) such Credit Party’s title to not less than fifty percent (50%) of the
            Engineered Value of the Oil and Gas Interests in the area known as the
            Camp Hill
            Field in Anderson County, Texas and (iii) the validity, perfection and
            priority
            of the Liens created by the 

           

          
            
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            Mortgages
              and such other matters regarding the Mortgages as Administrative Agent
              shall
              reasonably request. The Borrower will, and will cause each Guarantor
              to, use
              commercially reasonable efforts to deliver to the Administrative Agent,
              or its
              counsel, within 120 days after the Effective Date, reasonably satisfactory
              evidence demonstrating that the Borrower or such Guarantor, as the
              case may be,
              has performed all of the title curative actions described on Schedule
              6.10. To
              the extent any such title curative action is not performed within 120
              days of
              the Effective Date, the Administrative Agent may, in its reasonable
              discretion,
              reduce the Borrowing Base and the Conforming Borrowing Base to account
              for such
              failure to perform such title curative action and such reduction shall
              be
              restored upon the performance of such title curative action to the
              reasonable
              satisfaction of the Administrative Agent.

             

            Section
              6.11. Swap
              Agreements.
              The
              Borrower will maintain all hedge, collar and swap transactions that
              are in
              effect as of the Effective Date without waiver or amendment of any
              terms or
              provisions thereof. Upon the request of the Required Lenders, each
              of Borrower
              and each Restricted Subsidiary will take all actions necessary to cause
              all of
              its right, title and interest in each Swap Agreement to which it is
              a party and
              the hedge transactions related thereto to be collaterally assigned
              to the
              Administrative Agent, for the benefit of the Secured Parties (unless
              such
              assignment is subject to the prior consent of any counterparty to such
              Swap
              Agreement in which event each Credit Party that is a party to such
              Swap
              Agreement shall use its commercially reasonable efforts to obtain such
              consent),
              and shall, if requested by the Administrative Agent or the Required
              Lenders, use
              its commercially reasonable efforts to cause each such agreement or
              contract to
              (a) expressly permit such assignment and (b) upon the occurrence of
              any default
              or event of default under such agreement or contract, (i) to permit
              the Lenders
              to cure such default or event of default and assume the obligations
              of such
              Credit Party under such agreement or contract and (ii) to prohibit the
              termination of such agreement or contract by the counterparty thereto
              if the
              Lenders assume the obligations of such Credit Party under such agreement
              or
              contract and the Lenders take the actions required under the foregoing
              clause
              (i). Upon the request of the Administrative Agent, the Borrower shall,
              within
              thirty (30) days of such request, provide to the Administrative Agent
              and each
              Lender copies of all agreements, documents and instruments evidencing
              the Swap
              Agreements not previously delivered to the Administrative Agent and
              Lenders,
              certified as true and correct by a Financial Officer of the Borrower,
              and such
              other information regarding such Swap Agreements as the Administrative
              Agent and
              Lenders may reasonably request.

             

            Section
              6.12. Operation
              of Oil and Gas Interests.

            

            (a) The
              Borrower will, and will cause each Restricted Subsidiary to, maintain,
              develop
              and operate its Oil and Gas Interests in a good and workmanlike manner,
              and
              observe and comply with all of the terms and provisions, express or
              implied, of
              all oil and gas leases relating to such Oil and Gas Interests so long
              as such
              Oil and Gas Interests are capable of producing Hydrocarbons and accompanying
              elements in paying quantities, except where such failure to comply
              could not
              reasonably be expected to have a Material Adverse Effect.

            

            (b) The
              Borrower will, and will cause each Restricted Subsidiary to, comply
              in all
              respects with all contracts and agreements applicable to or relating
              to its Oil
              and Gas Interests or the production and sale of Hydrocarbons and accompanying
              elements 

             

            
              
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                Index

              

            

            

              therefrom,
                except to the extent a failure to so comply could not reasonably
                be expected to
                have a Material Adverse Effect. 

               

              Section
                6.13. Restricted
                Subsidiaries.
                In the
                event any Person is or becomes a Restricted Subsidiary after the
                Effective Date,
                the Borrower will (a) promptly take all action necessary to comply
                with
Section
                6.14,
                and,
                with respect to each such Restricted Subsidiary, provide to the Administrative
                Agent the information required pursuant to Section
                4.13
                for
                Restricted Subsidiaries existing on the Effective Date, (b) promptly
                take all
                such action and execute and deliver, or cause to be executed and
                delivered, to
                the Administrative Agent all such documents, opinions, instruments,
                agreements,
                and certificates similar to those described in Section
                5.01(b)
                and
Section
                5.01(c)
                that the
                Administrative Agent may request, and (c) promptly cause such Restricted
                Subsidiary to (i) become a party to this Agreement and Guarantee
                the Obligations
                by executing and delivering to the Administrative Agent a Counterpart
                Agreement
                in the form of Exhibit C, and (ii) to the extent required to comply
                with
Section
                6.09,
                grant
                to the Administrative Agent, for the benefit of the Secured Parties,
                a security
                interest in all of such Restricted Subsidiary’s Oil and Gas Interests to secure
                the Obligations. Upon delivery of any such Counterpart Agreement
                to the
                Administrative Agent, notice of which is hereby waived by each Credit
                Party,
                such Restricted Subsidiary shall be a Guarantor and shall be as fully
                a party
                hereto as if such Restricted Subsidiary were an original signatory
                hereto. Each
                Credit Party expressly agrees that its obligations arising hereunder
                shall not
                be affected or diminished by the addition or release of any other
                Credit Party
                hereunder. This Agreement shall be fully effective as to any Credit
                Party that
                is or becomes a party hereto regardless of whether any other Person
                becomes or
                fails to become or ceases to be a Credit Party hereunder. With respect
                to each
                such Restricted Subsidiary, the Borrower shall promptly send to the
                Administrative Agent written notice setting forth with respect to
                such Person
                the date on which such Person became a Restricted Subsidiary of the
                Borrower,
                and supplement the data required to be set forth in the Schedules
                to this
                Agreement as a result of the acquisition or creation of such Restricted
                Subsidiary; provided that such supplemental data must be reasonably
                acceptable
                to the Administrative Agent and Required Lenders.

               

              Section
                6.14. Pledged
                Equity Interests.
                On
                the
                date hereof and at the time hereafter that any Restricted Subsidiary
                of the
                Borrower is created or acquired or any Unrestricted Subsidiary becomes
                a
                Restricted Subsidiary, the Borrower and the Subsidiaries (as applicable)
                shall
                execute and deliver to the Administrative Agent for the benefit of
                the Secured
                Parties, a Pledge Agreement, in form and substance reasonably acceptable
                to the
                Administrative Agent, from the Borrower and/or the Subsidiaries (as
                applicable)
                covering all Equity Interests owned by the Borrower or such Restricted
                Subsidiaries in such Restricted Subsidiaries, together with all certificates
                (or
                other evidence reasonably acceptable to Administrative Agent) evidencing
                the
                issued and outstanding Equity Interests of each such Restricted Subsidiary
                of
                every class owned by such Credit Party (as applicable) which, if
                certificated,
                shall be duly endorsed or accompanied by stock powers executed in
                blank (as
                applicable), as Administrative Agent shall reasonably deem necessary
                or
                appropriate to grant, evidence and perfect a first priority security
                interest in
                the issued and outstanding Equity Interests owned by Borrower or
                any Restricted
                Subsidiary in each Restricted Subsidiary.

              

              Section
                6.15. Production
                Proceeds and Bank Accounts.
                Except
                as otherwise provided in Section
                4.18,
                Subject
                to the terms and conditions of the Mortgages, each Credit Party shall
                cause

               

              
                
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                  Index

                

              

              

                all
                  production proceeds and revenues attributable to the Oil and Gas
                  Interests of
                  such Credit Party to be paid and deposited into deposit accounts
                  of such Credit
                  Party maintained with the Administrative Agent or with other financial
                  institutions acceptable to the Administrative Agent and cause all
                  such deposit
                  accounts at such other financial institutions to be subject to
                  a control
                  agreement in favor of the Administrative Agent for the benefit
                  of the Secured
                  Parties, in form and substance reasonably satisfactory to the Administrative
                  Agent (each, an “Eligible
                  Account”).

                 

                Section
                  6.16. Existing
                  Swap Agreements.
                  With
                  respect to each Swap Agreement in effect on the Effective Date
                  and secured by
                  the assets and properties that secure the Existing Revolving Facility,
                  the
                  Borrower shall, on or before June 2, 2006, either (a) terminate
                  such Swap
                  Agreement and pay in full any and all Indebtedness and liabilities
                  arising from
                  such termination or (b) novate such Swap Agreement on terms and
                  conditions
                  reasonably satisfactory to the Administrative Agent.

                 

                Article
                  VII

                

                Negative
                  Covenants

                

                Until
                  the
                  Aggregate Commitment has expired or terminated and the principal
                  of and interest
                  on each Loan and all fees payable hereunder have been paid in full
                  and all
                  Letters of Credit have expired or terminated and all LC Disbursements
                  shall have
                  been reimbursed, each Credit Party covenants and agrees with the
                  Lenders
                  that:

                 

                Section
                  7.01. Indebtedness.
                  The
                  Borrower will not, nor will it permit any of its Restricted Subsidiaries
                  to,
                  create, incur, assume or permit to exist any Indebtedness, except:

                

                (a) the
                  Obligations;

                 

                (b) Indebtedness
                  existing on the date hereof and set forth in Schedule 7.01 and extensions,
                  renewals and replacements of any such Indebtedness that do not
                  increase the
                  outstanding principal amount thereof;

                 

                (c) Indebtedness
                  of the Borrower to any Guarantor and of any Guarantor to the Borrower
                  or any
                  other Guarantor; provided
                  that (i)
                  all such Indebtedness shall be unsecured and subordinated in right
                  of payment to
                  the payment in full of all of the Obligations in a manner and on
                  terms and
                  conditions reasonably satisfactory to the Administrative Agent
                  and (ii) all such
                  Indebtedness is evidenced by promissory notes in form and substance
                  reasonably
                  satisfactory to the Administrative Agent, and such promissory notes
                  are subject
                  to a first priority security interest in favor of the Administrative
                  Agent for
                  the benefit of the Secured Parties on terms and conditions reasonably
                  satisfactory to the Administrative Agent;

                

                (d) Guarantees
                  by any Credit Party of the Indebtedness of any other Credit Party;

                

                (e) Indebtedness
                  of the Borrower and the Restricted Subsidiaries incurred to finance
                  the
                  acquisition, construction or improvement of any fixed or capital
                  assets,
                  including Capital Lease Obligations, and any Indebtedness assumed
                  in connection
                  with 

                 

                
                  
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                    Index

                  

                

                

                  the
                    acquisition of any such assets or secured by a Lien on any such
                    assets prior to
                    the acquisition thereof, and extensions, renewals and replacements
                    of any such
                    Indebtedness that do not increase the outstanding principal amount
                    thereof;
provided
                    that (i)
                    such Indebtedness is incurred prior to or within 180 days after
                    such acquisition
                    or the completion of such construction or improvement and (ii)
                    the aggregate
                    principal amount of Indebtedness permitted by this Section
                    7.01(e)
                    together
                    with the aggregate principal amount of Indebtedness permitted
                    under Section
                    7.01(f)
                    and
Section
                    7.01(k)
                    does not
                    exceed $5,000,000 at any time outstanding;

                   

                  (f) Indebtedness
                    arising under any performance bond, or letter of credit obtained
                    for similar
                    purposes or any reimbursement obligations in respect thereof,
                    entered into in
                    the ordinary course of business;

                  

                  (g) Indebtedness
                    under Swap Agreements to the extent permitted under Section
                    7.06;

                   

                  (h) subject
                    to any adjustment to the Borrowing Base and Conforming Borrowing
                    Base required
                    under Section
                    3.05,
                    Indebtedness under the Second Lien Facility, including Guarantees
                    thereof by the
                    Restricted Subsidiaries, in an aggregate principal amount not
                    to exceed
                    $175,000,000 at any time outstanding;

                   

                  (i) Indebtedness
                    consisting of Non-Recourse Debt in an aggregate principal amount
                    not to exceed
                    $25,000,000 at any time outstanding; provided
                    that no
                    Credit Party shall incur any Non-Recourse Debt after the Effective
                    Date without
                    the Required Lenders’ prior written consent to the relevant documentation
                    establishing or evidencing the non-recourse nature and amount
                    of such
                    Non-Recourse Debt, which consent shall not be unreasonably withheld;

                   

                  (j) Indebtedness
                    of any Person that becomes a Restricted Subsidiary after the
                    date hereof;
provided
                    that (i)
                    such Indebtedness exists at the time such Person becomes a Restricted
                    Subsidiary
                    and is not created in contemplation of or in connection with
                    such Person
                    becoming a Restricted Subsidiary and (ii) the aggregate principal
                    amount of
                    Indebtedness permitted by this Section
                    7.01(j)
                    together
                    with the aggregate principal amount of the Indebtedness permitted
                    under
Section
                    7.01(e)
                    and
Section
                    7.01(k)
                    does not
                    exceed $5,000,000 at any time outstanding; and

                   

                  (k) other
                    unsecured Indebtedness of the Credit Parties in an aggregate
                    principal amount
                    that together with the aggregate principal amount of the Indebtedness
                    permitted
                    under Section
                    7.01(e)
                    and
Section
                    7.01(j)
                    do not
                    exceed $5,000,000.

                   

                  Section
                    7.02. Liens.
                    The
                    Borrower will not, nor will it permit any of its Restricted Subsidiaries
                    to,
                    create, incur, assume or permit to exist any Lien on any property
                    or asset now
                    owned or hereafter acquired by it, or assign or sell any income
                    or revenues
                    (including accounts receivable) or rights in respect of any thereof,
                    except:

                  

                  (a) any
                    Lien
                    created pursuant to this Agreement or the Security Instruments;

                  

                  (b) Permitted
                    Encumbrances; 

                  

                  
                    
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    (c) any
      Lien
      on any property or asset of the Borrower or any Restricted Subsidiary existing
      on the date hereof and set forth in Schedule 7.02; provided
      that (i)
      such Lien shall not apply to any other property or asset of the Borrower or
      any
      other Restricted Subsidiary and (ii) such Lien shall secure only those
      obligations which it secures on the date hereof and extensions, renewals and
      replacements thereof that do not increase the outstanding principal amount
      thereof;

    

    (d) any
      Lien
      existing on any property or asset (together with any receivables, intangibles
      and proceeds related thereto) in prior to the acquisition thereof by the
      Borrower or any Restricted Subsidiary or existing on any property or asset
      of
      any Person that becomes a Restricted Subsidiary after the date hereof prior
      to
      the time such Person becomes a Restricted Subsidiary; provided
      that
      (i) such Lien is not created in contemplation of or in connection with such
      acquisition or such Person becoming a Restricted Subsidiary, as the case may
      be,
      (ii) such Lien shall not apply to any other property or assets of the
      Borrower or any other Restricted Subsidiary or to any of the Mortgaged
      Properties and (iii) such Lien shall secure only those obligations or
      Indebtedness which it secures on the date of such acquisition or the date such
      Person becomes a Restricted Subsidiary, as the case may be, and extensions,
      renewals and replacements thereof that do not increase the outstanding principal
      amount thereof and such obligations or Indebtedness is permitted under this
      Agreement; 

    

    (e) Liens
      on
      fixed or capital assets (together with any receivables, intangibles and proceeds
      related thereto) acquired, constructed or improved by the Borrower or any
      Restricted Subsidiary; provided
      that
      (i) such Liens, secure Indebtedness permitted under this Agreement,
      (ii) such Liens and the Indebtedness secured thereby are incurred prior to
      or within 180 days after such acquisition or the completion of such
      construction or improvement, (iii) the Indebtedness secured thereby does
      not exceed the cost of acquiring, constructing or improving such fixed or
      capital assets and (iv) such security interests shall not apply to any
      other property or assets of the Borrower or any other Restricted Subsidiaries
      or
      to any of the Mortgaged Properties;

    

    (f) subject
      to the Intercreditor Agreement, Liens securing the Second Lien Obligations;
      provided
      that
      such Liens shall not encumber any property or asset that is not subject to
      a
      lien of the appropriate priority in favor of or for the benefit of the Secured
      Parties to secure the Obligations;

    

    (g) Liens
      securing the obligations and liabilities of the Borrower or any Restricted
      Subsidiary under Swap Agreements to the extent permitted under, and subject
      to
      the limitations set forth in, Section
      7.06;
      and

    

    (h) Liens
      granted prior to the Effective Date to secure Non-Recourse Debt, outstanding
      as
      of the Effective Date, or Liens granted after the date of this Agreement to
      secure Non-Recourse Debt permitted under Section
      7.01(i).

     

    Section
      7.03. Fundamental
      Changes.
      The
      Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
      engage to any material extent in any business other than businesses of the
      type
      conducted by the Borrower and its Restricted Subsidiaries on the date of
      execution of 

     

    
      
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      this
        Agreement and after giving effect to the Transactions and businesses reasonably
        related thereto. The Borrower will not, nor will it permit any of its Restricted
        Subsidiaries to, merge, dissolve, liquidate, consolidate with or into another
        Person, or Dispose of (whether in one transaction or in a series of
        transactions) all or substantially all of its assets (whether now owned or
        hereafter acquired) to or in favor of any Person, except that, so long as
        no
        Default exists or would result therefrom:

      

      (a) the
        Borrower may merge or consolidate with any other Person; provided
        that the
        continuing or surviving person is the Borrower;

      

      (b) any
        Restricted Subsidiary may merge or consolidate with (i) the Borrower;
provided
        that the
        Borrower shall be the continuing or surviving Person, or (ii) any other Person;
        provided
        that the
        continuing or surviving Person is a Restricted Subsidiary;

      

      (c) any
        Restricted Subsidiary may Dispose of all or substantially all of its assets
        (upon voluntary liquidation or otherwise) to the Borrower or to another
        Restricted Subsidiary; and

      

      (d) any
        Restricted Subsidiary may participate in a merger or consolidation as part
        of a
        Disposition of such Restricted Subsidiary that is permitted under Section
        7.04.

       

      Section
        7.04. Dispositions.
        The
        Borrower will not, nor will it permit any of its Restricted Subsidiaries
        to,
        make any Disposition, except:

      

      (a) Dispositions
        permitted by Section
        7.03;

      

      (b) Dispositions
        made between Scheduled Redeterminations of the Borrowing Base having an
        Engineered Value not exceeding, in the aggregate for the Borrower and its
        Restricted Subsidiaries taken as a whole, 5% of the Borrowing Base most recently
        determined;

       

      (c) subject
        to the prior written consent of the Required Lenders, any other Disposition
        of
        Borrowing Base Properties, provided that no such consent is required if (i)
        the
        Borrower delivers prior written notice of such Disposition to the Administrative
        Agent at least 30 days prior to the date of such Disposition specifying the
        Borrowing Base Properties to be included in such Disposition, the proposed
        closing date for such Disposition and the consideration to be received by
        the
        Borrower and any Guarantors, as the case may be, as a result of such
        Disposition, and (ii) the Credit Parties prepay the Borrowings pursuant to
        Section
        2.10(b)
        in an
        amount sufficient to eliminate any Borrowing Base Deficiency as determined
        by
        the Required Lenders after the receipt of such notice by the Administrative
        Agent and in such Lenders’ complete and sole discretion using such
        methodologies, assumptions and discount rates as such Lenders customarily
        use in
        assigning collateral value to Oil and Gas Interests
        as of
        such date of determination;

      

      (d) Dispositions
        consisting of assignments of customary overrides, royalties, working interests
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        interests
          relate, and similar ordinary course transactions;

        

        (e) Permitted
          Dispositions;

        

        (f) the
          Disposition of Oil and Gas Interests and other properties described on
          Schedule
          7.04; and

        

        (g) Dispositions
          of any assets not constituting Borrowing Base Properties or the proceeds
          thereof;

        

        provided,
          however,
          that
          any Disposition pursuant to clauses (b) through (f) shall be for fair
          market.

         

        Section
          7.05. Investments,
          Loans, Advances, Guarantees and Acquisitions.
          The
          Borrower will not, nor will it permit any of its Restricted Subsidiaries
          to,
          purchase, hold or acquire (including pursuant to any merger with any Person
          that
          was not a wholly owned Restricted Subsidiary prior to such merger) any
          Equity
          Interests, evidences of Indebtedness or other securities (including any
          option,
          warrant or other right to acquire any of the foregoing) of, make or permit
          to
          exist any loans or advances to, Guarantee any Indebtedness of, or make
          or permit
          to exist any investment or any other interest in, any other Person, or
          purchase
          or otherwise acquire (in one transaction or a series of transactions) any
          assets
          of any other Person constituting a business unit, except:

        

        (a) Permitted
          Investments;

        

        (b) investments
          by the Borrower in the Equity Interests of any Restricted Subsidiary;
provided
          that
          none of the proceeds of any such investment are used to make an investment
          in
          Pinnacle or any Person other than a Restricted Subsidiary;

        

        (c) investments
          by the Borrower or any Guarantor consisting of intercompany Indebtedness
          permitted under Section
          7.01(c)
          provided
          that none of the proceeds of any such investment are used to make an investment
          in Pinnacle or any Person other than a Restricted Subsidiary;

        

        (d) Guarantees
          constituting Indebtedness permitted by Section
          7.01;

        

        (e) investments
          consisting of Swap Agreements to the extent permitted under Section
          7.06;
          and

        

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

        

        (g) trade
          credits and accounts arising in the ordinary course of business;

        

        (h) investments
          made as a result of the receipt of non-cash considerations from a Disposition
          that was made pursuant to and in compliance with this Agreement;

        

        
          
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    (i) investments
      made in any debtor of the Borrower as a result of the receipt of stock,
      obligations or securities in settlement of debts created in the ordinary course
      of business and owing to the Borrower or any Restricted Subsidiary;

     

    (j) investments
      made pursuant to the requirements of farm-out, farm-in, joint operating, joint
      venture or area of mutual interest agreements, gathering systems, pipelines
      or
      other similar or customary arrangements entered into the ordinary course of
      business (including advances to operators under operating agreements entered
      into by the Borrower in the ordinary course of business); provided that any
      such
      single investment in excess of $1,000,000 shall be approved by the Board of
      Directors of the Borrower. 

    

    (k) investments
      made in connection with the purchase, lease, or other acquisition of tangible
      assets of any Person and investments made in connection with the purchase,
      lease
      or other acquisition of all or substantially all of the business, of any Person,
      or all of the capital stock or other equity interests of any Person, or any
      division, line of business or business unit of any Person (including (i) by
      the
      merger or consolidation of such Person into the Borrower or any Restricted
      Subsidiary or by the merger of a Restricted Subsidiary into such Person and
      (ii)
      the purchase of proved reserves); provided that any newly acquired Subsidiary
      shall promptly comply with the requirements of Section
      6.13;

     

    (l) investments
      in Pinnacle existing as of the Effective Date; and

     

    (m) any
      other
      investments in any Person having an aggregate fair market value (measured on
      the
      date each such investment was made and without giving effect to subsequent
      changes in value), when taken together will all other investments made pursuant
      to this clause (m) do not exceed $2,000,000.

    

    Section
      7.06. Swap
      Agreements.
      The
      Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
      enter into or maintain any Swap Agreement, except the Swap Agreements required
      under Section
      6.11
      and Swap
      Agreements entered into in the ordinary course of business and not for
      speculative purposes to (a) hedge or mitigate Crude Oil and Natural Gas price
      risks to which the Borrower or any Restricted Subsidiary has actual exposure,
      and (b) effectively cap, collar or exchange interest rates (from fixed to
      floating rates, from one floating rate to another floating rate or otherwise)
      with respect to any interest-bearing liability or investment of any Credit
      Party; provided
      that
      with respect to the preceding clause (a), (i) to the extent any such Swap
      Agreements require any Credit Party to deliver money, assets or other security,
      including letters of credit, against any event of nonperformance prior to actual
      default by such Credit Party in the performance of its obligations thereunder
      (excluding any such Swap Agreement with any Lender Counterparty that only
      requires the delivery of the money, assets or other security required pursuant
      to the Loan Documents), the aggregate value of all money, assets or other
      security, including the amount drawn or which could be drawn under any such
      letters of credit, delivered by the Credit Parties, taken as a whole, shall
      not
      exceed $10,000,000 in the aggregate at any time, and the term of any transaction
      entered into after the Effective Date under any such Swap Agreements requiring
      such delivery of money, assets or other security shall not exceed twelve (12)
      months, (ii) such Swap Agreements (at the time each transaction under such
      Swap
      Agreement is entered into) would not cause the aggregate notional amount of
      Crude 

     

    
      
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      Oil
        and
        Natural Gas under all Swap Agreements then in effect (including the Swap
        Agreements required under Section
        6.11)
        to
        exceed (x) eighty-five percent (85%) of the “forecasted production from proved
        producing reserves” (as defined below) of the Borrower and the Restricted
        Subsidiaries for the first two years of the forthcoming four year period
        or (y)
        fifty percent (50%) of the “forecasted production from proved producing
        reserves” of the Borrower and the Restricted Subsidiaries for the last two years
        of the forthcoming four year period, and (iii) the maximum duration of any
        transaction under such Swap Agreements does not exceed 48 months. As used
        in
        this clause, “forecasted production from proved producing reserves” means the
        forecasted production of Crude Oil and Natural Gas as reflected in the most
        recent Reserve Report delivered to the Administrative Agent pursuant to
Section
        6.01,
        after
        giving effect to any pro forma adjustments for the consummation of any
        Acquisitions or Dispositions of Oil and Gas Interests and production from
        new
        wells completed since the effective date of such Reserve Report. Once the
        Borrower or any Restricted Subsidiaries enters into a Swap Agreement or any
        hedge transaction pursuant to any Swap Agreement, the terms and conditions
        of
        such Swap Agreement and such hedge transaction may not be amended or modified,
        nor may such Swap Agreement or hedge transaction be cancelled without the
        prior
        written consent of Required Lenders.

       

      Section
        7.07. Restricted
        Payments.
        The
        Borrower will not, nor will it permit any of its Restricted Subsidiaries
        to,
        declare or make, or agree to pay or make, directly or indirectly, any Restricted
        Payment, except that (a) the Borrower may declare and pay dividends with
        respect
        to its Equity Interests payable solely in additional shares of its common
        stock,
        (b) any Restricted Subsidiary may make Restricted Payments to the Borrower
        or
        any Guarantor, (c) the Borrower may make cash payments in lieu of issuing
        fractional shares in an aggregate amount not exceeding $200,000 during the
        term
        of this Agreement, and (d) the Borrower may declare and pay distributions
        effecting “poison pill” rights plans provided that any securities or rights so
        distributed have a nominal fair market value at the time of
        declaration.

       

      Section
        7.08. Transactions
        with Affiliates.
        The
        Borrower will not, nor will it permit any of its Restricted Subsidiaries
        to,
        sell, lease or otherwise transfer any property or assets to, or purchase,
        lease
        or otherwise acquire any property or assets from, or otherwise engage in
        any
        other transactions with, any of its Affiliates, except (a) in the ordinary
        course of business at prices and on terms and conditions not less favorable
        to
        the Borrower or such Restricted Subsidiary than could be obtained on an
        arm’s-length basis from unrelated third parties, (b) transactions between or
        among the Borrower and its Restricted Subsidiaries not involving any other
        Affiliate, (c) transactions described on Schedule 7.08, (d) any Restricted
        Payment permitted by Section
        7.07,
        (e)
        investments permitted under Section
        7.05,
        (f)
        with respect to any Person serving as an officer, director, employee or
        consultant of the Borrower or any Restricted Subsidiary, (i) the payment
        of
        reasonable compensation, benefits or indemnification liabilities in connection
        with his or her services in such capacity provided that the payment of any
        such
        compensation, benefits or indemnification liabilities are approved by a majority
        of the disinterested members of the Board of Directors of the Borrower or
        by the
        Compensation Committee of the Borrower, (iii) the making of advances for
        travel
        or other business expenses in the ordinary course of business or (iii) such
        Person’s participation in any benefit or compensation plan; and (g) the
        repayment of Indebtedness permitted under Section
        7.01(c).

      

      
        
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    Section
      7.09. Restrictive
      Agreements.
      The
      Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
      directly or indirectly, enter into, incur or permit to exist any agreement
      or
      other arrangement that prohibits, restricts or imposes any condition upon (a)
      the ability of the Borrower or any Restricted Subsidiary to create, incur or
      permit to exist any Lien upon any of its property or assets (other than (1)
      Equity Interests in any Unrestricted Subsidiary, (2) other investments in Equity
      Interests of joint ventures permitted under Section
      7.05(m),
      (3)
      investments permitted under Section
      7.05(j)
      if such
      restriction or conditions apply only to the property or assets that are the
      subject of such investment and (4) unless the value of such Equity Interests
      are
      included in the determination of the Borrowing Base, the investments permitted
      under Section
      7.05(l)),
      or (b)
      the ability of any Restricted Subsidiary to pay dividends or other distributions
      with respect to any of its Equity Interests or to make or repay loans or
      advances to the Borrower or any Restricted Subsidiary or to Guarantee
      Indebtedness of the Borrower or any Restricted Subsidiary; provided
      that (i)
      the foregoing shall not apply to restrictions and conditions imposed by law
      or
      by this Agreement, (ii) the foregoing shall not apply to restrictions and
      conditions set forth in the Second Lien Facility Documents, (iii) the foregoing
      shall not apply to restrictions and conditions existing on the date hereof
      identified on Schedule 7.09 (but shall apply to any extension or renewal of,
      or
      any amendment or modification expanding the scope of, any such restriction
      or
      condition), (iv) clause (a) of the foregoing shall not apply to restrictions
      or
      conditions imposed by any agreement relating to secured Indebtedness permitted
      by this Agreement (other than the Second Lien Facility) if such restrictions
      or
      conditions apply only to the property or assets securing such Indebtedness,
      (v)
      clause (a) of the foregoing shall not apply to customary provisions in leases
      and other contracts restricting the assignment thereof (other than oil, gas
      and
      mineral leases constituting Mortgaged Properties), (vi) existing
      restrictions with respect to a Person acquired by the Borrower or any of its
      Restricted Subsidiaries (except to the extent such restrictions were put in
      place in connection with or in contemplation of such acquisition), which
      restrictions are not applicable to any Person, or the properties or assets
      of
      any Person, other than the Person, or the property or assets of the Person,
      so
      acquired; and (vii) any restriction with respect to Equity Interests of a
      Restricted Subsidiary imposed pursuant to an agreement entered into for the
      sale
      or disposition of such Equity Interests or any restriction with respect to
      the
      assets of a Credit Party imposed pursuant to an agreement entered into for
      the
      sale or disposition of such assets or all or substantially all the Equity
      Interests of such Restricted Subsidiary pending the closing of such sale or
      disposition.

     

    Section
      7.10. Disqualified
      Stock.
      The
      Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
      issue any Disqualified Stock.

     

    Section
      7.11. Amendments
      to Organizational Documents and Fiscal Year.
      The
      Borrower will not, nor will it permit any of its Restricted Subsidiaries to,
      enter into or permit any modification or amendment of, or waive any material
      right or obligation of any Restricted Subsidiary under the Organizational
      Documents of any Restricted Subsidiary that would materially and adversely
      affect the voting rights or relative priority of any Equity Interests of any
      Restricted Subsidiary. The Borrower will not, nor will it permit any of its
      Restricted Subsidiaries to, change its fiscal year.

     

    Section
      7.12. Financial
      Covenants.

    

    
      
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    (a) Consolidated
      Current Ratio.
      The
      Borrower will not permit the Consolidated Current Ratio to be less than 1.00
      to
      1.00 at any time.

     

    (b) Leverage
      Ratio.

    

    (i) The
      Borrower will not permit the ratio, determined as of the end of the fiscal
      quarter ending June 30, 2006, of (A) Total Net Debt as of the end of such fiscal
      quarter, to (B) Consolidated EBITDAX for the trailing four fiscal quarter period
      ending on such date, to be greater than 3.50 to 1.0.

    

    (ii) The
      Borrower will not permit the ratio, determined as of the end of any fiscal
      quarter ending on or after September 30, 2006, of (A) Total Net Debt as of
      the
      end of such fiscal quarter to (B) Consolidated EBITDAX for the trailing four
      fiscal quarter period ending on such date, to be greater than 3.25 to
      1.00.

    

    For
      purposes of determining the Borrower’s compliance with this Section
      7.12(b),
      Consolidated EBITDAX shall not include the net revenue attributable to any
      assets that are subject to a Lien granted to secure the Non-Recourse
      Debt.

     

    Section
      7.13. Sale
      and Leaseback Transactions and other Off-Balance Sheet
      Liabilities.
      The
      Borrower will not, nor will it permit any Restricted Subsidiary to, enter into
      or suffer to exist any (i) Sale and Leaseback Transaction or (ii) any other
      transaction pursuant to which it incurs or has incurred Off-Balance Sheet
      Liabilities, except for Swap Agreements permitted under the terms of
Section
      7.06
      and
      Advance Payment Contracts; provided,
      that
      the
      aggregate amount of all Advance Payments received by any Credit Party that
      have
      not been satisfied by delivery of production at any time does not exceed, in
      the
      aggregate $1,000,000.

     

    Section
      7.14. Second
      Lien Facility Restrictions.
      The
      Borrower will not, nor will it permit any Restricted Subsidiary to, (a) except
      for the regularly scheduled payments of principal and interest required under
      the Second Lien Facility Documents, directly or indirectly, retire, redeem,
      defease, repurchase or prepay prior to the scheduled due date thereof any part
      of the principal of, or interest on, the Second Lien Loans, or (b) except as
      otherwise permitted under the Intercreditor Agreement, enter into or permit
      any
      supplement, modification or amendment of, or waive any right or obligation
      of
      any Person under, any Second Lien Document.

     

    Article
      VIII

    

    Guarantee
      of Obligations

    

    Section
      8.01. Guarantee
      of Payment.
      Each
      Guarantor unconditionally and irrevocably guarantees to the Administrative
      Agent
      for the benefit of the Lenders and the Lender Counterparties, the punctual
      payment of all Obligations now or which may in the future be owing by the
      Borrower under the Loan Documents and all Obligations which may now or which
      may
      in the future be owing by the Borrower or any other Guarantor to any Lender
      Counterparty under any Swap Agreement (the “Guaranteed
      Liabilities”).
      This
      Guarantee is a guaranty of payment and not of collection only. The
      Administrative Agent shall not be required to exhaust any right or remedy or
      take any action against the Borrower or any other Person or any collateral.
      The
      Guaranteed Liabilities include interest accruing after the commencement of
      a
      proceeding 

     

    
      
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      under
        bankruptcy, insolvency or similar laws of any jurisdiction at the rate or
        rates
        provided in the Loan Documents, or the Swap Agreements between any Credit
        Party
        and any Lender Counterparty, as the case may be, regardless of whether such
        interest is an allowed claim. Each Guarantor agrees that, as between the
        Guarantor and the Administrative Agent, the Guaranteed Liabilities may be
        declared to be due and payable for the purposes of this Guarantee
        notwithstanding any stay, injunction or other prohibition which may prevent,
        delay or vitiate any declaration as regards the Borrower or any other Guarantor
        and that in the event of a declaration or attempted declaration, the Guaranteed
        Liabilities shall immediately become due and payable by each Guarantor for
        the
        purposes of this Guarantee.

       

      Section
        8.02. Guarantee
        Absolute.
        Each
        Guarantor guarantees that the Guaranteed Liabilities shall be paid strictly
        in
        accordance with the terms of this Agreement and the Swap Agreements to which
        any
        Lender Counterparty is a party. The liability of each Guarantor hereunder
        is
        absolute and unconditional irrespective of: (a) any change in the time, manner
        or place of payment of, or in any other term of, all or any of the Loan
        Documents or the Guaranteed Liabilities, or any other amendment or waiver
        of or
        any consent to departure from any of the terms of any Loan Document or
        Guaranteed Liability, including any increase or decrease in the rate of interest
        thereon; (b) any release or amendment or waiver of, or consent to departure
        from, any other guaranty or support document, or any exchange, release or
        non-perfection of any collateral, for all or any of the Loan Documents or
        Guaranteed Liabilities; (c) any present or future law, regulation or order
        of
        any jurisdiction (whether of right or in fact) or of any agency thereof
        purporting to reduce, amend, restructure or otherwise affect any term of
        any
        Loan Document or Guaranteed Liability; (d) without being limited by the
        foregoing, any lack of validity or enforceability of any Loan Document or
        Guaranteed Liability; and (e) any other setoff, defense or counterclaim
        whatsoever (in any case, whether based on contract, tort or any other theory)
        with respect to the Loan Documents or the transactions contemplated thereby
        which might constitute a legal or equitable defense available to, or discharge
        of, the Borrower or a Guarantor.

       

      Section
        8.03. Guarantee
        Irrevocable.
        This
        Guarantee is a continuing guaranty of the payment of all Guaranteed Liabilities
        now or hereafter existing under this Agreement and such Swap Agreements to
        which
        any Lender Counterparty is a party and shall remain in full force and effect
        until payment in full of all Guaranteed Liabilities and other amounts payable
        hereunder and until this Agreement and the Swap Agreements are no longer
        in
        effect or, if earlier, when the Guarantor has given the Administrative Agent
        written notice that this Guarantee has been revoked; provided
        that any
        notice under this Section shall not release the revoking Guarantor from any
        Guaranteed Liability, absolute or contingent, existing prior to the
        Administrative Agent’s actual receipt of the notice at its branches or
        departments responsible for this Agreement and such Swap Agreements and
        reasonable opportunity to act upon such notice.

       

      Section
        8.04. Reinstatement.
        This
        Guarantee shall continue to be effective or be reinstated, as the case may
        be,
        if at any time any payment of any of the Guaranteed Liabilities is rescinded
        or
        must otherwise be returned by the Administrative Agent, any Lender or any
        Lender
        Counterparty on the insolvency, bankruptcy or reorganization of the Borrower,
        or
        any other Credit Party, or otherwise, all as though the payment had not been
        made.

      

      
        
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    Section
      8.05. Subrogation.
      No
      Guarantor shall exercise any rights which it may acquire by way of subrogation,
      by any payment made under this Guarantee or otherwise, until all the Guaranteed
      Liabilities have been paid in full and this Agreement and the Swap Agreements
      to
      which any Lender Counterparty is a party are no longer in effect. If any amount
      is paid to the Guarantor on account of subrogation rights under this Guarantee
      at any time when all the Guaranteed Liabilities have not been paid in full,
      the
      amount shall be held in trust for the benefit of the Lenders and the Lender
      Counterparties and shall be promptly paid to the Administrative Agent to be
      credited and applied to the Guaranteed Liabilities, whether matured or unmatured
      or absolute or contingent, in accordance with the terms of this Agreement and
      such Swap Agreements. If any Guarantor makes payment to the Administrative
      Agent, Lenders, or any Lender Counterparties of all or any part of the
      Guaranteed Liabilities and all the Guaranteed Liabilities are paid in full
      and
      this Agreement and such Swap Agreements are no longer in effect, the
      Administrative Agent, Lenders and Lender Counterparties shall, at such
      Guarantor’s request, execute and deliver to such Guarantor appropriate
      documents, without recourse and without representation or warranty, necessary
      to
      evidence the transfer by subrogation to such Guarantor of an interest in the
      Guaranteed Liabilities resulting from the payment.

     

    Section
      8.06. Subordination.
      Without
      limiting the rights of the Administrative Agent, the Lenders and the Lender
      Counterparties under any other agreement, any liabilities owed by the Borrower
      to any Guarantor in connection with any extension of credit or financial
      accommodation by any Guarantor to or for the account of the Borrower, including
      but not limited to interest accruing at the agreed contract rate after the
      commencement of a bankruptcy or similar proceeding, are hereby subordinated
      to
      the Guaranteed Liabilities, and such liabilities of the Borrower to such
      Guarantor, if the Administrative Agent so requests, shall be collected, enforced
      and received by any Guarantor as trustee for the Administrative Agent and shall
      be paid over to the Administrative Agent on account of the Guaranteed
      Liabilities but without reducing or affecting in any manner the liability of
      the
      Guarantor under the other provisions of this Guarantee.

    

    Section
      8.07. Payments
      Generally.
      All
      payments by the Guarantors shall be made in the manner, at the place and in
      the
      currency (the “Payment
      Currency”)
      required by the Loan Documents and the Swap Agreement to which any Lender
      Counterparty is a party, as the case may be; provided,
      however,
      that
      (if the Payment Currency is other than Dollars) any Guarantor may, at its option
      (or, if for any reason whatsoever any Guarantor is unable to effect payments
      in
      the foregoing manner, such Guarantor shall be obligated to) pay to the
      Administrative Agent at its principal office the equivalent amount in Dollars
      computed at the selling rate of the Administrative Agent or a selling rate
      chosen by the Administrative Agent, most recently in effect on or prior to
      the
      date the Guaranteed Liability becomes due, for cable transfers of the Payment
      Currency to the place where the Guaranteed Liability is payable. In any case
      in
      which any Guarantor makes or is obligated to make payment in Dollars, the
      Guarantor shall hold the Administrative Agent, the Lenders and the Lender
      Counterparties harmless from any loss incurred by the Administrative Agent,
      any
      Lender or any Lender Counterparty arising from any change in the value of
      Dollars in relation to the Payment Currency between the date the Guaranteed
      Liability becomes due and the date the Administrative Agent, such Lender or
      such
      Lender Counterparty is actually able, following the conversion of the Dollars
      paid by such Guarantor into the Payment Currency and remittance of such Payment
      Currency to the place 

     

    
      
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      where
        such Guaranteed Liability is payable, to apply such Payment Currency to such
        Guaranteed Liability.

       

      Section
        8.08. Setoff.
        Each
        Guarantor agrees that, in addition to (and without limitation of) any right
        of
        setoff, banker’s lien or counterclaim the Administrative Agent, any Lender or
        any Lender Counterparty may otherwise have, the Administrative Agent, such
        Lender or such Lender Counterparty shall be entitled, at its option, to offset
        balances (general or special, time or demand, provisional or final) held
        by it
        for the account of any Guarantor at any office of the Administrative Agent,
        such
        Lender or such Lender Counterparty, in Dollars or in any other currency,
        against
        any amount payable by such Guarantor under this Guarantee which is not paid
        when
        due (regardless of whether such balances are then due to such Guarantor),
        in
        which case it shall promptly notify such Guarantor thereof; provided
        that the
        failure of the Administrative Agent, such Lender, or such Lender Counterparty
        to
        give such notice shall not affect the validity thereof.
        In
        addition to the foregoing, as collateral security for the repayment of such
        Guarantor’s obligations and liabilities under this Agreement, each 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 as in effect from time to time in any applicable
        jurisdiction) maintained with such Secured Party and all funds that such
        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 Obligations that are due and payable at such time (whether at
        maturity, by acceleration, after notice of prepayment or otherwise) subject
        to
        this Agreement.

       

      Section
        8.09. Formalities.
        Each
        Guarantor waives presentment, notice of dishonor, protest, notice of acceptance
        of this Guarantee or incurrence of any Guaranteed Liability and any other
        formality with respect to any of the Guaranteed Liabilities or this
        Guarantee.

       

      Section
        8.10. Limitations
        on Guarantee.
        The
        provisions of the Guarantee under this Article VIII are severable, and in
        any
        action or proceeding involving any state corporate law, or any state, federal
        or
        foreign bankruptcy, insolvency, reorganization or other law affecting the
        rights
        of creditors generally, if the obligation of any Guarantor under this Guarantee
        would otherwise be held or determined to be avoidable, invalid or unenforceable
        on account of the amount of such Guarantor’s liability under this Guarantee,
        then, notwithstanding any other provision of this Guarantee to the contrary,
        the
        amount of such liability shall, without any further action by the guarantors,
        the Administrative Agent, any Lender or an Lender Counterparty, be automatically
        limited and reduced to the highest amount that is valid and enforceable as
        determined in such action or proceeding (such highest amount determined
        hereunder being the relevant Guarantor’s “Maximum Liability”). This Section
        8.10
        with
        respect to the Maximum Liability of the Guarantors is intended solely to
        preserve the rights of the Administrative Agent, Lenders and Lender
        Counterparties hereunder to the maximum extent not subject to avoidance under
        applicable law, and no Guarantor nor any other Person shall have any right
        or
        claim under this Section
        8.10
        with
        respect to the Maximum Liability, except to the extent necessary so that
        none of
        the obligations of any Guarantor hereunder shall not be rendered voidable
        under
        applicable law.

       

      
        
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        Article
          IX

        

        Events
          of Default

        

        If
          any of
          the following events (“Events
          of Default”)
          shall
          occur:

        

        (a) the
          Borrower shall fail to pay any principal of any Loan or any reimbursement
          obligation in respect of any LC Disbursement when and as the same shall
          become
          due and payable, whether at the due date thereof or at a date fixed for
          prepayment thereof or otherwise; 

        

        (b) the
          Borrower shall fail to pay any interest on any Loan or any fee or any other
          amount (other than an amount referred to in clause (a) of this Article)
          payable under this Agreement, when and as the same shall become due and
          payable,
          and such failure shall continue unremedied for a period of five (5)
          days;

        

        (c) any
          representation or warranty made or deemed made by or on behalf of the Borrower
          or any Restricted Subsidiary in this Agreement or any other Loan Document,
          or in
          any report, certificate, financial statement or other document furnished
          hereunder or thereunder, shall prove to have been incorrect in any material
          respect when made or deemed made;

        

        (d) the
          Borrower or any Restricted Subsidiary shall fail to observe or perform
          any
          covenant, condition or agreement contained in (i) Section
          6.01, Section
          6.02,
          Section
          6.05
          (with
          respect to insurance),and such failure shall continue unremedied for a
          period of
          10 days after the occurrence thereof or (ii) Section
          6.03
          (with
          respect to the Borrower or any Restricted Subsidiary’s existence),Section
          6.08,
          or in
Article
          VII;

        

        (e) the
          Borrower or any Restricted Subsidiary shall fail to observe or perform
          any
          covenant, condition or agree-ment contained in (i) this Agreement (other
          than
          those specified in clause (a), (b) or (d) of this Article) and such failure
          shall continue unremedied for a period of 30 days after the occurrence
          thereof or (ii) any other Loan Document and such failure shall continue
          unremedied for a period of 20 days after the occurrence thereof;

        

        (f) the
          Borrower or any Restricted Subsidiary shall fail to make any payment
          (whether of principal or interest and regardless of amount) in respect
          of any
          Material Indebtedness, when and as the same shall become due and payable
          (or, if
          permitted by the terms of the relevant document, within any applicable
          grace
          period);

        

        (g) any
          event
          or condition occurs that results in any Material Indebtedness becoming
          due prior
          to its scheduled maturity or that enables or permits the holder or holders
          of
          any Material Indebtedness or any trustee or agent on its or their behalf
          to
          cause any Material Indebtedness to become due, or to require the prepayment,
          repurchase, redemption or defeasance thereof, prior to its scheduled maturity;
          provided
          that
          this clause (g) shall not apply to secured Indebtedness permitted under
Section
          7.01(e)
          that
          becomes due as a result of the voluntary sale or transfer of the property
          or
          assets securing such Indebtedness;

        

        
          
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    (h) an
      involuntary proceeding shall be commenced or an involuntary petition shall
      be
      filed seeking (i) liquidation, reorganization or other relief in respect of
      the Borrower or any Restricted Subsidiary or its debts, or of a substantial
      part
      of its assets, under any Federal, state or foreign bankruptcy, insolvency,
      receivership or similar law now or hereafter in effect or (ii) the
      appointment of a receiver, trustee, custodian, sequestrator, conservator or
      similar official for the Borrower or any Restricted Subsidiary or for a
      substantial part of its assets, and, in any such case, such proceeding or
      petition shall continue undismissed for 60 days or an order or decree
      approving or ordering any of the foregoing shall be entered;

    

    (i) the
      Borrower or any Restricted Subsidiary shall (i) voluntarily commence any
      proceeding or file any petition seeking liquidation, reorganization or other
      relief under any Federal, state or foreign bankruptcy, insolvency, receivership
      or similar law now or hereafter in effect, (ii) consent to the institution
      of, or fail to contest in a timely and appropriate manner, any proceeding or
      petition described in clause (h) of this Article, (iii) apply for or
      consent to the appointment of a receiver, trustee, custodian, sequestrator,
      conservator or similar official for the Borrower or any Restricted Subsidiary
      or
      for a substantial part of its assets, (iv) file an answer admitting the
      material allegations of a petition filed against it in any such proceeding,
      (v) make a general assignment for the benefit of creditors or
      (vi) take any action for the purpose of effecting any of the
      fore-going;

    

    (j) the
      Borrower or any Restricted Subsidiary shall become unable, admit in writing
      its
      inability or fail generally to pay its debts as they become due;

    

    (k) one
      or
      more judgments for the payment of money in an aggregate amount in excess of
      $5,000,000 (exclusive of amounts fully covered by valid and collectible
      insurance for which the issuer has not denied coverage) shall be rendered
      against the Borrower or any Restricted Subsidiary or any combination thereof
      and
      the same shall remain undischarged for a period of 30 consecutive days
      during which execution shall not be effectively stayed, or any action shall
      be
      legally taken by a judgment creditor to attach or levy upon any assets of the
      Borrower or any Restricted Subsidiary to enforce any such judgment;

    

    (l) an
      ERISA
      Event shall have occurred that, in the opinion of the Required Lenders, when
      taken together with all other ERISA Events that have occurred, could reasonably
      be expected to result in a Material Adverse Effect;

    

    (m) except
      in
      connection with a transaction period by Section
      7.03
      or
Section
      7.04,
      the
      delivery by any Guarantor to the Administrative Agent of written notice that
      its
      Guarantee under Article
      VIII
      has been
      revoked or any Guarantee of the Obligations is declared invalid or
      unenforceable; or

    

    (n) a
      Change
      in Control shall occur;

    

    then,
      and
      in every such event (other than an event with respect to the Borrower or any
      Restricted Subsidiary described in clause (h) or (i) of this Article), and
      at
      any time thereafter during the 

     

    
      
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      continuance
        of such event, the Administrative Agent may, and at the request of the Required
        Lenders shall, by notice to the Borrower, take either or both of the following
        actions, at the same or different times:  (i) terminate the
        Aggregate Commitment, and thereupon the Aggregate Commitment shall terminate
        immediately, and (ii) declare the Loans then outstanding to be due and
        payable in whole (or in part, in which case any principal not so declared
        to be
        due and payable may thereafter be declared to be due and payable), and thereupon
        the principal of the Loans so declared to be due and payable, together with
        accrued interest thereon and all fees and other obligations of the Borrower
        accrued hereunder, shall become due and payable immediately, without
        presentment, demand, protest or other notice of any kind, all of which are
        hereby waived by the Borrower; and in case of any event with respect to the
        Borrower described in clause (h) or (i) of this Article, the Aggregate
        Commitment shall automatically terminate and the principal of the Loans then
        outstanding, together with accrued interest thereon and all fees and other
        obligations of the Borrower accrued hereunder, shall automatically become
        due
        and payable, without present-ment, demand, protest or other notice of any
        kind,
        all of which are hereby waived by the Borrower.

       

      Article
        X

      

      The
        Administrative Agent

      

      Each
        of
        the Lenders and the Issuing Bank hereby irrevocably appoints the Administrative
        Agent as its agent and authorizes the Administrative Agent to take such actions
        on its behalf and to exercise such powers as are delegated to the Administrative
        Agent by the terms hereof, together with such actions and powers as are
        reasonably incidental thereto.

      

      The
        bank
        serving as the Administrative Agent hereunder shall have the same rights
        and
        powers in its capacity as a Lender as any other Lender and may exercise the
        same
        as though it were not the Administrative Agent, and such bank and its Affiliates
        may accept deposits from, lend money to and generally engage in any kind
        of
        business with any Credit Party or other Affiliate thereof as if it were not
        the
        Administrative Agent hereunder.

      

      The
        Administrative Agent shall not have any duties or obligations except those
        expressly set forth herein. Without limiting the generality of the foregoing,
        (a) the Administrative Agent shall not be subject to any fiduciary or other
        implied duties, regardless of whether a Default has occurred and is continuing,
        (b) the Administrative Agent shall not have any duty to take any
        discretionary action or exercise any discretionary powers, except discretionary
        rights and powers expressly contemplated hereby that the Administrative Agent
        is
        required to exercise in writing as directed by the Required Lenders (or such
        other number or percentage of the Lenders as shall be necessary under the
        circumstances as provided in Section
        11.02),
        and
        (c) except as expressly set forth herein, the Administrative Agent shall
        not
        have any duty to disclose, and shall not be liable for the failure to disclose,
        any information relating to any Credit Party that is communicated to or obtained
        by the bank serving as Administrative Agent or any of its Affiliates in any
        capacity. The Administrative Agent shall not be liable for any action taken
        or
        not taken by it with the consent or at the request of the Required Lenders
        (or
        such other number or percentage of the Lenders as shall be necessary under
        the
        circumstances as provided in Section
        11.02)
        or in
        the absence of its own gross negligence or willful misconduct. The
        Administrative Agent shall be deemed not to have knowledge of any Default
        unless
        and until 

       

      
        
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        written
          notice thereof is given to the Administrative Agent by the Borrower or
          a Lender,
          and the Administrative Agent shall not be responsible for or have any duty
          to
          ascertain or inquire into (i) any statement, warranty or representation
          made in or in connection with this Agreement, (ii) the contents of any
          certificate, report or other document delivered hereunder or in connection
          herewith, (iii) the performance or observance of any of the covenants,
          agreements or other terms or conditions set forth herein, (iv) the
          validity, enforceability, effectiveness or genuineness of this Agreement
          or any
          other agreement, instrument or document, or (v) the satisfaction of any
          condition set forth in Article
          V
          or
          elsewhere herein, other than to confirm receipt of items expressly required
          to
          be delivered to the Administrative Agent. 

        

        The
          Administrative Agent shall be entitled to rely upon, and shall not incur
          any
          liability for relying upon, any notice, request, certificate, consent,
          statement, instrument, document or other writing believed by it to be genuine
          and to have been signed or sent by the proper Person. The Administrative
          Agent
          also may rely upon any statement made to it orally or by telephone and
          believed
          by it to be made by the proper Person, and shall not incur any liability
          for
          relying thereon. The Administrative Agent may consult with legal counsel
          (who
          may be counsel for the Borrower), independent accountants and other experts
          selected by it, and shall not be liable for any action taken or not taken
          by it
          in accordance with the advice of any such counsel, accountants or
          experts.

        

        The
          Administrative Agent may perform any and all its duties and exercise its
          rights
          and powers by or through any one or more sub-agents appointed by the
          Administrative Agent. The Administrative Agent and any such sub-agent may
          perform any and all its duties and exercise its rights and powers through
          their
          respective Related Parties. The exculpatory provisions of the preceding
          paragraphs shall apply to any such sub-agent and to the Related Parties
          of the
          Administrative Agent and any such sub-agent, and shall apply to their respective
          activities in connection with the syndication of the credit facilities
          provided
          for herein as well as activities as Administrative Agent.

        

        Subject
          to the appointment and acceptance of a successor Administrative Agent as
          provided in this paragraph, the Administrative Agent may resign at any
          time by
          notifying the Lenders, the Issuing Bank and the Borrower. Upon any such
          resignation, the Required Lenders shall have the right, in consultation
          with the
          Borrower, to appoint a successor. If no successor shall have been so appointed
          by the Required Lenders and shall have accepted such appointment within
          30 days after the retiring Administrative Agent gives notice of its
          resignation, then the retiring Administrative Agent may, on behalf of the
          Lenders and the Issuing Bank, appoint a successor Administrative Agent
          which
          shall be a bank with an office in Chicago, Illinois or New York, New York,
          or an
          Affiliate of any such bank. Upon the acceptance of its appointment as
          Administrative Agent hereunder by a successor, such successor shall succeed
          to
          and become vested with all the rights, powers, privileges and duties of
          the
          retiring Administrative Agent, and the retiring Administrative Agent shall
          be
          discharged from its duties and obligations hereunder. The fees payable
          by the
          Borrower to a successor Administrative Agent shall be the same as those
          payable
          to its predecessor unless otherwise agreed between the Borrower and such
          successor. After the Administrative Agent’s resignation hereunder, the
          provisions of this Article and Section
          11.03
          shall
          continue in effect for the benefit of such retiring Administrative Agent,
          its
          sub-agents and their respective Related Parties in respect of any actions
          taken
          or omitted to be taken by any of them while it was acting as Administrative
          Agent.

         

        
          
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          Each
            Lender acknowledges that it has, independently and without reliance upon
            the
            Administrative Agent or any other Lender and based on such documents
            and
            information as it has deemed appropriate, made its own credit analysis
            and
            decision to enter into this Agreement. Each Lender also acknowledges
            that it
            will, independently and without reliance upon the Administrative Agent
            or any
            other Lender and based on such documents and information as it shall
            from time
            to time deem appropriate, continue to make its own decisions in taking
            or not
            taking action under or based upon this Agreement, any related agreement
            or any
            document furnished hereunder or thereunder.

           

          Article
            XI

          

          Miscellaneous

          Section
            11.01. Notices.

          

          (a) Except
            in
            the case of notices and other communications expressly permitted to be
            given by
            telephone (and subject to paragraph (b) below), all notices and other
            communications provided for herein shall be in writing and shall be delivered
            by
            hand or overnight courier service, mailed by certified or registered
            mail or
            sent by telecopy, as follows:

          

          (i) if
            to the
            Borrower, to Carrizo Oil & Gas, Inc., 100 Louisiana Street, Suite 1500,
            Houston, Texas 77002, Attention: Chief Financial Officer;

          

          (ii) if
            to the
            Administrative Agent or Issuing Bank, to JPMorgan Chase Bank, N.A., 10
            South
            Dearborn, Floor 19, Mail Code IL1-0010, Chicago, Illinois, 60603-2003,
            Telecopy
            No.: (312) 385-7096, Attention: Shawuna Simmons, with a copy to JPMorgan
            Chase
            Bank, N.A., 600 Travis Street, 20th
            Floor,
            Mail Code TX2-T086, Houston, Texas 77002, Attention: Jo Linda Papadakis,
            Vice
            President, Telecopy Number: (713) 216-7770;

          

          (iii) if
            to any
            other Lender, to it at its address (or telecopy number) set forth in
            its
            Administrative Questionnaire.

          

          (b) Notices
            and other communications to the Lenders hereunder may be delivered or
            furnished
            by electronic communications pursuant to procedures approved by the
            Administrative Agent; provided that the foregoing shall not apply to
            notices
            pursuant to Article
            II
            if such
            Lender has notified the Administrative Agent that it is incapable of
            receiving
            notices under Article II by electronic communication. The Administrative
            Agent
            or the Borrower may, in their discretion, agree to accept notices and
            other
            communications to it hereunder by electronic communications pursuant
            to
            procedures approved by it; provided that approval of such procedures
            may be
            limited to particular notices or communications. 

          

          (c) Any
            party
            hereto may change its address or telecopy number for notices and other
            communications hereunder by notice to the other parties hereto. All notices
            and
            other communications given to any party hereto in accordance with the
            provisions
            of this Agreement shall be deemed to have been given on the date of
            receipt.

          

          
            
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          Section
            11.02. Waivers;
            Amendments.

          

          (a) No
            failure or delay by the Administrative Agent, the Issuing Bank or any
            Lender in
            exercising any right or power hereunder shall operate as a waiver thereof,
            nor
            shall any single or partial exercise of any such right or power, or any
            abandonment or discontinuance of steps to enforce such a right or power,
            preclude any other or further exercise thereof or the exercise of any
            other
            right or power. The rights and remedies of the Administrative Agent,
            the Issuing
            Bank and the Lenders hereunder are cumulative and are not exclusive of
            any
            rights or remedies that they would otherwise have. No waiver of any provision
            of
            this Agree-ment or consent to any departure by the Borrower therefrom
            shall in
            any event be effective unless the same shall be permitted by paragraph (b)
            of this Section, and then such waiver or consent shall be effective only
            in the
            specific instance and for the purpose for which given. Without limiting
            the
            generality of the foregoing, the making of a Loan or issuance of a Letter
            of
            Credit shall not be construed as a waiver of any Default, regardless
            of whether
            the Administrative Agent, any Lender or the Issuing Bank may have had
            notice or
            knowledge of such Default at the time.

           

          (b) Neither
            this Agreement nor any provision hereof may be waived, amended or modified
            except pursuant to an agreement or agreements in writing entered into
            by the
            Credit Parties and the Required Lenders or by the Credit Parties and
            the
            Administrative Agent with the consent of the Required Lenders; provided
            that no
            such agreement shall (1) increase the Borrowing Base or, at any time
            prior to
            August 1, 2007, the Conforming Borrowing Base without the written consent
            of
            each Lender, (2) increase the Applicable Percentage of any Lender or
            the
            Aggregate Commitment above the Maximum Facility Amount without the written
            consent of such Lender, (3) reduce the principal amount of any Loan or
            LC
            Disbursement or reduce the specified rate of interest thereon, or reduce
            any
            fees payable hereunder, without the written consent of each Lender affected
            thereby, (4) decrease the Monthly Reduction without the written consent
            of each
            Lender, (5) postpone the scheduled date of payment of the principal amount
            of
            any Loan or LC Disbursement, or any interest thereon, or any fees payable
            hereunder, or reduce the amount of, waive or excuse any such payment,
            or
            postpone the scheduled date of expiration of any of the Aggregate Commitment,
            without the written consent of each Lender affected thereby, (6) change
            Section
            2.17(b)
            or
Section
            2.17(c)
            in a
            manner that would alter the pro rata sharing of payments required thereby,
            without the written consent of each Lender, (7) release any Credit Party
            from
            its obligations under the Loan Documents or, except in connection with
            any
            sales, transfers, leases or other Dispositions permitted in Section
            7.04,
            release
            any of the Collateral, or (8) change any of the provisions of this Section
            or
            the definition of “Required Lenders” or any other provision hereof specifying
            the number or percentage of Lenders required to waive, amend or modify
            any
            rights hereunder or make any determination or grant any consent hereunder,
            without the written consent of each Lender; provided further
            that no
            such agreement shall amend, modify or otherwise affect the rights or
            duties of
            the Administrative Agent or the Issuing Bank hereunder without the prior
            written
            consent of the Administrative Agent or the Issuing Bank, as the case
            may
            be.
            Notwithstanding anything to the contrary herein, no Defaulting Lender
            shall have
            any right to approve or disapprove any amendment, waiver or consent hereunder,
            except that the Commitment of such Lender may not be increased or extended
            without the consent of such Lender.

          

          
            
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          Section
            11.03. Expenses;
            Indemnity; Damage Waiver.

          

          (a) The
            Borrower shall pay (i) all reasonable out-of-pocket expenses incurred
            by the
            Administrative Agent and its Affiliates, including the reasonable fees,
            charges
            and disbursements of counsel for the Administrative Agent, in connection
            with
            the syndication of the credit facilities provided for herein, the preparation
            and administration of this Agreement and the other Loan Documents or
            any
            amendments, modifications or waivers of the provi-sions hereof (whether
            or not
            the transactions contemplated hereby or thereby shall be consummated),
            (ii) all
            reasonable out-of-pocket expenses incurred by the Issuing Bank in connection
            with the issuance, amendment, renewal or extension of any Letter of Credit
            or
            any demand for payment thereunder and (iii) all out-of-pocket expenses
            incurred
            by the Administrative Agent, the Issuing Bank or any Lender, including
            the fees,
            charges and disbursements of any counsel for the Administrative Agent,
            the
            Issuing Bank or any Lender, in connection with the enforcement or protection
            of
            its rights in connection with this Agreement, including its rights under
            this
            Section, or in connection with the Loans made or Letters of Credit issued
            hereunder, including all such out-of-pocket expenses incurred during
            any
            workout, restructuring or negotiations in respect of such Loans or Letters
            of
            Credit. 

          

          (b) THE
            CREDIT PARTIES SHALL INDEMNIFY THE ADMINISTRATIVE AGENT, THE ISSUING
            BANK AND
            EACH LENDER, AND EACH RELATED PARTY OF ANY OF THE FOREGOING PERSONS (EACH
            SUCH
            PERSON BEING CALLED AN “INDEMNITEE”)
            AGAINST, AND HOLD EACH INDEMNITEE HARMLESS FROM, ANY AND ALL LOSSES,
            CLAIMS,
            DAMAGES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE FEES, CHARGES
            AND
            DISBURSEMENTS OF ANY COUNSEL FOR ANY INDEMNITEE, INCURRED BY OR ASSERTED
            AGAINST
            ANY INDEMNITEE ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF
            (I) THE EXECUTION OR DELIVERY OF THIS AGREEMENT OR ANY AGREEMENT OR
            INSTRUMENT CONTEMPLATED HEREBY, THE PERFORMANCE BY THE PARTIES HERETO
            OF THEIR
            RESPECTIVE OBLIGATIONS HEREUNDER OR THE CONSUMMATION OF THE TRANSACTIONS
            OR ANY
            OTHER TRANSACTIONS CONTEMPLATED HEREBY, (II) ANY LOAN OR LETTER OF CREDIT
            OR THE USE OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL BY THE ISSUING
            BANK
            TO HONOR A DEMAND FOR PAYMENT UNDER A LETTER OF CREDIT IF THE DOCUMENTS
            PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY COMPLY WITH
            THE TERMS
            OF SUCH LETTER OF CREDIT), (III) ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE
            OF HAZARDOUS MATERIALS ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE
            BORROWER
            OR ANY SUBSIDIARY, OR ANY ENVIRONMENTAL LIABILITY RELATED IN ANY WAY
            TO THE
            BORROWER OR ANY SUBSIDIARY, OR (IV) ANY ACTUAL OR PROSPECTIVE CLAIM,
            LITIGATION,
            INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER
            BASED ON
            CONTRACT, TORT OR ANY OTHER THEORY AND REGARDLESS OF WHETHER ANY INDEMNITEE
            IS A
            PARTY THERETO; PROVIDED
            THAT
            SUCH INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT
            THAT
            SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES ARE

        

         

        
          
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          DETERMINED
            BY A COURT OF COMPETENT JURISDICTION BY FINAL AND NONAPPEALABLE JUDGMENT
            TO HAVE
            RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH
            INDEMNITEE.

           

          (c) To
            the
            extent that any Credit Party fails to pay any amount required to be paid
            by it
            to the Administrative Agent or the Issuing Bank under paragraph (a) or
            (b) of
            this Section, each Lender severally agrees to pay to the Administrative
            Agent or
            the Issuing Bank, as the case may be, such Lender’s Applicable Percentage (in
            each case, determined as of the time that the applicable unreimbursed
            expense or
            indemnity payment is sought) of such unpaid amount; provided
            that the
            unreimbursed expense or indemnified loss, claim, damage, liability or
            related
            expense, as the case may be, was incurred by or asserted against the
            Administrative Agent or the Issuing Bank in its capacity as such.

          

          (d) To
            the
            extent permitted by applicable law, the Credit Parties shall not assert,
            and
            hereby waive, any claim against any Indemnitee, on any theory of liability,
            for
            special, indirect, consequential or punitive damages (as opposed to direct
            or
            actual damages) arising out of, in connection with, or as a result of,
            this
            Agreement or any agreement or instrument contemplated hereby, the Transactions,
            any Loan or Letter of Credit or the use of the proceeds thereof.

          

          (e) All
            amounts due under this Section shall be payable not later than 10 days
            after
            written demand therefor.

           

          Section
            11.04. Successors
            and Assigns.

          

          (a) The
            provisions of this Agreement shall be binding upon and inure to the benefit
            of
            the parties hereto and their respective successors and assigns permitted
            hereby
            (including any Affiliate of the Issuing Bank that issues any Letter of
            Credit),
            except that (i) no Credit Party may assign or otherwise transfer any
            of its
            rights or obligations hereunder without the prior written consent of
            each Lender
            (and any attempted assignment or transfer by such Credit Party without
            such
            consent shall be null and void) and (ii) no Lender may assign or otherwise
            transfer its rights or obligations hereunder except in accordance with
            this
            Section. Nothing in this Agreement, expressed or implied, shall be construed
            to
            confer upon any Person (other than the parties hereto, their respective
            successors and assigns permitted hereby (including any Affiliate of the
            Issuing
            Bank that issues any Letter of Credit), Participants (to the extent provided
            in
            paragraph (c) of this Section) and, to the extent expressly contemplated
            hereby,
            the Related Parties of each of the Administrative Agent, the Issuing
            Bank and
            the Lenders) any legal or equitable right, remedy or claim under or by
            reason of
            this Agreement.

           

          (b) 

          

          (i) Subject
            to the conditions set forth in paragraph (b)(ii) below, any Lender may
            assign to
            one or more assignees all or a portion of its rights and obligations
            under this
            Agreement (including all or a portion of its Commitment and the Loans
            at the
            time owing to it) with the prior written consent (such consent not to
            be
            unreasonably withheld) of:

          

          
            
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          (A) the
            Borrower, provided
            that no
            consent of the Borrower shall be required for an assignment to a Lender,
            an
            Affiliate of a Lender, a Federal Reserve Bank, an Approved Fund or, if
            an Event
            of Default has occurred and is continuing, any other assignee; and

          

          (B) the
            Administrative Agent, provided
            that no
            consent of the Administrative Agent shall be required for an assignment
            of any
            Commitment to an assignee that is a Lender with a Commitment immediately
            prior
            to giving effect to such assignment; 

          

          (C) the
            Issuing Bank.

           

          (ii) Assignments
            shall be subject to the following additional conditions: 

          

          (A) except
            in
            the case of an assignment to a Lender, an Affiliate of a Lender, an Approved
            Fund or an assignment of the entire remaining amount of the assigning
            Lender’s
            Commitment or Loans, the amount of the Commitment or Loans of the assigning
            Lender subject to each such assignment (determined as of the date the
            Assignment
            and Assumption with respect to such assignment is delivered to the
            Administrative Agent) shall not be less than $5,000,000 unless each of
            the
            Borrower and the Administrative Agent otherwise consent, provided
            that no
            such consent of the Borrower shall be required if an Event of Default
            has
            occurred and is continuing;

          

          (B) each
            partial assignment shall be made as an assignment of a proportionate
            part of all
            the assigning Lender’s rights and obligations in respect of such Lender’s
            Commitment and such Lender’s Loans under this Agreement;

          

          (C) the
            parties to each assignment shall execute and deliver to the Administrative
            Agent
            an Assignment and Assumption, together with a processing and recordation
            fee of
            $3,500; and

          

          (D) the
            assignee, if it shall not be a Lender, shall deliver to the Administrative
            Agent
            an Administrative Questionnaire in which the assignee designates one
            or more
            Credit Contacts to whom all syndicate-level information (which may contain
            material non-public information about the Borrower and its affiliates,
            the
            Credit Parties and their related parties or their respective securities)
            will be
            made available and who may receive such information in accordance with
            the
            assignee’s compliance procedures and applicable laws, including Federal and
            state securities laws.

           

          For
            the
            purposes of this Section
            11.04(b),
            the
            term “Approved
            Fund”
has
            the
            following meaning:

          

          
            
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          “Approved
            Fund”
means
            any Person (other than a natural person) that is engaged in making, purchasing,
            holding or investing in bank loans and similar extensions of credit in
            the
            ordinary course of its business and that is administered or managed by
            (a) a
            Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate
            of an
            entity that administers or manages a Lender.

          

          (iii) Subject
            to acceptance and recording thereof pursuant to paragraph (b)(iv) of this
            Section, from and after the effective date specified in each Assignment
            and
            Assumption the assignee thereunder shall be a party hereto and, to the
            extent of
            the interest assigned by such Assignment and Assumption, have the rights
            and
            obligations of a Lender under this Agreement, and the assigning Lender
            thereunder shall, to the extent of the interest assigned by such Assignment
            and
            Assumption, be released from its obligations under this Agreement (and,
            in the
            case of an Assignment and Assumption covering all of the assigning Lender’s
            rights and obligations under this Agreement, such Lender shall cease
            to be a
            party hereto but shall continue to be entitled to the benefits of Section
            2.14,
            Section
            2.15,
            Section
            2.16
            and
Section
            11.03).
            Any
            assignment or transfer by a Lender of rights or obligations under this
            Agreement
            that does not comply with this Section
            11.04
            shall be
            treated for purposes of this Agreement as a sale by such Lender of a
            participation in such rights and obligations in accordance with paragraph
            (c) of
            this Section except that any attempted assignment or transfer by any
            Lender that
            does not comply with clause (C) of Section
            11.04(b)(ii)
            shall be
            null and void.

           

          (iv) The
            Administrative Agent, acting for this purpose as an agent of the Borrower,
            shall
            maintain at one of its offices a copy of each Assignment and Assumption
            delivered to it and a register for the recordation of the names and addresses
            of
            the Lenders, and the Commitment and Applicable Percentage of, and principal
            amount of the Loans and LC Disbursements owing to, each Lender pursuant
            to the
            terms hereof from time to time (the “Register”).
            The
            entries in the Register shall be conclusive, and the Credit Parties,
            the
            Administrative Agent, the Issuing Bank and the Lenders may treat each
            Person
            whose name is recorded in the Register pursuant to the terms hereof as
            a Lender
            hereunder for all purposes of this Agreement, notwithstanding notice
            to the
            contrary. The Register shall be available for inspection by the Credit
            Parties,
            the Issuing Bank and any Lender, at any reasonable time and from time
            to time
            upon reasonable prior notice.

          

          (v) Upon
            its
            receipt of a duly completed Assignment and Assumption executed by an
            assigning
            Lender and an assignee, the assignee’s completed Administrative Questionnaire
            (unless the assignee shall already be a Lender hereunder), the processing
            and
            recordation fee referred to in paragraph (b) of this Section any written
            consent to such assignment required by paragraph (b) of this Section,
            the
            Administrative Agent shall accept such Assignment and Assumption and
            record the
            information contained therein in the Register; provided
            that if
            either the assigning Lender or the assignee shall have failed to make
            any
            payment required to be made by it pursuant to Section
            2.05(d)
            or
Section
            2.05(e),
            Section
            2.06,
            Section
            2.17(d)
            or
Section
            11.03(c),
            the
            Administrative Agent shall have no 

        

         

        
          
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          obligation
            to accept such Assignment and Assumption and record the information therein
            in
            the Register unless and until such payment shall have been made in full,
            together with all accrued interest thereon. No assignment shall be effective
            for
            purposes of this Agreement unless it has been recorded in the Register
            as
            provided in this paragraph.

           

          (c) 

          

          (i) Any
            Lender may, without the consent of the Borrower (unless such sale is
            to a
            Competitor and no Event of Default exists in which event Borrower’s prior
            written consent shall be required), the Administrative Agent or the Issuing
            Bank, sell participations to one or more banks or other entities (a
“Participant”)
            in all
            or a portion of such Lender’s rights and obligations under this Agreement
            (including all or a portion of its Commitment and the Loans owing to
            it);
provided
            that
            (A) such Lender’s obligations under this Agreement shall remain unchanged,
            (B) such Lender shall remain solely responsible to the other parties hereto
            for the performance of such obligations and (C) the Borrower, the
            Administrative Agent, the Issuing Bank and the other Lenders shall continue
            to
            deal solely and directly with such Lender in connection with such Lender’s
            rights and obligations under this Agreement. Any agreement or instrument
            pursuant to which a Lender sells such a participation shall provide that
            such
            Lender shall retain the sole right to enforce this Agreement and to approve
            any
            amendment, modification or waiver of any provision of this Agreement;
            provided
            that
            such agreement or instrument may provide that such Lender will not, without
            the
            consent of the Participant, agree to any amendment, modification or waiver
            described in the first proviso to Section
            11.02(b)
            that
            affects such Participant. Subject to paragraph (c)(ii) of this Section,
            the
            Borrower agrees that each Participant shall be entitled to the benefits
            of
Section
            2.14,
            Section
            2.15
            and
Section
            2.16
            to the
            same extent as if it were a Lender and had acquired its interest by assignment
            pursuant to paragraph (b) of this Section. To the extent permitted by
            law, each
            Participant also shall be entitled to the benefits of Section
            11.08
            as
            though it were a Lender, provided such Participant agrees to be subject
            to
Section
            2.17(c)
            as
            though it were a Lender.

          

          (ii) A
            Participant shall not be entitled to receive any greater payment under
            Section
            2.14
            or
Section
            2.16
            than the
            applicable Lender would have been entitled to receive with respect to
            the
            participation sold to such Participant, unless the sale of the participation
            to
            such Participant is made with the prior written consent of the Borrower. A
            Participant that would be a Foreign Lender if it were a Lender shall
            not be
            entitled to the benefits of Section
            2.16
            unless
            the Borrower is notified of the participation sold to such Participant
            and such
            Participant agrees, for the benefit of the Borrower, to comply with Section
            2.16(e)
            as
            though it were a Lender. 

          

          (d) Any
            Lender may at any time pledge or assign a security interest in all or
            any
            portion of its rights under this Agreement to secure obligations of such
            Lender,
            including without limitation any pledge or assignment to secure obligations
            to a
            Federal 

        

         

        
          
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          Reserve
            Bank, and this Section shall not apply to any such pledge or assignment
            of a
            security interest; provided
            that no
            such pledge or assignment of a security interest shall release a Lender
            from any
            of its obligations hereunder or substitute any such pledge or assignee
            for such
            Lender as a party hereto.

           

          Section
            11.05. Survival.
            All
            covenants, agreements, representations and warranties made by the Credit
            Parties
            herein and in the certificates or other instru-ments delivered in connection
            with or pursuant to this Agreement shall be considered to have been relied
            upon
            by the other parties hereto and shall survive the execution and delivery
            of this
            Agreement and the making of any Loans and issuance of any Letters of
            Credit,
            regardless of any investigation made by any such other party or on its
            behalf
            and notwithstanding that the Administrative Agent, the Issuing Bank or
            any
            Lender may have had notice or knowledge of any Default or incorrect
            representation or warranty at the time any credit is extended hereunder,
            and
            shall continue in full force and effect as long as the principal of or
            any
            accrued interest on any Loan or any fee or any other amount payable under
            this
            Agreement is outstanding and unpaid or any Letter of Credit is outstanding
            and
            so long as the Aggregate Commitment has not expired or terminated. The
            provisions of Section
            2.14,
            Section
            2.15,
            Section
            2.16
            and
Section
            11.03
            and
Article
            X
            shall
            survive and remain in full force and effect regardless of the consummation
            of
            the transactions contemplated hereby, the repayment of the Loans, the
            expiration
            or termination of the Letters of Credit and the Aggregate Commitment
            or the
            termination of this Agreement or any provision hereof.

           

          Section
            11.06. Counterparts;
            Integration; Effectiveness.
            This
            Agreement may be executed in counterparts (and by different parties hereto
            on
            different counterparts), each of which shall constitute an original,
            but all of
            which when taken together shall constitute a single contract. This Agreement
            and
            any separate letter agreements with respect to fees payable to the
            Administrative Agent constitute the entire contract among the parties
            relating
            to the subject matter hereof and supersede any and all previous agreements
            and
            understandings, oral or written, relating to the subject matter hereof.
            THIS
            WRITTEN CREDIT AND GUARANTY AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
            THE
            FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
            OF
            PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
            THERE ARE
            NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
            Except
            as provided in Section
            5.01,
            this
            Agreement shall become effective when it shall have been executed by
            the
            Administrative Agent and when the Administrative Agent shall have received
            counterparts hereof which, when taken together, bear the signatures of
            each of
            the other parties hereto, and thereafter shall be binding upon and inure
            to the
            benefit of the parties hereto and their respective successors and assigns.
            Delivery of an executed counterpart of a signature page of this Agreement
            by
            telecopy shall be effective as delivery of a manually executed counterpart
            of
            this Agreement.

           

          Section
            11.07. Severability.
            Any
            provision of this Agreement held to be invalid, illegal or unenforceable
            in any
            jurisdiction shall, as to such jurisdiction, be ineffective to the extent
            of
            such invalidity, illegality or unenforceability without affecting the
            validity,
            legality and enforceability of the remaining provisions hereof; and the
            invalidity of a particular provision in a particular jurisdiction shall
            not
            invalidate such provision in any other jurisdiction.

          

          
            
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          Section
            11.08. Right
            of Setoff.
            If an
            Event of Default shall have occurred and be continuing, each Lender and
            each of
            its Affiliates is hereby authorized at any time and from time to time,
            to the
            fullest extent permitted by law, to set off and apply any and all deposits
            (general or special, time or demand, provisional or final) at any time
            held and
            other obligations at any time owing by such Lender or Affiliate to or
            for the
            credit or the account of the Borrower against any of and all the obligations
            of
            any Credit Party now or hereafter existing under this Agreement held
            by such
            Lender, irrespective of whether or not such Lender shall have made any
            demand
            under this Agreement and although such obligations may be unmatured.
            The rights
            of each Lender under this Section and Section
            8.08
            are in
            addition to other rights and remedies (including other rights of setoff)
            which
            such Lender may have.

           

          Section
            11.09. GOVERNING
            LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS.

          

          (a) THIS
            AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW
            OF THE
            STATE OF TEXAS.

          

          (b) EACH
            CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF
            AND ITS
            PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL
            OR TEXAS
            STATE COURT SITTING IN DALLAS, TEXAS IN ANY ACTION OR PROCEEDING ARISING
            OUT OF
            OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
            JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
            AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY
            BE HEARD
            AND DETERMINED IN SUCH TEXAS STATE OR, TO THE EXTENT PERMITTED BY LAW,
            IN SUCH
            FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT
            IN ANY
            SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
            OTHER
            JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED
            BY LAW.
            NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT THE ADMINISTRATIVE
            AGENT,
            THE ISSUING BANK OR ANY LENDER MAY OTHERWISE HAVE TO BRING ANY ACTION
            OR
            PROCEEDING RELATING TO THIS AGREEMENT AGAINST ANY CREDIT PARTY OR ITS
            PROPERTIES
            IN THE COURTS OF ANY JURISDICTION.

          

          (c) EACH
            CREDIT PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST
            EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT MAY
            NOW OR
            HERE-AFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING
            ARISING
            OUT OF OR RELATING TO THIS AGREEMENT IN ANY COURT REFERRED TO IN PARAGRAPH
            (B)
            OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES,
            TO THE
            FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM
            TO THE
            MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.

          

          
            
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          (d) EACH
            PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN
            THE MANNER
            PROVIDED FOR NOTICES IN Section
            11.01.
            NOTHING
            IN THIS AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY TO THIS AGREEMENT
            TO SERVE
            PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

           

          Section
            11.10. WAIVER
            OF JURY TRIAL.
            EACH
            PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
            LAW,
            ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY
            OR
            INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
            CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY).
            EACH
            PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
            OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
            PARTY WOULD
            NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER
            AND
            (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
            ENTER INTO THIS AGREE-MENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
            AND
            CERTIFICATIONS IN THIS SECTION.

           

          Section
            11.11. Headings.
            Article
            and Section headings and the Table of Contents used herein are for convenience
            of reference only, are not part of this Agreement and shall not affect
            the
            construction of, or be taken into consideration in interpreting, this
            Agreement.

           

          Section
            11.12. Confidentiality.
            Each of
            the Administrative Agent, the Issuing Bank and the Lenders agrees to
            maintain
            the confidentiality of the Information (as defined below), except that
            Information may be disclosed (a) to its and its Affiliates’ directors,
            officers, employees and agents, including accountants, legal counsel
            and other
            advisors (it being understood that the Persons to whom such disclosure
            is made
            will be informed of the confidential nature of such Information and instructed
            to keep such Information confidential), (b) to the extent requested by any
            regulatory authority, (c) to the extent required by applicable laws or
            regulations or by any subpoena or similar legal process, (d) to any other
            party
            to this Agreement, (e) in connection with the exercise of any remedies
            hereunder
            or any suit, action or proceeding relating to this Agreement or the enforcement
            of rights hereunder, (f) subject to an agreement containing provisions
            substantially the same as those of this Section, to (i) any assignee
            of or
            Participant in, or any prospective assignee of or Participant in, any
            of its
            rights or obligations under this Agreement or (ii) any actual or prospective
            counterparty (or its advisors) to any swap or derivative transaction
            relating to
            the Credit Parties and their obligations, (g) with the consent of the
            Borrower
            or (h) to the extent such Information (i) becomes publicly available
            other than as a result of a breach of this Section or (ii) becomes
            available to the Administrative Agent, the Issuing Bank or any Lender
            on a
            non-confidential basis from a source other than a Credit Party. For the
            purposes
            of this Section, “Information”
means
            all information received from any Credit Party relating to any Credit
            Party or
            its business, other than any such information that is available to the
            Administrative Agent, the Issuing Bank or any Lender on a non-confidential
            basis
            prior to disclosure by any Credit Party. Any Person required to maintain
            the
            confidentiality of Information as provided in this Section shall be considered
            to have complied with its obligation to do so if such Person has exercised
            the
            same degree of care to maintain the confidentiality of such Information
            as such
            Person would accord to its own confidential information.

          

          
            
              CARRIZO
                REVOLVING CREDIT AGREEMENT

               

            

            
              87

              
                

              

            

            
              Index

            

          

        

        

          EACH
            LENDER ACKNOWLEDGES THAT INFORMATION AS DEFINED IN THIS Section
            11.12
            FURNISHED TO IT PURSUANT TO THIS AGREEMENT MAY INCLUDE MATERIAL NON-PUBLIC
            INFORMATION CONCERNING THE BORROWER AND ITS RELATED PARTIES OR THEIR
            RESPECTIVE
            SECURITIES, AND CONFIRMS THAT IT HAS DEVELOPED COMPLIANCE PROCEDURES
            REGARDING
            THE USE OF MATERIAL NON-PUBLIC INFORMATION AND THAT IT WILL HANDLE SUCH
            MATERIAL
            NON-PUBLIC INFORMATION IN ACCORDANCE WITH THOSE PROCEDURES AND APPLICABLE
            LAW,
            INCLUDING FEDERAL AND STATE SECURITIES LAWS. 

          

          ALL
            INFORMATION, INCLUDING REQUESTS FOR WAIVERS AND AMENDMENTS, FURNISHED
            BY THE
            BORROWER OR THE ADMINISTRATIVE AGENT PURSUANT TO, OR IN THE COURSE OF
            ADMINISTERING, THIS AGREEMENT WILL BE SYNDICATE-LEVEL INFORMATION, WHICH
            MAY
            CONTAIN MATERIAL NON-PUBLIC INFORMATION ABOUT THE BORROWER AND ITS AFFILIATES
            ,
            THE CREDIT PARTIES AND THEIR RELATED PARTIES OR THEIR RESPECTIVE SECURITIES.
            ACCORDINGLY, EACH LENDER REPRESENTS TO THE BORROWER AND THE ADMINISTRATIVE
            AGENT
            THAT IT HAS IDENTIFIED IN ITS ADMINISTRATIVE QUESTIONNAIRE A CREDIT CONTACT
            WHO
            MAY RECEIVE INFORMATION THAT MAY CONTAIN MATERIAL NON-PUBLIC INFORMATION
            IN
            ACCORDANCE WITH ITS COMPLIANCE PROCEDURES AND APPLICABLE LAW.

           

          Section
            11.13. Interest
            Rate Limitation.
            Notwithstanding anything herein to the contrary, if at any time the interest
            rate applicable to any Loan, together with all fees, charges and other
            amounts
            which are treated as interest on such Loan under appli-cable law (collectively
            the “Charges”),
            shall
            exceed the maximum lawful rate (the “Maximum
            Rate”)
            which
            may be contracted for, charged, taken, received or reserved by the Lender
            holding such Loan in accordance with applicable law, the rate of interest
            payable in respect of such Loan hereunder, together with all Charges
            payable in
            respect thereof, shall be limited to the Maximum Rate and, to the extent
            lawful,
            the interest and Charges that would have been payable in respect of such
            Loan
            but were not payable as a result of the operation of this Section shall
            be
            cumulated and the interest and Charges payable to such Lender in respect
            of
            other Loans or periods shall be increased (but not above the Maximum
            Rate
            therefor) until such cumulated amount, together with interest thereon
            at the
            Federal Funds Effective Rate to the date of repayment, shall have been
            received
            by such Lender.
            Chapter
            346 of the Texas Finance Code (which regulates certain revolving credit
            accounts
            (formerly Tex. Rev. Civ. Stat. Ann. Art. 5069, Ch. 15)) shall not apply
            to this
            Agreement or to any Loan, nor shall this Agreement or any Loan be governed
            by or
            be subject to the provisions of such Chapter 346 in any manner
            whatsoever.

           

          Section
            11.14. USA
            PATRIOT Act.
            Each
            Lender that is subject to the requirements of the USA Patriot Act (Title
            III of
            Pub. L. 107-56 (signed into law October 26, 2001)) (the “Act”) hereby notifies
            each Credit Party that pursuant to the requirements of the Act, it is
            required
            to obtain, verify and record information that identifies each Credit
            Party,
            which information includes the name and address of each Credit Party
            and other
            information that will allow such Lender to identify each Credit Party
            in
            accordance with the Act.

          

          
            
              CARRIZO
                REVOLVING CREDIT AGREEMENT

               

            

            
              88

              
                

              

            

            
              Index

            

          

        

        
          

            IN
              WITNESS WHEREOF, the parties hereto have caused this Agreement to be
              duly
              executed by their respective authorized officers as of the day and
              year first
              above written.

            

            BORROWER:

            

            CARRIZO
              OIL & GAS, INC.

            

            

            By: /s/
              Paul F. Boling

            Name: Paul
              F. Boling

            Title: Vice
              President and Chief Financial Officer

            

            

            GUARANTOR:

            

            CCBM,
              INC.

            

            

            By: /s/
              Paul F. Boling

            Name: Paul
              F. Boling

            Title: Vice
              President

            

            

            JPMORGAN
              CHASE BANK, NATIONAL 

            ASSOCIATION,
              individually and as 

            Administrative
              Agent

            

            

            By: /s/
              Charles Kingswell-Smith

            Name: Charles
              Kingswell-Smith

            Title: Senior
              Vice President

             

             

             

            
              
                CARRIZO
                  REVOLVING CREDIT AGREEMENT - SIGNATURE PAGE

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