1 EXHIBIT 2.1 COMBINATION AGREEMENT DATED JUNE 6, 1997 2 TABLE OF CONTENTS

1
EXHIBIT 2.1

COMBINATION AGREEMENT

DATED JUNE 6, 1997
2
TABLE OF CONTENTS

ARTICLE I. DEFINITIONS; ORDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 1.2 Combination Transactions Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE II. THE ENCINITAS PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.1 The Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.4 Deliveries at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.5 Consent to Limited Partner Interest Transfer . . . . . . . . . . . . . . . . . . . . . . . . 8

ARTICLE III. THE PRODUCTION MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.1 The Production Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3.3 Production Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.4 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.5 Surrender and Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

ARTICLE IV. THE ENCINITAS MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.1 The Encinitas Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.4 Conversion of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.5 Surrender and Exchange of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . 11

ARTICLE V. THE LA XXXX MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.1 The La Xxxx Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.4 Conversion of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 5.5 Surrender and Exchange of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . 14
Section 5.6 No Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

ARTICLE VI. THE CARRIZO PARTNERS MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.1 The Carrizo Partners Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.4 Conversion of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6.5 Surrender and Exchange of Partnership Interests . . . . . . . . . . . . . . . . . . . . . . 16

ii
3

Section 6.6 No Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . 17
Section 7.1 Organization; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 7.2 Capitalization of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 7.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 7.4 Authority and Authorization; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 7.5 Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 7.6 Financial Statements of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 7.7 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

ARTICLE VIII. REPRESENTATIONS AND WARRANTIES OF THE FOUNDERS . . . . . . . . . . . . . . . . . . . . . . 19
Section 8.1 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 8.2 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8.3 Authority and Authorization; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8.4 Experience; Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8.5 Access to Company Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 8.6 Investment Purposes; Rule 144 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.7 Additional Restriction on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

ARTICLE IX. REPRESENTATIONS AND WARRANTIES OF PRODUCTION . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.1 Organization; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.4 Authority and Authorization; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 9.5 Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.6 Financial Statements of Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.7 Ownership of Encinitas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 9.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 9.9 Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

ARTICLE X. REPRESENTATIONS AND WARRANTIES OF ENCINITAS . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 10.1 Formation; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 10.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 10.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 10.4 Authority and Authorization; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 10.5 Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 10.6 Financial Statements of Encinitas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 10.7 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 10.8 Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

ARTICLE XI. REPRESENTATIONS AND WARRANTIES OF LA XXXX . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 11.1 Formation; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

iii
4

Section 11.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 11.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11.4 Authority and Authorization; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11.5 Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11.6 Financial Statements of La Xxxx . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 11.7 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 11.8 Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

ARTICLE XII. REPRESENTATIONS AND WARRANTIES OF CARRIZO PARTNERS . . . . . . . . . . . . . . . . . . . . 28
Section 12.1 Formation; Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 12.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 12.3 No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.4 Authority and Authorization; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.5 Litigation, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 12.6 Financial Statements of Carrizo Partners . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 12.7 Ownership of Placedo Partners Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 12.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 12.9 Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

ARTICLE XIII. COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 13.1 Equityholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 13.2 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 13.3 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

ARTICLE XIV. CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 14.1 Conditions to the Obligations of All Parties to Effect the Combination Transactions . . . . 32
Section 14.2 Conditions to the Obligations of the Company and each of the Founders to Effect the
Encinitas Purchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 14.3 Conditions to the Obligations of the Company and Production to Effect the Production
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Section 14.4 Conditions to the Obligations of the Company and Encinitas to Effect the Encinitas
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 14.5 Conditions to the Obligations of the Company and La Xxxx to Effect the La Xxxx Merger . . . 33
Section 14.6 Conditions to the Obligations of the Company and Carrizo Partners to Effect the
Carrizo Partners Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 14.7 Conditions to the Obligations of the Company to Effect Any of the Combination
Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 14.8 Other Combination Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

iv
5

ARTICLE XV. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 15.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 15.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

ARTICLE XVI. MISCELLANEOUS AND GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 16.1 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 16.2 Modification or Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 16.3 Restrictions on Transfer; Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 16.4 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 16.5 Stock Splits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 16.6 No Rights as Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Section 16.7 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 16.8 Entire Agreement, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 16.9 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 16.10 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 16.11 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 16.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 16.13 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Exhibits

Exhibit A Production Plan of Merger
Exhibit B Transferor Representations and Warranties
Exhibit C Encinitas Plan of Merger
Exhibit D La Xxxx Plan of Merger
Exhibit E Carrizo Partners Plan of Merger
Exhibit F Founders Disclosure Schedule
Exhibit G Production Disclosure Schedule
Exhibit H Encinitas Disclosure Schedule
Exhibit I La Xxxx Disclosure Schedule
Exhibit J Carrizo Partners Disclosure Schedule

Schedules

Schedule 1.1(A) Carrizo Partners Limited Partners' Percentages
Schedule 1.1(B) Encinitas Limited Partners' Percentages
Schedule 1.1(C) La Xxxx Limited Partners' Percentages

v
6
COMBINATION AGREEMENT

THIS COMBINATION AGREEMENT (this "Agreement"), dated as of June 6,
1997, is by and among (i) Carrizo Oil & Gas, Inc., a Texas corporation (the
"Company"), (ii) Carrizo Production, Inc., a Texas corporation ("Production"),
(iii) Encinitas Partners Ltd., a Texas limited partnership ("Encinitas"), (iv)
La Xxxx Partners Ltd., a Texas limited partnership ("La Xxxx"), (v) Carrizo
Partners Ltd., a Texas limited partnership ("Carrizo Partners"), and (vi) Xxxx
X. Xxxx, Xx., Xxxxxx X. Xxxxxxx, Xxxxxxxxx X. Xxxxxxx, XX, Xxxxxxx X. X.
Xxxxxxxx and Xxxxx X. Xxxxxx (each, a "Founder" and together, the "Founders").

RECITALS

WHEREAS, the Company, Production, Encinitas, La Xxxx, Carrizo Partners
and the Founders desire to combine certain of the oil and gas properties and
exploration and development operations owned and conducted by the Company,
Production, Encinitas, La Xxxx and Carrizo Partners (the "Combination") through
the purchase by the Company of certain limited partner interests in Encinitas
and the merger of Production, Encinitas, La Xxxx and Carrizo Partners with and
into the Company at or about the time of the closing of the initial public
offering (the "Offering") of shares of the Company's common stock, par value
$0.01 per share (the "Common Stock"), pursuant to the Securities Exchange Act
of 1933, as amended (the "Securities Act"), as will be described in the
Company's registration statement on Form S-1, to be filed with the Securities
and Exchange Commission (the "SEC") with respect to the Offering; and

WHEREAS, to effect the Combination, the Company plans (i) a purchase
of limited partner interests in Encinitas from the Founders (the "Encinitas
Purchase") for Common Stock, (ii) a merger (the "Production Merger") of
Production with and into the Company in which the stockholders of Production
(the "Production Stockholders") will receive Common Stock, (iii) a merger (the
"Encinitas Merger") of Encinitas with and into the Company in which the limited
partners of Encinitas (the "Encinitas Limited Partners") will receive Common
Stock, (iv) a merger (the "La Xxxx Merger") of La Xxxx with and into the
Company in which the limited partners of La Xxxx (the "La Xxxx Limited
Partners") will receive Common Stock and (v) a merger (the "Carrizo Partners
Merger") of Carrizo Partners with and into the Company in which the limited
partners of Carrizo Partners (the "Carrizo Partners Limited Partners") will
receive Common Stock (the Encinitas Purchase, the Production Merger, the
Encinitas Merger, the La Xxxx Merger and the Carrizo Partners Merger
collectively may be referred to herein as the "Combination Transactions," and
each may be referred to herein as a "Combination Transaction"); and

WHEREAS, the Board of Directors of the Company has deemed each of the
Combination Transactions to be in the best interest of the Company and the
stockholders of the Company, and has approved, and recommended that the
stockholders of the Company approve, this Agreement and each of the Combination
Transactions; and

1
7
WHEREAS, the Board of Directors of Production has deemed the
Production Merger and the other Combination Transactions to be in the best
interest of Production and the stockholders of Production, and has approved,
and recommended that the stockholders of Production approve, this Agreement and
the Production Merger; and

WHEREAS, the Board of Directors of Production, as the general partner
of Encinitas, has deemed the Encinitas Merger and the other Combination
Transactions to be in the best interest of Encinitas and the Encinitas Limited
Partners, and has approved, and recommended that the Encinitas Limited Partners
approve, this Agreement, an amendment to the Encinitas Partnership Agreement
(as defined in Section 1.1) to permit the Encinitas Merger and the Encinitas
Merger; and

WHEREAS, the Board of Directors of the Company, as the general partner
of La Xxxx, has deemed the La Xxxx Merger and the other Combination
Transactions to be in the best interest of La Xxxx and the La Xxxx Limited
Partners, and has approved, and recommended that the La Xxxx Limited Partners
approve, this Agreement, an amendment to the La Xxxx Partnership Agreement (as
defined in Section 1.1) to permit the La Xxxx Merger and the La Xxxx Merger;
and

WHEREAS, the Board of Directors of the Company, as the general partner
of Carrizo Partners, has deemed the Carrizo Partners Merger and the other
Combination Transactions to be in the best interest of Carrizo Partners and the
Carrizo Partners Limited Partners, and has approved, and recommended that the
Carrizo Partners Limited Partners approve, this Agreement, an amendment to the
Carrizo Partners Partnership Agreement (as defined in Section 1.1) to permit
the Carrizo Partners Merger and the Carrizo Partners Merger; and

WHEREAS, the parties hereto desire to set forth the terms and
conditions of the Combination and to provide for certain relationships and
obligations among the parties hereto following the Closing Date (as defined in
Section 1.1):

NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound hereby, the aforesaid parties hereto hereby agree as follows:

ARTICLE I.

DEFINITIONS; ORDER

SECTION 1.1 DEFINED TERMS. As used in this Agreement, the following
terms have the meanings specified in this Section 1.1. Other capitalized terms
have the meanings assigned to them elsewhere in this Agreement.

Accredited Investor means an "Accredited Investor" as defined in Rule
501(a) promulgated under the Securities Act.

2
8
Carrizo Partners After Payout Consideration means, with respect to each
Carrizo Partners Limited Partner Interest, the product of (i) 707,358 shares of
Common Stock (which is equal to the difference between (a) the Carrizo Partners
Aggregate Valuation Shares and (b) the quotient of (1) the aggregate Carrizo
Partners Before Payout Consideration with respect to all Carrizo Partners
Limited Partner Interests, divided by (2) 86.667% (the aggregate Before Payout
Percentages with respect to all Carrizo Partners Limited Partner Interests as
set forth on Schedule 1.1(A) hereto)), multiplied by (ii) the percentage set
forth on Schedule 1.1(A) hereto as the After Payout Percentage with respect to
such Carrizo Partners Limited Partner Interest. For purposes of clarity, it is
agreed that the Carrizo Partners After Payout Consideration with respect to
each of the units representing a Carrizo Partners Limited Partner Interest
attributable to an original capital contribution of $50,000 by an Investor
Limited Partner (as defined in the Carrizo Partners Partnership Agreement) is
23,578 shares of Common Stock, and the aggregate Carrizo Partners After Payout
Consideration with respect to all Carrizo Partners Limited Partner Interests is
483,361 shares of Common Stock.

Carrizo Partners Aggregate Valuation Sharesmeans 806,250 shares of
Common Stock, which is equal to the number of shares of Common Stock that would
be issued to the partners of Carrizo Partners if shares were being issued in
respect of all partner interests in Carrizo Partners in the Carrizo Partners
Merger (it being understood, however, that because no shares are being issued
in respect of the general partner interest in Carrizo Partners in the Carrizo
Partners Merger, the number of shares issuable in the Carrizo Partners Merger
will be less than the Carrizo Partners Aggregate Valuation Shares).

Carrizo Partners Approvalsmeans the approval of the Carrizo Partners
Partnership Agreement Amendment by the general partner of Carrizo Partners and
a majority in interest of the Carrizo Partners Limited Partners Interests, in
accordance with the Carrizo Partners Partnership Agreement, and the approval of
the Carrizo Partners Merger by the partners of Carrizo Partners in accordance
with the Carrizo Partners Partnership Agreement, as amended by the Carrizo
Partners Partnership Agreement Amendment.

Carrizo Partners Before Payout Consideration means, with respect to
each Carrizo Partners Limited Partner Interest, the product of (i) 98,892
shares of Common Stock (which is equal to the quotient of (a) $1,040,344 (which
is the amount of cash that if distributed with respect to all partner interests
in Carrizo Partners at August 1, 1997 (the assumed Carrizo Partners Effective
Time (as defined in Section 6.3)) would result in distributions to the Investor
Limited Partners in an amount sufficient to cause a Conversion Date to occur
(i.e., an amount that would be sufficient to repay a loan or loans in the
amounts, and made at the times, of the Capital Contributions of the Investor
Limited Partners, bearing interest at 20% per annum compounded annually) minus
the aggregate amount of distributions made by Carrizo Partners with respect to
all partner interests in Carrizo Partners prior to the Carrizo Partners
Effective Time, divided by (b) the Share Valuation Price), multiplied by (ii)
the percentage set forth on Schedule 1.1(A) hereto as the Before Payout
Percentage with respect to such Carrizo Partners Limited Partner Interest. For
purposes of clarity, it is agreed that the Carrizo Partners Before Payout
Consideration with respect to each of the units representing a Carrizo Partners
Limited Partner Interest attributable to an original capital contribution of
$50,000

3
9
by an Investor Limited Partner is 6,593 shares of Common Stock, and the
aggregate Carrizo Partners Before Payout Consideration with respect to all
Carrizo Partners Limited Partner Interests is 85,707 shares of Common Stock.
Capitalized terms used in this definition and not otherwise defined in this
Agreement shall have the meanings given to them in the Carrizo Partners
Partnership Agreement.

Carrizo Partners Limited Partner Interests means the limited partner
interests in Carrizo Partners of the limited partners of Carrizo Partners.

Carrizo Partners Merger Consideration means, with respect to each
Carrizo Partners Limited Partner Interest, the sum of the Carrizo Partners
Before Payout Consideration and the Carrizo Partners After Payout Consideration
with respect to such Carrizo Partners Limited Partner Interest. For purposes
of clarity, it is agreed that the Carrizo Partners Merger Consideration with
respect to each of the units representing a Carrizo Partners Limited Partner
Interest attributable to an original capital contribution of $50,000 by an
Investor Limited Partner (as defined in the Carrizo Partners Partnership
Agreement) is 30,171 shares of Common Stock, and the aggregate Carrizo Partners
Merger Consideration with respect to all Carrizo Partners Limited Partner
Interests is 569,068 shares of Common Stock.

Carrizo Partners Partnership Agreement means the Agreement of Limited
Partnership of Carrizo Partners Ltd. dated January 7, 1994 as it has or may be
amended from time to time.

Carrizo Partners Partnership Agreement Amendmentmeans the proposed
amendment to the Carrizo Partners Partnership Agreement to permit the Carrizo
Partners Merger upon the approval of a majority in interest of the Carrizo
Partners Limited Partner Interests.

Closing means the closing of each of the Offering, the Encinitas
Purchase Closing (if consummated), the Production Merger (if consummated), the
Encinitas Merger (if consummated), the La Xxxx Merger (if consummated) and the
Carrizo Partners Merger (if consummated).

Closing Date means the date of the closing of the Offering, the
Encinitas Purchase Closing (if consummated), the Production Merger (if
consummated), the Encinitas Merger (if consummated), the La Xxxx Merger (if
consummated) and the Carrizo Partners Merger (if consummated).

Encinitas After Payout Consideration means, with respect to each
Encinitas Limited Partner Interest, the product of (i) 1,166,111 shares of
Common Stock (which is equal to the difference between (a) the Encinitas
Aggregate Valuation Shares and (b) the quotient of (1) the aggregate Encinitas
Before Payout Consideration with respect to all Encinitas Limited Partner
Interests, divided by (2) 98.58% (the aggregate Before Payout Percentages with
respect to all Encinitas Limited Partner Interests as set forth on Schedule
1.1(B) hereto)), multiplied by (ii) the percentage set forth on Schedule 1.1(B)
hereto as the After Payout Percentage with respect to such Encinitas Limited
Partner Interest. For purposes of clarity, it is agreed that the Encinitas
After Payout Consideration with respect to each of the units representing an
Encinitas Limited Partner Interest attributable to an original capital
contribution of $50,000 by an Additional Limited Partner (as

4
10
defined in the Encinitas Partnership Agreement) is 8,329 shares of Common
Stock, and the aggregate Encinitas After Payout Consideration with respect to
all Encinitas Limited Partner Interests is 829,932 shares of Common Stock.

Encinitas Aggregate Valuation Sharesmeans 1,672,500 shares of Common
Stock, which is equal to the number of shares of Common Stock that would be
issued to the partners of Encinitas if shares were being issued in respect of
all partner interests in Encinitas in the Encinitas Merger (it being
understood, however, that because no shares are being issued in respect of the
general partner interest in Encinitas in the Encinitas Merger, the number of
shares issuable in the Encinitas Merger will be less than the Encinitas
Aggregate Valuation Shares).

Encinitas Approvals means the approval of the Encinitas Partnership
Agreement Amendment by the general partner of Encinitas and a majority in
interest of the Encinitas Limited Partners Interests, in accordance with the
Encinitas Partnership Agreement, and the approval of the Encinitas Merger by
the partners of Encinitas in accordance with the Encinitas Partnership
Agreement, as amended by the Encinitas Partnership Agreement Amendment.

Encinitas Before Payout Consideration means, with respect to each
Encinitas Limited Partner Interest, the product of (i) 506,389 shares of Common
Stock (which is equal to the quotient of (a) $5,327,211 (which is the amount of
cash that if distributed with respect to all partner interests in Encinitas at
August 1, 1997 (the assumed Encinitas Effective Time (as defined in Section
4.3)) would result in distributions to the Additional Limited Partners in an
amount sufficient to cause a Conversion Date to occur (i.e., an amount that
would result in the aggregate amount of distributions to the Additional Limited
Partners being equal to the sum of the aggregate Capital Contributions of the
Additional Limited Partners, plus 20% per annum thereon from the Amendment
Date, compounded annually) minus the aggregate amount of distributions made by
Encinitas with respect to all partner interests in Encinitas prior to the
Encinitas Effective Time, divided by (b) the Share Valuation Price), multiplied
by (ii) the percentage set forth on Schedule 1.1(B) hereto as the Before Payout
Percentage with respect to such Encinitas Limited Partner Interest. For
purposes of clarity, it is agreed that the Encinitas Before Payout
Consideration with respect to each of the units representing an Encinitas
Limited Partner Interest attributable to an original capital contribution of
$50,000 by an Additional Limited Partner is 7,234 shares of Common Stock, and
the aggregate Encinitas Before Payout Consideration with respect to all
Encinitas Limited Partner Interests is 499,300 shares of Common Stock.
Capitalized terms used in this definition and not otherwise defined in this
Agreement shall have the meanings given to them in the Encinitas Partnership
Agreement.

Encinitas Limited Partner Interests means the limited partner
interests in Encinitas of the limited partners of Encinitas.

Encinitas Merger Consideration means, with respect to each Encinitas
Limited Partner Interest, the sum of the Encinitas Before Payout Consideration
and the Encinitas After Payout Consideration with respect to such Encinitas
Limited Partner Interest. For purposes of clarity, it is

5
11
agreed that the Encinitas Merger Consideration with respect to each of the
units representing an Encinitas Limited Partner Interest attributable to an
original capital contribution of $50,000 by an Additional Limited Partner (as
defined in the Encinitas Partnership Agreement) is 15,563 shares of Common
Stock, and the aggregate Encinitas Merger Consideration with respect to all
Encinitas Limited Partner Interests is 1,329,232 shares of Common Stock.

Encinitas Partnership Agreement means the Amended and Restated
Agreement of Limited Partnership of Encinitas Partners Ltd. as it has or may be
amended from time to time.

Encinitas Partnership Agreement Amendment means the proposed amendment
to the Encinitas Partnership Agreement to permit the Encinitas Merger upon the
approval of a majority in interest of the Encinitas Limited Partner Interests.

Encinitas Purchase Consideration means, with respect to each Founder,
the sum of the Encinitas Before Payout Consideration and the Encinitas After
Payout Consideration with respect to the Encinitas Limited Partner Interests
owned by such Founder.

La Xxxx Aggregate Valuation Shares means 48,700 shares of Common
Stock, which is equal to the number of shares of Common Stock that would be
issued to the partners of La Xxxx if shares were being issued in respect of all
partner interests in La Xxxx in the La Xxxx Merger (it being understood,
however, that because no shares are being issued in respect of the general
partner interest in La Xxxx in the La Xxxx Merger, the number of shares
issuable in the La Xxxx Merger will be less than the La Xxxx Aggregate
Valuation Shares).

La Xxxx Approvals means the approval of the La Xxxx Partnership
Agreement Amendment by the general partner of La Xxxx and a majority in
interest of the La Xxxx Limited Partners Interests, in accordance with the La
Xxxx Partnership Agreement, and the approval of the La Xxxx Merger by the
partners of La Xxxx in accordance with the La Xxxx Partnership Agreement, as
amended by the La Xxxx Partnership Agreement Amendment.

La Xxxx Limited Partner Interests means the limited partner interests
in La Xxxx of the limited partners of La Xxxx.

La Xxxx Merger Consideration means, with respect to each La Xxxx
Limited Partner Interest, the sum of the product of (i) the La Xxxx Aggregate
Valuation Shares multiplied by (ii) the percentage set forth on Schedule 1.1(C)
hereto with respect to such La Xxxx Limited Partner Interest.

La Xxxx Partnership Agreement means the Agreement of Limited
Partnership of La Xxxx Partners Ltd. dated March 26, 1996 as it may be amended
from time to time.

La Xxxx Partnership Agreement Amendment means the proposed amendment
to the La Xxxx Partnership Agreement to permit the La Xxxx Merger upon the
approval of a majority in interest of the La Xxxx Limited Partner Interests.

6
12
Mergers means the Production Merger, the Encinitas Merger, the La Xxxx
Merger and the Carrizo Partners Merger.

Offering Memorandum means the Offering Memorandum of the Company
dated June 6, 1997.

Production Merger Consideration means 70 shares of Common Stock (which
is equal to the whole number nearest to the quotient of (i) the difference
between (a) the Encinitas Aggregate Valuation Shares and (b) the sum of (1) the
aggregate Encinitas Merger Consideration in the Encinitas Merger with respect
to all Encinitas Limited Partner Interests and (2) the aggregate Encinitas
Purchase Consideration of all Founders, divided by (ii) 4,900 (the total number
of shares of Production's common stock currently outstanding and to be
outstanding at the Production Effective Time (as defined in Section 3.3))).

Shares means shares of Common Stock acquired pursuant to the
Combination Transactions.

Share Valuation Pricemeans $10.52 (which is the price per share of
Common Stock that was established by the Company for use in determining the
Carrizo Partners Merger Consideration and the Encinitas Merger Consideration
(it being understood that such price likely will differ, and may differ
significantly, from the sale price per share to the public of the Common Stock
in the Offering)).

Surviving Corporation means the Company, which shall be the surviving
corporation of each of the Mergers.

SECTION 1.2 COMBINATION TRANSACTIONS ORDER. The Combination
Transactions shall occur on the Closing Date in the following order: (a) the
Encinitas Purchase Closing, if consummated, immediately followed by (b) the
Production Merger, if consummated, immediately followed by (c) the Encinitas
Merger, the La Xxxx Merger and the Carrizo Partners Merger, which, if
consummated, shall occur simultaneously.

ARTICLE II.
THE ENCINITAS PURCHASE

SECTION 2.1 THE PURCHASE. Subject to the terms and conditions of this
Agreement, on the Closing Date, the Company will purchase and acquire from each
of the Founders, and each of the Founders will sell, assign and transfer to the
Company, all of his Encinitas Limited Partner Interests free and clear of any
liens, encumbrances or defects ("Liens").

SECTION 2.2 PURCHASE PRICE. In exchange for each Founder's Encinitas
Limited Partner Interests, the Company shall pay each such Founder his
Encinitas Purchase Consideration.

7
13
SECTION 2.3 CLOSING. The closing of the Encinitas Purchase (the
"Encinitas Purchase Closing"), if consummated, shall take place at the offices
of Xxxxx & Xxxxx, L.L.P., 000 Xxxxxxxxx, Xxxxxxx, Xxxxx 00000 (or at such other
place as the parties hereto shall mutually agree), on the Closing Date,
provided that the conditions set forth in Sections 14.1, 14.2 and 14.7 shall
have been fulfilled or waived in accordance with this Agreement.

SECTION 2.4 DELIVERIES AT CLOSING. At the Encinitas Purchase Closing,
each Founder shall deliver a duly executed assignment in form and substance
reasonably acceptable to the Company transferring his Encinitas Limited Partner
Interests to the Company and directions to the general partner of Encinitas to
transfer on the books of Encinitas such Founder's Encinitas Limited Partner
Interests to the Company. At or promptly following the Encinitas Purchase
Closing, the Company shall deliver to each Founder, in exchange for such
Founder's Encinitas Limited Partner Interests, a stock certificate from the
Company in the name of such Founder representing the number of shares of Common
Stock equal to such Founder's Encinitas Purchase Consideration, as set forth in
Section 2.2.

SECTION 2.5 CONSENT TO LIMITED PARTNER INTEREST TRANSFER. By its
execution of this Agreement, Production, as general partner of Encinitas,
consents to the transfer of any Encinitas Limited Partner Interests to the
Company or its permitted assigns pursuant to the Encinitas Purchase, and to
the admittance of the Company as an Encinitas Limited Partner in respect of
such transferred Encinitas Limited Partner Interests.

ARTICLE III.
THE PRODUCTION MERGER

SECTION 3.1 THE PRODUCTION MERGER. Subject to the terms and
conditions of this Agreement, at the Production Effective Time (as defined in
Section 3.3), Production shall be merged with and into the Company in
accordance with the Plan or Merger attached hereto as Exhibit A (the
"Production Plan of Merger"), which is hereby made a part hereof and
incorporated herein by reference, and the separate existence of Production
shall thereupon cease. The Company shall be the surviving corporation in the
Production Merger and shall continue to be governed by the laws of the State of
Texas, and the separate existence of the Company with all its rights,
privileges, immunities, and franchises shall continue unaffected by the
Production Merger. The Production Merger shall have the effect specified in
the Texas Business Corporation Act (the "TBCA") with respect to Production and
with respect to the Surviving Corporation.

SECTION 3.2 CLOSING. The closing of the Production Merger (the
"Production Merger Closing"), if consummated, shall take place at the offices
of Xxxxx & Xxxxx, L.L.P., 000 Xxxxxxxxx, Xxxxxxx, Xxxxx 00000 (or at such other
place as the parties hereto shall mutually agree), on the Closing Date,
provided that the conditions set forth in Sections 14.1, 14.3 and 14.7 shall
have been fulfilled or waived in accordance with this Agreement.

8
14
SECTION 3.3 PRODUCTION EFFECTIVE TIME. At the Production Closing,
Production and the Company will cause the Articles of Merger, including the
Production Plan of Merger incorporated by reference therein, to be filed with
the Secretary of State of the State of Texas as required by, and executed in
accordance with, the TBCA. The Production Merger shall become effective at the
time (the "Production Effective Time") specified in the Production Plan of
Merger.

SECTION 3.4 CONVERSION OF SHARES. As provided in the Production Plan
of Merger:

(a) at the Production Effective Time, by virtue of the Production
Merger and without any action on the part of the holder of any share of Common
Stock or capital stock of Production:

(i) subject to Section 3.4(b) and Article VII of the
Production Plan of Merger, each share of common stock of Production
("Production Common Stock") outstanding immediately prior to the
Production Effective Time, other than Production Common Stock that is
to be canceled pursuant to Section 3.4(a)(ii), shall be converted into
and represent the right to receive the Production Merger
Consideration, payable as provided in Section 3.5;

(ii) each share of Production Common Stock that is held by
Production or any subsidiary thereof as treasury stock immediately
prior to the Production Effective Time shall be canceled, and no
payment shall be made with respect thereto; and

(iii) each share of Common Stock outstanding immediately
prior to the Production Effective Time shall remain outstanding and
continue unchanged as one share of Common Stock; and

(b) no fractional shares of Common Stock shall be issued in the
Production Merger, and each holder of shares of Production Common Stock will
be issued a whole share of Common Stock in lieu of any fractional share
interest to which such holder would otherwise be entitled.

SECTION 3.5 SURRENDER AND EXCHANGE OF SHARES. (a) Promptly after the
Production Effective Time, the Surviving Corporation will send to each
recordholder of shares of Production Common Stock immediately prior to the
Production Effective Time (i) a letter of transmittal for use in exchanging
certificates representing shares of Production Common Stock for the Production
Merger Consideration and (ii) instructions for use in effecting the surrender
of the certificates representing shares of Production Common Stock in exchange
for certificates representing shares of Common Stock. Upon surrender of
certificates for Production Common Stock for cancellation to the Surviving
Corporation, together with a duly executed letter of transmittal and such other
documents as the Surviving Corporation shall reasonably require, the holder of
such certificates shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Common Stock into which
the shares of Production Common Stock theretofore represented by the
certificates for Production Common Stock so surrendered shall have been
converted pursuant to the provisions of Section 3.4, and the certificates for
Production Common Stock so surrendered shall be canceled. The letter of
transmittal shall (x) specify, among other things, that delivery shall be

9
15
effected, and risk of loss and title to the Production Common Stock shall pass,
only upon actual delivery of the certificates for shares of Production Common
Stock to the Surviving Corporation, (y) include provisions ensuring the rights
of each party hereunder including customary provisions and a statement that
satisfies the requirements of Treas. Reg. Section 1.1445-2(b)(2) certifying
that the holder submitting such letter of transmittal is not a "foreign person"
and provide that if such statement is not made, appropriate tax withholding
will be made from the Production Merger Consideration and (z) include the
representations and warranties set forth on Exhibit B hereto and other
provisions to ensure that the receipt by such holder of shares of Common Stock
otherwise complies with Regulation D promulgated under the Securities Act and
other applicable laws.

(b) Until surrendered in accordance with the terms hereof, each
certificate for shares of Production Common Stock shall after the Production
Effective Time represent for all purposes only the right to receive the
Production Merger Consideration. Unless and until so surrendered, no dividends
or other distributions payable to the holders of Common Stock, as to any time
on or after the Production Effective Time, will be paid to the holder of such
outstanding certificates.

(c) From and after the Production Effective Time, there shall be
no further registration of transfers on the books of Production of shares of
Production Common Stock that were outstanding immediately prior to the
Production Effective Time.

(d) Notwithstanding the foregoing, the Surviving Corporation shall
not be liable to any holder of shares of Production Common Stock for any amount
paid to a public official pursuant to applicable abandoned property laws. Any
amounts remaining unclaimed by holders of shares of Production Common Stock
three years after the Production Effective Time (or such earlier date
immediately prior to such time as such amounts would otherwise escheat to or
become property of any governmental entity) shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation free and clear
of any claims or interests of any person previously entitled thereto.

ARTICLE IV.
THE ENCINITAS MERGER

SECTION 4.1 THE ENCINITAS MERGER. Subject to the terms and conditions
of this Agreement, at the Encinitas Effective Time (as defined in Section 4.3),
Encinitas shall be merged with and into the Company in accordance with the Plan
of Merger attached hereto as Exhibit C (the "Encinitas Plan of Merger"), which
is hereby made a part hereof and incorporated herein by reference and the
separate existence of Encinitas shall thereupon cease. The Company shall be
the surviving corporation in the Encinitas Merger and shall continue to be
governed by the laws of the State of Texas, and the separate existence of the
Company with all its rights, privileges, immunities, and franchises shall
continue unaffected by the Encinitas Merger. The Encinitas Merger shall have
the effect specified in the Texas Revised Limited Partnership Act (the "TRLPA")
and the TBCA, respectively, with respect to Encinitas and with respect to the
Surviving Corporation.

10
16
SECTION 4.2 CLOSING. The closing of the Encinitas Merger (the
"Encinitas Merger Closing"), if consummated, shall take place at the offices of
Xxxxx & Xxxxx, L.L.P., 000 Xxxxxxxxx, Xxxxxxx, Xxxxx 00000 (or at such other
place as the parties hereto shall mutually agree), on the Closing Date,
provided that the conditions set forth in Sections 14.1, 14.4 and 14.7 shall
have been fulfilled or waived in accordance with this Agreement.

SECTION 4.3 EFFECTIVE TIME. At the Encinitas Closing, Encinitas and
the Company will cause the Articles of Merger, including the Encinitas Plan of
Merger incorporated by reference therein, to be filed with the Secretary of
State of the State of Texas as required by, and executed in accordance with,
the TRLPA and the TBCA. The Encinitas Merger shall become effective at the
time (the "Encinitas Effective Time") specified in the Encinitas Plan of
Merger.

SECTION 4.4 CONVERSION OF PARTNERSHIP INTERESTS. As provided in the
Encinitas Plan of Merger:

(a) at the Encinitas Effective Time, by virtue of the Encinitas
Merger and without any action on the part of the holder of any share of Common
Stock or partnership interest of Encinitas:

(i) subject to Section 4.4(b), all of the Encinitas
Limited Partner Interests outstanding immediately prior to the
Encinitas Effective Time, other than Encinitas Limited Partner
Interests that are to be canceled pursuant to Section 4.4(a)(ii),
shall be converted into and represent the right to receive the
Encinitas Merger Consideration, payable to the holder of such
Encinitas Limited Partner Interests as provided in Section 4.5;

(ii) any Encinitas Limited Partner Interests outstanding
immediately prior to the Encinitas Effective Time that are held by
Encinitas or any subsidiary thereof or by the Company (pursuant to the
Encinitas Purchase or otherwise) shall be canceled, and no payment
shall be made with respect thereto;

(iii) all general partner interests in Encinitas
outstanding immediately prior to the Encinitas Effective Time shall be
canceled, and no payment shall be made with respect thereto; and

(iv) each share of Common Stock outstanding immediately
prior to the Encinitas Effective Time shall remain outstanding and
continue unchanged as one share of Common Stock; and

(b) no fractional shares of Common Stock shall be issued in the
Encinitas Merger, and each holder of Encinitas Limited Partner Interests will
be issued the whole number of shares of Common Stock nearest to the number of
shares to which such holder would otherwise be entitled.

SECTION 4.5 SURRENDER AND EXCHANGE OF PARTNERSHIP INTERESTS. (a)
Promptly after the Encinitas Effective Time, the Surviving Corporation will
send to each recordholder of Encinitas

11
17
Limited Partner Interests immediately prior to the Encinitas Effective Time a
letter of transfer for use in delivery to such holder of the Encinitas Merger
Consideration. Upon delivery of a duly executed letter of transfer and such
other documents as the Surviving Corporation shall reasonably require, the
holder of such Encinitas Limited Partner Interests shall be entitled to receive
a certificate representing that number of whole shares of Common Stock into
which the Encinitas Limited Partner Interests shall have been converted
pursuant to the provisions of Section 4.4. The letter of transfer shall (x)
specify, among other things, that delivery shall be effected only upon actual
delivery of the letter of transfer to the Surviving Corporation, (y) include
provisions ensuring the rights of each party hereunder including customary
provisions and a statement that satisfies the requirements of Treas. Reg.
Section 1.1445-2(b)(2) certifying that the holder submitting such letter of
transfer is not a "foreign person" and provide that if such statement is not
made, appropriate tax withholding will be made from the Encinitas Merger
Consideration and (z) include the representations and warranties set forth on
Exhibit B hereto and other provisions to ensure that the receipt by such holder
of shares of Common Stock otherwise complies with Regulation D promulgated
under the Securities Act and other applicable laws.

(b) Until a letter of transfer with respect to each Encinitas
Limited Partner Interest is accepted by the Company in accordance with the
terms hereof, Encinitas Limited Partner Interests shall after the Encinitas
Effective Time represent for all purposes only the right to receive the
Encinitas Merger Consideration. Unless and until so surrendered, no dividends
or other distributions payable to the holders of Common Stock, as to any time
on or after the Encinitas Effective Time, will be paid to the holder of such
Encinitas Limited Partner Interests.

(c) From and after the Encinitas Effective Time, there shall be no
further registration of transfers on the books of Encinitas of Encinitas
Limited Partner Interests that were outstanding immediately prior to the
Encinitas Effective Time.

(d) Notwithstanding the foregoing, the Surviving Corporation shall
not be liable to any holder of Encinitas Limited Partner Interests for any
amount paid to a public official pursuant to applicable abandoned property
laws. Any amounts remaining unclaimed by holders of Encinitas Limited Partner
Interests three years after the Encinitas Effective Time (or such earlier date
immediately prior to such time as such amounts would otherwise escheat to or
become property of any governmental entity) shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation free and clear
of any claims or interests of any person previously entitled thereto.

SECTION 4.6 NO DISSENTERS' RIGHTS. Encinitas Limited Partners shall
have no appraisal, dissenters' or similar rights in connection with the
Encinitas Merger.

12
18
ARTICLE V.
THE LA XXXX MERGER

SECTION 5.1 THE LA XXXX MERGER. Subject to the terms and conditions
of this Agreement, at the La Xxxx Effective Time (as defined in Section 5.3),
La Xxxx shall be merged with and into the Company in accordance with the Plan
of Merger attached hereto as Exhibit D (the "La Xxxx Plan of Merger"), which is
hereby made a part hereof and incorporated herein by reference, and the
separate existence of La Xxxx shall thereupon cease. The Company shall be the
surviving corporation in the La Xxxx Merger and shall continue to be governed
by the laws of the State of Texas, and the separate existence of the Company
with all its rights, privileges, immunities, and franchises shall continue
unaffected by the La Xxxx Merger. The La Xxxx Merger shall have the effect
specified in the TRLPA and the TBCA, respectively, with respect to La Xxxx and
with respect to the Surviving Corporation.

SECTION 5.2 CLOSING. The closing of the La Xxxx Merger (the "La Xxxx
Merger Closing"), if consummated, shall take place at the offices of Xxxxx &
Xxxxx, L.L.P., 000 Xxxxxxxxx, Xxxxxxx, Xxxxx 00000 (or at such other place as
the parties hereto shall mutually agree), on the Closing Date, provided that
the conditions set forth in Sections 14.1, 14.5 and 14.7 shall have been
fulfilled or waived in accordance with this Agreement.

SECTION 5.3 EFFECTIVE TIME. At the La Xxxx Closing, La Xxxx and the
Company will cause the Articles of Merger, including the La Xxxx Plan of Merger
incorporated by reference therein, to be filed with the Secretary of State of
the State of Texas as required by, and executed in accordance with, the TRLPA
and the TBCA. The La Xxxx Merger shall become effective at the time (the "La
Xxxx Effective Time") specified in the La Xxxx Plan of Merger.

SECTION 5.4 CONVERSION OF PARTNERSHIP INTERESTS. As provided in the
La Xxxx Plan of Merger:

(a) at the La Xxxx Effective Time, by virtue of the La Xxxx Merger
and without any action on the part of the holder of any share of Common Stock
or partnership interest of La Xxxx:

(i) subject to Section 5.4(b), all of the La Xxxx Limited
Partner Interests outstanding immediately prior to the La Xxxx
Effective Time, other than La Xxxx Limited Partner Interests that are
to be canceled pursuant to Section 5.4(a)(ii), shall be converted into
and represent the right to receive the La Xxxx Merger Consideration,
payable to the holder of such La Xxxx Limited Partner Interests as
provided in Section 5.5;

(ii) any La Xxxx Limited Partner Interests outstanding
immediately prior to the La Xxxx Effective Time that are held by La
Xxxx or any subsidiary thereof or by the Company shall be canceled,
and no payment shall be made with respect thereto;

13
19
(iii) all general partner interests in La Xxxx outstanding
immediately prior to the La Xxxx Effective Time shall be canceled, and
no payment shall be made with respect thereto; and

(iv) each share of Common Stock outstanding immediately
prior to the La Xxxx Effective Time shall remain outstanding and
continue unchanged as one share of Common Stock; and

(b) no fractional shares of Common Stock shall be issued in the La
Xxxx Merger, and each holder of La Xxxx Limited Partner Interests will be
issued the whole number of shares of Common Stock nearest to the number of
shares to which such holder would otherwise be entitled.

SECTION 5.5 SURRENDER AND EXCHANGE OF PARTNERSHIP INTERESTS. (a)
Promptly after the La Xxxx Effective Time, the Surviving Corporation will send
to each recordholder of La Xxxx Limited Partner Interests immediately prior to
the La Xxxx Effective Time a letter of transfer for use in delivery to such
holder of the La Xxxx Merger Consideration. Upon delivery of a duly executed
letter of transfer and such other documents as the Surviving Corporation shall
reasonably require, the holder of such La Xxxx Limited Partner Interests shall
be entitled to receive a certificate representing that number of whole shares
of Common Stock into which the La Xxxx Limited Partner Interests shall have
been converted pursuant to the provisions of Section 5.4. The letter of
transfer shall (x) specify, among other things, that delivery shall be effected
only upon actual delivery of the letter of transfer to the Surviving
Corporation, (y) include provisions ensuring the rights of each party hereunder
including customary provisions and a statement that satisfies the requirements
of Treas. Reg. Section 1.1445-2(b)(2) certifying that the holder submitting
such letter of transfer is not a "foreign person" and provide that if such
statement is not made, appropriate tax withholding will be made from the La
Xxxx Merger Consideration and (z) include the representations and warranties
set forth on Exhibit B hereto and other provisions to ensure that the receipt
by such holder of shares of Common Stock otherwise complies with Regulation D
promulgated under the Securities Act and other applicable laws.

(b) Until a letter of transfer with respect to each La Xxxx
Limited Partner Interest is accepted by the Company in accordance with the
terms hereof, La Xxxx Limited Partner Interests shall after the La Xxxx
Effective Time represent for all purposes only the right to receive the La Xxxx
Merger Consideration. Unless and until so surrendered, no dividends or other
distributions payable to the holders of Common Stock, as to any time on or
after the La Xxxx Effective Time, will be paid to the holder of such La Xxxx
Limited Partner Interests.

(c) From and after the La Xxxx Effective Time, there shall be no
further registration of transfers on the books of La Xxxx of La Xxxx Limited
Partner Interests that were outstanding immediately prior to the La Xxxx
Effective Time.

(d) Notwithstanding the foregoing, the Surviving Corporation shall
not be liable to any holder of La Xxxx Limited Partner Interests for any amount
paid to a public official pursuant to

14
20
applicable abandoned property laws. Any amounts remaining unclaimed by holders
of La Xxxx Limited Partner Interests three years after the La Xxxx Effective
Time (or such earlier date immediately prior to such time as such amounts would
otherwise escheat to or become property of any governmental entity) shall, to
the extent permitted by applicable law, become the property of the Surviving
Corporation free and clear of any claims or interests of any person previously
entitled thereto.

SECTION 5.6 NO DISSENTERS' RIGHTS. La Xxxx Limited Partners shall
have no appraisal, dissenters' or similar rights in connection with the La Xxxx
Merger.

ARTICLE VI.
THE CARRIZO PARTNERS MERGER

SECTION 6.1 THE CARRIZO PARTNERS MERGER. Subject to the terms and
conditions of this Agreement, at the Carrizo Partners Effective Time (as
defined in Section 6.3), Carrizo Partners shall be merged with and into the
Company in accordance with the Plan of Merger attached hereto as Exhibit E (the
"Carrizo Partners Plan of Merger"), which is hereby incorporated herein by
reference, and the separate existence of Carrizo Partners shall thereupon
cease. The Company shall be the surviving corporation in the Carrizo Partners
Merger and shall continue to be governed by the laws of the State of Texas, and
the separate existence of the Company with all its rights, privileges,
immunities, and franchises shall continue unaffected by the Carrizo Partners
Merger. The Carrizo Partners Merger shall have the effect specified in the
TRLPA and the TBCA, respectively, with respect to Carrizo Partners and with
respect to the Surviving Corporation.

SECTION 6.2 CLOSING. The closing of the Carrizo Partners Merger (the
"Carrizo Partners Merger Closing"), if consummated, shall take place at the
offices of Xxxxx & Xxxxx, L.L.P., 000 Xxxxxxxxx, Xxxxxxx, Xxxxx 00000 (or at
such other place as the parties hereto shall mutually agree), on the Closing
Date, provided that the conditions set forth in Sections 14.1, 14.6 and 14.7
shall have been fulfilled or waived in accordance with this Agreement.

SECTION 6.3 EFFECTIVE TIME. At the Carrizo Partners Closing, Carrizo
Partners and the Company will cause the Articles of Merger, including the
Carrizo Partners Plan of Merger incorporated by reference therein, to be filed
with the Secretary of State of the State of Texas as required by, and executed
in accordance with, the TRLPA and the TBCA. The Carrizo Partners Merger shall
become effective at the time (the "Carrizo Partners Effective Time") specified
in the Carrizo Partners Plan of Merger.

15
21
SECTION 6.4 CONVERSION OF PARTNERSHIP INTERESTS. As provided in the
Carrizo Partners Plan of Merger:

(a) at the Carrizo Partners Effective Time, by virtue of the
Carrizo Partners Merger and without any action on the part of the holder of any
share of Common Stock or partnership interest of Carrizo Partners:

(i) subject to Section 6.4(b), all of the Carrizo
Partners Limited Partner Interests outstanding immediately prior to
the Carrizo Partners Effective Time, other than Carrizo Partners
Limited Partner Interests that are to be canceled pursuant to Section
6.4(a)(ii), shall be converted into and represent the right to receive
the Carrizo Partners Merger Consideration, payable to the holder of
such Carrizo Partners Limited Partner Interests as provided in Section
6.5;

(ii) any Carrizo Partners Limited Partner Interests
outstanding immediately prior to the Carrizo Partners Effective Time
that are held by Carrizo Partners or any subsidiary thereof or by the
Company shall be canceled, and no payment shall be made with respect
thereto;

(iii) all general partner interests in Carrizo Partners
outstanding immediately prior to the Carrizo Partners Effective Time
shall be canceled, and no payment shall be made with respect thereto;
and

(iv) each share of Common Stock outstanding immediately
prior to the Carrizo Partners Effective Time shall remain outstanding
and continue unchanged as one share of Common Stock; and

(b) no fractional shares of Common Stock shall be issued in the
Carrizo Partners Merger, and each holder of Carrizo Partners Limited Partner
Interests will be issued the whole number of shares of Common Stock nearest to
the number of shares to which such holder would otherwise be entitled.

SECTION 6.5 SURRENDER AND EXCHANGE OF PARTNERSHIP INTERESTS. (a)
Promptly after the Carrizo Partners Effective Time, the Surviving Corporation
will send to each recordholder of Carrizo Partners Limited Partner Interests
immediately prior to the Carrizo Partners Effective Time a letter of transfer
for use in delivery to such holder of the Carrizo Partners Merger
Consideration. Upon delivery of a duly executed letter of transfer and such
other documents as the Surviving Corporation shall reasonably require, the
holder of such Carrizo Partners Limited Partner Interests shall be entitled to
receive a certificate representing that number of whole shares of Common Stock
into which the Carrizo Partners Limited Partner Interests shall have been
converted pursuant to the provisions of Section 4.7. The letter of transfer
shall (x) specify, among other things, that delivery shall be effected only
upon actual delivery of the letter of transfer to the Surviving Corporation,
(y) include provisions ensuring the rights of each party hereunder including
customary provisions and

16
22
a statement that satisfies the requirements of Treas. Reg. Section
1.1445-2(b)(2) certifying that the holder submitting such letter of transfer is
not a "foreign person" and provide that if such statement is not made,
appropriate tax withholding will be made from the Carrizo Partners Merger
Consideration and (z) include the representations and warranties set forth on
Exhibit B hereto and a statement that the holder submitting such letter of
transfer is an Accredited Investor and other provisions to ensure that the
receipt by such holder of shares of Common Stock otherwise complies with
Regulation D promulgated under the Securities Act and other applicable laws.

(b) Until a letter of transfer with respect to each Carrizo
Partners Limited Partner Interest is accepted by the Company in accordance with
the terms hereof, Carrizo Partners Limited Partner Interests shall after the
Carrizo Partners Effective Time represent for all purposes only the right to
receive the Carrizo Partners Merger Consideration. Unless and until so
surrendered, no dividends or other distributions payable to the holders of
Common Stock, as to any time on or after the Carrizo Partners Effective Time,
will be paid to the holder of such Carrizo Partners Limited Partner Interests.

(c) From and after the Carrizo Partners Effective Time, there
shall be no further registration of transfers on the books of Carrizo Partners
of Carrizo Partners Limited Partner Interests that were outstanding immediately
prior to the Carrizo Partners Effective Time.

(d) Notwithstanding the foregoing, the Surviving Corporation shall
not be liable to any holder of Carrizo Partners Limited Partner Interests for
any amount paid to a public official pursuant to applicable abandoned property
laws. Any amounts remaining unclaimed by holders of Carrizo Partners Limited
Partner Interests three years after the Carrizo Partners Effective Time (or
such earlier date immediately prior to such time as such amounts would
otherwise escheat to or become property of any governmental entity) shall, to
the extent permitted by applicable law, become the property of the Surviving
Corporation free and clear of any claims or interests of any person previously
entitled thereto.

SECTION 6.6 NO DISSENTERS' RIGHTS. Carrizo Partners Limited Partners
shall have no appraisal, dissenters' or similar rights in connection with the
Carrizo Partners Merger.

ARTICLE VII.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants the following to each of
the other parties hereto. Except as set forth in the Offering Memorandum:

SECTION 7.1 ORGANIZATION; QUALIFICATION. The Company is a corporation
duly organized under the TBCA and is validly existing and in good standing
under the laws of the State of Texas. The Company has all requisite corporate
power and authority to own, operate or lease its properties and to carry on its
business as now being conducted.

17
23
SECTION 7.2 CAPITALIZATION OF THE COMPANY. The authorized capital
stock of the Company consists solely of 40,000,000 shares of Common Stock and
10,000,000 shares of preferred stock, par value $0.01 per share. As of the
date hereof (taking into account the 521-for-one stock split that has been
approved by the Board of Directors of the Company) 5,210,000 shares of Common
Stock and no shares of preferred stock are outstanding, as well as outstanding
options to purchase 208,400 shares of Common Stock. All outstanding shares of
capital stock of the Company are, and the shares of Common Stock to be issued
pursuant to this Agreement, when issued in accordance with the terms hereof and
thereof, will be, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights.

SECTION 7.3 NO CONFLICTS. Subject to the Company Shareholder Approval
(as defined in Section 13.1), consummation of the transactions contemplated
hereby and compliance with the terms and provisions of this Agreement will not
conflict with, result in a breach of, require notice under or constitute a
default under either the Company's Articles of Incorporation or Bylaws or any
judgment, order, injunction, decree or ruling of any court or governmental
authority or under any material agreement, indenture or instrument to which the
Company is a party. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court or governmental authority
or other third party is required on the part of the Company in connection with
the execution and delivery of this Agreement or for the consummation by the
Company of the transactions contemplated by this Agreement, other than the
Company Shareholder Approval and filings with the Secretary of State of the
State of Texas in connection with the Mergers or filings pursuant to federal or
state securities laws.

SECTION 7.4 AUTHORITY AND AUTHORIZATION; BINDING EFFECT. The Company
has all requisite corporate power and authority to execute and deliver this
Agreement and, subject to the Company Shareholder Approval, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and, subject to the Company Shareholder Approval, the consummation by the
Company of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company. This Agreement has
been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by the other parties hereto,
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and
rules of law governing specific performance, injunctive relief or other
equitable remedies.

SECTION 7.5 LITIGATION, ETC. (a) There is no action, claim or
proceeding pending or, to the knowledge of the Company, threatened to which the
Company is or would be party before any court or governmental authority acting
in an adjudicative capacity or any arbitration or arbitration tribunal with
respect to which there is a reasonable likelihood of a determination having, or
which, insofar as reasonably can be foreseen, in the future would have a
material adverse effect on the Company, (b) the Company is not subject to any
outstanding order, writ, injunction or decree having, or which, insofar as
reasonably can be foreseen, in the future would have a material adverse effect
on the Company, and (c) since its formation, there have been no claims made or
actions or proceedings

18
24
brought against any officer or director of the Company arising out of or
pertaining to any action or omission within the scope of his employment or
position with the Company, which claim, action or proceeding is material to the
Company.

SECTION 7.6 FINANCIAL STATEMENTS OF THE COMPANY. Each of the balance
sheets of the Company included in the Offering Memorandum (including the
related notes and schedules) fairly presents, in all material respects, the
financial position of the Company as of its date, and each of the statements of
income and changes in financial position included in the Offering Memorandum
(including any related notes and schedules) fairly presents the results of
operations, shareholders' equity, retained earning and changes in financial
position, as the case may be, of the Company for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments not material in amount of effect), in each case in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except as may be noted therein. Since December 31, 1996, no
dividends, distributions, repurchases of interests or any other payment has
been made to any equityholder of the Company as such. The Company did not have
on December 31, 1996 or the date of any subsequent balance sheet of the
Company, any material contingent liabilities, liabilities for taxes,
obligations, guarantees or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
the balance sheet, including the notes thereto, of the Company as of said date.
Since December 31, 1996, there has been no material adverse change in the
financial condition, assets or operation of the business of the Company.

SECTION 7.7 COMPLIANCE WITH LAWS. The operations of the Company do
not violate any federal, state, local or other laws or regulations or any order
or requirement of any court or governmental agency or authority in any material
respect, including without limitation those laws, regulations, orders or
requirements relating to environment or health. Such operations are not
subject to any existing, pending or, to the knowledge of the Company,
threatened action, suit, investigation, inquiry or proceeding by or before any
court or governmental agency or authority under any federal, state or local
environmental law, rule or regulation, except in each case for any matter that
would not have a material adverse effect on the Company.

ARTICLE VIII.
REPRESENTATIONS AND WARRANTIES OF THE FOUNDERS

Each of the Founders hereby represents and warrants the following to
the Company (with each Founder making representations and warranties solely
with respect to that Founder). Except as set forth on the Founders Disclosure
Schedule, attached hereto as Exhibit F:

SECTION 8.1 OWNERSHIP. The Founders Disclosure Schedule sets forth
the true and correct Encinitas Limited Partner Interests owned by such Founder.
The Founder owns its Encinitas Limited Partner Interest free and clear of all
Liens.

19
25
SECTION 8.2 NO CONFLICTS. Consummation of the transactions
contemplated hereby and compliance with the terms and provisions of this
Agreement will not conflict with, result in a breach of, require notice or
consent under or constitute a default under any judgment, order, injunction,
decree or ruling of any court or governmental authority or under any material
agreement, indenture or instrument to which the Founder is a party. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any court or governmental authority or other third party is
required on the part of the Founder in connection with the execution and
delivery of this Agreement or for the consummation of the transactions
contemplated by this Agreement.

SECTION 8.3 AUTHORITY AND AUTHORIZATION; BINDING EFFECT. The Founder
has all requisite authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by the Founder and, assuming the due authorization,
execution and delivery hereof by the other parties hereto, constitutes a valid
and binding obligation of the Founder enforceable against the Founder in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.

SECTION 8.4 EXPERIENCE; STATUS. (a) The Founder has experience in
analyzing and investing in companies like the Company and is capable of
evaluating the merits and risks of his investment in the Company and has the
capacity to protect his own interests. To the extent necessary, the Founder
has retained, at his own expense, and relied upon, appropriate professional
advice regarding the investment, tax and legal merits and consequences of the
Combination Transactions, or any part thereof, and owning Shares, it being
understood that the Company has not retained legal or financial advisors on
behalf of the Founder.

(b) The Founder is an Accredited Investor, is able to bear the
economic risk of his investment in the Shares and has sufficient net worth to
sustain a loss of his entire investment in the Company without economic
hardship if such loss should occur.

SECTION 8.5 ACCESS TO COMPANY INFORMATION. (a) The Founder has had
an opportunity to discuss the Company's business, management and financial
affairs with the members of the Company's management and has had the
opportunity to review the Company's facilities. The Founder has also had an
opportunity to ask questions of the officers of the Company, which questions
were answered to his satisfaction. The Founder acknowledges that he is familiar
with all aspects of the Company's business.

(b) The Founder has received and carefully reviewed a copy of the
Offering Memorandum. The Founder understands that information in such Offering
Memorandum is preliminary and subject to change. The Founder acknowledges that
he has reviewed the information in such Offering Memorandum solely for general
background purposes and that, in particular, information with respect to the
Offering and the Combination Transactions is expected to change prior to the
Closing. The Founder recognizes that he will receive no supplement or
amendment to such Offering Memorandum. The Founder acknowledges that his
investment decision is based

20
26
primarily on his familiarity with the assets the Company currently owns and is
expected to acquire and the Company's management.

(c) The Founder has received no representations or warranties from
the Company, or its employees, affiliates, attorneys, accountants or agents,
except as set forth in this Agreement.

(d) The Founder understands that the purchase of the Shares
involves numerous risks, including those outlined in the Offering Memorandum.

SECTION 8.6 INVESTMENT PURPOSES; RULE 144. (a) The Founder is
acquiring Shares solely for investment for his own account, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
distribution thereof. The Founder understands that the Shares have not been
registered under the Securities Act or applicable state and other securities
laws by reason of a specific exemption from the registration provisions of the
Securities Act and applicable state and other securities laws, the availability
of which depends upon, among other things, the bona fide nature of the
investment intent and the accuracy of the Founders' representations as
expressed herein. The Founder understands that the Company is relying, in
part, upon the representations and warranties contained in this Agreement for
the purpose of determining whether the Combination Transactions meet the
requirements for such exemptions.

(b) The Founder acknowledges and understands that he must bear the
economic risk of his investment in the Shares for an indefinite period of time
because the Shares must be held indefinitely unless subsequently registered
under the Securities Act and applicable state and other securities laws or
unless an exemption from such registration is available. The Founder
understands that, except as described in the Offering Memorandum, the Company
has not agreed to and does not plan to file a registration statement to
register the resale of the Shares under the Securities Act.

(c) The Founder is aware of the current provisions of Rule 144
promulgated under the Securities Act ("Rule 144") which permit limited resale
of securities purchased in a private placement subject to the satisfaction of
certain conditions, including among other things, the existence of a public
market for the securities, the availability of certain current public
information about the issuer of the securities, the resale occurring not less
than one year after a party has purchased from an issuer or its affiliate and
paid the full purchase price for the securities to be sold, the sale being
effected through a "broker's transaction" or in transactions directly with a
"market maker" and the number of securities being sold during any three-month
period not exceeding specified limitations. The Founder understands that any
transfer agent of the Company will be issued stop-transfer instructions with
respect to such Shares unless such transfer is subsequently registered under
the Securities Act and applicable state and other securities laws or unless an
exemption from such registration is available. The Founder understands that
for purposes of Rule 144, he will be deemed an affiliate of the Company.

21
27
(d) The Founder acknowledges and agrees that the foregoing
representations are true as of the date hereof, the time of receipt of Shares
and the time of the vote on and effective time of any merger or other
transaction that resulted in the issuance of Shares.

SECTION 8.7 ADDITIONAL RESTRICTION ON TRANSFER. The Founder has
received a copy of the Amended and Restated Bylaws of the Company and
understands that the Shares will be subject to the restrictions on transfer
contained in Article I of such Bylaws. The Founder also acknowledges the
restrictions on transfer of the Shares in Section 16.3 of this Agreement.

ARTICLE IX.
REPRESENTATIONS AND WARRANTIES OF PRODUCTION

Production hereby represents and warrants the following to the
Company. Except as set forth on the Production Disclosure Schedule, attached
hereto as Exhibit G:

SECTION 9.1 ORGANIZATION; QUALIFICATION. Production is a corporation
duly organized under the TBCA and is validly existing and in good standing
under the laws of the State of Texas. Production has all requisite corporate
power and authority to own, operate or lease its properties and to carry on its
business as now being conducted.

SECTION 9.2 CAPITALIZATION. The authorized capital stock of
Production consists solely of 100,000 shares of common stock, par value $0.01
per share, of which 4,900 shares are outstanding as of the date hereof and will
be outstanding as of the Production Effective Time. Production does not, and
will not as of the Closing Date, have any outstanding subscriptions, options or
other arrangements or commitments obligating it to issue any additional shares
of capital stock. All outstanding shares of capital stock of Production are
duly authorized, validly issued, fully paid and nonassessable and not subject
to preemptive rights.

SECTION 9.3 NO CONFLICTS. Subject to the Production Shareholder
Approval (as defined in Section 13.1), consummation of the transactions
contemplated hereby and compliance with the terms and provisions of this
Agreement will not conflict with, result in a breach of, require notice or
consent under or constitute a default under Production's Articles of
Incorporation or Bylaws or any judgment, order, injunction, decree or ruling of
any court or governmental authority or under any material agreement, indenture
or instrument to which Production is a party. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court or
governmental authority or other third party is required on the part of
Production in connection with the execution and delivery of this Agreement or
for the consummation by Production of the transactions contemplated by this
Agreement other than the Production Shareholder Approval and filings with the
Secretary of State of the State of Texas in connection with the Production
Merger.

SECTION 9.4 AUTHORITY AND AUTHORIZATION; BINDING EFFECT. Production
has all requisite corporate power and authority to execute and deliver this
Agreement and, subject to the Production

22
28
Shareholder Approval, to consummate the transactions involving Production
contemplated hereby. The execution and delivery of this Agreement and, subject
to the Production Shareholder Approval, the consummation of the transactions by
Production contemplated hereby have been duly authorized by all necessary
corporate action on the part of Production. This Agreement has been duly
executed and delivered by Production and, assuming the due authorization,
execution and delivery hereof by the other parties hereto, constitutes a valid
and binding obligation of Production enforceable against Production in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.

SECTION 9.5 LITIGATION, ETC. (a) There is no action, claim, or
proceeding pending or, to the knowledge of Production, threatened, to which
Production is or would be a party before any court or governmental authority
acting in an adjudicative capacity or any arbitrator or arbitration tribunal
with respect to which there is a reasonable likelihood of a determination
having, or which, insofar as reasonably can be foreseen, in the future would
have a material adverse effect on Production, (b) Production is not subject to
any outstanding order, writ, injunction or decree having, or which, insofar as
reasonably can be foreseen, in the future would have a material adverse effect
on Production, and (c) there have been no claims made or actions or proceedings
brought against any officer or director of Production arising out of or
pertaining to any action or omission within the scope of his employment or
position with Production, which claim, action or proceeding is material to
Production.

SECTION 9.6 FINANCIAL STATEMENTS OF PRODUCTION. Each of the balance
sheets of Production included in the Offering Memorandum (including the related
notes and schedules) fairly presents, in all material respects, the financial
position of Production as of its date, and each of the statements of income and
changes in financial position included in the Offering Memorandum (including
any related notes and schedules) fairly presents the results of operations,
stockholders' equity, retained earning and changes in financial position, as
the case may be, of Production for the periods set forth therein (subject, in
the case of unaudited statements, to normal year-end audit adjustments not
material in amount of effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved, except as may be noted therein. Since December 31, 1996, no
dividends, distributions, repurchases of interests or any other payment has
been made to any equityholder of Production as such. Production did not have
on December 31, 1996 or the date of any subsequent balance sheet of Production,
any material contingent liabilities, liabilities for taxes, obligations,
guarantees or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in the balance
sheet, including the notes thereto, of Production as of said date. Since
December 31, 1996, there has been no material adverse change in the financial
condition, assets or operation of the business of Production.

SECTION 9.7 OWNERSHIP OF ENCINITAS. Production owns its general
partner interest in Encinitas free and clear of all Liens.

23
29
SECTION 9.8 COMPLIANCE WITH LAWS. The operations of Production do not
violate any federal, state, local or other laws or regulations or any order or
requirement of any court or governmental agency or authority in any material
respect, including without limitation those laws, regulations, orders or
requirements relating to environment or health. Such operations are not
subject to any existing, pending or, to the knowledge of Production, threatened
action, suit, investigation, inquiry or proceeding by or before any court or
governmental agency or authority under any federal, state or local
environmental law, rule or regulation, except in each case for any matter that
would not have a material adverse effect on Production.

SECTION 9.9 LIMITED PARTNERS. To the knowledge of Production, as the
general partner of Encinitas, all of the Encinitas Limited Partners are
Accredited Investors.

ARTICLE X.
REPRESENTATIONS AND WARRANTIES OF ENCINITAS

Encinitas hereby represents and warrants the following to the Company.
Except as set forth on the Encinitas Disclosure Schedule, attached hereto as
Exhibit H:

SECTION 10.1 FORMATION; QUALIFICATION. Encinitas is a limited
partnership duly formed under Texas law and is validly existing and in good
standing under the laws of the State of Texas. Encinitas has all requisite
partnership power and authority to own, operate or lease its properties and to
carry on its business as now being conducted.

SECTION 10.2 CAPITALIZATION. Production is the sole general partner
of Encinitas and owns all the general partner interests in Encinitas free and
clear of all Liens. All the outstanding limited and general partner interests
of Encinitas are duly authorized, validly issued, fully paid to the extent
required under the Encinitas Partnership Agreement and nonassessable (except as
provided by Texas partnership law) and were issued free of preemptive rights.
Encinitas does not, and will not as of the Closing Date, have any outstanding
subscriptions, options or other arrangements or commitments obligating
Encinitas to issue any additional limited or general partner interests.
Immediately prior to the Encinitas Effective Time, there will be no outstanding
interests in Encinitas other than those set forth in the Encinitas Partnership
Agreement, a true and correct copy of which has heretofore been delivered to
the Company.

SECTION 10.3 NO CONFLICTS. Assuming the Encinitas Approvals,
consummation of the transactions contemplated hereby and compliance with the
terms and provisions of this Agreement will not materially conflict with,
result in a material breach of, require notice or consent under or constitute a
material breach under the Encinitas Partnership Agreement or the certificate of
limited partnership of Encinitas or any judgment, order, injunction, decree or
ruling of any court or governmental authority or under any material agreement,
indenture or instrument to which Encinitas or the general partner of Encinitas
is a party. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court or governmental authority or other third
party is

24
30
required on the part of Encinitas or the general partner of Encinitas in
connection with the execution and delivery of this Agreement or for the
consummation by Encinitas of the transactions contemplated by this Agreement,
other than the Encinitas Approvals. There are no agreements or arrangements
regarding the management or internal governance of Encinitas or relating to the
allocation of its assets, revenues or costs other than the Encinitas
Partnership Agreement.

SECTION 10.4 AUTHORITY AND AUTHORIZATION; BINDING EFFECT. Encinitas
has all requisite partnership power and authority to enter into and, subject
to the Encinitas Approvals, perform the provisions of this Agreement involving
Encinitas. The execution and delivery of this Agreement and the consummation
by Encinitas of the transactions contemplated hereby have been duly authorized
by all necessary partnership action on the part of Encinitas, subject to the
Encinitas Approvals. Subject to such approvals, this Agreement has been duly
executed and delivered by Encinitas and, assuming the due authorization,
execution and delivery hereof by the other parties hereto, constitutes a valid
and binding obligation of Encinitas enforceable against Encinitas in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies.

SECTION 10.5 LITIGATION, ETC. (a) There is no action, claim or
proceeding pending or, to the knowledge of Encinitas, threatened, to which
Encinitas is or would be a party before any court or governmental authority
acting in an adjudicative capacity or any arbitrator or arbitration tribunal
with respect to which there is a reasonable likelihood of a determination
having, or which, insofar as reasonably can be foreseen, in the future would
have a material adverse effect on Encinitas, (b) Encinitas is not subject to
any outstanding order, writ, injunction or decree having, or which, insofar as
reasonably can be foreseen, in the future would have a material adverse effect
on Encinitas, and (c) there have been no claims made or actions or proceedings
brought against any officer or director of the general partner of Encinitas
arising out of or pertaining to any action or omission within the scope of his
employment or position as an officer or director of the general partner of
Encinitas, which claim, action or proceeding is material to Encinitas.

SECTION 10.6 FINANCIAL STATEMENTS OF ENCINITAS. Each of the balance
sheets of Encinitas included in the Offering Memorandum (including the related
notes and schedules) fairly presents, in all material respects, the financial
position of Encinitas as of its date, and each of the statements of income and
changes in financial position included in the Offering Memorandum (including
any related notes and schedules) fairly presents the results of operations,
partners' equity, retained earnings and changes in financial position, as the
case may be, of Encinitas for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments not material
in amount or effect), in each case in accordance with generally accepted
accounting principles consistently applied during the periods involved, except
as may be noted therein. Since December 31, 1996, no distributions, repurchases
of interests or any other payment has been made to any equityholder of
Encinitas as such. Encinitas did not have on December 31, 1996 or the date of
any subsequent balance sheet of Encinitas, any material contingent liabilities,
liabilities for taxes, obligations, guarantees or unrealized or anticipated
losses from any unfavorable commitments,

25
31
except as referred to or reflected or provided for in the balance sheet,
including the notes thereto, of Encinitas as of said date. Since December 31,
1996, there has been no material adverse change in the financial condition,
assets or operation of the business of Encinitas.

SECTION 10.7 COMPLIANCE WITH LAWS. The operations of Encinitas do not
violate any federal, state, local or other laws or regulations or any order or
requirement of any court or governmental agency or authority in any material
respect, including without limitation those laws, regulations, orders or
requirements relating to environment or health. Such operations are not
subject to any existing, pending or, to the knowledge of Encinitas, threatened
action, suit, investigation, inquiry or proceeding by or before any court or
governmental agency or authority under any federal, state or local
environmental law, rule or regulation, except in each case for any matter that
would not have a material adverse effect on Encinitas.

SECTION 10.8 LIMITED PARTNERS. The general partner of Encinitas
believes, based upon its prior substantive relationship with each of the
Encinitas Limited Partners, that each of the Encinitas Limited Partners are
Accredited Investors and that each of the other representations and warranties
set forth on Exhibit B hereto are true and correct with respect to each of the
Encinitas Limited Partners to the same extent as if such limited partners had
signed such Exhibit B.

ARTICLE XI.
REPRESENTATIONS AND WARRANTIES OF LA XXXX

Xx Xxxx hereby represents and warrants the following to the Company.
Except as set forth on the La Xxxx Disclosure Schedule, attached hereto as
Exhibit I:

SECTION 11.1 FORMATION; QUALIFICATION. La Xxxx is a limited
partnership duly formed under Texas law and is validly existing and in good
standing under the laws of the State of Texas. La Xxxx has all requisite
partnership power and authority to own, operate or lease its properties and to
carry on its business as now being conducted.

SECTION 11.2 CAPITALIZATION. The Company is the sole general partner
of La Xxxx and owns all the general partner interests in La Xxxx free and clear
of all Liens. All the outstanding limited and general partner interests of La
Xxxx are duly authorized, validly issued, fully paid to the extent required
under the La Xxxx Partnership Agreement and nonassessable (except as provided
by Texas partnership law) and were issued free of preemptive rights. La Xxxx
does not, and will not as of the Closing Date, have any outstanding
subscriptions, options or other arrangements or commitments obligating La Xxxx
to issue any additional limited or general partner interests. Immediately
prior to the La Xxxx Effective Time, there will be no outstanding interests in
La Xxxx other than those set forth in the La Xxxx Partnership Agreement, a true
and correct copy of which has heretofore been delivered to the Company.

26
32
SECTION 11.3 NO CONFLICTS. Assuming the La Xxxx Approvals,
consummation of the transactions contemplated hereby and compliance with the
terms and provisions of this Agreement will not materially conflict with,
result in a material breach of, require notice or consent under or constitute a
material breach under the La Xxxx Partnership Agreement or the certificate of
limited partnership of La Xxxx or any judgment, order, injunction, decree or
ruling of any court or governmental authority or under any material agreement,
indenture or instrument to which La Xxxx or the general partner of La Xxxx is a
party. No consent, approval, order or authorization of, or registration,
declaration or filing with, any court or governmental authority or other third
party is required on the part of La Xxxx or the general partner of La Xxxx in
connection with the execution and delivery of this Agreement or for the
consummation by La Xxxx of the transactions contemplated by this Agreement,
other than the La Xxxx Approvals. There are no agreements or arrangements
regarding the management or internal governance of La Xxxx or relating to the
allocation of its assets, revenues or costs other than the La Xxxx Partnership
Agreement.

SECTION 11.4 AUTHORITY AND AUTHORIZATION; BINDING EFFECT. La Xxxx has
all requisite partnership power and authority to enter into and, subject to
the La Xxxx Approvals, perform the provisions of this Agreement involving La
Xxxx. The execution and delivery of this Agreement and the consummation by La
Xxxx of the transactions contemplated hereby have been duly authorized by all
necessary partnership action on the part of La Xxxx, subject to the La Xxxx
Approvals. Subject to such approvals, this Agreement has been duly executed
and delivered by La Xxxx and, assuming the due authorization, execution and
delivery hereof by the other parties hereto, constitutes a valid and binding
obligation of La Xxxx enforceable against La Xxxx in accordance with its terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies.

SECTION 11.5 LITIGATION, ETC. (a) There is no action, claim or
proceeding pending or, to the knowledge of La Xxxx, threatened, to which La
Xxxx is or would be a party before any court or governmental authority acting
in an adjudicative capacity or any arbitrator or arbitration tribunal with
respect to which there is a reasonable likelihood of a determination having, or
which, insofar as reasonably can be foreseen, in the future would have a
material adverse effect on La Xxxx, (b) La Xxxx is not subject to any
outstanding order, writ, injunction or decree having, or which, insofar as
reasonably can be foreseen, in the future would have a material adverse effect
on La Xxxx, and (c) there have been no claims made or actions or proceedings
brought against any officer or director of the general partner of La Xxxx
arising out of or pertaining to any action or omission within the scope of his
employment or position as an officer or director of the general partner of La
Xxxx, which claim, action or proceeding is material to La Xxxx.

SECTION 11.6 FINANCIAL STATEMENTS OF LA XXXX. Each of the balance
sheets of La Xxxx included in the Offering Memorandum (including the related
notes and schedules) fairly presents, in all material respects, the financial
position of La Xxxx as of its date, and each of the statements of income and
changes in financial position included in the Offering Memorandum (including
any related notes and schedules) fairly presents the results of operations,
partners' equity, retained earnings and changes in financial position, as the
case may be, of La Xxxx for the periods set forth

27
33
therein (subject, in the case of unaudited statements, to normal year-end audit
adjustments not material in amount or effect), in each case in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except as may be noted therein. Since December 31, 1996, no
distributions, repurchases of interests or any other payment has been made to
any equityholder of La Xxxx as such. La Xxxx did not have on December 31, 1996
or the date of any subsequent balance sheet of La Xxxx, any material contingent
liabilities, liabilities for taxes, obligations, guarantees or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in the balance sheet, including the notes thereto, of
La Xxxx as of said date. Since December 31, 1996, there has been no material
adverse change in the financial condition, assets or operation of the business
of La Xxxx.

SECTION 11.7 COMPLIANCE WITH LAWS. The operations of La Xxxx do not
violate any federal, state, local or other laws or regulations or any order or
requirement of any court or governmental agency or authority in any material
respect, including without limitation those laws, regulations, orders or
requirements relating to environment or health. Such operations are not
subject to any existing, pending or, to the knowledge of La Xxxx, threatened
action, suit, investigation, inquiry or proceeding by or before any court or
governmental agency or authority under any federal, state or local
environmental law, rule or regulation, except in each case for any matter that
would not have a material adverse effect on La Xxxx.

SECTION 11.8 LIMITED PARTNERS. The general partner of La Xxxx
believes, based upon its prior substantive relationship with each of the La
Xxxx Limited Partners, that each of the La Xxxx Limited Partners are Accredited
Investors and that each of the other representations and warranties set forth
on Exhibit B hereto are true and correct with respect to each of the La Xxxx
Limited Partners to the same extent as if such limited partners had signed such
Exhibit B.

ARTICLE XII.
REPRESENTATIONS AND WARRANTIES OF CARRIZO PARTNERS

Carrizo Partners hereby represents and warrants the following to the
Company. Except as set forth on the Carrizo Partners Disclosure Schedule,
attached hereto as Exhibit J:

SECTION 12.1 FORMATION; QUALIFICATION. Carrizo Partners is a limited
partnership duly formed under Texas law and is validly existing and in good
standing under the laws of the State of Texas. Carrizo Partners has all
requisite partnership power and authority to own, operate or lease its
properties and to carry on its business as now being conducted.

SECTION 12.2 CAPITALIZATION. The Company is the sole general partner
of Carrizo Partners and owns all the general partner interests in Carrizo
Partners free and clear of all Liens. All the outstanding limited and general
partner interests of Carrizo Partners are duly authorized, validly issued,
fully paid to the extent required under the Carrizo Partners Partnership
Agreement and nonassessable (except as provided by Texas partnership law) and
were issued free of preemptive rights. Carrizo Partners does not, and will not
as of the Closing Date, have any outstanding

28
34
subscriptions, options or other arrangements or commitments obligating Carrizo
Partners to issue any additional limited or general partner interests.
Immediately prior to the Carrizo Partners Effective Time, there will be no
outstanding interests in Carrizo Partners other than those set forth in the
Carrizo Partners Partnership Agreement, a true and correct copy of which has
heretofore been delivered to the Company.

SECTION 12.3 NO CONFLICTS. Assuming the Carrizo Partners Approvals,
consummation of the transactions contemplated hereby and compliance with the
terms and provisions of this Agreement will not materially conflict with,
result in a material breach of, require notice or consent under or constitute a
material breach under the Carrizo Partners Partnership Agreement or the
certificate of limited partnership of Carrizo Partners or any judgment, order,
injunction, decree or ruling of any court or governmental authority or under
any material agreement, indenture or instrument to which Carrizo Partners or
the general partner of Carrizo Partners is a party. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
court or governmental authority or other third party is required on the part of
Carrizo Partners or the general partner of Carrizo Partners in connection with
the execution and delivery of this Agreement or for the consummation by Carrizo
Partners of the transactions contemplated by this Agreement, other than the
Carrizo Partners Approvals. There are no agreements or arrangements regarding
the management or internal governance of Carrizo Partners or relating to the
allocation of its assets, revenues or costs other than the Carrizo Partners
Partnership Agreement.

SECTION 12.4 AUTHORITY AND AUTHORIZATION; BINDING EFFECT. Carrizo
Partners has all requisite partnership power and authority to enter into and,
subject to the Carrizo Partners Approvals, perform the provisions of this
Agreement involving Carrizo Partners. The execution and delivery of this
Agreement and the consummation by Carrizo Partners of the transactions
contemplated hereby have been duly authorized by all necessary partnership
action on the part of Carrizo Partners, subject to the Carrizo Partners
Approvals. Subject to such approvals, this Agreement has been duly executed
and delivered by Carrizo Partners and, assuming the due authorization,
execution and delivery hereof by the other parties hereto, constitutes a valid
and binding obligation of Carrizo Partners enforceable against Carrizo Partners
in accordance with its terms, subject to laws of general application relating
to bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.

SECTION 12.5 LITIGATION, ETC. (a) There is no action, claim or
proceeding pending or, to the knowledge of Carrizo Partners, threatened, to
which Carrizo Partners is or would be a party before any court or governmental
authority acting in an adjudicative capacity or any arbitrator or arbitration
tribunal with respect to which there is a reasonable likelihood of a
determination having, or which, insofar as reasonably can be foreseen, in the
future would have a material adverse effect on Carrizo Partners, (b) Carrizo
Partners is not subject to any outstanding order, writ, injunction or decree
having, or which, insofar as reasonably can be foreseen, in the future would
have a material adverse effect on Carrizo Partners, and (c) there have been no
claims made or actions or proceedings brought against any officer or director
of the general partner of Carrizo Partners arising out of or pertaining

29
35
to any action or omission within the scope of his employment or position as an
officer or director of the general partner of Carrizo Partners, which claim,
action or proceeding is material to Carrizo Partners.

SECTION 12.6 FINANCIAL STATEMENTS OF CARRIZO PARTNERS. Each of the
balance sheets of Carrizo Partners included in the Offering Memorandum
(including the related notes and schedules) fairly presents, in all material
respects, the financial position of Carrizo Partners as of its date, and each
of the statements of income and changes in financial position included in the
Offering Memorandum (including any related notes and schedules) fairly presents
the results of operations, partners' equity, retained earnings and changes in
financial position, as the case may be, of Carrizo Partners for the periods set
forth therein (subject, in the case of unaudited statements, to normal year-end
audit adjustments not material in amount or effect), in each case in accordance
with generally accepted accounting principles consistently applied during the
periods involved, except as may be noted therein. Since December 31, 1996, no
distributions, repurchases of interests or any other payment has been made to
any equityholder of Carrizo Partners as such. Carrizo Partners did not have on
December 31, 1996 or the date of any subsequent balance sheet of Carrizo
Partners, any material contingent liabilities, liabilities for taxes,
obligations, guarantees or unrealized or anticipated losses from any
unfavorable commitments, except as referred to or reflected or provided for in
the balance sheet, including the notes thereto, of Carrizo Partners as of said
date. Since December 31, 1996, there has been no material adverse change in
the financial condition, assets or operation of the business of Carrizo
Partners.

SECTION 12.7 OWNERSHIP OF PLACEDO PARTNERS LTD. Carrizo Partners
owns its fifty percent (50%) limited partner interest in Placedo Partners Ltd.
free and clear of all Liens.

SECTION 12.8 COMPLIANCE WITH LAWS. The operations of Carrizo Partners
do not violate any federal, state, local or other laws or regulations or any
order or requirement of any court or governmental agency or authority in any
material respect, including without limitation those laws, regulations, orders
or requirements relating to environment or health. Such operations are not
subject to any existing, pending or, to the knowledge of Carrizo Partners,
threatened action, suit, investigation, inquiry or proceeding by or before any
court or governmental agency or authority under any federal, state or local
environmental law, rule or regulation, except in each case for any matter that
would not have a material adverse effect on Carrizo Partners.

SECTION 12.9 LIMITED PARTNERS. The general partner of Carrizo
Partners believes, based upon its prior substantive relationship with each of
the Carrizo Partners Limited Partners, that each of the Carrizo Partners
Limited Partners are Accredited Investors and that each of the other
representations and warranties set forth on Exhibit B hereto are true and
correct with respect to each of the Carrizo Partners Limited Partners to the
same extent as if such limited partners had signed such Exhibit B.

30
36
ARTICLE XIII.
COVENANTS AND AGREEMENTS

SECTION 13.1 EQUITYHOLDER APPROVAL. (a) The Company shall, as
promptly as practicable, submit this Agreement and the transactions
contemplated hereby for the approval of its shareholders (the "Company
Shareholder Approval") and, subject to the fiduciary duties of the Board of
Directors of the Company under applicable law, shall use its reasonable best
efforts to obtain shareholder approval and adoption of this Agreement and the
transactions contemplated hereby.

(b) Production shall, as promptly as practicable, submit this
Agreement and the Production Merger for the approval of its shareholders (the
"Production Shareholder Approval") and, subject to the fiduciary duties of the
Board of Directors of the Company under applicable law, shall use its
reasonable best efforts to obtain shareholder approval and adoption of this
Agreement and the transactions contemplated hereby.

(c) Subject to its fiduciary duties as a general partner under
applicable law, Production, as general partner of Encinitas, shall, as promptly
as practicable, recommend the Encinitas Approvals to the limited partners of
Encinitas, and shall use its reasonable best efforts to obtain such approvals.

(d) Subject to its fiduciary duties as a general partner under
applicable law, the Company, as general partner of La Xxxx, shall, as promptly
as practicable, recommend the La Xxxx Approvals to the limited partners of La
Xxxx, and shall use its reasonable best efforts to obtain such approvals.

(e) Subject to its fiduciary duties as a general partners under
applicable law, the Company, as general partner of Carrizo Partners, shall, as
promptly as practicable, recommend the Carrizo Partners Approvals to the
limited partners of Carrizo Partners, and shall use its reasonable best efforts
to obtain such approvals.

SECTION 13.2 CONDUCT OF BUSINESS. Production, Encinitas, La Xxxx and
Carrizo Partners agree that prior to the Closing, and except as otherwise
contemplated herein or consented to in writing by the Company or as relates to
the Offering, each shall (a) conduct its business in the ordinary course and
shall use reasonable efforts to preserve intact its present business
organization, maintain the services of its present officers and employees and
preserve the relations with its customers, suppliers and others having business
relations with it; (b) except as set forth on a Disclosure Schedule attached
hereto, not pay or declare dividends or other distributions, split, combine or
otherwise reclassify its capital stock or partnership interests or directly or
indirectly repurchase or otherwise acquire shares of its capital stock or
partnership interests; (c) not issue any capital stock, partnership interests
or debt securities having voting rights for directors or any rights, options,
securities convertible or exchangeable therefor, except under existing employee
stock option plans or presently outstanding convertible or exchangeable
securities; and (d) not amend or modify its certificates or articles of
incorporation, by-laws, partnership agreements or other governing

31
37
documents, except for the Encinitas Partnership Agreement Amendment, the La
Xxxx Partnership Agreement Amendment and the Carrizo Partners Partnership
Agreement Amendment.

SECTION 13.3 THIRD PARTY CONSENTS. Each of the parties hereto will
use its best efforts to obtain such consents of third parties to agreements
which would otherwise be violated by any provisions hereof, to take all actions
necessary to effect the transactions contemplated hereby, and to make such
filings with governmental authorities necessary to consummate the transactions
contemplated by this Agreement including, without limitation, the execution and
delivery of any additional instruments reasonably necessary to consummate the
transactions contemplated by this Agreement.

ARTICLE XIV.
CONDITIONS

SECTION 14.1 CONDITIONS TO THE OBLIGATIONS OF ALL PARTIES TO EFFECT
THE COMBINATION TRANSACTIONS. The respective obligations of each of the
parties to effect the Combination Transactions shall be subject to the
fulfillment (or waiver) at or prior to the Closing of the following conditions:

(a) Initial Public Offering. The Offering shall occur prior to or
simultaneously with the Closing.

(b) Company Shareholder Approval. The approval of the
shareholders of the Company to this Agreement and the transactions contemplated
hereby shall have been obtained.

SECTION 14.2 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND EACH OF
THE FOUNDERS TO EFFECT THE ENCINITAS PURCHASE. The respective obligations of
the Company and each of the Founders to effect the Encinitas Purchase shall be
subject to the fulfillment (or waiver) at or prior to the Closing of the
following additional conditions:

(a) No Orders. There shall not be issued and in effect any order
restraining, prohibiting or delaying consummation of the Encinitas Purchase.

SECTION 14.3 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND
PRODUCTION TO EFFECT THE PRODUCTION MERGER. The respective obligations of the
Company and Production to effect the Production Merger shall be subject to the
fulfillment (or waiver) at or prior to the Production Effective Time of the
following additional conditions:

(a) No Orders. There shall not be issued and in effect any order
restraining, prohibiting or delaying consummation of the Production Merger.

32
38
(b) Production Shareholder Approval. The approval of the
shareholders of Production to this Agreement and the Production Merger shall
have been obtained.

SECTION 14.4 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND
ENCINITAS TO EFFECT THE ENCINITAS MERGER. The respective obligations of the
Company and Encinitas to effect the Encinitas Merger shall be subject to the
fulfillment (or waiver) at or prior to the Encinitas Effective Time of the
following additional conditions:

(a) No Orders. There shall not be issued and in effect any order
restraining, prohibiting or delaying consummation of the Encinitas Merger.

(b) Encinitas Approvals. The Encinitas Approvals shall have been
obtained.

SECTION 14.5 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND LA XXXX
TO EFFECT THE LA XXXX MERGER. The respective obligations of the Company and La
Xxxx to effect the La Xxxx Merger shall be subject to the fulfillment (or
waiver) at or prior to the La Xxxx Effective Time of the following additional
conditions:

(a) No Orders. There shall not be issued and in effect any order
restraining, prohibiting or delaying consummation of the La Xxxx Merger.

(b) La Xxxx Approvals. The La Xxxx Approvals shall have been
obtained.

SECTION 14.6 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND CARRIZO
PARTNERS TO EFFECT THE CARRIZO PARTNERS MERGER. The respective obligations of
the Company and Carrizo Partners to effect the Carrizo Partners Merger shall be
subject to the fulfillment (or waiver) at or prior to the Carrizo Partners
Effective Time of the following additional conditions:

(a) No Orders. There shall not be issued and in effect any order
restraining, prohibiting or delaying consummation of the Carrizo Partners
Merger.

(b) Carrizo Partners Approvals. The Carrizo Partners Approvals
shall have been obtained.

SECTION 14.7 CONDITIONS TO THE OBLIGATIONS OF THE COMPANY TO EFFECT
ANY OF THE COMBINATION TRANSACTIONS. The obligations of the Company to effect
any of the Combination Transactions shall be subject to the fulfillment (or
waiver) at or prior to the Closing of the following additional conditions:

(a) Accuracy of Representations and Warranties. The
representations and warranties of each of the Founders, Production, Encinitas,
La Xxxx and Carrizo Partners contained in Articles VIII, IX, X, XI and XII,
respectively, shall be true and correct in all material respects on and as of
the Closing as if made on and as of such time (except for representation and
warranties made of as a

33
39
specified date or time, which shall be true and correct in all material
respects as of such specified date or time); at the Closing each of the
Founders, Production, Encinitas, La Xxxx and Carrizo Partners shall deliver a
certificate signed by such party, or an officer or general partner thereof (as
applicable), certifying the foregoing.

(b) Performance of Covenants. The Founders, Production,
Encinitas, La Xxxx and Carrizo Partners shall have performed and complied in
all material respect with the covenants and agreements contained in this
Agreement that are required to be performed or complied with by it on or prior
to the Closing.

SECTION 14.8 OTHER COMBINATION TRANSACTIONS. For further clarity,
the parties hereby acknowledge that it is not a condition to the obligation of
any party (other than the Company) to consummate any Combination Transactions
that any other Combination Transactions is consummated.

ARTICLE XV.
TERMINATION

SECTION 15.1 TERMINATION. This Agreement may be terminated and the
Combination contemplated hereby may be abandoned at any time prior to the
Effective Time, whether before or after approval of any other matter by any
equityholder of the parties:

SECTION (a) By mutual consent of the Company, Production,
Encinitas, La Xxxx and Carrizo Partners, including, without limitation, for the
purpose of engaging in another transaction involving the merger or sale or
other business combination of one or more of such entities into any other
entity or another similar transaction;

SECTION (b) By the Company, if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall have
issued an order, decree or ruling or taken any other action, in each case
permanently restraining, enjoining or otherwise prohibiting the Combination
Transactions contemplated by this Agreement; or

(c) By the Company, if the Company determines that there is a
reasonable probability that the Offering or the Combination Transactions will
not be consummated on or prior to December 31, 1997.

SECTION 15.2 EFFECT OF TERMINATION. In the event of termination of
this Agreement by a party as provided in Section 15.1, written notice thereof
shall promptly be given to the other parties,

34
40
and this Agreement shall forthwith terminate without further action of the
parties hereto. If this Agreement is terminated as provided, however, there
shall be no liabilities or obligations hereunder on the part of the parties,
except that nothing herein shall relieve any party hereto from liability for
any breach of this Agreement that resulted in the termination.

ARTICLE XVI.
MISCELLANEOUS AND GENERAL

SECTION 16.1 SURVIVAL. The representations and warranties in
Articles VII, IX, X, XI and XII and any statement made in any certificate
required under Section 14.7 shall expire at the Effective Time, and the
representations and warranties in Article VIII shall survive the Effective
Time.

SECTION 16.2 MODIFICATION OR AMENDMENT. At any time before or after
approval of any matter by any equityholder of the parties, the parties hereto
may modify, waive or amend this Agreement by written agreement executed and
delivered by duly authorized representatives of the respective parties.

SECTION 16.3 RESTRICTIONS ON TRANSFER; LEGENDS. Prior to any proposed
transfer (whether by sale, assignment, pledge or otherwise) of Shares, the
proposed transferor (the "Transferor") will give written notice to the Company
of his intention to effect such transfer. Each such notice shall describe the
manner and circumstances of the proposed transfer in sufficient detail, and
shall be accompanied by a written opinion of legal counsel who shall be
reasonably satisfactory to the Company, addressed to the Company, to the effect
that the proposed transfer of the securities in question may be effected
without registration under the Securities Act, and that such proposed transfer
does call into question the exemption from registration under which such Shares
were initially issued by the Company. Any such legal opinion must be
reasonably satisfactory to the Company and must state that it may also be
relied upon by any transfer agent, stock exchange or counsel to the Company.
The Company may also require a certificate of the Transferor that certifies as
to matters that assist the Company in establishing compliance with securities
laws at the time of the original issuance of the Shares as well as at the time
of the proposed transfer (including without limitation, the representations set
forth on Exhibit B attached hereto). Upon compliance with the terms hereof to
the satisfaction of the Company, the Transferor shall be entitled to transfer
such securities in accordance with the terms of the notice delivered by the
Transferor to the Company. Each certificate evidencing the Shares so
transferred shall bear an appropriate restrictive legend reasonably deemed
appropriate by the Company, including any appropriate legend relating to the
restrictions and obligations under this Agreement. The Transferor will, prior
to any transfer (unless such transfer is made pursuant to Rule 144 or an
effective registration statement under the Securities Act), cause any
transferee of the Shares, to enter into an agreement with the Company that the
transferee will take and hold such securities subject to the provisions and
upon the conditions specified herein. Without limiting the generality of any
other provision hereof, the provisions of this Section 16.3 shall be binding on
successive transferees. The Company shall have no obligation to

35
41
effect any transfer on its books and records (and no such attempted transfer
shall be effective) unless such transfer is made in accordance with the terms
hereof. The Company may issue stop transfer instructions to any transfer agent
for the Common Stock in order to implement any restriction on transfer
contemplated by this Agreement. The Shares shall contain the following legend:

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY AS TO THE AVAILABILITY OF AN EXEMPTION FROM REGISTRATION
THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT ANY PROSPECTUS
DELIVERY REQUIREMENTS ARE NOT APPLICABLE. THE SHARES WERE (1) ISSUED
PURSUANT TO AN AGREEMENT AND (2) ARE SUBJECT TO PROVISIONS OF THE
BYLAWS OF THE COMPANY, BOTH OF WHICH INCLUDE ADDITIONAL RESTRICTIONS
ON THEIR TRANSFER AND COPIES OF SUCH AGREEMENT AND AMENDED AND
RESTATED BYLAWS MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY.

SECTION 16.4 INDEMNIFICATION. (a) Whether or not any of the
Combination Transactions are consummated, the Company hereby agrees to
indemnify the directors and officers of the Company and Production, acting in
their capacity as an officer or director, as the case may be, of the Company or
Production, respectively, in its own capacity or in its capacity as the general
partner of Encinitas, La Xxxx or Carrizo Partners (each an "Indemnitee"), and
hold the Indemnitees harmless from and against, and shall reimburse them on
demand for, any and all losses, damages, liabilities, claims, demands,
deficiencies, judgements, settlements, whether or not arising out of
third-party claims, including without limitation the reasonable fees and
expenses of counsel and other related costs and expenses ("Losses") resulting
from or arising out of the Combination Transactions, including but not limited
to (i) all liabilities of the Company, Production, Encinitas, La Xxxx and
Carrizo Partners in connection with the Combination Transactions and (ii) any
liabilities to the limited partners of Encinitas, La Xxxx or Carrizo Partners
in connection with the Combination Transactions; provided that the Company
shall not be required by this Agreement to indemnify (1) the officers and
directors of the Company or Production to the extent that the Company or
Production breaches this Agreement or the officers and directors of the Company
or Production in such entities' capacity as general partners of Encinitas, La
Xxxx or Carrizo Partners to the extent that Encinitas, La Xxxx or Carrizo
Partners, as the case may be, breaches this agreement for Losses resulting from
the termination or breach of this Agreement ("Termination Related Losses") in
the event that this Agreement shall be terminated pursuant to Section 15.1(c)
as a result of such breach of this Agreement by the Company, Production,
Encinitas, La Xxxx or Production, as applicable or (2) (without limiting the
generality of any other clause hereof) any Indemnitee for any Losses to such

36
42
Indemnitee resulting from, arising out of or in such Indemnitee's capacity as
an equityholder of any of the parties hereto ("Equityholder Losses").

(b) If a claim by a third party is made against a party
indemnified pursuant to this Section 16.4, and if such indemnified party
intends to seek indemnity with respect thereto under this Section 16.4, the
indemnified party shall promptly notify the indemnifying party of such claim;
provided that the failure of the indemnified party to notify the indemnifying
party of any such claim shall not relieve the indemnifying party of its
obligations under this Section 16.4, except to the extent the indemnifying
party is actually prejudiced by such failure. In case any action or proceeding
including any such claim is brought against the indemnified party, the
indemnifying party shall be entitled to participate therein and to assume the
defense thereof with counsel reasonably satisfactory to the indemnified party
to the extent it may wish; provided, that, in the event the indemnifying party
so assumes the defense, the indemnified party shall still have the right to
employ separate counsel at its own expense in any such action and to
participate in the defense thereof. Without the prior written consent of the
indemnified party, which consent shall not unreasonably be withheld, the
indemnifying party will not consent to the entry of any judgment or enter into
any settlement of any such claim which does not include as an unconditional
term thereof the giving by the claimant or plaintiff thereof to such
indemnified party of a release from any and all liability in respect of such
claim or litigation. The indemnified party will not enter into any settlement
or pay (except pursuant to a final court order or judgment) any such claim
without the prior written consent of the indemnifying party, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing, the
indemnified party shall have the right to pay or settle any such claim,
provided that in such event it shall waive any right to indemnity therefor by
the indemnifying party or parties.

(c) Without limiting the generality of any other provision
hereunder, it is the express intent of this Agreement that the Indemnitees be
indemnified regardless of such Indemnitee's acts of negligence or gross
negligence, to the extent that such indemnification is allowed pursuant to the
terms of this Agreement; provided, that, notwithstanding the foregoing or any
other provision hereof, the Company shall not indemnify any Indemnitee under
this Section 16.4 for any action taken or any failure to act by such Indemnitee
after the date of this Agreement if such action or failure to act is in
material breach of any provision hereof or if such action or inaction
constituted intentional misconduct or a willful violation of law.

SECTION 16.5 STOCK SPLITS. The consideration to be received in the
Combination Transaction is based upon the number of shares of Common Stock that
will be outstanding following the 521-for-one stock split described in Section
7.2. The Company may change such consideration to make an appropriate
adjustment to reflect any other subsequent stock split, stock dividend, reverse
stock split or reclassification of shares, but need not make any other
adjustment in respect of any other distribution or transaction. The provisions
of this Section shall apply notwithstanding any other provision of this
Agreement to the contrary contained herein or in any attachment or Exhibit
thereto.

SECTION 16.6 NO RIGHTS AS SHAREHOLDER. Prior to the time that Common
Stock is issued in accordance with the terms hereof, nothing contained in this
Agreement shall be construed as

37
43
conferring upon any person any rights as a shareholder of the Company,
including without limitation the right to vote, receive distributions, call
meetings, consent or receive notices as a shareholder in respect of any meeting
of shareholders or imposing any fiduciary or other duty on the Company, its
officers, directors or shareholders, in favor of such person, all of which
rights and duties are expressly disclaimed and waived with respect to such
person.

SECTION 16.7 FURTHER ASSURANCES. The parties hereto without
additional consideration shall execute and deliver or shall cause to be
executed and delivered such further documents and certificates and to take such
further actions as may be reasonably required or desirable to carry out the
provisions of this Agreement and consummate the transactions contemplated
hereby, and if an entity, such party shall its reasonable best efforts to cause
its equity holders to do the same. In particular, without limiting the
generality of the foregoing sentence, at any time after the Closing, any party
hereto will execute and deliver or shall cause to be executed and delivered any
deeds, bills of sale, assignments, assurances, or any other actions or things
as are necessary or desirable to vest, perfect, or confirm of record or
otherwise in the Company its rights, title, or interest in, to, or under any of
the rights, properties, or assets acquired or to be acquired by the Company as
a result of or in connection with the Combination Transactions or otherwise to
carry out this Agreement, and will give any additional information and execute
any reasonably requested certificate or document in order to ensure compliance
with applicable securities laws with respect to the transactions contemplated
hereby.

SECTION 16.8 ENTIRE AGREEMENT, ETC. This Agreement (a) constitutes
the entire agreement, and supersedes all other prior agreements and
understandings, both written and oral, among the parties, with respect to the
subject matter hereof, and (b) shall not be assignable by any party and (c) is
not intended to create any obligations to, or rights in respect of, any persons
other than the parties hereto and the Indemnitees as described in Section 16.4.

SECTION 16.9 CONSTRUCTION. As used herein the phrase "the
transactions contemplated hereby" and similar phrases shall refer to the
transactions to be effected pursuant to this Agreement, but specifically shall
not include the Offering.

SECTION 16.10 NOTICES. Any notice or other communication required or
permitted under this Agreement shall be by facsimile actually received or in
writing and mailed by certified or registered mail, return receipt requested,
postage prepaid. Any such notice shall be deemed given upon its receipt at the
following address:

38
44

(a) If the Company: (b) If to Production:

Carrizo Oil & Gas, Inc. Production, Inc.
00000 Xx. Xxxx'x Xxxx, Xxxxx 000 00000 Xx. Xxxx'x Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000 Xxxxxxx, Xxxxx 00000
Attn: President Attn: President
Tel: (000) 000-0000 Tel: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000

with a copy to: with a copy to:

Xxxx X. Xxxxxx Xxxx X. Xxxxxx
Xxxxx & Xxxxx, L.L.P. Xxxxx & Xxxxx, L.L.P.
3000 One Xxxxx Xxxxx 0000 Xxx Xxxxx Xxxxx
910 Louisiana 000 Xxxxxxxxx
Xxxxxxx, Xxxxx 00000 Xxxxxxx, Xxxxx 00000
Tel: (000) 000-0000 Tel: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000

Encinitas Partners Ltd. La Xxxx Partners Ltd.
00000 Xx. Xxxx'x Xxxx, Xxxxx 000 00000 Xx. Xxxx'x Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000 Xxxxxxx, Xxxxx 00000
Attn: President Attn: President
Tel: (000) 000-0000 Tel: (000) 000-0000
Fax: (000) 000-0000 Fax: (000) 000-0000

(e) If to Carrizo Partners Ltd.: (f) If to a Founder:

Carrizo Partners Ltd. [Founder]
00000 Xx. Xxxx'x Xxxx, Xxxxx 000 c/o Carrizo Oil & Gas, Inc.
Xxxxxxx, Xxxxx 00000 00000 Xx. Xxxx'x Xxxx, Xxxxx 000
Xxxx: President Xxxxxxx, Xxxxx 00000
Tel: (000) 000-0000 Attn: President
Fax: (000) 000-0000 Tel: (000) 000-0000
Fax: (000) 000-0000

Any party may, by notice given in accordance with this section to the other
parties, designate another address or person for receipt of notices hereunder.

39
45
SECTION 16.11 CAPTIONS. The article, section and paragraph captions
herein are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.

SECTION 16.12 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each such counterpart being deemed to be an original,
and all such counterparts taken together shall constitute the same agreement.

SECTION 16.13 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS.

40
46
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the parties hereto on the date first hereinabove written.

CARRIZO OIL & GAS, INC, CARRIZO PRODUCTION, INC.,
a Texas corporation a Texas corporation

By: /s/ X.X. XXXXXXX XX By: /s/ X.X. XXXXXXX XX
--------------------------------- ---------------------------------
Name: Name:
Title: Title:

ENCINITAS PARTNERS LTD. LA XXXX PARTNERS LTD.

By: Carrizo Production, Inc., By: Carrizo Oil & Gas, Inc.,
a Texas corporation a Texas corporation
Title: General Partner Title: General Partner

By: /s/ X.X. XXXXXXX XX By: /s/ X.X. XXXXXXX XX
------------------------ -------------------------
Name: Name:
Title: Title:

CARRIZO PARTNERS LTD.

By: Carrizo Oil & Gas, Inc.,
a Texas corporation
Title: General Partner

By: /s/ X.X. XXXXXXX XX
------------------------
Name:
Title:

[Signature Page to Combination Agreement among Carrizo Oil & Gas, Inc., a Texas
corporation, Carrizo Production, Inc., a Texas corporation, Encinitas
Partners Ltd., a Texas limited partnership, La Xxxx Partners
Ltd., a Texas limited partnership, Carrizo Partners
Ltd., a Texas limited partnership, and
Xxxx X. Xxxx, Xx., Xxxxxx X. Xxxxxxx,
Xxxxxxxxx X. Xxxxxxx, XX, Xxxxxxx
X. X. Xxxxxxxx and Xxxxx X. Xxxxxx]

41
47
FOUNDERS

/s/ XXXX X. XXXX, XX.
---------------------------------
Xxxx X. Xxxx, Xx.

/s/ XXXXXX X. XXXXXXX
---------------------------------
Xxxxxx X. Xxxxxxx

/s/ XXXXXXXXX X. XXXXXXX, XX
---------------------------------
Xxxxxxxxx X. Xxxxxxx, XX

/s/ XXXXXXX X.X. XXXXXXXX
---------------------------------
Xxxxxxx X.X. Xxxxxxxx

/s/ XXXXX X. XXXXXX
---------------------------------
Xxxxx X. Xxxxxx

[Signature Page to Combination Agreement among Carrizo Oil & Gas, Inc., a Texas
corporation, Carrizo Production, Inc., a Texas corporation, Encinitas
Partners Ltd., a Texas limited partnership, La Xxxx Partners Ltd.,
a Texas limited partnership, Carrizo Partners Ltd., a Texas
limited partnership, and Xxxx X. Xxxx, Xx., Xxxxxx X.
Xxxxxxx, Xxxxxxxxx X. Xxxxxxx, XX, Xxxxxxx X. X.
Xxxxxxxx and Xxxxx X. Xxxxxx]

42
48
SCHEDULES

The schedules have been intentionally omitted herefrom. The
Company will furnish supplementally a copy of any or all of such omitted
schedules to the Commission upon request.

49
EXHIBIT A

PLAN OF MERGER
MERGING
CARRIZO PRODUCTION, INC.
(A TEXAS CORPORATION)
WITH AND INTO
CARRIZO OIL & GAS, INC.
(A TEXAS CORPORATION)

This Plan of Merger (this "Plan") is between Carrizo Production,
Inc., a Texas corporation ("Production"), and Carrizo Oil & Gas, Inc., a Texas
corporation ("Carrizo Oil & Gas") (Production and Carrizo Oil & Gas being
hereinafter collectively referred to as the "Constituent Corporations").

W I T N E S S E T H:

WHEREAS, Production is a corporation duly organized and existing
under the laws of the State of Texas with an authorized capital of 100,000
shares of common stock, par value $.01 per share ("Production Common Stock"),
of which 4,900 shares are issued and outstanding; and

WHEREAS, Carrizo Oil & Gas is a corporation duly organized and
existing under the laws of the State of Texas with an authorized capital of (a)
40,000,000 shares of common stock, par value $.01 per share ("Common Stock"),
of which 5,210,000 shares are issued and outstanding and (b) 10,000,000 shares
of Preferred Stock, par value $.01 per share, of which no shares are issued and
outstanding; and

WHEREAS, Production and Carrizo Oil & Gas are parties to a
certain Combination Agreement dated as of June 6, 1997 (the "Combination
Agreement"); and

WHEREAS, each of the boards of directors of the Constituent
Corporations deems it advisable and in the best interest of each of such
corporations and their respective shareholders that Production be merged with
and into Carrizo Oil & Gas under and pursuant to the Texas Business Corporation
Act (the "TBCA") as contemplated herein (the "Merger") and accordingly has
approved this Plan and recommended that the shareholders of such corporation
approve this Plan; and

WHEREAS, no shareholder of Production will become personally
liable for the liabilities or obligations of any other person or entity as a
result of the Merger;

NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereto have agreed and
do hereby agree, subject to the conditions hereinafter set forth, as follows:
50
ARTICLE I
MERGER AND NAME OF SURVIVING CORPORATION

At the Effective Time, as hereinafter defined, Production shall
be merged with and into Carrizo Oil & Gas, and Carrizo Oil & Gas is hereby also
designated as the "Surviving Corporation" and shall not be a new corporation
and shall continue its corporate existence as a Texas corporation governed by
the laws of the State of Texas.

ARTICLE XVIII
TERMS AND CONDITIONS OF MERGER

At the Effective Time, the Merger shall have the effect specified
in the TBCA with respect to Production and with respect to the Surviving
Corporation.

ARTICLE XVIIII
MANNER AND BASIS OF CONVERTING SHARES

(a) Subject to paragraph (a) of Article VII hereof and
paragraph (d) of this Article III, at the Effective Time, each share of
Production Common Stock issued and outstanding immediately prior to the
Effective Time, other than Production Common Stock that is to be canceled
pursuant to paragraph (b) of this Article III, shall be converted into and
represent the right to receive 70 shares of Common Stock (the "Production
Merger Consideration").

(b) At the Effective Time, each share of Production Common
Stock that is held by Production or any subsidiary thereof as treasury stock
immediately prior to the Effective Time shall be canceled, and no payment shall
be made with respect thereto.

(c) At the Effective Time, each share of Common Stock
outstanding immediately prior to the Effective Time shall remain outstanding
and continue unchanged as one share of Common Stock.

(d) No fractional shares of Common Stock shall be issued in
the Merger. Each holder of shares of Production Common Stock will be issued a
whole share of Common Stock in lieu of any fractional share interest to which
such holder would otherwise be entitled.

ARTICLE IV
ARTICLES OF INCORPORATION, BYLAWS
AND OFFICERS AND DIRECTORS

(a) The Articles of Incorporation of Carrizo Oil & Gas in
effect immediately prior to the Effective Time shall be and constitute the
Articles of Incorporation of the Surviving Corporation, until duly amended in
accordance with the terms thereof and the TBCA.

-45-
51
(b) The Bylaws of Carrizo Oil & Gas in effect immediately
prior to the Effective Time shall be and constitute the Bylaws of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
TBCA.

(c) The directors of Carrizo Oil & Gas immediately prior to
the Effective Time shall thereafter continue to be the directors of the
Surviving Corporation. The officers of Carrizo Oil & Gas in office immediately
prior to the Effective Time shall thereafter continue to be the officers of the
Surviving Corporation. Each such director and officer will hold office in
accordance with the Articles of Incorporation and Bylaws of the Surviving
Corporation.

ARTICLE V
APPROVAL AND EFFECTIVE TIME OF THE MERGER

The Merger shall be effected when all the following actions in
paragraphs (a) through (c) have been taken:

(a) This Plan shall have been approved by the shareholders of
the Constituent Corporations in accordance with the TBCA;

(b) Articles of Merger pursuant to the TBCA shall have been
filed with the Secretary of State of the State of Texas; and

(c) Each of the conditions of the Constituent Corporations set
forth in Sections 14.1, 14.3 and 14.7 of the Combination Agreement shall have
been satisfied or waived.

The Surviving Corporation shall file a statement complying with Article 10.03
of the TBCA with the Secretary of State of the State of Texas, within 90 days
of the date of the filing of the Articles of Merger, setting forth the time and
date upon which all the conditions set forth in paragraphs (a), (b) and (c) of
this Article V have been satisfied (such time and date being referred to as the
"Effective Time").

ARTICLE VI
ABANDONMENT OF PLAN

This Plan may be abandoned at any time prior to the Effective
Time by the filing with the Secretary of State of the State of Texas of a
statement complying with Section 5.03(I) of the TBCA stating that this Plan has
been abandoned. In the event of the abandonment of this Plan pursuant to this
Article VI, this Plan and the transactions contemplated hereby shall become
void and have no effect, without any liability on the part of either
Constituent Corporation or their respective directors, officers or
stockholders, as the case may be, in respect of this Plan.

-46-
52
ARTICLE VII
MISCELLANEOUS

(a) Notwithstanding paragraph (a) of Article III hereof,
shares of Production Common Stock outstanding immediately prior to the
Effective Time and held by a holder who makes a written demand for the payment
of the fair value of such holder's shares in the manner provided under the TBCA
(a "Dissenting Shareholder") shall not be converted into the right to receive
the Production Merger Consideration, unless such holder shall have failed to
perfect or shall have effectively withdrawn or lost his right to payment of the
fair value of his shares of Production Common Stock under the TBCA. If after
the Effective Time such holder shall have failed to perfect or shall have
effectively withdrawn or lost his right to payment of the fair value of his
shares of Production Common Stock under the TBCA, such shares of Production
Common Stock shall be treated as if they had been converted as of the Effective
Time into the right to receive the Production Merger Consideration. Production
shall give the Carrizo Oil & Gas prompt notice of any objections or demands
received by Production from any shareholder exercising his right to dissent,
and, prior to the Effective Time, Carrizo Oil & Gas shall have the right to
participate in all negotiations and proceedings with respect thereto. Prior to
the Effective Time, Production shall not, except with the prior written consent
of Carrizo Oil & Gas, make any payment with respect to, or settle or offer or
agree to settle, any such demands.

(b) This Plan shall be governed by and construed in accordance
with the laws of the State of Texas.

(c) If at any time the Surviving Corporation shall consider or
be advised that any further assignment, assurance or other action is necessary
or desirable to vest in the Surviving Corporation the title to any property or
right of either of the Constituent Corporations or otherwise to carry out the
purposes of this Agreement, the proper officers, directors or representatives
of the relevant Constituent Corporation shall execute and make all such proper
assignments or assurances and take such other actions. The proper officers,
directors or representatives of the Surviving Corporation are hereby authorized
in the name of each of the Constituent Corporations, or otherwise, to take any
and all such action.

-47-
53
IN WITNESS WHEREOF, the undersigned have caused this Plan of
Merger to be executed this 6th day of June, 1997.

CARRIZO PRODUCTION, INC.

By:
---------------------------
Name:
Title:

CARRIZO OIL & GAS, INC.

By:
---------------------------
Name:
Title:

-48-
54
EXHIBIT B

TRANSFEROR REPRESENTATIONS AND WARRANTIES

The undersigned hereby represents and warrants to Carrizo Oil & Gas,
Inc., a Texas corporation (the "Company"), the following (capitalized terms
used herein shall have the meanings given to them in the Combination Agreement
dated as of June 6, 1997 among the Company and the other parties thereto (the
"Combination Agreement"):

(a) EXPERIENCE; STATUS.

(i) The undersigned has experience in analyzing and investing
in companies like the Company and is capable of evaluating the merits
and risks of his investment in the Company and has the capacity to
protect his own interests. To the extent necessary, the undersigned has
retained, at his own expense, and relied upon, appropriate professional
advice regarding the investment, tax and legal merits and consequences
of the Combination Transactions, or any part thereof, and owning the
shares of Common Stock the undersigned will receive pursuant to the
Combination Transactions (the "Shares"), it being understood that the
Company has not retained legal or financial advisors on behalf of the
undersigned.

(ii) The undersigned is an Accredited Investor, is able to bear
the economic risk of his investment in the Shares and has sufficient net
worth to sustain a loss of his entire investment in the Company without
economic hardship if such loss should occur.

(b) ACCESS TO COMPANY INFORMATION.

(i) The undersigned has had an opportunity to discuss the
Company's business, management and financial affairs with the members of
the Company's management and has had the opportunity to review the
Company's facilities. The undersigned has also had an opportunity to
ask questions of the officers of the Company, which questions were
answered to his satisfaction. The undersigned acknowledges that he is
familiar with all aspects of the Company's business.

(ii) The undersigned has received and carefully reviewed a copy
of the Offering Memorandum. The undersigned understands that information
in such Offering Memorandum is preliminary and subject to change. The
undersigned acknowledges that he has reviewed the information in such
Offering Memorandum solely for general background purposes and that, in
particular, information with respect to the Company, the Offering and
the Combination Transactions, is expected to change prior to the closing
of the Combination Transactions. The undersigned recognizes that he
will receive no supplement or amendment to such Offering Memorandum.
The undersigned acknowledges that his investment decision is based
primarily on his familiarity with the assets the Company currently owns
and may acquire and the Company's management.

-49-
55
(iii) The undersigned has received no representations or
warranties from the Company, or its employees, affiliates, attorneys,
accountants or agents, except as set forth in the Combination Agreement.

(iv) The undersigned understands that the purchase of the
Shares involves numerous risks, including those outlined in the Offering
Memorandum.

(i) The undersigned is acquiring Shares solely for investment
for his own account, not as a nominee or agent, and not with the view
to, or for resale in connection with, any distribution thereof. The
undersigned understands that the Shares have not been registered under
the Securities Act or applicable state and other securities laws by
reason of a specific exemption from the registration provisions of the
Securities Act and applicable state and other securities laws, the
availability of which depends upon, among other things, the bona fide
nature of the investment intent and the accuracy of the undersigned's
representations as expressed herein. The undersigned understands that
the Company is relying, in part, upon the representations and warranties
contained in this consent for the purpose of determining whether the
Combination Transactions meet the requirements for such exemptions.

(ii) The undersigned acknowledges and understands that he must
bear the economic risk of his investment in the Shares for an indefinite
period of time because the Shares must be held indefinitely unless
subsequently registered under the Securities Act and applicable state
and other securities laws or unless an exemption from such registration
is available. The undersigned understands that, except as described in
the Offering Memorandum, the Company has not agreed to and does not plan
to file a registration statement to register the resale of the Shares
under the Securities Act.

(iii) The undersigned is aware of the current provisions of Rule
144 promulgated under the Securities Act which permit limited resale of
securities purchased in a private placement subject to the satisfaction
of certain conditions, including, among other things, the existence of a
public market for the securities, the availability of certain current
public information about the issuer of the securities, the resale
occurring not less than two years (soon to be amended to one year) after
a party has purchased from an issuer or its affiliate and paid the full
purchase price for the securities to be sold, the sale being effected
through a "broker's transaction" or in transactions directly with a
"market maker" and the number of securities being sold during any three-
month period not exceeding specified limitations. The undersigned
understands that any transfer agent of the Company will be issued stop-
transfer instructions with respect to such Shares unless such transfer
is subsequently registered under the Securities Act and applicable state
and other securities laws or unless an exemption from such registration
is available.

(d) OTHER. The undersigned acknowledges and agrees that the
foregoing representations are true as of the date hereof, the time of receipt
of Shares and the time of the vote on and effective time of any merger or other
transaction that resulted in the issuance of Shares.

-50-
56
(e) ADDITIONAL RESTRICTION ON TRANSFER. The undersigned has
received a copy of the Amended and Restated Bylaws of the Company and
understands that the Shares will be subject to the restrictions on transfer
contained in Article I of such Bylaws. The undersigned also acknowledges and
agrees to be bound by the restrictions on transfer of the Shares in Section
16.3 of the Combination Agreement.

------------------------------
[signature]

-51-
57
EXHIBIT C

PLAN OF MERGER
MERGING
ENCINITAS PARTNERS LTD.
(A TEXAS LIMITED PARTNERSHIP)
WITH AND INTO
CARRIZO OIL & GAS INC.
(A TEXAS CORPORATION)

This Plan of Merger (this "Plan") is between Encinitas Partners
Ltd., a Texas limited partnership ("Encinitas"), and Carrizo Oil & Gas, Inc., a
Texas corporation ("Carrizo Oil & Gas") (Encinitas and Carrizo Oil & Gas being
hereinafter collectively referred to as the "Constituent Entities").

W I T N E S S E T H:

WHEREAS, Encinitas is a limited partnership duly organized and
existing under the laws of the State of Texas; and

WHEREAS, Encinitas and Carrizo Oil & Gas are parties to a certain
Combination Agreement dated as of June 6, 1997 (the "Combination Agreement");
and

WHEREAS, the board of directors of Carrizo Production, Inc., a
Texas corporation and the general partner of Encinitas, has deemed the merger
of Encinitas with and into Carrizo Oil & Gas under and pursuant to the Texas
Revised Limited Partnership Act (the "TRLPA") and the Texas Business
Corporation Act (the "TBCA") as contemplated herein (the "Merger") advisable
and in the best interest of Encinitas and the partners of Encinitas, and has
approved, and recommended the limited partners of Encinitas approve, (a) the
amendment (the "Partnership Agreement Amendment") to the Amended and Restated
Agreement of Limited Partnership of Encinitas Partners Ltd. (the "Encinitas
Partnership Agreement") to permit the Merger upon the vote of a majority in
interest of the limited partners of Encinitas and (b) this Plan and the Merger;
and

-52-
58
WHEREAS, no partner of Encinitas will become personally liable
for the liabilities or obligations of any other person or entity as a result of
the Merger;

ARTICLE I
MERGER AND NAME OF SURVIVING CORPORATION

At the Effective Time, as hereinafter defined, Encinitas shall be
merged with and into Carrizo Oil & Gas, and Carrizo Oil & Gas is hereby also
designated as the "Surviving Corporation" and shall not be a new corporation
and shall continue its corporate existence as a Texas corporation governed by
the laws of the State of Texas.

ARTICLE XIXI
TERMS AND CONDITIONS OF MERGER

At the Effective Time, the Merger shall have the effect specified
in the TRLPA and the TBCA, respectively, with respect to Encinitas and with
respect to the Surviving Corporation.

ARTICLE XXI
MANNER AND BASIS OF CONVERTING SHARES

(a) Subject to paragraph (e) of this Article III, at the
Effective Time, all of the limited partner interests in Encinitas (the
"Encinitas Limited Partner Interests") outstanding immediately prior to the
Effective Time, other than Encinitas Limited Partner Interests that are to be
canceled pursuant to paragraph (b) of this Article III, shall be converted into
and represent the right to receive the Encinitas Merger Consideration (defined
below) payable to the holder of such Encinitas Limited Partner Interest. As
used herein, the following terms have the meanings specified below:

Encinitas After Payout Consideration means, with respect to each
Encinitas Limited Partner Interest, the product of (i) 1,166,111 shares of
Common Stock multiplied by (ii) the percentage set forth on Schedule A hereto
as the After Payout Percentage with respect to such Encinitas Limited Partner
Interest.

Encinitas Before Payout Consideration means, with respect to each
Encinitas Limited Partner Interest, the product of (i) 506,389 shares of Common
Stock multiplied by (ii) the percentage set forth on Schedule A hereto as the
Before Payout Percentage with respect to such Encinitas Limited Partner
Interest.

-53-
59
Encinitas Merger Consideration means, with respect to each Encinitas
Limited Partner Interest, the sum of the Encinitas Before Payout Consideration
and the Encinitas After Payout Consideration with respect to such Encinitas
Limited Partner Interest.

(b) At the Effective Time, any Encinitas Limited Partner
Interests outstanding immediately prior to the Effective Time that are held by
Encinitas or any subsidiary thereof or by Carrizo Oil & Gas shall be canceled,
and no payment shall be made with respect thereto.

(c) At the Effective Time, all general partner interests in
Encinitas outstanding immediately prior to the Effective Time shall be
canceled, and no payment shall be made with respect thereto.

(d) At the Effective Time, each share of Common Stock
outstanding immediately prior to the Effective Time shall remain outstanding
and continue unchanged as one share of Common Stock.

(e) No fractional shares of Common Stock shall be issued in
the Merger. Each holder of Encinitas Limited Partner Interests will be issued
a whole share of Common Stock in lieu of any fractional share interest to which
such holder would otherwise be entitled.

ARTICLE IV
ARTICLES OF INCORPORATION, BYLAWS
AND OFFICERS AND DIRECTORS

(b) The Bylaws of Carrizo Oil & Gas in effect immediately
prior to the Effective Time shall be and constitute the Bylaws of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
TBCA.

ARTICLE V
APPROVAL AND EFFECTIVE TIME OF THE MERGER

The Merger shall be effected when all the following actions in
paragraphs (a) through (d) have been taken:

-54-
60
(a) The Partnership Agreement Amendment and this Plan shall
have been approved by the partners of Encinitas in accordance with the TRLPA
and the Encinitas Partnership Agreement;

(b) This Plan shall have been approved by the shareholders of
Carrizo Oil & Gas in accordance with the TBCA;

(d) Each of the conditions of the Constituent Entities set
forth in Sections 14.1, 14.4 and 14.7 of the Combination Agreement shall have
been satisfied or waived.

The Surviving Corporation shall file a statement complying with Section 2.12 of
the TRLPA and Article 10.03 of the TBCA with the Secretary of State of the
State of Texas, within 90 days of the date of the filing of the Articles of
Merger, setting forth the time and date upon which the conditions set forth in
paragraphs (a), (b), (c) and (d) of this Article V have been satisfied (such
time and date being referred to as the "Effective Time").

ARTICLE VI
ABANDONMENT OF PLAN

This Plan may be abandoned at any time prior to the Effective
Time by the filing with the Secretary of State of the State of Texas of a
statement complying with Section 2.12 of the TRLPA and Section 5.03(I) of the
TBCA stating that this Plan has been abandoned. In the event of the
abandonment of this Plan pursuant to this Article VI, this Plan and the
transactions contemplated hereby shall become void and have no effect, without
any liability on the part of either Constituent Entity or their respective
directors, officers, partners or shareholders, as the case may be, in respect
of this Plan.

ARTICLE VII
MISCELLANEOUS

(a) This Plan shall be governed by and construed in accordance
with the laws of the State of Texas.

(b) If at any time the Surviving Corporation shall consider or
be advised that any further assignment, assurance or other action is necessary
or desirable to vest in the Surviving Corporation the title to any property or
right of either of the Constituent Entities or otherwise to carry out the
purposes of this Agreement, the proper officers, directors or representatives
of the relevant Constituent Entity shall execute and make all such proper
assignments or assurances and take such other actions. The proper officers,
directors or representatives of the Surviving Corporation are hereby authorized
in the name of each of the Constituent Entity, or otherwise, to take any and
all such action.

-55-
61
IN WITNESS WHEREOF, the undersigned have caused this Plan of
Merger to be executed this 6th day of June, 1997.

ENCINITAS PARTNERS LTD.

By: Carrizo Production, Inc.,
as general partner

By:
-----------------------
Name:
Title:

CARRIZO OIL & GAS, INC.

By:
------------------------------
Name:
Title:

-56-
62

SCHEDULE A

ENCINITAS LIMITED PARTNER INTEREST PERCENTAGES

CAPITAL BEFORE PAYOUT AFTER PAYOUT
PARTNER CONTRIBUTION PERCENTAGE PERCENTAGE
------- ------------ ---------- ----------

Initial Limited Partners:
Partner $201,891.67 5.76833% 8.87654%
Partner 201,891.67 5.76833 8.87654
Partner 201,891.66 5.76833 8.87654
Partner 50,225 1.43500 1.46035
Partner 70,100 2.00286 3.08143
Partner 75,000 2.14286 2.14286
------------ ---------- ----------

Total Initial Limited Partners $ 801,000 22.88571% 33.31426%
Additional Limited Partners:
Partner $ 250,000 7.14286% 3.57143%
Partner 275,000 7.85714 3.92857
Partner 50,000 1.42857 0.71429
Partner 50,000 1.42857 0.71429
Partner 50,000 1.42857 0.71429
Partner 50,000 1.42857 0.71429
Partner 300,000 8.57143 4.28571
Partner 200,000 5.71429 2.85714
Partner 25,000 0.71429 0.35714
Partner 100,000 2.85714 1.42857
Partner 150,000 4.28571 2.14286
Partner 150,000 4.28571 2.14286
Partner 100,000 2.85714 1.42857
Partner 75,000 2.14286 1.07143

CAPITAL BEFORE PAYOUT AFTER PAYOUT
PARTNER CONTRIBUTION PERCENTAGE PERCENTAGE
------- ------------ ---------- ----------

Additional Limited Partners (continued):
Partner 100,000 2.85714 1.42857
Partner 100,000 2.85714 1.42857
Partner 100,000 2.85714 1.42857
Partner 100,000 2.85714 1.42857
Partner 50,000 1.42857 0.71429
Partner 50,000 1.42857 0.71429
Partner 100,000 2.85714 1.42857
Partner 100,000 2.85714 1.42857
Partner 50,000 1.42857 0.71429
Partner 50,000 1.42857 0.71429
Partner 25,000 0.71429 0.35714
----------- --------- ---------
Total Additional Limited Partners $ 2,650,000 75.71429% 37.85714%
----------- --------- ---------
Total Limited Partners $ 3,451,000 98.60000% 71.17140%
General Partner:
Partner $ 49,000 1.40000% 28.82860%
----------- --------- ---------
Total General and Limited Partners $ 3,500,000 100.00000% 100.00000%
=========== ========== ==========

EXHIBIT D

PLAN OF MERGER
MERGING
LA XXXX PARTNERS LTD.
(A TEXAS LIMITED PARTNERSHIP)
WITH AND INTO
CARRIZO OIL & GAS INC.
(A TEXAS CORPORATION)

This Plan of Merger (this "Plan") is between La Xxxx Partners
Ltd., a Texas limited partnership ("La Xxxx"), and Carrizo Oil & Gas, Inc., a
Texas corporation ("Carrizo Oil & Gas") (La Xxxx and Carrizo Oil & Gas being
hereinafter collectively referred to as the "Constituent Entities").

W I T N E S S E T H:

WHEREAS, La Xxxx is a limited partnership duly organized and
existing under the laws of the State of Texas; and

WHEREAS, La Xxxx and Carrizo Oil & Gas are parties to a certain
Combination Agreement dated as of June 6, 1997 (the "Combination Agreement");
and

WHEREAS, the board of directors of Carrizo Oil & Gas, as the
general partner of La Xxxx, has deemed the merger of La Xxxx with and into
Carrizo Oil & Gas under and pursuant to the Texas Revised Limited Partnership
Act (the "TRLPA") and the Texas Business Corporation Act (the "TBCA") as
contemplated herein (the "Merger") advisable and in the best interest of La
Xxxx and the partners of La Xxxx, and has approved, and recommended the limited
partners of La Xxxx approve, (a) the amendment (the "Partnership Agreement
Amendment") to the Amended and Restated Agreement of Limited Partnership of La
Xxxx Partners Ltd. (the "La Xxxx Partnership Agreement") to permit the Merger
upon the vote of a majority in interest of the limited partners of La Xxxx and
(b) this Plan and the Merger; and

WHEREAS, the board of directors of Carrizo Oil & Gas has deemed
the Merger advisable and in the best interest of Carrizo Oil & Gas and its
shareholders and accordingly has approved, and recommended that the
shareholders of Carrizo Oil & Gas approve, this Plan and the Merger; and
65
WHEREAS, no partner of La Xxxx will become personally liable for
the liabilities or obligations of any other person or entity as a result of the
Merger;

ARTICLE I
MERGER AND NAME OF SURVIVING CORPORATION

At the Effective Time, as hereinafter defined, La Xxxx shall be
merged with and into Carrizo Oil & Gas, and Carrizo Oil & Gas is hereby also
designated as the "Surviving Corporation" and shall not be a new corporation
and shall continue its corporate existence as a Texas corporation governed by
the laws of the State of Texas.

ARTICLE XXII
TERMS AND CONDITIONS OF MERGER

At the Effective Time, the Merger shall have the effect specified
in the TRLPA and the TBCA, respectively, with respect to La Xxxx and with
respect to the Surviving Corporation.

ARTICLE XXIII
MANNER AND BASIS OF CONVERTING SHARES

(a) Subject to paragraph (e) of this Article III, at the
Effective Time, all of the limited partner interests in La Xxxx (the "La Xxxx
Limited Partner Interests") outstanding immediately prior to the Effective
Time, other than La Xxxx Limited Partner Interests that are to be canceled
pursuant to paragraph (b) of this Article III, shall be converted into and
represent the right to receive the La Xxxx Merger Consideration (defined below)
payable to the holder of such La Xxxx Limited Partner Interest. As used
herein, the following terms have the meanings specified below:

La Xxxx Merger Consideration means, with respect to each La Xxxx
Limited Partner Interest, the sum of the product of (i) 48,700 multiplied by
(ii) the percentage set forth on Schedule A hereto with respect to such La Xxxx
Limited Partner Interest.

(b) At the Effective Time, any La Xxxx Limited Partner
Interests outstanding immediately prior to the Effective Time that are held by
La Xxxx or any subsidiary thereof or by Carrizo Oil & Gas shall be canceled,
and no payment shall be made with respect thereto.

(c) At the Effective Time, all general partner interests in La
Xxxx outstanding immediately prior to the Effective Time shall be canceled, and
no payment shall be made with respect thereto.

-60-
66
(d) At the Effective Time, each share of Common Stock
outstanding immediately prior to the Effective Time shall remain outstanding
and continue unchanged as one share of Common Stock.

(e) No fractional shares of Common Stock shall be issued in
the Merger. Each holder of La Xxxx Limited Partner Interests will be issued a
whole share of Common Stock in lieu of any fractional share interest to which
such holder would otherwise be entitled.

ARTICLE IV
ARTICLES OF INCORPORATION, BYLAWS
AND OFFICERS AND DIRECTORS

ARTICLE V
APPROVAL AND EFFECTIVE TIME OF THE MERGER

The Merger shall be effected when all the following actions in
paragraphs (a) through (d) have been taken:

(a) The Partnership Agreement Amendment and this Plan shall
have been approved by the partners of La Xxxx in accordance with the TRLPA and
the La Xxxx Partnership Agreement;

(b) This Plan shall have been approved by the shareholders of
Carrizo Oil & Gas in accordance with the TBCA;

(d) Each of the conditions of the Constituent Entities set
forth in Sections 14.1, 14.5 and 14.7 of the Combination Agreement shall have
been satisfied or waived.

-61-
67
The Surviving Corporation shall file a statement complying with Section 2.12 of
the TRLPA and Article 10.03 of the TBCA with the Secretary of State of the
State of Texas, within 90 days of the date of the filing of the Articles of
Merger, setting forth the time and date upon which the conditions set forth in
paragraphs (a), (b), (c) and (d) of this Article V have been satisfied (such
time and date being referred to as the "Effective Time").

ARTICLE VI
ABANDONMENT OF PLAN

ARTICLE VII
MISCELLANEOUS

(a) This Plan shall be governed by and construed in accordance
with the laws of the State of Texas.

-62-
68
IN WITNESS WHEREOF, the undersigned have caused this Plan of
Merger to be executed this 6th day of June, 1997.

LA XXXX PARTNERS LTD.

By: Carrizo Oil & Gas, Inc.,
as general partner

By:
-----------------------
Name:
Title:

CARRIZO OIL & GAS, INC.

By:
------------------------------
Name:
Title:

-63-
69
SCHEDULE A

LA XXXX LIMITED PARTNER INTEREST PERCENTAGES

CAPITAL
PARTNER CONTRIBUTION PERCENTAGE
------- ------------ ----------

Limited Partners:

Partner $67,500 15%

Partner 67,500 15

Partner 22,500 5
-------- ---
Total Limited Partners $225,000 50%

General Partner:

Partner $225,000 50%
-------- ---
Total General and Limited Partners $450,000 100%
======== ===

70
EXHIBIT E

PLAN OF MERGER
MERGING
CARRIZO PARTNERS LTD.
(A TEXAS LIMITED PARTNERSHIP)
WITH AND INTO
CARRIZO OIL & GAS INC.
(A TEXAS CORPORATION)

This Plan of Merger (this "Plan") is between Carrizo Partners
Ltd., a Texas limited partnership ("Carrizo Partners"), and Carrizo Oil & Gas,
Inc., a Texas corporation ("Carrizo Oil & Gas") (Carrizo Partners and Carrizo
Oil & Gas being hereinafter collectively referred to as the "Constituent
Entities").

W I T N E S S E T H:

WHEREAS, Carrizo Partners is a limited partnership duly organized
and existing under the laws of the State of Texas; and

WHEREAS, Carrizo Partners and Carrizo Oil & Gas are parties to a
certain Combination Agreement dated as of June 6, 1997 (the "Combination
Agreement"); and

WHEREAS, the board of directors of Carrizo Oil & Gas, as the
general partner of Carrizo Partners, has deemed the merger of Carrizo Partners
with and into Carrizo Oil & Gas under and pursuant to the Texas Revised Limited
Partnership Act (the "TRLPA") and the Texas Business Corporation Act (the
"TBCA") as contemplated herein (the "Merger") advisable and in the best
interest of Carrizo Partners and the partners of Carrizo Partners, and has
approved, and recommended the limited partners of Carrizo Partners approve, (a)
the amendment (the "Partnership Agreement Amendment") to the Amended and
Restated Agreement of Limited Partnership of Carrizo Partners Ltd. (the
"Carrizo Partners Partnership Agreement") to permit the Merger upon the vote of
a majority in interest of the limited partners of Carrizo Partners and (b) this
Plan and the Merger; and

WHEREAS, the board of directors of Carrizo Oil & Gas has deemed
the Merger advisable and in the best interest of Carrizo Oil & Gas and its
shareholders and accordingly has
71
approved, and recommended that the shareholders of Carrizo Oil & Gas approve,
this Plan and the Merger; and

WHEREAS, no partner of Carrizo Partners will become personally
liable for the liabilities or obligations of any other person or entity as a
result of the Merger;

ARTICLE I
MERGER AND NAME OF SURVIVING CORPORATION

At the Effective Time, as hereinafter defined, Carrizo Partners
shall be merged with and into Carrizo Oil & Gas, and Carrizo Oil & Gas is
hereby also designated as the "Surviving Corporation" and shall not be a new
corporation and shall continue its corporate existence as a Texas corporation
governed by the laws of the State of Texas.

ARTICLE XXIIII
TERMS AND CONDITIONS OF MERGER

At the Effective Time, the Merger shall have the effect specified
in the TRLPA and the TBCA, respectively, with respect to Carrizo Partners and
with respect to the Surviving Corporation.

ARTICLE XXIVI
MANNER AND BASIS OF CONVERTING SHARES

(a) Subject to paragraph (e) of this Article III, at the
Effective Time, all of the limited partner interests in Carrizo Partners (the
"Carrizo Partners Limited Partner Interests") outstanding immediately prior to
the Effective Time, other than Carrizo Partners Limited Partner Interests that
are to be canceled pursuant to paragraph (b) of this Article III, shall be
converted into and represent the right to receive the Carrizo Partners Merger
Consideration (defined below) payable to the holder of such Carrizo Partners
Limited Partner Interest. As used herein, the following terms have the
meanings specified below:

Carrizo Partners After Payout Consideration means, with respect to each
Carrizo Partners Limited Partner Interest, the product of (i) 707,358 shares of
Common Stock multiplied by (ii) the percentage set forth on Schedule A hereto
as the After Payout Percentage with respect to such Carrizo Partners Limited
Partner Interest.

Carrizo Partners Before Payout Consideration means, with respect to each
Carrizo Partners Limited Partner Interest, the product of (i) 98,892 shares of
Common Stock multiplied by (ii) the percentage set forth on Schedule A hereto
as the Before Payout Percentage with respect to such Carrizo Partners Limited
Partner Interest.

-66-
72
Carrizo Partners Merger Consideration means, with respect to each
Carrizo Partners Limited Partner Interest, the sum of the Carrizo Partners
Before Payout Consideration and the Carrizo Partners After Payout Consideration
with respect to such Carrizo Partners Limited Partner Interest.

(b) At the Effective Time, any Carrizo Partners Limited
Partner Interests outstanding immediately prior to the Effective Time that are
held by Carrizo Partners or any subsidiary thereof or by Carrizo Oil & Gas
shall be canceled, and no payment shall be made with respect thereto.

(c) At the Effective Time, all general partner interests in
Carrizo Partners outstanding immediately prior to the Effective Time shall be
canceled, and no payment shall be made with respect thereto.

(d) At the Effective Time, each share of Common Stock
outstanding immediately prior to the Effective Time shall remain outstanding
and continue unchanged as one share of Common Stock.

(e) No fractional shares of Common Stock shall be issued in
the Merger. Each holder of Carrizo Partners Limited Partner Interests will be
issued a whole share of Common Stock in lieu of any fractional share interest
to which such holder would otherwise be entitled.

ARTICLE IV
ARTICLES OF INCORPORATION, BYLAWS
AND OFFICERS AND DIRECTORS

ARTICLE V
APPROVAL AND EFFECTIVE TIME OF THE MERGER

The Merger shall be effected when all the following actions in
paragraphs (a) through (d) have been taken:

-67-
73
(a) The Partnership Agreement Amendment and this Plan shall
have been approved by the partners of Carrizo Partners in accordance with the
TRLPA and the Carrizo Partners Partnership Agreement;

(b) This Plan shall have been approved by the shareholders of
Carrizo Oil & Gas in accordance with the TBCA;

(d) Each of the conditions of the Constituent Entities set
forth in Sections 14.1, 14.6 and 14.7 of the Combination Agreement shall have
been satisfied or waived.

ARTICLE VI
ABANDONMENT OF PLAN

ARTICLE VII
MISCELLANEOUS

(a) This Plan shall be governed by and construed in accordance
with the laws of the State of Texas.

IN WITNESS WHEREOF, the undersigned have caused this Plan of
Merger to be executed this 6th day of June, 1997.

-68-
74
CARRIZO PARTNERS LTD.

By: Carrizo Oil & Gas, Inc.,
as general partner

By:
--------------------------
Name:
Title:

CARRIZO OIL & GAS, INC.

By:
---------------------------------
Name:
Title:

-69-
75

SCHEDULE A

CARRIZO PARTNERS LIMITED PARTNER INTEREST PERCENTAGES

CAPITAL BEFORE PAYOUT AFTER PAYOUT
PARTNERS CONTRIBUTION PERCENTAGE PERCENTAGE
-------- ------------ ---------- ----------

Special Limited Partner:

Partner $ 0 0.001% 25.00000%
--------- -------- --------
Investor Limited Partners:

Partner $ 175,000 23.333% 11.66667%

Partner 50,000 6.667 3.33333

Partner 100,000 13.333 6.66667

Partner 50,000 6.667 3.33333

Partner 75,000 10.000 5.00000
--------- ------- -----------

Total Investor Limited Partners $ 650,000 86.666% 43.33333%
--------- ------- ----------
Total Limited Partners $ 650,000 86.667% 68.33333%

General Partner:

Partner $ 100,000 13.333% 31.66667%
--------- ------- ---------

Total General and Limited Partners $ 750,000 100.000% 100.00000%
========= ======= =========

76
EXHIBIT F

FOUNDERS DISCLOSURE SCHEDULE

None.
77
EXHIBIT G

PRODUCTION DISCLOSURE SCHEDULE

None.
78
EXHIBIT H

ENCINITAS DISCLOSURE SCHEDULE

None.
79
EXHIBIT I

LA XXXX DISCLOSURE SCHEDULE

None.
80
EXHIBIT J

CARRIZO PARTNERS DISCLOSURE SCHEDULE

None.

Document Metadata

Table of Contents

1 EXHIBIT 2.1 COMBINATION AGREEMENT DATED JUNE 6, 1997 2 TABLE OF CONTENTS

Document Metadata