Exhibit 10.4

 

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    EXECUTION VERSION     Bank of America, N.A.    

c/o Merrill Lynch, Pierce, Fenner & Smith

   Incorporated

    Bank of America Tower at One Bryant Park     New York, NY 10036     Attn:
John Servidio     Telephone:   646-855-7127     Facsimile:   704-208-2869

 

DATE:    March 2, 2012 TO:    Stone Energy Corporation    625 East Kaliste
Saloom Road    Lafayette, LA 70508 ATTENTION:    Kenneth H. Beer TELEPHONE:   
337-237-0410 FACSIMILE:    337-521-2072; beerkh@stoneenergy.com FROM:    Bank of
America, N.A.    c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated
TELEPHONE:    646-855-7127 FACSIMILE:    704-208-2869 SUBJECT:    Additional
Bond Hedge Transaction Reference Number(s):    128153903

The purpose of this letter agreement (this “Confirmation”) is to confirm the
terms and conditions of the Transaction entered into between Bank of America,
N.A. (“Dealer”) and Stone Energy Corporation (“Counterparty”) on the Trade Date
specified below (the “Transaction”). This Confirmation constitutes a
“Confirmation” as referred to in the Agreement specified below.

The definitions and provisions contained in the 2002 ISDA Equity Derivatives
Definitions (the “Equity Definitions”), as published by the International Swaps
and Derivatives Association, Inc., are incorporated into this Confirmation. In
the event of any inconsistency between the Equity Definitions and this
Confirmation, this Confirmation shall govern. Certain defined terms used herein
have the meanings assigned to them in the Indenture to be dated on or about
March 6, 2012 between Counterparty and The Bank of New York Mellon Trust
Company, N.A., as trustee (as may be amended, modified or supplemented from time
to time, but only if such amendment, modification or supplement is consented to
by Dealer in writing, the “Indenture”) relating to USD 275,000,000 principal
amount of 1.75% senior convertible notes due 2017 and the additional USD
25,000,000 principal amount of 1.75% Convertible Senior Notes due 2017 issued
pursuant to the option to purchase additional convertible notes exercised on
March 1, 2012 (the “Convertible Notes”) issued by Counterparty. In the event of
any inconsistency between the Indenture and this Confirmation, this Confirmation
shall govern. For the avoidance of doubt, references herein to sections of the
Indenture are based on the draft of the Indenture most recently reviewed by the
parties at the time of this Confirmation. If any relevant sections of the
Indenture are changed, added, or renumbered following execution of this
Confirmation but prior to the execution of the Indenture, the parties will amend
this Confirmation in good faith to preserve the economic intent of the parties
based on the draft of the Indenture so reviewed. The parties further acknowledge
that references to the Indenture herein are references to the Indenture as in
effect on the

 

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date of its execution and if the Indenture is amended following its execution,
any such amendment will be disregarded for purposes of this Confirmation (other
than as provided in paragraph 5(b) below) unless the parties agree otherwise in
writing.

Each party is hereby advised, and each such party acknowledges, that the other
party has engaged in, or refrained from engaging in, substantial financial
transactions and has taken other material actions in reliance upon the parties’
entry into the Transaction to which this Confirmation relates on the terms and
conditions set forth below.

1. This Confirmation evidences a complete and binding agreement between Dealer
and Counterparty as to the terms of the Transaction to which this Confirmation
relates. This Confirmation shall supplement, form a part of, and be subject to,
an agreement in the form of the ISDA 2002 Master Agreement as if Dealer and
Counterparty had executed an agreement (the “Agreement”) in such form (without
any Schedule but with the elections and modifications set forth in this
Confirmation) on the Trade Date. In the event of any inconsistency between
provisions of the Agreement and this Confirmation, this Confirmation will
prevail for the purpose of the Transaction. The parties hereby agree that no
Transaction other than the Transaction to which this Confirmation relates shall
be governed by the Agreement.

2. The terms of the particular Transaction to which this Confirmation relates
are as follows:

 

General Terms: Trade Date:    March 2, 2012. Effective Date:    The closing date
for the issuance of the Convertible Notes issued pursuant to the option to
purchase additional Convertible Notes exercised on March 1, 2012. Option Style:
   Modified American, as described below under “Procedures for Exercise”. Option
Type:    Call. Buyer:    Counterparty. Seller:    Dealer. Shares:    The common
stock, par value USD 0.01 per share, of Counterparty (Ticker symbol “SGY”).
Number of Options:    25,000. For the avoidance of doubt, the Number of Options
shall be reduced by any Options exercised by Counterparty. In no event will the
Number of Options be less than zero. Option Entitlement:    As of any date, a
number of Shares per Option equal to the Applicable Percentage multiplied by the
“Conversion Rate” (as defined in the Indenture) as of such date (but without
regard to any adjustments to the “Conversion Rate” pursuant to Section 10.03 or
Section 10.04(l) of the Indenture). Strike Price:    As provided in Schedule A
to this Confirmation. Applicable Percentage:    50%. Premium:    As provided in
Schedule A to this Confirmation. Premium Payment Date:    The Effective Date.
Exchange:    New York Stock Exchange. Related Exchange(s):    All Exchanges.
Calculation Agent:    Dealer. Following any calculation by the Calculation Agent
hereunder, upon a prior written request by Counterparty the

 

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   Calculation Agent will provide Counterparty with reasonable detail the basis
for such calculation (including any assumption used in making such calculation),
it being understood that the Calculation Agent shall not be obligated to
disclose any proprietary models used by it for such calculation. Procedures for
Exercise:    Exercise Dates:    Each Conversion Date. Conversion Dates:    Each
“Conversion Date” (as defined in the Indenture) occurring during the Exercise
Period for Convertible Notes in denominations of USD 1,000 principal amount that
are surrendered for conversion on such Conversion Date in accordance with the
terms of the Indenture, subject to “Notice of Exercise” below, but are not
“Relevant Convertible Notes” under, and as defined in, the confirmation between
the parties hereto regarding the Base Bond Hedge Transaction dated February 29,
2012 (Reference Number(s): 128152577) (the “Base Bond Hedge Transaction
Confirmation”) (such Convertible Notes, the “Relevant Convertible Notes”). For
the purposes of determining whether any Convertible Notes will be Relevant
Convertible Notes hereunder or under the Base Bond Hedge Transaction
Confirmation, Convertible Notes that are converted pursuant to the Indenture
shall be allocated first to the Base Bond Hedge Transaction Confirmation until
all Options thereunder are exercised. Exercisable Options:    In respect of each
Conversion Date, a number of Options equal to the number of Relevant Convertible
Notes in denominations of USD 1,000 principal amount surrendered for conversion
on such Conversion Date in accordance with the terms of the Indenture, subject
to “Notice of Exercise” below, but no greater than the Number of Options. Free
Convertibility Date:    December 1, 2016. Exercise Period:    The period from
and including the Effective Date to and including the Expiration Date.
Expiration Date:    Notwithstanding anything to the contrary in section 3.1(f)
of the Equity Definitions, “Expiration Date” shall mean the earlier of (x) the
last day on which any Convertible Notes remain outstanding and (y) the Scheduled
Trading Day immediately preceding the “Maturity Date” (as defined in the
Indenture). Multiple Exercise:    Applicable, as provided under “Exercisable
Options” above. Automatic Exercise:    Applicable, subject to “Notice of
Exercise” below. Notice of Exercise:    Notwithstanding anything to the contrary
in the Equity Definitions or under “Exercisable Options” above, in order to
exercise any Exercisable Options, Counterparty must notify Dealer in writing (x)
prior to 5:00 p.m., New York City time, on the day that is at least two
Scheduled Trading Days’ prior to the first day of the applicable Conversion
Period in respect of the Options being exercised or (y) prior to 12:00 p.m., New
York City time, on the day that is the Scheduled Trading Day immediately
preceding the first day of the applicable Conversion Period in respect of the
Options being exercised, of (i) the number of such Options (including, if
applicable, whether all or any portion of the Convertible Notes

 

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   relating to such Options are Convertible Notes as to which additional Shares
would be added to the “Conversion Rate” (as defined in the Indenture) pursuant
to Section 10.03 of the Indenture (the “Make-Whole Convertible Notes”)), (ii)
the scheduled first day of the applicable Conversion Period and the scheduled
Settlement Date, (iii) the Relevant Settlement Method for such Options and (iv)
if the Relevant Settlement Method for such Options is not Net Share Settlement,
Settlement in Shares or Settlement in Cash (each as defined below), the fixed
amount of cash per Relevant Convertible Note that Counterparty has elected to
deliver to “Holders” (as defined in the Indenture) of the related Relevant
Convertible Notes (the “Specified Cash Amount”), and such notice shall also
include the information, representations, acknowledgements and agreements
required pursuant to “Settlement Method Election Conditions” below; provided
that in respect of any Options relating to Relevant Convertible Notes with a
Conversion Date occurring on or after the Free Convertibility Date, (A) such
notice may be given on or prior to the Expiration Date and need only specify the
information required in clause (i) above (provided that any such notice given on
the Expiration Date shall be given prior to 12:00 p.m., New York City time, on
such date), and (B) if the Relevant Settlement Method for such Options is not
Net Share Settlement, Dealer shall have received a separate notice (the “Notice
of Final Settlement Method”) in respect of all such Relevant Convertible Notes
before 5:00 p.m., New York City time, on or prior to the Free Convertibility
Date specifying the information required in clauses (iii) and (iv) above, as
well as the information, representations, acknowledgements and agreements
required pursuant to “Settlement Method Election Conditions” below; provided
further that any “Notice of Exercise” delivered to Dealer pursuant to the Base
Bond Hedge Transaction shall be deemed to be a Notice of Exercise pursuant to
this Confirmation and the terms of such Notice of Exercise shall apply, mutadis
mutandis, to this Confirmation. Settlement Terms: Settlement Method:    For any
Option, Net Share Settlement; provided that if the Relevant Settlement Method
set forth below for such Option is not Net Share Settlement, then the Settlement
Method for such Option shall be such Relevant Settlement Method, but only if the
Settlement Method Election Conditions have been satisfied and Counterparty shall
have notified Dealer of the Relevant Settlement Method in the Notice of Exercise
or Notice of Final Settlement Method, as applicable, for such Option. Relevant
Settlement Method:   

In respect of any Option, subject to the Settlement Method Election Conditions:

(i) if Counterparty has elected to settle its conversion obligations in respect
of the related Relevant Convertible Note (A) entirely in Shares pursuant to
Section 10.02(b) of the Indenture (together with cash in lieu of fractional
Shares) (such settlement method, “Settlement in Shares”); (B) in a combination
of cash and Shares pursuant to Section 10.02(b) of the Indenture with a
Specified Cash Amount less than USD 1,000 (such settlement method, “Low Cash
Combination Settlement”); or (C) in a

 

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combination of cash and Shares pursuant to Section 10.02(b) of the Indenture
with a Specified Cash Amount equal to USD 1,000, then, in each case, the
Relevant Settlement Method for such Option shall be Net Share Settlement;

 

(ii) if Counterparty has elected to settle its conversion obligations in respect
of the related Relevant Convertible Note in a combination of cash and Shares
pursuant to Section 10.02(b) of the Indenture with a Specified Cash Amount
greater than USD 1,000, then the Relevant Settlement Method for such Option
shall be Combination Settlement; and

 

(iii) if Counterparty has elected to settle its conversion obligations in
respect of the related Relevant Convertible Note entirely in cash pursuant to
Section 10.02(b) of the Indenture (such settlement method, “Settlement in
Cash”), then the Relevant Settlement Method for such Option shall be Cash
Settlement.

Settlement Method Election Conditions:   

For any Relevant Settlement Method other than Net Share Settlement with a
Specified Cash Amount equal to USD 1,000, such Relevant Settlement Method shall
apply to an Option only if the Notice of Exercise or Notice of Final Settlement
Method for such Option, as applicable, contains:

 

(i) a representation that, on the date of such Notice of Exercise or Notice of
Final Settlement Method, as applicable, none of Counterparty and its officers
and directors is aware or in possession of any “material non-public information”
(within the meaning of Section 10(b) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and the rules promulgated thereunder) with respect
to Counterparty or the Shares;

 

(ii) a representation that Counterparty is electing the settlement method for
the related Relevant Convertible Note and such Relevant Settlement Method in
good faith and not as part of a plan or scheme to evade the prohibitions of Rule
10b-5 under the Exchange Act;

 

(iii) a representation that Counterparty has not entered into or altered any
hedging transaction relating to the Shares corresponding to or offsetting the
Transaction;

 

(iv) a representation that Counterparty is not electing the settlement method
for the related Relevant Convertible Note and such Relevant Settlement Method to
create actual or apparent trading activity in the Shares (or any security
convertible into or exchangeable for the Shares) or to raise or depress or
otherwise manipulate the price of the Shares (or any security convertible into
or exchangeable for the Shares) or otherwise in violation of the Exchange Act;
and

 

(v) an acknowledgment by Counterparty that (A) any transaction by Dealer
following Counterparty’s election of the settlement method for the related
Relevant Convertible Note and such Relevant Settlement Method shall be made at
Dealer’s sole discretion and for Dealer’s own account and (B) Counterparty does
not have, and shall not attempt to exercise, any influence over how, when,
whether or at what price to effect such transactions, including, without
limitation, the price paid or received per Share pursuant to such transactions,
or whether such transactions are made on any securities exchange or privately.

 

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Net Share Settlement:    If Net Share Settlement is applicable to any Option
exercised or deemed exercised hereunder, in lieu of the obligations set forth in
Sections 8.1 and 9.1 of the Equity Definitions, Dealer will deliver to
Counterparty, on the relevant Settlement Date for each such Option, an aggregate
number of Shares and cash in lieu of fractional shares, if any, (the “Net Share
Settlement Amount”) equal to the product of (x) the Applicable Percentage and
(y) the number of Shares that Counterparty would be obligated to deliver to the
“Holder(s)” (as defined in the Indenture) of the Relevant Convertible Notes
converted on such Conversion Date pursuant to Section 10.02(b) of the Indenture
and cash in lieu of fractional shares, if any, pursuant to Section 10.02(i) of
the Indenture, as if Counterparty had elected to satisfy its conversion
obligation in respect of such Relevant Convertible Notes with a Specified Cash
Amount equal to USD 1,000 per Relevant Convertible Note, notwithstanding any
different Specified Cash Amount actually elected by Counterparty with respect to
the settlement of such Relevant Convertible Notes; provided that such obligation
shall be determined excluding any Shares and/or cash that Counterparty is
obligated to deliver to holder(s) of the Relevant Convertible Notes as a result
of any adjustments to the “Conversion Rate” pursuant to Sections 10.03 or
10.04(l) of the Indenture; and provided further that, with respect to any
Settlement in Shares or Low Cash Combination Settlement, in no event shall the
Net Share Settlement Amount for any Option exceed a number of Shares equal to
the Applicable Limit for such Option divided by the Applicable Limit Price on
the settlement date for the Relevant Convertible Notes relating to such Option.
Combination Settlement:   

If Combination Settlement is applicable to any Option exercised or deemed
exercised hereunder, in lieu of the obligations set forth in Sections 8.1 and
9.1 of the Equity Definitions, Dealer will deliver to Counterparty, on the
relevant Settlement Date for each such Option:

 

(i) cash (the “Combination Settlement Cash Amount”) equal to the sum for each
Trading Day during the applicable Conversion Period for such Option of an amount
for each such Trading Day (the “Daily Combination Settlement Cash Amount”) equal
to (A) the lesser of (1) the product of (x) the Applicable Percentage and (y)
the Specified Cash Amount minus USD 1,000 and (2) the Daily Option Value,
divided by (B) the number of Trading Days in the applicable Conversion Period;
provided that if the calculation in clause (A) above results in zero or a
negative number for any Trading Day, the Daily Combination Settlement Cash
Amount for such Trading Day shall be deemed to be zero; and

 

(ii) an aggregate number of Shares (the “Combination Settlement Share Amount”)
equal to the sum for each Trading Day during the applicable Conversion Period
for such Option of a number of Shares for each such Trading Day (the “Daily
Combination Settlement Share Amount”) equal to (A) the Daily Option Value on
such Trading Day minus the Daily Combination Settlement Cash Amount for such
Trading Day, divided by (B) the VWAP Price on such Trading Day, divided by (C)
the number of Trading Days in the applicable Conversion Period; provided that if
the calculation in clause (A) above results in zero or a negative number for any
Trading Day, the Daily Combination Settlement Share Amount for such Trading Day
shall be deemed to be zero.

 

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   Dealer will deliver cash in lieu of any fractional Shares to be delivered
with respect to any Combination Settlement Share Amount valued at the VWAP Price
for the last Trading Day of the applicable Conversion Period. Cash Settlement:
   If Cash Settlement is applicable to any Option exercised or deemed exercised
hereunder, in lieu of Section 8.1 of the Equity Definitions, Dealer will pay to
Counterparty, on the relevant Settlement Date for each such Option, an amount of
cash (the “Cash Settlement Amount”) equal to the sum for each Trading Day during
the applicable Conversion Period for such Option of (i) the Daily Option Value
for such Trading Day, divided by (ii) the number of Trading Days in the
applicable Conversion Period. Daily Option Value:    For any Trading Day, an
amount equal to (i) the Option Entitlement on such Trading Day, multiplied by
(ii)(x) the VWAP Price on such Trading Day minus (y) the Strike Price on such
Trading Day; provided that if the calculation contained in clause (ii) above
results in a negative number, the Daily Option Value for such Trading Day shall
be deemed to be zero. In no event will the Daily Option Value be less than zero.
Applicable Limit:    For any Option, an amount of cash equal to the Applicable
Percentage multiplied by the excess of (i) the aggregate of (A) the amount of
cash, if any, delivered to the Holder of the related Relevant Convertible Note
upon conversion of such Relevant Convertible Note and (B) the number of Shares,
if any, delivered to the Holder of the related Relevant Convertible Note upon
conversion of such Relevant Convertible Note multiplied by the Applicable Limit
Price on the settlement date for the Relevant Convertible Notes relating to such
Option, over (ii) USD 1,000. Applicable Limit Price:    On any day, the opening
price as displayed under the heading “Op” on Bloomberg page SGY <equity> (or any
successor thereto). Trading Day:    A day on which (i) there is no Market
Disruption Event and (ii) trading in the Shares generally occurs on the Exchange
or, if the Shares are not then listed on the Exchange, on the principal other
U.S. national or regional securities exchange on which the Shares are then
listed or, if the Shares are not then listed on a U.S. national or regional
securities exchange, on the principal other market on which the Shares are then
listed or admitted for trading. If the Shares are not so listed or admitted for
trading, “Trading Day” means a Business Day. Scheduled Trading Day:    A day
that is scheduled to be a Trading Day on the principal U.S. national or regional
securities exchange or market on which the Shares are listed or admitted for
trading. If the Shares are not so listed or admitted for trading, “Scheduled
Trading Day” means a Business Day. Business Day:    Any day other than a
Saturday, a Sunday or a day on which the Federal Reserve Bank of New York or
banks in the State of Texas are authorized or required by law or executive order
to close or be closed.

 

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Market Disruption Event:    Section 6.3(a) of the Equity Definitions is hereby
replaced in its entirety by the following:    “‘Market Disruption Event’ means,
in respect of a Share, (i) a failure by the primary U.S. national or regional
securities exchange or market on which the Shares are listed or admitted for
trading to open for trading during its regular trading session or (ii) the
occurrence or existence prior to 1:00 p.m. New York City time on any Scheduled
Trading Day for the Shares for more than one half-hour period in the aggregate
during regular trading hours of any suspension or limitation imposed on trading
(by reason of movements in price exceeding limits permitted by the relevant
stock exchange or otherwise) in the Shares or in any options, contracts or
futures contracts relating to the Shares.” VWAP Price:    On any Trading Day,
the per Share volume-weighted average price as displayed on Bloomberg page (or
any successor thereto) “SGY <equity> AQR” in respect of the period from 9:30
a.m. to 4:00 p.m., New York City time, on such Trading Day (or if such
volume-weighted average price is unavailable at such time, the market value of
one Share on such Trading Day, as determined by the Calculation Agent using a
volume-weighted method). For the avoidance of doubt, the VWAP Price will be
determined without regard to after-hours trading or any other trading outside of
the regular trading session hours. Conversion Period:   

For any Option and regardless of the Settlement Method applicable to such
Option:

 

(i) if the related Conversion Date occurs prior to the Free Convertibility Date,
the 25 consecutive Trading Days commencing on, and including, the third Trading
Day immediately following such Conversion Date; provided that if the Notice of
Exercise for such Option specifies that Settlement in Shares or Low Cash
Combination Settlement applies to the related Relevant Convertible Note, the
Conversion Period shall be the 50 consecutive Trading Day period commencing on,
and including, the third Trading Day immediately following such Conversion Date;

 

(ii) if the related Conversion Date occurs on or following the Free
Convertibility Date, the 25 consecutive Trading Days commencing on, and
including, the 27th Scheduled Trading Day immediately prior to the “Maturity
Date” (as defined in the Indenture”); provided that if the Notice of Exercise or
Notice of Final Settlement Method, as applicable, for such Option specifies that
Settlement in Shares or Low Cash Combination Settlement applies to the related
Relevant Convertible Note, the Conversion Period shall be the 50 consecutive
Trading Days commencing on, and including, the 53rd Scheduled Trading Day
immediately prior to the “Maturity Date” (as defined in the Indenture”).

Settlement Date:    For any Option, the third Business Day immediately following
the final Trading Day of the applicable Conversion Period for such Option.
Settlement Currency:    USD. Other Applicable Provisions:    To the extent
Dealer is obligated to deliver Shares hereunder, the provisions of Sections 9.4
(except that “Settlement Date” shall be as defined above, unless a Settlement
Disruption Event prevents

 

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   delivery of such Shares on that date), 9.8, 9.9, 9.10, 9.11 and 9.12 of the
Equity Definitions shall be applicable as if “Physical Settlement” applied to
the Transaction; provided that the Representation and Agreement contained in
Section 9.11 of the Equity Definitions shall be modified by excluding any
restrictions, obligations, limitations or requirements under applicable
securities laws as a result of the fact that Counterparty is the issuer of the
Shares. Restricted Certificated Shares:    Notwithstanding anything to the
contrary in the Equity Definitions, Dealer may, in whole or in part, deliver any
Shares required to be delivered hereunder in certificated form to Counterparty
in lieu of delivery through the Clearance System. With respect to such
certificated Shares, the Representation and Agreement contained in Section 9.11
of the Equity Definitions shall be modified by deleting the remainder of the
provision after the word “encumbrance” in the fourth line thereof. Share
Adjustments:    Method of Adjustment:    Calculation Agent Adjustment, which
means that, notwithstanding Section 11.2(c) of the Equity Definitions, upon any
adjustment to the “Conversion Rate” (as defined in the Indenture) and/or the
nature of the Shares under the Convertible Notes pursuant to the Indenture
(other than an increase in the “Conversion Rate” pursuant to Section 10.03 or
Section 10.04(l) of the Indenture), the Calculation Agent will make a
corresponding adjustment to any one or more of the Strike Price, Number of
Options, the Option Entitlement and any other term relevant to the exercise,
settlement, payment or other terms of the Transaction. Counterparty agrees that
it will notify Dealer prior to the effectiveness of any such adjustment and, to
the extent such adjustment requires an exercise of discretion by Counterparty
under the terms of the Indenture, it shall use good faith efforts to consult
with the Calculation Agent in order to achieve a commercially reasonable
adjustment, determination or calculation (it being understood for the avoidance
of doubt that notwithstanding any such consultation, Counterparty shall remain
entitled to make such adjustments as permitted in accordance with the terms of
the Indenture); provided that notwithstanding the foregoing, if any Potential
Adjustment Event occurs during the Conversion Period but no adjustment was made
to any Convertible Note under the Indenture because the relevant “Holder” (as
defined in the Indenture) was deemed to be a record owner of the underlying
Shares on the related Conversion Date, then the Calculation Agent shall make an
adjustment, as determined by it, to the terms hereof in order to account for
such Potential Adjustment Event. Potential Adjustment Events:    Notwithstanding
Section 11.2(e) of the Equity Definitions, a “Potential Adjustment Event” means
an occurrence of any event or condition, as set forth in Sections 10.04(a), (b),
(c), (d) and (e) of the Indenture that would result in an adjustment to the
“Conversion Rate” (as defined in the Indenture) of the Convertible Notes;
provided that in no event shall there be any adjustment hereunder as a result of
an adjustment to the “Conversion Rate” pursuant to Section 10.03 or
Section 10.04(l) of the Indenture.

 

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Extraordinary Events: Merger Events:    Notwithstanding Section 12.1(b) of the
Equity Definitions (which shall not apply for the purposes hereof), a “Merger
Event” means the occurrence of any event or condition set forth in Section 10.05
of the Indenture. Notice of Merger Consideration:    Upon the occurrence of a
Merger Event that causes the Shares to be converted into or exchanged for more
than a single type of consideration (determined based in part upon the form of
election of the holders of the Shares), Counterparty shall promptly notify the
Calculation Agent in writing of the types and amounts of consideration that
holders of Shares have affirmatively elected to receive upon consummation of
such Merger Event; provided that in no event shall the date of such notification
be later than the date on which such Merger Event is consummated. Consequences
of Merger Events:    Notwithstanding Section 12.2 of the Equity Definitions
(which shall not apply for the purposes hereof), upon the occurrence of a Merger
Event, to the extent an adjustment is made under the Indenture in respect of
such Merger Event, the Calculation Agent shall make a corresponding adjustment
in respect of any adjustment under the Indenture to any one or more of the
nature of the Shares, the Strike Price, the Number of Options, the Option
Entitlement and any other term relevant to the exercise, settlement, payment or
other terms of the Transaction; provided, however, that such adjustment shall be
made without regard to any adjustment to the “Conversion Rate” (as defined in
the Indenture) for the issuance of additional shares as set forth in
Section 10.03 or Section 10.04(l) of the Indenture. Nationalization, Insolvency
or Delisting:    Cancellation and Payment (Calculation Agent Determination);
provided that, in addition to the provisions of Section 12.6(a)(iii) of the
Equity Definitions, it will also constitute a Delisting if the Exchange is
located in the United States and the Shares are not immediately re-listed,
re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global
Select Market or The NASDAQ Global Market (or their respective successors); if
the Shares are immediately re-listed, re-traded or re-quoted on any of the New
York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market
(or their respective successors), such exchange or quotation system shall
thereafter be deemed to be the Exchange. Additional Disruption Events:   

Change in Law:

  

Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is
hereby amended by (i) replacing the phrase “the interpretation” in the third
line thereof with the phrase “, or public announcement of, the formal or
informal interpretation”; and (ii) by replacing the word “Shares” where it
appears in clause (X) thereof with the words “Hedge Position”.

 

The parties agree that, for the avoidance of doubt, for purposes of Section
12.9(a)(ii) of the Equity Definitions, “any applicable law or regulation”, and
for purposes of Section 5(b)(i) of the Agreement, “any applicable law”, shall
include the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010,
any rules and regulations promulgated thereunder and any similar law or
regulation (collectively, the “Wall Street Act”), and the consequences specified
in Section 12.9(b)(i) of the Equity

 

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   Definitions and Section 6 of the Agreement shall apply to any Change in Law
or Illegality, as the case may be, arising from any such act, rule or
regulation. The parties hereby agree that any additional capital charges or
other regulatory capital requirements imposed with respect to this Transaction
in connection with the Wall Street Act, if material, shall constitute “a
materially increased cost in performing its obligations under such Transaction”
for purposes of Section 12.9(a)(ii)(Y) of the Equity Definitions, if
applicable. The foregoing constitutes a specific reservation for purposes of the
Wall Street Act. Failure to Deliver:    Not Applicable. Insolvency Filing:   
Applicable. Hedging Disruption:   

Applicable; provided that Section 12.9(a)(v) of the Equity Definitions is hereby
modified by inserting the following two phrases at the end of such Section:

 

“For the avoidance of doubt, the term “equity price risk” shall be deemed to
include stock price and volatility risk. And, for the further avoidance of
doubt, any such transactions or assets referred to in phrases (A) or (B) above
must be available on commercially reasonable pricing terms.”.

Increased Cost of Hedging:    Not Applicable. Hedging Party:    Dealer or an
affiliate of Dealer that is involved in the hedging of this Transaction for all
applicable Additional Disruption Events. Determining Party:    Dealer for all
applicable Extraordinary Events. Acknowledgments: Non-Reliance:    Applicable.
Agreements and Acknowledgments Regarding Hedging Activities:    Applicable.
Additional Acknowledgments:    Applicable.

3. Mutual Representations, Warranties and Agreements.

In addition to the representations, warranties and agreements in the Agreement
and those contained elsewhere herein, each of Dealer and Counterparty represents
and warrants to, and agrees with, the other party that:

 

  (a) Commodity Exchange Act. It is an “eligible contract participant” within
the meaning of Section 1a(12) of the U.S. Commodity Exchange Act, as amended
(the “CEA”). The Transaction has been subject to individual negotiation by the
parties. The Transaction has not been executed or traded on a “trading facility”
as defined in the CEA.

 

  (b) Securities Act. It is a “qualified institutional buyer” as defined in Rule
144A under the U.S. Securities Act of 1933, as amended (the “Securities Act”),
or an “accredited investor” as defined in Section 2(a)(15)(ii) of the Securities
Act.

 

  (c) ERISA. The assets used in the Transaction (1) are not assets of any “plan”
(as such term is defined in Section 4975 of the U.S. Internal Revenue Code (the
“Code”)) subject to Section 4975 of the Code or any “employee benefit plan” (as
such term is defined in Section 3(3) of the U.S. Employee Retirement Income
Security Act of 1974, as amended (“ERISA”)) subject to Title I of ERISA, and
(2) do not constitute “plan assets” within the meaning of Department of Labor
Regulation 2510.3-101, 29 CFR Section 2510-3-101.

 

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4. Representations, Warranties and Agreements of Counterparty.

In addition to the representations and warranties in the Agreement and those
contained elsewhere herein, Counterparty further represents, warrants and agrees
that:

 

  (a) Counterparty is not as of the Trade Date or the Premium Payment Date and
shall not be after giving effect to the transactions contemplated hereby,
“insolvent” (as such term is defined in Section 101(32) of the U.S. Bankruptcy
Code (Title 11 of the United States Code) (the “Bankruptcy Code”)) and on each
such date Counterparty would be able to purchase a number of Shares equal to the
Number of Shares in compliance with the laws of the jurisdiction of
Counterparty’s incorporation or organization;

 

  (b) Counterparty shall promptly provide written notice to Dealer upon the
occurrence and continuation of an Event of Default, a Potential Adjustment
Event, a Merger Event or any other Extraordinary Event; provided, however, that
should Counterparty be in possession of material non-public information
regarding Counterparty, Counterparty shall not communicate such information to
Dealer;

 

  (c) Counterparty has not and will not directly or indirectly violate any
applicable law (including, without limitation, the Securities Act and the
Exchange Act and the regulations promulgated thereunder) that is material to the
performance of a party’s obligations or hedging activities in connection with
the Transaction;

 

  (d) Counterparty has (and shall at all times during the Transaction have) the
capacity and authority to invest directly in the Shares underlying the
Transaction and has not entered into the Transaction with the intent to avoid
any regulatory filings;

 

  (e) Counterparty’s financial condition is such that it has no need for
liquidity with respect to its investment in the Transaction and no need to
dispose of any portion thereof to satisfy any existing or contemplated
undertaking or indebtedness;

 

  (f) Counterparty’s investments in and liabilities in respect of the
Transaction, which it understands are not readily marketable, are not
disproportionate to its net worth, and Counterparty is able to bear any loss in
connection with the Transaction, including the loss of its entire investment in
the Transaction;

 

  (g) Counterparty understands, agrees and acknowledges that Dealer has no
obligation or intention to register the Transaction under the Securities Act,
any state securities law or other applicable federal securities law;

 

  (h) each of Counterparty’s filings under the Securities Act, the Exchange Act,
or other applicable securities laws that are required to be filed have been
filed and that, as of the respective dates thereof and as of the date of this
representation, such filings when considered as a whole (with the more recent
such filings deemed to amend inconsistent statements contained in any earlier
such filings) do not contain any misstatement of a material fact or any omission
of a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading;

 

  (i) Counterparty is not, and after giving effect to the transactions
contemplated hereby will not be, required to register as an “investment company”
as such term is defined in the Investment Company Act of 1940, as amended;

 

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  (j) Counterparty understands, agrees and acknowledges that no obligations of
Dealer to it hereunder shall be entitled to the benefit of deposit insurance and
that such obligations shall not be guaranteed by any affiliate of Dealer or any
governmental agency;

 

  (k) (A) Counterparty is acting for its own account, and it has made its own
independent decisions to enter into the Transaction and as to whether the
Transaction is appropriate or proper for it based upon its own judgment and upon
advice from such advisers as it has deemed necessary, (B) Counterparty is not
relying on any communication (written or oral) of Dealer or any of its
affiliates as investment advice or as a recommendation to enter into the
Transaction (it being understood that information and explanations related to
the terms and conditions of the Transaction shall not be considered investment
advice or a recommendation to enter into the Transaction) and (C) no
communication (written or oral) received from Dealer or any of its affiliates
shall be deemed to be an assurance or guarantee as to the expected results of
the Transaction;

 

  (l) without limiting the generality of Section 13.1 of the Equity Definitions,
Counterparty acknowledges that Dealer is not making any representations or
warranties with respect to the treatment of the Transaction under any accounting
standards including ASC Topic 260, Earnings Per Share, ASC Topic 815,
Derivatives and Hedging, ASC Topic 480, Distinguishing Liabilities from Equity
and ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (or
any successor issue statements) or under FASB’s Liabilities & Equity Project;

 

  (m) Counterparty is not entering into the Transaction for the purpose of
(i) creating actual or apparent trading activity in the Shares (or any security
convertible into or exchangeable for the Shares) or (ii) raising or depressing
or otherwise manipulating the price of the Shares (or any security convertible
into or exchangeable for the Shares) or otherwise in violation of the Exchange
Act;

 

  (n) On the Trade Date, none of Counterparty and its officers and directors is
aware or in possession of any “material non-public information” (within the
meaning of Section 10(b) of the Exchange Act and the rules promulgated
thereunder) regarding Counterparty or the Shares;

 

  (o) Counterparty has not entered into any obligation or undertaking that would
contractually limit it from effecting Net Share Settlement under this
Transaction and it agrees not to enter into any such obligation or undertaking
that would contractually limit it from effecting settlement pursuant to the
Relevant Settlement Method during the term of this Transaction;

 

  (p) Counterparty is entering into the Transaction, solely for the purposes
stated in the board resolution authorizing the Transaction and in its public
disclosure, and there is no internal policy, whether written or oral, of
Counterparty that would prohibit Counterparty from entering into any aspect of
the Transaction; and

 

  (q) Counterparty has no knowledge, and is otherwise not aware, of any federal,
state or local (including non-U.S. jurisdictions) law, rule, regulation or
regulatory order applicable to Counterparty or the Shares that would give rise
to any reporting, consent, registration or other requirement (including without
limitation a requirement to obtain prior approval from any person or entity) as
a result of Dealer or its affiliates owning or holding (however defined) Shares,
except as required (i) pursuant to the Exchange Act and (ii) by the Securities
Act in connection with any registration rights held by Dealer pursuant to this
Confirmation.

5. Other Provisions.

 

  (a)

Method of Delivery; Designation by Dealer. Notwithstanding any other provision
in this Confirmation to the contrary requiring or allowing Dealer to purchase,
sell, receive or deliver any Shares or other securities to or from Counterparty,
Dealer may designate any of its affiliates to purchase, sell, receive or deliver
such Shares or other securities and otherwise to perform Dealer’s

 

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  obligations in respect of the Transaction and any such designee may assume
such obligations. Dealer shall be discharged of its obligations to Counterparty
to the extent of any such performance.

 

  (b) Additional Termination Events.

(i) The occurrence of an Amendment Event shall constitute an Additional
Termination Event in respect of which (A) Counterparty shall be the sole
Affected Party and the Transaction shall be the sole Affected Transaction and
(B) Dealer shall be the party entitled to designate an Early Termination Date
pursuant to Section 6(b) of the Agreement. “Amendment Event” means that
Counterparty amends, modifies, supplements or obtains a waiver with respect to
(i) any term of the Indenture or the Convertible Notes governing the principal
amount, coupon, maturity, repurchase obligation of Counterparty, redemption
right of Counterparty, any term relating to conversion of the Convertible Notes
(including changes to the conversion rate, conversion settlement dates or
conversion conditions), or (ii) any term that would require consent of the
holders of not less than 100% of the principal amount of the Convertible Notes
to amend, in each case without the prior written consent of Dealer, such consent
not to be unreasonably withheld.

(ii) The Convertible Notes becoming due and payable under the terms of the
Indenture as a result of the occurrence of an “Event of Default” with respect to
Counterparty as set forth in Section 6.01 of the Indenture shall constitute an
Additional Termination Event in respect of which (A) Counterparty shall be the
sole Affected Party and the Transaction shall be the sole Affected Transaction
and (B) Dealer shall be the party entitled to designate an Early Termination
Date pursuant to Section 6(b) of the Agreement.

(iii) The receipt by Dealer from Counterparty, within the applicable time period
set forth under “Notice of Exercise” above, of any Notice of Exercise in respect
of the exercise of any Options that, according to such Notice of Exercise,
relate to Make-Whole Convertible Notes shall constitute an Additional
Termination Event as provided in this paragraph 5(b)(iii). Upon receipt of any
such Notice of Exercise, Dealer shall designate an Exchange Business Day
following such Additional Termination Event (which Exchange Business Day shall
be on or as promptly as reasonably practicable after the related settlement date
for such Convertible Notes) as an Early Termination Date with respect to the
portion of the Transaction corresponding to a number of Options (the “Make-Whole
Conversion Options”) equal to the lesser of (A) (x) the aggregate principal
amount of Make-Whole Convertible Notes specified in such Notice of Exercise,
divided by USD 1,000, minus (y) the number of Make-Whole Conversion Options (as
defined in the Base Bond Hedge Transaction Confirmation), if any, that relate to
such Make-Whole Convertible Notes, and (B) the Number of Options as of the date
Dealer designates such Early Termination Date and, as of such date, the Number
of Options shall be reduced by the number of Make-Whole Conversion Options. Any
payment hereunder with respect to such termination (the “Make-Whole Unwind
Payment”) shall be calculated pursuant to Section 6 of the Agreement as if
(1) an Early Termination Date had been designated in respect of a Transaction
having terms identical to the Transaction and a Number of Options equal to the
number of Make-Whole Conversion Options, (2) Counterparty were the sole Affected
Party with respect to such Additional Termination Event and (3) the terminated
portion of the Transaction were the sole Affected Transaction (and, for the
avoidance of doubt, in determining the amount payable pursuant to Section 6 of
the Agreement, the Calculation Agent shall not take into account any adjustments
to the Option Entitlement that result from corresponding adjustments to the
Conversion Rate pursuant to Section 10.03 of the Indenture); provided that the
amount of cash payable in respect of such early termination by Dealer to
Counterparty (determined, for the avoidance doubt, without regard to the
immediately following sentence or paragraph 5(m) below) shall not be greater
than the product of (x) the Applicable Percentage and (y) the excess of (I)(1)
the number of Make-Whole Conversion Options, multiplied by (2) the Conversion
Rate (after taking into account any applicable adjustments to the Conversion
Rate pursuant to Section 10.03 of the Indenture), multiplied by (3) a price per
Share determined by the Calculation Agent in good faith and in a commercially
reasonable manner, over (II) the aggregate principal amount of the related
Make-Whole

 

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Convertible Notes, as determined by the Calculation Agent in good faith and in a
commercially reasonable manner. Counterparty may irrevocably elect, if so
designated in its Notice of Exercise to Dealer as set forth above, to receive
the Make-Whole Unwind Payment in Shares, in which case, in lieu of making such
Make-Whole Unwind Payment as set forth above, Dealer shall deliver to
Counterparty, within a commercially reasonable period of time after such
designation as determined by Dealer (taking into account existing liquidity
conditions and Dealer’s hedging and hedge unwind activity or settlement activity
in connection with such delivery) a number of Shares equal to such Make-Whole
Unwind Payment divided by a price per Share determined by the Calculation Agent
in good faith and in a commercially reasonable manner.

 

  (c) Understanding and Acknowledgement. Counterparty understands and
acknowledges that notwithstanding any other relationship between Counterparty
and Dealer (and Dealer’s affiliates), in connection with this Transaction and
any other over-the-counter derivative transaction between Counterparty and
Dealer or Dealer’s affiliates, Dealer or its affiliates, as the case may be, is
acting as principal and is not a fiduciary or adviser to Counterparty in respect
of any such transaction, including any entry into or exercise, amendment, unwind
or termination thereof.

 

  (d)

Repurchase Notices. Counterparty shall, on any day on which Counterparty effects
any repurchase of Shares, promptly give Dealer a written notice of such
repurchase (a “Repurchase Notice”) on such day if following such repurchase, the
Options Equity Percentage as determined on such day is (i) equal to or greater
than 9.0% or (ii) greater by 0.5% than the Options Equity Percentage included in
the immediately preceding Repurchase Notice (or, in the case of the first such
Repurchase Notice, greater than the Options Equity Percentage as of the Trade
Date). The “Options Equity Percentage” as of any day is the fraction, expressed
as a percentage, (A) the numerator of which is the product of the Number of
Options in aggregate and the Option Entitlement and (B) the denominator of which
is the number of Shares outstanding on such day. In the event that Counterparty
fails to provide Dealer with a Repurchase Notice on the day and in such manner
specified in this paragraph 5(d), Counterparty agrees to indemnify and hold
harmless Dealer and its affiliates and their respective officers, directors,
employees, affiliates, advisors, agents and controlling persons (each, an
“Indemnified Person”) from and against any and all losses (including losses
relating to Dealer’s hedging activities as a consequence of becoming, or of the
risk of becoming, a Section 16 “insider”, including without limitation, any
forbearance from hedging activities or cessation of hedging activities and any
losses in connection therewith with respect to the Transaction), claims,
damages, judgments, liabilities and expenses (including reasonable attorney’s
fees), joint or several, which an Indemnified Person may become subject to, as a
result of Counterparty’s failure to provide Dealer with a Repurchase Notice on
the day and in the manner specified in this paragraph, and to reimburse, within
30 days, upon written request, each of such Indemnified Persons for any
reasonable legal or other expenses incurred in connection with investigating,
preparing for, providing testimony or other evidence in connection with or
defending any of the foregoing. If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against the Indemnified Person in respect of the foregoing, such
Indemnified Person shall promptly notify Counterparty in writing, and
Counterparty, upon request of the Indemnified Person, shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the Indemnified
Person and any others Counterparty may designate in such proceeding and shall
pay the fees and expenses of such counsel related to such proceeding.
Counterparty shall not be liable for any settlement of any proceeding
contemplated by this paragraph that is effected without its written consent, but
if settled with such consent or if there be a final judgment for the plaintiff,
Counterparty agrees to indemnify any Indemnified Person from and against any
loss or liability by reason of such settlement or judgment. Counterparty shall
not, without the prior written consent of the Indemnified Person, effect any
settlement of any pending or threatened proceeding contemplated by this
paragraph that is in respect of which any Indemnified Person is or could have
been a party and indemnity could have been sought hereunder by such Indemnified
Person, unless such settlement includes an unconditional release of such
Indemnified Person from all liability on claims that are the subject matter of
such proceeding on terms reasonably satisfactory to such Indemnified Person. If
the indemnification provided for in this paragraph is unavailable to an

 

15

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  Indemnified Person or insufficient in respect of any losses, claims, damages
or liabilities referred to therein, then Counterparty hereunder, in lieu of
indemnifying such Indemnified Person thereunder, shall contribute to the amount
paid or payable by such Indemnified Person as a result of such losses, claims,
damages or liabilities. The remedies provided for in this paragraph are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any Indemnified Person at law or in equity. The indemnity and
contribution agreements contained in this paragraph shall remain operative and
in full force and effect regardless of the termination of the Transaction.

 

  (e) Rule 10b-18.

(i) Except as disclosed to Dealer in writing prior to the date on which the
offering of the Convertible Notes was first announced, Counterparty represents
and warrants to Dealer that it has not made any purchases of blocks by or for
itself or any of its Affiliated Purchasers pursuant to the one block purchase
per week exception in Rule 10b-18(b)(4) under the Exchange Act during each of
the four calendar weeks preceding such date (“Rule 10b-18 purchase,” “blocks”
and “Affiliated Purchaser” each as defined in Rule 10b-18 under the Exchange Act
(“Rule 10b-18”)). Counterparty agrees and acknowledges that it shall not, and
shall cause its affiliates and Affiliated Purchasers not to, directly or
indirectly (including by means of a derivative instrument) enter into any
transaction to purchase any Shares during the period beginning on such date and
ending on the day on which Dealer has informed Counterparty in writing that it
has completed all purchases of Shares to hedge initially its exposure to the
Transaction.

(ii) On any day during any Conversion Period, neither Counterparty nor any
“affiliate” or “affiliated purchaser” (each as defined in Rule 10b-18) shall
directly or indirectly (including, without limitation, by means of any
cash-settled or other derivative instrument) purchase, offer to purchase, place
any bid or limit order that would effect a purchase of, or commence any tender
offer relating to, any Shares (or an equivalent interest, including a unit of
beneficial interest in a trust or limited partnership or a depository share) or
any security convertible into or exchangeable or exercisable for Shares, except
through Dealer.

(iii) Counterparty agrees that it (A) will not, on any day during any Conversion
Period, make, or permit to be made, any public announcement (as defined in Rule
165(f) under the Securities Act) of any Merger Transaction or potential Merger
Transaction unless such public announcement is made prior to the opening or
after the close of the regular trading session on the Exchange for the Shares;
(B) shall promptly (but in any event prior to the next opening of the regular
trading session on the Exchange) notify Dealer following any such announcement
that such announcement has been made; and (C) shall promptly (but in any event
prior to the next opening of the regular trading session on the Exchange)
provide Dealer with written notice specifying (i) Counterparty’s average daily
Rule 10b-18 Purchases (as defined in Rule 10b-18) during the three full calendar
months immediately preceding the announcement date that were not effected
through Dealer or its affiliates and (ii) the number of Shares purchased
pursuant to the proviso in Rule 10b-18(b)(4) under the Exchange Act for the
three full calendar months preceding the announcement date. Such written notice
shall be deemed to be a certification by Counterparty to Dealer that such
information is true and correct. In addition, Counterparty shall promptly notify
Dealer of the earlier to occur of the completion of such transaction and the
completion of the vote by target shareholders. “Merger Transaction” means any
merger, acquisition or similar transaction involving a recapitalization as
contemplated by Rule 10b-18(a)(13)(iv) under the Exchange Act.

 

  (f)

Regulation M. Counterparty represents and warrants to Dealer that
(x) Counterparty (A) was not on the date on which the offering of the
Convertible Notes was first announced, has not since such date, and is not on
the date hereof, engaged in a “distribution,” as such term is used in Regulation
M under the Exchange Act (“Regulation M”), of any securities of Counterparty,
other than the distribution of the Convertible Notes and (B) shall not engage in
any “distribution,” as such term is defined in Regulation M, other than a
distribution meeting the requirements of the exceptions set forth in sections
101(b)(10) and 102(b)(7) of Regulation M, until the second Exchange

 

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  Business Day immediately following the Trade Date, and (y)(A) on any day
during any Conversion Period, the Shares or securities that are convertible
into, or exchangeable or exercisable for Shares, are not, and shall not be,
subject to a “restricted period,” as defined in Regulation M and
(B) Counterparty shall not engage in any “distribution,” as such term is defined
in Regulation M, other than a distribution meeting the requirements of the
exceptions set forth in sections 101(b)(10) and 102(b)(7) of Regulation M, until
the second Exchange Business Day immediately following the last day in such
Conversion Period.

 

  (g) Early Unwind. In the event the sale of the additional Convertible Notes is
not consummated with the initial purchasers pursuant to the Purchase Agreement
dated as of the Trade Date between Counterparty, Barclays Capital Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Initial Purchasers”),
as representatives of the initial purchasers party thereto (the “Purchase
Agreement”), relating to the issuance of the Convertible Notes for any reason by
the close of business in New York on March 6, 2012 (or such later date as agreed
upon by the parties, which in no event shall be later than March 13, 2012)
(March 6, 2012 or such later date as agreed upon being the “Early Unwind Date”),
the Transaction shall automatically terminate (the “Early Unwind”), on the Early
Unwind Date and (i) the Transaction and all of the respective rights and
obligations of Dealer and Counterparty under the Transaction shall be cancelled
and terminated and (ii) each party shall be released and discharged by the other
party from and agrees not to make any claim against the other party with respect
to any obligations or liabilities of the other party arising out of and to be
performed in connection with the Transaction either prior to or after the Early
Unwind Date; provided that, other than in cases involving a breach of the
Purchase Agreement by the Initial Purchasers, Counterparty shall purchase from
Dealer on the Early Unwind Date all Shares purchased by Dealer or one of more of
its affiliates for the purpose of hedging the Transaction at the cost at which
Dealer or one or more of its affiliates purchased such Shares and reimburse
Dealer for any costs or expenses (including market losses) relating to the
unwinding of its hedging activities in connection with the Transaction
(including any loss or cost incurred as a result of its terminating,
liquidating, obtaining or reestablishing any hedge or related trading position).
The amount of any such reimbursement shall be determined by Dealer in good faith
and in a commercially reasonable manner. Dealer shall notify Counterparty of
such amount and Counterparty shall pay such amount in immediately available
funds on the Early Unwind Date. Dealer and Counterparty represent and
acknowledge to the other that, subject to the proviso included in this
paragraph, upon an Early Unwind, all obligations with respect to the Transaction
shall be deemed fully and finally discharged.

 

  (h) Transfer or Assignment. Either party may transfer or assign any of its
rights or obligations under the Transaction or the Agreement with the prior
written consent of the non-transferring party, such consent not to be
unreasonably withheld. Notwithstanding the foregoing or any provision of the
Agreement to the contrary, Dealer may, subject to applicable law, freely
transfer and assign all of its rights and obligations under the Transaction and
the Agreement without the consent of Counterparty to (x) any affiliate of Dealer
whose obligations are guaranteed by Dealer or an affiliate of Dealer of credit
quality equivalent to that of Dealer or (y) any third party as provided in the
immediately following paragraph in connection with an Excess Ownership Position.

If at any time at which (1) the Equity Percentage exceeds 9.0% or (2) Dealer,
Dealer Group (as defined below) or any person whose ownership position would be
aggregated with that of Dealer or Dealer Group (Dealer, Dealer Group or any such
person, a “Dealer Person”) under any relevant state corporate law or any state
or federal bank holding company or banking laws, or other federal, state or
local laws, regulations or regulatory orders applicable to ownership of Shares
(“Applicable Laws”), owns, beneficially owns, constructively owns, controls,
holds the power to vote or otherwise meets a relevant definition of ownership in
excess of a number of Shares equal to (x) the number of Shares that, in the good
faith determination of the relevant Dealer Person, would give rise to materially
burdensome reporting or registration obligations or other requirements
(including obtaining prior approval by a state or federal regulator) of a Dealer
Person under Applicable Laws (including, without limitation, “interested
stockholder” or

 

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“acquiring person” status under Section 203 of the Delaware General Corporation
Law, but excluding any report or filing required pursuant to Section 13 of the
Exchange Act and the rules promulgated thereunder) and with respect to which
such requirements have not been met or the relevant approval has not been
received minus (y) 1.0% of the number of Shares outstanding on the date of
determination (either such condition described in clause (1) or (2), an “Excess
Ownership Position”) and Dealer is unable, after commercially reasonable
efforts, to eliminate such Excess Ownership Position or effect a transfer or
assignment to a third party with a rating (or whose guarantor has a rating) for
its long term, unsecured and unsubordinated indebtedness equal to the Required
Rating on pricing terms and within a time period reasonably acceptable to it of
all or a portion of the Transaction such that an Excess Ownership Position no
longer exists, Dealer may designate any Scheduled Trading Day as an Early
Termination Date with respect to a portion (the “Terminated Portion”) of the
Transaction, such that an Excess Ownership Position no longer exists. In the
event that Dealer so designates an Early Termination Date with respect to a
portion of this Transaction, a payment shall be made pursuant to Section 6 of
the Agreement as if (x) an Early Termination Date had been designated in respect
of a Transaction having terms identical to this Transaction and a Number of
Shares equal to the Terminated Portion, (y) Counterparty shall be the sole
Affected Party with respect to such partial termination and (z) such Transaction
shall be the only Terminated Transaction (and, for the avoidance of doubt, the
provisions of paragraph 5(m) shall apply to any amount that is payable by Dealer
to Counterparty pursuant to this sentence). The “Equity Percentage” as of any
day is the fraction, expressed as a percentage, (A) the numerator of which is
the number of Shares that Dealer and any of its affiliates subject to
aggregation with Dealer, for purposes of the “beneficial ownership” test under
Section 13 of the Exchange Act, and all persons who may form a “group” (within
the meaning of Rule 13d-5(b)(1) under the Exchange Act) with Dealer (“Dealer
Group”), beneficially own (within the meaning of Section 13 of the Exchange Act)
on such day and (B) the denominator of which is the number of Shares outstanding
on such day. “Required Rating” means a rating of A- or better by Standard &
Poor’s Ratings Services or its successor (“S&P”), or A3 or better by Moody’s
Investors Service, Inc. or its successor (“Moody’s”) or, if either S&P or
Moody’s ceases to rate such debt, at least an equivalent rating or better by a
substitute rating agency mutually agreed by Counterparty and Dealer.

In the case of a transfer or assignment by Counterparty of its rights and
obligations hereunder and under the Agreement, in whole or in part (any Options
so transferred or assigned, the “Transfer Options”), to any party, withholding
of consent by Dealer shall not be considered unreasonable if such transfer or
assignment does not meet the following reasonable conditions that Dealer may
impose: (i) with respect to any Transfer Options, Counterparty shall not be
released from its notice and indemnification obligations pursuant to paragraph
5(d) (“Repurchase Notices”) or any obligations under paragraph 2 regarding
Extraordinary Events or paragraph 5(o) (“Registration”) of this Confirmation;
(ii) any Transfer Options shall only be transferred or assigned to a third party
that is a U.S. person (as defined in the Internal Revenue Code of 1986, as
amended); (iii) such transfer or assignment shall be effected on terms,
including any reasonable undertakings by such third party (including, but not
limited to, undertakings with respect to compliance with applicable securities
laws in a manner that, in the reasonable judgment of Dealer, will not expose
Dealer to material risks under applicable securities laws) and execution of any
documentation and delivery of legal opinions with respect to securities laws and
other matters by such third party and Counterparty as are reasonably requested
as satisfactory to Dealer; (iv) Dealer will not, as a result of such transfer
and assignment, be required to pay the transferee on any payment date an amount
under Section 2(d)(i)(4) of the Agreement greater than an amount that Dealer
would have been required to pay to Counterparty in the absence of such transfer
and assignment; (v) an Event of Default, Potential Event of Default or
Termination Event will not occur as a result of such transfer and assignment;
(vi) without limiting the generality of clause (ii), Counterparty shall have
caused the transferee to make such Payee Tax Representations and to provide such
tax documentation as may be reasonably requested by Dealer to permit Dealer to
determine that results described in clauses (iv) and (v) will not occur upon or
after such transfer and assignment; and (vii) Counterparty shall be responsible
for all reasonable costs and expenses, including reasonable attorney’s fees,
incurred by Dealer in connection with such transfer or assignment.

 

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  (i) Staggered Settlement. If upon advice of counsel with respect to applicable
legal and regulatory requirements, including any requirements relating to
Dealer’s hedging activities hereunder, Dealer reasonably determines that it
would not be practicable or advisable to deliver, or to acquire Share to
deliver, any or all of the Shares to be delivered on a Settlement Date for the
Transaction, Dealer may, by notice to Counterparty on or prior to any Settlement
Date (a “Nominal Settlement Date”), elect to pay the cash and/or deliver Shares
deliverable on such Nominal Settlement Date on two or more dates (each, a
“Staggered Settlement Date”) or at two or more times on the Nominal Settlement
Date as follows: (i) in such notice, Dealer will specify to Counterparty the
related Staggered Settlement Dates (each of which will be on or prior to such
Nominal Settlement Date, but not prior to the beginning of the related
Conversion Period) or delivery times and how it will allocate the cash it is
required to pay and/or Shares it is required to deliver under the Relevant
Settlement Method among the Staggered Settlement Dates or delivery times; and
(ii) the amount of cash and/or aggregate number of Shares that Dealer will
deliver to Counterparty hereunder on all such Staggered Settlement Dates and
delivery times will equal the amount of cash and/or the number of Shares that
Dealer would otherwise be required to deliver on such Nominal Settlement Date.

 

  (j) [Intentionally Omitted.]

 

  (k) Regulatory Provisions. The time of dealing for the Transaction will be
confirmed by Dealer upon written request by Counterparty.

 

  (l) Netting and Setoff. Obligations under the Transaction shall not be netted,
recouped or set off (including pursuant to Section 6 of the Agreement) against
any other obligations of the parties, whether arising under the Agreement, this
Confirmation, under any other agreement between the parties hereto, by operation
of law or otherwise, and no other obligations of the parties shall be netted,
recouped or set off (including pursuant to Section 6 of the Agreement) against
obligations under the Transaction, whether arising under the Agreement, this
Confirmation, under any other agreement between the parties hereto, by operation
of law or otherwise, and each party hereby waives any such right of setoff,
netting or recoupment; provided that both parties agree that subparagraph
(ii) of Section 2(c) of the Agreement shall apply to the Transaction.

 

  (m)

Alternative Calculations and Dealer Payment on Early Termination and on Certain
Extraordinary Events. If Dealer shall owe Counterparty any amount pursuant to
Section 12.2 of the Equity Definitions and “Consequences of Merger Events”
above, or Sections 12.3, 12.6, 12.7 or 12.9 of the Equity Definitions (except in
the event of a Merger Event, Insolvency, or Nationalization, in which the
consideration or proceeds to be paid to holders of Shares consists solely of
cash) or pursuant to Section 6(d)(ii) of the Agreement (except in the event of
an Event of Default in which Counterparty is the Defaulting Party or a
Termination Event in which Counterparty is the Affected Party, that resulted
from an event or events within Counterparty’s control) (a “Payment Obligation”),
Counterparty shall have the right, in its sole discretion, to require Dealer to
satisfy any such Payment Obligation by the Share Termination Alternative (as
defined below) by giving irrevocable telephonic notice to Dealer, confirmed in
writing within one Scheduled Trading Day, between the hours of 9:00 A.M. and
4:00 P.M. New York City time on the Merger Date, Announcement Date or Early
Termination Date or other date the Transaction is cancelled or terminated, as
applicable, where such notice shall include a representation and warranty from
Counterparty that it is not, as of the date of the telephonic notice and the
date of such written notice, aware of any “material non-public information”
(within the meaning of Section 10(b) of the Exchange Act and the rules
promulgated thereunder) concerning itself or the Shares (“Notice of Share
Termination”); provided that if Counterparty does not elect to require Dealer to
satisfy its Payment Obligation by delivery of Share Termination Delivery
Property, Dealer shall have the right (without regard to the exceptions set
forth above), in its sole discretion, to elect to satisfy its Payment Obligation
by delivery of Share Termination Delivery Property notwithstanding
Counterparty’s failure to elect or election to the contrary, it being understood
that if Counterparty elects to have Dealer satisfy its Payment Obligation in
cash Dealer will use commercially reasonable efforts to follow such election
prior to exercising its right to elect to

 

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  satisfy its Payment Obligation by delivery of Share Termination Delivery
Property. Upon such Notice of Share Termination, the following provisions shall
apply on the Scheduled Trading Day immediately following the Merger Date,
Announcement Date or Early Termination Date or other date the Transaction is
cancelled or terminated, as applicable:

 

Share Termination Alternative:    Applicable and means that Dealer shall deliver
to Counterparty the Share Termination Delivery Property on the date on which the
Payment Obligation would otherwise be due pursuant to “Consequences of Merger
Events” above, Section 12.7 or 12.9 of the Equity Definitions or Section
6(d)(ii) of the Agreement, as applicable, or such later date as the Calculation
Agent may reasonably determine (the “Share Termination Payment Date”), in
satisfaction of the Payment Obligation. Share Termination Delivery Property:   
A number of Share Termination Delivery Units, as calculated by the Calculation
Agent, equal to the Payment Obligation divided by the Share Termination Unit
Price. The Calculation Agent shall adjust the Share Termination Delivery
Property by replacing any fractional portion of the aggregate amount of a
security therein with an amount of cash equal to the value of such fractional
security based on the values used to calculate the Share Termination Unit Price.
Share Termination Unit Price:    The value of property contained in one Share
Termination Delivery Unit on the date such Share Termination Delivery Units are
to be delivered as Share Termination Delivery Property, as determined by the
Calculation Agent in its discretion by commercially reasonable means and
notified by the Calculation Agent to Dealer at the time of notification of the
Payment Obligation. Share Termination Delivery Unit:    In the case of a
Termination Event, Event of Default, Delisting, one Share or, in the case of an
Insolvency, Nationalization or Merger Event, one Share or a unit consisting of
the number or amount of each type of property received by a holder of one Share
(without consideration of any requirement to pay cash or other consideration in
lieu of fractional amounts of any securities) in such Insolvency,
Nationalization or Merger Event, as applicable. If such Insolvency,
Nationalization or Merger Event involves a choice of consideration to be
received by holders, such holder shall be deemed to have elected to receive the
maximum possible amount of cash. Failure to Deliver:    Applicable. Other
Applicable Provisions:    If Share Termination Alternative is applicable, the
provisions of Sections 9.8, 9.9, 9.10, 9.11 (except that the Representation and
Agreement contained in Section 9.11 of the Equity Definitions shall be

 

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   modified by excluding any representations therein relating to restrictions,
obligations, limitations or requirements under applicable securities laws
arising as a result of the fact that Counterparty is the issuer of the Shares or
any portion of the Share Termination Delivery Units) and 9.12 of the Equity
Definitions will be applicable as if “Physical Settlement” applied to the
Transaction, except that all references to “Shares” shall be read as references
to “Share Termination Delivery Units.”

 

  (n) No Collateral. Notwithstanding any provision of this Confirmation, the
Agreement, Equity Definitions or any other agreement between the parties to the
contrary, the obligations of Counterparty under the Transaction are not secured
by any collateral.

 

  (o) Registration. Counterparty hereby agrees that if, in the good faith
reasonable judgment of Dealer, based on the advice of counsel, the Shares
(“Hedge Shares”) acquired by Dealer for the purpose of hedging its obligations
pursuant to the Transaction cannot be sold in the public market by Dealer
without registration under the Securities Act, Counterparty shall, at its
election, either (i) in order to allow Dealer to sell the Hedge Shares in a
registered offering, make available to Dealer an effective registration
statement under the Securities Act and (A) enter into an agreement, in form and
substance reasonably satisfactory to Dealer, substantially in the form of an
underwriting agreement for a registered offering, (B) provide accountant’s
“comfort” letters customary in form for registered offerings of equity
securities, (C) provide disclosure opinions of nationally recognized outside
counsel to Counterparty reasonably acceptable to Dealer, (D) provide other
customary opinions, certificates and closing documents customary in form for
registered offerings of equity securities and (E) afford Dealer a reasonable
opportunity to conduct a due diligence investigation with respect to
Counterparty customary in scope for underwritten offerings of equity securities
(provided, however, that if Dealer, in its sole reasonable discretion, is not
satisfied with access to due diligence materials, the results of its due
diligence investigation, or the procedures and documentation for the registered
offering referred to above, then clause (ii) or clause (iii) of this paragraph
shall apply at the election of Counterparty); (ii) in order to allow Dealer to
sell the Hedge Shares in a private placement, enter into and comply with a
private placement agreement substantially similar to private placement purchase
agreements customary for private placements of equity securities, in form and
substance satisfactory to Dealer (in which case, the Calculation Agent shall
make any adjustments to the terms of the Transaction that are necessary, in its
reasonable judgment, to compensate Dealer for any discount from the public
market price of the Shares incurred on the sale of Hedge Shares in a private
placement); or (iii) purchase the Hedge Shares from Dealer at the closing price
on such Exchange Business Days, and in the amounts, requested by Dealer.

 

  (p) Tax Disclosure. Notwithstanding anything to the contrary herein, in the
Equity Definitions or in the Agreement, and notwithstanding any express or
implied claims of exclusivity or proprietary rights, the parties (and each of
their employees, representatives or other agents) are authorized to disclose to
any and all persons, beginning immediately upon commencement of their
discussions and without limitation of any kind, the tax treatment and tax
structure of the Transaction, and all materials of any kind (including opinions
or other tax analyses) that are provided by either party to the other relating
to such tax treatment and tax structure.

 

  (q) Status of Claims in Bankruptcy. Dealer acknowledges and agrees that this
Confirmation is not intended to convey to Dealer rights with respect to the
Transaction that are senior to the claims of common stockholders in any U.S.
bankruptcy proceedings of Counterparty; provided that nothing herein shall limit
or shall be deemed to limit Dealer’s right to pursue remedies in the event of a
breach by Counterparty of its obligations and agreements with respect to the
Transaction; provided further that nothing herein shall limit or shall be deemed
to limit Dealer’s rights in respect of any transactions other than the
Transaction.

 

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  (r) Securities Contract. The parties hereto agree and acknowledge that Dealer
is one or more of a “financial institution” and “financial participant” within
the meaning of Sections 101(22) and 101(22A) of the Bankruptcy Code. The parties
hereto further agree and acknowledge (A) that this Confirmation is a “securities
contract,” as such term is defined in Section 741(7) of the Bankruptcy Code,
with respect to which each payment and delivery hereunder or in connection
herewith is a “termination value,” “payment amount” or “other transfer
obligation” within the meaning of Section 362 of the Bankruptcy Code and a
“settlement payment” (as such term is defined in Section 741(8) of the
Bankruptcy Code) or a “transfer” within the meaning of Section 546 of the
Bankruptcy Code and (B) that Dealer is entitled to the protections afforded by,
among other sections, Section 362(b)(6), 362(b)(27), 362(o), 546(e), 546(j),
548(d)(2), 555 and 561 of the Bankruptcy Code.

 

  (s) Right to Extend. Dealer may postpone any Conversion Date or postpone or
extend any other date of valuation or delivery with respect to some or all of
the relevant Options (in which event the Calculation Agent shall make good faith
and commercially reasonable adjustments to the amount of cash and/or number of
Shares to be delivered on the corresponding Settlement Date for such Options),
if Dealer determines, in its reasonable discretion, that such postponement or
extension is reasonably necessary or appropriate to (i) preserve Dealer’s or its
affiliate’s hedging or hedge unwind activity hereunder in light of existing
liquidity conditions in the cash market, the stock loan market or any other
relevant market or (ii) enable Dealer or its affiliate to effect purchases or
sales of Shares in connection with its hedging, hedge unwind or settlement
activity hereunder in a manner that would, if Dealer or such affiliate were
Issuer or an affiliated purchaser of Issuer, be in compliance with applicable
legal, regulatory or self-regulatory requirements, or with related policies and
procedures applicable to Dealer and/or such affiliate. Dealer shall use
commercially reasonable efforts to minimize the duration of any such
postponement or extension, which, unless otherwise agreed by the parties, shall
not be more than 50 Scheduled Trading Days (or, in the case of Settlement in
Shares and Low Cash Combination Settlement, 100 Scheduled Trading Days) from
such original Conversion Date or other date of valuation or delivery.

 

  (t) Governing Law. The law of the State of New York (without reference to its
choice of law doctrine other than Title 14 of the New York General Obligations
Law).

 

  (u) Waiver of Jury Trial. EACH PARTY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY SUIT, ACTION OR PROCEEDING RELATING TO THE TRANSACTION. EACH PARTY
(I) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF SUCH A SUIT, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER
AND (II) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO ENTER
INTO THE TRANSACTION, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS PROVIDED HEREIN.

 

  (v) Additional ISDA Schedule Terms.

(i) “Specified Entity” means in relation to each of Dealer and Counterparty for
purposes of Sections 5(a)(v), 5(a)(vi), 5(a)(vii) and 5(b)(v) of the Agreement,
not applicable.

(ii) “Specified Transaction” will have the meaning specified in Section 14 of
the Agreement.

(iii) The “Cross-Default” provisions of Section 5(a)(vi) of the Agreement will
not apply to either party.

 

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(iv) Automatic Early Termination. The “Automatic Early Termination” provision of
Section 6(a) of the Agreement will not apply to Dealer and will not apply to
Counterparty.

(v) “Termination Currency” means United States Dollars (“USD”).

(vi) Payment by Counterparty. In the event that (i) an Early Termination Date
occurs or is designated with respect to the Transaction as a result of an Event
of Default (other than an Event of Default arising under Section 5(a)(ii) or
5(a)(iv) of the Agreement) or a Termination Event and, as a result, Counterparty
owes to Dealer an amount calculated under Section 6(e) of the Agreement or
(ii) Counterparty owes to Dealer, pursuant to Section 12.7 or Section 12.9 of
the Equity Definitions, an amount calculated under Section 12.8 of the Equity
Definitions, such amount shall be deemed to be zero.

(vii) Consent to Recording. Each party (i) consents to the monitoring or
recording, at any time and from time to time, by the other party of any and all
communications between officers or employees of the parties, (ii) waives any
further notice of such monitoring or recording, and (iii) agrees to notify (and,
if required by law, obtain the consent of) its officers and employees with
respect to such monitoring or recording. Any such recording may be submitted in
evidence to any court or in any Proceeding for the purpose of establishing any
matters pertinent to this Transaction.

(viii) Severability. In the event any one or more of the provisions contained in
this Confirmation or the Agreement shall be held illegal, invalid or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby.

(ix) Fully Paid Transactions. The condition precedent in Section 2(a)(iii)(1) of
the Agreement shall not apply to a payment and delivery owing by a party if the
other party shall have satisfied in full all its payment or delivery obligations
under Section 2(a)(i) of the Agreement and shall at the relevant time have no
future payment or delivery obligations, whether absolute or contingent, under
Section 2(a)(i) of the Agreement.

(x) [Intentionally Omitted.]

(xi) Part 3(a) of the ISDA Schedule – Tax Forms:

Party Required to Deliver Document

 

    

Form/Document/Certificate

    

Date by which to be Delivered

Counterparty    A complete and duly executed United States Internal Revenue
Service Form W-9 (or successor thereto.)      (i) Upon execution and delivery of
this Agreement; (ii) promptly upon reasonable demand by Dealer; and (iii)
promptly upon learning that any such Form previously provided by Counterparty
has become obsolete or incorrect. Dealer    A complete and duly executed United
States Internal Revenue Service Form W-9 (or successor thereto).      (i) Upon
execution and delivery of this Agreement; (ii) promptly upon reasonable demand
by Counterparty; and (iii) promptly upon learning that any such Form previously
provided by Dealer has become obsolete or incorrect.

 

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6. Account Details:

 

  (a) Account for payments to Counterparty:

Bank: JPMorgan Chase Bank, N.A.

Location: Lafayette, LA

ABA: 021000021

Acct: Stone Energy Corporation

Acct No.: 8700378593

SWIFT Code: CHASUS33

Account for delivery of Shares to Counterparty:

To be provided by Counterparty.

 

  (b) Account for payments to Dealer:

Bank of America, N.A.

New York, NY

SWIFT: BOFAUS3N

Bank Routing: 026-009-593

Account Name: Bank of America

Account No.: 0012334-61892

7. Process Agent:

For purposes of Section 13(c) of the Agreement:

Counterparty appoints as its Process Agent: not applicable.

Dealer appoints as its Process Agent: not applicable.

8. Offices:

The Office of Counterparty for the Transaction is: Inapplicable, Counterparty is
not a Multibranch Party.

The Office of Dealer for the Transaction is: New York.

9. Notices:

For purposes of this Confirmation:

 

  (a) Address for notices or communications to Counterparty:

Stone Energy Corporation

625 East Kaliste Saloom Road

Lafayette, LA 70508

Attention: Kenneth H. Beer

Telephone No.: 337-237-0410

Facsimile No.: 337-521-2072; beerkh@stoneenergy.com

 

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  (b) Address for notices or communications to Dealer:

Bank of America, N.A.

c/o Merrill Lynch, Pierce, Fenner & Smith Incorporated

Bank of America Tower at One Bryant Park

New York, NY 10036

Attention: John Servidio

Telephone: 646-855-7127

Facsimile: 704-208-2869

This Confirmation may be executed in several counterparts, each of which shall
be deemed an original but all of which together shall constitute one and the
same instrument.

 

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Counterparty hereby agrees (a) to check this Confirmation carefully and
immediately upon receipt so that errors or discrepancies can be promptly
identified and rectified and (b) to confirm that the foregoing (in the exact
form provided by Dealer) correctly sets forth the terms of the agreement between
Dealer and Counterparty with respect to the Transaction, by manually signing
this Confirmation or this page hereof as evidence of agreement to such terms and
providing the other information requested herein and immediately returning an
executed copy to John Servidio, Facsimile No. 704-208-2869.

 

Yours faithfully, BANK OF AMERICA, N.A. By:  

/s/ Jake Mendelsohn

  Name: Jake Mendelsohn   Title: Managing Director

 

Agreed and Accepted By: STONE ENERGY CORPORATION By:  

/s/ Kenneth H. Beer

Name: Kenneth H. Beer Title: Executive Vice President & Chief Financial Officer

 

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SCHEDULE A

For purposes of this Transaction, the following terms shall have the following
values/meanings:

 

1.    Strike Price:    USD 42.6532.    2.    Premium:    USD  2,951,250.   

 

Schedule A–1