Exhibit 10.3

INTERCREDITOR AGREEMENT

among

STONE ENERGY CORPORATION,

each of the Guarantors party hereto from time to time,

BANK OF AMERICA, N.A.,

as First Lien Administrative Agent for the

First Lien Credit Agreement Secured Parties,

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as Second Lien Collateral Agent for the

Second Lien Secured Parties,

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,

as the Second Lien Notes Trustee,

and

each additional Representative from time to time party hereto

dated as of February 28, 2017

 

 

--------------------------------------------------------------------------------

INTERCREDITOR AGREEMENT, dated as of February 28, 2017 (as amended, supplemented
or otherwise modified from time to time, this “Agreement”), among STONE ENERGY
CORPORATION, a Delaware corporation (“Stone Energy”), each of the Guarantors (as
defined below) party hereto from time to time, BANK OF AMERICA, N.A., as
administrative agent for the First Lien Credit Agreement Secured Parties (as
defined below) (in such capacity and together with its successors in such
capacity, the “First Lien Administrative Agent”), THE BANK OF NEW YORK MELLON
TRUST COMPANY, N.A., as collateral agent for the Second Lien Secured Parties (as
defined below) (in such capacity and together with its successors in such
capacity, the “Second Lien Collateral Agent”), THE BANK OF NEW YORK MELLON TRUST
COMPANY, N.A. as trustee pursuant to the Second Lien Notes (as defined below)
(in such capacity and together with its successors in such capacity, the “Second
Lien Notes Trustee”), and each additional Representative that from time to time
becomes a party hereto pursuant to Section 5.03 and Section 8.10.

In consideration of the mutual agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the First Lien Administrative Agent (for itself and on behalf of
the First Lien Credit Agreement Secured Parties), the Second Lien Collateral
Agent, the Second Lien Notes Trustee (for itself and on behalf of each holder of
the Second Lien Notes), and each other Representative party hereto from time to
time (for itself and on behalf of the Secured Parties under the applicable Debt
Facility), intending to be legally bound, hereby agree as follows:

ARTICLE I

Definitions

SECTION 1.01. Certain Defined Terms . Capitalized terms used but not otherwise
defined herein have the meanings set forth in the First Lien Credit Agreement.
As used in this Agreement, the following terms have the meanings specified
below:

“Agreement” has the meaning assigned to such term in the introductory paragraph
of this Agreement.

“Bankruptcy Code” means Title 11 of the United States Code, as amended or any
similar federal or state law for the relief of debtors.

“Bankruptcy Law” means the Bankruptcy Code and any federal, state or foreign,
bankruptcy, insolvency, receivership or similar law for the relief of debtors.

“Cash Collateralized” means, with respect to any Letter of Credit, the deposit
by Stone Energy of cash in a cash collateral account opened by the First Lien
Administrative Agent in an amount not to exceed 103% of the outstanding face
amount of such Letter of Credit pursuant to documentation in form and substance
reasonably satisfactory to the First Lien Administrative Agent and the
applicable Issuing Bank in respect of such Letter of Credit. “Cash Collateral”
shall have a meaning correlative to the foregoing and shall include the proceeds
of such cash collateral and other credit support.

 

2

--------------------------------------------------------------------------------

“Collateral” means the First Lien Collateral and the Second Lien Collateral but
excluding in all cases any Excluded Asset and the Excluded Equity Interests, as
the context may require. Collateral (and Proceeds thereof) shall also be deemed
to exclude any amounts received or deemed received by any First Lien Secured
Party or Second Lien Secured Party in respect of any First Lien Obligation or
Second Lien Obligation owed to it from separate insurance, credit default swap
protection or other protection against loss (x) that is arranged by such First
Lien Secured Party or Second Lien Secured party (as applicable) for its own
account in respect of any such First Lien Obligation or Second Lien Obligation
and (y) the provider of which insurance or protection shall have no recourse to
the Collateral (which insurance or other protection amounts shall be for the
sole benefit of such First Lien Secured Party or Second Lien Secured Party (as
applicable)).

“Collateral Agents” means the First Lien Administrative Agent and the Second
Lien Collateral Agent, as the context may require.

“Collateral Documents” means the First Lien Collateral Documents and/or the
Second Lien Collateral Documents, as the context may require.

“Credit Party” means Stone Energy and each Guarantor from time to time.

“Debt Facility” means any First Lien Debt Facility and/or any Second Lien Debt
Facility.

“DIP Cap” means an amount equal to (x) the greater of (i) 120% of the First Lien
Priority Obligations outstanding at the time of determination and (ii) 115% of
the First Lien Priority Cap Amount plus (y) $15.0 million solely to pay the
costs and expenses incurred in connection with the retention of professionals
and the payment of adequate protection in respect of First Lien Obligations.

“DIP Financing” means the obtaining of credit or incurring debt secured by Liens
on the Collateral pursuant to section 364 of the Bankruptcy Code (or similar
Bankruptcy Law).

“Discharge of First Lien Obligations” means the date on which the following
conditions are satisfied:

(a)    irrevocable payment in full in cash of the principal of and interest
(including accruing on or after the commencement of an Insolvency or Liquidation
Proceeding, whether or not such interest would be allowed in the proceeding) on
all outstanding indebtedness constituting First Lien Obligations;

(b)    irrevocable payment in full in cash of all other monetary First Lien
Obligations that are due and payable or otherwise accrued and owing at or prior
to the time such principal and interest are paid (other than indemnification
obligations for which no claim or demand for payment, whether oral or written,
has been made at such time);

(c)    termination or expiration of any unfunded commitments to extend credit
that would be First Lien Obligations;

 

3

--------------------------------------------------------------------------------

(d)    termination or cash collateralization (pursuant to documentation in form
and substance reasonably satisfactory to First Lien Administrative Agent, but in
no event greater than 103% of the aggregate undrawn face amount) of all Letters
of Credit, or the making of other arrangements reasonably satisfactory to the
applicable letter of credit issuer of all letters of credit issued under the
First Lien Credit Agreement;

(e)    all Specified Swap Contracts and Specified Cash Management Agreements
shall have been terminated or expired in full and all amounts due from any
Credit Party or Affiliate in connection therewith have been indefeasibly paid in
full in cash (in immediately available funds) or the cash collateralization of
all such applicable Specified Swap Contracts or Specified Cash Management
Agreements on terms reasonably satisfactory to each applicable counterparty (or
the making of other arrangements reasonably satisfactory to the applicable
counterparty); and

(f)    there are no outstanding Obligations of any of the Credit Parties under
any of the First Lien Debt Documents that are required to be secured by the
Collateral in accordance with the terms of such First Lien Debt Documents;

provided that the Discharge of First Lien Obligations shall not be deemed to
have occurred in connection with a Refinancing of all of the First Lien Credit
Agreement Obligations with a Replacement First Lien Debt Facility secured by the
Collateral under Replacement First Lien Debt Documents.

“Discharge of First Lien Priority Obligations” means the date on which the
following conditions are satisfied:

(a)     irrevocable payment in full in cash of the principal of and interest
(including accruing on or after the commencement of an Insolvency or Liquidation
Proceeding, whether or not such interest would be allowed in the proceeding) on
all outstanding indebtedness constituting First Lien Priority Obligations;

(b)     irrevocable payment in full in cash of all other monetary First Lien
Priority Obligations that are due and payable or otherwise accrued and owing at
or prior to the time such principal and interest are paid (other than
indemnification obligations for which no claim or demand for payment, whether
oral or written, has been made at such time);

(c)     termination or expiration of any unfunded commitments to extend credit
that would be First Lien Priority Obligations (other than pursuant to Specified
Swap Contracts or Specified Cash Management Agreements, in each case which have
been cash collateralized on terms reasonably satisfactory to each applicable
counterparty, or as to which arrangements have otherwise been made that are
reasonably satisfactory to the applicable counterparty); and

(d)     termination or cash collateralization (pursuant to documentation in form
and substance reasonably satisfactory to First Lien Administrative Agent, but in
no event greater than 103% of the aggregate undrawn face amount) of all Letters
of Credit, or the making of other arrangements reasonably satisfactory to the
applicable letter of credit issuer of all letters of credit issued under the
First Lien Credit Agreement;

 

4

--------------------------------------------------------------------------------

provided that the Discharge of First Lien Priority Obligations shall not be
deemed to have occurred in connection with a Refinancing of all of the First
Lien Credit Agreement Obligations with a Replacement First Lien Debt Facility
secured by the Collateral under Replacement First Lien Debt Documents.

“Discharge of Second Lien Obligations” means the date on which the following
conditions are satisfied:

(a)    irrevocable payment in full in cash of the principal of and interest
(including accruing on or after the commencement of an Insolvency or Liquidation
Proceeding, whether or not such interest would be allowed in the proceeding) on
all outstanding indebtedness constituting Second Lien Obligations;

(b)    irrevocable payment in full in cash of all other monetary Second Lien
Obligations that are due and payable or otherwise accrued and owing at or prior
to the time such principal and interest are paid (other than indemnification
obligations for which no claim or demand for payment, whether oral or written,
has been made at such time);

(c)    termination or expiration of any unfunded commitments to extend credit
that would be Second Lien Obligations; and

(d)    there are no outstanding Obligations of any of the Credit Parties under
any of the Second Lien Debt Documents that are required to be secured by the
Collateral in accordance with the terms of such Second Lien Debt Documents;

provided that the Discharge of Second Lien Obligations shall not be deemed to
have occurred in connection with a Refinancing of all of the First Lien
Obligations or any of the Second Lien Obligations with a Replacement Second Lien
Debt Facility secured by the Collateral under one or more Replacement Second
Lien Debt Documents.

“Enforcement Action” means an action under applicable law to:

(a)    foreclose, execute, levy, or collect on, take possession or control of,
sell or otherwise realize upon (judicially or non-judicially), or lease,
license, or otherwise dispose of (whether publicly or privately), Collateral, or
otherwise exercise or enforce remedial rights with respect to Collateral under
the First Lien Debt Documents or the Second Lien Debt Documents (including by
way of set-off, recoupment notification of a public or private sale or other
disposition pursuant to the UCC. or other applicable law, notification to
account debtors, notification to depositary banks under deposit account control
agreements, or exercise of rights under landlord consents, if applicable),

(b)    solicit bids from third Persons to conduct the liquidation or disposition
of Collateral or to engage or retain sales brokers, marketing agents, investment
bankers, accountants, appraisers, auctioneers, or other third Persons for the
purposes of valuing, marketing, promoting, and selling Collateral,

 

5

--------------------------------------------------------------------------------

(c)    to receive a transfer of Collateral in satisfaction of Debt or any other
Obligation secured thereby,

(d)    to otherwise enforce a security interest or exercise another right or
remedy, as a secured creditor or otherwise, pertaining to the Collateral at law,
in equity, or pursuant to the First Lien Debt Documents or Second Lien Debt
Documents (including the commencement of applicable legal proceedings or other
actions with respect to all or any portion of the Collateral to facilitate the
actions described in the preceding clauses, and exercising voting rights in
respect of equity interests comprising Collateral), or

(e)    effect the Disposition of Collateral by any Credit Party after the
occurrence and during the continuation of an event of default under the First
Lien Debt Documents or the Second Lien Debt Documents with the consent of the
First Lien Administrative Agent or the Second Lien Collateral Agent, as
applicable.

“Event of Default” means (a) prior to the Discharge of First Lien Obligations,
an Event of Default (as defined in the First Lien Credit Agreement) or any other
event of default (or equivalent thereunder) under any other First Lien Debt
Document and (b) from and after the Discharge of First Lien Obligations but
prior to the Discharge of Second Lien Obligations, any event of default under
any Second Lien Debt Document.

“Excess First Lien Obligations” means any First Lien Obligations in excess of
the First Lien Priority Cap Amount.

“Excess Second Lien Obligations” means any Second Lien Obligations in excess of
$225,000,000 (such amount, the “Second Lien Cap”).

“Excluded Asset” has the meaning specified in the First Lien Security Agreement.

“Existing First Lien Credit Agreement” means that certain Fourth Amended and
Restated Credit Agreement, dated as of June 24, 2014, among Stone Energy, the
lenders party thereto, the First Lien Administrative Agent and the other parties
party thereto, as amended, restated, amended and restated, extended,
supplemented or otherwise modified from time to time prior to the date hereof.

“Existing Specified Cash Management Agreements” means those cash management
agreements entered into on or prior to the date hereof and constituting
“Specified Cash Management Agreements” under the Existing First Lien Credit
Agreement. The Existing Specified Cash Management Agreements shall constitute
Specified Cash Management Agreements for all purposes hereunder.

“Existing Specified Swap Contracts” means those swap contracts entered into on
or prior to the date hereof and constituting “Specified Swap Contracts” under
the Existing First Lien Credit Agreement. The Existing Specified Swap Contracts
shall constitute Specified Swap Contracts for all purposes hereunder.

“First Lien Administrative Agent” has the meaning specified in the preamble and
shall include any successor administrative agent appointed in accordance with
the First Lien

 

6

--------------------------------------------------------------------------------

Credit Agreement to so act; provided that such successor administrative agent
has executed and delivered a Joinder Agreement pursuant to which such successor
administrative agent shall agree to be bound as the First Lien Administrative
Agent for all purposes of this Agreement. After any Refinancing of the First
Lien Credit Agreement, a reference herein to the First Lien Administrative Agent
shall be deemed to be a reference to the then-applicable First Lien
Representative, as the context may require.

“First Lien Cash Collateral Account” means the “Cash Collateral Account” as such
term is defined in the First Lien Credit Agreement and any other blocked,
interest or non-interest bearing deposit accounts of any Credit Party under the
dominion of the First Lien Administrative Agent or other agent appointed
pursuant to the First Lien Debt Documents for the purpose of cash
collateralizing First Lien Obligations.

“First Lien Collateral” means (a) any “Collateral” as defined in the First Lien
Credit Agreement or any other First Lien Debt Document and (b) any other
existing and future assets and property, and all proceeds thereof of any Credit
Party with respect to which a Lien is granted, intended to be granted, purported
to be granted or required to be granted pursuant to a First Lien Collateral
Document as security for any First Lien Obligations.

“First Lien Collateral Documents” means the “Security Documents” as defined in
the First Lien Credit Agreement, each First Lien Mortgage in effect from time to
time and any other collateral agreement, security agreement, deed of trust or
other instrument or document executed and delivered by any Credit Party for
purposes of providing collateral security for any First Lien Obligation.

“First Lien Credit Agreement” means that certain Fifth Amended and Restated
Credit Agreement, dated on or about the date hereof, among Stone Energy, the
lenders party thereto, the First Lien Administrative Agent and the other parties
party thereto, as amended, restated, amended and restated, extended,
supplemented or otherwise modified from time to time.

“First Lien Credit Agreement Loan Documents” means the First Lien Credit
Agreement and the other “Credit Documents” as defined in the First Lien Credit
Agreement.

“First Lien Credit Agreement Obligations” means all Obligations of the Credit
Parties under the First Lien Credit Agreement Loan Documents.

“First Lien Credit Agreement Secured Parties” means (i) the First Lien
Administrative Agent, (ii) each Person that is a Lender under the First Lien
Credit Agreement from time to time, (iii) each Issuing Bank party to the First
Lien Credit Agreement from time to time, (iv) the beneficiaries of each
indemnification obligation undertaken by Stone Energy or any Credit Party under
any of the First Lien Credit Agreement Loan Documents, (v) each Hedge Bank that
is a party to a Specified Swap Contract and (vi) each Cash Management Bank that
is a party to a Specified Cash Management Agreement.

“First Lien Debt Documents” means the First Lien Credit Agreement Loan
Documents, any Specified Swap Contracts, any Specified Cash Management
Agreements and any Replacement First Lien Debt Documents, as the context may
require.

 

7

--------------------------------------------------------------------------------

“First Lien Debt Facilities” means the First Lien Credit Agreement and any
Replacement First Lien Debt Facility, as the context may require.

“First Lien Guarantors” means each of the Credit Parties that provides a
Guarantee in respect of any of the Obligations of any other Credit Party under
the First Lien Debt Documents. Each of the First Lien Guarantors existing on the
date hereof are listed on the signature pages hereto as a First Lien Guarantor.

“First Lien Mortgages” means a collective reference to each mortgage, deed of
trust and other document or instrument under which any Lien on real property
owned or leased by any Credit Party is granted to secure any of the First Lien
Obligations or under which rights or remedies with respect to any such Liens are
governed, as amended, restated, amended and restated, extended, supplemented or
otherwise modified from time to time.

“First Lien Obligations” means all Obligations of the Credit Parties under the
First Lien Debt Documents.

“First Lien Priority Cap Amount” means an amount equal to all First Lien
Obligations to the extent incurred by the Credit Parties, excluding obligations
under any Specified Swap Contract and any Specified Cash Management Agreement,
up to and including the greater of: (i) $250 million; (ii) 115% of the Borrowing
Base as defined in, and as in effect from time to time under, the First Lien
Credit Agreement; and (iii) $100 million plus 35% of Modified ACNTA. For the
avoidance of doubt, obligations under Specified Swap Contracts and Specified
Cash Management Agreements will not be subject to the First Lien Priority Cap
Amount and shall not constitute Excess First Lien Obligations under any
circumstances.

“First Lien Priority Obligations” means all First Lien Obligations other than
Excess First Lien Obligations.

“First Lien Representative” means (a) in the case of any First Lien Credit
Agreement Obligations or the First Lien Credit Agreement Secured Parties
thereunder, the Administrative Agent and (b) in the case of any Replacement
First Lien Debt Facility and the Replacement First Lien Secured Parties
thereunder, the trustee, administrative agent, or other similar agent under such
Replacement First Lien Debt Facility that is named as the representative in
respect of such Replacement First Lien Debt Facility in the applicable Joinder
Agreement.

“First Lien Secured Parties” means, collectively, the “Secured Parties” as
defined in the First Lien Credit Agreement and any Replacement First Lien
Secured Parties, as the context may require.

“First Lien Security Agreement” means that certain Fourth Amended and Restated
Security Agreement, dated on or about the date hereof, by Stone Energy and each
of the Guarantors party thereto from time to time in favor of the First Lien
Administrative Agent, as amended, restated, amended and restated, extended,
supplemented or otherwise modified from time to time.

“First Priority Lien” means the Liens on the First Lien Collateral granted in
favor, or for the benefit, of the First Lien Secured Parties whether created
under the First Lien Collateral Documents or acquired by possession, statute,
operation of law, judgment, subrogation of otherwise.

 

8

--------------------------------------------------------------------------------

“Guarantor” means, collectively, the First Lien Guarantors and the Second Lien
Guarantors.

“Insolvency or Liquidation Proceeding” means:

(a)    any case commenced by or against any Credit Party under any Bankruptcy
Law, any other proceeding for the reorganization, recapitalization or adjustment
or marshalling of the assets or liabilities of any Credit Party, any
receivership or assignment for the benefit of creditors relating to any Credit
Party or any similar case or proceeding relative to any Credit Party or its
creditors, as such, in each case whether or not voluntary;

(b)    any liquidation, dissolution, marshalling of assets or liabilities or
other winding up of or relating to any Credit Party, in each case whether or not
voluntary and whether or not involving bankruptcy or insolvency; or

(c)    any other proceeding of any type or nature in which substantially all
claims of creditors of any Credit Party are determined and any payment or
distribution is or may be made on account of such claims.

“Joinder Agreement” means a supplement to this Agreement in substantially the
form of Annex II hereof.

“Majority Holders” means the Holders (as defined in the Second Lien Note
Indenture) of a majority in principal amount of the Outstanding (as defined in
the Second Lien Note Indenture) Second Lien Notes.

“Modified ACNTA” has the meaning provided to such term in the Second Lien Note
Indenture as in effect on the date of this Agreement.

“Obligations” means, with respect to any Secured Debt Document, any payment,
performance or other obligation of any Credit Party of any kind, under or in
respect of such Secured Debt Document, including, any liability of any Credit
Party on any claim, whether or not the right of any Secured Party to payment in
respect of such claim is reduced to judgment, liquidated, unliquidated, fixed,
contingent, matured, disputed, undisputed, legal, equitable, secured or
unsecured and whether not such claim is discharged, stayed, allowed, authorized
or otherwise affected by any Insolvency or Liquidation Proceeding. Without
limiting the generality of the foregoing, the Obligations of any Credit Party
under any Secured Debt Document shall include (a) the obligation to pay
principal, interest, ordinary course settlement payments, termination payments,
breakage costs, reimbursement obligations in respect of Letters of Credit,
obligations to provide cash collateral in respect of Letters of Credit (whether
or not drawn), commissions, fees, premiums, charges, expenses, attorneys’ fees
and disbursements, indemnities and other amounts payable by such Credit Party
under such Secured Debt Document, (b) Post-Petition Interest and (c) any
reimbursement obligations of any Credit Party in respect of any amounts paid in
advance or on behalf of such Credit Party by any applicable Secured Party.

 

9

--------------------------------------------------------------------------------

“Officer’s Certificate” has the meaning provided to such term in Section 8.08.

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

“Pledged or Controlled Collateral” has the meaning assigned to such term in
Section 5.05(a).

“Post-Petition Interest” means interest, fees, costs, expenses and other charges
that pursuant to any of the Secured Debt Documents accruing as of, and
continuing to accrue after the commencement of any Insolvency or Liquidation
Proceeding, whether or not such interest, fees, costs expenses and other charges
are allowed or allowable under the Bankruptcy Law or in any such Insolvency or
Liquidation Proceeding.

“Proceeds” means the proceeds of any sale, collection or other liquidation of
any Collateral and any payment or distribution made in respect of any Collateral
in an Insolvency or Liquidation Proceeding and any amounts received by the First
Lien Administrative Agent or any other First Lien Secured Party from a Second
Lien Secured Party in respect of any Collateral pursuant to this Agreement.

“Refinance” means, (a) in respect of any agreement with reference to the First
Lien Credit Agreement, the First Lien Obligations, or any Replacement First Lien
Debt, that such agreement refunds, refinances or replaces the First Lien Credit
Agreement, the First Lien Obligations, or such Replacement First Lien Debt in
full in a transaction that is permitted under the terms of the Second Lien Debt
Documents then in effect and is consummated in compliance with Section 5.03 and
Section 8.10 and (b) in respect of any agreement with reference to the Second
Lien Debt Documents, the Second Lien Obligations or any Replacement Second Lien
Debt, that such Debt refunds, refinances or replaces the Second Lien Debt
Documents, the Second Lien Obligations or such Replacement Second Lien Debt in a
transaction that is permitted under the terms of the First Lien Debt Documents
then in effect and is consummated in accordance with Section 5.03 and
Section 8.10. “Refinance,” “Refinanced” and “Refinancing” shall have correlative
meanings.

“Replacement First Lien Debt” means any Debt that is incurred, issued or
guaranteed by Stone Energy and/or any Credit Party (other than Debt constituting
First Lien Credit Agreement Obligations) which Debt is secured by the First Lien
Collateral (or a portion thereof) on a pari passu basis with the First Lien
Credit Agreement Obligations and which Debt replaces or Refinances such First
Lien Credit Agreement Obligations in full in accordance with the requirements of
Section 5.03 and Section 8.10.

“Replacement First Lien Debt Documents” means, with respect to any series, issue
or class of Replacement First Lien Debt, the loan agreements, the promissory
notes, indentures, the First Lien Collateral Documents or other operative
agreements evidencing or governing such Debt.

“Replacement First Lien Debt Facility” means any debt facility with respect to
which the requirements contained in Section 5.03 and Section 8.10 of this
Agreement have been satisfied, which is secured by the First Lien Collateral (or
a portion thereof) on a pari passu basis

 

10

--------------------------------------------------------------------------------

with other First Lien Obligations and that Refinances all of the First Lien
Credit Agreement or any other Replacement First Lien Debt Facility then in
existence with Replacement First Lien Debt; provided that any First Priority
Lien securing such Replacement First Lien Debt Facility shall be subject to the
terms of this Agreement for all purposes (including the lien priorities as set
forth herein as of the date hereof).

“Replacement First Lien Secured Parties” means, with respect to any series,
issue or class of Replacement First Lien Debt, the holders of such Debt, the
First Lien Representative with respect thereto, and the beneficiaries of each
indemnification obligation undertaken by Stone Energy or any Credit Party under
any related Replacement First Lien Debt Document.

“Replacement Second Lien Debt” means any Debt that is incurred, issued or
guaranteed by Stone Energy and/or any other Credit Party (other than Debt
constituting Second Lien Obligations incurred pursuant to the Second Lien
Indenture Documents), which Debt is secured by the Second Lien Collateral (or
any portion thereof) and for which the applicable Replacement Second Lien Debt
Documents provide that such Debt is to be secured by such Second Lien Collateral
on a subordinate or junior basis to the First Lien Obligations; provided that
(a) the applicable Credit Party is permitted to incur, issue or guaranty such
Debt under the terms of the First Lien Debt Documents in effect at the time
thereof and (b) the requirements set forth in Section 5.03 and Section 8.10 are
satisfied.

“Replacement Second Lien Debt Documents” means, with respect to any series,
issue or class of Replacement Second Lien Debt, the loan agreements, the
promissory notes, indentures, the Second Lien Collateral Documents or other
operative agreements evidencing or governing such Debt.

“Replacement Second Lien Debt Facility” means any debt facility with respect to
which the requirements contained in Section 5.03 and Section 8.10 of this
Agreement have been satisfied and that Refinances any of the First Lien
Obligations or Second Lien Obligations then outstanding through Stone Energy’s
and any other Credit Party’s incurrence, issuance or guaranty of any Replacement
Second Lien Debt. For the avoidance of doubt, no Replacement Second Lien Debt
Facility shall be required to be an indenture or notes offering and may be a
facility evidenced or governed by a credit agreement, loan agreement, note
agreement, promissory note, indenture or any other agreement or instrument;
provided that any Second Priority Lien securing such Replacement Second Lien
Debt Facility shall be subject to the terms of this Agreement for all purposes
(including the lien priorities as set forth herein as of the date hereof).

“Replacement Second Lien Secured Parties” means, with respect to any series,
issue or class of Replacement Second Lien Debt, the holders of such Debt, the
Second Lien Collateral Agent, the Second Lien Representative with respect
thereto, and the beneficiaries of each indemnification obligation undertaken by
Stone Energy or any other Credit Party under any related Replacement Second Lien
Debt Document.

“Representatives” means the First Lien Representatives and the Second Lien
Representatives, as the context may require.

 

11

--------------------------------------------------------------------------------

“Second Lien Collateral” means (a) any “Collateral” as defined in the Second
Lien Collateral Documents and (b) any other existing and future assets and
property, and all proceeds thereof of any Credit Party with respect to which a
Lien is granted, intended to be granted, purported to be granted or required to
be granted pursuant to a Second Lien Collateral Document as security for any
Second Lien Obligations; provided that Second Lien Collateral shall not include
any Excluded Assets or Excluded Equity Interests.

“Second Lien Collateral Agent” has the meaning assigned to such term in the
introductory paragraph of this Agreement and shall include any successor
collateral agent appointed by, or on behalf of, the Second Lien Secured Parties
to act as collateral agent for the benefit of the Second Lien Secured Parties
under the terms of the Second Lien Debt Documents from time to time; provided
that such successor collateral agent has executed and delivered a Joinder
Agreement in accordance with Section 8.10 of this Agreement pursuant to which
such successor collateral agent shall agree to be bound as the Second Lien
Collateral Agent for all purposes of this Agreement.

“Second Lien Collateral Documents” means the Second Lien Security Agreement,
each Second Lien Mortgage in effect from time to time and any other collateral
agreement, security agreement, mortgage, deed of trust or other instrument or
document executed and delivered by any Credit Party for purposes of providing
collateral security for any Second Lien Obligation.

“Second Lien Debt Documents” means the Second Lien Indenture Documents and any
Replacement Second Lien Debt Documents, as the context may require.

“Second Lien Debt Facilities” means the Second Lien Note Indenture (and the
Second Lien Notes issued pursuant thereto) and any Replacement Second Lien Debt
Facilities, as the context may require.

“Second Lien Guarantors” means each of the Credit Parties that provides a
Guarantee in respect of any of the Obligations of any other Credit Party under
the Second Lien Debt Documents; provided that no Credit Party shall be a “Second
Lien Guarantor” unless it is also a First Lien Guarantor.

“Second Lien Indenture Documents” means, collectively, the Second Lien Note
Indenture, the Second Lien Notes and the Second Lien Collateral Documents.

“Second Lien Mortgages” means a collective reference to each mortgage, deed of
trust and other document or instrument under which any Lien on real property
owned or leased by any Credit Party is granted to secure any Second Lien
Obligations or under which rights or remedies with respect to any such Liens are
governed, as amended, restated, amended and restated, extended, supplemented or
otherwise modified from time to time.

“Second Lien Notes” means the notes issued pursuant to the Second Lien Note
Indenture.

“Second Lien Note Indenture” means that certain Indenture dated as of the date
hereof among Stone Energy, the Second Lien Guarantors, the Second Lien Notes
Trustee and the Second Lien Collateral Agent, as amended, restated, amended and
restated, extended, supplemented or otherwise modified from time to time.

 

12

--------------------------------------------------------------------------------

“Second Lien Notes Trustee” has the meaning assigned to such term in the
introductory paragraph of this Agreement.

“Second Lien Obligations” means all Obligations of the Credit Parties under the
Second Lien Debt Documents.

“Second Lien Representative” means (a) in the case of any Second Lien
Obligations or the Second Lien Secured Parties thereunder, the Second Lien Notes
Trustee and (b) in the case of any Replacement Second Lien Debt Facility and the
Replacement Second Lien Secured Parties thereunder, the trustee, administrative
agent or other similar agent under such Replacement Second Lien Debt Facility
that is named as the representative in respect of such Replacement Second Lien
Debt Facility in the applicable Joinder Agreement.

“Second Lien Secured Parties” means the holders of the Second Lien Notes, the
Second Lien Notes Trustee, any other Second Lien Representative, the Second Lien
Collateral Agent and any Replacement Second Lien Secured Parties, as the context
may require.

“Second Lien Security Agreement” means that certain Second Lien Security
Agreement, dated as of the date hereof, by Stone Energy and each of the other
Guarantors party thereto from time to time in favor of the Second Lien
Collateral Agent, as amended, restated, amended and restated, extended,
supplemented or otherwise modified from time to time.

“Second Priority Lien” means the Liens on the Second Lien Collateral in favor of
Second Lien Collateral Agent or Second Lien Secured Parties under Second Lien
Collateral Documents.

“Secured Debt Documents” means the First Lien Debt Documents and the Second Lien
Debt Documents, as the context may require.

“Secured Obligations” means the First Lien Obligations and the Second Lien
Obligations, as the context may require.

“Secured Parties” means the First Lien Secured Parties and the Second Lien
Secured Parties, as the context may require.

“Standstill Period” means a period of 210 days from the date of delivery of a
written notice to the First Lien Administrative Agent (or replacement First Lien
Representative) of any Second Lien Secured Party’s intention to exercise any
rights or remedies with respect to any Collateral in respect of any Second Lien
Obligations, which notice may be delivered only following the occurrence of and
during the continuation of an Event of Default (as defined in the applicable
Second Lien Debt Documents) with respect to the Second Lien Obligations.

“Stone Energy” has the meaning specified in the preamble.

 

13

--------------------------------------------------------------------------------

“Uniform Commercial Code” or “UCC” the Uniform Commercial Code as in effect in
the State of New York; provided that if perfection or the effect of perfection
or non-perfection or the priority of any security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, “UCC” means the Uniform Commercial Code as in effect
from time to time in such other jurisdiction for purposes of the provisions
hereof relating to such perfection, effect of perfection or non-perfection or
priority.

SECTION 1.02. Terms Generally. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include,” “includes” and “including” shall
be deemed to be followed by the phrase “without limitation.” The word “will”
shall be construed to have the same meaning and effect as the word “shall.”
Unless the context requires otherwise, (a) any definition of or reference to any
agreement, instrument, other document, statute or regulation herein shall be
construed as referring to such agreement, instrument, other document, statute or
regulation as from time to time amended, supplemented or otherwise modified,
(b) any reference herein to any Person shall be construed to include such
Person’s successors and assigns, but shall not be deemed to include the
subsidiaries of such Person unless express reference is made to such
subsidiaries, (c) the words “herein,” “hereof” and “hereunder,” and words of
similar import, shall be construed to refer to this Agreement in its entirety
and not to any particular provision hereof, (d) all references herein to
Articles, Sections and Annexes shall be construed to refer to Articles, Sections
and Annexes of this Agreement, (e) unless otherwise expressly qualified herein,
the words “asset” and “property” shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts and contract rights and (f) the
term “or” is not exclusive.

ARTICLE II

Priorities and Agreements with Respect to Collateral

SECTION 2.01. Subordination.

(a)    Notwithstanding the date, time, manner, method or order of filing or
recordation of any document or instrument or of grant, attachment or perfection
of any Liens granted to, or on behalf of, any of the Collateral Agents or any
other Secured Party on the Collateral (or any actual or alleged defect, or
deficiency or failure to perfect, in any of the foregoing) and notwithstanding
any provision of the UCC, any applicable law, any Secured Debt Document or any
other circumstance whatsoever, the Second Lien Collateral Agent and each Second
Lien Representative, on behalf of itself and each Second Lien Secured Party
under its Second Lien Debt Facility, hereby agrees that (A) any Lien on the
Collateral securing any First Lien Priority Obligations now or hereafter held by
or on behalf of the First Lien Administrative Agent, any other First Lien
Representative, any other First Lien Secured Party or any other agent or trustee
therefor, regardless of how acquired, whether by grant, statute, operation of
law, subrogation or otherwise, shall have priority over and be senior in all
respects and prior to any Lien on the Collateral securing any Second Lien
Obligations or any Excess First Lien Obligations, (B) any Lien on the Collateral
securing any Second Lien Obligations now or

 

14

--------------------------------------------------------------------------------

hereafter held by or on behalf of any Second Lien Secured Party or any other
agent or trustee therefor and any Lien on the Collateral securing any Excess
First Lien Obligations, regardless of how acquired, whether by grant, statute,
operation of law, subrogation or otherwise, shall be junior and subordinate in
right, priority, operation, effect and all other respects to all Liens on the
Collateral securing any First Lien Priority Obligations and (C) after the
Discharge of First Lien Priority Obligations, any Lien on the Collateral
securing any Excess First Lien Obligations now or hereafter held by or on behalf
of any First Lien Secured Party, regardless of how acquired, whether by grant,
statute, operation of law, subrogation or otherwise, shall be junior and
subordinate in right, priority, operation, effect and all other respects to all
Liens on the Collateral securing any Second Lien Obligations.

(b)    All Liens on the Collateral securing any First Lien Priority Obligations
shall be and remain senior in right, priority, operation, effect and all other
respects and prior to all Liens on the Collateral securing any Second Lien
Obligations or any Excess First Lien Obligations for all purposes, whether or
not such Liens securing any First Lien Priority Obligations are subordinated in
any respect to any Lien securing any other obligation of any Credit Party or any
other Person or otherwise subordinated, voided, avoided, invalidated or lapsed.
All Liens on the Collateral securing any Second Lien Obligations shall be and
remain senior in right, priority, operation, effect and all other respects and
prior to all Liens on the Collateral securing any Excess First Lien Obligations
for all purposes, whether or not such Liens securing any Second Lien Obligations
are subordinated in any respect to any Lien securing any other obligation of any
Credit Party or any other Person or otherwise subordinated, voided, avoided,
invalidated or lapsed.

SECTION 2.02. Nature of Claims.

(a)    The Second Lien Collateral Agent and each Second Lien Representative, on
behalf of itself and each Second Lien Secured Party under its Second Lien Debt
Facility, each acknowledges that, in accordance with the provisions of the First
Lien Debt Documents (i) all or a portion of the First Lien Obligations is
revolving in nature and that the amount thereof that may be outstanding at any
time or from time to time may be increased or reduced and subsequently
reborrowed, (ii) the terms of the First Lien Debt Documents and the First Lien
Obligations may be amended, supplemented or otherwise modified, and the First
Lien Obligations, or a portion thereof, may be Refinanced from time to time and
(iii) the aggregate amount of the First Lien Obligations may be increased, in
each case, without notice to or consent by the Second Lien Collateral Agent or
any other Second Lien Secured Party and without affecting the provisions hereof.

(b)    The Lien priorities provided for in Section 2.01 shall not be altered or
otherwise affected by any amendment, supplement or other modification, or any
Refinancing, of any of the Secured Obligations or any portion thereof. As
between the Credit Parties and the Secured Parties, the foregoing provisions
will not limit or otherwise affect the obligations of the Credit Party contained
in any Secured Debt Document with respect to the incurrence of additional
Secured Obligations (whether constituting First Lien Obligations or Second Lien
Obligations, as the case may be).

 

15

--------------------------------------------------------------------------------

SECTION 2.03. Prohibition on Contesting Liens.

(a)    The Second Lien Collateral Agent and each of the Second Lien
Representatives, for itself and on behalf of each Second Lien Secured Party
under its Second Lien Debt Facility, each agrees that it shall not (and hereby
waives any right to) contest or support any other Person in contesting, in any
proceeding (including any Insolvency or Liquidation Proceeding), the validity,
extent, perfection, priority or enforceability of any Lien securing any First
Lien Obligations up to the First Lien Priority Cap Amount held (or purported to
be held) or deemed to be held by virtue of this Agreement by or on behalf of the
First Lien Administrative Agent, any of the other First Lien Secured Parties or
any other agent or trustee therefor in any of the First Lien Collateral.

(b)    The First Lien Administrative Agent and each First Lien Representative,
for itself and on behalf of each First Lien Secured Party under its First Lien
Debt Facility, each agrees that it shall not (and hereby waives any right to)
contest or support any other Person in contesting, in any proceeding (including
any Insolvency or Liquidation Proceeding), the validity, extent, perfection,
priority or enforceability of any Lien securing any Second Lien Obligations held
(or purported to be held) or deemed to be held by virtue of this Agreement by or
on behalf of the Second Lien Collateral Agent, any of the Second Lien Secured
Parties or any other agent or trustee therefor in any of the Second Lien
Collateral.

(c)    Notwithstanding the foregoing, no provision in this Agreement shall be
construed to prevent or impair (i) the rights of the First Lien Administrative
Agent or any other First Lien Secured Party to enforce this Agreement (including
the priority of the Liens securing the First Lien Obligations as provided in
Section 2.01) or any of the First Lien Debt Documents or (ii) after the
Discharge of First Lien Obligations, the rights of the Second Lien Collateral
Agent or any other Second Lien Secured Party to enforce this Agreement
(including the priority of the Liens securing the Second Lien Obligations as
provided in Section 2.01) or any of the Second Lien Debt Documents.

SECTION 2.04. No Other Liens, Rights or Remedies.

(a)    The parties hereto agree that, so long as the Discharge of First Lien
Obligations has not occurred, none of the Credit Parties shall, or shall permit
any of its Subsidiaries to, grant or permit any Lien on any asset to secure any
Second Lien Obligation and no Second Lien Secured Party shall hold any Lien on
any asset to secure any Second Lien Obligation, unless such Credit Party has
granted, or concurrently therewith grants, a senior priority Lien on such asset
to secure the First Lien Obligations. To the extent that the provisions of the
immediately preceding sentence are not complied with for any reason, without
limiting any other right or remedy available to the First Lien Administrative
Agent or any other First Lien Secured Party, the Second Lien Collateral Agent
and each Second Lien Representative, for itself and on behalf of the other
Second Lien Secured Parties under its Second Lien Debt Facility, each agrees
that (i) the Second Lien Collateral Agent and the other Second Lien Secured
Parties shall be deemed to hold and have held such Lien for the benefit of each
of the First Lien Administrative Agent and the other First Lien Secured Parties
and (ii) any amounts received by or distributed to any Second Lien Secured Party
pursuant to or as a result of any Lien granted in contravention of this
Section 2.04 shall be subject to Section 4.02.

 

16

--------------------------------------------------------------------------------

(b)    To the extent any of the Credit Parties or any of their respective
Subsidiaries grants or permits the Second Lien Collateral Agent or any other
Second Lien Secured Party any right or remedy with respect to any of the
Collateral that has not also been granted or permitted to the First Lien
Administrative Agent or any other First Lien Secured Party, the Second Lien
Collateral Agent, and each Second Lien Representative, for itself and on behalf
of the other Second Lien Secured Parties under its Second Lien Debt Facility
each agrees, that until the Discharge of First Lien Priority Obligations (i) the
Second Lien Collateral Agent and each other Second Lien Secured Party shall be
required to exercise such right or remedy at the direction of the First Lien
Representative and (ii) any exercise of such right or remedy by the Second Lien
Collateral Agent or any other Second Lien Secured Party shall be for the benefit
of the First Lien Secured Parties pursuant to and in accordance with the terms
of this Agreement.

(c)    The parties hereto acknowledge and agree that it is their intention that
the First Lien Collateral and the Second Lien Collateral be identical other than
any Excluded Assets and any Excluded Equity Interests. In furtherance of the
foregoing, the parties hereto agree:

(i)    to cooperate in good faith in order to determine, upon any reasonable
written request by the First Lien Representative or the Second Lien Collateral
Agent (acting at the written direction of the Majority Holders), the specific
assets included in the First Lien Collateral and the Second Lien Collateral, the
steps taken to perfect the First Priority Liens and the Second Priority Liens
thereon and the identity of the respective parties obligated under the First
Lien Debt Documents and the Second Lien Debt Documents; and

(ii)    that the documents, agreements and instruments creating or evidencing
the First Lien Collateral and the First Priority Liens shall be in all material
respects in the same form as the documents, agreements and instruments creating
or evidencing the Second Lien Collateral and the Second Priority Liens, other
than with respect to the first priority and second priority nature of the Liens
created or evidenced thereunder, the identity of the Secured Parties that are
parties thereto or secured thereby and other matters contemplated by this
Agreement and other than with respect to Excluded Assets and Excluded Equity
Interests.

(d)    Until the Discharge of First Lien Obligations, other than Liens granted
to secure the Secured Obligations, none of the Credit Parties shall grant or
issue or permit to exist any Lien on any asset or property other than Permitted
Liens.

SECTION 2.05. Perfection of Liens. Subject to Section 5.05, none of the First
Lien Secured Parties shall be responsible for perfecting and maintaining the
perfection of Liens with respect to the Collateral for the benefit of the Second
Lien Secured Parties. The provisions of this Agreement are intended solely to
govern the respective Lien priorities as between the First Lien Secured Parties
and the Second Lien Secured Parties and shall not impose on the First Lien
Secured Parties, the Second Lien Secured Parties, or any agent or trustee
therefor any obligations in respect of the disposition of Proceeds of any
Collateral which would conflict with prior perfected claims therein in favor of
any other Person or any order or decree of any court or governmental authority
or any applicable law. To the extent a Secured Party does not maintain a
perfected Lien on any portion of Collateral, any Proceeds received in respect of
such portion of Collateral shall be paid over to the extent necessary pursuant
to Section 4.01 as if all Secured Parties held such a perfected Lien.

 

17

--------------------------------------------------------------------------------

SECTION 2.06. Certain Cash Collateral. Notwithstanding anything in this
Agreement or any other Secured Debt Document to the contrary, collateral
consisting of First Lien Cash Collateral Accounts (or amounts on deposit therein
or credited thereto), shall be applied as specified in the First Lien Loan
Documents and will not constitute Collateral or Second Lien Collateral
hereunder.

ARTICLE III

Enforcement

SECTION 3.01. Exercise of Remedies. Subject, following the expiration of the
Standstill Period, to the Second Lien Collateral Agent’s rights under clause
(f) of this Section 3.01:

(a)    So long as the Discharge of First Lien Obligations has not occurred,
whether or not any Insolvency or Liquidation Proceeding has been commenced by or
against any Credit Party, (i) none of the Second Lien Collateral Agent nor any
other Second Lien Secured Party will (x) take or seek to take any Enforcement
Actions in respect of any Second Lien Obligations, or institute any action or
proceeding with respect to any Enforcement Actions (including any action of
foreclosure), (y) contest, protest or object to any foreclosure proceeding or
other Enforcement Action brought with respect to the Collateral or any other
First Lien Collateral by the First Lien Administrative Agent or any other First
Lien Secured Party in respect of the First Lien Obligations, the exercise of any
right by the First Lien Administrative Agent or any other First Lien Secured
Party (or any agent or sub-agent on their behalf) in respect of the First Lien
Obligations under any lockbox agreement, control agreement, landlord waiver or
bailee’s letter or similar agreement or arrangement to which the First Lien
Administrative Agent or any other First Lien Secured Party either is a party or
may have rights as a third party beneficiary, or any other exercise by any First
Lien Secured Party of any rights and remedies relating to the Collateral under
the First Lien Debt Documents or otherwise in respect of the First Lien
Collateral or the First Lien Obligations or (z) object to the forbearance by the
First Lien Secured Parties from bringing or pursuing any foreclosure proceeding
or action, any other Enforcement Action or any other exercise of any rights or
remedies relating to the Collateral in respect of First Lien Obligations and
(ii) the First Lien Administrative Agent and the other First Lien Secured
Parties shall have the exclusive right to take Enforcement Actions and otherwise
enforce rights, exercise remedies (including setoff and the right to credit bid
their debt) and make determinations regarding the release, disposition or
restrictions with respect to the Collateral without any consultation with or the
consent of the Second Lien Collateral Agent or any other Second Lien Secured
Party; provided, however, that (A) in any Insolvency or Liquidation Proceeding
commenced by or against a Credit Party, any Second Lien Representative may file
a proof of claim with respect to the Second Lien Obligations under its Second
Lien Debt Facility; provided no such action is, or could reasonably be expected
to be, inconsistent with the terms of the Agreement, (B) the Second Lien
Collateral Agent may take any action (not adverse to the prior status of the
Liens on the Collateral securing the First Lien Obligations or the rights of the
First Lien Administrative Agent or the other First Lien Secured Parties to
exercise remedies in

 

18

--------------------------------------------------------------------------------

respect thereof) in order to create, prove, perfect, preserve or protect (but
not enforce) its rights in, and perfection and priority of its Lien on, the
Collateral and (C) the Second Lien Secured Parties may file any responsive or
defensive pleadings in opposition to any motion, claim, adversary proceeding or
other pleading made by any person objecting to or otherwise seeking the
disallowance of the claims of such Second Lien Secured Party or the avoidance of
any Second Priority Lien, to the extent not inconsistent with the terms of this
Agreement. In taking Enforcement Actions and otherwise exercising rights and
remedies with respect to the First Lien Collateral, the First Lien
Administrative Agent and the other First Lien Secured Parties may enforce the
provisions of the First Lien Debt Documents and exercise remedies thereunder,
all in such order and in such manner as they may determine in the exercise of
their sole discretion and without consultation with the Second Lien Collateral
Agent or any other Second Lien Secured Party and regardless of whether any such
exercise is adverse to the claims or interest of any Second Lien Secured Party.
Such exercise and enforcement shall include the rights of an agent appointed by
them to sell or otherwise dispose of Collateral upon foreclosure, to incur
expenses in connection with such sale or disposition and to exercise all the
rights and remedies of a secured lender under the Uniform Commercial Code of any
applicable jurisdiction or under the First Lien Mortgages under any applicable
laws of any jurisdiction and of a secured creditor under Bankruptcy Laws or
other applicable laws of any applicable jurisdiction.

(b)    So long as the Discharge of First Lien Priority Obligations has not
occurred, except as expressly provided in the proviso in Section 3.01(a)(ii),
the Second Lien Collateral Agent and each Second Lien Representative, on behalf
of itself and each Second Lien Secured Party under its Second Lien Debt Facility
each agrees that it will not, in the context of its role as creditor, take or
receive any Collateral or any Proceeds of Collateral in connection with the
exercise of any right or remedy (including setoff) with respect to any
Collateral in respect of any Second Lien Obligation. Without limiting the
generality of the foregoing, unless and until the Discharge of First Lien
Priority Obligations has occurred, except as expressly provided in the proviso
in Section 3.01(a)(ii), the sole right of the Second Lien Collateral Agent and
the other Second Lien Secured Parties with respect to the Collateral is to hold
a Lien on the Collateral in respect of Second Lien Obligations pursuant to the
Second Lien Debt Documents for the period and to the extent granted therein and
to receive a share of the Proceeds thereof, if any, after the Discharge of First
Lien Priority Obligations has occurred.

(c)    Subject to the proviso in Section 3.01(a)(ii), (i) the Second Lien
Collateral Agent and each Second Lien Representative, for itself and on behalf
of each Second Lien Secured Party under its Second Lien Debt Facility each
agrees that none of the Second Lien Collateral Agent nor any other Second Lien
Secured Party will take any action that would hinder any Enforcement Action or
other exercise of remedies undertaken by the First Lien Administrative Agent or
any First Lien Secured Party with respect to the Collateral under the First Lien
Debt Documents, including any sale, lease, exchange, transfer or other
disposition of the Collateral, whether by foreclosure or otherwise, and (ii) the
Second Lien Collateral Agent and each Second Lien Representative, for itself and
on behalf of each Second Lien Secured Party under its Second Lien Debt Facility
each hereby waives any and all rights it or any Second Lien Secured Party may
have as a creditor or otherwise to object to the manner in which the First Lien
Administrative Agent or the other First Lien Secured Parties seek to enforce or
collect the First Lien Obligations or the Liens granted on any of the First Lien
Collateral, regardless of whether any action or failure to act by or on behalf
of the First Lien Administrative Agent or any other First Lien Secured Party is
adverse to the interests of the Second Lien Secured Parties.

 

19

--------------------------------------------------------------------------------

(d)    The Second Lien Collateral Agent and each Second Lien Representative (for
itself and on behalf of each Second Lien Secured Party under its Second Lien
Debt Facilities) each hereby acknowledges and agrees that no covenant, agreement
or restriction contained in any Second Lien Debt Document shall be deemed to
restrict in any way the rights and remedies of the First Lien Secured Parties
with respect to the First Lien Collateral as set forth in this Agreement and the
First Lien Debt Documents.

(e)    Until the Discharge of First Lien Priority Obligations and subject to
Section 3.01(f), the First Lien Administrative Agent shall have the exclusive
right to take Enforcement Actions or otherwise exercise any right or remedy with
respect to the Collateral and shall have the exclusive right to determine and
direct the time, method and place for exercising such right or remedy or
conducting any proceeding with respect thereto.

(f)    After the expiration of the Standstill Period, the Second Lien Collateral
Agent may commence Enforcement Actions with respect to the Collateral; provided
that in no event shall the Second Lien Collateral Agent or any Second Lien
Representative (for itself and on behalf of each Second Lien Secured Party under
its Second Lien Debt Facilities) take or continue to take any Enforcement
Actions if, notwithstanding the expiration of the Standstill Period, any First
Lien Secured Party shall have commenced and be diligently pursuing the exercise
of rights and remedies with respect to any of the Collateral, or an Insolvency
or Liquidation Proceeding shall have been commenced in respect of the Credit
Parties; provided, further, that in any Insolvency or Liquidation Proceeding
commenced by or against the Credit Parties, the Second Lien Collateral Agent or
any Second Lien Representative (for itself and on behalf of each Second Lien
Secured Party under its Second Lien Debt Facilities) may take any action
expressly permitted by the express provisions of this Agreement.

(g)    The parties hereto understand and acknowledge that the provisions of this
Section 3.01 do not modify or affect the exercise of the purchase right set
forth in Section 5.07.

SECTION 3.02. Cooperation. Subject to the proviso in Section 3.01(a)(ii), the
Second Lien Collateral Agent and each Second Lien Representative, on behalf of
itself and each Second Lien Secured Party under its Second Lien Debt Facility,
each agrees that, unless and until the Discharge of First Lien Priority
Obligations has occurred, it will not commence, or join with any Person (other
than the First Lien Secured Parties and the First Lien Representatives upon the
written request of the First Lien Administrative Agent) in commencing, any
Enforcement Action with respect to any Lien held by it in the Collateral under
any of the Second Lien Debt Documents or otherwise in respect of any Second Lien
Obligations.

SECTION 3.03. Actions upon Breach. Should any Second Lien Secured Party,
contrary to this Agreement, in any way take, attempt to take or threaten to take
any Enforcement Action with respect to the Collateral (including any attempt to
realize upon or enforce any remedy with respect to this Agreement) or fail to
take any action required by this Agreement, this Agreement shall create a
rebuttable presumption and admission by such Second Lien Secured Party that the
First Lien Secured Parties (in its or their own name or in the name of any

 

20

--------------------------------------------------------------------------------

Credit Party) or any Credit Party may obtain relief against such Second Lien
Secured Party by injunction, specific performance or other appropriate equitable
relief. The Second Lien Collateral Agent and each Second Lien Representative, on
behalf of itself and each Second Lien Secured Party under its Second Lien Debt
Facility, each hereby (a) agrees that the First Lien Secured Parties’ damages
from the actions of the Second Lien Secured Parties may at that time be
difficult to ascertain and may be irreparable and waives any defense that any
Credit Party or the First Lien Secured Parties cannot demonstrate damage or be
made whole by the awarding of damages and (b) irrevocably waives any defense
based on the adequacy of a remedy at law and any other defense that might be
asserted to bar the remedy of specific performance in any action that may be
brought by the First Lien Administrative Agent or any other First Lien Secured
Party.

SECTION 3.04. Voting. With respect to any remedies to be taken by the Secured
Parties with respect to the Collateral and all other matters relating to the
Collateral or the First Lien Debt Documents, the applicable First Lien
Representative shall take direction from the applicable First Lien Secured
Parties in accordance with the applicable First Lien Debt Documents. Except as
otherwise provided herein, and to the extent not inconsistent with the
provisions of this Agreement, with respect to the Second Lien Collateral, the
Second Lien Collateral Agent shall take direction and comply with the
instructions of the applicable Second Lien Secured Parties in accordance with
the applicable Second Lien Debt Documents.

ARTICLE IV

Payments

SECTION 4.01. Application of Proceeds. After an Event of Default has occurred
and until such Event of Default is cured or waived, so long as the Discharge of
First Lien Obligations and the Discharge of Second Lien Obligations has not
occurred, whether or not any Insolvency or Liquidation Proceeding has been
commenced by or against the Credit Party, the Collateral or Proceeds thereof or
any Proceeds received in connection with the sale or other disposition of, or
collection on, such Collateral upon the exercise of remedies, or any
distributions (including, and to the extent not considered Proceeds of
Collateral, with respect to any debtor or equity securities distributed pursuant
to a chapter 11 plan of reorganization or liquidation, in whole or partial
satisfaction (or waiver) of any secured claim of any Second Lien Secured Party)
with respect to secured claims in connection with any Insolvency or Liquidation
Proceeding, including in connection with a 363 sale or a chapter 11 plan, shall
be applied in accordance with the following waterfall:

(a)    First, on a pro rata basis, to pay fees, expenses and indemnities
(including, but not limited to, fees, expenses and disbursements of legal
counsel) of the First Lien Administrative Agent and each Issuing Bank (other
than letter of credit reimbursement obligations) due and payable under the First
Lien Credit Agreement Loan Documents;

(b)    Second, to payment of the First Lien Priority Obligations to be applied
in accordance with the First Lien Debt Documents until Discharge of First Lien
Priority Obligations;

 

21

--------------------------------------------------------------------------------

(c)    Third, on a pro rata basis, to pay fees, expenses and indemnities
(including, but not limited to, fees, expenses and disbursements of legal
counsel) of the Second Lien Collateral Agent and the Second Lien Notes Trustee
due and payable under the Second Lien Debt Documents;

(d)    Fourth, to payment of the Second Lien Obligations to be applied in
accordance with the Second Lien Debt Documents until payment in full of the
Second Lien Obligations (other than Excess Second Lien Obligations);

(e)    Fifth, to payment of the Excess First Lien Obligations to be applied in
accordance with the First Lien Debt Documents until Discharge of First Lien
Obligations that remain after Discharge of First Lien Priority Obligations in
accordance with clause (b);

(f)    Sixth, to payment of the Excess Second Lien Obligations to be applied in
accordance with the Second Lien Debt Documents until payment in full of the
Excess Second Lien Obligations; and

(g)    Seventh, any remaining proceeds to the applicable Credit Party or as a
court of competent jurisdiction may direct.

After an Event of Default (as defined in the First Lien Credit Agreement) or any
other event of default (or equivalent) under any other First Lien Debt Document
has occurred and until such event of default is cured or waived, so long as the
Discharge of First Lien Priority Obligations has not occurred, whether or not
any Insolvency or Liquidation Proceeding has been commenced by or against the
Credit Party, any non-cash Collateral or Proceeds received in connection with
the sale or other disposition of, or collection on, Collateral may be held by or
on behalf of the First Lien Administrative Agent or any First Lien Secured Party
as Collateral and upon conversion to cash be distributed as set forth in the
above waterfall.

Upon the Discharge of First Lien Priority Obligations, the First Lien
Administrative Agent shall deliver promptly to the Second Lien Collateral Agent
any Collateral or Proceeds thereof held by it in the same form as received, with
any necessary endorsements, or as a court of competent jurisdiction may
otherwise direct, to be applied by the Second Lien Collateral Agent to the
Second Lien Obligations in accordance with this Agreement and in such order as
specified in the relevant Second Lien Debt Documents.

SECTION 4.02. Payment Over. Until the Discharge of First Lien Priority
Obligations, any Collateral, Proceeds thereof, payments or other distributions
received by a Second Lien Secured Party in respect of claims made against
Collateral, to the extent secured by, or otherwise in respect of Collateral (or,
subject to the rights of the Second Lien Secured Parties as unsecured creditors,
as a result of lien avoidance or similar action), including, and to the extent
not considered proceeds of Collateral, with respect to any debt or equity
securities distributed pursuant to a chapter 11 plan of reorganization or
liquidation, in whole or partial satisfaction (or waiver) of any secured claim
of any Second Lien Secured Party, whether in connection with any enforcement
action, Insolvency or Liquidation Proceeding or otherwise, will be
(i) segregated and held in trust and (ii) promptly turned over or paid over to
the First Lien

 

22

--------------------------------------------------------------------------------

Administrative Agent in the form received, with any necessary endorsements or as
a court of competent jurisdiction may otherwise direct. For the avoidance of
doubt, no mandatory or voluntary prepayments of Second Lien Obligations will be
permitted prior to the Discharge of First Lien Obligations; provided that
nothing in this Agreement will prohibit the scheduled payment of interest with
respect to the Second Lien Obligations (so long as there is not an Event of
Default arising from a failure to pay principal or interest under the First Lien
Debt Documents or an Event of Default resulting in the acceleration of
obligations under the First Lien Debt Documents).

ARTICLE V

Other Agreements

SECTION 5.01. Releases.

(a)    The Second Lien Collateral Agent and each Second Lien Representative, for
itself and on behalf of each Second Lien Secured Party under its Second Lien
Debt Facility, each agrees that, prior to the Discharge of First Lien Priority
Obligations:

(i)    if in connection with any exercise of any of the First Lien Secured
Parties’ rights or remedies in respect of the Collateral, the First Lien
Administrative Agent, for itself or on behalf of any of the First Lien Secured
Parties, releases any of its Liens on any part of the Collateral or the First
Lien Administrative Agent, for itself or on behalf of any of the First Lien
Secured Parties, releases any Guarantor from its obligations under its Guarantee
of the First Lien Obligations;

(ii)    if in connection with any exercise of any First Lien Secured Parties
remedies, the equity interests of any Person are foreclosed upon or otherwise
disposed of and the First Lien Administrative Agent releases its Lien on such
equity interests and/or the property or assets of such Person;

(iii)    if in the event of a sale, transfer or other disposition of any
specified item of Collateral (including all or substantially all of the equity
interests of any Subsidiary of Stone Energy), as permitted pursuant to the terms
of the First Lien Debt Documents, or otherwise consented to by the First Lien
Secured Parties in accordance with the First Lien Debt Documents, or any other
disposition in any Insolvency or Liquidation Proceeding, including pursuant to a
363 sale or chapter 11 plan, the First Lien Administrative Agent, for itself or
on behalf of any of the First Lien Secured Parties, releases any of its Liens on
any part of the Collateral or the First Lien Administrative Agent for itself or
on behalf of any of the First Lien Secured Parties, releases any Guarantor from
its obligations under its Guarantee of the First Lien Obligations; or

(iv)    if, in the event the First Lien Administrative Agent waives the
requirement that a First Priority Lien attach to any Collateral,

then, with respect to clauses (i) to (iv) above (including the preamble), (x)
the Liens, if any, of the Second Lien Collateral Agent, for itself or for the
benefit of the Second Lien Secured Parties, on such Collateral shall be
automatically, unconditionally and

 

23

--------------------------------------------------------------------------------

simultaneously waived, released and terminated, as applicable, and any Guarantor
released from its obligations under its Guarantee of First Lien Obligations
released by the First Lien Administrative Agent shall be released under its
Guarantee of Second Lien Obligations, automatically and without any further
action, concurrently with the termination, waiver and release, as applicable, of
all Liens granted upon such Collateral to secure First Lien Obligations and the
Second Lien Collateral Agent shall take such reasonable steps as are necessary
(including at the request of the First Lien Administrative Agent) to effectuate
the foregoing termination and release at Stone Energy’s sole cost and expense,
in each case so long as all First Priority Liens and Second Priority Liens
attach to the proceeds of the sale for application in accordance with the
distribution provisions of Section 4.01 (it being understood and agreed that
such proceeds may not be sufficient to effect the Discharge of First Lien
Priority Obligations, or the Discharge of Second Lien Obligations, as the case
may be) and (y) the Second Lien Secured Parties will not object to and will be
deemed to have consented to such waiver, release and terminations. Promptly upon
delivery to the Second Lien Collateral Agent of a certificate from the First
Lien Administrative Agent or any Credit Party stating that any such termination
and release of Liens securing the First Lien Obligations will occur, the Second
Lien Collateral Agent, for itself and on behalf of the Second Lien Secured
Parties, shall execute and deliver, at Stone Energy’s or the other Guarantor’s
sole cost and expense, to the First Lien Administrative Agent or such Credit
Party such termination statements, releases and other documents (including
documents which are corresponding junior lien versions of termination
statements, releases and other documents that the First Lien Administrative
Agent delivers under the First Lien Debt Facility to the extent applicable) so
as to confirm the foregoing releases referred to in clauses (i) to (iv) of the
first sentence of this clause (a) when such First Lien Administrative Agent’s
releases occur.

(b)    The Second Lien Collateral Agent and each Second Lien Representative, for
itself and on behalf of each Second Lien Secured Party under its Second Lien
Debt Facility, each hereby irrevocably constitutes and appoints the First Lien
Administrative Agent and any officer, employee or agent of the First Lien
Administrative Agent, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Second Lien Collateral Agent, such Second Lien Representative or
any other Second Lien Secured Party and in the First Lien Administrative Agent’s
own name, from time to time in the First Lien Administrative Agent’s discretion,
for the purpose of carrying out the terms of Section 5.01(a), to take any and
all appropriate action and to execute any and all documents and instruments that
may be necessary or desirable to accomplish the purposes of Section 5.01(a),
including any termination statements, endorsements or other instruments of
transfer or release.

(c)    Unless and until the Discharge of First Lien Priority Obligations has
occurred, the Second Lien Collateral Agent and each Second Lien Representative,
for itself and on behalf of each Second Lien Secured Party under its Second Lien
Debt Facility, each hereby consents to the application, whether prior to or
after an event of default under any First Lien Debt Document of Proceeds,
including any Proceeds resulting from a mandatory or optional prepayment under
the Second Lien Debt Facilities, of Collateral to the repayment of First Lien
Priority Obligations pursuant to the First Lien Debt Documents.

 

24

--------------------------------------------------------------------------------

(d)    Notwithstanding anything to the contrary in any Second Lien Debt
Document, in the event the terms of a First Lien Collateral Document, on the one
hand, and a Second Lien Collateral Document, on the other hand, each require any
Credit Party (i) to make payment in respect of any item of Collateral, (ii) to
deliver or afford control over any item of Collateral to, or deposit any item of
Collateral with, (iii) to register ownership of any item of Collateral in the
name of or make an assignment of ownership of any Collateral or the rights
thereunder to, (iv) to cause any securities intermediary, commodity intermediary
or other Person acting in a similar capacity to agree to comply, in respect of
any item of Collateral, with instructions or orders from, or to treat, in
respect of any item of Collateral, as the entitlement holder, (v) to hold any
item of Collateral in trust for (to the extent such item of Collateral cannot be
held in trust for multiple parties under applicable law), (vi) to obtain the
agreement of a bailee or other third party to hold any item of Collateral for
the benefit of or subject to the control of or, in respect of any item of
Collateral, (vii) to follow the instructions of or to obtain the agreement of a
landlord with respect to access to leased premises where any item of Collateral
is located or waivers or subordination of rights with respect to any item of
Collateral in favor of, in any case, the First Lien Administrative Agent or
First Lien Secured Party, on the one hand, and any other Secured Party, on the
other hand, such Credit Party may, until the Discharge of First Lien Priority
Obligations has occurred, comply with such requirement under the Second Lien
Collateral Documents as it relates to such Collateral by taking any of the
actions set forth above only with respect to, or in favor of, the First Lien
Administrative Agent. Until the Discharge of First Lien Priority Obligations
occurs, to the extent that the First Lien Administrative Agent or First Lien
Secured Parties (i) have released any Lien on Collateral or any Guarantor from
its Obligation under its guaranty and any such Liens or guaranty are later
reinstated or (ii) obtain any new Liens or additional Guarantees from any
Guarantor, then the Second Lien Collateral Agent, for itself and the Second Lien
Secured Parties, shall be granted a Lien on any such Collateral, subject to the
lien subordination provisions of this Agreement, and each Second Lien
Representative, for itself and for the Second Lien Secured Parties represented
by it, shall be granted an additional guaranty, as the case may be.

(e)    If, in the event any of the Liens granted to the Second Lien Collateral
Agent or any other Second Lien Secured Party extends to any Excluded Assets or
Excluded Equity Interests, then the Liens, if any, of the Second Lien Collateral
Agent, for itself or for the benefit of the Second Lien Secured Parties on such
Excluded Assets or Excluded Equity Interests shall be automatically,
unconditionally and immediately released and terminated and the Second Lien
Collateral Agent and any applicable other Second Lien Secured Party shall take
any steps reasonably required to effectuate the foregoing termination and
release at Stone Energy’s sole cost and expense. Pending such release and
termination, the Second Lien Collateral Agent shall automatically without any
further action be deemed to hold such Lien for the benefit of the First Lien
Secured Parties, subject to the priorities and other provisions of this
Agreement.

SECTION 5.02. Insurance and Condemnation Awards. (x) Except as otherwise agreed
in the First Lien Debt Documents, unless and until the Discharge of First Lien
Obligations has occurred, the First Lien Administrative Agent and the First Lien
Secured Parties and (y) from and after the Discharge of First Lien Obligations
unless and until the Discharge of Second Lien Obligations has occurred, the
Second Lien Collateral Agent and the Second Lien Secured Parties, shall have the
sole and exclusive right, subject to the rights of the Credit Parties under, and
to the extent required by, and subject to any limitations in, the applicable
First Lien

 

25

--------------------------------------------------------------------------------

Debt Documents and Second Lien Debt Documents, (a) to be named as additional
insured and loss payee under any insurance policies maintained from time to time
by any Credit Parties, (b) adjust settlement for any insurance policy covering
the Collateral in the event of any loss thereunder and (c) to approve any award
granted in any condemnation or similar proceeding affecting the Collateral.
Unless and until the Discharge of First Lien Obligations and the Discharge of
Second Lien Obligations has occurred, all proceeds of any such policy and any
such award, if in respect of the Collateral, shall, if no Event of Default shall
have occurred and be continuing, be applied (i) first, prior to the occurrence
of the Discharge of First Lien Priority Obligations, to the First Lien
Administrative Agent for the benefit of the First Lien Secured Parties pursuant
to the terms of the First Lien Debt Documents, (ii) second, after the occurrence
of the Discharge of First Lien Priority Obligations, to the Second Lien
Collateral Agent for the benefit of the Second Lien Secured Parties pursuant to
the terms of the applicable Second Lien Debt Documents and (iii) third, if no
Second Lien Obligations are outstanding, be paid to the owners of the subject
property, or such other Person as may be entitled thereto or as a court of
competent jurisdiction may otherwise direct. If the Second Lien Collateral Agent
or any other Second Lien Secured Party shall, at any time, receive any proceeds
of any such insurance policy or any such award in contravention of this
Agreement, it shall pay such proceeds over to the First Lien Administrative
Agent for further application in accordance with the terms of Section 4.01 or
this Section 5.02, as applicable.

SECTION 5.03. Amendments to Debt Documents.

(a)    Without the prior written consent of the Second Lien Collateral Agent (to
be given or withheld at the written direction of the Majority Holders) on at
least ten (10) Business Days’ prior notice to the Second Lien Representatives,
or unless permitted under the Second Lien Debt Documents, unless and until the
Discharge of Second Lien Obligations has occurred, notwithstanding anything
herein to the contrary, (x) no First Lien Debt Document may be entered into,
amended, restated, supplemented, replaced or otherwise modified and no Debt
under the First Lien Debt Documents may be Refinanced, to the extent such
amendment, restatement, supplement, replacement or modification or Refinancing,
or the terms of such new First Lien Debt Document, would (i) contravene the
provisions of this Agreement or any of the Second Lien Debt Documents,
(ii) reduce the capacity to incur Obligations constituting Second Lien
Obligations, in each case, under the Second Lien Debt Documents on the day of
any such amendment, restatement, supplement, modification or Refinancing;
(iii) increase the principal amount of the First Lien Credit Agreement or any
Replacement First Lien Debt in respect thereof in excess of the First Lien
Priority Cap Amount, or (iv) impose additional restrictions on the ability of
the obligor thereunder to pay or repay any Second Lien Obligations then
outstanding; and (y) no First Lien Debt Document may be entered into, amended,
restated, supplemented, replaced or otherwise modified to the extent such
amendment, supplement or modification, or the terms of any new First Lien Debt
Document, would be prohibited by, or would require any Credit Party to act or
refrain from acting in a manner that would violate, any of the terms of this
Agreement. In connection with any Refinancing of any Debt under any First Lien
Debt Document (x) Stone Energy will deliver an Officer’s Certificate to the
Second Lien Collateral Agent certifying that such Refinancing is permitted by
the Second Lien Debt Documents and (y) the holders (and their representatives)
of any such Refinancing Debt shall execute a Joinder Agreement or otherwise bind
themselves in writing to the terms of this Agreement.

 

26

--------------------------------------------------------------------------------

(b)    Without the prior written consent of the First Lien Representative on at
least fifteen (15) Business Days’ prior notice to the First Lien
Representatives, or unless permitted under the First Lien Debt Documents, unless
and until the Discharge of First Lien Obligations has occurred, notwithstanding
anything herein to the contrary, (x) no Second Lien Debt Document may be entered
into, amended, restated, supplemented, replaced or otherwise modified and no
Debt under the Second Lien Debt Documents may be Refinanced, to the extent such
amendment, restatement, supplement, replacement or modification or Refinancing,
or the terms of such new Second Lien Debt Document, would (i) contravene the
provisions of this Agreement or any of the First Lien Debt Documents,
(ii) change to earlier dates any scheduled dates for payment of principal
(including the final maturity date) under such Second Lien Debt Document or of
interest on Debt under such Second Lien Debt Document, (iii) modify (or have the
effect of a modification of) the mandatory prepayment provisions of the
applicable Second Lien Debt Document for such Second Lien Debt Facility in a
manner that would result in the weighted average life to maturity being less
than the weighted average life to maturity of the Second Lien Obligations under
such Second Lien Debt Document prior to giving effect thereto, (iv) reduce the
capacity to incur Obligations constituting First Lien Obligations to an amount
below the First Lien Priority Cap Amount or add new restrictions (other than as
to amount) applicable to the incurrence of First Lien Obligations, (v) increase
the principal amount of the Second Lien Notes or any Replacement Second Lien
Debt in respect thereof in excess of the amount permitted under the First Lien
Debt Documents, (vi) increase the interest rate or yield applicable to any
Obligations in respect of Second Lien Indenture Documents and any Replacement
Second Lien Debt Document with respect thereto by more than 3% per annum
(excluding increases resulting from the accrual of interest at the default
rate), (vii) change any default or Event or Default thereunder in a manner
adverse to the Credit Parties thereunder (other than to eliminate any such Event
of Default or increase any grace period related thereto or otherwise make such
Event of Default or condition less restrictive or burdensome on any Credit
Parties), (viii) increase materially the obligations of the obligor thereunder
or to confer any additional material rights on the lenders under the Second Lien
Facilities (or a representative on their behalf) which would be adverse to any
Credit Party or First Lien Secured Parties; and (y) no Second Lien Debt Document
may be entered into, amended, restated, supplemented, replaced or otherwise
modified to the extent such amendment, supplement or modification, or the terms
of any new Second Lien Debt Document, would be prohibited by, or would require
any Credit Party to act or refrain from acting in a manner that would violate,
any of the terms of this Agreement. In connection with any Refinancing of any
Debt under any Second Lien Debt Document (x) Stone Energy will deliver an
Officer’s Certificate to the First Lien Representative certifying that such
Refinancing is permitted by the First Lien Debt Documents and (y) the holders
(and their representatives) of any such Refinancing Debt shall execute a Joinder
Agreement or otherwise bind themselves in writing to the terms of this
Agreement.

(c)    The Second Lien Collateral Agent and each Second Lien Representative, for
itself and on behalf of each Second Lien Secured Party under its Second Lien
Debt Facility, each agrees that each Second Lien Collateral Document shall
include the following language (or language to similar effect reasonably
approved by the First Lien Administrative Agent):

“Notwithstanding anything herein to the contrary, (i) the liens and security
interests granted to the Second Lien Collateral Agent pursuant to this Agreement
are expressly subject and, to the extent set forth in the

 

27

--------------------------------------------------------------------------------

Intercreditor Agreement referred to below, subordinate to the liens and security
interests granted in favor of the First Lien Secured Parties (as defined in such
Intercreditor Agreement), including liens and security interests granted to Bank
of America, N.A., as administrative agent, pursuant to or in connection with the
Fifth Amended and Restated Credit Agreement, dated on or about the date hereof,
among Stone Energy Corporation, the lenders from time to time party thereto,
Bank of America, N.A., as administrative agent, and the other parties thereto,
as further amended, restated, amended and restated, extended, supplemented or
otherwise modified from time to time and (ii) the exercise of any right or
remedy by the Second Lien Collateral Agent hereunder is subject to the
limitations and provisions of the Intercreditor Agreement dated on or about the
date hereof (as amended, restated, supplemented or otherwise modified from time
to time, the “Intercreditor Agreement”), among Stone Energy Corporation, Bank of
America, N.A., as first lien administrative agent, The Bank of New York Mellon
Trust Company, N.A., as second lien collateral agent and the other parties
thereto. In the event of any conflict between the terms of the Intercreditor
Agreement and the terms of this Agreement, the terms of the Intercreditor
Agreement shall govern.”

In addition, each Second Lien Mortgage covering any Collateral shall contain
such other language as the First Lien Administrative Agent may reasonably
request to reflect the lien subordination of such Second Lien Mortgage to the
First Lien Collateral Document covering such Collateral.

(d)    In the event that the First Lien Administrative Agent and/or the First
Lien Secured Parties enter into any amendment, waiver or consent in respect of
any of the First Lien Collateral Documents for the purpose of adding to or
deleting from, or waiving or consenting to any departures from any provisions
of, any First Lien Collateral Document or changing in any manner the rights of
the First Lien Administrative Agent, the First Lien Secured Parties, or any
Credit Party thereunder (including the release of any Liens in First Lien
Collateral or any Guarantees in favor of the First Lien Secured Parties) in a
manner that is applicable to all First Lien Debt Facilities, then such
amendment, waiver or consent shall apply automatically to any comparable
provision of each comparable Second Lien Collateral Document without the consent
of the Second Lien Collateral Agent or any Second Lien Secured Party and without
any action by the Second Lien Collateral Agent, any other Second Lien Secured
Party or any other Credit Party; provided, however, that (i) no such amendment,
waiver or consent shall (A) remove assets subject to the Second Priority Liens
or release any such Liens, except to the extent that such release is permitted
or required by Section 5.01(a) and provided that there is a concurrent release
of the corresponding First Priority Liens, (B) amend, modify or otherwise affect
the rights or duties of the Second Lien Collateral Agent or any Second Lien
Representative in its role as Collateral Agent or Representative without its
prior written consent, (C) impose duties on any of the Second Lien Secured
Parties without their consent, (D) permit Liens on the Collateral not permitted
under the Second Lien Debt Documents, or (E) be prejudicial to the interests of
Second Lien Secured Parties to a greater extent than the interests of the First
Lien Secured Parties (other than by virtue of their relative priorities and
rights and obligations under this Agreement) and (ii) written notice of such
amendment, waiver or consent shall have been given to the Second Lien Collateral
Agent promptly after the effectiveness of such amendment, waiver or consent.

 

28

--------------------------------------------------------------------------------

(e)    Stone Energy agrees to deliver to each Collateral Agent copies of (i) any
amendments, supplements or other modifications to the Secured Debt Documents and
(ii) any new Secured Debt Documents promptly after effectiveness thereof.

SECTION 5.04. Rights as Unsecured Creditors. The First Lien Secured Parties may
exercise rights and remedies as unsecured creditors against any Credit Party in
accordance with the terms of the First Lien Debt Documents and applicable law;
provided that the First Lien Secured Parties will not exercise such rights and
remedies in a manner inconsistent with this Agreement. The Second Lien
Collateral Agent and each Second Lien Representative, on behalf of itself and
all applicable Second Lien Secured Parties, each may exercise rights and
remedies as unsecured creditors against any Credit Party in accordance with the
terms of the Second Lien Debt Documents and applicable law; provided that the
Second Lien Collateral Agent and each Second Lien Representative, on behalf of
itself and all applicable Second Lien Parties, will not exercise such rights and
remedies in a manner inconsistent with this Agreement. Nothing in this Agreement
shall prohibit the receipt by any First Lien Secured Party of the required
payments of principal, premium, interest, fees and other amounts due under the
First Lien Debt Documents. In the event any Second Lien Secured Party becomes a
judgment lien creditor in respect of Collateral as a result of its enforcement
of its rights as an unsecured creditor in respect of Second Lien Obligations,
such judgment lien shall be subordinated to the Liens securing First Lien
Priority Obligations on the same basis as the other Liens securing the Second
Lien Obligations are so subordinated to such Liens securing First Lien Priority
Obligations under this Agreement. Nothing in this Agreement shall impair or
otherwise adversely affect any rights or remedies the First Lien Secured Parties
may have with respect to the First Lien Collateral.

SECTION 5.05. Gratuitous Bailee for Perfection.

(a)    The First Lien Administrative Agent acknowledges and agrees that if it
shall at any time possess or control any Collateral that also secures any Second
Lien Obligations that can be perfected by the possession or control of such
Collateral or of any account in which such Collateral is held, and if such
Collateral or any such account is in fact in the possession or under the control
of the First Lien Administrative Agent, or of agents or bailees of such Person
(such Collateral being referred to herein as the “Pledged or Controlled
Collateral”), or if it shall any time obtain any landlord waiver or bailee’s
letter or any similar agreement or arrangement granting it rights or access to
Collateral, the First Lien Administrative Agent shall also hold such Pledged or
Controlled Collateral, or take such actions with respect to such landlord
waiver, bailee’s letter or similar agreement or arrangement, as sub-agent or
gratuitous bailee for the other Collateral Agents, in each case solely for the
purpose of perfecting the Liens granted under the relevant Second Lien
Collateral Documents.

(b)    Except as otherwise specifically provided herein, until the Discharge of
First Lien Priority Obligations has occurred, the First Lien Administrative
Agent and the First Lien Secured Parties shall be entitled to deal with and
administer the Pledged or Controlled Collateral in accordance with the terms of
the First Lien Debt Documents without notice to the Second Lien Collateral Agent
or any other Second Lien Secured Party as if the Liens under the

 

29

--------------------------------------------------------------------------------

Second Lien Collateral Documents did not exist. The rights of the Second Lien
Collateral Agent and the Second Lien Secured Parties with respect to the Pledged
or Controlled Collateral shall at all times be subject to the terms of this
Agreement.

(c)    No First Lien Secured Parties shall have any obligation whatsoever to any
Second Lien Secured Party to assure that any of the Pledged or Controlled
Collateral is genuine or owned by the Credit Parties or to protect or preserve
rights or benefits of any Person or any rights pertaining to the Collateral,
except as expressly set forth in this Section 5.05. The duties or
responsibilities of the First Lien Administrative Agent under this Section 5.05
shall be limited solely to holding or controlling the Collateral and the related
Liens referred to in paragraphs (a) and (b) of this Section 5.05 as sub-agent
and gratuitous bailee for the other Collateral Agent(s) for purposes of
perfecting the Lien held by the other Collateral Agent(s).

(d)    The First Lien Administrative Agent shall not have by reason of the
Second Lien Debt Documents or this Agreement, or any other document, a fiduciary
relationship in respect of any Second Lien Secured Party, and the Second Lien
Collateral Agent and each Second Lien Representative, for itself and on behalf
of each Second Lien Secured Party under its Second Lien Debt Facility, each
hereby waives and releases the First Lien Administrative Agent from all claims
and liabilities arising pursuant to the First Lien Administrative Agent’s roles
under this Section 5.05 as sub-agents and gratuitous bailees with respect to the
Collateral.

(e)    Upon the Discharge of First Lien Priority Obligations, the First Lien
Administrative Agent shall, at Stone Energy’s sole cost and expense,
(i) (A) deliver to the Second Lien Collateral Agent, all Collateral, including
all proceeds thereof, held or controlled by the First Lien Administrative Agent
or any of its agents or bailees, including the transfer of possession and
control, as applicable, of the Pledged or Controlled Collateral, together with
any necessary endorsements and notices to depositary banks, securities
intermediaries and commodities intermediaries, and assign its rights under any
landlord waiver or bailee’s letter or any similar agreement or arrangement
granting it rights or access to Collateral, or (B) direct and deliver such
Collateral as a court of competent jurisdiction may otherwise direct, and
(ii) at the request of the Second Lien Collateral Agent, (A) notify any
applicable insurance carrier that it is no longer entitled to be a loss payee or
additional insured under the insurance policies of any Credit Party issued by
such insurance carrier and (B) notify any governmental authority involved in any
condemnation or similar proceeding involving any Credit Party that the Second
Lien Collateral Agent is entitled to approve any awards granted in such
proceeding. The Credit Parties shall take such further action as is required to
effectuate the transfer contemplated hereby and shall indemnify each of the
Collateral Agents and each Representative for loss or damage suffered by it as a
result of such transfer, except for loss or damage suffered by any such Person
as a result of its own willful misconduct or gross negligence. Neither the First
Lien Administrative Agent nor any other First Lien Secured Party shall have any
obligation to follow instructions from the Second Lien Collateral Agent or any
other Second Lien Secured Party in contravention of this Agreement.

(f)    Neither the First Lien Administrative Agent nor any of the other First
Lien Secured Parties shall be required to marshal any present or future
collateral security for any obligations of any Credit Party to the First Lien
Administrative Agent or any First Lien Secured Party under the First Lien Debt
Documents or any assurance of payment in respect thereof, or to

 

30

--------------------------------------------------------------------------------

resort to such collateral security or other assurances of payment in any
particular order, and all of their rights in respect of such collateral security
or any assurance of payment in respect thereof shall be cumulative and in
addition to all other rights, however existing or arising.

SECTION 5.06. When Discharge of Obligations Deemed To Not Have Occurred. If, at
any time any Credit Party consummates any Refinancing in accordance with
Section 5.03 and Section 8.10 of any First Lien Obligations or Second Lien
Obligations, as applicable, then a Discharge of First Lien Obligations or
Discharge of Second Lien Obligations, as the case may be, shall automatically be
deemed not to have occurred for all purposes of this Agreement (other than with
respect to any actions taken prior to the date of such designation as a result
of the occurrence of a Discharge of First Lien Obligations, Discharge of First
Lien Priority Obligations or Discharge of Second Lien Obligations, as the case
may be), and the applicable agreement governing such First Lien Obligations or
Second Lien Obligations, as applicable, shall automatically be treated as a
First Lien Debt Document or Second Lien Debt Document, as applicable for all
purposes of this Agreement, including for purposes of the Lien priorities and
rights in respect of Collateral set forth herein and the collateral agent, for
the holders of such First Lien Obligations or Second Lien Obligations as the
case may be, shall be the First Lien Administrative Agent or the Second Lien
Collateral Agent, as applicable for all purposes of this Agreement. Upon receipt
of notice of such incurrence (including the identity of the new First Lien
Administrative Agent or the Second Lien Collateral Agent, as applicable), each
Person party hereto shall promptly (a) enter into such documents and agreements,
including amendments or supplements to this Agreement, as Stone Energy or such
new Collateral Agent shall reasonably request in writing in order to provide the
new First Lien Administrative Agent or the Second Lien Collateral Agent, as
applicable the rights of a First Lien Administrative Agent or Second Lien
Collateral Agent, as applicable contemplated hereby, (b) to the extent that such
Refinancing is in respect of the First Lien Obligations, deliver to such First
Lien Administrative Agent or, to the extent that the Discharge of First Lien
Obligations has occurred and such Refinancing is in respect of the Second Lien
Obligations, such Second Lien Collateral Agent, to the extent that it is legally
permitted to do so, all Collateral, including all proceeds thereof, held or
controlled by the Second Lien Collateral Agent or any of their respective agents
or bailees (to the extent applicable), including the transfer of possession and
control, as applicable, of the Pledged or Controlled Collateral, together with
any necessary endorsements and notices to depositary banks, securities
intermediaries and commodities intermediaries, and assign its rights under any
landlord waiver or bailee’s letter or any similar agreement or arrangement
granting it rights or access to Collateral, (c) notify any applicable insurance
carrier that it is no longer entitled to be a loss payee or additional insured
under the insurance policies of any Guarantor issued by such insurance carrier
and (d) notify any governmental authority involved in any condemnation or
similar proceeding involving any Credit Party that the new First Lien
Administrative Agent or Second Lien Collateral Agent, as applicable is entitled
to approve any awards granted in such proceeding; provided that any reasonable
costs or other expenses incurred in connection with clauses (a) to (d) above
shall be the exclusive responsibility of the Credit Parties.

SECTION 5.07. Purchase Right. Without prejudice to the enforcement of the First
Lien Secured Parties’ remedies, the First Lien Secured Parties agree that
(a) within five Business Days after Stone Energy or any Credit Party obtains
actual knowledge of the occurrence of a continuing Event of Default (as defined
in the First Lien Credit Agreement)

 

31

--------------------------------------------------------------------------------

under any First Lien Debt Document or (b) the commencement of an Insolvency or
Liquidation Proceeding (each, a “Purchase Event”), Stone Energy shall notify the
Second Lien Collateral Agent and the First Lien Representative of the occurrence
of such Purchase Event and the right to purchase First Lien Obligations as set
forth in this Section 5.07 (a “Notice of Purchase Event”). Within ten (10) days
of receipt of the Notice of Purchase Event by the Second Lien Collateral Agent,
one or more of the Second Lien Secured Parties may request by delivery of a
notice to the First Lien Representative, and the First Lien Secured Parties
hereby offer the Second Lien Secured Parties the option, to purchase all, but
not less than all, of the aggregate amount of outstanding First Lien Obligations
(including unfunded commitments under any First Lien Debt Document) outstanding
at the time of purchase at par, plus any premium that would be applicable upon
prepayment of the First Lien Obligations and accrued and unpaid interest and
fees (including breakage costs and, in the case of any First Lien Obligations
under any Specified Swap Contract, the amount that would be payable by the
relevant Credit Party thereunder if such Credit Party were to terminate such
Specified Swap Contract on the date of the purchase or, if not terminated an
amount determined by the relevant First Lien Secured Party to be necessary to
collateralize its credit risk arising out of such agreement and, if applicable,
the Cash Collateral to be furnished to the First Lien Secured Parties providing
Letters of Credit under the First Lien Debt Documents in such amounts (not to
exceed 103% thereof) as such First Lien Secured Party determines is reasonably
necessary to secure such First Lien Secured Party in connection with any such
outstanding and undrawn letters of credit), without warranty or representation
or recourse (except for representations and warranties required to be made by
assigning lenders pursuant to the Assignment and Acceptance (as such term is
defined in the First Lien Credit Agreement)). If such right is exercised, the
parties shall endeavor to close promptly thereafter but in any event within ten
(10) days of the request. If one or more of the Second Lien Secured Parties
exercise such purchase right, it shall be exercised pursuant to documentation
mutually acceptable to each of the First Lien Representatives and the purchasing
Second Lien Secured Parties. If none of the Second Lien Secured Parties exercise
such right, or any attempted exercise is not closed within the required ten-day
period, the First Lien Secured Parties shall have no further obligations
pursuant to this Section 5.07 for such Purchase Event and may take any further
actions in their sole discretion in accordance with the First Lien Debt
Documents and this Agreement. Each First Lien Secured Party will retain all
rights to indemnification provided in the relevant First Lien Debt Document for
all claims and other amounts relating to period prior to the purchase of the
First Lien Obligations pursuant to this Section 5.07.

SECTION 5.08. No Interference. The Second Lien Collateral Agent and each Second
Lien Representative, for itself and on behalf of each Second Lien Secured Party
under its Second Lien Debt Facility, each hereby agrees that it and each of the
other Second Lien Secured Parties:

(a)    will not support, take or cause to be taken any action to make any Second
Priority Lien pari passu with, or to give any Second Lien Secured Party any
preference or priority relative to, any First Priority Lien securing First Lien
Obligations up to the First Lien Priority Cap Amount with respect to the
Collateral or any part thereof;

(b)    will not challenge or question in any proceeding (x) the validity or
enforceability of any First Lien Obligations or First Lien Debt Document, or
(y) the validity, attachment, perfection or priority of any First Priority Lien
securing First Lien Obligations up to the First Lien Priority Cap Amount, or
(z) the validity or enforceability of the priorities, rights or duties
established by the provisions of this Agreement;

 

32

--------------------------------------------------------------------------------

(c)    will not support, take or cause to be taken any action to interfere,
hinder or delay, in any manner, whether by judicial proceedings or otherwise,
any sale, transfer or other disposition of the Collateral by prior to the
Discharge of First Lien Priority Obligation, any First Lien Secured Party or the
First Lien Administrative Agent in any enforcement action;

(d)    prior to the Discharge of First Lien Priority Obligations, shall have no
right to (i) direct the First Lien Administrative Agent or any other First Lien
Secured Party to exercise any right, remedy or power with respect to any
Collateral, (ii) consent to the exercise by the First Lien Administrative Agent
or any other First Lien Secured Party of any right, remedy or power with respect
to any Collateral or (iii) object to the forbearance by the First Lien
Administrative Agent or any other First Lien Secured Party from commencing or
pursuing any foreclosure action or proceeding or failing to act by or on behalf
of the First Lien Administrative Agent or any other First Lien Secured Party
even if such action or inaction is, or could be, adverse to the interests of the
Second Lien Secured Parties and further (it being understood that the absence of
such objection shall not be deemed to toll any Standstill Period then
continuing), will not assert and hereby waives, to the fullest extent permitted
by law, any right to demand, request, plead or otherwise assert or claim the
benefit of any marshalling, appraisal, valuation or other similar right that may
be available under applicable law with respect to the Collateral;

(e)    will not institute any suit or assert in any suit or Insolvency or
Liquidation Proceeding any claim against the First Lien Administrative Agent or
other First Lien Secured Party seeking damages from or other relief by way of
specific performance, instructions or otherwise with respect to, and neither the
First Lien Administrative Agent nor any other First Lien Secured Party shall be
liable for, any action taken or omitted to be taken by the First Lien
Administrative Agent or other First Lien Secured Party with respect to any
Collateral securing First Lien Obligations up to the First Lien Priority Cap
Amount;

(f)    will not seek, and hereby waives any right, to have any Collateral or any
part thereof marshaled upon any foreclosure or other disposition of such
Collateral; and

(g)    will not, directly or indirectly, whether by judicial proceedings or
otherwise, challenge the enforceability of any provision of this Agreement.

ARTICLE VI

Insolvency or Liquidation Proceedings.

SECTION 6.01. Use of Cash Collateral and DIP Financing.

 

  (a) Until the Discharge of First Lien Priority Obligations, if an Insolvency
or Liquidation Proceeding has commenced, the Second Lien Collateral Agent and
each Second Lien Representative, for itself and on behalf of each Second Lien
Secured Party under its Second Lien Debt Facility, each will not contest,
protest, or object to, and will be deemed to have consented to,

 

33

--------------------------------------------------------------------------------

  (1) any use, sale, or lease of “cash collateral” (as defined in section 363(a)
of the Bankruptcy Code), and

 

  (2) Stone Energy or any other Credit Party obtaining DIP Financing

if the First Lien Administrative Agent consents in writing to such use, sale, or
lease, or DIP Financing, provided that

(A)    the Second Lien Collateral Agent otherwise retains its Lien on the
Collateral, and

(B)    after taking into account the principal amount of any DIP Financing
(after giving effect to any Refinancing of First Lien Obligations) on any date,
the sum of the then outstanding principal amount of any First Lien Obligations
and any DIP Financing does not exceed the DIP Cap on such date,

(b)    Any customary “carve-out” or other similar administrative priority
expense or claim consented to in writing by the First Lien Administrative Agent
to be paid prior to the Discharge of First Lien Obligations will be deemed for
purposes of Section 6.01(a) to be a use of cash collateral.

To the extent the Liens securing any First Lien Priority Obligations are
subordinated or pari passu with such DIP Financing, the Second Lien Secured
Parties will subordinate (and will be deemed hereunder to have subordinated) its
Liens in the Collateral to (A) such DIP Financing (and all obligations relating
thereto), subject to the DIP Cap, on the same basis as the Liens securing the
Second Lien Obligations, are so subordinated to Liens securing First Lien
Priority Obligations under this Agreement, to the extent the principal amount of
such DIP Financing does not exceed the DIP Cap.

Until the Discharge of First Lien Priority Obligations, no Second Lien Secured
Party may provide DIP Financing to Stone Energy or other Credit Party secured by
Liens equal or senior in priority to the Liens securing any First Lien Priority
Obligations, provided that if no First Lien Secured Party offers to provide DIP
Financing to the extent permitted under Section 6.01(a) on or before the date of
the hearing to approve DIP Financing, or otherwise permits such DIP Financing,
then a Second Lien Secured Party may seek to provide such DIP Financing secured
by Liens junior in priority to the Liens securing any First Lien Obligations,
and First Lien Secured Parties may object thereto.

SECTION 6.02. Sale of Assets. The Second Lien Collateral Agent and each Second
Lien Representative, for itself and on behalf of each Second Lien Secured Party
under its Second Lien Debt Facility, each will not contest, protest, or object,
and will be deemed to have consented pursuant to section 363(f) of the
Bankruptcy Code, to a Disposition of Collateral free and clear of its Liens or
other interests under section 363 of the Bankruptcy Code if the First Lien
Administrative Agent consents in writing to the Disposition, provided that

 

  (a)

either (i) pursuant to court order, all First Priority Liens and Second Priority
Liens attach to the proceeds of the sale for application in accordance with the
distribution provisions of Section 4.01 (it being understood and agreed that
such proceeds may not

 

34

--------------------------------------------------------------------------------

  be sufficient to effect the Discharge of First Lien Priority Obligations or
the Discharge of Second Lien Obligations, as the case may be), or (ii) the
Proceeds of a Disposition of Collateral received by First Lien Administrative
Agent in excess of those necessary to achieve the Discharge of First Lien
Priority Obligations, are distributed in accordance with this Agreement, the UCC
and applicable law, and

 

  (b) Second Lien Secured Parties are not deemed to have waived any rights to
credit bid on the Collateral in any such Disposition in accordance with section
363(k) of the Bankruptcy Code; provided that any such credit bid must
contemplate the Discharge of First Lien Priority Obligations upon the
consummation of any resulting Disposition.

Upon the First Lien Administrative Agent’s request, the Second Lien Collateral
Agent, solely in its capacity as holder of a Lien on Collateral, will join any
objection asserted by the First Lien Administrative Agent to any Disposition of
Collateral during an Insolvency or Liquidation Proceeding.

SECTION 6.03. Relief From the Automatic Stay.

Until the Discharge of First Lien Priority Obligations, no Second Lien Secured
Party may seek relief from the automatic stay or any other stay in an Insolvency
or Liquidation Proceeding in respect of the Collateral without the First Lien
Administrative Agent’s prior written consent or oppose any request by First Lien
Administrative Agent for relief from such stay.

SECTION 6.04. Adequate Protection. (a) Until the Discharge of First Lien
Priority Obligations, no Second Lien Secured Party will contest, protest, or
object to

 

  (1) a request by a First Lien Secured Party for “adequate protection” under
any Bankruptcy Law, or

 

  (2) an objection, based on a First Lien Secured Party claiming a lack of
adequate protection, by a First Lien Secured Party to a motion, relief, action,
or proceeding.

 

  (b) Notwithstanding the preceding Section 6.04(a), until the Discharge of
First Lien Priority Obligations, in an Insolvency or Liquidation Proceeding:

 

  (1) Except as permitted in this Section 6.04, no Second Lien Secured Parties
may seek or request adequate protection or relief from the automatic stay
imposed by section 362 of the Bankruptcy Code or other relief.

 

  (2) If a First Lien Secured Party is granted adequate protection in the form
of additional or replacement Collateral in connection with a motion described in
Section 6.01, then the Second Lien Collateral Agent may seek or request adequate
protection in the form of a Lien on such additional or replacement Collateral,
which Lien will be subordinated to the Liens securing the First Lien Priority
Obligations and any DIP Financing (subject to the DIP Cap), and all related
Obligations, on the same basis as the other Liens securing the Second Lien
Obligations are subordinated to the Liens securing First Lien Priority
Obligations under this Agreement.

 

35

--------------------------------------------------------------------------------

  (3) Any claim by a Second Lien Secured Party under section 507(b) of the
Bankruptcy Code will be subordinate in right of payment to any claim of First
Lien Secured Parties in respect of First Lien Priority Obligations under section
507(b) of the Bankruptcy Code and any payment thereof will be deemed to be
Proceeds of Collateral, provided that, subject to Section 6.06(a), Second Lien
Secured Parties will be deemed to have agreed pursuant to section 1129(a)(9) of
the Bankruptcy Code that such section 507(b) claims may be paid under a plan of
reorganization in any form having a value on the effective date of such plan
equal to the allowed amount of such claims.

 

  (4) So long as First Lien Administrative Agent is receiving payment in cash of
all Post-Petition Interest, Second Lien Collateral Agent may seek and, subject
to the terms hereof, retain payments of Post-Petition Interest consisting of
interest at the non-default rate under the Second Lien Loan Documents (“Second
Lien Adequate Protection Payments”). If a Second Lien Secured Party receives
Second Lien Adequate Protection Payments before the Discharge of First Lien
Priority Obligations, then upon the effective date of any plan or the conclusion
or dismissal of any Insolvency or Liquidation Proceeding, the Second Lien
Secured Party will pay over to the First Lien Administrative Agent pursuant to
Section 4.01, an amount equal to the lesser of (i) the Second Lien Adequate
Protection Payments received by the Second Lien Secured Party and (ii) the
amount necessary to effect the Discharge of First Lien Priority Obligations.
Notwithstanding anything herein to the contrary, First Lien Secured Parties will
not be deemed to have consented to, and expressly retain their rights to object
to, the payment of Second Lien Adequate Protection Payments.

SECTION 6.05. First Lien Objections to Second Lien Actions. Until the Discharge
of First Lien Priority Obligations, subject to Section 3.01, nothing in this
Article VI limits a First Lien Secured Party from objecting in an Insolvency or
Liquidation Proceeding or otherwise to any action taken by a Second Lien Secured
Party, including the Second Lien Secured Party’s seeking adequate protection or
asserting any of its rights and remedies under the Second Lien Debt Documents or
otherwise.

SECTION 6.06. Avoidance; Reinstatement of Obligations.

 

  (a)

If a First Lien Secured Party receives payment or property on account of a First
Lien Priority Obligation, and the payment is subsequently invalidated, avoided,
declared to be fraudulent or preferential, set aside, or otherwise required to
be transferred to a trustee, receiver, or the estate of any Credit Party (a
“Recovery”), then, to the extent of the Recovery, the First Lien Priority
Obligations intended to have been satisfied by the payment will be reinstated as
First Lien Priority Obligations on the date of the Recovery, and no Discharge of
the First Lien Priority Obligations will be deemed to have occurred for all
purposes under this Agreement. If this Agreement is terminated prior to a
Recovery, this Agreement will be

 

36

--------------------------------------------------------------------------------

  reinstated in full force and effect, and such prior termination will not
diminish, release, discharge, impair, or otherwise affect the obligations of the
parties thereto from the date of reinstatement. No Second Lien Secured Party may
benefit from a Recovery, and any distribution made to a Second Lien Secured
Party as a result of a Recovery will be paid over to the First Lien
Administrative Agent for application in accordance with Section 4.01.

 

  (b) Until the Discharge of First Lien Priority Obligations, if any Second Lien
Secured Party obtains knowledge of or is notified by the First Lien
Administrative Agent that a payment or distribution made to a First Lien Secured
Party in respect of First Lien Priority Obligations is rescinded for any reason
whatsoever, such Second Lien Secured Party shall promptly pay or remit to the
First Lien Administrative Agent any payment or distribution received by it in
respect of any Collateral subject to any First Priority Liens securing such
First Lien Priority Obligations, and the provisions set forth in this Agreement
shall be reinstated as if such payment or distribution had not been made.

SECTION 6.07. Reorganization Securities. Nothing in this Agreement prohibits or
limits the right of a Second Lien Secured Party to receive and retain any debt
or equity securities that are issued by a reorganized debtor pursuant to a plan
of reorganization or similar dispositive restructuring plan in connection with
an Insolvency or Liquidation Proceeding, provided that any debt securities
received by a Second Lien Secured Party on account of a Second Lien Obligation
that constitutes a “secured claim” within the meaning of section 506(b) of the
Bankruptcy Code will be paid over or otherwise transferred to the First Lien
Administrative Agent for application in accordance with Section 4.01, unless
such distribution is made under a plan that is consented to by the affirmative
vote of all classes composed of the secured claims of First Lien Secured
Parties.

If, in an Insolvency or Liquidation Proceeding, debt Obligations of the
reorganized debtor secured by Liens upon any property of the reorganized debtor
are distributed pursuant to a plan of reorganization or similar dispositive
restructuring plan, both on account of First Lien Obligations and on account of
Second Lien Obligations, then, to the extent the debt Obligations distributed on
account of the First Lien Obligations and on account of the Second Lien
Obligations are secured by Liens upon the same property, the provisions of this
Agreement will survive the distribution of such debt Obligations pursuant to
such plan and will apply with like effect to the Liens securing such debt
Obligations.

SECTION 6.08. Other Matters. Notwithstanding the provisions of section
1129(b)(1) of the Bankruptcy Code, the Second Lien Collateral Agent, and each
Second Lien Representative, for itself and on behalf of each Second Lien Secured
Party under its Second Lien Debt Facility, each agree that they will not
directly or indirectly propose, sponsor, support, agree to or vote in favor of
any plan of reorganization or liquidation of Stone Energy that (i) is pursuant
to section 1129(b) of the Bankruptcy Code with respect to the treatment of all
or any portion of the First Lien Obligations or the First Lien Secured Parties;
(ii) is inconsistent with this Agreement; or (iii) without the consent of the
First Lien Administrative Agent, does not provide for the Discharge of First
Lien Obligations on the effective date of such plan.

 

37

--------------------------------------------------------------------------------

SECTION 6.09. Post-Petition Interest.

 

  (a) No Second Lien Secured Party may oppose or seek to challenge any claim by
a First Lien Secured Party for allowance or payment in any Insolvency or
Liquidation Proceeding of First Lien Obligations consisting of Post-Petition
Interest.

 

  (b) No First Lien Secured Party may oppose or seek to challenge in an
Insolvency or Liquidation Proceeding a claim by a Second Lien Secured Party for
allowance of or, to the extent permitted under Section 6.04(b)(4), payment of,
Second Lien Obligations consisting of Post-Petition Interest.

SECTION 6.10. Waivers.

The Second Lien Collateral Agent waives:

(a)    any claim it may hereafter have against any First Lien Secured Party
arising out of any cash collateral or financing arrangement or out of any grant
of a security interest in connection with the Collateral in an Insolvency or
Liquidation Proceeding, so long as such actions are not in express contravention
of the terms of this Agreement;

(b)    any right to assert or enforce any claim under section 506(c) or 552 of
the Bankruptcy Code as against First Lien Secured Parties or any of the
Collateral to the extent securing the First Lien Priority Obligations; and

(c)    solely in its capacity as a holder of a Lien on Collateral, any claim or
cause of action that any Credit Party may have against any First Lien Secured
Party, except to the extent arising from a breach by such First Lien Secured
Party of the provisions of this Agreement.

SECTION 6.11. Separate Grants of Security and Separate Classification. The
grants of Liens pursuant to the First Lien Collateral Documents and the Second
Lien Collateral Documents constitute two separate and distinct grants. Because
of, among other things, their differing rights in the Collateral, the Second
Lien Obligations, to the extent deemed to be “secured claims” within the meaning
of section 506(b) of the Bankruptcy Code, are fundamentally different from the
First Lien Obligations and must be separately classified in any plan of
reorganization in an Insolvency or Liquidation Proceeding. Second Lien Secured
Parties will not seek in an Insolvency or Liquidation Proceeding to be treated
as part of the same class of creditors as First Lien Secured Parties and will
not oppose or contest any pleading by First Lien Secured Parties seeking
separate classification of their respective secured claims.

 

38

--------------------------------------------------------------------------------

SECTION 6.12. Effectiveness In Insolvency or Liquidation Proceeding. The parties
hereto acknowledge that this Agreement is a “subordination agreement” under
section 510(a) of the Bankruptcy Code, which will be effective before, during,
and after the commencement of an Insolvency or Liquidation Proceeding. All
references in this Agreement to any Credit Party will include such Person as a
debtor-in-possession and any receiver or trustee for such Person in an
Insolvency or Liquidation Proceeding.

ARTICLE VII

Reliance; Etc.

SECTION 7.01. Reliance. All loans and other extensions of credit made or deemed
made on and after the date hereof by the First Lien Secured Parties to any
Credit Party shall be deemed to have been given and made in reliance upon this
Agreement.

SECTION 7.02. No Warranties or Liability. The Second Lien Collateral Agent and
each Second Lien Representative, on behalf of itself and each Second Lien
Secured Party under its Second Lien Debt Facility, each acknowledge that neither
the First Lien Administrative Agent nor any other First Lien Secured Party has
made any express or implied representation or warranty, including with respect
to the execution, validity, legality, completeness, collectability or
enforceability of any of the First Lien Debt Documents, the ownership of any
Collateral or the perfection or priority of any Liens thereon. The First Lien
Secured Parties will be entitled to manage and supervise their respective loans
and extensions of credit under the First Lien Debt Documents in accordance with
law and as they may otherwise, in their sole discretion, deem appropriate, and
the First Lien Secured Parties may manage their loans and extensions of credit
without regard to any rights or interests that the Second Lien Collateral Agent
or any other Second Lien Secured Party has in the Collateral or otherwise,
except as otherwise provided in this Agreement. Neither the First Lien
Administrative Agent nor any other First Lien Secured Party shall have any
express or implied duty to the Second Lien Collateral Agent or any other Second
Lien Secured Party to act or refrain from acting in a manner that allows, or
results in, the occurrence or continuance of an event of default or default
under any agreement with any Credit Party or Subsidiary (including the Second
Lien Debt Documents), regardless of any knowledge thereof that they may have or
be charged with. Except as expressly set forth in this Agreement, none of the
Secured Parties have otherwise made to each other, nor do they hereby make to
each other, any warranties, express or implied, nor do they assume any liability
to each other with respect to (a) the enforceability, validity, value or
collectability of any of the Secured Obligations, any Guarantee or security
which may have been granted to any of them in connection therewith, (b) the
Credit Parties’ title to or right to transfer any of the Collateral or (c) any
other matter except as expressly set forth in this Agreement.

SECTION 7.03. Obligations Unconditional. All rights, interests, agreements and
obligations of the Secured Parties hereunder shall remain in full force and
effect irrespective of:

(a)    any lack of validity or enforceability of any Secured Debt Document;

(b)    any change in the time, manner or place of payment of, or in any other
terms of, all or any of the Secured Obligations or any amendment or waiver or
other

 

39

--------------------------------------------------------------------------------

modification, including any increase in the amount thereof, whether by course of
conduct or otherwise, of the terms of any Secured Debt Document made in
accordance with Section 5.03 and Section 8.10;

(c)    any exchange of any security interest in any Collateral or any other
collateral or any amendment, waiver or other modification, whether in writing or
by course of conduct or otherwise, of all or any of the Secured Obligations or
any Guarantee in respect thereof;

(d)    the commencement of any Insolvency or Liquidation Proceeding in respect
of any Credit Party; or

(e)    any other circumstances that otherwise might constitute a defense
available to (i) any Credit Party in respect of the Secured Obligations (other
than the Discharge of First Lien Obligations or the Discharge of Second Lien
Obligations subject to Section 5.06 and Section 6.04) or (ii) any Second Lien
Secured Party in respect of its obligations under this Agreement.

SECTION 7.04. No Waiver of Lien Priorities.

(a)    No right of any of the Secured Parties (including any Collateral Agent)
to enforce any provision of this Agreement or any other Secured Debt Document
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of any Credit Party or by any act or failure to act by any
Secured Party, or by any noncompliance by any Person with the terms, provisions
and covenants of this Agreement or any of the other Secured Debt Documents,
regardless of any knowledge thereof which any Secured Party may have or be
otherwise charged with.

(b)    Without in any way limiting the generality of the foregoing paragraph
(but subject to the rights of the Credit Parties under the First Lien Debt
Documents and subject to the provisions of Section 3.01(f) and Section 5.03(a)),
the First Lien Secured Parties, the First Lien Administrative Agent, and any of
them may, at any time and from time to time in accordance with the First Lien
Debt Documents and/or applicable law, without the consent of, or notice to, any
Second Lien Secured Party, without incurring any liabilities to any Second Lien
Secured Party (except to the extent arising from a breach by such First Lien
Secured Party of the provisions of this Agreement) and without impairing or
releasing the Lien priorities and other benefits provided in this Agreement
(even if any right of subrogation or other right or remedy of any Second Lien
Secured Party is affected, impaired or extinguished thereby) do any one or more
of the following:

(i)    subject to compliance with Section 5.03 and Section 8.03, change the
manner, place or terms of payment or change or extend the time of payment of, or
amend, renew, exchange, increase or alter, the terms of any of the First Lien
Obligations or any Lien on any Collateral or guaranty of any of the First Lien
Obligations or any liability of any Credit Party, or any liability incurred
directly or indirectly in respect thereof (including any increase in or
extension of the First Lien Obligations, without any restriction as to the tenor
or terms of any such increase or extension) or otherwise amend,

 

40

--------------------------------------------------------------------------------

renew, exchange, extend, modify or supplement in any manner any Liens held by
the First Lien Administrative Agent, or any of the other First Lien Secured
Parties, the First Lien Obligations or any of the First Lien Debt Documents;

(ii)    sell, exchange, release, surrender, realize upon, enforce or otherwise
deal with in any manner and in any order any part of the Collateral or any
liability of any Credit Party to any of the First Lien Secured Parties, or any
liability incurred directly or indirectly in respect thereof;

(iii)    settle or compromise any First Lien Priority Obligation or any other
liability of any Credit Party or any security therefor or any liability incurred
directly or indirectly in respect thereof and apply any sums by whomsoever paid
and however realized to any liability (including the First Lien Priority
Obligations) in any manner or order; and

(iv)    exercise or delay in or refrain from exercising any right or remedy
against any Credit Party or any other Person or any security, and elect any
remedy and otherwise deal freely with any Credit Party or any Collateral and any
security and any Guarantor or any liability of any Credit Party to the First
Lien Secured Parties or any liability incurred directly or indirectly in respect
thereof.

(c)    Except (x) to the extent arising from a breach by any First Lien Secured
Party of the provisions of this Agreement or (y) as otherwise expressly provided
herein, the Second Lien Collateral Agent and each Second Lien Representative, on
behalf of itself and the Second Lien Secured Parties represented by it, each
also agrees that the First Lien Secured Parties shall have no liability to such
Person, or any of the Second Lien Secured Parties.

(d)    Except to the extent arising from a breach by such First Lien Secured
Party of the provisions of this Agreement, the Second Lien Collateral Agent and
each Second Lien Representative, on behalf of itself and the Second Lien Secured
Parties represented by it, each hereby waives any claim against any First Lien
Secured Party arising out of any and all actions which the First Lien Secured
Parties may take or permit or omit to take with respect to:

(i)    the First Lien Debt Documents (other than this Agreement);

(ii)    the collection of the First Lien Obligations; or

(iii)    the foreclosure upon, or sale, liquidation or other disposition of, any
Collateral.

(e)    Except as expressly otherwise provided herein, the Second Lien Collateral
Agent and each Second Lien Representative, on behalf of itself and the Second
Lien Secured Parties represented by it, each agrees that the First Lien Secured
Parties have no duty to them in respect of the maintenance or preservation of
the Collateral, the First Lien Obligations or otherwise.

 

41

--------------------------------------------------------------------------------

SECTION 7.05. Other Permitted Actions. Notwithstanding anything to the contrary
herein, a Second Lien Secured Party may:

(a)    vote on any plan of reorganization subject to Section 6.08, make other
filings and make any arguments and motions that, in each case, do not contravene
this Agreement;

(b)    join (but not control) any foreclosure or other judicial lien enforcement
proceeding with respect to the Collateral initiated by the First Lien
Administrative Agent;

(c)    subject to Section 5.06, receive any Collateral or proceeds of Collateral
on account of its Second Lien Obligations after the Discharge of the First Lien
Priority Obligations has occurred; and

(d)    accelerate the maturity of, or demand as immediately due and payable, all
or any part of the Second Lien Obligations.

ARTICLE VIII

Miscellaneous

SECTION 8.01. Conflicts.

(a)    In the event of any conflict between the provisions of this Agreement and
the provisions of any other Secured Debt Document, the provisions of this
Agreement shall govern. Notwithstanding the foregoing, the relative rights and
obligations of the First Lien Administrative Agent, the First Lien
Representatives and the First Lien Secured Parties (as amongst themselves) with
respect to any First Lien Collateral shall be governed by terms of any
intercreditor agreement agreed to among the First Lien Secured Parties and in
the event of any conflict between such intercreditor agreement and this
Agreement as to such relative rights and obligations, the provisions of such
intercreditor agreement shall control.

(b)    The parties hereto acknowledge that the secured creditor relationship
between different classes of Second Lien Obligations may be governed separately
from this Agreement, including by a second lien intercreditor agreement.
Notwithstanding the foregoing, the parties hereto acknowledge and agree that
this Agreement shall govern the secured creditor relationship between the First
Lien Obligations and the Second Lien Obligations, and that in the event of any
conflict between the terms of this Agreement and that of an intercreditor
agreement governing the rights among different classes of Second Lien Debt
Facilities, this Agreement shall control.

SECTION 8.02. Continuing Nature of this Agreement; Severability. This is a
continuing agreement of Lien subordination, and the First Lien Secured Parties
may continue, at any time and without notice to the Second Lien Collateral Agent
or any other Second Lien Secured Party, to extend credit and other financial
accommodations and lend monies to or for the benefit of any Credit Party
constituting First Lien Obligations in reliance hereon. The terms of this
Agreement shall survive and continue in full force and effect in any Insolvency
or Liquidation Proceeding. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
hereof, and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.
The parties shall endeavor in good-faith negotiations to replace the

 

42

--------------------------------------------------------------------------------

invalid, illegal or unenforceable provisions with valid provisions the economic
effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions. The terms of this Agreement shall govern even if part
or all of the Secured Obligations or the Liens securing payment and performance
thereof are not perfected or are avoided, disallowed, set aside or otherwise
invalidated in any judicial proceeding or otherwise. All references to any
Credit Party shall include such Credit Party as debtor and debtor in possession
and any receiver, trustee or similar person for any Credit Parties (as the case
may be) in any Insolvency or Liquidation Proceeding. This Agreement shall
terminate and be of no further force and effect:

(a)    with respect to any First Lien Representative, the First Lien Secured
Parties represented by it and their First Lien Obligations, on the date on which
no First Lien Obligations of such First Lien Secured Parties are any longer
secured by, and no longer required to be secured by, any of Collateral pursuant
to the terms of the applicable First Lien Debt Documents, subject to the rights
of the First Lien Secured Parties under Section 6.06; and

(b)    with respect to any Second Lien Representative, the Second Lien Secured
Parties represented by it and their Second Lien Obligations, on the date on
which no Second Lien Obligations of such Second Lien Secured Parties are any
longer secured by, and no longer required to be secured by, any of the
Collateral pursuant to the terms of the applicable Second Lien Debt Documents.

SECTION 8.03. Amendments; Waivers.

(a)    No failure or delay on the part of any party hereto in exercising any
right or power hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the parties hereto are cumulative and are not exclusive of any
rights or remedies that they would otherwise have. No waiver of any provision of
this Agreement or consent to any departure by any party therefrom shall in any
event be effective unless the same shall be permitted by paragraph (b) of this
Section 8.03, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice or demand on
any party hereto in any case shall entitle such party to any other or further
notice or demand in similar or other circumstances. This Agreement constitutes
the entire agreement between the parties hereto (or bound hereby) and supersedes
all prior agreements, oral or written, relating to its subject matter.

(b)    This Agreement may be amended in writing signed by each Collateral Agent
party to this Agreement at the time of such amendment, each Representative that
is a party to this Agreement at the time of such amendment (in each case, acting
in accordance with the documents governing the applicable Debt Facility) and
each other Secured Party that is a direct party hereto at the time of such
amendment; provided that any such amendment, supplement or waiver which by the
terms of this Agreement requires Stone Energy’s consent or which materially
increases the obligations or materially reduces the rights of, or otherwise
materially adversely affects, any Credit Party (which for avoidance of doubt
includes Sections 5.01, 5.03, 5.05, 6.01, 8.03, 8.07 and 8.10 hereof but
excludes any other provision of Article VIII), shall require the consent of
Stone Energy. Any such amendment, supplement or waiver shall be in writing and
shall be binding upon all of the Secured Parties and their respective successors
and assigns.

 

43

--------------------------------------------------------------------------------

(c)    Notwithstanding the foregoing, without the consent of any Secured Party
(and with respect to any amendment or modification which by the terms of this
Agreement requires Stone Energy’s consent or which increases the obligations or
reduces the rights of any Credit Party, with the consent of Stone Energy), any
Collateral Agent or Representative may become a party hereto by execution and
delivery of a Joinder Agreement in accordance with Section 8.10 of this
Agreement and upon such execution and delivery, such Collateral Agent or
Representative and the Secured Parties and Secured Obligations of the Debt
Facility for which such Representative is acting shall be subject to the terms
hereof.

(d)    Notwithstanding anything in this Agreement to the contrary, it is
understood and agreed that the Collateral Agents and the Representatives then
party to this Agreement, without the consent of any other First Lien Secured
Party or any other Second Lien Secured Party, may enter into a supplemental
agreement (which may take the form of an amendment and restatement of this
Agreement) to give effect to any amendments in connection with a Refinancing of
any of the Secured Obligations or to effectuate the subordination of Liens as
required by this Agreement; provided, that any such supplemental agreement is
not prohibited by any of the Secured Debt Documents then in effect in accordance
with the terms thereof and a certificate of a Responsible Officer delivered to
the Collateral Agents and applicable Representatives certifying such compliance
shall be conclusive and the Collateral Agents and such Representatives may rely
thereon without further inquiry and shall be fully protected in doing so; and
provided, further, that the Representatives shall execute and deliver such
supplemental agreement at the other’s request and such supplemental agreement
may contain additional intercreditor terms applicable solely to the holders of
such Replacement First Lien Debt or Replacement Second Lien Debt vis-à-vis the
holders of the relevant obligations hereunder.

SECTION 8.04. Information Concerning Financial Condition of Stone Energy and the
Subsidiaries. None of the Collateral Agents, Representatives or other Secured
Parties shall have any duty to inform the other parties of (a) the financial
condition of Stone Energy and the Subsidiaries and all endorsers or guarantors
of the Secured Obligations and (b) all other circumstances bearing upon the risk
of nonpayment of the Secured Obligations. No Secured Parties shall have any duty
to advise any other party hereunder of information known to it or them regarding
such condition or any such circumstances or otherwise. In the event that any
Secured Party, in its sole discretion, undertakes at any time or from time to
time to provide any such information to any other party, it shall be under no
obligation to (i) make, and no Secured Party shall be deemed to have made, any
express or implied representation or warranty, including with respect to the
accuracy, completeness, truthfulness or validity of any such information so
provided, (ii) provide any additional information or to provide any such
information on any subsequent occasion, (iii) undertake any investigation or
(iv) disclose any information that, pursuant to accepted or reasonable
commercial finance practices, such party wishes to maintain confidential or is
otherwise required to maintain confidential.

SECTION 8.05. Subrogation. Each Second Lien Representative, on behalf of itself
and each Second Lien Secured Party under its Second Lien Debt Facility, hereby
waives any rights of subrogation it may acquire as a result of any payment
hereunder until the Discharge of First Lien Priority Obligations has occurred.

 

44

--------------------------------------------------------------------------------

SECTION 8.06. Application of Payments. Except as otherwise provided herein, all
payments received by the First Lien Secured Parties may be applied, reversed and
reapplied, in whole or in part, to such part of the First Lien Priority
Obligations as the First Lien Secured Parties, in their sole discretion, deem
appropriate, consistent with the terms of the First Lien Debt Documents.

SECTION 8.07. Additional Guarantors. Stone Energy agrees that, if any Subsidiary
or direct or indirect parent of Stone Energy shall, in accordance with any of
the Secured Debt Documents, become a First Lien Guarantor or Second Lien
Guarantor after the date hereof, it will promptly cause such Subsidiary or
parent to become party hereto by executing and delivering an instrument in the
form of Annex I. Upon such execution and delivery, such Subsidiary or parent
will become a First Lien Guarantor and Second Lien Guarantor hereunder with the
same force and effect as if originally named as a First Lien Guarantor and
Second Lien Guarantor herein. The execution and delivery of such instrument
shall not require the consent of any other party hereunder, and will be
acknowledged by each of the Collateral Agents. The rights and obligations of
each Guarantor hereunder shall remain in full force and effect notwithstanding
the addition of any new Guarantor as a party to this Agreement.

SECTION 8.08. Dealings with Guarantors. Upon any application or demand by any
Credit Party to any Collateral Agent or Representative to take or permit any
action under any of the provisions of this Agreement or under any Collateral
Document (if such action is subject to the provisions hereof), at the request of
such Collateral Agent or Representative, such Credit Party, as appropriate,
shall furnish to such Representative a certificate of a Responsible Officer (an
“Officer’s Certificate”) stating that all conditions precedent, if any, provided
for in this Agreement or such Collateral Document, as the case may be, relating
to the proposed action have been complied with, except that in the case of any
such application or demand as to which the furnishing of such documents is
specifically required by any provision of this Agreement or any Collateral
Document relating to such particular application or demand, no additional
certificate or opinion need be furnished.

SECTION 8.09. Interpretation. Any determinations as to whether the Discharge of
First Lien Obligations or the Discharge of Second Lien Obligation has occurred
shall be made without taking into account any limitations on any such
obligations imposed by the Bankruptcy Court or other applicable Bankruptcy Law.

SECTION 8.10. Refinancings, Etc.

(a)    Subject to Section 5.03 and the execution of Joinders by any replacement
First Lien Administrative Agent, First Lien Representative, Second Lien
Collateral Agent or Second Lien Representative, the Secured Obligations may be
Refinanced without affecting the Lien priorities provided for herein or the
other provisions hereof (it is understood that the foregoing shall in no way be
interpreted to limit the ability of any Credit Party to undertake any
refinancing or replacement transaction otherwise permitted by the Secured Debt
Documents; provided that (i) except as otherwise consented to by the First Lien
Secured Parties in accordance

 

45

--------------------------------------------------------------------------------

with the First Lien Credit Agreement, the First Lien Credit Agreement may only
be Refinanced in full and (ii) on or before the date of such incurrence, the
Debt incurred to effect such Refinancing shall be designated as a “First Lien
Debt Facility” or “Second Lien Debt Facility”, as applicable and (iii) the
amount of the Second Lien Obligations shall not exceed the Second Lien Cap. Upon
the consummation of such Refinancing and satisfaction of the requirements set
forth in this Section 8.10, the holders, lenders and agents of such Replacement
First Lien Debt or Replacement Second Lien Debt shall be entitled to the
benefits, rights and obligations of this Agreement as (x) in the case of any
Replacement First Lien Debt, as First Lien Secured Parties and (y) in the case
of any Replacement Second Lien Debt, as Second Lien Secured Parties.

(b)    Stone Energy and the Guarantors may enter into Specified Swap Contracts
and Specified Cash Management Agreements without notice to or the consent
(except to the extent a consent is otherwise required under any Secured Debt
Document) of any Collateral Agent, Representative or any other Secured Party,
all without affecting the Lien priorities provided for herein or the other
provisions hereof.

SECTION 8.11. [Reserved]

SECTION 8.12. [Reserved]

SECTION 8.13. Notices; Effectiveness; Electronic Communications.

(a)    Notices Generally. Except in the case of notices and other communications
expressly permitted to be given by telephone (and except as provided in
subsection (b) below), all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopier as follows, and all
notices and other communications expressly permitted hereunder to be given by
telephone shall be made to the applicable telephone number, if to any Credit
Party or any Secured Party, to the address, telecopier number, electronic mail
address or telephone number specified for such Person on Schedule 8.13. Notices
sent by hand or overnight courier service, or mailed by certified or registered
mail, shall be deemed to have been given when received; notices sent by
telecopier shall be deemed to have been given when sent (except that, if not
given during normal business hours for the recipient, shall be deemed to have
been given at the opening of business on the next business day for the
recipient). Notices delivered through electronic communications to the extent
provided in subsection (b) below shall be effective as provided in such
subsection (b).

(b)    Electronic Communications. (i) Notices and other communications sent to
any Secured Party to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other communication is
not sent during the normal business hours of the recipient, such notice or
communication shall be deemed to have been sent at the opening of business on
the next business day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.

 

46

--------------------------------------------------------------------------------

(c)    Reliance. The Secured Parties shall be entitled to rely and act upon any
notices purportedly given by or on behalf of any Credit Party even if (i) such
notices were not made in a manner specified herein, were incomplete or were not
preceded or followed by any other form of notice specified herein, or (ii) the
terms thereof, as understood by the recipient, varied from any confirmation
thereof. All telephonic notices to and other telephonic communications with any
Secured Party may be recorded by such Secured Party, and each of the parties
hereto hereby consents to such recording.

SECTION 8.14. Transfers. The Second Lien Collateral Agent and each Second Lien
Representative, on behalf of itself and each Second Lien Secured Party under its
Second Lien Debt Facility, each agrees that the Second Lien Debt Documents will
not permit the assignment, transfer, pledge or grant of a security interest in
all or any part of the Second Lien Obligations unless (a) such assignment,
transfer, pledge or grant is made subject to the terms of this Agreement and
(b) the applicable assignee, transferee, pledgee or grantee is bound by this
Agreement. The First Lien Administrative Agent, on behalf of itself and each
First Lien Secured Party, each agrees that the First Lien Debt Documents will
not permit the assignment, transfer, pledge or grant of a security interest in
all or any part of the First Lien Obligations unless (a) such assignment,
transfer, pledge or grant is made subject to the terms of this Agreement and
(b) the applicable assignee, transferee, pledgee or grantee is bound by this
Agreement.

SECTION 8.15. Further Assurances. The First Lien Administrative Agent, each
First Lien Representative, on behalf of itself and each First Lien Secured Party
under the First Lien Debt Facility for which it is acting, the Second Lien
Collateral Agent and each Second Lien Representative, on behalf of itself, and
each Second Lien Secured Party under its Second Lien Debt Facility, each agrees
that it will, at Stone Energy’s sole cost and expense, take such further action
and shall execute and deliver such additional documents and instruments (in
recordable form, if requested) as the other parties hereto may reasonably
request to effectuate the terms of, and the Lien priorities contemplated by,
this Agreement.

SECTION 8.16. GOVERNING LAW; JURISDICTION; ETC.

(a)    GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

(b)    SUBMISSION TO JURISDICTION. EACH PARTY HERETO IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
AND OF THE UNITED STATES DISTRICT COURT OF THE SOUTHERN DISTRICT OF NEW YORK,
AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER SECURED DEBT DOCUMENT, OR FOR
RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH
ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT
OR, TO THE FULLEST

 

47

--------------------------------------------------------------------------------

EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES
HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT OR IN ANY OTHER
SECURED DEBT DOCUMENT SHALL AFFECT ANY RIGHT TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT OR ANY OTHER SECURED DEBT DOCUMENT AGAINST STONE
ENERGY OR ANY OTHER CREDIT PARTY OR ITS PROPERTIES IN THE COURTS OF ANY
JURISDICTION.

(c)    WAIVER OF VENUE. EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER SECURED DEBT DOCUMENT
IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION 8.16. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT.

(d)    SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF
PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 8.13. NOTHING IN THIS
AGREEMENT WILL AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY APPLICABLE LAW.

SECTION 8.17. Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER SECURED DEBT DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR
ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT
OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.17.

SECTION 8.18. Binding on Successors and Assigns. This Agreement shall be binding
upon each of the Secured Parties, each of the Credit Parties hereto and their
respective successors and assigns.

 

48

--------------------------------------------------------------------------------

SECTION 8.19. Section Titles. The section titles contained in this Agreement are
and shall be without substantive meaning or content of any kind whatsoever and
are not a part of this Agreement.

SECTION 8.20. Counterparts. This Agreement may be executed in one or more
counterparts, including by means of facsimile or other electronic method, each
of which shall be an original and all of which shall together constitute one and
the same document. Delivery of an executed signature page to this Agreement by
facsimile or other electronic transmission shall be as effective as delivery of
a manually signed counterpart of this Agreement.

SECTION 8.21. Authorization; Specific Performance.

(a)     By its signature, each Person executing this Agreement on behalf of a
party hereto represents and warrants to the other parties hereto that it is duly
authorized to execute this Agreement. The First Lien Secured Parties have
appointed the First Lien Administrative Agent as collateral agent pursuant to
the First Lien Credit Agreement on behalf of the First Lien Secured Parties and
the First Lien Administrative Agent represents and warrants that it has duly
accepted such appointment. Each of the Second Lien Representatives has appointed
the Second Lien Collateral Agent as collateral agent pursuant to the terms of
the Second Lien Debt Documents on behalf of the Second Lien Secured Parties and
the Second Lien Collateral Agent represents and warrants that it has duly
accepted such appointment.

(b)    Each Secured Party may demand specific performance of this Agreement. The
First Lien Administrative Agent, the Second Lien Collateral Agent and each
Representative, on behalf of itself and the Secured Parties under its Debt
Facility, hereby irrevocably waives any defense based on the adequacy of a
remedy at law and any other defense that might be asserted to bar the remedy of
specific performance in any action that may be brought by any Secured Party
against any other Secured Party in respect of this Agreement.

SECTION 8.22. No Third Party Beneficiaries; Successors and Assigns. The lien
priorities set forth in this Agreement and the rights and benefits hereunder in
respect of such lien priorities shall inure solely to the benefit of the First
Lien Administrative Agent, First Lien Representatives, the other First Lien
Secured Parties, the Second Lien Collateral Agent, the Second Lien
Representatives, the other Second Lien Secured Parties, and their respective
permitted successors and assigns, and no other Person (including the Credit
Parties, or any trustee, receiver, debtor in possession or bankruptcy estate in
a bankruptcy or like proceeding) shall have or be entitled to assert such
rights. Nothing in this Agreement is intended to or shall impair the obligations
of any Credit Party, which are absolute and unconditional, to pay the Secured
Obligations as and when the same shall become due and payable in accordance with
their terms. Except for Sections 5.01, 5.03, 5.05, 6.01 and Article VIII hereof,
neither Stone Energy nor any other Credit Party shall have any rights hereunder.

SECTION 8.23. Effectiveness. This Agreement shall become effective as of the
date hereof when (i) executed and delivered by the parties hereto and (ii) the
Bankruptcy Court (as defined in the First Lien Credit Agreement) shall have
entered the final Confirmation Order (as defined in the First Lien Credit
Agreement) and all conditions to the Effective Date (as defined in the Plan of
Reorganization (as defined in the First Lien Credit Agreement)) shall have

 

49

--------------------------------------------------------------------------------

been satisfied or waived. Upon the occurrence of the foregoing, each of the
Secured Parties shall recognize the existence and permissibility of the other
Secured Parties and their respective Debt, Liens and/or Obligations pursuant to
the terms of this Agreement.

SECTION 8.24. Collateral Agent and Representative. It is understood and agreed
that (a) the First Lien Administrative Agent is entering into this Agreement in
its capacity as administrative agent, as applicable, under the First Lien Credit
Agreement and the provisions of Article VIII of the First Lien Credit Agreement
applicable to the Administrative Agent (as defined therein) thereunder shall
also apply to the First Lien Administrative Agent hereunder and (b) the Second
Lien Collateral Agent is entering into this Agreement in its capacity as
collateral agent under the Second Lien Indenture Documents and the provisions of
Article 7 and Article 13 of the Second Lien Note Indenture applicable to the
Collateral Agent (as defined therein) thereunder shall also apply to the Second
Lien Collateral Agent hereunder.

SECTION 8.25. Survival of Agreement. All covenants, agreements, representations
and warranties made by any party in this Agreement shall be considered to have
been relied upon by the other parties hereto and shall survive the execution and
delivery of this Agreement.

SECTION 8.26. Certain Notices. Stone Energy agrees to give the Second Lien
Collateral Agent reasonable notice of the occurrence of the Discharge of First
Lien Obligations or the Discharge of First Lien Priority Obligations.

SECTION 8.27. Indirect Action. Unless otherwise expressly stated, if a party may
not take an action under this Agreement, then it may not take that action
indirectly, or take any action assisting or supporting any other Person in
taking that action directly or indirectly. “Taking an action indirectly” means
taking an action that is not expressly prohibited for the party but is intended
to have substantially the same effect as the prohibited action.

 

50

--------------------------------------------------------------------------------

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

 

STONE ENERGY CORPORATION By:  

/s/ David H. Welch

Name:  

David H. Welch

Title:  

Chief Executive Officer and President

 

[Signature Page to Intercreditor Agreement]

--------------------------------------------------------------------------------

GUARANTOR: STONE ENERGY OFFSHORE, L.L.C. By:  

/s/ David H. Welch

Name:  

David H. Welch

Title:  

Chief Executive Officer and President

 

[Signature Page to Intercreditor Agreement]

--------------------------------------------------------------------------------

FIRST LIEN ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A. By:  

/s/ Mark Hedrick

Name:  

Mark Hedrick

Title:  

Managing Director

 

[Signature Page to Intercreditor Agreement]

--------------------------------------------------------------------------------

SECOND LIEN COLLATERAL AGENT: THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.,
AS COLLATERAL AGENT By:  

/s/ R. Tarnas

Name:  

R. Tarnas

Title:  

Vice President

 

[Signature Page to Intercreditor Agreement]

--------------------------------------------------------------------------------

SECOND LIEN NOTES TRUSTEE: THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., AS
TRUSTEE By:  

/s/ R. Tarnas

Name:  

R. Tarnas

Title:  

Vice President

 

[Signature Page to Intercreditor Agreement]

--------------------------------------------------------------------------------

ANNEX I

GUARANTOR JOINDER AGREEMENT

Reference is made to that certain Intercreditor Agreement, dated as of
February 28, 2017 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the “Intercreditor Agreement”), among BANK OF
AMERICA, N.A., as First Lien Administrative Agent for the First Lien Credit
Agreement Secured Parties (in such capacity and together with its successors in
such capacity, the “First Lien Administrative Agent”); THE BANK OF NEW YORK
MELLON TRUST COMPANY, N.A., in its capacity as Second Lien Collateral Agent for
the Second Lien Secured Parties (in such capacity and together with its
successors in such capacity, the “Second Lien Collateral Agent”); THE BANK OF
NEW YORK MELLON TRUST COMPANY, N.A., in its capacity as the Second Lien Notes
Trustee (in such capacity and together with its successors in such capacity, the
“Second Lien Notes Trustee”); STONE ENERGY CORPORATION, a Delaware corporation
(the “Company”), each of the GUARANTORS from time to time party thereto and each
additional Representative from time to time party thereto. Capitalized terms
used herein and not defined herein have the meaning ascribed thereto in the
Intercreditor Agreement.

Pursuant to the terms of Section 8.07 of the Intercreditor Agreement,
[                    ], a [    ] [    ] (the “Additional Obligor”), hereby
agrees to be bound by the Intercreditor Agreement as a Guarantor thereunder. The
Additional Obligor represents and warrants to each Secured Party that this
Joinder Agreement has been duly authorized, executed and delivered by the
Additional Obligor and constitutes the legal, valid and binding obligation,
enforceable against it in accordance with its terms.

THIS JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.

Dated: [            ], 20[    ]

 

[                    ] By:  

 

Name:   [                     ] Title:   [                    ]

 

Signature Page to Guarantor Joinder Agreement

--------------------------------------------------------------------------------

ANNEX II

JOINDER AGREEMENT

Reference is made to that certain Intercreditor Agreement, dated as of
February 28, 2017 (as amended, amended and restated, supplemented or otherwise
modified from time to time, the “Intercreditor Agreement”), among BANK OF
AMERICA, N.A., as First Lien Administrative Agent for the First Lien Credit
Agreement Secured Parties (in such capacity and together with its successors in
such capacity, the “First Lien Administrative Agent”); THE BANK OF NEW YORK
MELLON TRUST COMPANY, N.A., in its capacity as Second Lien Collateral Agent for
the Second Lien Secured Parties (in such capacity and together with its
successors in such capacity, the “Second Lien Collateral Agent”); THE BANK OF
NEW YORK MELLON TRUST COMPANY, N.A., in its capacity as the Second Lien Notes
Trustee (in such capacity and together with its successors in such capacity, the
“Second Lien Notes Trustee”); STONE ENERGY CORPORATION, a Delaware corporation
(the “Company”), each of the GUARANTORS from time to time party thereto and each
additional Representative from time to time party thereto. Capitalized terms
used herein and not defined herein have the meaning ascribed thereto in the
Intercreditor Agreement.

Pursuant to the terms of [Section [5.03][8.10] of] the Intercreditor Agreement,
[                    ], a [    ] [    ] (the “Replacement [Agent]
[Representative]”), hereby agrees to be bound by the Intercreditor Agreement as
a [First Lien Administrative Agent] [First Lien Representative] [Second Lien
Collateral Agent] [Second Lien Representative] thereunder. The Replacement
[Agent] [Representative] represents and warrants to each other Secured Party,
the Company and the Guarantors that this Joinder Agreement has been duly
authorized, executed and delivered by the Replacement [Agent] [Representative]
and constitutes the legal, valid and binding obligation, enforceable against it
in accordance with its terms.

THIS JOINDER AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.

Dated: [            ], 20[    ]

 

[                    ] By:  

 

Name:   [                    ] Title:   [                    ]

 

Signature Page to Joinder Agreement