ENERGY XXI GULF COAST, INC.

 
Senior Notes due 2013

 
REGULATION D PURCHASE AGREEMENT

 
REGULATION D PURCHASE AGREEMENT (the “Agreement”) by and among Energy XXI Gulf
Coast, Inc., a Delaware corporation (the “Company”), Energy XXI (Bermuda)
Limited, a Bermuda company and the ultimate parent of the Company (“Parent”),
the other guarantors under the indenture referred to below (the “Subsidiary
Guarantors,” and together with Parent, the “Guarantors”) and the Regulation D
Purchasers listed on the signature page hereto (the “Regulation D Purchasers”).
 
WHEREAS:
 
A. The Company proposes to issue and sell $750,000,000 in aggregate principal
amount of its Senior Notes due 2013 (the “Notes”). The Notes will be offered and
sold (i) outside the United States (the “Regulation S Notes”) to the initial
purchasers (the “Initial Purchasers”) in a transaction (the “Regulation S
Offering”) exempt from the registration requirements of the Securities Act of
1933, as amended, and the rules and regulations of the Securities and Exchange
Commission (the “Commission”) thereunder (collectively, the “Securities Act”) in
reliance upon Regulation S of the Securities Act (“Regulation S”), and (ii)
within the United States (the “Regulation D Notes” and, together with the
Regulation S Notes, constitute the “Notes”) directly to the Regulation D
Purchasers in a private placement (the “Regulation D Placement”) without being
registered under the Securities Act in reliance upon Section 4(2) thereof and/or
Regulation D thereunder (“Regulation D”).
 
B. In connection with the Regulation D Placement, the Company and Guarantors
(together, the “Company Parties”) have entered into a placement agency agreement
(the “Placement Agency Agreement”) with the placement agents named therein (the
“Placement Agents”). Each of the Placement Agents have agreed to act as initial
purchasers in connection with the Regulation S Offering (in such capacity, each,
an “Initial Purchaser” and, collectively, the “Initial Purchasers”) subject to
the terms and conditions and other provisions of a Regulation S Purchase
Agreement (the “Regulation S Purchase Agreement”) to be entered into between the
Initial Purchasers and the Company Parties.
 
C. Prior to or concurrently with the closing of the Regulation S Offering and
the Regulation D Placement, the Company Parties will enter into an Amended and
Restated First Lien Credit Agreement with the Lenders party thereto and The
Royal Bank of Scotland plc, as Administrative Agent of the Lenders (such
agreement and all related loan documents, collectively, the “Credit Agreement”).
Proceeds from the sale of the Notes, and borrowing under the Credit Agreement
will be used to finance the acquisition (the “Pogo Acquisition”) of certain of
the offshore Gulf of Mexico oil and natural gas properties (the “Pogo Assets”)
of Pogo Producing Company (“Pogo”) pursuant to the Purchase and Sale Agreement
(the “Purchase and Sale Agreement”) dated as of April 24, 2007 between Pogo and
Energy XXI GOM, LLC, a wholly-owned subsidiary of the Company (“Buyer”), and to
repay certain debt and to pay fees and expenses of these transactions as
summarized in the Preliminary CIM (as defined below). The closing of the Pogo
Acquisition under the Purchase and Sale Agreement will occur concurrently with
the closing of the Regulation S Offering, the Regulation D Placement and the
borrowing under the Credit Agreement (the “Closing Date”).
 

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D. The Notes will be issued pursuant to an indenture (the “Indenture”), to be
entered into between the Company, Parent, the other Guarantors and Wells Fargo
Bank, National Association, as trustee (the “Trustee”). Pursuant to the
Indenture, the Guarantors shall fully and unconditionally guarantee, on a senior
basis, to each holder of the Notes and the Trustee, the payment and performance
of the Company’s obligations under the Indenture and the Notes (each such
guarantee being referred to herein as a “Guarantee.”
 
E. Holders of the Notes will be entitled to the benefits of a registration
rights agreement (the “Registration Rights Agreement”) to be entered into among
the Company Parties, the Initial Purchasers and the Regulation D Purchasers
pursuant to which the Company Parties will agree, among other things to (i) file
a registration statement (the “Registration Statement") with the Commission for
a registered offer (the “Exchange Offer”) to exchange any and all of the Notes
for a like aggregate principal amount of notes that are identical in all
material respects to the Notes (the “Exchange Notes”) except for that the
Exchange Notes will not contain terms with respect to transfer restrictions or
liquidated damages, (ii) use their reasonable best efforts to cause the
Registration Statement to be declared effective under the Securities Act and
(iii) use their reasonable best efforts to consummate the Exchange Offer, in
each case, within the timeframe, and subject to the provisions contained
therein.
 
F. The Company, Jefferies & Company, Inc., as closing agent (the “Closing
Agent”), and Wells Fargo Bank, National Association, as escrow agent, will enter
into an escrow agreement (the “Escrow Agreement”) to provide for the escrow of
the proceeds for the purchase of the Notes and the payment of such proceeds on
the Closing Date pursuant to the terms of the Escrow Agreement and as set forth
in this Agreement.
 
G. This Agreement, the Credit Agreement, the Purchase and Sale Agreement, the
Indenture, the Registration Rights Agreement and the Escrow Agreement are
referred to herein collectively as the “Transaction Documents,” and the
transactions contemplated hereby and thereby are referred to herein collectively
as the “Transactions.” This Agreement, the Registration Rights Agreement and the
Indenture are referred herein collectively as the “Regulation D Purchase
Documents.” Nothing in this Agreement should be read to limit or otherwise
modify the terms and other provisions of the Engagement Letter dated as of March
15, 2007 (the “Engagement Letter”) between Parent and Jefferies, provided that,
in the event any terms of the Engagement Letter are inconsistent with or
contradict any terms of this Agreement, this Agreement shall govern.
 
H. The Company has prepared a preliminary confidential information memorandum,
dated May 12, 2007 (the “Preliminary CIM”), relating to the Regulation D
Placement and the Regulation S Offering, (ii) a pricing term sheet attached
hereto as Schedule I, which includes pricing terms and other information with
respect to the Notes (the “Pricing Supplement” and, together with the
Preliminary CIM, the “Time of Sale Document”) and (iii) a final confidential
information memorandum dated the date hereof relating to the Regulation D
Placement and the Regulation S Offering, as the same may be amended or
supplemented (the “CIM”). “CIM” means, as of any date or time referred to in
this Agreement, the most recent information memorandum (whether the Time of Sale
Document or the CIM, and any amendment or supplement to either such document),
including exhibits and schedules thereto.
 
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NOW, THEREFORE, each of the Company Parties hereby agrees and, the Regulation D
Purchasers hereby severally agree as follows:
 
1. PURCHASE AND SALE OF REGULATION D NOTES.
 
(a) Purchase and Sale of Regulation D Notes.
 
(i) Closing. Subject to the satisfaction (or waiver) of the conditions set forth
in Sections 5 and 6, at the closing of the Regulation D Placement (the
“Closing”), the Company shall issue and sell to the several Regulation D
Purchasers, and the Regulation D Purchasers severally agree to purchase from the
Company on the Closing Date (as defined below), the principal amount of
Regulation D Notes set forth in the confirmations of sale delivered to the
Regulation D Purchasers by or on behalf of the Company on or about the date
hereof. The Closing shall occur at the offices of Vinson & Elkins LLP, First
City Tower, 1001 Fannin Street, Suite 2500, Houston, Texas 77002-6760.
 
(ii) Determination of Closing Date. The date and time of the Closing (the
“Closing Date”) shall be 10:00 a.m., New York City time, on June 8, 2007 (or
such later date as is mutually agreed to by the Company and the Closing Agent);
provided, however, that if the Closing has not taken place on the Closing Date
because of a failure to satisfy one or more of the conditions specified in
Section 5 or Section 6 hereof, “Closing Date” shall mean 10:00 a.m., New York
City time, on the first business day following the satisfaction (or waiver) of
all such conditions after notification by the Company to the Closing Agent of
the satisfaction (or waiver) of such conditions, provided further, that if the
Closing has not occurred by June 13, 2007, each Regulation D Purchaser’s payment
of their respective portion of the Purchase Price that was deposited into the
escrow account will be returned to it promptly as set forth in the Escrow
Agreement.
 
(iii) Purchase Price. The purchase price for the Regulation D Notes to be
purchased by the several Regulation D Purchasers at the Closing (in the
aggregate, the “Purchase Price”) shall be set forth in the confirmation of sale
delivered to the Regulation D Purchasers by or on behalf of the Company on or
about the date hereof and the payment of the Purchase Price shall be made by the
Regulation D Purchasers by wire transfer of immediately available funds in
accordance with the instructions set forth in Section 1(b).
 
(b) Closing Mechanics.
 
(i) Closing Agent to Contact Regulation D Purchasers. By the fifth business day
prior to the Closing, the Closing Agent, will contact the Regulation D
Purchasers to confirm the closing mechanics set forth herein.
 
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(ii) Company to Deliver Executed Regulation D Notes to Closing Agent for
Regulation D Purchasers. At least three business days prior to the Closing Date,
the Company will deliver to the Closing Agent duly executed certificates
representing the Regulation D Notes in the form contemplated by the Indenture,
registered in the names previously provided by the Closing Agent to the Company,
which certificates the Closing Agent shall hold until the Closing Agent is
directed to release such certificates by the Company for sale to the Regulation
D Purchasers as provided in Section 1(b)(vi).
 
(iii) Regulation D Purchasers to Fund Purchase Price. On or before 10:00 a.m.,
New York City time, on the second business day prior to the Closing Date, each
of the Regulation D Purchasers will deliver their respective portions of the
Purchase Price to the Closing Agent by wire transfer in immediately available
funds according to the wire transfer instructions previously delivered to each
of such Regulation D Purchasers. Regulation D Purchasers will receive from the
Company interest on the amount they funded according to the prior sentence at
the initial interest rate to be borne by the Regulation D Notes for the number
of days such funds remain deposited into the escrow account of the Escrow
Agreement (computed on the basis of a 360-day year), payable on the Closing
Date, as set forth in the Escrow Agreement; if there is no Closing, Regulation D
Purchasers will receive from the Company interest on the amount they funded
according to the prior sentence based on the return on Permitted Investments (as
defined in the Escrow Agreement) applicable to such funded amounts, payable when
such funds are returned to such Regulation D Purchasers, as set forth in the
Escrow Agreement. The delivery of funds from a Regulation D Purchaser to the
Closing Agent shall be deemed to constitute irrevocable instructions from such
Regulation D Purchaser to the Closing Agent that the Regulation D Purchasers’
conditions to the Closing, as set forth in Section 6, will be deemed to be
satisfied upon receipt by the Closing Agent of the Company Closing Certificate
(as defined below) and, in that event, such Regulation D Purchaser agrees that
the Closing Agent may instruct the Escrow Agent to release the funds as
contemplated by, and subject to, Section 1(b)(vi). Funds received by the Closing
Agent pursuant to this Section 1 (or funded by the Closing Agent in its sole
discretion pursuant to Section 1(b)(iv)) will be held in trust and not as
property or in the title of the Closing Agent.
 
(iv) Closing Agent Right to Fund for Late Regulation D Purchasers. In the event
that any Regulation D Purchaser shall fail to deliver all or any of its
respective portion of the Purchase Price on or before 9:00 a.m., New York City
time, on the Closing Date:
 
(A) The Closing Agent may, in its sole discretion, but shall not be obligated
to, fund the unfunded portion of the Purchase Price applicable to such
Regulation D Purchaser, on behalf of such Regulation D Purchaser. The funding of
any portion of the Purchase Price by the Closing Agent pursuant to this Section
1(b)(iv) shall not relieve a defaulting Regulation D Purchaser of any liability
that it may have to the Company or the Closing Agent pursuant to this Agreement
or for the breach of its obligations under this Agreement.
 
(B) In the event that the Closing Agent shall have funded any such unfunded
portion as set forth in the preceding clause (A), the Closing Agent may, in its
sole discretion, but shall not be obligated to, (I) retain, at and following the
Closing, beneficial ownership in the Regulation D Notes as such Regulation D
Purchaser would have been entitled to had it timely funded, (II) direct the
disposition of such Regulation D Note to another party or (III) require such
Regulation D Purchaser, upon written notice, to purchase such Registration D
Notes from the Closing Agent within two business days after the Closing Date at
a price equal to the initial offering price of such Regulation D Notes plus
accrued and unpaid interest to the date of settlement.
 
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(C) In the case of the preceding clause (B)(I) or (II), if so requested by the
Closing Agent, (I) such Regulation D Purchaser shall take any action reasonably
requested by the Closing Agent to effect the transfer of the applicable
Regulation D Notes to the Closing Agent or such other party, as the case may be,
and shall be deemed to have consented to the Closing Agent retaining and taking
beneficial ownership, or directing the disposition, of such Regulation D Notes
and (II) the Company shall transfer registration of such Regulation D Notes to,
or as directed by, the Closing Agent.
 
(v) Distribution of Purchase Price Received by Closing Agent to Escrow Agent.
Upon receipt of the Purchase Price from any Regulation D Purchaser, the Closing
Agent will distribute such funds to the Escrow Agent for deposit into the escrow
account to be established pursuant to the Escrow Agreement (the “Escrow
Account”).
 
(vi) Release of Purchase Price Funds; Delivery of Regulation D Notes. On the
Closing Date:
 
(A) upon receipt by the Closing Agent of a certificate from Chief Financial
Officer of the Company (the “Company Closing Certificate”) certifying that the
conditions to the Regulation D Purchasers’ obligations to close as set forth in
Section 6 have been satisfied and in consideration for the sale of the
Regulation D Notes to Regulation D Purchasers, the Closing Agent will instruct
the Escrow Agent, pursuant to the terms of the Escrow Agreement, to release the
Purchase Price as set forth in the Escrow Agreement; and
 
(B) in consideration for the receipt of the Purchase Price deposited in the
Escrow Account as specified above, the Company shall deliver, the Regulation D
Purchasers the Regulation D Notes to the applicable Regulation D Purchasers in
accordance with the instructions contained in Annex A hereto.
 
2. REGULATION D PURCHASERS’ REPRESENTATIONS AND WARRANTIES.
 
Each Regulation D Purchaser represents and warrants, severally and not jointly,
that:
 
(a) No Public Sale or Distribution. The Regulation D Purchaser is acquiring the
Regulation D Notes for its own account and not with a view towards, or for
resale in connection with, the public sale or distribution thereof in a manner
that would violate the Securities Act; provided, however, that by making the
representations herein, the Regulation D Purchaser does not agree to hold any of
the Regulation D Notes for any minimum or other specific term and reserves the
right to dispose of the Regulation D Notes at any time in accordance with or
pursuant to a registration statement or an exemption under the Securities Act
and subject to the terms of the Regulation D Notes and the Indenture. The
Regulation D Purchaser is acquiring the Regulation D Notes hereunder in the
ordinary course of its business. The Regulation D Purchaser does not presently
have any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Regulation D Notes. As used in this Agreement, “Person”
means an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a government
or any department or agency thereof.
 
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(b) Regulation D Purchaser Status. Each of the Regulation D Purchasers
acknowledges that it is one of the following:
 
(i) an institutional “accredited investor” as defined in Rule 501(a)(1), (2),
(3) or (7) of Regulation D under the Securities Act; or
 
(ii) a “qualified institutional buyer” as defined in Rule 144A(a)(1) under the
Securities Act.
 
Such Regulation D Purchaser also acknowledges that it has the knowledge and
experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Regulation D Notes.
 
(c) Reliance on Exemptions. The Regulation D Purchaser understands that the
Regulation D Notes are being offered and sold in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying in part upon the truth and accuracy of, and
the Regulation D Purchasers’ compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Regulation D Purchasers
set forth herein in order to determine the availability of such exemptions and
the eligibility of the Regulation D Purchasers to acquire the Regulation D
Notes.
 
(d) No General Solicitation or Advertising. The Regulation D Purchaser has not
engaged, and will not engage, directly or indirectly in any form of “general
solicitation” or “general advertising” in connection with the offering of the
Regulation D Notes (as those terms are used in Regulation D under the Securities
Act) or in any manner involving a public offering within the meaning of Section
4(2) of the Securities Act.
 
(e) Independent Evaluation. The Regulation D Purchaser confirms and agrees that
(i) it has independently evaluated the merits of its decision to purchase the
Regulation D Notes, (ii) it has not relied on the advice of, or any
representations by, Jefferies, Greenwich Capital Markets, Inc., BNP Paribas
Securities Corp., BMO Capital Markets Corp., Capital One Southcoast, Inc. and
Natexis Bleichroeder Inc. (each, a “Placement Agent” and, collectively, the
“Placement Agents”) or any of their respective affiliates or any representative
of the Placement Agents or their respective affiliates in making such decision,
and (iii) neither the Placement Agents nor any of their respective
representatives has any responsibility with respect to the completeness or
accuracy of any information or materials furnished to the Regulation D Purchaser
in connection with the transactions contemplated hereby, including the
Preliminary CIM, Time of Sale Document and CIM.
 
(f) Information. The Regulation D Purchaser acknowledges that the Company has
offered the Regulation D Purchaser materials relating to the business, finances
and operations of the Company or relating to the offer and sale of the
Regulation D Notes specifically requested by the Regulation D Purchaser and that
historical financial information and pro forma financial information included in
the Time of Sale Document, including under the headings “Summary - Energy XXI
Summary Historical and Pro Forma Financial Data,” “Summary - Pogo Properties
Summary Historical Financial Data,” “Summary - Summary Unaudited Consolidated
Pro Forma Financial Statements” relating to the Pogo Assets, is unaudited and
furthermore, that the pro forma financial information has not been prepared in
accordance with Regulation S-X of the Commission. The Regulation D Purchaser and
its advisors, if any, have been afforded the opportunity to ask questions of the
Company. The Regulation D Purchaser understands that its investment in the
Regulation D Notes involves a high degree of risk and is able to bear the
economic risk of such investment. The Regulation D Purchaser has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of its investment in the Regulation D Notes and has sought
such accounting, legal and tax advice as it has considered necessary to make an
informed investment decision with respect to its acquisition of the Regulation D
Notes.
 
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(g) No Governmental Review. The Regulation D Purchaser understands that no
United States agency or any other government or governmental agency has passed
on or made any recommendation or endorsement of the Regulation D Notes or the
fairness or suitability of the investment in the Regulation D Notes nor have
such authorities passed upon or endorsed the merits of the offering of the
Regulation D Notes.
 
(h) Transfer or Resale. The Regulation D Purchaser understands that: (i) the
Notes have not been and will not be registered under the Securities Act or any
state securities laws; (ii) the Regulation D Purchaser agrees that if it decides
to offer, sell or otherwise transfer any of the Regulation D Notes, such
Regulation D Notes may be offered, sold or otherwise transferred only: (A)
pursuant to an effective registration statement under the Securities Act; (B) to
the Company; (C) outside the United States in accordance with Regulation S under
the Securities Act and in compliance with local laws; or (D) within the United
States (1) in accordance with the exemption from registration under the
Securities Act and in compliance with any applicable state securities laws, or
(2) in a transaction that does not require registration under the Securities Act
or applicable state securities laws.
 
(i) Legends. The Regulation D Purchaser understands that upon the original
issuance thereof, and until such time as the same is no longer required under
applicable requirements of the Securities Act or applicable state securities
laws, the certificates or other instruments representing the Regulation D Notes
and all certificates or other instruments issued in exchange therefor or in
substitution thereof, shall bear the legend(s) set forth in the Indenture, and
that the Company will make a notation on its records and give instructions to
the Trustee in order to implement the restrictions on transfer set forth and
described herein.
 
(j) Validity; Enforcement. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Regulation D Purchaser and constitutes
the legal, valid and binding obligation of the Regulation D Purchasers
enforceable against the Regulation D Purchaser in accordance with its terms,
except as such enforceability may be limited by general principles of equity or
by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors’ rights and remedies.
 
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(k) Residency. For purposes of U.S. securities laws, the Regulation D Purchaser
is a resident of the jurisdiction specified with respect to such Regulation D
Purchaser on Annex A hereto.
 
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY PARTIES.
 
In addition to the other representations, warranties and agreements contained in
the Agreement, each of the Company Parties hereby represents, warrants and
agrees with, the Regulation D Purchasers as follows:
 
(a) No Material Misstatement or Omission. The CIM did not, as of its date,
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
 
(b) The Transaction Documents. Each of the Company Parties has all necessary
power and authority to execute and deliver the Transaction Documents to which
they are a party and to perform its respective obligations thereunder; each of
the Transaction Documents has been duly authorized by the Company Parties, as
the case may be, and, when executed and delivered by the Company Parties, as the
case may be, will constitute a valid and binding agreement of the Company
Parties, as the case may be, enforceable against the Company Parties, as the
case may be, in accordance with its terms; and the Indenture, when executed and
delivered by the Company Parties will meet the requirements for qualification
under the Trust Indenture Act of 1939, as amended, and the rules and regulations
of the Commission thereunder (collectively, the “Trust Indenture Act”).
 
(c) Acquisition of Pogo Assets. After giving effect to the Transactions
contemplated by the CIM, the Company will have acquired the Pogo Assets as
contemplated by the CIM.
 
(d) The Regulation D Notes. The Company has all necessary power and authority to
execute, issue and deliver the Regulation D Notes; the Regulation D Notes have
been duly authorized for issuance and sale by the Company, will be in the form
contemplated by the Indenture and, when executed, authenticated and issued in
accordance with the terms of the Indenture and delivered to and paid for by the
Regulation D Purchasers pursuant to this Agreement, will constitute valid and
binding obligations of the Company, entitled to the benefits of the Indenture,
enforceable against the Company in accordance with their terms. The Regulation D
Notes and the Guarantees will conform, in all material respects to the
description thereof contained in the CIM.
 
(e) The Guarantees. Each of the Guarantors has all necessary power and authority
to execute, issue and deliver its respective Guarantee; the Guarantees have been
duly authorized for issuance and sale by each of the Guarantors, will be in the
form contemplated by the Indenture and, when executed and the Guarantees issued
in accordance with the terms of the Indenture, will constitute valid and binding
obligations of each of the Guarantors, entitled to the benefits of the
Indenture, enforceable against each of the Guarantors in accordance with their
terms.
 
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(f) The Exchange Notes and Related Guarantees. Each of the Company Parties has
all necessary power and authority to execute, issue and deliver the Exchange
Notes and the related Guarantees to which they are a party; the Exchange Notes
and the related Guarantees have been duly authorized for issuance and sale by
the Company Parties, as the case may be, will be in the form contemplated by the
Indenture and, when executed, authenticated and issued in accordance with the
terms of the Indenture and delivered to and exchanged for the Notes and the
related Guarantees, as the case may be, will constitute valid and binding
obligations of the Company Parties, as the case may be, entitled to the benefits
of the Indenture, enforceable against the Company Parties, as the case may be,
in accordance with their terms.
 
(g) No Material Adverse Change. Except as otherwise disclosed in the CIM, and
for the period from and after the date hereof and prior to the Closing Date,
except as otherwise disclosed or to be disclosed in the CIM: (i) there has been
no material adverse change, or any development that could reasonably be expected
to result in a material adverse change, in the condition, financial or
otherwise, or in the earnings, business or operations, whether or not arising
from transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity, Parent or the Pogo Assets (any such
change is called a “Material Adverse Change”); (ii) Parent, or the Company and
its subsidiaries, considered as one entity, have not incurred any material
liability or obligation (including any off-balance sheet obligation), indirect,
direct or contingent, not in the ordinary course of business nor entered into
any material transaction or agreement not in the ordinary course of business;
(iii) there has been no dividend or distribution of any kind declared, paid or
made by the Company or Parent, except for dividends paid to the Company or other
subsidiaries, any of the Company’s subsidiaries on any class of capital stock or
repurchase or redemption by the Company or Parent or any of its subsidiaries of
any class of capital stock; and (iv) there has not occurred any downgrading from
the Caa2 rating by Moody’s Investors Service, Inc. and the CCC rating by
Standard & Poor’s Rating Services accorded to any securities of the Parent of
the Company, nor has any notice been given of any intended or potential
downgrading or of any review for a possible change that does not indicate the
direction of the possible change, in the rating accorded any securities of the
Parent or the Company or any of its subsidiaries by any “nationally recognized
statistical rating organization” (as such term is defined for purposes of Rule
436(g)(2) under the Securities Act).
 
(h) Going Concern of Company. On the Closing Date, after giving effect to the
offering and sale of the Notes and the application of the proceeds thereof as
described in the CIM, (i) the fair value and present fair saleable value of the
assets of the Company and its subsidiaries on a going concern basis will exceed
the sum of its stated liabilities and identified contingent liabilities; and
(ii) each of the Company and its subsidiaries will not be (a) left with
unreasonably small capital with which to carry on its business as it is proposed
to be conducted, (b) unable to pay its debts (contingent or otherwise) as they
mature or (c) otherwise insolvent. In computing the amount of such contingent
liabilities at any time, such liabilities will be computed at the amount that,
in the light of all the facts and circumstances existing at such time, represent
the amount that can reasonably be expected to become an actual or matured
liability.
 
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(i) Independent Accountants. (i) UHY, LLP, who have expressed their opinion with
respect to the financial statements of the Company and, the carve-out financial
statements for Castex Energy, Inc. (which, in each case, includes the related
notes thereto) included in the CIM and (ii) Grant Thornton LLP, who have
expressed their opinion with respect to the financial statements of Marlin
Energy Offshore L.L.C., Marlin Texas GP, L.L.C. and Marlin Texas L.L.C. (which
term includes the related notes thereto) to be included in the CIM, are each (i)
independent public or certified public accountants as required by the Securities
Exchange Act of 1934 as amended (the “Exchange Act”), (ii) in compliance with
the applicable requirements relating to the qualification of accountants under
Rule 2-01 of Regulation S-X and (iii) a registered public accounting firm as
defined by the Public Company Accounting Oversight Board whose registration has
not been suspended or revoked and who has not requested such registration to be
withdrawn.
 
(j) Preparation of the Financial Statements. As of the date hereof, the
financial statements contained in the Preliminary CIM and the Time of Sale
Document and to be contained in the CIM, present fairly in all material respects
the consolidated financial position of (i) the Company and its subsidiaries,
(ii) Marlin Energy Offshore L.L.C., Marlin Texas GP L.L.C., and Marlin Texas
L.L.C., (iii) the assets acquired from Castex Energy, Inc., and (iv) the Pogo
Assets, in each case, as of and at the dates indicated and the results of each
of their respective operations and cash flows for the periods specified. All
such financial statements have been prepared in conformity in all material
respects with generally accepted accounting principles applied on a consistent
basis throughout the periods involved, except as contemplated by the CIM. As of
the date hereof, the financial data set forth in the CIM, and the financial data
set forth or to be set forth in the CIM will as of its date, fairly present the
information set forth therein on a basis consistent with that of the audited and
unaudited financial statements contained in the CIM.
 
(k) Pro Forma Financial Information. The pro forma financial information of the
Company and its subsidiaries and the related notes thereto included under the
captions Summary - Energy XXI Summary Historical and Pro Forma Financial Data,”
“Summary - Summary Unaudited Consolidated Pro Forma Financial Statements” and
“Capitalization” under the column “As Adjusted” and elsewhere in the CIM, as of
its date, presented fairly the information contained therein, and the
assumptions used in the preparation thereof are reasonable and the adjustments
used therein are appropriate to give effect to the Transactions and
circumstances referred to therein.
 
(l) Engineer Reports. The Company has heretofore delivered to the Placement
Agents true, correct and complete copies of the engineering reports of
(i) Netherland, Sewell & Associates, (ii) Miller & Lents, Ltd., and (iii) Ryder
Scott Company LP (collectively, the “Engineer Reports”). There have been no
material adverse developments concerning the matters reported in such
Engineering Reports since their respective dates.
 
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(m) Incorporation and Good Standing of the Company Parties. Each of the Company
Parties has been duly incorporated or organized and is validly existing as a
corporation, partnership or limited liability company, as applicable, in good
standing under the laws of the jurisdiction of its incorporation or organization
and has the power and authority (corporate or other) to own, lease and operate
its properties and to conduct its business as described in the CIM as of its
date, and to enter into and perform its obligations under each of the
Transaction Documents to which it is a party. Each of the Company Parties is
duly qualified as a foreign corporation, partnership or limited liability
company, as applicable, to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure to be so qualified would not, individually or in the aggregate, have a
material adverse effect on the financial position, stockholders’ equity, results
of operations or business of the Company, Parent or the Pogo Assets (a “Material
Adverse Effect”). All of the issued and outstanding capital stock or other
equity or ownership interest of each of the Subsidiary Guarantors has been duly
authorized and validly issued, is fully paid and nonassessable and is owned by
the Company, directly or through subsidiaries, free and clear of any security
interest, mortgage, pledge, lien, charge, encumbrance or adverse claim, except
as disclosed in the CIM. Parent does not, directly or indirectly, own any
securities of any entity other than the Energy XXI (US Holdings) Limited, Energy
XXI USA, Inc., the Company and its subsidiaries. As of the date hereof, the
Company does not own or control, and as of the Closing Date, the Company will
not own or control, directly or indirectly, any corporation, association or
other entity other than (i) the subsidiaries listed on Annex B hereto and (ii)
such other entities omitted from Annex B hereto, which, when such omitted
entities are considered in the aggregate as a single subsidiary, would not
constitute a “significant subsidiary” within the meaning of Rule 1-02(w) of
Regulation S-X.
 
(n) Capitalization and Other Capital Stock Matters. As of the date hereof, the
capitalization of the Company and its subsidiaries presented on a consolidated
basis in the CIM under the caption “Capitalization” under the column “Actual” is
a fair summary of such capitalization in all material respects.
 
(o) Non-Contravention of Existing Instruments; No Further Authorizations or
Approvals Required. None of the Company Parties (i) is in violation of its
charter or by laws, (ii) is in default (or, with the giving of notice or lapse
of time, would be in default or constitute a default) (“Default”) under any
indenture, mortgage, loan or credit agreement, note, contract, franchise, lease
or other instrument to which any of the Company Parties is a party or by which
it or any of them may be bound, or to which any of the property or assets of the
Company Parties is subject (each, an “Existing Instrument”), or (iii) is in
violation of any law, administrative regulation or administrative or court
decree applicable to any of the Company Parties except with respect to clauses
(ii) and (iii) of this sentence, for such Defaults or violations as would not,
individually or in the aggregate, result in a Material Adverse Effect. The
Company Parties’ execution, delivery and performance of the Transaction
Documents to which they are a party and the consummation of the Transactions,
including the issuance and sale of the Notes, (i) will not result in any
violation of the provisions of the charter or bylaws of any of the Company
Parties, (ii) will not conflict with or constitute a breach of, or Default or a
Debt Repayment Triggering Event (as defined below) under, or result in the
creation or imposition of any security interest, mortgage, pledge, lien, charge,
encumbrance or adverse claim upon any property or assets of any of the Company
Parties pursuant to, or require the consent of any other party to any Existing
Instrument or other third party and (iii) will not result in any violation of
any law, administrative regulation or administrative or court decree applicable
to any of the Company Parties except with respect to clauses (ii) and (iii) of
this sentence, for such conflicts, breaches, Defaults, Debt Repayment Triggering
Events or violations as would not, individually or in the aggregate, result in a
Material Adverse Effect. As used herein, a “Debt Repayment Triggering Event”
means any event or condition that gives, or with the giving of notice or lapse
of time would give, the holder of any note, debenture or other evidence of
indebtedness (or any person acting on such holder’s behalf) the right to require
the repurchase, redemption or repayment of all or a portion of such indebtedness
by the Company Parties.
 
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(p) Regulatory Approval. No consent, approval, authorization or other order of,
or registration or filing with, any court or other governmental or regulatory
authority or agency, is required for each of the Company Parties’ execution,
delivery and performance of the Transaction Documents to which it is a party and
consummation of the Transactions, except (i) with respect to the transactions
contemplated by the Registration Rights Agreement or the filing of a Current
Report on Form 8-K with the Commission as may be required under the Securities
Act and the Exchange Act, as the case may be, (ii) as required by the state
securities or “blue sky” laws, and (iii) for such consents, approvals,
authorizations, orders, filings or registrations that have been obtained or made
and are in full force and effect except as would not have a Material Adverse
Effect.
 
(q) No Material Actions or Proceedings. Except as otherwise disclosed in the
CIM, there are no legal or governmental actions, suits or proceedings pending
or, to the best of the Company’s knowledge, (i) threatened against or affecting
any of the Company Parties, (ii) which has as the subject thereof any officer or
director of, or property owned or leased by, the Company Parties or (iii)
relating to environmental or discrimination matters, where in any such case (A)
any such action, suit or proceeding, if so determined adversely, would
reasonably be expected to result in a Material Adverse Effect or adversely
affect the consummation of the Transactions or (B) any such action, suit or
proceeding is or would be material in the context of the offer and sale of
Notes. No material labor dispute with the employees of any of the Company
Parties, or with the employees of any principal supplier of the Company Parties,
exists or, to the best of the Company’s knowledge, is threatened or imminent.
 
(r) Intellectual Property Rights. Except as otherwise disclosed in the CIM, the
Company Parties own or possess, and as of the closing of the Transaction will
own and possess, sufficient trademarks, service marks, trade names, patents,
patent rights, copyrights, domain names, licenses, approvals, trade secrets,
inventions, know-how (including unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), licenses and other similar
rights (collectively, “Intellectual Property Rights”) reasonably necessary to
conduct their businesses as now conducted and as to be conducted as described in
the CIM, except where the failure to own or possess such Intellectual Property
Rights would not have a Material Adverse Effect.
 
(s) All Necessary Permits, etc. Except as otherwise disclosed in the CIM, each
of the Company Parties possess such valid and current certificates,
authorizations or permits issued by the appropriate state, federal or other
applicable regulatory agencies or bodies and such valid licenses or other rights
to use all databases, geological data, geophysical data, engineering data,
seismic data, maps and other technical information, in each case, necessary to
conduct their respective businesses, and neither the Company nor any Guarantor
has received, or has any reason to believe that it has received or will receive,
any notice of proceedings relating to the revocation or modification of, or
non-compliance with, any such certificate, authorization or permit which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect.
 
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(t) Title to Properties. Each of the Company Parties has (i) generally
satisfactory title to its oil and gas properties, title investigations having
been carried out by the Company Parties in accordance with the practice in the
oil and gas industry in the areas in which the Company Parties operate except
as, in each case, would not result in a Material Adverse Effect, (ii) good and
marketable title to all other real property owned by it to the extent necessary
to carry on its business and (iii) good and marketable title to all personal
property owned by it, in each case free and clear of all liens, encumbrances and
defects except such as are described in the CIM or such as do not materially
affect the value of the properties of the Company Parties, considered as one
enterprise, and do not interfere with the use made and proposed to be made of
such properties, by the Company Parties, considered as one enterprise; and all
of the leases and subleases material to the business of the Company Parties,
considered as one enterprise, and under which the Company Parties hold
properties described in the CIM, are in full force and effect, and none of the
Company Parties has any notice of any material claim of any sort that has been
asserted by anyone adverse to the rights of any of the Company Parties under any
of the leases or subleases mentioned above, or affecting or questioning the
rights of any of the Company Parties to the continued possession of the leased
or subleased premises under any such lease or sublease.
 
(u) Gas Imbalances; Prepayments. On a net basis there are no gas imbalances,
take-or-pay or other prepayments that would require the Company or any of its
subsidiaries to deliver Hydrocarbons produced from the Oil and Gas Properties at
some future time without then or thereafter receiving full payment therefor
exceeding one-half bcf of gas (on an mcf equivalent basis) in the aggregate,
other than as disclosed in the CIM or as would not result in a Material Adverse
Effect.
 
(v) Tax Law Compliance. Except as disclosed in the CIM, the Company Parties have
filed all necessary federal and state income and franchise tax returns and have
paid all taxes required to be paid by any of them and, if due and payable, any
related or similar assessment, fine or penalty levied against any of them except
as may be being contested in good faith and by appropriate proceedings, except
as would not result in a Material Adverse Effect. The Company has made adequate
charges, accruals and reserves in the applicable financial statements referred
to in Sections 3(j) above in respect of all federal and state and income and
franchise taxes for all periods as to which the tax liability of the Company or
any of its subsidiaries has not been finally determined, other than as disclosed
in the CIM or as would not result in a Material Adverse Effect.
 
(w) Company’s Accounting System. The Company makes and keeps accurate books and
records and maintains a system of accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management’s general or specific authorization; (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles as applied in the United States and to
maintain accountability for assets; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences in each case, other than as disclosed in the CIM or as would not
result in a Material Adverse Effect.
 
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(x) Insurance. Each of the Company Parties is insured by recognized, financially
sound and reputable institutions with policies in such amounts and with such
deductibles and covering such risks as are generally deemed adequate and
customary for their businesses including, but not limited to, policies covering
real and personal property owned or leased by the Company Parties against theft,
damage, destruction, acts of vandalism, earthquakes and hurricanes, other than
as disclosed in the CIM or as would not result in a Material Adverse Effect. The
Company has no reason to believe that it or any Guarantor will not be able (i)
to renew its existing insurance coverage as and when such policies expire or
(ii) to obtain comparable coverage from similar institutions as may be necessary
or appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change. Except as described in the CIM and
except as would not result in a Material Adverse Effect, none of the Company
Parties has been denied any insurance coverage which it has sought or for which
it has applied.
 
(y) No Unlawful Contributions or Other Payments. Neither the Company Parties
nor, to the best of the Company’s knowledge, any employee or agent of the
Company Parties, has made any contribution or other payment to any official of,
or candidate for, any federal, state or foreign office in violation of any law.
 
(z) Disclosure Controls and Procedures; Deficiencies in or Changes to Internal
Control Over Financial Reporting. Parent has established and maintains
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Securities Exchange Act of 1934, as amended), which (i) are designed
to ensure that material information relating to the Parent, including its
consolidated subsidiaries, is made known to the Parent’s principal executive
officer and its principal financial officer by others within those entities and
are effective in all material respects to perform the functions for which they
were established. Based on the most recent evaluation of its disclosure controls
and procedures, Parent is not aware of (i) any significant deficiencies or
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect its ability
to record, process, summarize and report financial information or (ii) any
fraud, whether or not material, that involves management or other employees who
have a significant role in Parent’s internal control over financial reporting.
Parent is not aware of any change in its internal control over financial
reporting that has occurred during its most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, its internal
control over financial reporting.
 
(aa) Compliance with Environmental Laws. Except as described in the CIM or as
would not, singly or in the aggregate, result in a Material Adverse Effect, (i)
neither the Company nor any of its subsidiaries is in violation of any federal,
state or local statute, law, rule, regulation, ordinance, code, policy or rule
of common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or judgment,
relating to pollution or protection of human health, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or wildlife, including, without limitation, laws and
regulations relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, “Hazardous Materials”) or to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, “Environmental
Laws”), (ii) the Company Parties have all permits, authorizations and approvals
required under any applicable Environmental Laws and are each in compliance with
their requirements, (iii) there are no pending or threatened administrative,
regulatory or judicial actions, suits, demands, demand letters, claims, liens,
notices of noncompliance or violation, investigation or proceedings relating to
any Environmental Law against any of the Company Parties and (iv) there are no
events or circumstances that might reasonably be expected to form the basis of
an order for clean-up or remediation, or an action, suit or proceeding by any
private party or governmental body or agency, against or affecting any of the
Company Parties relating to Hazardous Materials or any Environmental Laws.
 
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(bb) Compliance with Laws. The Company has not been advised, and has no reason
to believe, that it and each of the Guarantors are not conducting business in
compliance with all applicable laws, rules and regulations of the jurisdictions
in which it is conducting business, except where failure to be so in compliance
would not result in a Material Adverse Effect.
 
(cc) Company Parties Not an “Investment Company.” Neither the Company nor any
Guarantor is, and after receipt of payment for the Notes, will be, an
“investment company” within the meaning of Investment Company Act of 1940, as
amended, and the rules and regulations of the Commission thereunder.
 
(dd) Brokers. Except for the Placement Agents, there is no broker, finder or
other party that is entitled to receive from the Company any brokerage or
finder’s fee or other fee or commission as a result of the Regulation D
Placement or the transactions contemplated thereby.
 
(ee) No Registration Required Under the Securities Act. Assuming the accuracy of
the representations and warranties of the Placement Agents contained in Section
1(B) of the Placement Agency Agreement and of the Regulation D Purchasers
contained in this Agreement and the compliance of such parties with the
agreements set forth herein and therein, it is not necessary, in connection with
the issuance and sale of the Regulation D Notes, in the manner contemplated by
the Transaction Documents and the CIM, to register the Regulation D Notes under
the Securities Act or to qualify the Indenture under the Trust Indenture Act.
 
(ff) QIBs and Accredited Investors. The Company will not offer or sell any of
the Regulation D Notes to any person whom it reasonably believes is not (i) a
“qualified institutional buyer” as defined in Rule 144A (“QIBs”) or (ii) an
institutional “accredited investor” (as defined in clauses (1), (2), (3) and (7)
of Rule 501(a) of Regulation D).
 
(gg) Regulation D Purchasers; Compliance With Rule 502(d). The Company will
exercise reasonable care to ensure that the Regulation D Purchasers are not
“underwriters” within the meaning of Section 2(a)(11) of the Securities Act and,
without limiting the foregoing, that such purchases will comply with Rule 502(d)
under the Securities Act.
 
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(hh) No General Solicitation. To the knowledge of the Company, none of the
Company Parties or any of their respective Affiliates have engaged, or will
engage, directly or indirectly in any form of “general solicitation” or “general
advertising” in connection with the offering of the Regulation D Notes (as those
terms are used in Regulation D under the Securities Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act. To the knowledge of the Company, none of the Company Parties have entered,
and will enter, into any arrangement or agreement with respect to the
distribution of the Regulation D Notes, except for this Agreement, the Placement
Agency Agreement, the Indenture, the Escrow Agreement, the Engagement Letter and
the Registration Rights Agreement, and the Company agrees not to enter into any
such arrangement or agreement.
 
(ii) No Offer and Sale Within Six Months. None of the Company Parties nor any of
their respective Affiliates have sold or issued any security of the same or
similar class or series as any of the Notes that would be required to be
integrated with the Notes in a manner that would require registration under the
Securities Act during the six-month period preceding the earlier of the date of
this Agreement and the Closing Date, including any sales pursuant to Rule 144A,
Regulation D or Regulation S. None of Parent, the Company nor any of its
Affiliates have any intention of making, and will not make, an offer or sale of
any securities that would be required to be integrated with the Notes in a
manner that would require registration under the Securities Act, for a period of
six months after the date of this Agreement, except for the offering of Notes as
contemplated by this Agreement, the Registration Rights Agreement and the
Regulation S Offering. As used in this paragraph, the terms “offer” and “sale”
have the meanings specified in Section 2(a)(3) of the Securities Act.
 
The Company acknowledges that the Placement Agents and, for purposes of the
opinion to be delivered pursuant to Section 6 hereof, counsel to the Company,
will rely upon the accuracy and truthfulness of the foregoing representations
and hereby consents to such reliance.
 
4. COVENANTS.
 
(a) Reasonable Best Efforts. Each party shall use its reasonable best efforts to
timely satisfy each of the conditions to be satisfied by it as provided in
Sections 5 and 6 of this Agreement.
 
(b) Form D. The Company agrees to file a Form D with respect to the Regulation D
Notes as required under Regulation D and to comply with any applicable state
securities and “Blue Sky” laws in connection with the sale of the Regulation D
Notes.
 
(c) Use of Proceeds. The net proceeds from the sale of the Notes will be used by
the Company in the manner described in the Preliminary CIM and described or to
be described in the CIM under the caption titled “Use of Proceeds.”
 
(d) Fees and Expenses. Except as otherwise set forth in the Regulation D
Documents, each party to this Agreement shall bear its own expenses in
connection with the sale of the Regulation D Notes to the Regulation D
Purchasers.
 
(e) Publicity. The Regulation D Purchasers agree that they will not issue any
press release or otherwise make any public statement, filing or other
communication regarding the offering or the business, operations or financial
condition of Parent or the Company without the prior consent of the Company,
except to the extent required by law or legal process, in which case such
Regulation D Purchaser shall provide the Company with prior notice of such
disclosure. Parent and the Company agree that they will not publicly disclose
the names of the Regulation D Purchasers or include the names of the Regulation
D Purchasers, without the prior written consent of the Regulation D Purchasers,
in any press release or other public statement, filing or other communication,
except (a) in any registration statement in which such Regulation D Purchaser is
identified as a selling securityholder, or (b) to the extent required by law or
legal process (including but not limited to by the filing of one or more Form
D’s with the Commission regarding the Regulation D Placement).
 
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(f) Withholding Taxes. The Regulation D Purchasers shall deliver to the Company
a properly completed and duly executed applicable Internal Revenue Service Form
W-8 or W-9 that establishes a complete exemption from United States withholding
tax. The Regulation D Purchasers will provide replacement forms on the
obsolescence of such forms or inaccuracy of any information thereon.
 
5. CONDITIONS TO THE COMPANY’S OBLIGATION TO SELL.
 
The obligation of the Company hereunder to issue and sell the Regulation D Notes
to the Regulation D Purchasers at the Closing is subject to the satisfaction, at
or before the Closing Date, of each of the following conditions, provided that
these conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion by providing the Regulation D
Purchasers with prior written notice thereof.
 
(a) The representations and warranties of the Regulation D Purchaser shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Regulation D Purchaser
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Regulation D Purchaser at or prior to the
Closing Date.
 
(b) No injunction, restraining order or order of any nature by a governmental
authority shall have been issued as of the Closing Date that would prevent or
materially interfere with the consummation of the Offering or any of the
transactions contemplated thereby; and no stop order suspending the
qualification or exemption from qualification of any of the Securities in any
jurisdiction shall have been issued and no proceeding for that purpose shall
have been commenced or, to the knowledge of the Regulation D Purchasers after
reasonable inquiry, be pending or contemplated as of the Closing Date.
 
(c) At least $750.0 million in aggregate principal amount of Notes shall have
been sold by the Company to the Regulation D Purchasers and the Initial
Purchasers and an amount shall have been borrowed by the Company under the
Credit Agreement in an amount sufficient to repay all outstanding borrowings
under the Amended and Restated Second Lien Credit Agreement, dated as of July
28, 2006 among the Company, various lenders named therein, BNP Paribas, and RBS
Securities Corporation (the “Second Lien Facility”).
 
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(d) No action shall have been taken and no statute, rule, regulation or order
shall have been enacted, adopted or issued by any federal, state or foreign
governmental or regulatory authority of competent jurisdiction that would, as of
the Closing Date, render impossible the issuance or sale of the Regulation D
Notes; and no injunction or order of any federal, state or foreign court shall
have been issued that would, as of the Closing Date, prevent the issuance or
sale of the Notes.
 
6. CONDITIONS TO THE REGULATION D PURCHASERS’ OBLIGATION TO PURCHASE.
 
The several obligations of the Regulation D Purchasers hereunder to purchase the
Regulation D Notes at the Closing are subject to the satisfaction, at or before
the Closing Date, of each of the following conditions, provided that (a) these
conditions are for the Regulation D Purchasers’ sole respective benefit and may
be waived by the Regulation D Purchasers at any time in their sole discretion
(each with respect to itself only) by providing the Company with prior written
notice thereof and (b) the Regulation D Purchasers acknowledge that their
respective portions of the Purchase Price may be released from the Escrow
Account pursuant to the terms of the Escrow Agreement upon receipt by the
Closing Agent of the Company Closing Certificate as set forth in Section 1(b):
 
(a) Each of the Company Parties shall have executed and delivered, or caused to
be delivered, to the Regulation D Purchasers or the Closing Agent (i) each of
the Transaction Documents to which it is a party and (ii) the Regulation D Notes
being purchased by the Regulation D Purchasers at the Closing pursuant to this
Agreement, in each case in form and substance reasonably satisfactory to the
Regulation D Purchasers or their agents.
 
(b) The Transactions shall have been consummated in accordance with their terms
and in accordance with the applicable Transaction Documents and as described in
the Preliminary CIM and as described or to be described in the CIM.
 
(c) At least $750.0 million in aggregate principal amount of Notes shall have
been sold by the Company to the Regulation D Purchasers and the Initial
Purchasers and an amount shall have been borrowed by the Company under the
Credit Agreement in an amount sufficient to repay all outstanding borrowings
under the Second Lien Facility.
 
(d) The Regulation D Notes shall have been designated for trading on PORTAL, to
the extent so eligible.
 
(e) On the Closing Date, the Regulation D Purchasers or the Closing Agent (on
behalf of the Regulation D Purchasers) shall have received the opinions of
Vinson & Elkins LLP, U.S. counsel for Parent and the Company, and Appleby Hunter
Bailhache, Bermuda counsel for Parent, in each case dated as of the Closing
Date, substantially to the effect set forth on Annex C.
 
(f) The Company Parties shall have each delivered to the Regulation D Purchasers
or the Closing Agent (on behalf of the Regulation D Purchasers) a certificate
evidencing qualification by such entity as a foreign corporation and good
standing issued by the Secretaries of State (or comparable office) of each of
the jurisdictions in which the Company Parties operate as of a date within 30
days prior to the Closing Date.
 
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(g) The Company Parties shall have delivered to the Regulation D Purchasers or
the Closing Agent (on behalf of the Regulation D Purchasers) a certificate,
executed by the Secretary of each of the Company Parties, and dated as of the
Closing Date, as to (i) the resolutions consistent with Sections 3(b), 3(d),
3(e) and 3(f) as adopted by Board of Directors of each such entity in a form
reasonably acceptable to the Regulation D Purchasers, and (ii) the memorandum of
association, the certificate of incorporation and bylaws, or other
organizational documents of each such entity.
 
(h) The representations and warranties of the Company Parties contained herein
shall be true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date), and the Company shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by the Regulation D Purchase Documents to be performed, satisfied or
complied with by the Company Parties, as applicable, at or prior to the Closing
Date. The Regulation D Purchasers or the Closing Agent (on behalf of the
Regulation D Purchasers) shall have received certificates, executed by an
authorized officer of each of the Parent and the Company, dated as of the
Closing Date, to the foregoing effect. The statements of the Company Parties and
their respective officers made in any certificates delivered pursuant to this
Agreement may be made only in their official, rather than individual capacity,
and shall be true and correct on and as of the Closing Date.
 
(i) No action shall have been taken and no statute, rule, regulation or order
shall have been enacted, adopted or issued by any federal, state or foreign
governmental or regulatory authority of competent jurisdiction that would, as of
the Closing Date, render impossible the issuance or sale of the Regulation D
Notes; and no injunction or order of any federal, state or foreign court shall
have been issued that would, as of the Closing Date, prevent the issuance or
sale of the Regulation D Notes.
 
7. TERMINATION.
 
In the event that the Closing shall not have occurred due to the failure of the
Company Parties or the Regulation D Purchasers to satisfy the conditions set
forth in Sections 5 and 6 above (and the nonbreaching party’s failure to waive
such unsatisfied condition(s)), the nonbreaching party shall have the option to
terminate this Agreement with respect to such breaching party at the close of
business on the third business day following the date previously scheduled to be
the Closing Date subject to Section 1(a)(ii).
 
8. INDEMNIFICATION.
 
(i) In consideration of the Regulation D Purchasers’ execution and delivery of
the Regulation D Purchase Documents and the issuance of the Regulation D Notes
under the Indenture, and acquiring the Regulation D Notes hereunder and in
addition to all of the other obligations of the Company under this Agreement,
the Company, shall defend, protect, indemnify and hold harmless the Regulation D
Purchasers and the Regulation D Purchasers’ stockholders, partners, members,
officers, directors, employees and direct or indirect investors and any of the
foregoing Persons’ agents or other representatives, including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement (each, an “Indemnitee” and collectively, the “Indemnitees”), as
incurred, from and against any and all actions, causes of action, suits, claims,
losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”),
incurred by any Indemnitee as a result of, or arising out of, or relating to any
misrepresentation or breach of any representation or warranty made by the
Company in the Note Purchase Documents or any other certificate, instrument or
document contemplated hereby or thereby. To the extent that the foregoing
undertaking by each of the Parent and the Company may be unenforceable for any
reason, each of the Parent and the Company shall make the maximum contribution
to the payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law.
 
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(ii) Promptly after receipt by an Indemnitee under this Section 8 of notice of
any claim or the commencement of any action or proceeding (including any
governmental investigation), such Indemnitee will, if a claim for
indemnification in respect thereof is to be made against the Company, notify the
Company in writing of the commencement thereof; but the omission to so notify
will not relieve it from any liability which the Company may have to any
Indemnitee to the extent it is not materially prejudiced as a result thereof. In
case any such action or proceeding is brought against any Indemnitee, and it
notifies the Company of the commencement thereof, the Company will be entitled
to participate therein, and to the extent that it may elect, by written notice
delivered to such Indemnitee promptly after receiving the aforesaid notice from
such Indemnitee, to assume the defense thereof, with counsel reasonably
satisfactory to such Indemnitee; provided, however, that if the defendants
(including any impleaded parties) in any such action include both the Indemnitee
and the Company (as applicable) and the Indemnitee shall have reasonably
concluded that there may be legal defenses available to it and/or other
Indemnitees which are different from or additional to those available to the
Company, the Indemnitee or Indemnitees shall have the right to select separate
counsel to defend such action on behalf of such Indemnitee or Indemnitees. Upon
receipt of notice from the Company to such Indemnitee of its election to so
appoint counsel to defend such action and approval by the Indemnitee of such
counsel, the Company will not be liable to such Indemnitee under this Section 8
for any legal or other expenses subsequently incurred by such Indemnitee in
connection with the defense thereof unless: (A) the Indemnitee shall have
employed separate counsel in accordance with the proviso to the preceding
sentence (it being understood, however, that the Company shall not be liable for
the expense of more than one separate counsel (in addition to any local
counsel), approved by the Indemnitee representing the Indemnitees who are
parties to such action); (B) the Company shall not have employed counsel
reasonably satisfactory to the Indemnitee to represent the Indemnitee within a
reasonable time after notice or commencement of the action; (C) the Company has
authorized the employment of counsel for the Indemnitee at the expense of the
Company; or (D) the use of counsel chosen by the Company to represent the
Indemnitee would present such counsel with a conflict of interest.
 
(iii) The Company will not without the prior written consent of the Indemnitees,
settle or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
Indemnitees are actual or potential parties to such claim or action) unless such
settlement, compromise or consent includes an unconditional release of each
Indemnitee from all liability arising out of such claim, action, suit or
proceeding and does not include an admission of guilt of, or failure to act by,
the Indemnitee, or include any injunctive relief against any Indemnitee. Neither
the Company nor the Parent shall be liable for any settlement, compromise or the
consent to the entry of judgment in connection with any such action effected
without its written consent, but if settled with its written consent or if there
be a final judgment for the plaintiff in any such action other than a judgment
entered with the consent of such Indemnitee, or the Company shall indemnify and
hold harmless any Indemnitee from and against any loss or liability by reason of
such settlement or judgment.
 
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(iv) Each Indemnitee shall furnish such information regarding itself or the
claim in question as the Company may reasonably request in writing and as shall
be reasonably required in connection with the defense of such claim and
litigation arising therefrom.
 
(v) Notwithstanding anything to the contrary herein, the rights and remedies
provided in this Section 8 are the sole rights with respect to the transactions
contemplated by this Agreement and no party hereto shall make any other claim
for costs, damages of expenses (including fees and expenses of attorneys,
consultants, experts or other representatives) to any fine of or penalty on or
any liability of any other nature or otherwise, under, arising out of or
relating to this Agreement, or the transactions contemplated hereby, whether
based on contract, tort, strict liability, other laws or otherwise.
 
(vi) Notwithstanding anything to the contrary herein, the provisions of this
Section 8 are intended solely for the benefit of the Regulation D Purchasers and
not for the benefit of, nor may any provision hereby be enforced by, any other
Person.
 
(vii) No indemnification will or may be sought under this Section 8, by any
Person who would have been entitled to indemnification under this Section 8 two
years after the date of this Agreement.
 
9. MISCELLANEOUS.
 
(a) Notices. Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with an overnight
courier service, in each case properly addressed to the party to receive the
same. The addresses and facsimile numbers for such communications shall be:
 
If to the Company:
 
Energy XXI Gulf Coast, Inc.
Suite 2626
1021 Main
Houston, Texas 77002
Facsimile: 713-351-3300
Attn: David West Griffin, Director
 
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Copy to:
 
Vinson & Elkins LLP
First City Tower
1001 Fannin Street
Suite 2500
Houston, Texas 77002-6760
Facsimile: 713-758-2346
Attn: T. Mark Kelly, Esq.
 
and if to the Regulation D Purchasers, to the applicable address and facsimile
number set forth on Annex A hereto, or to such other address and/or facsimile
number and/or to the attention of such other Person as the recipient party has
specified by written notice given to each other party prior to the effectiveness
of such change. Written confirmation of receipt (A) given by the recipient of
such notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender’s facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by an overnight courier service shall be rebuttable
evidence of personal service, receipt by facsimile or receipt from an overnight
courier service in accordance with clause (A), (B) or (C) above, respectively.
 
(b) Governing Law; Jurisdiction; Jury Trial. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York. Any
legal suit, action or proceeding arising out of or based upon this Agreement or
the transactions contemplated hereby may be instituted in the federal courts of
the United States of America located in the Borough of Manhattan in the City of
New York or the courts of the State of New York in each case located in the
Borough of Manhattan in the City of New York. Each party hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereby irrevocably
waives any right it may have, and agrees not to request, a jury trial for the
adjudication of any dispute hereunder or in connection with or arising out of
this Agreement or any transaction contemplated hereby.
 
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(c) Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns; provided
that no party shall assign any of its rights or obligations hereunder without
the prior written consent of the other party.
 
(d) Survival. Unless this Agreement is terminated under Section 7, the
representations and warranties of the parties hereto contained in Sections 2 and
3, respectively, and the agreements and covenants set forth in Sections 4 and 8
shall survive the Closing.
 
(e) Headings. The headings of this Agreement are for convenience of reference
and shall not form part of, or affect the interpretation of, this Agreement.
 
(f) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected, impaired or invalidated, and the parties hereto shall use
their best efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
 
(g) Entire Agreement. This Agreement and the Escrow Agreement constitutes the
entire agreement of the parties to this Agreement and supersedes all prior
written or oral and all contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof.
 
(h) Amendment. This Agreement may not be amended or modified unless in writing
by all of the parties hereto, and no condition herein (express or implied) may
be waived unless waived in writing by each party whom the condition is meant to
benefit. The failure by any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof. Any amendment to this Agreement made in
conformity with the provisions of this Section 8(i) shall be binding on the
Regulation D Purchasers and all holders of the Regulation D Notes purchased
under this Agreement, as applicable.
 
(i) Counterparts. This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party; provided, that a facsimile signature shall be
considered due execution and shall be binding upon the signatory thereto with
the same force and effect as if the signature were an original, not a facsimile
signature.
 
(j) Further Assurances. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as any other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
 
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(k) No Third Party Beneficiaries. This Agreement is intended for the benefit of
the parties hereto and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person; provided, however, that each of the Placement Agents may rely upon
Sections 1, 2, 3, and 4 hereof as if such representations, warranties,
agreements and covenants, as applicable, were made directly to the Placement
Agents. The parties further agree that the Placement Agents may rely on or, if
the Placement Agents so requests, be specifically named as an addressee of, the
legal opinions to be delivered pursuant to Section 6(e) of this Agreement.
 
(l) Limitation on Duties of Closing Agent and Placement Agents; Exculpation.
Each party hereto agrees for the express benefit of each of the Closing Agent
and the Placement Agents, their respective affiliates and their respective
representatives that:
 
(i) Neither the Closing Agent, nor any of its respective affiliates or any of
their representatives has any duties or obligations other than those
specifically set forth herein.
 
(ii) None of the Closing Agent, the Placement Agents nor any of their respective
affiliates or respective representatives (1) shall be liable for any improper
payment made in accordance with the information provided by the Company; (2)
makes any representation or warranty, or has any responsibilities as to the
validity, accuracy, value or genuineness of any information, certificates or
documentation delivered by or on behalf of the Company pursuant to this
Agreement, the Placement Agency Agreement or the other Transaction Documents or
in connection with any of the transactions contemplated hereby or thereby,
including any information in the Preliminary CIM or the CIM or (3) shall be
liable (x) for any action taken, suffered or omitted by any of them in good
faith and reasonably believed to be authorized or within the discretion or
rights or powers conferred upon it by this Agreement, the Placement Agency
Agreement or any other Transaction Document or (y) for anything that any of them
may do or refrain from doing in connection with this Agreement, the Placement
Agency Agreement or any other Transaction Document, except for such party’s own
gross negligence, willful misconduct or bad faith.
 
(iii) Each of the Closing Agent, the Placement Agents, their respective
affiliates and their respective representatives shall be entitled to (1) rely
on, and shall be protected in acting upon, any certificate, instrument, opinion,
notice, letter or any other document or security delivered to any of them by or
on behalf of the Company, and (2) be indemnified by the Company for acting as
Placement Agent and Closing Agent, respectively, hereunder pursuant the
indemnification provisions set forth in the Placement Agency Agreement, which
hereby are incorporated by reference herein.
 
[SIGNATURE PAGE FOLLOWS]
 
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IN WITNESS WHEREOF, the parties hereto have caused their respective signature
page to this Regulation D Purchase Agreement to be duly executed as of         
, 2007.

        ENERGY XXI GULF COAST, INC.  
   
   
  By:   /s/ J. Granger Anderson III  

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Name: J. Granger Anderson III
Title: Vice President, Land
 

        ENERGY XXI (BERMUDA) LIMITED  
   
   
  By:   /s/ David West Griffin  

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Name: David West Griffin
Title: Chief Financial Officer
   

        ENERGY XXI TEXAS, LP  
   
   
  By:   /s/ J. Granger Anderson III  

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Name: J. Granger Anderson III
Title: Vice President, Land
 

        ENERGY XXI TEXAS GP, LLC  
   
   
  By:   /s/ J. Granger Anderson III  

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Name: J. Granger Anderson III
Title: Vice President, Land
 

        ENERGY XXI GOM, LLC  
   
   
  By:   /s/ J. Granger Anderson III  

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Name: J. Granger Anderson III
Title: Vice President, Land

 

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        PURCHASER  
   
   
   

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Insert name of Purchaser     By:      

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Name:
Title:
       
Address:

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Telephone:

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Fax: 

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Annex A
 
Registration Information
 
Legal Name Of Regulation D Purchaser:
______________________________________________________________
 
Aggregate principal amount of Regulation D Notes to be purchased by you:
$______________
(if special denominations required, please note)
 
Address Of Regulation D Purchaser:
_________________________________________________________________ 
 

  Attention: _________________________
Telephone Number:
Fax Number:
 
__________________________________
__________________________________
__________________________________
 

Nominee (Name in which the Regulation D Notes are to be registered, if different
than name of Regulation D Purchaser): ___________________________
 
Tax I.D. Number:
__________________________________

 
(If Acquired in the name of a nominee, the taxpayer I.D. number of such nominee)
 
Person To Receive Copies of Regulation D Purchase Documents 
 
Name:
Telephone Number:
Email:
__________________________________
__________________________________
__________________________________

 
Operations Contacts
Primary:
Telephone Number:
Email:
Secondary:
Telephone Number: 
Email:
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
__________________________________
 

Mail Payment Notices (if different than mailing address):

  __________________________________

 

  Attention: _________________________

Telephone Number: 
 
__________________________________
__________________________________
__________________________________
 
Fax Number: 
State of Principal Place of Business:
 
__________________________________
__________________________________
Custodian Information:
 
Name:
DTC Participant No. 
 
__________________________________
__________________________________
 
Physical Delivery Instructions:  

__________________________________

 

  Attention: _________________________
Telephone Number: 
__________________________________
__________________________________
Fax Number: 
__________________________________

 
Tax Withholding Form Attached (indicate type):
____________________________________________________
 
Wire Transfer Instructions for Payments to Regulation D Purchaser under the
Escrow Agreement: ____________________
 
Annex A-1

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Annex B

List of Subsidiaries of the Company

Energy XXI Texas, LP

Energy XXI Texas GP, LLC

Energy XXI GOM, LLC

Annex B-1

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Annex C
 
Opinion of Vinson & Elkins, as U.S. counsel for Parent and the Company, and
Appleby Hunter Bailhache, as Bermuda counsel for Parent, to be delivered
pursuant to Section 6(b) of the Purchase Agreement. [To be allocated among
counsel]
 
References to the Preliminary CIM in this Exhibit include any supplements
thereto at the Closing Date.
 
1. Each of the Company and the Guarantors is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
formation, with limited liability power and corporate power, as the case may be,
and authority to own, lease and operate its properties and to conduct its
business as described in the CIM and to enter into and perform its respective
obligations under the Regulation D Purchase Agreement, Escrow Agreement, the
Registration Rights Agreement and the Indenture (collectively the “Note Purchase
Documents”), as the case may be.
 
2. Each of the Company and the Guarantors has all necessary corporate power and
authority to execute and deliver the Note Purchase Documents, to perform its
obligations thereunder to issue the Regulation D Notes.
 
3. The Regulation D Purchase Agreement has been duly authorized, executed and
delivered by each of the Guarantors and the Company.
 
4. Each of the Indenture, Escrow Agreement, and the Registration Rights
Agreement has been duly authorized, executed and delivered by the Company and
each of the Guarantors, as the case may be, and constitutes a valid and binding
agreement of the Company and each of the Guarantors, as the case may be,
enforceable against the Company and each of the Guarantors, as the case may be,
in accordance with its terms. The Indenture is in sufficient form for
qualification under the Trust Indenture Act.
 
5. The Regulation D Notes, when executed, authenticated and issued in accordance
with the terms of the Indenture and delivered to and paid for by the Regulation
D Purchasers pursuant to the Purchase Agreement, will constitute valid and
binding obligations of the Company, entitled to the benefits of the Indenture,
enforceable against the Company in accordance with their terms.
 
6. The Guarantees, when the Regulation D Notes have been executed, authenticated
and issued in accordance with the terms of the Indenture and delivered to and
paid for by the Regulation D Purchasers pursuant to the Purchase Agreement, will
constitute valid and binding obligations of the Guarantors, entitled to the
benefits of the Indenture, enforceable against the Guarantors in accordance with
their terms.
 
7. The Exchange Notes and the related Guarantees have been duly authorized by
the Company and the Guarantors, as the case may be.
 
Annex C-1

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8. The execution and delivery of the Note Purchase Documents by Parent, the
Company and the subsidiaries of the Company, the performance by such companies
of their respective obligations thereunder, including the issuance and sale of
the Notes and the Guarantees, (i) will not result in any violation of the
provisions of the charter, by-laws or equivalent constituent documents of
Parent, the Company or any Guarantor; (ii) will not constitute a breach of, or
default or a Debt Repayment Triggering Event under, or result in the creation or
imposition of any security interest, mortgage, pledge, lien, charge, encumbrance
or adverse claim upon any property or assets of Parent, the Company or any
Guarantor, pursuant to any material Existing Instrument listed on identified on
the annexed schedule furnished to us by the Company, and which the Company has
represented lists all material agreements and instruments to which the Company
or any of its subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of the Company
or any of its subsidiaries is subject; (iii) will not result in any violation of
any federal, Delaware or New York law or, to the best knowledge of such counsel
any administrative regulation or administrative or court decree, applicable to
Parent, the Company or any of the subsidiaries of the Company; or (v) will not
require any consent, approval, authorization or other order of, or registration
(provided no opinion is given with respect to federal or state securities laws),
or filing with, any court or other governmental or regulatory authority or
agency, except (i) with respect to the transaction contemplated by the
Registration Rights Agreement and may be required under the Securities Act and
the Exchange Act, (ii) as required by federal or state securities or “blue sky”
laws and (iii) for such consents, approvals, authorizations, orders, filings or
registrations which have been obtained or made.
 
9. Assuming the accuracy of the representations and warranties of Parent, the
Company and the Regulation D Purchasers contained in the Purchase Agreement and
the compliance of such parties with the agreements set forth herein and therein,
it is not necessary, in connection with the issuance and sale of the Regulation
D Notes to the Regulation D Purchasers, in the manner contemplated by Note
Purchase Documents and the CIM, to register the initial sale of the Regulation D
Notes under the Securities Act or to qualify the Indenture under the Trust
Indenture Act it being understood no opinion is given with respect to subsequent
resales of the Regulation D Notes.
 
10. Neither the Parent nor the Company is, and after receipt of payment for the
Notes, will be, an “investment company” within the meaning of, and subject to
registration under, Investment Company Act. 
 
Annex C-2

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