exv4w5






Exhibit 4.5




AMENDED AND RESTATED SECURITY AGREEMENT




Dated as of August 28, 2008




among




STONE ENERGY CORPORATION




and the other Debtors parties hereto




in favor of




BANK OF AMERICA, N.A.,




as Administrative Agent




 









 





TABLE OF CONTENTS

(CONTINUED)




	 	 	 	 	 
	SECTION 1. DEFINITIONS
	 	 	1	 
	 
	1.1 Defined Terms
	 	 	1	 
	 
	1.2 Interpretation
	 	 	2	 
	 
	1.3 Certain Definitions
	 	 	2	 
	 
	 	 	 	 
	SECTION 2. GRANT OF SECURITY INTEREST
	 	 	6	 
	 
	2.1 Grant of Security Interest
	 	 	6	 
	 
	2.2 Avoidance Limitation
	 	 	7	 
	 
	2.3 Debtors Remain Liable
	 	 	7	 
	 
	 	 	 	 
	SECTION 3. REPRESENTATIONS AND WARRANTIES
	 	 	7	 
	 
	3.1 No Other Liens
	 	 	7	 
	 
	3.2 Perfected First-Priority Liens
	 	 	8	 
	 
	3.3 Debtor’s Legal Name; Jurisdiction of Organization; Chief Executive Office
	 	 	8	 
	 
	3.4 Certain Collateral
	 	 	8	 
	 
	3.5 Investment Property
	 	 	8	 
	 
	 	 	 	 
	SECTION 4. COVENANTS AND AGREEMENTS
	 	 	9	 
	 
	4.1 Maintenance of Insurance
	 	 	9	 
	 
	4.2 Maintenance of Perfected Security Interest; Further Documentation;
Filing Authorization; Further Assurances; Power of Attorney
	 	 	9	 
	 
	4.3 Changes in Name, etc
	 	 	11	 
	 
	4.4 Pledged Securities
	 	 	11	 
	 
	4.5 Commercial Tort Claims
	 	 	12	 
	 
	 	 	 	 
	SECTION 5. LIMITATION ON PERFECTION OF SECURITY INTEREST
	 	 	13	 
	 
	 	 	 	 
	SECTION 6. REMEDIAL PROVISIONS
	 	 	13	 
	 
	6.1 General Interim Remedies
	 	 	13	 
	 
	6.2 Receivables, Chattel Paper, Instruments and Payment Intangibles
	 	 	13	 
	 
	6.3 Contracts
	 	 	14	 
	 
	6.4 Pledged Securities
	 	 	15	 
	 
	6.5 Foreclosure
	 	 	15	 
	 
	6.6 Application of Proceeds
	 	 	16	 
	 
	6.7 Waiver of Certain Rights
	 	 	16	 
	 
	6.8 Remedies Cumulative
	 	 	16	 
	 
	6.9 Reinstatement
	 	 	17	 






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TABLE OF CONTENTS

(CONTINUED)




	 	 	 	 	 
	SECTION 7. MISCELLANEOUS
	 	 	17	 
	 
	7.1 Amendments
	 	 	17	 
	 
	7.2 Notices
	 	 	17	 
	 
	7.3 No Waiver by Course of Conduct; Cumulative Remedies; No Duty
	 	 	17	 
	 
	7.4 Enforcement Expenses; Indemnification
	 	 	17	 
	 
	7.5 Successors and Assigns
	 	 	19	 
	 
	7.6 Set-Off
	 	 	19	 
	 
	7.7 Counterparts
	 	 	19	 
	 
	7.8 Severability
	 	 	19	 
	 
	7.9 Section Headings
	 	 	20	 
	 
	7.10 Integration; Direct Conflict
	 	 	20	 
	 
	7.11 GOVERNING LAW, WAIVER OF JURY TRIAL, ETC
	 	 	20	 
	 
	7.12 Additional Debtors
	 	 	22	 
	 
	7.13 Termination; Releases
	 	 	22	 
	 
	7.14 Amendment and Restatement; Confirmation of Liens
	 	 	23	 






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TABLE OF CONTENTS

(CONTINUED)




	 	 	 	 	 
	SCHEDULES
	 	 	 	 
	Schedule 3.3

	 	-
	 	Organization, Location, and Filing Information
	Schedule 3.4

	 	-
	 	Certain Collateral
	Schedule 3.5(a)

	 	-
	 	Pledged Securities
	Schedule 7.2

	 	-
	 	Debtors’ Addresses for Notice






	 	 	 	 	 
	ANNEXES
	 	 	 	 
	 
	 	 	 	 
	Annex I

	 	-
	 	Security Agreement Supplement







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AMENDED AND RESTATED SECURITY AGREEMENT




     This AMENDED AND RESTATED SECURITY AGREEMENT dated as of August 28, 2008 (this
“Agreement”), is among STONE ENERGY CORPORATION, a Delaware corporation (the
“Borrower”), any subsidiary of Borrower party hereto from time to time (the
“Subsidiaries”) (the Borrower and the Subsidiaries collectively being the
“Debtors”) and BANK OF AMERICA, N.A., in its capacity as administrative agent (in such
capacity, the “Agent”) for the benefit of the Secured Parties (as defined below).



INTRODUCTION




     A. Reference is made to the Amended and Restated Credit Agreement dated as of November 1, 2007
(as amended or otherwise modified from time to time, the “Existing Credit Agreement”) among
the Borrower, certain financial institutions which are or may become parties thereto, and the
Agent.



     B. The Existing Credit Agreement is being amended and restated in its entirety pursuant to
that certain Second Amended and Restated Credit Agreement dated as of August 28, 2008 (as amended,
restated, supplemented and otherwise modified from time to time, the “Credit Agreement”)
among the Borrower, certain financial institutions which are or may become parties thereto, and the
Agent.



     C. In connection with the Existing Credit Agreement, Borrower has previously executed and
delivered the Security Agreement dated as of November 1, 2007 (the “Existing Security
Agreement”) between the Borrower and the Agent.



     D. It is a condition precedent to the effectiveness of the Credit Agreement and the making of
Advances thereunder that the Debtors shall have entered into this Agreement, which shall amend and
restate the Existing Security Agreement, in order to secure the Borrower’s obligations under the
Credit Agreement, the obligations of the Subsidiaries under any Guaranty (as defined in the Credit
Agreement), and all other Secured Obligations (as defined below).



     In consideration of the credit and other direct and indirect benefits expected to be received
in connection with the Credit Agreement, including as a result of the shared identity of interest
as members of a combined group of companies, and for other good, valuable, and reasonably
equivalent consideration, each Debtor jointly and severally agrees with the Agent as follows:



SECTION 1.




DEFINITIONS




     1.1 Defined Terms. Terms defined above and elsewhere in this Agreement shall have
their specified meanings. Capitalized terms used herein but not defined herein shall have the
meanings specified by the Credit Agreement. All terms used herein and defined in the UCC shall
have the same definitions herein as specified therein.



 









 





     1.2 Interpretation. Where the context requires, terms relating to the Collateral or
any part thereof, when used in relation to a Debtor, shall refer to such Debtor’s Collateral or the
relevant part thereof. Each Debtor agrees to the terms and provisions of Section 1.2 and
1.3 of the Credit Agreement and such terms and provisions are incorporated herein for all
purposes.



     1.3 Certain Definitions. The following terms shall have the following meanings:



     “Chattel Paper” means all of each Debtor’s present and future chattel paper, including
electronic chattel paper.



     “Collateral” has the meaning specified in Section 2.1.



     “Collateral Account” means any deposit account with the Agent which is designated,
maintained, and under the control of the Agent in which the Agent has a security interest, and
which has been established pursuant to the provisions of this Agreement for the purposes described
in this Agreement, including collecting, holding, disbursing, or applying certain funds, all in
accordance with this Agreement.



     “Contracts” means all contracts, undertakings, or agreements (other than rights
evidenced by Chattel Paper, Documents or Instruments) to which any Debtor now or hereafter is
bound, or a party, beneficiary or assignee, in any event, including all such contracts,
undertakings, or agreements in or under which any Debtor may now or hereafter have any right, title
or interest, including any agreement relating to the terms of payment or the terms of performance
of any Receivable.



     “Copyrights” means all of the following now owned or hereafter acquired by any Debtor:
(a) all copyright rights in any work subject to the copyright laws of the United States or any
other country, whether as author, assignee, transferee or otherwise, and (b) all registrations and
applications for registration of any such copyright in the United States or any other country and
all extensions and renewals thereof, including registrations, recordings, supplemental
registrations and pending applications for registration in the United States Copyright Office.



     “Copyright Licenses” means any written agreement naming any Debtor as licensor or
licensee, granting any right under any Copyright, including, without limitation, the grant of
rights to manufacture, distribute, exploit and sell materials derived from any Copyright.



     “Deposit Accounts” means all deposit accounts now or hereafter held in the name of any
Debtor.



     “Document” means any document, including, without limitation, a bill of lading, dock
warrant, dock receipt, warehouse receipt or order for the delivery of goods, and also any other
document which in the regular course of business or financing is treated as adequately evidencing
that the person in possession of it is entitled to receive, hold and dispose of the document and
the goods it covers.



     “Equipment” means all of each Debtor’s present or future owned or leased fixtures and
equipment wherever located, including drilling platforms and rigs and remotely operated vehicles,
trenchers, and other equipment used by any Debtor for the provision of marine



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construction services, well operations services, oil and gas production services, or other
services, vehicles, motor vehicles, rolling stock, vessels, aircraft, and any manuals,
instructions, blueprints, computer software (including software that is imbedded in and part of the
equipment) and similar items which relate to the above, together with all parts thereof and all
accessions and additions thereto.



     “Equity” means shares of capital stock or a partnership, profits, capital or member
interest, or options, warrants or any other right to substitute for or otherwise acquire the
capital stock or a partnership, profits, capital or member interest of any Debtor.



     “Fixtures” means any fixture or fixtures now or hereafter owned or leased by any of
the Debtors, or in which any of the Debtors holds or acquires any other right, title or interest,
constituting “fixtures” under the UCC.



     “General Intangibles” means all general intangibles now owned or hereafter acquired by
any Debtor, including all right, title and interest that such Debtor may now or hereafter have in
or under any Contract, all payment intangibles, customer lists, Licenses, Copyrights, Trademarks,
Patents, and all applications therefor and reissues, extensions or renewals thereof, rights in
Intellectual Property, interests in partnerships, joint ventures and other business associations,
permits, trade secrets, software, data bases, data, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or Trademark License), all
rights and claims in or under insurance policies (including insurance for fire, damage, loss and
casualty, whether covering personal property, real property, tangible rights and intangible rights,
all liability, life, key man and business interruption insurance, and all unearned premiums),
uncertificated securities, rights to receive dividends, distributions, cash, Instruments and other
property in respect of or in exchange for pledged stock and Investment Property, rights or
indemnification.



     “Instruments” means all of each Debtor’s instruments, including all promissory notes
and other evidences of indebtedness, including intercompany instruments, other than instruments
that constitute, or are a part of a group of writings that constitute, Chattel Paper.



     “Intellectual Property” means all intellectual and similar property of any Debtor of
every kind and nature now owned or hereafter acquired by any Debtor, including inventions, designs,
Patents, Patent Licenses, Trademarks, Trademark Licenses, Copyrights, Copyright Licenses, domain
names and domain name registrations, trade secrets, confidential or proprietary technical and
business information, know-how or other data or information, software and databases and all
embodiments or fixations thereof and related documentation, registrations and franchises, licenses
for any of the foregoing and all license rights, and all additions, improvements and accessions to,
and books and records describing or used in connection with, any of the foregoing.



     “Investment Property” means all investment property now owned or hereafter acquired by
any Debtor, wherever located, including (i) all securities, whether certificated or uncertificated,
including stocks, bonds, interests in limited liability companies, partnership interests,
treasuries, certificates of deposit, and mutual fund shares; (ii) all securities entitlements of
any Debtor, including the rights of any Debtor to any securities account and the financial assets
held by a securities intermediary in such securities account and any free credit balance or other
money



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owing by any securities intermediary with respect to that account; (iii) all securities
accounts of any Debtor; (iv) all commodity contracts of any Debtor; and (v) all commodity accounts
held by any Debtor.



     “Inventory” means all of each Debtor’s present and future inventory, wherever located,
including inventory, merchandise, goods and other personal property that are held by or on behalf
of any Debtor for sale or lease or are furnished or are to be furnished under a contract of
service, or that constitute raw materials, work in process, finished goods, returned goods, or
materials or supplies of any kind, nature or description used or consumed or to be used or consumed
in such Debtor’s business or in the processing, production, packaging, promotion, delivery or
shipping of the same, including all supplies, and embedded software. “Inventory” shall also
include inventory in joint production with another person, inventory in which any Debtor has an
interest as consignor, and inventory that is returned to or stopped in transit by any Debtor, and
all combinations and products thereof.



     “Letter-of-Credit Rights” means all letter-of-credit rights now owned or hereafter
acquired by any Debtor, including rights to payment or performance under a letter of credit,
whether or not such Debtor, as beneficiary, has demanded or is entitled to demand payment or
performance.



     “Licenses” means any Patent License, Trademark License, Copyright License or other
license or sublicense to which any Debtor is a party, including any franchises, permits,
certificates, licenses, authorizations and the like and any other requirements of any government or
any commission, board, court, agency, instrumentality or political subdivision thereof.



     “Liquid Assets” means all cash and cash equivalents at any time held by any of the
Debtors, including all amounts from time to time held in any checking, savings, deposit or other
account of any of the Debtors, all monies, proceeds or sums due or to become due therefrom or
thereon and all documents (including, but not limited to passbooks, certificates and receipts)
evidencing all funds and investments held in such accounts.



     “Patents” means all of the following now owned or hereafter acquired by any Debtor:
(a) all letters patent of the United States or any other country, all registrations and recordings
thereof, and all applications for letters patent of the United States or any other country,
including registrations, recordings and pending applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any State thereof, or any
other country, and (b) all reissues, continuations, divisions, continuations-in-part, renewals or
extensions thereof, and the inventions disclosed or claimed therein, including the right to make,
use and/or sell the inventions disclosed or claimed therein.



     “Patent License” means all agreements, whether written or oral, providing for the
grant by or to any Debtor of any right to manufacture, use or sell any invention covered in whole
or in part by a Patent.



     “Pledged Securities” means, with respect to each Debtor, (a) all Equity held by such
Debtor in any corporations or other entities (including, without limitation, those corporations or
other entities described in Schedule 3.5 that are directly held by such Debtor), together
with all



-4-









 







warrants to purchase, all depositary shares, and all other rights of such Debtor in respect of
such Equity, (b) all certificates, instruments or other documents evidencing such Equity and
registered or held in the name of, or otherwise in the possession of, such Debtor, and (c) all
present and future payments, dividend distributions, instruments, compensation, property, assets,
interests and rights in connection with or related to the Equity described in clause (a) above, and
all monies due or to become due and payable to such Debtor in connection with or related to such
Equity or otherwise paid, issued or distributed in respect of or in exchange therefor (including,
without limitation, all proceeds of dissolution or liquidation).



     “Proceeds” means all of each Debtor’s present and future (a) proceeds of the
Collateral, whether arising from the collection, sale, lease, exchange, assignment, licensing, or
other disposition of the Collateral, (b) any and all payments (in any form whatsoever) made or due
and payable from time to time in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of all or any part of the Collateral by any Governmental Authority (or any
person acting under authority from a Governmental Authority), (c) claims against third parties for
impairment, loss, damage, or impairment of the value of such Collateral, and (d) any and all
proceeds of, and all claims for, any insurance, indemnity, warranty or guaranty payable from time
to time with respect to any of the Collateral, including any credit insurance with respect to
Receivables, in each case whether represented as money, deposit accounts, accounts, general
intangibles, securities, instruments, documents, chattel paper, inventory, equipment, fixtures, or
goods.



     “Receivables” means all of each Debtor’s present and future accounts, accounts from
governmental agencies, instruments, and general intangibles, including those arising from the
provision of services to the customers of any Debtor, and rights to payment under all Contracts,
income tax refunds, and other rights to the payment of money, together with all of the right, title
and interest of any of the Debtors in and to (a) all security pledged, assigned, hypothecated or
granted to or held by any of the Debtors to secure the foregoing, (b) all of any of the Debtors’
right, title and interest in and to any goods or services, the sale of which gave rise thereto, (c)
all guarantees, endorsements and indemnifications on, or of, any of the foregoing, (d) all powers
of attorney granted to any of the Debtors for the execution of any evidence of indebtedness or
security or other writing in connection therewith, (e) all credit information, reports and
memoranda relating thereto, and (f) all other writings related in any way to the foregoing.



     “Records” means all of each Debtor’s present and future books, accounting records,
files, computer files, computer programs, correspondence, credit files, records, ledger cards,
invoices, and other records primarily related to any other items of Collateral, including without
limitation all similar information stored on a magnetic medium or other similar storage device and
other papers and documents in the possession or under the control of any of the Debtors or any
computer bureau from time to time acting for any of the Debtors.



     “Secured Obligations” means (a) the Obligations and (b) any increases, extensions,
renewals, replacements, and rearrangements of the foregoing obligations under any amendments,
supplements, and other modifications of the agreements creating the foregoing obligations, in each
case, whether direct or indirect, absolute or contingent.



-5-









 





     “Secured Parties” means the Banks, the holders of any Secured Obligations arising
under Specified Swap Contracts, the Issuing Bank, and the Agent.



     “State of Organization” means the jurisdiction of organization of each of the Debtors
as listed on Schedule 3.3, as the same may be changed in accordance with Section
4.4.



     “Supporting Obligations” means all supporting obligations, including letters of credit
and guaranties issued in support of Accounts, Chattel Paper, Documents, General Intangibles,
Instruments, or Investment Property.



     “Trademarks” means all of the following now owned or hereafter acquired by any Debtor:
all trademarks, service marks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, trade dress, logos, other source or business identifiers,
designs and general intangibles of like nature, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications filed in connection therewith, including
registrations and registration applications in the United States Patent and Trademark Office, any
State of the United States or any similar offices in any other country or any political subdivision
thereof, and all extensions or renewals thereof.



     “Trademark License” means any agreement, whether written or oral, providing for the
grant by or to any Debtor of any right to use any Trademark.



     “UCC” means the Uniform Commercial Code as in effect on the date hereof in the State
of Texas, as amended from time to time, and any successor statute.



SECTION 2.




GRANT OF SECURITY INTEREST




     2.1 Grant of Security Interest. Each Debtor hereby grants to the Agent, for the
benefit of the Secured Parties, a security interest in all of such Debtor’s right, title, and
interest in and to the following property (the “Collateral”) to secure the payment and
performance of the Secured Obligations: (a) all Chattel Paper, all Collateral Accounts, all
commercial tort claims, all Contracts, all Deposit Accounts, all Documents, all Equipment, all
Fixtures, all General Intangibles, all Instruments, all Intellectual Property, all Inventory, all
Investment Property (including without limitation the Pledged Securities), all Letter-of-Credit
Rights, all Liquid Assets, all Receivables, all Records, and all Supporting Obligations, (b) any
and all additions, accessions and improvements to, all substitutions and replacements for and all
products of or derived from the foregoing, and (c) all Proceeds of the foregoing.


To the extent that the Collateral is not subject to the UCC, each Debtor collaterally assigns all
of such Debtor’s right, title, and interest in and to such Collateral to the Agent for the benefit
of the Secured Parties to secure the payment and performance of the Secured Obligations to the full
extent that such a collateral assignment is possible under the relevant law.



Notwithstanding anything to the contrary in this Agreement, the term “Collateral” shall not include
(i) any lease, license, contract, property right or agreement (or any of its rights or interests
thereunder) if and to the extent that the grant of the security interest shall, after giving


-6-









 






effect to Sections 9.406, 9.407, 9.408 or 9.409 of the UCC (or any successor provision or
provisions) or any other applicable law, constitute or result in (A) the abandonment, invalidation
or unenforceability of any material right, title or interest of the applicable Debtor therein or
(B) a breach or termination pursuant to the terms of, or a default under, any such lease license,
contract, property rights or agreement; provided, however, that the security interest shall attach
immediately at any such time as the restriction resulting in abandonment, invalidation or
unenforceability or breach or termination shall be removed or become invalid or any condition
thereto (including any consent) shall be satisfied; (ii) once paid, any amounts constituting the
payment of a dividend or the repurchase or redemption of the shares of the Borrower’s common stock,
in each case to the extent such dividend, repurchase or redemption is permitted under Section
6.5 of the Credit Agreement; and (iii) Realty Collateral (as such term is defined in the
Mortgages).




     2.2 Avoidance Limitation. Notwithstanding Section 2.1 above, the amount of
any Secured Obligations that are secured by any Debtor’s rights in Collateral subject to a Lien in
favor of the Agent hereunder or under any other Security Document shall be limited to the extent,
if any, required so that the Liens it has granted under this Security Agreement shall not be
subject to avoidance under Section 548 of the Bankruptcy Code of the United States or to being set
aside or annulled under any Legal Requirement relating to fraud on creditors. In determining the
limitations, if any, on the amount of any Secured Obligations that are subject to the Lien on such
Debtor’s Collateral hereunder pursuant to the preceding sentence, it is the intention of the
parties hereto that any rights of subrogation or contribution which such Debtor may have under the
Guaranties, any other agreement or Legal Requirement shall be taken into account.



     2.3 Debtors Remain Liable. Anything herein to the contrary notwithstanding: (a) each
Debtor shall remain liable under the Contracts included in the Collateral to the extent set forth
therein to perform such Debtor’s obligations thereunder to the same extent as if this Agreement had
not been executed; (b) the exercise by the Agent of any rights hereunder shall not release any
Debtor from any obligations under the Contracts included in the Collateral; and (c) the Agent shall
not have any obligation under the Contracts included in the Collateral by reason of this Agreement,
nor shall the Agent be obligated to perform or fulfill any of the obligations of any Debtor
thereunder, including any obligation to make any inquiry as to the nature or sufficiency of any
payment any Debtor may be entitled to receive thereunder, to present or file any claim, or to take
any action to collect or enforce any claim for payment thereunder.



SECTION 3.




REPRESENTATIONS AND WARRANTIES




To induce the Banks to make Advances to the Borrower and to issue Letters of Credit for the account
of the Borrower under the Credit Agreement, each Debtor hereby represents and warrants to the
Agent, for the benefit of the Secured Parties, that:



     3.1 No Other Liens. Each Debtor owns each item of the Collateral free and clear of
any and all Liens or claims of others except for Permitted Liens. No financing statement or other
public notice with respect to all or any part of the Collateral is on file or of record in any
public office, except (i) such as have been filed in favor of the Agent, for the ratable benefit of
the



-7-









 







Secured Parties, pursuant to this Agreement or (ii) such as have been filed with respect to
Permitted Liens.



     3.2 Perfected First-Priority Liens. To the extent that the filing of a UCC financing
statement, or the “control” by Agent of a certificated security, can be effective to perfect a
security interest in the Collateral under the UCC, the security interests granted pursuant to this
Agreement (a) will, upon completion of the filing of UCC financing statements describing the
Collateral in the offices located in the jurisdictions listed on Schedule 3.3, the filing
of UCC fixture filings describing the Fixture Collateral (as defined in the Mortgages) in the
mortgage records of any parish where such Fixture Collateral is located, and the taking of all
applicable actions in respect of perfection contemplated by Section 4.4 in respect of
Collateral, constitute valid perfected security interests in the Collateral in favor of the Agent,
for the benefit of the Secured Parties, as collateral security for the Secured Obligations,
enforceable in accordance with the terms hereof against all creditors of such Debtor and any
Persons purporting to purchase any Collateral from such Debtor and (b) are prior to all other Liens
on the Collateral except for Permitted Liens.



     3.3 Debtor’s Legal Name; Jurisdiction of Organization; Chief Executive Office. Each
Debtor’s exact legal name is set forth on the signature page hereof, and from and after an
amendment or modification thereto, on a written notification delivered to the Agent pursuant to
Section 4.4. Except as set forth in Schedule 3.3, such Debtor has not conducted business
under any name other than its current name during the last five years prior to the date of this
Agreement. On the date hereof, such Debtor’s jurisdiction of organization, type of organization,
identification number from the jurisdiction of organization (if any), and the location of such
Debtor’s chief executive office or sole place of business or principal residence, as the case may
be, are specified on Schedule 3.3.



     3.4 Certain Collateral. Except as set forth on Schedule 3.4,



          (a) none of the Collateral constitutes, or is the Proceeds of, farm products and none of the
Collateral has been purchased for, or will be used by any Debtor primarily for personal, family or
household purposes;




          (b) such Debtor holds no commercial tort claims with a value in excess of $2,500,000;




          (c) such Debtor holds no interest in, title to or power to transfer, any material Patents,
material Trademarks, or material Copyrights;




          (d) such Debtor holds no interest in, title to or power to transfer any material Intellectual
Property that is registered or for which an application has been filed in the United States Patent
and Trademark Office or the United States Copyright Office;




          (e) such Debtor owns no (i) certificated vehicles with an aggregate value greater than
$500,000 or (ii) vessels, railcars, or aircraft.




     3.5 Investment Property.




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          (a) Each Debtor is the legal and beneficial owner of the Pledged Securities as set forth on
Schedule 3.5(a). The Pledged Securities have been duly authorized, validly issued and are
fully paid and non-assessable and are not subject to any limitations to purchase or similar rights
by any person, and none of the Pledged Securities constitutes margin stock (within the meaning of
Regulation U issued by the FRB). Except as set forth on Schedule 3.5(a), the Pledged
Securities constitute all of the issued and outstanding Equity of each of the respective issuers
thereof and no such issuer has any obligation to issue any additional Equity or rights or options
thereto.




          (b) Except (x) as may be required in connection with any disposition of any portion of the
Pledged Securities by laws affecting the offering and sale of securities generally, and (y) the
filing of UCC financing statements as contemplated by Section 3.2, no consent of any Person
and no license, permit, approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any Governmental Authority is required in connection with
(i) the execution, delivery, performance, validity or enforceability of this Agreement, (ii) the
perfection or maintenance of the security interest created hereby (including the first-priority
nature thereof), or (iii) the exercise by the Agent of the rights provided for in this Agreement.




          (c) Such Debtor is the record and beneficial owner of, and has good title to the Investment
Property pledged by it hereunder, free of any and all Liens or options in favor of, or claims of,
any other Person, except the security interest created by this Agreement and other Permitted Liens.




SECTION 4.




COVENANTS AND AGREEMENTS



Each Debtor covenants and agrees with the Agent and the Secured Parties that, from and after the
date of this Agreement until this Agreement terminates in accordance with Section 7.13(a):




     4.1 Maintenance of Insurance. Such Debtor will comply with the provisions of the
Credit Agreement governing the maintenance of insurance for any of its assets constituting
Collateral.



     4.2 Maintenance of Perfected Security Interest; Further Documentation; Filing
Authorization; Further Assurances; Power of Attorney.



          (a) Subject to Section 5, such Debtor shall maintain the security interest created by
this Agreement in the Collateral as a perfected first-priority security interest subject only to
Permitted Liens and shall defend such security interest against the claims and demands of all
Persons whomsoever other than Persons holding such Permitted Liens.




          (b) Such Debtor will furnish to the Agent from time to time statements and schedules further
identifying and describing the assets and property of such Debtor and such other reports in
connection with the Collateral as the Agent may reasonably request, all in reasonable detail.




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          (c) Subject in each case to Section 5, each Debtor further agrees to take any other
action reasonably requested by the Agent to insure the attachment, perfection and priority of, and
the ability of the Agent to enforce, the security interest in any and all of the Collateral
including, without limitation, (i) executing, delivering and, where appropriate, filing financing
statements and amendments relating thereto under the UCC, to the extent, if any, that any Debtor’s
signature thereon is required therefor; and (ii) complying with any provision of any statute, law,
regulation or treaty of the United States or any other country, including the UCC of any applicable
jurisdictions, as to any Collateral if compliance with such provision is a condition to the
attachment, perfection or priority of, or the ability of the Agent to enforce, the security
interest in such Collateral.




          (d) Each Debtor hereby irrevocably authorizes the Agent at any time and from time to time to
file in any applicable jurisdiction in which the Uniform Commercial Code has been adopted and is in
effect any initial financing statements and amendments thereto that (a) indicate the Collateral (i)
as all assets of each Debtor or words of similar effect, or (ii) as being of an equal or lesser
scope or with greater detail, and (b) contain any other information required by the UCC for the
sufficiency or filing office acceptance of any initial financing statement or amendment. Each
Debtor agrees to furnish any such information to the Agent promptly upon request. Each Debtor also
ratifies its authorization for the Agent to have filed in any Uniform Commercial Code jurisdiction
any like initial financing statements or amendments thereto if filed prior to the date hereof.




          (e) During the existence of an Event of Default,





          (i) At the Agent’s request, each Debtor shall take any actions reasonably requested by
the Agent with respect to such Event of Default, including diligently endeavoring to cure
any material defect existing or claimed, and taking all reasonably necessary and desirable
steps for the defense of any legal proceedings, including the employment of counsel, the
prosecution or defense of litigation, and the release or discharge of all adverse claims;




          (ii) The Agent, whether or not named as a party to any legal proceedings, is authorized
to take any additional steps as the Agent deems necessary or desirable for the defense of
any such legal proceedings or the protection of the validity or priority of this Agreement
and the security interests, collateral assignments, and other Liens created hereunder,
including the employment of independent counsel, the prosecution or defense of litigation,
the compromise or discharge of any adverse claims made with respect to any Collateral and
the payment or removal of prior liens or security interests, and the reasonable expenses of
the Agent in taking such action shall be paid by the Debtors; and




          (iii) Each Debtor agrees that, if such Debtor fails to perform under this Agreement or
any other Credit Document to which such Debtor is a party, the Agent may, but shall not be
obligated to, perform such Debtor’s obligations under this Agreement or such other Credit
Document, and any reasonable expenses incurred by the Agent in performing such Debtor’s
obligations shall be paid by such Debtor. Any such performance by the Agent may be made by
the Agent in reasonable reliance on any



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statement, invoice, or claim, without inquiry into the validity or accuracy thereof.
The amount and nature of any expense of the Agent hereunder shall be conclusively
established by a certificate of any officer of the Agent absent manifest error, and such
amount shall be included in the Secured Obligations.



          (f) Each Debtor irrevocably appoints the Agent as such Debtor’s attorney in fact, with full
authority to act during the existence of an Event of Default, for such Debtor and in the name of
such Debtor, to take any action and execute any agreement which the Agent deems necessary or
advisable to accomplish the purposes of this Agreement, including the actions that Agent is
expressly authorized to take pursuant to this Agreement (including pursuant to paragraph (e)
above), and instituting proceedings the Agent deems necessary or desirable to enforce the rights of
the Agent with respect to this Agreement.




     4.3 Changes in Name, etc. Such Debtor will not, except upon 30 days’ prior written
notice to the Agent or such lesser period to which the Agent may agree in writing, (a) change its
type of organization, jurisdiction of organization or other legal structure from that referred to
in Section 3.3, (b) change its organizational number if it has one, or (c) change its name.
Promptly following such notice to the Agent and before taking any action described in clause (a),
(b), or (c) above, such Debtor shall deliver to the Agent all additional approved or executed
financing statements and other executed documents reasonably requested by the Agent to maintain the
validity, perfection, and priority of the security interests provided for or required herein.



     4.4 Pledged Securities. With respect to Pledged Securities:



          (a) If any Debtor shall at any time own or acquire any Pledged Securities which are
certificated securities, whether as a stock split, stock dividend, or other distribution with
respect to Pledged Securities, or otherwise, such Debtor shall promptly, and in any event within
ten (10) Business Days after receipt thereof, deliver the same to the Agent, accompanied by such
instruments of transfer or assignment duly executed in blank as the Agent may from time to time
specify. If any Pledged Securities now owned or hereafter acquired by any Debtor are
uncertificated securities and are issued to such Debtor or its nominee directly by the issuer
thereof, such Debtor shall immediately notify the Agent thereof, and shall take any actions
requested by the Agent to enable the Agent to obtain “control” (within the meaning of Section 8-106
of the UCC) with respect thereto.




          (b) So long as no Event of Default has occurred and is continuing, each Debtor shall be
entitled:





          (i) to exercise, in a manner not inconsistent with the terms hereof, the voting power
with respect to the Pledged Securities of such Debtor, and for that purpose the Agent shall
(if any Pledged Securities shall be registered in the name of the Agent or its nominee)
execute or cause to be executed from time to time, at the expense of the Borrower, such
proxies or other instruments in favor of such Debtor or its nominee, in such form and for
such purposes as shall be reasonably requested by such Debtor, to enable it to exercise such
voting power with respect to the Pledged Securities; and



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          (ii) except as otherwise provided herein or in the Credit Agreement, to receive and
retain for its own account any and all payments, proceeds, dividends, distributions,
property, assets, or rights to the extent such are permitted pursuant to the terms of the
Credit Agreement.



          (c) Upon the occurrence and during the continuation of any Event of Default, all rights of
each Debtor to exercise or refrain from exercising the voting and other consensual rights that it
would otherwise be entitled to exercise pursuant to Section 4.4(b) and to receive the
payments, proceeds, dividends, distributions, property, assets, or rights that the Debtor would
otherwise be authorized to receive and retain pursuant to Section 4.4(b) shall cease, and
thereupon the Agent shall be entitled to exercise all voting power with respect to the Pledged
Securities and to receive and retain, as Collateral hereunder, any and all payments, proceeds,
dividends, distributions, property, assets, or rights at any time declared or paid upon any of the
Pledged Securities during such an Event of Default and otherwise to act with respect to the Pledged
Securities to the same extent as the applicable Debtor would have been, absent application of this
clause (c).




          (d) All payments, proceeds, dividends, distributions, property, assets, instruments or rights
that are received by each Debtor contrary to the provisions of this Section 4.4 shall be
received and held in trust by such Debtor for the benefit of the Agent, shall be segregated by each
Debtor from other funds of such Debtor and shall be forthwith paid over to the Agent as Pledged
Securities in the same form as so received (with any necessary endorsement).




          (e) If such Debtor is an issuer of Pledged Securities, such Debtor agrees that (i) it will be
bound by the terms of this Agreement relating to the Pledged Securities issued by it and will
comply with such terms insofar as such terms are applicable to it and (ii) it will comply with
instructions received by it pursuant to the terms of Section 4.4(f) with respect to the
Pledged Securities issued by it.




          (f) Each Debtor hereby authorizes and instructs each issuer of any Pledged Securities pledged
by such Debtor hereunder to (i) comply with any instruction received by it from the Agent in
writing that (x) states that an Event of Default has occurred and is continuing and (y) is
otherwise in accordance with the terms of this Agreement, without any other or further instructions
from such Debtor, and each Debtor agrees that each such issuer shall be fully protected in so
complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other
payments with respect to the Pledged Securities directly to the Agent.




     4.5 Commercial Tort Claims. If any Debtor shall at any time hold or acquire a
commercial tort claim with a value in excess of $2,500,000, such Debtor shall promptly notify the
Agent in a writing signed by such Debtor of the brief details thereof and grant to the Agent in
such writing a security interest therein and in the proceeds thereof, all upon the terms of this
Security Agreement, with such writing to be in form and substance satisfactory to the Agent.
Notwithstanding the foregoing, any such security interest in commercial tort claims shall, prior to
the occurrence (and after the waiver or cure) of an Event of Default (and during the continuation
of an Event of Default unless the Agent has demanded the attachment of such



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security interest thereto), not be required to attach to the extent the value of any such
commercial tort claim does not exceed $2,500,000.



SECTION 5.




LIMITATION ON PERFECTION OF SECURITY INTEREST



Notwithstanding anything to the contrary contained above, the perfection of the security interest
granted in Section 2 above (except with respect to Deposit Accounts, Letter of Credit
Rights and certificated Pledged Securities) will, prior to the occurrence (and after the waiver or
cure) of an Event of Default (and during the continuation of an Event of Default unless the Agent
has required that further actions are taken with respect to the perfection thereof), be effected
solely by filing an appropriate financing statement under the applicable Uniform Commercial Code.
The perfection of the security interest granted in Section 2 above in certificated Pledged
Securities will be effected by filing an appropriate financing statement under the applicable
Uniform Commercial Code and by possession by the Agent of the certificates representing such
Pledged Securities, accompanied by such instruments of transfer or assignment duly executed in
blank as the Agent may from time to time specify.




SECTION 6.




REMEDIAL PROVISIONS



During the existence of an Event of Default, the Agent may, at the Agent’s option, exercise one or
more of the remedies specified elsewhere in this Agreement or the following remedies:




     6.1 General Interim Remedies. During the existence of an Event of Default, the Agent
may exercise one or more of the following remedies:



          (a) To the extent permitted by law, the Agent may exercise all the rights and remedies of a
secured party under the UCC.




          (b) The Agent may prosecute actions in equity or at law for the specific performance of any
covenant or agreement herein contained or in aid of the execution of any power herein granted or
for the enforcement of any other appropriate legal or equitable remedy.




          (c) The Agent may require any Debtor to promptly assemble any tangible Collateral of such
Debtor and make it available to the Agent at a place to be designated by the Agent. The Agent may
occupy any premises owned or leased by any Debtor where the Collateral is assembled for a
reasonable period in order to effectuate the Agent’s rights and remedies hereunder or under law,
without obligation to any Debtor with respect to such occupation.




     6.2 Receivables, Chattel Paper, Instruments and Payment Intangibles. During the
existence of an Event of Default, the Agent may establish one or more Collateral Accounts for the
purpose of collecting the payments due to the Debtors under any Contracts or otherwise with respect
to the Receivables, Chattel Paper, Instruments and/or payment intangibles constituting Collateral
and holding the proceeds thereof, and may, or may direct the Debtors to, instruct all



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makers and/or all obligors with respect thereto to make all payments with respect to such
Collateral directly to the Agent for deposit into the Collateral Accounts designated by the Agent.
After such direction to the Debtors, all payments, whether of principal, interest, or other
amounts, under any Contracts or otherwise with respect to the Receivables, Chattel Paper,
Instruments and/or payment intangibles constituting Collateral shall be directed to the appropriate
Collateral Account. All such payments which may from time to time come into the possession of any
Debtor shall be held in trust for the Agent, segregated from the other funds of such Debtor, and
delivered to the Agent immediately in the form received with any necessary endorsement for deposit
into the appropriate Collateral Account, such delivery in no event to be later than one Business
Day after receipt thereof by the applicable Debtor. Each Debtor agrees to execute any documents
reasonably requested by the Agent to create any Collateral Account and pledge it to the Agent. In
connection with the foregoing, the Agent shall have the right at any time during the existence of
an Event of Default to take any of the following actions, in the Agent’s own name or in the name of
the applicable Debtor: compromise or extend the time for payment of any payments due with respect
to any Instrument or Chattel Paper upon such terms as the Agent may reasonably determine; endorse
the name of the applicable Debtor, on checks, instruments, or other evidences of payment with
respect to any such Collateral; make written or verbal requests for verification of amount owing on
any such Collateral from the maker thereof or obligor thereunder; open mail addressed to such
Debtor which the Agent reasonably believes relates to any such Collateral, and, to the extent of
checks or other payments with respect to any such Collateral, dispose of the same in accordance
with this Agreement; take action in the Agent’s name or the applicable Debtor’s name, to enforce
collection of such checks and other payments; and take all other action necessary to carry out this
Agreement and give effect to the Agent’s rights hereunder. Costs and expenses incurred by the
Agent in collection and enforcement of amounts owed under any Contracts or otherwise with respect
to the Receivables, Chattel Paper, Instruments and/or payment intangibles constituting Collateral,
including attorneys’ fees and out-of-pocket expenses, shall be reimbursed by the applicable Debtor
to the Agent on demand.



     6.3 Contracts. During the existence of an Event of Default, the Agent may, at its
option, exercise one or more of the following remedies with respect to the Contracts that
constitute Collateral:



          (a) (i) take any action permitted under Section 6.2 and (ii) in the place and stead of
the applicable Debtor, exercise any other rights of such Debtor under such Contracts in accordance
with the terms thereof. Without limitation of the foregoing, each Debtor agrees that under the
foregoing circumstances, the Agent may give notices, consents and demands and make elections under
such Contracts, modify or waive the terms of such Contracts and enforce such Contracts, in each
case, to the same extent and on the same terms as such Debtor might have done. It is understood
and agreed that notwithstanding the exercise of such rights and/or the taking or such actions by
the Agent, such Debtor shall remain liable for performance of its obligations under such Contracts;




          (b) upon receipt by the Agent of notice from any counterparty to any such Contract of such
Person’s intent to terminate such Contract, the Agent shall be entitled to (i) cure or cause to be
cured the condition giving rise to such Person’s right of termination of such



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Contract, or (ii) acquire and assume (or assign and cause the assumption by a third party of)
the rights and obligations of the applicable Debtor under such Contract; and




          (c) upon termination of any Contract by operation of law or otherwise, the Agent shall be
entitled to enter into a new agreement (“Successor Agreement”) with the counterparty to
such terminated Contract, on the same terms and with the same provisions as such terminated
Contract. Each Debtor agrees that such Debtor shall have no rights whatsoever with respect to any
Successor Agreement.




     6.4 Pledged Securities.



          (a) Each Debtor recognizes that the Agent may be unable to effect a public sale of any or all
the Pledged Securities, by reason of certain prohibitions and registration requirements contained
in the Securities Act and applicable state securities laws or otherwise, and may be compelled to
resort to one or more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own account for
investment and not with a view to the distribution or resale thereof. Each Debtor acknowledges and
agrees that any such private sale may result in prices and other terms less favorable than if such
sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale
shall be deemed to have been made in a commercially reasonable manner. The Agent shall be under no
obligation to delay a sale of any of the Pledged Securities for the period of time necessary to
permit the issuer thereof to register such securities for public sale under the Securities Act, or
under applicable state securities laws, even if such issuer would agree to do so.




          (b) Each Debtor agrees to use its best efforts to do or cause to be done all such other acts
(other than preparation and filing of a registration statement) as may be necessary to make such
sale or sales of all or any portion of the Pledged Securities pursuant to this Section 6.4
valid and binding and in compliance with any and all other applicable Legal Requirements. Each
Debtor further agrees that a breach of any of the covenants contained in this Section 6.4
will cause irreparable injury to the Agent and the Secured Parties, that the Agent and the Secured
Parties have no adequate remedy at law in respect of such breach and, as a consequence, that each
and every covenant contained in this Section 6.4 shall be specifically enforceable against
such Debtor, and such Debtor hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no Event of Default has
occurred.




     6.5 Foreclosure.



          (a) During the existence of an Event of Default, the Agent may foreclose on the Collateral in
any manner permitted by the courts of or in the State of Texas or the jurisdiction in which any
Collateral is located. If the Agent should institute a suit against any Collateral or any Debtor
for the collection of the Secured Obligations and for the foreclosure of this Agreement, the Agent
may at any time before the entry of a final judgment dismiss the same, and take any other action
permitted by this Agreement.




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          (b) To the extent permitted by law, the Agent may exercise all the foreclosure rights and
remedies of a secured party under the UCC during the existence of an Event of Default. In
connection therewith, the Agent may sell any Collateral at public or private sale, at the office of
the Agent or elsewhere, for cash or credit and upon such other terms as the Agent deems
commercially reasonable. The Agent may sell any Collateral at one or more sales, and the security
interest granted hereunder shall remain in effect as to the unsold portion of the Collateral. Each
Debtor agrees that to the extent permitted by law such sales may be made without notice. If notice
is required by law, each Debtor hereby deems ten days advance notice of the time and place of any
public or private sale reasonable notification, recognizing that if any portion of the Collateral
is perishable or threatens to decline speedily in value or is of a type customarily sold on a
recognized market, shorter notice may be reasonable. The Agent shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given. The Agent may adjourn any sale
by announcement at the time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was adjourned. In the event that any sale hereunder is not
completed or is defective in the opinion of the Agent, the Agent shall have the right to cause
subsequent sales to be made hereunder. Any statements of fact or other recitals made in any bill
of sale, assignment, or other document representing any sale hereunder, including statements
relating to the occurrence of an Event of Default, acceleration of the Secured Obligations, notice
of the sale, the time, place, and terms of the sale, and other actions taken by the Agent in
relation to the sale may be conclusively relied upon by the purchaser at any sale hereunder. The
Agent may delegate to any agent the performance of any acts in connection with any sale hereunder,
including the sending of notices and the conduct of the sale.




     6.6 Application of Proceeds. Unless otherwise specified herein, any cash proceeds
received by the Agent from the sale of, collection of, or other realization upon any part of the
Collateral or any other amounts received by the Agent hereunder may be, at the reasonable
discretion of the Agent (i) held by the Agent in one or more Cash Collateral Accounts as cash
collateral for the Secured Obligations or (ii) applied in the order specified in Section
7.7 of the Credit Agreement.



     6.7 Waiver of Certain Rights. To the full extent each Debtor may do so under
applicable law, such Debtor shall not insist upon, plead, claim, or take advantage of any law
providing for any appraisement, valuation, stay, extension, or redemption, and such Debtor hereby
waives and releases the same, and all rights to a marshaling of the assets of such Debtor,
including the Collateral of such Debtor, or to a sale in inverse order of alienation in the event
of foreclosure of the liens and security interests hereby created. Such Debtor shall not assert
any right under any law pertaining to the marshaling of assets, sale in inverse order of
alienation, the administration of estates of decedents or other right to defeat, reduce, or
otherwise adversely affect in any respect the rights of the Agent under the terms of this
Agreement.



     6.8 Remedies Cumulative. The Agent’s remedies under this Agreement and the Credit
Documents to which any Debtor is a party shall be cumulative, and no delay in enforcing this
Agreement and the Credit Documents to which any Debtor is a party shall act as a waiver of the
Agent’s rights hereunder.



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     6.9 Reinstatement. The obligations of each Debtor under this Agreement shall continue
to be effective or automatically be reinstated, as the case may be, if at any time payment of any
of the Secured Obligations is rescinded or otherwise must be restored or returned by the Agent upon
the insolvency, bankruptcy, dissolution, liquidation or reorganization of any Debtor or any other
obligor or otherwise, all as though such payment had not been made.



SECTION 7.




MISCELLANEOUS




     7.1 Amendments. None of the terms or provisions of this Agreement may be waived,
amended, supplemented or otherwise modified except in accordance with Section 9.1 of the
Credit Agreement. No consent of any holder of Secured Obligations arising under a Specified Swap
Contract (except in such Person’s capacity as a Bank, if applicable) shall be required for any
waiver, amendment, supplement or other modification to this Agreement.



     7.2 Notices. All notices, requests and demands to or upon the Agent or any Debtor
hereunder shall be effected in the manner provided for in Section 9.2 of the Credit
Agreement. All notices, requests and demands hereunder to any Debtor shall be given to it at its
address or telecopy number provided on Schedule 7.2 or at such other address in the United
States as may be specified by such Debtor in a written notice delivered to the Agent in accordance
with Section 9.2 of the Credit Agreement.



     7.3 No Waiver by Course of Conduct; Cumulative Remedies; No Duty. No failure to
exercise, nor any delay in exercising, on the part of the Agent, any right, power or privilege
hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. A waiver by the Agent of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy that the Agent would otherwise have
on any future occasion. The rights and remedies provided herein and in the other Credit Documents
are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights
or remedies provided by law. The powers conferred on Agent under this Agreement are solely to
protect Agent’s rights under this Agreement and shall not impose any duty upon it to exercise any
such powers. Except as elsewhere provided hereunder, Agent shall have no duty as to any of the
Collateral or as to the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to the Collateral.



     7.4 Enforcement Expenses; Indemnification.



          (a) Costs and Expenses. Each Debtor shall pay (i) all out-of-pocket expenses of
Agent, including reasonable fees and disbursements of special counsel for Agent, in connection with
the preparation of this Agreement and the other Credit Documents and, if appropriate, the
recordation of the Credit Documents, any waiver or consent hereunder or any amendment hereof or any
Default or alleged Default hereunder, and (ii) if an Event of Default occurs, all out-of-pocket
expenses incurred by Agent and each Bank, including fees and disbursements of counsel in connection
with such Event of Default and collection and other enforcement proceedings resulting therefrom,
fees of auditors and consultants incurred in



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connection therewith and investigation expenses incurred by Agent and each Bank in connection
therewith. Borrower shall indemnify each Bank against any Taxes imposed by reason of the execution
and delivery of this Agreement or the Notes (other than Taxes in respect of the net income of such
Bank).




          (b) Indemnification. WHETHER OR NOT THE TRANSACTIONS CONTEMPLATED HEREBY ARE
CONSUMMATED, THE BORROWER SHALL INDEMNIFY AND HOLD HARMLESS EACH AGENT-RELATED PERSON, EACH BANK
AND THEIR RESPECTIVE AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, COUNSEL, AGENTS AND
ATTORNEYS-IN-FACT (COLLECTIVELY THE “INDEMNITEES”) FROM AND AGAINST ANY AND ALL
LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, DEMANDS, ACTIONS, JUDGMENTS, SUITS,
COSTS, EXPENSES, AND DISBURSEMENTS (INCLUDING ALL FEES, EXPENSES, AND DISBURSEMENTS OF ANY LAW FIRM
OR OTHER EXTERNAL COUNSEL AND, WITHOUT DUPLICATION, THE ALLOCATED COST OF INTERNAL LEGAL SERVICES
AND ALL EXPENSES AND DISBURSEMENTS OF INTERNAL COUNSEL AND INCLUDING SETTLEMENT COSTS) OF ANY KIND
OR NATURE WHATSOEVER, (EXCLUDING, HOWEVER, THE COSTS AND EXPENSES INCURRED BY THE BANKS, OTHER THAN
THE AGENT, IN CONNECTION WITH THE PREPARATION, EXECUTION OR DELIVERY OF THIS AGREEMENT) WHICH MAY
AT ANY TIME BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ANY SUCH INDEMNITEE IN ANY WAY RELATING
TO OR ARISING OUT OF OR IN CONNECTION WITH (A) THE EXECUTION, DELIVERY, ENFORCEMENT, PERFORMANCE OR
ADMINISTRATION OF ANY CREDIT DOCUMENT OR ANY OTHER AGREEMENT, LETTER, OR INSTRUMENT DELIVERED IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED THEREBY OR THE CONSUMMATION OF THE TRANSACTIONS
CONTEMPLATED THEREBY, (B) ANY COMMITMENT, ADVANCE, OR LETTER OF CREDIT OR THE USE OR PROPOSED USE
OF THE PROCEEDS THEREFROM (INCLUDING ANY REFUSAL BY THE ISSUING BANK TO HONOR A DEMAND FOR PAYMENT
UNDER A LETTER OF CREDIT IF THE DOCUMENTS PRESENTED IN CONNECTION WITH SUCH DEMAND DO NOT STRICTLY
COMPLY WITH THE TERMS OF SUCH LETTER OF CREDIT), OR (C) ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE
OF HAZARDOUS WASTE OR HAZARDOUS SUBSTANCES ON OR FROM ANY PROPERTY CURRENTLY OR FORMERLY OWNED OR
OPERATED BY THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR ANY LIABILITY UNDER ENVIRONMENTAL LAW
RELATED IN ANY WAY TO THE BORROWER OR ANY OF ITS SUBSIDIARIES, OR (D) ANY ACTUAL OR PROSPECTIVE
CLAIM, LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING, WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY (INCLUDING ANY INVESTIGATION OF, PREPARATION FOR, OR DEFENSE OF
ANY PENDING OR THREATENED CLAIM, INVESTIGATION, LITIGATION OR PROCEEDING) AND REGARDLESS OF WHETHER
ANY INDEMNITEE IS A PARTY THERETO (ALL THE FOREGOING, COLLECTIVELY, THE “INDEMNIFIED
LIABILITIES”), IN ALL CASES, WHETHER OR NOT CAUSED BY OR ARISING, IN WHOLE OR IN PART, OUT OF
THE COMPARATIVE, CONTRIBUTORY, OR SOLE NEGLIGENCE OF THE INDEMNITEE; PROVIDED THAT SUCH
INDEMNITY SHALL NOT, AS TO ANY INDEMNITEE, BE AVAILABLE TO THE EXTENT THAT SUCH



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LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, CLAIMS, DEMANDS, ACTIONS, JUDGMENTS,
SUITS, COSTS, EXPENSES OR DISBURSEMENTS ARE DETERMINED BY A COURT OF COMPETENT JURISDICTION BY
FINAL AND NONAPPEALABLE JUDGMENT TO HAVE RESULTED FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT
OF SUCH INDEMNITEE. NO INDEMNITEE SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY OTHERS
OF ANY INFORMATION OR OTHER MATERIALS OBTAINED THROUGH INTRALINKS OR OTHER SIMILAR INFORMATION
TRANSMISSION SYSTEMS IN CONNECTION WITH THIS AGREEMENT, NOR SHALL ANY INDEMNITEE HAVE ANY LIABILITY
FOR ANY INDIRECT OR CONSEQUENTIAL DAMAGES RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT
OR ARISING OUT OF ITS ACTIVITIES IN CONNECTION HEREWITH OR THEREWITH (WHETHER BEFORE OR AFTER THE
EFFECTIVE DATE). ALL AMOUNTS DUE UNDER THIS SECTION 7.4 SHALL BE PAYABLE WITHIN TEN
BUSINESS DAYS AFTER DEMAND THEREFOR. THE AGREEMENTS IN THIS SECTION SHALL SURVIVE THE RESIGNATION
OF THE AGENT, THE REPLACEMENT OF ANY BANK, THE TERMINATION OF THIS AGREEMENT, THE REPAYMENT,
SATISFACTION OR DISCHARGE OF ALL THE OTHER SECURED OBLIGATIONS AND THE RELEASE OF THE COLLATERAL.




     7.5 Successors and Assigns. This Agreement shall be binding upon the successors and
assigns of each Debtor and shall inure to the benefit of the Agent and the Secured Parties and
their successors and assigns; provided that no Debtor may assign, transfer or delegate any
of its rights or obligations under this Agreement without the prior written consent of the Agent.



     7.6 Set-Off. Each Debtor hereby irrevocably authorizes the Agent and each Bank at any
time and from time to time upon the occurrence and during the continuation of any Event of Default,
without prior notice to such Debtor or any other Debtor, any such notice being waived by such
Debtor to the fullest extent permitted by law, to set off and apply any and all deposits (general
or special, time or demand, provisional or final) at any time held by, and other indebtedness at
any time owing by, such Bank to or for the credit or the account of the respective Debtor against
any and all Obligations owing to such Bank under the Credit Agreement, the Guaranties, or under any
other Credit Document, now or hereafter existing, irrespective of whether or not the Agent or such
Bank shall have made demand for payment and although such Obligations may be contingent or
unmatured or denominated in a currency different from that of the applicable deposit or
indebtedness. Any such set-off shall be subject to the notice requirements of Section 7.4
of the Credit Agreement; provided, however, that the failure to give such notice
shall not affect the validity of such set-off and application.



     7.7 Counterparts. This Agreement may be executed in one or more counterparts (and by
different parties hereto in different counterparts), each of which shall constitute an original,
but all of which together shall constitute a single contract. Delivery of an executed counterpart
of a signature page of this Agreement by telecopy or electronic transmission shall be effective as
delivery of an original manually executed counterpart of this Agreement.



     7.8 Severability. If any provision of this Agreement is held to be illegal, invalid
or unenforceable, (a) the legality, validity and enforceability of the remaining provisions of this
Agreement shall not be affected or impaired thereby and (b) the parties shall endeavor in good



-19-









 







faith negotiations to replace the illegal, invalid or unenforceable provisions with valid
provisions the economic effect of which comes as close as possible to that of the illegal, invalid
or unenforceable provisions. The invalidity of a provision in a particular jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.



     7.9 Section Headings. The Section headings used in this Agreement are included for
convenience of reference only and shall not affect the interpretation of this Agreement.



     7.10 Integration; Direct Conflict. This Agreement and the other Credit Documents
constitute the entire contract among the parties relating to the subject matter hereof and
supersede any and all previous agreements and understandings, oral or written, relating to the
subject matter hereof. In the event of a direct conflict between this Agreement and the Credit
Agreement, the Credit Agreement shall control; provided, however, the parties understand and agree
that this Agreement sets forth additional covenants, obligations and rights and the parties will
use all reasonable efforts to construe the provisions and covenants in this Agreement as not being
in direct conflict with the Credit Agreement.



     7.11 GOVERNING LAW, WAIVER OF JURY TRIAL, ETC.



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




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




          (c) WAIVER OF VENUE. EACH DEBTOR IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY ANY



-20-









 






LEGAL REQUIREMENT, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT
IN ANY COURT REFERRED TO IN PARAGRAPH (b) OF THIS SECTION. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.




          (d) SERVICE OF PROCESS. EACH PARTY HERETO IRREVOCABLY CONSENTS TO SERVICE OF PROCESS
IN THE MANNER PROVIDED FOR NOTICES IN SECTION 7.2. NOTHING IN THIS AGREEMENT WILL AFFECT
THE RIGHT OF ANY PARTY HERETO TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY ANY LEGAL
REQUIREMENT.




          (e) WAIVER OF PUNITIVE DAMAGES, ETC. EACH DEBTOR HEREBY (i) IRREVOCABLY WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, (A) ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY
LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN
CONNECTION WITH THE CREDIT DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR ASSOCIATED
THEREWITH, ANY “SPECIAL DAMAGES,” AS DEFINED BELOW; AND (B) ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
ANY OTHER CREDIT DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY); (ii) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR
AGENT OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (iii)
ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS AND
THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL
SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT
INCLUDE ANY PAYMENT OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY
OTHER PARTY HERETO.




          (f) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER CREDIT
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED



-21-









 






ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT AND THE OTHER CREDIT DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.




     7.12 Additional Debtors. Each Subsidiary of the Borrower that is required to become a
party to this Agreement after the date hereof pursuant to Section 5.8 of the Credit
Agreement shall become a Debtor for all purposes of this Agreement upon execution and delivery by
such Subsidiary of an instrument in the form of Annex I hereto.



     7.13 Termination; Releases.



          (a) This Security Agreement and the security interest created hereby shall terminate when all
the Secured Obligations have been indefeasibly paid in full and all commitments of each of the
Secured Parties to the Debtors have been fully and finally terminated, at which time the Agent
shall execute and deliver to the Debtors or the Debtors’ designee, at the Debtors’ expense, all
Uniform Commercial Code termination statements and similar documents which the Debtors shall
reasonably request from time to time to evidence such termination. Any execution and delivery of
termination statements or documents pursuant to this Section 7.13(a) shall be without
recourse to or warranty by the Agent.




          (b) Any Debtor other than the Borrower shall automatically be released from its obligations
hereunder and the security interest granted hereby in the Collateral of such Debtor shall be
automatically released in the event that all the Capital Stock of such Debtor shall be sold,
transferred or otherwise disposed of to a person that is not an Affiliate of the Borrower in
accordance with the terms of the Credit Agreement; provided that, to the extent required by
the Credit Agreement, the Majority Banks or, if required by the terms of the Credit Agreement, such
other requisite number of Banks, shall have consented to such sale, transfer or other disposition
and the terms of such consent did not provide otherwise. If any of the Collateral shall be sold,
transferred or otherwise disposed of by any Debtor in a transaction permitted by the Credit
Agreement the security interest created hereby in any Collateral that is so sold, transferred or
otherwise disposed of shall automatically terminate and be released upon the closing of such sale,
transfer or other disposition, and such Collateral shall be sold free and clear of the Lien and
security interest created hereby; provided, however, that such security interest
will continue to attach to all proceeds of such sales or other dispositions. In connection with
any of the foregoing, the Agent shall promptly execute and deliver to the Debtors or the Debtors’
designee, at the Debtors’ expense, all Uniform Commercial Code termination statements and similar
documents that the Debtors shall reasonably request from time to time to evidence such termination.
Any execution and delivery of termination statements or documents pursuant to this Section
7.13(b) shall be without recourse to or warranty by the Agent.




-22-









 








          (c) No consent of any holder of Secured Obligations arising under a Specified Swap Contract
(except in such Person’s capacity as a Bank, if applicable) shall be required for any release of
Collateral or Debtors pursuant to this Section 7.13.




     7.14 Amendment and Restatement; Confirmation of Liens. This Agreement is an amendment
and restatement of the Existing Security Agreement, and supersedes the Existing Security Agreement
in its entirety; provided, however, that (i) the execution and delivery of this Security Agreement
shall not effect a novation of the Existing Security Agreement but shall be, to the fullest extent
applicable, in modification, renewal, confirmation and extension of such Existing Security
Agreement, and (ii) the Liens, security interests and other interests in the Collateral (as such
term is defined in the Existing Security Agreement, hereinafter the “Original Collateral”)
granted under the Existing Security Agreement are and shall remain legal, valid, binding and
enforceable with regard to such Original Collateral. Each Grantor party to the Existing Security
Agreement hereby acknowledges and confirms the continuing existence and effectiveness of such
Liens, security interests and other interests in the Original Collateral granted under the Existing
Security Agreement, and further agrees that the execution and delivery of this Security Agreement
and the other Loan Documents shall not in any way release, diminish, impair, reduce or otherwise
affect such Liens, security interests and other interests in the Original Collateral granted under
the Existing Security Agreement.


THIS WRITTEN AGREEMENT AND THE CREDIT DOCUMENTS, AS DEFINED IN THE CREDIT AGREEMENT, REPRESENT THE
FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.



THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.




[Signature pages follow.]




-23-









 





     EXECUTED as of the date first above written.



	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A., as	 	 
	 	 	Administrative Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Ronald E. McKaig	 	 
	 

	 	 	 	 	 	 
	 	 	Name: Ronald E. McKaig	 	 
	 	 	Title: Senior Vice President	 	 






Signature Page to Security Agreement



















 





	 	 	 	 	 
	 	STONE ENERGY CORPORATION,

a Delaware corporation

 	 
	 	By:  	/s/ David H. Welch
 	 
	 	Name:  	David H. Welch 	 
	 	Title:  	President and Chief Executive Officer 	 
	 



	 	 	 	 	 
	 	By:  	/s/ Kenneth H. Beer 	 
	 	Name:  	Kenneth H. Beer 	 
	 	Title:  	Senior Vice President and Chief Financial Officer 	 
	 



	 	 	 	 	 
	 	STONE ENERGY OFFSHORE, L.L.C.,

a Delaware limited liability company

Through its sole member,

STONE ENERGY CORPORATION

 	 
	 	By:  	/s/ David H. Welch
 	 
	 	Name:  	David H. Welch 	 
	 	Title:  	President and Chief Executive Officer 	 



	 	 	 	 	 
	 	By:  	                       /s/ Kenneth H. Beer
 	 
	 	Name:  	Kenneth H. Beer 	 
	 	Title:  	Senior Vice President and Chief Financial Officer 	 
	 



Signature Page to Security Agreement





 








 








SCHEDULE 3.3




ORGANIZATION, LOCATION

AND FILING INFORMATION




	 	 	 	 	 	 	 	 	 
	 	 	 	 	Jurisdiction of	 	File # in	 	 
	 	 	Prior	 	Formation and	 	Domestic	 	Address of Chief
	Entity	 	Names	 	Type of Entity	 	Jurisdiction	 	Executive Office
	Stone Energy 

Corporation
	 	 	 	Delaware Corporation
	 	2329102
	 	625 E. Kaliste Saloom

Road

Lafayette, Louisiana

70508
	 	 	 	 	 	 	 	 	 
	Stone Energy 

Offshore, L.L.C.
	 	Bois d’Arc

Properties, LP;

Bois d’Arc

Energy, Inc.;

Bois d’Arc

Holdings, LLC;

Bois d’Arc

Offshore Ltd.
	 	Delaware Limited

Liability Company
	 	4537731
	 	625 E. Kaliste Saloom

Road

Lafayette, Louisiana

70508






Schedule 3.3 to Security Agreement




 









 





SCHEDULE 3.4




CERTAIN COLLATERAL




None.




Schedule 3.4 to Security Agreement




 









 





SCHEDULE 3.5(a)



PLEDGED SECURITIES




	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Type of	 	Certificate	 	Number of	 	Percentage
	Debtor	 	Issuer	 	Interests	 	Number	 	Shares	 	of Interests
	Stone Energy 

Corporation
	 	Stone Energy,

L.L.C.
	 	LLC

membership

interests
	 	N/A
	 	N/A
	 	100%
	Stone Energy 

Corporation
	 	Stone Energy

Offshore,

L.L.C.
	 	LLC

membership

interests
	 	N/A
	 	N/A
	 	100%
	Stone Energy 

Offshore, 

L.L.C.
	 	Caillou Boca

Gathering,

LLC
	 	LLC

membership

interests
	 	N/A
	 	N/A
	 	90%






Schedule 3.5(a) to Security Agreement




 









 





SCHEDULE 7.2




DEBTORS’ ADDRESS FOR NOTICE




c/o Stone Energy Corporation

625 E. Kaliste Saloom Road

Lafayette, LA 70508

ATTN: Kenneth H. Beer, Senior Vice President and Chief Financial Officer

Telephone: (337) 237-0410

Facsimile: (337) 237-0426


Schedule 7.2 to Security Agreement


 








 





Annex I to the

Security Agreement




     This SUPPLEMENT NO. [     ] dated as of [               ] (this
“Supplement”), is delivered in connection with the Security Agreement dated as of August [     ],
2008 (as amended or otherwise modified from time to time, the “Security Agreement”),
among Stone Energy Corporation (the “Borrower”), certain subsidiaries of the Borrower party
thereto from time to time (such subsidiaries together with the Borrower, the “Debtors”),
and Bank of America, N.A. (“BOA”), as administrative agent (in such capacity, the
“Agent”) for the benefit of the Secured Parties (as defined therein).



     A. Reference is made to the Second Amended and Restated Credit Agreement dated as
of August [     ], 2008 (as amended or otherwise modified from time to time, the “Credit Agreement”), among
the Borrower, the lenders from time to time party thereto (the “Banks”), and the Agent.



     B. The Debtors have entered into the Security Agreement as a condition precedent to the
effectiveness of the Credit Agreement. Section 7.12 of the Security Agreement provides
that additional Subsidiaries of the Borrower may become Debtors under the Security Agreement by
execution and delivery of an instrument in the form of this Supplement. The undersigned Subsidiary
(the “New Debtor”) is executing this Supplement in accordance with the requirements of the
Credit Agreement to become a Debtor under the Security Agreement.



     C. Capitalized terms used herein and not otherwise defined herein shall have the meanings
assigned to such terms in the Security Agreement or, where any such term is not defined in the
Security Agreement, the Credit Agreement.



     Accordingly, the Agent and the New Debtor agree as follows:



     SECTION 1. In accordance with Section 7.12 of the Security Agreement, the New Debtor
by its signature below becomes a Debtor under the Security Agreement with the same force and effect
as if originally named therein as a Debtor, and the New Debtor hereby (a) agrees to all the terms
and provisions of the Security Agreement applicable to it as a Debtor thereunder and (b) represents
and warrants that the representations and warranties made by it as a Debtor thereunder are true and
correct on and as of the date hereof. The Schedules to the Security Agreement are hereby
supplemented by the Schedules attached hereto with respect to the New Debtor. In furtherance of
the foregoing, the New Debtor, as security for the payment and performance in full of the Secured
Obligations (as defined in the Security Agreement), does hereby create and grant to the Agent, for
the benefit of the Secured Parties, a security interest in and lien on all of the New Debtor’s
right, title and interest in and to the Collateral of the New Debtor. Each reference to a “Debtor”
in the Security Agreement shall be deemed to include the New Debtor.



     SECTION 2. The New Debtor represents and warrants to the Agent that this Supplement has been
duly authorized, executed and delivered by it and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.



Annex I to Security Agreement

-2-




 








 





     SECTION 3. This Supplement may be executed by one or more of the parties to this Agreement on
any number of separate counterparts (including by telecopy), and all of said counterparts taken
together shall be deemed to constitute one and the same instrument.



     SECTION 4. Except as expressly supplemented hereby, the Security Agreement and the Guaranties
shall remain in full force and effect.



     SECTION 5. THIS SUPPLEMENT SHALL BE GOVERNED BY, AND INTERPRETED AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF TEXAS.



     SECTION 6. All communications and notices to the New Debtor under the Security Agreement shall
be in writing and given as provided in Section 7.2 of the Security Agreement to the address
for the New Debtor set forth under its signature below.



     SECTION 7. The New Debtor agrees to reimburse the Agent for its reasonable out-of-pocket
expenses in connection with this Supplement, including the reasonable fees, other charges and
disbursements of counsel for the Agent.


THIS WRITTEN AGREEMENT AND THE CREDIT DOCUMENTS, AS DEFINED IN THE CREDIT AGREEMENT, REPRESENT THE
FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.



THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.




Annex I to Security Agreement

-3-




 









 





     IN WITNESS WHEREOF, the New Debtor and the Agent have duly executed this Supplement to the
Security Agreement as of the day and year first above written.



	 	 	 	 	 	 	 
	 	 	[NAME OF NEW DEBTOR]	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 Name:
	 	 

	 	 
	 

	 	 Title:
	 	 

	 	 
	 

	 	 Address:
	 	 

	 	 
	 

	 	 
	 	 

	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	BANK OF AMERICA, N.A., as
 Administrative Agent	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 Name:
	 	 

	 	 
	 

	 	 Title:
	 	 

	 	 
	 

	 	 
	 	 

	 	 






Annex I to Security Agreement

-4-




 









 





SCHEDULE 3.3




ORGANIZATION, LOCATION

AND FILING INFORMATION




	 	 	 	 	 	 	 	 	 
	 	 	 	 	Jurisdiction	 	 	 	 
	 	 	 	 	of Formation	 	 	 	 
	 	 	 	 	and	 	File # in	 	 
	 	 	Prior	 	Type of	 	Domestic	 	Address of Chief Executive
	Entity	 	Names	 	Entity	 	Jurisdiction	 	Office
	 	 	 	 	 	 	 	 	 
	 
	 
	 





Annex I to Security Agreement

-5-




 









 





SCHEDULE 3.5(a)

PLEDGED SECURITIES




	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	Type of	 	Certificate	 	Number of	 	Percentage
	Debtor	 	Issuer	 	Interests	 	Number	 	Shares	 	of Interests
	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 
	 	 
	 	 
	 	 
	 	 





Annex I to Security Agreement

-6-