Document:

ex10_1.htm

    
      

      

    

     

     

    Exhibit 10.1

     

    

      THIRD
AMENDMENT TO

      AMENDED
AND RESTATED FIRST LIEN CREDIT AGREEMENT

      

      This THIRD
AMENDMENT TO AMENDED AND RESTATED FIRST LIEN CREDIT AGREEMENT (“Amendment”), dated
effective as of __________, 2009 (the “Effective Date”), is
by and among Energy XXI Gulf Coast, Inc., a Delaware corporation (the “Borrower”), the
lenders party to the First Lien Credit Agreement described below (the “Lenders”), and The
Royal Bank of Scotland plc, as administrative agent for the Lenders (in such
capacity, the “Administrative
Agent”), and the other parties in the capacities herein
identified.

       

      RECITALS

       

      WHEREAS,
the Borrower, the Lenders, the Administrative Agent and certain other Persons
are parties to the Amended and Restated First Lien Credit Agreement, dated as of
June 8, 2007, as modified by the Consent Regarding Amended and Restated First
Lien Credit Agreement dated as of July 27, 2007, as amended by that certain
First Amendment to Amended and Restated First Lien Credit Agreement dated
effective as of November 19, 2007, and as amended by that certain Waiver,
Consent and Second Amendment to Amended and Restated First Lien Credit Agreement
dated effective as of December 1, 2008 (as so modified, and as amended,
supplemented, amended and restated or otherwise modified from time to time, the
“First Lien Credit
Agreement”); and

       

      WHEREAS,
the parties hereto desire to amend the First Lien Credit Agreement in certain
other respects as set forth herein.

       

      NOW THEREFORE,
in consideration of the premises and the mutual covenants, representations and
warranties contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

       

      AGREEMENT

       

      Section
1. Definitions.  Capitalized
terms used herein but not defined herein shall have the meanings as given them
in the First Lien Credit Agreement, unless the context otherwise
requires.

       

      Section
2. Amendments to First Lien
Credit Agreement.  The First Lien Credit Agreement is hereby
amended as follows:

       

      (a) Section
1.1.

       

      (1) Section
1.1 of the First Lien Credit Agreement is hereby amended by adding the following
definition(s) in the proper alphabetical order:

       

      “EXXI, Inc.” means
Energy XXI, Inc., a Delaware corporation.

       

      “Pledged Notes Sales
Contribution” is defined in the Third Amendment.

       

      “Pledged Notes Security
Agreement” is defined in the Third Amendment.

       

      “PP Notes Letter
Agreement” is defined in the Third Amendment.

       

      “Qualified PP Debt
Interest” means, without duplication and with respect to any applicable
period, any interest on the Pledged Notes (as defined in the Third Amendment)
actually paid during such period by the Borrower to EXXI, Inc., as holder of the
Pledged Notes (as defined in the Third Amendment), but solely to the extent that
(a) EXXI, Inc. has contributed (or caused to be contributed through Intermediate
Holdco) an amount equal to such interest payment to the Borrower as a capital
contribution during such period; and (b) the amount of such capital contribution
are deposited into one of the Deposit Accounts specified in the Disclosure
Schedule or a Deposit Account subject to a Control Agreement in favor of the
Administrative Agent (and, at the time of entry into such Control Agreement,
maintained with a depositary institution reasonably acceptable to the
Administrative Agent).

       

      “Secured Debt” means,
on any date and without duplication, the Indebtedness of the Borrower and its
Subsidiaries that is secured by a Lien on any property and/or assets of the
Borrower and/or its Subsidiaries (including without limitation, second lien
financing, if any).  For the avoidance of doubt, “Secured Debt”
includes, but is not limited to, amounts of Indebtedness outstanding under the
First Lien Credit Agreement (including Letter of Credit Outstandings), any put
premium financing under Hedging Agreements with a counterparty that is a Secured
Party, any secured obligations of the Borrower or its Subsidiaries to pay any
deferred premiums on any Hedge Agreement, and Capital Lease Liabilities (if
any).

       

      “Secured Debt Leverage
Ratio” means, as of the last day of any Fiscal Quarter, the ratio
of

       

      (a)  Secured
Debt outstanding on the last day of such Fiscal Quarter

       

      to

       

      (b)  EBITDA
computed for the period consisting of such Fiscal Quarter and each of the three
immediately preceding Fiscal Quarters;

       

      provided, however, that for purposes of calculating
“Secured Debt Leverage Ratio”, any calculation of EBITDA hereunder for
any applicable period shall be made using an EBITDA for such applicable period
calculated on a pro forma basis (inclusive of any acquisitions and/or
divestitures, if any, of assets or equity interests made during such applicable
period as if such acquisitions or divestitures had been made at the beginning of
such applicable period).

       

      “Third Amendment”
means that certain Third Amendment to Amended and Restated First Lien Credit
Agreement dated effective as of __________, 2009, by and among the Borrower, the
Lenders parties thereto, the Administrative Agent, and the other parties thereto
in the capacities therein specified.

       

      (2) The
definition of “Applicable Margin” in Section 1.1 of the First Lien Credit
Agreement is hereby amended and restated as follows:

       

      “Applicable Margin”
means, for any day and with respect to all Loans maintained as LIBO Rate Loans
or Base Rate Loans, the applicable percentage set forth below corresponding to
the Borrowing Base Utilization Percentage:

       

      
        	
                If
      the Borrowing

                Base
      Utilization

                Percentage is:

              	
                Then
      the Applicable Margin for LIBO Rate Loans
      is:

              	
                Then
      the Applicable Margin for Base Rate Loans
      is:

              
	
                Greater
      than or equal to 90%

              	
                3.35%

              	
                2.35%

              
	
                Greater
      than or equal to 75% but less than 90%

              	
                3.10%

              	
                2.10%

              
	
                Greater
      than or equal to 50% but less than 75%

              	
                2.85%

              	
                1.85%

              
	
                Less
      than 50%

              	
                2.60%

              	
                1.60%

              

      

      

       

      provided, that the
applicable percentages set forth in the foregoing table shall be increased by
0.15% during any period commencing with the date that a 90% Hedging Position
shall have occurred and ending on the date that is the later of (a) ninety (90)
days after the occurrence of such 90% Hedging Position or (b) the date that (i)
such 90% Hedging Position shall no longer be existing and (ii) the Borrower
shall have delivered a certificate of an Authorized Officer of the Borrower
certifying as to the same in form and substance reasonably satisfactory to the
Administrative Agent.

       

      If at any
time the Borrower fails to deliver a Reserve Report pursuant to Section 2.8.2 or
2.8.3, then the
“Applicable
Margin” means the rate per annum set forth on the grid when the Borrowing
Base Utilization Percentage is at its highest level until such time as such
Reserve Report has been delivered.

       

      (3) The
definition of “Interest Expense” in Section 1.1 of the First Lien Credit
Agreement is hereby amended and restated as follows:

       

      “Interest Expense”
means, for any applicable period, the aggregate cash interest expense (both
accrued and paid and net of interest income paid during such period to the
Borrower and its Subsidiaries) of the Borrower and its Subsidiaries for such
applicable period, including the portion of any payments made in respect of
Capitalized Lease Liabilities allocable to interest expense, but excluding
one-time write-offs of unamortized upfront fees associated with this Agreement
and the other Loan Documents, the Existing Credit Agreement and the “Loan
Documents” thereunder and the PP Debt Documents; provided, however, that solely
for purposes of determining compliance with Section 7.2.4(b) for
any applicable period, “Interest Expense” to the extent used in calculating the
Interest Coverage Ratio shall exclude any Qualified PP Debt Interest for such
period.

       

      (4) The
definition of “Obligor” in Section 1.1 of the First Lien Credit Agreement is
hereby amended and restated as follows:

       

      “Obligor” means, as
the context may require, the Borrower and each other Person (other than (a) a
Secured Party and (b) the Parent to the extent the obligations in respect of the
Loan Documents arise solely by reason of the PP Notes Letter Agreement)
obligated under any Loan Document; provided, however, that for
purposes of Article VI and Article VII of the First Lien Credit Agreement and
Sections 4.6,
5.1, 8.1.5, 8.1.6 and 8.2 of the First Lien
Credit Agreement, the term “Obligor” shall exclude EXXI, Inc. to the extent such
Person’s obligations under the Loan Documents arise solely by reason of its
being a party to the PP Notes Letter Agreement and the Pledged Notes Security
Agreement.

       

      (b) Section
7.1.16(b).  Section 7.1.16(b) of the First Lien Credit
Agreement is hereby amended and restated in its entirety as
follows:

       

      “(b)           During
each period from July 1st to
October 31st of each
calendar year, the Borrower will not permit the aggregate Credit Exposures of
all Lenders to exceed an amount equal to (i) the lesser of the Loan Commitment
Amount or the Borrowing Base then in effect minus (ii)
$25,000,000.”

       

      (c) Section
7.2.4.  Section 7.2.4 of the First Lien Credit Agreement is
hereby amended and restated in its entirety as follows:

       

      “SECTION
7.2.4                                           Financial Conditions and
Operations. The Borrower will not permit any of the events specified
below to occur:

       

      (a)           The
Borrower will not permit the Total Leverage Ratio (i) as of the last day of the
Fiscal Quarter ending June 30, 2007, to be greater than 3.75 to 1.00, (ii) as of
the last day of any Fiscal Quarter thereafter (commencing with the Fiscal
Quarter ending September 30, 2007) to and including the Fiscal Quarter ending
March 31, 2009, to be greater than 3.50 to 1.00, (iii) as of the last day of any
Fiscal Quarter thereafter (commencing with the Fiscal Quarter ending June 30,
2009) to and including the Fiscal Quarter ending December 31, 2009, to be
greater than 4.50 to 1.00, (iv) as of the last day of any Fiscal Quarter
thereafter (commencing with the Fiscal Quarter ending March 31, 2010) to and
including the Fiscal Quarter ending June 30, 2010, to be greater than 4.25 to
1.00, (v) as of the last day of any Fiscal Quarter thereafter (commencing with
the Fiscal Quarter ending September 30, 2010) to and including the Fiscal
Quarter ending December 31, 2010, to be greater than 4.00 to 1.00, and (vi) as
of the last day of any Fiscal Quarter thereafter (commencing with the Fiscal
Quarter ending March 31, 2011), to be greater than 3.75 to 1.00.

       

      (b)           The
Borrower will not permit the Interest Coverage Ratio as of the last day of any
Fiscal Quarter to be less than 3.00 to 1.00.

       

      (c)           The
Borrower will not permit the Current Ratio as of the last day of any Fiscal
Quarter to be less than 1.00 to 1.00.

       

      (d)           The
Borrower will not permit the Secured Debt Leverage Ratio as of the last day of
any Fiscal Quarter (commencing with the Fiscal Quarter ending June 30, 2009) to
be greater than 2.50 to 1.00.”

       

      (d) Section
8.1.3  Section 8.1.3 of the First Lien Credit Agreement is
hereby amended by inserting the words “or Parent or EXXI, Inc. shall default
under any obligation under the PP Notes Letter Agreement” at the end of such
Section.

       

      (e) Section
8.1.4.  Section 8.1.4 of the First Lien Credit Agreement is
hereby amended by inserting the words “and/or EXXI, Inc. shall default in the
performance or observance of any of its obligations under the Pledged Notes
Security Agreement” immediately following the words “executed by
it”.

       

      (f) Disclosure
Schedule.  The Disclosure Schedule to the First Lien Credit
Agreement, is hereby amended by deleting Item 6.19(a) thereof in its entirety
and replacing it in its entirety with Item 6.19(a) to the Disclosure Schedule
attached hereto as Annex I.

       

      (g) Section 6 of the Second
Amendment.  Section 6 of the Second Amendment (as defined in
the First Lien Credit Agreement) is hereby amended and restated in its entirety
as follows:

       

      “Section
6.                                [Reserved.]”

       

      For sake
of clarity, nothing in this clause (g) is intended to relieve the Borrower or
any other Obligor of any obligations under the Second Amendment, including
without limitation, Sections 2 and 5 thereof.

       

      Section
3. [Borrowing Base
Redetermination.  The Borrower and the Lenders hereby agree
that effective as of [March 31, 2009], the Borrowing Base shall be equal to
$240,000,000 until such time as the Borrowing Base is redetermined or otherwise
adjusted pursuant to the terms of the First Lien Credit
Agreement.  The Borrower and the Lenders hereby agree that this
determination of the Borrowing Base shall be deemed to be the determination as
required under Section
2.8.3 of the First Lien Credit Agreement in regards to the calendar year
ending December 31, 2008.]

       

      Section
4. Conditions to
Effectiveness.  This Amendment shall be deemed effective
(subject to the conditions herein contained) as of the Effective Date following
the satisfaction of the following conditions:

       

      (a) the
Administrative Agent shall have received counterparts hereof duly executed by
the Borrower, the Administrative Agent, the Issuers and the Required
Lenders;

       

      (b) the
Administrative Agent shall have received for the account of each Lender that has
delivered its executed counterpart this Amendment to the Administrative Agent on
or prior to the Effective Date, an amendment fee for each such Lender in an
amount equal to one hundred (100) basis points on such Lender’s Percentage of
the Borrowing Base [established pursuant to Section 3 of this
Amendment];

       

      (c) the
Administrative Agent shall have received, in form and substance satisfactory to
it, a letter agreement dated as of the Effective Date (the “PP Notes Letter
Agreement”), in form and substance satisfactory to the Administrative
Agent, among the Parent, EXXI, Inc., as the holder of approximately $126,000,000
of outstanding principal amount of PP Notes (the “Pledged Notes”), and
the Borrower, pursuant to which (i) EXXI, Inc. agrees to contribute, or cause to
be contributed, promptly as capital contributions to the Borrower, the amount of
all interest on the Pledged Notes received by EXXI, Inc., (ii) EXXI, Inc. agrees
to contribute, or cause to be contributed, promptly as capital contributions to
the Borrower, an amount equal to all proceeds (net of reasonable fees and
expenses) of the sale, transfer, assignment or other disposition of any of the
Pledged Notes (each such capital contribution made in connection with the
receipt of such proceeds from any such sale, transfer, assignment or other
disposition of Pledged Notes, herein a “Pledged Notes Sales
Contribution”) and to cause the Borrower to deposit such Pledged Notes
Sales Contribution into a Deposit Account subject to a Control Agreement in
favor of the Administrative Agent (and, at the time of entry into such Control
Agreement, maintained with a depositary institution reasonably acceptable to the
Administrative Agent), (iii) the Parent agrees, for the period from the
Effective Date to and including the date when the Borrowing Base is next
redetermined in accordance with Section 2.8.2 of the First Lien Credit
Agreement, to not make or declare any dividends or other distributions on or
with respect to, or on account of, the stock of (or other equity interests in)
the Parent, and (iv) EXXI, Inc. and Borrower agree that the payments of interest
by the Borrower to EXXI, Inc. on the Pledged Notes (which shall be contributed
to capital as provided in (i)) and the Pledged Notes Sales Contributions will be
deposited into a Deposit Account subject to a Control Agreement in favor of the
Administrative Agent (and, at the time of entry into such Control Agreement,
maintained with a depositary institution reasonably acceptable to the
Administrative Agent);

       

      (d) Borrower
and EXXI, Inc. shall execute and deliver or cause to be executed and delivered
to the Administrative Agent, all agreements, documents, instruments and other
writings described in Section 5.1.2 of the First Lien Credit Agreement with
respect to such Obligor; provided that any
such agreements and other writings previously delivered by Borrower to the
Administrative Agent may be incorporated by reference into the certificate duly
executed and delivered by the Borrower’s Secretary or Assistant Secretary
hereunder; and

       

      (e) the
Administrative Agent shall have received evidence, satisfactory to it, that the
Parent has contributed (or caused to be contributed through Intermediate Holdco)
not less than $48 million in cash to the Borrower since March 20, 2009, which
contribution shall be deposited into one or more Deposit Accounts subject to a
Control Agreement in favor of the Administrative Agent (and, at the time of
entry into such Control Agreement, maintained with a depositary institution
reasonably acceptable to the Administrative Agent).

       

      Section
5. Covenants.  The
Borrower agrees to deliver to the Administrative Agent on or prior to that date
that is 15 days after the Effective Date, or such later date as acceptable to
the Administrative Agent in its sole discretion, (a) a duly executed pledge and
security agreement of EXXI, Inc. in form and substance satisfactory to the
Administrative Agent, granting a Lien in favor of the Administrative Agent in
the Pledged Notes, interest paid by the Borrower on the Pledged Notes, proceeds
from the sale of such Pledged Notes and any accounts in which such proceeds are
deposited, and all proceeds and products of the foregoing (the “Pledged Notes Security
Agreement”); (b) Uniform Commercial Code Form UCC-1 financing statements
as requested by the Administrative Agent suitable in form for naming EXXI, Inc.
as a debtor and the Administrative Agent as the secured party, and/or other
similar instruments or documents to be filed under the UCC of all jurisdictions
and/or evidence of such other actions as may be necessary or, in the opinion of
the Administrative Agent, desirable to perfect on a first priority basis the
security interests of the Administrative Agent pursuant to the security
agreement described in clause (a) above; and (c) a legal opinion from counsel to
EXXI, Inc., in form and substance reasonably satisfactory to the Administrative
Agent, with respect to the grant and perfection of the security interests of the
Administrative Agent pursuant to the security agreement described in clause (a)
above.

       

      Section
6. Representations and
Warranties.  The Borrower hereby represents and warrants that
after giving effect hereto:

       

      (a) the
representations and warranties of the Obligors contained in the Loan Documents
(other than Section 6.17 of the First Lien Credit Agreement solely with respect
to the Lehman Hedging Agreement (as defined in the Second Amendment)) are true
and correct in all material respects on and as of the Effective Date, other than
those representations and warranties that expressly relate solely to a specific
earlier date, which shall remain correct in all material respects as of such
earlier date;

       

      (b) the
execution, delivery and performance by the Borrower and each other Obligor of
this Amendment has been duly authorized by all necessary corporate action
required on their part and this Amendment, along with the First Lien Credit
Agreement and other Loan Documents, constitutes the legal, valid and binding
obligation of each Obligor a party thereto enforceable against them in
accordance with its terms, except as its enforceability may be affected by the
effect of bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting the rights or remedies
of creditors generally;

       

      (c) neither
the execution, delivery and performance of this Amendment by the Borrower and
each other Obligor, the performance by them of the First Lien Credit Agreement
nor the consummation of the transactions contemplated hereby does or shall
contravene, result in a breach of, or violate (i) any provision of any Obligor’s
certificate or articles of incorporation or bylaws or other similar documents,
or agreements, (ii) any law or regulation, or any order or decree of any court
or government instrumentality, or (iii) any indenture, mortgage, deed of trust,
lease, agreement or other instrument to which any Obligor or any of its
Subsidiaries is a party or by which any Obligor or any of its Subsidiaries or
any of their property is bound, except in any such case to the extent such
conflict or breach has been waived by a written waiver document, a copy of which
has been delivered to Administrative Agent on or before the date
hereof;

       

      (d) no
Material Adverse Effect has occurred since June 30, 2008; and

       

      (e) no
Default or Event of Default or Borrowing Base Deficiency has occurred and is
continuing.

       

      Section
7. Loan Document;
Ratification.

       

      (a) This
Amendment is a Loan Document.

       

      (b) The
Borrower and each other Obligor hereby ratifies, approves and confirms in every
respect all the terms, provisions, conditions and obligations of the First Lien
Credit Agreement and each of the other Loan Documents (other than the Lehman
Hedging Agreement (as defined in the Second Amendment)), including without
limitation all Mortgages, Security Agreements, Guaranties, Control Agreements
and other Security Documents, to which it is a party.

       

      Section
8. Costs And
Expenses.  As provided in Section 10.3 of the First Lien Credit
Agreement, the Borrower agrees to reimburse Administrative Agent for all fees,
costs, and expenses, including the reasonable fees, costs, and expenses of
counsel or other advisors for advice, assistance, or other representation, in
connection with this Amendment and any other agreements, documents, instruments,
releases, terminations or other collateral instruments delivered by the
Administrative Agent in connection with this Amendment.

       

      Section
9. GOVERNING
LAW.  THIS AMENDMENT SHALL BE DEEMED A CONTRACT AND INSTRUMENT
MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK AND THE
LAWS OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAW.

       

      Section
10. Severability.  Any
provision of this Amendment that is prohibited or unenforceable in any
jurisdiction shall, as to such provision and such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Amendment or affecting the validity or
enforceability of such provision in any other jurisdiction.

       

      Section
11. Counterparts.  This
Amendment may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument, and any party hereto may
execute this Amendment by signing one or more counterparts.  Any
signature hereto delivered by a party by facsimile or electronic transmission
shall be deemed to be an original signature hereto.

       

      Section
12. No
Waiver.  The express waivers set forth herein are limited to
the extent described herein and, except as expressly set forth in this
Amendment, the execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any default of the Borrower or any other Obligor or any
right, power or remedy of the Administrative Agent or the other Secured Parties
under any of the Loan Documents, nor constitute a waiver of (or consent to
departure from) any terms, provisions, covenants, warranties or agreements of
any of the Loan Documents.  The parties hereto reserve the right to
exercise any rights and remedies available to them in connection with any
present or future defaults with respect to the First Lien Credit Agreement or
any other provision of any Loan Document.

       

      Section
13. Successors and
Assigns.  This Amendment shall be binding upon the Borrower and
its successors and permitted assigns and shall inure, together with all rights
and remedies of each Secured Party hereunder, to the benefit of each Secured
Party and the respective successors, transferees and assigns.

       

      Section
14. Entire
Agreement.  THIS AMENDMENT, THE FIRST LIEN CREDIT AGREEMENT AND
THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT OF THE PARTIES WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.

       

      THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN THE PARTIES.

       

      [Signature
Pages Follow]

       

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      IN WITNESS WHEREOF,
the parties hereto have caused this Amendment to be duly executed and delivered
by their respective duly authorized officers as of the Effective
Date.

       

      BORROWER:

       

      ENERGY
XXI GULF COAST, INC.

      

      

      By:                                                                           

      Name:  Rick
Fox

       

      Title:  Chief
Financial Officer

       

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      ADMINISTRATIVE AGENT,
ISSUERS AND LENDERS:

       

      THE ROYAL
BANK OF SCOTLAND plc, as Administrative Agent, Issuer and Lender

      

      

      By:                                                                           

      Name:

      Title:

      

      

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      BNP PARIBAS, as Issuer and
Lender

      

      

      By:                                                                           

      Name:

      Title:

      

      

      By:                                                                           

      Name:

      Title:

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      BMO
CAPITAL MARKETS FINANCING, INC., as Lender

      

      

      By:                                                                           

      Name:

      Title:

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      GUARANTY
BANK, FSB, as Lender

      

      

      

      By:                                                                           

      Name:

      Title:

      

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      AMEGY
BANK NATIONAL ASSOCIATION, as Lender

      

      

      

      By:                                                                           

      Name:

      Title:

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      THE BANK
OF NOVA SCOTIA, as Lender

      

      

      

      By:                                                                           

      Name:

      Title:

      

      

      

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      LEHMAN
COMMERCIAL PAPER INC., as Lender

      

      

      

      By:                                                                           

      Name:

      Title:

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      TORONTO
DOMINION (TEXAS) LLC, as Lender

      

      

      

      By:                                                                           

      Name:

      Title:

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      CAPITAL
ONE, NATIONAL ASSOCIATION, as Lender

      

      

      

      

      By:                                                                           

      Name:                      

      Title:

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      NATIXIS,
as Lender

      

      

      

      By:                                                                           

      Name:

      Title:

      

      By:                                                                           

      Name:

      Title:

      

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      ALLIED
IRISH BANKS p.l.c., as Lender

      

      

      

      By:                                                                           

      Name:

      Title:

      

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      CREDIT
SUISSE, as Lender

      

      

      

      By:                                                                           

      Name:

      Title:

      

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      UBS LOAN
FINANCE LLC, as Lender

      

      

      

      By:                                                                           

      Name:

      Title:

      

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      WHITNEY
NATIONAL BANK, as Lender

      

      

      

      By:                                                                           

      Name:

      Title:

      

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      ACKNOWLEDGED
AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN:

      

      ENERGY
XXI GOM, LLC

      

      

      

      By:                                                                           

      Name:  Rick
Fox

      Title:    Chief
Financial Officer

      

      ENERGY
XXI TEXAS ONSHORE, LLC

      

      

      By:                                                                           

      Name:  Rick
Fox

      Title:    Chief
Financial Officer

      

      ENERGY
XXI ONSHORE, LLC

      

      

      

      By:                                                                           

      Name:  Rick
Fox

      Title:    Chief
Financial Officer

      

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      ACKNOWLEDGED
AND AGREED AS OF THE DATE FIRST ABOVE WRITTEN IN ITS CAPACITY AS GUARANTOR UNDER
ITS LIMITED RECOURSE GUARANTY AND GRANTOR UNDER ITS PLEDGE AGREEMENT AND
IRREVOCABLE PROXY DELIVERED IN CONNECTION WITH THE FIRST LIEN CREDIT
AGREEMENT:

      

      ENERGY
XXI USA, INC.

      

      

      By:

      Name:  Rick
Fox

      Title:    Chief
Financial Officer

      

      
        
          
            24671362 06020964

          

           

        

        
           

          
            

          

        

        
           

        

      

      ANNEX I

      to Third
Amendment

      

      Item
6.19(a) of Disclosure Schedule

      

      [attached]

      
        
          
            24671362 06020964
                                                             
Annex IPROMISSORY NOTE

PROMISSORY NOTE

October 3, 2008

$1,000

FOR VALUE RECEIVED, GATEWAY CERTIFICATIONS, INC. (collectively, the “Maker”), at 35 MEADOW STREET, SUITE 308, BROOKLYN, NY 11206, promises to pay to the order of LAWRENCE WILLIAMS, JR. (the “Holder”), in lawful money of the United States of America, the principal sum of One Thousand Dollars ($1,000.00).

The following terms and provisions apply to this Note:

1.

Interest Rate.  Interest shall accrue on the principal amount of this note at a rate of Eight percent (8%) per annum.

2.

Payment Terms.  Maker shall pay to Holder twelve (12) quarterly installments of $83.34 each on the last day of each quarter as provided herein with the first such installment on December 31, 2008 until the principal and interest have been paid in full.  Maker shall pay to Holder all outstanding principal and accrued interest on the Maturity Date (defined below).

3.

Maturity Date.  All outstanding principal and unpaid interest under this Note and all other amounts due and payable under this Note shall become automatically due and payable, without demand or notice, on June 30, 2013.

4.

Security For Payment.  This Note is not secured.

5.

Prepayment. This Note may be prepaid in whole or in part at any time, and from time to time, without penalty, but any prepayment shall not postpone any required payment hereunder.

6.

General Payment Terms.  Receipt of a check shall not constitute payment hereunder until such check is fully and finally honored by the bank upon which it is drawn, and any wire transfer of funds shall not constitute payment until actually credited to such bank account of the Holder as the Holder may from time to time designate.

7.

Computations and Payments.  All payments of interest under this Note shall be computed on the basis of a 360-day year factor applied to the actual number of days elapsed.  If the date for a payment under this Note shall be a day that is not a business day, then for all purposes of this Note, the payment then due shall be made on the next business day, and such extension of time shall in each case be included in any computation of payments of interest.  All payments shall be applied first to payment in full of any costs incurred in the collection of any sum due under this Note, including (without limitation) reasonable attorneys’ fees, then to the payment in full of any late charges, then to the payment in full of accrued, unpaid interest and finally to the reduction of the unpaid principal balance of this Note.

8.

Default.  The occurrence of any one or more of the following shall constitute a default (an “Event of Default”) under this Note:

(a)

the failure to make a payment under this Note when due or any other default in or breach of Maker’s performance under this Note or any other indebtedness of Maker; or

(b)

the filing or commencement by or against Maker of any proceeding regarding bankruptcy or insolvency.

9.

Late Charge.  Maker shall pay to Holder a late charge equal to 5% of any amount due hereunder that is not received by Holder within ten (10) days of when such amount is due.  Maker agrees that it would be extremely difficult or impractical to determine Holder’s actual damages in the event of such late payment, that the amount specified above is a reasonable estimate of such damages and that such amount shall constitute liquidated damages for such late payment.  The foregoing provision shall not be construed to extend the due date for any amount required to be paid hereunder.  Holder shall have no obligation to accept any late payment not accompanied by such late charge.

10.

Remedies.  Upon the occurrence of an Event of Default and so long as the Event of Default shall continue unwaived by Holder:

(a)

In the case of an Event of Default described in Section 8(a) hereof, Holder may, by written notice to Maker, declare all amounts evidenced by this Note immediately due and payable.

(b)

In the case of an Event of Default described in Section 8(b) hereof, all amounts evidenced by this Note shall become due and payable automatically and immediately.

(c)

Holder may exercise any of its rights and remedies set forth herein.

(d)

The remedies of Holder shall be cumulative and concurrent, and may be pursued singly, successively, or together, at Holder’s sole discretion, and may be exercised as often as the occasion therefor shall occur; and the failure to exercise any such right or remedy shall in no event be construed as a waiver or release thereof.

11.

Extensions.  Maker consents to any and all renewals and extensions in the time of payment hereof without in any way affecting the liability of Maker.  No extension of time for the payment of this Note or any installment due hereunder made by agreement with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the liability of Maker, either in whole or in part, unless Holder agrees otherwise in writing.

12.

Limit of Validity.  It is the intention of the parties hereto to comply with all applicable usury laws; accordingly, it is agreed that notwithstanding any provision to the contrary herein, no such provision shall require the payment of or permit the collection of interest in excess of the maximum permitted by law to be collected from the Maker.  If any excess of interest in such respect is provided for, or shall be adjudicated to be so provided for, herein then in such event (a) the provisions of this paragraph shall govern and control, (b) neither the Maker nor their successors or assigns or any other party liable for the payment hereof, shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount permitted by law, and the same shall be construed as a mutual mistake of the parties, and (c) any such excess which may have been collected shall be, at the option of the Holder, either applied as a credit against the then unpaid Principal amount hereof or refunded to Maker.

13.

Collection Costs and Expenses.  Maker shall pay all costs, fees and expenses (including court costs and reasonable attorneys’ fees) incurred by Holder in collecting or attempting to collect any amount that becomes due hereunder or in seeking legal advice with respect to such collection or a default hereunder.

14.

Notices.  All notices, requests, demands, and other communications with respect hereto shall be in writing and shall be delivered by hand, sent prepaid by air courier or sent by the United States 

2

mail, certified, postage prepaid, return receipt requested, at the addresses designated herein or such other address as the parties may designate to each other in writing.

15.

Amendments Only in Writing.  This Note or any provision hereof may be waived, changed, modified or discharged only by agreement in writing signed by Maker and Holder.

16.

Obligations Joint and Several.  The term “Maker” shall include each person and entity now or hereafter liable hereunder, whether as maker, principal, surety, guarantor, endorser or otherwise, each of whom shall be jointly, severally and primarily liable for all of the obligations set forth herein.

17.

Time of Essence.  TIME IS OF THE ESSENCE with respect to the performance by the Maker of each of their obligations hereunder.

18.

Choice of Law.  This Note and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of New York where jurisdiction shall lie.

IN WITNESS WHEREOF, the Maker has caused this Note to be signed in its name by its duly authorized officer on the date first written above.

MAKER:

Gateway Certifications, Inc.

/s/ Lawrence Williams, Jr.

Lawrence Williams, Jr.

President & Treasurer

3

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