Document:

EX-10.7

 

EXHIBIT 10.7

September 12, 2006

Mr. Frederick L. Farrar

3502 Woodview Trace

Suite 210

Indianapolis, Indiana 46268

Dear Mr. Farrar:

     Reference is made to the merger (“Merger”) of [OP Merger Sub] with and into Windrose
Medical Properties, L.P. (“Company OP”) pursuant to the Agreement and Plan of Merger dated
September 12, 2006 (the “Merger Agreement”). In connection with the Merger, units of
partnership interest in Company OP (“Company OP Units”) will automatically be converted
into shares of common stock of Health Care REIT, Inc. (“Parent Shares”) as set forth in the
Merger Agreement and cash in lieu of fractional shares, in a taxable transaction (the “OP Unit
Exchange”). You and certain others are holders of Company OP Units and, in connection with the
Merger, will exchange your Company OP Units in the Merger.

     Health Care REIT, Inc. (“Parent”) hereby agrees to pay to you, at the Effective Time
of the OP Merger (as defined in the Merger Agreement), an amount of cash equal to the Adjustment
Amount (as defined below), determined as of the Effective Time, attributable to your OP Unit
Exchange. For informational purposes only, the Current Tax Cost based on December 31, 2005 basis
numbers, and assuming a value of $18.06 per Company OP Unit in the OP Unit Exchange, is estimated
to be approximately $27,322. The Gross-Up Amount will be calculated as set forth below.

     Katz Sapper Miller (the “Expert”) shall determine the Adjustment Amount. Parent shall
be responsible for the fees and expenses of the Expert. In determining the Current Tax Cost (as
defined below) and the Gross-Up Amount (as defined below), the Expert shall take into account, as
relevant, your actual tax basis capital account in the Company OP, as determined for federal income
tax purposes, and your actual tax basis in your interest in the Company OP.

     The payment of the Adjustment Amount pursuant to this letter agreement shall be in addition
to, and shall not in any manner reduce, the amounts distributable or payable to you pursuant to the
other provisions of the Merger Agreement and Amended and Restated Agreement of Limited Partnership
of Company OP (calculated as if there had been no Adjustment Amount).

     “Adjustment Amount” means the amount equal to the sum of (i) the Current Tax Cost and
(ii) the Gross-Up Amount as of the Effective Time of the Merger.

 

 

     “Current Tax Cost” means, with respect to the OP Unit Exchange, an amount equal to the
aggregate of the federal, state and local income taxes, net of the benefit of the deduction from
federal income taxes for state and local income taxes assumed paid, that would be incurred by you
as a result of the OP Unit Exchange. For purposes of this paragraph, (x) all income arising from
the OP Unit Exchange that is treated as ordinary income or short-term capital gain under the
applicable provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and
all payments under this letter agreement shall be treated as subject to federal, state and local
income taxes at an effective tax rate imposed on ordinary income of individuals residing in the
local and state in which you reside are for tax purposes determined using the maximum federal,
state and local rates of tax on ordinary income then in effect, (y) all other income arising from
the OP Unit Exchange shall be subject to federal, state and local income tax at the effective tax
rate imposed on long-term capital gains of individuals residing in the local and state in which the
you reside, determined using the maximum federal, local and state rates on long-term capital gains
then in effect (including for this purpose with respect to any Code Section 1245 or Section 1250
recapture (or, as relevant, analogous state and local recapture), the maximum tax rate imposed on
such income), and (z) any amounts giving rise to a payment pursuant to this provision will be
determined assuming the OP Unit Exchange was the only transaction or event reported on your tax
return (i.e., without giving effect to any loss carryforwards or other deductions attributable to
you).

     “Gross-Up Amount” means an amount equal to the federal, state and local income taxes
payable by you as the result of the receipt of an amount equal to the Current Tax Cost and the
Gross-Up Amount, as applicable, pursuant to this letter agreement, calculated in a manner
consistent with and using the same tax rates used for the calculation of Current Tax Cost.
Exhibit A to this letter agreement sets forth an example of a calculation of the Gross-Up
Amount.

Very Truly Yours,

HEALTH CARE REIT, INC.

By: /s/ George L. Chapman                              

Name: George L. Chapman

Title: Chairman and Chief Executive Officer

 

 

Exhibit A

Example of Gross-Up Amount Calculation

	 	 	 	 	 
	Total Gain Recognized
	 	 	5,000,000	 
	Unrecaptured Section 1250 Gain
	 	 	500,000	 
	Federal Tax Rate — Ordinary Income
	 	 	35.00	%
	Federal Tax Rate — Unrecaptured Section 1250 Gain
	 	 	25	%
	Federal Tax Rate — Regular Capital Gain
	 	 	15	%
	Hypothetical Applicable State and Local Tax Rate
	 	 	4.4	%
	 
	 	 	 	 
	State and
Local Tax Due from OP Unit Exchange ($5,000,000 * 4.4%)
	 	 	220,000	 
	Federal Tax Benefit from State and Local Tax Deduction ($220,000 * 35.0%)
	 	 	(77,000	)
	 
	 	 	 	 
	Federal Tax Due from OP Unit Exchange ($500,000 * 25% plus $4,500,000 * 15%)
	 	 	800,000	 
	Less: Federal Tax Benefit from State and Local Tax Deduction
	 	 	(77,000	)
	 
	 	 	 
	 
	 	 	 	 
	Federal Tax Due
	 	 	723,000	 
	State and Local Tax Due
	 	 	220,000	 
	 
	 	 	 
	Total Tax Due
	 	 	943,000	 
	 
	 	 	 	 
	Gross-Up Calculation
	 	 	 	 
	 
	 	 	 	 
	Total Tax by Applicable Holders (net of any applicable deductions)
	 	 	943,000	 
	 
	 	 	 
	Divide by (1 — Federal, State and Local effective tax rate1)
	 	 	62.14	%2, 3
	 
	 	 	 	 
	Result
	 	 	1,517,541	 
	 
	 	 	 	 
	Payment for Federal, State and Local Tax Due
	 	 	943,000	 
	Gross-Up Payment
	 	 	574,541	 
	 
	 	 	 	 
	Total Payment
	 	 	1,517,541	 

This Exhibit A is intended to provide an example of the gross up calculation used to
determine the Gross-Up Amount only and does not reflect the actual tax due from the OP Unit
Exchange.

 

			
	1	 	The foregoing assumes solely for purposes of
the illustration that any tax payments pursuant to the [letter agreement] would
be taxed as ordinary income. The Expert shall be responsible for determining
the tax rate applicable to such payments.
	 
	2	 	Does not take into account phase-out of
itemized deductions.
	 
	3	 	Does not take into account any
self-employment taxes relating to any payments.Unassociated Document

    Exhibit
      10.1

    

    AGREEMENT

     

    This
      AGREEMENT (the
      “Agreement”) is made and entered into as of October
      11, 2006,
      by and among Energy Partners, Ltd., a Delaware corporation (“Parent”), EPL
      Acquisition Corp. LLC, a Delaware limited liability company and a direct
      wholly-owned subsidiary of Parent (“Merger Sub”) and Stone Energy Corporation, a
      Delaware corporation (“Target”). The foregoing shall be referred to collectively
      as the “Parties” and each may also be individually referred to as a
“Party”.

     

    WHEREAS,
      Parent,
      Merger Sub and Target are parties to an Agreement and Plan of Merger, dated
      as
      of June 22, 2006 (the “Merger Agreement”) (capitalized terms used herein but not
      otherwise defined herein shall have the meanings ascribed to them in the Merger
      Agreement);

     

    WHEREAS,
      Target was a party to an Agreement and Plan of Merger (“Plains Merger
      Agreement”), dated as of April 23, 2006, with Plains Exploration &
Production Company (“Plains”) at the time that Target received a merger proposal
      from Parent;

     

    WHEREAS,
      to induce and permit Target to terminate the Plains Merger Agreement and enter
      into the Merger Agreement, Parent agreed to pay the $43.5 million (the “Plains
      Termination Fee”) that Target was required to pay to Plains to terminate the
      Plains Merger Agreement;

     

    WHEREAS,
      Parent paid to Plains the Plains Termination Fee;

     

    WHEREAS,
      ATS, Inc. (“ATS”), a wholly-owned subsidiary of Woodside Petroleum Ltd.
      (“Woodside”), announced, on or around August 28, 2006, that it would commence a
      tender offer for all of the outstanding shares of Parent’s common stock for
      $23.00 per share in cash (the “ATS Tender Offer”);

     

    WHEREAS,
      on or around August 28, 2006, ATS also commenced an action, being Civil Action
      Number 2374-N (the “ATS Litigation”), in the Court of Chancery of the State of
      Delaware in and for New Castle County (“Delaware Court”) against Parent,
      Parent’s directors and Target for injunctive and declaratory relief seeking,
      among other things, to temporarily, preliminarily and permanently enjoin Parent
      from convening and holding a special meeting of its stockholders for the purpose
      of obtaining their approval of the Merger Agreement and the Transactions
      contemplated thereunder;

     

    WHEREAS,
      on September 7, 2006, Parent commenced an action, being Civil Action Number
      2402-N (the “Parent Litigation”), in Delaware Court against Target seeking
      declaratory relief respecting certain rights and obligations of the Parties
      under the Merger Agreement;

     

    WHEREAS,
      on or around September 12, 2006, Thomas Farrington filed a purported class
      action complaint against Parent, Parent’s directors and Target in Delaware
      Court,

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    being
      Civil Action Number 2416-N (the “Shareholder Litigation”), asserting
      substantially the same claims as those asserted by ATS in the ATS
      Litigation;

     

    WHEREAS,
      the ATS Litigation, the Parent Litigation and the Shareholder Litigation
      (collectively, the “Litigation”) are currently pending in Delaware Court, which
      has, as of the date of this Agreement, yet to render a final determination
      or
      finding with respect to any of the Litigation; and

     

    WHEREAS,
      under the current circumstances, Parent, Merger Sub and Target desire, among
      other things, to terminate the Merger Agreement pursuant to the terms of this
      Agreement;

     

    NOW,
      THEREFORE,
      in
      consideration of the foregoing and the mutual representations, warranties,
      covenants and agreements set forth herein, and for other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      Parties agree as follows:

     

    1.  Validity
      and Due Consideration. Each
      Party
      represents and warrants to the other Parties that: (i) it is duly authorized
      to
      execute and deliver this Agreement and no further
      corporate
      or limited liability company
      authorizations (including any director or stockholder approvals) are required
      for such Party’s execution, delivery and performance of this Agreement; and (ii)
      this Agreement constitutes a legal, valid and binding obligation of it,
      enforceable in accordance with its terms, except as enforceability may be
      limited by applicable bankruptcy, moratorium or other similar laws affecting
      creditors’ rights generally and by general principles of equity.

     

    2.  The
      Payment. Simultaneously
      with the execution of this Agreement, Parent shall pay to Target an amount
      of
      cash equal to $8.0 million (the “Payment”) in immediately available funds
      (pursuant to the written instructions previously provided to Parent by
      Target).

     

    3.  Termination
      of Merger Agreement. Effective
      upon the (i) execution of this Agreement by all Parties; (ii) payment of the
      Payment by Parent in accordance with Section 2 hereof; and (iii) filing
      of
      the
      Stipulation of Dismissal as
      provided by Section 9 hereof, the Merger Agreement shall be terminated in its
      entirety (together with all rights and obligations of the Parties thereunder)
      and shall be void and of no further force or effect, except that all rights
      and
      obligations of the Parties under the final two sentences of Section 7.1 of
      the
      Merger Agreement, the
      two
      confidentiality agreements executed between Target and Parent, each accepted
      and
      agreed upon on May 26, 2006
      referred to in such sentences, and the Stipulation and Order Governing the
      Production, Exchange and Filing of Confidential Information filed September
      25,
      2006 in the Delaware Court in connection with the Litigation, shall remain
      in
      full force and effect according to their terms.

     

    4.  Release
      of Claims. Effective
      upon the (i) execution of this Agreement by all Parties, (ii) payment of the
      Payment by Parent as provided by Section 2 hereof; and (iii) filing of the
      Stipulation of Dismissal by Parent to Target as provided by Section 9 hereof,
      Parent and Merger Sub
      on their
      behalves and on behalf of their respective officers
      and directors, 

     

    
      
         

      

      
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    subsidiaries,
      controlled affiliates and other controlled entities and, to the extent they
      have
      the power to do so, their respective agents
      (collectively, the “Parent and Sub Releasors”), on the one hand, and
      Target
      on its
      behalf and on behalf of its
      officers
      and directors, subsidiaries, controlled affiliates and other controlled entities
      and, to the extent it has the power to do so, its agents
      (collectively, the “Target Releasors”), on the other hand, release and forever
      discharge the others and the others’ past or present directors, officers,
      employees, agents, accountants, counsel, financial advisors, subsidiaries,
      successors and other representatives and affiliates (“Related Parties”) from any
      and all claims, demands, rights, actions, causes of action, debts, damages,
      dues, sums of money, judgments, charges, complaints, liabilities, obligations,
      promises, suits, costs, losses, and expenses (including attorneys’ fees and
      costs actually incurred) whatsoever, whether known or unknown, suspected or
      unsuspected, both in law and in equity that Parent and Sub Releasors (or any
      securityholder or other third party asserting or purporting to assert a claim
      or
      right of action that is the property -- or on behalf -- of Parent or Merger
      Sub), on the one hand, and Target Releasors (or any securityholder or other
      third party asserting or purporting to assert a claim or right of action that
      is
      the property -- or on behalf -- of Target), on the other hand, ever had or
      now
      has or may hereafter have, for, upon or by reason of any matter, cause or thing
      whatsoever, from the beginning of the world to the date hereof, including,
      without limitation, in connection with Merger Agreement or any transactions
      contemplated thereby or fees actually or potentially payable thereunder, against
      Target and its Related Parties and Parent and Merger Sub and their Related
      Parties, respectively. Nothing in this Agreement, however, shall be deemed
      to
      release Target and its Related Parties or Parent and Merger Sub and their
      respective Related Parties from the agreements, representations, warranties,
      rights, obligations, releases and undertakings contained in this Agreement
      or
      the agreements set forth on Exhibit A hereto. The Parties further agree that
      the
      Plains Termination Fee was duly paid by Parent and that nothing in this
      Agreement is intended to or shall allow Parent or Merger Sub or anyone
      purporting to act on their behalf to recover or seek to recover from Target
      the
      Plains Termination Fee or any portion thereof.

     

    5.  Covenant
      Not To Sue.
      Other
      than any action or proceeding necessary to enforce the terms of this Agreement,
      none of the Parent and Sub Releasors or Target Releasors shall encourage,
      solicit, initiate, institute, commence, continue, file, or otherwise further
      prosecute, whether directly or indirectly, or through third parties, any
      lawsuit, cause of action, claim, demand, or legal proceeding, for or arising
      out
      of or relating to any claim released herein, against any Party or Related Party.
      Furthermore, the Parent and Sub Releasors and Target Releasors shall not join
      with, encourage,
      solicit, initiate, institute, commence, continue, file or otherwise prosecute,
      whether directly or indirectly or through third parties, any claim
      by ATS,
      Woodside or any of their respective affiliates or subsidiaries
      against
      any Party or Related Party with respect to or relating to this Agreement, any
      claims released herein and/or the Merger Agreement or any transactions
      contemplated or fees actually or potentially payable thereunder. 

     

    6.  Discovery
      of Claims.
      Each of
      the Parties expressly and knowingly acknowledges that it or its attorneys may,
      after the execution of this Agreement, discover claims, damages, facts or law
      different from or in addition to those which each now knows or believes to
      exist
      or to be applicable with respect to this Agreement and/or the Merger Agreement.
      Nonetheless, it is the Parties’ intention fully, finally and forever to settle
      and release each and every matter released in this Agreement, known or unknown,
      suspected or unsuspected, which now exists, or heretofore may have existed,
      that
      each Party has respectively released in this 

     

    
      
         

      

      
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    Agreement
      on its own behalf and/or on behalf of others
      (as to
      agents, to the extent they have the power to do so).
      In
      furtherance of this intention, the releases given by each Party shall be and
      remain in effect as full and complete releases of all released matters
      notwithstanding the discovery or existence or any such additional or different
      claims, damages, facts or law.

     

    7.  Compromise
      of Claims; Third Party Beneficiaries.
      It is
      understood and agreed that this Agreement shall not be construed to be an
      admission of any liability or obligation whatsoever with respect to any matter
      by any Party to any other Party or to any other person or entity. Except as
      provided in Section 4, 5 and 17 hereof, there are no third party beneficiaries
      hereto. Notwithstanding anything herein to the contrary, nothing in this
      Agreement shall be construed as a waiver or release of any claim or defense,
      in
      law or equity, that Parent, Merger Sub or Target has or may have against ATS
      or
      any of its affiliates.

     

    8.  The
      Shareholder and ATS Litigations. Subject
      to
      paragraph 5 hereunder, each Party and its respective Related Parties shall
      have
      the right to take appropriate steps to conduct their respective defenses in
      connection with the ATS Litigation, Shareholder Litigation or any other
      litigation, as well as to respond to discovery or other informational requests.
      Parent will use all reasonable efforts to defend against the claims in the
      Shareholder Litigation and the ATS Litigation as to all defendants, including
      any claims relating to Target. Parent shall not compromise or settle the
      Shareholder Litigation or the ATS Litigation absent consultation with Target.
      No
      Party shall have a right to recover from any other Party any expenses or costs,
      including attorneys’ fees or settlement payment amounts, incurred in connection
      with the litigation or any settlement of the ATS Litigation or the Shareholder
      Litigation. 

     

    9.  Dismissal
      of Parent Litigation. Simultaneously
      with the execution of this Agreement, Parent shall deliver to Target an executed
      stipulation of dismissal with respect to the Parent Litigation (the “Stipulation
      of Dismissal”) in the form set forth in Exhibit “B” hereto. Parent and Target
      shall immediately thereafter file the Stipulation of Dismissal and seek
      immediate action by the Delaware Court approving the dismissal of the Parent
      Litigation with prejudice in accordance with the terms of the Stipulation of
      Dismissal. No Party shall seek or be entitled to recover any expenses or costs,
      including attorneys’ fees, incurred in connection with the Parent Litigation
      from another Party.

     

    10.  Governing
      Law. This
      Agreement and the rights of the parties hereto shall be construed, interpreted,
      subject to and governed in accordance with the internal laws of the State of
      Delaware, without reference to rules relating to conflicts of law.

     

    11.  Injunctive
      Relief and Specific Performance. The
      Parties hereto agree that irreparable damage would occur in the event that
      any
      of the provisions of this Agreement were not performed in accordance with their
      specific terms or were otherwise breached. The Parties shall be entitled to
      seek
      an injunction or injunctions to prevent breaches of this Agreement and/or to
      enforce specifically the terms and provisions hereof, this being in addition
      to
      any other remedies to which they may be entitled at law or in
      equity.

     

    12.  Notices.
      All
      notices, requests, claims, demands and other communications under this Agreement
      shall be in writing and addressed as follows:

     

    
      
         

      

      
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    To
      Parent:

     

    Energy
      Partners, Ltd.

    201
      St.
      Charles Avenue, Suite 3400

    New
      Orleans, Louisiana 70170

    Attention:
      John H. Peper

    Telephone:
      (504) 569-1875

    Facsimile:
      (504) 569-1874

    Email:
      jpeper@eplweb.com

     

    With
      a
      copy (which shall not constitute notice) to:

     

    Cahill
      Gordon & Reindel LLP

    80
      Pine
      Street

    New
      York,
      New York 10005

    Attention:
      John Schuster

    Telephone:
      (212) 701-3000

    Facsimile:
      (212) 269-5420

    Email:
      jschuster@cahill.com

     

    To
      Target:

     

    Stone
      Energy Corporation

    625
      E.
      Kaliste Saloom Road

    Lafayette,
      Louisiana 70508

    Attention:
      Andrew L. Gates, III

    Telephone:
      (337) 237-0410

    Facsimile:
      (337) 237-0426

    Email:
      gatesal@stoneenergy.com

     

    With
      a
      copy (which shall not constitute notice) to:

     

    Vinson
      & Elkins LLP

    666
      Fifth
      Avenue 26th Floor

    New
      York,
      New York 10103

    Attention:
      Alan P. Baden

    Telephone:
      (212) 237-0000

    Facsimile:
      (212) 849-5337

    Email:
      abaden@velaw.com

     

    Any
      such
      notice or communication shall be deemed given (i) when made, if made by hand
      delivery or electronic mail, and upon confirmation of receipt, if made by
      facsimile, (ii) one business day after being deposited with a next-day courier,
      postage prepaid, or (iii) three business days after being sent certified or
      registered mail, return receipt requested, postage prepaid, in each case
      addressed as above (or to such other address as such party may designate in
      writing from time to time).

     

    
      
         

      

      
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    13.  Public
      Announcements. Each
      of
      the Parties has furnished to the other a form of the press release that it
      intends to issue shortly after the execution of this Agreement.

     

    14.  No
      Admission; Settlement Materials. The
      provisions of this Agreement shall not be deemed a concession or admission
      by
      any Party of any breach of duty, liability, default or wrongdoing whatsoever,
      each of the Parties acknowledging, without conceding any infirmity in its claims
      or defenses, that it is entering into this Agreement solely in order avoid
      the
      further expense and inconvenience of litigation and/or to further business
      purposes. The Parties further agree that the negotiations and discussions and
      drafts and other writings concerning and leading toward the execution of this
      Agreement (the “Settlement Materials”) were undertaken for settlement purposes
      and will not be used by the Parties in any litigation against one another,
      other
      than litigation arising out of or for the purpose of enforcing this Agreement.
      The Parties agree to maintain the confidence of the Settlement Materials for
      all
      time, except as a Party may reasonably determine to be required (and solely
      to
      the extent required) by applicable statutes, regulations or laws (including
      the
      federal securities laws and regulations promulgated thereunder) or solely to
      the
      extent as may be required by court order or other order of compulsion, although
      the foregoing shall not prevent the Parties from sharing the Settlement
      Materials with their respective counsel or accountants (who shall be made aware
      of the confidentiality obligations set forth in this Agreement).

     

    15.  Jurisdiction
      and Venue for Disputes.
      Each
      Party submits to the exclusive jurisdiction of any state or federal court
      sitting in the State of Delaware in any dispute or action arising out of or
      relating to this Agreement and agrees that any and all claims in respect of
      such
      dispute or action may be heard and determined in any such court. Each Party
      also
      agrees not to bring any dispute or action arising out of or relating to this
      Agreement in any other court. Each Party agrees that a final judgment in any
      dispute or action so brought will be conclusive and may be enforced by dispute
      or action on the judgment or in any other manner provided at law (common,
      statutory or other) or in equity. Each Party waives any defense of inconvenient
      forum to the maintenance of any dispute or action so brought and waives any
      bond, surety, or other security that might be required of any other Party with
      respect thereto.

     

    16.  No
      Prior Assignment of Claims.
      Each
      Party represents and warrants to the other that it has not hypothecated or
      otherwise encumbered or assigned any claim or cause of action arising out of,
      related to or in connection with the claims alleged in or referred to this
      Agreement.

     

    17.  Parties
      Bound and Benefited.
      This
      Agreement shall bind each Party and inure to the benefit of each Party and
      its
      respective Related Parties and their respective successors and
      heirs.

     

    18.  Joint
      Drafting and Advice of Counsel. This
      Agreement shall be construed as jointly drafted by the Parties, and the rule
      construing ambiguities against the drafter shall not apply. Each Party hereto
      acknowledges and agrees that it has received the advice of its own counsel
      before entering into this Agreement, and that it is not relying on any other
      Party concerning this Agreement or any aspect of the transactions contemplated
      herein.

     

    
      
         

      

      
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    19.  Modification
      and Waiver.
      No
      modification or amendment to this Agreement shall be effective unless in a
      writing executed on behalf of all Parties hereto. No waiver shall be effective
      unless in writing and executed by the Party against whom enforcement of the
      waiver is sought. No failure on the part of any Party to exercise, and no delay
      in exercising, any right hereunder shall operate as a waiver thereof nor shall
      any single or partial exercise by such Party of any right hereunder preclude
      any
      other or further exercise thereof or the exercise of any other
      right.

     

    20.  Entire
      Agreement.
      This
      Agreement constitutes the entire, integrated agreement between the Parties
      regarding the subject matter hereof and supersedes any and all prior and
      contemporaneous agreements, representations and understandings of the Parties,
      whether written or oral.

     

    21.  Waiver
      of Right to Trial by Jury.
      EACH
      PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS
      AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE
      EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY
      MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY
      ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED
      BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
      REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
      OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION,
      SEEK
      TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED
      THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY,
      AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
      OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION
      21.

     

    22.  Headings.
      The
      headings of this Agreement are provided for convenience and reference only,
      and
      shall not bear upon the interpretation or enforcement of this
      Agreement.

     

    23.  Further
      Instruments.
      The
      Parties agree to execute, have acknowledged and deliver to each other such
      other
      documents and instruments, if any, as may be necessary or appropriate to
      evidence or to carry out the terms of this Agreement.

     

    24.  Counterparts.
      This
      Agreement may be executed in two or more counterparts, each of which shall
      be
      deemed an original, all of which together shall constitute one and the same
      instrument.

     

     

    
      
         

      

      
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    IN
      WITNESS
      WHEREOF, the parties hereto have duly executed this Agreement as of the day
      and
      year first above written.

     

    ENERGY
      PARTNERS, LTD.

     

    By: 
      /s/
      Richard A. Bachmann        

           
      Name:  Richard A. Bachmann

           
      Title:    Chairman and Chief Executive

     

    Officer

     

    EPL
      ACQUISITION CORP. LLC

     

    By: 
      /s/
      Richard A. Bachmann        

           
      Name:  Richard A. Bachmann

           
      Title:    Chairman and Chief Executive

     

    Officer

     

    STONE
      ENERGY CORPORATION

     

    By: 
      /s/David
      H. Welch            

           
      Name:  David H. Welch

           
      Title:    President and Chief Executive

                        
      Officer

    

    

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    

    EXHIBIT
      “A”

     

    PROPERTY: WEST
      CAMERON BLOCK 176

    Cameron
      Parish, Louisiana

    SERIAL
      NO.: OCS-G
      0762

     

    
      	 	
              1.

            	
              Participation
                Agreement dated February 19, 2006, between Newfield Exploration Company,
                and Energy Partners, Ltd.

            

    

     

    
      	 	
              2.

            	
              Letter
                Agreement dated March 3, 2006, between Stone Energy Corporation and
                Newfield Exploration Company, granting consent to assign an undivided
                25%
                interest in rights, duties and obligations to Energy Partners, Ltd.
                under
                that certain Option Farmout Agreement dated February 8, 2006 covering
                West
                Cameron 176.

            

    

     

    PROPERTY: EAST
      CAMERON BLOCK 43

    Cameron
      Parish, Louisiana

    SERIAL
      NO.: OCS-G
      23788

     

    
      	 	
              1.

            	
              Letter
                Agreement dated October 14, 2002, by and between Energy Partners,
                Ltd.,
                and Stone Energy Corporation.

            

    

     

    
      	 	
              2.

            	
              Farmout
                Agreement dated October 10, 2003, by and between Stone Energy Corporation
                and Newfield Exploration Company, as Farmors, and Energy Partners,
                Ltd.,
                as Farmee.

            

    

     

    PROPERTY: EAST
      CAMERON BLOCK 44

    Cameron
      Parish, Louisiana

    SERIAL
      NO.: OCS-G
      19730

     

    
      	 	
              1.

            	
              Letter
                Agreement dated October 14, 2002, by and between Energy Partners,
                Ltd.,
                and Stone Energy Corporation.

            

    

     

    
      	 	
              2.

            	
              Farmout
                Agreement dated October 10, 2003, by and between Stone Energy Corporation
                and Newfield Exploration Company, as Farmors, and Energy Partners,
                Ltd.,
                as Farmee.

            

    

     

    
      	 	
              3.

            	
              Letter
                Agreement dated February 4, 2004, by and between Unocal Gulf Region
                USA,
                Stone Energy Corporation, Newfield Exploration Company, & Energy
                Partners, Ltd.

            

    

     

    
      	 	
              4.

            	
              Platform
                Processing Agreement dated May 11, 2004, between Stone Energy Corporation,
                as Operator, and Energy Partners, Ltd., as
                Non-Operator.

            

    

     

    
      	 	
              5.

            	
              Pipeline
                Crossing Agreement dated April 30, 2004, between Energy Partners,
                Ltd.,
                and Energy Partners, Ltd.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    
      	 	
              6.

            	
              Pipeline
                Crossing Agreement dated May 4, 2004, between Stone Energy Corporation,
                and Energy Partners, Ltd.

            

    

     

    PROPERTY: EAST
      CAMERON BLOCK 46

    Cameron
      Parish, Louisiana

    SERIAL
      NO.: OCS-G
      3288

     

    
      	 	
              1.

            	
              Farmout
                Agreement dated April 27, 2006, by and between Stone Energy Corporation,
                as Farmor, Energy Partners, Ltd., as
                Farmee

            

    

     

    
      	 	
              2.

            	
              Operating
                Agreement, dated May 8, 2006, between Newfield Exploration Company,
                as
                Operator, and Energy Partners, Ltd., as
                Non-Operator

            

    

     

    
      	 	
              3.

            	
              Participation
                Agreement dated May 8, 2006, between Newfield Exploration Company,
                and
                Energy Partners, Ltd.

            

    

     

    
      	 	
              4.

            	
              Platform
                Processing Agreement dated August 24, 2006, between Stone Energy
                Corporation, as Operator, and Newfield Exploration Company and Energy
                Partners, Ltd., as Producers.

            

    

     

    PROPERTY: EAST
      CAMERON BLOCK 121

    Cameron
      Parish, Louisiana

    SERIAL
      NO.: OCS-G
      22582

     

    
      	 	
              1.

            	
              Letter
                of No Objection dated February 20, 2006, between Stone Energy Corporation,
                and Energy Partners, Ltd.

            

    

     

    PROPERTY: EAST
      CAMERON BLOCK 378

    Cameron
      Parish, Louisiana

    SERIAL
      NO.: OCS-G
      12856

     

    
      	 	
              1.

            	
              Production
                Handling Agreement, effective October 14, 2004, between Anadarko
                Petroleum
                Corporation, Noble Energy Inc., and PANACO, Inc., as Processors,
                and
                Energy Partners, Ltd., Stone Energy Corporation, and Ocean Front
                Oil &
                Gas, Inc., as Producers.

            

    

     

    
      	 	
              2.

            	
              Operating
                Agreement dated September 23, 1996, between Hall-Houston Oil Company,
                as
                Operator, and Zilkha Energy Company and Ocean Front Oil & Gas, Inc.,
                as Non-Operators.

            

    

     

    
      	 	
              3.

            	
              Letter
                Agreement dated August 28, 2002, between El Paso Production GOM,
                Inc. and
                Hall-Houston Oil Company.

            

    

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    

     

    PROPERTY: SOUTH
      MARSH 192

    Iberia,
      St. Mary, & Vermilion Parishes, Louisiana

    SERIAL
      NO.: OCS-G
      24874

     

    
      	 	
              1.

            	
              Participation
                Agreement dated June 1, 2004, between Arena Offshore, LLC, Triumph
                Energy,
                LLC, Energy Partners, Ltd., and Stone Energy
                Corporation.

            

    

     

    
      	 	
              2.

            	
              Operating
                Agreement dated June 1, 2004, between Arena Offshore, LLC, Triumph
                Energy,
                LLC, Energy Partners, Ltd., as Non-Operators, and Stone Energy
                Corporation, as Operator.

            

    

     

    
      	 	
              3.

            	
              Production
                Handling Agreement dated October 25, 2005, between Arena Offshore,
                LLC and
                Arena Energy, LLC, as Processors, and Stone Energy Corporation, Arena
                Energy, LLC, and Arena Offshore, LLC, as
                Producers.

            

    

     

    
      	 	
              4.

            	
              Assignment
                of Operating Rights effective June 1, 2004 between Arena Offshore,
                LLC, as
                Assignor, and Stone Energy Corporation and Energy Partners, Ltd.,
                as
                Assignees, conveying a 15% interest and a 4.9998% interest,
                respectively.

            

    

     

    
      	 	
              5.

            	
              Assignment
                of Operating Rights effective June 1, 2004 between Arena Energy LLC,
                as
                Assignor, and Stone Energy Corporation and Energy Partners, Ltd.,
                as
                Assignees, conveying a 35% interest and an 11.6662% interest,
                respectively.

            

    

     

    
      	 	
              6.

            	
              Assignment
                of Overriding Royalty Interest effective June 1, 2003 between Arena
                Energy, LLC, as Assignor, and Tana Exploration Company, LLC, as Assignee,
                conveying a 1.5% of 8/8ths ORRI.

            

    

     

    PROPERTY: EUGENE
      ISLAND 242

    Iberia
      & St. Mary Parishes, Louisiana

    SERIAL
      NO.: OCS-G
      2898

     

    
      	 	
              1.

            	
              Farmout
                Agreement dated June 28, 2004, effective June 18, 2004, between Stone
                Energy Corporation, as Farmor, and Energy Partners, Ltd., as
                Farmee

            

    

     

    
      	 	
              2.

            	
              Indemnity
                Agreement dated March 2, 2005, between Energy Partners, Ltd., and
                Stone
                Energy Corporation.

            

    

     

    PROPERTY: SOUTH
      PASS BLOCK 38

    Plaquemines
      & St. Bernard Parishes, Louisiana

    SERIAL
      NO.: OCS-G
      21695

     

    
      	 	
              1.

            	
              Letter
                Agreement dated October 17, 2005, by and between Stone Energy Corporation
                and Energy Partners, Ltd.

            

    

     

    

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    EXHIBIT
      B

     

    IN
      THE COURT OF CHANCERY OF THE STATE OF DELAWARE

     

    IN
      AND FOR NEW CASTLE COUNTY

     

    
      	
              ENERGY
                PARTNERS, LTD., a Delaware

              corporation,

               

              Plaintiff,

               

              v.

               

              STONE
                ENERGY CORPORATION,

               

              Defendant.

            	
              )

              )

              )

              )

              )

              )

              )

              )

              )

              )

            	
               

              Civil
                Action No. 2402-N

            

    

    

    STIPULATION
      AND ORDER OF DISMISSAL

     

    It
      is
      hereby stipulated and agreed, by and among counsel for
      the
      parties and subject to Court approval, that the above-captioned action is hereby
      dismissed in its entirety and with prejudice, each party to bear its own fees
      and costs.

     

    IT
      IS SO
      ORDERED, this _____ day of October, 2006.

     

    

     

                                                                           
_____________________

    The
      Honorable Donald F. Parsons,

    Vice
      Chancellor

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Stipulated
      and agreed:

     

    
      	
              ABRAMS
                & LASTER LLP

               

              ______________________________

              Kevin
                G. Abrams (#2375)

              Brandywine
                Plaza West, Suite 303

              1521
                Concord Pike

              Wilmington,
                Delaware 19801

              (302)
                778-1000

              Counsel
                for Plaintiff Energy Partners Ltd.

            	
              PRICKETT,
                JONES & ELLIOTT, P.A.

               

              ______________________________

              Bruce
                E. Jameson (#2931)

              1310
                King Street

              P.
                O. Box 1328

              Wilmington,
                DE 19899

              (302)
                888-6500

              Counsel
                for Defendant Stone Energy

              Corporation

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