EXHIBIT 10.5

 

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AMENDED AND RESTATED

 

CREDIT AGREEMENT

 

among

 

HORNBECK OFFSHORE SERVICES, LLC

 

and

 

HORNBECK OFFSHORE TRANSPORTATION, LLC,

as Borrowers

 

and

 

HIBERNIA NATIONAL BANK,

as Agent

 

and

 

THE LENDERS LISTED ON THE SIGNATURE PAGES,

as Banks

 

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Revolving Line of Credit

 

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Dated Effective as of February 13, 2004

 

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AMENDED AND RESTATED

CREDIT AGREEMENT

 

THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated effective as of February 13,
2004, is made among HORNBECK OFFSHORE SERVICES, LLC, a Delaware limited
liability company (“HOS”); HORNBECK OFFSHORE TRANSPORTATION, LLC, a Delaware
limited liability company formerly known as LEEVAC Marine, LLC (“HOT”; HOS and
HOT are sometimes referred to herein collectively as the “Borrowers” and
individually as a “Borrower”); HIBERNIA NATIONAL BANK, a national banking
association, as agent (in such capacity, together with its successors and
assigns in such capacity, the “Agent”), and the lender or lenders listed from
time to time on Schedule 1 hereto and on the signature pages hereof (one or
more, the “Banks”, which term also shall include, subject to the terms and
conditions of Section 10.20 of this Agreement, Bank Affiliates (hereinafter
defined) to the limited extent such Bank Affiliates are party from time to time
to Hedging Agreements (hereinafter defined) with Borrowers), which agree as
follows:

 

PRELIMINARY STATEMENT

 

Borrowers previously obtained from the Banks a revolving line of credit in an
aggregate amount not to exceed $60,000,000.00 to partially finance working
capital needs and acquisitions;

 

Borrowers desire to increase their borrowing availability under that line of
credit up to $100,000,000.00 and the Banks have agreed to such increase, upon
and subject to the terms and conditions hereof.

 

ARTICLE 1

 

GENERAL TERMS

 

Section 1.01 Terms Defined Above. As used in this Agreement, the terms “HOS,”
“HOT,” “Borrower,” “Agent,” and “Banks,” shall have the meanings indicated
above.

 

Section 1.02 Certain Definitions. As used in this Agreement, the following terms
shall have the following meanings, unless the context otherwise requires:

 

“Advance” shall mean the disbursement of the proceeds of the Credit Loan and all
or any portion of such disbursement so long as same remains outstanding and
unpaid.

 

“Affiliate” shall mean as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, “control” of a Person means the
power, directly or indirectly, to direct or in effect cause the direction of the
management and policies of such Person, whether by contract or otherwise.

 

“Agreement” shall mean this Amended and Restated Credit Agreement, as the same
may from time to time be amended, modified or supplemented.

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“Applicable Margin” shall mean, in accordance with the following:

 

For any given fiscal quarter (the “given quarter”), if the Leverage Ratio* of
the Guarantor (on a consolidated basis with its Subsidiaries) at the end of the
preceding quarter was:   then the Applicable Margin for any Loan accruing
interest at the Floating Rate during the given quarter shall be:   and the
Applicable Margin for any Loan accruing interest at the Prime Rate during the
given quarter shall be:   and the Unused Commitment Fee Rate during the given
quarter shall be: ³ 4.0:1.0**   3.50% per annum   1.00% per annum   0.50% per
annum

³ 3.5:1.0 and

< 4.0:1.0

  3.00% per annum   0.50% per annum   0.375% per annum

³ 3.0:1.0 and

< 3.50:1.0

  2.50% per annum   0.00% per annum   0.375% per annum

³ 2.50:1.0 and

< 3.00:1.0

  2.00% per annum   0.00% per annum   0.25% per annum < 2.50:1.0   1.50% per
annum   0.00% per annum   0.25% per annum

*If the Borrowers’ accounts payable are averaging greater than sixty (60) days
outstanding at the time of calculation (i.e., at the end of the preceding
quarter) then Funded Debt shall be used for this calculation of the Leverage
Ratio instead of Net Debt.

 

**If financial statements under Section 5.01 hereof for the preceding quarter
are not timely provided to the Agent, then the Applicable Margin shall be
calculated based on this level for the given quarter from the first day thereof
through the date on which the financial statements are provided and a different
Applicable Margin demonstrated.

 

“Assignment and Acceptance” shall have the meaning set forth in Section 9.06
hereof.

 

“Bank Affiliate” shall mean an Affiliate of a Bank listed on Schedule 1 to this
Agreement.

 

“Borrowing Base” shall mean Sixty Million and No/100 ($60,000,000.00) Dollars.
Any increase or decrease in the Borrowing Base is subject to unanimous written
approval of the Banks and, in addition, compliance, demonstrated to Agent’s
satisfaction, by the Guarantor and the Borrowers with Section 5.17 and 5.18
hereof and applicable provisions of the Indenture (including without limitation,
to the extent applicable, compliance with the Consolidated Interest Coverage
Ratio test at Section 4.09 of the Indenture).

 

“Borrowing Base Credit Commitments” shall mean the commitments of each of the
Banks for the Credit Loan set forth on Schedule 1 hereto under the heading
titled “Borrowing Base Credit Commitment,” taking into account the Borrowing
Base from time to time in effect but in the same proportions among the Banks as
the Credit Commitments, as amended from time to time. The Agent shall have the
right to substitute a revised Schedule 1 hereto to reflect adjustments in
connection with changes of the Borrowing Base.

 

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“Business Day” shall mean a day other than a Saturday, Sunday or legal holiday
for commercial banks in New Orleans, Louisiana or New York, New York.

 

“Change in Control” shall mean any change of circumstances such that (i) so long
as no Offering Event has occurred such that the shares of common stock of
Guarantor are traded on a pubic exchange, the Control Group is collectively the
beneficial and record owners of less than fifty-one (51.0%) percent of the
voting shares of stock of Guarantor, (ii) Todd M. Hornbeck (so long as he is
alive and not incapacitated) is not (x) on the Board of Directors of Guarantor
and each Borrower and (y) a senior officer of Guarantor and each Borrower
equivalent to President or higher, or (iii) Guarantor fails to be the sole
member of each Borrower. For purposes hereof, beneficial ownership will be
determined in the same manner as provided in Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, so long as the applicable Person does not
disclaim beneficial interest of such shares, provided that holders of awards
under the Guarantor’s Incentive Compensation Plan will be deemed beneficial
owners of all restricted shares or shares subject to options granted under such
plan without regard to vesting requirements. Any record owner of warrants or
options awarded under the Incentive Plan shall be deemed to be the record owner
of the shares beneficially owned as a result of the ownership of such warrants
or options for purposes of this definition of Change in Control.

 

“CIC” shall mean Cari Investment Company, a Louisiana corporation.

 

“CIC Shareholders” shall mean Jon P. Vaccari, Nori A. Vaccari and Christian G.
Vaccari.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Collateral” shall mean the properties, property interests and rights described
in Section 3.01 hereof, or otherwise covered by the Collateral Documents, as
security for the Obligations.

 

“Collateral Documents” shall mean collectively the documents required by the
Agent to obtain the security interests in the Collateral, as described in
Section 3.01 hereof, and all other agreements, documents and instruments
required in Section 3.01, as the same may from time to time be amended or
supplemented.

 

“Commitments” shall mean, collectively, the Credit Commitments.

 

“Common Stock” shall mean the common stock, par value $0.01 per share, of
Guarantor or such other class of securities as shall constitute the common
equity of Guarantor.

 

“Consolidated Interest Coverage Ratio” shall have the meaning set forth in the
Indenture, with the exception of the definition of a Qualified Service Contract
used in such definition, which shall be as defined in this Agreement.

 

“Control Group” shall mean (i) the Effective Date Shareholders, and (ii)
transferees in any Permitted Transfer.

 

“Credit Commitments” shall mean the commitments of each of the Banks for the
Credit Loan set forth on Schedule 1 hereto under the heading titled “Credit
Commitment,” as amended from time to time.

 

“Credit Limit” shall mean the lesser of (i) the Borrowing Base from time to time
in effect, and (ii) One Hundred Million and No/100 ($100,000,000.00) Dollars.

 

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“Credit Line” shall mean the lesser of (i) the Borrowing Base from time to time
in effect, and (ii) the credit facility afforded by the Banks to the Borrowers
to receive Advances under this Agreement, up to the Credit Limit.

 

“Credit Loan” shall mean the aggregate Advances made by the Banks to the
Borrowers under the Credit Line, in accordance with Section 2.01 hereof, and
represented by the Credit Notes.

 

“Credit Notes” shall mean the promissory notes executed by Borrowers, each
substantially in the form of Exhibit A hereto, initially dated the Effective
Date (and subsequently dated on the date that additional Banks become a party to
this Agreement), payable to the order of each Bank in the amount of the Bank’s
Commitment, in representation of the Advances available to be made under the
Credit Loan, together with any and all amendments, renewals, modifications,
extensions for any period, increases or rearrangements thereof.

 

“Debt” shall mean any and all amounts or liabilities owing from time to time by
a Borrower or Guarantor, as applicable, to any Person, including the Agent or
any of the Banks, direct or indirect, liquidated or contingent, now existing or
hereafter arising, including without limitation (i) indebtedness for money
borrowed; (ii) unfunded portions of commitments for money to be borrowed; (iii)
the amounts of all standby and commercial letters of credit and bankers
acceptances, matured or unmatured, issued on behalf of a Borrower or Guarantor,
as applicable; (iv) guaranties of the obligations of any other Person, whether
direct or indirect, whether by agreement to purchase the indebtedness of any
other Person or by agreement for the furnishing of funds to any other Person
through the purchase or lease of goods, supplies or services (or by way of stock
purchase, capital contribution, advance or loan) for the purpose of paying or
discharging the indebtedness of any other Person, or otherwise; (v) the present
value of all obligations for the payment of rent or hire of property of any kind
(real or personal) under leases or lease agreements required to be capitalized
under generally accepted accounting principles, and (vi) trade payables incurred
in the ordinary course of business or otherwise.

 

“Default” shall mean the occurrence of any of the events specified in Article 8
hereof, whether or not any requirement for notice or lapse of time or other
condition precedent has been satisfied.

 

“Default Rate” shall mean at any date of calculation, the Prime Rate plus the
Applicable Margin plus three (3.00%) percent per annum, but in any event the
Default Rate shall not exceed eighteen (18.0%) percent per annum.

 

“Draw Request Certificate” shall have the meaning set forth in Section 2.02
hereof.

 

“EBITDA” shall mean, for any rolling four fiscal quarter period preceding any
applicable date of calculation, the sum of (a) Net Income for that period, plus
(b) depreciation, amortization and all other non-cash expenses for that period,
plus (c) Interest Expense for that period, plus (d) the aggregate amount of
federal and state taxes on or measured by income for that period (whether or not
payable during that period), all calculated for Guarantor and its Subsidiaries
on a consolidated basis. EBITDA shall be calculated for all periods as defined
above except that with respect to the Leverage Ratio only, as at any date of
calculation:

 

(y) with respect to assets acquired by a Subsidiary after December 31, 2001,
whether by out-right purchase thereof or by virtue of a merger of a company that
is not a

 

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Subsidiary into a Subsidiary or acquisition by a Subsidiary of any other company
that is not a Subsidiary (which acquisitions or mergers are not otherwise
prohibited by this Agreement), for the first year after the applicable
transaction, EBITDA shall be calculated for the preceding twelve months on a pro
forma basis to include both (A) EBITDA with respect to the newly acquired assets
for the period of time owned by the applicable Subsidiary, and (B) EBITDA with
respect to such newly acquired assets, prior to the applicable Subsidiary’s
acquisition thereof, for the period of time beginning with the day after the
preceding year anniversary of the applicable date of calculation and ending on
the day preceding the date that the applicable Subsidiary acquired such newly
acquired assets (whether by acquisition or merger), and

 

(z) with respect to any newly constructed vessel of a Subsidiary (whether
constructed directly for a Subsidiary or constructed for a third party and
acquired by a Subsidiary within twelve (12) months after its delivery) having a
Qualified Service Contract during the first year following the delivery and
acceptance of the vessel by a Subsidiary (as to vessels delivered by a shipyard
to that Subsidiary upon its construction) or during the first year following the
acquisition by a Subsidiary (as to vessels constructed for third parties and
acquired by a Subsidiary within twelve (12) months after its delivery), for the
first year after delivery or acquisition of the vessel, as the case may be, the
EBITDA shall be calculated on a pro forma basis to include Qualified Service
Contract Cashflow.

 

Pro forma calculations shall be demonstrated to the satisfaction of the Agent.

 

“Effective Date” shall mean the effective date of this Agreement.

 

“Effective Date Shareholders” shall mean those Persons certified to Agent by
Guarantor on the Effective Date as being the record owners of all issued and
outstanding shares of stock of Guarantor.

 

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

 

“Event of Default” shall mean the occurrence of any of the events specified in
Article 8 hereof, provided that any requirement for notice or lapse of time or
any other condition precedent has been satisfied.

 

“Fixed Charges” shall mean, for any applicable period of calculation, the sum of
current maturities of principal and capitalized lease payments on Debt, Interest
Expense and current tax obligations (excluding portions thereof that are
deferred and excluding trade payables incurred in the ordinary course of
business).

 

“Floating Rate” shall mean the LIBO Rate for any applicable Interest Period.

 

“Funded Debt” shall mean, as at any applicable date of calculation, all
outstanding Debt of the Guarantor (on a consolidated basis with its
Subsidiaries) that is Debt comprised of money borrowed, letters of credit and
bankers acceptances, matured or unmatured, and the present value of capitalized
lease obligations, but not (i) Debt comprised of guaranties, (ii) unfunded
commitments to lend and (iii) trade payables.

 

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“Governmental Authority” shall mean any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including without limitation, any arbitration panel, any court or any
commission.

 

“Governmental Requirement” shall mean any law, statute, code, ordinance, order,
rule, regulation, judgment, decree, injunction, franchise, permit, certificate,
license, authorization or other direction or requirement (including without
limitation any of the foregoing which relate to environmental standards or
controls, occupational, safety and health standards or controls and any
environmental protection statute) of any (domestic or foreign) Governmental
Authority.

 

“Guarantor” shall mean Hornbeck Offshore Services, Inc. (formerly
HORNBECK-LEEVAC Marine Services, Inc.), a Delaware corporation.

 

“Guarantor Subsidiaries” shall mean HOS-IV, HOT&T and those other Subsidiaries
that from time to time execute and deliver guaranties of (or other collateral
security for) the Obligations under subsections 3.01(h) and (i) hereof, and
“Guarantor Subsidiary” means any such Person.

 

“Guaranty” shall have the meaning set forth in Section 3.01 hereof.

 

“Hazardous Materials” shall mean:

 

(i) any “hazardous waste” as defined by the Resource Conservation and Recovery
Act of 1976 (42 U.S.C. § 6901 et seq.), as amended from time to time, and
regulations promulgated thereunder;

 

(ii) any “hazardous substance” as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq.)
(“CERCLA”), as amended from time to time, and regulations promulgated
thereunder;

 

(iii) asbestos;

 

(iv) polychlorinated biphenyls;

 

(v) any substance the presence of which on the Vessels is prohibited by any
lawful Governmental Requirement from time to time in force and effect relating
to the Vessels; and

 

(vi) any other substance which by any Governmental Requirement requires special
handling in its collection, storage, treatment or disposal.

 

“Hedging Agreement” shall mean any interest rate, commodity or foreign exchange
swap, collar, cap or similar agreement evidencing Hedging Obligations.

 

“Hedging Arrangements” shall have the meaning set forth in the definition of
Hedging Obligations.

 

“Hedging Obligations” of a Person shall mean any and all obligations of such
Person, whether absolute or contingent and howsoever and whensoever created,
arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the

 

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parties thereto from the fluctuations of interest rates, commodity prices,
exchange rates or forward rates applicable to such party’s assets, liabilities
or exchange transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate locks, options, puts and warrants or any similar
derivative transactions (“Hedging Arrangements”), and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.

 

“HNB” shall mean Hibernia National Bank, a national banking association.

 

“HOS Fleet Mortgage” shall have the meaning set forth in Section 3.01 hereof.

 

“HOS-IV” shall mean HOS-IV, LLC, a Delaware limited liability company.

 

“HOS-IV Guaranty” shall mean the Guaranty Agreement dated as of June 26, 2003 by
HOS-IV in favor of the Agent, for the ratable benefit of the Banks, as it may
from time to time be amended, modified, supplemented or restated.

 

“HOS-IV Vessels” shall mean the HOS TRADER (Official Number 1059198), the HOS
VOYAGER (Official Number 1065076), the HOS EXPRESS (Official Number 1069398),
the HOS EXPLORER (Official Number 1076230), the HOS PIONEER (Official Number
1091418), and the HOS MARINER (Official Number 1083977).

 

“HOS Security Agreement” shall have the meaning set forth in Section 3.01
hereof.

 

“HOS Vessels” shall mean the BJ BLUE RAY (Official Number 1114862), the HOS
INNOVATOR (Official Number 1108573), the HOS DEEPWATER (Official Number
1088301), the HOS STORMRIDGE (Official Number 1124421), the HOS SANDSTORM
(Official Number 1124424), the HOS BRIGADOON (Official Number 1077123) and the
HOS GEMSTONE (Official Number 1141952); provided, that (i) should any other
vessels of HOS be required to be mortgaged by HOS to the Agent in accordance
with the terms and conditions of this Agreement as security for the Obligations,
then such vessels upon being so mortgaged shall be HOS Vessels, and (ii) should
the Agent and the Banks release a HOS Vessel from the Liens securing the
Obligations, then such vessel thereafter no longer shall be a HOS Vessel
(provided, further, that nothing herein shall be deemed to imply that the Agent
and the Banks would be required, or otherwise agree, to so release any HOS
Vessel from such Liens).

 

“HOT Fleet Mortgage” shall have the meaning set forth in Section 3.01 hereof.

 

“HOT Security Agreement” shall have the meaning set forth in Section 3.01
hereof.

 

“HOT Vessels” shall mean the SEA SERVICE (Official Number 570691), the ATLANTIC
SERVICE (Official Number 568767), the BROOKLYN SERVICE (Official Number 566723),
and the SPARTAN SERVICE (Official Number 596900); provided, that (i) should any
other vessels of HOT be required to be mortgaged by HOT to the Agent in
accordance with the terms and conditions of this Agreement as security for the
Obligations, then such vessels upon being so mortgaged shall be HOT Vessels, and
(ii) should the Agent and the Banks release a HOT Vessel from the Liens securing
the Obligations, then such vessel thereafter no longer shall be a HOT Vessel
(provided, further, that nothing herein shall be deemed to imply that the Agent
and the Banks would be required, or otherwise agree, to so release any HOT
Vessel from such Liens).

 

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“HOT&T” shall mean Hornbeck Offshore Trinidad & Tobago, LLC, a Delaware limited
liability company.

 

“HOT&T Guaranty” shall have the meaning set forth in Section 3.01 hereof.

 

“Immediate Family” of a specified Person shall mean such Person’s spouse, mother
or father, or any of such specified Person’s brothers, sisters, sons or
daughters and, in the case of Todd M. Hornbeck or Troy A. Hornbeck, either of
their two paternal uncles.

 

“Indenture” shall mean the Indenture dated as of July 24, 2001 among Guarantor,
Borrowers, Energy Services Puerto Rico, LLC, Hornbeck Offshore Operators, LLC
(formerly HORNBECK-LEEVAC Marine Operators, LLC), HOS-IV, HOT&T and the
Indenture Trustee, as it has been and may from time to time be amended,
modified, supplemented or refinanced.

 

“Indenture Documents” shall mean the Indenture and all notes, collateral
documents and other agreements, documents and instruments executed or delivered
in connection therewith, together with any and all renewals, modifications,
amendments, extensions for any period, increases or rearrangements thereof.

 

“Indenture Noteholders” shall mean the holders from time to time of the notes
issued under the Indenture.

 

“Indenture Obligations” shall mean any and all amounts, liabilities and
obligations owing from time to time by Borrowers and the Guarantor to the
Indenture Trustee or all or any of the Indenture Noteholders pursuant to any of
the Indenture Documents, whether such amounts, liabilities or obligations be
liquidated or unliquidated, now existing or hereafter arising, absolute or
contingent.

 

“Indenture Trustee” shall mean Wells Fargo Bank Minnesota, National Association,
as trustee for the Indenture Noteholders under the Indenture, and its successors
and assigns thereunder.

 

“Interest Expense” shall mean, as of the last day of any rolling four fiscal
quarter period (or such other applicable period as provided in the definition of
EBITDA), the sum of (a) all interest, fees, charges and related expenses paid or
payable (without duplication) for that rolling four fiscal quarter period (or
such other applicable period) to a lender in connection with borrowed money or
the deferred purchase price of assets that are considered “interest expense”
under generally accepted accounting principles, plus (b) the portion of rent
paid or payable (without duplication) for that rolling period (or such other
applicable period) under capital lease obligations that should be treated as
interest in accordance with Financial Accounting Standards Board Statement No.
13.

 

“Interest Period” shall mean 30, 60, 90 or 180 days, as the case may be;
provided, that (x) if any Interest Period would otherwise end on a day that is
not a LIBOR Business Day, that Interest Period shall be extended to the next
succeeding LIBOR Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month, in which event such
Interest Period shall end on the immediately preceding LIBOR Business Day; (y)
any Interest Period that begins on the last LIBOR Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the last LIBOR
Business Day of a calendar month; and (z) any Interest Period that would
otherwise extend beyond the Maturity Date shall end on the Maturity Date.

 

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“Interest Rate Contracts” shall mean interest rate swap agreements, interest
rate cap agreements, interest rate collar agreements, interest rate insurance
and other agreements or arrangements designed to provide protection against
fluctuation in interest rates.

 

“Leverage Ratio” shall mean, as at any applicable date of calculation, the ratio
obtained by dividing Net Debt by EBITDA; provided, that Funded Debt shall be
substituted for Net Debt in certain circumstances set forth in the definition of
Applicable Margin.

 

“LIBO Rate” means an interest rate per annum equal to the quotient (converted to
a percentage) of (i) the rate per annum as determined by the Agent at or about
9:30 o’clock A.M. (Central Time) (or as soon thereafter as practicable) on the
second Business Day prior to the first day of the applicable Interest Period, as
being the rate at which deposits of United States Dollars are offered to the
Banks in the London inter-bank market by the Reference Banks, at the time of
determination and in accordance with the normal practice in such market, for
delivery on the first day of such Interest Period, in amounts equal (as nearly
as may be) to the amount of the Loan on the first day of such Interest Period,
divided by (ii) 1.00 minus the LIBOR Reserve Requirement.

 

“LIBOR Business Day” shall mean any Business Day on which commercial banks are
open for international business (including dealings in U.S. dollar deposits) in
the London inter-bank market.

 

“LIBOR Reserve Requirement” shall mean that percentage which is specified by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including, but not limited to, any
marginal reserve requirement) for the Banks with respect to liabilities
consisting of or including “Eurocurrency liabilities” (as defined in Regulation
D of the Board of Governors of the Federal Reserve System) with a maturity
equivalent with the applicable Interest Period. In determining the percentage
for the LIBOR Reserve Requirement, the Agent may use any reasonable averaging
and attribution methods.

 

“Lien” shall mean any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the property, whether such interest
is based on jurisprudence, statute or contract, and including but not limited to
the lien or security interest or ship mortgage arising from a mortgage,
encumbrance, pledge, security agreement, preferred ship mortgage, conditional
sale or trust receipt or a lease, consignment or bailment for security purposes.
The term “Lien” shall include reservations, exceptions, encroachments,
easements, servitudes, usufructs, rights-of-way, covenants, conditions,
restrictions, leases and other title exceptions and encumbrances affecting
property. For the purposes of the Loan Documents, a Person shall be deemed to be
the owner of any property which it has acquired or holds subject to a
conditional sale agreement, financing lease or other arrangement pursuant to
which title to the property has been retained by or vested in some other Person
for security purposes.

 

“Loan Documents” shall mean collectively this Agreement, the Notes, the
Collateral Documents and any other agreement, document or instrument executed or
delivered in connection herewith and therewith (including without limitation
subordination agreements, consents, waivers, Draw Request Certificates and other
certifications and Hedging Agreements between a Borrower and any Bank), together
with any and all renewals, modifications, amendments, extensions for any period,
or rearrangements hereof or of any thereof.

 

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“Loan Parties” shall mean, collectively, the Borrowers, the Guarantor, HOS-IV
and any other Guarantor Subsidiary now or in the future, and “Loan Party” means
each such Person.

 

“Maturity Date” shall mean February 13, 2009; provided, that such date
automatically shall be accelerated to March 31, 2008 if, before March 31, 2008,
(i) the maturity date of the notes issued under the Indenture has not been
extended to any date after July 31, 2009, or (ii) the Indenture and the notes
issued thereunder are not refinanced having a maturity date at any date after
July 31, 2009 (and such refinance shall not be in violation of Section 6.07
hereof).

 

“Moody’s” shall mean Moody’s Investor Services, Inc.

 

“Net Debt” shall mean, as at any applicable date of calculation, the difference
of (i) Funded Debt, minus (ii) the amount of cash and cash equivalents
(determined in accordance with generally accepted accounting principles) owned
by Guarantor (on a consolidated basis with its Subsidiaries) in excess of
$2,500,000.

 

“Net Income” shall mean, with respect to any rolling four fiscal quarter period
(or such other applicable period as provided in the definition of EBITDA), the
consolidated net income for that period, determined in accordance with generally
accepted accounting principles.

 

“Notes” shall mean, collectively, the outstanding Credit Notes and “Note” shall
mean any of such Credit Notes.

 

“Obligations” shall mean any and all amounts, liabilities and obligations owing
from time to time by the Borrowers to the Agent or all or any of the Banks,
pursuant to any of the Loan Documents, whether such amounts, liabilities or
obligations be liquidated or unliquidated, now existing or hereafter arising,
absolute or contingent.

 

“Offering Event” shall mean the occurrence of a public sale for cash of (i)
equity securities, (ii) securities convertible into equity securities or a
right, warrant or option to receive or purchase equity securities (the
securities described in (i) and (ii) being collectively “Equity Securities”),
(iii) convertible notes, (iv) notes combined with Equity Securities, or (v) all
or substantially all of the assets, in each case of any of a Borrower or
Guarantor; provided, that any private placement of equity securities, including
the issuance by the Guarantor of shares of its common stock, shall not be an
Offering Event.

 

“Permitted Liens” shall mean those Liens described in Section 6.01 hereof.

 

“Permitted Transfer” with respect to Common Stock means (i) a Transfer by CIC to
the CIC Shareholders, pro rata in accordance with their respective ownership of
the capital stock of CIC, (ii) a Transfer by gift to the spouse or lineal
descendants of a Person or to a trust (the trustee of which is a commercial bank
or trust company or a member of such Person’s Immediate Family) or to a family
partnership, all of the beneficial interests in which are owned by such Person
and his or her spouse or lineal descendants, (iii) a Transfer by a Person to any
member of such Person’s Immediate Family or to a trust (the trustee of which is
a commercial bank or trust company or a member of such Person’s Immediate
Family) or a family partnership, all of the beneficial interests of which are
owned by such Person or a member of such Person’s Immediate Family, and (iv) a
Transfer pursuant to a divorce decree.

 

10

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“Person” shall mean any individual, corporation, partnership, limited liability
company, joint venture, association, joint stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof, or any
other form of entity.

 

“Plan(s)” shall mean any employee pension benefit plan within the meaning of
Section (3)(2) of ERISA sponsored and maintained by a Person, including any such
plan to which such Person is required to contribute on behalf of its employees.

 

“Prime Rate” shall mean the rate of interest announced publicly by Citibank,
N.A. (or its successor) in New York, New York from time to time as its “prime
rate” or “base rate,” which rate is a reference rate and is not necessarily the
lowest rate quoted or charged by Citibank, N.A. (or its successor) or the Agent
or any Bank to their respective customers.

 

“Qualified Services Contract” shall mean, with respect to any newly constructed
offshore supply vessel, offshore service vessel (including, without limitation,
any crewboat and anchor-handling towing supply (AHTS) vessel), tug,
double-hulled tank barge and double-hulled tanker delivered to Guarantor or any
of its Subsidiaries, or any newly constructed vessel constructed for a third
party and then acquired by Guarantor or its Subsidiaries (including either
Borrower) within 365 days of such vessel’s original delivery date, a contract
that the Board of Directors of the Guarantor, acting in good faith, designates
as a Qualified Services Contract pursuant to a resolution of the Board of
Directors, which contract:

 

  (a) is between Guarantor or one of its Subsidiaries, on the one hand, and (1)
a Person or Subsidiary of a Person with a rating of either BBB- or higher from
S&P or Baa3 or higher from Moody’s, or if such ratings are not available, then a
similarly investment grade rating from another nationally recognized statistical
rating agency or (2) any other Person provided such contract is supported by
letters of credit, performance bonds or guarantees, from an entity that has an
investment grade rating, for the full amount of the remaining contracted
payments over the contract term;

 

  (b) provides for services to be performed by the Guarantor or one of its
Subsidiaries involving the use of such vessel or a charter (bareboat or
otherwise) of such vessel by the Guarantor or one of its Subsidiaries, in either
case for a minimum period of at least one year;

 

  (c) provides for a fixed day rate for such vessel; and

 

  (d) provides for commencement of the payments of the day rate referred to in
clause (c) of this definition within sixty (60) days of the date the Guarantor
or one of its Subsidiaries has entered into the contract.

 

Should Borrowers desire to rely on a Qualified Services Contract for purposes of
complying with subsection 8.01(p), Borrowers shall provide to Agent a certified
copy of each such Qualified Services Contract and applicable Board resolutions
promptly after adoption of the resolutions.

 

“Qualified Service Contract Cashflow” shall mean, as to an applicable vessel of
a Subsidiary with a Qualified Service Contract, EBITDA attributable to such
vessel under such Qualified Service Contract calculated in good faith by the
Chief Financial Officer of the Guarantor and shall include in the calculation
the revenues earned or (for pro forma calculation purposes) to be earned
pursuant to the Qualified Service Contract relating to such vessel and the

 

11

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estimated expenses related thereto. Such estimated expenses shall be based on
the expenses of the most nearly comparable vessel in the Subsidiary’s fleet or
the Guarantor’s other Subsidiaries’ fleets or, if no such comparable vessel
exists, then on the industry average for expenses of comparable vessels;
provided, that in determining the estimated expenses attributable to such new
vessel, the calculation shall give effect to the interest expense attributable
to the incurrence, assumption or guarantee of any Debt relating to the
construction or acquisition of such new vessel for the period starting with the
beginning of the four quarter period referred to in the definition of “EBITDA”
for which the calculation of Qualified Service Contract Cashflow is being made
and ending with the delivery or acquisition of the vessel. Furthermore, (A) the
pro forma calculation of Qualified Service Contract Cashflow attributable to
such vessel for the four quarter reference period shall be reduced by (i) the
actual cash flow earned under the Qualified Service Contract accounted for in
the actual results for the reference period and (ii) any cash flow resulting
from spot market or other activities prior to the commencement of the Qualified
Service Contract and accounted for in the actual results for the reference
period, and (B) if the contracted dayrate for such vessel is reduced at any time
prior to one year from the commencement of service under such contract, then the
Qualified Service Contract Cashflow shall be adjusted to give effect to the
commencement date of the reduced dayrate.

 

“Reference Banks” shall mean the principal London offices of the banks shown on
the Dow Jones Telerate Matrix for British Bankers Association Interest
Settlement Rates.

 

“Required Banks” shall mean Banks holding at least sixty (60.0%) percent of the
aggregate principal amount of the Notes.

 

“S&P” shall mean Standard & Poor’s Rating Services.

 

“Subsidiaries” shall mean any Person of which Guarantor owns, directly or
indirectly, fifty (50.0%) percent or more of the voting or other equity
interests, and “Subsidiary” means any such Person.

 

“Surveyor” shall mean any marine engineer/surveyor approved in writing by the
Required Banks, and shall initially mean Norman J. Dufour, Jr., unless and until
the Agent shall have otherwise notified Borrowers in writing to the contrary.

 

“Transfer” shall mean any direct or indirect transfer, assignment, donation,
devise, sale, gift, pledge, hypothecation, encumbrance, or other disposition of
any security, or any interest therein, whether voluntary or involuntary,
including without limitation any disposition or transfer as a part of any
liquidation of assets or any reorganization pursuant to the United States’ or
any other jurisdiction’s bankruptcy laws or other similar debtor relief laws.

 

“2001 Credit Agreement” shall mean the Credit Agreement dated as of December 31,
2001 among Borrowers, the lenders party thereto (including the Banks party
hereto on the Effective Date) and the Agent, as amended by three amendments,
dated February 25, 2002, June 18, 2003 and September 30, 2003.

 

“Unused Commitment Fee” shall mean an amount calculated by multiplying the
Unused Commitment Fee Rate times the average daily unborrowed amount of the
Borrowing Base Credit Commitments for the period in question, computed on the
per annum basis of a year of 360 days for the actual number of days in the
applicable periods.

 

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“Unused Commitment Fee Rate” shall be calculated as set forth in the definition
of Applicable Margin.

 

“Vessels” shall mean, collectively, the HOS Vessels and the HOT Vessels and any
other vessels subject to Liens in favor of the Agent, for the ratable benefit of
the Banks, securing the Obligations and/or guaranties thereof, and “Vessel”
shall mean any of such Vessel.

 

Section 1.03 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with generally accepted
accounting principles as in effect from time to time.

 

[The rest of this page is intentionally blank.]

 

13

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ARTICLE 2

 

THE CREDIT LINE

 

Section 2.01 The Credit Line and the Credit Loan. (a) The parties acknowledge
and agree that immediately preceding the effectiveness of this Agreement, the
outstanding principal amount of advances under the 2001 Credit Agreement was
$51,900,000.00 in the aggregate, $10,380,000.00 of which was owed by the
Borrowers to Hibernia National Bank, $10,380,000.00 to Fortis Capital Corp.,
$10,380,000.00 to Southwest Bank of Texas, N.A., $10,380,000.00 to DVB Bank
Aktiengesellschaft and $10,380,000.00 to Wells Fargo, N.A. Such advances shall
be restated on the Effective Date and be considered Advances made by the Banks
to the Borrowers consistent with the Commitments hereunder; no novation is
intended hereby. Subject to and upon the terms and conditions set forth in this
Agreement, and relying upon the representations and warranties contained in this
Agreement, each Bank, severally, is willing to make multiple Advances to the
Borrowers under the Credit Line prior to the Maturity Date in the aggregate
principal amount up to such Bank’s Borrowing Base Credit Commitment set forth on
Schedule 1 hereto. The aggregate amount of the Advances cannot exceed the Credit
Limit. The Credit Line shall be revolving, such that from the Effective Date
through the Business Day immediately preceding the Maturity Date, the Borrowers
may borrow, repay and reborrow under the Credit Line. The Credit Loan and
Advances thereunder will be evidenced by a Credit Note for each Bank in the
principal amount, initially, of such Bank’s Credit Commitment. Interest on the
Credit Line shall accrue as described in Section 2.03 hereof and shall be
payable, in arrears, also as provided in Section 2.03. The Credit Notes shall
mature and be payable in full (including without limitation all then outstanding
principal and accrued and unpaid interest) on the Maturity Date.

 

(b) ANY ADVANCE HEREUNDER TO OR ON BEHALF OF A BORROWER SHALL BE DEEMED FOR ALL
PURPOSES TO BE AN ADVANCE TO BOTH BORROWERS. EACH BORROWER HEREBY ACKNOWLEDGES
AND AGREES THAT IT IS SOLIDARILY (JOINTLY AND SEVERALLY) LIABLE WITH THE OTHER
BORROWER TO THE BANKS FOR THE PAYMENT AND PERFORMANCE OF ALL ADVANCES AND ANY
OTHER OBLIGATIONS INCURRED OR FROM TIME TO TIME DUE AND PAYABLE.

 

Section 2.02 Manner and Notice of Advances Under the Credit Line. Subject to the
requirements and limitations set forth in this Section 2.02 and in Article 7
hereof, Advances may be drawn solely for the purposes set forth in Section 2.10
hereof.

 

Borrowers shall provide the Agent with any request for an Advance (i) prior to
10:00 a.m. (central time) at least two (2) Business Days prior to the requested
date of the Advance to initially accrue interest based on the Floating Rate and
(ii) at least one (1) Business Day prior to the requested date of the Advance to
initially accrue interest based on the Prime Rate, in each case pursuant to a
Draw Request Certificate (the “Draw Request Certificate”), the form of which is
attached hereto as Exhibit B. If the Advance is in connection with the
acquisition of a company or assets of another company (other than in the
ordinary course of business), then Borrowers shall provide to the Agent such
other information in connection therewith as the Agent requests, including
without limitation compliance with subsection 2.01(a) and Section 6.05 hereof if
applicable. The Agent will use its best efforts to give telephone notice to the
Banks of a proposed Advance on the same day such Draw Request Certificate is
received by the Agent from Borrowers, but in any event (x) at least two (2)
Business Days prior to any Advance to initially accrue interest based on the
Floating Rate interest option, and (y) at least one (1) Business Day prior to
any Advance to initially accrue interest based on the Prime Rate interest
option. Advances shall be made only on Business Days. The request for any
Advance shall constitute a certification by Borrowers that all of the
representations and warranties contained in Article 4 (other than those

 

14

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representations and warranties that are, by their specific terms, limited in
application to a specific date) are true and correct as of the date of such
request and also as of the date of the Advance.

 

Not later than 12:00 noon (central time) on the date of any Advance, each of the
Banks shall make available to the Agent, in immediately available funds, the
amount of such Bank’s pro rata portion (i.e., the percentage of its Credit
Commitment as compared to the aggregate of the Credit Commitments) of the amount
of the requested Advance. Upon receipt from each Bank of such amount, and upon
fulfillment of the applicable conditions set forth in Sections 7.01 or 7.02
hereof, the Agent (on behalf of the Banks) will make available to Borrowers the
aggregate amount of such Advance in accordance with the further terms of this
Section 2.02. The failure or refusal of any Bank to make available to the Agent,
at the aforesaid time and place on any date of an Advance, the amount of its
portion of the requested Advance shall not relieve any other Bank from its
several obligation hereunder to make available to the Agent the amount of such
other Bank’s portion of any requested Advance.

 

The Agent may, unless notified to the contrary by any Bank prior to the date of
an Advance, assume that each Bank has made available to the Agent on such date
of the applicable Advance the amount of each Bank’s portion of the Advance to be
made on such date, and the Agent shall, in reliance upon such assumption, make
available to Borrowers a corresponding amount. If any Bank makes available to
the Agent such amount on a date after the date of the applicable Advance, such
Bank shall pay to the Agent on demand an amount equal to the product of (i) the
average computed for the period referred to in the numerator in clause (iii)
below, of the weighted average interest rate paid by the Agent for federal funds
acquired by the Agent during each day included in such period, times (ii) the
amount of such Bank’s portion of such Advance, times (iii) a fraction, the
numerator of which is the number of days that elapse from and including such
date of the Advance to the date on which the amount of such Bank’s portion of
such Advance shall become immediately available to the Agent, and the
denominator of which is 365; provided, that if such Bank has not paid to the
Agent such Bank’s portion of the Advance by 12:00 noon (central time) on the
third (3rd) Business Day after the Advance was made to Borrowers, then the
interest rate in clause (i) above shall be the Prime Rate (adjusted daily) from
and after such 2nd Business Day after the Advance was made until and including
the date such Bank makes available to the Agent such Bank’s portion of the
Advance; provided, further, that if such Bank has not paid to the Agent such
Bank’s portion of the Advance by 12:00 noon (central time) on the fifteenth
(15th) Business Day after the Advance was made to Borrowers, then the interest
rate in clause (i) above shall be the Prime Rate (adjusted daily) plus three
(3.0%) percent per annum from and after such 15th Business Day after the Advance
was made until and including the date such Bank makes available to the Agent
such Bank’s portion of the Advance. A statement of the Agent submitted to each
Bank with respect to any amounts owing under this paragraph shall be prima facie
evidence of the amount due and owing to the Agent by such Bank. If any Bank
fails to pay to Agent its portion of any Advance within thirty (30) days after
an Advance or if any Bank twice fails to timely make its portion of Advances to
be made to Borrowers available to the Agent before 12:00 noon (central time) on
the dates Advances are made to Borrowers, then, if requested to do so by
Borrower or any other Bank or the Agent, such Bank shall sell all of its
interests, rights and obligations under this Agreement (including all of its
Commitment and its portion of the Credit Loan at the time owing to it) and the
Note held by it to another Bank or bank under Section 9.06 hereof.

 

Absent manifest error, the credit advice resulting from the deposit of the
proceeds of the Advance in Borrowers’ account with the Agent shall be deemed
conclusive evidence of Borrowers’ solidary (joint and several) indebtedness to
the Banks in connection with the Credit Loan.

 

When each Advance is made by the Agent to a Borrower hereunder, Borrowers shall
be deemed to have renewed and reissued each Credit Note for the amount of such
Advance represented by said

 

15

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Credit Note plus the amount of all previous Advances then outstanding and all
other amounts due under each Credit Note.

 

Section 2.03 Interest on the Credit Loan. (a) The Credit Loan shall bear
interest from the date of each Advance until paid at either (i) the Prime Rate
plus the Applicable Margin, per annum, adjusted daily, or (ii) the Floating Rate
plus the Applicable Margin, per annum, adjusted on the first day of each
Interest Period (i.e., in accordance with the definition of LIBO Rate,
determined two (2) Business Days prior to each Interest Period). Interest on the
Credit Loan shall be payable in arrears (x) if accruing based on the Prime Rate
interest option, on the last day of each month beginning February 29, 2004 and,
with respect to any of the Credit Loan being converted to accrue interest based
on the Floating Rate interest option, on the date of such conversion with
respect to such portion being converted, (y) if accruing based on the Floating
Rate interest option, on the last day of each applicable Interest Period (unless
an Interest Period is for 180 days, in which case interest on such applicable
Advances shall be payable on the 90th day of such Interest Period and on the
last day of such Interest Period), and (z) on the maturity of the Credit Loan on
the Maturity Date. All payments of interest shall be computed on the per annum
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) elapsed.

 

(b) The Prime Rate shall remain fixed for one Business Day, to be adjusted
daily. The Floating Rate shall remain fixed for the duration of any Interest
Period for which the Floating Rate interest option is selected. Borrowers shall
provide to the Agent at least two (2) Business Days’ prior written notice of the
change of interest accrual on any portion of the Credit Loan from the Prime Rate
interest option to the Floating Rate interest option. At least two (2) Business
Days prior to the end of an Interest Period, Borrowers shall provide the Agent
with written notice as to whether the applicable portion of the Credit Loan is
to continue accruing interest at the Floating Rate interest option (and if so,
then for what new Interest Period) or to accrue at the Prime Rate interest
option after the end of the Interest Period until further notice to the contrary
from Borrowers. If Borrowers do not timely notify the Agent of their election
for any portion of the Credit Loan accruing interest at the Floating Rate
interest option (i.e., at least two (2) Business Days prior to the end of an
Interest Period), then the interest rate on such portion of the Credit Loan
shall, following the end of such Interest Period, accrue interest based on the
Prime Rate interest option.

 

(c) Borrowers will indemnify the Banks against, and reimburse the Agent (for
payment to the Banks) on demand for, any loss or expense actually and
demonstrably incurred or sustained by the Banks (including without limitation,
any loss or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by the Banks to fund or maintain Floating Rate
advances) as a result of any payment or prepayment (whether authorized or
required hereunder or otherwise) of all or a portion of any Floating Rate
advance on a day other than the day on which the applicable Interest Period
ends. For purposes of this Section, funding losses arising by reason of
liquidation or reemployment of deposits or other funds acquired by the Banks to
fund or maintain Floating Rate advances shall be calculated as the remainder
obtained by subtracting: (1) the yield (reflecting both stated interest rate and
discount, if any) to maturity of obligations of the United States Treasury as
determined by the Agent in an amount equal or comparable to such advance for the
period of time commencing on the date of the payment, prepayment or change of
rate as provided above and ending on the last day of the subject interest
period, from (2) the Floating Rate of the subject Interest Period, times the
number of days from the date of payment, prepayment or change of rate to the
last day of the subject interest period, divided by 360. Any payment due under
this Section will be paid to the Agent within five days after demand therefor by
the Agent, and if not timely received by the Agent, such amount shall thereafter
accrue interest at the Default Rate and be payable on demand.

 

(d) The determination by the Agent of an interest rate hereunder or interest
amount due hereunder shall for all purposes be prima facie evidence of the
correctness of such rate or calculation.

 

16

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(e) At no time shall there be more than five (5) separate portions of the Credit
Loan accruing interest based on the Floating Rate interest option, and no
portion of the Credit Loan accruing interest based on the Floating Rate interest
option shall be for a principal amount of less than $1,000,000.00.

 

Section 2.04 Default Rate. If an Event of Default shall occur in the payment on
the due date of any payment of principal or interest due hereunder, Borrowers
will pay interest on any such past due installment (retroactively) from the date
of the Default on such payment up to the date of actual payment (as well after
as before judgment) at the Default Rate. Upon the acceleration of the principal
indebtedness represented by the Credit Notes resulting from an Event of Default
hereunder, the accelerated principal balance of the Credit Loan shall bear
interest from the date of acceleration up to the date of actual payment (as well
after as before judgment) at the Default Rate. All such interest at the Default
Rate shall be payable on demand.

 

Section 2.05 Prepayments. The Credit Loan shall or may be prepaid as follows:

 

(i) Mandatory Prepayments—

 

(y) The Required Banks shall be entitled to require mandatory prepayments of the
Credit Loan as set forth in Section 5.08 of this Agreement, unless other
Collateral satisfactory to the Required Banks is substituted for the Collateral
subject thereto, pursuant to documentation in form and substance satisfactory to
the Agent.

 

(z) Borrowers shall prepay the Credit Loan from time to time as may be necessary
so that the principal amount of the Credit Line outstanding does not exceed the
Credit Limit then in effect.

 

(ii) Voluntary Prepayments—Borrowers may make voluntary prepayments from time to
time on the Credit Loan outstanding hereunder, in whole or in part, without
premium or penalty (other than as provided in subsection 2.03(c) above and as
otherwise may have been or be agreed to), upon at least two (2) Business Days’
notice to the Agent setting forth (x) the proposed date of prepayment (which
shall be a Business Day), and (y) the principal amount of the prepayment (which
shall be an amount equal to at least one hundred thousand dollars ($100,000.00)
or any lesser remaining balance of the Credit Loan then outstanding).

 

(iii) As to any prepayment, whether mandatory or voluntary, (y) Borrowers shall
pay all accrued interest on the portions of the Credit Loan so prepaid, at the
time of prepayment, and (z) prepayments shall be applied first, to that portion
of the Credit Loan accruing interest based on the Prime Rate interest option
and, second, to the remaining amounts of the Credit Loan outstanding with due
regard, to the extent practicable, to minimizing any fees under subsection
2.03(c).

 

Section 2.06 Business Days. If the date for any payment or prepayment hereunder
falls on a day which is not a Business Day, then for all purposes of this
Agreement (unless otherwise provided herein) the same shall be deemed to have
fallen on the next following Business Day, and such extension of time shall in
such case be included in the computation of payments of interest.

 

Section 2.07 Nature of Commitment. The Banks’ obligation to make any Advance
shall be deemed to be a transaction made pursuant to a contract to make a loan
or extend debt financing or

 

17

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financial accommodations to Borrowers within the meaning of Sections 365(c)(2)
and 365(e)(2)(B) of the Bankruptcy Code of the United States.

 

Section 2.08 Payments. Borrowers shall make each payment hereunder and under the
Notes and any other Loan Document in lawful money of the United States of
America in same day funds to the Agent at its main office in New Orleans,
Louisiana, not later than 11:00 a.m. (Central Time) on the day when due, or such
other place in the United States as designated in writing by the Agent. The
Agent shall promptly send to each Bank by federal wire transfer its respective
proportionate share of all amounts to which the Banks are entitled.

 

Section 2.09 Certain Fees. (a) Borrowers shall pay to the Agent (i) on the
Effective Date, for disbursement in accordance with subsection 9.01(a) hereof to
the Banks pro-rata according to their Credit Commitments, a nonrefundable loan
origination fee equal to $250,000, and (ii) after the Effective Date,
simultaneously with any increase in the Borrowing Base, for disbursement in
accordance with subsection 9.01(a) hereof to the Banks pro-rata according to the
respective increases in their respective Credit Commitments, a nonrefundable
loan origination fee equal to a percentage of the amount of the increase of the
Borrowing Base, determined as follows:

 

If the date of increase of the

Borrowing Base occurs between:

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

  

then the percentage applied shall be:

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

Effective Date—

February 13, 2005

   0.50%

February 14, 2005—

February 13, 2006

   0.40%

February 14, 2006—

February 13, 2007

   0.30%

February 14, 2007—

February 13, 2008

   0.20%

February 14, 2008—

the day preceding the

Maturity Date

   0.10%

 

(b) Borrowers shall pay to the Agent, for disbursement in accordance with
subsection 9.01(a) hereof to the Banks pro-rata according to their Credit
Commitments, not later than the fifth (5th) Business Day after the end of each
fiscal quarter, an Unused Commitment Fee in arrears for the prior quarter. On
the Maturity Date, Borrowers shall pay to the Agent, for disbursement in
accordance with Article 9 hereof to the Banks pro-rata according to their Credit
Commitments, an Unused Commitment Fee in arrears for the period from the first
day of the fiscal quarter in which the Maturity Date occurs up to, but not
including, the Maturity Date.

 

(c) Borrowers shall pay to the Agent, for its own account, such fees as are
agreed to in a separate agreement among Borrowers and the Agent with respect to
the Agent’s services provided hereunder and in connection herewith.

 

18

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Section 2.10 Use of Proceeds. Borrowers shall use the proceeds of the Advances
exclusively for their working capital purposes and for funding, subject to the
terms and conditions hereof, acquisitions of assets and companies and
construction of vessels.

 

Section 2.11 Inability to Determine Floating Rate. In the event, prior to the
commencement of any Interest Period relating to any portion of the Credit Loan
to accrue interest based on the Floating Rate interest option, the Agent shall
determine or be notified by the Required Banks that adequate and reasonable
methods do not exist for ascertaining the Floating Rate that would otherwise
determine the rate of interest to be applicable to any portion of the Credit
Loan to accrue interest based on the Floating Rate interest option during any
Interest Period, the Agent shall forthwith give notice of such determination
(which shall be conclusive and binding on Borrowers and the Banks absent
manifest error) to Borrowers and the Banks. In such event (i) the applicable
request giving rise to such determination, (x) if a request for an Advance,
shall be deemed to have requested that the Advance accrue interest based on the
Prime Rate interest option, and (y) if a request to convert to, or continue,
interest accrual based on the Floating Rate interest option, shall be denied and
that portion of the Credit Loan shall accrue interest based on the Prime Rate
interest option, (ii) each portion of the Credit Loan then accruing interest
based on the Floating Rate interest option will automatically, on the last day
of the then current Interest Period thereof, convert to accrue interest based on
the Prime Rate interest option, and (iii) no further Advances shall be made that
are to accrue interest based on the Floating Rate interest option until the
Agent or the Required Banks determines that the circumstances giving rise to
such suspension no longer exist, whereupon the Agent or, as the case may be, the
Agent upon the instruction of the Required Banks, shall so notify Borrowers and
the Banks.

 

Section 2.12 Illegality. Notwithstanding any other provisions herein, if any
present or future law, regulation, treaty or directive or the interpretation or
application thereof shall, subsequent to the date hereof, make it unlawful for
any Bank to make any Advance or maintain any portion of the Credit Loan, in
either case with interest accruing based on the Floating Rate interest option,
such Bank shall forthwith give notice of such circumstances to Borrowers and the
other Banks and thereupon (a) the commitment of such Bank to make Advances
accruing interest based on the Floating Rate interest option or to convert
portions of the Credit Loan so as to accrue interest based on the Floating Rate
interest option shall forthwith be suspended and (b) such Bank’s portion of the
Credit Loan then accruing interest based on the Floating Rate interest option
will automatically, on the last day of the then current respective Interest
Periods thereof (unless required by law to be an earlier date), convert to
accrue interest based on the Prime Rate interest option. Borrowers hereby agree
promptly to pay the Agent for the account of such Bank, upon demand by such
Bank, any additional amounts necessary to compensate such Bank for any costs
incurred by such Bank in making any conversion in accordance with this Section
2.12, including any interest or fees payable by such Bank to lenders of funds
obtained by it in order to make or maintain hereunder its portion of the Credit
Loan accruing interest based on the Floating Rate interest option.

 

Section 2.13 Additional Costs, etc. If any present or future applicable law
relative to Floating Rate application, which expression, as used herein,
includes statutes, rules and regulations thereunder and interpretations thereof
by any competent court or by any governmental or other regulatory body or
official charged with the administration or the interpretation thereof and
requests, directives, instructions and notices at any time or from time to time
hereafter made upon or otherwise issued to any Bank or the Agent by any central
bank or other fiscal, monetary or other authority (whether or not having the
force of law), shall:

 

(a) subject any Bank or the Agent to any tax, levy, impost, duty, charge, fee,
deduction or withholding of any nature with respect to this Agreement, the other
Loan Documents, such Bank’s Commitment or the Credit Loan (other than taxes
based upon or measured by the revenue, income or profits of such Bank or the
Agent), or

 

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(b) materially change the basis of taxation (except for changes in taxes on
revenue, income or profits) of payments to any Bank of the principal of or the
interest on the Credit Loan or any other amounts payable to any Bank or the
Agent under this Agreement or the other Loan Documents, or

 

(c) impose or increase or render applicable (other than to the extent
specifically provided for elsewhere in this Agreement) any special deposit,
reserve, assessment, liquidity, capital adequacy or other similar requirements
(whether or not having the force of law) against assets held by, or deposits in
or for the account of, or loans by, or commitments of an office of any Bank, or

 

(d) impose on any Bank or the Agent any other conditions or requirements with
respect to this Agreement, the other Loan Documents, the Credit Loan, such
Bank’s Commitment, or any class of loans or commitments of which the Credit Loan
or such Bank’s Commitment form a part,

 

and the result of any of the foregoing is:

 

(i) to increase the cost to any Bank of making, funding, issuing, renewing,
extending or maintaining the Credit Loan or the Commitment of such Bank, or

 

(ii) to reduce the amount of principal, interest or other amount payable to such
Bank or the Agent hereunder on account of the Commitment of such Bank or the
Credit Loan, or

 

(iii) to require such Bank or the Agent to make any payment or to forego any
interest or other sum payable hereunder, the amount of which payment or foregone
interest or other sum is calculated by reference to the gross amount of any sum
receivable or deemed received by such Bank or the Agent from Borrowers
hereunder,

 

then, and in each such case, Borrowers will, upon demand made by such Bank or
the Agent (as the case may be) at any time and from time to time and as often as
the occasion therefor may arise, pay to such Bank or the Agent such additional
amounts as will be sufficient to compensate such Bank or the Agent for such
additional cost, reduction, payment or foregone interest or other sum.

 

Section 2.14 Capital Adequacy. If after the date hereof any Bank determines that
(i) the adoption of or change in any law, governmental rule, regulations,
policy, guideline or directive (whether or not having the force of law)
regarding capital requirements for banks or bank holding companies or any change
in the interpretation or application thereof by a court or governmental
authority with appropriate jurisdiction, or (ii) compliance by such Bank or any
corporation controlling such Bank with any law, governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law) of any
such entity regarding capital adequacy, has the effect of reducing the return on
such Bank’s commitment or portion of the Credit Loan to a level below that which
such Bank could have achieved but for such adoption, change or compliance
(taking into consideration such Bank’s then existing policies with respect to
capital adequacy and assuming full utilization of such entity’s capital) by any
amount deemed by such Bank to be material, then such Bank may notify Borrowers
of such fact. To the extent that the amount of such reduction in the return on
capital is not reflected in the Prime Rate, Borrowers agree to pay such Bank for
the amount of such reduction in the return on capital as and when such

 

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reduction is determined upon presentation by such Bank of a certification in
accordance with Section 2.15 hereof. Each Bank shall allocate such cost
increases among its customers in good faith and on an equitable basis.

 

Section 2.15 Certificate. A certificate setting forth any additional amounts
payable pursuant to Section 2.13 or 2.14 and a complete explanation of such
amounts which are due, submitted by any Bank or the Agent to Borrowers, shall
for all purposes be prima facie evidence that such amounts are due and owing.

 

Section 2.16 Indemnity. Borrowers agree to indemnify each Bank and to hold each
Bank harmless from and against any loss, cost or expense that such Bank may
sustain or incur as a consequence of (i) default by Borrowers in payment of the
principal amount of or any interest on any portion of the Credit Loan accruing
interest based on the Floating Rate interest option as and when due and payable,
including any such loss or expense arising from interest or fees payable by such
Bank to lenders of funds obtained by it in order to maintain its portion of the
Credit Loan accruing interest based on such Floating Rate interest option or
(ii) default by Borrowers in making a borrowing after Borrowers have provided a
Draw Request Certificate requesting that the Advance to be made accrue interest
based on the Floating Rate interest option.

 

Section 2.17 Application of Payments. Payments made under this Agreement and the
other Loan Documents, whether made when due under the Loan Documents or after
foreclosure on Collateral, for application to the Obligations shall be applied
to the Obligations as follows:

 

(i) to the Agent, with respect to fees and expenses accrued and outstanding
(including without limitation reasonable attorneys’ fees and expenses);

 

(ii) to the Banks, ratably according to their Credit Commitments, with respect
to fees under Section 2.09 hereof;

 

        (iii) to the Banks, with respect to other fees and expenses and late
charges accrued and outstanding with respect to the Obligations (including
without limitation reasonable attorneys’ fees and expenses of the Banks in
accordance with Section 5.07 hereof), “pro-rata according to the respective loan
amounts then outstanding” (hereinafter defined). Of the fees and expenses and
late charges due with respect to the Credit Loan (as opposed to Hedging
Obligations), such amounts shall then be paid to the Banks ratably according to
the Banks’ applicable Commitments;

 

(iv) to the Banks, with respect to interest accrued and outstanding on the
Obligations, “pro-rata according to the respective loan amounts then
outstanding”. Of the interest accrued and then outstanding with respect to the
Credit Loan (as opposed to Hedging Obligations), such amounts shall then be paid
to the Banks ratably according to the Banks’ applicable Commitments; and

 

(v) to the Banks, with respect to principal amounts of the Credit Loan due and
payable and Hedging Obligations then due and unpaid, “pro-rata according to the
respective loan amounts then outstanding”. Of the principal due with respect to
the Credit Loan (as opposed to the Hedging Obligations), such amounts shall then
be paid to the Banks ratably according to the Banks’ applicable Commitments.

 

“Pro-rata according to the respective loan amounts then outstanding” shall be
determined—

 

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(i) in instances other than with respect to foreclosure on Collateral or the
exercise by the Agent of its other rights and remedies under the Loan Documents,
applicable amounts under a subsection as to Hedging Obligations shall not be
considered, and

 

(ii) in instances with respect to foreclosure on Collateral or the exercise by
the Agent of its other rights and remedies under the Loan Documents, by adding
the aggregate principal amounts of the Credit Loan outstanding and Hedging
Obligations then due and unpaid before giving effect to the payment and then
dividing that sum by the Credit Loan amount outstanding and the Hedging
Obligations due and unpaid to determine the Credit Loan’s and Hedging
Obligations’ respective percentages of application; following such allocation to
Hedging Obligations, the Bank holding such Hedging Obligations shall be entitled
to the amount so allocated for application against the relevant Hedging
Obligations.

 

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ARTICLE 3

 

SECURITY FOR THE OBLIGATIONS

 

Section 3.01 Security. The Obligations shall be secured by the following:

 

(a) The Security Agreement dated February 25, 2002 by HOS in favor of the Agent,
for the ratable benefit of the Banks (as it has been, and may from time to time
be further, amended, modified, supplemented or restated, the “HOS Security
Agreement”), pursuant to which HOS has granted and shall maintain in favor of
Agent a first security interest in all of HOS’s right, title and interest in and
to the HOS Vessels and all related property and rights of HOS (including without
limitation all goods, machinery, equipment (including without limitation
equipment furnished by HOS), inventory, contract rights, construction plans and
specifications and general intangibles relating to the HOS Vessels, as well as
all of HOS’s rights under charter hire and accounts relative to HOS Vessels),
together with proper UCC-1 Financing Statements duly filed in Louisiana and
Delaware and appropriate consents.

 

(b) The Security Agreement dated February 25, 2002 by HOT in favor of the Agent,
for the ratable benefit of the Banks (as it has been, and may from time to time
be further, amended, modified, supplemented or restated, the “HOT Security
Agreement”), pursuant to which HOT has granted and shall maintain in favor of
Agent a first security interest in all of HOT’s right, title and interest in and
to the HOT Vessels and all related property and rights of HOT (including without
limitation all goods, machinery, equipment, contract rights, construction plans
and specifications and general intangibles relating to the HOT Vessels, as well
as all of HOT’s rights under charter hire and accounts relative to the HOT
Vessels), together with proper UCC-1 Financing Statements duly filed in
Louisiana and appropriate consents.

 

(c) The First Preferred Fleet Mortgage dated February 25, 2002 by HOT in favor
of the Agent, for the ratable benefit of the Banks (as it has been, and may from
time to time be further, amended, modified, supplemented or restated, the “HOT
Fleet Mortgage”), pursuant to which HOT has granted and shall maintain a first
preferred ship mortgage lien in favor of Agent in all of HOT’s right, title and
interest in and to the HOT Vessels, duly filed with the United States Coast
Guard.

 

(d) The First Preferred Fleet Mortgage dated February 25, 2002 by HOS in favor
of the Agent, for the ratable benefit of the Banks (as it has been, and may from
time to time be further, amended, modified, supplemented or restated, the “HOS
Fleet Mortgage”), pursuant to which HOS has granted and shall maintain a first
preferred ship mortgage lien in favor of Agent in all of HOS’s right, title and
interest in and to the HOS Vessels, duly filed with the United States Coast
Guard.

 

(e) A first security interest in all deposit accounts of either Borrower
individually or both Borrowers jointly with the Agent, including without
limitation as provided in the HOS Security Agreement and the HOT Security
Agreement.

 

(f) The Guaranty Agreement dated December 31, 2001 by Guarantor in favor of the
Banks (as it has been, and may from time to time be further, amended, modified,
supplemented or restated, the “Guaranty”) guarantying the payment and
performance of the Obligations.

 

(g) (i) The HOS-IV Guaranty guarantying the payment and performance of the
Obligations, and (ii) the Guaranty Agreement dated of even date herewith by
HOT&T in favor of the Banks (as it may from time to time be amended, modified,
supplemented or restated, the “HOT&T Guaranty”) guarantying the payment and
performance of the Obligations.

 

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(h) (i) Upon the formation or acquisition of any Subsidiary under Section 6.05
hereof which results in Guarantor having Subsidiaries (other than Borrowers,
Hornbeck Offshore Operators, LLC, HOS-IV and HOT&T) with assets totaling
$50,000,000.00 or more, or upon any Subsidiaries (other than Borrowers and
Hornbeck Offshore Operators, LLC, HOS-IV and HOT&T) from time to time existing
having assets totaling $50,000,000.00 or more, and (ii) thereafter, upon the
formation or acquisition of any Subsidiary under Section 6.05 hereof, such
Subsidiary or Subsidiaries as are satisfactory to the Required Banks in their
sole discretion (such that the Subsidiaries, other than Borrowers, Hornbeck
Offshore Operators, LLC, HOS-IV and HOT&T, not guarantying the Obligations have
assets totaling less than $50,000,000.00) shall guaranty the payment and
performance of the Obligations by executing and delivering in favor of the
Agent, for the ratable benefit of the Banks, a guaranty agreement comparable to
the Guaranty but in any event in form and substance satisfactory to the Agent
and the Required Banks, and such Subsidiary or HOS-IV or HOT&T also shall grant
to the Agent, for the ratable benefit of the Banks, security interests or
mortgages in such collateral as may be required by the Required Banks in
accordance with Section 5.17 hereof (also pursuant to documentation in form and
substance satisfactory to the Agent and the Required Banks). Notwithstanding the
foregoing, in the event that, but for this sentence, a Subsidiary formed under
the laws of a jurisdiction outside of the United States would be required to
execute and deliver a guaranty, then in lieu of such guaranty the Guarantor or
applicable Subsidiary of Guarantor that owns such foreign Subsidiary shall
promptly pledge to the Agent, for the ratable benefit of the Banks, on an equity
class by equity class basis the lesser of (y) all of the equity of such class in
such foreign Subsidiary that it owns or (z) sixty-five percent (65%) of the
equity of such class issued and outstanding in such foreign Subsidiary (in other
words, no more than 65% of each class of the foreign Subsidiary’s equity issued
and outstanding is to be pledged), as security for the Obligations (and if the
pledgor is not a Borrower, also as security for its guaranty of the
Obligations), all pursuant to documentation in form and substance satisfactory
to the Agent.

 

(i) Borrowers and (by its acceptance hereof) Guarantor acknowledge and agree
that they shall be required to supplement the Collateral and the Collateral
Documents, or to cause the Collateral and the Collateral Documents to be
supplemented, with additional first priority Liens securing the Obligations as
required in Sections 5.17 and 5.18 of this Agreement, pursuant to documentation
in form and substance satisfactory to Agent.

 

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ARTICLE 4

 

REPRESENTATIONS AND WARRANTIES

 

In order to induce the Agent and the Banks to enter into this Agreement,
Borrowers hereby represent and warrant to the Agent and the Banks (which
representations and warranties shall be deemed to be restated by Borrowers in
connection with any Advance) that:

 

Section 4.01 Existence. (a) Each Borrower is a limited liability company duly
organized, legally existing and in good standing under the laws of its state of
organization, and, as of the date of the first Advance and thereafter, is duly
qualified as a foreign limited liability company in all jurisdictions wherein
the property it owns or the business it transacts make such qualification
necessary.

 

(b) The chief executive office of HOS is located at 103 Northpark Blvd., Suite
300, Covington, Louisiana 70433. The federal taxpayer identification number of
HOS is 76-0497638.

 

(c) The chief executive office of HOT is located at 103 Northpark Blvd., Suite
300, Covington, Louisiana 70433. The federal taxpayer identification number of
HOT is 72-1053262.

 

Section 4.02 Power and Authorization. Each Borrower is duly authorized and
empowered to execute, deliver and perform the Loan Documents to which it is a
party. All action on the part of each Borrower requisite for the due creation
and execution of its Loan Documents has been duly and effectively taken.

 

Section 4.03 Binding Obligations. The Loan Documents to which each Borrower is a
party constitute valid and binding obligations of such Borrower, enforceable
against each Borrower in accordance with their respective terms (except that
enforcement may be subject to any applicable bankruptcy, insolvency or similar
laws generally affecting the enforcement of creditors’ rights).

 

Section 4.04 No Legal Bar or Resultant Lien. The Loan Documents do not and will
not violate any provisions of either Borrower’s certificates of formation or
operating agreement, will not violate any contract, agreement, law, regulation,
order, injunction, judgment, decree or writ to which either Borrower is subject,
and will not result in the creation or imposition of any Lien upon any property
of either Borrower, other than as contemplated by this Agreement.

 

Section 4.05 No Consents. The execution, delivery and performance by each
Borrower of the Loan Documents to which it is a party did not and do not require
the consent or approval of any other Person (including without limitation any
charterer) except those which have been obtained and remain in full force and
effect.

 

Section 4.06 Financial Condition. All historical financial statements of each
Borrower delivered to the Agent and the Banks fairly and accurately present the
financial position of each Borrower and such financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, and there are no
contingent liabilities not disclosed thereby which would or could materially
adversely affect the financial condition of either Borrower. Since the close of
the period covered by the latest historical financial statement delivered to the
Agent with respect to each Borrower, there has been no material adverse change
in the assets, liabilities or financial condition of such Borrower or the
prospects of such Borrower performing its obligations under the Loan Documents.
Except as otherwise disclosed to the Agent and the Banks in writing, no event
has occurred (including, without limitation, any litigation or administrative
proceedings) and no condition exists or, to the knowledge of either Borrower, is
threatened, which (i) might render

 

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either Borrower unable to perform its obligations under this Agreement or the
other Loan Documents to which it is a party, (ii) would constitute a Default
hereunder, or (iii) might materially adversely affect the financial condition of
either Borrower or the validity or priority of the lien of the Collateral
Documents to which either Borrower is a party.

 

Section 4.07 Investments and Guaranties. Neither Borrower has made investments
in, advances to or guaranties of the obligations of any Person, except as
reflected in the financial statements described in Section 4.06 hereof, or as
set forth on Schedule 4.07 attached hereto or as otherwise disclosed to the
Agent and the Banks in writing, or as expressly permitted by this Agreement.

 

Section 4.08 Liabilities and Litigation. Neither Borrower has any material
(individually or in the aggregate) liabilities, direct or contingent, except as
disclosed or referred to in the financial statements described in Section 4.06
hereof, or as set forth on Schedule 4.08 attached hereto or as otherwise
disclosed to the Agent and the Banks in writing. Except as referred to in the
financial statements described in Section 4.06 hereof and except as set forth on
Schedule 4.08 attached hereto or as otherwise disclosed to the Agent and the
Banks in writing, there is no litigation, legal or administrative proceeding,
investigation or other action of any nature pending or, to the knowledge of
either Borrower, threatened against or affecting either Borrower which involves
the possibility of any judgment or liability not fully covered by insurance
(except for a deductible of up to $100,000), and which may materially and
adversely affect, whether individually or in the aggregate, the business or the
property of either Borrower or either Borrower’s ability to carry on business as
now conducted.

 

Section 4.09 Taxes and Governmental Charges. Each Borrower has filed all tax
returns and reports required to be filed and has paid all taxes, assessments,
fees and other governmental charges levied upon it or upon its property or
income which are due and payable, including interest and penalties, or have
provided adequate reserves for the payment thereof adequate under generally
accepted accounting principles (provided that such reserves may be set up under
generally accepted accounting principles).

 

Section 4.10 Defaults. Neither Borrower is in default (in any respect which
materially and adversely affects its business, properties, operations or
condition, financial or otherwise) under any indenture, mortgage, deed of trust,
agreement or other instrument to which it is a party or by which it is bound,
except as otherwise disclosed to the Agent and the Banks in writing.

 

Section 4.11 Casualties and Condemnation. Since the date of the most recent
financial statements furnished to the Agent and the Banks, neither the business
nor the property of either Borrower has been materially and adversely affected
as a result of any casualty, fire, explosion, earthquake, flood, drought,
windstorm, accident, strike or other labor disturbance, embargo, requisition or
taking of property or cancellation of contracts, permits or concessions by any
domestic or foreign government or any agency thereof, riot, activities of armed
forces or acts of God or of any public enemy, except as otherwise disclosed in
writing to the Agent and the Banks.

 

Section 4.12 Use of Proceeds; Margin Stock. The proceeds of the extensions of
credit hereunder will be used by Borrowers for the purposes listed in Section
2.10. None of such proceeds will be used for the purpose of, and neither
Borrower is engaged in the business of extending credit for the purpose of,
purchasing or carrying any “margin stock” as defined in Regulation U of the
Board of Governors of the Federal Reserve System (12 C.F.R. Part 221), or for
the purpose of reducing or retiring any indebtedness which was originally
incurred to purchase or carry a margin stock or for any other purpose which
might constitute this transaction a “purpose credit” within the meaning of said
Regulation U. Neither Borrower is engaged principally, or as one of such
Borrower’s important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stocks. Neither either Borrower nor any
other Person acting on behalf of either Borrower has taken or will take any
action

 

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which might cause this Agreement to violate Regulation U or any other regulation
of the Board of Governors of the Federal Reserve System or to violate the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each
case as now in effect or as the same may hereinafter be in effect.

 

Section 4.13 Compliance with the Law. To the best of the Borrowers’ knowledge
after due inquiry, except as set forth on Schedule 4.13 attached hereto, neither
Borrower (i) is in violation of any Governmental Requirement to which such
Borrower or any of its property is subject, or (ii) has failed to obtain any
license, permit, franchise or other authorization required by any Governmental
Authority or otherwise necessary to the ownership of any of its property or the
conduct of its business; in each case, which violation or failure could
reasonably be anticipated to materially and adversely affect the business,
profits, property or condition (financial or otherwise) of such Borrower.

 

Section 4.14 ERISA. Each Borrower and its Plans are in compliance in all
material respects with the applicable provisions of ERISA, and no Reportable
Event, as such term is defined in Title IV of ERISA, has occurred with respect
to any Plan of either Borrower.

 

Section 4.15 No Material Misstatements. No information, exhibit or report
furnished by either Borrower to the Agent and the Banks in connection with this
Agreement or the other Loan Documents or in the negotiation of this Agreement or
the other Loan Documents contained any material misstatement of fact or omitted
to state a material fact necessary to make the statements contained herein and
therein not misleading.

 

Section 4.16 Utility or Investment Company. Neither Borrower is engaged in the
generation, transmission, or distribution and sale of electric power;
transportation, distribution and sale through a local distribution system of
natural or other gas for domestic, commercial, industrial, or other use;
ownership or operation of a pipeline for the transmission or sale of natural or
other gas, crude oil or petroleum products to other pipeline companies,
refineries, local distribution systems, municipalities, or industrial consumers;
provision of telephone or telegraph service to others; production, transmission,
or distribution and sale of steam or water; operation of a railroad; or
provision of sewer service to others. Neither Borrower is an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.

 

Section 4.17 Title to Collateral. As of the date of the first Advance and
thereafter, each Borrower has good and merchantable title to its Collateral,
free of all liens and encumbrances other than Permitted Liens.

 

Section 4.18 Hazardous Materials. Neither Borrower has any knowledge that any
Hazardous Materials are now located on or in the Vessels, or that any other
Person has ever caused or permitted any Hazardous Materials to be placed, held,
located or disposed of on, the Vessels or any part thereof, except for such
Hazardous Materials that may have been placed, held or located on the Vessels in
accordance with, and otherwise not in violation of, all Governmental
Requirements.

 

Section 4.19 Borrowers Ownership; Change in Control. Guarantor is the sole
member of each Borrower. No event resulting in a Change in Control has occurred.

 

Section 4.20 Guarantor Subsidiaries. Guarantor directly owns all of the equity
of HOS-IV and (as of the Effective Date and, unless the Borrowers have notified
the Agent in writing, thereafter) HOT&T. Such ownership is free and clear of any
Lien.

 

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ARTICLE 5

 

AFFIRMATIVE COVENANTS

 

Unless the Agent’s and the Required Banks’ (or, if required by Section 10.12
hereof, all of the Banks’) prior written consent to the contrary is obtained,
Borrowers will at all times comply with the covenants contained in this Article
5 (or cause Guarantor compliance with the applicable covenants), from the date
hereof and for so long as any part of the Obligations is outstanding.

 

Section 5.01 Financial Statements and Reports. Borrowers will promptly furnish,
or cause to be furnished, to Agent and each of the Banks such information
regarding the business and affairs and financial condition of Borrowers and
Guarantor as the Agent or the Required Banks may reasonably request. Without
limiting the generality of the foregoing, Borrowers will furnish or cause to be
furnished to Agent and each of the Banks, each of the following:

 

(a) Guarantor Annual Reports—as soon as available and in any event within one
hundred twenty (120) days after the close of each fiscal year of Guarantor, the
annual report on Form 10-K containing the audited consolidated balance sheet of
Guarantor as of the end of such year, the audited consolidated statement of
income of Guarantor for such year, the audited consolidated statement of
shareholders equity of Guarantor for such year, and the audited consolidated
statement of cash flow of Guarantor for such year (along with data for each
business segment for such periods), setting forth in each case in comparative
form the corresponding figures for the preceding fiscal year, accompanied by the
unqualified audit opinions of Ernst & Young LLP or another independent certified
public accountant acceptable to the Required Banks; and

 

(b) Borrowers Annual Reports—for any year in which there is a Subsidiary (other
than Hornbeck Offshore Operators, LLC, Energy Services Puerto Rico, LLC and
Borrowers) that is not a Guarantor Subsidiary, as soon as available and in any
event within one hundred twenty (120) days after the close of such year, the
audited balance sheet of each Borrower as of the end of such year, the audited
statement of income of each Borrower for such year, the audited statement of
shareholders equity of each Borrower for such year, and the audited statement of
cash flow of each Borrower for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year,
accompanied by the unqualified audit opinions of Ernst & Young LLP or another
independent certified public accountant acceptable to the Required Banks; and

 

(c) Subsidiaries Annual Reports—promptly upon the request of the Agent or the
Required Banks after April 30 in any year, the balance sheet of any Subsidiary
or Subsidiaries (that are not Borrowers or Guarantor Subsidiaries) as of the end
of the most recently completed fiscal year, the statement of income of such
Subsidiary or Subsidiaries for such year, the statement of shareholders equity
of such Subsidiary or Subsidiaries for such year, and the statement of cash flow
of such Subsidiary or Subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year,
certified as being true, correct and complete in all material respects by the
chief financial officer of Guarantor; and

 

(d) Guarantor Quarterly Reports—as soon as available and in any event within
sixty (60) days after the end of each quarter, the quarterly report on Form 10-Q
containing the consolidated balance sheet of Guarantor as of the end of such
quarter, the consolidated statements of income of Guarantor for such quarter and
for the period from the beginning of the fiscal year through such quarter, the
consolidated statements of shareholders equity of Guarantor for such

 

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quarter and for the period from the beginning of the fiscal year through such
quarter, and the consolidated statements of cash flow of Guarantor for such
quarter and for the period from the beginning of the fiscal year through such
quarter (along with data for each business segment for such periods), setting
forth in each case in comparative form the corresponding figures for the
corresponding period of the preceding fiscal year (if in existence in such
preceding fiscal year), certified as being true, correct and complete in all
material respects by the chief financial officer of Guarantor; and

 

(e) Audit Reports—promptly upon receipt thereof, copies of each other audit
report submitted to either Borrower or Guarantor by independent accountants in
connection with any annual, interim or special audit made by them of the books
of either Borrower or Guarantor; and

 

(f) Budget—as soon as available and in any event not later than March 31 of each
calendar year (commencing with the calendar year 2004) up to and including the
Maturity Date, Guarantor’s consolidated annual budget (including income
statement, balance sheet and statement of cash flow) for such calendar year.

 

All such balance sheets and other reports referred to above shall be in such
detail as the Agent or the Required Banks may reasonably request and shall
conform to generally accepted accounting principles applied on a consistent
basis, except only for such changes in accounting principles or practice with
which the independent certified public accountants concur.

 

Section 5.02 Certificates of Compliance. (a) Concurrently with the furnishing of
the annual financial statements pursuant to subsections 5.01(a) and (b) hereof,
Borrowers will furnish or cause to be furnished to the Agent, for distribution
to the Banks, certificates from the independent certified public accountants for
Borrowers and Guarantor stating that in the ordinary course of their audit of
Borrowers or Guarantor, as applicable, insofar as it relates to accounting
matters, their audit has not disclosed the existence of any condition which
constitutes a Default, or if their audit has disclosed the existence of any such
condition, specifying the nature, period of existence and status thereof;
provided, that the independent certified public accountants shall not be liable
to the Agent or the Banks for their failure to discover a Default.

 

(b) Concurrently with the furnishing of the quarterly financial statements
pursuant to subsection 5.01(d) hereof, Borrowers will furnish to Agent a
certificate that there is no Default or Event of Default at such time and a
certificate in form and substance satisfactory to the Agent calculating (and
certifying compliance or non-compliance with) applicable financial tests at
subsections 8.01(m), (n) and (p) hereof, and Borrowers will cause Guarantor to
deliver a certificate to Agent specifying any changes in the ownership of
Guarantor that Guarantor is aware of since the last certificate of the ownership
of Guarantor and certifying that no Change in Control has occurred.

 

Section 5.03 Taxes and Other Liens. Each Borrower will, and will cause Guarantor
to, pay and discharge promptly when due all taxes, assessments and governmental
charges or levies imposed upon such Borrower or Guarantor or upon its income or
upon any of its property as well as all claims of any kind (including claims for
labor, materials, supplies and rent) which, if unpaid, might become a Lien upon
any or all of its property; provided, that a Borrower or Guarantor shall not be
required to pay any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall currently be contested in good faith by
appropriate proceedings diligently conducted and if the contesting party shall
have set up reserves therefor adequate under generally accepted accounting
principles (provided that such reserves may be set up under generally accepted
accounting principles).

 

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Section 5.04 Existence; Compliance. Each Borrower will, and will cause Guarantor
to, maintain its limited liability company existence and rights. Each Borrower
will, and will cause Guarantor to, observe and comply with all valid laws,
statutes, codes, acts, ordinances, orders, judgments, decrees, injunctions,
rules, regulations, certificates, franchises, permits, licenses, authorizations,
directions and requirements of all federal, state, county, municipal and other
governments, departments, commissions, boards, courts, authorities, officials
and officers, domestic or foreign, unless any such failure to observe and comply
would not have a material adverse effect on the business, profits, property or
condition (financial or otherwise) of either Borrower or of Guarantor.

 

Section 5.05 Further Assurance. Borrowers will promptly (and in no event later
than 30 days after written notice from the Agent is received) cure or cause to
be cured any defects in the creation, execution and delivery of any of the Loan
Documents. Borrowers will, at their expense, promptly (and in no event later
than 30 days after written notice from the Agent is received) execute and
deliver, or cause to be executed and delivered, to the Agent and the Banks upon
request all such other and further documents, agreements and instruments
(including without limitation further security agreements, financing statements,
continuation statements, and assignments of accounts and contract rights) in
compliance with or accomplishment of the covenants and agreements of each
Borrower and Guarantor in the Loan Documents or to further evidence and more
fully describe the Collateral, including any renewals, additions, substitutions,
replacements or accessions to the Collateral, or to correct any omissions in the
Collateral Documents, or more fully state the security obligations set out
herein or in any of the Collateral Documents, or to perfect, protect or preserve
any Liens created pursuant to any of the Collateral Documents, or to make any
recordings, to file any notices, or obtain any consents as may be necessary or
appropriate in connection with the transactions contemplated by this Agreement.

 

Section 5.06 Performance of Obligations. Borrowers will repay the Credit Loan in
accordance with the Notes and this Agreement. Each Borrower will do and perform
every act required of such Borrower, and will cause the other Borrower and
Guarantor to do and perform every act required of them, by the Loan Documents at
the time or times and in the manner specified.

 

Section 5.07 Reimbursement of Expenses. Borrowers will pay (i) all reasonable
legal fees incurred by the Agent in connection with the preparation, execution,
delivery, filing, recording and administration of the Loan Documents and all
related documents (including any amendments), and (ii) all reasonable legal fees
incurred by the Agent and the Banks in connection with the enforcement of the
Loan Documents and all related documents; provided, that Borrowers shall not be
responsible for the costs and expenses of the Agent or any Bank in connection
with the preparation of documentation regarding an assignment by a Bank (other
than Hibernia National Bank, individually) of its portion of the Loans (and,
with respect to any assignments by Hibernia National Bank, Borrowers shall be
liable for the costs and expenses, but in any event not more than $2,500.00 of
costs and expenses per assignment). Except as otherwise set forth in Section
5.18 hereof, Borrowers will pay all costs and other expenses in connection with
any appraisal required or performed under this Agreement and otherwise payable
to the Surveyor in connection with this Agreement. Borrowers will upon request
promptly reimburse the Agent and the Banks for all reasonable amounts expended,
advanced or incurred by the Agent and the Banks to satisfy any obligation of
Borrowers under this Agreement, or to protect the property of a Borrower or
Guarantor or to collect the Obligations, or to enforce the rights of the Agent
and the Banks under this Agreement or the other Loan Documents, which amounts
will include all court costs, reasonable attorneys’ fees (including without
limitation, any reasonable attorneys’ fees incurred in connection with any
bankruptcy proceeding affecting the Agent’s and the Banks’ rights hereunder and
any attorneys’ fees incurred in connection with preparation for trial or
appeal), fees of auditors and accountants, and investigation expenses reasonably
incurred by the Agent and the Banks in connection with any such matters,
together with interest at the Default Rate on each such amount from the date
that the same is expended, advanced or incurred by the Agent and the Banks until
the date of reimbursement to the Agent and the Banks.

 

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Section 5.08 Insurance. (a) Borrowers shall cause the Agent to be named as loss
payee, for the ratable benefit of the Banks, as to the Collateral and as
mortgagee and the Agent and the Banks to be named as additional insureds, with a
waiver of rights of subrogation, under an all risk insurance policy, and the
Agent and the Banks to be named as additional insureds, with a waiver of rights
of subrogation, under the comprehensive general liability insurance, statutory
workers’ compensation insurance and longshoreman and harbor workers’ act
coverage policies.

 

(b) Borrowers may purchase such insurance from any insurance company or broker
that is acceptable to the Agent, which approval shall not be unreasonably
withheld. All such insurance policies, including renewals and replacements, must
also be in form and substance acceptable to the Agent, which approval shall not
be unreasonably withheld, and must additionally contain a non-contributory loss
payable endorsement in favor of the Agent, for the ratable benefit of the Banks,
providing in part that (i) all proceeds under such policies of insurance will,
subject to the terms and conditions of subsection (f) below, be delivered
directly to the Agent (payable as hereinafter provided), (ii) all returned
premiums under such policies of insurance (to the extent the same were not paid
by a Borrower) will be delivered and paid directly to the Agent, and (iii) no
act or omission on the part of a Borrower, or any of their officers, agents,
employees or representatives, nor breach of any warranty contained in such
policies, shall affect the obligations of the insurer to pay the full amount of
any loss to the Agent. Such policies of insurance must also contain a provision
prohibiting cancellation or the alteration of such insurance without at least
thirty (30) days’ prior written notice to the Agent of such intended
cancellation or alteration.

 

(c) Borrowers agree to provide, or cause to be provided to, the Agent with
originals or certified copies of such policies of insurance or certificates with
respect thereto. Borrowers further agree to promptly furnish the Agent with
copies of all renewal notices and, if requested by the Agent, with copies of
receipts for paid premiums. Borrowers shall provide, or cause to be provided to,
the Agent binders or such other proof acceptable to the Agent that renewal or
replacement policies of insurance will be in effect before any such existing
policy or policies should expire. If Borrowers’ insurance policies and renewals
are held by another Person, Borrowers agree to supply, or cause to be supplied,
original or certified copies of the same to the Agent, together with binders or
such other proof acceptable to the Agent that renewal or replacement policies of
insurance will be in effect before any such existing policy or policies should
expire.

 

(d) In the event Borrowers should, for any reason whatsoever, fail to cause any
insurance required hereunder or under the HOT Fleet Mortgage or the HOS Fleet
Mortgage to be maintained as herein or therein provided, or to cause such
policies to be and remain so assigned or payable as provided herein, or to cause
to be delivered to the Agent satisfactory evidence thereof, then the Agent, if
it so elects, may itself have any such insurance effected in such amounts and in
such companies as it may deem proper and may pay the premiums therefor and
Borrowers shall reimburse the Agent (and the Banks, if applicable) upon demand
for the amount of the premiums paid, together with interest thereon at the
Default Rate from date until paid. The Agent and the Banks shall not be
responsible for the solvency of any company issuing any insurance policy,
whether or not selected or approved by the Agent or the Banks, or for the
collection of any amounts due under any such policy, and shall be responsible
and accountable only for such money as may be actually received by the Agent or
the Banks.

 

(e) Borrowers agree to immediately notify the Agent in writing of any material
casualty to or accident involving a HOT Vessel or a HOS Vessel (or any other
vessel owned by either Borrower or any Guarantor Subsidiary that could have a
material adverse effect upon such Borrower or such Guarantor Subsidiary), in
each case whether or not such casualty or loss is covered by insurance.
Borrowers further agree to promptly notify the applicable Borrower’s insurance
company and to submit

 

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an appropriate claim and proof of claim to the insurance company in the event
that a HOT Vessel or a HOS Vessel or any other vessel owned by either Borrower,
is lost, damaged, or destroyed as a result of an insured hazard. As to the HOT
Vessels and the HOS Vessels, the Agent may submit such a claim and proof of
claim to the insurance company on the applicable Borrower’s behalf, should the
applicable Borrower fail to do so promptly for any reason. As to the HOT Vessels
and the HOS Vessels, each Borrower hereby irrevocably appoints the Agent as its
agent and attorney-in-fact, each such agency being coupled with an interest, to
make, settle and adjust claims under such policy or policies of insurance
(regardless of whether a settlement or adjustment of a claim is an Event of
Default) and to endorse the name of such Borrower on any check or other item of
payment for the proceeds thereof; it being understood, however, that unless one
or more Defaults exist under this Agreement, the Agent will not settle or adjust
any such claim without the prior approval of such Borrower (which approval shall
not be unreasonably withheld).

 

(f) In the event of an actual, constructive, agreed, compromised or arranged
total loss or of any requisition of a HOT Vessel or a HOS Vessel, all insurance
payments therefor shall be made payable, and delivered, only to the Agent and no
other Person. Neither Borrower shall declare or agree with underwriters that a
HOT Vessel or a HOS Vessel is a constructive or compromised, agreed or arranged
constructive total loss without the prior written consent of the Agent and the
Required Banks. The proceeds of all other insurance (i) covering a HOT Vessel
shall be made payable to HOT and the Agent jointly, and delivered to the Agent,
and (ii) covering a HOS Vessel shall be made payable to HOS and the Agent
jointly, and delivered to the Agent. Subject to the last sentence of this
paragraph, the Agent shall make available to the applicable Borrower the
proceeds of all insurance (x) by an appropriate payment order directed to the
interested underwriter to pay any outstanding bill for repairing or replacing a
HOT Vessel or a HOS Vessel and/or any outstanding third-party claims or (y) to
reimburse the applicable Borrower in whole or in part for any expenditures the
applicable Borrower may have made for repairing or replacing a HOT Vessel or a
HOS Vessel and/or to pay any third party claims, but the Agent, as a condition
precedent to such reimbursement, may require the applicable Borrower to furnish
the Agent with receipted bills or waivers of liens or appropriate releases for
any third-party claims. In connection with any repair to or replacement of a HOT
Vessel or a HOS Vessel, the applicable Borrower shall be required to pay the
amount of the deductible and the applicable Borrower shall be required to pay
any balance of the cost of repairs or replacement not covered by insurance.
Notwithstanding the foregoing provisions of this Section 5.08, but subject to
clause (B) of the next sentence following this sentence, the insurance policies
may provide that if for a particular claim any such insurance payments do not
exceed $125,000.00, then such payments may be paid to the applicable Borrower.
Notwithstanding anything contained herein to the contrary, the Agent shall, at
the option of the Required Banks, be entitled to receive any insurance proceeds
and apply them to the Obligations (in accordance with Section 2.17 hereof, and
if there is then existing an Event of Default, then there shall be deemed to
have been a foreclosure on Collateral for purposes of Section 2.17) if (A) there
has been an actual, constructive, agreed or arranged total loss or requisition
of a HOS Vessel or a HOT Vessel or (B) there otherwise has been and is then
continuing any Event of Default.

 

(g) The Agent’s receipt of such insurance proceeds and the application of such
proceeds as provided herein shall not, however, affect the Agent’s Liens against
the HOT Vessels or the HOS Vessels, for the ratable benefit of the Banks. Other
than the circumstances where insurance proceeds relative to the loss of or
damage to a HOT Vessel or a HOS Vessel are applied to the repayment of the
Obligations, nothing under this Section shall be deemed to excuse Borrowers from
their obligations to promptly repair, replace or restore any lost or damaged
vessel, whether or not the same are covered by insurance, whether or not such
proceeds of insurance are available, and whether or not such proceeds are
sufficient in amount to complete such repair, replacement or restoration, to the
satisfaction of the Agent. Furthermore, unless otherwise confirmed by the Agent
and the Banks in writing, the application or release of any insurance proceeds
by the Agent shall not be deemed to cure or waive any Event of Default under

 

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this Agreement. Any proceeds which have not been disbursed within one (1) month
after their receipt and which a Borrower has not committed to the repair or
restoration of a HOT Vessel or a HOS Vessel shall be used to repay the Credit
Loan (in accordance with Section 2.17 hereof).

 

(h) Borrowers, upon request of the Agent, shall furnish, or cause to be
furnished, to the Agent reports on each existing policy of insurance showing
such information as the Agent or the Required Banks may request, including
without limitation the following: (i) the name of the insurer; (ii) the risks
insured; (iii) the amount of the policy; (iv) the property insured; (v) the then
current value on the basis of which insurance has been obtained and the manner
of determining that value; and (vi) the expiration date of the policy.

 

Section 5.09 Accounts and Records. Borrowers will keep, and will cause Guarantor
to keep, books of record and accounts in which true and correct entries will be
made as to all material matters of all dealings or transactions in relation to
the respective business and activities, sufficient to permit reporting in
accordance with generally accepted accounting principles, consistently applied.

 

Section 5.10 Right of Inspection. (a) Borrowers will, and will cause Guarantor
to, permit any officer, employee or agent of the Agent, any Bank, the Surveyor,
the United States Coast Guard or the American Bureau of Shipping to visit and
inspect the HOS Vessels and the HOT Vessels, and to visit and inspect the other
Collateral, and (b) Borrowers will, and will cause Guarantor to, permit any
officer, employee or agent of the Agent and (upon the occurrence and continuance
of an Event of Default) any Bank to examine the books of record and accounts of
Borrowers and Guarantor, take copies and extracts therefrom, and discuss the
affairs, finances and accounts of Borrowers and Guarantor with Borrowers’ and
Guarantor’s officers, accountants, counsel and auditors, all of the foregoing at
such reasonable times and on reasonable notice and without hindrance or delay
and as often as the Agent, any Bank (if applicable), the Surveyor, the United
States Coast Guard or the American Bureau of Shipping may reasonably desire.

 

Section 5.11 Maintenance of Properties. Borrowers shall maintain and preserve,
and cause Guarantor to maintain and preserve, all of Borrowers’ and Guarantor’s
respective properties (and any property leased by or consigned to a Borrower or
Guarantor or held under title retention or conditional sales contracts) that are
used or useful in the conduct of Borrowers’ and Guarantor’s respective business
in the ordinary course in good working order and condition at all times,
ordinary wear and tear excepted, and make all repairs, replacements, additions,
betterments and improvements to its properties to the extent necessary so that
any failure will not materially and adversely affect the business of a Borrower
or Guarantor. Without limiting the generality of the foregoing, Borrowers shall
at all times maintain the Vessels in compliance with the requirements of the
American Bureau of Shipping or any other classification society acceptable to
the Agent, for the highest classification for vessels of like age and type, and
upon the Agent’s request therefor, the Borrowers shall promptly provide to the
Agent copies of certificates duly issued by the American Bureau of Shipping or
other classification society acceptable to the Agent, to the effect that the
Vessels have been given the highest classification and rating for vessels of the
same respective ages and types, free of all recommendations and notations of
such classification society affecting class.

 

Section 5.12 Notice of Certain Events. (a) Borrowers shall promptly notify the
Agent if either Borrower learns of the occurrence of any event which constitutes
a Default, together with a detailed statement by a responsible officer of each
Borrower as to the nature of the Default and the steps being taken to cure the
effect of such Default.

 

(b) Borrowers shall promptly notify the Agent of any change in location of a
Borrower’s principal place of business or the office of a Borrower where records
concerning accounts and

 

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contract rights are kept, or any change in the federal taxpayer identification
number or organizational identification number of a Borrower.

 

(c) Borrowers shall promptly provide the Agent, upon request therefor by the
Agent, listings of the Borrowers’ assets and the condition thereof, in form and
substance satisfactory to the Agent.

 

(d) Borrowers shall promptly submit such information in form and substance
satisfactory to the Agent as may be reasonably requested by the Agent concerning
construction of new vessels for the Borrowers.

 

(e) Borrowers shall promptly notify the Agent of any defaults or alleged
defaults of any party with respect to any construction contract for new-build
vessels or any charter agreement that could have a material adverse effect upon
either Borrower or any of their Affiliates, and thereafter keep the Agent
advised of any significant developments in connection therewith.

 

(f) Borrowers shall promptly notify the Agent of any and all Liens filed or
otherwise asserted, and attachments made, against the HOS Vessels or the HOT
Vessels, together with copies of all related instruments and any other materials
that the Agent shall require.

 

(g) Borrowers shall cause Guarantor to provide to the Agent (i) written notice
of any sale or transfer of shares of five (5%) percent or more of the stock of
Guarantor promptly after any such sale or transfer and (ii) upon request
therefor by the Agent from time to time, evidence satisfactory to the Agent that
no Change in Control has occurred.

 

Section 5.13 Indemnity. Borrowers hereby agree to defend, indemnify and hold the
Agent and the Banks and their respective directors, officers, agents and
employees harmless from and against all claims, demands, causes of action,
liabilities, losses, costs and expenses (including, without limitation, costs of
suit, reasonable legal fees and fees of expert witnesses; provided, that such
costs of suit, reasonable legal fees and fees of expert witnesses shall be only
those incurred by the Agent; provided, further, that such limitation in
connection with the indemnity hereunder shall not limit the application of
Section 5.07 hereof) arising from or in connection with (i) the presence in, on
or under all Collateral and their other properties of any Hazardous Material, or
any releases or discharges thereof on, under or from such property, (ii) any
activity carried on or undertaken on or off such property, whether prior to or
during the term of this Agreement, and whether by a Borrower, a contractor or
any predecessor in title or any officers, employees, agents, contractors, or
subcontractors of a Borrower, a contractor or any predecessor in title, or any
third persons at any time occupying or present on such property, in connection
with the handling, use, generation, manufacture, treatment, removal, storage,
decontamination, clean-up, transport or disposal of any such Hazardous Material
at any time located or present on or under such property, (iii) any and all
other third party claims in connection with any of the Collateral or their other
properties, or (iv) any breach of any representation, warranty or covenant under
the terms of this Agreement. The foregoing indemnity shall further apply to any
residual contamination affecting any natural resources, and to any contamination
of any property or natural resources arising in connection with the generation,
use, handling, storage, transport or disposal of any such Hazardous Material,
and irrespective of whether any of such activities were or will be undertaken in
accordance with applicable Governmental Regulations, and shall survive the
termination of this Agreement and all of the other Loan Documents. The indemnity
herein shall not apply to the extent of any gross negligence or willful
misconduct on the part of the Agent or the Banks.

 

Section 5.14 ERISA Information and Compliance. Borrowers will furnish to the
Agent (i) promptly after the filing thereof with the United States Secretary of
Labor or the Pension Benefit Guaranty Corporation, copies of each annual and
other report with respect to each Plan or any trust

 

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created by either Borrower, and (ii) immediately upon becoming aware of the
occurrence of any “reportable event,” as such term is defined in Section 4043 of
ERISA, or of any “prohibited transaction,” as such term is defined in Section
4975 of the Internal Revenue Code of 1986, as amended, in connection with any
Plan or any trust created by either Borrower, a written notice signed by the
president, the chairman or the chief financial officer of each Borrower
specifying the nature thereof, what action the applicable Borrower is taking or
proposes to take with respect thereto, and, when known, any action taken by the
Internal Revenue Service with respect thereto. Each Borrower will comply with
all of the applicable funding and other requirements of ERISA as such
requirements relate to the Plans of such Borrower.

 

Section 5.15 Charters. HOS shall perform all of its obligations in respect of,
and observe all of the terms and provisions of, any charter of a HOS Vessel, and
shall use its best efforts to keep all such agreements in full force and effect
for the applicable term thereof. HOT shall perform all of its obligations in
respect of, and observe all of the terms and provisions of, any charter of a HOT
Vessel, and shall use its best efforts to keep all such agreements in full force
and effect for the applicable term thereof. Notwithstanding the foregoing, no
breach by a Borrower under a charter shall be a Default or Event of Default
hereunder unless the result would have a material adverse effect on the
financial condition of a Borrower or otherwise on a Borrower’s ability to repay
the Obligations.

 

Section 5.16 Intentionally omitted.

 

Section 5.17 Collateral Value. The Borrowers shall cause the fair market value
of the Vessels (and other vessels of Guarantor Subsidiaries or (subject to the
second sentence hereafter) other Subsidiaries of Guarantor included within the
Collateral in accordance with subsections 3.01(h) and (i) hereof) at all times
to be greater than or equal to two hundred (200%) percent of the Borrowing Base
from time to time in effect. If from time to time, in order for Borrowers to
comply with the preceding sentence, additional vessels are required to be
mortgaged to the Agent, then (i) the Agent shall be entitled to choose in its
sole and absolute discretion which additional vessel or vessels owned (subject
to the next following sentence) by any Subsidiary of Guarantor, not otherwise
subject to a mortgage Permitted Lien (as to the Borrowers) or a mortgage Lien
securing Debt that otherwise does not violate this Agreement (as to any other
Subsidiary of Guarantor), shall be so mortgaged so that Borrowers will be in
compliance with the preceding sentence (and the parties acknowledge that the
Borrowers may suggest what additional vessel or vessels they would prefer but
such suggestions nevertheless shall not have the effect of impairing the fact
that the selection is at the Agent’s sole and absolute discretion), and (ii) the
applicable Borrower(s) or Guarantor Subsidiary(ies) or other Subsidiary(ies) of
Guarantor owning such vessel(s) shall promptly supplement and amend the
applicable Collateral Documents and this Agreement, or enter into Collateral
Documents, pursuant to documentation in form and substance satisfactory to the
Agent, so as to grant to the Agent, for the ratable benefit of the Banks, first
preferred ship mortgage liens (or the foreign equivalent) thereon and first
priority security interests (or the foreign equivalent) in all related assets
(see, subsections 3.01(a) - (d)), and in connection therewith Borrowers shall
provide to the Agent evidence of insurance required under the Loan Documents and
applicable Certificates of Documentation as to the vessels and vessel abstracts
thereon showing the HOS Mortgage or the HOT Mortgage (or other first preferred
ship mortgage, if by a Guarantor Subsidiary or other Subsidiary), as the case
may be, as the only recorded Lien thereon. Notwithstanding the foregoing, to the
extent necessary so that no Subsidiary formed outside the United States will be
considered under the U.S. Internal Revenue Code (as amended) and the regulations
promulgated thereunder (including without limitation Reg. Section 1.956-2(c)(2))
to be a pledgor or guarantor of the Obligations, the Agent agrees that in
choosing additional vessels to be Collateral, it will not choose vessels owned
by a Subsidiary formed outside the United States if the Borrowers, Guarantor
Subsidiaries or other Subsidiaries formed within the United States own vessels
that are not already Collateral and that are operating; provided, that the
Borrowers acknowledge and agree that, without limiting each Bank’s right to
approve or disapprove increases in the Borrowing Base in its

 

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sole discretion, any Bank’s dissatisfaction with the additional collateral taken
as a whole may be a reason for withholding its consent to an increase in the
Borrowing Base. If the market value of the Vessels (and other vessels granted as
Collateral) is greater than two hundred (200%) percent of the Borrowing Base,
Borrowers shall not be entitled to the release of any Collateral without the
written consent of all Banks. Borrowers shall not substitute vessels (and
related assets) for existing Vessels that are Collateral without the written
consent of the Required Banks. The parties hereto acknowledge and consent that
on the Effective Date, the HOS GEMSTONE (Official Number 1141952) is being
substituted for the HOS CORNERSTONE (Official Number 1091051) as a HOS Vessel.

 

Section 5.18 Appraisal. The Required Banks shall be entitled to require, at any
time (but in any event only two (2) times during the term of this Agreement)
that Agent obtain appraisals by the Surveyor relative to the Vessels. The
foregoing limitation shall not apply (i) in connection with increases of the
Borrowing Base and (ii) during the occurrence and continuance of any Default or
Event of Default, in which event the Agent or the Required Banks shall be
entitled to require by the Surveyor other appraisals relative to the Vessels.
Borrowers shall, in accordance with Section 5.07 hereof, be liable for all
expenses in connection with any such appraisals. In addition to the foregoing,
the Required Banks may from time to time in their discretion obtain further
appraisals by the Surveyor relative to the Vessels, at the pro-rata cost and
expense of all the Banks (computed by reference to each Bank’s respective
Commitments).

 

Section 5.19 Deposit Accounts. Borrowers shall (and Borrowers shall cause
Guarantor to) maintain their primary domestic deposit, collection and
disbursement banking accounts at the Agent. The foregoing is not applicable to
investment or foreign banking accounts of Borrowers and Guarantor or other
banking related products.

 

[The rest of this page is intentionally blank.]

 

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ARTICLE 6

 

NEGATIVE COVENANTS

 

Unless the Agent’s and the Required Banks’ (or, if required by Section 10.12
hereof, all the Banks’) prior written consent to the contrary is obtained,
Borrowers will at all times comply with the covenants contained in this Article
6 (or cause Guarantor compliance with the applicable covenants), from the date
hereof and for so long as any part of the Obligations is outstanding.

 

Section 6.01 Liens. Neither Borrower will create, incur, assume, or permit to
exist any Lien on any of its Collateral or other properties, except for:

 

(i) The security interests in its Collateral and any other Liens in favor of the
Agent and the Banks to secure the Obligations;

 

(ii) Any other liens or security interests in favor of the Agent and the Banks;

 

(iii) Liens for taxes, assessments, or other governmental charges not yet due or
which are being contested in good faith by appropriate action promptly initiated
and diligently conducted, if such reserve as shall be required by generally
accepted accounting principles shall have been made therefor;

 

(iv) Liens of landlords, carriers, warehousemen, mechanics, laborers, seamen
(for the last voyage of the applicable Vessel or other vessel belonging to a
Borrower) and materialmen arising by law in the ordinary course of business for
sums either not yet due or being contested in good faith by appropriate action
promptly initiated and diligently conducted, if such reserve as shall be
required by generally accepted accounting principles shall have been made
therefor;

 

(v) Precautionary Liens on property covered by capital leases;

 

(vi) Legal or equitable encumbrances deemed to exist by reason of negative
pledge covenants and other covenants or undertakings of like nature (provided,
that any such covenant or undertaking shall not apply to Borrowers’ ability to
grant Liens in favor of the Agent and the Banks);

 

(vii) Purchase money Liens granted by a Borrower on equipment (including
vessels) of such Borrower that is not Collateral, securing the purchase price of
such equipment; provided, that such Lien shall not extend to or cover any other
property of either Borrower or Guarantor;

 

(viii) Liens granted by a Borrower on the vessels under construction on the
Effective Date or other vessels acquired or constructed by a Borrower after July
19, 2001, securing Debt incurred by a Borrower for the acquisition of assets or
construction of vessels by a Borrower after the Effective Date or securing
refinances of such Debt (but not principal amounts over and above the principal
amount(s) refinanced; and

 

(ix) Liens on property of a Borrower that is not Collateral, which Liens arise
from a judgment or judgments against a Borrower; provided, that such Liens shall
not exceed $500,000.00 in the aggregate during the term of the Loan and such
Borrower shall nevertheless diligently contest any such judgment.

 

Section 6.02 Intentionally omitted.

 

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Section 6.03 Dividends. Neither Borrower shall, and Borrowers shall cause
Guarantor to not, declare or make any cash dividends, or reservations therefor,
or make any distribution of cash or property, or both, in respect of any
membership interests or shares of the capital stock, as the case may be, of
either Borrower or of Guarantor; provided, that (i) Borrowers shall be permitted
to make cash distributions, collectively, to Guarantor (x) that are
simultaneously invested as equity in the other Borrower or a Subsidiary
Guarantor, and (y) otherwise, of up to $2,000,000 in any calendar year in the
aggregate for both Borrowers collectively, but in any such event under clause
(x) or (y), only if there is no Default or Event of Default and the making of
any such dividend shall not give rise to a Default or an Event of Default, and
(ii) stock dividends (including any rights distributed pursuant to a stockholder
rights plan), stock splits and reverse stock splits with respect to Guarantor
shall be permitted; provided, further, that Borrowers shall promptly notify the
Agent (or cause the Guarantor to notify the Agent) of any such permitted
dividends, splits or reverse splits.

 

Section 6.04 Nature of Business. Neither Borrower will engage in any material
respect in any business other than the marine vessel business, including any
logistics services related thereto.

 

Section 6.05 Mergers and Consolidations; Asset Acquisitions; Guarantor
Subsidiaries. (a) Neither Borrower will acquire, merge with or consolidate with
any Person, nor will it sell, assign, lease or otherwise dispose of (whether in
one transaction or in a series of transactions) any Collateral or all or
substantially all of its property (whether now owned or hereafter acquired) to
any Person; provided, that—

 

(x) a Borrower may merge with another Person (other than the other Borrower and
the Guarantor) if, and only if, (1) such Borrower is the surviving entity, (2)
the merging Person is primarily in the business of owning and/or operating
vessels, (3) immediately preceding and after giving effect to such merger, (A)
there is no Default or Event of Default and (B) the Borrowers shall have
$10,000,000 in cash or cash equivalents in account(s) maintained at one or more
Banks or otherwise available for the making of Advances under the Credit Line
(taking into account the Credit Limit), (4) after giving effect to such merger,
(A) such Borrower shall have at least as much tangible net worth as it had
before giving effect to the merger and (B) had the merger occurred on the last
day of the most recently ended fiscal quarter, the Leverage Ratio of Guarantor
(on a consolidated basis with its Subsidiaries) would be at least 0.375 below
the maximum ratio permitted under subsection 8.01(p) for such quarter end before
an Event of Default otherwise would exist thereunder, and (5) Borrowers shall
have provided the Agent at least fifteen (15) days advance notice of the merger
and such information and materials in connection therewith that the Agent or any
Bank reasonably requests, and

 

(y) a Borrower may acquire or form a Subsidiary if, and only if, (1) the
Subsidiary is primarily in the business of owning and/or operating vessels or
owning companies that primarily are in the business of owning and/or operating
vessels, (2) immediately preceding and after giving effect to such acquisition
or formation, (A) there is no Default or Event of Default and (B) the Borrowers
shall have $10,000,000 in cash or cash equivalents in account(s) maintained at
one or more Banks or otherwise available for the making of Advances under the
Credit Line (taking into account the Credit Limit), (3) after giving effect to
such acquisition or formation, had the acquisition or formation occurred on the
last day of the most recently ended fiscal quarter, the Leverage Ratio of
Guarantor (on a consolidated basis with its Subsidiaries, including the new
Subsidiary) would be at least 0.375 below the maximum ratio permitted under
subsection 8.01(p) for such quarter end before an Event of Default otherwise
would exist thereunder, (4) such Borrower shall control the management and
operations of such Subsidiary, (5)

 

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simultaneously with the acquisition or formation of such Subsidiary, such
Subsidiary shall (if required under subsection 3.01(h) hereof) execute and
deliver to the Agent, for the ratable benefit of the Banks, a guaranty of the
payment of the Obligations and also such Subsidiary or another Subsidiary shall
grant collateral therefor as may be required under subsection 3.01(h) hereof or
by the Required Banks in accordance with Section 5.17 hereof, (6) the Guarantor
and the Borrowers shall not at any time be or become liable for such
Subsidiary’s Debts, then or thereafter arising, and (7) the Borrowers shall have
provided the Agent at least fifteen (15) days advance notice of the acquisition
and such information and materials in connection therewith that the Agent or any
Bank reasonably requests.

 

(b) Other than with respect to new build vessels (including barges) constructed
for or acquired by, a Borrower pursuant to construction contracts or acquisition
agreements to which such Borrower from time to time is a party, neither Borrower
will acquire or construct any vessel (including barges) or other capital assets
unless (1) immediately preceding and after giving effect to such acquisition or
new construction, (A) there is no Default or Event of Default and (B) the
Borrowers shall have $10,000,000 in cash or cash equivalents in account(s)
maintained at one or more Banks or otherwise available for the making of
Advances under the Credit Line (taking into account the Credit Limit), (2) after
giving effect to such acquisition or new construction, (A) such Borrower shall
have at least as much tangible net worth as it had before giving effect to the
acquisition and (B) had the acquisition occurred on the last day of the most
recently ended fiscal quarter, the Leverage Ratio of Guarantor (on a
consolidated basis with its Subsidiaries) would be at least 0.375 below the
maximum ratio permitted under subsection 8.01(p) for such quarter end before an
Event of Default otherwise would exist thereunder, and (3) Borrowers shall have
provided the Agent at least fifteen (15) days advance notice of the acquisition
or new construction and such information and materials in connection therewith
that the Agent or any Bank reasonably requests.

 

If a Borrower desires to take any action contrary to the terms of this Section
6.05, the Agent and the Required Banks shall not unreasonably withhold their
consent with respect thereto; provided, that before the Agent and the Banks
decide whether to consent, the Agent and the Banks shall have been provided with
all such information and materials that they request and had sufficient time to
assess the proposed action and, further, if the Agent and the Required Banks so
consent, then Guarantor and Borrowers and such other Persons as may be required
by the Agent shall execute and deliver such documents as the Agent requires, in
form and substance satisfactory to the Agent.

 

(c) Guarantor shall not, and Borrowers will not permit Guarantor to, acquire,
merge with or consolidate with any Person, or sell, assign, lease or otherwise
dispose of (whether in one transaction or in a series of transactions) all or
substantially all of its property (whether now owned or hereafter acquired) to
any Person; provided, that—

 

(x) the Guarantor may merge with another Person (other than either Borrower) if,
and only if, (1) the Guarantor is the surviving entity, (2) the merging Person
is primarily in the business of owning and/or operating vessels or owning
companies that primarily own and/or operate vessels, (3) immediately preceding
and after giving effect to such merger, (A) there is no Default or Event of
Default and (B) the Borrowers shall have $10,000,000 in cash or cash equivalents
in account(s) maintained at one or more Banks or otherwise available for the
making of Advances under the Credit Line (taking into account the Credit Limit),
(4) after giving effect to such merger, (A) the Guarantor shall have at least as
much tangible net worth as it had before giving effect to the merger and (B) had
the merger occurred on the last day of the most recently ended fiscal quarter,
the Leverage Ratio of Guarantor (on a consolidated basis with its Subsidiaries)
would be at

 

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least 0.375 below the maximum ratio permitted under subsection 8.01(p) for such
quarter end before an Event of Default otherwise would exist thereunder, and (5)
the Guarantor shall have provided the Agent at least fifteen (15) days advance
notice of the merger and such information and materials in connection therewith
that the Agent or any Bank reasonably requests, and

 

(y) the Guarantor may acquire or form a Subsidiary if, and only if, (1) the
Subsidiary is primarily in the business of owning and/or operating vessels or
owning other companies that primarily are in the business of owning and/or
operating vessels, (2) immediately preceding or after giving effect to such
acquisition or formation, (A) there is no Default or Event of Default and (B)
the Borrowers shall have $10,000,000 in cash or cash equivalents in account(s)
maintained at one or more Banks or otherwise available for the making of
Advances under the Credit Line (taking into account the Credit Limit), (3) after
giving effect to such acquisition or formation, had the acquisition or formation
occurred on the last day of the most recently ended fiscal quarter, the Leverage
Ratio of Guarantor (on a consolidated basis with its Subsidiaries, including the
new Subsidiary) would be at least 0.375 below the maximum ratio permitted under
subsection 8.01(p) for such quarter end before an Event of Default otherwise
would exist thereunder, (4) Guarantor shall control the management and
operations of such Subsidiary, (5) simultaneously with the acquisition or
formation of such Subsidiary, such Subsidiary shall (if required under
subsection 3.01(h) hereof) execute and deliver to the Agent, for the ratable
benefit of the Banks, a guaranty of the payment of the Obligations and also such
Subsidiary or another Subsidiary shall grant collateral therefor as may be
required under subsection 3.01(h) hereof or by the Required Banks in accordance
with Section 5.17 hereof, (6) the Guarantor and the Borrowers shall not at any
time be or become liable for such Subsidiary’s Debts, then or thereafter
arising, and (7) the Guarantor shall have provided the Agent at least fifteen
(15) days advance notice of the acquisition and such information and materials
in connection therewith that the Agent or any Bank reasonably requests.

 

If Guarantor desires to take any action contrary to the terms of this Section
6.05, the Agent and the Required Banks shall not unreasonably withhold their
consent with respect thereto; provided, that before the Agent and the Banks
decide whether to consent, the Agent and the Banks shall have been provided with
all such information and materials that they request and had sufficient time to
assess the proposed action and, further, if the Agent and the Required Banks so
consent, then Guarantor and Borrowers and such other Persons as may be required
by the Agent shall execute and deliver such documents as the Agent requires, in
form and substance satisfactory to the Agent.

 

Section 6.06 ERISA Compliance. Neither Borrower will at any time permit any Plan
maintained by it to engage in any “prohibited transaction” as such term is
defined in Section 4975 of the Code; incur any “accumulated funding deficiency”
as such term is defined in Section 302 of ERISA; or terminate any such Plan in a
manner which could result in the imposition of a Lien on the property of such
Borrower pursuant to Section 4068 of ERISA.

 

Section 6.07 Indenture Documents. Borrowers shall not amend, modify, supplement,
refinance or waive (and Borrowers shall cause Guarantor to not amend, modify,
supplement, refinance or waive) the Indenture Documents, or enter into other
documents in connection therewith (and Borrowers shall cause Guarantor to not
enter into other documents in connection therewith), including without
limitation as to any refinance, to increase the interest rates or fees or
premiums thereunder, to add any additional collateral thereunder, to increase or
decrease the principal amount subject thereto if the incurrence of the Debt will
result in a Default or an Event of Default, to add other circumstances that
would require

 

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prepayment of the underlying loans, to change any sections containing provisions
relating to insurance requirements or the applications of insurance proceeds or
other insurance-related matters, to change any sections containing provisions
relating to asset sales, to change Section 4.09 thereof, to reduce any
standstill periods, to place further restrictions on the ability of Borrowers or
Guarantor to operate or conduct their business, to add any other defaults or
events of default (or amend the definitions thereof in a manner that would be
more restrictive on Borrowers, Guarantor, or any Subsidiaries), or to change the
maturity, amortization and other payment schedules of the underlying loans. In
addition, Borrowers shall not otherwise amend, modify, supplement, refinance or
waive (and Borrowers shall cause Guarantor not to amend, modify, supplement,
refinance or waive) the Indenture Documents in any manner so as to make any of
the covenants therein more restrictive than when first executed or so as to
result in a Default or Event of Default or provide for Borrower or the Guarantor
to take or not take any action that could result in a Default or Event of
Default. As to all other amendments, modifications, supplements, refinances and
waivers to such documents, Borrowers shall provide to the Agent an executed copy
promptly after the execution and delivery thereof. As of the Effective Date, the
Banks and the Agent (i) understand that the Guarantor intends to amend or
refinance the Indenture Obligations during the term of this Agreement, and (ii)
acknowledge that if (x) the amended or refinanced Debt thereunder accrues
interest at a rate per annum less than the per annum interest rate that the
notes issued under the Indenture accrue on the Effective Date, (y) the amended
or refinanced Debt thereunder is scheduled to mature later than the scheduled
maturity of the notes issued under the Indenture in existence on the Effective
Date, and (z) the debt incurrence covenants under the amended or refinanced
Indenture are less stringent on the Guarantor than the debt incurrence covenants
under Section 4.09 of the Indenture as in existence on the Effective Date, then
such provisions shall not violate this Section 6.07; provided, that nothing in
this sentence shall be construed as limiting the possible acceleration of the
Maturity Date as set forth in the definition of such term in Section 1.02 hereof
or as amending or otherwise modifying the debt incurrence provisions under this
Agreement.

 

Section 6.08 Indenture Obligations and Other Debt Payments and Prepayments.
Borrowers shall not pay (or allow same by an other Person) the Indenture
Obligations or any other Debt (other than the Obligations and trade payables
coming due in the ordinary course of business) incurred after December 31, 2001
if there is then existing a Default or an Event of Default or if doing so would
give rise to a Default or an Event of Default. Borrowers shall not prepay (or
allow same by any other Person) any Debt, other than (i) the Credit Loan, in
accordance with this Agreement, (ii) trade payables, in the ordinary course of
business, and (iii) as to all other Debt (including without limitation the
Indenture Obligations), so long as there is no Default or Event of Default then
existing and doing so would not give rise to a Default or an Event of Default
and the Borrowers shall have $10,000,000 in cash or cash equivalents in
account(s) maintained at one or more Banks or otherwise available for the making
of Advances under the Credit Line (taking into account the Credit Limit),
partial prepayments of such other Debt or the refinancing of any such other Debt
in full. If any Debt is to be incurred by the Borrowers or the Guarantor for any
prepayments, reference is hereby made to Section 10.12 hereof as to certain
conditions that may have to be satisfied before the incurrence of such Debt.

 

Section 6.09 Loans. Borrowers, Guarantor Subsidiaries and Guarantor shall not
lend or advance any money to any Person; provided, that (i) intra-company Debt,
in an aggregate amount not to exceed $20,000,000 outstanding at any one time,
owed by Guarantor, a Borrower, a Subsidiary or a less than 50%-owned Affiliate
of a Borrower, Guarantor or a Guarantor Subsidiary to a Borrower, a Guarantor
Subsidiary or Guarantor in connection with accounting allocations between such
Persons (provided, further, that such Debt shall be unsecured and subordinated
to the Obligations upon terms and conditions satisfactory to Agent) is
permitted, (ii) loans or advances by Guarantor, a Borrower, or a Guarantor
Subsidiary to Guarantor, a Borrower or a Guarantor Subsidiary (provided,
further, that such Debt shall be unsecured and subordinated to the Obligations
upon terms and conditions satisfactory to Agent) are permitted, (iii) loans or
advances to officers, directors and employees of a Borrower or the Guarantor

 

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made in the ordinary course of business and consistent with past practices of
the Borrowers, Guarantor Subsidiaries, and the Guarantor in an aggregate amount
not to exceed $500,000 outstanding at any one time, are permitted, and (iv)
Guarantor, a Borrower or a Guarantor Subsidiary may provide financing to a
Person in connection with such Person acquiring an ownership interest in a
Subsidiary or a less than 50%-owned Affiliate of a Borrower, Guarantor or a
Guarantor Subsidiary (and such financing shall be for no other purpose) where
such Person’s ownership interest is reasonably necessary, advisable or
incidental to the conduct of business by such Subsidiary or Affiliate in a
jurisdiction outside of the United States (provided, further, that (x) as to
such a financing provided by a Guarantor Subsidiary that does not involve a
transfer of equity in such Guarantor Subsidiary and as to any such financing
provided by a Borrower or Guarantor, the Person acquiring the equity interest
shall be acquiring it from the applicable Loan Party providing the financing,
(y) no actual funds shall transfer from the Guarantor, a Borrower or a Guarantor
Subsidiary in connection with any such financing and (z) no such financings in
the aggregate shall be with respect to more than thirty percent (30%) of the
equity of any such Subsidiary or more than 51% of the equity of any such
Affiliate).

 

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ARTICLE 7

 

CONDITIONS

 

Section 7.01 General Conditions to Amendment and Restatement. The obligation of
the Agent and the Banks to amend and restate the 2001 Credit Agreement is
subject to (a) the accuracy of each and every representation and warranty of
Borrowers and any other Loan Party made in this Agreement or any other Loan
Document, or in any certificate delivered to the Agent and the Banks pursuant to
or in connection with this Agreement, (b) the absence of a Default or Event of
Default hereunder, and (c) the satisfaction of the following conditions: (i)
Borrowers shall have paid or caused to be paid all fees and out-of-pocket
expenses of the Agent in connection with the preparation, execution and delivery
of all of the Loan Documents executed on the date of this Agreement and the
consummation of the transactions contemplated thereby; and (ii) the Agent shall
have received the following, each in form and substance satisfactory to the
Agent and (except for the Notes) in sufficient counterparts:

 

(A) Duly executed counterparts of this Agreement signed by all the parties
hereto.

 

(B) The duly executed Credit Notes, each dated the Effective Date.

 

(C) Duly executed counterparts of the Collateral Documents, including without
limitation such confirmatory agreements and amendments and supplements as are
required by the Agent.

 

(D) All consents to, waivers (other than those that are not required until the
initial Advance in accordance with the further terms of this Section 7.01) and
subordination agreements respecting the transactions contemplated hereby as may
be required by the Agent.

 

(E) Certificates of good standing as to each Borrower, Guarantor, HOS-IV and
HOT&T issued by the Secretary of State of their respective states of
organization and from the other jurisdictions where Borrowers are qualified to
conduct business.

 

(F) The duly executed certificate of the Secretary of each Borrower, HOS-IV and
HOT&T setting forth (i) resolutions of its managers in form and substance
satisfactory to the Agent with respect to the authorization of this Agreement
and the other Loan Documents to which it is a party and the transactions
contemplated hereby and thereby; (ii) the names and true signatures of the
officers or other persons authorized to sign such instruments; and (iii) copies
of the certificates of formation (and all prior merger or conversion, as the
case may be, documentation) and the operating agreement of such Borrower, HOS-IV
or HOT&T, as the case may be. If there have been no changes to the certificates
of formation and operating agreement since the time that they previously were
delivered, then a certificate to that effect from the applicable Loan Party will
be acceptable.

 

(G) The duly executed certificate of the Secretary of Guarantor setting forth
(i) resolutions of its directors in form and substance satisfactory to Agent
with respect to the authorization of the Loan Documents to which it is a party
and the transactions contemplated hereby and thereby; (ii) the names and true
signatures of the officers authorized to sign such instruments; and (iii) copies
of the certificate of incorporation and the bylaws of Guarantor. If there have
been no changes to the certificate of incorporation

 

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or bylaws since the time that they previously were delivered, then a certificate
to that effect from Guarantor will be acceptable.

 

(H) Copies of (i) all charter agreements then effective and for longer than
twelve (12) months relating to the HOT Vessels and the HOS Vessels, (ii)
Certificates of Documentation for the HOT Vessels and the HOS Vessels, (iii)
vessel abstracts for the HOT Vessels and the HOS Vessels showing the HOT Fleet
Mortgage and the HOS Fleet Mortgage, as the case may be, as the only recorded
Lien thereon.

 

(I) Evidence that the insurance as to the Borrowers required hereunder and under
the other Loan Documents has been obtained and is in full force and effect.

 

(J) The fees set forth in Section 2.09 hereof or otherwise required under any
other Loan Documents.

 

(K) A copy of each amendment or supplement changes to the Indenture since
December 31, 2001.

 

(L) A certificate of Guarantor certifying as to the Effective Date Shareholders.

 

(M) Duly executed counterparts by the Borrowers of a Compliance Certificate.

 

(N) Any other document (including without limitation legal opinions of counsel
to Borrowers and Guarantor) which the Agent may reasonably request.

 

Section 7.02 Conditions to Each Advance. The obligation of the Banks to make
Advances after the Effective Date is subject to (a) the accuracy as of the date
of such Advance of each and every representation and warranty of Borrowers and
any other Loan Party made in this Agreement or any other Loan Document, or in
any certificate delivered to the Agent and the Banks pursuant to or in
connection with this Agreement, (b) the absence of a Default or Event of Default
hereunder as of the date of such Advance, (c) the performance by each Borrower
of the respective obligations to be performed hereunder on or before such date,
or the satisfaction of other conditions hereunder on or before such date,
including without limitation those obligations and conditions set forth in
Section 2.02 hereinabove, and (d) the Agent shall have received on or before
such date the following:

 

(A) A Draw Request Certificate.

 

(B) In connection with acquisitions, any other document which the Agent may
reasonably request.

 

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ARTICLE 8

 

DEFAULT

 

Section 8.01 Events of Default. Any of the following events shall be considered
an “Event of Default” as that term is used herein:

 

(a) Principal and Interest Payments; Fees. Borrowers fail to make payment when
due of any installment of principal or interest on the Loans, or of any fee or
any other Obligation or Debt to the Agent or any of the Banks, whether or not
related to the Credit Loan, and (other than with respect to the payment due on
the Maturity Date) such failure is not cured within three (3) Business Days
after the applicable due date; or

 

(b) Representations and Warranties. Any representation or warranty made by a
Borrower, Guarantor or a Guarantor Subsidiary under the Loan Documents proves to
have been incorrect in any material adverse respect as of the date thereof, or
any representation, statement (including financial statements), certificate or
data furnished or made by a Borrower, Guarantor or a Guarantor Subsidiary (or
any officer, accountant or attorney thereof) under the Loan Documents proves to
have been untrue in any material adverse respect as of the date as of which the
facts therein set forth were stated or certified; or

 

(c) Covenants. A Borrower, Guarantor or a Guarantor Subsidiary defaults in the
observance or performance of any of the covenants or agreements contained in
this Agreement, the Notes or any of the other Loan Documents (including without
limitation Hedging Agreements) or any Hedging Arrangements, or any other present
or future agreements relating to any Debt between a Borrower and the Banks, to
be kept or performed by a Borrower or any such other Person (other than a
default under any other paragraph of this Section 8.01) and such Default
continues unremedied for a period of thirty (30) days after the earlier of (i)
written notice thereof having been given by the Agent to Borrowers and (ii) such
Default otherwise becoming known to the chief executive officer, president or
chief financial officer of a Borrower; provided, that no such notice or cure
period shall be applicable concerning a failure of the covenants under (x)
Sections 5.05 and 5.08 or Article 6 of this Agreement, (y) Section 3.13 in each
of the HOT Fleet Mortgage and the HOS Fleet Mortgage, (z) Section 4.1 of each of
the HOS Security Agreement, the HOT Security Agreement; or

 

(d) Involuntary Bankruptcy or Receivership Proceedings. A receiver, conservator,
liquidator or trustee of a Borrower, Guarantor or a Guarantor Subsidiary, or of
any of their respective properties is appointed by order or decree of any court
or agency or supervisory authority having jurisdiction; or an order for relief
is entered against a Borrower, Guarantor or a Guarantor Subsidiary under the
Federal Bankruptcy Code; or a Borrower, Guarantor or a Guarantor Subsidiary is
adjudicated bankrupt or insolvent; or any material portion of the properties of
a Borrower, Guarantor or a Guarantor Subsidiary is sequestered by court order
and such order remains in effect for more than thirty (30) days after such party
obtains knowledge thereof; or a petition is filed against a Borrower, Guarantor
or a Guarantor Subsidiary under any reorganization, arrangement, insolvency,
readjustment of debt, dissolution, liquidation or receivership law of any
jurisdiction, whether now or hereafter in effect, and such petition is not
dismissed within thirty (30) days; or

 

(e) Voluntary Petitions. A Borrower, Guarantor or a Guarantor Subsidiary files a
case under the Federal Bankruptcy Code or seeks relief under any provision of
any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of

 

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any jurisdiction, whether now or hereafter in effect, or consents to the filing
of any case or petition against it under any such law; or a Borrower, Guarantor
or a Guarantor Subsidiary makes an assignment for the benefit of its creditors,
or admits in writing its inability to pay its debts generally as they become
due, or consents to the appointment of a receiver, trustee or liquidator of a
Borrower, Guarantor or a Guarantor Subsidiary or of all or any part of their
respective properties; or

 

(f) Invalidity of Loan Documents. (i) Any material provision of the Loan
Documents shall for any reason cease to be valid and binding on a Borrower,
Guarantor or a Guarantor Subsidiary after the Effective Date, or a Borrower,
Guarantor or a Guarantor Subsidiary or any third party shall so state in
writing, and (ii) such invalidity or the effect of such invalidity is not cured
to the Agent’s satisfaction within thirty (30) days after the earliest to occur
of (x) notice from the Agent concerning its belief that a material provision is
no longer valid and binding, (y) any written statement of a Borrower, Guarantor,
or a Guarantor Subsidiary or any third party that a material provision is not
valid and binding, or (z) the chief executive officer, president or chief
financial officer of a Borrower, Guarantor or a Guarantor Subsidiary otherwise
becomes aware that any material provision is not valid and binding; or

 

(g) Attachment. A writ or warrant of attachment or any similar process (in any
such instance, a “writ”) shall be issued by any court against all or any
material portion of the respective properties of a Borrower, Guarantor or a
Guarantor Subsidiary and such writ is not released or bonded within thirty (30)
days after its entry; or

 

(h) Other Debt. A Borrower, Guarantor or a Guarantor Subsidiary defaults in the
payment of any amounts due to any Person in connection with any Debt in excess
of $5,000,000.00 in aggregate principal amount (other than the Indenture
Obligations), or (other than as to vessel construction contracts covered under
subsection 8.01(j) below) defaults in the observance or performance of any of
the covenants or agreements contained in any credit agreements, indentures,
notes, leases, contracts, collateral or other documents relating to a contract
involving remaining Debt (including indemnity) obligations in excess of
$5,000,000.00 to which either Borrower, Guarantor or a Guarantor Subsidiary is a
party under which any such Debt was created or is governed, and any grace period
applicable to any such default has elapsed without cure or waiver; or

 

(i) Undischarged Judgments. Judgment for the payment of money in excess of
$1,000,000.00 (which is not covered by insurance) is rendered by any court or
other governmental body against either Borrower, Guarantor or a Guarantor
Subsidiary and such Borrower, Guarantor or such Guarantor Subsidiary does not
discharge the same or provide for its discharge in accordance with its terms, or
procure a stay of execution thereof within thirty (30) days from the date of
entry thereof, and within said period of thirty (30) days from the date of entry
thereof or such longer period during which execution of such judgment shall have
been stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal while providing such reserves therefor as may be required
under generally accepted accounting principles; or

 

(j) Construction Contracts. Any default occurs under any construction contract
for the construction of a vessel for HOS or HOT and any grace period available
to a Borrower or the applicable contractor for any such default has elapsed
without cure or waiver and such default results in termination of the contract
for the construction of such vessel and payment obligations for remaining Debt
owed by a Borrower as a result of such default are in excess of $5,000,000; or

 

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(k) Citizenship. Either Borrower ceases to be a citizen of the United States of
America within the meaning of Title 46, Section 802 of the United States Code;
or

 

(l) Vessel Loss. There occurs a total loss of a Vessel, actual or constructive,
or a compromised or arranged or otherwise agreed constructive loss of a Vessel,
not fully covered by insurance (subject to permitted deductibles) and such
Vessel is not replaced as Collateral with another vessel or vessels of the
Required Banks’ choosing in their sole and absolute discretion (as though
additional Collateral were required under Section 5.17 hereof and in accordance
with the requirements of such section) within thirty (30) days after such loss;
or

 

(m) Minimum Guarantor Net Worth. Guarantor (on a consolidated basis with its
Subsidiaries consistent with its audited financial statements as of December 31,
2003) fails to maintain a net worth of at least 80% of Guarantor’s net worth at
December 31, 2003 (on a consolidated basis with its Subsidiaries) as of the last
day of each quarter, commencing March 31, 2004, increased annually at the end of
each calendar year by fifty (50%) percent of Guarantor’s net income (on a
consolidated basis with its Subsidiaries consistent with its audited financial
statements for the period ended December 31, 2003) for such year and ninety
(90%) percent of the gross proceeds derived from all equity contributed to
Guarantor during such year and reduced by the amount of net losses incurred to
the extent of non-cash unamortized deferred finance charges, if any, written off
in connection with any refinancing of the Indenture Obligations. For the
purposes of this section, “net worth” shall mean the sum of common stock,
preferred stock, capital surplus and retained earnings; or

 

(n) Minimum Guarantor Fixed Charge Coverage Ratio. Guarantor (on a consolidated
basis with its Subsidiaries) as of the last day of each fiscal quarter fails to
maintain a ratio of (i) EBITDA minus expenditures for the maintenance and
recertification of assets (including drydocking, but excluding discretionary
items such as vessel upgrades) incurred and paid during the applicable period of
calculation of EBITDA, to (ii) Fixed Charges incurred, whether or not paid,
during the applicable period of calculation of EBITDA, of greater than or equal
to 1.30:1.00; or

 

(o) Intentionally deleted.

 

(p) Maximum Guarantor Leverage Ratio. Guarantor (on a consolidated basis with
its Subsidiaries) as of the last day of each fiscal quarter fails to maintain a
Leverage Ratio of less than or equal to 4.5:1.0; or

 

(q) Change in Control. There occurs a Change in Control; or

 

(r) Indenture Obligations. There occurs an “Event of Default” as defined in any
of the Indenture Documents; provided, that a cure or waiver of such “Event of
Default” under the Indenture Documents will automatically cure an Event of
Default under this subsection 8.01(r); or

 

(s) Contract Payments. Either Borrower accepts, solicits or retains, or any
third party on behalf of a Borrower accepts, solicits or retains, any amounts
under Vessel charters (including without limitation contracts of affreightment)
more than one (1) month in advance of when such amounts are to become due; or

 

(t) Surveys. The Borrowers do not provide to the Agent by March 31, 2004 surveys
of the Vessels dated not earlier than April 1, 2003 from the Surveyor showing an
aggregate orderly liquidation value of at least $120,000,000.

 

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Section 8.02 Remedies. (a) Upon the happening of any Event of Default specified
in Section 8.01 (other than subsections 8.01(d) or 8.01(e) thereof, (i) all
obligations, if any, of the Agent or the Banks to make Advances to Borrowers
shall immediately cease and terminate; and (ii) the Agent may, and at the
written direction of the Required Banks shall (to the extent so directed), by
written notice to Borrowers declare the entire principal amount of all
Obligations then outstanding, including interest accrued thereon, to be
immediately due and payable without presentment, demand, protest, notice of
protest or dishonor or other notice of default of any kind, all of which are
hereby expressly waived by Borrowers.

 

(b) Upon the happening of any Event of Default specified in subsections 8.01(d)
or 8.01(e) hereof, (i) all obligations, if any, of the Agent or the Banks to
make Advances to Borrowers shall immediately cease and terminate; and (ii) the
entire principal amount of all Obligations then outstanding, including interest
accrued thereon, shall, without notice or action by the Agent, be immediately
due and payable without presentment, demand, protest, notice of protest or
dishonor or other notice of default of any kind, all of which are hereby
expressly waived by Borrowers.

 

(c) In addition to the foregoing, upon the happening of any of the events
described in subsections (a) and (b) above, the Agent may, and at the written
direction of the Required Banks shall (to the extent so directed), exercise any
of the rights or remedies provided in the Collateral Documents and other Loan
Documents or avail itself of any rights or remedies provided by applicable law.

 

Section 8.03 Set-Off. Upon the occurrence of any Event of Default, Agent and
Banks shall have the right to set-off any funds of either Borrower in the
possession of Agent or Banks against any Debt then due by Borrowers to the Agent
or the Banks. Borrowers agree that any holder of a participation in any Note may
exercise any and all rights of counter-claim, set-off, banker’s lien and other
liens with respect to any and all monies owing by Borrowers to such holder as
fully as if such holder of a participation were a holder of a note in the amount
of such participation.

 

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ARTICLE 9

 

THE AGENT; SETOFF; RATABLE PAYMENTS

 

Section 9.01 Appointment and Authorization. (a) Each Bank appoints and
authorizes the Agent to receive all payments of principal, interest, fees and
other amounts payable by the Borrowers under this Agreement and to remit same
that is payable to the Banks immediately to the Banks, to disburse the Advances
from the Banks, and to take such action and to exercise such powers under this
Agreement, the Notes, the Collateral Documents and the other Loan Documents as
are delegated to the Agent by the Banks from time to time. The Agent shall
promptly distribute to the Banks upon receipt, by the close of business on the
next Business Day following receipt by the Agent, all payments and prepayments
of principal, interest, fees and other amounts paid by the Borrowers under this
Agreement that is payable to the Banks, in proportion to the Banks’ Commitments
or as otherwise set forth herein (such as under Section 2.17 hereof). Similarly,
the Banks shall be obligated to fund Advances in proportion to their Borrowing
Base Credit Commitments. The Agent may resign at any time by written notice to
the Banks; the successor Agent shall be selected by the Required Banks from
among the remaining Banks.

 

(b) Each Bank appoints and authorizes the Agent to hold this Agreement, the
Collateral Documents and all other Loan Documents (except for the Notes and
Hedging Agreements, which will be held by the respective Banks party thereto),
and to take such action and exercise such powers under this Agreement, the
Notes, the Collateral Documents and the other Loan Documents as are delegated to
the Agent by the Banks from time to time. Any requests by the Borrowers for
consent by the Banks or waiver or amendment of provisions of this Agreement
shall be delivered by the Borrowers to the Agent, but favorable action on such
requests shall require the approval of the Required Banks or all of the Banks,
as the case may be.

 

(c) Each Bank appoints and authorizes the Agent to supervise the syndication of
the Loans to a group of financial institutions identified by the Agent in
consultation with the Borrowers in accordance with the provisions of Section
9.06 hereof.

 

Section 9.02 Agent’s Reliance. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it under or in connection with this Agreement, the Notes, the
Collateral Documents or the other Loan Documents, except for its or their own
gross negligence or willful misconduct. Without limiting the generality of the
foregoing, the Agent: (i) may treat the payee of any of the Notes as the holder
thereof until the Agent receives written notice of the assignment or transfer
thereof, signed by such payee and in form satisfactory to the Agent; (ii) may
consult with legal counsel (including counsel for the Borrowers), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations made in or in connection with this
Agreement, the Notes, the Collateral Documents and the other Loan Documents;
(iv) shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement, the
Notes, the Collateral Documents or the other Loan Documents, or to inspect any
property (including the books and records) of the Borrowers; (v) shall not be
responsible to any Bank for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement, the Notes,
the Collateral Documents or the other Loan Documents; and (vi) shall incur no
liability under or in respect to this Agreement, the Notes, the Collateral
Documents or the other Loan Documents by acting upon any notice, consent,

 

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certificate or other instrument or writing (which may be by facsimile, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.

 

Section 9.03 Acts by Agent after Default, etc. In the event that the Agent shall
have been notified in writing by any of the Borrowers or the Banks of any
Default or Event of Default (or in the event that the officer of the Agent
responsible for the Borrowers’ account obtains actual knowledge of a Default or
an Event of Default), the Agent (a) shall immediately notify the Banks; (b)
shall take such action and assert such rights under this Agreement as it is
expressly required to do pursuant to the terms of this Agreement with the
consent of the Required Banks; (c) may take such other actions and assert such
other rights as it deems advisable, in its discretion, for the protection of the
interests of the Banks pursuant to applicable laws with the consent of the
Required Banks; and (d) shall inform all the Banks of the taking of action or
assertion of rights pursuant to this Section. Each Bank agrees with the Agent
and the other Banks that the decisions and determinations of the Required Banks
in enforcing this Agreement, the Notes, the Collateral Documents and other
applicable Loan Documents and guiding the Agent in those matters shall be
binding upon all the Banks, including without limitation authorizing the Agent
at the pro rata expense of all the Banks (to the extent not reimbursed by the
Borrowers) to retain attorneys to seek judgment on this Agreement, the Notes,
the Collateral Documents and other applicable Loan Documents. Each Bank agrees
with the other Banks that it will not, without the consent of the other Banks,
separately seek to institute any legal action with respect to the Credit Loan
against the Borrowers, the Guarantor or any other party executing documents in
favor of the Agent or the Banks; provided, that a Bank party to a Hedging
Agreement or Hedging Arrangement shall be entitled to enforce the applicable
Borrower’s payment obligations thereunder.

 

Section 9.04 Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based on
the financial statements referred to herein and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement, the Notes, the Collateral Documents and the other Loan
Documents.

 

Section 9.05 Agent. The Agent shall have the same rights and powers under this
Agreement, the Notes, the Collateral Documents and the other Loan Documents as
any other Bank and may exercise the same as though it were not the Agent; and
the term “Bank” or “Banks” shall, unless otherwise expressly indicated, include
Agent in its individual capacity. The Agent may accept deposits from, lend money
to, act as trustee under indentures of, and generally engage in any kind of
business with Borrowers as if the Agent were not the Agent and without any duty
to account therefor to the Banks.

 

Section 9.06 Assignments and Participations. (a) No Bank may assign to any other
Person any portion of its interests, rights and obligations under this Agreement
(including, without limitation, any portion of its Commitment or the Credit Loan
at the time owing to it and Note held by it) unless each of the following
conditions is or has been satisfied: (i) the Agent has given its prior written
consent (which consent will not be unreasonably withheld), (ii) so long as there
is not then existing an Event of Default, the Borrowers have given their prior
written consent (which consent will not be unreasonably withheld), (iii) each
such assignment is of a constant, and not a varying, percentage of all the
assigning Bank’s rights and obligations under this Agreement, (iv) the
assignment is for a Commitment of $5,000,000.00 or more (or if a Bank’s
Commitment is for less than $5,000,000, then such Bank may sell all of its
Commitment), (v) the parties to such assignment have executed and delivered to
the Agent an Assignment and Acceptance, substantially in the form of Exhibit C
hereto (the “Assignment and Acceptance”), together with the Note subject to such
assignment, one or more signature pages to this Agreement containing the

 

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signature of the assignee, and (following the Effective Date, as defined in the
applicable Assignment and Acceptance) payment by the assignee to the Agent for
its own account of an assignment administration fee in the amount of $3,500.00,
(vi) either the assignor or assignee shall have paid the Agent’s and any Bank’s
costs and expenses (including without limitation attorneys fees and expenses) in
connection with the assignment if, in accordance with Section 5.07 hereof, such
costs and expenses are not to be borne by Borrowers, (vii) the Agent shall have
delivered to the Borrowers a fully executed copy of such Assignment and
Acceptance, and (viii) the assignee is (A) a state or national commercial bank
or other financial institution located in the United States or (B) a bank or
other financial institution organized under a jurisdiction other than the United
States, provided that such foreign bank or other financial institution has
provided the Agent and the Borrowers with forms prescribed by the Internal
Revenue Service certifying as to such Bank’s status for purposes of determining
exemption from United States withholding taxes with respect to all payments to
be made to such Bank hereunder, and provided further that such foreign bank or
other financial institution shall not transfer its interests, rights and
obligations under this Agreement to any affiliate of such foreign bank or other
financial institution unless such affiliate provides the Agent and the Borrowers
with the aforesaid tax forms; provided, that with respect to clause (ii) above,
the Borrowers’ consent also shall not be required as to an assignment by a Bank
of all of its Commitment if such assignment is part of a sale or assignment of
all or substantially all of either that Bank’s assets or its marine transactions
portfolio and the acquiring Person is a bank or financial institution not
affiliated with any company engaged in marine transportation and is not a
creditor of the Borrowers or the Guarantor with respect to other Debts. Upon
satisfaction of each of the foregoing conditions and upon acceptance and
notation by the Agent, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least five (5)
Business Days after the execution thereof, (x) the assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Bank, and (y) the assigning Bank shall, to
the extent provided in such assignment, be released from its obligations under
this Agreement. Notwithstanding the foregoing, the restrictions contained above
in this subsection 9.06(a) shall not apply to assignments to any Federal Reserve
Bank, and the conditions set forth in clauses (i) and (ii) above shall not apply
to assignments by any Bank to any Person which controls, is controlled by, or is
under common control with, or is otherwise substantially affiliated with that
Bank.

 

(b) Upon its receipt of an Assignment and Acceptance executed by the parties to
such assignment together with the Note subject to such assignment and the
written consent of the Agent and the Borrowers to such assignment, the Agent
shall give prompt notice thereof to the Borrowers and the Banks. Within five (5)
Business Days after receipt of such notice, the Borrowers at their own expense,
shall execute and deliver to the Agent, in exchange for the surrendered Note, a
new Note to the order of such assignee(s) in an amount equal to the amount
assumed by such assignee pursuant to such Assignment and Acceptance and, if the
assigning Bank has retained some portion of its obligations hereunder, a new
Note to the order of the assigning Bank in an amount equal to the amount
retained by it hereunder. Such new Notes shall be in an aggregate principal
amount equal to the aggregate principal amounts of the surrendered Note, shall
be dated the effective date of such Assignment and Acceptance and shall
otherwise be in the form of the assigned Note. The surrendered Note shall be
canceled and returned to the Borrowers. The Agent shall have the right to
substitute a revised Schedule 1 hereto to reflect the respective Commitments
(and Borrowing Base Credit Commitments) following each such assignment.

 

(c) Each Bank, without the consent of the Agent, the other Banks or the
Borrowers, may sell participations to one or more banks or other financial
institutions not affiliated with any company engaged in marine transportation
and not a creditor of the Borrowers or the Guarantor with respect to other Debts
(and such bank or banks or financial institution or financial institutions shall
be bound by the terms of this Agreement, including without limitation this
Section 9.06) in all or a portion of the Credit Loan (including its Commitment)
under this Agreement; provided, that the selling Bank shall

 

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retain the sole right and responsibility to enforce the obligations of the
Borrowers relating to the Credit Loan and that the only rights granted to the
participant pursuant to such participation arrangements with respect to waivers,
amendments or modifications of this Agreement shall be the right to approve
waivers, amendments, or modifications which require the consent of all of the
Banks as provided in Section 10.12 hereof.

 

Section 9.07 Indemnification of the Agent. The Banks ratably (computed by
reference to each Bank’s respective Commitment) shall indemnify the Agent, its
respective affiliates and the respective shareholders, directors, officers,
employees, agents and counsel of the foregoing (each an “Agent Indemnitee”) and
hold each Agent Indemnitee harmless from and against any and all claims (whether
groundless or otherwise), liabilities, losses, damages, costs and expenses of
any kind, including, without limitation, (i) the reasonable fees and
disbursements of counsel for which the Agent has not been reimbursed by the
Borrowers and (ii) any expenses for which the Agent has not been reimbursed by
the Borrowers as required by this Agreement, which may be incurred by such Agent
Indemnitee arising out of or related to this Agreement or the transactions
contemplated hereby, or the Agent’s actions taken hereunder; provided, that (x)
no Agent Indemnitee shall have the right to be indemnified hereunder for such
Agent Indemnitee’s own gross negligence or willful misconduct, as determined by
a court of competent jurisdiction, or to the extent that such claim relates to
the breach by such Agent Indemnitee of its obligations under this Agreement, and
(y) insofar as the Agent may also be a Bank, the foregoing indemnification in
favor of the Agent shall not apply to claims, liabilities, losses, damages,
costs and expenses incurred in its capacity as a Bank. The foregoing shall
survive the termination of this Agreement.

 

Section 9.08 Setoff. In addition to, and without limitation of, any rights of
the Banks under applicable law, if either Borrower or any other Loan Party
becomes insolvent, however evidenced, or any Event of Default occurs, any and
all deposits (including all account balances, whether provisional or final and
whether or not collected or available) and any other Obligations at any time
held or owing by any Bank or any Affiliate of any Bank to or for the credit or
account of either Borrower or any other Loan Party may be offset and applied
toward the payment of the Obligations owing to such Bank, whether or not the
Obligations, or any part thereof, shall then be due.

 

Section 9.09 Ratable Payments. If any Bank, whether by setoff or otherwise, has
payment made to it upon the Obligations owing to it (other than payments
received pursuant to Sections 2.12, 2.13 or 2.14) in a greater proportion than
that received by any other Bank, such Bank agrees, promptly upon demand, to
purchase a portion of the Obligations held by the other Banks so that after such
purchase each Bank will hold its proportionate share of the Borrowing Base
Credit Commitments. If any Bank, whether in connection with setoff or amounts
which might be subject to setoff or otherwise, receives Collateral or other
protection for its Obligations or such amounts which may be subject to setoff,
such Bank agrees, promptly upon demand, to take such action necessary such that
all Banks share in the benefits of such Collateral ratably in proportion to
their respective Borrowing Base Credit Commitments. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.

 

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ARTICLE 10

 

MISCELLANEOUS

 

Section 10.01 Notices. Any notice or demand which, by provision of this
Agreement, is required or permitted to be given or served by one party to or on
another shall be deemed to have been sufficiently given and served for all
purposes (if mailed) three calendar days after being deposited, postage prepaid,
in the United States mail, registered or certified mail, or (if delivered by
express courier) one calendar day after being delivered to such courier, or (if
delivered in person) the same day as delivery, in each case addressed (until
another address or addresses are given in writing) as follows:

 

If to Borrowers:

 

Hornbeck Offshore Services, LLC

103 Northpark Blvd., Suite 300

Covington, LA 70433

Attn: Mr. Todd M. Hornbeck

 

and

 

Hornbeck Offshore Transportation, LLC

103 Northpark Blvd., Suite 300

Covington, LA 70433

Attn: Mr. Todd M. Hornbeck

 

If to Agent:

 

Hibernia National Bank, as Agent

313 Carondelet Street

New Orleans, LA 70130

Attn: Mr. Gary Culbertson

 

If to Banks:

 

At the addresses set forth on Schedule 1 hereto.

 

Section 10.02 Invalidity. In the event that any one or more of the provisions
contained in this Agreement, the Notes, the Collateral Documents or the other
Loan Documents shall, for any reason, be held invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, the Notes, the Collateral Documents or
the other Loan Documents.

 

Section 10.03 Successors and Assigns. All covenants and agreements by or on
behalf of the Borrowers, the Agent or the Banks contained in the Loan Documents
shall bind their respective successors and assigns and shall inure to the
benefit of the Agent, the Banks and the Borrowers and their respective
successors and assigns.

 

Section 10.04 Renewal, Extension or Rearrangement. All provisions of this
Agreement relating to the Notes shall apply with equal force and effect to each
and all promissory notes or security instruments hereinafter executed which in
whole or in part represent a renewal, extension for any period, increase or
rearrangement of any part of the Notes.

 

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Section 10.05 Waivers. No course of dealing on the part of the Agent, any Bank,
their respective officers, employees, consultants or agents, nor any failure or
delay by the Agent or any Bank with respect to exercising any of their rights,
powers or privileges under this Agreement, the Notes, the Collateral Documents
or the other Loan Documents shall operate as a waiver thereof.

 

Section 10.06 Cumulative Rights. The rights and remedies of Agent and Banks
under this Agreement, the Notes, the Collateral Documents or the other Loan
Documents shall be cumulative, and the exercise or partial exercise of any such
right or remedy shall not preclude the exercise of any other right or remedy.

 

Section 10.07 Singular or Plural. Words used herein in the singular, where the
context so permits, shall be deemed to include the plural or vice versa. The
definitions of words in the singular herein shall apply to such words when used
in the plural where the context so permits and vice versa.

 

Section 10.08 CONSTRUCTION. THIS AGREEMENT IS, AND THE NOTES WILL BE, CONTRACTS
MADE UNDER AND SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE UNITED STATES OF AMERICA AND THE INTERNAL LAWS OF THE STATE OF LOUISIANA.

 

Section 10.09 Titles of Articles, Sections and Subsections. All titles or
headings to articles, sections, subsections or other divisions of this Agreement
or the exhibits hereto are only for the convenience of the parties and shall not
be construed to have any effect or meaning with respect to the other content of
such articles, sections, subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto.

 

Section 10.10 Limitation of Liability. The Loan Documents are executed by
officers of the Agent and the Banks, and by acceptance of the Credit Line,
Borrowers agree that for the payment of any claim or the performance of any
obligations hereunder resulting from any default by the Agent or any of the
Banks, resort shall be had solely to the assets and property of the defaulting
Agent or Bank, and no shareholder, officer, employee or agent of the defaulting
Agent or Bank shall be personally liable therefor.

 

Section 10.11 Relationship Between the Parties. The relationship between the
Agent and the Banks, on the one hand, and Borrowers on the other, shall be
solely that of lender and borrower, and such relationship shall not, under any
circumstances whatsoever, be construed to be a joint venture, joint adventure or
partnership. Neither the Agent nor any Bank has any fiduciary obligation to
either Borrower, Guarantor or any Subsidiary with respect to this Agreement or
the transactions contemplated hereby.

 

Section 10.12 Amendment; Waiver. No amendment or waiver of any provision of this
Agreement or any other Loan Document (other than Hedging Agreements and Hedging
Arrangements) or consent to any departure therefrom by Borrowers or the Banks
shall be effective unless the same shall be in writing and signed by Borrowers,
the Agent and the Required Banks; provided, that without the written consent of
all of the Banks, no amendment or waiver to this Agreement or any other Loan
Document (other than Hedging Agreements and Hedging Arrangements) shall (i)
change the scheduled payment dates or maturity of the Credit Loan, or (ii)
change the principal of or the rate or time of payment of interest or any
premium payable with respect to any Note or the fees payable under Section 2.09,
or (iii) increase the Commitments, or (iv) release any of the Borrowers, or
affect the time, amount or allocation of any required prepayments, or (v) effect
the release of any Collateral (except as contemplated by Sections 5.17 and
8.01(1)) or any guarantor of the Obligations or subordinate the rights of the
Agent and the Banks with respect to Collateral, or (vi) reduce the proportion of
the Required Banks required with respect to any consent, or (vii) change the
application of payments under Sections 2.09 and 2.17 hereof,

 

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or (viii) change the definition of Required Banks or amend this Section 10.12,
or (ix) increase or decrease the Borrowing Base. In addition, but subject to
those amendments that require the approval of all Banks, if a Borrower or the
Guarantor incurs from time to time additional Debt (other than Obligations) in
excess of $30,000,000 not in existence on the Effective Date, then the Required
Banks shall be entitled to require such amendments to this Agreement and the
other Loan Documents as they deem to be reasonably appropriate in light of the
terms and conditions of such Debt; provided, that (A) absent there being any
Default or Event of Default and absent any circumstances in connection with the
incurrence of such Debt that would require a waiver or amendment of the terms
and conditions of this Agreement, for example at Section 6.05 hereof (although
nothing herein implies or should be deemed to imply that the Agents or the Banks
would agree to any waiver or amendment) and (B) the Leverage Ratio would not
have been violated on the last day of the fiscal quarter preceding the
incurrence of such Debt had such Debt been incurred on such date, then the
Required Banks shall not be entitled to require amendments to the definitions of
Applicable Margin, EBITDA and Net Debt hereunder and Sections 2.09, 5.07, 5.17,
6.05, 6.08, 8.01(n) and 8.01(p) hereof. Banks not party to a Hedging Agreement
or Hedging Arrangement shall not be entitled to consent to any amendments or
other modifications thereto of waivers thereof. Bank Affiliates shall not be
entitled to consent to any amendments or other modifications to, or waivers of
the Loan Documents, other than their applicable Hedging Agreements as Hedging
Arrangements.

 

Section 10.13 Entire Agreement. This Agreement and the other Loan Documents
supersede all prior written or oral understandings with respect to the
transactions contemplated hereby and thereby. Borrowers are not relying upon any
representation by the Agent, any of the Banks or any representative thereof, and
no representation has been made, that the Agent or any Bank will, at the time of
an Event of Default or Default, or at any other time, waive, negotiate, discuss
or take or refrain from taking any action with respect to any such Event of
Default or Default.

 

Section 10.14 Time of the Essence. Time shall be deemed of the essence with
respect to the performance of all of the terms, provisions and conditions on the
part of Borrowers, the Agent and the Banks to be performed hereunder.

 

Section 10.15 Counterparts. This Agreement may be executed in multiple
counterparts, and it shall not be necessary that the signatures of all parties
hereto be contained on any one counterpart hereof; each counterpart shall be
deemed an original, but all of which together shall constitute one and the same
instrument.

 

Section 10.16 Interest. It is the intention of the parties hereto to conform
strictly to applicable usury laws as presently in effect. Accordingly,
notwithstanding the designation of Louisiana law pursuant to Section 10.08
hereof, if the transactions contemplated hereby are held by a final judgment of
a court of competent jurisdiction to be usurious under applicable law (including
the laws of the United States of America or any state other than Louisiana),
then, in that event, notwithstanding anything to the contrary in this Agreement,
the Notes, the Collateral Documents or the other Loan Documents, the parties
hereto agree as follows: (i) the aggregate of all consideration which
constitutes interest under applicable law that is contracted for, charged or
received under the Loan Documents shall under no circumstances exceed the
maximum amount of interest allowed by applicable law, and any excess shall be
credited on the Obligations (or, if the Obligations shall have been paid in
full, refunded to Borrowers for division between themselves as they deem
appropriate), and (ii) in the event that the maturity of the Obligations is
accelerated by reason of an election of the holder thereof resulting from any
Event of Default under this Agreement or otherwise, or in the event of any
prepayment, then such consideration that constitutes interest may never include
more than the maximum amount allowed by applicable law, and excess interest, if
any, provided for in this Agreement or otherwise shall be canceled automatically
as of the date of such acceleration or prepayment and, if theretofore paid,
shall be credited on the Obligations (or, if the

 

55

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

Obligations shall have been paid in full, refunded to Borrowers for division
between themselves as they deem appropriate).

 

Section 10.17 NO THIRD PARTY BENEFICIARY. THERE SHALL BE NO THIRD PARTY
BENEFICIARY OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION BANK AFFILIATES,
GUARANTOR, INDENTURE NOTEHOLDERS AND THE INDENTURE TRUSTEE.

 

Section 10.18 SOLIDARY LIABILITY. EACH BORROWER ACKNOWLEDGES AND AGREES THAT IT
IS SOLIDARILY (JOINTLY AND SEVERALLY) LIABLE WITH THE OTHER BORROWER FOR THE
PAYMENT AND PERFORMANCE OF ALL OBLIGATIONS FROM TIME TO TIME OWING HEREUNDER AND
UNDER THE OTHER LOAN DOCUMENTS EXECUTED BY EITHER OR BOTH OF THE BORROWERS.

 

Section 10.19 WAIVERS OF JURY TRIAL. BORROWERS, THE AGENT AND THE BANKS HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY
COUNTERCLAIM THEREIN.

 

Section 10.20 Bank Affiliates. No Bank Affiliate party to any Hedging Agreement
with Borrowers shall have any rights under this Agreement or the other Loan
Documents (other than its Hedging Agreement), except with respect to its rights
under, but subject to the terms and conditions of, Section 2.17 hereof to
receive proceeds of Collateral or as a result of the Agent’s exercise of other
rights and remedies under the Loan Documents. No Bank Affiliate shall be a third
party beneficiary in any respect whatsoever of any of the terms and conditions
of this Agreement (including without limitation as to any amendments to or
waivers of Section 2.17) or the other Loan Documents.

 

[The rest of this page is intentionally blank.]

 

56

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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be duly
executed on the date first above written.

 

HORNBECK OFFSHORE SERVICES, LLC By:  

/s/ Todd M. Hornbeck

                                                                               
                 

    Name:    Todd M. Hornbeck     Title:       President and Chief Executive
Officer

 

HORNBECK OFFSHORE TRANSPORTATION, LLC By:  

/s/ Todd M. Hornbeck

                                                                               
                 

    Name:    Todd M. Hornbeck     Title:       President and Chief Executive
Officer

 

HIBERNIA NATIONAL BANK, as Agent By:  

/s/ Gary Culbertson

                                                                               
                 

    Name:    Gary Culbertson     Title:       Vice President

 

HIBERNIA NATIONAL BANK, as a Bank By:  

/s/ Gary Culbertson

                                                                               
                 

    Name:    Gary Culbertson     Title:       Vice President

 

FORTIS CAPITAL CORP. By:  

/s/ K. DeLathanwer

                                                                               
                 

    Name:    K. DeLathanwer     Title:       Senior Vice President

By:  

/s/ Carl Rasmussen

                                                                               
                 

    Name:    Carl Rasmussen     Title:       Vice President

 

SOUTHWEST BANK OF TEXAS, N.A. By:  

/s/ Ross Bartley

                                                                               
                 

    Name:    Ross Bartley     Title:       Assistant Vice President

 

[Signatures continued on next page.]

 

57

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DVB BANK AKTIENGESELLSCHAFT By:  

/s/ Sylven Hoelitz

                                                                               
                 

    Name:    Sylven Hoelitz     Title:       Senior Vice President

By:  

/s/ Gorm Eikemo

                                                                               
                 

    Name:    Gorm Eikemo     Title:       Vice President

 

WELLS FARGO BANK, N.A. By:  

/s/ C. Lauinger III

                                                                               
                 

    Name:    C. Lauinger III     Title:       Vice President

 

ACCEPTED AND AGREED TO:

 

HORNBECK OFFSHORE SERVICES, INC.

HOS-IV, LLC

HORNBECK OFFSHORE TRINIDAD & TOBAGO, LLC

 

By:  

/s/ Todd M. Hornbeck

                                                                               
                 

    Name:    Todd M. Hornbeck     Title:       President and Chief Executive
Officer

 

The President and Chief Executive Officer of all of the aforementioned companies
has executed this Agreement intending that all the companies named above are
bound and to be bound by the one signature as if he had executed this Agreement
separately for each company.

 

 

58

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LIST OF SCHEDULES

 

1 Commitments of the Banks

 

4.07 Investments and Guaranties

 

4.08 Liabilities and Litigation

 

4.13 Compliance with the Law

 

LIST OF EXHIBITS

 

A Form of Credit Note

 

B Form of Draw Request Certificate (§2.02)

 

C Form of Assignment and Acceptance (§9.06(a))

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

SCHEDULE 1

 

Commitments of the Banks

Name and Address of Bank

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

  

Credit Commitment

of Bank

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

  

Borrowing Base

Credit

Commitment of Bank

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

Hibernia National Bank

313 Carondelet Street

New Orleans, LA 70130

Attn: Mr. Gary Culbertson

   $ 20,000,000.00    $ 12,000,000.00

Fortis Capital Corp.

Three Stamford Plaza

301 Tresser Boulevard

Stamford, CT 06901

Attn: Mr. Carl Rasmussen

   $ 20,000,000.00    $ 12,000,000.00

Southwest Bank of Texas, N.A. 5

Post Oak Park

4400 Post Oak Parkway

Houston, TX 77027

Attn: Mr. Edward Bowdon

   $ 20,000,000.00    $ 12,000,000.00

DVB Bank Aktiengesellschaft

609 Fifth Avenue

5th Floor

New York, NY 10017

Attn: Mr. Gorm Eikemo

   $ 20,000,000.00    $ 12,000,000.00

Wells Fargo Bank, N.A.

Energy Services and Equipment Group

1000 Louisiana Street

Third Floor

Houston, TX 77002

Attn: Mr. Philip Lauinger III

   $ 20,000,000.00    $ 12,000,000.00

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

SCHEDULE 4.07

 

Investments and Guaranties

 

None.

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

SCHEDULE 4.08

 

Liabilities and Litigation

 

HOT is party to an environmental clean-up matter regarding SBA Shipyards, Inc.,
Jennings, Louisiana. The matter involves remediation resulting from work
performed by SBA Shipyards, Inc. for approximately 20 companies (former
customers of SBA Shipyards, Inc.). HOT’s Participation Allocation is estimated
to be 2.2%.

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

SCHEDULE 4.13

 

Compliance with the Law

 

None.

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

EXHIBIT A

 

[Form of Credit Note attached]

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

CREDIT NOTE

 

$                            

   [Date ]

Maturity Date:

  

February 13, 2009 (subject

   New Orleans, Louisiana       

to possible automatic acceleration as

           

set forth in the Credit Agreement

           

referred to below)

      

 

FOR VALUE RECEIVED, the undersigned HORNBECK OFFSHORE SERVICES, LLC, a Delaware
limited liability company, and HORNBECK OFFSHORE TRANSPORTATION, LLC, a Delaware
limited liability company (collectively, the “Borrowers”), hereby promise to pay
to the order of                              (the “Lender”) at the office of
Hibernia National Bank (herein called the “Agent”), 313 Carondelet Street, New
Orleans, Louisiana 70130, the principal sum of                      and 00/100
($            .00) Dollars, or so much thereof as may be advanced pursuant to
the Amended and Restated Credit Agreement dated as of February 13, 2004 among
the Borrowers, the banks and other financial institutions from time to time
party thereto and the Agent, as same may be amended from time to time (herein
called the “Credit Agreement”), whichever is less.

 

The credit advice resulting from the deposit of the proceeds of any disbursement
hereunder in the Borrowers’ account with the Agent, or the Agent’s copy of any
cashier’s check representing all or any part of the proceeds of the
disbursements shall be deemed prima facie evidence of the Borrowers’
indebtedness to the Bank on the Credit Line.

 

The unpaid principal of this Note shall bear interest at one (or both) of the
following interest rates, at the Borrowers’ option from time to time: (i) Prime
Rate plus the Applicable Margin or (ii) Floating Rate plus the Applicable
Margin, as more particularly set forth in the Credit Agreement. The Borrowers
shall select the interest rate applicable to each Advance or other portion of
the Credit Loan outstanding (or such interest rate shall otherwise be
determined) in accordance with the provisions of the Credit Agreement. Interest
after maturity of this Note for any reason whatsoever shall be increased to the
Prime Rate plus the Applicable Margin plus 3% per annum and shall be payable on
demand. Interest shall be computed as set forth in the Credit Agreement.

 

The Borrowers may or shall from time to time prepay the principal of this Note,
and reborrow, in whole or in part, in accordance with the Credit Agreement. Any
prepayment of the principal of this Note shall include accrued interest to the
date of prepayment on the principal amount being prepaid and any applicable
premium or fee.

 

Interest on Advances accruing interest based on the Prime Rate interest option
shall be payable monthly in arrears on the last day of each month beginning
February 29, 2004 and on any conversion thereof to accrue interest based on the
Floating Rate interest option. Interest on Advances accruing interest based on
the Floating Rate interest option shall be payable on the last day of each
Interest Period (30, 60, 90 or 180 days), and in the case of 180 day Interest
Periods, also at the end of the first 90 days thereof. The outstanding principal
on this Note shall be payable in full at maturity of this Note on the Maturity
Date.

 

This Note is a Credit Note issued pursuant to and is entitled to the benefit of
the Credit Agreement. Reference is made to the Credit Agreement for provisions
for the acceleration of the maturity

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

hereof on the occurrence of certain events specified therein, the definition of
capitalized terms not otherwise defined herein, and for all other pertinent
purposes.

 

All payments and prepayments made by the Borrowers hereunder shall be made to
the Agent in lawful money of the United States, in immediately available funds,
before 11:00 a.m. (central time) on the date that such payment is required, or
otherwise is, to be made. Any payment received and accepted by the Agent after
such time shall be considered for all purposes (including the calculation of
interest, to the extent permitted by law) as having been made on the next
following Business Day. Whenever any payment to be made hereunder falls on a day
other than a Business Day, unless otherwise provided in the Credit Agreement,
such payment shall be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the calculation of interest.

 

The Borrowers expressly waive demand and presentment for payment, notice of
nonpayment, protest, notice of protest, notice of dishonor, bringing of suit,
diligence in taking any action to collect amounts called for hereunder and in
the handling of property at any time existing as security in connection
herewith, and shall be directly and primarily liable for the payment of all sums
owing and to be owing hereon, regardless of and without any notice, diligence,
act or omission as or with respect to the collection of any amount called for
hereunder or in connection with any right, lien, interest or property at any and
all times had or existing as security for any amount called for hereunder.

 

If any Event of Default occurs, the Agent and the Lender shall have all of the
rights and remedies (including acceleration of the maturity date of this Note)
available to them pursuant to the Credit Agreement or applicable law.

 

If an Event of Default occurs and this Note is placed in the hands of an
attorney for collection, or suit is filed hereon, or proceedings are had in
bankruptcy, probate, receivership or other judicial proceedings for the
establishment or collection of any amount called for hereunder, or any amount
payable or to be payable hereunder is collected through any such proceedings,
the Borrowers agree to pay to the Agent and the Lender a reasonable amount as
attorney’s fees.

 

Irrespective of the Borrower or Borrowers who directly or indirectly receive the
amounts funded on Advances, each of the Borrowers shall be liable jointly and
severally and solidarily to the Lender for all amounts outstanding from time to
time under this Note.

 

This Note shall be governed by and construed in accordance with the laws of the
State of Louisiana.

 

Neither this Note nor the indebtedness represented by this Note is a novation of
the indebtedness represented by the credit agreement that has been amended and
restated by the Credit Agreement or any promissory notes issued under such
credit agreement.

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

IN WITNESS WHEREOF, the Borrowers have executed and delivered this Note on the
day first written above.

 

HORNBECK OFFSHORE SERVICES, LLC By:        

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

    Name:   Todd M. Hornbeck     Title:   President and Chief Executive Officer

 

HORNBECK OFFSHORE TRANSPORTATION,

    LLC

By:        

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

    Name:   Todd M. Hornbeck     Title:   President and Chief Executive Officer

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

EXHIBIT B

 

[Form of Draw Request Certificate]

 

[See Section 2.02]

 

                    , 200    

 

Hibernia National Bank, as Agent

313 Carondelet Street

New Orleans, LA 70130

 

  Re: Draw Request

 

Ladies and Gentlemen:

 

Reference is hereby made to the Amended and Restated Credit Agreement dated as
of February 13, 2004 (as amended, modified and supplemented from time to time,
the “Credit Agreement”) among Hornbeck Offshore Services, LLC (“HOS”), Hornbeck
Offshore Transportation, LLC (“HOT”; HOS and HOT are collectively, “Borrowers”),
Hibernia National Bank, as Agent (“Agent”) and the Banks a party thereto
(“Banks”). Capitalized terms used herein without definition shall have the
respective meanings ascribed thereto in the Credit Agreement.

 

Pursuant to, and subject to the terms and conditions of, Section 2.02 and
Article 7 of the Credit Agreement, Borrowers hereby request that the Banks make
an Advance to Borrowers in the amount of                      and         /100
Dollars ($                    ) on                 , 200     in accordance with
the terms and conditions of the Credit Agreement.

 

The Advance shall accrue interest based on ¨ the Prime Rate interest option, or
¨ the Floating Rate interest option, with an initial Interest Period of
             days.

 

Borrowers hereby represent and warrant to the Agent and the Banks, and covenant,
acknowledge and agree with the Agent and the Banks that:

 

(a) the aforementioned request for an Advance is with respect to:

 

  (i) ¨ Working capital, in the amount of $                ,

 

  (ii) ¨ An acquisition (see attached for details), in the amount of
$                .

 

(b) the Borrowing Base is $                    . After giving effect to the
Advance requested hereby, the principal amount of the Credit Line outstanding
will be $                    ,

 

(c) the representations and warranties in the Credit Agreement are true and
correct and no Default or Event of Default exists under the Credit Agreement,

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

(d) attached hereto are all other materials (if any) required to be delivered to
Agent in connection with this Draw Request Certificate, and

 

(e) Borrowers are and shall continue to be solidarily (jointly and severally)
liable for the Advance requested hereunder and all other Obligations.

 

The undersigned hereby represent and warrant to Agent that they have all
requisite power and authority to execute and deliver this Draw Request
Certificate to the Agent.

 

Very truly yours,

HORNBECK OFFSHORE SERVICES, LLC

By:        

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

    Name:         Title:    

 

By:        

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

    Name:     Title:

 

HORNBECK OFFSHORE TRANSPORTATION, LLC

By:

       

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

    Name:     Title:

 

By:

       

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

    Name:     Title:

 

Exhibit B - Page 2

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

EXHIBIT C

 

FORM OF ASSIGNMENT AND ACCEPTANCE

 

Dated                     , 200    

 

Reference is made to the Credit Agreement dated as of February 13, 2004, as the
same may be amended, modified or supplemented from time to time (as so amended,
modified or supplemented from time to time, the “Agreement”), among Hornbeck
Offshore Services, LLC and Hornbeck Offshore Transportation, LLC, as Borrowers,
Hibernia National Bank, as Agent and the banks party thereto (the “Banks”).
Capitalized terms which are used herein without definition and which are defined
in the Agreement shall have the same meanings herein as in the Agreement.

 

                         (the “Assignor”) and                          (the
“Assignee”) agree as follows:

 

1. Assignment. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, as of the Effective
Date (as hereinafter defined) a         % interest in and to all the Assignor’s
rights and obligations under the Agreement (including, without limitation, its
Commitment, the Credit Loan currently owing to it and the Note held by it).

 

2. Concerning the Assignor. The Assignor (i) represents that as of the date
hereof, its Commitment percentage (without giving effect to assignments thereof
which have not yet become effective) is         %, and the outstanding balance
of its Credit Loan (unreduced by any assignments thereof which have not yet
become effective) is $                    ; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of the Agreement or any other instrument or document furnished pursuant thereto,
other than that it is the legal and beneficial owner of the interest being
assigned by it hereunder and that such interest is free and clear of any adverse
claim; (iii) makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrowers or the performance or
observance by the Borrowers of any of its obligations under the Agreement, the
Notes, the Collateral Documents or any other Loan Document or any other
instrument or document furnished pursuant thereto; and (iv) attaches the Note
delivered to it under the Agreement and requests that the Borrowers exchange
such Note for new Notes payable to each of the Assignor and the Assignee as
follows:

 

Notes Payable to

    the Order of:

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

   Amount of Note

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

[Name of Assignor]

   [Note ($            )]

[Name of Assignee]

   [Note ($            )]

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

3. Concerning the Assignee. The Assignee (i) represents and warrants that it is
legally authorized to enter into this Assignment and Acceptance; (ii) confirms
that it has received a copy of the Agreement, together with copies of the
financial statements referred to therein and the most recent financial
statements delivered pursuant thereto and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into this Assignment and Acceptance; (iii) agrees that it will,
independently and without reliance upon the Assignor, the Agent or any other
Banks and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under the Agreement; (iv) appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers under the Agreement
and the Notes as are delegated to the Agent by the terms thereof, together with
such powers as are reasonably incidental thereto; and (iv) agrees that it will
perform in accordance with their terms all the obligations which the Agreement,
the Notes, the Collateral Documents and the other Loan Documents require are to
be performed by it as a Bank.

 

4. Effective Date. The effective date for this Assignment and Acceptance shall
be                      (the “Effective Date”). Following the execution of this
Assignment and Acceptance, it will be delivered to the Agent for acceptance.

 

5. Obligations. Upon such acceptance and recording, from and after the Effective
Date, (i) the Assignee shall be a party to the Agreement and, to the extent
provided in this Assignment and Acceptance, have the rights and obligations of a
Bank thereunder, and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released from its
obligations under the Agreement, other than confidentiality requirements.

 

6. Payments. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments in respect of the interest assigned
hereby (including payments of principal, interest and other amounts) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments for periods prior to the Effective Date or with respect to the making
of this assignment directly between themselves.

 

[NAME OF ASSIGNOR]

By:

       

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

    Name:     Title:

 

[NAME OF ASSIGNEE]

By:

       

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

    Name:     Title:

 

Exhibit C - Page 2

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

Each of the undersigned hereby consents to the assignment contemplated by this
Assignment and Acceptance.

 

HORNBECK OFFSHORE SERVICES, LLC

By:

       

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

    Name:     Title:

HORNBECK OFFSHORE TRANSPORATION, LLC

By:

       

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

    Name:     Title:

HIBERNIA NATIONAL BANK, as Agent

By:

       

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

    Name:     Title:

 

Exhibit C - Page 3