Exhibit 10.2
THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE
RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS NOTE
MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO THE
COMPANY, (II) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (III) TO AN ACCREDITED
INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER JURISDICTIONS OF THE UNITED
STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO
IN (A) ABOVE.
THIS NOTE DOES NOT REQUIRE PHYSICAL SURRENDER OF THE NOTE IN THE EVENT OF A
CONVERSION. AS A RESULT, FOLLOWING ANY CONVERSION OF ANY PORTION OF THIS NOTE,
THE OUTSTANDING PRINCIPAL AMOUNT REPRESENTED BY THIS NOTE MAY BE LESS THAN THE
PRINCIPAL AMOUNT SET FORTH BELOW.
PURSUANT TO SECTION 2 HEREIN, THE OBLIGATIONS UNDER THIS NOTE ARE SUBJECT TO
CERTAIN SUBORDINATION PROVISIONS.
SUBORDINATED CONVERTIBLE NOTE DUE MARCH 31, 2010

     
Note No.:           
  Original Principal
Issuance Date: December    , 2005
  Amount: $                    
 
  New York, New York  

     This Note (“Note”) is a duly authorized note of HORIZON OFFSHORE, INC., a
corporation duly organized and existing under the laws of the State of Delaware
(the “Company”), designated as the Company’s Subordinated Convertible Notes Due
March 31, 2010 (“Maturity Date”).
     For Value Received, the Company hereby promises to pay to the order of
                                        , or its permitted registered assigns or
successors-in-interest (“Holder”) the

 

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principal sum of [PRINCIPAL] (U.S. $                    ) on the Maturity Date.
No interest shall accrue on the principal amount hereunder.
     All payments on this Note shall be made in lawful money of the United
States of America by wire transfer of immediately available funds to such
account as the Holder may from time to time designate by written notice in
accordance with the provisions of this Note or by Company check. This Note may
not be prepaid in whole or in part except as otherwise provided herein. Whenever
any amount expressed to be due by the terms of this Note is due on any day which
his not a Business Day (as defined below), the same shall instead be due on the
next succeeding day which is a Business Day.
     Capitalized terms used herein and not otherwise defined shall have the
meanings set forth in the Exchange Agreement dated December ___, 2005, pursuant
to which the Note was originally issued (the “Exchange Agreement”). For purposes
hereof the following terms shall have the meanings ascribed to them below:
     Section 1. Definitions. For purposes hereof the following terms shall have
the meanings ascribed to them below:
     “Act” shall mean the Securities Act of 1933, as amended.
     “Business Day” shall mean any day other than a Saturday, a Sunday or a day
on which commercial banks in the City of New York are authorized or required by
law or executive order to remain closed.
     “Capitalized Lease Liabilities” means all monetary obligations of the
Company and its Subsidiaries under any leasing or similar arrangement which, in
accordance with GAAP, are or would be classified as capitalized leases.
     “Conversion Price” shall equal, subject to the adjustments set forth
herein, $0.38 provided that, subject to adjustment set forth herein, the
Conversion Price shall be increased to $.48 on January 1, 2006.
     “Convertible Securities” means any convertible securities, warrants,
options or other rights to subscribe for or to purchase or exchange for, shares
of Common Stock.
     “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.
     “Indebtedness” of any Person means, without duplication:
          (a) all obligations of such Person for borrowed money (including all
notes payable and drafts accepted representing extensions of credit) and all
obligations of such Person evidenced by bonds, Notes, notes or other similar
instruments on which interest charges are customarily paid;
          (b) all obligations, contingent or otherwise, relative to the face
amount of all letters of credit, whether or not drawn, and banker’s acceptances
issued for the account of such Person;

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          (c) all Capitalized Lease Liabilities of such Person (to the extent
required by GAAP to be included on the balance sheet of such Person);
          (d) whether or not so included as liabilities in accordance with GAAP
(i) all obligations of such Person to pay the deferred purchase price of
property or services (excluding trade accounts payable for other than borrowed
money arising in the ordinary course of business) and indebtedness secured by a
Lien on property owned or being purchased by such Person (including indebtedness
arising under conditional sales or other title retention agreements), whether or
not such indebtedness shall have been assumed by such Person or is limited in
recourse, and (ii) all obligations (contingent or otherwise) to guarantee,
purchase or otherwise acquire, or otherwise assure a creditor against loss in
respect of, Indebtedness of another Person;
          (e) all net obligations of such Person under Interest Rate Contracts;
and
          (f) all obligations of such Person to redeem, purchase or otherwise
retire or extinguish any of its Stock, or any warrants, options or rights to
acquire its Stock, at a fixed or determinable date (whether by operation of a
sinking fund or otherwise), at another’s option or upon the occurrence of a
condition not solely within the control of such Person (e.g., redemption from
future earnings).
     “Instrument” means any contract, agreement, letter of credit, indenture,
mortgage, deed, certificate of title, document or writing (whether by formal
agreement, letter or otherwise) under which any obligation is evidenced, assumed
or undertaken, any Lien (or right or interest therein) is granted or perfected,
or any property (or right or interest therein) is conveyed.
     “Interest Rate Contract” means any interest rate cap agreement, interest
rate collar agreement, interest rate swap agreement or other agreement or
arrangement designed to protect against fluctuations in interest rates.
     “Lien” means any mortgage, pledge, hypothecation, assignment, charge,
deposit arrangement, encumbrance, lien (statutory or other), adverse claim or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any conditional sale or other title
retention agreement, any financing lease involving substantially the same
economic effect as any of the foregoing and the filing of any financing
statement under the UCC or comparable law of any jurisdiction).
     “Person” means any natural person, corporation, partnership, limited
liability company, firm, association, government, governmental agency or any
other entity, whether acting in an individual, fiduciary or other capacity.
     “Principal Amount” means the principal amount of this Note.
     “Proceeding” means (a) any insolvency, bankruptcy, receivership,
liquidation, reorganization, readjustment, composition or other similar
proceeding relating to any of the Company or its Subsidiaries, its properties or
its creditors as such, (b) any proceeding for any liquidation, dissolution or
other winding-up of any of the Company or its Subsidiaries, whether voluntary or
involuntary, and whether or not involving insolvency or bankruptcy proceedings,
or (any assignment for the benefit of creditors or marshaling of assets of any
of the Company or its

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Subsidiaries or the appointment of a trustee, receiver, sequestrator or other
custodian for any of the Company or its Subsidiaries any of their properties.
     “Senior Debt” means the principal of and accrued interest on all
Indebtedness incurred by any of the Company or its Subsidiaries under any of the
Senior Debt Documents, reduced by the amount of all principal repayments of any
such Indebtedness consisting of term loans and, without duplication, the amount
of all permanent reductions of commitments under any revolving facilities under
which Senior Debt may be incurred. Senior Debt shall also include any
refinancing of Indebtedness
     “Senior Debt Documents” means those documents set forth in Schedule 1.
     “Senior Lender” means any holder of Senior Debt and “Senior Lenders” means
the holders, collectively, of Senior Debt.
     “Stock” means all shares of capital stock of or in a corporation, whether
voting or non voting, and including, without limitation, common stock and
preferred stock.
     “Subsidiary” means, with respect to any Person, (1) any corporation of
which the outstanding Stock having a least a majority of the votes entitled
(without regard to the occurrence of any contingency) to be cast in the election
of directors under ordinary circumstances shall at the time be owned, directly
or indirectly, by such Person; or (2) any other Person of which at least a
majority of the voting interest under ordinary circumstances is at the time,
directly or indirectly, owned by such Person. Except as otherwise indicated
herein, references to Subsidiaries shall refer to Subsidiaries of the Issuer.
     Section 2. Subordination.
          (a) Subordination. This Note shall be and hereby is expressly made
subordinate for all purposes to the Senior Debt to the extent and in the manner
provided herein.
          (b) Subordination in Event of Insolvency or Liquidation, Etc. (i) In
the event of any Proceeding, (1) the Senior Debt shall first be paid in full
before any payment or distribution, whether in cash, securities or other
property, shall be made in respect of this Note, and (2) any payment or
distribution of assets which would otherwise (but for this provision) be payable
or deliverable in respect of this Note shall be paid or delivered directly to
the Senior Lenders for application to and payment of the Senior Debt until all
Senior Debt shall have been paid in full.
               (ii) The Holder agrees that if it has not filed appropriate
claims or proofs of claim in respect of the Note in any Proceeding within thirty
(30) days of any bar date, the Senior Lenders may file such claims or proofs of
claim on its behalf.
          (c) Turnover of Improper Payments. If any payment or distribution,
whether in cash, securities or other property, shall be received by the Holder
in contravention of any of the terms hereof, such payment or distribution shall
be received and held in trust for the benefit of the Senior Lenders, and shall
be promptly paid over and delivered to the Senior Lenders for

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application to the payment of the Senior Debt to the extent necessary to cause
the Senior Debt to be paid in full.
          (d) Subrogation. At such time as the Senior Debt has been paid in
full, the Holder shall be subrogated to any rights of the Senior Lenders in and
to the Senior Debt and any security therefor, to the extent paid by or on behalf
of the Holder, and to receive any further payments or distributions of assets of
the Company applicable to the Senior Debt until the Note shall be paid in full.
For purposes of such subrogation, no payments or distributions to the Senior
Lenders of any cash, property or securities to which the Holder would be
entitled except for the provisions of this Section 2 shall, as among the Company
and its creditors other than the Senior Lenders on the one hand and the Holder
on the other hand, be deemed to have been made as a payment by any of them to or
on account of the Senior Debt.
          (e) Reinstatement. The provisions of this Section 2 shall continue to
be effective or be reinstated, as the case may be, if at any time any payment in
respect of the Senior Debt is rescinded or must otherwise be returned by the
Senior Lenders in the event of a Proceeding, all as though such payment had not
been made.
          (f) Company Obligations Absolute. Nothing contained herein shall
impair, as among the Company and the Holder, the obligation of the Company to
pay to the Holder all amounts payable in respect of this Note as and when the
same shall become due and payable in accordance with the terms hereof, or
prevent the Holder from exercising all rights, powers and remedies otherwise
permitted by applicable law or upon an Event of Default with respect to this
Note.
          (g) Certain Payments and Distributions. Nothing contained herein shall
prohibit the payment or distribution on account of this Note that is made in the
form of equity securities of the Company, or in the form of debt securities or
other evidences of Indebtedness that are subordinated in right of payment to the
Senior Debt at least to the extent and the same terms as provided for in this
Note.
          (h) No Waiver or Impairment of Subordination Provisions. The
subordination effected by this Section 2 is a continuing subordination, and the
Holder hereby agrees that at any time and from time to time, without notice to
it, but subject in each case to any limitation set forth in the definition of
Senior Debt: (a) the time for the Company’s performance of or compliance with
any of its agreements contained in any Senior Debt Document may be extended or
such performance or compliance may be waived by the applicable Senior Lenders;
(b) a Senior Debt agreement may be amended for the purpose of adding any
provisions thereto or increasing the amount of, or changing the terms of, the
Senior Debt or changing in any manner the rights of any Senior Lender or any
obligor thereunder; (c) payment of any Senior Debt or any portion thereof may be
extended; (d) the maturity of the Senior Debt may be accelerated on a default or
an event of default; and (e) any collateral security therefor may be exchanged,
sold, surrendered, released or otherwise dealt with, in accordance with the
terms of any Senior Debt Agreements; all without impairing or affecting the
obligations of the Holder. The Holder hereby unconditionally waives notice of
the incurrence of Senior Debt or any part thereof and reliance by any Senior
Lender upon the subordination of this Note to the Senior Debt.

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          (i) Reliance by Senior Lenders on Subordination Provisions. Holder, by
accepting this Note, and the Company acknowledge and agree that the
subordination provisions contained in this Section 2 are, and are intended to
be, an inducement and a consideration to each holder of any Senior Debt, whether
such Senior Debt was created or acquired before or after the issuance of the
Notes, to acquire and continue to hold, or to continue to hold, such Senior Debt
and such holder of such Senior Debt shall be deemed conclusively to have relied
on such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Debt.
Section 3. Conversion.
          (a) Conversion Right of Holder. Subject to the terms hereof, the
Holder shall have the right, at such Holder’s option, at any time and from time
to time on or prior to 5:00 p.m., New York City time, on February 28, 2006, to
convert the outstanding Principal Amount under this Note in whole or in part by
delivering to the Company a fully executed notice of conversion in the form of
conversion notice attached hereto as Exhibit A (the “Conversion Notice”), which
may be transmitted by facsimile.
          (b) Common Stock Issuance Upon Conversion.
               (i) Conversion Date Procedures. Upon conversion of this Note
pursuant to Section 3(a) above, the outstanding Principal Amount hereunder shall
be converted into such number of fully paid, validly issued and non-assessable
shares of the Company’s common stock, par value $ .00001 per share (“Common
Stock”), free of any liens, claims and encumbrances (other than liens, claims
and encumbrances due to actions taken by Holder), as is determined by dividing
the outstanding Principal Amount being converted by the then applicable
Conversion Price and the rights of the Holder under this Note shall cease and
the Holder shall be treated for all purposes as having become an owner of Common
Stock. The date of any Conversion Notice hereunder shall be referred to herein
as the “Conversion Date”. If a conversion under this Note cannot be effected in
full for any reason, or if the Holder is converting less than all of the
outstanding Principal Amount hereunder pursuant to a Conversion Notice, the
Company shall, promptly after surrender by the Holder of this Note to the
Company, promptly deliver to the Holder, upon request, (but no later than five
(5) Trading Days after the later of the Conversion Date and such request) a Note
for such outstanding Principal Amount as has not been converted if this Note has
been surrendered to the Company for partial conversion. The Holder shall not be
required to physically surrender this Note to the Company upon any conversion
hereunder unless the full outstanding Principal Amount represented by this Note
is being converted or repaid, in which case the Holder shall promptly surrender
this Note to the Company. The Holder and the Company shall maintain records
showing the outstanding Principal Amount so converted and repaid and the dates
of such conversions or repayments or shall use such other method, reasonably
satisfactory to the Holder and the Company, so as not to require physical
surrender of this Note upon each such conversion or repayment.
               (ii) Stock Certificates. The Company will deliver to the Holder
not later than five (5) Trading Days after the later of (i) the Conversion Date
and (ii) delivery to the Company of the Conversion Notice, together with any
certificates or opinions required to be delivered therewith, provided that no
such certificates or opinions shall be due if the Common

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Stock issuable upon conversion is to be issued in the name of the Holder (such
later date, the “Delivery Date”), a certificate or certificates, representing
the number of shares of Common Stock being acquired upon the conversion of this
Note. If in the case of any conversion hereunder, such certificate or
certificates are not delivered to or as directed by the Holder by the Delivery
Date, the Holder shall be entitled by written notice to the Company at any time
on or before its receipt of such certificate or certificates thereafter, to
rescind such conversion, in which event the Company shall immediately return
this Note tendered for conversion.
          (c) Conversion Price Adjustments.
               (i) Stock Dividends, Splits and Combinations. If the Company or
any of its Subsidiaries, at any time while the Note is convertible (A) shall pay
a stock dividend or otherwise make a distribution or distributions of Common
Stock or Convertible Securities, (B) subdivide the outstanding Common Stock into
a larger number of shares, or (C) combine the outstanding Common Stock into a
smaller number of shares, then the Conversion Price shall be multiplied by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding before such event and the denominator of which shall be the number
of shares of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section 3(c) shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision or combination.
               (ii) Rounding of Adjustments. All calculations under this
Section 3 shall be made to the nearest cent or the nearest 1/100th of a share,
as the case may be.
               (iii) Notice of Adjustments. Whenever any Conversion Price is
adjusted pursuant to Section 3(c)(i), the Company shall promptly deliver to the
Holder of this Note, a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring such
adjustment, provided that any failure to so provide such notice shall not affect
the automatic adjustment hereunder.
               (iv) Notice of Certain Events. If:
               (A) the Company shall authorize the granting to all holders of
the Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights; or
               (B) the approval of any stockholders of the Company shall be
required in connection with any reclassification of the Common Stock of the
Company, any consolidation or merger to which the Company is a party, any sale
or transfer of all or substantially all of the assets of the Company, of any
compulsory share of exchange whereby the Common Stock is converted into other
securities, cash or property; or
               (C) the Company shall authorize the voluntary or involuntary
dissolution, liquidation or winding up of the affairs of the Company;
then the Company shall cause to be mailed to the Holder at its last address as
it shall appear upon the books of the Company, on or prior to the date notice to
the Company’s stockholders generally

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is given but in any event, on a date that will provide sufficient notice to the
Holder to convert this Note prior to the occurrence of the relevant transaction,
a notice stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution, redemption, rights or warrants, or if a record
is not to be taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants
are to be determined or (y) the date on which such reclassification,
consolidation, merger, sale, transfer or share exchange is expected to become
effective or close, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer or share exchange.
          (d) Reservation and Issuance of Underlying Securities. The Company
covenants that it will at all times reserve and keep available out of its
authorized and unissued Common Stock solely for the purpose of issuance upon
conversion of this Note, free from preemptive rights or any other actual
contingent purchase rights of persons other than the holders of the Notes, such
number of shares of Common Stock as shall be issuable hereunder. The Company
covenants that all shares of Common Stock that shall be so issuable shall, upon
issue, be duly authorized, validly issued, fully paid, and nonassessable.
          (e) No Fractions. Upon a conversion hereunder the Company shall not be
required to issue stock certificates representing fractions of shares of Common
Stock, but may if otherwise permitted, make a cash payment in respect of any
final fraction of a share based on the closing price of a share of Common Stock
at such time. If the Company elects not, or is unable, to make such a cash
payment, the Holder shall be entitled to receive, in lieu of the final fraction
of a share, one whole share of Common Stock.
          (f) Charges, Taxes and Expenses. Issuance of certificates for shares
of Common Stock upon the conversion of this Note by the Holder shall be made
without charge to the holder hereof for any issue or transfer tax or other
similar incidental expense in respect of the issuance of such certificate, all
of which issue or transfer taxes and other similar incidental expenses shall be
paid by the Company, and such certificates shall be issued in the name of the
Holder or in such name or names as may be directed by the Holder; provided,
however, that in the event certificates for shares of Common Stock are to be
issued in a name other than the name of the Holder, this Note when surrendered
for conversion shall be accompanied by an assignment form.
          (g) Cancellation. After all of the Principal Amount has been paid in
full or converted into Common Stock, this Note shall automatically be deemed
canceled and the Holder shall promptly surrender this Note to the Company at the
Company’s principal executive offices.
          (h) Notices Procedures. Any and all notices or other communications or
deliveries to be provided by the Holder hereunder, including, without
limitation, any Conversion Notice, shall be in writing and delivered personally,
by confirmed facsimile, or by a nationally recognized overnight courier service
to the Company at the facsimile telephone number or address of the principal
place of business of the Company as set forth in the Exchange Agreement. Any and
all notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, or by a
nationally

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recognized overnight courier service addressed to the Holder at the facsimile
telephone number or address of the Holder appearing on the books of the Company,
or if no such facsimile telephone number or address appears, at the principal
place of business of the Holder. Any notice or other communication or deliveries
hereunder shall be deemed delivered (i) upon receipt, when delivered personally,
(ii) when sent by facsimile, upon receipt if received on a Business Day prior to
5:00 p.m. (Eastern Time), or on the first Business Day following such receipt if
received on a Business Day after 5:00 p.m. (Eastern Time) or (iii) upon receipt,
when deposited with a nationally recognized overnight courier service.
     Section 4. Events of Default. The term “Event of Default” shall mean any of
the events set forth in this Section 4.
          (a) Non-Payment of Obligations. The Company shall default in the
payment when due of any principal of this Note.
          (b) Bankruptcy, Insolvency, etc. The Company or any Subsidiary shall:
               (i) become insolvent or generally fail to pay, or admit in
writing its inability to pay, its debts as they become due;
               (ii) apply for, consent to, or acquiesce in, the appointment of a
trustee, receiver, sequestrator or other custodian for itself or any of its
property, or make a general assignment for the benefit of creditors;
               (iii) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee, receiver,
sequestrator or other custodian for itself or for any of its property, and such
trustee, receiver, sequestrator or other custodian shall not be discharged
within sixty (60) days;
               (iv) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or proceeding under
any bankruptcy or insolvency law, or any dissolution, winding up or liquidation
proceeding, in respect of the Company or any Subsidiary and, if such case or
proceeding is not commenced by the Company or Subsidiary, such case or
proceeding shall be consented to or acquiesced in by the Company or such
Subsidiary or shall result in the entry of an order for relief or shall remain
for sixty (60) days undismissed; or
               (v) take any corporate action authorizing, or in furtherance of,
any of the foregoing.
          (c) Default on Other Indebtedness, Contracts, etc. (a) Any
Indebtedness of the Company or any Subsidiary in an aggregate principal amount
exceeding $250,000 (other than the Note) shall not be paid at its stated
maturity or shall be duly declared to be or shall become due and payable prior
to the stated maturity thereof, (b) there shall occur and be continuing any
event under any Instrument relating to any such Indebtedness, the effect of
which is to cause such Indebtedness to become due prior to its stated maturity,
or (c) the holder or holders of such Indebtedness, or any trustee, agent or
other representative on behalf of such holder or holders, shall have demanded or
required, pursuant to the terms of any Instrument relating to such

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Indebtedness, that the Company or any Subsidiary redeem, repurchase or otherwise
acquire or retire such Indebtedness for value at any time prior to its stated
maturity.
          (d) Action if Bankruptcy. If any Event of Default described in Section
4(b) shall occur, the outstanding Principal Amount shall automatically be and
become immediately due and payable without notice, demand or presentment.
          (e) Action if Other Event of Default. If any Event of Default (other
than any Event of Default described in Section 4(b)) shall occur for any reason,
whether voluntary or involuntary, and be continuing, the Holder may, upon notice
or demand, declare all or any portion of the outstanding principal amount of the
Note to be due and payable, whereupon the full unpaid amount of the Note which
shall be so declared due and payable shall be and become immediately due and
payable without further notice, demand, or presentment.
     Section 5. Miscellaneous.
          (a) The provisions of this Note may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and,
(x) in the case of an amendment or modification, is consented to by the Company
and the Holder and the (y) in the case of a waiver of any obligation of the
Company or compliance with any prohibition contained in this Agreement, is
consented to by the Holder.
          (b) Notices. All notices hereunder shall be in writing or by telecopy
(confirmed in writing) and shall be sufficiently given to the Holder, the
Company or any Guarantor if addressed or delivered to them at the following
addresses:

         
 
  If to the Holder:   [                                        ]
 
       
 
      Facsimile:
 
       
 
  with copies to:   [                                        ]
 
       
 
  If to the Company:   Horizon Offshore, Inc.
 
      2500 CityWest Boulevard, Suite 2200
 
      Houston, Texas 77042
 
      Attention: Executive Vice President and
 
                           Chief Financial Officer
 
      Facsimile: (713) 361-2677
 
       
 
  with copies to:   Jones, Walker, Waechter, Poitevent,
 
      Carrere & Denegre, L.L.P.
 
      201 St. Charles Avenue, Suite 5100
 
      New Orleans, Louisiana 70170
 
      Attention: William B. Masters, Esq.
 
      Telecopier No.: (504) 582-8012

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or at such other address as any party may designate to any other party by
written notice. All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; when
received, if deposited in the mail postage prepaid; when transmission is
verified, if telecopied; and on the next Business Day, if timely delivered to an
air courier guaranteeing overnight delivery.
          (c) No failure or delay on the part of Holder in exercising any power
or right under this Note shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or
demand on the Company in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by any Holder shall,
except as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
          (d) Holder shall be under no obligation to marshal any assets in favor
of the Company or any other party or against or in payment of any or all of this
Note. To the extent that the Company makes a payment or payments to the Holder,
and such payment or payments or any part thereof are subsequently for any reason
invalidated, set aside or required to be repaid to a trustee, receiver or any
other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the obligation or part
thereof originally intended to be satisfied, and all rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made.
          (e) Costs and Expenses. The Company agrees to pay all reasonable
charges and expenses, including attorneys’ fees and expenses, which may be
incurred by the Holder in the successful enforcement of this Note, or collecting
any amount due under this Note.
          (f) Severability. Any provision of this Note which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions of this Note or affecting the validity or enforceability of
such provision in any other jurisdiction.
          (g) Governing Law. (i) THIS NOTE SHALL BE DEEMED MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.
               (ii) The Company hereby agrees that any legal action or
proceeding against it with respect to this Note may be brought in the courts of
the State of New York or of the United States of America for the Southern
District of New York as any Holder may elect, and, by execution and delivery
hereof, it accepts and consents for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts and
agrees that such jurisdiction shall be exclusive. The Company hereby irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of the copies thereof by certified
mail, return receipt requested, postage prepaid, to it at its address set forth
herein, such service to become effective upon the earlier of (i) the date 10
calendar days after such mailing and (ii) any earlier date permitted by
applicable law. The Company hereby agrees that Sections 5-1401 and 5-1402 of the
General Obligations Law of the

-11-

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State of New York shall apply to this Note and waives any right to stay or to
dismiss any action or proceeding brought before said courts on the basis of
forum non conveniens. Nothing herein shall affect the right of Holder to bring
proceedings against the Company in the courts of any other jurisdiction or to
serve process in any other manner permitted by applicable law.
               (iii) The Company, hereby irrevocably designates, appoints and
empowers CT Corporation System, whose present address is 111 Eighth Avenue, New
York, New York 10011, as its authorized agent to receive, for and on its behalf
and its property, service of process in the State of New York when and as such
legal actions or proceedings may be brought in the courts of the State of New
York or of the United States of America sitting in New York, and such service of
process shall be deemed complete upon the date of delivery thereof to such agent
whether or not such agent gives notice thereof to such Obligor, or upon the
earliest of any other date permitted by applicable law. It is understood that a
copy of said process served on such agent will as soon as practicable be
forwarded to the Company at its address set forth in Section 5(b) above, but its
failure to receive such copy shall not affect in any way the service of said
process on said agent as such agent of such Obligors. The Company agrees that it
will at all times continuously maintain an agent to receive service of process
in the State of New York on behalf of itself and its properties and in the event
that, for any reason, the agent named above or its successor shall no longer
serve as its agent to receive service of process in the State of New York on its
behalf, it shall promptly appoint a successor so to serve and shall advise the
Holder thereof (and shall furnish to the Holder the consent of any successor
agent so to act).
          (h) Successors and Assigns. This Note shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that the Company may assign or transfer its rights
or obligations hereunder without the prior written consent of the Holder. This
Note shall be freely transferable, without restriction, subject to compliance
with applicable securities laws.
          (i) Waiver of Jury Trial, etc. THE COMPANY HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THE NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN), OR ACTIONS OF THE COMPANY.

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     IN WITNESS WHEREOF, the Company has caused this Note to be duly executed on
December ___, 2005.

                 
 
                        HORIZON OFFSHORE, INC.    
 
               
 
      By:        
 
               
 
          Name:    
 
          Title:    
 
               
ATTEST:
               
 
                                 

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EXHIBIT A
FORM OF CONVERSION NOTICE
(To be Executed by the Holder
in order to Convert a Note)
The undersigned hereby elects to convert the aggregate outstanding Principal
Amount (as defined in the Note) indicated below of this Note into shares of
Common Stock, $.00001 par value per share (the “Common Stock”), of HORIZON
OFFSHORE, INC. (the “Company”) according to the conditions hereof, as of the
date written below. If shares are to be issued in the name of a person other
than the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates and opinions as
reasonably requested by the Company in accordance therewith, including an
opinion of counsel reasonably satisfactory to the Company that registration of
this issuance is not required under the Securities Act of 1933, as amended. No
fee will be charged to the holder for any conversion, except for such transfer
taxes, if any.

     
Conversion information:
   
 
   
 
  Date to Effect Conversion
 
   
 
   
 
  Aggregate Principal Amount of Note Being Converted
 
   
 
   
 
  Number of Shares of Common Stock to be Issued
 
   
 
   
 
  Applicable Conversion Price
 
   
 
   
 
  Signature
 
   
 
   
 
  Name
 
   
 
   
 
  Address

 

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SCHEDULE 1
SENIOR DEBT DOCUMENTS

(1)   Loan Agreement, dated December 30, 1998, among Horizon Vessels, Inc.,
Horizon Offshore Contractors, Inc., The CIT Group/Equipment Financing, Inc.,
Heller Financial Leasing, Inc., U. S. Bancorp Leasing & Financial and Safeco
Credit Company, Inc., as amended through the date hereof, and any notes,
guarantees, security agreements and mortgages executed with respect thereto  
(2)   Financing Agreement, dated as of March 31, 2005, by and among Horizon
Offshore, Inc., the borrowers listed on the signature pages thereto, the
guarantees listed on the signature pages thereto, and Manchester Securities
Corp., as agent for the lenders thereunder, and any notes, guarantees, security
agreements and mortgages executed with respect thereto.   (3)   Loan Agreement,
dated June 29, 2001, between Horizon Vessels, Inc. and General Electric Capital
Corporation, as amended through the date hereof, and any notes, guarantees,
security agreements and mortgages executed with respect thereto   (4)   Amended
and Restated Loan Agreement, executed March 11, 2004 but dated June 29, 2001,
between Horizon Vessels, Inc., Horizon Offshore, Inc. and Horizon Offshore
Contractors, Inc. and Wachovia Bank, National Association (successor by merger
to SouthTrust Bank), as amended through the date hereof, and any notes,
guarantees, security agreements and mortgages executed with respect thereto  
(5)   Loan Agreement, dated June 30, 2003, between Horizon Vessels International
Ltd. and General Electric Credit Corporation of Tennessee, as amended through
the date hereof, and any notes, guarantees, security agreements and mortgages
executed with respect thereto