EXHIBIT 10.1

EXECUTION COPY



 

 


18% Subordinated Secured
	Notes due March 31, 2007


 

 

 


PURCHASE AGREEMENT


 

 


among


 

 


HORIZON OFFSHORE, INC.,


as Issuer

 

 


THE GUARANTORS LISTED ON
	THE SIGNATURE PAGES HEREOF,


as Guarantors

 

 


and


 

 


THE PURCHASERS LISTED ON
	THE SIGNATURE PAGES HEREOF,


as Initial Purchasers


 

 

 


Dated as of May 27, 2004

 

 


TABLE OF CONTENTS


Page

	
		
		ARTICLE 1. 
			
		AUTHORIZATION OF NOTES; SALE AND
			PURCHASE OF NOTES; INVESTMENT REPRESENTATIONS *	
		1

	 	 
	 	
		
		SECTION 1.1.	
		
		Authorization of Notes	
		1

	 	
		
		SECTION 1.2.	
		
        
		Sale and
			Purchase of Notes	
		1
	 	
		
		SECTION 1.3.	
		
        
		Investment
			Representations	
		2
	 	
		
		SECTION 1.4.	
		
        
		Subordination of Notes; Security	
		4
	 	 	 	 
	
		
        
		ARTICLE 2. 
			TERMS OF THE NOTES	
		4
	 	 	 
	 	
		
		SECTION 2.1.	
		
        
		Interest	
		4
	 	
		
        
		SECTION
			2.1.1	
		
        
		Interest
			Rate	
		4
	 	
		
        
		SECTION
			2.1.2	
		
        
		Post-Default Rates	
		5
	 	
		
        
		SECTION
			2.1.3	
		
        
		Payment
			Dates	
		5
	 	
		
        
		SECTION
			2.2.	
		
        
		Principal
			Payments; Voluntary Prepayments; Mandatory Prepayments	
		5
	 	
		SECTION 2.3	
		
        
		Payments,
			Interest Rate Computations, Other Computations, etc	
		6
	 	
		SECTION 2.4	
		
        
		Additional Notes	
		6
	 	
		SECTION 2.5	
		
        
		Proration
			of Payments	
		7
	 	
		SECTION 2.6	
		Setoff















				
		8
	 	
		SECTION 2.7	
		
        
		Tax Treatment	
		8
	 	 	 	 
	
		ARTICLE 3. COLLATERAL MATTERS	
		8
	 	 	 	 
	 	
		SECTION 3.1.	
		Appointment of Collateral Agent	
		8
	 	 
	
		
		
		ARTICLE 4. CONDITIONS TO CLOSING	
		9
	 	 	 	 
	 	
		SECTION 4.1.	
		
		
		Resolutions, etc.	
		9
	 	
		SECTION 4.2.	
		
		
		No Contest, etc.	
		9
	 	
		SECTION 4.3.	
		
		
		Certificate as to Completed Conditions,
			Warranties, No Default, etc.	
		10
	 	
		SECTION 4.4.	
		
		
		Compliance with Requirements of Law	
		10
	 	
		SECTION 4.5.	
		
		
		Opinions of Counsel	
		10
	 	
		SECTION 4.6.	
		
		
		Closing Expenses, etc.	
		10
	 	
		SECTION 4.7.	
		
		
		Security Documents.
				
		10
	 	
		SECTION 4.8.	
		
		
		Other Documents, Certificates, etc.	
		11
	 	
		SECTION 4.9.	
		
		
		Satisfactory Legal Form..	
		11
	 	
		SECTION 4.10	
		
		
		Amendment and Waiver of Credit Facilities.	
		11
	 	
		SECTION 4.11.	
		
		
		IEC Parent Guarantee.	
		11
	 	 	 	 
	
		ARTICLE 5.  
			
		
		WARRANTIES, ETC.	
		11
	 	 	 	 
	 	
		SECTION 5.1.	
		
		
		Organization, Power, Authority, etc.	
		11
	 	
		SECTION 5.2.	
		
		
		Due Authorization.	
		12
	 	
		SECTION 5.3.	
		
		
		Validity, etc.	
		12
	 	
		SECTION 5.4.	
		
		
		Capitalization of the Issuer
				
		12
	 	
		SECTION 5.5.	
		
		
		Financial Information; Solvency.	
		12
	 	
		SECTION 5.6.	
		
		
		Material Adverse Change.	
		13
	 	
		SECTION 5.7.	
		
		
		Absence of Default
				
		13
	 	
		SECTION 5.8.	
		
		
		Litigation, Legislation, etc.
				
		13
	 	
		SECTION 5.9.	
		
		
		Use of Proceeds; Regulations T, U and X.	
		13
	 	
		SECTION 5.10.	
		
		
		Government Regulation.	
		14
	 	
		SECTION 5.11.	
		
		
		Taxes.	
		14
	 	
		SECTION 5.12.	
		
		
		ERISA.	
		14
	 	
		SECTION 5.13.
				
		
		
		Labor Controversies.	
		14
	 	
		SECTION 5.14.	
		
		
		Ownership of Properties.	
		14
	 	
		SECTION 5.15.
				
		
		
		Intellectual Property.	
		14
	 	
		SECTION 5.16.	
		
		
		Accuracy of Information.	
		15
	 	
		SECTION 5.17.	
		
		
		Insurance.
				
		15
	 	
		SECTION 5.18.	
		
		
		Certain Indebtedness.	
		15
	 	
		SECTION 5.19.	
		
		
		Company Actions.	
		15
	 	
		SECTION 5.20.	
		
		
		Consents.	
		16
	 	
		SECTION 5.21.	
		
		
		Contracts.	
		16
	 	
		SECTION 5.22.	
		
		
		Condition of Property.	
		16
	 	
		SECTION 5.23.	
		
		
		Subsidiaries.	
		16
	 	
		SECTION 5.24.	
		
		
		No Offering of Notes.
				
		16
	 	
		SECTION 5.25.	
		
		
		Collateral and Security Documents.	
		16
	 	
		SECTION 5.26.	
		
		
		No Registration Required.	
		16
	 	
		SECTION 5.27.	
		
		
		Private Placement	
		17
	 	
		SECTION 5.28.	
		
		
		Tax Treatment of Contingencies.
				
		17
	 	
		SECTION 5.29.	
		
		
		IEC Contract.	
		17
	 	 	 	 
	
		ARTICLE 6.  
			
		
		COVENANTS	
		17
	 	 	 	 
	 	
		SECTION 6.1.	
		
		
		Covenants.
				
		17
	 	
		SECTION 6.1.1.	
		
		
		Information.	
		17
	 	
		SECTION 6.1.2.	
		
		
		Payment of Obligations.	
		18
	 	
		SECTION 6.1.3.	
		
		
		Corporate Existence; Mergers.	
		18
	 	
		SECTION 6.1.4.	
		
		
		Compliance with Law.	
		18
	 	
		SECTION 6.1.5.	
		
		
		Further Assurance.	
		18
	 	
		SECTION 6.1.6.	
		
		
		Cross Collateralization.
				
		18
	 	
		SECTION 6.1.7.	
		
		
		Perfection and Validity of Security Interests.	
		19
	 	
		SECTION 6.1.8.	
		
		
		Additional Guarantees.
				
		19
	 	
		SECTION 6.1.9.	
		
		
		Form D.	
		20
	 	
		SECTION 6.1.10.	
		
		
		Use of Proceeds of Equity Offerings.	
		20
	 	
		SECTION 6.1.11.	
		
		
		Iroquois and Pemex May Costero Collateral;
			etc.	
		20
	 	
		SECTION 6.1.12.	
		
		
		Liens.	
		21
	 	
		SECTION 6.1.13.	
		
		
		Affiliate Transaction.	
		21
	 	
		SECTION 6.1.14.	
		
		
		Other Indebtedness.	
		21
	 	
		SECTION 6.1.15.	
		
		
		Business Activities.	
		22
	 	
		SECTION 6.1.16.	
		
		
		Anti-Layering.	
		22
	 	
		SECTION 6.1.17.	
		
		
		Pemex Contract	
		22
	 	
		SECTION 6.1.18.	
		
		
		Restricted Payments, etc.
			
		22
	 	
		SECTION 6.1.19.	
		
		
		Asset Dispositions, etc.	
		23
	 	
		SECTION 6.1.20.	
		
		
		Limitation on Restrictions on Subsidiary
			Dividends.	
		23
	 	
		SECTION 6.1.21.	
		
		
		Stay, Extension and Usury Laws.	
		23
	 	
		SECTION 6.1.22.	
		
		
		Board of Directors.	
		23
	 	
		SECTION 6.1.23.	
		
		
		IEC Contract.	
		24
	 	 	 	 
	
		ARTICLE 7.  
			
		
		EVENTS OF DEFAULT	
		24
	 	 	 	 
	 	
		SECTION 7.1.	
		
		
		Events of Default
			
		24
	 	
		SECTION 7.1.1.	
		
		
		Non-Payment of Obligations.	
		24
	 	
		SECTION 7.1.2.	
		
		
		Non-Performance of Certain Covenants.	
		24
	 	
		SECTION 7.1.3.	
		
		
		Defaults Under Other Documents;
			Non-Performance of Other Obligations.	
		25
	 	
		SECTION 7.1.4.	
		
		
		Bankruptcy, Insolvency, etc.	
		25
	 	
		SECTION 7.1.5.	
		
		
		Breach of Warranty.	
		25
	 	
		SECTION 7.1.6.	
		
		
		Default on Other Indebtedness, Contracts, etc.	
		26
	 	
		SECTION 7.1.7.	
		
		
		Judgments.	
		26
	 	
		SECTION 7.1.8.	
		
		
		Invalidity of Guarantees.	
		26
	 	
		SECTION 7.1.9.	
		
		
		Change of Control	
		26
	 	
		SECTION 7.2.	
		
		
		Action if Bankruptcy.	
		26
	 	
		SECTION 7.3.	
		
		
		Action if Other Event of Default
			
		26
	 	 	 	 
	
		ARTICLE 8.  
			
		
		GUARANTEE	
		27
	 	 	 	 
	 	
		SECTION 8.1.	
		
		
		The Guarantee.	
		27
	 	
		SECTION 8.2.	
		
		
		Demand by the Noteholders.
				
		28
	 	
		SECTION 8.3.	
		
		
		Enforcement of Guarantee.	
		28
	 	
		SECTION 8.4.	
		
		
		Waivers.	
		28
	 	
		SECTION 8.5.	
		
		
		Benefits of Guarantee.	
		29
	 	
		SECTION 8.6.	
		
		
		Modification of Notes, etc.	
		29
	 	
		SECTION 8.7.	
		
		
		Reinstatement	
		30
	 	
		SECTION 8.8.	
		
		
		Waiver of Subrogation, etc.
			
		30
	 	
		SECTION 8.9.	
		
		
		Election of Remedies, etc.	
		30
	 	
		SECTION 8.10.	
		
		Subordination of Guarantees	
		31
	 	
		SECTION 8.11.	
		
		
		Continuing Guarantee.	
		31
	 	
		SECTION 8.12.	
		
		
		Contribution.	
		31
	 	
		SECTION 8.13.	
		
		
		Savings Clause	
		31
	 	 	 	 
	
		ARTICLE 9.  
			
		
		DEFINITIONS	
		32
	 	 	 	 
	 	
		SECTION 9.1.	
		
		
		Defined Terms.	
		32
	 	
		SECTION 9.2.	
		
		
		Use of Defined Terms.	
		44
	 	
		SECTION 9.3.	
		
		
		Cross-References.	
		44
	 	
		SECTION 9.4.	
		
		
		Accounting and Financial Determinations.
				
		44
	 	 	 	 
	
		ARTICLE 10.  
			
		
		REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.	
		44
	 	 	 	 
	 	
		SECTION 10.1.	
		
		
		Registration of Notes.	
		44
	 	
		SECTION 10.2.	
		
		
		Transfer and Exchange of Notes.	
		44
	 	
		SECTION 10.3.	
		
		
		Replacement of Notes.	
		45
	 	 	 	 
	
		ARTICLE 11.   MISCELLANEOUS	
		45
	 	 	 	 
	 	
		SECTION 11.1.	
		
		
		Waivers, Amendments, etc.
			
		45
	 	
		SECTION 11.2.	
		
		
		Notices.
				
		47
	 	
		SECTION 11.3.	
		
		
		Costs and Expenses.	
		48
	 	
		SECTION 11.4.	
		
		
		Indemnification.	
		48
	 	
		SECTION 11.5.	
		
		
		Survival	
		50
	 	
		SECTION 11.6.	
		
		
		Severability.	
		50
	 	
		SECTION 11.7.	
		
		
		Headings.
				
		50
	 	
		SECTION 11.8.	
		
		
		Counterparts, Effectiveness, etc.	
		50
	 	
		SECTION 11.9.	
		
		
		Governing Law; Entire Agreement
			
		50
	 	
		SECTION 11.10.	
		
		
		Successors and Assigns.	
		52
	 	
		SECTION 11.11.	
		
		
		Other Transactions.	
		52
	 	
		SECTION 11.12.	
		
		
		Confidentiality.	
		52
	 	
		SECTION 11.13.	
		
		
		Waiver of Jury Trial, etc.	
		52
	 	
		SECTION 11.14.	
		
		
		Limitation of Liability.
				
		52
	 	
		SECTION 11.15.	
		
		
		Usury Savings Clause.	
		53
	 	 	 	 
	
		ARTICLE 12.   SUBORDINATION OF INDEBTEDNESS	
		53
	 	 	 	 
	 	
		SECTION 12.1.	
		
		
		Subordination.
				
		54
	 	
		SECTION 12.2.	
		
		
		Subordination in Event of Insolvency or
			Liquidation, Etc.	
		54
	 	
		SECTION 12.3.	
		
		
		Turnover of Improper Payments.
				
		54
	 	
		SECTION 12.4.	
		
		
		Subrogation.	
		54
	 	
		SECTION 12.5.	
		
		
		Reinstatement	
		54
	 	
		SECTION 12.6.	
		
		
		Obligors’ Obligations Absolute.	
		54
	 	
		SECTION 12.7.	
		
		
		Certain Payments and Distributions.	
		55
	 	
		SECTION 12.8.	
		
		
		Legend.
				
		55
	 	
		SECTION 12.9.	
		
		
		No Waiver or Impairment of Subordination
			Provisions.	
		55
	 	
		SECTION 12.10.	
		
		
		Exclusion for Collateral	
		55
	 	
		SECTION 12.11	
		
		
		Reliance by Senior Lenders on Subordination
			Provisions.	
		55


SCHEDULES AND EXHIBITS

	
		Schedule 1 -  	
		Disclosure Schedule
	
		Schedule 2 -	
		Notes Purchased by Initial Purchasers

	
		Schedule 3 -	
		Security Documents
	
		Schedule 4 -	
		Senior Debt Documents
	
		Exhibit A -
				
		Form of Note

	
		Exhibit B -	
		Form of Agreement to Be Bound as Guarantor


SCHEDULES AND EXHIBITS

Schedule 1 - Disclosure Schedule

Schedule 2 - Notes Purchased by Initial Purchasers

Schedule 3 - Security Documents

Schedule 4 - Senior Debt Documents

Exhibit A - Form of Note

Exhibit B - Form of Agreement to Be Bound as Guarantor

PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT, dated as of May 27, 2004, among
HORIZON OFFSHORE, INC., a Delaware corporation (the "Issuer"), the
guarantors listed on the signature pages hereof (the "Guarantors"), the
purchasers listed on the signature pages hereof, as initial purchasers (the "Initial
Purchasers"), and each other Person that may hereafter become a registered
holder of a Note in accordance with Article 10 below (the Initial
Purchasers and any such holder, individually a "Noteholder", and
collectively, the "Noteholders").


W I T N E S S E T H:


RECITALS:

A.        The Issuer desires to issue (1) $18,750,000 aggregate principal
        amount of its 18% Subordinated Secured Notes due March 31, 2007 and (2)
        up to an additional $6,250,000 aggregate principal amount of its 18%
        Subordinated Secured Notes due March 31, 2007 at the option of the
        Noteholders in accordance with Section 2.4(b) hereof; and

B.        The Initial Purchasers are willing, on the terms and conditions set
        forth herein, to purchase such Notes on the date hereof.

NOW, THEREFORE, the parties hereto, intending to be legally
bound, agree as follows (with certain terms defined in Article 9):

ARTICLE 1

AUTHORIZATION OF NOTES;
SALE AND PURCHASE

OF NOTES; INVESTMENT REPRESENTATIONS

SECTION 1.1.       
    Authorization of Notes    
(a) The Issuer hereby authorizes the issuance and sale of
Eighteen Million Seven Hundred Fifty Thousand Dollars ($18,750,000) aggregate
principal amount of its 18% Subordinated Secured Notes due March 31, 2007 (the "Notes";
such term to include (i) any such notes issued in exchange or substitution
therefor or renewal thereof pursuant to Section 10.2 or Section 10.3,
(ii) any Additional Notes and (iii) unless the context indicates otherwise, the
related Guarantees). The Notes shall be substantially in the form of 
Exhibit A.

(b)        The Notes are being offered and sold to the Initial
Purchasers without being registered under the Securities Act, in reliance upon
Section 4(2) thereof and/or Regulation D thereunder. In connection with this
Agreement, the other Documents and the transactions contemplated hereby and
thereby, each Initial Purchaser agrees that it is acting solely for itself and
not as agent, and shall not be deemed to be acting as agent, for any other
Initial Purchaser.

SECTION 1.2.       

Sale and Purchase of Notes.     Subject to the terms and conditions of this Agreement, the
Issuer will issue and sell to the Initial Purchasers, and the Initial
Purchasers, acting severally and not jointly, agree to purchase the Notes in the
respective amounts set forth in Schedule 2 attached hereto, at the
purchase price set forth therein (the "Purchase Price"). The sale and
purchase of such Notes (the "Closing") will occur at the offices of King
& Spalding LLP, 1100 Louisiana, Suite 4000, Houston, Texas 77002 at 10:00 a.m.,
on May 27, 2004 (the "Closing Date"). At the Closing, the Issuer shall
deliver such Notes to the Initial Purchasers in such denominations as the
Initial Purchasers shall request, dated as of the Closing Date, against delivery
by the Initial Purchasers to the Issuer of immediately available funds in the
amount of the Purchase Price by wire transfer to the account of Horizon Offshore
Contractors, Inc., account number 159506 at Southwest Bank of Texas, N.A.,
Houston, Texas, ABA No. 113011258. If the Issuer shall fail to tender such Notes
to the Initial Purchasers as provided in this Section 1.2, or any of the
conditions specified in Article 4 shall have not been fulfilled to the
satisfaction of the Initial Purchasers, the Initial Purchasers shall have no
obligations under this Agreement, without waiving any rights they may have by
reason of such failure or such nonfulfillment.  

SECTION 1.3.       

Investment Representations.        Each of the Initial Purchasers,
severally and not jointly, represents and warrants to the Issuer:  

(a)        (i) it is knowledgeable, sophisticated and experienced in making,
        and is qualified to make, decisions with respect to investments in
        securities representing an investment decision like that involved in the
        purchase of the Notes, and has requested, received, reviewed and
        considered all information it deems relevant in making an informed
        decision to purchase the Notes; (ii) it is acquiring the Notes set forth
        in Schedule 2 attached hereto in the ordinary course of its
        business and for its own account for investment only and with no present
        intention of distributing any of such Notes or any arrangement or
        understanding with any other persons regarding the distribution of such
        Notes; (iii) it will not, directly or indirectly, offer, sell, pledge,
        transfer or otherwise dispose of (or solicit any offers to buy, purchase
        or otherwise acquire or take a pledge of) any of the Notes except in
        compliance with the Securities Act and any applicable state securities
        laws; (iv) it, or its representatives, if any, have been furnished with,
        or have had access to, all materials relating to the business, finances
        and operations of the Issuer and the Guarantors (including all reports
        filed with the Commission) and materials relating to the offer and sale
        of the Notes which have been requested by such Initial Purchaser; such
        Initial Purchaser, or its representatives, if any, have been afforded
        the opportunity to ask questions of the Issuer and the Guarantors; and
        neither such inquiries nor any other due diligence investigations
        conducted by such Initial Purchaser, or its representatives, if any,
        shall modify, amend or affect such Initial Purchaser’s right to rely on
        the Issuer’s and the Guarantors’ representations and warranties
        contained in Article 5 below; and (v) it understands that its
        investment in the Notes involves a significant degree of risk, including
        a risk of total loss of its investment, and it is fully aware of and
        understands all the risks related to its purchase of the Notes.
        
        

(b)        it has all necessary power and authority to execute
        and deliver this Agreement; this Agreement has been duly authorized by
        it; assuming that this Agreement is the valid and binding agreement of
        each of the parties thereto, other than such Initial Purchaser, this
        Agreement constitutes a valid and binding agreement of such Initial
        Purchaser, enforceable against such Initial Purchaser in accordance with
        its terms, subject, as to enforcement of remedies, to bankruptcy,
        insolvency, reorganization, moratorium, or similar laws affecting rights
        of creditors generally and to the effect of general principals of
        equity.

(c)        it understands that the Notes are being offered in
        transactions not involving any public offering within the meaning of the
        Securities Act, that the Notes have not been and will not be registered
        under the Securities Act and that (i) if in the future it decides to
        offer, resell, pledge or otherwise transfer any of the Notes, such Notes
        may be offered, resold, pledged or otherwise transferred only (a) to the
        Issuer, (b) in the United States to a person whom the seller reasonably
        believes is a qualified institutional buyer in a transaction meeting the
        requirements of Rule 144A under the Securities Act, (c) pursuant to an
        exemption from registration under the Securities Act provided by Rule
        144 thereunder (if available), (d) to an accredited investor in a
        transaction exempt from the registration requirements of the Securities
        Act, or (e) pursuant to an effective registration statement under the
        Securities Act, in each of cases (a) through (e) in accordance with any
        applicable securities laws of the states and other jurisdictions of the
        United States, and that (ii) such Initial Purchaser will, and each
        subsequent holder is required to, notify any subsequent purchaser of the
        Notes from it of the resale restrictions referred to in (i) above.

(d)        it understands that the Notes will bear a legend to
        the following effect unless the Issuer determines otherwise in
        compliance with applicable law:

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 l44A THEREUNDER.  

THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE
        ISSUER THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE
        TRANSFERRED, ONLY (I) TO THE ISSUER THEREOF, (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 OF RULE 144A, (III) PURSUANT
        TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY
        RULE 144 THEREUNDER (IF AVAILABLE), (IV) TO AN ACCREDITED INVESTOR IN A
        TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
        ACT OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
        SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) 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 IS BEING ISSUED WITH ORIGINAL ISSUE
        DISCOUNT FOR PURPOSES OF SECTIONS 1271, 1272, 1273 AND 1275 OF THE
        INTERNAL REVENUE CODE. THE ISSUE PRICE OF THIS NOTE IS $800.00 PER
        PRINCIPAL AMOUNT OF $1,000 AT MATURITY; THE ISSUE DATE IS MAY 27, 2004.
        THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS NOTE WILL BE DETERMINED IN
        ACCORDANCE WITH SECTION 1272(a)(6) OF THE INTERNAL REVENUE CODE.

(e)        it understands that no United States federal or state
        agency or any other government or governmental agency has passed upon or
        made any recommendation or endorsement of the Notes or the fairness or
        suitability of the investment in the Notes nor have such authorities
        passed upon or endorsed the merits of the offering of the Notes.  

(f)        its principal executive offices are in the
        jurisdiction set forth immediately below such Initial Purchaser’s
        signature on the signature page hereto.  

(g)        it is an "accredited
investor" (as defined in
        Rule 501(a) of Regulation D under the Securities Act) or a "qualified
        institutional buyer" (as defined in 144A(a)(1) under the Securities
        Act).

(h)        it acknowledges that the Obligors and others will
        rely upon the truth and accuracy of the foregoing acknowledgements,
        representations and agreements; it agrees that if any of the
        acknowledgements, representations or agreements such Initial Purchaser
        is deemed to have made in connection with its purchase of Notes is no
        longer accurate, it shall promptly notify the Issuer; if any Initial
        Purchaser is purchasing Notes as a fiduciary or agent for one or more
        investor accounts, such Initial Purchaser represents that it has sole
        investment discretion with respect to each of those accounts and full
        power to make the above acknowledgements, representations and agreements
        on behalf of each account.

SECTION 1.4.       

Subordination of Notes; Security.     The Indebtedness evidenced
        by the Notes and the Guarantees shall be subordinate and junior in right
        of payment to Senior Debt in the manner and to the extent provided in Articles 8 and
12 and, except as provided herein with respect
        to certain Collateral, shall rank equal in right of payment to the
        Existing Subordinated Notes (and related guarantees thereof,
        respectively). The Notes shall be secured by the Security Documents.

ARTICLES 2.

TERMS OF THE NOTES

SECTION 2.1       
Interest.   Interest on the outstanding
        principal amount of the Notes and other outstanding Obligations shall
        accrue and be payable in accordance with this Section 2.1.

SECTION 2.1.1      
 Interest Rate.    Subject to
Section 2.1.2, the Notes shall accrue interest
        from their respective dates of issuance at a rate of 18% per annum; provided,
however, that if the Mexican Pledge Agreement is
        not duly registered by the Public Registry of Commerce of Mexico City on
        or prior to July 9, 2004, then the Notes shall accrue interest at a rate
        of 1% per annum above the rate otherwise applicable to the Notes from
        such date until such time as the Mexican Pledge Agreement is so duly
        registered.  

SECTION 2.1.2       
Post-Default Rates. From and after the
        occurrence of an Event of Default and during the continuance thereof,
        interest shall accrue (after as well as before judgment) on the
        outstanding principal amount of the Notes and on other Obligations that
        are due and payable (including, to the extent permitted by applicable
        law, interest on overdue interest) at a rate per annum equal to the
        Post-Default Rate; provided that upon the cessation or cure of such
        Event of Default (and any other Event of Default that may have occurred
        and be continuing) the Notes again shall bear interest at the rate
        provided in Section 2.1.1.

SECTION 2.1.3       
Payment Dates. Accrued interest on the
        Notes shall be payable, without duplication:

(a)        on the Stated Maturity Date;
        
        


(b)       with respect to any portion of the Notes prepaid or
        repaid pursuant to Section 2.2, on the date such prepayment or
        repayment is due   as provided in Section 2.2 and, in the case of a
        voluntary prepayment, on the date set forth in any notice required for
        such prepayment;

(c)        on each Quarterly Payment Date;

(d)        on the date of acceleration of the Notes pursuant to
        Section 7.2 or 7.3; and

(e)        in the case of interest accruing at the Post-Default
        Rate, upon demand.

SECTION 2.2.       
Principal
Payments;
        Voluntary Prepayments; Mandatory Prepayments.     (a) The Issuer will make payment in full of all
        unpaid principal of the Notes on the Stated Maturity Date (or such
        earlier date as the Notes may become or be declared due and payable
        pursuant to Article 7).  

(b)        Prior to the Stated Maturity Date, the Issuer may
        from time to time on any Business Day, make a voluntary prepayment
        (allocated on a pro rata basis to each Noteholder), in
        whole or in part, of the outstanding principal amount of the Notes; provided,
however, that (i) the Issuer shall allocate the
        amount of any such voluntary prepayment between the Notes and the
        Existing Subordinated Notes on a pro rata basis based on
        the aggregate principal amount of the Notes and Existing Subordinated
        Notes then outstanding; (ii) all such voluntary prepayments shall
        require at least three (3) Business Days prior written notice to the
        Noteholders, (iii) all such voluntary prepayments shall be in a minimum
        amount of $1,000,000 (subject to the Issuer’s right to prepay in full
        the entire unpaid principal amount of the Notes), and (iv) as to the
        voluntary prepayment in full of the Notes, such prepayment shall require
        at least five (5) Business Days prior written notice to the Noteholders.

(c)        Prior to the Stated Maturity Date, subject to full
        payment and satisfaction of prior Liens on the Collateral permitted by
        this Agreement, the Issuer shall, following the receipt of any funds
        from any Person by the Issuer, any other Obligor or any other Person,
        including, without limitation, any proceeds from a sale, issuance,
        conveyance, transfer, lease or other disposition of, and any payments
        made for fees, costs or expenses under, or as compensation,
        indemnification or settlement or compromise of claims or law suits for,
        in connection with or related to, all or any portion of the Collateral,
        apply all of such funds to make a prepayment (allocated on a pro
rata basis to each Noteholder and subject to the rights of the
        Existing Noteholders and to the terms of the Amended Collateral Agency
        Agreement), in whole or in part, of the outstanding principal amount of
        the Notes. The Issuer shall send a notice of such prepayment, promptly
        following the receipt of such proceeds, providing three (3) Business
        Days prior notice to the Noteholders.

SECTION 2.3       

Payments, Interest Rate Computations, Other
Computations, etc.     All payments by the Issuer of the principal of or interest on the
        Notes shall be made by the Issuer to the Noteholders pro rata
        according to the unpaid principal amounts of their respective Notes. All
        other amounts payable to any Noteholder under this Agreement or any
        other Document shall be paid to such Noteholder entitled thereto.
        Subject to Section 2.4, all such payments required to be made to
        such Noteholder shall be made, without setoff, deduction or
        counterclaim, not later than 2:00 p.m., New York City time, on the date
        due, in immediately available funds, to such account as each Noteholder
        shall specify from time to time by notice to the Issuer. Funds received
        after that time shall be deemed to have been received by the Noteholders
        on the next following Business Day. All interest shall be computed on
        the basis of a 360-day year consisting of twelve 30-day months. Whenever
        any payment to be made shall otherwise be due on a day which is not a
        Business Day, such payment shall be made on the immediately succeeding
        Business Day and such extension of time shall be included in the
        computation of accrued interest.  

SECTION 2.4.       
Additional Notes.        (a) The Issuer shall pay any interest due on any
        Quarterly Payment Date in cash to the extent that such payment is not
        prohibited by the Senior Debt Documents. To the extent that the Issuer
        is prohibited by the Senior Debt Documents from paying all or part of
        any interest due on any Quarterly Payment Date in cash, then the Issuer
        shall issue to each Noteholder Additional Notes (allocated on a pro
rata basis to each Noteholder) in an aggregate principal amount
        equal to the amount of interest due to such Noteholder that is not paid
        in cash.

(b)        The Noteholders shall have the option, but not the
        obligation, to purchase from time to time up to $5,000,000 aggregate
        purchase price of Additional Notes in accordance with the procedures set
        forth below. In the event that any or all of the Noteholders elect to
        purchase Additional Notes pursuant to the immediately preceding
        sentence, the Issuer agrees to issue such Additional Notes on the same
        terms and conditions set forth in this Agreement. If any Noteholder
        elects to purchase Additional Notes pursuant to this Section 2.4(b),
        such Noteholder shall give five (5) Business Days prior written notice
        of such election and the aggregate purchase price of such intended
        purchase to the Issuer and the other Noteholders and shall give such
        other Noteholders an opportunity to purchase Additional Notes pursuant
        to this Section 2.4(b). In the event that the aggregate purchase
        price of Additional Notes that all of the Noteholders intend to purchase
        exceeds $5,000,000, then the amount of Additional Notes to be issued and
        sold to each Noteholder shall be reduced on as nearly a pro rata basis as practicable. The Issuer shall issue to each Noteholder
        electing to purchase Additional Notes pursuant to this Section 2.4(b)
        an aggregate principal amount of Additional Notes equal to the sum of
        (x) the purchase price for such Additional Notes to be paid by such
        Noteholder pursuant to this Section 2.4(b) and (y) twenty-five
        percent (25%) of such purchase price to be paid by such Noteholder
        pursuant to this Section 2.4(b). Notwithstanding anything to the
        contrary in this Section 2.4(b), the aggregate purchase price for
        all Additional Notes issued at any one time pursuant to this Section 2.4(b) shall be not less than $100,000 and shall be in
        integral multiples thereof. The aggregate purchase price for any
        Additional Notes issued pursuant to this Section 2.4(b) shall be
        reduced pro rata among the Noteholders then electing to
        purchase Additional Notes (based upon the purchase price each such
        Noteholder has elected to pay) to the extent necessary to comply with
        the immediately preceding sentence.

(c)        If the Issuer issues Additional Notes pursuant to
        this Section 2.4, then the Issuer shall deliver to the
        Noteholders to which such Additional Notes are to be issued an opinion
        of counsel satisfactory to such Noteholder that: (1) each such
        Additional Note (and the Guarantees thereof) (A) has been duly
        authorized, executed and delivered by the Issuer and the Guarantors, and
        (B) constitutes a legal, valid and binding obligation of the Issuer or
        the relevant Guarantor, as applicable, enforceable in accordance with
        its terms subject, as to enforcement of remedies, to bankruptcy,
        insolvency, reorganization, moratorium, or similar laws affecting rights
        of creditors generally and to the effect of general principles of
        equity; and (2) the issuance and delivery of such Additional Notes (and
        the Guarantees thereof) complies with all Requirements of Law,
        including, without limitation, all federal and state securities laws.

SECTION 2.5.       
Proration of Payments.     (a) The Issuer shall not, and shall not permit any of its
        Subsidiaries to, prepay or otherwise retire in whole or in part, or
        purchase or otherwise acquire, directly or indirectly, any Notes held by
        any Noteholder unless the Issuer or such Subsidiary shall have offered
        to prepay or otherwise retire, purchase or acquire, as the case may be,
        the same proportion of the aggregate principal amount of the Notes held
        by each other Noteholder at the time outstanding upon the same terms and
        conditions. Any Notes prepaid or otherwise retired, purchased or
        acquired by the Issuer or any of its Subsidiaries, shall not be deemed
        to be outstanding for any purpose under this Agreement.  

(b)        If any Noteholder shall obtain any payment or other
        recovery (whether voluntary, involuntary, by application of setoff or
        otherwise) on account of principal of or interest on the Notes or other
        Obligations in excess of such Noteholder’s pro rata share of
        payments then or therewith obtained thereon by all Noteholders, such
        Noteholder which has received in excess of its pro rata share
        shall purchase from the other Noteholders such participations in the
        Notes or other Obligations held by them as shall be necessary to cause
        such purchaser to share the excess payment or other recovery ratably
        with each of them; provided, however, that if all or any
        portion of the excess payment or other recovery is thereafter recovered
        from such purchasing holder, the purchase shall be rescinded and the
        purchase price restored to the extent of such recovery, but without
        interest. The Issuer agrees that any Noteholder so purchasing a
        participation from another Noteholder pursuant to this Section 2.5
        may, to the fullest extent permitted by law, exercise all its rights of
        payment (including pursuant to Section 2.6) with respect to such
        participation as fully as if such Noteholder were the direct creditor of
        the Issuer in the amount of such participation. If under any applicable
        bankruptcy, insolvency or other similar law, any Noteholder receives a
        secured claim in lieu of a setoff to which this Section 2.5
        applies, such Noteholder shall, to the extent practicable, exercise its
        rights in respect of such secured claim in a manner consistent with the
        rights of the Noteholders under this Section 2.5 to share in the
        benefits of any recovery on such secured claim.

(c)        Notwithstanding anything in this
Section 2.5
        to the contrary, the Issuer shall be permitted to exchange Notes for
        consideration consisting only of common equity of the Issuer at any
        time, without making a pro rata offer to other
        Noteholders.

SECTION 2.6.       

Setoff.      In addition to and not in
        limitation of any rights of any Noteholder under applicable law, each
        Noteholder shall, upon the occurrence and during the continuance of any
        Event of Default, have the right to appropriate and apply to the payment
        of the Obligations owing to it (whether or not then due), and (as
        security for such Obligations) the Issuer hereby grants to each
        Noteholder, a continuing security interest in, any and all balances,
        credits, deposits, accounts or moneys of such Issuer then or thereafter
        maintained with such Noteholder; provided, however, that
        any such appropriation and application shall be subject to the
        provisions of Section 2.5.

SECTION 2.7.       

Tax Treatment.     For United States federal income tax purposes, the
        Issuer, and each Noteholder by purchasing Notes, agrees to treat the
        Notes as indebtedness of the Issuer to which Section 1272(a)(6) of the
        Internal Revenue Code applies. Original issue discount on the Notes for
        U.S. federal income tax purposes shall be computed by the Issuer in
        accordance with Section 1272(a)(6) of the Internal Revenue Code; provided,
however, that any assumptions made by the Issuer in
        making such computation shall be subject to the approval of the
        Noteholders.

ARTICLE 3.

COLLATERAL MATTERS

SECTION 3.1.       
Appointment of Collateral Agent.     Elliott Associates, L.P., a Delaware limited
        partnership with its principal place of business in New York, is hereby
        appointed the initial collateral agent (in such capacity, the "Collateral
        Agent") to act on behalf of the Noteholders in connection with the
        Collateral and pursuant to the provisions of the Amended Collateral
        Agency Agreement and the other Security Documents. Subject to the
        provisions of the Amended Collateral Agency Agreement, the Collateral
        Agent shall hold all Collateral granted pursuant to the Security
        Documents for the equal and ratable benefit of itself and the
        Noteholders. Subject to the provisions of the Amended Collateral Agency
        Agreement and the other Security Documents, (a) the Collateral Agent
        will execute and deliver the Collateral Agency Agreement Amendment and
        the other Security Documents and act in accordance with the terms
        thereof, (b) the Collateral Agent may, in its sole discretion and
        without the consent of the Noteholders, take all actions it deems
        necessary or appropriate in order to (i) enforce any of the terms of the
        Security Documents and (ii) collect and receive, for the benefit of the
        Noteholders, any and all amounts payable in respect of the Obligations,
        and (c) the Collateral Agent shall have power to institute and to
        maintain such suits and proceedings as it may deem expedient to prevent
        any impairment of the Collateral by any act that may be unlawful or in
        violation of the Security Documents or this Agreement, and such suits
        and proceedings as the Collateral Agent may deem expedient to preserve
        or protect its interests and the interests of the Noteholders in the
        Collateral (including the power to institute and maintain suits or
        proceedings to restrain the enforcement of or compliance with any
        legislative or other governmental enactment, rule or order that may be
        unconstitutional or otherwise invalid if the enforcement of, or
        compliance with, such enactment, rule or order would impair the security
        interest thereunder or be prejudicial to the interests of the
        Noteholders or the Collateral Agent). Notwithstanding the foregoing, the
        Collateral Agent may, at the expense of the Issuer, request the
        direction of the Required Holders with respect to any such actions and,
        upon receipt of the written consent of the Required Holders, shall take
        such actions, subject in each case to the provisions of the Amended
        Collateral Agency Agreement and the other Security Documents. Reference
        is made to the Amended Collateral Agency Agreement with respect to the
        appointment of a successor Collateral Agent in the event of resignation
        or removal of the initial Collateral Agent or any successor Collateral
        Agent.

ARTICLE 4.

CONDITIONS TO CLOSING

The several obligations of the Initial Purchasers to
        purchase the Notes on the Closing Date shall be subject to the prior or
        concurrent satisfaction of each of the conditions precedent set forth in
        this Article 4.

SECTION 4.1.       
Resolutions, etc.       
The Initial Purchasers shall have received:

(a)        a certificate, dated the Closing Date, of the Secretary or an
        assistant secretary of each Obligor as of the Closing Date;

(b)        electronic forms of "bring down" certificates as to the so-called "good
        standing" certificate with respect to each Obligor (other than any
        Obligors organized under the laws of The United Mexican States) as of
        the Closing Date for the appropriate State of its incorporation or
        organization;

(c)        electronic forms of evidence of qualification of each Obligor as of
        the Closing Date to do business in each other jurisdiction in which the
        failure to so qualify could result in a Material Adverse Change;
        
        

(d)        such other documents (certified if requested) as the
        Initial Purchasers may request with respect to this Agreement, the
        Notes, the Guarantees, any other Document, the transactions contemplated
        hereby and thereby, or any Organic Document, Contractual Obligation or
        Approval.

SECTION 4.2.       
No Contest, etc.       
No litigation, arbitration, governmental
        investigation, injunction, proceeding or inquiry shall be pending or, to
        the knowledge of any Obligor, threatened which:

(a)        seeks to enjoin or otherwise prevent the consummation
        of, or to recover any damages or obtain relief as a result of, the
        transactions contemplated by or in connection with this Agreement or any
        other Document; or

(b)        would be materially adverse to any of the parties
        hereto with respect to the transactions contemplated hereby.

No litigation set forth in Item 5.8
        (Litigation) of the Disclosure Schedule (except for such litigation
        identified as Pemex, Iroquois or Williams), in the opinion of the
        Initial Purchasers could result in a Material Adverse Change or give
        rise to any liability on the part of any Noteholder in connection with
        this Agreement or the other Documents or the transactions contemplated
        hereby or thereby.

SECTION 4.3.       
Certificate as to Completed Conditions,
Warranties, No Default, etc.    The Initial Purchasers shall have received a
        certificate, dated the Closing Date, of the chief financial or other
        executive officer of the Issuer to the effect that:

(a)        all conditions precedent set forth in this
Article 4 have
        been satisfied;
        
        

(b)        all representations and warranties set forth in
Article 5 are true and correct in all material respects as of the
        date hereof and as of the Closing Date;

(c)        all representations and warranties set forth in the
        Documents are true and correct in all material respects; and

(d)        no Default has occurred and is continuing.

SECTION 4.4.       
Compliance with
        Requirements of Law.     The Initial Purchasers shall have received evidence
        satisfactory to them that each Obligor is in compliance in all material
        respects with all Requirements of Law and has obtained and maintains in
        full force and effect (a) all licenses, permits and approvals issued by
        Governmental Authorities necessary to carry on its business (except
        where the failure to have any such license, permit or approval could not
        result in a Material Adverse Change), and (b) all Approvals.  

SECTION 4.5.       
Opinions of Counsel.     The Initial Purchasers shall have received an
        opinion letter, dated the Closing Date and addressed to the Initial
        Purchasers, from (i) Jones, Walker, Waechter, Poitevent, Carrère &
        Denègre, L.L.P., counsel to the Obligors, (ii) Goodrich Riquelme y
        Asociados, Mexican counsel to the Obligors and (iii) Solomon Harris,
        Cayman Islands counsel to the Obligors, each in form and substance
        satisfactory to the Initial Purchasers, and covering such matters as the
        Initial Purchasers may request.

SECTION 4.6.       
Closing Expenses, etc.   
The Initial Purchasers shall have received all costs
        and expenses which have been invoiced on or prior to the Closing Date
        and are payable by the Obligors pursuant to Section 11.3. The
        Obligors agree that they will continue to be obligated to pay costs and
        expenses to the Noteholders pursuant to Section 11.3 after the
        Closing Date whether such costs arise before or after the Closing Date.

SECTION 4.7.       
Security Documents.    The Initial Purchasers shall have received each
        Security Document, duly executed and delivered by the Obligor(s) and
        each other party thereto.

SECTION 4.8.       
Other Documents,
        Certificates, etc.    The Initial Purchasers shall have received such other
        documents, certificates, opinions of counsel or other materials as they
        reasonably request from any Obligor (including, without limitation, a
        certificate to the effect of the matters set forth in Section 6.1.11(c) executed by the Chief Financial Officer of the
        Issuer). All representations and warranties set forth in Article 5
        are true and correct in all material respects as of the date hereof and
        as of the Closing Date.

SECTION 4.9.       
Satisfactory Legal
        Form.    All documents executed or submitted by or on behalf
        of any Obligor shall be satisfactory in form and substance to the
        Initial Purchasers, the Initial Purchasers shall have received all
        information, and such counterpart originals or such certified or other
        copies of such Instruments, as the Initial Purchasers may request. All
        legal matters incident to the transactions contemplated by this
        Agreement shall be satisfactory to the Initial Purchasers.

SECTION 4.10.       

Amendment and Waiver of Credit Facilities.     The Issuer shall have amended all of its existing
        loan documents, or otherwise received a waiver pursuant to the terms of
        such loan documents effective for the full terms thereof, to permit the
        Obligors to have outstanding at any time an aggregate amount of surety
        and performance bonds at least equal to the aggregate amount of such
        surety and performance bonds outstanding as of the Closing Date.

SECTION 4.11.       
IEC Parent
        Guarantee.    The Obligors shall have delivered to IEC the parent
        guarantee required under Section 17.4 of the IEC Contract in the form
        required by Appendix "X-1" contained therein and in compliance with the
        terms of the IEC Contract and shall have delivered an executed copy of
        such parent guarantee to the Initial Purchasers. Such guarantee shall be
        in full force and effect.

ARTICLE 5.

WARRANTIES, ETC.

In order to induce the Initial Purchasers to enter
        into this Agreement and the other Documents and to purchase the Notes,
        each Obligor represents and warrants to each Noteholder, as of the date
        hereof and as of the Closing Date, as set forth in this Article 5.
        
        

SECTION 5.1.       
Organization, Power,
        Authority, etc.        Each of the Issuer and its Subsidiaries (i) is
        validly organized and existing and in good standing under the laws of
        the jurisdiction of its incorporation or organization, (ii) is duly
        qualified to do business and is in good standing in each jurisdiction
        where the failure to so qualify could result in a Material Adverse
        Change, and (iii) has full power and authority, and holds all
        governmental licenses, permits, registrations and other approvals
        required under all Requirements of Law, to own and hold under lease its
        property and to conduct its business as conducted prior to the Closing
        Date and as contemplated to be conducted subsequent to the Closing Date,
        except where the failure to hold any such licenses, permits,
        registrations and other approvals could not result in a Material Adverse
        Change. Each Obligor has full power and authority to enter into and
        perform its obligations under this Agreement and each other Document
        executed or to be executed by it and, in the case of the Issuer, to
        issue the Notes.  

SECTION 5.2.       
Due Authorization.     The execution and delivery by the Obligors of this
        Agreement and the Amendment, the issuance, execution and delivery by the
        Issuer of the Notes, and the execution and delivery by each Obligor of
        each other Document executed or to be executed by it and the incurrence
        and performance by the Obligors of their respective obligations under
        the Amendment and the Documents have been duly authorized by all
        necessary corporate action, do not require any Approval (except those
        Approvals already obtained), do not and will not conflict with, result
        in any violation of, or constitute any default under, any provision of
        any Organic Document or Contractual Obligation of any Obligor or any law
        or governmental regulation or court decree or order, and will not result
        in or require the creation or imposition of any Lien on any Obligor’s
        properties pursuant to the provisions of any Contractual Obligation of
        any Obligor, except for Liens imposed pursuant to this Agreement or any
        other Document.

SECTION 5.3.       
Validity, etc.       
This Agreement, the Notes, the Amendment and the
        other Documents executed by each Obligor constitute, the legal, valid
        and binding obligations of such Obligor, enforceable in accordance with
        their respective terms subject, as to enforcement of remedies, to
        bankruptcy, insolvency, reorganization, moratorium, or similar laws
        affecting rights of creditors generally and to the effect of general
        principles of equity.

SECTION 5.4.       

Capitalization of the
        Issuer.     The authorized capital stock of the Issuer consists
        of 35,000,000 shares of Common Stock, 26,549,250 shares of which were
        outstanding as of March 11, 2004. All such outstanding shares are duly
        authorized, validly issued, fully paid and nonassessable, and are not,
        and will not have been, issued in violation of any preemptive rights.
        Except for options to purchase shares of Common Stock (of which there
        were 3,369,850 options outstanding as of March 11, 2004 at a weighted
        average exercise price of $7.35 per share) and the Warrants, no issued,
        no authorized but unissued and no treasury shares of capital stock of
        the Issuer are subject to any preemptive right, option, warrant, right
        of conversion or purchase or any similar right issued or granted by the
        Issuer or, to the best knowledge of the Obligors, by any of its
        stockholders. Since March 11, 2004, the Issuer has not issued any shares
        of Common Stock, any securities exercisable for or convertible into
        shares of Common Stock, or any other shares of capital stock of the
        Issuer except for the issuance of (i) the Warrants, (ii) shares of
        Common Stock upon exercise of any Warrants and (iii) shares of Common
        Stock upon exercise of any options outstanding as of March 11, 2004.
        There are no agreements or understandings with respect to the voting,
        sale or transfer of any shares of capital stock of the Issuer to which
        the Issuer or, to the best knowledge of the Obligors, any of its
        stockholders is a party.

SECTION 5.5.       

Financial Information;
        Solvency.     (a)  All balance sheets, all statements of operations,
        stockholders’ equity and cash flows, and all other financial information
        of the Issuer and its Subsidiaries which have been furnished by or on
        behalf of the Issuer and its Subsidiaries to the Initial Purchasers for
        the purposes of or in connection with this Agreement or any transaction
        contemplated hereby, including the consolidated audited balance sheets
        of the Issuer as of December 31, 2003, and the related consolidated
        statements of income and cash flows for the Fiscal Year ended December
        31, 2003, together with the opinion thereon of PricewaterhouseCoopers LLP have been prepared in accordance with GAAP consistently applied
        throughout the periods involved and present fairly in all material
        respects the matters reflected therein subject, in the case of unaudited
        statements, to changes resulting from normal year end audit adjustments
        and to the absence of footnotes. As of the date hereof and except for
        transactions contemplated by this Agreement and the other Documents,
        neither the Issuer nor any of its Subsidiaries has material contingent
        liabilities or material liabilities for taxes, long term leases or
        unusual forward or long term commitments which are not reflected in the
        financial statements described above.  

(b)        The Projections are based upon estimates and
        assumptions believed by the Issuer and its management to be reasonable
        in light of current conditions and reflect the good faith estimate of
        the Issuer and its management of the results of operations and the other
        information projected therein. The Projections were prepared in a manner
        consistent with the preparation of the Issuer’s historical financial
        statements.

(c)        After giving effect to the issuance of the Notes and
        to the consummation of the other transactions contemplated by this
        Agreement and the other Documents to occur on the Closing Date, each
        Obligor is Solvent.

SECTION 5.6.       
Material Adverse
        Change.     Except as disclosed in Item 5.6 (Material
        Adverse Change) of the Disclosure Schedule, neither the Issuer nor any
        of its Subsidiaries shall have sustained since December 31, 2003, the
        date of the latest audited financial statements (i) any material Loss or
        (ii) since such date, there shall not have been any change in the
        capital stock, short-term debt or long-term debt of the Issuer or any of
        its Subsidiaries or any Material Adverse Change.

SECTION 5.7.       
Absence of Default.     Except for such defaults as shall be cured
        simultaneously with the Closing, the Issuer and its Subsidiaries are not
        in default in the payment of (or in the performance of any obligation
        applicable to) any material Indebtedness, are not in material default
        under any regulation of any Governmental Authority or court decree or
        order, and are not in default under any Requirements of Law which
        default could result in a Material Adverse Change.

SECTION 5.8.       
Litigation,
        Legislation, etc.       
Except as disclosed in Item 5.8 (Litigation)
        of the Disclosure Schedule, there is no pending or, to the knowledge of
        the Obligors, threatened litigation, arbitration or governmental
        investigation, proceeding or inquiry which, if adversely determined,
        could result in a Material Adverse Change; and none of the proceedings
        set forth in such Item 5.8 seeks to amend, modify or enjoin the
        transactions contemplated hereby or is likely to be adversely
        determined. There is no legislation, governmental regulation or judicial
        decision known to the Obligors that could result in a Material Adverse
        Change.

SECTION 5.9.       

Use of Proceeds;
        Regulations T, U and X.     (a) The Issuer shall use the proceeds of the Notes
        on the Closing Date in accordance with Item 5.9(a) (Transaction
        Costs and Use of Proceeds) of the Disclosure Schedule.

(b)        Neither the Issuer nor any Subsidiary is engaged
        principally, or as one of its important activities, in the business of
        extending credit for the purpose of purchasing or carrying Margin Stock
        (as defined in F.R.S. Board Regulation U), and no assets of the Issuer
        or any Subsidiary consist of Margin Stock. The proceeds of the Notes
        hereunder will not be used for a purpose which violates, or would be
        inconsistent with, F.R.S. Board Regulation T, U or X.

SECTION 5.10.       
Government Regulation.     Neither the Issuer nor any Subsidiary is or, as of
        the Closing Date, after giving effect to the issuance of the Notes and
        application of the net proceeds therefrom, will be an "investment
        company" within the meaning of the Investment Holding Company Act of
        1940, as amended, or a "holding company," or a "subsidiary company" of a
        "holding company," or an "affiliate" of a "holding company" or of a
        "subsidiary company" of a "holding company," within the meaning of the
        Public Utility Holding Company Act of 1935, as amended, or subject to
        regulation under the Federal Power Act, the Interstate Commerce Act or,
        based upon the Initial Purchasers’ representations set forth in Section 1.3, any other federal or state law limiting the Obligors’
        ability to issue the Notes or of any Obligor to otherwise incur
        Indebtedness or to execute, deliver or perform the Documents to which it
        is party.

SECTION 5.11.       
Taxes.     Each of the Issuer and its present or past
        Subsidiaries has filed all tax returns and reports required by law to
        have been filed by it and has paid all Taxes and Charges owed by it
        whether or not shown to be due on such tax returns or reports, except
        any such Taxes or Charges which are being diligently contested in good
        faith by appropriate proceedings and for which adequate reserves in
        accordance with GAAP shall have been set aside on its books.

SECTION 5.12.       
ERISA.        The Issuer and its Subsidiaries (i) are not party to any employee
        benefit plan subject to part 3 of Title I of ERISA and (ii) are in
        compliance in all material respects with ERISA. The consummation of the
        transactions provided for in this Agreement and compliance by the Issuer
        and each other Obligor with the provisions of the Documents will not
        involve any prohibited transaction within the meaning of ERISA or
        Section 4975.  

SECTION 5.13.       
Labor Controversies.       There are no labor controversies pending or, to the
        best knowledge of the Obligors, threatened, relating to the Issuer or
        any Subsidiary. To the best knowledge of the Obligors, there is no
        unfair labor practice complaint pending or threatened against the Issuer
        or any Subsidiary before the National Labor Relations Board, and no
        grievance or arbitration proceeding or arising out of or under any
        collective bargaining agreement is so pending or threatened against the
        Issuer or any Subsidiary. There is no strike, labor dispute, slowdown or
        stoppage pending against the Issuer or any Subsidiary or, to the best
        knowledge of the Obligors, threatened against the Issuer or any
        Subsidiary. Neither the Issuer nor any of its Subsidiaries is subject to
        any collective bargaining agreement.

SECTION 5.14.        

Ownership of
        Properties.        Each of the Issuer and its Subsidiaries owns good
        title to all of its material personal properties and assets of any
        nature whatsoever, free and clear of all Liens except as permitted
        pursuant to Section 6.1.12.

SECTION 5.15.       
Intellectual Property        Each of the Issuer and its Subsidiaries owns or
        licenses all intellectual property, and has obtained assignments of all
        licenses and other rights, as the Issuer considers necessary for or as
        are otherwise material to the conduct of the business of the Issuer and
        its Subsidiaries as now conducted without, individually or in the
        aggregate, any infringement upon rights of other Persons which could
        result in a Material Adverse Change.

SECTION 5.16.       
Accuracy of
        Information.        All factual information heretofore or
        contemporaneously furnished by or on behalf of the Issuer or any
        Subsidiary in writing to any Noteholder for purposes of or in connection
        with this Agreement or any transaction contemplated hereby and all
        information that has been furnished to or filed with the Commission by
        or on behalf of the Issuer or any Subsidiary pursuant to the Exchange
        Act is true and accurate in every material respect on the date as of
        which such information is dated or certified, in the case of any such
        information furnished in writing to any Noteholder, and as of the date
        of execution and delivery of this Agreement by such Noteholder and as of
        the Closing Date, and such information is not incomplete by omitting to
        state any material fact necessary to make such information not
        misleading. None of this Agreement, any document or written statement
        furnished to any of the Noteholders by or on behalf of the Issuer or any
        Subsidiary or any information that has been furnished to or filed with
        the Commission by or on behalf of the Issuer or any Subsidiary pursuant
        to the Exchange Act contains any untrue statement of a material fact or
        omits to state any material fact necessary in order to make the
        statements contained herein or therein not materially misleading. The
        Noteholders recognize that the Projections are not to be viewed as facts
        and that actual results during the period or periods covered by the
        Projections may differ from the projected or forecasted results.

SECTION 5.17.       

Insurance.        All policies of insurance in effect of any kind or
        nature owned by or issued to the Issuer and the Subsidiaries, including
        policies of life, fire, theft, product liability, public liability,
        property damage, other casualty, employee fidelity, workers’
        compensation, property and liability insurance, (a) are, together with
        all policies of employee health and welfare and title insurance, if any,
        in full force and effect, (b) comply in all respects with the applicable
        requirements set forth herein and (c) are of a nature and provide such
        coverage, including through self-insurance, retentions and deductibles,
        as is customarily carried by companies engaged in similar businesses and
        owning similar properties in the same general areas in which the Issuer
        and its Subsidiaries operate.

SECTION 5.18.       

Certain Indebtedness.       
Item 5.18 (Existing Indebtedness) of the
        Disclosure Schedule sets forth all Indebtedness of the Issuer and its
        Subsidiaries as of the Closing Date, which (a) is for borrowed money,
        (b) is not incurred in the ordinary course of the business of the Issuer
        or any Subsidiary in a manner and to the extent consistent with past
        practice or (c) is material to the financial condition, operations,
        businesses, properties or prospects of the Issuer or any Subsidiary.

SECTION 5.19.       
Company Actions.        Since December 31, 2003, the Obligors have not,
        except for the Existing Subordinated Notes, (i) issued or granted any
        securities other than the Existing Subordinated Notes, the Warrants,
        shares of Common Stock issued upon exercise of any Warrants and shares
        of Common Stock issued upon exercise of any options outstanding as of
        March 11, 2004; (ii) incurred any liability or obligation, direct or
        contingent, other than liabilities and obligations which were incurred
        in the ordinary course of business or which are not material, (iii)
        entered into any material transaction not in the ordinary course of
        business or (iv) declared or paid any dividend on any of its capital
        stock.

SECTION 5.20.       
Consents.        The Issuer and its Subsidiaries have all material
        permits and governmental consents and approvals necessary under
        Requirements of Law in connection with the transactions contemplated
        hereby and in the reasonable business judgment of the Obligors, deemed
        advisable under Requirements of Law in connection with the ongoing
        business and operations of the Issuer and the Subsidiaries, except for
        permits, consents and approvals the failure to so have could not result
        in a Material Adverse Change.

SECTION 5.21.       
Contracts.        Except for any contract defaults as will be cured
        upon or prior to the Closing, there are no material defaults by the
        Issuer or any Subsidiary or, to the Obligors’ knowledge after due
        inquiry, any other default in existence under any such material
        Contractual Obligations, in each case that could result in a Material
        Adverse Change.

SECTION 5.22.       

Condition of Property.        The Issuer and its Subsidiaries own or lease all of
        the assets and properties material to the conduct of their business.

SECTION 5.23.       
Subsidiaries.       
Item 5.23 (Subsidiaries) of the Disclosure
        Schedule sets forth all Subsidiaries of the Issuer.

SECTION 5.24.       

No Offering of Notes.        None of the Issuer or any of its Affiliates nor any
        agent acting on their behalf, has directly or indirectly offered any of
        the Notes or any similar security of any Obligor for sale to, or
        solicited offers to buy the Notes or any similar security of any Obligor
        from, or otherwise approached or negotiated with respect thereto with,
        any Person other than institutional investors, and neither any Obligor
        nor any agent acting on behalf of any Obligor has taken or will take any
        action which would subject the issuance or sale of the Notes to the
        provisions of Section 5 of the Securities Act or to the provisions of
        any securities or Blue Sky laws of any applicable jurisdiction.

SECTION 5.25.       

Collateral and
        Security Documents.        As of the Closing Date, (i) each Obligor has good
        title, free of all Liens other than those permitted pursuant to Section 6.1.12 to all of the material Collateral owned by such
        Obligor; (ii) the representations and warranties of each Obligor
        contained in the Security Documents are true and correct; (iii) when
        executed and delivered the Security Documents will create a valid lien
        on, and enforceable security interests in favor of the Collateral Agent
        for the benefit of the Secured Parties (as such term is defined in the
        Security Documents) in all Collateral subject to the Security Documents,
        subject, as to enforcement of remedies, to bankruptcy, insolvency,
        reorganization, moratorium, or similar laws affecting rights of
        creditors generally and to the effect of general principals of equity;
        and (iv) to the extent governed by Article 8 or Article 9 of the UCC,
        when financing statements have been filed in the appropriate offices,
        the Collateral Agent will have a perfected first or second priority
        Lien, as the case may be (as provided in the Security Documents), upon
        all of the Collateral in which a security interest may be perfected by
        filing, subject to (a) Liens permitted by this Agreement and the
        Security Documents and (b) Collateral in which security interests or
        liens can only be perfected through compliance with the terms of the
        Federal Assignment of Claims Act.

SECTION 5.26.       
No Registration
        Required.        Assuming the accuracy of the representations and
        warranties of each of the Initial Purchasers contained in this Agreement
        and the compliance of such parties with the agreements set forth herein
        and therein, it is not necessary, in connection with the issuance and
        sale of the Notes in the manner contemplated by this Agreement and the
        other Documents, to register the Notes under the Securities Act.

SECTION 5.27.       
Private Placement.    (a) None of the Issuer or any of its Affiliates
        has, directly or indirectly engaged in any form of general solicitation
        or general advertising in connection with the offering of the Notes (as
        those terms are used in Regulation D under the Securities Act) under the
        Securities Act or in any manner involving a public offering within the
        meaning of Section 4(2) of the Securities Act; the Issuer has not
        entered into any arrangement with respect to the distribution of the
        Notes and each Obligor hereby agrees not to enter into any such
        arrangement.

(b)        None of the Company or any of its affiliates has,
        directly or indirectly, sold, offered for sale, solicited offers to buy
        or otherwise negotiated in respect of, any "security" (as defined
        in the Securities Act) which is or will be integrated with the sale of
        any of the Notes in a manner that would require the registration under
        the Securities Act of any of the Notes.

SECTION 5.28.       
Tax Treatment of Contingencies.    The Issuer believes that the contingencies that would
        give rise to an increase in the interest rate on the Notes under
        Section 2.1.1 are remote within the meaning of United States Treasury
        Regulations section 1.1275-2(h)(2) and that Section 1272(a)(6) of the
        Internal Revenue Code applies to the Notes.

SECTION 5.29.       
IEC Contract.    (a) None of the Obligors or any Subsidiary has
        defaulted or is in default in any payment or performance obligation
        under the IEC Contract, except for such defaults which have been waived
        or consented to in writing by IEC, such waiver or consent signed by a
        duly authorized officer of IEC.

(B)        As of the Closing Date, the Issuer has given irrevocable
        wire instructions to Citibank, N.A. to transfer immediately after the
        Closing $9.1 million of the net proceeds from the sale of the Notes by
        the Issuer in order to cause the IEC Letter of Credit to be issued.
 

ARTICLE 6.

COVENANTS

SECTION 6.1.       
Covenants.        The Obligors, jointly and severally, agree with each Noteholder
        that until the Notes and all other Obligations (other than Obligations
        that expressly survive the termination of this Agreement pursuant to Section 11.5) have been paid and performed in full, such Person will
        perform the Obligations set forth in this Section 6.1.

SECTION 6.1.1       
Information.    (a) The Issuer shall furnish, or cause to be
        furnished, to each Noteholder (i) as soon as possible and in no event
        more than ninety (90) days after the end of each Fiscal Year copies of
        the Issuer's (A) consolidating financial statements and financial
        statements categorized by geographic area, each as is prepared by the
        Issuer in the ordinary course of its business and (B) consolidated
        financial statements, all as prepared in accordance with GAAP and
        certified by the Issuer's accountants as of the end of such period,
        including a balance sheet and related statements of income, and, if
        applicable, stockholders’ equity and cash flows; (ii) as soon as
        possible and in no event more than forty-five (45) days after the end of
        each Fiscal Quarter, similar financial statements to those referred to
        in (i) above, unaudited, but certified by the Issuer's chief financial
        officer; (iii) if requested by any Noteholder, as soon as possible and
        in no event more than thirty (30) days after the end of each month,
        internal unaudited financial statements for such month and (iv) such
        other financial or other information and access to the management of the
        Issuer as the Noteholders may from time to time reasonably request. Such
        financial statements shall be prepared in accordance with GAAP applied
        on a consistent basis.

(b)        Concurrently with the furnishing of the annual and
        quarterly financial statements pursuant to Section 6.1.1(a), the
        Issuer will furnish to each Noteholder a certificate signed by the chief
        financial officer of the Issuer stating that no Default exists, or if a
        Default exists then the nature, period of existence and status thereof.

SECTION 6.1.2       
Payment of Obligations.    The Issuer and each of its Subsidiaries will pay
        and discharge, as the same shall become due and payable, all lawful
        taxes, assessments and charges or levies made upon it or its property or
        assets, by any governmental body, agency or official except where any of
        such items may be diligently contested in good faith by appropriate
        proceedings, and the Issuer and each of its Subsidiaries shall have set
        aside on its respective books, if required under GAAP, reserves for the
        liabilities related to such items.

SECTION 6.1.3        
Corporate Existence; Mergers.    Each Obligor shall at all times maintain its
        corporate existence and shall not, without prior written consent of the Noteholders, dissolve or otherwise dispose of all or substantially all
        of its assets, in one transaction or a series of transactions, or
        consolidate with or merge into another corporation.

SECTION 6.1.4       

Compliance with Law.    Each Obligor shall comply with and satisfy all
        applicable Governmental Requirements.

SECTION 6.1.5        
Further Assurance.    The Obligors will, at their expense, promptly (and
        in no event later than 30 days after written notice from the Noteholders
        is received) execute and deliver, or cause to be executed and delivered,
        to the Noteholders upon reasonable 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 the
        Obligors in this Agreement or the other 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 Security Documents, or more fully
        state the security obligations set out herein or in any of the Security
        Documents, or to perfect, protect or preserve any Liens created pursuant
        to any of the Security 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 6.1.6       

Cross
        Collateralization.    If the Issuer issues any Additional Notes, the
        Obligors shall amend the Security Documents to the extent required to
        ensure that any Additional Notes will be secured by the Security
        Documents.

SECTION 6.1.7       

Perfection and
        Validity of Security Interests.    The Obligors shall use their commercially
        reasonable efforts to ensure that the following occur within the time
        periods specified below:

(i)        written consent to the assignment to the Collateral
        Agent under the Security Documents is obtained from Pemex on or before
        June 9, 2004;


(ii)        on or before June 1, 2004, the Obligors deliver to
        the Noteholders all corporate "good standing" certificates, legal
        opinions and other corporate documents of any of the Obligors which are
        not delivered to the Initial Purchasers on or before the Closing Date
        and which are reasonably requested by the Noteholders; and

(iii)        all other Security Documents will be filed, perfected
        or recorded and valid against third parties within ten (10) days after
        the Closing Date.

If the Obligors fail to cause any of the events set
        forth in clauses (i) through (iii) of this Section 6.1.7 to occur
        within the time periods set forth therein, then the Obligors shall
        continue to use their best efforts to cause such events to occur after
        the expiration of such time periods. On or before the date of delivery
        of any of the documents set forth in clauses (i) and (iii) of this Section 6.1.7, the Obligors will deliver to the Noteholders an
        opinion or opinions of counsel to such Obligors as to the due
        recordation, perfection and validity of such security interests in form
        and substance satisfactory to the Noteholders.

SECTION 6.1.8       

Additional Guarantees.        If (1) any Obligor transfers or causes to be
        transferred, in one transaction or a series of related transactions, any
        Collateral to any Subsidiary that, following such transaction or series
        of related transactions, is not a Guarantor, (2) if any Subsidiary that
        is a "significant subsidiary" (as defined in Rule 1-02(w) of Regulation
        S-X promulgated by the Commission) is not at such time a Guarantor or
        (3) if any Subsidiary that is not at such time a Guarantor is or becomes
        a guarantor of the Existing Subordinated Notes pursuant to the terms of
        the Existing Purchase Agreement, then such transferee, significant
        subsidiary or other Subsidiary or other Subsidiary shall:

(a)        execute and deliver to the Noteholders an agreement
        to be bound as a Guarantor pursuant to this Agreement in the form set
        forth in Exhibit B pursuant to which such Subsidiary shall agree
        to unconditionally guarantee on a subordinated secured basis all of the
        Issuer’s obligations under the Notes and this Agreement on the terms set
        forth in this Agreement;

(b)        execute and deliver to the Noteholders such
        amendments to the Security Documents as the Noteholders deem necessary
        or advisable in order to make such Subsidiary a party to such
        instruments as applicable;

(c)        take such actions necessary or advisable to grant to
        the Collateral Agent for the benefit of the Noteholders a perfected
        security interest, as required by Security Documents;

(d)        take such further action and execute and deliver such
        other documents specified in this Agreement or otherwise reasonably
        requested by the Collateral Agent to effectuate the foregoing; and

(e)        deliver to the Noteholders an opinion of counsel that
        such Guarantee and any other documents required to be delivered (i) have
        been duly authorized, executed and delivered by such Subsidiary, (ii)
        comply with the applicable requirements of this Section 6.1.8 and
        (iii) constitute legal, valid, binding and enforceable obligations of
        such Subsidiary and such other opinions regarding the perfection of such
        liens in the Collateral as provided for in this Agreement.

Thereafter, such Subsidiary shall be a Guarantor for
        all purposes of this Agreement.

SECTION 6.1.9     
Form D.    The Issuer agrees to file Forms D with respect to
        the Notes as required under Regulation D and to provide copies thereof
        to the Initial Purchasers promptly after such filing.

SECTION 6.1.10     
Use of Proceeds of
        Equity Offerings.    The Issuer and its Subsidiaries have not entered,
        and will not enter, into any Instrument or otherwise agree to prohibit
        or restrict the ability of the Issuer and its Subsidiaries to use all or
        part of the proceeds of any equity or rights offering to make one or
        more prepayments, in whole or in part, of the outstanding aggregate
        principal amount of the Notes.

SECTION 6.1.11     
Iroquois and Pemex May Costero Collateral;
        etc.    (a)  The Obligors will use their best efforts to cause Exim Bank and/or Southwest Bank of Texas, N.A., as necessary, to enter
        into a collateral sharing agreement or other appropriate agreement or
        document in form and substance satisfactory to the Noteholders in their
        sole discretion pursuant to which Exim Bank and/or Southwest Bank of
        Texas, N.A. agree to share with the Noteholders all collections or
        proceeds received by either of them in connection with any claims or
        receivables under the Iroquois Contract as follows: all Noteholders
        shall share in 50% of all such collections or proceeds (such percentage
        the "Sharing Percentage"); provided that the Sharing
        Percentage shall increase by 1% for each $125,000 aggregate principal
        amount of Additional Notes issued pursuant to Section 2.4(b); and
        provided further that in no event shall the amount received in
        respect of such collections or proceeds by the Noteholders in respect of
        Notes issued on the Closing Date, including any Additional Notes issued
        pursuant to Section 2.4(a) deriving from any such Notes and any
        notes issued in exchange or substitution for any such Notes or
        Additional Notes or renewal thereof pursuant to Section 10.2 or
        Section 10.3, exceed $6,250,000 plus an amount equal to
        one-third (1/3) of the aggregate principal amount of any such Additional
        Notes issued pursuant to Section 2.4(a). Upon the receipt of all
        documents contemplated by this Section 6.1.11(a), the Obligors
        shall reduce the maximum amount that may be borrowed under the Issuer’s
        domestic revolving credit facility to not more than an aggregate of $15
        million.

(b)        The Obligors will use their best efforts to cause the
        Issuer, RLI Insurance Company and JPMorgan Chase Bank to amend the
        Escrow and Security Agreement, dated as of March 14, 2004, among the
        Issuer, RLI Insurance Company and JPMorgan Chase Bank, or to enter into
        a similar agreement, in either case in form and substance satisfactory
        to the Noteholders in their sole discretion, such that the escrow agent
        under such agreement will hold the monies thereunder first in favor of
        RLI Insurance Company, second in favor of the Collateral Agent on behalf
        of the Noteholders and third in favor of the Collateral Agent on behalf
        of the Existing Noteholders.

(c)        As of the date hereof, the Issuer has not drawn down, and during the
        period from the date hereof until the date of receipt of all documents
        contemplated by Section 6.1.11(a), the Issuer will not draw down,
        in excess of $15 million under its domestic revolving credit facility.

(d)        The Issuer will use its best efforts to obtain as promptly as
        possible the release of the guaranty of ECH Offshore, S. de R.L. de C.V.
        under the Exim Bank Agreement and shall deliver a copy of such release
        to the Noteholders promptly upon receipt thereof.

SECTION 6.1.12       


Liens.    Each of the Obligors lawfully owns (and shall at all times
own) and is (and shall at all times be) lawfully possessed of its respective
Collateral free and clear of all liens, mortgages, taxes and encumbrances except
for (i) liens under the Security Documents; (ii) liens set forth in Item
6.1.12 (Liens) of the Disclosure Schedule; (iii) such other liens,
mortgages, taxes and encumbrances, if any, as have been consented to in writing
by the Noteholders; (iv) liens securing Senior Debt; (v) liens for loss, damage,
or expense which are covered by insurance; (vi) liens for which a bond or other
security has been posted by or on behalf of the Issuer; (vii) liens for taxes,
assessments and governmental charges or levies on its property for monies which
are not yet past due and payable; (viii) liens imposed by law, such as
carriers’, warehousemens’ and mechanics’ liens and other similar liens arising
in the ordinary course of business for monies which are not yet past due and
payable; and (ix) easements, building restrictions and such other encumbrances
or charges against real property as are of a nature generally existing with
respect to properties of a similar character and which do not in any material
way affect the marketability of the same or interfere with the use thereof in
the business of the Obligors, and except where any of the items listed in
clauses (iii), (vii) and (viii) of this section may be diligently contested in
good faith by appropriate proceedings, and the Issuer shall have set aside on
its books, if required, by GAAP, appropriate reserves for the liabilities
related to any such liens (with such liens described in subsections (i) through
(viii) sometimes hereinafter referred to as "Permitted Liens"); and the
Issuer does hereby warrant and will defend the title and possession thereto and
to every part thereof for the benefit of the Noteholders against the claims and
demands of all Persons whomsoever.

SECTION 6.1.13      


Affiliate Transaction.      The Issuer will not, and will not permit any of its
Subsidiaries to, authorize, permit or suffer to occur any transactions,
contracts or other agreements by the Issuer or any of its Subsidiaries with any
Affiliate of the Issuer or any of its Subsidiaries other than in the ordinary
course of business and on terms that are no less favorable to the Issuer than
those that could have been obtained in a comparable transaction on an
arm's-length basis.  

SECTION 6.1.14       


Other Indebtedness.    Neither the Issuer nor any Subsidiary shall incur any
Indebtedness of any kind whatsoever, except for the Notes, the Guarantees, the
Existing Subordinated Notes (and any existing or future guarantees in connection
therewith), loans under the Issuer’s existing revolving credit facilities with
The CIT Group/Equipment Financing, Inc. and Southwest Bank of Texas, NA,
ordinary course of business leases and accounts payable, and Refinancing
Indebtedness.

SECTION 6.1.15       


Business Activities.    The Issuer will not, and will not permit any of its
Subsidiaries to, engage in any business activity, except business activities in
which the Issuer and its Subsidiaries are engaged on the Closing Date and such
activities as may be ancillary, incidental or related thereto.

SECTION 6.1.16       


Anti-Layering.    The Issuer will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist or otherwise become or
be liable in respect of any Indebtedness that is subordinated in right of
payment to any Senior Debt and senior in any respect in right of payment to the
Notes or any Guarantee, as applicable.

SECTION 6.1.17       

Pemex Contract.    (a) Any funds received from any Person by the Issuer, any
other Obligor or any other Person (other than the Collateral Agent), including,
without limitation, any payments made for fees, costs or expenses under, or as
compensation, indemnification or settlement or compromise of claims of law suits
or arbitration proceedings ("Contract Payments") for, in connection with
or related to the Public Works Contract for Engineering, Procurement and Start
Up (the "Pemex Contract"), known as EPC-64, dated August 18, 2000, by and
between Pemex Exploración y Producción ("Pemex") and ECH shall be
deposited by the Issuer or any such Obligor within two (2) Business Days after
such Obligor’s receipt directly into the account of ECH, account number 312010
at Southwest Bank of Texas, N.A. in Houston, Texas, for distribution by the
Collateral Agent in accordance with the terms of the Amended Collateral Agency
Agreement.  

(b)        The Obligors will use their commercially reasonable efforts
to give prior notice to the Noteholders of any meetings or discussions with
Pemex or its representatives relating to the Pemex Claims and will use their
commercially reasonable efforts to give one or more representatives of the
Noteholders the opportunity to participate in any such meetings or discussions.
The Obligors will comply with all reasonable suggestions of the Noteholders or
the duly authorized representatives thereof in connection with the Pemex Claims
and will not take any actions in respect thereof to which the Noteholders or the
duly authorized representatives thereof shall reasonably object. The Issuer will
not, and will not permit any of its Subsidiaries to, settle or compromise any
claim, cause of action, demand, right, liability, litigation, arbitration or
other proceeding (a "Suit") in connection with, or agree to any
reduction, set off or discount of, the Pemex Claims, or any payments,
compensation or monies to be received in connection with the Pemex Claims,
without the prior written consent of the Required Holders; provided, 
however, that the Issuer shall be permitted to settle or compromise any Suit
in connection with, or agree to any reduction, set off or discount of (a "Settlement"),
the Pemex Claims in accordance with the terms set forth in Item 6.17(b)
(Settlement of Suits) of the Disclosure Schedule.

SECTION 6.1.18       

Restricted Payments, etc.    The Issuer will not, and will not permit any of its
Non-Wholly Owned Subsidiaries to, declare, pay or make any dividend or
distribution (in cash, property or obligations) on any shares of any class of
its Stock or on any warrants, options or other rights in respect of any class of
its Stock. The Issuer will not, and will not permit any of its Subsidiaries to,
apply any of its funds, property or assets to the purchase, redemption, sinking
fund or other retirement of any shares of any class of Stock of the Issuer or
any Non-Wholly Owned Subsidiary, or make any deposit for any of the foregoing.

The Issuer will not, and will not permit any of its
Subsidiaries to, make any Investments other than (1) Investments in any Person
that is or immediately after such Investment will become a Subsidiary or that
will merge or consolidate with a Subsidiary, (2) Permitted Joint Ventures and
(3) any guarantees issued in connection with the Existing Subordinated Notes.



SECTION 6.1.19       

Asset Dispositions, etc.    
The Issuer will not, and will not permit any of its
Subsidiaries to, sell, transfer, lease or otherwise dispose of, or grant
options, warrants or other rights with respect to, any of its assets (including
accounts receivable and Stock of Subsidiaries) to any Person, unless (a) such
disposition is made in the ordinary course of business and consists of
inventories; or (b) such disposition constitutes a disposition of obsolete or
retired assets not used in the business of the Issuer and its Subsidiaries.

SECTION 6.1.20       

Limitation on Restrictions
on Subsidiary Dividends.    The Issuer will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Subsidiary to: (a) pay dividends or make other distributions on its Stock or
other interests or participations in profits owned by the Issuer or any of its
Subsidiaries; (b) pay any Indebtedness owed to the Issuer or any of its
Subsidiaries; (c) make loans or advances to the Issuer or any of its
Subsidiaries; or (d) transfer any of its property or assets to the Issuer or any
of its Subsidiaries, except for such encumbrances and restrictions existing
under or by reason of this Agreement, the other Documents, the Existing Purchase
Agreement and the documents executed in connection therewith, or the Senior Debt
Documents.

SECTION 6.1.21       

Stay, Extension and Usury Laws.    The Obligors covenant (to the extent that they may lawfully
do so) that they will not at any time insist upon, plead or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Agreement; and the Obligors (to
the extent that they may lawfully do so) hereby expressly waive all benefit or
advantage of any such law, and covenant that they will not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Collateral Agent, but shall suffer and permit the execution of every such
power as though such law has not been enacted.

SECTION 6.1.22       

Board of Directors.    The Issuer agrees that (i) for so long as Falcon Mezzanine
Partners, LP or an Affiliate thereof is a Noteholder it shall have the right to
designate one observer to the Issuer’s Board of Directors, such observer to
receive all information distributed to the Board of Directors and all committees
of the Board of Directors and to be invited to all meetings of the Board of
Directors and all committees of the Board of Directors, but without the right to
vote with the Board of Directors; and (ii) for so long as Bryant R. Riley or an
Affiliate thereof is a Noteholder he shall have the right to (x) designate one
observer to the Issuer’s Board of Directors, such observer to receive all
information distributed to the Board of Directors and all committees of the
Board of Directors and to be invited to all meetings of the Board of Directors
and all committees of the Board of Directors, but without the right to vote with
the Board of Directors or (y) designate one individual to be nominated by the
Issuer’s Board of Directors as a member of the Issuer’s Board of Directors. 
Any designated observers to the Issuer’s Board of Directors must execute and
deliver, in a form acceptable to the Issuer, an agreement to keep the Issuer’s
confidential information confidential and to comply with the Issuer’s insider
trading policy. The Issuer may exclude any such observer from access to any
information distributed to the Board of Directors or any portion thereof to the
extent that the Issuer believes in good faith and for reasonable cause that such
access would result in the loss by the Issuer of the attorney-client privilege
or other valuable right. The Issuer agrees to use its best efforts, subject to
legal requirements and Nasdaq listing standards, to nominate the individual
designated from time to time pursuant to clause (ii)(y) above, and to support
their election by the Issuer’s stockholders, provided, however, that any
such designee that is subsequently elected to the Issuer’s board of directors by
the Issuer’s stockholders must immediately resign as a member of the Issuer’s
board of directors once the Noteholder that initially nominated him or her is no
longer a Noteholder. The nomination of any such designee is conditioned upon the
receipt by the Issuer of all information required by the Nominating Committee of
the Issuer’s Board of Directors to make an informed judgment that the designee’s
nomination would not violate legal requirements or Nasdaq listing standards.
Notwithstanding the foregoing, Bryant R. Riley shall not be entitled to more
than one nominee as a member of the Issuer’s Board of Directors pursuant to the
terms of this Agreement and the Existing Purchase Agreement.

SECTION 6.1.23      

IEC Contract.    On the Closing Date, the Issuer will use $9.1 million of the
net proceeds from its sale of the Notes in order to cause the IEC Letter of
Credit to be issued.

ARTICLE 7.



EVENTS OF DEFAULT

SECTION 7.1.       
Events of Default.    The term "Event of Default" shall mean any of the
events set forth in this Section 7.1.  

SECTION 7.1.1       

Non-Payment of
      Obligations.    The Issuer shall default:

(a)        in the payment or prepayment when due of any principal of the Notes;
        or

(b)        in the payment when due of the interest payable in respect of the
        Notes or any other Obligations and such default shall continue
        unremedied for a period of five (5) Business Days.

SECTION 7.1.2       


Non-Performance of Certain Covenants.  

(a)        Any Obligor shall default in the due performance and
observance of any of its obligations under Article 6 (other than 
Sections 6.1.7, 6.1.14, 6.1.16 and 6.1.17) and such
default shall continue unremedied for a period of ten (10) days after notice
thereof shall have been given to the Issuer by the Noteholders of at least 25%
in aggregate principal amount of the Notes (or if such default is not reasonably
susceptible to cure within ten (10) days, such longer period as is reasonably
needed to effect such cure, but in no event longer than thirty (30) days from
the date notice is given, so long as the Obligors promptly commence and
diligently pursue such cure).

(b)        Any Obligor shall default in the due performance and
observance of any of its obligations under Section 6.1.7, 6.1.14,
6.1.16 or 6.1.17.

SECTION 7.1.3       

Defaults Under Other Documents; Non-Performance of Other Obligations. Any "Event of Default" shall occur under the other
Documents; or any Obligor shall default in the due performance and observance of
any other obligation, covenant or agreement contained in this Agreement or in
any other Document and such default shall continue unremedied for a period of
ten (10) days after notice thereof shall have been given to the Issuer by the
Required Holders (or if such default is not reasonably susceptible to cure
within ten (10) days, such longer period as is reasonably needed to effect such
cure, but in no event longer than thirty (30) days from the date notice is
given, so long as the Issuer promptly commences and diligently pursues such
cure).

SECTION 7.1.4       

Bankruptcy, Insolvency, etc.  The Issuer or any Subsidiary shall:

(a)        become insolvent or generally fail to pay, or admit in writing its
        inability to pay, its debts as they become due;

(b)        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;

(c)        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;

(d)        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 Issuer or any Subsidiary and,
        if such case or proceeding is not commenced by the Issuer or Subsidiary,
        such case or proceeding shall be consented to or acquiesced in by the
        Issuer or such Subsidiary or shall result in the entry of an order for
        relief or shall remain for sixty (60) days undismissed; or

(e)        take any corporate action authorizing, or in furtherance of, any of
        the foregoing.  

SECTION 7.1.5       
Breach of Warranty. Any representation or warranty of any Obligor under
        this Agreement or any other Document or in any other writing furnished
        by or on behalf of any Obligor to any Noteholder for the purposes of or
        in connection with this Agreement or any such Document is or shall be
        incorrect when made in any material respect.

SECTION 7.1.6      
Default on Other
        Indebtedness, Contracts, etc.  (a) Any Indebtedness of the Issuer or any Subsidiary in an aggregate
        principal amount exceeding $250,000 (other than the Notes) 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 Indebtedness,
        that the Issuer or any Subsidiary redeem, repurchase or otherwise
        acquire or retire such Indebtedness for value at any time prior to its
        stated maturity.

SECTION 7.1.7       


Judgments.  A final judgment which, with other such outstanding final
judgments against the Issuer and its Subsidiaries (in each case to the extent
not covered by insurance), exceeds an aggregate of $250,000 shall be entered
against the Issuer or any Subsidiary and, within 30 days after entry thereof,
such judgment shall not have been discharged or execution thereof stayed pending
appeal or, within 30 days after the expiration of any such stay, such judgment
shall not have been discharged or stayed or bonded.

SECTION 7.1.8       


Invalidity of Guarantees.  Any of the Guarantees, the ECH Mexico Guarantee or the HOC
Mexico Guarantee ceases to be in full force and effect; any Guarantee is
declared to be null and void and unenforceable; any of the Guarantees, the ECH
Mexico Guarantee or the HOC Mexico Guarantee is found to be invalid; or any
Guarantor or any guarantor under the ECH Mexico Guarantee or the HOC Mexico
Guarantee denies its liability under its Guarantee, the ECH Mexico Guarantee or
the HOC Mexico Guarantee, as the case may be (in each case, other than by reason
of release of a Guarantor in accordance with the terms of this Agreement).

SECTION 7.1.9.       

Change of Control. A Change of Control shall have occurred.

SECTION 7.2       
Action if Bankruptcy.  If any Event of Default described in Section 7.1.4
shall occur, the outstanding principal amount of the Notes and all other
Obligations shall automatically be and become immediately due and payable
without notice, demand or presentment.

SECTION 7.3       

Action if Other Event of Default.  If any Event of Default (other than any Event of Default
described in Section 7.1.4) shall occur for any reason, whether voluntary
or involuntary, and be continuing, the Required Holders may, upon notice or
demand, declare all or any portion of the outstanding principal amount of the
Notes to be due and payable and all other Obligations to be due and payable,
whereupon the full unpaid amount of the Notes and all other Obligations which
shall be so declared due and payable shall be and become immediately due and
payable without further notice, demand, or presentment, and to the extent any
Obligations are paid by the Issuer, they shall constitute a prepayment under
this Agreement. If at any time any portion of the outstanding principal amount
of the Notes or any other Obligations shall be declared due and payable in
accordance with this Section 7.3, the Required Holders may at any time
thereafter, by written instrument filed with the Issuer, rescind and annul such
declaration and its consequences. Notwithstanding the foregoing and subject to
the subordination provisions of this Agreement, the right of any Noteholder to
receive payment of principal of, or interest on any Note held by such Noteholder
on or after the respective dates expressed in such Note, or to bring suit for
the enforcement of any such repayment on or after such respective date, is
absolute and unconditional and shall not be impaired or affected without the
consent of such Noteholder.

ARTICLE 8



GUARANTEE

SECTION 8.1.      
The Guarantee.    Each Guarantor, jointly and severally, hereby absolutely,
unconditionally and irrevocably guarantees to the Noteholders, and their
successors, endorsees, transferees and assigns, the prompt payment (whether at
stated maturity, by acceleration or otherwise) and performance of (a) the Notes
and the other Obligations of the Issuer, including (i) all principal of and
interest (including any interest which accrues after the commencement of any
case, proceeding or other action relating to the bankruptcy, insolvency or
reorganization of the Issuer, whether or not such interest constitutes an
allowable claim) on any Note issued pursuant to this Agreement and (ii) all
other amounts payable and all obligations to be performed by the Issuer under
this Agreement or any other Document and (b) any renewals or extensions of any
of the foregoing (collectively, the "Guaranteed Obligations"). Each
Guarantor, jointly and severally, agrees that this is a guarantee of payment and
performance and not of collection, and that its obligations hereunder shall be
primary, absolute and unconditional, irrespective of, and unaffected by:


(1)        the genuineness, validity, regularity, enforceability or
    any future amendment of, or change in, the Notes, this Agreement or any
    other Document or any other agreement, document or instrument to which the
    Issuer or any other Obligor is or are or may become a party;


(2)        the absence of any action to enforce the Notes, this
    Agreement or any other Document or the waiver or consent by the Noteholders
    with respect to any of the provisions of any Document;


(3)        any other action or circumstances which might otherwise
    constitute a legal or equitable discharge or defense of a surety or
    guarantor (other than payment in full);

it being agreed by each Guarantor that its obligations
hereunder shall not be discharged until the payment and performance, in full, of
the Guaranteed Obligations. Each Guarantor shall be regarded, and shall be in
the same position, as principal debtor with respect to the Guaranteed
Obligations. Each Guarantor expressly waives all rights it may now or in the
future have under any statute, or at common law, or at law or in equity, or
otherwise, to compel any Noteholder to proceed in respect of the Guaranteed
Obligations against the Issuer or any other Person before proceeding against, or
as a condition to proceeding against, the Issuer. Each Guarantor further
expressly waives and agrees not to assert or take advantage of any defense based
upon the failure of any Noteholder to commence an action in respect of the
Guaranteed Obligations against the Issuer, any other Obligor or any other
Person. Each Guarantor agrees that any notice or directive given at any time to
any Noteholder by the Issuer, any other Obligor or any other Person which is
inconsistent with the waivers in the preceding two sentences shall be null and
void and may be ignored by such Noteholder, and, in addition, may not be pleaded
or introduced as evidence in any litigation relating to the obligations of such
Guarantor under this Article 8 for the reason that such pleading or
introduction would be at variance with the written terms hereof, unless the
Required Holders have specifically agreed otherwise in writing. The foregoing
waivers are of the essence of the transaction contemplated by the Documents and,
but for this provisions of this Article 8 and such waivers, the Initial
Purchasers and each subsequent Noteholder would decline to purchase the Notes.

SECTION 8.2.      

Demand by the Noteholders.    In addition to the terms of the guarantee set forth in 
Section 8.1, and in no manner imposing any limitation on such terms, if the
then outstanding principal amount of the Guaranteed Obligations is declared to
be immediately due and payable (or automatically becomes immediately due and
payable), then the Guarantors are, jointly and severally, required to pay to the
holder of the Guaranteed Obligations the entire outstanding Guaranteed
Obligations due and owing to such holder. Payment by the Issuer shall be
credited and applied upon the Guaranteed Obligations and shall be made in
immediately available federal funds to an account as set forth in Section 2.3.
The Noteholders will, upon any such payment to such Noteholders, promptly
thereafter cause to be distributed like funds (after payment of any amounts
payable to the Noteholders pursuant to Section 2.3) ratably to each
holder of the Guaranteed Obligations based on the respective Guaranteed
Obligations held by such holder.

SECTION 8.3.      

Enforcement of Guarantee.    Except as otherwise provided in this Agreement, in no event
shall any Noteholder have any obligation (although each is entitled, at its
option) to proceed against the Issuer or any other Obligor or Person or any real
or personal property pledged to secure the Guaranteed Obligations before
proceeding against any Guarantor, and any Noteholder may proceed, prior or
subsequent to, or simultaneously with, the enforcement of any Noteholder’s
rights hereunder, to exercise any right or remedy which it may have against the
Issuer or any such other Person or against any property, real or personal, as a
result of any Lien it may have as security for all or any portion of the
Guaranteed Obligations.

SECTION 8.4.      

Waivers.    In addition to the waivers contained in Section 8.1,
each Guarantor waives, and agrees that it shall not at any time insist upon,
plead or in any manner whatever claim or take the benefit or advantage of, any
appraisal, valuation, stay, extension, marshalling of assets or redemption laws,
or exemption, whether now or at any time hereafter in force, which may delay,
prevent or otherwise affect the performance by it of its obligations under, or
the enforcement by the Noteholders of, the provisions of this Article 8.
Each Guarantor further hereby waives diligence, presentment and demand (whether
for non-payment or protest or of acceptance, maturity, extension of time, change
in nature or form of the Guaranteed Obligations, acceptance of the Guarantees by
the Noteholders and acceptance of security, release of security, composition or
agreement arrived at as to the amount of, or the terms of, the Guaranteed
Obligations, notice of adverse change in the Issuer’s or any other Obligor’s
financial condition or any other fact which might materially increase the risk
to the Guarantors) with respect to any of the Guaranteed Obligations or all
other demands whatsoever and, to the extent permitted by applicable law, waives
the benefit of all provisions of law which are or might be in conflict with the
terms of this Article 8. Each Guarantor represents, warrants and agrees
that its obligations under this Article 8 are not and shall not be
subject to any counterclaims, offsets or defenses of any kind against the
Noteholders, the Issuer, the other Obligors or any other guarantor of the
Guaranteed Obligations now existing or which may arise in the future.

SECTION 8.5.      
Benefits of Guarantee.    The provisions of this Article 8 are for the benefit
of the Noteholders and their respective successors, transferees, endorsees and
assigns and nothing herein contained shall impair, as among the Issuer and the
Noteholders, the obligations of the Issuer under the Notes and the Documents.

SECTION 8.6.      
Modification of Notes, etc.    If the Noteholders shall at any time or from time to time,
with or without the consent of, or notice to, each Guarantor:


(1)        change or extend the manner, place or terms of payment of, or renew
        or alter all or any portion of, the Guaranteed Obligations, including,
        without limitation, the Notes and the other Obligations under the
        Documents;


(2)        take any action under or in respect of the Notes or the Documents in
        the exercise of any remedy, power or privilege contained therein or
        available to it at law, equity or otherwise, or waive or refrain from
        exercising any such remedies, powers or privileges;


(3)        amend or modify, in any manner whatsoever, the Notes or the
        Documents;


(4)        extend or waive the time for any of the Issuer’s or other Person’s
        performance of, or compliance with, any term, covenant or agreement on
        its part to be performed or observed under the Notes or the Documents,
        or waive such performance or compliance or consent to a failure of, or
        departure from, such performance or compliance;


(5)        take and hold security or collateral for the payment of the
        Guaranteed Obligations or sell, exchange, release, dispose of, or
        otherwise deal with, any property pledged, mortgaged or conveyed, or in
        which the Noteholders may have been granted a Lien, to secure any
        Indebtedness of the Issuer, any other Obligors or any other guarantor of
        any of the Guaranteed Obligations, to the Noteholders;


(6)        release anyone who may be liable in any manner for the payment of
        any amounts owed by the Issuer, any other Obligors or any other
        guarantor of any of the Guaranteed Obligations, to any Noteholder;


(7)        modify or terminate the terms of any intercreditor or subordination
        agreement pursuant to which claims of other creditors of the Issuer, any
        other Obligors or any other guarantor of any of the Guaranteed
        Obligations, are subordinated to the claims of any Noteholder; or


(8)        apply any sums by whomever paid or however realized to any amounts
        owing by the Issuer, any other Obligors or any other guarantor of the
        Guaranteed Obligations, to any Noteholder in such manner as any
        Noteholder shall determine in its discretion;

then none of the Noteholders shall incur any liability to any
Guarantor as a result thereof, and no such action shall impair or release the
obligations of any Guarantor under this Article 8.

SECTION 8.7.      
Reinstatement. To the extent permitted by law, the provisions of this 
Article 8 shall remain in full force and effect and continue to be effective
in the event any petition is filed by or against the Issuer or other Obligors
for liquidation or reorganization, in the event the Issuer or any other Obligors
becomes insolvent or makes an assignment for the benefit of creditors or in the
event a receiver or trustee is appointed for all or any significant part of the
assets of the Issuer or any other Obligors, and shall continue to be effective
or be reinstated, as the case may be, if at any time payment and performance of
the Guaranteed Obligations or any part thereof is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by any
Noteholder, whether as a "voidable preference", "fraudulent conveyance"
or otherwise, all as though such payment or performance had not been made. In
the event that any payment of the Guaranteed Obligations, or any part thereof,
is rescinded, reduced, restored or returned, the Guaranteed Obligations or part
thereof so rescinded, restored or returned shall be reinstated, and the
Guaranteed Obligations shall be deemed reduced only by such amount paid and not
so rescinded, reduced, restored or returned.

SECTION 8.8.      
Waiver of Subrogation, etc.    Upon the making by any Guarantor of any payment hereunder in
respect of the Guaranteed Obligations, such Guarantor shall be subrogated to the
rights of the Noteholders against the Issuer with respect to such payment; 
provided that such Guarantor shall not enforce any right to receive any
payment by way of subrogation, reimbursement, contribution or setoff resulting
from such payment until all of the Guaranteed Obligations have been paid in
full. If any amount shall be paid to any Guarantor on account of such
subrogation, reimbursement, contribution or setoff rights, such amount shall be
held in trust for the benefit of the Noteholders and any other holders of the
Guaranteed Obligations and shall forthwith be paid to the Noteholders and all
other holders of Guaranteed Obligations to be credited and applied upon the
Guaranteed Obligations, whether matured or unmatured, in accordance with the
terms of the Notes and this Agreement.  

SECTION 8.9.      
Election of Remedies, etc.    Any election of remedies which results in the denial or
impairment of the right of any Noteholder to seek a deficiency judgment against
the Issuer shall not impair any Guarantor’s obligations to pay the full amount
of the Guaranteed Obligations. In the event any Noteholder shall bid at any
foreclosure or trustee’s sale or at any private sale permitted by law or the
Documents, such Noteholder may bid all or less than the amount of the Guaranteed
Obligations and the amount of such bid need not be paid by such Noteholder but
shall be credited against the Guaranteed Obligations. The amount of the
successful bid at any such sale, whether any Noteholder or any other party is
the successful bidder, shall be conclusively deemed to be the fair market value
of the collateral and the difference between such bid amount and the remaining
balance of the Guaranteed Obligations shall be conclusively deemed to be the
amount of the Guaranteed Obligations guaranteed under the provisions of this
Article 8, notwithstanding that any present or future law or court decision or
ruling may have the effect of reducing the amount of any deficiency claim to
which any Noteholder might otherwise be entitled but for such bidding at any
such sale.

SECTION 8.10.      

Subordination of
    Guarantees. All Guarantees pursuant to this Article 8 will be
subordinated on the same basis to Senior Debt of such Guarantor as the Notes are
subordinated to Senior Debt under Article 12.

SECTION 8.11.      

Continuing Guarantee. Each Guarantor agrees that the provisions of this 
Article 8 are a continuing Guarantee and shall remain in full force and
effect until the payment and performance in full of the Guaranteed Obligations.

SECTION 8.12.      

Contribution. In the event any Guarantor (a "Funding Guarantor")
shall make a payment in respect of the Notes or any other Obligations or shall
suffer any loss as a result of any realization upon any of its assets pursuant
to any Document, the other Guarantors (the "Contributing Guarantors") shall,
subject to the last sentence of this Section 8.12, contribute to such
Funding Guarantor an amount equal to such Contributing Guarantor’s Pro Rata
Share of such payment made, or loss suffered, by such Funding Guarantor. The
Contributing Guarantor’s Pro Rata Share with respect to any such payment or loss
by each Funding Guarantor shall be determined as of the date on which such
payment or loss was made or suffered by reference to the ratio of (i) such
Contributing Guarantor’s maximum obligation hereunder as provided in
Section 8.13 (such Guarantor’s "Maximum Obligation") as of such date
(without giving effect to any right to receive, or obligation to make, any
contribution hereunder) to (ii) the aggregate Maximum Obligations of all
Guarantor’s (including such Funding Guarantor) as of such date (without giving
effect to any right to receive, or obligation to make, any contribution
hereunder). Nothing in this Section 8.12 shall affect each Guarantor’s
several liability for the entire amount of the Obligations (up to such
Guarantor’s Maximum Obligation). Each Guarantor covenants and agrees that its
obligation to make a contribution hereunder to a Funding Guarantor and its right
to receive any contribution hereunder from a Contributing Guarantor shall be
subordinate and junior in right of payment to the Obligations.

SECTION 8.13.      
Savings Clause.

(a)        It is the intent of each Guarantor that its maximum
obligations hereunder (the "Guarantor Maximum Obligation") shall be in,
but not in excess of:


(i)        in a case or proceeding commenced by or against such
    Guarantor under the Bankruptcy Code on or within one year from the date on
    which such Guaranteed Obligations are incurred, the maximum amount which
    would not otherwise cause such Guaranteed Obligations to be avoidable or
    unenforceable against the Guarantor under (A) Section 548 of the Bankruptcy
    Code or (B) any state fraudulent transfer or fraudulent conveyance act or
    statute applied in such case or proceeding by virtue of Section 544 of the
    Bankruptcy Code; or


(ii)        in a case or proceeding commenced by or against such
    Guarantor under the Bankruptcy Code subsequent to one year from the date on
    which the Guaranteed Obligations of such Guarantor are incurred, the maximum
    amount which would not otherwise cause such Guaranteed Obligations to be
    avoidable or unenforceable against such Guarantor under any state fraudulent
    transfer or fraudulent conveyance act or statute applied in any such case or
    proceeding by virtue of Section 544 of the Bankruptcy Code; or


(iii)        in a case or proceeding commenced by or against such
    Guarantor under any law, statute or regulation other than the Bankruptcy
    Code (including any other bankruptcy, reorganization, arrangement,
    moratorium, readjustment of debt, dissolution, liquidation or similar debtor
    relief laws or any state fraudulent transfer or fraudulent conveyance act or
    statute applied in any such case or proceeding), the maximum amount which
    would not otherwise cause the Guaranteed Obligations of such Guarantor to be
    avoidable or unenforceable against such Guarantor under such law, statute or
    regulation.

The substantive laws under which possible avoidance or
unenforceability of the Guaranteed Obligations shall be determined in any such
case or proceeding shall hereinafter be referred to as the "Avoidance
Provisions."  

(b)        To the extent set forth in this Section 8.13(b), but
only to the extent that the Guaranteed Obligations of such Guarantor would
otherwise be subject to avoidance under any Avoidance Provisions if such
Guarantor is not deemed to have received valuable consideration, fair value or
reasonably equivalent value for such Guaranteed Obligations, and if such
Guaranteed Obligations would render such Guarantor insolvent, leave such
Guarantor with an unreasonably small capital to conduct its business or cause
such Guarantor to have incurred debts (or to have intended to have incurred
debts) beyond its ability to pay such debts as they mature, in each case as of
the time any of the Guaranteed Obligations are deemed to have been incurred
under the Avoidance Provisions, then the maximum Guaranteed Obligations shall be
reduced to that amount which, after giving effect thereto, would not cause the
Guaranteed Obligations, as so reduced, to be subject to avoidance under the
Avoidance Provisions. This Section 8.13(b) is intended solely to preserve
the rights of the Noteholders under the Notes and the other Documents to the
maximum extent that would not cause the Guaranteed Obligations to be subject to
avoidance under the Avoidance Provisions, and neither such Guarantor nor any
other Person shall have any right or claim under this Section 8.13(b) as
against any Noteholder that would not otherwise be available to such Person
under the Avoidance Provisions.

ARTICLE 9



DEFINITIONS

SECTION 9.1.       
Defined Terms.    The following terms (whether or not underscored) when used
in this Agreement, including its preamble and recitals, shall, except where the
context otherwise requires, have the following meanings (such meanings to be
equally applicable to the singular and plural forms thereof):

"Additional Notes" means notes substantially in the
form of Exhibit A that are issued after the Closing Date from time to
time in accordance with Section 2.4.

"Affiliate" means, with respect to any Person, any of
(i) a director or executive officer of such Person, (ii) a spouse, parent,
sibling or descendant of such Person (or a spouse, parent, sibling or descendent
of any director or executive offer of such Person) and (iii) any other Person
that, directly or indirectly, controls or is controlled by or is under common
control with such Person. For the purpose of this definition, "control"
(including the terms "controlling," "controls by" and "under
common control with"), as used respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities or by contract or agency or otherwise.

"Agreement" means, on any date, this Purchase
Agreement as originally in effect on the Closing Date and as thereafter from
time to time amended, supplemented, amended and restated, or otherwise modified
and in effect.

"Amended Collateral Agency Agreement" means the
Collateral Agency Agreement dated as of March 11, 2004, among Elliott
Associates, L.P., as Collateral Agent, the Obligors and the Initial Purchasers
as amended by the Collateral Agency Agreement Amendment, as the same may be
further amended, restated, supplemented or otherwise modified in accordance with
the terms thereof.

"Amendment" means
the Amendment No. 1 and Waiver to
Purchase Agreement, dated as of May 27, 2004, by and among the Issuer and the
holders listed on the signature pages thereof.

"Approval" means each and every approval, consent,
filing and registration by or with any Person, including, without limitation,
Governmental Authorities, necessary to authorize or permit the execution,
delivery or performance of this Agreement, the Notes or any other Document, for
the issuance of the Notes, for the validity or enforceability hereof or thereof,
or for the consummation of the transactions contemplated by the Documents.
 

"Avoidance Provisions" is defined in Section 8.13.

"Bankruptcy Code"
means the Bankruptcy Code of 1978,
11 U.S.C. § 101 et seq., as amended.

"Business Day" means
any day which is neither a
Saturday or Sunday nor a legal holiday on which banks are authorized or required
to be closed in New York, New York.

"Capitalized Lease Liabilities" means all monetary
obligations of the Issuer and its Subsidiaries under any leasing or similar
arrangement which, in accordance with GAAP, are or would be classified as
capitalized leases.

"Change of Control" means any of (1) the sale, lease,
exchange or other transfer by the Issuer of all or substantially all of its
assets, (2) the merger of the Issuer with, or the consolidation of the Issuer
into, any other corporation as a result of which the stockholders of the Issuer
immediately prior to such merger or consolidation do not own Stock having more
than 50% of the outstanding voting power (assuming conversion of all convertible
securities and exercise of all outstanding options and warrants) of the
surviving corporation, (3) the dissolution or liquidation of the Issuer,
(4) more than 20% of the outstanding voting Stock of the Issuer becomes
beneficially owned, directly or indirectly, by any "person" or "group" (as such
terms are used in Sections 13(d) and 14(d) of the Exchange Act and the
applicable rules and regulations thereunder), or (5) during any period of two
(2) years (whether commencing before or after the Closing Date), the failure of
individuals who on the first day of such period were directors of the Issuer
(together with any replacement or additional directors who are nominated or
elected by a majority of directors then in office) to constitute a majority of
the Board of Directors of the Issuer.

"Charges" means all federal, state, county, city,
municipal, local, foreign or other governmental (including PBGC) (a) taxes at
the time due and payable and (b) levies, assessments, charges, liens, claims or
encumbrances upon or relating to (i) the Obligations, (ii) the Issuer’s and its
Subsidiaries’ employees, payroll, income or gross receipts, (iii) the Issuer’s
and its Subsidiaries’ ownership or use of their assets, or (iv) any other aspect
of the Issuer’s and its Subsidiaries’ business.  

"Closing" is defined in Section 1.2.

"Closing Date" is defined in Section 1.2.

"Collateral" means collectively, all of the tangible
and intangible real and personal property, owned by Obligors (including but not
limited to contract rights, accounts receivable, payments, earnings, bank
accounts and other property of Obligors) over and in which the Collateral Agent
has a Lien under the Security Documents.

"Collateral Agency Agreement Amendment" means
Amendment No. 1 to Collateral Agency Agreement, of even date herewith, among
Elliott Associates, L.P., as Collateral Agent, the Obligors and the other
parties set forth therein.

"Collateral Agent" is defined
in
Section 3.1.



"Commission" means the
Securities and Exchange
Commission.

"Common Stock" means shares now or hereafter
authorized of any class of common stock of the Issuer and any other capital
stock of the Issuer, however designated, that has the right (subject to any
prior rights of any class or series of preferred stock) to participate in any
distribution of the assets upon voluntary or involuntary liquidation,
dissolution or winding up of the Issuer or in the earnings of the Issuer without
limit as to per share amount, and shall include, without limitation, the
presently authorized 35,000,000 shares of Common Stock, par value $1.00 per
share.

"Commonly Controlled Entity" means, with respect to
any Person, an entity or trade or business, whether or not incorporated, which
is from time to time a member of a controlled group or a group under common
control with such Person within the meaning of Sections 414(b), 414(c), 414(m)
or 414(o) of the Internal Revenue Code or Section 4001(a)(14) of ERISA. Unless
otherwise indicated in this Agreement, Commonly Controlled Entity shall refer to
a Commonly Controlled Entity with respect to the Issuer.

"Contract Payments" is defined in Section 6.1.17.

"Contractual Obligation" means,
relative to any
Person, any provision of any security issued by such Person or of any Instrument
or undertaking to which such Person is a party or by which it or any of its
property is bound.

"Contributing Guarantors" is
defined in 
Section 8.12.

"Convertible Securities" means evidences of
Indebtedness, shares of stock or other securities which, with or without payment
of additional consideration in cash or property, are convertible into or
exchangeable for shares of Common Stock, whether or not the right to convert or
exchange thereunder is immediately exercisable or is conditioned upon the
passage of time, the occurrence or non-occurrence of some other event, or both.

"Default" means any Event of
Default or any condition
or event which, after notice or lapse of time or both, would constitute an Event
of Default.

"Disclosure Schedule" means the Disclosure Schedule
attached hereto as Schedule 1.

"Documents" means, collectively, this Agreement, the
Notes, the Security Documents and each other Instrument executed and delivered
by the Issuer or any other Obligor as of the date hereof or at any time
thereafter, in connection with the transactions contemplated by this Agreement,
in each case, as amended, modified or supplemented from time to time.

"Dollar" and the sign "$" mean
lawful money of
the United States.

"ECH" means ECH Offshore, S. de R.L. de C.V., a 
sociedad de responsabilidad limitada de capital variable organized under the
laws of Mexico and one of the Obligors hereunder.

"ECH Mexico Guarantee" means
the "Contrato de Fianza"
(Guaranty Agreement), dated as of May 27, 2004, granted by ECH in favor of
Elliott Associates, L.P.

"Environment" means soil, surface
waters, ground
waters, land, streams, sediments, surface or subsurface strata and ambient air.

"Environmental Laws" means all
federal, state and
local laws or regulations, codes, common law, consent agreements, orders,
decrees, judgments or injunctions issued, promulgated, approved or entered thereunder relating to pollution or protection of the Environment, natural
resource or occupational health and safety.  

"Environmental Liabilities and Costs" means all
liabilities, obligations, responsibilities, remedial actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, expert
and consulting fees and costs of investigation and feasibility studies), fines,
penalties, settlement costs, sanctions and interest incurred as a result of any
claim or demand, by any Person, whether based in contract, tort, implied or
express warranty, strict liability, criminal or civil statute, any Environmental
Law, permit, order, variance or agreement with a Governmental Authority or other
Person, arising from or related to the administration of any Environmental Law
or arising from environmental, health or safety conditions or a release or
threatened release resulting from the past, present or future operations of the
Issuer or any of its Subsidiaries or affecting any of their properties, or any
release or threatened release for which the Issuer or any of its Subsidiaries is
otherwise responsible under any Environmental Law.

"ERISA" means the Employee
Retirement Income Security
Act of 1974, as amended, and any successor statute of similar import, together
with the regulation thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.

"Event of Default" is defined in Section 7.1.

"Exchange Act" means the Securities
Exchange Act of
1934, as amended from time to time.

"Exim Bank" means the Export-Import
Bank of the United
States.

"Exim Bank Agreement" means the Loan Agreement, dated
August 15, 2001, between Horizon Offshore Contractors, Inc., Horizon Subsea
Services, Inc. and Horizon Vessels, Inc., HorizEn, LLC, jointly and severally,
and Southwest Bank of Texas, N.A., as agent for the lenders, as amended through
the date hereof, and any notes, guarantees, security agreements and mortgages
executed with respect thereto.

"Existing Noteholders" means the "Noteholders" as
defined in the Existing Purchase Agreement.

"Existing Purchase Agreement" means the Purchase
Agreement, dated as of March 11, 2004, among the Issuer, the guarantors listed
on the signature pages thereof, and the purchasers listed on the signature pages
thereof, as amended, restated, supplemented or otherwise modified in accordance
with the terms thereof.

"Existing Subordinated Notes"
means the 16%
Subordinated Secured Notes due March 31, 2007 issued from time to time by the
Issuer pursuant to the Existing Purchase Agreement and guaranteed by the
guarantors as set forth therein.

"Fiscal Quarter" means any quarter
of a Fiscal Year.

"Fiscal Year" means each twelve
month accounting
period ending on December 31 of each calendar year.

"Funding Guarantor" is defined
in Section 8.12.



"F.R.S. Board" means the Board of
Governors of the
Federal Reserve System (or any successor).

"GAAP" means generally accepted
accounting principles
in effect from time to time in the United States.

"Governmental Authority" means 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.

"Guaranteed Obligations" is defined in Section 8.1.

"Guarantees" means the obligations of
the Guarantors
pursuant to Article 8.

"Guarantor" or "Guarantors" means (i)
any
Guarantor listed on the signature page of this Agreement, and (ii) each of the
Issuer’s current or future Subsidiaries that in the future becomes bound by this
Agreement pursuant to Section 6.1.17.

"Guarantor Maximum Obligation" is
defined in 
Section 8.13.

"herein", "hereof", "hereto", "hereunder"
and similar terms contained in this Agreement or any other Document refer to
this Agreement or such other Document, as the case may be, as a whole and not to
any particular Section, clause or provision of this Agreement or such other
Document.

"HOC Mexico" means HOC Offshore S. de R.L. de C.V., a
sociedad de responsabilidad limitada de capital variable organized under the
laws of Mexico and one of the Obligors hereunder.

"HOC Mexico Guarantee" means
the "Contrato de Fianza"
(Guaranty Agreement), dated as of May 27, 2004, granted by HOC Mexico in favor
of Elliott Associates, L.P.

"IEC" means Israel Electric
Corporation Ltd.

"IEC Contract" means the Construction
Agreement, dated
March 1, 2004, between Horizon Offshore Contractors, Inc. and IEC.

"IEC Letter of Credit" means the letter
of credit
required to be issued on behalf of the Issuer or any of its Subsidiaries in
favor of IEC pursuant to the IEC Contract.

"including" means including without
limiting the
generality of any description preceding such term.

"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, debentures, 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;

(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).  

"Indemnified Liabilities"
        is defined in Section 11.4.

"Initial Purchasers" is
defined in the
        preamble to this Agreement.

"Insolvency" or "Insolvent" means, at
        any particular time, a Multiemployer Pension Plan is insolvent within
        the meaning of Section 4245 of ERISA.

"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.

"Internal Revenue Code" means the United
        States Internal Revenue Code of 1986, as amended.

"Investment" means, relative to any Person,
        (a) any direct or indirect loan or advance or other extension of credit
        (including, without limitation, a guarantee) or capital contribution
        made by such Person to any other Person excluding commission, travel and
        similar advances to officers and employees made in the ordinary course
        of business), (b) any ownership or similar interest held by such Person
        in any other Person, and (c) the purchase of any debt or equity
        securities or instruments issued by any other Person including, without
        limitation, Stock, notes, debentures, drafts and acceptances, trust
        certificates, partnership interests or units or membership interests in
        limited liability companies (other than temporary short term investments
        in cash equivalents made by the Issuer or any of its Subsidiaries for
        cash management purposes). The amount of any Investment of the nature
        referred to in clause (a) or (b) shall be the original principal or
        capital amount thereof less all returns of principal or equity thereon
        (and without adjustment by reason of the financial condition of such
        other Person) and, if made by the transfer or exchange of property other
        than cash, shall be deemed to have been made in an original principal or
        capital amount equal to the fair market value of such property.

"Iroquois Contract"
means the Construction
        Contract No. 02-12, dated April 12, 2002, between Iroquois Gas
        Transmission System, L.P. by its agent Iroquois Pipeline Operating
        Company and Horizon Offshore Contractors, Inc.

"Issuer" is defined in the preamble to this
        Agreement.

"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).

"Loss" means any loss, damage, destruction,
        theft, or seizure of, or any other casualty with respect to, or any
        condemnation of, any property or asset of any Person in an amount in
        excess of $500,000 individually or in the aggregate for any Fiscal Year;
        and the "amount" of any Loss means (i) if such asset or property
        is repaired or replaced, the greater of (A) the cost to repair or
        replace the property or asset that was the subject of such Loss and (B)
        the amount of insurance proceeds or condemnation awards payable as a
        result of such Loss, and (ii) if such asset or property is not repaired
        or replaced, the amount of insurance proceeds or condemnation awards
        payable as a result of such loss.

"Material Adverse Change" means a material
        adverse change in (a) the condition (financial or otherwise),
        operations, performance, business, properties or prospects of the Issuer
        and its Subsidiaries taken as a whole; or (b) the rights and remedies of
        the Noteholders under the Documents; or (c) the ability of the Issuer to
        repay the Notes or any other Obligations, or of the Issuer or other
        Obligor to perform its obligations under the Documents; or (d) the
        legality, validity or enforceability of any Document.

"Maturity" means the earlier of the Stated
        Maturity Date or such other date when the Notes or portion thereof shall
        be or become due and payable in accordance with the terms of this
        Agreement, whether by required repayment, prepayment, declaration or
        otherwise.

"Maximum Lawful Rate" is defined in
Section 11.15.

"Maximum Obligation"
is defined in Section 8.12.

"Mexican Pledge Agreement" means the Pledge
        Agreement without Transmission of Possession granted by ECH Offshore S.
        de R.L. de C.V. to Elliott Associates, L.P., as Collateral Agent for
        itself and the various holders.

"Multiemployer Pension Plan" means a
        Multiemployer Plan which is subject to Subtitle E of Title IV of ERISA.

"Multiemployer Plan"
means a Plan which is a "multiemployer
        plan" within the meaning of Section 3(37) of ERISA.

"Non-Wholly Owned Subsidiary" means a
        Subsidiary of the Issuer whose Stock is not owned entirely by the Issuer
        or a Wholly-Owned Subsidiary.

"Noteholder" and "Noteholders" is
        defined in the preamble to this Agreement.

"Noteholder Parties" is
defined in Section 11.4.

"Notes" is defined in Section 1.1.

"Obligations" means
all obligations of the
        Issuer (monetary or otherwise) arising under or in connection with this
        Agreement, the Notes and the other Documents.

"Obligor" means any of
the Issuer and the
        Guarantors.

"Organic Document"
means, relative to any
        Person, its articles or certificate of incorporation or certificate of
        limited partnership or organization, its bylaws, partnership or
        operating agreement or other organizational documents, and all
        stockholders agreements, voting trusts and similar arrangements
        applicable to any of its Stock or partnership interests or other
        ownership interests.

"PBGC" means the
Pension Benefit Guaranty
        Corporation and any entity succeeding the Issuer or any of its
        Subsidiaries to any or all of its functions under ERISA.

"Pemex" is defined in
Section 6.1.17.

"Pemex Claims" means all claims for payment or
        damages, including all interest, penalties and fees thereon, made by the
        Obligors under the Pemex Contract other than claims relating to weather.



"Pemex Contract" is
defined in Section 6.1.17.

"Pension Plan" means
any Plan which is subject
        to the provisions of Title IV of ERISA, or to the provisions of
        Section 302 of ERISA or Section 412 of the Internal Revenue Code.

"Permitted Joint Venture" means the
        participation by the Issuer or any of its Subsidiaries in (i) the joint
        ventures set forth in Item 9(a) (Permitted Joint Ventures) of the
        Disclosure Schedule in which the aggregate net Investment by the Issuer
        and its Subsidiaries in such joint ventures at any one time will not
        exceed (x) $10,000,000 for the joint venture set forth in section (1) of
Item 9(a) (Permitted Joint Ventures) of the Disclosure Schedule
        and (y) $15,000,000 for the joint venture set forth in section (2) of Item 9(a) (Permitted Joint Ventures) of the Disclosure Schedule and
        (ii) any other joint ventures to perform offshore services in the oil
        and gas industry with any other Persons in which the aggregate net
        Investments by the Issuer and its Subsidiaries in all such joint
        ventures (excluding the joint ventures set forth in Item 9(a)
        (Permitted Joint Ventures) of the Disclosure Schedule) at any one time
        will not exceed $10,000,000.

"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.

"Plan" shall mean, at a particular time, any
        employee benefit plan (within the meaning of Section 3(3) of ERISA),
        which is covered by ERISA and in respect of which the Issuer or any
        Subsidiary or a Commonly Controlled Entity is (or, if such plan were
        terminated at such time, would under Section 4069 of ERISA be deemed to
        be) an "employer" as defined in Section 3(5) of ERISA.

"Post-Default Rate"
means the sum of the rate
        per annum otherwise applicable to the Notes plus two percent (2%)
        per annum.

"Proceeding" means (a) any insolvency,
        bankruptcy, receivership, liquidation, reorganization, readjustment,
        composition or other similar proceeding relating to any of the Obligors,
        its properties or its creditors as such, (b) any proceeding for any
        liquidation, dissolution or other winding-up of any of the Obligors,
        whether voluntary or involuntary, and whether or not involving
        insolvency or bankruptcy proceedings, or (c) any assignment for the
        benefit of creditors or marshaling of assets of any of the Obligors or
        the appointment of a trustee, receiver, sequestrator or other custodian
        for any of the Obligors or any of their properties.

"Projections" means the projected balance
        sheet and projected statements of income and cash flows of the Issuer
        prepared by the Issuer, together with supporting details and a statement
        of underlying assumptions, which have been delivered prior to the
        Closing Date to the Initial Purchasers in connection with their purchase
        of Notes pursuant to this Agreement.

"Purchase Price" is
defined in Section 1.2.

"Quarterly Payment Date" means each March 31,
        June 30, September 30 and December 31, commencing with June 30, 2004,
        or, if such day is not a Business Day, the immediately succeeding
        Business Day.

"Refinancing Indebtedness" means any
        refinancing, extension, renewal, refund, repayment, prepayment,
        redemption, defeasance, retirement, or issuance of a security or
        Indebtedness in exchange or replacement for any Senior Debt, in whole or
        in part, in each case that does not:

(1)  result in an increase in the aggregate principal
        amount of Indebtedness of the Issuer and its Subsidiaries in excess of
        the sum of (i) 5% of the aggregate principal amount outstanding under
        any term loans as of March 11, 2004 and (ii) 10% of the aggregate
        lending commitments under any revolving credit facilities as of March
        11, 2004;

(2)  create Indebtedness with: (a) a Weighted Average
        Life to Maturity that is less than the Weighted Average Life to Maturity
        of the Indebtedness being refinanced; or (b) a final maturity earlier
        than the final maturity of the Indebtedness being refinanced; provided that such Refinancing Indebtedness shall be Indebtedness
        solely of the Issuer or a Guarantor;

(3)  change any of the respective obligors from the
        obligors on the Indebtedness being refinanced;  

(4)  affect the security, if any, for the Indebtedness
        being refinanced (except to the extent that less security is granted to
        holders of such Refinancing Indebtedness); and

(5)  except as set forth in Item 9(b)
        (Refinancing Indebtedness) of the Disclosure Schedule, provide the
        holders of such Refinancing Indebtedness with covenants, defaults,
        rights or remedies that, taken as a whole, are materially more favorable
        to such holders than the terms that are applicable under the instruments
        and documents governing the Indebtedness being refinanced.

"Required Holders" means, at any time,
        Noteholders holding, in the aggregate, two-thirds of the outstanding
        principal amount of the Notes at any time (excluding any Notes held by
        any Obligor or any Subsidiary of any Obligor).

"Requirements of Law" means, as to any Person,
        the Organic Documents of such Person, and all federal, state and local
        laws, rules, regulations, orders, decrees or other determinations of an
        arbitrator, court or other Governmental Authority, including, without
        limitation, all disclosure and other requirements of ERISA, the
        requirements of Environmental Laws and any permits under Environmental
        Laws, the requirements of the Occupational Safety and Health
        Administration, in each case applicable to or binding upon such Person
        or any of its property or to which such Person or any of its property is
        subject.

"Securities Act" means the Securities Act of
        1933, as amended from time to time, and the rules and regulations of the
        Commission thereunder.

"Security Documents" means those documents set
        forth in Schedule 3.

"Senior Debt" means the principal of and
        accrued interest on all Indebtedness incurred by any Obligor 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
        Indebtedness.

"Senior Debt Documents" means those documents
        set forth in Schedule 4.

"Senior Lender" means any holder of Senior
        Debt and "Senior Lenders" means the holders, collectively, of
        Senior Debt.

"Settlement" is defined in
Section 6.1.17(b).

"Sharing Percentage" is defined in
Section
        6.1.11(a).

"Solvent" means, with respect to any Person on
        a particular date, that on such date (i) the fair value of the assets of
        such Person (both at fair valuation and at present fair saleable value)
        is, on the date of determination, greater than the total amount of
        liabilities of such Person (including all obligations and liabilities of
        such Person fixed or contingent, direct or indirect, disputed or
        undisputed, and whether or not required to be reflected on a balance
        sheet prepared in accordance with GAAP), (ii) such Person is able to pay
        all liabilities of such Person as they mature, and (iii) such Person
        does not have unreasonably small capital with which to carry on its
        business. In computing the amount of contingent or unliquidated
        liabilities at any time, such liabilities will be computed at the amount
        which, in light of all the facts and circumstances existing at such
        time, represents the amount that can reasonably be expected to become an
        actual or matured liability.

"Stated Maturity Date" means March 31, 2007.

"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.

"Suit" is defined
in Section 6.1.17(b).

"SWBT Agreement" means the Loan Agreement,
        dated March 27, 2001, between Horizon Offshore Contractors, Inc.,
        Horizon Subsea Services, Inc. and Horizon Vessels, Inc., jointly and
        severally, and Southwest Bank of Texas, N.A., as agent for the lenders,
        as amended through the date hereof, and any notes, guarantees, security
        agreements and mortgages executed with respect thereto.

"Taxes" means all taxes, levies, imposts,
        deductions, charges or withholdings, and all liabilities with respect
        thereto (including any penalties and interest thereon).

"UCC" means the Uniform Commercial Code of any
        applicable jurisdiction, as in effect from time to time.

"United States" or "U.S." means the
        United States of America, its 50 states and the District of Columbia.

"Warrants" mean the
warrants to purchase an
        aggregate of 5,283,300 shares of Common Stock issued pursuant to the
        Existing Purchase Agreement.

"Weighted Average Life to Maturity" means,
        when applied to any Indebtedness at any date, the number of years
        obtained by dividing (a) the then outstanding aggregate principal amount
        of such Indebtedness into (b) the sum of the total of the products
        obtained by multiplying (i) the amount of each then remaining
        installment, sinking fund, serial maturity or other required payment of
        principal, including payment at final maturity, in respect thereof, by
        (ii) the number of years (calculated to the nearest one-twelfth) which
        will elapse between such date and the making of such payment.

"Wholly-Owned Subsidiary" means a Subsidiary
        of the Issuer whose Stock is, directly or indirectly, owned entirely by
        the Issuer.

"written" or "in writing" means any
        form of written communication or a communication by means of telecopier
        device, telegraph or cable.

SECTION 9.2.       

Use of Defined Terms. Unless otherwise defined or the context otherwise
        requires, terms for which meanings are provided in this Agreement shall
        have such meanings when used in the Disclosure Schedule and each Note,
        notice and other communication delivered from time to time in connection
        with this Agreement or any other Document.

SECTION 9.3.       

Cross-References. Unless otherwise specified, references in this
        Agreement and in each other Document to any Article or Section are
        references to such Article or Section of this Agreement or such other
        Document, as the case may be, and unless otherwise specified, references
        in any Article, Section, or definition to any clause are references to
        such clause of such Section, Article or definition.

SECTION 9.4.       

Accounting and
        Financial Determinations. Unless otherwise specified, all accounting terms
        used herein or in any other Document shall be interpreted, all
        accounting determinations and computations hereunder or thereunder shall
        be made, and all financial statements required to be delivered hereunder
        or thereunder shall be prepared in accordance with GAAP.

ARTICLE 10.

REGISTRATION;
        EXCHANGE; SUBSTITUTION OF NOTES

SECTION 10.1.        
Registration of Notes. The Issuer shall keep at its principal executive
        office a register for the registration of transfers of Notes. The name
        and address of each Noteholder, each transfer thereof and the name and
        address of each transferee of one or more Notes shall be registered in
        such register. Prior to due presentment for registration of transfer,
        the Person in whose name any Note shall be registered shall be deemed
        and treated as the owner and holder thereof for all purposes hereof, and
        the Issuer shall not be affected by any notice or knowledge to the
        contrary. The Issuer shall give to any Noteholder, promptly upon request
        therefor, a complete and correct copy of the names and addresses of all
        such Noteholders.

SECTION 10.2.       

Transfer and Exchange
        of Notes. Upon surrender of any Note at the principal
        executive office of the Issuer for registration of transfer or exchange
        (and in the case of a surrender for registration of transfer, duly
        endorsed or accompanied by a written instrument of transfer duly
        executed by the registered Noteholder or his attorney duly authorized in
        writing and accompanied by the address for notices of each transferee of
        such Note or part thereof), the Issuer shall execute and deliver, at its
        expense, one or more new Notes as requested by the registered Noteholder
        thereof, in exchange therefor, in an aggregate principal amount of the
        surrendered Note. Each such new Note shall be payable to or issued to
        such Person as such Noteholder shall request and shall be substantially
        in the form of Exhibit A. Each such new Note shall be dated and
        bear interest from the date to which interest shall have been paid on
        the surrendered Note or dated the date of the surrendered Note if no
        interest shall have been paid thereon. Notes shall not be transferred in
        denominations of less than $100,000 unless necessary to enable the
        registration of transfer by a Noteholder of all of its Notes. Transfers
        hereunder shall be made by the Issuer to the extent permitted by
        applicable law.  

If any transfer of all or a portion of a Note is not
        made pursuant to an effective registration statement under the
        Securities Act, (i) the Noteholder thereof will, if reasonably requested
        by the Issuer, deliver to the Issuer an opinion of counsel, which may be
        counsel to the Noteholder but which must be reasonably satisfactory to
        the Issuer, reasonably satisfactory in form, scope and substance to the
        Issuer, that the Note (or portion thereof) may be sold without
        registration under the Securities Act; (ii) the proposed transferee
        shall make an investment covenant reasonably satisfactory to the Issuer
        (except that no such covenant will be required in connection with a
        transfer effected in accordance with Rule 144A under the Securities
        Act); and (iii) the proposed transferee shall agree that the Note issued
        to such transferee shall bear the legend set forth in Section 1.3(d)
        of this Agreement.

Notwithstanding the foregoing provisions of this Section 10.2, the restrictions upon the transferability of any Note
        and the requirement to include the first two paragraphs of the legend
        set forth in Section 1.3(d) of this Agreement shall terminate as
        to such Note (i) when and so long as such Note shall have been
        effectively registered under the Securities Act and disposed of pursuant
        thereto or (ii) when the Issuer shall have received an opinion of
        counsel reasonably satisfactory to it that such restrictive legend is
        not required in order to ensure compliance with the Securities Act.
        Whenever the restrictions imposed by this Section 10.2 shall
        terminate as to any Note, the Noteholder thereof shall be entitled to
        receive from the Issuer a new Note bearing a legend consisting only of
        the final paragraph of the legend set forth in Section 1.3(d) of
        this Agreement.

SECTION 10.3.       

Replacement of Notes. Upon receipt by the Issuer of notice from any
        Noteholder of the loss, theft, destruction or mutilation of any Note
        held by such Noteholder and (a) in the case of loss, theft or
        destruction, of security reasonably satisfactory to the Issuer (or, in
        the case of the Initial Purchaser or any other Noteholder that is an
        institutional investor, an unsecured agreement of indemnity from such
        Noteholder), or (b) in the case of mutilation, upon surrender and
        cancellation thereof, the Issuer, at its own expense, shall execute and
        deliver, in lieu thereof, a new Note, dated and bearing interest from
        the date to which interest shall have been paid on such lost, stolen,
        destroyed or mutilated Note or dated the date of such lost, stolen,
        destroyed or mutilated Note if no interest shall have been paid thereon.

ARTICLE 11

MISCELLANEOUS

SECTION 11.1.       
Waivers, Amendments,
        etc.

(a)        The provisions of this Agreement and of each Document may from time
        to time be amended, modified or waived, (1) if such amendment,
        modification or waiver is in writing and, (x) in the case of an
        amendment or modification, is consented to by the Issuer and the
        Required Holders and (y) in the case of a waiver of any obligation of
        the Issuer or compliance with any prohibition contained in this
        Agreement or any other Document, is consented to by the Required Holders
        or (2) as otherwise provided in any Document; provided, however, that no
        such amendment, modification or waiver of the following shall be
        effective unless:
        
        


(i)        consented to by each Noteholder, if such amendment,
        modification or waiver would modify any requirement hereunder that any
        particular action be taken by all the Noteholders or by the Required
        Holders;


(ii)        consented to by each Noteholder, if such amendment,
        modification or waiver would modify this Section 11.1, change the
        definition of "Required Holders," or subject any Noteholder to
        any additional obligations;


(iii)        consented to by each Noteholder, if such amendment,
        modification or waiver would reduce any amounts payable to such
        Noteholders described in Article 2, extend the Stated Maturity
        Date, extend the due date for, or reduce the amount of, any payment or
        prepayment of principal of or interest on the Notes (or reduce the
        principal amount of or rate of interest on the Notes);  


(iv)        consented to by each Noteholder, if such amendment,
        modification or waiver would release all or substantially all of the
        Collateral;


(v)        consented to by each Noteholder, if such amendment,
        modification or waiver would release any Guarantor from any of its
        obligations under its Guarantee or this Agreement otherwise than in
        accordance with the terms hereof;


(vi)        consented to by each Noteholder, if such amendment,
        modification or waiver would affect the ranking of the Notes or any
        Guarantee in a manner adverse to the Noteholders;


(vii)        consented to by each Noteholder, if such amendment,
        modification or waiver would make any Notes payable in money other than
        that stated in the Notes; or


(viii)        consented to by each Noteholder, if such amendment,
        modification or waiver would, after the Issuer’s obligation to prepay
        Notes arises hereunder, amend, change or modify in any material respect
        the obligation of the Issuer to make any prepayment of the Notes.

(b)        No failure or delay on the part of any Noteholder in
        exercising any power or right under this Agreement or any other Document
        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 Issuer in any case shall entitle it to any notice or
        demand in similar or other circumstances. No waiver or approval by any
        Noteholder 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.

(c)        No Noteholder shall be under any obligation to
        marshal any assets in favor of the Issuer or any other party or against
        or in payment of any or all of the Obligations. Recourse for security
        shall not be required at any time. To the extent that the Issuer makes a
        payment or payments to the Noteholders, 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.

SECTION 11.2       
Notices. All notices hereunder shall be in writing or by
        telecopy (confirmed in writing) and shall be sufficiently given to the
        Initial Purchasers, Noteholders, the Issuer or any Guarantor if
        addressed or delivered to them at the following addresses:


		
			If to the Initial Purchasers:	
			 To the address listed
        underneath such Initial Purchaser’s name in the signature pages hereof.
	 	 
	 	 
	
			
			with copies to:
	
			
			King & Spalding LLP

			
			1185 Avenue of the Americas

			
			New York, New York 10036

			
			Attention: Alexander G. Simpson

			
			Telecopier No.: (212) 556-2222

			
	 	 
	 	 
	
			If to any other Noteholder:	
			At its last known address
        appearing on the books of the Issuer maintained for such purpose in
        accordance with Section 10.1.
	 	 
	 	 
	
			If to the Issuer or any Guarantor:	
			
			Horizon Offshore, Inc.

			
			2500 CityWest Boulevard, Suite 2200

			
			Houston, Texas 77042

			
			Attention: Executive Vice President and Chief
        Financial Officer

			
			Telecopier No.: (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

			
			Telecopier No.: (504) 582-8012

			




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.

SECTION 11.3       
Costs and Expenses. The Obligors agree to pay from time to time (before
        and after the Closing Date) all reasonable out of pocket expenses of the
        Noteholders for the negotiation, preparation, execution, and delivery of
        this Agreement and each other Document, including schedules and
        exhibits, and any amendments, waivers, consents, supplements,
        terminations, releases or other modifications to this Agreement or any
        other Document as may from time to time hereafter be required (including
        the reasonable fees and expenses of counsel for the Noteholders, or of
        any consultants or other experts retained by the Noteholders from time
        to time in connection therewith), and to pay all reasonable expenses of
        the Required Holders (including reasonable fees and expenses of counsel
        to the Required Holders, or of any consultants or other experts retained
        by the Required Holders) incurred in connection with any restructuring
        or "work-out" of any Obligations, provided that the Noteholders
        shall be entitled to reimbursement in respect of reasonable attorneys’
        fees and expenses payable to a single law firm designated by the
        Required Holders in connection with any such enforcement, restructuring
        or "work-out". The Obligors also agree to pay and hold the
        Noteholders harmless from any stamp, documentary, intangibles, transfer
        or similar taxes or charges, and to reimburse each Noteholder upon
        demand for all reasonable out-of-pocket expenses (including reasonable
        attorneys’ fees and expenses) incurred by such Noteholder in enforcing
        the Obligations of any Obligors under this Agreement or any other
        Document.

SECTION 11.4       
Indemnification. In consideration of the execution and delivery of
        this Agreement by each Noteholder and the making of the Notes, each
        Obligor, jointly and severally hereby indemnifies, exonerates and holds
        each Noteholder, each of its successors and assigns, each of its
        officers, directors, employees, attorneys and agents of each Noteholder
        and each of their respective successors and assigns (each, a "Noteholder
        Party" and collectively, the "Noteholder Parties") free and
        harmless from and against any and all actions, causes of action, suits,
        losses, costs, liabilities (including, but not limited to, under the
        Securities Act, the Exchange Act, or any other federal or state
        statutory law or regulation, and Environmental Liabilities and Costs),
        damages and expenses (irrespective of whether such Noteholder Party is a
        party to the action for which indemnification hereunder is sought),
        including reasonable attorneys’ fees and disbursements (the "Indemnified
        Liabilities"), incurred by the Noteholder Parties or any of them or
        asserted or awarded against the Noteholder Parties or any of them as a
        result of, or arising out of, or relating to:

(a)        any transaction financed or to be financed in whole or in part,
        directly or indirectly, with the proceeds of the Notes;

(b)        the use of any of the proceeds of the Notes by the Issuer for any
        other purpose;

(c)        the making of any claim by any investment banking firm, broker or
        third party that it is entitled to compensation from any Noteholder in
        connection with this Agreement (other than investment banking firms and
        brokers retained by any Noteholder);

(d)        the entering into and performance of this Agreement and any other
        Document by any of the Noteholder Parties (other than the breach by such
        Noteholder Party of this Agreement);

(e)        any investigation, litigation, or proceeding related to any of the
        Documents, whether or not any Noteholder is party thereto;

(f)        the existence of any contaminant, in, under, on or otherwise
        affecting any property owned, used, operated, or leased by the Issuer or
        any Subsidiary in the past, present, or future or any surrounding areas
        affected by such property, regardless of whether the existence of the
        contaminant is related to the past, present or future operations of the
        Issuer and the Subsidiaries, or their predecessors in interest or any
        other Person; any Environmental Liabilities and Costs related to any
        property owned, used, operated, or leased by the Issuer or any
        Subsidiary in the past, present or future; any Environmental Liabilities
        and Costs related to the past, present or future operations of the
        Issuer or any Subsidiary; any alleged violations of any Environmental
        Law related to any property owned, used, operated, or leased by the
        Issuer or any Subsidiary in the past, present or future; any alleged
        violations of any Environmental Law related to the past, present or
        future operations of the Issuer or any Subsidiary; the performance of
        any remedial action that is related to any property owned, used,
        operated or leased by the Issuer or any Subsidiary in the past, present
        or future; the performance of any remedial action that is related to the
        past, present or future operations of the Issuer or any Subsidiary; and
        the imposition of any Lien on any property affected by this Agreement or
        any of the other Documents arising from any Environmental Liabilities or
        Costs; or

(g)        any claim, litigation, investigation or proceeding relating to any
        of the foregoing, whether or not any Noteholder (or any of their
        respective officers, directors, employees or agents) is a party thereto;



except for any such Indemnified
        Liabilities arising for the account of a particular Noteholder Party by
        reason of the relevant Noteholder Party’s bad faith, gross negligence,
        willful misconduct or breach of this Agreement as determined by a final
        and nonappealable decision of a court of competent jurisdiction. If and
        to the extent that the foregoing undertaking may be unenforceable for
        any reason, each Obligor hereby agrees, jointly and severally, to make
        the maximum contribution to the payment and satisfaction of each of the
        Indemnified Liabilities which is permissible under applicable law. The
        foregoing indemnity shall remain operative and in full force and effect
        notwithstanding the consummation of the transactions contemplated
        hereunder, the repayment of any of the Notes made hereunder, the
        invalidity or unenforceability of any term or provision of this
        Agreement or any other Document, or any investigation made by or on
        behalf of any Noteholder. Promptly after receipt by any Noteholder Party
        of notice of commencement of any claim, investigation, litigation or
        proceeding such Noteholder Party will, if a claim in respect thereof is
        to be made against any Obligor under this Section 11.4, deliver
        to the Obligors written notice of such commencement thereof, provided
        that the failure to give such notice shall not relieve the Obligors of
        their obligations under this Section 11.4 except to the extent
        the Obligors are actually prejudiced by such failure. The Obligors shall
        have the right to participate in the defense thereof (including
        participation in discussions regarding such defense) at their own
        expense, but only to the extent such participation would not, in the
        opinion of counsel to the Noteholder Party, result in a waiver of the
        attorney-client privilege of such Noteholder Party. If an
        indemnification claim in respect of any claim, investigation, litigation
        or proceeding is to be made against any Obligor under this Section 11.4 by any Noteholder Party, such Noteholder Party shall
        not settle or compromise any such claim, investigation, litigation or
        proceeding without the prior consent of the Obligors (which consent
        shall not be unreasonably withheld or delayed) so long as the Obligors
        have provided evidence reasonably satisfactory to such Noteholder Party
        that the Obligors have the financial ability to satisfy the maximum
        amount for which such Noteholder Party may be found liable in connection
        with such claim, investigation, litigation or proceeding.

SECTION 11.5       

Survival. The obligations of the Obligors under Section 11.3
        and Section 11.4 shall in each case survive the payment or permitted
        transfer of any Notes, the enforcement, amendment or waiver of any
        provision of this Agreement or the Notes and the termination of this
        Agreement. The representations and warranties made by the Obligors in
        this Agreement, the Notes and in each other Document shall survive the
        execution and deliver of this Agreement, the Notes and each such other
        Document, the purchase or transfer of any Notes or portion thereof or
        interest therein, and may be relied upon by any subsequent Noteholder,
        regardless of any investigation made at any time by or on behalf of any
        Noteholder


SECTION 11.6       

Severability. Any provision of this Agreement, the Notes or any
        other Document 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 Agreement, the Notes or such other Document or
        affecting the validity or enforceability of such provision in any other
        jurisdiction.

SECTION 11.7       

Headings. The various Headings of this Agreement, the Notes
        and of each other Document are inserted for convenience only and shall
        not affect the meaning or interpretation of this Agreement, the Notes or
        such other Document or any provisions hereof or thereof.

SECTION 11.8       
Counterparts,
        Effectiveness, etc.    This Agreement may be executed by the parties hereto
        in several counterparts, each of which shall be deemed to be an original
        and all of which shall constitute together but one and the same
        agreement. This Agreement shall become effective when counterparts
        hereof have been executed by the Issuer, the Guarantors and each Initial
        Purchaser.

SECTION 11.9       
Governing Law; Entire
        Agreement    (a) THIS AGREEMENT AND THE NOTES SHALL EACH BE DEEMED TO BE A
        CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
        NEW YORK. This Agreement, the Notes and the other Documents constitute
        the entire understanding among the parties hereto with respect to the
        subject matter hereof and supersede any prior agreements, written or
        oral, with respect thereto.

(b)        Each Obligor hereby agrees that any legal action or proceeding
        against it with respect to this Agreement, the Notes or any of the other
        Documents 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 Noteholder 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, unless waived by
        the Required Holders in writing, with respect to any action or
        proceeding brought by it against such Noteholders. Each Obligor (other
        than any Obligor organized in The United Mexican States) 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. Each
        Obligor hereby agrees that Sections 5-1401 and 5-1402 of the General
        Obligations Law of the State of New York shall apply to this Agreement
        and each of the other Documents 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 any
        Noteholder to bring proceedings against any Obligor in the courts of any
        other jurisdiction or to serve process in any other manner permitted by
        applicable law (including, with respect to any Obligor organized in The
        United Mexican States, in accordance with Mexican law).

(c)        Each Obligor, other than any Obligor organized in The United
Mexican States, 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. Each such Obligor shall furnish the
consent of CT Corporation System so to act to the
CollateralAgent and the Noteholders on or prior to the
Closing Date. It is understood that a copy of said process served on such agent
will as soon as practicable be forwarded to the Obligors at its address set
forth in Section 11.2, 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. Each such Obligor 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 Collateral Agent and the
Noteholders thereof (and shall furnish to theCollateral
Agent and the Noteholders the consent of any successor agent so to act).

(d)        Each Obligor organized in The United Mexican States hereby
irrevocably agrees to grant within ten (10) Business Days after the Closing Date
a power of attorney for lawsuits and collections in accordance with the
applicable laws of The United Mexican States to William B. Gibbens, III, whose
present address is c/o Horizon Offshore, Inc., 2500 CityWest Boulevard, Suite
2200, Houston, Texas 77042, for such individual to act as authorized agent for
each such Obligor to receive, for and on its behalf and its property, service of
process by personal service thereof 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 personal service thereof. It is understood that a copy
of said process served on such agent will as soon as practicable be forwarded to
each such Obligor at its address set forth in Section 11.2. Each such
Obligor agrees that it will at all times continuously maintain such agent to
receive service of process 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 on its behalf, it shall
promptly grant a power of attorney in accordance with the applicable laws of The
United Mexican States to appoint a successor so to serve and shall advise the
Collateral Agent and the Noteholders thereof (and shall furnish to the
Collateral Agent and the Noteholders the consent of any successor agent so to
act).  

SECTION 11.10.       
Successors and Assigns. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns; 
provided, however, that no Obligor may assign or transfer its rights
or obligations hereunder without the prior written consent of all Noteholders.
The Notes shall be freely transferable, without restriction, subject to
compliance with applicable securities laws and Section 10.2.

SECTION 11.11.       
Other Transactions. Nothing contained herein shall preclude any Noteholder from
engaging in any transaction, in addition to those contemplated by this Agreement
or any other Document, with the Issuer or any of its Subsidiaries and Affiliates
that is not otherwise expressly prohibited under this Agreement or any other
Document.

SECTION 11.12.       

Confidentiality. The Noteholders shall hold all non-public, proprietary or
confidential information obtained pursuant to the requirements of this Agreement
in accordance with their customary procedures for handling confidential
information of this nature and in accordance with safe and sound banking
practices; however, the Noteholders may make disclosure of any such information
to its examiners, Affiliates, outside auditors, counsel, consultants, appraisers
and other professional advisors in connection with this Agreement or as required
by or any proposed transferee in connection with the contemplated transfer of
any Notes or as required or requested by any Governmental Authority or
representative thereof or in connection with the enforcement hereof or of any
Document or related document or pursuant to legal process. In no event shall any
Noteholder be obligated or required to return any materials furnished to it by
or on behalf of the Issuer.

SECTION 11.13.       
Waiver of Jury Trial, etc.    EACH OF THE HOLDERS AND THE OBLIGORS HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), OR
ACTIONS OF SUCH HOLDERS OR OBLIGORS. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
SUCH HOLDERS ENTERING INTO THIS AGREEMENT.

SECTION 11.14.       

Limitation of Liability. None of the Noteholders, the Obligors nor any Affiliates
thereof shall have any liability with respect to, and each of the Noteholders
and the Obligors hereby waive, release and agree not to sue upon, any claim for
any special, indirect, punitive, exemplary or consequential damages suffered by
such Person in connection with, arising out of, or in any way related to this
Agreement, the Documents, the transactions contemplated herein, or any act,
omission or event occurring in connection therewith.

SECTION 11.15.       

Usury Savings Clause. Notwithstanding anything to the contrary in this Agreement
or any other Document, the Noteholders do not intend to and do not hereby
require the Obligors to agree to pay any interest in excess of that permitted by
applicable law and if at any time any rate of interest accruing on any
Obligation, when aggregated with all amounts payable by the Issuer or any other
Obligor under any of the Documents that are deemed or construed to be interest
accrued or accruing on such Obligation under applicable law, exceeds the highest
rate of interest permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable to such Noteholder
with respect to such Obligation (each a "Maximum Lawful Rate"), then in
such event and so long as the Maximum Lawful Rate would be so exceeded, such
rate of interest shall be reduced to the Maximum Lawful Rate; provided
that if at any time thereafter such rate of interest accruing on Obligations
held by such Noteholder is less than the Maximum Lawful Rate, the Issuer shall
continue to pay interest to such Noteholder at the Maximum Lawful Rate until
such time as the total interest received by such Noteholder in respect of the
Obligations held by it is equal to the total interest which such Noteholder
would have received had interest on all Obligations held by such Noteholder (but
for the operation of this Section 11.15) accrued at the rate otherwise
applicable under this Agreement and the other Documents. Thereafter, interest
payable to such Noteholder in respect of the Obligations held by it shall accrue
at the applicable rate set forth in this Agreement or other Documents unless and
until such rate again exceeds the Maximum Lawful Rate, in which event this 
Section 11.15 shall again apply. In no event, shall the total interest
received by any Noteholder pursuant to the terms hereof exceed the amount which
such Noteholder could lawfully have received had interest been calculated for
the full term of this Agreement at the Maximum Lawful Rate. In the event that
the Maximum Lawful Rate is calculated pursuant to this Section 11.15, (a)
if required by applicable law, such interest shall be calculated at a daily rate
equal to the Maximum Lawful Rate divided by the number of days in the year in
which such calculation is made, and (b) if permitted by applicable law, the
Issuer and such Noteholder shall (i) characterize any non principal payment as
an expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effect thereof, and (iii) amortize, prorate, allocate and
spread in equal or unequal parts the total amount of interest throughout the
entire contemplated term of the Notes so that interest for the entire term of
the Notes shall not exceed the Maximum Lawful Rate. Notwithstanding the
provisions of this Section 11.15, in the event that a court of competent
jurisdiction shall make a final determination that any Noteholder has received
interest in excess of the Maximum Lawful Rate, such Noteholder shall, to the
extent permitted by applicable law, promptly apply such excess, first to any
interest due and outstanding under this Agreement and the other Documents,
second to any principal due and payable under this Agreement and the Notes,
third to the remaining principal amount of the Notes and fourth to other unpaid
Obligations held by such Noteholder, and thereafter shall refund any excess to
the Issuer or as a court of competent jurisdiction may otherwise order.

ARTCILE 12.



SUBORDINATION OF INDEBTEDNESS.  

SECTION 12.1.       

Subordination. The Notes and the obligations of the Guarantors under 
Article 8 shall be and hereby are expressly made subordinate for all
purposes to the Senior Debt to the extent and in the manner provided in this
Agreement.

SECTION 12.2.       
Subordination in Event of
    Insolvency or Liquidation, Etc.   
(a) 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 Notes, and (2) any
payment or distribution of assets which would otherwise (but for this Agreement)
be payable or deliverable in respect of the Notes 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.

(b)        The Noteholders agree that if they have not filed appropriate
claims or proofs of claim in respect of the Notes in any Proceeding within
thirty (30) days of any bar date, the Senior Lenders may file such claims or
proofs of claim on their behalf.

SECTION 12.3.       
Turnover of Improper
    Payments. If any payment or distribution,
whether in cash, securities or other property, shall be received by the
Noteholders 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
application to the payment of the Senior Debt to the extent necessary to cause
the Senior Debt to be paid in full.

SECTION 12.4.       
Subrogation. At such time as the Senior Debt has
been paid in full, the Noteholders 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 Noteholders, and to receive any further
payments or distributions of assets of the Obligors applicable to the Senior
Debt until the Notes 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 Noteholders would be entitled except for the provisions
of this Agreement shall, as among the Obligors and their creditors other than
the Senior Lenders on the one hand and the Noteholders 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.

SECTION 12.5.       
Reinstatement. The provisions of this Agreement
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.

SECTION 12.6.       
Obligors’ Obligations
    Absolute. Nothing contained herein shall impair, as among the
Obligors and the Noteholders, the obligation of the Obligors to pay to the
Noteholders all amounts payable in respect of the Notes as and when the same
shall become due and payable in accordance with the terms thereof, or prevent
the Noteholders from exercising all rights, powers and remedies otherwise
permitted by applicable law or upon an Event of Default with respect to the
Notes.

SECTION 12.7.       

Certain Payments and
    Distributions. Nothing contained herein shall prohibit the payment or
distribution on account of Notes that is made in the form of equity securities
of Obligors, or in the form of debt securities or other evidences of
Indebtedness that are subordinated in right of payment to Senior Debt at least
to the extent and the same terms as provided for in this Agreement.

SECTION 12.8.       
Legend. Each Note now or hereafter issued shall bear on its face a
clear and conspicuous legend that it is subject to the terms of this Article.

SECTION 12.9.       
No Waiver or Impairment of Subordination
    Provisions. The subordination effected by this
Agreement is a continuing subordination, and each Noteholder 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 any Obligor’s performance of or compliance with any of its agreements
contained in any Senior Debt agreement 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 of 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 Noteholders. Each Noteholder hereby unconditionally waives notice of the
incurring of Senior Debt or any part thereof and reliance by any Senior Lender
upon the subordination of the Notes to Senior Debt.

SECTION 12.10.       
Exclusion for Collateral. Notwithstanding anything in this Article 12 to the
contrary, none of the provisions of this Article 12 (other than this 
Section 12.10) shall apply to the Collateral or to any payments,
distributions or proceeds, whether in cash, securities or property, deriving
from or made on account of the Collateral, whether received in the ordinary
course, upon foreclosure, upon transfer in lieu of foreclosure, as a
distribution or payment in any Proceeding, through voluntary or mandatory
prepayment or otherwise, and whether or not a Default or Event of Default shall
have occurred and be continuing. Without limitation to the foregoing, no
provision of this Article 12 shall in any way limit or impair the rights
of any Noteholder to receive and retain any amount on account of any Collateral
and to apply such amount to the Notes, the obligations of the Guarantors under
Article 8 and any other obligations held by such Noteholder and secured by such
Collateral, and the Senior Lenders’ reliance on the subordination provisions set
forth in this Article 12 is expressly made subject to each Noteholder’s
right to receive and retain any amount on account of any Collateral and to apply
such amount to the Notes, the obligations of the Guarantors under Article 8
and any other obligations held by such Noteholder at any time, whether or not
the Senior Debt has been paid in full or otherwise.

SECTION 12.11.       
Reliance by Senior Lenders
    on Subordination Provisions. Each Noteholder, by accepting a Note, and each Obligor
acknowledges and agrees that the subordination provisions contained in this 
Article 12 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.

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.

	
		 
	

                        
						HORIZON OFFSHORE, INC.


                        
	
		 
	
		 
	
		 

	 	 	 
	 	 	 
	 	
		By:	
		
/s/ David W. Sharp

		
	 	 	
		Name:
		David W. Sharp
	 	 	
		Title:
		Executive Vice President and Chief Financial Officer


 

											GUARANTORS:

										
									
								
							
						
					
				
			
		
	

	
		 
	

                        
						HORIZON VESSELS, INC.


                        
	
		 
	
		 
	
		 

	 	 	 
	 	 	 
	 	
		By:	
		
/s/ David W. Sharp

		
	 	 	
		Name:
		David W. Sharp
	 	 	
		Title:
		Executive Vice President and Chief Financial Officer



 


	
		 
	

                        
						HORIZON OFFSHORE CONTRACTORS, INC.


                        
	
		 
	
		 
	
		 

	 	 	 
	 	 	 
	 	
		By:	
		
/s/ David W. Sharp

		
	 	 	
		Name:
		David W. Sharp
	 	 	
		Title:
		Executive Vice President and Chief Financial Officer



 


	
		 
	

                        HORIZON SUBSEA SERVICES, INC.
	
		 
	
		 
	
		 

	 	 	 
	 	 	 
	 	
		By:	
		
/s/ David W. Sharp

		
	 	 	
		Name:
		David W. Sharp
	 	 	
		Title:
		Executive Vice President and Chief Financial Officer




                         

	
		 
	

                        HORIZON VESSELS INTERNATIONAL, LTD.
	
		 
	
		 
	
		 

	 	 	 
	 	 	 
	 	
		By:	
		
/s/ David W. Sharp

		
	 	 	
		Name:
		David W. Sharp
	 	 	
		Title:
		Executive Vice President and Chief Financial Officer



 


                        	
								 
	

                        		HorizEN, LLC

                        		

                        		
	
								 
	
								 
	
								 

	 	 	 
	 	 	 
	 	
								By:	
								
/s/ David W. Sharp

								
	 	 	
								Name:
								David W. Sharp
	 	 	
								Title:
								Executive Vice President and Chief Financial
								Officer



 


                        	
								 
	

                        		ECH OFFSHORE, S. de R.L. de C.V.
	
								 
	
								 
	
								 

	 	 	 
	 	 	 
	 	
								By:	
								
/s/ David W. Sharp

								
	 	 	
								Name:
								David W. Sharp
	 	 	
								Title:
								Executive Vice President and Chief Financial
								Officer



 


                        	
								 
	

                        		HOC OFFSHORE, S. de R.L. de C.V.
	
								 
	
								 
	
								 

	 	 	 
	 	 	 
	 	
								By:	
								
/s/ David W. Sharp

								
	 	 	
								Name:
								David W. Sharp
	 	 	
								Title:
								Executive Vice President and Chief Financial
								Officer



 

										
									
								
							
						
					
				
			
		
	

	 	
                        
                        INITIAL PURACHASERS:
	 	 	 
	 	
		ELLIOTT ASSOCIATES, L.P.
	 	 
	 	
		By: 
		
			
		
Elliott Capital Advisors, L.P.,
as General Partner

		
	 	 	 
	 	
		By:  	
		Braxton
		Associates, Inc.,
as General Partner
	 	 	 
	 	
		By:  	
		
/s/ Elliot Greenberg

		
	 	 	
		Name:
		Elliot Greenberg
	 	 	
		Title:
		Vice President
	 	 
	 	
		Address:    	
		712 Fifth Avenue
36th Floor
New York, New York 10019


 

	 	 	 
	 	
		ELLIOTT INTERNATIONAL, L.P.
	 	 
	 	
		By: 
		
			
		
Elliott International Capital Advisors Inc.,
as Attorney-in-Fact

		
	 	 	 
	 	
		By:  	
		
/s/ Elliot Greenberg

		
	 	 	
		Name:
		Elliot Greenberg
	 	 	
		Title:
		Vice President
	 	 	 
	 	
		Address:    	
		712 Fifth Avenue
36th Floor
New York, New York 10019
	 	 	 


 

	 	 	 
	 	
		FALCON MEZZANINE PARTNERS, LP
	 	 
	 	
		By: 
		
			
		
Falcon Mezzanine Investments, LLC, its
General Partner

		
	 	 	 
	 	
		By:  	
		
/s/ Eric Rogoff

		
	 	 	
		Name:
		Eric Rogoff
	 	 	
		Title:
		Vice President
	 	 	 
	 	
		Address:    	
		60 Kendrick Street
Needham, Massachusetts 02494
	 	
		Telecopier
		No.:	
		(781) 247-7299
	 	 	 


 

	 	 	 
	 	
		D. E. SHAW LAMINAR PORTFOLIOS, L.L.C.
	 	 
	 	
		By:  	
		
/s/ Max Holmes

		
	 	 	
		Name: Max Holmes
	 	 	
		Title:
		Authorized Signatory
	 	 	 
	 	
		Address:    	
		120 West 45th St.
New York, New York 10036
	 	
		Telecopier
		No.:	
		(781) 247-7299
	 	 	 


 

	 	 	 
	 	
		B. RILEY & CO., INC.
	 	 
	 	
		By:  	
		
/s/ Bryant Riley

		
	 	 	
		Name: 
		Bryant Riley
	 	 	
		Title: 
		Chairman
	 	 	 
	 	
		Address:    	
		11150 Santa Monica Blvd., Suite 750
Los Angeles, CA 90025
	 	 	 


 

	 	 	 
	 	
		SACC PARTNERS, LP
	 	 
	 	
		By:  	
		
/s/ Tom Kelleher

		
	 	 	
		Name: 
		Tom Kelleher
	 	 	
		Title: 
		General Partner
	 	 	 
	 	
		Address:    	
		11150 Santa Monica Blvd., Suite 750
Los Angeles, CA 90025
	 	
		Telecopier
		No.:	
		(781) 247-7299
	 	 	 


 

	 	 	 
	 	
		LLOYD I. MILLER
	 	 
	 	
		By:  	
		
/s/ Lloyd I. Miller

		
	 	 	
		Name: 
		Lloyd I. Miller
	 	 	
		in his individual capacity
	 	 	 
	 	
		Address:    	
		4550 Gordon Drive
Naples, FL 34102
	 	 	 


 

	 	 	 
	 	
		MILFAM I, L.P.
	 	 
	 	
		By:  	
		
/s/ Lloyd I. Miller

		
	 	 	
		Name: 
		Lloyd I. Miller
	 	 	
		iTitle:
		Limited Partner
	 	 	 
	 	
		Address:    	
		4550 Gordon Drive
Naples, FL 34102
	 	 	 


 

	 	 	 
	 	
		HIGHLAND CRUSADER OFFSHORE PARTNERS
	 	 
	 	
		By:  	
		
/s/ Kurt Plumer

		
	 	 	
		Name:
		Kurt Plumer
	 	 	
		iTitle:
		General Partner
	 	 	 
	 	
		Address:    	
		13455 Noel Road, Suite 1300
Dallas, TX 75240
	 	 	 




EXHIBIT A

FORM OF NOTE

 

EXHIBIT B

FORM OF AGREEMENT TO BE BOUND AS GUARANTOR


AGREEMENT TO BE BOUND AS GUARANTOR (this "Agreement"),
dated as of ____________, 20__ by ______________ ("New Guarantor") in
favor of the Noteholders in connection with that certain Purchase Agreement,
dated as of May 27, 2004, among Horizon Offshore, Inc., as Issuer (the "Issuer"),
the Guarantors listed on the signature pages thereof, as Guarantors (the "Guarantors"),
and the Purchasers listed on the signature pages thereof, as Initial Purchasers,
pursuant to which the Issuer has issued its 18% Subordinated Secured Notes due
March 31, 2007, guaranteed by the Guarantors.  

WHEREAS, the Issuer is obligated pursuant to Section 6.1.8
of the Purchase Agreement to cause the New Guarantor to become a Guarantor under
the Purchase Agreement; and

WHEREAS, the New Guarantor is executing this document
pursuant to Section 6.1.8 of the Purchase Agreement.


NOW, THEREFORE, in consideration of the premises and
other good and valuable consideration, the receipt of which is hereby
acknowledged, the New Guarantor hereby agrees as follows:

1.       
Definitions.    (a)    Capitalized terms used herein
without definition shall have the meanings assigned to them in the Purchase
Agreement.

(b)      For all purposes of this Agreement, except as otherwise
herein expressly provided or unless the context otherwise requires: (i) the
terms and expression used herein shall have the same meanings as corresponding
terms and expressions used in the Purchase Agreement; and (ii) the words
"herein," "hereof" and "hereby" and other words of similar import used in this
Agreement refer to this Agreement as a whole and not to any particular section
hereof.

2.       
Agreement to Guarantee.    The New Guarantor hereby
agrees, jointly and severally with all other Guarantors, to guarantee, on the
basis set forth in Article 8 of the Purchase Agreement, the Issuer’s
obligations under the Notes on the terms and subject to the conditions set forth
in Article 8 of the Purchase Agreement and to be bound by all other
applicable provisions of the Purchase Agreement. From and after the date hereof,
the New Guarantor shall be a Guarantor for all purposes under the Purchase
Agreement and the Notes.

3.       
Ratification of Purchase Agreement.    Except as
expressly amended hereby, the Purchase Agreement is in all respects ratified and
confirmed and all the terms, conditions and provisions thereof shall remain in
full force and effect.

4.       
Further Assurances.    At any time and from time to
time, upon the request and at the sole expense of the New Guarantor, the New
Guarantor will promptly and duly execute and deliver any and all further
instruments and documents and take such further action as the Noteholders
reasonably deem necessary to effect the purposes of this Agreement.

5.       
Binding Effect.    This Agreement shall be binding
upon the New Guarantor and shall inure to the benefit of the Noteholders and
their respective successors and assigns.

6.       
Governing Law.    THIS AGREEMENT SHALL BE DEEMED TO BE
A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW
YORK.  




                        	
								 
	

                        		[NAME OF NEW GUARANTOR]
	
								 
	
								 
	
								 

	 	 	 
	 	 	 
	 	
								By:	
								
 

								
	 	 	
								Name:
	 	 	
								Title: