Document:

exv4w3

 

Exhibit 4.3

DIRECTOR DESIGNATION AGREEMENT

     This DIRECTOR DESIGNATION AGREEMENT (this “Agreement”), dated as of July 6, 2006, is
made by and between Kaiser Aluminum Corporation, a Delaware corporation (the “Company”),
and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and
Service Workers International Union, AFL-CIO, CLC (formerly known as the United Steelworkers of
America, AFL-CIO, CLC) (the “Union”).

RECITALS

     WHEREAS, in February 2002, the Company, along with Kaiser Aluminum & Chemical Corporation, a
wholly owned subsidiary of the Company (“KACC”), and certain of KACC’s wholly owned
subsidiaries, filed for protection under chapter 11 of title 11 of the United States Code (the
“Bankruptcy Code”);

     WHEREAS, in connection with their reorganization under the Bankruptcy Code, the Company and
KACC had negotiations with their key constituencies regarding the terms of their reorganization
and, as part of such negotiations, KACC and the Union reached an agreement in principle with
respect to certain modifications to certain labor agreements between KACC and the Union, the terms
and conditions of which are reflected in the Final Company Proposal to the USWA under 11 U.S.C.
§1113 and §1114, dated January 27, 2004 and approved by the United States Bankruptcy Court for the
District of Delaware (the “Bankruptcy Court”) in a final order dated March 22, 2004 (the
“Union Settlement Agreement”);

     WHEREAS, pursuant to the Union Settlement Agreement, all plans, funds and programs providing
retiree benefits (as defined by Section 1114(a) of the Bankruptcy Code) and maintained or
established by KACC prior to February 12, 2002 were to be terminated, and KACC and the Union agreed
to establish a voluntary employee benefit association trust (“VEBA”), with two trustees
appointed by each of KACC and the Union, to provide, among other things, benefits for certain
eligible retirees of KACC represented by the Union and other unions and their surviving spouses and
eligible dependents, to which KACC agreed to contribute a portion of its equity upon KACC’s
emergence from the protection of chapter 11 of the Bankruptcy Code;

     WHEREAS, pursuant to the Union Settlement Agreement, the Union was granted certain rights with
respect to the composition of the board of directors of reorganized KACC and certain committees
thereof;

     WHEREAS, under the Second Amended Joint Plan of Reorganization of the Company, KACC and
Certain of Their Debtor Affiliates, as modified, filed pursuant to Section 1121(a) of title 11 of
the United States Code and confirmed by an order of the Bankruptcy Court entered on February 6,
2006 which confirmation was affirmed by an order of the United States District Court for the
District of Delaware entered on May 11, 2006 (the “Plan”), the Company (rather than KACC,
as was contemplated by the Union Settlement Agreement) is the ultimate parent company in the
reorganization of the Company, KACC and certain of their debtor affiliates;

 

 

     WHEREAS, pursuant to the Plan, the Company contributed, among other things, 11,439,900 shares
of the common stock, par value $0.01 per share, of the Company (“Common
Stock”) to the VEBA, representing 57.2% of the issued and outstanding shares of the
Common Stock as of the effective date of the Plan (the “Effective Date”);

     WHEREAS, pursuant to the Union Settlement Agreement and the Plan, (a) the number of directors
comprising the board of directors of the Company (the “Board”) as of the Effective Date was
fixed at 10 and (b) the Union designated four individuals to serve on the Board commencing as of
the Effective Date (the “Initial Union Directors”);

     WHEREAS, pursuant to the Plan, the Company adopted an amended and restated certificate of
incorporation (as adopted and as amended from time to time, the “Charter”) and amended and
restated bylaws (as adopted and as amended from time to time, the “Bylaws”) which provide,
among other things, that (a) stockholders may elect directors at, and only at, an annual meeting of
stockholders and nominations of persons for election as directors may be made only at an annual
meeting of stockholders and may be made by or at the direction of the Board or a committee thereof
or by any stockholder that is a stockholder of record at the time it gives notice of such
nomination, who is entitled to vote for the election of directors at such annual meeting, and who
complies with the procedures with respect to the nomination of directors set forth in the Bylaws,
(b) vacancies on the Board will be filled solely by the remaining directors, (c) any newly created
directorship will be filled solely by the directors then in office, and (d) the Board is entitled
to designate committees and select the members thereof;

     WHEREAS, on or promptly after the Effective Date, the Board is expected to adopt corporate
governance guidelines addressing, among other things, the selection of directors, the composition
of the Board and the creation and operation of Board committees (as so adopted, and as amended from
time to time by the Board in good faith and to the extent either required by applicable law or
Applicable Listing Requirements (as defined below) or consistent with recognized corporate
governance best practices among U.S. corporations having publicly-held equity securities that are
traded or quoted on a national securities exchange or association or quotation system, the
“Corporate Governance Guidelines”);

     WHEREAS, on or promptly after the Effective Date, the Board is expected to establish a
Nominating and Corporate Governance Committee (the “Nominating Committee”) for the purposes
of (a) establishing criteria to be utilized by it in assessing whether a candidate for a position
on the Board has appropriate skills and experience, (b) identifying individuals qualified to become
members of the Board, including without limitation evaluating candidates submitted to the Company
by its stockholders, (c) recommending candidates to fill vacancies and newly-created positions on
the Board, (d) recommending director nominees for the election by stockholders at the annual
meetings of stockholders, and (e) developing and recommending to the Board corporate governance
principles applicable to the Company;

     WHEREAS, promptly after its formation, the Nominating Committee is expected to adopt certain
policies establishing criteria to be utilized by it in assessing whether a director candidate has
appropriate skills and experience, which policies are applicable to all director candidates
including any candidate designated by the Union in accordance with this Agreement (as so adopted,
and as amended from time to time by the Nominating Committee in good faith

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and to the extent either
required by applicable law or Applicable Listing Requirements or consistent with recognized
corporate governance best practices among U.S. corporations having
publicly-held equity securities that are traded or quoted on a national securities exchange or
association or quotation system, the “Director Candidate Policies”);

     WHEREAS, in addition to establishing the Nominating Committee, the Board is expected to
establish an Executive Committee (the “Executive Committee”) and an Audit Committee (the
“Audit Committee”), in each case on or promptly after the Effective Date; and

     WHEREAS, the Company and the Union desire to definitively document their understanding with
respect to the right of the Union to nominate individuals to serve on the Board subsequent to the
Effective Date, which understanding is predicated in part on the foregoing description of the
Charter and Bylaws and the various actions to be taken by the Board and the Nominating Committee
described above.

AGREEMENT

     NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto
agree as follows:

Article I. Preliminary Acknowledgement

     Each of the Company and the Union acknowledge that each director of the Company owes his or
her fiduciary duties to the Company and all of its stockholders.

Article II. Right of Union to Designate Directors

     2.1 General. The Union shall at all times prior to the termination of this Agreement
pursuant to Article VI hereof have the right, subject in all cases to the procedures set
forth in this Article II and the exercise by the directors of the Company of their
fiduciary duties, to designate individuals to serve on the Board, and this Agreement sets forth the
exclusive rights of the Union with respect thereto. For purposes of this Agreement, the term
“Union Director” means any of the Initial Union Directors or any other individuals serving
on the Board that have been designated by the Union in accordance with the procedures set forth in
this Agreement.

     2.2 Election at Annual Meetings of Stockholders. In connection with each annual
meeting of the Company’s stockholders, the Union shall have the right to designate as candidates to
be submitted to stockholders of the Company for election at such annual meeting that minimum number
of candidates necessary to ensure that, assuming (x) such candidates are included in the slate of
director candidates recommended by the Board in the Company’s proxy statement relating to such
annual meeting and (y) the stockholders of the Company elect each candidate so included, at least
40% of the members of the Board immediately following such election are Union Directors, all in
accordance with the following procedures (subject to Section 2.4):

	 	(a)	 	The Union shall timely deliver to the Nominating Committee a written notice (an
“Annual Meeting Candidate Notice”) specifying, with respect to each candidate
designated by the Union, the following information (the “Required
Information”):

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	 	 	 	(i)his or her name, age, business and residential address and
principal occupation or employment; (ii) the number of shares of the Common Stock
beneficially
owned by him or her; (iii) a resume or similar document detailing his or her
personal and professional experiences and accomplishments; and (iv) all other
information relating to the candidate that would be required to be disclosed in a
proxy statement or other filing made in connection with the solicitation of proxies
for the election of directors pursuant to (A) the Securities Exchange Act of 1934,
as amended (the “Exchange Act”), (B) the rules of the Securities and
Exchange Commission (the “SEC”), or (C) the Marketplace Rules or other
applicable criteria of the National Association of Securities Dealers, Inc. or, if
securities of the Company are then principally traded or quoted on a national
securities exchange or association or quotation system other than The Nasdaq Stock
Market, Inc., such national securities exchange or association or quotation system
(the “Applicable Listing Requirements”); provided, however,
that, if a Union Director’s term on the Board expires at the related annual meeting
of stockholders and the Union desires to designate such Union Director as a
candidate for re-election at such annual meeting, the Annual Meeting Candidate
Notice need only so indicate and include the name of such Union Director. In
addition, such Annual Meeting Candidate Notice must be accompanied by the written
consent of each director candidate named therein to serve as a member of the Board
and any committee of the Board to which he or she may be assigned to serve if
elected.
	 
	 	(b)	 	Where the date of the Company’s annual meeting of stockholders does not change
by more than 30 calendar days from the date of the previous year’s annual meeting, the
Annual Meeting Candidate Notice shall be timely if, and only if, it is received by the
Nominating Committee not less than 120, nor more than 150, calendar days before the
anniversary of the date that the Company’s proxy statement was first mailed to
stockholders in connection with its previous year’s annual meeting. Where there was no
annual meeting of stockholders in the previous year or where the date of the Company’s
annual meeting of stockholders changes by more than 30 calendar days from the date of
the previous year’s annual meeting, the Annual Meeting Candidate Notice shall be timely
if, and only if, it is received by the Nominating Committee no later than the close of
business on the 10th calendar day following the first day on which the date of the
upcoming annual meeting is publicly disclosed in a press release reported by the Dow
Jones News Service, Associated Press or comparable national news service or in a
document filed by the Company with the SEC pursuant to the Exchange Act or furnished by
the Company to stockholders. The Company shall, as promptly as practicable after any
formal action by the Board to fix the date of the annual meeting of stockholders next
following such action, deliver to the Union a written notice setting forth the date
fixed for such annual meeting and identifying any Union Directors whose terms are
expiring at such annual meeting.
	 
	 	(c)	 	The Nominating Committee shall evaluate each director candidate identified in
the Annual Meeting Candidate Notice and determine whether such candidate satisfies the
qualifications contemplated by Article IV hereof (with such determination to be
made in good faith and not to be unreasonably made, withheld

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	 	 	 	or delayed). If the
Nominating Committee so determines that such candidate satisfies such qualifications,
then, unless otherwise required by its fiduciary duties
(as determined in good faith by the Nominating Committee after consultation with
legal counsel), the Nominating Committee shall recommend such director candidate to
the Board for inclusion in the slate of directors recommended by the Board in the
Company’s proxy statement relating to the annual meeting.
	 
	 	(d)	 	The Board shall, unless otherwise required by its fiduciary duties (as
determined in good faith by the Board after consultation with legal counsel), accept
the recommendation of the Nominating Committee with respect to each director candidate
identified in the Annual Meeting Candidate Notice and direct that such director
candidate be included in the slate of directors recommended by the Board in the
Company’s proxy statement relating to the annual meeting.

     2.3 Vacancies and Newly Created Directorships. In the event of (x) a vacancy on the
Board resulting from the death, resignation, disqualification or removal of a Union Director (a
“Vacancy”) or (y) newly created directorships resulting from an increase in the number of
directors of the Company (“Newly Created Directorships”), the Union shall have the right to
designate (i) in the case of a Vacancy, the individual to fill such Vacancy and (ii) in the case of
Newly Created Directorships, the minimum number of individuals to fill such Newly Created
Directorships necessary to ensure that at least 40% of the members of the Board immediately
following the filling of such Newly Created Directorships are Union Directors, all in accordance
with the following procedures (subject to Section 2.4):

	 	(a)	 	The Union shall deliver to the Nominating Committee a written notice (the
“Candidate Notice”) specifying, with respect to each candidate designated to
fill the Vacancy or Newly Created Directorships, as applicable, the Required
Information. Such Candidate Notice must be accompanied by the written consent of each
director candidate named therein to serve as a member of the Board and any committee of
the Board to which he or she may be assigned to serve if elected.
	 
	 	(b)	 	The Nominating Committee shall evaluate each director candidate identified in
the Candidate Notice and determine whether such candidate satisfies the qualifications
contemplated by Article IV hereof (with such determination to be made in good
faith and not to be unreasonably made, withheld or delayed). If the Nominating
Committee so determines that such candidate satisfies such qualifications, then, unless
otherwise required by its fiduciary duties (as determined in good faith by the
Nominating Committee after consultation with legal counsel), the Nominating Committee
shall recommend to the Board that it fill the Vacancy or Newly Created Directorship, as
applicable, with such candidate.
	 
	 	(c)	 	The Board shall, unless otherwise required by its fiduciary duties (as
determined in good faith by the Board after consultation with legal counsel), accept
the recommendation of the Nominating Committee with respect to the director

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	 	 	 	candidate
identified in the Candidate Notice and fill the Vacancy or Newly Created Directorship,
as applicable, with such candidate.

     2.4 Modifications to Procedures. In the event that the procedures set forth in
Section 2.2 or Section 2.3 are no longer consistent with (a) applicable law, including without
limitation the rules of the SEC, or Applicable Listing Requirements, (b) the Charter as a result of
any amendment thereto, or (c) the Bylaws as a result of (i) any amendment thereto adopted by the
stockholders of the Company or (ii) any amendment thereto adopted by the Board but not stockholders
in order to reflect changes in (A) applicable law, including without limitation the rules of the
SEC, or (B) Applicable Listing Requirements, then the Company and the Union will negotiate in good
faith to modify the procedures set forth in Section 2.2 or Section 2.3, as applicable, so as to
effect the original intent of the parties as closely as possible in an acceptable manner to permit
the Union to exercise its rights under Section 2.1.

Article III. Union Directors to Serve on Board Committees

     So long as the Board maintains any of the following committees, each such committee shall,
unless otherwise required by the Board’s fiduciary duties (as determined in good faith by the Board
after consultation with legal counsel), include at least one Union Director (provided at least one
Union Director is qualified to serve thereon as determined by the Board, with such determination to
be made in good faith and not to be unreasonably made, withheld or delayed): (a) Audit Committee;
(b) Executive Committee; and (c) Nominating Committee.

Article IV. Qualifications of Union Directors

     Each individual designated by the Union pursuant to Article II hereof to serve as a
director of the Company must satisfy (a) the applicable independence criteria contained in the
Applicable Listing Requirements, (b) the qualifications to serve as a director of the Company as
set forth in the Corporate Governance Guidelines and the Director Candidates Policies, and (c) any
other qualifications to serve as a director of the Company imposed by applicable law, including
without limitation the rules of the SEC (in each case as such criteria and qualifications shall be
interpreted by the Nominating Committee reasonably and in good faith). In addition, no such
individual may be at the time of his or her designation by the Union to serve as a director of the
Company or his or her election as a Union Director, and no such individual may become while serving
as a Union Director, an officer, employee, director or member of the Union or any of its locals or
affiliated organizations (any such officer, employee, director or member, a “Union
Associate”). The Company and the Union agree and acknowledge that an individual shall not fail
to satisfy the criteria and qualifications set forth in the first sentence of this Article
IV solely because such individual was a Union Associate prior to the time of his or her
designation by the Union to serve as a director of the Company; it being understood that unusual
facts and circumstances concerning a particular Union Associate could dictate otherwise.

Article V. Independence of Board

     A majority of the members of the Board shall satisfy the independence criteria contained in
the Applicable Listing Requirements, as such requirements shall be interpreted by the Board
reasonably and in good faith.

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Article VI. Termination

     This Agreement shall terminate in its entirety, and the Union shall have no further rights
hereunder, on December 31, 2012, unless the Company and the Union shall otherwise agree in writing.
Upon the termination of this Agreement, the Union shall cause each Union Director to submit his or
her resignation to the Board, which submission the Board may accept or reject in its discretion.

Article VII. Miscellaneous

     7.1 Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given or made by delivery in person, by overnight
courier, by facsimile transmission, by electronic transmission or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the following addresses
(or at such other address for a party specified in a notice given in accordance with this
Section 7.1):

	 	(a)	 	If to the Company:

Kaiser Aluminum Corporation

27422 Portola Parkway, Suite 350

Foothill Ranch, California 92610

Facsimile: 949-614-1930

Attention: Corporate Secretary

E-mail: john.donnan@kaiseraluminum.com

with a copy to:

Kaiser Aluminum Corporation

27422 Portola Parkway, Suite 350

Foothill Ranch, California 92610

Facsimile: 949-614-1930

Attention: Vice President, Human Resources

E-mail: jim.mcauliffe@kaiseraluminum.com

with a copy to:

Jones Day

2727 N. Harwood Street

Dallas, Texas 75223

Facsimile: 214-969-5100

Attention: Troy B. Lewis, Esq.

E-mail: tblewis@jonesday.com

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	 	(b)	 	If to the Union:

United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied

Industrial and Service Workers International Union, AFL-CIO, CLC

5 Gateway Center, Suite 807

Pittsburgh, Pennsylvania 15222

Facsimile: 412-562-2429

Attention: General Counsel

E-mail: pwhitehead@uswa.org

with a copy to:

United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied

Industrial and Service Workers International Union, AFL-CIO, CLC

District Director, District 11

2829 University Avenue, SE, Suite 100

Minneapolis, Minnesota 55414

Facsimile: 612-623-8854

Attention: Robert Bratlich

E-mail: rbratlich@usw.org

     All such notices and communications shall be deemed to have been delivered or given upon
receipt, if delivered personally, by electronic transmission or by overnight courier; when receipt
is acknowledged, if sent by facsimile transmission and three Business Days after being deposited in
the mail, if mailed.

     7.2 Assignment. Neither of the parties to this Agreement shall assign or delegate any
of their respective rights or obligations under this Agreement without the prior written consent of
the other party hereto.

     7.3 No Third-Party Beneficiaries. Except as expressly set forth herein, this
Agreement shall be binding upon and inure solely to the benefit of the parties hereto and their
respective successors and permitted assigns and nothing herein, express or implied, is intended to
or shall confer upon any other person any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.

     7.4 Entire Agreement. This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof and supersedes all prior agreements and
undertakings, both written and oral, between the parties with respect to the subject matter hereof.

     7.5 Amendment and Waiver. This Agreement may not be amended or modified or any
provision hereof waived except by an instrument in writing signed by both of the parties to this
Agreement.

     7.6 Counterparts. This Agreement may be executed by facsimile signature and in any
number of counterparts, each such counterpart to be deemed an original and all such counterparts,
taken together, to constitute one instrument.

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     7.7 Severability. If any term or other provision of this Agreement is invalid,
illegal or unenforceable under any law or public policy, all other terms and provisions of this
Agreement shall nevertheless remain in full force and effect. Upon a determination that any term
or other provision is invalid, illegal or unenforceable, the parties hereto shall negotiate in good
faith to replace the invalid, illegal or unenforceable provisions with valid, legal and enforceable
provisions the effect of which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.

     7.8 Governing Law. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without giving effect to the principles of conflict of
laws thereof.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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     IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized
officers of each of the Company and the Union as of the date first above written.

	 	 	 	 	 
	 	 	KAISER ALUMINUM CORPORATION
	 
	 	 	 	 
	 

	 	By:
	 	          /s/ John M. Donnan
	 

	 	 	 	 
	 

	 	 	 	John M. Donnan, Vice President, Secretary
	 

	 	 	 	& General Counsel
	 
	 	 	 	 
	 	 	UNITED STEEL, PAPER AND FORESTRY, RUBBER, MANUFACTURING,
ENERGY, ALLIED INDUSTRIAL AND SERVICE WORKERS
INTERNATIONAL UNION, AFL-CIO, CLC
	 
	 	 	 	 
	 

	 	By:
	 	          /s/ Robert Bratlich
	 

	 	 	 	 
	 

	 	 	 	Robert Bratlich, District Director

10exv10w1

 

Exhibit 10.1

THIRD AMENDMENT TO AMENDED AND RESTATED LOAN

AGREEMENT AND PROMISSORY NOTES

     This THIRD AMENDMENT TO AMENDED AND RESTATED LOAN AGREEMENT AND PROMISSORY NOTES (the
“Amendment”), executed to be effective as of June 29, 2006 (the “Closing Date”) is
entered into by and among Horizon Vessels, Inc., a Delaware corporation, Horizon Offshore, Inc., a
Delaware corporation, and Horizon Offshore Contractors, Inc., a Delaware corporation (referred to,
jointly and severally, as the “Borrower”) and General Electric Capital Corporation, a
Delaware corporation, successor-in-interest to SouthTrust Bank (the “Bank”). All
capitalized terms used herein and not otherwise defined shall have the meanings given to such terms
in the Loan Agreement (as hereinafter defined).

     WHEREAS, the Borrower and the Bank are parties to that certain Amended and Restated Loan
Agreement dated as of June 29, 2001 (as amended by that certain First Amendment to Amended and
Restated Loan Agreement dated November 4, 2004 and that certain Second Amendment to Amended and
Restated Loan Agreement dated March 31, 2005, the “Loan Agreement”), wherein Borrower
obtained a single advance term loan in the original principal amount of $6,000,000 (the
“$6,000,000 Loan”) and a single advance term loan in the amount of $1,680,000 (the
“$1,680,000 Loan”, together with the $6,000,000 Loan, the “Loans”). In connection
with the Loans, Borrower executed certain instruments and documents evidencing, securing,
governing, guaranteeing and/or pertaining to the Loans including but not limited to the following
(collectively, the “Loan Documents”):

     (1) the real estate promissory note (the “June 2001 Note”) dated June 29, 2001, in the
original principal amount of $6,000,000.00, executed by the Borrower and payable to the order of
SouthTrust Bank, predecessor-in-interest to the Bank, bearing interest and due and payable as
therein provided;

     (2) the real estate promissory note (the “August 2001 Note” together with the June
2001 Note, the “Notes”) dated August 31, 2001, in the original principal amount of
$1,680,000.00, executed by the Borrower and payable to the order of SouthTrust Bank,
predecessor-in-interest to the Bank, bearing interest and due and payable as therein provided;

     (3) the deed of trust (with security agreement, assignment of leases, assignment of rents, and
financing statement) (the “June 2001 Deed of Trust”) dated June 29, 2001, executed by the
Borrower, for the benefit of SouthTrust Bank, predecessor-in-interest to Bank, securing the
$6,000,000 Loan; and

     (4) the deed of trust (with security agreement, assignment of leases, assignment of rents, and
financing statement) (the “August 2001 Deed of Trust”) dated August 31, 2001, executed by
the Borrower, for the benefit of SouthTrust Bank, predecessor-in-interest to Bank, securing the
$1,680,000 Loan.

     WHEREAS, Borrower has requested that the Bank (i) extend the maturity date of the Notes and
(ii) amend the Loan Agreement and the Notes in accordance with the terms and conditions described
herein, and

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     WHEREAS, the Bank has agreed to do so, subject to the terms and conditions set forth herein.

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

     1. Loan Agreement. The Loan Agreement is hereby amended as follows:

     (a) Annex I attached hereto is hereby added to the end of the Loan Agreement as Annex I
and the terms and provisions contained in Annex I are incorporated by reference into the
Loan Agreement as if fully set forth therein.

     (b) Section 5 of the Loan Agreement is hereby deleted in its entirety and the following
is substituted therefor:

     “5. Affirmative Covenants. Until (i) the Notes and other obligations
and liabilities of Borrower under this Loan Agreement and the other Loan Documents
are fully paid and satisfied, and (ii) the Bank has no further commitment to lend
hereunder, Borrower agrees and covenants that it will, unless the Bank shall
otherwise consent in writing:

     (a) Maintenance of Corporate Existence. Preserve and maintain (a) its
legal existence and good standing under the laws of the jurisdiction of its
incorporation or organization and (b) its rights (charter and statutory), privileges
franchises and Permits necessary or desirable in the conduct of its business,
except, in the case of this clause (b), where the failure to do so would not, in the
aggregate, have a Material Adverse Effect.

     (b) Compliance with Laws, Etc. Comply with all applicable Requirements
of Law, Contractual Obligations and Permits, except for such failures to comply that
could not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.

     (c) Payment of Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the case may be, all of its
Charges and other obligations of whatever nature, except where the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Borrower and none of the Collateral is or could
reasonably be expected to become subject to any Lien or forfeiture or loss as a
result of such contest.

     (d) Maintenance of Property. Maintain and preserve (a) in all material
respects in good working order and condition the Collateral and all other of its
property reasonably necessary in the conduct of its business in each case, ordinary
wear and tear excepted, and (b) all material rights, permits, licenses, approvals
and privileges (including all Permits) necessary, used or useful, whether because

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of its ownership, lease, sublease or other operation or occupation of property
or other conduct of its business, and shall make all necessary or appropriate
filings with, and give all required notices to, Government Authorities.

     (e) Maintenance of Insurance. Maintain insurance, including but not
limited to, fire insurance, comprehensive property damage, public liability,
worker’s compensation, business interruption and other insurance deemed necessary or
otherwise required by Bank. With respect to the insurance policy for the Port
Arthur Property (as described in the Deeds of Trust) General Electric Capital
Corporation shall be named as additional insured and loss payee.

     (f) Keeping of Books. Keep proper Books and Records, in which full,
true and correct entries shall be made in accordance with GAAP and all other
applicable Requirements of Law of all financial transactions and the assets and
business of the Borrower.

     (g) Access to Books and Property. Borrower shall, with respect to the
Collateral, during normal business hours and upon reasonable advance notice (unless
a Default shall have occurred and be continuing, in which event no notice shall be
required and Bank shall have access at any and all times): (a) provide access to
such property to Bank and any of its Related Persons, as frequently as Bank
determines to be appropriate, (b) permit Bank and any of its Related Persons to
inspect, audit and make extracts and copies from all of Borrower’s Books and Records
and (c) permit Bank to inspect, review, evaluate and make physical verifications and
appraisals of the Collateral in any manner and through any medium that Bank
considers advisable, and Borrower agrees to render to Bank, at Borrower’s cost and
expense, such clerical and other assistance as may be reasonably requested with
regard thereto.

     (h) Environmental Compliance. The Borrower will comply with and will
use its best efforts to cause its agents, contractors and sub-contractors (while
such Persons are acting within the scope of their contractual relationship with the
Borrower) to so comply with (i) all applicable environmental, health and safety
laws, codes and ordinances, and all rules and regulations promulgated thereunder of
all Governmental Agencies and (ii) the terms and conditions of all applicable
permits, licenses, certificates and approvals of all Governmental Agencies now or
hereafter granted or obtained with respect to the properties owned or operated by
the Borrower. The Borrower will use its best efforts and safety practices to
prevent the unauthorized release, discharge, disposal, escape or spill of Hazardous
Materials on or about the properties owned or operated by the Borrower.

     (i) Environmental Indemnification.

     (i) The Borrower hereby agrees to indemnify and hold the Indemnitees
harmless from and against any and all claims, losses, liability, damages and
injuries of any kind whatsoever asserted against any Indemnitee with respect
to or as a direct result of the presence, escape,

3

 

seepage, spillage, release, leaking, discharge or migration from the
properties owned or operated by the Borrower of any Hazardous Material,
including without limitation, any claims asserted or arising under any
applicable environmental, health and safety laws, codes and ordinances, and
all rules and regulations promulgated thereunder of all Governmental
Agencies, whether or not caused by or within the control of the Borrower.

     (ii) It is the parties’ understanding that neither the Bank nor any
Related Party (collectively, the “Indemnitee”) does now, has never
and does not intend in the future to exercise any operational control or
maintenance over the properties owned or operated by the Borrower, nor has
the Bank in the past, presently, or intends in the future to, maintain an
ownership interest in the properties owned or operated by the Borrower
except as may arise upon enforcement of the Bank’s rights under this
Amendment or the other Loan Documents.

     (iii) Should, however, the Bank or any other Indemnitee hereafter
exercise any ownership interest in or operational control over the
properties owned or operated by the Borrower, e.g., including but not
limited to, through foreclosure, then the above stated indemnity and hold
harmless shall be limited with respect to any actions or failures to act by
the Bank or other Indemnitee subsequent to exercising such interest or
operational control, to the extent such action or inaction by the Bank or
other Indemnitee is admitted by the Bank or other Indemnitee or is found by
a court of competent jurisdiction to have caused or made worse any condition
for which liability is asserted, including but not limited to, the presence,
escape, seepage, spillage, leaking, discharge or migration on or from the
properties owned or operated by the Borrower of any Hazardous Material.

     (j) Further Assurances. At any time and from time to time, upon the
written request of Bank and at the sole expense of Borrower, promptly and duly
execute and deliver any and all such further instruments and documents and take such
further action as Bank may reasonably deem necessary or advisable (a) to obtain the
full benefits of the Loan Agreement and the other Loan Documents, (b) to protect,
preserve, maintain and enforce Bank’s rights in (and the priority of Bank’s Lien on)
any Collateral or (c) to enable Bank to exercise all or any of the rights, remedies
and powers granted herein or in any other Loan Document.

     (c) Section 6 of the Loan Agreement is hereby deleted in its entirety and the following
is substituted therefor:

     “Section 6. Negative Covenants. Until (i) the Notes and all
other obligations and liabilities of Borrower under this Loan Agreement and the
other Loan Documents are fully paid and satisfied, and (ii) the Bank has no further
commitment to lend hereunder, Borrower will not, without the prior written consent
of Bank:

4

 

     (a) Indebtedness. Cancel any debt owing to it or create, incur, assume
or permit to exist any Indebtedness, except:

     (i) the Loans;

     (ii) accounts payable and accrued liabilities incurred in the ordinary
course of business;

     (iii) letters of credit, performance and bid bonds obtained by Borrower
and its Subsidiaries in the ordinary course of business in an aggregate
amount not to exceed USD $40,000,000;

     (iv) supersedas bonds obtained by Borrower and its Subsidiaries in the
ordinary course of their business;

     (v) purchase money indebtedness in connection with capital expenditures
permitted by Section 6(o); and

     (vi) Indebtedness listed on Schedule 6(a) attached hereto and made a
part hereof.

     (b) Liens. Incur, maintain or otherwise suffer to exist any Lien upon
or with respect to the Collateral, whether now owned or hereafter acquired, or
assign any right to receive income or profits, except for Permitted Liens.

     (c) Investments; Fundamental Changes. Form any Subsidiary, merge with,
consolidate with, acquire all or substantially all of the assets or Stock of, or
otherwise combine with or make any investment in or, except as provided in Section
6(g) below, loan or advance to, any Person.

     (d) Asset Sales. Sell any of its assets or properties, including its
accounts or any shares of its Stock or engage in any sale-leaseback, synthetic lease
or similar transaction except in the ordinary course of its business.

     (e) Restricted Payments. Make or permit any Restricted Payment.

     (f) Changes in Nature of Business. Make any changes in any of its
business objectives, purposes, or operations that could reasonably be expected to
adversely affect repayment of the Obligations or could reasonably be expected to
have a Material Adverse Effect, or engage in any business other than that presently
engaged in or proposed to be engaged in the Projections delivered to Bank.

     (g) Transactions with Affiliates. Enter into any lending, borrowing or
other commercial transaction, other than bareboat charters of vessels to Affiliates
in the ordinary course of business, with any of its employees, directors, Affiliates
(including upstreaming and downstreaming of cash and intercompany advances and
payments by a Borrower on behalf of another Borrower other than loans or

5

 

advances to employees in the ordinary course of business) except on terms no
less favorable to the Borrower than the Borrower could obtain in an arms-length
transaction with a Person not affiliated with the Borrower.

     (h) Third-Party Restrictions on Indebtedness, Liens, Investments or
Restricted Payments. Incur or otherwise suffer to exist or become effective or
remain liable on or responsible for any Contractual Obligation limiting the ability
of any Subsidiary of Borrower to make Restricted Payments to, or investments in, or
repay Indebtedness or otherwise sell property to, Borrower, except, pursuant to the
Loan Documents.

     (i) Modification of Certain Documents. Amend, waive, or otherwise
modify its charter or by-laws or other organizational documents in a manner which
will have a Material Adverse Effect on Borrower.

     (j) Accounting Changes; Fiscal Year. Change its (a) accounting
treatment or reporting practices, except as allowed by GAAP or any Requirement of
Law, or (b) its Fiscal Year or its method for determining Fiscal Quarters or Fiscal
Months.

     (k) Changes to Name, Locations, Etc. Change (i) its name, chief
executive office, corporate offices from those set forth on Schedule 6(k), (ii)
location of its records concerning the Collateral from those locations set forth on
Schedule 6(k), (iii) the type of legal entity that it is, (iv) its organization
identification number, if any, issued by its state of incorporation or organization,
or (v) its state of incorporation or organization from that set forth on Schedule
6(k).

     (l) Margin Regulations. Borrower shall not use all or any portion of
the proceeds of any credit extended hereunder to purchase or carry margin stock
(within the meaning of Regulation U of the Federal Reserve Board) in contravention
of Regulation U of the Federal Reserve Board.

     (m) Compliance with ERISA. No ERISA Affiliate shall cause or suffer to
exist (a) any event that could result in the imposition of a Lien with respect to
any Title IV Plan or Multiemployer Plan or (b) any other ERISA Event, that would, in
the aggregate, reasonably be expected to result in liabilities in excess of the
Threshold Amount. Borrower shall not cause or suffer to exist any event that could
result in the imposition of a Lien with respect to any Benefit Plan.

     (n) Hazardous Materials. Borrower shall not cause or suffer to exist
any Release of any Hazardous Material at, to or from any real property owned,
leased, subleased or otherwise operated or occupied by Borrower that would violate
any Environmental Law, form the basis for any Environmental Liabilities or otherwise
adversely affect the value or marketability of any real property, other

6

 

than such violations, Environmental Liabilities and effects that would not, in
the aggregate, have a Material Adverse Effect.

     (o) Capital Expenditures. Capital Expenditures may only be made for
the purpose of the acquisition or upgrading of marine construction vessels and the
acquisition of equipment and accessories related to such vessels, or other equipment
in the ordinary course of Borrower’s business.”

     (d) Section 7 of the Loan Agreement is hereby deleted in its entirety and the following
is substituted therefor:

     “Section 7. Financial Covenants. Unless otherwise specified,
all accounting and financial terms and covenants set forth in this Loan Agreement
are to be determined accordingly to GAAP, consistently applied. Until (i) the Notes
and all other obligations and liabilities of Borrower under this Loan Agreement and
the other Loan Documents are fully paid and satisfied, and (ii) the Bank has no
further commitment to lend hereunder, Horizon Offshore will maintain the following
financial covenants:

     (a) Fixed Charge Coverage Ratio. Horizon Offshore shall have at the
end of the Fiscal Quarter ending June 30, 2006, and at the end of each Fiscal
Quarter thereafter, a Fixed Charge Coverage Ratio of not less than 1.33: 1 for each
such period then ended.

     (b) Tangible Net Worth. Horizon Offshore shall not permit Tangible Net
Worth at the end of any Fiscal Quarter of Horizon Offshore to be less than the sum
of (i) USD $140,000,000 plus (ii) 50% of (A) the amount of net proceeds received by
the Horizon Offshore from any future public or private sales of the common stock
after the date of the Loan Agreement, and (B) to the extent not already included,
the amount of other increases in shareholder equity occurring after the date of this
Amendment.

     (c) Current Ratio. Horizon Offshore shall not permit the Current Ratio
to be less than 1.1 to 1 at the end of any Fiscal Quarter of Horizon Offshore.

     (d) Working Capital. Horizon Offshore shall not permit Working Capital
to be less than USD $3,000,000 at the end of any Fiscal Quarter of the Horizon
Offshore.

     (e) Debt Ratio. Horizon Offshore shall not permit the Debt Ratio to be
greater than 55% at the end of any Fiscal Quarter of the Horizon Offshore.”

     (e) Section 8 of the Loan Agreement is hereby deleted and the following is substituted
therefor:

     “Section 8. Reporting Requirements. Until (i) the Notes and
all other obligations and liabilities of Borrower under this Loan Agreement and the
other Loan Documents are fully paid and satisfied, and (ii) the Bank has no further

7

 

commitment to lend hereunder, Borrower will, unless Bank shall otherwise in
writing, furnish to Bank the following:

     (a) Financial Statements and Monthly Accounts Payable Aging Report.
Borrower shall deliver to Bank:

     (i) Quarterly Reports. Within 45 days following the end of
each Fiscal Quarter, the Horizon Offshore’s consolidated Financial
Statements for such Fiscal Quarter prepared in accordance with GAAP, which
shall provide comparisons to budget and actual results for the corresponding
period during the prior Fiscal Year, both on a quarterly and year-to-date
basis.

     (ii) Annual Reports. Within 90 days following the close of
each Fiscal Year, the Financial Statements for such Fiscal Year certified
without qualification by an independent certified accounting firm acceptable
to Bank, which shall provide comparisons to the prior Fiscal Year, and shall
be accompanied by (i) a statement in reasonable detail showing the
calculations used in determining compliance with the financial covenants
hereunder, and (ii) any management letter that may be issued.

     (iii) Compliance Certificate. Together with each delivery of
any Financial Statement pursuant to clause (a) or (b) above, a Compliance
Certificate in the form of Exhibit “C” attached hereto duly executed by a
Responsible Officer of Horizon Offshore that, among other things, (i)
demonstrates compliance with each financial covenant contained in Section 7
that is tested at least on a quarterly basis and (ii) states that the
Financial Statements are complete and correct and that no Default is
continuing as of the date of delivery of such Compliance Certificate or, if
a Default is continuing, states the nature thereof and the action that
Horizon Offshore proposes to take with respect thereto.

     (iv) Projections. Prior to December 31st of each Fiscal Year,
the Projections, which will be prepared by Horizon Offshore in good faith,
with care and diligence, and using assumptions that are reasonable under the
circumstances at the time such Projections are delivered to Bank and
disclosed therein when delivered.

     (v) Monthly Accounts Payable Aging Report. Within fifteen (15)
days following the end of each calendar month, a list of all outstanding
accounts payable of Borrower and any Subsidiaries of the Borrower showing
the vendor, supplier or servicer, the amount due and the aging of such
accounts payables.

     (b) Periodic Reporting. Borrower shall deliver to Bank on each
anniversary of the Closing Date and from time to time at Bank’s request, a report

8

 

by a reputable insurance broker, satisfactory to Bank, with respect to
Borrower’s insurance policies.

     (c) Copies of Notices and Reports. Borrower shall promptly deliver to
Bank copies of each of the following: (a) all reports that Borrower transmits to its
Security holders generally, (b) all documents that Borrower files with the
Securities and Exchange Commission, the National Association of Securities Dealers,
Inc., any securities exchange or any Governmental Authority exercising similar
functions, and (c) any material document transmitted or received pursuant to, or in
connection with, any Contractual Obligation governing Indebtedness of Borrower.

     (d) Other Events. Borrower shall advise Bank promptly, in reasonable
detail, in writing of:

     (i) Liens. Any Lien, other than a Permitted Lien, attaching to
or asserted against any of the Collateral or any occurrence causing a
material loss or decline in value of any Collateral and the estimated (or
actual, if available) amount of such loss or decline.

     (ii) Changes to Collateral. Any material change in the
composition of the Collateral.

     (iii) Default; Material Adverse Effect. The occurrence of any
Default or other event that has had or could reasonably be expected to have
a Material Adverse Effect.

     (iv) Litigation, Etc. The existence, threat or commencement of
any Litigation against Borrower, any ERISA Affiliate or any Plan or any
allegation of criminal misconduct against Borrower that has had or could
reasonably be expected to have a Material Adverse Effect.

     (e) Taxes. Borrower shall give Bank notice of each of the following
(which may be made by telephone if promptly confirmed in writing) promptly after any
officer of Borrower knows or has reason to know of it: (a) the creation, or filing
with the IRS or any other Governmental Authority, of any Contractual Obligation or
other document extending, or having the effect of extending, the period for
assessment or collection of any taxes with respect to any Tax Affiliate and (b) the
creation of any Contractual Obligation of any Tax Affiliate, or the receipt of any
request directed to any Tax Affiliate, to make any adjustment under Section 481(a)
of the Code, by reason of a change in accounting method or otherwise, which would
have a Material Adverse Effect.

     (f) Labor Matters. Borrower shall give Bank notice of each of the
following (which may be made by telephone if promptly confirmed in writing),
promptly after, and in any event within 30 days after any officer of Borrower knows
or has reason to know of it: (a) the commencement of any material labor dispute to
which Borrower is or may become a party, including any strikes,

9

 

lockouts or other disputes relating to any of such Person’s plants and other
facilities and (b) the incurrence by Borrower of any Worker Adjustment and
Retraining Notification Act or related or similar liability incurred with respect to
the closing of any facility of any such Person (other than, in the case of this
clause (b), those that would not, in the aggregate, have a Material Adverse Effect).

     (g) ERISA Matters. Borrower shall give Bank (a) on or prior to any
filing by any ERISA Affiliate of any notice of intent to terminate any Title IV
Plan, a copy of such notice and (b) promptly, and in any event within ten (10) days,
after any officer of any ERISA Affiliate knows or has reason to know that a request
for a minimum funding waiver under Section 412 of the Code has been filed with
respect to any Title IV Plan or Multiemployer Plan, a notice (which may be made by
telephone if promptly confirmed in writing) describing such waiver request and any
action that any ERISA Affiliate proposes to take with respect thereto, together with
a copy of any notice filed with the PBGC or the IRS pertaining thereto.

     (h) Environmental Matters.

     (i) Borrower shall provide Bank notice of each of the following (which
may be made by telephone if promptly confirmed by Borrower in writing)
promptly after any officer or environmental risk manager (or equivalent
designation) of Borrower who knows or has reason to know of it (and, upon
the request of Bank, documents and information in connection therewith): (i)
the receipt by Borrower of any notice of violation of or potential liability
or similar notice under Environmental Law; (ii)(A) unpermitted Releases, (B)
the existence of any condition that could reasonably be expected to result
in violations of or liabilities under, any Environmental Law; or (C) the
commencement of, or any material change to, any action, investigation, suit,
proceeding, audit, claim, demand, dispute alleging a violation of or
liability under any Environmental Law, that, for each of clauses (A), (B)
and (C) above (and, in the case of clause (C), if adversely determined), in
the aggregate for each such clause, could reasonably be expected to result
in Environmental Liabilities in excess of the Threshold Amount; (iii) the
receipt by Borrower of notification that any property of Borrower is subject
to any Lien in favor of any Governmental Authority securing, in whole or in
part, Environmental Liabilities; and (iv) any proposed acquisition or lease
of real property, if such acquisition or lease would have a reasonable
likelihood of resulting in aggregate Environmental Liabilities in excess of
the Threshold Amount.

     (ii) Upon request of Bank, Borrower shall provide Bank (i) a copy of
any order, notice, request or other information or communication received in
connection with any Release, and (ii) a report containing an update as to
the status of any environmental, health or safety compliance, hazard or
liability issue identified in any document delivered to Bank

10

 

pursuant to any Loan Document or as to any condition reasonably
believed by Bank to result in material Environmental Liabilities in excess
of the Threshold Amount.

     (i) Other Reports and Information. Borrower shall, upon request of
Bank, furnish to Bank such other reports and information in connection with the
affairs, business, financial condition, operations, prospects or management of
Borrower or the Collateral as Bank may reasonably request, all in reasonable detail.

     2. Amendment to June 2001 Promissory Note. Notwithstanding anything to the contrary
contained in the June 2001 Note, the June 2001 Note shall be due and payable in sixty (60) monthly
installments of $66,937.15 each commencing on July 30, 2006 and continuing thereafter on the same
day of each and every calendar month with the final installment of all outstanding principal, plus
accrued and unpaid interest being due and payable on June 29, 2011. The unpaid principal balance
of the June 2001 Note shall bear interest at the Loan Interest Rate. The “Loan Interest Rate”
shall be and mean the floating rate of interest per annum equal to Three Hundred Fifty (350) basis
points (each basis point equaling one hundredth of one percent) in excess of the thirty (30) day
London Interbank Based Offer Rate, as quoted in the Wall Street Journal, or such other reputable
and nationally-recognized rate quoting service selected by Bank, in effect on each Payment
Adjustment Date. The Loan is payable in full on June 29, 2011. The remainder of the June 2001
Note is amended mutatis mutandus.

     3. Amendment to August 2001 Promissory Note. Notwithstanding anything to the contrary
contained in the August 2001 Note, the August 2001 Note shall be due and payable in sixty (60)
monthly installments of $19,566.01 each commencing on July 30, 2006 and continuing thereafter on
the same day of each and every calendar month with the final installment of all outstanding
principal, plus accrued and unpaid interest being due and payable on June 29, 2011. The unpaid
principal balance of the August 2001 Note shall bear interest at the Loan Interest Rate. The “Loan
Interest Rate” shall be and mean the floating rate of interest per annum equal to Three Hundred
Fifty (350) basis points (each basis point equaling one hundredth of one percent) in excess of the
thirty (30) day London Interbank Based Offer Rate, as quoted in the Wall Street Journal, or such
other reputable and nationally-recognized rate quoting service selected by Bank, in effect on each
Payment Adjustment Date. The Loan is payable in full on June 29, 2011. The remainder of the
August 2001 Note is amended mutatis mutandus.

     4. Acknowledgment of Note Balance. Borrower and Bank hereby acknowledge and agree
that as of the date hereof, the outstanding principal balance of the June 2001 Note is
$4,016,229.00 and the outstanding principal balance of the August 2001 Note is $1,173,960.60. The
Bank acknowledges and agrees that there are no prepayment penalties associated with prepayment of
the Notes.

     5. Consent. Borrower agrees and acknowledges that the Loan Agreement and each of the
Loan Documents shall continue in full force and effect as amended and modified by this Amendment.
Nothing in this Amendment extinguishes, novates or releases any right, claim, lien, security
interest or entitlement of the Bank created by or contained in the Loan Agreement, nor is

11

 

Borrower released from any covenant, warranty or obligation created by or contained therein as
a result of this Amendment.

     6. Representations and Warranties. The Borrower hereby represents and warrants to the
Bank that (a) this Amendment has been duly executed and delivered on behalf of Borrower, (b) this
Amendment constitutes a valid and legally binding agreement enforceable against Borrower in
accordance with its terms, (c) the representations and warranties contained in the Loan Agreement
and the Loan Documents are true and correct on and as of the date hereof in all material respects
as though made as of the date hereof except as heretofore otherwise disclosed in writing to the
Bank (other than those of such representations and warranties which by their express terms speak to
a date on or before the date hereof), (d) no Default exists under the Loan Agreement or any of the
Loan Documents and (e) the execution, delivery and performance of this Amendment has been duly
authorized by Borrower. Borrower will, upon request by the Bank, provide satisfactory evidence of
these representations and warranties.

     7. Counterparts. This Amendment may be signed in any number of counterparts, each of
which shall be construed as an original and which may be delivered in original or facsimile form,
but all of which together shall constitute one and the same instrument.

     8. Conditions to Effectiveness. This Amendment shall be effective upon (i) due
execution of this Amendment by all parties hereto and delivery of signed copies to the Bank, (ii)
delivery to Bank of a certificate of an officer and of the secretary or an assistant secretary of
the Borrower certifying, inter alia, true and complete copies of resolutions adopted by the Board
of Directors of the Borrower (A) authorizing the execution, delivery and performance by the
Borrower of this Amendment, and (B) authorizing officers of the of the Borrower to execute and
deliver this Amendment a party and any related documents, including any agreement contemplated by
this Amendment; and (iii) certificates from the Secretary of State for the State of Delaware
certifying that Borrower is in good standing in the State of Delaware.

     9. Choice of Law. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT EXECUTED BY THE
PARTIES UNDER, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF TEXAS, EXCEPT TO THE EXTENT THAT THE LAWS OF THE UNITED STATES OF AMERICA AND ANY RULES,
REGULATIONS OR ORDERS ISSUED OR PROMULGATED THEREUNDER APPLICABLE TO THE AFFAIRS AND TRANSACTIONS
OF ANY BANK OTHERWISE PREEMPT TEXAS LAW, IN WHICH EVENT SUCH FEDERAL LAW SHALL CONTROL.

     10. Entire Agreement. THIS AMENDMENT AND THE LOAN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN
ORAL AGREEMENTS BETWEEN THE PARTIES.

12

 

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

	 	 	 	 	 
	 	BORROWER:

HORIZON VESSELS, INC., a Delaware corporation

 	 
	 	By:  	/s/ William B. Gibbens, III 	 
	 	Name:  	William B. Gibbens, III 	 
	 	Title:  	Executive Vice President and General Counsel 	 

13

 

	 	 	 	 	 

	 	 	 	 	 
	 	BORROWER:

HORIZON OFFSHORE, INC., a Delaware corporation

 	 
	 	By:  	/s/ William B. Gibbens, III 	 
	 	Name:  	William B. Gibbens, III 	 
	 	Title:  	Executive Vice President and General Counsel 	 

14

 

	 	 	 	 	 

	 	 	 	 	 
	 	BORROWER:

HORIZON OFFSHORE CONTRACTORS, INC., a Delaware corporation

 	 
	 	By:  	/s/ William B. Gibbens, III 	 
	 	Name:  	William B. Gibbens, III 	 
	 	Title:  	Executive Vice President and General Counsel 	 

15

 

	 	 	 	 	 

	 	 	 	 	 
	 	BANK:

GENERAL ELECTRIC CAPITAL CORPORATION, a
Delaware corporation, successor-in-interest to
SouthTrust Bank

 	 
	 	By:  	/s/ W. Jerome McDermott 	 
	 	Name:  	W. Jerome McDermott 	 
	 	Title:  	Duly Authorized Signatory 	 

16

 

	 	 	 	 	 

Annex “I”

Defined Terms

     As used in the this Loan Agreement, the following terms have the following meaning:

     “Affiliates” means, with respect to any Person, each officer, director, general partner or
joint-venturer of such Person and any other Person that directly or indirectly controls, is
controlled by, or is under common control with, such Person; provided, however,
that Bank shall not be an Affiliate of Borrower. For purpose of this definition, “control”
means the possession of either (a) the power to vote, or the beneficial ownership of 10% or more of
the Voting Stock of such Person or (b) the power or direct or cause the direction of the management
and policies of such Person, whether by contract or otherwise.

     “Benefit Plan” means any employee benefit plan as defined in Section 3(3) of ERISA (whether
governed by the laws of the United States or otherwise) to which Borrower incurs or otherwise has
any obligation or liability, contingent or otherwise.

     “Books and Records” means all books, records, board minutes, contracts, licenses, insurance
policies, environmental audits, business plans, files, computer files, computer discs and other
data and software storage and media devices, accounting books and records, financial statements
(actual and pro forma), filings with Governmental Authorities and any and all records and
instruments relating to the Collateral or Borrower’s business.

     “Capital Expenditures” means, for any Person for any period, the aggregate of all
expenditures, whether or not made through the incurrence of Indebtedness, by such Person and its
Subsidiaries during such period for the acquisition, leasing (pursuant to a Capital Lease),
construction, replacement, repair, substitution or improvement of fixed or capital assets or
additions to equipment, in each case required to be capitalized under GAAP on a consolidated
balance sheet of such Person, excluding interest capitalized during construction.

     “Capital Leases” means, with respect to any Person, any lease of, or other arrangement
conveying the right to use, any property (whether real, personal or mixed) by such Person as lessee
that has been or should be accounted for as a capital lease on a balance sheet of such Person
prepared in accordance with GAAP.

     “Capitalized Lease Obligations” means, at any time, with respect to any Capital Lease, any
lease entered into as part of any sale and leaseback transaction of any Person or any synthetic
lease, the amount of all obligations of such Person that is (or that would be, if such synthetic
lease or other lease were accounted for as a Capital Lease) capitalized on a balance sheet of such
Person prepared in accordance with GAAP.

     “Charges” means all Federal, state, county, city, municipal, local, foreign or other
governmental taxes (including taxes owed to PBGC at the time due and payable), levies, customs or
other duties, assessments, charges, liens, and all additional charges, interest, penalties,
expenses, claims or encumbrances upon or relating to (a) the Collateral, (b) the Obligations, (c)
the employees, payroll, income or gross receipts of Borrower, (d) the ownership or use of any
assets by Borrower, or (e) any other aspect of Borrower’s business.

17

 

     “Code” means the U.S. Internal Revenue Code of 1986 as amended.

     “Contractual Obligations” means as to any Person, any provision of any security issued by such
Person or of any agreement, instrument, or other undertaking (other than a Loan Document) to which
such Person is a party or by which it or any of its property is bound or to which any of its
property is subject.

     “CIT Loan Agreement” means that certain loan agreement evidencing a loan up to the maximum
principal amount of $80,000,000.00 made to Horizon Vessels, Inc. by The CIT Group/Equipment
Financing, Inc., as agent for itself and the other lenders party thereto.

     “Current Assets” means the assets of the Horizon Offshore on a consolidated basis which would
in accordance with GAAP be classified as current assets of a corporation conducting a business the
same as or similar to the Borrower.

     “Current Liabilities” means indebtedness of the Horizon Offshore on a consolidated basis which
would in accordance with GAAP be classified as current liabilities of a corporation conducting a
business the same as or similar to the Horizon Offshore excluding (a) the principal amount
outstanding under the Working Capital Loan, (b) the principal payment due hereunder on the Maturity
Date and (c) other debt that is specifically subordinated to the Loan on terms reasonably
acceptable to Bank.

     “Current Maturities of Long Term Debt” means for the Horizon Offshore and its Subsidiaries on
a consolidated basis, the principal amount due and payable during the next succeeding twelve month
period on Total Funded Debt of the Horizon Offshore and its Subsidiaries, excluding (a) the
principal amount due under the Working Capital Loan and the principal payment due hereunder on the
Maturity Date and (b) mandatory principal prepayments required by Section 1.6(a) of the CIT Loan
Agreement.

     “Current Ratio” means the ratio of Current Assets to Current Liabilities.

     “Debt Ratio” means the ratio of Total Funded Debt to the sum of Total Funded Debt plus the
Horizon Offshore’s stockholder’s equity.

     “Default” means any Event of Default or any event that, with the passage of time or notice or
both, would become an Event of Default.

     “EBITDA” means, for any period, the Net Income (Loss) of Horizon Offshore and its Subsidiaries
on a consolidated basis for such period, plus interest expense, income tax expense, amortization
expense (including accelerated amortization of prepaid loan fees, discounts and warrant expense, as
required by GAAP), depreciation expense and extraordinary losses and minus extraordinary gains, in
each case, of Horizon Offshore and its Subsidiaries on a consolidated basis for such period
determined in accordance with GAAP to the extent included in the determination of such Net Income
(Loss).

     “Environmental Laws” means all present and future Requirements of Law and Permits imposing
liability or standards of conduct for or relating to the regulation and protection of

18

 

human health, safety, the environment and natural resources, and including public notification
requirements and environmental transfer of ownership, notification or approval statutes.

     “Environmental Liabilities” means all Liabilities (including costs of Remedial Actions,
natural resource damages and costs and expenses of investigation and feasibility studies) that may
be imposed on, incurred by or asserted against Borrower as a result of, or related to, any claim,
suit, action, investigation, proceeding or demand by any Person, whether based on contract, tort,
implied or express warranty, strict liability, criminal or civil statute or common law or
otherwise, arising under any Environmental Law or in connection with any environmental, health or
safety condition or with any Release an resulting from the ownership, lease, sublease or other
operation or occupation of property by Borrower, whether on, prior or after the date hereof.

     “ERISA” means the Employee Retirement Income Security Act of 1974.

     “ERISA Affiliate” means, collectively, the Borrower, and any Person under common control, or
treated as a single employer, with Borrower, within the meaning of Section 414(b), (c), (m) or (o)
of the Code.

     “ERISA Event” means any of the following: (a) a reportable event described in Section 4043(b)
of ERISA (or, unless the 30-day notice requirement has been duly waived under the applicable
regulations, Section 4043(c) of ERISA) with respect to a Title IV Plan, (b) the withdrawal of any
ERISA Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan year in which
it was a substantial employer, as defined in Section 4001(a)(2) of ERISA, (c) the complete or
partial withdrawal of any ERISA Affiliate from any Multiemployer Plan, (d) with respect to any
Multiemployer Plan, the filing of a notice of reorganization, insolvency or termination (or
treatment of a plan amendment as termination) under Section 4041A of ERISA, (e) the filing of a
notice of intent to terminate a Title IV Plan (or treatment of a plan amendment as termination)
under Section 4041 of ERISA, (f) the institution of proceedings to terminate a Title IV Plan or
Multiemployer Plan by the PBGC, (g) the failure to make any required contribution to any Title IV
Plan or Multiemployer Plan when due, (h) the imposition of a lien under Section 412 of the Code or
Section 302 or 4068 of ERISA on any property (or rights to property, whether real or personal) of
any ERISA Affiliate, (i) the failure of a Benefit Plan or any trust thereunder intended to qualify
for tax exempt status under Section 401 or 501 of the Code or other Requirements of Law to qualify
thereunder and (j) any other event or condition that might reasonably be expected to constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Title IV Plan or Multiemployer Plan or for the imposition of any liability upon any
ERISA Affiliate under Title IV of ERISA other than for PBGC premiums due but not delinquent.

     “Financial Statements” means each financial statement delivered pursuant to Section 8(a), (b)
or (c).

     “Fiscal Month” means any of the monthly accounting periods of Borrower.

     “Fiscal Quarter” means each three month fiscal period ending on March 31, June 30, September
30 or December 31.

     “Fiscal Year” means the twelve month period of Borrower ending on December 31.

19

 

     “Fixed Charge Coverage Ratio” means, for the Horizon Offshore and its Subsidiaries on a
consolidated basis determined in accordance with GAAP as of the last day of any Fiscal Quarter of
the Horizon Offshore: (a) EBITDA for the four (4) Fiscal Quarters then ended divided by (b) the sum
of (i) Current Maturities of Long Term Debt as of the last day of such Fiscal Quarter, plus (ii)
Cash Interest paid during the four (4) Fiscal Quarters then ended, plus (iii) Tax Expense for the
four (4) Fiscal Quarters then ended.

     “GAAP” means generally accepted accounting principles in the United States of America, as in
effect from time to time, set forth in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants, in the statements and
pronouncements of the Financial Accounting Standards Board and in such other statements by such
other entity as may be in general use by significant segments of the accounting profession that are
applicable to the circumstances as of the date of determination.

     “Governmental Authorities” or “Governmental Agencies” means any government or any state,
department or other political subdivision thereof or governmental body, agency, authority,
department or commission having jurisdiction over the Borrower, or its Subsidiaries or their
properties (including, without limitation, any court or tribunal) exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining to government and
any corporation, partnership or other entity directly or indirectly owned by the foregoing.

     “Guaranty Obligation” means, as applied to any Person, any direct or indirect liability,
contingent or otherwise, of such Person for any Indebtedness, lease, dividend or other obligation
(the “primary obligation”) of another Person (the “primary obligor” ), if the purpose or intent of
such Person in incurring such liability, or the economic effect thereof, is to guarantee such
primary obligation or provide support, assurance or comfort to the holder of such primary
obligation or to protect or indemnify such holder against loss with respect to such primary
obligation, including (a) the direct or indirect guaranty, endorsement (other than for collection
or deposit in the ordinary course of business), co-making, discounting with recourse or sale with
recourse by such Person of any primary obligation, (b) the incurrence of reimbursement obligations
with respect to any letter of credit or bank guarantee in support of any primary obligation, (c)
the existence of any Lien, or any right, contingent or otherwise, to receive a Lien, on the
property of such Person securing any part of any primary obligation and (d) any liability of such
Person for a primary obligation through any Contractual Obligation (contingent or otherwise) or
other arrangement (i) to purchase, repurchase or otherwise acquire such primary obligation or any
security therefor or to provide funds for the payment or discharge of such primary obligation
(whether in the form of a loan, advance, stock purchase, capital contribution or otherwise), (ii)
to maintain the solvency, working capital, equity capital or any balance sheet item, level of
income or cash flow, liquidity or financial condition of any primary obligor, (iii) to make
take-or-pay or similar payments, if required, regardless of non-performance by any other party to
any Contractual Obligation, (iv) to purchase, sell or lease (as lessor or lessee) any property, or
to purchase or sell services, primarily for the purpose of enabling the primary obligor to satisfy
such primary obligation or to protect the holder of such primary obligation against loss or (v) to
supply funds to or in any other manner invest in, such primary obligor (including to pay for
property or services irrespective of whether such property is received or such services are
rendered); provided, however, that “Guaranty Obligations” shall not include (x) endorsements for
collection or deposit in the ordinary course of business and (y) product

20

 

warranties given in the ordinary course of business. The outstanding amount of any Guaranty
Obligation shall equal the outstanding amount of the primary obligation so guaranteed or otherwise
supported or, if lower, the stated maximum amount for which such Person may be liable under such
Guaranty Obligation.

     “Hazardous Material” means any substance, material or waste that is classified, regulated or
otherwise characterized under any Environmental Law as hazardous, toxic, a contaminant or a
pollutant or by other words of similar meaning or regulatory effect, including petroleum or any
fraction thereof, asbestos, polychlorinated biphenyls and radioactive substances.

     “Horizon Offshore” means Horizon Offshore, Inc., a Delaware corporation.

     “Indebtedness” of any Person means, without duplication, any of the following, whether or not
matured: (a) all indebtedness for borrowed money, (b) all obligations evidenced by notes, bonds,
debentures or similar instruments, (c) all reimbursement and all obligations with respect to (i)
letters of credit, bank guarantees or bankers’ acceptances or (ii) surety, customs, reclamation or
performance bonds (in each case not related to judgments or litigation) other than those entered
into in the ordinary course of business, (d) all obligations to pay the deferred purchase price of
property or services, other than trade payables incurred in the ordinary course of business and not
paid within 120 days of date of invoice, (e) all obligations created or arising under any
conditional sale or other title retention agreement, regardless of whether the rights and remedies
of the seller or lender under such agreement in the event of default are limited to repossession or
sale of such property, (f) all Capitalized Lease Obligations, (g) all obligations, whether or not
contingent, to purchase, redeem, retire, defease or otherwise acquire for value any of its own
Stock or Stock Equivalents (or any Stock or Stock Equivalent of a direct or indirect parent entity
thereof), valued at, in the case of redeemable preferred Stock, the greater of the voluntary
liquidation preference and the involuntary liquidation preference of such Stock plus accrued and
unpaid dividends, (h) all payments that would be required to be made in respect of any hedging or
similar agreement in the event of a termination (including an early termination) on the date of
determination and (i) all Guaranty Obligations for obligations of any other Person constituting
Indebtedness of such other Person; provided, however, that the items in each of clauses (a) through
(i) above shall constitute “Indebtedness” of such Person solely to the extent, directly or
indirectly, (x) such Person is liable for any part of any such item, (y) any such item is secured
by a Lien on such Person’s property or (z) any other Person has a right, contingent or otherwise,
to cause such Person to become liable for any part of any such item or to grant such a Lien.

     “IRS” means the Internal Revenue Service of the United States, and any successors thereto.

     “Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment, charge, deposit
arrangement, encumbrance, easement, lien (statutory or other), security interest or other security
arrangement and any other preference, priority or preferential arrangement of any kind or nature
whatsoever, including any conditional sale contract or other title retention agreement, the
interest of a lessor under a Capital Lease and any synthetic or other financing lease having
substantially the same economic effect as any of the foregoing.

21

 

     “Litigation” means any claim, lawsuit, litigation, investigation or proceeding of or before
any arbitrator or Governmental Authority.

     “Material Adverse Effect” means any fact, event or circumstance that, alone or when taken with
other events or conditions occurring or existing concurrently with such event or condition (a) has
a material adverse effect on the business, assets, operations or condition (financial or
otherwise), of Horizon Offshore on a consolidated basis, (b) materially impairs the ability of
Horizon Offshore, on a consolidated basis, to pay and perform its obligations under the Loan
Documents to which it is a party, (c) materially impairs the ability of Bank to enforce its rights
and remedies under any Loan Document or (d) has any material adverse effect on the Collateral, the
Liens of Bank in such Collateral or the priority of such Liens.

     “Maturity Date” means June 29, 2011.

     “Multiemployer Plan” means any multiemployer plan, as defined in Section 4001(a)(3) of ERISA,
to which any ERISA Affiliate incurs or otherwise has any obligation or liability, contingent or
otherwise.

     “Net Income (Loss)” means with respect to any Person and for any period, the aggregate net
income (or loss) after taxes of such Person for such period, determined in accordance with GAAP.

     “Obligations” means, with respect to Borrower, all amounts, obligations, liabilities,
covenants and duties of every type and description owing by Borrower to Bank, any other Indemnitee
and any Affiliate of any of them arising out of, under, or in connection with, any Loan Document or
any other agreement between Borrower and Bank, whether direct or indirect (regardless of whether
acquired by assignment), absolute or contingent, due or to become due, whether liquidated or not,
now existing or hereafter arising and however acquired, and whether or not evidenced by any
instrument or for the payment of money, including, without duplication, (a) the Loans, (b) all
interest, whether or not accruing after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or similar proceeding, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding and (c) all other fees,
expenses (including fees, charges and disbursement of counsel), interest, commissions, charges,
costs, disbursements, indemnities and reimbursement of amounts paid and other sums chargeable to
Borrower under any Loan Document.

     “PBGC” means the United States Pension Benefit Guaranty Corporation and any successor thereto.

     “Permits” means, with respect to any Person, any permit, approval, authorization, license,
registration, certificate, concession, grant, franchise, variance or permission from, and any other
Contractual Obligations with, any Governmental Authority, in each case whether or not having the
force of law and applicable to or biding upon such Person or any of its property or to which such
Person or any of its property is subject.

     “Permitted Liens” means the following liens:

22

 

     (i) liens for Taxes not at the time delinquent or thereafter payable without penalty or being
contested in good faith, provided provision is made to the extent required by GAAP for the eventual
payment thereof in the event it is found that such are payable by the Borrower;

     (ii) liens of carriers, warehousemen, mechanics, materialmen and landlords incurred in the
ordinary course of business for sums not overdue or being contested in good faith, provided
provision is made to the extent required by GAAP for the eventual payment thereof in the event it
is found that such sums are payable by the Borrower;

     (iii) maritime liens;

     (A) arising in the ordinary course of business by operation of law that are being
contested in good faith by appropriate proceedings and for which reserves have been made to
the reasonable satisfaction of the Bank; or

     (B) arising in connection with salvage and general average; or

     (C) arising in connection with crew wages claimed by not paid;

     (iv) liens incurred in the ordinary course of business in connection with workmen’s
compensation, unemployment insurance or other forms of governmental insurance or benefits, or to
secure performance of tenders and statutory obligations entered into in the ordinary course of
business or to secure obligations on surety or appeal bonds in the ordinary course of business or
easements, rights of way and similar encumbrances incurred in the ordinary course of business and
not interfering with the ordinary conduct of the business of the Borrower;

     (v) judgment liens in existence less than thirty (30) days after the entry thereof or with
respect to which execution has been stayed or the payment of which is covered in full by insurance;

     (vi) liens required by the terms of the Loan Agreement; and

     (vii) purchase money security interests in connection with Capital Expenditures permitted by
Section 6(o).

     “Person” means any individual, partnership, corporation (including a business trust and a
public benefit corporation), joint stock company, estate, association, firm, enterprise, trust,
limited liability company, unincorporated association, joint venture and any other entity or
Governmental Authority.

     “Projections” means as of any date the consolidated balance sheet, statements of income and
cash flow for Horizon Offshore and its Subsidiaries (including forecasted Capital Expenditures) (a)
by month for the next Fiscal Year, and (b) by year for the following three Fiscal Years, in each
case prepared in a manner consistent with GAAP and accompanied by senior management’s discussion
and analysis of such plan.

     “Related Persons” means, with respect to any Person, each Affiliate of such Person and each
director, officer, employee, agent, trustee, representative, attorney, accountant and each

23

 

insurance, environmental, legal, financial and other advisor and other consultants and agents
of or to such Person or an of its Affiliates.

     “Release” means any release, threatened release, spill, emission, leaking, pumping, pouring,
emitting, emptying, escape, injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Material into or through the environment.

     “Remedial Action” means all actions required to (a) clean up, remove, treat or in any other
way address any Hazardous Material in the indoor or outdoor environment, (b) prevent or minimize
any Release so that a Hazardous Material does not migrate or endanger or threaten to endanger
public health or welfare or the indoor or outdoor environment or (c) perform pre remedial studies
and investigations and post-remedial monitoring and care with respect to any Hazardous Material.

     “Requirements of Law” means, with respect to any Person, collectively, the common law and all
federal, state, local, foreign, multinational or international laws, statutes, codes, treaties,
standards, rules and regulations, guidelines, ordinances, orders, judgments, writs, injunctions,
decrees (including administrative or judicial precedents or authorities) and the interpretation or
administration thereof by, and other determinations, directive, requirements of requests of, any
Governmental Authority, in each case whether or not having the force of law and that are applicable
to or binding upon such Person or any of its property or to which such Person or any of its
property is subject.

     “Responsible Officer” means the President, the Vice President, the Chief Financial Officer of
Horizon Offshore or such other officer as Bank may approve.

     “Restricted Payment” means: (a) the declaration or payment of any dividend or the incurrence
of any liability to make any other payment or distribution of cash or other property or assets on
or in respect of Borrower’s Stock; (b) any payment or distribution made in respect of any
subordinated Indebtedness of Borrower in violation of any subordination or other agreement made in
favor of Bank (provided that conversion or exchange of subordinated indebtedness into or for Stock
of Horizon Offshore is expressly permitted); (c) any payment on account of the purchase,
redemption, defeasance or other retirement of Borrower’s Stock or Indebtedness or any other payment
or distribution made in respect of any thereof, either directly or indirectly; other than (i) that
arising under the Loan Agreement or (ii) interest and principal, when due without acceleration or
modification of the amortization as in effect on June 30, 2006, under Indebtedness (not including
subordinated Indebtedness, payments of which shall be permitted only in accordance with the terms
of the relevant subordination agreement made in favor of Bank) permitted under Section
6(a); or (d) any payment, loan, contribution, or other transfer of funds or other property to
any holder of Stock of such Person which is not expressly and specifically permitted in the Loan
Agreement; provided, that no payment to Bank shall constitute a Restricted Payment.

     “Security” means all Stock, Stock Equivalents, voting trust certificates, bonds, debentures,
instruments and other evidence of Indebtedness, whether or not secured, convertible or
subordinated, all certificates of interest, share or participation in, all certificates for the
acquisition of, and all warrants, options and other rights to acquire, any Security.

24

 

     “Stock” means all shares of capital stock (whether denominated as common stock or preferred
stock), equity interests, beneficial, partnership or membership interests, joint venture interests,
participations or other ownership or profit interests in or equivalents (regardless of how
designated) of or in a Person (other than a individual), whether voting or non-voting.

     “Stock Equivalents” means all securities convertible into or exchangeable for Stock or any
other Stock Equivalent and all warrants, options or other rights to purchase, subscribe for or
otherwise acquire any Stock or any other Stock Equivalent, whether or not presently convertible,
exchangeable or exercisable.

     “Subsidiary” means, with respect to any Person, any corporation, partnership, joint venture,
limited liability company, association or other entity, the management of which is, directly or
indirectly, controlled by, or of which an aggregate of more than 50% of the outstanding Voting
Stock is, at the time, owned or controlled directly or indirectly by, such Person or one or more
Subsidiaries of such Person.

     “Tangible Net Worth” means, at any particular date, all amounts which, in conformity with
GAAP, would be included as stockholder’s equity on a consolidated balance sheet of the Horizon
Offshore and its Subsidiaries; including, without limitation, adjustments for the addition of
paid-in-kind interest, discounts and warrant amoritization on subordinated debt; provided, however,
there shall be excluded from Tangible Net Worth (a) any amount at which shares of capital stock of
the Horizon Offshore or any of its Subsidiaries appear as an asset on the Horizon Offshore’s or
Subsidiary’s balance sheet, (b) goodwill, including any amounts, however designated, that represent
the excess of the purchase price and for assets or stock over the value assigned thereto, (c)
patents, trademarks, trade names and copyrights, (d) loans and advances to any stockholder,
director, officer or employee of the Horizon Offshore or any of its subsidiaries or any Affiliate
thereof and (e) all other assets which are properly classified as intangible assets.

     “Taxes” means taxes, levies, imposts, deductions, or withholdings, and all liabilities with
respect thereto, excluding taxes imposed on or measured by the Net Income of Bank.

     “Tax Affiliate” means, (a) Borrower and its Subsidiaries and (b) any Affiliate of Borrower
with which Borrower files or is eligible to file consolidated, combined or unitary tax returns.

     “Tax Expense” means, for any period respecting the Horizon Offshore and its Subsidiaries on a
consolidated basis, the sum of all income tax expense for such period determined in accordance with
GAAP applied consistently.

     “Threshold Amount” means $250,000; provided, however, that a claim asserted against a Borrower
which is covered by valid and collectible insurance (subject to any applicable deductibles) and for
which no defense to coverage has been asserted or is expected to be asserted and is within the
coverage limits of such coverage, shall not be included in the Threshold Amount event if in excess
of $250,000.

     “Total Funded Debt” means, as of any date of determination, without duplication, the sum of
(a) all principal indebtedness of the Horizon Offshore and its Subsidiaries for borrowed money on
that date (other than intercompany indebtedness), plus (b) the aggregate amount of all

25

 

monetary obligations of the Horizon Offshore and is Subsidiaries under any and all Capital
Leases on such date.

     “Voting Stock” means Stock of any Person having ordinary power to vote in the election of
members of the board of directors, managers, trustees or other controlling Persons, of such Person
(irrespective of whether, at the time, Stock of any other class or classes of such entity shall
have or might have voting power by reason of the occurrence of any contingency).

     “Working Capital” means the excess of Current Assets over Current Liabilities.

26

 

Exhibit “C”

FORM OF CERTIFICATE OF COMPLIANCE

[HORIZON OFFSHORE, INC., LETTERHEAD]

[Date]

General Electric Capital Corporation

To: Account Manager

     This is to certify that in accordance with Section 8 of the Third Amendment to Amended
and Restated Loan Agreement dated as of June 29, 2006 (the “Agreement”; capitalized terms
are used herein as defined in the Agreement) that the attached Financial Statements attached hereto
are complete and true and have been prepared in conformance with GAAP (other than, in the case of
monthly or quarterly statements, the absence of footnotes and other year end audit adjustments).
In addition, there are not Defaults or Events of Default continuing as of such date.

     Also attached are the covenant calculations used in determining compliance with the financial
covenants contained in Section 8 of the Agreement. [FOR USE ONLY IN CONNECTION WITH
QUARTERLY AND ANNUAL FINANCIAL STATEMENTS]

	 	 	 	 	 
	 	Very truly yours,

 	 
	 	 	 
	 	Name:  	 	 
	 	Its: 	 	 
	 

27

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