Document:

exv10w1

 

Exhibit 10.1

LOAN AGREEMENT

          This LOAN AGREEMENT (as amended, supplemented or modified from time to
time, this (“Agreement”) is dated as of June 4, 2003 and is between HORIZON
VESSELS, INC., a Delaware corporation, (collectively “Borrower”) and ELLIOTT
ASSOCIATES, L.P., a Delaware limited partnership (“Lender”).

          The parties hereto agree as follows:

ARTICLE I

GENERAL DEFINITIONS

Section 1.1     Definitions. The following terms, as used herein, have the
following meanings:

          “Affiliate” means (i) any Person that directly, or indirectly through one
or more intermediaries, controls the Borrower (a “Controlling Person”) or (ii)
any Person (other than the Borrower) which is controlled by or is under common
control with a Controlling Person. As used herein, the term “control” means
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.

          “Borrower” mean Horizon Vessels, Inc., a Delaware corporation and its
successors and assigns.

          “Business Day” means any day except a Saturday, Sunday or other day on
which federal offices or Texas banks are authorized by law to close.

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

          “Collateral” shall mean the properties, property interests and rights
covered by the Collateral Documents, as security for the Loan, including
without limitation, the Real Property and the Vessel.

          “Collateral Documents” mean the Deed of Trust, Preferred Ship Mortgage,
the Guaranty of Horizon Offshore, Inc., the Guaranty of Horizon Offshore
Contractors, Inc., the Guaranty of Horizon Marine Construction Ltd., the
Guaranty of ECH Offshore S. de R.L de C.V., the Assignment of Insurance and the
Assignment of Charter delivered or to be delivered pursuant thereto,
substantially in the forms attached hereto as Exhibits “A,” “B,” “C”, “D”, “E”,
“F”, “G”, and “H”, respectively.

          “Deed of Trust” means the Deed of Trust, Security Agreement and
Assignment of Leases and Rents to be executed by Borrower on or before July 1,
2003, in favor of Gary Rachlin, Trustee, for the benefit of Lender, securing
payment of the Note and covering certain real property situated in Jefferson
County, Texas, which is more particularly described therein.

 

 

          “Default” means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.

          “Drawdown Date” means the dates of funding of the Loan pursuant to
Section 2.1.

          “Effective Date” means the date on which this Agreement becomes effective
and has been executed by all parties pursuant to Section 8.8 hereto.

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

          “GAAP” means generally accepted accounting principles as in effect from
time to time in the United States.

          “Government Requirement” mean any law, statute, ordinance, order, rule,
regulation, judgment, decree, certificate, license, authorization or other
requirement of any (domestic or foreign) federal, state, county, municipal or
other government, agency, department, commission, board, court, authority or
official.

          “Guarantors” shall mean Horizon Offshore, Inc., Horizon Offshore
Contractors, Inc., Horizon Marine Construction Ltd., and ECH Offshore S. R.L.
de C.V., and “Guarantor” shall mean any one of them.

          “Lender” means Elliott Associates, L.P. and its successors and assigns.

          “Loan” means a loan made by the Lender to the Borrower pursuant to this
Agreement.

          “Note” or “Term Note” means the Term Note as such term is defined in
Article II and substantially in the form attached hereto as Exhibit “J”.

          “Person” means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.

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

          “Preferred Ship Mortgage” means a document in a form to be properly
recorded with the United States Coast Guard, National Vessel Documentation
Center, with respect to the PECOS HORIZON, which when recorded shall provide
the Lender with a second lien against the Vessel and substantially in the form
attached hereto as Exhibit “B”.

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          “Real Property” shall mean the real property covered by the Deed of
Trust.

          “Term” means the time period commencing on the Drawdown Date.

          “Vessel” means the United States flag vessel PECOS HORIZON (O.N. 528068).

          Section 1.2      Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared, in accordance
with GAAP as in effect from time to time, applied on a basis consistent
(except for changes concurred in by the Borrowers’ independent public
accountants) with the most recent audited financial statements of the Borrower
delivered to the Lender.

ARTICLE II

THE LOAN

          Section 2.1     Commitment
to Make Loan. Term Commitment. The Lender agrees,
on the terms and conditions set forth in this Agreement, to make a Fifteen
Million and 00/100 Dollars ($15,000,000.00) loan (“Term Loan”) to the Borrower
in two advances - the first in the amount of $10,000,000 which will be secured
by the Preferred Ship Mortgage, the Assignment of Charter, the Assignment of
Insurance, and the Guarantys and the second in the amount of $5,000,000 which
will be secured by the Deed of Trust (which Deed of Trust shall be executed
and delivered no later than July 1, 2003). This Commitment is not revolving in
nature, and the Term Loan may not be reborrowed once the Borrower has repaid
the Term Loan in whole or in part.

          Section 2.2     Note. The Loan shall be evidenced by, and repayable with
interest in accordance with, a single note substantially in the form of
Exhibit “I” hereto and appropriately completed (together with any and all
renewals, modifications or extensions thereof or substitution therefore, the
“Term Note”).

          Section 2.3      Interest Rates. The Term Note shall bear interest at the
fixed rate of twelve percent (12%) per annum (the “Interest Rate”). Any
overdue principal of and, to the extent permitted by law, overdue interest on
the Term Note shall bear interest, payable on demand, for each day until paid
at a rate per annum (the “Default Rate”) equal to the lesser of (a) three
percent (3%) above the Interest Rate or (b) the maximum rate permitted by
applicable law.

          Section 2.4      Payment. The Borrower shall repay $10,000,000 principal
amount of the Term Loan on July 15, 2003 and shall repay the balance of the
Term Loan on or before October 1, 2003, and shall pay interest monthly on the
unpaid balance thereof on the monthly anniversary of the first Drawdown Date.

          Section 2.5     General
Provisions as to Payments. The Borrower shall make each
payment of principal of, and interest on, the Loans, not later than 10:00 a.m.
(Central Time) on the date when due, in Federal or other funds immediately
available. Whenever any payment of principal of, or

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interest on, the Loan shall be due on a day which is not a Business Day, the
date for payment thereof shall be extended to the next succeeding Business Day.

          Section 2.6     Computation of Interest. Interest shall be computed on the
basis of a year of 360 days for the actual number of days elapsed.

          Section 2.7      Commitment Fee. Borrower shall pay a commitment fee of 3% of
the amount of the Term Loan on the first Drawdown Date.

          Section 2.8      Prepayment. In the event the Vanauatu flag vessel SEA
HORIZON, owned by Horizon Vessels International, LLC, is refinanced, Borrower
shall make a mandatory prepayment of the Term Note in the amount of
$10,000,000. The Borrower shall have the privilege to prepay the Term Note in
whole or in part, without penalty, provided, however, that Borrower shall be
required to prepay the Term Note, without penalty, if, as a result of a marine
casualty, the Vessel becomes a total loss or a constructive or arranged total
loss.

ARTICLE III

CONDITIONS TO LOANS

          Section 3.1     Requirements of Closing. The Lender shall have no obligation
to advance funds until:

               (i)     receipt by the Lender of the Note, duly executed by the Borrower, and
each of the Collateral Documents required by Section 2.1, duly executed by the
Borrower and Guarantors, as the case may be;

               (ii)     all legal matters incident to this Agreement, the Note, the
Collateral Documents and the transactions contemplated hereby and thereby
shall be reasonably satisfactory to counsel for the Lender;

               (iii)     receipt by the Lender of:

                                        (A) a copy of Borrower’s certificate of organization certified by the
Secretary of State of the State of Delaware and dated with a recent date.

                                        (B) a certificate of the Secretary or an Assistant
Secretary of the
Borrower dated the date of such Loan and certifying, as applicable, (1) that
the certificate of organization of Borrower has not been amended since the date
of the last amendment thereto indicated on the certificate furnished pursuant
to clause (A) above, (2) as to the absence of dissolution or liquidation
proceedings by or against the Borrower, (3) that attached thereto is a true and
correct copy of the resolutions adopted by the Board of directors of the
Borrower authorizing the execution, delivery and performance of this Agreement,
the Note and the Collateral Documents and that said resolutions have not been
amended and are in full force and effect on the date of such certificate, (4)
as to the incumbency and specimen signatures of each officer of the Borrower

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executing this Agreement, the Note and any other Collateral Documents to which
it is a party, or any other document delivered in connection herewith or
therewith; and (5) each Borrower is qualified to do business in each
jurisdiction where the failure to so qualify would have a material adverse
affect on its financial condition;

               (iv)     receipt by the Lender of the Preferred Ship Mortgage and each
document reasonably requested by Lender to be filed, registered or recorded in
order to create in favor of Lender a perfected Preferred Ship Mortgage on the
Vessel;

               (v)     receipt by Lender of evidence that the Vessel has been classed Al,
Maltese Cross, and has a valid Loadline Certificate issued by the American
Bureau of Shipping, and received a Certificate of Inspection from the United
States Coast Guard;

               (vi)     receipt by Lender, with respect to the Real Property of a survey,
mortgagee policy of title insurance, soils report, environmental assessment,
wetlands assessment, estoppel certificate from the holder of the first liens
affecting the Real Property and such other assurances and documentation
requested by Lender, all in form and substance satisfactory to Lender;

               (vii)     Lender determining that no material adverse change has occurred to
the Borrower’s or any Guarantor’s business operation or financial condition or
prospects or Borrower’s ability to operate the Vessel since the date of the
Lender’s Commitment or to any other facts, circumstances or conditions upon
which the Lender has relied or utilized in making its decision to make the
Loan.

               (viii)     receipt by Lender of the Drawdown Notice substantially in the form
attached hereto as Exhibit “I” and made a part hereof by reference at least
three Business Days before the anticipated Drawdown Date;

               (ix)     an opinion of counsel to the Borrower (as to due formation;
authorization; execution and validity of the Collateral Documents;
enforceability of all Collateral Documents, including all of the Guarantees;
perfection of second priority ship mortgage and other security interests; no
consents being required or, if required, having been obtained; no material
litigation; no conflict with existing obligations; and perfected assignments of
charter and insurance), all in form and substance satisfactory to the Lender;

               (x)     a certificate of insurance, evidencing that the Borrower has procured
the insurance required by this Agreement and the Collateral Documents.

               (xi)     receipt by Lender of satisfactory lien searches
on the Collateral;

               (xii)     receipt by Lender of
Borrower’s most recent financial statements;

               (xiii)     the
absence of a Default or an Event of Default.

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All documents and opinions referred to in this Article shall be in form and
substance satisfactory to the Lender and its counsel.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

          The Borrower represents and warrants that:

          Section 4.1     Corporate Existence and Power. Borrower is a corporation duly
organized and validly existing under the laws of the State of Delaware, and
has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as
now conducted and to operate the PECOS HORIZON. Borrower is duly qualified as
a corporation and in good standing in each jurisdiction where the
qualification or licensing is required by the nature of its business or the
character and location of its property or business and in which the failure to
so qualify or be licensed, as the case may be, in the aggregate, could have a
material adverse effect on the business, financial position, results or
operations, or properties of Borrower.

          Section 4.2     Corporate and Governmental Authorization;
Contravention The
execution, delivery and performance by the Borrower of this Agreement, the
Note and the Collateral Documents to which it is a party have been duly
authorized by all corporate action, require no action by or in respect of, or
filing with, any governmental body, agency or official (other than the
Preferred Ship Mortgage) and do not contravene, or constitute (with or without
the giving of notice or lapse of time or both) a default under, any provision
of applicable law or of the certificate of incorporation of the Borrower or of
any agreement, judgment, injunction order, decree or other instrument binding
upon or affecting the Borrower or result in the creation or imposition of any
lien (other than the lien created by the Collateral Documents) on any of its
assets.

          Section 4.3     Binding Effect. This Agreement constitutes a valid and binding
agreement of the Borrower and the Note, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations
of the Borrower, in each case enforceable against the Borrower in accordance
with its terms, except as (i) the enforceability hereof and thereof may be
limited by bankruptcy, insolvency or similar laws affecting creditor’s rights
generally and (ii) rights of acceleration and the availability of equitable
remedies may be limited by equitable principles of general applicability.

          Section 4.4      Financial Information.

          (a)        The consolidating balance sheet of the Borrower for the fiscal year
then ended, copies of which have been made available to the Lender, fairly
present, in conformity with GAAP, the financial position of the Borrower as of
such date and its results of operations and cash flows for such fiscal year.
As of the date of such financial statements, the Borrower did not have any
material contingent obligation, contingent liability or liability for taxes,
long-term lease or unusual forward or long-term commitment, which is not
reflected in any of such financial statements or notes thereto.

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          (b)        Since the date of the latest balance sheet there has been no material
adverse change in the business, financial position, results of operations or
prospects of the Borrower.

          Section 4.5     Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Borrower threatened against or affecting,
the Borrower before any court, governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which could
materially adversely affect the business, financial position or results of
operations of the Borrower or which in any manner draws into question the
validity of this Agreement, the Note, or any Collateral Document and there is
no basis known to the Borrower for any such action, suit or proceeding.

          Section 4.6     Marketable Title. The Borrower has good and marketable title
to the Collateral on the Drawdown Date.

          Section 4.7     Filings. All actions by or in respect of, and all filings
with, any governmental body, agency or official required in connection with
the execution, delivery and performance of this Agreement, the Note and the
Collateral Documents, or necessary for the validity or enforceability thereof
or for the protection or perfection of the rights and interests of the Lender
thereunder, will, prior to the date of delivery thereof, have been duly taken
or made, as the case may be, and will at all times thereafter remain in full
force and effect.

          Section 4.8     Regulation U. The proceeds of the Loans will be used by the
Borrower for general corporate purposes. None of the loan proceeds will be
used, directly or indirectly, for the purpose of purchasing or carrying any
margin stock or for the purpose of reducing or retiring any indebtedness which
was originally incurred to purchase or carry margin stock or for any other
purpose which might constitute the Loans a “purpose Loan” within the meaning
of Regulation U or Regulation X of the Board of Governors of the Federal
Reserve System.

          Section 4.9      Taxes. United States Federal income tax returns of the
Borrower have been prepared and filed through the fiscal year ended 2001 by
Borrowers’ accountants. The Borrower has filed or obtained extensions of time
within which to file all United Stated Federal income tax returns and all
other material tax returns which are required to be filed by it, including,
but not limited to, all payroll taxes and state property and income taxes, and
have paid all taxes due pursuant to such returns or pursuant to any assessment
received by the Borrower. The charges, accruals and reserves on the books of
the Borrower in respect of taxes or other governmental charges are, in the
opinion of the Borrower, adequate.

          Section 4.10      Environmental Compliance.

          (a)        The Borrower (including, for purposes of this Section 4.10(a), any
former or current Affiliate of the Borrower) will comply with all applicable
laws, rules, regulations and orders of all governmental authorities, agencies
and officials relating to environmental matters and the release, handling and
disposal of hazardous, toxic and polluting substances.

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          (b)        The Borrower has obtained and is in material compliance with all
required
governmental permits, certificates, licenses, approvals and other
authorizations, and have filed all
notifications relating to air emissions, effluent discharges and solid and
hazardous waste storage,
treatment and disposal required in connection with its ownership or use of
the Vessel.

          (c)        Any toxic or hazardous substances handled by the Vessel will be
transported in
compliance with the Comprehensive Environmental Response, Compensation and
Liability Act of
1980, as amended by the Superfund Amendment and the Reauthorization Act of
1986 (“CERCLA”),
the Federal Clean Water Act or the Clean Air Act or any other applicable
environmental law,
regulation or ordinance which applies to the operation of the Vessel.

          Section 4.11     Disclosure. None of this Agreement, the Collateral
Documents, any schedule or exhibit thereto or document, certificate, report,
statement or other information furnished to the Lender in connection herewith
or therewith or with the consummation of the transactions contemplated hereby
or thereby contains any material misstatement of fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading.

          Section 4.12      ERISA. The Borrower and its Plans are in compliance in all
material respects with the applicable provisions of ERISA, and no Reportable
Event, as such term is defined in Title IV of ERISA, has occurred with respect
to any Plan of the Borrower.

          Section 4.13      Defaults. Borrower is not in default (in any respect which
materially and adversely affects its business, properties, operations or
condition, financial or otherwise) under any indenture, mortgage, deed of
trust, agreement or other instrument to which it is a party or by which it is
bound, except as otherwise disclosed to Lender in writing.

          Section 4.14     Compliance with the Law. Borrower is not in violation of any
Governmental Requirement to which such Borrower or any of its property is
subject, or (ii) has failed to obtain any license, permit, franchise or other
authorization required by any Governmental Authority or otherwise necessary to
the ownership of any of its property or the conduct of its business; in each
case, which violation or failure could reasonably be anticipated to materially
and adversely affect the business, profits, property or condition (financial
or otherwise) of such Borrower.

ARTICLE V

AFFIRMATIVE COVENANTS

          The Borrower agrees that so long as the Lender is committed to make the
Loan hereunder or any amount payable hereunder or under the Note or any
Collateral Document remains unpaid:

          Section 5.1      Information.

          (a)        Borrower shall furnish, or cause to be furnished, to Lender (i) as
soon as possible and in no event more than one hundred twenty (120) days after
the end of each fiscal year of Borrower’s

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consolidating financial statements, prepared in accordance with GAAP and
certified by the Borrower’s accountants as of the end of such period,
including a balance sheet and related statements of income, and, if
applicable, member’s equity and cash flows; (ii) as soon as possible and in no
event more than sixty (60) days after the close of each fiscal quarter of
Borrower, similar financial statements to those referred to in (i) above,
unaudited, but certified by Borrower’s chief financial officer; and (iii) such
other financial or other information as Lender may from time to time
reasonably request. Such financial statements shall be prepared in accordance
with generally accepted accounting principles applied on a consistent basis.

          (b)        Each of the Guarantors shall furnish, or cause to be furnished, to
Lender (i) as soon
as possible and in no event more than one hundred twenty (120) days after
the end of each fiscal year
of such Guarantor the applicable financial statements, prepared in
accordance with GAAP and
certified by the Guarantor’s accountants as of the end of such period,
including a balance sheet and
related statements of income; (ii) as soon as possible and in no event
more than sixty (60) days after
the close of each fiscal quarter of such Guarantor, similar financial
statements to those referred to
in (i) above, unaudited, but certified by each Guarantor’s chief financial
officer, and (iii) such other
financial or other information as Lender may from time to time reasonably
request. Such financial
statements shall be prepared in accordance with generally accepted
accounting principles applied on
a consistent basis.

          (c)        Concurrently with the furnishing of the annual and quarterly financial
statements
pursuant to subsection 5.1 (a) hereof, Borrower will furnish to Lender a
certificate signed by the chief
financial officer of such Borrower stating that no Default exists, or if a
Default exists then the nature,
period of existence and status thereof.

          Section 5.2     Payment of Obligations. The Borrower will pay and discharge,
as the same shall become due and payable, (i) all its obligations and
liabilities, including all claims or demands of materialmen, mechanics,
carriers, warehousemen, landlords and other like persons which, in any such
case, if unpaid, might by law give rise to a maritime or other lien on the
Collateral, and (ii) all lawful taxes, assessments and charges or levies made
upon it or its property or assets, by any governmental body, agency or
official except where any of the items in clause (i) or (ii) of this Section
5.2 may be diligently contested in good faith by appropriate proceedings, and
the Borrower shall have set aside on its books, if required under GAAP,
reserves for the liabilities related to such items.

          Section 5.3     Corporate Existence. Borrower shall at all times maintain its
corporate existence and shall not, without Lender’s prior written consent,
dissolve or otherwise dispose of all or substantially all of its assets, in
one transaction or a series of transactions, or consolidate with or merge into
another corporation.

          Section 5.4      Compliance with Law. The Borrower shall comply with and
satisfy all
applicable Governmental Requirements. The Borrower will also obtain and
maintain in force all necessary permits, licenses, and approvals necessary for
the operation of the Vessel, including but

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not limited to, those required by the American Bureau of Shipping (“ABS”)
and/or the United States Coast Guard.

          Section 5.5      Payment of Taxes. Borrower will pay and discharge promptly
when due all taxes, assessments and governmental charges or levies imposed
upon it or upon its income or upon its Vessel as well as all claims of any
kind (including claims for labor, materials, supplies and rent) which, if
unpaid, might become a lien upon the Vessel; provided, however, the Borrower
shall not be required to pay any such tax, assessment, charge, levy or claim
if the amount, applicability, or validity thereof shall currently be contested
in good faith by appropriate proceedings diligently conducted and shall have
set up reserves for the liabilities for any such taxes in accordance with
generally accepted accounting principles; provided further, that any such
contest shall prevent the sale of the Vessel under special execution or other
for the payment of any such tax, assessment, charge, levy or claim, or other
forfeiture or loss of title to the Vessel.

          Section 5.6     Insurance. References in this Section 5.6 to the term
“Vessel” shall also include not only the Vessel, as herein defined, but also
all of the Collateral. Without limiting the generality of the foregoing:

                                   (a)        So long as any of the obligations of the Term Loan remain outstanding,
Borrower, at its expense and at no expense to the Lender, shall keep the
Vessel insured or cause the
vessel to be insured (i) against risks of fire, explosion and marine
perils (including without limitation
a collision or Four-Fourths Running Down Clause), and against all other
liabilities and risks insured
under the most recent form of policy known as “Institute Time Clauses -
Hulls,” or equivalent,
including but not limited to strikes, riots, and civil commotion coverage,
(ii) risks covered by
protection and indemnity insurance (including, without limitation,
coverage against third party
claims for pollution liability including statutory and governmental
clean-up liabilities), (iii) excess
protection and indemnity, and (iv) if the vessel is to engage in a foreign
voyage, war risks hull and
P&I, including confiscation, nationalization and expropriation. The
Borrower will keep the Vessel
insured, in lawful money of the United States and in markets acceptable to
the Lender, for not less
than in the case of the insurance referred to in clause (i) and (ii)
above, the full insurable value of the
Vessel; provided, however, that any protection and indemnity insurance
shall be in an amount not
less than the amount of insurance against total loss.

                                   (b)        The policy or policies of insurance shall be issued by first class
underwriters or mutual associations and shall contain terms customarily
imposed on vessels engaged
in the same or similar type of trade. The Borrower also shall obtain
Mortgagee’s Interest or Breach
of Warranty insurance with respect to the hull and machinery insurance
furnished by Borrower or
any charterer with the Lender as the beneficiary. The Borrower shall
furnish to the Lender, annually,
not later than ninety (90) days after the end of Borrower’s fiscal year, a
detailed certificate or opinion
signed by a firm of marine insurance brokers approved by the Lender that
the insurance coverages
in place and the amounts thereof are prudent and reasonably take into
account existing industry
practices, and the risks associated with the trade of the Vessel and
comply with Borrower’s
obligations under this Section 5.6. Cover notes and/or certificates for
all insurance coverages
provided for herein shall be furnished to the Lender upon execution of
this Loan Agreement and

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thereafter delivered to Lender whenever requested and in any event at the time
such insurance coverages are renewed, extended or a new insurance policy
substituted therefor. All policies required hereunder shall contain provisions
that the same may not be canceled or materially modified until thirty (30)
days following delivery to Lender of written notice of intent to cancel or
materially modify the policy. Borrower undertakes to use its best efforts to
have deleted any language contained in the printed policy or insurance
certificate which relieves the insurance carrier from responsibility to the
Lender in the event such carrier fails to provide such notice.

                                   (c)        All insurance and the policies evidencing the same shall by their
terms
be taken out in the joint names of Borrower and Lender, and shall by their
terms be payable to them
as their respective interests may appear. The interest of Lender is
hereby declared to be the
outstanding amount of the obligations of the Term Loan, whether contingent
or absolute, due or to
become due, and in event of a total loss of the Vessel, actual or
constructive, or a compromised
constructive loss or requisition, the Lender shall be paid the entire
amount of insurance covering the
Vessel up to the entire outstanding amount of the obligations of the Term
Loan. If such a total loss
shall occur, Borrower and Lender shall join in a payment order directing
the interested underwriter
to pay the proceeds of the insurance applicable to such total loss in the
manner herein provided in
Section 4.11 of the Preferred Ship Mortgage. The Borrower shall not
declare or agree with the
underwriters that the Vessel is a constructive or compromised, agreed or
arranged total loss without
the prior written consent of the Lender. The proceeds of all other
insurance shall be paid to the
Lender and the Borrower jointly (except in the case of worker’s
compensation, P&I, or comparable
insurance payments payable, due to the nature thereof, to third parties),
and provided that the
Borrower is not in default under this Loan Agreement, the Lender shall
either make available to the
Borrower by an appropriate payment order directed to the interested
underwriter the proceeds of all
insurance to pay any outstanding bill for supplying or repairing the
Vessel (to the extent the proceeds
are so relevant) and/or outstanding third-party claim, provided that the
Borrower pays the amount
of the deductible; or reimburse the Borrower, in whole or in part, for any
expenditures it may have
made for repairing the Vessel (to the extent the proceeds are so relevant)
and/or obtaining waivers
of Liens or appropriate releases for the third-party claims. Should the
Borrower not effect repairs
to the Vessel or pay third-party claims, or in either event furnish and/or
pay the deductible, or if the
Borrower is in default hereunder, then the Lender shall be entitled to
receive the proceeds of any
insurance applicable to such loss and upon payment shall credit the net
proceeds of any insurance
as provided in Section 4.11 of the Preferred Ship Mortgage; provided,
however, that Lender’s rights
to any insurance proceeds shall be subject to the Intercreditor Agreement
between Lender and
General Electric Capital Corporation dated June 2, 2003.

                                   (d)        All policies for insurance shall provide that (i) there shall be no
recourse against the Lender for the payment of premiums or commissions and
(ii) if such policies
provide for the payment of club calls, assessments or advances, there
shall be no recourse against
the Lender for the payment thereof.

                                   (e)        With respect to insurance placed by the Borrower, Borrower agrees
to renew all insurance policies or cause or procure the same to be renewed
before the relevant
policies or contracts expire and to procure that the insurers or a firm of
independent marine insurance

-11-

 

brokers shall promptly confirm in writing to the Lender as and when each such
renewal is effected. The Borrower further agrees with respect to such
insurance placed by it to cause such insurers or independent marine insurance
brokers to agree (x) to advise the Lender promptly of any failure to renew or
other event which could cause a lapse in coverage and of any default in
payment of any premium and of any other act or omission on the part of the
Borrower of which they have knowledge and which might, in their opinion,
invalidate or render unenforceable, or cause the lapse of, or prevent the
renewal or extension of, in whole or in part, the insurance on the Vessel and
(y) to mark their records and advise the Lender at least thirty (30) days
prior to the expiration date of any of the insurance policies, that such
insurance policies have been renewed or replaced with new insurance which
complies with the provisions hereof.

                                   (f)        The Borrower warrants that it will maintain all such insurance
unimpaired by any act, breach of warranty or otherwise, and that it will not
be guilty of or permit any act of omission or commission which will in any way
invalidate, void or suspend any insurance herein provided to be maintained.
The Borrower shall pay for any loss of or damage to the Vessel by any cause
whatsoever and any third-party claims whatsoever which would constitute a Lien
against the Vessel not covered by insurance or for which no reimbursement or
incomplete reimbursement is secured from the insurance.

          Section 5.7     ERISA. The Borrower and its Plans are in compliance in all
material respects with the applicable provisions of ERISA, and no Reportable
Event, as such term is defined in Title IV of ERISA, has occurred with respect
to any Plan of the Borrower.

          Section 5.8     Notice of Certain Events. (a) Borrower will promptly notify
Lender if Borrower learns of the occurrence of any event which constitutes a
Default, together with a detailed statement by Borrower as to the nature of
the Default and the steps being taken to cure the effect of such Default.

               (b)        Borrower will promptly notify Lender of any change in location of
Borrower’s
principal place of business or the office of Borrower where records
concerning accounts and contract
rights are kept, or any change in the federal taxpayer identification
number of Borrower.

               (c)        Borrower will promptly notify Lender of any defaults or alleged
defaults of
any party with respect to any charter agreement of the Vessel and shall
cooperate in all respects with
all actions, if any, of Lender to cure such defaults.

               (d)        Borrower will promptly notify Lender of any and all Liens Filed or
otherwise
asserted, and attachments made, against its Vessel, together with copies
of all related instruments
and any other materials that Lender shall require.

               (e)        Borrower will promptly notify Lender of any material casualty to or
accident
involving the Collateral, whether or not such casualty or loss is covered
by insurance.

-12-

 

               (f)        Borrower will promptly notify Lender of the arising of any litigation,
governmental investigation, or dispute threatened against or affecting (i)
Borrower, which, if
adversely determined, would have a material adverse effect upon the
financial condition or business
of Borrower or (ii) its Vessel, including without limitation any arrest,
seizure, sequestration, or other
similar process or other enforcement action or attempted arrest or similar
action.

               (g)        Borrower will provide Lender with prior notice in each instance before
its
Vessel is to be located or operated other than in the Gulf of Mexico or
the Caribbean (including
coastal and adjoining inland waters), describing the planned voyage.

          Section 5.9      Further Assurance. Borrower will, at its expense, promptly
(and in no event later than 30 days after written notice from Lender is
received) execute and deliver, or cause to be executed and delivered, to
Lender upon reasonable request all such other and further documents,
agreements and instruments (including without limitation further security
agreements, financing statements, continuation statements, and assignments of
accounts and contract rights) in compliance with or accomplishment of the
covenants and agreements of Borrower and Guarantor in the loan documents or to
further evidence and more fully describe the Collateral, including any
renewals, additions, substitutions, replacements or accessions to the
Collateral, or to correct any omissions in the Collateral Documents, or more
fully state the security obligations set out herein or in any of the
Collateral Documents, or to perfect, protect or preserve any Liens created
pursuant to any of the Collateral Documents, or to make any recordings, to
file any notices, or obtain any consents as may be necessary or appropriate in
connection with the transactions contemplated by this Agreement.

          Section 5.10      Cross Collateralization. If Lender lends any new funds in
addition to the advances contemplated by this Agreement to Borrower, Borrower
shall amend the Collateral Documents such that any new loan will be secured by
the Collateral Documents.

          Section 5.11      Recordation Opinion of Counsel. Within twenty-one (21) days
after the Drawdown Date, Borrower will deliver to Lender an opinion of counsel
to Borrower as to the due recordation and validity of the preferred ship
mortgage and other security interests in form and substance satisfactory to
Lender.

ARTICLE VI

NEGATIVE COVENANTS

          Section 6.1      Liens. Borrower lawfully owns and is lawfully possessed of the
Collateral free and clear of all liens, mortgages, taxes and encumbrances
except for (i) liens accrued in the ordinary course of business which are not
yet past due and payable; (ii) liens under the Collateral Documents; (iii) such
other liens, mortgages, taxes and encumbrances, if any, as have been consented
to in writing by the Lender including the First Preferred Ship Mortgage in
favor of GECC dated June 29, 2001 and the mortgage on the real property in
favor of SouthTrust Bank dated June 2, 2003; (iv) liens for loss, damage, or
expense which are covered by insurance; and (v) liens for which a bond or other
security has been posted by or on behalf of the Borrower, and except where any
of the items listed in clauses (i) and (iii) of this section maybe diligently
contested in good faith

-13-

 

by appropriate proceedings, and the Borrower shall have set aside on its
books, if required, by GAAP, appropriate reserves for the liabilities related
to any such liens (with such liens described in subsections (i) to (v)
sometimes hereinafter referred to as “Permitted Liens”); and the Borrower does
hereby warrant and will defend the title and possession thereto and to every
part thereof for the benefit of Lender against the claims and demands of all
Persons whomsoever.

          Section 6.2     Acquisitions, Merger, Sales.  Borrower shall not, without
written consent of Lender, merge and/or acquire any other company whatsoever,
and shall not permit any changes whatsoever in the ownership or control of
Borrower, whether direct or indirect, and Borrower shall not permit or make
any change in the management structure of Borrower. Borrower will not sell,
transfer, exchange, mortgage, lien (except for Permitted Liens), apothecate,
encumber or otherwise dispose of the Vessel without the prior written consent
of the Lender, and any such written consent shall not be construed to be a
waiver of this provisions in respect of any subsequent proposed sale,
transfer, exchange, mortgage, lien, hypothecation, encumbrance or any other
disposition.

          Section 6.3      Affiliate Transaction. Borrower will not authorize, permit or
suffer to occur any transactions, contracts or other agreements by Borrower
with any Affiliate of Borrower or Guarantor other than in the ordinary course
of business and on terms that are no less favorable to Borrower than those
that could have been obtained in a comparable transaction on an arm’s-length
basis.

          Section 6.4     Other Indebtedness. Borrower shall not incur any loan or
indebtedness of any kind whatsoever, except for the Term Loan, loans from CIT
Group/Equipment Financing, Inc. and Southwest Bank of Texas, N.A., ordinary
course of business leases and accounts payable.

ARTICLE VII

DEFAULTS

          Section 7.1      Events of Default. If one or more of the following
events (“Events of Default”) shall have occurred and be continuing:

		
	 	     (i)        the Borrower or any Guarantor shall fail to pay when due
any principal of or interest on the Note, or any fee or any other
amount payable hereunder or under any Collateral Documents, and
such failure continues for a period of 3 days after notice thereof
has been given to Borrower (other than with respect to the final
payment due in accordance with Section 2.4);
	 
	 	     (ii)        Borrower or any Guarantor shall fail to observe or
perform any covenant or agreement contained in this Agreement or
any Collateral Document (other than any covenant or agreement
covered by subpart (i) of this Section 7.1) and such failure
remains and which unremedied for fifteen (15) days after written
notice thereof has been given to Borrower.
	 
	 	     (iii)        an Event of Default as defined in the Preferred Ship Mortgage

-14-

 

          or the Deed of Trust shall occur;

		
	 	     (iv)        any representation, warranty, certification or statement made
by the Borrower or any Guarantor in this Agreement or any Collateral
Documents to which it is a party or by the Borrower in any certificate,
financial statement or other document delivered pursuant hereto or
thereto shall prove to have been incorrect in any material respect when
made and shall not have been remedied;
	 
	 	     (v)        any Guarantor shall fail to observe or perform any covenant
referenced in any Guaranty which shall remain unremedied for fourteen
(14) days after written notice thereof;
	 
	 	     (vi)        Borrower or a Guarantor shall commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief
with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official
of it or any substantial part of its property, or shall consent to any
such reliefer to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors, or
shall fail generally to pay its debts as they become due, or shall take
any corporate action to authorize any of the foregoing;
	 
	 	     (vii)        an involuntary case or other proceeding shall be commenced
against Borrower or a Guarantor seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be
entered against the Borrower or such Guarantor under the federal
bankruptcy laws as now or hereafter in effect;
	 
	 	     (viii)        Borrower or a Guarantor shall default upon any other debt
owed the Lender or on any debt to other creditors or one or more
judgments or orders for the payment of money which are not insured in
excess of $250,000 shall be rendered against the Borrower or a Guarantor
and such judgment or order shall continue unsatisfied for a period of
fourteen (14) days during which execution shall not be effectively
stayed;
	 
	 	     (ix)        any Collateral Documents shall cease for any reason to be in
full force and effect or the Preferred Ship Mortgage shall cease to be
effective to grant a perfected security interest in the Vessels with the
priority stated to be created thereby or such security interest shall
cease to be in full force and effect or shall be declared null and void,
or the validity or enforceability of such security interest shall be
contested by the Borrower or the Borrower shall deny that it has any
further liability

-15-

 

		
	 	or obligation under any Collateral Documents, or Guarantor shall
deny that it has any further liability or obligation under the
Guaranty and such invalidity or the effect of such invalidity is
not cured to Lender’s satisfaction within thirty (30) days after
the earliest to occur of (x) notice from the Lender concerning its
belief that the Preferred Ship Mortgage is no longer valid or no
longer is effective to grant a perfected security interest in the
Vessel, (y) any written statement of Borrower or a Guarantor that
a material provision of any Collateral Document is not valid and
binding, or (z) Borrower or a Guarantor or the chief executive
officer, president or chief financial officer of Borrower or a
Guarantor, as applicable, otherwise becomes aware that any
material provisions of any Collateral Document is not valid or
binding;
	 
	 	     (x)        Borrower shall fail to make the mandatory prepayment
required by Section 2.8 hereof; or
	 
	 	     (xi)        the occurrence of any other default under any of
the Collateral Documents;

then, and in every such event, the Lender, at its option, may by notice to the
Borrower declare the Note (together with accrued interest thereon) to be, and
the Note shall thereupon become, immediately due and payable without
presentment, demand, protest or other notice of any kind, all of which are
hereby waived by the Borrower; provided that in the case of any of the Events
of Default specified in paragraph (vi) or (vii) above with respect to the
Borrower, without any notice to the Borrower or any other act by the Lender,
the Note (together with accrued interest thereon) shall become immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.

ARTICLE VIII

MISCELLANEOUS

          Section 8.1     Notices. All notices, requests and other communications to
aparty hereunder shall be in writing and shall be given to such party at its
address set forth below or such other address as such party may hereafter
specify in writing:

	 	 	 
	If to Borrower	 	
2500 CityWest Blvd, Suite 2000
	 	 	
Houston, Texas 77042
	 	 	
Attention: Chief Financial Officer
	 	 	
Telecopy: 713-361-2677

-16-

 

	 	 	 
	If to Lender:	 	
Elliott Management UK
	 	 	
Cleveland House, 4th Floor
	 	 	
33 King Street
	 	 	
London SW1Y6RJ,
	 	 	
England
	 	 	
Telecopy: 011-44-207-577-3710

Each such notice, request or other communication shall be effective (i) if
given by facsimile, on the Business Day following the day the facsimile is
transmitted or (ii) if given by mail, three Business Days after such
communication is deposited in the United States mail with first class postage
prepaid, addressed as aforesaid or (iii) delivered in person at the address
specified in this Section. Rejection or refusal to accept, or the inability to
deliver because of a changed address of which no notice was given, shall not
affect the validity of notice given in accordance with this Section.

          Section 8.2      No Waivers. No failure or delay by the Lender in exercising
any right, power or privilege hereunder or under the Note shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.

          Section 8.3      Expenses. The Borrower shall pay (i) all reasonable
out-of-pocket expenses of the Lender, including the reasonable fees and
disbursements of special counsel for the Lender, in connection with the
preparation of this Agreement in the aggregate and shall pay (ii) if an Event
of Default occurs, all out-of-pocket expenses incurred by the Lender,
including reasonable fees and disbursements of counsel, in connection with
such Event of Default and collection and other enforcement proceedings
resulting therefrom. The Borrower shall indemnify the Lender against any
transfer taxes, documentary taxes, assessments or charges made by any United
States federal or state governmental authority by reason of the execution and
delivery of this Agreement or the Note.

          Section 8.4      Amendments and Waivers. Any provision of this Agreement
or the Note
may be amended or waived if, but only if, such amendment or waiver is in
writing and is signed by both the Borrower and the Lender.

          Section 8.5      Successors and Assigns.

          (a)        The provisions of this Agreement shall be binding upon and inure to
the benefit of
the parties hereto and their respective successors and assigns, except
that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement
without the prior written consent
of the Lender.

          (b)        The Lender may at any time assign to one or more Lenders or other
institutions (each
an “Assignee”) all, or a proportionate part of all, of its rights and
obligations under this Agreement
and the Note, and such Assignee shall assume such rights and obligations,
pursuant to an instrument
executed by such Assignee and the Lender; provided that, notwithstanding
such assignment,

-17-

 

Borrower shall not be obligated to pay any additional amounts that may arise
by reason of such assignment, including, without limitation, any taxes,
expenses or costs. Upon execution and delivery of such an instrument and
payment by such Assignee to the Lender of an amount equal to the purchase
price agreed between the Lender and such Assignee, such Assignee shall become
a Lender party to this Agreement and shall have all the rights and obligations
(if any) of a Lender with a Commitment or Commitments as set forth in such
instrument of assumption, and the transferor Lender shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required. Upon the consummation of any assignment
pursuant to this subsection (b), the transferor Lender and the Borrower shall
make appropriate arrangements so that, if required, a new Note or Notes is
issued to the Assignee.

          (c)        The Lender may at any time assign all or any portion of its rights
under this
Agreement and the Note to a Federal Reserve Lender. No such assignment
shall release the Lender
from its obligations hereunder.

          (d)        With the written consent of Borrower, which consent shall not be
unreasonably
withheld, the Lender may furnish any information concerning Borrower in
its possession from time
to time to Assignees and participants (including prospective Assignees and
participants) and may
furnish such information in response to Loan inquiries consistent with
general banking practice.
Notwithstanding the foregoing, Borrower’s obligations to provide any such
information shall be
limited to supplying Lender with such information as is required by this
Agreement.

          Section 8.6     Governing Law. This Agreement and the Note shall be governed
by and construed in accordance with the laws of the State of Texas.

          Section 8.7     Waiver of Jury Trial. LENDER AND BORROWER HEREBY WAIVE TRIAL
BY JURY IN ANY ACTION OR PROCEEDING IN WHICH EITHER OF LENDER AND BORROWER MAY
BE PARTIES ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS AGREEMENT. IT IS
AGREED AND UNDERSTOOD THAT THIS WAIVER CONSTITUTES A WAIVER OF TRIAL BY JURY
OF ALL CLAIMS AGAINST THE PARTIES TO SUCH ACTIONS OR PROCEEDINGS, INCLUDING
CLAIMS AGAINST PARTIES WHO WERE NOT PARTIES TO THIS MORTGAGE.

          Section 8.8
     Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.

          Section 8.9      Entire Agreement. This Agreement, the Note, and the Collateral
Documents and other loan documents set forth the entire agreement of the
parties with respect to the subject matter hereof and thereof and supersede all
previous understandings, written or oral, in respect thereof.

          Section 8.10      Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain

-18-

 

in full force and effect in such jurisdiction and shall be liberally
construed in order to carry out the intentions of the parties hereto as nearly
as may be possible; and (ii) the invalidity or unenforceability of any
provision hereof in any jurisdiction shall not affect the validity or
enforceability of such provisions in any other jurisdiction.

          Section 8.11     Usury Savings Language. Reference is hereby made to the
provisions of the Note regarding compliance with usury laws. Such provisions
are hereby incorporated herein by this reference.

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

	 	 	 	 	 
	 	 	
HORIZON VESSELS, INC.	 	 
	 	 	 	 	 
	 	 	
By: [ILLEGIBLE]	 	 
	 	 	 	
	 
	 	 	
Title:	 	 
	 	 	 	 	

	 	 	

ELLIOTT ASSOCIATES L.P.	 	 
	 	 	 	 	 
	 	 	
By: [ILLEGIBLE]	 	 
	 	 	 	
	 
	 	 	
Title: Sr. Portfolio Manager	 	 
	 	 	 	 	

-19-exv10w2

 

Exhibit 10.2

AMENDMENT NO. 1 TO LOAN AGREEMENT

          This AMENDMENT NO. 1 (“Amendment No, 1”) to the Loan Agreement dated June
4, 2003, between HORIZON VESSELS, INC., a Delaware corporation, (“Borrower”)
and ELLIOTT ASSOCIATES, L,P., a Delaware limited partnership (“Lender”), (the
“Loan Agreement”) is dated as of June 30,2003.

               WHEREAS, pursuant to the Loan Agreement, the Leader has made available to
the Borrower a loan facility of up to USD 15,000,000.00 (the “Loan”), and

               WHEREAS,
the Borrower and the Lender wish to amend the Loan Agreement as
herein provided.

          NOW THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree to amend the Loan Agreement as
follows:

          1.0    Section 1.1    Definitions shall be amended by adding the
following:

          “Fixed Charge Coverage Ratio” means the sum of the Guarantor’s earnings
on a consolidated basis before interest, taxes, depreciation and amortization
less the the greater of the Guarantor’s actual consolidated capital
expenditures or USD 10,000,000.00 on an annualized basis divided by the sum of
the Guarantor’s consolidated (i) cash interest expenses and (ii) the current
portion of long term debt and capitalized lease expenses. For purposes of this
definition, the current portion of long term debt and capitalized leases will
be determined as of the last day of the calculation period. The Fixed Charge
Coverage Ratio will be calculated at the end of each of the Guarantor’s fiscal
quarters using the results of that quarter and each of the three immediately
preceding quarters.

          2.0    Section 2.1    Commitment to Make Loan is hereby amended to add the
following at the end thereof:

          As consideration for Lender agreeing to this Amendment No. 1 to Loan
Agreement, Borrower agrees to pay Lender a commitment fee of S150,000 on or
before July 15, 2003.

          3.0    Section 2.3    Interest Rates shall be deleted in its entirety and
replaced by the following:

The Term Note shall bear interest at the fixed rate of twelve percent (12%) per
annum (but in no event to exceed the maximum rate permitted by law) (the
“Interest Rate”), except that in the event Borrower does
not (i) procure
cancellation of the preferred ship mortgage on the Vessel in favor of General
Electric Capital Corporation on or before August 15, 2003, (ii) procure the
cancellation of the first and second Deed of Trust in favor of
SouthTrust Bank
on the property located at 8200 Yacht Club Road, Port Arthur Texas on or before
October 1, 2003, and (iii) pay the Overadvance of $5,000,000
from CIT
Group/Equipment Financing, Inc. (“CIT”) pursuant to

 

 

the Credit Agreement among the Borrower, certain guarantors and CIT dated May
10, 2001, on or before July 30, 2003, the Interest Rate shall be increased to
the lesser of eighteen percent (18%) per annum or the highest lawful rate
permitted by applicable law the “Maximum Rate”. Any overdue principal of and,
to the extent permitted by law, overdue interest on the Term Note shall bear
interest, payable on demand, for each day until paid at a rate per
annum (the “Default Rate”) equal to the lesser of
(a) three percent (3%) above the
Interest Rate or (b) the maximum rale permitted by applicable law. In the
event the Maximum Rate becomes applicable under clauses (i) or (ii) above,
the Maximum Rate shall remain in effect until Borrower complies with
requirements of clauses (i) and (ii) at which time the
Interest Rate shall
return to twelve percent (12%) per annum. In the event the Maximum Rate
becomes applicable under clause (iii) above, the Maximum Rate shall remain
applicable for the entire term of the Agreement.

          4.0    Section 2.4    Payment. Shall be deleted in its entirety and
replaced by the following:

The balance of the Term Note plus accrued interest shall be payable on or
before June 30, 2004, or such earlier time as provided below and Borrower shall
pay interest monthly on the 4th day of each and every month until the Term Note
is paid. In the event Borrower is unable to pay the balance of the Term Note,
plus accrued interest, on or before June 30, 2004 as a result of
fixed Charge
Coverage Ratio being less than 1.1 to 1.0 based on the aggregate result of any
four consecutive quarters, Lender shall have the irrevocable option from such
time to convert up to $5,000,000 of the loan into freely tradable unledgeded
common stock of Horizon Offshore, Inc. at a conversion price which is the
greater of 100% of the volume weighted average price of Horizon Offshore, Inc.
(“Horizon”) common stock for the 30 trading days preceding the receipt by
Horizon of a conversion notice from the Lender or $3.50 per share. For the
avoidance of doubt, the lender will have the right to convert up to $5,000,000
of the loan from July 1, 2004 in the event that the above test is not
met. The
lender will have the right to convert minimum tranches of $250,000 at
any one
time. Horizon shall deliver freely tradable unledgeded stock within 2 business
days of receiving a conversion notice. In the event that Horizon does not
deliver such stock, the Term Note shall immediately be due and payable.

In the event the Fixed Charge Coverage
Ratio test is less that 1.1 to 1 based
on the aggregate result of any four consecutive quarters on June 30, 2004, and
the Borrower has been unable to pay the balance of the term note prior to
that time, then the balance of the loan then outstanding shall mature 3 months
from such time and shall continue to roll 3 months forward until the Fixed
Charge Coverage Ratio test is greater than 1.1 to 1 based on the aggregate
result of any four consecutive quarters.

          5.0    Section 2.8    Prepayment
shall be amended by deleting the first
sentence and by inserting the following:

          In the event that Borrower or any of the Guarantors or any of their
affiliates or subsidiaries receives a payment from Petroleos de Mexico
pursuant to the EPC 64 contract of at least $40,000,000, Borrower shall make a
mandatory prepayment of the Term Loan of $5,000,000.

 

 

          Borrower shall make a mandatory prepayment of the outstanding loan
balance when the Horizon Offshore, Inc.’s Fixed Charge Coverage Ratio is
greater than 1.1 to 1.0 based on the aggregate result of any four consecutive
quarters.

          In the event Horizon Offshore, Inc. is in receipt of proceeds from the
sale of new common equity or convertible securities the Borrower shall make a
mandatory prepayment of an amount equal to the lesser of the entire amount of
such proceeds or the then outstanding loan balance.

          6.0    Section 7.01    Events of Default is hereby amended by deleting
sub-section (xi) and substituting in lieu thereof the following:

          (xi)
the occurrence of a default under any of the Collateral Documents or
under any contract or agreement for the borrowing of money in which the
Borrower or any of the Guarantors is a party.

          7.0    Except
as specifically amended by this Amendment No. 1, all of the
terms and provisions of the Loan Agreement shall remain in full force and
effect.

          8.0    All capitalized terms used herein but not defined herein shall
have the meanings given to them in the Loan Agreement

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

	 	 	 	 	 
	 	 	
HORIZON VESSELS, INC.	 	 
	 	 	 	 	 
	 	 	
By: [ILLEGIBLE]	 	 
	 	 	 	
	 
	 	 	
Title:  [ILLEGIBLE]	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	
ELLIOTT ASSOCIATES L.P.	 	 
	 	 	 	 	 
	 	 	
By: [ILLEGIBLE]	 	 
	 	 	 	
	 
	 	 	
Title:  Senior Portfolio Manager

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