AMENDED AND RESTATED PURCHASE AGREEMENT

  Exhibit 10.2

 

 

 

 

 

8% Subordinated Secured Notes due March 31, 2010

 

 

AMENDED AND RESTATED

 

 

PURCHASE AGREEMENT

 

 

 

among

 

 

 

HORIZON OFFSHORE, INC.,

 

as Issuer

 

 

 

THE GUARANTORS LISTED ON THE SIGNATURE PAGES HEREOF,

 

as Guarantors

 

 

 

and

 

 

 

THE HOLDERS LISTED ON THE SIGNATURE PAGES HEREOF,

 

as Noteholders

 

 

 

 

Dated as of April 30, 2005

 

 

 

 

 

 

 

TABLE OF CONTENTS

Page

ARTICLE 1.  TERMS OF THE NOTES	1
SECTION 1.1  Interest	1
SECTION 1.2  Principal Payments; Voluntary Prepayments	2
SECTION 1.3  Payments, Interest Rate Computations, Other Computations, etc	2
SECTION 1.4  Additional Notes	3
SECTION 1.5  Proration of Payments	3
SECTION 1.6  Setoff	3
SECTION 1.7  Tax Treatment	4
SECTION 1.8  Legend	4
SECTION 1.9  Subordination of Notes	5
ARTICLE 2. COLLATERAL MATTERS	5
SECTION 2.1  Termination of Collateral Agent	5
ARTICLE 3.  WARRANTIES, ETC.	6
SECTION 3.1  Organization, Power, Authority, etc.	6
SECTION 3.2  Due Authorization	6
SECTION 3.3  Validity, etc.	6
ARTICLE 4.  COVENANTS	6
SECTION 4.1  Covenants	6
ARTICLE 5.  EVENTS OF DEFAULT	7
SECTION 5.1  Events of Default	7
SECTION 5.2  Action if Bankruptcy	9
SECTION 5.3  Action if Other Event of Default	9
ARTICLE 6.  GUARANTEE	9
SECTION 6.1  The Guarantee	9
SECTION 6.2  Demand by the Noteholders	10
SECTION 6.3  Enforcement of Guarantee	10
SECTION 6.4  Waivers	10
SECTION 6.5  Benefits of Guarantee	11
SECTION 6.6  Modification of Notes, etc.	11
SECTION 6.7  Reinstatement	12
SECTION 6.8  Waiver of Subrogation, etc.	12
SECTION 6.9  Election of Remedies, etc.	12
SECTION 6.10  Subordination of Guarantees	13
SECTION 6.11  Continuing Guarantee	13
SECTION 6.12  Contribution	13
SECTION 6.13  Savings Clause.	13

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TABLE OF CONTENTS (Cont'd)

Page

ARTICLE 7.  DEFINITIONS	14
SECTION 7.1  Defined Terms	14
SECTION 7.2  Use of Defined Terms	21
SECTION 7.3  Cross-References	21
SECTION 7.4  Accounting and Financial Determinations	21
ARTICLE 8.  REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES	22
SECTION 8.1  Registration of Notes	22
SECTION 8.2  Transfer and Exchange of Notes	22
SECTION 8.3  Replacement of Notes	23
ARTICLE 9.  MISCELLANEOUS	23
SECTION 9.1  Waivers, Amendments, etc.	23
SECTION 9.2  Notices	24
SECTION 9.3  Costs and Expenses	25
SECTION 9.4  Indemnification	25
SECTION 9.5  Survival	27
SECTION 9.6  Severability	27
SECTION 9.7  Headings	27
SECTION 9.8  Counterparts, Effectiveness, etc.	27
SECTION 9.9  Governing Law; Entire Agreement	27
SECTION 9.10  Successors and Assigns	29
SECTION 9.11  Other Transactions	29
SECTION 9.12  Confidentiality	29
SECTION 9.13  Waiver of Jury Trial, etc.	29
SECTION 9.14  Limitation of Liability	30
SECTION 9.15 Usury Savings Clause	30
ARTICLE 10.  SUBORDINATION OF INDEBTEDNESS.	31
SECTION 10.1  Subordination	31
SECTION 10.2  Subordination in Event of Insolvency or Liquidation, Etc.	31
SECTION 10.3  Turnover of Improper Payments	31
SECTION 10.4  Subrogation	31
SECTION 10.5  Reinstatement	31
SECTION 10.6  Obligors' Obligations Absolute	31
SECTION 10.7  Certain Payments and Distributions	32
SECTION 10.8  Legend	32
SECTION 10.9  No Waiver or Impairment of Subordination Provisions	32
SECTION 10.10  Reliance by Senior Lenders on Subordination Provisions	32

 

SCHEDULES AND EXHIBITS
 

Schedule 1 - Senior Debt Documents

Exhibit A - Form of Note

 

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AMENDED AND RESTATED PURCHASE AGREEMENT

THIS AMENDED AND RESTATED PURCHASE AGREEMENT, dated as of April 30, 2005 and effective as of the date of consummation of the Exchange Transaction (as defined below) (the " Effective Date "), among HORIZON OFFSHORE, INC., a Delaware corporation (the " Issuer "), the guarantors listed on the signature pages hereof (the " Guarantors "), the holders listed on the signature pages hereof and each other Person that may hereafter become a registered holder of a Note in accordance with Article 8 below (individually a " Noteholder ", and collectively, the " Noteholders ").

W I T N E S S E T H :

RECITALS :

A.  As of the Effective Date, the Issuer has issued to the Noteholders $29,353,343.30 aggregate principal amount of its 18% Subordinated Secured Notes due March 31, 2007, which on the Effective Date shall be known as the Issuer's 8% Subordinated Notes due March 31, 2010, substantially in the form of Exhibit A (the " Notes "; such term to include (i) any such Notes issued in exchange or substitution therefor or issued hereof pursuant to Section 8.2 or Section 8.3 , and (ii) unless the context indicates otherwise, the related Guarantees); and

B.  On March 31, 2005, the Issuer and the Noteholders entered into that certain recapitalization letter agreement (the " Recap Letter Agreement ") pursuant to which the Noteholders agreed to, among other things, (i) exchange $22,680,480.34 aggregate principal amount of the Notes for shares of Common Stock and Series B Preferred Stock (the " Exchange Transaction ") such that only $6,672,862.96 aggregate principal amount of Notes shall remain outstanding after the consummation of the Exchange Transaction, (ii) amend the terms of the Notes as provided herein, and (iii) enter into this Agreement.

NOW, THEREFORE, the parties hereto, intending to be legally bound, agree as follows (with certain terms defined in Article 7 ):

ARTICLE 1.
TERMS OF THE NOTES

SECTION 1.1  Interest .  Interest on the outstanding principal amount of the Notes and other outstanding Obligations shall accrue and be payable in accordance with this Section 1.1.

SECTION 1.1.1  Interest Rate .  Subject to Section 1.1.2, the Notes shall accrue interest from the Effective Date at a rate of 8% per annum.

SECTION 1.1.2  Post-Default Rates .  From and after the occurrence of an Event of Default and during the continuance thereof, interest shall accrue (after as well as before judgment) on the outstanding principal amount of the Notes and on other Obligations that are due and payable (including, to the extent permitted by applicable law, interest on overdue interest) at a rate per annum equal to the Post-Default Rate; provided that upon the cessation or cure of such Event of Default (and any other Event of Default that may have occurred and be continuing) the Notes again shall bear interest at the rate provided in Section 1.1.1.

 

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SECTION 1.1.3  Payment Dates .  Accrued interest on the Notes shall be payable, without duplication:

(a)  on the Stated Maturity Date;

(b)  with respect to any portion of the Notes prepaid or repaid pursuant to Section 1.2 , on the date such prepayment or repayment is due as provided in Section 1.2 and, in the case of a voluntary prepayment, on the date set forth in any notice required for such prepayment;

(c)  on each Quarterly Payment Date;

(d)  on the date of acceleration of the Notes pursuant to Section 5.2 or 5.3 ; and

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

SECTION 1.2  Principal Payments; Voluntary Prepayments .  (a)  The Issuer will make payment in full of all unpaid principal of the Notes on the Stated Maturity Date (or such earlier date as the Notes may become or be declared due and payable pursuant to Article 5 ).

(b)  Prior to the Stated Maturity Date, the Issuer may from time to time on any Business Day, make a voluntary prepayment (allocated on a pro rata basis to each Noteholder), in whole or in part, of the outstanding principal amount of the Notes; provided , however , that (i) the Issuer shall allocate the amount of any such voluntary prepayment between the Notes and the Issuer's other 8% Subordinated Notes due March 31, 2010 on a pro rata basis based on the aggregate principal amount of the Notes and the Issuer's other 8% Subordinated Notes due March 31, 2010 then outstanding; (ii) all such voluntary prepayments shall require at least three (3) Business Days prior written notice to the Noteholders, (iii) all such voluntary prepayments shall be in a minimum amount of $1,000,000 (subject to the Issuer's right to prepay in full the entire unpaid principal amount of the Notes), and (iv) as to the voluntary prepayment in full of the Notes, such prepayment shall require at least five (5) Business Days prior written notice to the Noteholders.

SECTION 1.3  Payments, Interest Rate Computations, Other Computations, etc.   All payments by the Issuer of the principal of or interest on the Notes shall be made by the Issuer to the Noteholders pro rata according to the unpaid principal amounts of their respective Notes. All other amounts payable to any Noteholder under this Agreement or the Notes shall be paid to such Noteholder entitled thereto. Subject to Section 1.4 , all such payments required to be made to such Noteholder shall be made, without setoff, deduction or counterclaim, not later than 2:00 p.m., New York City time, on the date due, in immediately available funds, to such account as each Noteholder shall specify from time to time by notice to the Issuer. Funds received after that time shall be deemed to have been received by the Noteholders on the next following Business Day. All interest shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall be made on the immediately succeeding Business Day and such extension of time shall be included in the computation of accrued interest.

 

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SECTION 1.4  Additional Notes .  The Issuer shall pay any interest due on any Quarterly Payment Date in cash to the extent that such payment is not prohibited by the Senior Debt Documents. To the extent that the Issuer is prohibited by the Senior Debt Documents from paying all or part of any interest due on any Quarterly Payment Date in cash, then the Issuer shall issue to each Noteholder Additional Notes (allocated on a pro rata basis to each Noteholder) in an aggregate principal amount equal to the amount of interest due to such Noteholder that is not paid in cash.

SECTION 1.5  Proration of Payments .  (a)  The Issuer shall not, and shall not permit any of its Subsidiaries to, prepay or otherwise retire in whole or in part, or purchase or otherwise acquire, directly or indirectly, any Notes held by any Noteholder unless the Issuer or such Subsidiary shall have offered to prepay or otherwise retire, purchase or acquire, as the case may be, the same proportion of the aggregate principal amount of the Notes held by each other Noteholder at the time outstanding upon the same terms and conditions. Any Notes prepaid or otherwise retired, purchased or acquired by the Issuer or any of its Subsidiaries, shall not be deemed to be outstanding for any purpose under this Agreement.

(b)  If any Noteholder shall obtain any payment or other recovery (whether voluntary, involuntary, by application of setoff or otherwise) on account of principal of or interest on the Notes or other Obligations in excess of such Noteholder's pro rata share of payments then or therewith obtained thereon by all Noteholders, such Noteholder which has received in excess of its pro rata share shall purchase from the other Noteholders such participations in the Notes or other Obligations held by them as shall be necessary to cause such purchaser to share the excess payment or other recovery ratably with each of them; provided , however , that if all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing holder, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. The Issuer agrees that any Noteholder so purchasing a participation from another Noteholder pursuant to this Section 1.5 may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 1.6 ) with respect to such participation as fully as if such Noteholder were the direct creditor of the Issuer in the amount of such participation. If under any applicable bankruptcy, insolvency or other similar law, any Noteholder receives a secured claim in lieu of a setoff to which this Section 1.5 applies, such Noteholder shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Noteholders under this Section 1.5 to share in the benefits of any recovery on such secured claim.

(c)  Notwithstanding anything in this Section 1.5 to the contrary, the Issuer shall be permitted to exchange Notes for consideration consisting only of common equity of the Issuer at any time, without making a pro rata offer to other Noteholders.

SECTION 1.6  Setoff .  In addition to and not in limitation of any rights of any Noteholder under applicable law, each Noteholder shall, upon the occurrence and during the continuance of any Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due).

 

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SECTION 1.7  Tax Treatment .  For United States federal income tax purposes, the Issuer and each Noteholder agrees to treat the Notes as indebtedness of the Issuer to which Section 1272(a)(6) of the Internal Revenue Code applies. Original issue discount on the Notes for U.S. federal income tax purposes shall be computed by the Issuer in accordance with Section 1272(a)(6) of the Internal Revenue Code; provided, however, that any assumptions made by the Issuer in making such computation shall be subject to the approval of the Noteholders.

SECTION 1.8  Legend .  Each Noteholder understands that the Notes will continue to bear a legend to the following effect unless the Issuer determines otherwise in compliance with applicable law:

THIS NOTE (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS NOTE MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS NOTE IS HEREBY NOTIFIED THAT THE SELLER OF THIS NOTE MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE l44A THEREUNDER.

THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO THE ISSUER THEREOF, (II) IN THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (IV) TO AN ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER JURISDICTIONS OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE.

THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT FOR PURPOSES OF SECTIONS 1271, 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE. THE ISSUE PRICE OF THIS NOTE IS $800.00 PER PRINCIPAL AMOUNT OF $1,000 AT MATURITY; THE ISSUE DATE IS MAY 27, 2004. THE AMOUNT OF ORIGINAL ISSUE DISCOUNT ON THIS NOTE WILL BE DETERMINED IN ACCORDANCE WITH SECTION 1272(a)(6) OF THE INTERNAL REVENUE CODE.

 

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SECTION 1.9  Subordination of Notes .  The Indebtedness evidenced by the Notes and the Guarantees shall be subordinate and junior in right of payment to Senior Debt in the manner and to the extent provided in Articles 6 and 10 and shall rank equal in right of payment to the Issuer's other 8% Subordinated Notes due March 31, 2010 (and related guarantees thereof, respectively).

ARTICLE 2.
COLLATERAL MATTERS

SECTION 2.1  Termination of Collateral Agent .  Pursuant to the Recap Letter Agreement, the Noteholders consented to the assignment and release of all of the Collateral and the execution by Elliott Associates, L.P., a Delaware limited partnership with its principal place of business in New York ("Elliott"), in its capacity as collateral agent to act on behalf of the Noteholders in connection with the Collateral and pursuant to the provisions of the Amended Collateral Agency Agreement (in such capacity, the "Collateral Agent"), of any assignments and releases of any and all Liens existing for the benefit of the Noteholders with respect to the Collateral. AS A RESULT, ELLIOTT'S CAPACITY AS COLLATERAL AGENT IS HEREBY TERMINATED, AND THE NOTEHOLDERS HEREBY RELEASE AND AGREE TO INDEMNIFY ELLIOTT AND ITS AFFILIATES, RATABLY, IN ACCORDANCE WITH THE PRINCIPAL AMOUNT OF THE NOTEHOLDERS' RESPECTIVE NOTES THAT EACH NOTEHOLDER HELD PRIOR TO THE EXCHANGE TRANSACTION, FOR ANY AND ALL LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS OF ANY KIND AND NATURE WHATSOEVER, REGARDLESS OF WHETHER CAUSED IN WHOLE OR IN PART BY THE NEGLIGENCE OF ELLIOTT OR ANY OF ITS AFFILIATES, WHICH MAY BE IMPOSED ON, INCURRED BY OR ASSERTED AGAINST ELLIOTT OR ANY OF ITS AFFILIATES IN ANY WAY RELATING TO ARISING OUT OF ELLIOTT SERVING IN ITS CAPACITY AS COLLATERAL AGENT, THE AMENDED COLLATERAL AGENCY AGREEMENT, THIS AGREEMENT OR ANY OTHER DOCUMENTS CONTEMPLATED BY OR REFERRED TO HEREIN OR THEREIN OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (INCLUDING, WITHOUT LIMITATION, INTEREST, PENALTIES, ATTORNEYS' FEES AND AMOUNTS PAID IN SETTLEMENT) OR THE ENFORCEMENT OF ANY OF THE TERMS HEREOF OR THEREOF OR OF ANY SUCH OTHER DOCUMENTS; PROVIDED THAT NO NOTEHOLDER SHALL BE LIABLE FOR ANY OF THE FOREGOING TO THE EXTENT THEY ARISE FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF ELLIOTT OR ANY OF ITS AFFILIATES. In addition, the Amended Collateral Agency Agreement is hereby terminated, except for the provisions of Section 4 thereof which shall survive for the benefit of Elliott and any of its Affiliates as contemplated by Section 4.8 thereof.

 

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ARTICLE 3.
WARRANTIES, ETC.

Each Obligor represents and warrants to each Noteholder, as of the date hereof, as set forth in this Article 3 .

SECTION 3.1  Organization, Power, Authority, etc.   Each of the Issuer and its Subsidiaries (i) is validly organized and existing and in good standing under the laws of the jurisdiction of its incorporation or organization, (ii) is duly qualified to do business and is in good standing in each jurisdiction where the failure to so qualify could result in a Material Adverse Change, and (iii) has full power and authority, and holds all governmental licenses, permits, registrations and other approvals required under all Requirements of Law, to own and hold under lease its property and to conduct its business as conducted prior to the date hereof and as contemplated to be conducted subsequent to the date hereof, except where the failure to hold any such licenses, permits, registrations and other approvals could not result in a Material Adverse Change. Each Obligor has full power and authority to enter into and perform its obligations under this Agreement.

SECTION 3.2  Due Authorization .  The execution and delivery by the Obligors of this Agreement and the incurrence and performance by the Obligors of their respective obligations under this Agreement have been duly authorized by all necessary corporate action, do not require any Approval (except those Approvals already obtained), do not and will not conflict with, result in any violation of, or constitute any default under, any provision of any Organic Document or Contractual Obligation of any Obligor or any law or governmental regulation or court decree or order, and will not result in or require the creation or imposition of any Lien on any Obligor's properties pursuant to the provisions of any Contractual Obligation of any Obligor.

SECTION 3.3  Validity, etc.   This Agreement constitutes the legal, valid and binding obligation of such Obligor, enforceable in accordance with its terms subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting rights of creditors generally and to the effect of general principles of equity.

ARTICLE 4.
COVENANTS

SECTION 4.1  Covenants .  The Obligors, jointly and severally, agree with each Noteholder that until the Notes and all other Obligations (other than obligations that expressly survive the termination of this Agreement pursuant to Section 9.5 ) have been paid and performed in full, such Person will perform the obligations set forth in this Section 4.1 .

SECTION 4.1.1  Information .  The Obligors shall, for so long as any Notes remain outstanding and are not freely transferable under the Securities Act, furnish to the Noteholders and to prospective investors, upon their request, the information required to be delivered pursuant to Rule 144(d) under the Securities Act.

SECTION 4.1.2  Payment of Obligations .  The Issuer will pay and discharge, as the same shall become due and payable, all lawful taxes, assessments and charges or levies made upon it or its property or assets, by any governmental body, agency or official, except where any of such items may be diligently contested in good faith by appropriate proceedings, and the Issuer shall have set aside on its books, if required under GAAP, reserves for the liabilities related to such items, or such items could not result in a Material Adverse Change.

 

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SECTION 4.1.3  Corporate Existence; Mergers .  Each Obligor shall at all times maintain its corporate existence. In addition, each Obligor shall not, without prior written consent of the Noteholders, dissolve or otherwise dispose of all or substantially all of its assets, in one transaction or a series of transactions, or consolidate with or merge into another Person, unless:

(a)  in case such Obligor shall consolidate with or merge into another Person or convey, transfer or lease all or substantially all of its properties and assets to any Person, the Person formed by such consolidation or into which such Obligor is merged or the Person which acquires by conveyance or transfer, or which leases, all or substantially all of the properties and assets of such Obligor shall be a corporation, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an amendment or accession hereto, the due and punctual payment of the principal of and any premium and interest on all the Notes and performance or observance of every covenant of this Agreement and the Notes on the part of such Obligor to be performed or observed; and

(b)  immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing.

SECTION 4.1.4  Compliance with Law .  Each Obligor shall comply with and satisfy all applicable Governmental Requirements, except where the failure to do so could not result in a Material Adverse Change.

ARTICLE 5.
EVENTS OF DEFAULT

SECTION 5.1  Events of Default .  The term "Event of Default" shall mean any of the events set forth in this Section 5.1 .

SECTION 5.1.1  Non-Payment of Obligations .  The Issuer shall default:

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

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

SECTION 5.1.2  Non-Performance of Covenants .  Any Obligor shall default in the due performance and observance of any of its obligations under Article 4 and such default shall continue unremedied for a period of ten (10) days after notice thereof shall have been given to the Issuer by the Holders of at least 25% in aggregate principal amount of the Notes (or if such default is not reasonably susceptible to cure within ten (10) days, such longer period as is reasonably needed to effect such cure, but in no event longer than thirty (30) days from the date notice is given, so long as the Obligors promptly commence and diligently pursue such cure).

 

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SECTION 5.1.3  Bankruptcy, Insolvency, etc.   The Issuer or any Subsidiary shall:

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

(b)  apply for, consent to, or acquiesce in, the appointment of a trustee, receiver, sequestrator or other custodian for itself or any of its property, or make a general assignment for the benefit of creditors;

(c)  in the absence of such application, consent or acquiescence, permit or suffer to exist the appointment of a trustee, receiver, sequestrator or other custodian for itself or for any of its property, and such trustee, receiver, sequestrator or other custodian shall not be discharged within sixty (60) days;

(d)  permit or suffer to exist the commencement of any bankruptcy, reorganization, debt arrangement or other case or proceeding under any bankruptcy or insolvency law, or any dissolution, winding up or liquidation proceeding, in respect of the Issuer or any Subsidiary and, if such case or proceeding is not commenced by the Issuer or Subsidiary, such case or proceeding shall be consented to or acquiesced in by the Issuer or such Subsidiary or shall result in the entry of an order for relief or shall remain for sixty (60) days undismissed; or

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

SECTION 5.1.4  Default on Other Indebtedness, Contracts, etc.   (a)  Any Indebtedness of the Issuer or any Subsidiary in an aggregate principal amount exceeding $250,000 (other than the Notes) shall not be paid at its stated maturity or shall be duly declared to be or shall become due and payable prior to the stated maturity thereof, (b) there shall occur and be continuing any event under any Instrument relating to any such Indebtedness, the effect of which is to cause such Indebtedness to become due prior to its stated maturity, or (c) the holder or holders of such Indebtedness, or any trustee, agent or other representative on behalf of such holder or holders, shall have demanded or required, pursuant to the terms of any Instrument relating to such Indebtedness, that the Issuer or any Subsidiary redeem, repurchase or otherwise acquire or retire such Indebtedness for value at any time prior to its stated maturity.

SECTION 5.1.5  Invalidity of Guarantees .  Any of the Guarantees, the ECH Mexico Guarantee or the HOC Mexico Guarantee ceases to be in full force and effect; any Guarantee is declared to be null and void and unenforceable; any of the Guarantees, the ECH Mexico Guarantee or the HOC Mexico Guarantee is found to be invalid; or any Guarantor or any guarantor under the ECH Mexico Guarantee or the HOC Mexico Guarantee denies its liability under its Guarantee, the ECH Mexico Guarantee or the HOC Mexico Guarantee, as the case may be (in each case, other than by reason of release of a Guarantor in accordance with the terms of this Agreement).

 

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SECTION 5.2  Action if Bankruptcy .  If any Event of Default described in Section 5.1.2 shall occur, the outstanding principal amount of the Notes and all other Obligations shall automatically be and become immediately due and payable without notice, demand or presentment.

SECTION 5.3  Action if Other Event of Default .  If any Event of Default (other than any Event of Default described in Section 5.1.2 ) shall occur for any reason, whether voluntary or involuntary, and be continuing, the Required Holders may, upon notice or demand, declare all or any portion of the outstanding principal amount of the Notes to be due and payable and all other Obligations to be due and payable, whereupon the full unpaid amount of the Notes and all other Obligations which shall be so declared due and payable shall be and become immediately due and payable without further notice, demand, or presentment, and to the extent any Obligations are paid by the Issuer, they shall constitute a prepayment under this Agreement. If at any time any portion of the outstanding principal amount of the Notes or any other Obligations shall be declared due and payable in accordance with this Section 5.3 , the Required Holders may at any time thereafter, by written instrument filed with the Issuer, rescind and annul such declaration and its consequences. Notwithstanding the foregoing and subject to the subordination provisions of this Agreement, the right of any Noteholder to receive payment of principal of, or interest on any Note held by such Noteholder on or after the respective dates expressed in such Note, or to bring suit for the enforcement of any such repayment on or after such respective date, is absolute and unconditional and shall not be impaired or affected without the consent of such Noteholder.

ARTICLE 6.
GUARANTEE

SECTION 6.1  The Guarantee .  Each Guarantor, jointly and severally, hereby absolutely, unconditionally and irrevocably guarantees to the Noteholders, and their successors, endorsees, transferees and assigns, the prompt payment (whether at stated maturity, by acceleration or otherwise) and performance of (a) the Notes and the other Obligations of the Issuer, including (i) all principal of and interest (including any interest which accrues after the commencement of any case, proceeding or other action relating to the bankruptcy, insolvency or reorganization of the Issuer, whether or not such interest constitutes an allowable claim) on any Note issued pursuant to this Agreement and (ii) all other amounts payable and all obligations to be performed by the Issuer under this Agreement or the Notes and (b) any renewals or extensions of any of the foregoing (collectively, the "Guaranteed Obligations"). Each Guarantor, jointly and severally, agrees that this is a guarantee of payment and performance and not of collection, and that its obligations hereunder shall be primary, absolute and unconditional, irrespective of, and unaffected by:

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

 

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

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

it being agreed by each Guarantor that its obligations hereunder shall not be discharged until the payment and performance, in full, of the Guaranteed Obligations. Each Guarantor shall be regarded, and shall be in the same position, as principal debtor with respect to the Guaranteed Obligations. Each Guarantor expressly waives all rights it may now or in the future have under any statute, or at common law, or at law or in equity, or otherwise, to compel any Noteholder to proceed in respect of the Guaranteed Obligations against the Issuer or any other Person before proceeding against, or as a condition to proceeding against, the Issuer. Each Guarantor further expressly waives and agrees not to assert or take advantage of any defense based upon the failure of any Noteholder to commence an action in respect of the Guaranteed Obligations against the Issuer, any other Obligor or any other Person. Each Guarantor agrees that any notice or directive given at any time to any Noteholder by the Issuer, any other Obligor or any other Person which is inconsistent with the waivers in the preceding two sentences shall be null and void and may be ignored by such Noteholder, and, in addition, may not be pleaded or introduced as evidence in any litigation relating to the obligations of such Guarantor under this Article 6 for the reason that such pleading or introduction would be at variance with the written terms hereof, unless the Required Holders have specifically agreed otherwise in writing. The foregoing waivers are of the essence of the transaction contemplated by this Agreement and, but for the provision of Article 6 and such waivers, the Noteholders would decline to enter into this Agreement.

SECTION 6.2  Demand by the Noteholders .  In addition to the terms of the guarantee set forth in Section 6.1 , and in no manner imposing any limitation on such terms, if the then outstanding principal amount of the Guaranteed Obligations is declared to be immediately due and payable (or automatically becomes immediately due and payable), then the Guarantors are, jointly and severally, required to pay to the holder of the Guaranteed Obligations the entire outstanding Guaranteed Obligations due and owing to such holder. Payment by the Issuer shall be credited and applied upon the Guaranteed Obligations and shall be made in immediately available federal funds to an account as set forth in Section 1.3 . The Noteholders will, upon any such payment to such Noteholders, promptly thereafter cause to be distributed like funds (after payment of any amounts payable to the Noteholders pursuant to Section 1.3 ) ratably to each holder of the Guaranteed Obligations based on the respective Guaranteed Obligations held by such holder.

SECTION 6.3  Enforcement of Guarantee .  Except as otherwise provided in this Agreement, in no event shall any Noteholder have any obligation (although each is entitled, at its option) to proceed against the Issuer or any other Obligor or Person before proceeding against any Guarantor, and any Noteholder may proceed, prior or subsequent to, or simultaneously with, the enforcement of any Noteholder's rights hereunder, to exercise any right or remedy which it may have against the Issuer or any such other Person.

SECTION 6.4  Waivers .  In addition to the waivers contained in Section 6.1 , each Guarantor waives, and agrees that it shall not at any time insist upon, plead or in any manner whatever claim or take the benefit or advantage of, any appraisal, valuation, stay, extension, marshalling of assets or redemption laws, or exemption, whether now or at any time hereafter in force, which may delay, prevent or otherwise affect the performance by it of its obligations under, or the enforcement by the Noteholders of, the provisions of this Article 6 . Each Guarantor further hereby waives diligence, presentment and demand (whether for non-payment or protest or of acceptance, maturity, extension of time, change in nature or form of the Guaranteed Obligations, acceptance of the Guarantees by the Noteholders, composition or agreement arrived at as to the amount of, or the terms of, the Guaranteed Obligations, notice of adverse change in the Issuer's or any other Obligor's financial condition or any other fact which might materially increase the risk to the Guarantors) with respect to any of the Guaranteed Obligations or all other demands whatsoever and, to the extent permitted by applicable law, waives the benefit of all provisions of law which are or might be in conflict with the terms of this Article 6 . Each Guarantor represents, warrants and agrees that its obligations under this Article 6 are not and shall not be subject to any counterclaims, offsets or defenses of any kind against the Noteholders, the Issuer, the other Obligors or any other guarantor of the Guaranteed Obligations now existing or which may arise in the future.

 

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SECTION 6.5  Benefits of Guarantee .  The provisions of this Article 6 are for the benefit of the Noteholders and their respective successors, transferees, endorsees and assigns and nothing herein contained shall impair, as among the Issuer and the Noteholders, the obligations of the Issuer under this Agreement and the Notes.

SECTION 6.6  Modification of Notes, etc.   If the Noteholders shall at any time or from time to time, with or without the consent of, or notice to, each Guarantor:

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

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

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

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

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

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

 

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

then none of the Noteholders shall incur any liability to any Guarantor as a result thereof, and no such action shall impair or release the obligations of any Guarantor under this Article 6 .

SECTION 6.7  Reinstatement .  To the extent permitted by law, the provisions of this Article 6 shall remain in full force and effect and continue to be effective in the event any petition is filed by or against the Issuer or other Obligors for liquidation or reorganization, in the event the Issuer or any other Obligors becomes insolvent or makes an assignment for the benefit of creditors or in the event a receiver or trustee is appointed for all or any significant part of the assets of the Issuer or any other Obligors, and shall continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the Guaranteed Obligations or any part thereof is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any Noteholder, whether as a "voidable preference", "fraudulent conveyance" or otherwise, all as though such payment or performance had not been made. In the event that any payment of the Guaranteed Obligations, or any part thereof, is rescinded, reduced, restored or returned, the Guaranteed Obligations or part thereof so rescinded, restored or returned shall be reinstated, and the Guaranteed Obligations shall be deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

SECTION 6.8  Waiver of Subrogation, etc.   Upon the making by any Guarantor of any payment hereunder in respect of the Guaranteed Obligations, such Guarantor shall be subrogated to the rights of the Noteholders against the Issuer with respect to such payment; provided that such Guarantor shall not enforce any right to receive any payment by way of subrogation, reimbursement, contribution or setoff resulting from such payment until all of the Guaranteed Obligations have been paid in full. If any amount shall be paid to any Guarantor on account of such subrogation, reimbursement, contribution or setoff rights, such amount shall be held in trust for the benefit of the Noteholders and any other holders of the Guaranteed Obligations and shall forthwith be paid to the Noteholders and all other holders of Guaranteed Obligations to be credited and applied upon the Guaranteed Obligations, whether matured or unmatured, in accordance with the terms of the Notes and this Agreement.

SECTION 6.9  Election of Remedies, etc.   Any election of remedies which results in the denial or impairment of the right of any Noteholder to seek a deficiency judgment against the Issuer shall not impair any Guarantor's obligations to pay the full amount of the Guaranteed Obligations. In the event any Noteholder shall bid at any foreclosure or trustee's sale or at any private sale permitted by law or this Agreement, such Noteholder may bid all or less than the amount of the Guaranteed Obligations and the amount of such bid need not be paid by such Noteholder but shall be credited against the Guaranteed Obligations. The amount of the successful bid at any such sale, whether any Noteholder or any other party is the successful bidder, shall be conclusively deemed to be the fair market value of the collateral and the difference between such bid amount and the remaining balance of the Guaranteed Obligations shall be conclusively deemed to be the amount of the Guaranteed Obligations guaranteed under the provisions of this Article 6, notwithstanding that any present or future law or court decision or ruling may have the effect of reducing the amount of any deficiency claim to which any Noteholder might otherwise be entitled but for such bidding at any such sale.

 

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SECTION 6.10  Subordination of Guarantees .  All Guarantees pursuant to this Article 6 will be subordinated on the same basis to Senior Debt of such Guarantor as the Notes are subordinated to Senior Debt under Article 10 .

SECTION 6.11  Continuing Guarantee .  Each Guarantor agrees that the provisions of this Article 6 are a continuing Guarantee and shall remain in full force and effect until the payment and performance in full of the Guaranteed Obligations.

SECTION 6.12  Contribution .  In the event any Guarantor (a "Funding Guarantor") shall make a payment in respect of the Notes or any other Obligations, the other Guarantors (the "Contributing Guarantors") shall, subject to the last sentence of this Section 6.12 , contribute to such Funding Guarantor an amount equal to such Contributing Guarantor's Pro Rata Share of such payment made, or loss suffered, by such Funding Guarantor. The Contributing Guarantor's Pro Rata Share with respect to any such payment or loss by each Funding Guarantor shall be determined as of the date on which such payment or loss was made or suffered by reference to the