PURCHASE AGREEMENT among HORIZON OFFSHORE, INC.,

EXHIBIT 10.1

EXECUTION COPY

18% Subordinated Secured Notes due March 31, 2007

PURCHASE AGREEMENT

among

HORIZON OFFSHORE, INC.,

as Issuer

THE GUARANTORS LISTED ON THE SIGNATURE PAGES HEREOF,

as Guarantors

and

THE PURCHASERS LISTED ON THE SIGNATURE PAGES HEREOF,

as Initial Purchasers

Dated as of May 27, 2004

TABLE OF CONTENTS

Page

SCHEDULES AND EXHIBITS

SCHEDULES AND EXHIBITS

Schedule 1 - Disclosure Schedule

Schedule 2 - Notes Purchased by Initial Purchasers

Schedule 3 - Security Documents

Schedule 4 - Senior Debt Documents

Exhibit A - Form of Note

Exhibit B - Form of Agreement to Be Bound as Guarantor

PURCHASE AGREEMENT

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

W I T N E S S E T H :

RECITALS :

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

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

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

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

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

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

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

SECTION 1.3.        Investment Representations .        Each of the Initial Purchasers, severally and not jointly, represents and warrants to the Issuer:

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

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

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

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

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

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

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

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

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

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

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

SECTION 1.4.        Subordination of Notes; Security .     The Indebtedness evidenced by the Notes and the Guarantees shall be subordinate and junior in right of payment to Senior Debt in the manner and to the extent provided in Articles 8 and 12 and, except as provided herein with respect to certain Collateral, shall rank equal in right of payment to the Existing Subordinated Notes (and related guarantees thereof, respectively). The Notes shall be secured by the Security Documents.

ARTICLES 2.

TERMS OF THE NOTES

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

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

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

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

(a)        on the Stated Maturity Date;

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

(c)        on each Quarterly Payment Date;

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

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

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

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

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

SECTION 2.3        Payments, Interest Rate Computations, Other Computations, etc .     All payments by the Issuer of the principal of or interest on the Notes shall be made by the Issuer to the Noteholders pro rata according to the unpaid principal amounts of their respective Notes. All other amounts payable to any Noteholder under this Agreement or any other Document shall be paid to such Noteholder entitled thereto. Subject to Section 2.4 , all such payments required to be made to such Noteholder shall be made, without setoff, deduction or counterclaim, not later than 2:00 p.m., New York City time, on the date due, in immediately available funds, to such account as each Noteholder shall specify from time to time by notice to the Issuer. Funds received after that time shall be deemed to have been received by the Noteholders on the next following Business Day. All interest shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Whenever any payment to be made shall otherwise be due on a day which is not a Business Day, such payment shall be made on the immediately succeeding Business Day and such extension of time shall be included in the computation of accrued interest.

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

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

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

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

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

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

SECTION 2.6.        Setoff .      In addition to and not in limitation of any rights of any Noteholder under applicable law, each Noteholder shall, upon the occurrence and during the continuance of any Event of Default, have the right to appropriate and apply to the payment of the Obligations owing to it (whether or not then due), and (as security for such Obligations) the Issuer hereby grants to each Noteholder, a continuing security interest in, any and all balances, credits, deposits, accounts or moneys of such Issuer then or thereafter maintained with such Noteholder; provided , however , that any such appropriation and application shall be subject to the provisions of Section 2.5 .

SECTION 2.7.        Tax Treatment .     For United States federal income tax purposes, the Issuer, and each Noteholder by purchasing Notes, agrees to treat the Notes as indebtedness of the Issuer to which Section 1272(a)(6) of the Internal Revenue Code applies. Original issue discount on the Notes for U.S. federal income tax purposes shall be computed by the Issuer in accordance with Section 1272(a)(6) of the Internal Revenue Code; provided, however, that any assumptions made by the Issuer in making such computation shall be subject to the approval of the Noteholders.

ARTICLE 3.

COLLATERAL MATTERS

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

ARTICLE 4.

CONDITIONS TO CLOSING

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(d)        no Default has occurred and is continuing.

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

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

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

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

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

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

SECTION 4.10.        Amendment and Waiver of Credit Facilities .     The Issuer shall have amended all of its existing loan documents, or otherwise received a waiver pursuant to the terms of such loan documents effective for the full terms thereof, to permit the Obligors to have outstanding at any time an aggregate amount of surety and performance bonds at least equal to the aggregate amount of such surety and performance bonds outstanding as of the Closing Date.

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

ARTICLE 5.

WARRANTIES, ETC.

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

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

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

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

SECTION 5.4.        Capitalization of the Issuer .     The authorized capital stock of the Issuer consists of 35,000,000 shares of Common Stock, 26,549,250 shares of which were outstanding as of March 11, 2004. All such outstanding shares are duly authorized, validly issued, fully paid and nonassessable, and are not, and will not have been, issued in violation of any preemptive rights. Except for options to purchase shares of Common Stock (of which there were 3,369,850 options outstanding as of March 11, 2004 at a weighted average exercise price of $7.35 per share) and the Warrants, no issued, no authorized but unissued and no treasury shares of capital stock of the Issuer are subject to any preemptive right, option, warrant, right of conversion or purchase or any similar right issued or granted by the Issuer or, to the best knowledge of the Obligors, by any of its stockholders. Since March 11, 2004, the Issuer has not issued any shares of Common Stock, any securities exercisable for or convertible into shares of Common Stock, or any other shares of capital stock of the Issuer except for the issuance of (i) the Warrants, (ii) shares of Common Stock upon exercise of any Warrants and (iii) shares of Common Stock upon exercise of any options outstanding as of March 11, 2004. There are no agreements or understandings with respect to the voting, sale or transfer of any shares of capital stock of the Issuer to which the Issuer or, to the best knowledge of the Obligors, any of its stockholders is a party.

SECTION 5.5.        Financial Information; Solvency .     (a)  All balance sheets, all statements of operations, stockholders’ equity and cash flows, and all other financial information of the Issuer and its Subsidiaries which have been furnished by or on behalf of the Issuer and its Subsidiaries to the Initial Purchasers for the purposes of or in connection with this Agreement or any transaction contemplated hereby, including the consolidated audited balance sheets of the Issuer as of December 31, 2003, and the related consolidated statements of income and cash flows for the Fiscal Year ended December 31, 2003, together with the opinion thereon of PricewaterhouseCoopers LLP have been prepared in accordance with GAAP consistently applied throughout the periods involved and present fairly in all material respects the matters reflected therein subject, in the case of unaudited statements, to changes resulting from normal year end audit adjustments and to the absence of footnotes. As of the date hereof and except for transactions contemplated by this Agreement and the other Documents, neither the Issuer nor any of its Subsidiaries has material contingent liabilities or material liabilities for taxes, long term leases or unusual forward or long term commitments which are not reflected in the financial statements described above.

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

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

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

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

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

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

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

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

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

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

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

SECTION 5.14.         Ownership of Properties .        Each of the Issuer and its Subsidiaries owns good title to all of its material personal properties and assets of any nature whatsoever, free and clear of all Liens except as permitted pursuant to Section 6.1.12 .

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

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

SECTION 5.17.        Insurance .        All policies of insurance in effect of any kind or nature owned by or issued to the Issuer and the Subsidiaries, including policies of life, fire, theft, product liability, public liability, property damage, other casualty, employee fidelity, workers’ compensation, property and liability insurance, (a) are, together with all policies of employee health and welfare and title insurance, if any, in full force and effect, (b) comply in all respects with the applicable requirements set forth herein and (c) are of a nature and provide such coverage, including through self-insurance, retentions and deductibles, as is customarily carried by companies engaged in similar businesses and owning similar properties in the same general areas in which the Issuer and its Subsidiaries operate.

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

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

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

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

SECTION 5.22.        Condition of Property .        The Issuer and its Subsidiaries own or lease all of the assets and properties material to the conduct of their business.

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

SECTION 5.24.        No Offering of Notes .        None of the Issuer or any of its Affiliates nor any agent acting on their behalf, has directly or indirectly offered any of the Notes or any similar security of any Obligor for sale to, or solicited offers to buy the Notes or any similar security of any Obligor from, or otherwise approached or negotiated with respect thereto with, any Person other than institutional investors, and neither any Obligor nor any agent acting on behalf of any Obligor has taken or will take any action which would subject the issuance or sale of the Notes to the provisions of Section 5 of the Securities Act or to the provisions of any securities or Blue Sky laws of any applicable jurisdiction.

SECTION 5.25.        Collateral and Security Documents .        As of the Closing Date, (i) each Obligor has good title, free of all Liens other than those permitted pursuant to Section 6.1.12 to all of the material Collateral owned by such Obligor; (ii) the representations and warranties of each Obligor contained in the Security Documents are true and correct; (iii) when executed and delivered the Security Documents will create a valid lien on, and enforceable security interests in favor of the Collateral Agent for the benefit of the Secured Parties (as such term is defined in the Security Documents) in all Collateral subject to the Security Documents, subject, as to enforcement of remedies, to bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting rights of creditors generally and to the effect of general principals of equity; and (iv) to the extent governed by Article 8 or Article 9 of the UCC, when financing statements have been filed in the appropriate offices, the Collateral Agent will have a perfected first or second priority Lien, as the case may be (as provided in the Security Documents), upon all of the Collateral in which a security interest may be perfected by filing, subject to (a) Liens permitted by this Agreement and the Security Documents and (b) Collateral in which security interests or liens can only be perfected through compliance with the terms of the Federal Assignment of Claims Act.

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

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

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

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

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

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

ARTICLE 6.

COVENANTS

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

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

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

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

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

SECTION 6.1.4        Compliance with Law .    Each Obligor shall comply with and satisfy all applicable Governmental Requirements.

SECTION 6.1.5         Further Assurance .    The Obligors will, at their expense, promptly (and in no event later than 30 days after written notice from the Noteholders is received) execute and deliver, or cause to be executed and delivered, to the Noteholders upon reasonable request all such other and further documents, agreements and instruments (including without limitation further security agreements, financing statements, continuation statements, and assignments of accounts and contract rights) in compliance with or accomplishment of the covenants and agreements of the Obligors in this Agreement or the other Documents or to further evidence and more fully describe the Collateral, including any renewals, additions, substitutions, replacements or accessions to the Collateral, or to correct any omissions in the Security Documents, or more fully state the security obligations set out herein or in any of the Security Documents, or to perfect, protect or preserve any Liens created pursuant to any of the Security Documents, or to make any recordings, to file any notices, or obtain any consents as may be necessary or appropriate in connection with the transactions contemplated by this Agreement.

SECTION 6.1.6        Cross Collateralization .    If the Issuer issues any Additional Notes, the Obligors shall amend the Security Documents to the extent required to ensure that any Additional Notes will be secured by the Security Documents.

SECTION 6.1.7        Perfection and Validity of Security Interests .    The Obligors shall use their commercially reasonable efforts to ensure that the following occur within the time periods specified below:

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

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

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

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

SECTION 6.1.8        Additional Guarantees .        If (1) any Obligor transfers or causes to be transferred, in one transaction or a series of related transactions, any Collateral to any Subsidiary that, following such transaction or series of related transactions, is not a Guarantor, (2) if any Subsidiary that is a "significant subsidiary" (as defined in Rule 1-02(w) of Regulation S-X promulgated by the Commission) is not at such time a Guarantor or (3) if any Subsidiary that is not at such time a Guarantor is or becomes a guarantor of the Existing Subordinated Notes pursuant to the terms of the Existing Purchase Agreement, then such transferee, significant subsidiary or other Subsidiary or other Subsidiary shall:

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

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

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

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

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

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

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

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

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

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

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

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

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

SECTION 6.1.13       Affiliate Transaction .      The Issuer will not, and will not permit any of its Subsidiaries to, authorize, permit or suffer to occur any transactions, contracts or other agreements by the Issuer or any of its Subsidiaries with any Affiliate of the Issuer or any of its Subsidiaries other than in the ordinary course of business and on terms that are no less favorable to the Issuer than those that could have been obtained in a comparable transaction on an arm's-length basis.

SECTION 6.1.14        Other Indebtedness .    Neither the Issuer nor any Subsidiary shall incur any Indebtedness of any kind whatsoever, except for the Notes, the Guarantees, the Existing Subordinated Notes (and any existing or future guarantees in connection therewith), loans under the Issuer’s existing revolving credit facilities with The CIT Group/Equipment Financing, Inc. an