OFFERING MEMORANDUM STRICTLY CONFIDENTIAL

$300,000,000

HERCULES OFFSHORE, INC.6.750% Senior Notes due 2022

Hercules Offshore, Inc. is offering $300,000,000 aggregate principal amount of 6.750% senior notes due 2022, whichwe refer to as the “notes.”

The notes will mature on April 1, 2022. We will pay interest on the notes semi-annually in arrears on April 1 andOctober 1 of each year, starting on October 1, 2014.

We may redeem some or all of the notes at any time on or after April 1, 2017 at specified redemption prices,together with accrued and unpaid interest to the redemption date. We may also redeem the notes at 100% of theprincipal amount thereof plus the applicable premium and accrued and unpaid interest, if any, to the redemption dateat any time prior to April 1, 2017. In addition, until April 1, 2017, we may redeem up to 35% of the outstanding noteswith the net proceeds we raise in one or more equity offerings. If we experience certain kinds of changes of controlaccompanied by a ratings decline, we may be required to offer to repurchase the notes at an offer price in cash equal to101% of their principal amount, plus accrued and unpaid interest, if any, to the date of repurchase.

Concurrently with the launch of this offering, we commenced a fixed price tender offer for any and all of ouroutstanding 7.125% senior secured notes due 2017 (the “7.125% Senior Secured Notes”). We are also solicitingconsents to certain proposed amendments to the indenture governing the 7.125% Senior Secured Notes. We intend touse all of the net proceeds from this offering, together with cash on hand, to fund the tender offer and related consentsolicitation and to redeem any notes not purchased in the tender offer. This offering is not conditioned on thesuccessful consummation of the tender offer.

The notes will be our senior obligations and will be guaranteed on a senior basis by all of our domestic subsidiariesthat guarantee indebtedness under our revolving credit facility.

The notes will not be listed on any securities exchange or quotation system and will not have the benefit of anyexchange offer or other registration rights.

Investing in the notes involves risks. See “Risk Factors” beginning on page 11.

The notes have not been registered under the federal securities laws or the securities laws of any state. The initialpurchasers named below are offering the notes only to qualified institutional buyers in reliance on Rule 144A underthe Securities Act and to persons outside the United States in compliance with Regulation S under the Securities Act.See “Notice to Investors” for additional information about eligible offerees and transfer restrictions.

Issue Price: 100.000% plus accrued and unpaid interest from the issue date.

We expect that delivery of the notes will be made in New York, New York on or about March 26, 2014 through thefacilities of The Depository Trust Company.

Joint Book-Running Managers

Deutsche Bank SecuritiesCredit Suisse

Goldman, Sachs & Co.UBS Investment Bank

Capital One SecuritiesCo-Managers

Comerica Securities Cowen and Company IBERIA Capital Partners L.L.C Pareto SecuritiesRS Platou Markets AS Scotiabank Stephens Inc. Tudor, Pickering, Holt & Co.

The date of this offering memorandum is March 12, 2014.

IMPORTANT NOTICE TO READERS

This offering memorandum has been prepared by us based on information we haveobtained from sources we believe to be reliable. Summaries of documents contained in thisoffering memorandum may not be complete, and we refer you to the full documents for a morecomplete understanding of what we discuss in this offering memorandum. Neither we nor theinitial purchasers represent that the information herein is complete. The information in thisoffering memorandum is current only as of the date on the cover, and our business or financialcondition and other information in this offering memorandum may change after that date. Youshould consult your own legal, tax and business advisors regarding an investment in the notes.Information in this offering memorandum is not legal, tax or business advice.

You should base your decision to invest in the notes solely on information contained in thisoffering memorandum. Neither we nor the initial purchasers have authorized anyone to provideyou with any different information. Contact the initial purchasers with any questions concerningthis offering or to obtain documents or additional information to verify the information in thisoffering memorandum.

We are offering the notes in reliance on an exemption from registration under the SecuritiesAct for an offer and sale of securities that does not involve a public offering. If you purchase thenotes, you will be deemed to have made certain acknowledgments, representations andwarranties as detailed under “Notice to Investors.” You may be required to bear the financialrisk of an investment in the notes for an indefinite period. Neither we nor the initial purchasersare making an offer to sell the notes or soliciting offers to buy the notes in any jurisdictionwhere the offer and sale of the notes is prohibited. We do not make any representation to youthat the notes are a legal investment for you.

Each prospective purchaser of the notes must comply with all applicable laws andregulations in force in any jurisdiction in which it purchases, offers or sells the notes and mustobtain any consent, approval or permission required by it for the purchase, offer or sale by it ofthe notes under the laws and regulations in force in any jurisdiction to which it is subject or inwhich it makes such purchases, offers or sales, and neither we nor the initial purchasers shallhave any responsibility therefor.

None of the Securities and Exchange Commission (“SEC”) or any state securitiescommission or regulatory agency has passed upon the accuracy or adequacy of this offeringmemorandum or the investment merits of the notes offered hereby. Any representation to thecontrary is a criminal offense.

We have prepared this offering memorandum solely for use in connection with the offer ofthe notes to qualified institutional buyers under Rule 144A and to persons outside theUnited States under Regulation S. You agree that you will hold the information contained in thisoffering memorandum and the transactions contemplated hereby in confidence. You may notdistribute this offering memorandum to any person, other than a person retained to advise youin connection with the purchase of the notes. We and the initial purchasers may reject any offerto purchase the notes in whole or in part, sell less than the entire principal amount of the notesoffered hereby or allocate to any purchaser less than all of the notes for which they havesubscribed.

THE NOTES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE ANDMAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIESACT AND APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION OR

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EXEMPTION THEREFROM. PROSPECTIVE PURCHASERS SHOULD BE AWARE THAT THEY MAYBE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITEPERIOD OF TIME.

We expect delivery of the notes will be made against payment therefor on or about

March 26, 2014, which is the tenth business day following the date of pricing of the notes (such

settlement being referred to as “T+10“). You should note that trading in the notes on the date

of pricing and the next succeeding six business days may be affected by the T+10 settlement.

See “Private Placement.”

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NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A

LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED

STATUTES ANNOTATED, 1955, AS AMENDED, WITH THE STATE OF NEW HAMPSHIRE NOR

THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE

STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT

ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING.

NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS

AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE

HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED

OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO

MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT

ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

NON-GAAP FINANCIAL MEASURES

Regulation G, General Rules Regarding Disclosure of Non-GAAP Financial Measures andother SEC regulations define and prescribe the conditions for use of certain Non-GenerallyAccepted Accounting Principles (“Non-GAAP”) financial measures. We use various Non-GAAPfinancial measures such as adjusted operating income (loss), adjusted income (loss) fromcontinuing operations, adjusted diluted earnings (loss) per share from continuing operations,EBITDA and Adjusted EBITDA. EBITDA is defined as net income plus interest expense, incometaxes, depreciation and amortization. Adjusted EBITDA is defined as EBITDA as adjusted for(i) material impairment charges, (ii) loss on extinguishment of debt, (iii) insurance settlements,(iv) material gains and losses on asset sales and (v) a gain on our investment in DiscoveryOffshore S.A. We believe that in addition to GAAP-based financial information, Non-GAAPamounts are meaningful disclosures for the following reasons: (i) each are components of themeasures used by our board of directors and management team to evaluate and analyze ouroperating performance and historical trends, (ii) each are components of the measures used byour management team to make day-to-day operating decisions, (iii) under certain scenarios, thecredit agreement requires us to maintain compliance with a maximum secured leverage ratio,which contains Non-GAAP adjustments as components, (iv) each are components of themeasures used by our management to facilitate internal comparisons to competitors’ resultsand the shallow-water drilling and marine services industry in general, (v) results excludingcertain costs and expenses provide useful information for the understanding of the ongoingoperations without the impact of significant special items, and (vi) the payment of certainbonuses to members of our management is contingent upon, among other things, thesatisfaction by the Company of financial targets, which may contain Non-GAAP measures ascomponents. We acknowledge that there are limitations when using Non-GAAP measures.These Non-GAAP measures are not recognized terms under GAAP and do not purport to be analternative to net income as a measure of operating performance or to cash flows fromoperating activities as a measure of liquidity. EBITDA and Adjusted EBITDA are not intended tobe a measure of free cash flow for management’s discretionary use, as they do not considercertain cash requirements such as tax payments and debt service requirements. Because allcompanies do not use identical calculations, the amounts contained in this offeringmemorandum may not be comparable to other similarly titled measures of other companies.

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SEC REVIEW

In the event of a review by the SEC of any reports that we file under the Securities ExchangeAct of 1934, as amended (the “Exchange Act”), or any registration statement that we may filewith the SEC, we may be required to provide additional information or change, modify,reformulate or eliminate disclosure and other data that we present in this offeringmemorandum, including, without limitation, the description of our business, our Management’sDiscussion and Analysis of Financial Condition and Results of Operations and other informationand financial data incorporated by reference into this offering memorandum. Any suchmodification or reformulation may be significant. In particular, we note that the SEC hasadopted rules regarding the use of Non-GAAP measures, which will be applicable to any suchregistration statement. We may be required to change the way we report our Non-GAAPfinancial measures in such reports. If required, these changes will result in differences betweensome, or all, of the Non-GAAP financial measures included in this offering memorandum andthose included in any such registration statement, and these changes could be significant.

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FORWARD-LOOKING STATEMENTS

This offering memorandum, including the information we incorporate by reference,includes “forward-looking statements” within the meaning of Section 27A of the Securities Actof 1933, as amended (the “Securities Act”), and Section 21E of the Exchange Act that areapplicable to us and our business. All statements, other than statements of historical fact,included in this offering memorandum or the documents we incorporate by reference, includingstatements that address outlook, activities, events or developments that we intend,contemplate, estimate, expect, project, believe or anticipate will or may occur in the future areforward-looking statements. These include such matters as:

• our levels of indebtedness, covenant compliance and access to capital under currentmarket conditions;

• our ability to enter into new contracts for our rigs and liftboats, including our two ultra-high specification rigs, and future utilization rates and dayrates for the units;

• our ability to renew or extend our contracts, or enter into new contracts, when suchcontracts expire;

• demand for our rigs and our liftboats;

• activity levels of our customers and their expectations of future energy prices and abilityto obtain drilling permits in an efficient manner or at all;

• sufficiency and availability of funds for required capital expenditures, working capitaland debt service;

• our ability to close the sale and purchase of assets on time;

• expected completion times for our repair, refurbishment and upgrade projects;

• our ability to complete our shipyard projects incident free;

• our ability to complete our shipyard projects on time to avoid cost overruns and contractpenalties;

• our ability to effectively reactivate rigs that we have stacked;

• the timing and cost of shipyard projects and refurbishments and the return of idle rigs towork;

• our plans to increase international operations;

• expected useful lives of our rigs and liftboats;

• future capital expenditures and refurbishment, reactivation, transportation, repair andupgrade costs;

• liabilities and restrictions under applicable laws of the jurisdictions in which we operateand regulations protecting the environment;

• expected outcomes of litigation, investigations, claims, disputes and tax audits and theirexpected effects on our financial condition and results of operations;

• the existence of insurance coverage and the extent of recovery from our insuranceunderwriters for claims made under our insurance policies; and

• expectations regarding offshore drilling and liftboat activity and dayrates, marketconditions, demand for our rigs and liftboats, operating revenue, operating andmaintenance expense, insurance coverage, insurance expense and deductibles, interestexpense, debt levels and other matters with regard to outlook and future earnings.

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We have based these statements on our assumptions and analyses in light of ourexperience and perception of historical trends, current conditions, expected futuredevelopments and other factors we believe are appropriate in the circumstances. Forward-looking statements by their nature involve substantial risks and uncertainties that couldsignificantly affect expected results, and actual future results could differ materially from thosedescribed in such statements. Although it is not possible to identify all factors, we continue toface many risks and uncertainties. Among the factors that could cause actual future results todiffer materially are the risks and uncertainties described under “Risk Factors” in this offeringmemorandum, as well as the following:

• oil and natural gas prices and industry expectations about future prices;

• levels of oil and gas exploration and production spending;

• demand for and supply of offshore drilling rigs and liftboats;

• our ability to enter into and the terms of future contracts;

• the adequacy and costs of sources of credit and liquidity;

• our ability to collect receivables due from our customers;

• the worldwide military and political environment, uncertainty or instability resultingfrom an escalation or additional outbreak of armed hostilities or other crises in theMiddle East, North Africa, West Africa, Asia, Eastern Europe and other oil and naturalgas producing regions or acts of terrorism or piracy;

• the ability of our customers in the U.S. Gulf of Mexico to obtain drilling permits in anefficient manner or at all;

• the impact of governmental laws and regulations, including laws and regulations in theU.S. Gulf of Mexico following the Macondo well incident;

• our ability to obtain in a timely manner visas and work permits for our employeesworking in international jurisdictions, particularly in Angola;

• the impact of local content and cabotage laws and regulations in internationaljurisdictions in which we operate, particularly Nigeria;

• the impact of tax laws, regulations, interpretations and audits in jurisdictions where weconduct business;

• uncertainties relating to the level of activity in offshore oil and natural gas exploration,development and production;

• competition and market conditions in the contract drilling and liftboat industries;

• the availability of skilled personnel and the rising cost of labor;

• labor relations and work stoppages, particularly in the Nigerian labor environment;

• operating hazards such as hurricanes, severe weather and seas, fires, cratering,blowouts and other well control incidents, war, terrorism and cancellation orunavailability of insurance coverage or insufficient insurance coverage;

• the enforceability and interpretations of indemnity and liability provisions contained inour drilling contracts, particularly in the U.S. Gulf of Mexico;

• the effect of litigation, investigations, audits and contingencies; and

• our inability to achieve our plans or carry out our strategy.

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Many of these factors are beyond our ability to control or predict. Any of these factors, or acombination of these factors, could materially affect our future financial condition or results ofoperations and the ultimate accuracy of the forward-looking statements. These forward-lookingstatements are not guarantees of our future performance, and our actual results and futuredevelopments may differ materially from those projected in the forward-looking statements.Management cautions against putting undue reliance on forward-looking statements orprojecting any future results based on such statements or present or prior earnings levels. Inaddition, each forward-looking statement speaks only as of the date of the particular statement,and we undertake no obligation to publicly update or revise any forward-looking statementsexcept as required by applicable law.

MARKET AND INDUSTRY DATA

The market position and industry data that are presented herein are based upon internalsurveys, market research, publicly available information and industry publications. Although webelieve that our internal research and these independent sources are reliable, we have notsought to verify independently such information. Accordingly, we cannot assure you that suchinformation is accurate.

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OFFERING MEMORANDUM SUMMARY

This summary highlights information about our company contained elsewhere in thisoffering memorandum. This summary is not complete and does not contain all of theinformation that is important to you or that you should consider before investing in the notes.The information is qualified in its entirety by reference to detailed information appearingelsewhere in this offering memorandum and financial statements incorporated by reference intothis offering memorandum and, therefore, should be read together with those documents. Tounderstand the offering and our business fully, we strongly encourage you to read carefully thisentire offering memorandum, including the risk factors beginning on page 11. Unless thecontext requires otherwise or we specifically indicate otherwise, all the references to the terms“Hercules,” “the Company,” “we,” “our,” “ours” and “us” refer to Hercules Offshore, Inc. andits subsidiaries.

Company Overview

Hercules Offshore, Inc. is a leading provider of shallow-water drilling and marine services tothe oil and natural gas exploration and production industry globally. We provide these servicesto national oil and gas companies, major integrated energy companies and independent oil andnatural gas operators. As of February 19, 2014, we owned a fleet of 38 jackup rigs, includingHercules Triumph and Hercules Resilience, 19 liftboat vessels and operated an additional fiveliftboat vessels owned by a third party. Our diverse fleet is capable of providing services such asoil and gas exploration and development drilling, well service, platform inspection, maintenanceand decommissioning operations in several key shallow-water provinces around the world.

As of February 19, 2014, our business segments included the following:

• Domestic Offshore—includes 28 jackup rigs in the U.S. Gulf of Mexico that can drill inmaximum water depths ranging from 85 to 350 feet. Eighteen of the jackup rigs areeither under contract or available for contracts and ten are cold stacked.

• International Offshore—includes ten jackup rigs outside of the U.S. Gulf of Mexico. Wehave three jackup rigs contracted offshore in Saudi Arabia, two jackup rigs contractedoffshore in India, one jackup rig contracted offshore in the Democratic Republic ofCongo, one jackup rig contracted offshore in Angola and one jackup rig contractedoffshore in Vietnam. In addition, we have one jackup rig cold stacked in Bahrain as wellas one jackup rig cold stacked in Malaysia.

• International Liftboats—includes 24 liftboats. Twenty are operating or available forcontracts offshore West Africa, including five liftboats owned by a third party, one iscold stacked offshore West Africa and three are operating or available for contracts inthe Middle East region.

Our jackup rigs are used primarily for exploration and development drilling in shallowwaters. Under most of our contracts, we are paid a fixed daily rental rate called a “dayrate,” andwe are required to pay all costs associated with our own crews as well as the upkeep andinsurance of the rig and equipment. Dayrate drilling contracts typically provide for higher rateswhile the unit is operating and lower rates or a lump sum payment for periods of mobilizationor when operations are interrupted or restricted by equipment breakdowns, adverse weatherconditions or other factors.

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Our liftboats are self-propelled, self-elevating vessels with a large open deck space, whichprovides a versatile, mobile and stable platform to support a broad range of offshoremaintenance and construction services throughout the life of an oil or natural gas well. Aliftboat contract generally is based on a flat dayrate for the vessel and crew. Our liftboatdayrates are determined by prevailing market rates, vessel availability and historical rates paidby the specific customer. Under most of our liftboat contracts, we receive a variable rate forreimbursement of costs such as catering, fuel, oil, rental equipment, crane overtime and otheritems. Liftboat contracts generally are for shorter terms than are drilling contracts, althoughinternational liftboat contracts may have terms of greater than one year.

Competitive Strengths

We believe our operations benefit from a number of competitive strengths, including thefollowing:

• Leading provider of services. We are a leading service provider in our core businesses:jackup drilling and international liftboats. We own the third largest jackup rig fleet in theworld and have a leading jackup rig fleet in the oil and natural gas prolific U.S. Gulf ofMexico. We believe our leadership position has been especially favorable since 2011,when we acquired the assets of Seahawk Drilling, Inc. (“Seahawk”) in the U.S. Gulf ofMexico (the “Seahawk Transaction”). In addition, we operate the largest liftboat fleet inWest Africa and have a growing liftboat operation in the Middle East.

• Diversity of assets, revenue streams, and geographic footprint. We have a diversifiedset of assets that generate revenue streams with complementary cash flow profiles.Some of our businesses, such as domestic offshore drilling, are highly cyclical due tothe short-term nature of the contracts and the correlation to changes in commodityprices. Our domestic offshore drilling business is balanced by our international offshoreand liftboat businesses, which are typically less cyclical due to longer-term contracts andproduction-related activities. We also have a geographically balanced revenue streamwith operations in several key shallow-water drilling areas around the world. During thefiscal year ended December 31, 2013, we generated approximately 40% of our revenuesinternationally. Our breadth of services and broad geographic scope of operations helpreduce the volatility of our cash flows.

• Meaningful backlog with solid counterparties. We have a strong revenue backlog ofapproximately $1.0 billion as of February 19, 2014. Majors, national oil companies andindependent operators with investment grade ratings account for approximately 72% oftotal contracted revenue. We believe the size of our revenue backlog and the quality ofthe customers behind it provides us with an attractive and visible stream of cash flowsover the next few years.

• Long-standing relationships with key customers. Our management team has long-standing relationships with several national oil and gas companies and independent oiland gas operators that allow us to invest capital efficiently. For example, we recentlysigned five-year extensions for two of our rigs working with Saudi Aramco, one of ourlargest customers and also currently the world’s largest consumer of jackup rigs. Webelieve these projects generate an attractive return on capital, and given the long-termnature of the contracts, a relatively low risk profile for our revenue stream.

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• Knowledgeable and experienced management team focused in the oilfield servicesindustry. Our operating level management team has extensive industry experienceboth in the U.S. Gulf of Mexico and internationally, with an average of over 20 years ofexperience in the oil service industry. We believe that our management team’sconsiderable knowledge and experience enhance our ability to operate effectivelythroughout industry cycles and provide us with valuable insight in identifying andexecuting on business opportunities. Our management team also has extensiveexperience in managing growth, developing creative businesses solutions andintegrating acquisitions, which we expect will provide us with an advantage as marketand economic conditions continue to improve.

Business Strategies

We aim to be the leading provider of shallow-water drilling and liftboat services to the oiland natural gas exploration and production industry. We intend to employ the followingstrategies to achieve our goal:

• Focus on drilling and international liftboat services. We are one of the largest operatorsof a diverse fleet of jackup rigs and liftboats globally, and believe we are well-positionedto benefit from any increase in drilling and production services activity. We expect tostrengthen this leadership position in the jackup drilling market through our 2013acquisition of two ultra-high specification jackup drilling rigs.

• Maintain our status as an efficient, low-cost service provider. We intend to maintain anorganizational structure and asset base that allow us to be an efficient, low-cost serviceprovider in the oil and gas industry.

• Continue our focus on safety, reliability and operational excellence. We intend tocontinue to devote significant resources to safety, reliability and operational excellence,which we believe promotes a culture of diligence and minimizes risk. Since year-end2007, we have had a 56% improvement in our total recordable incident rate (1.77 in 2007versus 0.77 in 2013), and a 73% improvement in our lost time incident rate (0.45 in 2007versus 0.12 in 2013).

• Continue our geographic diversification. We are committed to continuing to expandinternationally and leverage our current geographic footprint. We have expanded thenumber of international rigs that we operate from two jackups in 2007 to the ten rigs weoperate today. In 2013, we acquired the Hercules Triumph and Hercules Resilience, twoultra-high specification jackup rigs that target and are currently under contract ininternational markets. Our international liftboat business has also grown from theoriginal four liftboats we operated in West Africa in 2005 to the 24 liftboats we operate inthe Middle East and West Africa today, including the Bull Ray, a high specificationliftboat that we acquired in 2013 and is currently working in West Africa. Ourinternational assets now account for approximately 73% of our total contract backlog.

• Pursue growth opportunities with a disciplined approach. Our long-term strategy is toundertake growth projects and acquisitions that generate an attractive return on capital.All potential projects are carefully evaluated based on their ability to improve ourcompetitive position throughout the business cycle and strengthen our financial profileand liquidity position.

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Recent Developments

Tender Offer for 7.125% Senior Secured Notes

On March 12, 2014, we commenced a fixed-price tender offer (the “Tender Offer”) for anyand all of our outstanding $300.0 million aggregate principal amount of 7.125% senior securednotes due 2017 (the “7.125% Senior Secured Notes”), together with a consent solicitationrelating to certain amendments to the indenture governing the 7.125% Senior Secured Notesand a release of the liens on collateral securing those notes. The Tender Offer and consentsolicitation are conditioned upon, among other things, our consummation of this offering orother satisfactory financing.

We are offering to purchase the 7.125% Senior Secured Notes for cash equal to $1,051.19per $1,000 principal amount, together with accrued and unpaid interest to the purchase date,and a consent fee of $6.25 per $1,000 principal amount of notes tendered before 5:00 p.m., NewYork City time, on March 25, 2014. No consent fees will be paid to holders who tender theirnotes after 5:00 p.m., New York City time, March 25, 2014 and prior to the expiration of theTender Offer at 11:59 p.m., New York City time, on April 9, 2014. Our offer to purchase the7.125% Senior Secured Notes is being made on the terms and subject to the conditions set forthin an Offer to Purchase and Consent Solicitation Statement dated March 12, 2014, and thisoffering memorandum shall not be deemed to constitute part of the Tender Offer.

We intend to use all of the net proceeds from this offering (after discounts and estimatedoffering expenses), together with cash on hand, to fund the Tender Offer and consentsolicitation and to redeem any of the 7.125% Senior Secured Notes not purchased in the TenderOffer, as described in “Use of Proceeds.” There is no assurance that the Tender Offer will besubscribed for in any amount. This offering is not conditioned on the completion of the TenderOffer.

If fully subscribed by March 25, 2014, we expect that the payments made in the TenderOffer and consent solicitation will total approximately $317.2 million (including the consent feebut excluding accrued and unpaid interest) and will result in a pre-tax charge to our net incomeof approximately $19.2 million. If any 7.125% Senior Secured Notes remain outstanding uponcompletion of the Tender Offer, we intend to redeem such notes pursuant to our call right underthe indenture governing the notes.

Deutsche Bank Securities Inc. is acting as dealer manager and solicitation agent for thetender offer, for which it will receive indemnification against certain liabilities andreimbursement of expenses. Additionally, certain of the initial purchasers or their affiliates areholders of our 7.125% Senior Secured Notes and, accordingly, may receive a portion of theproceeds of this offering in the Tender Offer.

Principal Executive Offices

Our principal executive offices are located at 9 Greenway Plaza, Suite 2200, Houston,TX 77046. Our telephone number is (713) 350-5100, and our internet website address iswww.herculesoffshore.com. The information contained on, or accessible through, our website isnot part of this offering memorandum.

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The Offering

The following is a brief summary of the principal terms of the notes. For a more detaileddescription of the notes, see “Description of the Notes” in this offering memorandum.

Issuer . . . . . . . . . . . . . . . . . . . . . . . . . Hercules Offshore, Inc.

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . $300,000,000 aggregate principal amount of 6.750% seniornotes due 2022.

Maturity . . . . . . . . . . . . . . . . . . . . . . . April 1, 2022.

Interest payment dates . . . . . . . . . . April 1 and October 1 of each year after date of issuance ofthe notes, commencing October 1, 2014.

Ranking . . . . . . . . . . . . . . . . . . . . . . . . The notes and related guarantees will:

• rank senior in right of payment to all of our and ourguarantors’ future subordinated indebtedness;

• rank equal in right of payment with all of our and ourguarantors’ existing and future senior indebtedness;

• be structurally subordinate to all liabilities and preferredstock of our non-guarantor subsidiaries; and

• be effectively subordinated to our and the guarantors’secured indebtedness, to the extent of the value of thecollateral securing such indebtedness, including ourrevolving credit facility.

As of December 31, 2013, on an as adjusted basis to giveeffect to the sale of the notes and the application of the netproceeds therefrom, as well as the other adjustments setforth in “Capitalization,” we would have had approximately$1.2 billion aggregate principal amount of seniorindebtedness outstanding (net of discounts), including$138.6 million of undrawn borrowing capacity under ourrevolving credit facility. Please read “Capitalization.”

Guarantees . . . . . . . . . . . . . . . . . . . . . The notes will be jointly and severally, fully andunconditionally guaranteed by all of our existing and futuredomestic restricted subsidiaries that guaranteeindebtedness under a credit facility, including our revolvingcredit facility.

Our non-guarantor subsidiaries represented approximately32% of our revenues for the year ended December 31,2013. In addition, these non-guarantor subsidiariesrepresented approximately 58% of our consolidated assetsas of December 31, 2013. As of December 31, 2013, ournon-guarantor subsidiaries had no indebtednessoutstanding (other than intercompany payables).

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For more information, see “Description of the Notes—TheNote Guarantees.”

Optional Redemption . . . . . . . . . . . . On or after April 1, 2017, we may redeem the notes, inwhole or in part, at the redemption prices described under“Description of the Notes—Optional Redemption—General,” plus accrued and unpaid interest, if any, to theredemption date.

Prior to April 1, 2017, we may on one or more occasionsredeem up to 35% of the notes with the net cash proceedsof certain equity offerings, at a redemption price equalto 106.750% of the aggregate principal amount of the notesplus accrued and unpaid interest, if any, to the redemptiondate; provided, that (i) after giving effect to any suchredemption, at least 65% of the notes originally issued inthis offering would remain outstanding immediately aftersuch redemption and (ii) we make such redemption notmore than 180 days after the consummation of such equityoffering. See “Description of the Notes—OptionalRedemption—Redemption with Proceeds from EquityOfferings.”

In addition, prior to April 1, 2017, we may redeem all orpart of the notes at a price equal to 100% of the aggregateprincipal amount of the notes to be redeemed, plus theapplicable premium and accrued and unpaid interest, ifany, to the redemption date. See “Description of theNotes—Optional Redemption—Redemption at ApplicablePremium.”

Covenants . . . . . . . . . . . . . . . . . . . . . The indenture governing the notes will contain covenantsthat, among other things, limit our ability and the ability ofour restricted subsidiaries to:

• incur additional indebtedness or issue certain preferredstock;

• pay dividends or make other distributions;

• make other restricted payments or investments;

• sell assets;

• create liens;

• enter into agreements that restrict dividends and otherpayments by restricted subsidiaries;

• engage in transactions with our affiliates; and

• consolidate, merge or transfer all or substantially all ofour assets.

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In addition, if and for so long as the notes have aninvestment grade rating from S&P, and Moody’s, we willnot be subject to certain of the covenants listed above. See“Description of the Notes—Certain Covenants—CovenantSuspension.” These covenants are subject to a number ofimportant qualifications and limitations. See “Descriptionof the Notes—Certain Covenants.”

Mandatory Offer to Repurchase . . . If we experience certain kinds of changes of controlaccompanied by a ratings decline, we may be required tooffer to repurchase the notes at an offer price in cash equalto 101% of their principal amount, plus accrued and unpaidinterest, if any, to the date of repurchase. See “Descriptionof the Notes—Change of Control.”

Following certain asset sales, we may be required to usethe proceeds to offer to repurchase the notes at an offerprice in cash equal to 100% of their principal amount, plusaccrued and unpaid interest, if any, to the date ofrepurchase. See “Description of the Notes—CertainCovenants—Limitations on Asset Sales.”

No Prior Market . . . . . . . . . . . . . . . . . The notes will be new securities for which there is currentlyno market. Although the initial purchasers have informedus that they intend to make a market in the notes, they arenot obligated to do so and they may discontinue marketmaking activities at any time without notice. Accordingly,we cannot assure you that a liquid market for the notes willdevelop or be maintained.

Transfer Restrictions; NoRegistration Rights . . . . . . . . . . . . We have not registered the notes under the Securities Act

or any state or other securities laws and holders of thenotes will not have the benefit of any exchange offer orother registration rights. The notes are subject torestrictions on transfer and may only be offered or sold intransactions exempt from or not subject to the registrationrequirements of the Securities Act. We do not intend to listthe notes on any securities exchange or quotation system.See “Notice to Investors.”

Use of Proceeds . . . . . . . . . . . . . . . . We expect to use all of the net proceeds from this offering,together with cash on hand, to fund the Tender Offer andconsent solicitation for our outstanding 7.125% SeniorSecured Notes and to redeem any of the 7.125% SeniorSecured Notes not purchased in the Tender Offer. For moreinformation about our use of proceeds from this offering,please read “Use of Proceeds.”

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Risk Factors . . . . . . . . . . . . . . . . . . . . See “Risk Factors” and the other information in thisoffering memorandum for a discussion of the factors youshould carefully consider before deciding to invest in thenotes.

For additional information regarding the notes, see the “Description of the Notes” sectionof this offering memorandum.

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SUMMARY CONDENSED CONSOLIDATED FINANCIAL DATA

We have derived the following summary condensed consolidated financial information asof December 31, 2013 and 2012 and for the three years ended December 31, 2013 from ouraudited consolidated financial statements and the related notes thereto incorporated byreference into this offering memorandum, which have been audited by Ernst & Young LLP,independent registered public accounting firm. We have derived the summary condensedconsolidated financial information as of December 31, 2011 from our audited consolidatedfinancial statements and the related notes thereto not included in this offering memorandum.

We were formed in July 2004 and commenced operations in August 2004. From ourformation to December 31, 2013, we completed the acquisition of Discovery Offshore in June2013, the Seahawk Transaction in April 2011, the acquisition of TODCO in July 2007 and severalsignificant asset acquisitions that impact the comparability of our historical financial results. Ourfinancial results reflect the impact of these transactions from the dates of their respectiveclosings. Our former Domestic Liftboats and Inland segments are reported as discontinuedoperations for all periods presented.

The summary condensed consolidated financial information below is qualified by referenceto and should be read together with (i) “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” included in our annual report on Form 10-K filed onFebruary 27, 2014 and (ii) our consolidated financial statements and the accompanying notesthereto, each as incorporated by reference into this offering memorandum. In addition, thefollowing information may not be deemed indicative of our future operations.

Year Ended December 31,

2013(a) 2012(b) 2011

(In thousands, except per sharedata)

Statement of Operations Data:

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 858,300 $ 618,225 $ 574,571Operating income (loss) attributable to Hercules Offshore, Inc. . . . . . . . . . . . . . . . . . . . 51,471 (59,727) (6,412)Loss from continuing operations attributable to Hercules Offshore, Inc. . . . . . . . . . . . (26,770) (121,000) (54,750)Loss per share from continuing operations attributable to Hercules Offshore, Inc.:

Basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.17) $ (0.79) $ (0.42)Other Financial Data:

Net cash provided by (used in):Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 182,470 $ 68,363 $ 52,025Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (572,663) (52,269) (32,520)Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 329,406 108,748 (21,820)Capital expenditures(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 544,987 138,605 55,222

EBITDA(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 187,477 $ 75,342 $ 139,131Adjusted EBITDA(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295,962 147,096 139,131Balance Sheet Data (as of end of period):

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 198,406 $ 259,193 $ 134,351Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227,291 217,184 174,598Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,301,448 2,016,630 2,006,704Long-term debt, net of current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,210,676 798,013 818,146Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 823,700 882,762 908,553

(a) Includes $114.2 million in asset impairment charges, an $11.5 million loss on the sale of Hercules 170 and a $31.6million gain for the Hercules 265 insurance settlement. In addition, includes a $14.9 million gain on equityinvestment, a $29.3 million charge related to the redemption of the 10.5% Senior Notes and issuance of the 7.5%Senior Notes and a $37.7 million tax benefit recognized related to the change in characterization of the SeahawkTransaction for tax purposes from a purchase of assets to a reorganization. There was no tax impact associatedwith the foregoing items.

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(b) Includes $108.2 million ($82.7 million, net of taxes or $0.54 per diluted share) in asset impairment charges. Inaddition, includes an $18.4 million gain ($11.9 million, net of taxes or $0.08 per diluted share) on the sale ofPlatform Rig 3 as well as a $27.3 million gain ($17.7 million, net of taxes or $0.12 per diluted share) for the Hercules185 insurance settlement.

(c) 2013 includes a $166.9 million final shipyard installment payment for each of Hercules Triumph and HerculesResilience.

(d) “EBITDA” is defined as net income or loss before interest, taxes, depreciation and amortization. Adjusted EBITDAis defined as EBITDA as adjusted for (i) material impairment charges, (ii) loss on extinguishment of debt(iii) insurance settlements (iv) material gains and losses on asset sales and (v) a gain on our investment inDiscovery Offshore S.A. EBITDA and Adjusted EBITDA are Non-GAAP financial measures. For a discussion of whywe believe these Non-GAAP measures, in addition to GAAP measures, provide meaningful information toinvestors and the limitations associated with such measures, please read “Non-GAAP Financial Measures.”

The following table reconciles our Loss from Continuing Operations, the most directlycomparable GAAP financial measure, to EBITDA and Adjusted EBITDA.

Year Ended December 31,

2013 2012 2011

Loss from Continuing Operations attributable to HerculesOffshore, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (26,770) $(121,000) $ (54,750)

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,248 72,734 72,086Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,944) (18,721) (27,682)Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . 151,943 142,329 149,477

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $187,477 $ 75,342 $139,131

Adjustments:Asset impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $114,168 $ 108,216 $ —Gain on Hercules 265 insurance settlement . . . . . . . . . . . . . . (31,600) — —Loss on sale of Hercules 170 . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,498 — —Gain on sale of Platform Rig 3 . . . . . . . . . . . . . . . . . . . . . . . . . — (18,350) —Gain on Hercules 185 insurance settlement . . . . . . . . . . . . . . — (27,268) —Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . 29,295 9,156 —Gain on equity investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,876) — —

Total adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,485 71,754 —

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $295,962 $ 147,096 $139,131

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RISK FACTORS

An investment in the notes involves risks. You should carefully consider the followingdiscussion of risks and the other information contained in this offering memorandum beforedeciding whether an investment in the notes is suitable for you.

Risks Related to Our Business and Our Industry

Our business depends on the level of activity in the oil and natural gas industry, which is

significantly affected by volatile oil and natural gas prices.

Our business depends on the level of activity of oil and natural gas exploration,development and production in the U.S. Gulf of Mexico and internationally, and in particular,the level of exploration, development and production expenditures of our customers. Demandfor our drilling services is adversely affected by declines associated with depressed oil andnatural gas prices. Even the perceived risk of a decline in oil or natural gas prices often causesoil and gas companies to reduce spending on exploration, development and production.However, higher prices do not necessarily translate into increased drilling activity since ourclients’ expectations about future commodity prices typically drive demand for our services.Reductions in capital expenditures of our customers reduce rig utilization and dayrates. Oil andnatural gas prices are extremely volatile and are affected by numerous factors, including thefollowing:

• the demand for oil and natural gas in the United States and elsewhere;

• the cost of exploring for, developing, producing and delivering oil and natural gas, andthe relative cost of onshore production or importation of natural gas;

• political, economic and weather conditions in the United States and elsewhere;

• advances in drilling, exploration, development and production technology;

• the ability of the Organization of Petroleum Exporting Countries, commonly called“OPEC,” to set and maintain oil production levels and pricing;

• the level of production in non-OPEC countries;

• domestic and international tax policies and governmental regulations;

• the development and exploitation of alternative fuels, and the competitive, social andpolitical position of natural gas as a source of energy compared with other energysources;

• the policies of various governments regarding exploration and development of their oiland natural gas reserves;

• the worldwide military and political environment and uncertainty or instability resultingfrom an escalation or additional outbreak of armed hostilities or other crises in theMiddle East, North Africa, West Africa, Asia, Eastern Europe and other significant oil andnatural gas producing regions; and

• acts of terrorism or piracy that affect oil and natural gas producing regions, especially inNigeria, where armed conflict, civil unrest and acts of terrorism are increasinglycommon occurrences.

While economic conditions continue to improve, reduced demand for drilling and liftboatservices could materially erode dayrates and utilization rates for our units, which couldadversely affect our financial condition and results of operations. Continued hostilities in the

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Middle East, North Africa, West Africa, Asia and Eastern Europe and the occurrence or threat ofterrorist attacks against the United States or other countries could negatively impact theeconomies of the United States and other countries where we operate. Another decline in theeconomy could result in a decrease in energy consumption, which in turn would cause ourrevenue and margins to decline and limit our future growth prospects.

The offshore service industry is highly cyclical and experiences periods of low demand and low

dayrates. The volatility of the industry has in the past resulted and could again result in sharp

declines in our profitability.

Historically, the offshore service industry has been highly cyclical, with periods of highdemand and high dayrates often followed by periods of low demand and low dayrates. Periodsof low demand or increasing supply intensify the competition in the industry and often result inrigs or liftboats being idle for long periods of time. As a result of the cyclicality of our industry,we expect our results of operations to be volatile and to decrease during market declines suchas the recession we recently experienced.

Maintaining idle assets or the sale of assets below their then carrying value may cause us to

experience losses and may result in impairment charges.

Prolonged periods of low utilization and dayrates, the cold stacking of idle assets or the saleof assets below their then carrying value may cause us to experience losses. These events mayalso result in the recognition of impairment charges on certain of our assets if future cash flowestimates, based upon information available to management at the time, indicate that theircarrying value may not be recoverable or if we sell assets at below their then carrying value.

We have a significant level of debt, and could incur additional debt in the future. Our debt could

have significant consequences for our business and future prospects.

As of December 31, 2013, on an as adjusted basis giving effect to this notes offering and theapplication of the net proceeds therefrom, we had total outstanding debt of approximately $1.2billion. This debt represented approximately 60% of our total book capitalization. As ofDecember 31, 2013, we had $138.6 million of available capacity under our revolving creditfacility, after the commitment of $11.4 million for letters of credit issued under it. We mayborrow under our revolving credit facility to fund working capital or other needs in the nearterm up to the remaining availability, subject to our compliance with financial and othercovenants. Our debt and the limitations imposed on us by our existing or future debtagreements could have significant consequences for our business and future prospects,including the following:

• we may not be able to obtain necessary financing in the future for working capital,capital expenditures, acquisitions, debt service requirements or other purposes and wemay be required under the terms of our existing credit facility or notes to use theproceeds of any financing we obtain to repay or prepay existing debt;

• we will be required to dedicate a substantial portion of our cash flow to payments ofinterest on our debt;

• we may be exposed to risks inherent in interest rate fluctuations on borrowings underour credit facility which could result in higher interest expense to the extent that we donot hedge such risk in the event of increases in interest rates;

• we could be more vulnerable during downturns in our business and be less able to takeadvantage of significant business opportunities and to react to changes in our businessand in market or industry conditions; and

• we may have a competitive disadvantage relative to our competitors that have less debt.

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Our ability to make payments on and to refinance our indebtedness, including the 10.25%Senior Notes due 2019, the 8.75% Senior Notes due 2021, the 3.375% Convertible Senior Notesdue 2038, the 7.5% Senior Notes due 2021 and the senior notes we expect to issue in thisoffering, and to fund planned capital expenditures will depend on our ability to generate cash inthe future, which is subject to general economic, financial, competitive, legislative, regulatoryand other factors that are beyond our control. Our future cash flows may be insufficient to meetall of our debt obligations and other commitments, and any insufficiency could negativelyimpact our business. To the extent we are unable to repay our indebtedness as it becomes dueor at maturity with cash on hand, we will need to refinance our debt, sell assets or repay thedebt with the proceeds from equity offerings. Additional indebtedness or equity financing maynot be available to us in the future for the refinancing or repayment of existing indebtedness,and we may not be able to complete asset sales in a timely manner sufficient to make suchrepayments.

Our debt instruments impose significant additional costs and operating and financial

restrictions on us, which may prevent us from capitalizing on business opportunities and

taking certain actions.

Our debt instruments impose significant additional costs and operating and financialrestrictions on us. These restrictions limit our ability to, among other things:

• incur additional indebtedness or issue certain preferred stock;

• pay dividends or make other distributions;

• make other restricted payments or investments;

• sell assets;

• create liens;

• enter into agreements that restrict dividends and other payments by restrictedsubsidiaries;

• engage in transactions with affiliates; and

• consolidate, merge or transfer all or substantially all of our assets.

Our compliance with these provisions may materially adversely affect our ability to react tochanges in market conditions, take advantage of business opportunities we believe to bedesirable, obtain future financing, fund needed capital expenditures, finance our acquisitions,equipment purchases and development expenditures, or withstand the present or any futuredownturn in our business.

If we are unable to comply with the financial covenant in our revolving credit facility, there

could be a default, which could result in an acceleration of repayment of funds that we have

borrowed.

Our revolving credit facility includes a financial covenant that will be tested if there are anyrevolving borrowings under the credit facility or letters of credit issued under the credit facilityexceeding $10.0 million. If we trigger the conditions requiring testing, our ability to comply withthis financial covenant can be affected by events beyond our control. Reduced activity levels inthe oil and natural gas industry could adversely impact our ability to comply with such covenantin the future. Our failure to comply with such covenant would result in an event of default underthe revolving credit facility. An event of default could prevent us from borrowing under our

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revolving credit facility, which could in turn have a material adverse effect on our availableliquidity. In addition, an event of default could result in our having to immediately repay allamounts outstanding under the revolving credit facility, the 10.25% Senior Notes due 2019, the8.75% Senior Notes due 2021, the 3.375% Convertible Senior Notes due 2038, the 7.5% SeniorNotes due 2021 and the senior notes we expect to issue in this offering, as well as result inforeclosure of liens on our assets. As of December 31, 2013, we were in compliance with allcovenants under our debt facilities.

Our industry is highly competitive, with intense price competition. Our inability to compete

successfully may reduce our profitability.

Our industry is highly competitive. Our contracts are traditionally awarded on a competitivebid basis. Pricing is often the primary factor in determining which qualified contractor isawarded a job, although rig and liftboat availability, location and technical capability and eachcontractor’s safety performance record and reputation for quality also can be key factors in thedetermination. Dayrates also depend on the supply of rigs and vessels and excess capacity putsdownward pressure on dayrates. Excess capacity can occur when newly constructed rigs andvessels enter service, when rigs and vessels are mobilized between geographic areas and whennon-marketed rigs and vessels are reactivated.

Several of our competitors also are incorporated in jurisdictions outside the United States,which provides them with significant tax advantages that are not available to us as a U.S.company and, as a result, may materially impair our ability to compete with them for manyprojects that would be beneficial to us.

We may require additional capital in the future, which may not be available to us or may be at

a cost which reduces our cash flow and profitability.

Our business is capital intensive and, to the extent we do not generate sufficient cash fromoperations, we may need to raise additional funds through public or private debt (which wouldincrease our interest costs) or equity financings to execute our business strategy or to fundcapital expenditures. Adequate sources of capital funding may not be available when needed ormay not be available on acceptable terms. In addition, under the terms of our revolving creditfacility, we may be required to use the proceeds of any capital that we raise to repay existingindebtedness. If funding is insufficient at any time in the future, we may be unable to fundmaintenance of our assets, take advantage of business opportunities or respond to competitivepressures, any of which could harm our business.

Asset sales have been an important component of our business strategy. We may be unable to

identify appropriate buyers with access to financing or to complete any sales on acceptable

terms.

We are currently considering sales or other dispositions of certain of our assets, and anysuch disposition could be significant and could significantly affect the results of operations ofone or more of our business segments. Asset sales may occur on less favorable terms thanterms that might be available at other times in the business cycle. At any given time,discussions with one or more potential buyers may be at different stages. Any such discussionsand agreements to sell assets may or may not result in the consummation of an asset sale. Wemay not be able to identify buyers with access to financing or complete sales on acceptableterms.

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Our customer contracts are generally short term, and we will experience reduced profitability if

our customers reduce activity levels, terminate or seek to renegotiate contracts, or if we

experience downtime, operational difficulties, or safety-related issues.

Currently, all of our drilling contracts with major customers are dayrate contracts, where wecharge a fixed charge per day regardless of the number of days needed to drill the well.Likewise, under our current liftboat contracts, we charge a fixed fee per day regardless of thesuccess of the operations that are being conducted by our customer utilizing our liftboat. Duringdepressed market conditions, a customer may no longer need a rig or liftboat that is currentlyunder contract or may be able to obtain a comparable rig or liftboat at a lower daily rate. As aresult, customers may seek to renegotiate the terms of their existing drilling contracts or avoidtheir obligations, including their payment obligations, under those contracts. In addition, ourcustomers may have the right to terminate, or may seek to renegotiate, existing contracts if weexperience downtime, operational problems above the contractual limit or safety-related issues,if the rig or liftboat is a total loss, if the rig or liftboat is not delivered to the customer within theperiod specified in the contract or in other specified circumstances, which include eventsbeyond the control of either party.

In the U.S. Gulf of Mexico, contracts are generally short term, and oil and natural gascompanies tend to reduce activity levels quickly in response to downward changes in oil andnatural gas prices. Due to the short-term nature of most of our contracts, a decline in marketconditions can quickly affect our business if customers reduce their levels of operations.

Some of our contracts with our customers include terms allowing them to terminate thecontracts without cause, with little or no prior notice and without penalty or early terminationpayments. In addition, we could be required to pay penalties if some of our contracts with ourcustomers are terminated due to downtime, operational problems or failure to deliver. Some ofour other contracts with customers may be cancelable at the option of the customer uponpayment of a penalty, which may not fully compensate us for the loss of the contract. Earlytermination of a contract may result in a rig or liftboat being idle for an extended period of time.The likelihood that a customer may seek to terminate a contract is increased during periods ofmarket weakness. If our customers cancel or require us to renegotiate some of our significantcontracts, if we are unable to secure new contracts on substantially similar terms, especiallythose contracts in our International Offshore segment, or if contracts are suspended for anextended period of time, our revenue and profitability would be materially reduced.

An increase in supply of rigs or liftboats could adversely affect our financial condition and

results of operations.

Reactivation of non-marketed rigs, mobilization of rigs back to the U.S. Gulf of Mexico ornew construction of rigs could result in excess supply in the region, and our dayrates andutilization could be reduced.

Construction of rigs, including high specification rigs such as Hercules Triumph andHercules Resilience, could result in excess supply in international regions, which could reduceour ability to secure new contracts for our rigs and could reduce our ability to renew, extend orobtain new contracts for working rigs at the end of such contract term. The excess supply wouldalso impact the dayrates on future contracts.

If market conditions improve, inactive rigs and liftboats that are not currently beingmarketed could be reactivated to meet an increase in demand. Improved market conditions inthe U.S. Gulf of Mexico, particularly relative to other regions, could also lead to the movement

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of jackup rigs and other mobile offshore drilling units into the U.S. Gulf of Mexico. Improvedmarket conditions in any region worldwide could lead to increased construction of rigs andliftboats and upgraded programs by our competitors. Some of our competitors have alreadyannounced plans to build additional jackup rigs with higher specifications than our rigs.According to IHS-Petrodata, as of February 19, 2014, 138 newbuild jackup rigs are scheduled fordelivery through 2017. Many of the rigs currently under construction have not been contractedfor future work, which may intensify price competition as scheduled delivery dates occur. Asignificant increase in the supply of jackup rigs, other mobile offshore drilling units or liftboatscould adversely affect both our utilization and dayrates.

Our business involves numerous operating hazards and exposure to extreme weather and

climate risks, and our insurance may not be adequate to cover our losses.

Our operations are subject to the usual hazards inherent in the drilling and operation of oiland natural gas wells, such as blowouts, reservoir damage, loss of production, loss of wellcontrol, punchthroughs, craterings, fires and pollution, such as the well control incidentexperienced in July 2013 by our jackup drilling rig Hercules 265 in the U.S. Gulf of Mexico. Theoccurrence of these events could result in the suspension of drilling or production operations,claims by the operator, severe damage to or destruction of the property and equipmentinvolved, injury or death to rig or liftboat personnel, and environmental damage. We may alsobe subject to personal injury and other claims of rig or liftboat personnel as a result of ourdrilling and liftboat operations. Operations also may be suspended because of machinerybreakdowns, abnormal operating conditions, failure of subcontractors to perform or supplygoods or services and personnel shortages.

In addition, our drilling and liftboat operations are subject to perils of marine operations,including capsizing, grounding, collision and loss or damage from severe weather. Tropicalstorms, hurricanes and other severe weather prevalent in the U.S. Gulf of Mexico could have amaterial adverse effect on our operations. In addition, damage to our rigs, liftboats, shorebasesand corporate infrastructure caused by high winds, turbulent seas, or unstable sea bottomconditions could potentially cause us to curtail operations for significant periods of time untilthe damages can be repaired. In addition, we cold stack a number of rigs in certain locationsoffshore. This concentration of rigs in specific locations could expose us to increased liabilityfrom a catastrophic event and could cause an increase in our insurance costs.

Damage to the environment could result from our operations, particularly through oilspillage or extensive uncontrolled fires. We may also be subject to property, environmental andother damage claims by oil and natural gas companies and other businesses operating offshoreand in coastal areas. Our insurance policies and contractual rights to indemnity may notadequately cover losses, and we may not have insurance coverage or rights to indemnity for allrisks. Moreover, pollution and environmental risks generally are subject to significantdeductibles and are not totally insurable. Risks from extreme weather and marine hazards mayincrease in the event of ongoing patterns of adverse changes in weather or climate.

A significant portion of our business is conducted in shallow-water areas of the U.S. Gulf of

Mexico. The mature nature of this region could result in less drilling activity in the area,

thereby reducing demand for our services.

The U.S. Gulf of Mexico, and in particular the shallow-water region of the U.S. Gulf ofMexico, is a mature oil and natural gas production region that has experienced substantialseismic survey and exploration activity for many years. Because a large number of oil andnatural gas prospects in this region have already been drilled, additional prospects of sufficient

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size and quality could be more difficult to identify. According to the U.S. Energy InformationAdministration, the average size of the U.S. Gulf of Mexico discoveries has declinedsignificantly since the early 1990s. In addition, the amount of natural gas production in theshallow-water U.S. Gulf of Mexico has declined over the last decade. Moreover, oil and naturalgas companies may be unable to obtain financing necessary to drill prospects in this region.The decrease in the size of oil and natural gas prospects, the decrease in production or thefailure to obtain such financing may result in reduced drilling activity in the U.S. Gulf of Mexicoand reduced demand for our services.

We can provide no assurance that our current backlog of contract drilling revenue will be

ultimately realized.

As of February 19, 2014, our total contract drilling backlog for our Domestic Offshore,International Offshore and International Liftboats segments was approximately $1.0 billion. Wecalculate our contract revenue backlog, or future contracted revenue, as the contract dayratemultiplied by the number of days remaining on the contract assuming full utilization, less anypenalties or reductions in dayrate for late delivery or non-compliance with contractualobligations. Backlog excludes revenue for management agreements, mobilization,demobilization, contract preparation and customer reimbursables. We may not be able toperform under our drilling contracts due to various operational factors, including unscheduledrepairs, maintenance, operational delays, health, safety and environmental incidents, weatherevents in the Gulf of Mexico and elsewhere and other factors (some of which are beyond ourcontrol), and our customers may seek to cancel or renegotiate our contracts for various reasons.In some of the contracts, our customer has the right to terminate the contract without penaltyand in certain instances, with little or no notice. In addition, we can provide no assurance thatour customers will pay any or all of the revenues that we earn from them for providing ourdrilling and liftboat services. Our inability or the inability of our customers to perform under ouror their contractual obligations may have a material adverse effect on our financial position,results of operations and cash flows.

Our insurance coverage has become more expensive, may become unavailable in the future,

and may be inadequate to cover our losses.

Our insurance coverage is subject to certain significant deductibles and levels of self-insurance, does not cover all types of losses and, in some situations, may not provide fullcoverage for losses or liabilities resulting from our operations. In addition, due to the lossessustained by us and the offshore drilling industry in recent years, we are likely to continueexperiencing increased costs for available insurance coverage, which may impose higherdeductibles and limit maximum aggregated recoveries, including for hurricane-relatedwindstorm damage or loss and for pollution and blowout events. Insurance costs may increasein the event of ongoing patterns of adverse changes in weather or climate.

Further, we may elect not to obtain or we may be unable to obtain windstorm coverage inthe future, thus putting us at a greater risk of loss due to severe weather conditions and otherhazards. If a significant accident or other event resulting in damage to our rigs or liftboats,including severe weather, equipment breakdowns, terrorist acts, piracy, war, civil disturbances,blowouts, pollution or environmental damage, occurs and is not fully covered by insurance or arecoverable indemnity from a customer, it could adversely affect our financial condition andresults of operations. Moreover, we may not be able to maintain adequate insurance in thefuture at rates we consider reasonable or be able to obtain insurance against certain risks.

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As a result of a number of catastrophic weather related and other events, insuranceunderwriters increased insurance premiums for many of the coverages historically maintainedand issued general notices of cancellation and significant changes for a wide variety ofinsurance coverages. The oil and natural gas industry has suffered extensive damage fromseveral hurricanes since 2005. As a result, our insurance costs have increased significantly, ourdeductibles have increased and our coverage for named windstorm damage was restricted. Anyadditional severe storm activity in the energy producing areas of the U.S. Gulf of Mexico in thefuture could cause insurance underwriters to no longer insure U.S. Gulf of Mexico assetsagainst weather-related damage. Further, due to the escalating costs for weather-relateddamage in the U.S. Gulf of Mexico, in the future we may elect to forgo purchasing suchcoverage. A number of our customers that produce oil and natural gas have previouslymaintained business interruption insurance for their production. This insurance is less availableand may cease to be available in the future, which could adversely impact our customers’business prospects in the U.S. Gulf of Mexico and reduce demand for our services.

Our customers may be unable or unwilling to indemnify us.

Consistent with standard industry practice, our clients generally assume, and indemnify usagainst, well control and subsurface risks under dayrate contracts, regardless of how the loss ordamages may be caused. Typically, our customer agrees to indemnify us for these risks, even ifwe are grossly negligent. However, since the Macondo well blowout and resulting litigation,some of our customers have been reluctant to extend their indemnity obligations in instanceswhere we are grossly negligent. These risks are those associated with the loss of control of awell, such as blowout or cratering, the cost to regain control or redrill the well and associatedpollution. There can be no assurance, however, that these clients will necessarily be financiallyable to indemnify us against all these risks. Also, we may be effectively prevented fromenforcing these indemnities because of the nature of our relationship with some of our largerclients. Additionally, from time to time we may not be able to obtain agreement from ourcustomers to indemnify us for such damages and risks.

Any violation of the Foreign Corrupt Practices Act (“FCPA”) or similar laws and regulations

could result in significant expenses, divert management attention, and otherwise have a

negative impact on us.

We are subject to the FCPA, which generally prohibits U.S. companies and theirintermediaries from making improper payments to foreign officials for the purpose of obtainingor retaining business, and the anti-bribery laws of other jurisdictions. On April 4, 2011, wereceived a subpoena from the Securities and Exchange Commission (“SEC”) requesting that weproduce documents relating to our compliance with the FCPA. We were also advised by theDepartment of Justice (“DOJ”) on April 5, 2011, that it was conducting a similar investigation.Under the direction of the audit committee, we conducted an internal investigation regardingthese matters. On April 24, 2012 and August 7, 2012, we received letters notifying us that theDOJ and SEC, respectively, had completed their investigations and did not intend to pursueenforcement action against us. Despite the favorable termination of these investigations, weremain subject to the FCPA and similar laws and regulations, and any determination that wehave violated the FCPA or laws of any other jurisdiction could have a material adverse effect onour financial condition.

Our international operations may subject us to political and regulatory risks and uncertainties.

In connection with our international contracts, the transportation of rigs, services andtechnology across international borders subjects us to extensive trade laws and regulations. Ourimport and export activities are governed by unique customs laws and regulations in each of

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the countries where we operate. In each jurisdiction, laws and regulations concerningimportation, recordkeeping and reporting, import and export control and financial or economicsanctions are complex and constantly changing. Our business and financial condition may bematerially affected by enactment, amendment, enforcement or changing interpretations of theselaws and regulations. Rigs and other shipments can be delayed and denied import or export fora variety of reasons, some of which are outside our control and some of which may result infailure to comply with existing laws and regulations and contractual requirements. Shippingdelays or denials could cause operational downtime or increased costs, duties, taxes and fees.Any failure to comply with applicable legal and regulatory obligations also could result incriminal and civil penalties and sanctions, such as fines, imprisonment, debarment fromgovernment contracts, seizure of goods and loss of import and export privileges.

Our international operations are subject to additional political, economic, and other

uncertainties not generally associated with domestic operations.

An element of our business strategy is to continue to expand into international oil andnatural gas producing areas such as West Africa, the Middle East and the Asia-Pacific region.We operate liftboats in West Africa, including Nigeria, and in the Middle East. We also operatedrilling rigs in Saudi Arabia, West Africa, India and Southeast Asia. Our international operationsare subject to a number of risks inherent in any business operating in foreign countries,including:

• political, social and economic instability, war and acts of terrorism;

• potential seizure, expropriation or nationalization of assets;

• damage to our equipment or violence directed at our employees, including kidnappingsand piracy;

• increased operating costs;

• complications associated with repairing and replacing equipment in remote locations;

• delays and potential prolonged disruption of operations associated with obtaining visasfor our employees and other local procedural requirements and administrative matters,particularly in Angola;

• repudiation, modification or renegotiation of contracts, disputes and legal proceedingsin international jurisdictions;

• limitations on insurance coverage, such as war risk coverage in certain areas;

• import-export quotas;

• confiscatory taxation;

• work stoppages or strikes, particularly in the Nigerian labor environments;

• unexpected changes in regulatory requirements;

• wage and price controls;

• imposition of trade barriers;

• imposition or changes in enforcement of local content and cabotage laws, particularly inWest Africa and Southeast Asia, where the legislatures are active in developing newlegislation;

• restrictions on currency or capital repatriations;

• currency fluctuations and devaluations; and

• other forms of government regulation and economic conditions that are beyond ourcontrol.

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Many governments favor or effectively require that liftboat or drilling contracts be awardedto local contractors or require foreign contractors to employ citizens of, or purchase suppliesfrom, a particular jurisdiction. In certain countries, government rules and regulations alsorequire that local citizens or entities be engaged as local representatives to support theoperations of foreign contractors or to own a portion of the equity or assets of companiesoperating within their jurisdiction. These practices and legal requirements regarding the use ofand potential company equity and asset ownership by local representatives might limit ourbusiness and operations, and occasions may arise when we have disagreements with our localrepresentative, or the continuation of such relationship may become infeasible. Any suchdevelopments might disrupt our operations and continuity of our business in such jurisdictions.If we are unable to resolve issues with a local representative, we may decide to terminate therelationship with such local representative and seek another local representative or seekopportunities for our vessels elsewhere. Where local representative relationships requireapproval from the local government or other third parties we may be constrained in our abilityto replace an existing local representative which may disrupt our operations and continuity ofour business in such jurisdictions and require us to seek opportunities for our vesselselsewhere. In addition, if we experience delays or are unable to perform our obligations underour contracts, our customers may seek to cancel the contracts, which could adversely affect ourfinancial condition, results of operations or cash flows.

Our non-U.S. contract drilling and liftboat operations are subject to various laws andregulations in countries in which we operate, including laws and regulations relating to theequipment and operation of drilling rigs and liftboats, currency conversions and repatriation, oiland natural gas exploration and development, taxation of offshore earnings and earnings ofexpatriate personnel, employees and suppliers by foreign contractors, the ownership of assets bylocal citizens and companies, and duties on the importation and exportation of units and otherequipment. Governments in some foreign countries have become increasingly active in regulatingand controlling the ownership of concessions and companies holding concessions, theexploration for oil and natural gas and other aspects of the oil and natural gas industries in theircountries. In some areas of the world, this governmental activity has adversely affected theamount of exploration and development work done by major oil and natural gas companies andmay continue to do so. Operations in developing countries can be subject to legal systems whichare not as predictable as those in more developed countries, which can lead to greater risk anduncertainty in legal matters and proceedings. Our ability to compete in international markets maybe adversely affected by these foreign governmental regulations and/or policies that favor theawarding of contracts to contractors in which nationals of those foreign countries have substantialownership interests or by regulations requiring foreign contractors to employ, transfer ownershipof equipment to, or purchase supplies from citizens of a particular jurisdiction.

Due to our international operations, we may experience currency exchange losses whenrevenue is received and expenses are paid in nonconvertible currencies or when we do not hedgean exposure to a foreign currency. We may also incur losses as a result of our inability to collectrevenue because of a shortage of convertible currency available to the country of operation,controls over currency exchange or controls over the repatriation of income or capital.

A small number of customers account for a significant portion of our revenue, and the loss of

one or more of these customers could adversely affect our financial condition and results of

operations.

In recent years there has been a significant consolidation in our customer base. Therefore, wederive a significant amount of our revenue from a few energy companies. Chevron Corporationand Saudi Aramco accounted for 15% and 12% of our revenue for the year ended December 31,

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2013, respectively. Our financial condition and results of operations will be materially adverselyaffected if these customers interrupt or curtail their activities, terminate their contracts with us, failto renew their existing contracts or refuse to award new contracts to us and we are unable toenter into contracts with new customers at comparable dayrates. There are a relatively smallnumber of potential customers for our high-specification rigs. The loss of either of these or anyother significant customer could adversely affect our financial condition and results of operations.

More of our existing jackup rigs are at a relative disadvantage to higher specification rigs,

which may be more likely to obtain contracts than lower specification jackup rigs such as ours.

Many of our competitors have jackup fleets with generally higher specification rigs thanthose in our jackup fleet other than our two ultra-high specification rigs. In our existing fleet,27 of our 38 jackup rigs are mat-supported, which are generally limited to geographic areas withsoft bottom conditions like much of the Gulf of Mexico. In addition, all of the new rigs underconstruction are of higher specification than our existing fleet, other than our two ultra-highspecification rigs. Most of these rigs under construction are currently without contracts, whichmay intensify price competition as scheduled delivery dates occur. Particularly in periods inwhich there is decreased rig demand, higher specification rigs may be more likely to obtaincontracts than lower specification jackup rigs such as ours. In the past, lower specification rigshave been stacked earlier in the cycle of decreased rig demand than higher specification rigsand have been reactivated later in the cycle, which may adversely impact our business. Inaddition, higher specification rigs may be more adaptable to different operating conditions andtherefore have greater flexibility to move to areas of demand in response to changes in marketconditions. Because a majority of our rigs were designed specifically for drilling in the shallow-water of the U.S. Gulf of Mexico, our ability to move them to other regions in response tochanges in market conditions is limited.

Furthermore, there is an increasing amount of exploration and production expendituresbeing concentrated in deepwater drilling programs and deeper formations, including deepnatural gas prospects, requiring higher specification jackup rigs, semisubmersible drilling rigsor drillships. This trend is expected to continue and could result in a decline in demand forlower specification jackup rigs like ours, which could have an adverse impact on our financialcondition and results of operations.

Acquisitions and integrating such acquisitions create certain risk and may affect our operating

results.

We have completed acquisitions and will consider pursuing acquisitions (including theacquisition of individual rigs and liftboats and our acquisitions of Seahawk in 2011 andDiscovery Offshore S.A. in 2013) in order to continue to grow and increase profitability.However, acquisitions involve numerous risks and uncertainties, including intense competitionfor suitable acquisition targets, the potential unavailability of financial resources necessary toconsummate acquisitions, difficulties in identifying suitable acquisition targets or in completingany transactions identified on sufficiently favorable terms.

In addition to the risks involved in identifying and completing acquisitions described above,even when acquisitions are completed, integration of acquired entities can involve significantdifficulties, such as:

• failure to achieve cost savings or other financial or operating objectives with respect toan acquisition;

• uncertainties and delays relating to upgrades and refurbishments of newly-acquired rigsand liftboats;

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• inability to perform under drilling contracts due to various operational factors, includingunscheduled repairs, maintenance, operational delays, health, safety and environmentalincidents, weather events and our new customers seeking to cancel or renegotiate ourcontracts for various reasons;

• strain on the operational and managerial controls of our business;

• managing geographically separated organization, systems and facilities;

• difficulties in the integration and retention of customers or personnel and the integrationand effective deployment of operations or technologies;

• assumption of unknown material liabilities or regulatory non-compliance issues;

• possible adverse short-term effects on our cash flows or operating results; and

• diversion of management’s attention from the ongoing operations of our business.

Failure to manage these acquisition risks could have a material adverse effect on our resultsof operations, financial condition and cash flows. There can be no assurance that we will be ableto consummate any acquisitions or expansions, successfully integrate acquired entities orassets, or generate positive cash flow at any acquired company or expansion project.

We may consider future acquisitions and may be unable to complete and finance future

acquisitions on acceptable terms. In addition, we may fail to successfully integrate acquired

assets or businesses we acquire or incorrectly predict operating results.

We may consider future acquisitions which could involve the payment by us of a substantialamount of cash, the incurrence of a substantial amount of debt or the issuance of a substantialamount of equity. In addition, we may not be able to obtain, on terms we find acceptable,sufficient financing or funding that may be required to fund any such acquisition or investmentand related capital expenditures.

We cannot predict the effect, if any, that any announcement or consummation of anacquisition would have on the trading price of our common stock.

Any future acquisitions could present a number of risks, including:

• the risk of incorrect assumptions regarding the future results of acquired operations orassets or expected cost reductions or other synergies expected to be realized as a resultof acquiring operations or assets;

• the risk of failing to integrate the operations or management of any acquired operationsor assets successfully and timely; and

• the risk of diversion of management’s attention from existing operations or otherpriorities.

If we are unsuccessful in integrating our acquisitions in a timely and cost-effective manner,our financial condition and results of operations could be adversely affected.

Failure to retain or attract skilled workers could hurt our operations.

We require skilled personnel to operate and provide technical services and support for our rigsand liftboats. The shortages of qualified personnel or the inability to obtain and retain qualifiedpersonnel could negatively affect the quality and timeliness of our work. In periods of economiccrisis or during a recession, we may have difficulty attracting and retaining our skilled workers asthese workers may seek employment in less cyclical or volatile industries or employers. In periods

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of recovery or increasing activity, we may have to increase the wages of our skilled workers, whichcould negatively impact our operations and financial results.

Although our domestic employees are not covered by a collective bargaining agreement,the marine services industry has been targeted by maritime labor unions in an effort to organizeU.S. Gulf of Mexico employees. A significant increase in the wages paid by competingemployers or the unionization of our U.S. Gulf of Mexico employees could result in a reductionof our skilled labor force, increases in the wage rates that we must pay, or both. If either ofthese events were to occur, our capacity and profitability could be diminished and our growthpotential could be impaired.

Governmental laws and regulations, including those arising out of the Macondo well incident

and those related to climate change and emissions of greenhouse gases, may add to our costs

or limit drilling activity.

Our operations are affected in varying degrees by governmental laws and regulations. Weare also subject to the jurisdiction of the Coast Guard, the National Transportation Safety Board,the Customs and Border Protection, the Department of Interior, the Bureau of Ocean EnergyManagement and the Bureau of Safety and Environmental Enforcement (“BSEE”), as well asprivate industry organizations such as the American Bureau of Shipping. New laws, regulationsand requirements imposed after the Macondo well incident may delay our operations and causeus to incur additional expenses in order for our rigs and operations in the U.S. Gulf of Mexico tobe compliant with these new laws, regulations and requirements. These new laws, regulationsand requirements and other potential changes in laws and regulations applicable to the offshoredrilling industry in the U.S. Gulf of Mexico may also prevent our customers from obtaining newdrilling permits and approvals in a timely manner, if at all, which could materially adverselyimpact our business, financial position or results of operations. In addition, we may be requiredto make significant capital expenditures to comply with laws and the applicable regulations andstandards of governmental authorities and organizations. Moreover, the cost of compliancecould be higher than anticipated. For example, the BSEE has extended its regulatoryenforcement reach to include contractors, which exposes contractors to potential fines,sanctions and penalties for violations of law arising in the BSEE’s jurisdictional area. Similarly,our international operations are subject to compliance with the FCPA, certain internationalconventions and the laws, regulations and standards of other foreign countries in which weoperate. It is also possible that existing and proposed governmental conventions, laws,regulations and standards, including those related to climate change and emissions ofgreenhouse gases, may in the future add significantly to our operating costs or limit ouractivities or the activities and levels of capital spending by our customers.

In addition to the laws, regulations and requirements implemented since the Macondoincident, the federal government has considered additional new laws, regulations andrequirements, including those that would have imposed additional equipment requirements andthat relate to the protection of the environment, which would be applicable to the offshore drillingindustry in the U.S. Gulf of Mexico. The federal government may again consider implementingnew laws, regulations and requirements. The implementation of new, more restrictive laws andregulations could lead to substantially increased potential liability and operating costs for us andour customers, which could cause our customers to discontinue or delay operating in the U.S.Gulf of Mexico and/or redeploy capital to international locations. These actions, if taken by any ofour customers, could result in underutilization of our U.S. Gulf of Mexico assets and have anadverse impact on our revenue, profitability and financial position.

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In addition, as our vessels age, the costs of drydocking the vessels in order to comply withgovernmental laws and regulations and to maintain their class certifications are expected toincrease, which could adversely affect our financial condition and results of operations.

Compliance with or a breach of environmental laws and regulations can be costly and could

limit our operations.

Our operations are subject to federal, state, local and foreign and/or international laws andregulations that require us to obtain and maintain specified permits or other governmentalapprovals, control the discharge of materials into the environment, require the removal andcleanup of materials that may harm the environment or otherwise relate to the protection of theenvironment. Governmental entities such as the U.S. Environmental Protection Agency andanalogous state agencies have the power to enforce compliance with these laws andregulations and the permits issued under them, often requiring difficult and costly actions. Forexample, as an operator of mobile offshore drilling units in navigable U.S. waters and someoffshore areas, we may be liable for damages and costs incurred in connection with oil spills orother unauthorized discharges of chemicals or wastes resulting from those operations.Additionally, the BSEE has extended its regulatory enforcement reach to include contractorswhich exposes contractors to potential fines, sanctions and penalties for violations of lawarising in the BSEE’s jurisdictional area. Failure to comply with these laws and regulations mayresult in the assessment of administrative, civil and criminal penalties, the imposition ofremedial obligations, and the issuance of injunctions restricting some or all of our activities inthe affected areas. Laws and regulations protecting the environment have become morestringent in recent years, and may in some cases impose strict liability, rendering a personliable for environmental damage without regard to negligence or fault on the part of suchperson. Some of these laws and regulations may expose us to liability for the conduct of orconditions caused by others or for acts that were in compliance with all applicable laws at thetime they were performed. The application of these requirements, the modification of existinglaws or regulations or the adoption of new requirements, both in U.S. waters andinternationally, could have a material adverse effect on our financial condition and results ofoperations.

We may not be able to maintain or replace our rigs and liftboats as they age.

The capital associated with the repair and maintenance of our fleet increases with age. Wemay not be able to maintain our fleet by extending the economic life of existing rigs andliftboats, and our financial resources may not be sufficient to enable us to make expendituresnecessary for these purposes or to acquire or build replacement units.

Our operating and maintenance costs with respect to our rigs include fixed costs that will not

decline in proportion to decreases in dayrates.

We do not expect our operating and maintenance costs with respect to our rigs tonecessarily fluctuate in proportion to changes in operating revenue. Operating revenue mayfluctuate as a function of changes in dayrate, but costs for operating a rig are generally fixed oronly semi-variable regardless of the dayrate being earned. Additionally, if our rigs incur idletime between contracts, we typically do not de-man those rigs because we will use the crew toprepare the rig for its next contract. During times of reduced activity, reductions in costs maynot be immediate as portions of the crew may be required to prepare our rigs for stacking, afterwhich time the crew members are assigned to active rigs or dismissed. Moreover, as our rigsare mobilized from one geographic location to another, including mobilizations to harshenvironments where high specification rigs such as the Hercules Triumph and HerculesResilience generally operate, the labor and other operating and maintenance costs can increase

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significantly. In general, labor costs increase primarily due to higher salary levels and inflation.Equipment maintenance expenses fluctuate depending upon the type of activity the unit isperforming and the age and condition of the equipment. Contract preparation expenses varybased on the scope and length of contract preparation required and the duration of the firmcontractual period over which such expenditures are amortized.

Upgrade, refurbishment and repair projects are subject to risks, including delays and cost

overruns, which could have an adverse impact on our available cash resources and results of

operations.

We make upgrade, refurbishment and repair expenditures for our fleet from time to time,including when we acquire units or when repairs or upgrades are required by law, in responseto an inspection by a governmental authority or when a unit is damaged. We also regularlymake certain upgrades or modifications to our drilling rigs to meet customer or contract specificrequirements. Upgrade, refurbishment and repair projects are subject to the risks of delay orcost overruns inherent in any large construction project, including costs or delays resulting fromthe following:

• unexpectedly long delivery times for, or shortages of, key equipment, parts andmaterials;

• shortages of skilled labor and other shipyard personnel necessary to perform the work;

• unforeseen increases in the cost of equipment, labor and raw materials used for ourrigs, particularly steel;

• unforeseen design and engineering problems;

• latent damages to or deterioration of hull, equipment and machinery in excess ofengineering estimates and assumptions;

• unanticipated actual or purported change orders;

• work stoppages;

• failure or delay of third-party service providers and labor disputes;

• disputes with shipyards and suppliers;

• delays and unexpected costs of incorporating parts and materials needed for thecompletion of projects;

• failure or delay in obtaining acceptance of the rig from our customer;

• financial or other difficulties at shipyards, including shipyard incidents that couldincrease the cost and delay the timing of projects;

• adverse weather conditions; and

• inability or delay in obtaining customer acceptance or flag-state, classification society,certificate of inspection, or regulatory approvals.

Significant cost overruns or delays would adversely affect our financial condition and resultsof operations. Additionally, capital expenditures for rig upgrade, reactivation and refurbishmentprojects could exceed our planned capital expenditures. Failure to complete an upgrade,reactivation, refurbishment or repair project on time may, in some circumstances, result in thedelay, renegotiation or cancellation of a drilling or liftboat contract and could put at risk ourplanned arrangements to commence operations on schedule. We also could be exposed topenalties for failure to complete an upgrade, refurbishment or repair project and commenceoperations in a timely manner. Our rigs and liftboats undergoing upgrade, reactivation,refurbishment or repair generally do not earn a dayrate during the period they are out of service.

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We are subject to litigation that could have an adverse effect on us.

We are from time to time involved in various litigation matters. The numerous operatinghazards inherent in our business increase our exposure to litigation, including personal injurylitigation brought against us by our employees that are injured operating our rigs and liftboats.These matters may include, among other things, contract dispute, personal injury,environmental, asbestos and other toxic tort, employment, tax and securities litigation, andlitigation that arises in the ordinary course of our business. We have extensive litigation broughtagainst us in federal and state courts located in Louisiana, Mississippi and South Texas, areasthat were significantly impacted by hurricanes during the last several years and by the Macondowell blowout incident. The jury pools in these areas have become increasingly more hostile todefendants, particularly corporate defendants in the oil and gas industry. We cannot predictwith certainty the outcome or effect of any claim or other litigation matter. Litigation may havean adverse effect on us because of potential negative outcomes, the costs associated withdefending the lawsuits, the diversion of our management’s resources and other factors.

Our operations present hazards and risks that require significant and continuous oversight, and

we depend upon the security and reliability of our technologies, systems and networks in

numerous locations where we conduct business.

We continue to increase our dependence on digital technologies to conduct our operations,to collect monies from customers and to pay vendors and employees. In addition, we haveoutsourced certain information technology development, maintenance and support functions.As a result, we are exposed to cybersecurity risks at both our internal locations and outsidevendor locations that could disrupt our operations for an extended period of time and result inthe loss of critical data and in higher costs to correct and remedy the effects of such incidents,although no such material incidents have occurred to date. If our systems for protecting againstinformation technology and cybersecurity risks prove to be insufficient, we could be adverselyaffected by having our business and financial systems compromised, our proprietaryinformation altered, lost or stolen, or our business operations and safety procedures disrupted.

Changes in effective tax rates, taxation of our foreign subsidiaries, limitations on utilization of

our net operating losses or adverse outcomes resulting from examination of our tax returns

could adversely affect our operating results and financial results.

Our future effective tax rates could be adversely affected by changes in tax laws, bothdomestically and internationally. From time to time, Congress and foreign, state and localgovernments consider legislation that could increase our effective tax rates. We cannotdetermine whether, or in what form, legislation will ultimately be enacted or what the impact ofany such legislation would be on our profitability. If these or other changes to tax laws areenacted, our profitability could be negatively impacted.

Our future effective tax rates could also be adversely affected by changes in the valuation ofour deferred tax assets and liabilities, the ultimate repatriation of earnings from foreignsubsidiaries to the United States, or by changes in tax treaties, regulations, accountingprinciples or interpretations thereof in one or more countries in which we operate. In addition,we are subject to the examination of our tax returns by the Internal Revenue Service and othertax authorities where we file tax returns. We regularly assess the likelihood of adverseoutcomes resulting from these examinations to determine the adequacy of our provision fortaxes. There can be no assurance that any existing or future examinations by the InternalRevenue Service or other taxing authorities will not have an adverse effect on our operatingresults and financial condition.

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Our liquidity depends upon cash on hand, cash from operations and availability under our

revolving credit facility.

Our liquidity depends upon cash on hand, cash from operations and availability under ourrevolving credit facility. The availability under the $150.0 million revolving credit facility is to beused for working capital, capital expenditures and other general corporate purposes. Exceptunder certain conditions, the revolving credit facility requires interest-only payments on aquarterly basis until the maturity date. No amounts were outstanding under the revolving creditfacility as of December 31, 2013, although $11.4 million in letters of credit had been issuedunder it. The remaining availability under the revolving credit facility is $138.6 million atDecember 31, 2013.

We currently maintain a shelf registration statement covering the future issuance from timeto time of various types of securities, including debt and equity securities. Although wecurrently believe we will have adequate liquidity to fund our operations for the foreseeablefuture, to the extent we do not generate sufficient cash from operations, we may need to raiseadditional funds through public or private debt or equity offerings to fund operations, and underthe terms of our existing indebtedness, we may be required to use the proceeds of any capitalthat we raise to repay existing indebtedness. Furthermore, we may need to raise additionalfunds through public or private debt or equity offerings or asset sales to refinance ourindebtedness, to fund capital expenditures or for general corporate purposes.

Risks Related to The Notes

We are a holding company, and we are dependent upon cash flow from subsidiaries to meet

our obligations.

We currently conduct our operations through, and most of our assets are owned by, bothU.S. and foreign subsidiaries, and our operating income and cash flow are generated by oursubsidiaries. As a result, cash we obtain from our subsidiaries is the principal source of fundsnecessary to meet our debt service obligations. Contractual provisions or laws, as well as oursubsidiaries’ financial condition and operating requirements, may limit our ability to obtain cashfrom our subsidiaries that we require to pay our debt service obligations. Applicable tax lawsmay also subject such payments to us by our subsidiaries to further taxation.

The inability to transfer cash from our subsidiaries may mean that, even though we mayhave sufficient resources on a consolidated basis to meet our obligations, we may not bepermitted to make the necessary transfers from subsidiaries to the parent company in order toprovide funds for the payment of the parent company’s obligations.

We may not be able to generate sufficient cash to service all of our indebtedness, including the

notes offered hereby, our currently outstanding notes and any indebtedness under our

revolving credit facility, and may be forced to take other actions to satisfy our obligations

under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends onour financial and operating performance, which is subject to prevailing economic andcompetitive conditions and to certain financial, business and other factors beyond our control.We cannot assure you that we will maintain a level of cash flows from operating activitiessufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.

If our cash flows and capital resources are insufficient to fund our debt service obligations,we may be forced to reduce or delay capital expenditures, sell assets or operations, seek

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additional capital or restructure or refinance our indebtedness, including the notes offeredhereby. We cannot assure you that we would be able to take any of these actions, that theseactions would be successful and permit us to meet our scheduled debt service obligations orthat these actions would be permitted under the terms of our existing or future debtagreements. In the absence of such cash flows and capital resources, we could face substantialliquidity problems and might be required to dispose of material assets or operations to meetour debt service and other obligations. Our debt instruments restrict our ability to dispose ofassets and use the proceeds from the disposition. We may not be able to consummate thosedispositions or to obtain the proceeds which we could realize from them, and any proceeds maynot be adequate to meet any debt service obligations then due. See “Description of OtherIndebtedness” and “Description of the Notes.”

If we cannot make scheduled payments on our debt, we will be in default and, as a result:

• our debt holders could declare all outstanding principal and interest to be due andpayable;

• the lenders under our revolving credit facility could terminate their commitments to loanus money and foreclose against the assets securing their borrowings; and

• we could be forced into bankruptcy or liquidation, which could result in the loss of yourinvestment in the notes.

If we default on our obligations to pay our other indebtedness, we may not be able to make

payments on the notes offered hereby.

Any default under the agreements governing our indebtedness and the remedies sought bythe holders of such indebtedness, could render us unable to pay principal, premium, if any, andinterest on the notes and substantially decrease the market value of the notes. If we are unableto generate sufficient cash flow and are otherwise unable to obtain funds necessary to meetrequired payments of principal, premium, if any, and interest on our indebtedness, or if weotherwise fail to comply with the various covenants, including financial and operatingcovenants, in the instruments governing our indebtedness, we could be in default under theterms of the agreements governing such indebtedness. In the event of such default, the holdersof such indebtedness could elect to declare all the funds borrowed thereunder to be due andpayable, together with accrued and unpaid interest, the lenders under the revolving creditfacility could elect to terminate their commitments thereunder, cease making further loans andinstitute foreclosure proceedings against our assets, and we could be forced into bankruptcy orliquidation. If our operating performance declines, we may in the future need to obtain waiversfrom the required lenders under our revolving credit facility to avoid being in default. If webreach our covenants under our revolving credit facility and seek a waiver, we may not be ableto obtain a waiver from the required lenders. If this occurs, we would be in default under therevolving credit facility, the lenders could exercise their rights as described above, and we couldbe forced into bankruptcy or liquidation. See “Description of Other Indebtedness” and“Description of the Notes.”

We may incur substantially more debt, which could further exacerbate the risks related to our

indebtedness.

We and our subsidiaries may incur substantial additional indebtedness in the future,including pursuant to our revolving credit facility. The terms of our existing indentures and theindenture governing the notes offered hereby do not fully prohibit us or our subsidiaries fromdoing so. Our revolving credit facility provides for a total available borrowing capacity of up to

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$150 million. All obligations under our revolving credit facility are, and obligations under anyfuture secured credit facility may be, secured by first-priority senior liens on substantially all ofour assets and the assets of the guarantors. If new debt is added to our current debt levels, therelated risks that we and our subsidiaries now face could intensify. Please see “Description ofthe Notes” and “Description of Other Indebtedness.”

The notes and subsidiary guarantees will be effectively subordinated to our secured debt to the

extent of the value of the assets securing that debt.

The notes will be effectively subordinated to the claims of our secured creditors, and thesubsidiary guarantees will be effectively subordinated to the claims of the secured creditors ofour subsidiary guarantors, in such case to the extent of the value of the assets securing suchdebt. Holders of our secured obligations will have claims that are prior to claims of the holdersof the notes with respect to the assets securing those obligations. In the event of a bankruptcy,liquidation or reorganization or similar proceeding relating to the Company or the subsidiaryguarantors, our assets and those of our subsidiaries will be available to pay obligations on thenotes and the guarantors only after holders of our secured debt have been paid the value of theassets securing such debt.

The notes will be structurally subordinated to all liabilities and preferred stock of any of our

non-guarantor subsidiaries.

The guarantors of the notes include substantially all of our domestic subsidiaries. Because asignificant portion of our operations is conducted by the non-guarantor subsidiaries, our cashflow and our ability to service debt, including our and the guarantor subsidiaries’ ability to paythe interest on and principal of the notes when due, are dependent to some extent upon interestpayments, cash dividends and distributions or other transfers from the non-guarantorsubsidiaries. In addition, any payment of interest, dividends, distributions, loans or advances bythe non-guarantor subsidiaries to us and to the guarantor subsidiaries, as applicable, could besubject to restrictions on dividends or repatriation of earnings under applicable local law,monetary transfer restrictions and foreign currency exchange regulations in the jurisdictions inwhich those non-guarantor subsidiaries operate. Moreover, payments to us and the guarantorsubsidiaries by the non-guarantor subsidiaries will be contingent upon non-guarantorsubsidiaries’ earnings.

Our non-guarantor subsidiaries are separate and distinct legal entities and have noobligation, contingent or otherwise, to pay any amounts due pursuant to the notes or theguarantees or to make any funds available therefor, whether by dividends, loans, distributionsor other payments. Any right that we or the subsidiary guarantors have to receive any assets ofany of the non-guarantor subsidiaries upon the liquidation or reorganization of thosesubsidiaries, and the consequent rights of holders of notes to realize proceeds from the sale ofany of those subsidiaries’ assets, will be effectively subordinated to the claims of thatsubsidiary’s creditors, including trade creditors and holders of debt of that subsidiary.

As of December 31, 2013, on an as adjusted basis to give effect to this notes offering andthe application of the net proceeds therefrom as described in “Use of Proceeds,” our non-guarantor subsidiaries had no indebtedness outstanding (other than intercompany payables).Our non-guarantor subsidiaries represented approximately 32% of our revenues for the yearended December 31, 2013. In addition, these non-guarantor subsidiaries representedapproximately 58% of our assets as of December 31, 2013.

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Federal and state statutes may allow courts, under specific circumstances, to void guarantees

or subordinate claims, or both, in respect of the guarantees.

The issuance of the guarantees by the subsidiary guarantors may be subject to reviewunder state and federal laws if a bankruptcy, liquidation or reorganization case or a lawsuit,including in circumstances in which bankruptcy is not involved, were to be commenced at somefuture date by the subsidiary guarantors or on behalf of our unpaid creditors or the unpaidcreditors of a subsidiary guarantor. Under the federal bankruptcy laws and comparableprovisions of state fraudulent transfer and fraudulent conveyance laws, a court may void orotherwise decline to enforce a subsidiary guarantor’s guarantee, or a court may subordinatesuch guarantee to the applicable subsidiary guarantor’s existing and future indebtedness. Whilethe relevant laws may vary from state to state, a court might void or otherwise decline toenforce the guarantee if it found that when the applicable subsidiary guarantor entered into itsguarantee, or, in some states, when payments became due under the guarantee, the applicablesubsidiary guarantor received less than reasonably equivalent value or fair consideration andeither:

• the applicable subsidiary guarantor was insolvent, or rendered insolvent by reason ofissuing the guarantee;

• the applicable subsidiary guarantor was engaged in a business or transaction for whichthe applicable subsidiary guarantor’s remaining assets constituted unreasonably smallcapital;

• the applicable subsidiary guarantor intended to incur or believed that the applicablesubsidiary guarantor would incur debts beyond such subsidiary guarantor’s ability topay such debts as they mature; or

• the applicable subsidiary guarantor was a defendant in an action for monetary damages,or had a judgment for monetary damages rendered against such guarantor, and thedamages remained unsatisfied after final judgment.

A court might also void a guarantee, without regard to the above factors, if it found that theapplicable subsidiary guarantor entered into its guarantee with actual intent to hinder, delay ordefraud its creditors. A court would likely find that a subsidiary guarantor did not receivereasonably equivalent value or fair consideration for the guarantee if such subsidiary guarantordid not substantially benefit directly or indirectly from the issuance of the applicable guarantee.As a general matter, value is given for a guarantee if, in exchange for the guarantee, property istransferred or an antecedent debt is satisfied. In the case of the subsidiary guarantees, a courtcould find that the benefit from the guarantees went to the parent company and that thesubsidiary guarantors did not, directly or indirectly, receive any benefit from the guarantees.The measures of insolvency applied by courts will vary depending upon the particularfraudulent transfer law applied in any proceeding to determine whether a fraudulent transferhas occurred. Generally, however, an entity would be considered insolvent if:

• the sum of its debts, including subordinate and contingent liabilities, was greater thanthe fair saleable value of its assets;

• the present fair saleable value of its assets were to be less than the amount that wouldbe required to pay the probable liability on its existing debts, including subordinate andcontingent liabilities, as they become absolute and mature; or

• it cannot pay its debts as they become due.

In the event of a finding that a fraudulent conveyance or transfer has occurred, a court mayvoid, or hold unenforceable, any of the guarantees, which could mean that you may not receive

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any payments on the guarantees and the court may direct you to repay any amounts that youhave already received from any subsidiary guarantor to such subsidiary guarantor or a fund forthe benefit of such subsidiary guarantor’s creditors. Furthermore, the holders of voided noteswould cease to have any direct claim against the applicable subsidiary guarantor. Consequently,the applicable subsidiary guarantor’s assets would be applied first to satisfy our or theapplicable subsidiary guarantor’s other liabilities, if any, before any portion of the applicablesubsidiary guarantor’s assets could be applied to the payment of the notes. Sufficient funds torepay the notes may not be available from other sources, including the remaining subsidiaryguarantors, if any. Moreover, the voidance of a guarantee could result in an event of defaultwith respect to our and our subsidiary guarantors’ other debt that could result in acceleration ofsuch debt (if not otherwise accelerated due to such subsidiary guarantor’s insolvency or otherproceeding).

Although the guarantees will contain a provision intended to limit the applicable subsidiaryguarantor’s liability to the maximum amount that it could incur without causing the incurrenceof obligations under its guarantee to be a fraudulent transfer, this provision may not be effectiveto protect those guarantees from being voided under fraudulent transfer law, or may reducethat subsidiary guarantor’s obligation to an amount that effectively makes its guaranteeworthless.

Certain covenants contained in the indenture governing the notes offered hereby will not be

applicable during any period in which the notes are rated investment grade by Moody’s and

S&P.

The indenture governing the notes offered hereby will provide that certain covenants willnot be applicable during any period in which the notes are rated investment grade by Moody’sand S&P. The covenants that would be suspended restrict, among other things, our ability topay dividends, incur debt, sell assets and enter into transactions with affiliates. There can be noassurance that the notes will ever be rated investment grade, or that if they are rated investmentgrade, the notes will maintain such rating. See “Description of the Notes—Certain Covenants—Covenant Suspension.”

We may not be able to repurchase the notes upon a change of control.

If we experience certain kinds of changes of control accompanied by a ratings decline, wemay be required to offer to repurchase the notes at an offer price in cash equal to 101% of theirprincipal amount, plus accrued and unpaid interest, if any, to the date of repurchase. We maynot be able to repurchase the notes upon a change of control because we may not havesufficient funds. Further, we may be contractually restricted under the revolving credit facility orother future senior indebtedness from repurchasing all of the notes tendered by holders upon achange of control. Accordingly, we may not be able to satisfy our obligations to purchase yournotes unless we are able to refinance or obtain waivers under our debt instruments. Our failureto repurchase the notes upon a change of control would cause a default under the indentureand a cross default under our debt instruments. Our revolving credit facility provides that achange of control will be a default that permits lenders to accelerate the maturity of borrowingsthereunder and, if such debt is not paid, to enforce security interests in the collateral securingsuch debt, thereby limiting our ability to raise cash to purchase the notes, and reducing thepractical benefit of the offer to purchase provisions to the holders of the notes. Any of our futuredebt agreements may contain similar provisions.

In addition, the change of control provisions in the indenture may not protect you fromcertain important corporate events, such as a leveraged recapitalization (which would increasethe level of our indebtedness), reorganization, restructuring, merger or other similar transaction,

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unless such transaction constitutes a “Change of Control” under the indenture. Such atransaction may not involve a change in voting power or beneficial ownership or, even if it does,may not involve a change that constitutes a “Change of Control” as defined in the indenturethat would trigger our obligation to repurchase the notes. Therefore, if an event occurs thatdoes not constitute a “Change of Control” as defined in the indenture, we will not be required tomake an offer to repurchase the notes and you may be required to continue to hold your notesdespite the event. See “Description of the Notes—Change of Control.”

There are restrictions on your ability to transfer or resell the notes under applicable securities

laws.

The notes are being offered and sold pursuant to an exemption from registration underUnited States and applicable state securities laws. Therefore, you may transfer or resell thenotes in the United States only in a transaction registered under or exempt from the registrationrequirements of the Securities Act and applicable state securities laws, and you may be requiredto bear the risk of your investment for an indefinite period of time. See “Legal Matters.”

An active trading market may not develop for the notes.

The notes are a new issue of securities. There is no active public trading market for thenotes. We do not intend to apply for listing of the notes on any securities exchange or quotationsystem. We cannot assure you that an active trading market will develop for the notes. Inaddition, the liquidity of the trading market in the notes and the market prices quoted for thenotes may be adversely affected by changes in the overall market for high yield securities andby changes in our financial performance or prospects or in the prospects for companies in ourindustry generally. As a consequence, an active trading market may not develop for your notes,you may not be able to sell your notes, or, even if you can sell your notes, you may not be ableto sell them at a price acceptable to you.

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USE OF PROCEEDS

We expect to receive net proceeds from this offering of approximately $294.8 million, afterdeducting the initial purchasers’ discount and estimated offering expenses. We expect to use allof the net proceeds from this offering, together with cash on hand, to fund the Tender Offer andconsent solicitation for our 7.125% Senior Secured Notes and to redeem any of the 7.125%Senior Secured Notes not purchased in the Tender Offer. If fully subscribed by March 25, 2014,we expect that the payments made in the Tender Offer and consent solicitation will totalapproximately $317.2 million (including the consent fee but excluding accrued and unpaidinterest) and will result in a pre-tax charge to our net income of approximately $19.2 million.There is no assurance that the Tender Offer will be subscribed for in any amount. This offeringis not conditioned on the completion of the Tender Offer. Please read “Summary—RecentDevelopments—Tender Offer for 7.125% Senior Secured Notes.”

Certain of the initial purchasers or their affiliates are holders of our 7.125% Senior SecuredNotes and, accordingly, may receive a portion of the proceeds of this offering in the TenderOffer. Please read “Private Placement.”

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and our capitalization as ofDecember 31, 2013:

• On an actual basis; and

• As adjusted to give effect to this offering and the use of the proceeds therefrom,together with cash on hand, to fund the Tender Offer and consent solicitation for our7.125% Senior Secured Notes as described under “Use of Proceeds.”

You should read our financial statements and notes thereto incorporated by reference intothis offering memorandum.

As of December 31, 2013

Actual As Adjusted

(in thousands)(unaudited)

Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 198,406 $ 175,974

Long-term Debt, Including Current Portion:Revolving Credit Facility(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $ —8.75% Senior Notes due July 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,000 400,0007.5% Senior Notes due October 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 300,0007.125% Senior Secured Notes due April 2017(b) . . . . . . . . . . . . . . . . . 300,000 —10.25% Senior Notes due April 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000 200,0003.375% Convertible Senior Notes due June 2038 . . . . . . . . . . . . . . . . 7,166 7,1667.375% Senior Notes due April 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,510 3,5106.750% Senior Notes due 2022 offered hereby . . . . . . . . . . . . . . . . . . — 300,000

Total Long-term Debt, Including Current Portion . . . . . . . . . . . . . 1,210,676 1,210,676Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 823,700 804,501(c)

Total Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,034,376 $2,015,177

(a) As of December 31, 2013, we had no indebtedness and $11.4 million of letters of credit issued under our revolvingcredit facility.

(b) Assumes that the Tender Offer for all 7.125% Senior Secured Notes is fully subscribed and that all outstanding7.125% Senior Secured Notes are purchased on March 25, 2014 at a purchase price of $317.2 million (including theconsent fee but excluding accrued and unpaid interest). This offering is not conditioned on the completion of theTender Offer. To the extent all outstanding 7.125% Senior Secured Notes are not tendered, we expect to redeemsuch notes promptly after the completion of the Tender Offer. In such event, the use of proceeds and capitalizationmay differ based on the difference between the consideration offered in the Tender Offer and the optionalredemption price.

(c) Assumes a $19.2 million pre-tax charge resulting from the Tender Offer.

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DESCRIPTION OF OTHER INDEBTEDNESS

Revolving Credit Facility

On July 8, 2013, we entered into an amendment to our existing revolving credit facility thatincreased our available borrowing capacity from $75.0 million to $150.0 million, with a sublimitof $50.0 million for the issuance of letters of credit. Borrowings under our revolving creditfacility bear interest, at our option, at either (i) the ABR (the highest of the administrative agent’scorporate base rate of interest, the federal funds rate plus 0.5%, or the one-month eurodollarrate (as defined in the credit facility) plus 1%), plus an applicable margin that ranges between1.5% and 3.0%, depending on our total leverage ratio, or (ii) the eurodollar rate plus anapplicable margin that ranges between 2.5% and 4.0%, depending on our total leverage ratio.We pay a per annum fee on all letters of credit issued under the revolving credit facility, whichfee equals the applicable margin for loans accruing interest based on the eurodollar rate, andwe pay a commitment fee of 0.50% per annum on the unused availability under the revolvingcredit facility. The revolving credit facility does not have a floor for the ABR or the eurodollarrate.

The revolving credit facility contains covenants that, among other things, limit our abilityand the ability of our restricted subsidiaries to:

• incur additional indebtedness or issue certain preferred stock;

• pay dividends or make other distributions;

• make other restricted payments or investments;

• sell assets;

• create liens;

• enter into agreements that restrict dividends and other payments by restrictedsubsidiaries;

• engage in transactions with our affiliates; and

• consolidate, merge or transfer all or substantially all of our assets.

In addition, the revolving credit facility requires us to maintain a secured leverage ratio ofnot more than 3.5 to 1.0 if there are any revolving borrowings outstanding under the creditfacility, or outstanding letters of credit under the revolving credit facility exceed $10 million.

The obligations under the revolving credit facility are jointly and severally, andunconditionally, guaranteed by substantially all of our current domestic subsidiaries, and aresecured by a first priority security interest in substantially all of our and the guarantors’ tangibleand intangible assets (subject to certain exceptions).

As of December 31, 2013, no amounts were outstanding and $11.4 million in letters of credithad been issued under the revolving credit facility, and the remaining availability under was$138.6 million.

All borrowings under the revolving credit facility will mature on July 9, 2018.

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8.75% Senior Notes due 2021

On July 8, 2013, we completed the issuance and sale of $400.0 million aggregate principalamount of senior notes at a coupon rate of 8.75% (“8.75% Senior Notes”) with a maturity in July2021. These notes were sold at par and we received net proceeds from the offering of the notesof approximately $393.0 million after deducting the bank fees and estimated offering expenses.The net proceeds from this offering, together with cash on hand (including the proceeds ofapproximately $103.9 million we received from the sales of our inland barge rigs, domesticliftboats and related assets), were used to fund our acquisition of Discovery shares, the finalshipyard payments totaling $333.9 million for Hercules Triumph and Hercules Resilience, relatedcapital expenditures, as well as general corporate purposes. Interest on the notes is payablesemi-annually in arrears on January 15 and July 15 of each year, to holders of record at theclose of business on January 1 and July 1 of each year. As of December 31, 2013, $400.0 millionprincipal amount of the 8.75% Senior Notes was outstanding. These notes are guaranteed byeach of the guarantors that guarantee our obligations under our revolving credit facility.

The indenture governing the notes contains covenants that, among other things, limit ourability and the ability of our restricted subsidiaries to:

• incur additional indebtedness or issue certain preferred stock;

• pay dividends or make other distributions;

• make other restricted payments or investments;

• sell assets;

• create liens;

• enter into agreements that restrict dividends and other payments by restrictedsubsidiaries;

• engage in transactions with our affiliates; and

• consolidate, merge or transfer all or substantially all of our assets.

The indenture governing the notes also contains a provision under which an event ofdefault by us or by any restricted subsidiary on any other indebtedness exceeding $25.0 millionwould be considered an event of default under the indenture if such default: (i) is caused byfailure to pay the principal at final maturity, or (ii) results in the acceleration of suchindebtedness prior to maturity.

Prior to July 15, 2016, we may redeem the notes with the net cash proceeds of certainequity offerings, at a redemption price equal to 108.75% of the aggregate principal amount plusaccrued and unpaid interest; provided that (i) after giving effect to any such redemptions, atleast 65% of the notes originally issued would remain outstanding immediately after suchredemption and (ii) we make such redemption not more than 180 days after consummation ofsuch equity offering. In addition, prior to July 15, 2017, we may redeem all or part of the notesat a price equal to 100% of the aggregate principal amount of the notes to be redeemed, plusthe applicable premium, as defined in the indenture, and accrued and unpaid interest.

On or after July 15, 2017, we may redeem all or part of the notes at the redemption pricesset forth below, together with accrued and unpaid interest, if any, to the redemption date, ifredeemed during the 12-month period beginning July 15 or the years indicated:

YearOptional

Redemption Price

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104.375%2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.188%2019 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000%

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If we experience certain kinds of changes of control, holders of the notes will be entitled torequire us to purchase all or any portion of the notes for a cash price equal to 101.0% of theprincipal amount of the applicable notes, plus accrued and unpaid interest, if any, to the date ofpurchase. Furthermore, in certain circumstances following an asset sale (as defined in theindenture), we may be required to use the excess proceeds to offer to repurchase the notes atan offer price in cash equal to 100% of their principal amount, plus accrued and unpaid interest.

7.5% Senior Notes due 2021

On October 1, 2013, we completed the issuance and sale of $300.0 million aggregateprincipal amount of senior notes at a coupon rate of 7.5% (“7.5% Senior Notes”) with a maturityin October 2021. These notes were sold at par and we received net proceeds from the offering ofthe notes of approximately $294.5 million after deducting the bank fees and estimated offeringexpenses. Interest on the notes is payable semi-annually in arrears on April 1 and October 1 ofeach year, beginning April 1, 2014, to holders of record at the close of business on March 15 andSeptember 15 of each year. As of December 31, 2013, $300.0 million principal amount of the7.5% Senior Notes was outstanding. These notes are guaranteed by each of the guarantors thatguarantee our obligations under our revolving credit facility.

The indenture governing the notes contains covenants that, among other things, limit ourability and the ability of our restricted subsidiaries to:

• incur additional indebtedness or issue certain preferred stock;

• pay dividends or make other distributions;

• make other restricted payments or investments;

• sell assets;

• create liens;

• enter into agreements that restrict dividends and other payments by restrictedsubsidiaries;

• engage in transactions with our affiliates; and

• consolidate, merge or transfer all or substantially all of our assets.

The indenture governing the notes also contains a provision under which an event ofdefault by us or by any restricted subsidiary on any other indebtedness exceeding $25.0 millionwould be considered an event of default under the indenture if such default: (i) is caused byfailure to pay the principal at final maturity, or (ii) results in the acceleration of suchindebtedness prior to maturity.

Prior to October 1, 2016, we may redeem the notes with the net cash proceeds of certainequity offerings, at a redemption price equal to 107.5% of the aggregate principal amount plusaccrued and unpaid interest; provided, that (i) after giving effect to any such redemptions, atleast 65% of the notes originally issued would remain outstanding immediately after suchredemption and (ii) we make such redemption not more than 180 days after consummation ofsuch equity offering. In addition, prior to October 1, 2016, we may redeem all or part of thenotes at a price equal to 100% of the aggregate principal amount of the notes to be redeemed,plus the applicable premium, as defined in the indenture, and accrued and unpaid interest.

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On or after October 1, 2016, we may redeem all or part of the notes at the redemption pricesset forth below, together with accrued and unpaid interest, if any, to the redemption date, ifredeemed during the 12-month period beginning October 1 of the years indicated:

YearOptional

Redemption Price

2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.625%2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.750%2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.875%2019 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000%

If we experience certain kinds of changes of control, holders of the notes will be entitled torequire us to purchase all or any portion of the notes for a cash price equal to 101.0% of theprincipal amount of the applicable notes, plus accrued and unpaid interest, if any, to the date ofpurchase. Furthermore, in certain circumstances following an asset sale (as defined in theindenture), we may be required to use the excess proceeds to offer to repurchase the notes atan offer price in cash equal to 100% of their principal amount, plus accrued and unpaid interest.

7.125% Senior Secured Notes due 2017

On April 3, 2012, we completed an offering of $300.0 million of the 7.125% Senior SecuredNotes with a maturity of April 2017. Interest on the 7.125% Senior Secured Notes is payable incash semi-annually in arrears on April 1 and October 1 of each year to holders of record at theclose of business on March 15 or September 15 of each year. As of December 31, 2013, $300.0million principal amount of the 7.125% Senior Secured Notes was outstanding.

The notes are guaranteed by each of the guarantors that guarantee our obligations underour revolving credit facility. The notes are secured by liens on all collateral that secures ourobligations under our revolving credit facility, subject to limited exceptions. The liens securingthe notes share on an equal and ratable first priority basis with liens securing our revolvingcredit facility. Under the intercreditor agreement the collateral agent for the lenders under ourrevolving credit facility is generally entitled to sole control of all decisions and actions.

On or after April 1, 2014, we may redeem the notes, in whole or part, at the redemptionprices set forth below, together with accrued and unpaid interest to the redemption date.

Year Optional Redemption Price

2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.344%2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.672%2016 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000%

We intend to use all of the net proceeds of this offering, together with cash on hand, to fundthe Tender Offer and related consent solicitation for the 7.125% Senior Secured Notes and toredeem any such notes not purchased in the Tender Offer.

10.25% Senior Notes due 2019

On April 3, 2012, we completed an offering of $200.0 million of the 10.25% Senior Noteswith a maturity of April 2019. Interest on the 10.25% Senior Notes is payable in cash semi-annually in arrears on April 1 and October 1 of each year to holders of record at the close ofbusiness on March 15 or September 15 of each year. Interest on the notes will be computed onthe basis of a 360-day year of twelve 30-day months. These notes were sold at par and we

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received net proceeds from the offering of the notes of $195.4 million after deducting the initialpurchasers’ discounts and offering expenses. We used the net proceeds from the offering, alongwith the net proceeds of the concurrent offering of our 7.125% Senior Secured Notes due 2017and of shares of our common stock, to repay all of our then outstanding borrowings under ourterm loan facility and for general corporate purposes. As of December 31, 2013, $200.0 millionprincipal amount of the 10.25% Senior Notes was outstanding.

The notes are guaranteed by each of the guarantors that guarantee our obligations underour revolving credit facility.

The indenture governing the notes contains covenants that, among other things, limit ourability and the ability of our restricted subsidiaries to:

• incur additional indebtedness or issue certain preferred stock;

• pay dividends or make other distributions;

• make other restricted payments or investments;

• sell assets;

• create liens;

• enter into agreements that restrict dividends and other payments by restrictedsubsidiaries;

• engage in transactions with our affiliates; and

• consolidate, merge or transfer all or substantially all of our assets.

The indenture governing the notes also contains a provision under which an event ofdefault by us or by any restricted subsidiary on any other indebtedness exceeding $25.0 millionwould be considered an event of default under the indenture if such default: (i) is caused byfailure to pay the principal at final maturity, or (ii) results in the acceleration of suchindebtedness prior to maturity.

Prior to April 1, 2015, we may redeem the notes with the net cash proceeds of certain equityofferings, at a redemption price equal to 110.25% of the aggregate principal amount plusaccrued and unpaid interest; provided, that (i) after giving effect to any such redemption, atleast 65% of the notes originally issued would remain outstanding immediately after suchredemption and (ii) we make such redemption not more than 180 days after the consummationof such equity offering. In addition, prior to April 1, 2015, we may redeem all or part of the notesat a price equal to 100% of the aggregate principal amount of notes to be redeemed, plus theapplicable premium, as defined in the indenture, and accrued and unpaid interest.

On or after April 1, 2015, we may redeem the notes, in whole or part, at the redemptionprices set forth below, together with accrued and unpaid interest to the redemption date.

Year Optional Redemption Price

2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107.688%2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.125%2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102.563%2018 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000%

If we experience a change of control, as defined, we must offer to repurchase the notes atan offer price in cash equal to 101% of their principal amount, plus accrued and unpaid interest.

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Furthermore, following certain asset sales, we may be required to use the proceeds to offer torepurchase the notes at an offer price in cash equal to 100% of their principal amount, plusaccrued and unpaid interest.

3.375% Convertible Senior Notes Due 2038

On June 3, 2008, we completed an offering of $250.0 million 3.375% Convertible SeniorNotes with a maturity in June 2038. The net carrying amount of the Convertible Senior Noteswas $7.2 million at December 31, 2013.

The interest on the 3.375% Convertible Senior Notes accretes to principal at an annual yieldto maturity of 3.375% per year. We will also pay contingent interest during any six-monthinterest period commencing June 1, 2013, for which the trading price of these notes for aspecified period of time equals or exceeds 120% of their accreted principal amount. The noteswill be convertible under certain circumstances into shares of our common stock at an initialconversion rate of 19.9695 shares of common stock per $1,000 principal amount of notes, whichis equal to an initial conversion price of approximately $50.08 per share. Upon conversion of anote, a holder will receive, at our election, shares of common stock, cash or a combination ofcash and shares of common stock. At December 31, 2013, the number of conversion sharespotentially issuable in relation to our 3.375% Convertible Senior Notes was 0.1 million. The3.375% Convertible Senior Notes are currently redeemable at our option, and holders of theConvertible Senior Notes will have the right to require us to repurchase the notes on June 1,2018 and on certain dates hereafter or on the occurrence of a fundamental change.

We determined that upon maturity or redemption, we have the intent and ability to settlethe principal amount of our 3.375% Convertible Senior Notes in cash, and any additionalconversion consideration spread (the excess of conversion value over face value) in shares ofour common stock.

The indenture governing the 3.375% Convertible Senior Notes contains a provision underwhich an event of default by us or by any subsidiary on any other indebtedness exceeding$25.0 million would be considered an event of default under the indenture if such default is:(i) caused by failure to pay the principal at final maturity, or (ii) results in the acceleration ofsuch indebtedness prior to maturity.

On May 1, 2013, we made an offer to purchase all of the outstanding notes in accordancewith our June 1, 2013 repurchase obligation under the indenture. Notes with an aggregateprincipal amount of $61.3 million were tendered pursuant to the terms of the offer and wererepurchased by us on June 1, 2013.

Other debt

In connection with the TODCO acquisition in July 2007, one of our domestic subsidiariesassumed approximately $3.5 million of 7.375% Senior Notes due in April 2018. There are nofinancial or operating covenants associated with these notes.

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DESCRIPTION OF THE NOTES

As used below in this “Description of the Notes,” the “Issuer” means Hercules Offshore,Inc., a Delaware corporation, and its successors, but not any of its subsidiaries. The Issuer willissue the notes described herein (the “Notes”) under an Indenture, to be entered into at theclosing of this offering (the “Indenture”), among the Issuer, the Guarantors and U.S. BankNational Association, as trustee (the “Trustee”). The terms of the Notes include those set forthin the Indenture and those made part of the Indenture by reference to the Trust Indenture Act.You may obtain a copy of the Indenture from the Issuer at its address set forth elsewhere in thisoffering memorandum.

The following is a summary of the material terms and provisions of the Notes and theIndenture. The following summary does not purport to be a complete description of the Notesand the Indenture and is subject to the detailed provisions of, and qualified in its entirety byreference to, the Indenture. You can find definitions of certain terms used in this descriptionunder the heading “—Certain Definitions.” The Notes will be denominated in U.S. dollars and allpayments on the Notes will be made in U.S. dollars.

Principal, Maturity and Interest

The Notes will mature on April 1, 2022. The Notes will bear interest at the rate shown on thecover page of this offering memorandum, payable in cash semi-annually in arrears on April 1and October 1 of each year, commencing on October 1, 2014, to Holders of record at the close ofbusiness on March 15 or September 15, as the case may be (whether or not a Business Day),immediately preceding the related interest payment date. Interest on the Notes will accrue fromand including the most recent date to which interest has been paid or, if no interest has beenpaid, from and including the date of issuance. Interest on the Notes will be computed on thebasis of a 360-day year of twelve 30-day months.

If a scheduled payment date falls on a day that is not a Business Day, the payment to bemade on such payment date will be made on the next succeeding Business Day with the sameforce and effect as if made on such payment date, and no additional interest will accrue solelyas a result of such delayed payment. Interest on overdue principal and interest will accrue at theapplicable interest rate on the Notes.

The Notes will be issued in registered form, without coupons, and in denominations of$2,000 and integral multiples of $1,000 in excess thereof.

An aggregate principal amount of Notes equal to $300.0 million is being issued in thisoffering. The Issuer may issue additional Notes having identical terms and conditions to theNotes being issued in this offering, except for issue date, issue price and first interest paymentdate, in an unlimited aggregate principal amount (“Additional Notes”), subject to compliancewith the covenants described under “—Certain Covenants—Limitations on AdditionalIndebtedness.” Any Additional Notes will be treated as part of the same issue as the Notesbeing issued in this offering and will be treated as one class with the Notes being issued in thisoffering, including for purposes of voting, redemptions and offers to purchase. For purposes ofthis Description of the Notes, references to the Notes include Additional Notes, if any.

Methods of Receiving Payments on the Notes

If a Holder of Notes in certificated form has given wire transfer instructions to the Issuer atleast ten Business Days prior to the applicable payment date, the Issuer will make all payments

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on such Holder’s Notes by wire transfer of immediately available funds to the account specifiedin those instructions. Otherwise, payments on the Notes will be made at the office or agency ofthe paying agent (the “Paying Agent”) and registrar (the “Registrar”) for the Notes within theCity and State of New York unless the Issuer elects to make interest payments by check mailedto the Holders at their addresses set forth in the register of Holders.

Ranking

The Notes will be senior unsecured obligations of the Issuer. The Notes (i) will rank seniorin right of payment to all future obligations of the Issuer that are, by their terms, expresslysubordinated in right of payment to the Notes and pari passu in right of payment with allexisting and future senior obligations of the Issuer that are not so subordinated, (ii) will beeffectively subordinated to the Issuer’s and the Guarantors’ secured indebtedness, to the extentof the value of the collateral securing such indebtedness, including the Indebtedness under theCredit Agreement and (iii) will be guaranteed by each Guarantor. Each Note Guarantee (asdefined below) will be a senior obligation of the relevant Guarantor and will rank senior in rightof payment to all future obligations of such Guarantor that are, by their terms, expresslysubordinated in right of payment to such Note Guarantee and pari passu in right of paymentwith all existing and future senior obligations of such Guarantor that are not so subordinated.The Notes will be effectively subordinated to all existing and future obligations, includingIndebtedness, of any Subsidiaries of the Issuer that do not guarantee the Notes, including anyUnrestricted Subsidiaries. Claims of creditors of these Subsidiaries, including trade creditors,will generally have priority as to the assets of these Subsidiaries over the claims of the Issuerand the holders of the Issuer’s Indebtedness, including the Notes.

As of December 31, 2013, on an as adjusted basis after giving effect to the sale of the notesand the application of the net proceeds therefrom as described in “Use of Proceeds” in thisoffering memorandum, (a) the Issuer and the Guarantors would have had approximately$1.2 billion aggregate principal amount of senior indebtedness outstanding (net of discounts),and $138.6 million of undrawn borrowing capacity under our revolving credit facility and(b) Issuer’s non-guarantor subsidiaries would not have had any indebtedness (other thanintercompany payables). Although the Indenture contains limitations on the amount ofadditional Indebtedness and secured Indebtedness that the Issuer and the RestrictedSubsidiaries may incur, the amount of permitted additional Indebtedness, including securedIndebtedness, could be substantial. See “—Certain Covenants—Limitations on AdditionalIndebtedness” and “—Certain Covenants—Limitations on Liens.”

Note Guarantees

The Issuer’s obligations under the Notes and the Indenture initially will be jointly andseverally guaranteed (the “Note Guarantees”) by each Domestic Restricted Subsidiary thatguarantees our credit facility. If, after the Issue Date, the Issuer or any Restricted Subsidiaryacquires or creates any other Domestic Restricted Subsidiary, or we redesignate anyUnrestricted Subsidiary as a Domestic Restricted Subsidiary, and (in each such case) suchDomestic Restricted Subsidiary guarantees any Indebtedness under any Credit Facility, then theIssuer shall cause it to become a Guarantor pursuant to the terms of the Indenture.

Not all of the Issuer’s Subsidiaries will, as of the Issue Date, guarantee the Notes.Unrestricted Subsidiaries, one Domestic Restricted Subsidiary and Foreign RestrictedSubsidiaries will not be Guarantors. In the event of a bankruptcy, liquidation or reorganizationof any of these non-Guarantor Subsidiaries, these non-Guarantor Subsidiaries will pay the

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holders of their debts and their trade creditors before they will be able to distribute any of theirassets to the Issuer. The Issuer’s non-Guarantor Subsidiaries represented approximately 32% ofour revenues for the year ended December 31, 2013. In addition, these non-GuarantorSubsidiaries represented approximately 58% of our consolidated assets as of December 31,2013.

As of the date of the Indenture, all of the Issuer’s current Subsidiaries will be “RestrictedSubsidiaries.” However, under the circumstances described below under the subheading“—Certain Covenants—Limitation on Designation of Unrestricted Subsidiaries,” the Issuer willbe permitted to designate any of its Subsidiaries as “Unrestricted Subsidiaries.” The effect ofdesignating a Subsidiary as an Unrestricted Subsidiary will be that:

• such Subsidiary will no longer be subject to many of the restrictive covenants in theIndenture;

• such Subsidiary will not guarantee the Notes;

• if such Subsidiary has previously been a Guarantor, it will be released from its NoteGuarantee and its obligations under the Indenture; and

• the assets, income, cash flow and other financial results of such Subsidiary will nolonger be consolidated with those of the Issuer for purposes of calculating compliancewith the restrictive covenants contained in the Indenture.

The obligations of each Guarantor under its Note Guarantee will be limited to the maximumamount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor(including, without limitation, any guarantees under the Credit Agreement) and after givingeffect to any collections from or payments made by or on behalf of any other Guarantor inrespect of the obligations of such other Guarantor under its Note Guarantee or pursuant to itscontribution obligations under the Indenture, result in the obligations of such Guarantor underits Note Guarantee not constituting a fraudulent conveyance or fraudulent transfer under federalor state law. Nonetheless, in the event of the bankruptcy or financial difficulty of a Guarantor,such Guarantor’s obligations under its Note Guarantee may be subject to review and avoidanceunder state and federal fraudulent transfer laws. Among other things, such obligations may beavoided if a court concludes that such obligations were incurred for less than a reasonablyequivalent value or fair consideration at a time when the Guarantor was insolvent, was renderedinsolvent, or was left with inadequate capital to conduct its business. A court would likelyconclude that a Guarantor did not receive reasonably equivalent value or fair consideration tothe extent that the aggregate amount of its liability on its Note Guarantee exceeds the economicbenefits it receives from the issuance of the Note Guarantee. See “Risk factors—Risks Related tothe Notes—Federal and state statutes may allow courts, under specific circumstances, to voidguarantees or subordinate claims, or both, in respect of the guarantees.”

Each Guarantor that makes a payment for distribution under its Note Guarantee is entitledto a contribution from each other Guarantor in a pro rata amount based on adjusted net assetsof each Guarantor.

A Subsidiary Guarantor shall be released from its obligations under its Note Guarantee andits obligations under the Indenture:

(1) in the event of a sale or other disposition of all or substantially all of the assets of suchSubsidiary Guarantor, by way of merger, consolidation or otherwise, or a sale or otherdisposition of all of the Equity Interests of such Subsidiary Guarantor then held by theIssuer and the Restricted Subsidiaries;

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(2) if such Subsidiary Guarantor is designated as an Unrestricted Subsidiary or otherwiseceases to be a Restricted Subsidiary, in each case in accordance with the provisions ofthe Indenture, upon effectiveness of such designation or when it first ceases to be aRestricted Subsidiary, as the case may be;

(3) if such Subsidiary Guarantor is released from its guarantee of any Credit Facility of theIssuer or any other Guarantor;

(4) in the event of the defeasance or discharge of the Indenture as described under“—Legal Defeasance and Covenant Defeasance” and “—Satisfaction and Discharge”; or

(5) dissolution of such Guarantor, provided no Default or Event of Default has occurredthat is continuing.

Payment of Additional Amounts by a Foreign Successor Issuer

A Foreign Successor Issuer is (i) any entity that is organized in a foreign jurisdiction otherthan the United States, any state thereof or the District of Columbia (a “Foreign Jurisdiction”)and becomes a successor of the Issuer as a result of a merger or other transaction or (ii) theIssuer, if Hercules Offshore, Inc. changes its place of organization to a Foreign Jurisdiction, ineach case, as permitted by the terms of the Indenture.

All payments made under or with respect to the Notes or any Note Guarantee by anyForeign Successor Issuer or any Guarantor of a Foreign Successor Issuer (each such person, a“Payor”) will be made free and clear of any withholding or deduction for or on account of anytax, duty, levy, impost, assessment or other governmental charge of whatever nature(collectively, “Tax”) imposed or levied by or on behalf of any jurisdiction in which any of thePayors is organized, resident or doing business for tax purposes or from or through which anyof the Payors (or any of their respective agents) makes any payment under or with respect to theNotes or any Note Guarantee or any department or political subdivision of any of the foregoing(each, a “Relevant Taxing Jurisdiction”), unless such Payor or other applicable withholdingagent is required to withhold or deduct Taxes by law. For the avoidance of doubt; a RelevantTaxing Jurisdiction shall not include the United States, any state thereof or the District ofColumbia. If a Payor or other applicable withholding agent is required by law to withhold ordeduct any amount for or on account of Taxes of a Relevant Taxing Jurisdiction from anypayment made under or with respect to the Notes or any Note Guarantee, the Payor, subject tothe exceptions listed below, will pay additional amounts (“Additional Amounts”) as may benecessary to ensure that the net amount received by each beneficial owner of the Notes aftersuch withholding or deduction (including withholding or deduction attributable to AdditionalAmounts payable hereunder) will not be less than the amount the beneficial owner would havereceived if such Taxes had not been withheld or deducted.

A Payor will not, however, pay Additional Amounts to a holder or beneficial owner of Notes:

(a) to the extent the Taxes giving rise to such Additional Amounts would not have beenimposed but for the holder’s or beneficial owner’s present or former connection withthe Relevant Taxing Jurisdiction (other than any connection resulting from theacquisition, ownership, holding or disposition of Notes, the receipt of paymentsthereunder or under any Note Guarantee and/or the exercise or enforcement of rightsunder any Notes or any Note Guarantee);

(b) to the extent the Taxes giving rise to such Additional Amounts would not have beenimposed but for the failure of the holder or beneficial owner of Notes, following thePayor’s written request addressed to the holder, to the extent such holder or beneficial

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owner is legally eligible to do so, to comply with any certification, identification,information or other reporting requirements, whether required by statute, treaty,regulation or administrative practice of a Relevant Taxing Jurisdiction, as a preconditionto exemption from, or reduction in the rate of deduction or withholding of, Taxesimposed by the Relevant Taxing Jurisdiction (including, without limitation, a certificationthat the holder or beneficial owner is not resident in the Relevant Taxing Jurisdiction);

(c) with respect to any estate, inheritance, gift, sales, transfer or any similar Taxes;

(d) if such holder is a fiduciary or partnership or other person other than the sole beneficialowner of such payment and the Taxes giving rise to such Additional Amounts wouldnot have been imposed on such payment had the holder been the beneficiary, partneror sole beneficial owner, as the case may be, of such Notes (but only if there is nomaterial cost or expense associated with transferring such Notes to such beneficiary,partner or sole beneficial owner and no restriction on such transfer that is outside thecontrol of such beneficiary, partner or sole beneficial owner);

(e) to the extent the Taxes giving rise to such Additional Amounts would not have beenimposed but for the presentation by the holder of any Notes, where presentation isrequired, for payment on a date more than 30 days after the date on which paymentbecame due and payable or the date on which payment thereof is duly provided for,whichever occurs later;

(f) with respect to any withholding or deduction that is imposed pursuant to the EuropeanCouncil Directive on the taxation of savings income which was adopted by the ECOFINCouncil on June 3, 2003 or any law implementing or complying with, or introduced inorder to conform to such directive (the “EU Savings Tax Directive”) or is required to bemade pursuant to the Agreement between the European Community and the SwissConfederation dated October 26, 2004 providing for measures equivalent to those laiddown in the EU Savings Tax Directive (the “EU-Swiss Savings Tax Agreement”) or anylaw or other governmental regulation implementing or complying with, or introducedin order to conform to, such agreement;

(g) with respect to any tax that is payable other than by deduction or withholding atsource; or

(h) any combination of items (a), (b), (c), (d), (e), (f) and (g).

A Payor, if it is the applicable withholding agent, will (i) make any such withholding ordeduction required by applicable law and (ii) remit the full amount deducted or withheld to therelevant authority in accordance with applicable law. The Payor will make reasonable efforts toobtain certified copies of tax receipts evidencing the payment of any Taxes so deducted orwithheld from each Relevant Taxing Jurisdiction imposing such Taxes. The Payor will provide tothe Trustee, within a reasonable time after the date the payment of any Taxes so deducted orwithheld are due pursuant to applicable law, either a certified copy or tax receipts evidencingsuch payment, or, if such tax receipts are not reasonably available to the Payor, such otherdocumentation that provides reasonable evidence of such payment by the Payor.

The Payor will deliver to the Trustee any Additional Amounts payable together with anofficer’s certificate stating that such Additional Amounts will be payable prior to the date onwhich such payments will be made and will include such other information necessary to enablethe Trustee to pay such Additional Amounts to holders on the payment date. Any suchcertificate will be delivered a reasonable amount of time in advance of when the payments inquestion are required to be made. The Payor will promptly publish a notice in accordance withthe provisions set forth in the Indenture stating that such Additional Amounts will be payableand describing the obligation to pay such amounts.

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The Payors, jointly and severally, will reimburse the holders of Notes, upon written requestof such holder of Notes and appropriate proof of payment for the amount of (i) any Taxes leviedor imposed by a Relevant Taxing Jurisdiction and payable by such holder or the applicablebeneficial owner in connection with payments made under or with respect to the Notes held bysuch holder or any Note Guarantee; and (ii) any Taxes levied or imposed with respect to anyreimbursement under the foregoing clause (i) or this clause (ii), so that the net amount receivedby the applicable beneficial owner after such reimbursement will not be less than the netamount such beneficial owner would have received if the Taxes giving rise to thereimbursement described in clauses (i) and/or (ii) had not been imposed, provided, however,that the indemnification obligation provided for in this paragraph shall not extend to Taxesimposed for which the holder or beneficial owner of the Notes would not have been eligible toreceive payment of Additional Amounts hereunder by virtue of clauses (a) through (h) above orto the extent such holder or beneficial owner received Additional Amounts with respect to suchpayments.

In addition, a Foreign Successor Issuer will pay any stamp, issue, registration, court,documentary, excise or other similar taxes, charges and duties (including interest, additions totax and penalties with respect thereto) imposed by any Relevant Taxing Jurisdiction at any timeon or after the date on which the Foreign Successor Issuer becomes a Foreign Successor Issuer(the “Successor Date”) in respect of the execution, issuance, registration or delivery of theNotes, any Note Guarantee or any other document or instrument referred to thereunder and anysuch taxes, charges or duties imposed by any Relevant Taxing Jurisdiction at any time on orafter the Successor Date as a result of, or in connection with, (i) any payments made pursuant tothe Notes, any Note Guarantee or any other such document or instrument referred tothereunder and/or (ii) the enforcement of the Notes, any Note Guarantee or any other suchdocument or instrument referred to thereunder.

The obligations described under this heading will survive any termination, defeasance ordischarge of the Indenture and will apply mutatis mutandis to any successor Person to anyPayor and to any jurisdiction (other than the United States, any state thereof or the District ofColumbia) in which such successor is organized, resident or doing business for tax purposes orany jurisdiction from or through which payment is made by such successor or its agents.Whenever the Indenture or this “Description of the Notes” refers to, in any context, the paymentof principal, premium, if any, interest or any other amount payable under or with respect to anyNote or under any Note Guarantee, such reference includes the payment of Additional Amountsor indemnification payments as described hereunder, if applicable.

Optional Redemption

General

At any time or from time to time on or after April 1, 2017, the Issuer, at its option, mayredeem the Notes, in whole or in part, at the redemption prices (expressed as percentages ofprincipal amount) set forth below, together with accrued and unpaid interest thereon, if any, tothe redemption date (subject to the right of Holders of record on the relevant record date toreceive interest due on the relevant interest payment date), if redeemed during the 12-monthperiod beginning April 1 of the years indicated:

Year Optional redemption price

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.063%2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.375%2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.688%2020 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100.000%

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Redemption with Proceeds from Equity Offerings

At any time or from time to time prior to April 1, 2017, the Issuer, at its option, may on anyone or more occasions redeem Notes issued under the Indenture with the net cash proceeds ofone or more Qualified Equity Offerings at a redemption price equal to 106.750% of the principalamount of the Notes to be redeemed, plus accrued and unpaid interest to the date ofredemption (subject to the right of Holders of record on the relevant record date to receiveinterest due on the relevant interest payment date); provided that:

(1) at least 65.0% of the aggregate principal amount of Notes originally issued under theIndenture on the Issue Date remains outstanding immediately after giving effect to anysuch redemption; and

(2) the redemption occurs not more than 180 days after the date of the closing of any suchQualified Equity Offering.

Redemption at Applicable Premium

The Notes may also be redeemed, in whole or in part, at any time or from time to time priorto April 1, 2017, at the option of the Issuer at a redemption price equal to 100% of the principalamount of the Notes redeemed plus the Applicable Premium (calculated by the Issuer) as of,and accrued and unpaid interest to, the applicable redemption date (subject to the right ofHolders of record on the relevant record date to receive interest due on the relevant interestpayment date). “Applicable Premium” means, with respect to any Note on any applicableredemption date, the greater of:

(1) 1.0% of the principal amount of such Note; and

(2) the excess, if any, of:

(a) the present value at such redemption date of (i) the redemption price of such Note atApril 1, 2017 (such redemption price being set forth in the table appearing above underthe caption “—Optional Redemption—General”) plus (ii) all required interest payments(excluding accrued and unpaid interest to such redemption date) due on such Notethrough April 1, 2017 computed using a discount rate equal to the Treasury Rate as ofsuch redemption date plus 50 basis points; over

(b) the principal amount of such Note.

“Treasury Rate” means, as of any redemption date, the weekly average yield to maturity atthe time of computation of United States Treasury securities with a constant maturity (ascompiled and published in the most recent Federal Reserve Statistical Release H.15 (519) whichhas become publicly available at least two Business Days prior to the redemption date (or, ifsuch Statistical Release is no longer published, any publicly available source of similar marketdata)) equal to the period from the redemption date to April 1, 2017; provided, however, that ifthe period from the redemption date to April 1, 2017 is not equal to the constant maturity of aUnited States Treasury security for which a weekly average yield is given, the Treasury Rateshall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) fromthe weekly average yields of United States Treasury securities that have a constant maturityclosest to and greater than the period from the redemption date to April 1, 2017 and the UnitedStates Treasury securities that have a constant maturity closest to and less than the period fromthe redemption date to April 1, 2017 for which such yields are given, except that if the periodfrom the redemption date to April 1, 2017 is less than one year, the weekly average yield onactually traded United States Treasury securities adjusted to a constant maturity of one yearshall be used.

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The Issuer may acquire Notes by means other than a redemption, whether pursuant to anissuer tender offer, open market purchase, negotiated transaction or otherwise, so long as theacquisition does not otherwise violate the terms of the Indenture.

Redemption upon Tax Event

If, as a result of:

(a) any amendment to, or change in, the laws (or regulations or rulings promulgatedthereunder) of any Relevant Taxing Jurisdiction which is announced and becomeseffective after the Successor Date (or, where a jurisdiction in question does not becomea Relevant Taxing Jurisdiction until a later date, after such later date); or

(b) any amendment to, or change in, the official application or official interpretation of thelaws, regulations or rulings of any Relevant Taxing Jurisdiction which is announcedand becomes effective after the Successor Date (or, where a jurisdiction in questiondoes not become a Relevant Taxing Jurisdiction until a later date, after such later date),

a Foreign Successor Issuer would be obligated to pay, on the next date for any payment and asa result of that amendment or change, Additional Amounts or indemnification payments asdescribed above under “—Payment of Additional Amounts by a Foreign Successor Issuer” withrespect to the Relevant Taxing Jurisdiction, which such Foreign Successor Issuer reasonablydetermines it cannot avoid by the use of reasonable measures available to it, then such ForeignSuccessor Issuer may redeem all, but not less than all, of the Notes, at any time thereafter, uponnot less than 30 nor more than 60 days’ notice, at a redemption price of 100% of their principalamount (or, if such payments result from a permitted merger under “—Certain Covenants—Limitations on Mergers, Consolidations, Etc.” that constitutes a Change of Control, 101% of theirprincipal amount), plus accrued and unpaid interest, if any, to the redemption date. Prior to thegiving of any notice of redemption described in this paragraph, a Foreign Successor Issuer willdeliver to the Trustee:

(i) a certificate signed by an officer of such Foreign Successor Issuer stating that theobligation to pay the Additional Amounts or indemnification payments cannot beavoided by such Foreign Successor Issuer’s taking reasonable measures available to it;and

(ii) a written opinion of independent legal counsel to such Foreign Successor Issuer ofrecognized standing (reasonably acceptable to the Trustee) to the effect that suchForeign Successor Issuer has or will become obligated to pay such Additional Amountsor indemnification payments as a result of an amendment or change described above.

A Foreign Successor Issuer will publish a notice of any optional redemption of the notesdescribed above in accordance with the provisions of the Indenture. No such notice ofredemption may be given more than 60 days before the Foreign Successor Issuer first becomesliable to pay any Additional Amount or indemnification payments.

Selection and Notice of Redemption

If less than all of the Notes are to be redeemed at any time pursuant to an optionalredemption, the Trustee will select the Notes for redemption in compliance with therequirements of the principal national securities exchange, if any, on which the Notes are listedor, if the Notes are not then listed on a national security exchange, on a pro rata basis, by lot orby such method as the Trustee deems fair and appropriate; provided, however, that no Notes ofa principal amount of $2,000 in original principal amount or less shall be redeemed in part. In

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addition, if a partial redemption is made pursuant to the provisions described under “—OptionalRedemption—Redemption with Proceeds from Equity Offerings,” selection of the Notes orportions thereof for redemption shall be made by the Trustee only on a pro rata basis or on asnearly a pro rata basis as is practicable (subject to the procedures of The Depository TrustCompany (“DTC”)), unless that method is otherwise prohibited.

Notice of redemption will be mailed by first-class mail (or, with respect to Notes in globalform, otherwise in accordance with the procedures of DTC) at least 30, but not more than 60,days before the date of redemption to each Holder of Notes to be redeemed at its registeredaddress, except that redemption notices may be given more than 60 days prior to a redemptiondate if the notice is issued in connection with a satisfaction and discharge of the Indenture. Ifany Note is to be redeemed in part only, the notice of redemption that relates to that Note willstate the portion of the principal amount of the Note to be redeemed. A new Note in a principalamount equal to the unredeemed portion of the Note will be issued in the name of the Holder ofthe Note upon cancellation of the original Note. On and after the applicable date of redemption,interest will cease to accrue on Notes or portions thereof called for redemption so long as theIssuer has deposited with the paying agent for the Notes funds in satisfaction of the applicableredemption price (including accrued and unpaid interest on the Notes to be redeemed) pursuantto the Indenture.

Change of Control

Upon the occurrence of any Change of Control, unless the Issuer has previously orconcurrently exercised its right to redeem all of the Notes as described under “—OptionalRedemption,” each Holder will have the right to require that the Issuer purchase all or anyportion (equal to $2,000 or an integral multiple of $1,000 in excess thereof) of that Holder’sNotes for a cash price (the “Change of Control Purchase Price”) equal to 101.0% of the principalamount of the Notes to be purchased, plus accrued and unpaid interest thereon to the date ofpurchase (subject to the right of Holders of record on the relevant record date to receive interestdue on the relevant interest payment date). Within 30 days following any Change of Control, theIssuer will mail, or cause to be mailed, to the Holders, with a copy to the Trustee, a notice:

(1) describing the transaction or transactions that constitute the Change of Control;

(2) offering to purchase, pursuant to the procedures required by the Indenture anddescribed in the notice (a “Change of Control Offer”), on a date specified in the notice(which shall be a Business Day not earlier than 30 days, nor later than 60 days, from thedate the notice is mailed) and for the Change of Control Purchase Price, all Notesproperly tendered by such Holder pursuant to such Change of Control Offer; and

(3) describing the procedures, as determined by the Issuer, that Holders must follow toaccept the Change of Control Offer.

A Change of Control Offer will be required to remain open for at least 20 Business Days orfor such longer period as is required by law. The Issuer will publicly announce the results of theChange of Control Offer on or as soon as practicable after the date of purchase.

If a Change of Control Offer is made, there can be no assurance that the Issuer will haveavailable funds sufficient to pay for all or any of the Notes that might be delivered by Holdersseeking to accept the Change of Control Offer. In addition, the Issuer cannot assure you that inthe event of a Change of Control the Issuer will be able to obtain the consents necessary toconsummate a Change of Control Offer from the lenders under agreements governingoutstanding Indebtedness which may prohibit the offer.

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The occurrence of certain change of control events identified in the Credit Agreementconstitutes a default under the Credit Agreement. Any future Credit Facilities or otheragreements relating to the Indebtedness to which the Issuer becomes a party may containsimilar restrictions and provisions. If the Change of Control were to occur, the Issuer may nothave sufficient available funds to pay the Change of Control Purchase Price for all Notes thatmight be delivered by Holders seeking to accept the Change of Control Offer after first satisfyingits obligations under the Credit Agreement or other agreements relating to Indebtedness, ifaccelerated. The failure of the Issuer to make or consummate the Change of Control Offer or topay the Change of Control Purchase Price when due will constitute a Default under theIndenture and will otherwise give the Trustee and the Holders the rights described under“—Events of Default.” See “Risk Factors—Risks Related to the Notes—We may not be able torepurchase the notes upon a change of control.”

The provisions described above that require the Issuer to make a Change of Control Offerfollowing a Change of Control will be applicable regardless of whether any other provisions ofthe Indenture are applicable to the transaction giving rise to the Change of Control. Except asdescribed above with respect to a Change of Control, the Indenture does not contain provisionsthat permit the Holders of the Notes to require that the Issuer purchase or redeem the Notes inthe event of a takeover, recapitalization or similar transaction.

The Issuer’s obligation to make a Change of Control Offer will be satisfied if a third partymakes the Change of Control Offer in the manner, at the times and otherwise in compliancewith the requirements set forth in the Indenture applicable to a Change of Control Offer made bythe Issuer and purchases all Notes properly tendered and not withdrawn under such Change ofControl Offer.

In the event that Holders of not less than 90% of the aggregate principal amount of theoutstanding Notes accept a Change of Control Offer and the Issuer, or any third party making aChange of Control Offer in lieu of the Issuer as described above, purchases all of the Notes heldby such Holders, the Issuer will have the right, upon not less than 30 nor more than 60 days’prior notice, given not more than 30 days following the purchase pursuant to the Change ofControl Offer described above, to redeem all of the Notes that remain outstanding followingsuch purchase at a redemption price equal to the Change of Control Purchase Price plus, to theextent not included in the Change of Control Purchase Price, accrued and unpaid interest on theNotes that remain outstanding, to the date of redemption (subject to the right of Holders ofrecord on the relevant record date to receive interest due on an interest payment date that is onor prior to the redemption date).

With respect to any disposition of assets, the phrase “all or substantially all” as used in theIndenture (including as set forth under the definition of “Change of Control” and “—CertainCovenants—Limitations on Mergers, Consolidations, Etc.” below) may vary in meaningaccording to the facts and circumstances of the subject transaction, has no clearly establishedmeaning under New York law (which governs the Indenture) and is subject to judicialinterpretation. Accordingly, in certain circumstances there may be a degree of uncertainty inascertaining whether a particular transaction would involve a disposition of “all or substantiallyall” of the assets of the Issuer and its Restricted Subsidiaries, taken as a whole, and therefore itmay be unclear as to whether a Change of Control has occurred and whether the Holders havethe right to require the Issuer to purchase Notes.

The Issuer will comply with applicable tender offer rules, including the requirements ofRule 14e-l under the Exchange Act and any other applicable laws and regulations in connectionwith the purchase of Notes pursuant to a Change of Control Offer. To the extent that the

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provisions of any securities laws or regulations conflict with the “Change of Control” provisionsof the Indenture, the Issuer shall comply with the applicable securities laws and regulations andwill not be deemed to have breached its obligations under the “Change of Control” provisionsof the Indenture by virtue of this compliance.

The provisions under the Indenture relating to the Issuer’s obligation to make a Change ofControl Offer may be waived, modified or terminated with the written consent of the Holders ofa majority in principal amount of the Notes then outstanding.

Notwithstanding anything to the contrary herein, a Change of Control Offer may be made inadvance of a Change of Control, conditional upon such Change of Control, if a definitiveagreement is in place for the Change of Control at the time of making of the Change of ControlOffer.

Certain Covenants

Covenant Suspension

During any period of time that the Notes have a Moody’s rating of “Baa3” or higher and anS&P rating of “BBB-” or higher (each, an “Investment Grade Rating”) and no Default hasoccurred and is then continuing, the Issuer and the Restricted Subsidiaries will not be subject tothe following covenants:

• “—Certain Covenants—Limitations on Additional Indebtedness”;

• “—Certain Covenants—Limitations on Layering Indebtedness”;

• “—Certain Covenants—Limitations on Restricted Payments”;

• “—Certain Covenants—Limitations on Dividend and Other Restrictions AffectingRestricted Subsidiaries”;

• “—Certain Covenants—Limitations on Transactions with Affiliates”;

• “—Certain Covenants—Limitations on Asset Sales”;

• clause (3) of the covenant described under “—Certain Covenants—Limitations onMergers, Consolidations, Etc.”;

• “—Certain Covenants—Additional Note Guarantees”; and

• “—Certain Covenants—Conduct of Business”

(collectively, the “Suspended Covenants”). In the event that the Issuer and the RestrictedSubsidiaries are not subject to the Suspended Covenants for any period of time as a result ofthe preceding sentence and, subsequently, one or both of the Rating Agencies, as applicable,withdraws its ratings or downgrades the ratings assigned to the Notes such that the Notes donot have an Investment Grade Rating, then the Issuer and the Restricted Subsidiaries willthereafter again be subject to the Suspended Covenants, it being understood that no actionstaken by (or omissions of) the Issuer or any of its Restricted Subsidiaries during the suspensionperiod shall constitute a Default or an Event of Default under the Suspended Covenants.Furthermore, after the time of reinstatement of the Suspended Covenants upon such withdrawalor downgrade, calculations with respect to Restricted Payments will be made in accordance withthe terms of the covenant described below under “—Certain Covenants—Limitations onRestricted Payments” as though such covenant had been in effect during the entire period oftime from the Issue Date.

There can be no assurance that the Notes will ever achieve or maintain Investment GradeRatings.

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Limitations on Additional Indebtedness

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly,incur any Indebtedness; provided that the Issuer or any Restricted Subsidiary may incuradditional Indebtedness, if, after giving effect thereto on a pro forma basis (including giving proforma effect to the application of the proceeds therefrom), the Consolidated Interest CoverageRatio would be at least 2.00 to 1.00 (the “Coverage Ratio Exception”).

Notwithstanding the above, each of the following shall be permitted (the “PermittedIndebtedness”):

(1) Indebtedness of the Issuer and any Restricted Subsidiary under Credit Facilities in anaggregate amount not to exceed the greater of (a) $300.0 million and (b) an amount ofIndebtedness at the time of Incurrence and after giving effect to the Incurrence of suchIndebtedness and the application of the proceeds therefrom that does not cause theSecured Leverage Ratio of the Issuer to exceed 3.5 to 1.0;

(2) Indebtedness under (a) the Notes and the Note Guarantees initially issued on the IssueDate, and (b) guarantees of Additional Notes permitted to be issued under theIndenture;

(3) Indebtedness of the Issuer and the Restricted Subsidiaries to the extent outstanding onthe Issue Date after giving effect in due course to the intended use of proceeds of theNotes (other than Indebtedness referred to in other clauses of this paragraph);

(4) Indebtedness under Hedging Obligations entered into for bona fide hedging purposesof the Issuer or any Restricted Subsidiary and not for the purpose of speculation;provided that in the case of Hedging Obligations relating to interest rates, (a) suchHedging Obligations relate to payment obligations on Indebtedness otherwisepermitted to be incurred by this covenant, and (b) the notional principal amount of suchHedging Obligations at the time incurred does not exceed the principal amount of theIndebtedness to which such Hedging Obligations relate;

(5) Indebtedness of the Issuer owed to a Restricted Subsidiary and Indebtedness of anyRestricted Subsidiary owed to the Issuer or any other Restricted Subsidiary; provided,however, that upon any such Restricted Subsidiary ceasing to be a RestrictedSubsidiary or such Indebtedness being owed to any Person other than the Issuer or aRestricted Subsidiary, the Issuer or such Restricted Subsidiary, as applicable, shall bedeemed to have incurred Indebtedness not permitted by this clause (5);

(6) Indebtedness in respect of (a) self-insurance obligations or completion, customs, stay,bid, performance, appeal or surety bonds or other obligations of a like nature issued forthe account of the Issuer or any Restricted Subsidiary in the ordinary course ofbusiness, including guarantees or obligations of the Issuer or any Restricted Subsidiarywith respect to letters of credit supporting such self-insurance, completion, customs,stay, bid, performance, appeal or surety bonds or other obligations (in each case otherthan for an obligation for money borrowed) or (b) obligations represented by letters ofcredit issued in the ordinary course of business, including letters of credit in order toprovide security for workers’ compensation claims, for the account of the Issuer or anyRestricted Subsidiary, as the case may be;

(7) Purchase Money Indebtedness incurred by the Issuer or any Restricted Subsidiary afterthe Issue Date, and Refinancing Indebtedness in respect thereof, in an aggregateprincipal amount not to exceed at any time outstanding the greater of (a) $175.0 millionand (b) 7.5% of Consolidated Tangible Assets determined at the time of incurrence on apro forma basis to give effect to the assets purchased;

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(8) Indebtedness arising from the honoring by a bank or other financial institution of acheck, draft or similar instrument inadvertently (except in the case of daylightoverdrafts) drawn against insufficient funds in the ordinary course of business;provided, however, that such Indebtedness is extinguished within five Business Days ofincurrence;

(9) Indebtedness arising in connection with endorsement of instruments for deposit in theordinary course of business;

(10) Refinancing Indebtedness with respect to Indebtedness incurred pursuant to theCoverage Ratio Exception or clause (2) or (3) above, this clause (10) or clause (15)below;

(11) indemnification, adjustment of purchase price, earn-out or similar obligations, in eachcase, incurred or assumed in connection with the acquisition or disposition of anybusiness or assets of the Issuer or any Restricted Subsidiary or Equity Interests of aRestricted Subsidiary, other than guarantees of Indebtedness incurred by any Personacquiring all or any portion of such business, assets or Equity Interests for the purposeof financing or in contemplation of any such acquisition; provided that in the case of adisposition, the maximum aggregate liability in respect of all such obligationsoutstanding under this clause (11) shall at no time exceed the gross proceeds actuallyreceived by the Issuer and the Restricted Subsidiaries in connection with suchdisposition;

(12) Contingent Obligations of the Issuer and the Guarantors in respect of Indebtednessotherwise permitted under this covenant;

(13) Indebtedness in respect of insurance premium financing for insurance being acquiredby the Issuer or a Restricted Subsidiary under customary terms and conditions;

(14) Indebtedness of Foreign Restricted Subsidiaries in an aggregate amount outstanding atany one time not to exceed 30% of the aggregate Consolidated Tangible Assets of all ofthe Foreign Restricted Subsidiaries, determined at the time of incurrence;

(15) Permitted Acquisition Indebtedness;

(16) Purchase Money Indebtedness incurred by the Issuer or any Restricted Subsidiary afterthe Issue Date, and Refinancing Indebtedness in respect thereof the proceeds of whichare used to finance the acquisition by Discovery Offshore or any Restricted Subsidiaryof one or more jackup rigs and related equipment and assets; and

(17) additional Indebtedness of the Issuer or any Restricted Subsidiary in an aggregateprincipal amount not to exceed at any time outstanding the greater of (a) $100.0 millionand (b) 5.0% of the Issuer’s Consolidated Tangible Assets determined at the time ofincurrence.

For purposes of determining compliance with this covenant, in the event that an item ofIndebtedness meets the criteria of more than one of the categories of Permitted Indebtednessdescribed in clauses (1) through (17) above or is entitled to be incurred pursuant to theCoverage Ratio Exception, the Issuer shall, in its sole discretion, classify such item ofIndebtedness and may divide and classify such Indebtedness in more than one of the types ofIndebtedness described, except that Indebtedness outstanding under the Credit Agreement onthe Issue Date after giving effect to the application of the proceeds of this offering shall bedeemed to have been incurred under clause (1) above, and may later reclassify any item ofIndebtedness described in clauses (1) through (17) above (provided that at the time ofreclassification it meets the criteria in such category or categories). In addition, for purposes of

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determining any particular amount of Indebtedness under this covenant, guarantees, Liens orletter of credit obligations supporting Indebtedness otherwise included in the determination ofsuch particular amount shall not be included so long as incurred by a Person that could haveincurred such Indebtedness.

For the purposes of determining compliance with any U.S. dollar-denominated restrictionon the incurrence of Indebtedness denominated in a foreign currency, the U.S. dollar-equivalentprincipal amount of such Indebtedness incurred pursuant thereto shall be calculated based onthe relevant currency exchange rate in effect on the earlier of the date that such Indebtednesswas incurred, in the case of term Indebtedness, or first committed, in the case of revolvingcredit Indebtedness; provided that if such Indebtedness is incurred to refinance otherIndebtedness denominated in a foreign currency, and such refinancing would cause theapplicable U.S. dollar-denominated restriction to be exceeded if calculated at the relevantcurrency exchange rate in effect on the date of such refinancing, such U.S. dollar-denominatedrestriction shall be deemed not to have been exceeded so long as the principal amount of suchRefinancing Indebtedness does not exceed the principal amount of such Indebtedness beingrefinanced. The principal amount of any Indebtedness incurred to refinance other Indebtedness,if incurred in a different currency from the Indebtedness being refinanced, shall be calculatedbased on the currency exchange rate applicable to the currencies in which such RefinancingIndebtedness is denominated that is in effect on the date of such refinancing.

Notwithstanding any other provision of this covenant, in no event shall the reclassificationof any lease or other liability as indebtedness due to a change in accounting principles after theIssue Date be deemed to be an incurrence of Indebtedness.

Limitations on Layering Indebtedness

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly,incur any Indebtedness that is or purports to be by its terms (or by the terms of any agreementgoverning such Indebtedness) subordinated in right of payment to any other Indebtedness ofthe Issuer or of such Restricted Subsidiary, as the case may be, unless such Indebtedness is alsoby its terms (or by the terms of any agreement governing such Indebtedness) made expresslysubordinate in right of payment to the Notes or the Note Guarantee of such RestrictedSubsidiary, to the same extent and in the same manner as such Indebtedness is subordinated tosuch other Indebtedness of the Issuer or such Restricted Subsidiary, as the case may be.

For purposes of the foregoing, no Indebtedness will be deemed to be subordinated in rightof payment to any other Indebtedness of the Issuer or any Restricted Subsidiary solely by virtueof being unsecured or secured by a Permitted Lien or by virtue of the fact that the holders ofsuch Indebtedness have entered into intercreditor agreements or other arrangements givingone or more of such holders priority over the other holders in the collateral held by them orother payments among them.

Limitations on Restricted Payments

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly,make any Restricted Payment if at the time of such Restricted Payment:

(1) a Default shall have occurred and be continuing or shall occur as a consequencethereof;

(2) after giving pro forma effect to such Restricted Payment as if such Restricted Paymenthad been made at the beginning of the applicable Four Quarter Period, the Issuer is not

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able to incur at least $1.00 of additional Indebtedness (other than PermittedIndebtedness) pursuant to the Coverage Ratio Exception; or

(3) the amount of such Restricted Payment, when added to the aggregate amount of allother Restricted Payments made after April 3, 2012 (other than Restricted Paymentsmade pursuant to clauses (2) through (10) of the next paragraph), exceeds the sum (the“Restricted Payments Basket”) of (without duplication):

(a) 50% of Consolidated Net Income for the period (taken as one accounting period)commencing on April 1, 2012 to and including the last day of the fiscal quarterended immediately prior to the date of such calculation for which consolidatedfinancial statements are available (or, if such Consolidated Net Income shall be adeficit, minus 100% of such deficit), plus

(b) 100% of (A) (i) the aggregate net cash proceeds and (ii) the Fair Market Value of(x) marketable securities (other than marketable securities of the Issuer), (y) EquityInterests of a Person (other than the Issuer or a Subsidiary of the Issuer) engaged in aPermitted Business and (z) other assets used in any Permitted Business, in the caseof clauses (i) and (ii), received by the Issuer or its Restricted Subsidiaries sinceApril 3, 2012 as a contribution to its common equity capital or from the issue or saleof Qualified Equity Interests of the Issuer or from the issue or sale of convertible orexchangeable Disqualified Equity Interests or convertible or exchangeable debtsecurities of the Issuer that have been converted into or exchanged for such QualifiedEquity Interests (other than Equity Interests or debt securities sold to a Subsidiary ofthe Issuer and Excluded Contributions), and (B) the aggregate net cash proceeds, ifany, received by the Issuer or any of its Restricted Subsidiaries upon any conversionor exchange described in clause (A) above, plus

(c) 100% of (A) the aggregate amount by which Indebtedness (other than anySubordinated Indebtedness) of the Issuer or any Restricted Subsidiary is reducedon the Issuer’s consolidated balance sheet upon the conversion or exchange afterApril 3, 2012 of any such Indebtedness into or for Qualified Equity Interests of theIssuer and (B) the aggregate net cash proceeds, if any, received by the Issuer or anyof its Restricted Subsidiaries upon any conversion or exchange described inclause (A) above, plus

(d) with respect to Restricted Investments made by the Issuer and its RestrictedSubsidiaries after April 3, 2012, an amount equal to the sum, without duplication, of(A) the net reduction in such Restricted Investments in any Person resulting from(i) repayments of loans or advances, or other transfers of assets, in each case to theIssuer or any Restricted Subsidiary, (ii) other repurchases, repayments orredemptions of such Restricted Investments, (iii) the sale of any such RestrictedInvestment to a purchaser other than the Issuer or a Subsidiary or (iv) the release ofany guarantee (except to the extent any amounts are paid under such guarantee)that constituted a Restricted Investment plus (B) with respect to any UnrestrictedSubsidiary designated as such after April 3, 2012 and redesignated as a RestrictedSubsidiary after April 3, 2012, the Fair Market Value of the Issuer’s Investment insuch Subsidiary held by the Issuer or any of its Restricted Subsidiaries at the timeof such redesignation.

Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraphwill not prohibit:

(1) the payment of (a) any dividend or redemption payment or the making of anydistribution within 60 days after the date of declaration thereof if, on the date of

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declaration, the dividend, redemption or distribution payment, as the case may be,would have complied with the provisions of the Indenture or (b) any dividend or similardistribution by a Restricted Subsidiary to the holders of its Equity Interests on a pro ratabasis or on a basis more favorable to the Issuer;

(2) the redemption or acquisition of any Equity Interests of the Issuer or any RestrictedSubsidiary in exchange for, or out of the proceeds of the substantially concurrentissuance and sale of, Qualified Equity Interests;

(3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement forvalue of Subordinated Indebtedness of the Issuer or any Restricted Subsidiary(including the payment of any required premium and any fees and expenses incurred inconnection with such purchase, repurchase, redemption, defeasance, other acquisitionor retirement for value) (a) in exchange for, or out of the proceeds of the substantiallyconcurrent issuance and sale of, Qualified Equity Interests, (b) in exchange for, or out ofthe proceeds of the substantially concurrent incurrence of, Refinancing Indebtednesspermitted to be incurred under the “Limitations on Additional Indebtedness” covenantand the other terms of the Indenture or (c) upon a Change of Control or in connectionwith an Asset Sale to the extent required by the agreement governing suchSubordinated Indebtedness but only if the Issuer shall have complied with thecovenants described under “—Change of Control” and “—Limitations on Asset Sales”and purchased all Notes validly tendered pursuant to the relevant offer prior topurchasing, repurchasing, redeeming, defeasing, acquiring or retiring for value suchSubordinated Indebtedness;

(4) the redemption, repurchase or other acquisition or retirement for value of EquityInterests of the Issuer held by officers, directors or employees or former officers,directors or employees (or their transferees, estates or beneficiaries under theirestates), either (x) upon any such individual’s death, disability, retirement, severance ortermination of employment or service or (y) pursuant to any equity subscriptionagreement, stock option agreement, stockholders’ agreement or similar agreement;provided, in any case, that the aggregate cash consideration paid for all suchredemptions, repurchases or other acquisitions or retirements shall not exceed(A) $10.0 million during any calendar year (with unused amounts in any calendar yearbeing carried forward to the next succeeding calendar year but not any subsequentyears) plus (B) the amount of any net cash proceeds received by or contributed to theIssuer from the issuance and sale after the Issue Date of Qualified Equity Interests ofthe Issuer to its officers, directors or employees that have not been applied to thepayment of Restricted Payments pursuant to this clause (4), plus (C) the net cashproceeds of any “key-man” life insurance policies that have not been applied to thepayment of Restricted Payments pursuant to this clause (4);

(5) (a) repurchases, redemptions or other acquisitions or retirements for value of EquityInterests deemed to occur upon the exercise of stock options, warrants, rights toacquire Equity Interests or other convertible securities to the extent such EquityInterests represent a portion of the exercise or exchange price thereof and (b) anyrepurchases, redemptions or other acquisitions or retirements for value of EquityInterests made in lieu of withholding taxes in connection with any exercise or exchangeof stock options, warrants or other similar rights;

(6) dividends on Preferred Stock or Disqualified Equity Interests issued in compliance withthe covenant “—Limitations on Additional Indebtedness” to the extent such dividendsare included in the definition of Consolidated Interest Expense;

(7) the payment of cash in lieu of fractional Equity Interests;

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(8) payments or distributions to dissenting stockholders pursuant to applicable law inconnection with a merger, consolidation or transfer of assets that complies with theprovisions described under the caption “—Limitations on Mergers, Consolidations,Etc.”;

(9) Restricted Payments with Excluded Contributions; or

(10) payment of other Restricted Payments in an aggregate amount since April 3, 2012 notto exceed $25.0 million;

provided that (a) in the case of any Restricted Payment pursuant to clauses (3), (4), (9) or(10) above, no Default shall have occurred and be continuing or occur as a consequence thereofand (b) no issuance and sale of Qualified Equity Interests used to make a payment pursuant toclauses (2), (3) or (4)(B) above shall increase the Restricted Payments Basket.

For the purposes of determining compliance with any U.S. dollar-denominated restrictionon Restricted Payments denominated in a foreign currency, the U.S. dollar-equivalent amount ofsuch Restricted Payment shall be calculated based on the relevant currency exchange rate ineffect on the date that such Restricted Payment was made.

Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries

The Issuer will not, and will not permit any Restricted Subsidiary to create or otherwisecause or permit to exist or become effective any consensual encumbrance or consensualrestriction on the ability of any Restricted Subsidiary to:

(a) pay dividends or make any other distributions on or in respect of its Equity Interests tothe Issuer or any of its Restricted Subsidiaries;

(b) make loans or advances, or pay any Indebtedness or other obligation owed, to theIssuer or any other Restricted Subsidiary (it being understood that the subordination ofloans and advances made to the Issuer or any Restricted Subsidiary to otherIndebtedness or obligations incurred by the Issuer or any Restricted Subsidiary shallnot be deemed a restriction on the ability to make loans or advances); or

(c) transfer any of its assets to the Issuer or any other Restricted Subsidiary;

except for:

(1) encumbrances or restrictions existing under or by reason of applicable law,regulation or order;

(2) encumbrances or restrictions existing under the Indenture, the Notes and the NoteGuarantees;

(3) non-assignment provisions of any contract, license or lease entered into in theordinary course of business;

(4) encumbrances or restrictions existing under agreements existing on the date of theIndenture (including, without limitation, the Credit Agreement) as in effect on thatdate;

(5) restrictions relating to any Lien permitted under the Indenture imposed by theholder of such Lien;

(6) restrictions imposed under any agreement to sell Equity Interests or assets, aspermitted under the Indenture, to any Person pending the closing of such sale;

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(7) any instrument governing Acquired Indebtedness or Equity Interests of a Personacquired by the Issuer or any of its Restricted Subsidiaries, which encumbrance orrestriction is not applicable to any Person, or the properties or assets of any Person,other than the Person or the properties or assets of the Person so acquired;

(8) any other agreement governing Indebtedness or other obligations entered intoafter the Issue Date that contains encumbrances and restrictions that in the goodfaith judgment of the Issuer are not materially more restrictive with respect to anyRestricted Subsidiary than those in effect on the Issue Date with respect to thatRestricted Subsidiary pursuant to agreements in effect on the Issue Date;

(9) customary provisions in partnership agreements, limited liability companyorganizational governance documents, joint venture agreements, shareholderagreements and other similar agreements entered into in the ordinary course ofbusiness that restrict the transfer of ownership interests in or assets of suchpartnership, limited liability company, joint venture, corporation or similar Person;

(10) Purchase Money Indebtedness and any Refinancing Indebtedness in respectthereof incurred in compliance with the covenant described under “—Limitationson Additional Indebtedness” that imposes restrictions of the nature described inclause (c) above on the assets acquired;

(11) restrictions on cash or other deposits or net worth imposed by customers, suppliersor landlords under contracts entered into in the ordinary course of business;

(12) any encumbrance or restriction applicable only to a Foreign Restricted Subsidiaryin agreements entered into in connection with Indebtedness incurred by suchForeign Restricted Subsidiary in compliance with clause (14) of the secondparagraph of the covenant described under “—Limitations on AdditionalIndebtedness”;

(13) Indebtedness incurred or Equity Interests issued by any Restricted Subsidiary,provided that the restrictions contained in the agreements or instrumentsgoverning such Indebtedness or Equity Interests (a) either (i) apply only in theevent of a payment default or a default with respect to a financial covenant in suchagreement or instrument or (ii) will not materially affect the Issuer’s ability to payall principal, interest on the Notes, as determined in good faith by the ChiefFinancial Officer of the Issuer, whose determination shall be conclusive; and (b) arenot materially more disadvantageous to the Holders of the Notes than is customaryin comparable financings (as determined by the Chief Financial Officer of theIssuer, whose determination shall be conclusive);

(14) any encumbrance or restrictions existing under Hedging Obligations permittedunder the Indenture; and

(15) any encumbrances or restrictions imposed by any amendments, refinancings,modifications, renewals, restatements, increases, supplements or replacements ofthe contracts, instruments or obligations referred to in clauses (1) through(14) above; provided that such amendments, refinancings, modifications, renewals,restatements, increases, supplements or replacements are, in the good faithjudgment of the Issuer, no more materially restrictive with respect to suchencumbrances and restrictions than those prior to such amendment or refinancing.

Limitations on Transactions with Affiliates

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly, inone transaction or a series of related transactions involving aggregate payments or

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consideration in excess of $1.0 million, sell, lease, transfer or otherwise dispose of any of itsassets to, or purchase any assets from, or enter into any contract, agreement, understanding,loan, advance or guarantee with, or for the benefit of, any Affiliate (an “Affiliate Transaction”),unless:

(1) such Affiliate Transaction is on terms that are not materially less favorable to the Issueror the relevant Restricted Subsidiary than those that could reasonably be expected tohave been obtained in a comparable transaction at such time on an arm’s-length basisby the Issuer or that Restricted Subsidiary from a Person that is not an Affiliate of theIssuer or that Restricted Subsidiary; and

(2) the Issuer delivers to the Trustee with respect to any Affiliate Transaction involvingaggregate value in excess of $20.0 million, an Officers’ Certificate certifying that suchAffiliate Transaction complies with clause (1) above and a Secretary’s Certificate whichsets forth and authenticates a resolution that has been adopted by the IndependentDirectors approving such Affiliate Transaction.

The foregoing restrictions shall not apply to:

(1) transactions exclusively between or among (a) the Issuer and one or more RestrictedSubsidiaries or (b) Restricted Subsidiaries;

(2) reasonable director, officer and employee compensation (including bonuses) and otherbenefits (including pursuant to any employment agreement or any retirement, health,stock option or other benefit plan) and indemnification and insurance arrangements, ineach case, as determined in good faith by the Issuer’s Board of Directors or seniormanagement;

(3) the entering into of a tax sharing agreement, or payments pursuant thereto, betweenthe Issuer and/or one or more Subsidiaries, on the one hand, and any other Person withwhich the Issuer or such Subsidiaries are required or permitted to file a consolidatedtax return or with which the Issuer or such Subsidiaries are part of a consolidated groupfor tax purposes to be used by such Person to pay taxes, and which payments by theIssuer and the Restricted Subsidiaries are not in excess of the tax liabilities that wouldhave been payable by them on a stand-alone basis;

(4) any Permitted Investments;

(5) any Restricted Payments which are made in accordance with the covenant describedunder “—Limitations on Restricted Payments”;

(6) (x) any agreement in effect on the Issue Date, as in effect on the Issue Date or asthereafter amended or replaced in any manner that, taken as a whole, is not moredisadvantageous to the Holders or the Issuer in any material respect than suchagreement as it was in effect on the Issue Date or (y) any transaction pursuant to anyagreement referred to in the immediately preceding clause (x);

(7) any transaction with a Person (other than an Unrestricted Subsidiary) which wouldconstitute an Affiliate of the Issuer solely because the Issuer or a Restricted Subsidiaryowns an equity interest in or otherwise controls such Person;

(8) (a) any transaction with an Affiliate where the only consideration paid by the Issuer orany Restricted Subsidiary is Qualified Equity Interests of the Issuer or (b) the issuanceor sale of any Qualified Equity Interests of the Issuer;

(9) transactions with customers, clients, suppliers, or purchasers or sellers of goods orservices, in each case in the ordinary course of business and otherwise in compliancewith the terms of the Indenture; provided that in the reasonable determination of the

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Board of Directors of the Issuer or the senior management of the Issuer, suchtransactions are on terms not materially less favorable to the Issuer or the relevantRestricted Subsidiary than those that could reasonably be expected to be obtained in acomparable transaction at such time on an arm’s-length basis from a Person that is notan Affiliate of the Issuer;

(10) pledges by the Issuer or any Restricted Subsidiary of Equity Interests in UnrestrictedSubsidiaries for the benefit of lenders or other creditors of the UnrestrictedSubsidiaries;

(11) any transaction entered into by a Person prior to the time such Person becomes aSubsidiary or is merged or consolidated into the Issuer or a Restricted Subsidiary(provided that such transaction is not entered into in contemplation of such event); and

(12) dividends and distributions to the Issuer or a Restricted Subsidiary by any UnrestrictedSubsidiary.

Limitations on Liens

The Issuer shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly,create, incur, assume or permit or suffer to exist any Lien (other than Permitted Liens) of anynature whatsoever against any assets of the Issuer or any Restricted Subsidiary (includingEquity Interests of a Restricted Subsidiary), whether owned at the Issue Date or thereafteracquired, which Lien secures Indebtedness, unless the Notes are equally and ratably securedwith (or prior to) such Indebtedness secured by such Lien.

Limitations on Asset Sales

The Issuer will not, and will not permit any Restricted Subsidiary to, directly or indirectly,consummate any Asset Sale unless:

(1) the Issuer or such Restricted Subsidiary receives consideration at least equal to the FairMarket Value (such Fair Market Value to be determined at the time of contractuallyagreeing to such Asset Sale or, in circumstances where the Issuer or such RestrictedSubsidiary grants a third party the right to purchase an asset, the date of such grant) ofthe assets included in such Asset Sale; and

(2) (a) at least 75% of the total consideration in such Asset Sale consists of cash or CashEquivalents or (b) the Fair Market Value of all forms of consideration other than cashand Cash Equivalents received for all Asset Sales since the Issue Date does not exceedin the aggregate 10.0% of the Consolidated Tangible Assets of the Issuer at the timesuch determination is made.

For purposes of clause (2), the following shall be deemed to be cash:

(a) the amount (without duplication) of any Indebtedness (other than SubordinatedIndebtedness, Disqualified Equity Interests, or Indebtedness owed to an Affiliate of theIssuer) of the Issuer or such Restricted Subsidiary that is delivered to the Issuer or suchRestricted Subsidiaries as consideration for such Asset Sale and promptly retired orextinguished without payment, or that is expressly assumed by the transferee of anysuch assets pursuant to (i) a written novation agreement that releases the Issuer or suchRestricted Subsidiary from further liability therefor or (ii) an assignment agreement thatincludes, in lieu of such a release, the agreement of the transferee or its parent companyto indemnify and hold harmless the Issuer or such Restricted Subsidiary from and againstany loss, liability or cost in respect of such assumed liability,

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(b) the amount of any obligations received from such transferee that are within 180 daysafter such Asset Sale converted by the Issuer or such Restricted Subsidiary into cash (tothe extent of the cash actually so received), and

(c) the Fair Market Value of (i) any assets (other than securities) received by the Issuer orany Restricted Subsidiary to be used by it in a Permitted Business, (ii) Equity Interestsacquired from a Person other than the Issuer or a Subsidiary in a Person that is aRestricted Subsidiary or in a Person engaged in a Permitted Business that shall becomea Restricted Subsidiary immediately upon the acquisition of such Person by the Issueror a Restricted Subsidiary or (iii) a combination of (i) and (ii).

If at any time any non-cash consideration received by the Issuer or any RestrictedSubsidiary, as the case may be, in connection with any Asset Sale is repaid or converted into orsold or otherwise disposed of for cash (other than interest received with respect to any suchnon-cash consideration), then the date of such repayment, conversion or disposition shall bedeemed to constitute the date of an Asset Sale hereunder and the Net Available Proceedsthereof shall be applied in accordance with this covenant.

Any Asset Sale pursuant to a condemnation, appropriation or other similar taking, includingby deed in lieu of condemnation, or pursuant to the foreclosure or other enforcement of aPermitted Lien or exercise by the related lienholder of rights with respect thereto, including bydeed or assignment in lieu of foreclosure shall not be required to satisfy the conditions set forthin clauses (1) and (2) of the first paragraph of this covenant.

Notwithstanding the foregoing, the 75% limitation referred to above shall be deemedsatisfied with respect to any Asset Sale in which the cash or Cash Equivalents portion of theconsideration received therefrom, determined in accordance with the foregoing provision on anafter-tax basis, is equal to or greater than what the after-tax proceeds would have been hadsuch Asset Sale complied with the aforementioned 75% limitation.

If the Issuer or any Restricted Subsidiary engages in an Asset Sale, the Issuer or suchRestricted Subsidiary shall, no later than 365 days following the consummation thereof, applyall or any of the Net Available Proceeds therefrom to:

(1) prepay, repay, redeem, defease or purchase secured Indebtedness of the Issuer or aRestricted Subsidiary (other than Disqualified Equity Interests, SubordinatedIndebtedness or Indebtedness owed to the Issuer or an Affiliate of the Issuer);

(2) satisfy all mandatory repayment obligations under Credit Facilities arising by reason ofsuch Asset Sale;

(3) repay any Indebtedness which was secured by the assets sold in such Asset Sale; and/or

(4) (A) make any capital expenditure or otherwise invest all or any part of the Net AvailableProceeds thereof in the purchase of assets (other than securities) to be used by theIssuer or any Restricted Subsidiary in the Permitted Business, (B) acquire QualifiedEquity Interests from a Person other than the Issuer or a Subsidiary in a Person that is aRestricted Subsidiary or in a Person engaged in a Permitted Business that shall becomea Restricted Subsidiary immediately upon the consummation of such acquisition or(C) a combination of (A) and (B).

The amount of Net Available Proceeds not applied or invested as provided in the precedingparagraph will constitute “Excess Proceeds.”

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When the aggregate amount of Excess Proceeds equals or exceeds $30.0 million, the Issuerwill be required to make an offer to purchase from all Holders and, if applicable, purchase orredeem (or make an offer to do so) any Pari Passu Indebtedness of the Issuer the provisions ofwhich require the Issuer to purchase or redeem such Indebtedness with the proceeds from anyAsset Sales (or offer to do so), in an aggregate principal amount of Notes and such Pari PassuIndebtedness equal to the amount of such Excess Proceeds as follows:

(1) the Issuer will (a) make an offer to purchase (a “Net Proceeds Offer”) to all Holders inaccordance with the procedures set forth in the Indenture, and (b) purchase or redeem(or make an offer to do so), pro rata in proportion to the respective principal amounts ofthe Notes and such other Indebtedness required to be purchased or redeemed, themaximum principal amount of Notes and Pari Passu Indebtedness that may bepurchased or redeemed out of the amount (the “Payment Amount”) of such ExcessProceeds;

(2) the offer price for the Notes will be payable in cash in an amount equal to 100% of theprincipal amount of the Notes tendered pursuant to a Net Proceeds Offer, plus accruedand unpaid interest thereon, if any, to the date such Net Proceeds Offer isconsummated (the “Offered Price”), in accordance with the procedures set forth in theIndenture, and the purchase or redemption price for such Pari Passu Indebtedness (the“Pari Passu Indebtedness Price”) shall be as set forth in the related documentationgoverning such Indebtedness;

(3) if the aggregate Offered Price of Notes validly tendered and not withdrawn by Holdersthereof exceeds the pro rata portion of the Payment Amount allocable to the Notes,Notes to be purchased will be selected on a pro rata basis; and

(4) upon completion of such Net Proceeds Offer in accordance with the foregoingprovisions, the amount of Excess Proceeds with respect to which such Net ProceedsOffer was made shall be deemed to be zero.

To the extent that the sum of the aggregate Offered Price of Notes tendered pursuant to aNet Proceeds Offer and the aggregate Pari Passu Indebtedness Price paid to the holders of suchPari Passu Indebtedness is less than the Payment Amount relating thereto (such shortfallconstituting a “Net Proceeds Deficiency”), the Issuer may use the Net Proceeds Deficiency, or aportion thereof, for any purposes not otherwise prohibited by the provisions of the Indenture.

Notwithstanding the foregoing, the sale, conveyance or other disposition of all orsubstantially all of the assets of the Issuer and its Restricted Subsidiaries, taken as a whole, willbe governed by the provisions of the Indenture described under the caption “—Change ofControl” and/or the provisions described under the caption “—Certain Covenants—Limitationson Mergers, Consolidations, Etc.” and not by the provisions of the Asset Sale covenant.

The Issuer will comply with applicable tender offer rules, including the requirements ofRule 14e-1 under the Exchange Act and any other applicable laws and regulations in connectionwith the purchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisionsof any securities laws or regulations conflict with the “Limitations on Asset Sales” provisions ofthe Indenture, the Issuer shall comply with the applicable securities laws and regulations andwill not be deemed to have breached its obligations under the “Limitations on Asset Sales”provisions of the Indenture by virtue of this compliance.

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Limitations on Designation of Unrestricted Subsidiaries

The Issuer may designate any Subsidiary (including any newly formed or newly acquiredSubsidiary) of the Issuer as an Unrestricted Subsidiary under the Indenture (a “Designation”)only if:

(1) no Default shall have occurred and be continuing at the time of or after giving effect tosuch Designation; and

(2) the Issuer would be permitted to make, at the time of such Designation, (a) a PermittedInvestment or (b) an Investment pursuant to the first paragraph of “—Limitations onRestricted Payments” above, in either case, in an amount (the “Designation Amount”)equal to the Fair Market Value of the Issuer’s proportionate interest in such Subsidiaryon such date.

No Subsidiary shall be Designated as an Unrestricted Subsidiary unless:

(1) all of the Indebtedness of such Subsidiary and its Subsidiaries shall, at the time ofDesignation, consist of Non-Recourse Debt, except any guarantee given solely tosupport the pledge by the Issuer or any Restricted Subsidiary of the Equity Interests ofsuch Unrestricted Subsidiary, which guarantee is not recourse to the Issuer or anyRestricted Subsidiary, and except for any Contingent Obligations of the Issuer or anyRestricted Subsidiary in respect of Indebtedness of such Unrestricted Subsidiary that ispermitted as both an incurrence of Indebtedness and an Investment (in each case in anamount equal to the amount of such Indebtedness so guaranteed) permitted by thecovenants described under “—Limitations on Additional Indebtedness” and“—Limitations on Restricted Payments” above);

(2) on the date such Subsidiary is Designated an Unrestricted Subsidiary, such Subsidiaryis not party to any agreement, contract, arrangement or understanding (other thanContingent Obligations permitted under clause (1) above) with the Issuer or anyRestricted Subsidiary unless the terms of the agreement, contract, arrangement orunderstanding, taken as a whole, are not materially less favorable to the Issuer or theRestricted Subsidiary than those that could reasonably expected to have been obtainedat the time from Persons who are not Affiliates of the Issuer, as determined in goodfaith by the Issuer;

(3) such Subsidiary is a Person with respect to which neither the Issuer nor any RestrictedSubsidiary has any direct or indirect obligation (a) to subscribe for additional EquityInterests of such Person or (b) to maintain or preserve the Person’s financial conditionor to cause the Person to achieve any specified levels of operating results (in each caseother than Contingent Obligations permitted under clause (1) above); and

(4) such Subsidiary does not guarantee or otherwise directly or indirectly provide creditsupport for any Indebtedness of the Issuer or any Restricted Subsidiary, except for anypledge of the Equity Interests of such Unrestricted Subsidiary to secure Indebtedness ofthe Issuer or any Restricted Subsidiary.

If, at any time, any Unrestricted Subsidiary fails to meet the preceding requirements as anUnrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposesof the Indenture and any Indebtedness of the Subsidiary and any Liens on assets of suchSubsidiary shall be deemed to be incurred by a Restricted Subsidiary at such time and, if theIndebtedness is not permitted to be incurred under the covenant described under “—Limitationson Additional Indebtedness” or the Lien is not permitted under the covenant described under“—Limitations on Liens,” the Issuer shall be in default of the applicable covenant.

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The Issuer may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary (a“Redesignation”) only if:

(1) no Default shall have occurred and be continuing at the time of and after giving effectto such Redesignation; and

(2) all Liens, Indebtedness and Investments of such Unrestricted Subsidiary outstandingimmediately following such Redesignation would, if incurred or made at such time,have been permitted to be incurred or made for all purposes of the Indenture.

All Designations and Redesignations must be evidenced by resolutions of the Board ofDirectors of the Issuer, delivered to the Trustee certifying compliance with the foregoingprovisions.

Limitations on Mergers, Consolidations, Etc.

The Issuer will not, directly or indirectly, in a single transaction or a series of relatedtransactions, consolidate or merge with or into another Person, or sell, lease, transfer, convey orotherwise dispose of or assign all or substantially all of the assets of the Issuer and theRestricted Subsidiaries (taken as a whole) unless:

(1) either:

(a) the Issuer will be the surviving or continuing Person; or

(b) the Person (if other than the Issuer) formed by or surviving such consolidation ormerger or to which such sale, lease, transfer, conveyance or other disposition orassignment shall be made (collectively, the “Successor”) is a corporation, limitedliability company or limited partnership organized and existing under the laws ofany Permitted Jurisdiction (provided that, if the surviving Person is not organizedand validly existing under the laws of the United States, any state of theUnited States or the District of Columbia, such Person will execute customarydocumentation relating to submission to jurisdiction, service of process and otherrelated matters as set forth in the indenture), and the Successor expressly assumes,by agreements in form and substance reasonably satisfactory to the Trustee, all ofthe obligations of the Issuer under the Notes and the Indenture;

(2) immediately after giving effect to such transaction and the assumption of theobligations as set forth in clause (1)(b) above and the incurrence of any Indebtedness tobe incurred in connection therewith, and the use of any net proceeds of suchIndebtedness on a pro forma basis, no Default shall have occurred and be continuing;and

(3) immediately after giving effect to such transaction and the assumption of theobligations as set forth in clause (1)(b) above and the incurrence of any Indebtedness tobe incurred in connection therewith, and the use of any net proceeds of suchIndebtedness on a pro forma basis either (x) the Issuer or the Successor, as the casemay be, could incur $1.00 of additional Indebtedness (other than PermittedIndebtedness) pursuant to the Coverage Ratio Exception or (y) the Consolidated InterestCoverage Ratio for the Issuer or the Successor, as the case may be, would be equal toor greater than such ratio for the Issuer immediately prior to such transaction.

For purposes of this covenant, any Indebtedness of the Successor which was notIndebtedness of the Issuer immediately prior to the transaction shall be deemed to have beenincurred in connection with such transaction to the extent such Indebtedness remainsoutstanding immediately after giving effect to such transaction.

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Except as provided in the sixth paragraph under the caption “—Note Guarantees,” noGuarantor may consolidate with or merge with or into (whether or not such Guarantor is thesurviving Person) another Person, unless:

(1) either:

(a) such Guarantor will be the surviving or continuing Person; or

(b) the Person (if other than such Guarantor) formed by or surviving any suchconsolidation or merger is another Guarantor or assumes, by agreements in formand substance reasonably satisfactory to the Trustee, all of the obligations of suchGuarantor under the Note Guarantee of such Guarantor and the Indenture; and

(2) immediately after giving effect to such transaction, no Default shall have occurred andbe continuing.

For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in asingle transaction or series of transactions) of all or substantially all of the properties or assetsof one or more Restricted Subsidiaries, the Equity Interests of which constitute all orsubstantially all of the properties and assets of the Issuer, will be deemed to be the transfer ofall or substantially all of the properties and assets of the Issuer.

Upon any consolidation, combination or merger of the Issuer or a Guarantor, or anytransfer of all or substantially all of the assets of the Issuer in accordance with the foregoing, inwhich the Issuer or such Guarantor is not the continuing obligor under the Notes or its NoteGuarantee, the surviving entity formed by such consolidation or into which the Issuer or suchGuarantor is merged or the Person to which the sale, conveyance, lease, transfer, disposition orassignment is made will succeed to, and be substituted for, and may exercise every right andpower of, the Issuer or such Guarantor under the Indenture, the Notes and the Note Guaranteeswith the same effect as if such surviving entity had been named therein as the Issuer or suchGuarantor and, except in the case of a lease, the Issuer or such Guarantor, as the case may be,will be released from the obligation to pay the principal of and interest on the Notes or inrespect of its Note Guarantee, as the case may be, and all of the Issuer’s or such Guarantor’sother obligations and covenants under the Notes, the Indenture and its Note Guarantee, ifapplicable.

Notwithstanding the foregoing, (i) any Restricted Subsidiary may consolidate with, mergewith or into or convey, transfer or lease, in one transaction or a series of transactions, all orsubstantially all of its assets to the Issuer or another Restricted Subsidiary and (ii) the Issuer orany Guarantor may consolidate with, merge with or into or convey, transfer or lease, in onetransaction or a series of transactions, all or substantially all of its assets to the Issuer or anotherGuarantor or merge with a Restricted Subsidiary of the Issuer solely for the purpose ofreincorporating the Issuer or a Guarantor in a Permitted Jurisdiction.

Notwithstanding the foregoing, clause (3) above will not prohibit the Issuer from enteringinto a transaction as a result of which the Issuer is reorganized in a Permitted Jurisdiction.

Additional Note Guarantees

If, after the Issue Date, (a) the Issuer or any Restricted Subsidiary shall acquire or createanother Domestic Restricted Subsidiary, or (b) any Unrestricted Subsidiary is Redesignated aDomestic Restricted Subsidiary, and (in each such case) such Domestic Restricted Subsidiaryguarantees any Indebtedness under any Credit Facility, then the Issuer shall, within 15 BusinessDays, cause such Domestic Restricted Subsidiary to:

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(1) execute and deliver to the Trustee a supplemental indenture substantially in the formprescribed by the Indenture pursuant to which such Domestic Restricted Subsidiaryshall unconditionally guarantee all of the Issuer’s obligations under the Notes and theIndenture; and

(2) deliver to the Trustee one or more opinions of counsel specified in the Indenture.

Conduct of Business

The Issuer will engage, and will cause its Restricted Subsidiaries to engage, only inbusinesses that, when considered together as a single enterprise, are primarily the PermittedBusiness.

Reports

Whether or not required by the SEC, so long as any Notes are outstanding, the Issuer willfurnish to the Holders of Notes, or file electronically with the SEC through the SEC’s ElectronicData Gathering, Analysis and Retrieval System (or any successor system), within the timeperiods applicable to the Issuer under Section 13(a) or 15(d) of the Exchange Act:

(1) all quarterly and annual financial information that would be required to be contained ina filing with the SEC on Forms 10-Q and 10-K if the Issuer were required to file theseForms, including a “Management’s Discussion and Analysis of Financial Condition andResults of Operations” and, with respect to the annual information only, a report on theannual financial statements by the Issuer’s certified independent accountants; and

(2) all current reports that would be required to be filed with the SEC on Form 8-K if theIssuer were required to file these reports.

In addition, whether or not required by the SEC, the Issuer will file a copy of all of theinformation and reports referred to in clauses (1) and (2) above with the SEC for publicavailability within the time periods specified in the SEC’s rules and regulations (unless theSEC will not accept the filing) and make the information available to securities analysts andprospective investors upon request. The Issuer and the Guarantors have agreed that, for so longas any Notes remain outstanding, the Issuer will furnish to the Holders and to securitiesanalysts and prospective investors, upon their request, the information required to be deliveredpursuant to Rule 144A(d)(4) under the Securities Act.

Events of Default

Each of the following is an “Event of Default”:

(1) failure to pay interest on any of the Notes when the same becomes due and payableand the continuance of any such failure for 30 days;

(2) failure to pay the principal of any of the Notes when it becomes due and payable,whether at stated maturity, upon redemption, upon purchase, upon acceleration orotherwise;

(3) failure by the Issuer to comply with any of its agreements or covenants describedabove under “—Certain Covenants—Limitations on Mergers, Consolidations, Etc.,” orin respect of its obligations to make a Change of Control Offer as described under“—Change of Control”;

(4) (a) except with respect to the covenant described under the heading “—CertainCovenants—Reports,” failure by the Issuer to comply with any other agreement or

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covenant in the Indenture and continuance of this failure for 60 days after notice of thefailure has been given to the Issuer by the Trustee or by the Holders of at least 25% ofthe aggregate principal amount of the Notes then outstanding, or (b) failure by theIssuer for 120 days after notice of the failure has been given to the Issuer by the Trusteeor by the Holders of at least 25% of the aggregate principal amount of the Notes thenoutstanding to comply with the covenant described under the heading “—CertainCovenants—Reports”;

(5) default by the Issuer or any Restricted Subsidiary under any mortgage, indenture orother instrument or agreement under which there may be issued or by which there maybe secured or evidenced Indebtedness for borrowed money by the Issuer or anyRestricted Subsidiary, whether such Indebtedness now exists or is incurred after theIssue Date, which default:

(a) is caused by a failure to pay at final maturity principal on such Indebtedness withinthe applicable express grace period and any extensions thereof, or

(b) results in the acceleration of such Indebtedness prior to its express final maturity(which acceleration is not rescinded, annulled or otherwise cured within 30 days ofreceipt by the Issuer or such Restricted Subsidiary of notice of any suchacceleration),

and, in each case, the principal amount of such Indebtedness, together with theprincipal amount of any other Indebtedness with respect to which an event described inclause (a) or (b) has occurred and is continuing, aggregates $25.0 million or more;provided that such Event of Default shall cease to be an Event of Default if (x) theIndebtedness that is the subject of such Event of Default has been repaid, or (y) thedefault relating to such Indebtedness is waived or cured and if such Indebtedness hasbeen accelerated, and then the holders thereof have rescinded their declaration ofacceleration in respect of such Indebtedness;

(6) one or more judgments (to the extent not covered by insurance) for the payment ofmoney in an aggregate amount in excess of $25.0 million shall be rendered against theIssuer, any of the Guarantors or any combination thereof and the same shall remainundischarged for a period of 60 consecutive days during which execution shall not beeffectively stayed;

(7) certain events of bankruptcy affecting the Issuer or any of its Significant Subsidiaries; or

(8) any Note Guarantee of any Significant Subsidiary ceases to be in full force and effect(other than in accordance with the terms of such Note Guarantee and the Indenture) oris declared null and void and unenforceable or found to be invalid or any Guarantordenies its liability under its Note Guarantee (other than by reason of release of aGuarantor from its Note Guarantee in accordance with the terms of the Indenture andthe Note Guarantee).

If an Event of Default (other than an Event of Default specified in clause (7) above withrespect to the Issuer), shall have occurred and be continuing under the Indenture, the Trustee,by written notice to the Issuer, or the Holders of at least 25% in aggregate principal amount ofthe Notes then outstanding, by written notice to the Issuer and the Trustee, may declare (an“acceleration declaration”) all amounts owing under the Notes to be due and payable. Uponsuch declaration of acceleration, the aggregate principal of and accrued and unpaid interest onthe outstanding Notes shall become due and payable upon the earlier of (x) the final maturity(after giving effect to any applicable grace period or extensions thereof) or an acceleration ofany Indebtedness under any Credit Facility prior to the express final stated maturity thereof and

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(y) five Business Days after the collateral agent under each Credit Facility receives theacceleration declaration, but only if such Event of Default is then continuing; provided, however,that after such acceleration, but before a judgment or decree based on acceleration, the Holdersof a majority in aggregate principal amount of such outstanding Notes may rescind and annulsuch acceleration if all Events of Default, other than the nonpayment of accelerated principaland interest, have been cured or waived as provided in the Indenture. If an Event of Defaultspecified in clause (7) with respect to the Issuer occurs, all outstanding Notes shall become dueand payable without any further action or notice to the extent permitted by applicable law.

Holders of the Notes may not enforce the Indenture or the Notes except as provided in theIndenture. Subject to indemnification of the Trustee and the satisfaction of certain otherconditions, Holders of a majority in principal amount of the then outstanding Notes may directthe Trustee in its exercise of any trust or power. The Trustee may withhold from Holders of theNotes notice of any Default or Event of Default (except an Event of Default relating to thepayment of principal or interest) if it determines that withholding notice is in their interest.

The Holders of a majority in aggregate principal amount of the Notes then outstanding bynotice to the Trustee may on behalf of the Holders of all of the Notes waive any existing Defaultor Event of Default and its consequences under the Indenture except a continuing Default orEvent of Default in the payment of interest on, or the principal of, the Notes. The Holders of amajority in principal amount of the then outstanding Notes will have the right to direct the time,method and place of conducting any proceeding for exercising any remedy available to theTrustee. However, the Trustee may refuse to follow any direction that conflicts with law or theIndenture, that may involve the Trustee in personal liability, or that the Trustee determines ingood faith may be unduly prejudicial to the rights of Holders of Notes not joining in the givingof such direction and may take any other action it deems proper that is not inconsistent with anysuch direction received from Holders of Notes. A Holder may not pursue any remedy withrespect to the Indenture or the Notes unless:

(1) the Holder gives the Trustee written notice of a continuing Event of Default;

(2) a Holder or Holders of at least 25% in aggregate principal amount of outstanding Notesmake a written request to the Trustee to pursue the remedy;

(3) such Holder or Holders offer the Trustee indemnity satisfactory to the Trustee againstany costs, liability or expense;

(4) the Trustee does not comply with the request within 60 days after receipt of the requestand the offer of indemnity; and

(5) during such 60-day period, the Holders of a majority in aggregate principal amount ofthe outstanding Notes do not give the Trustee a direction that is inconsistent with therequest.

However, such limitations do not apply to the right of any Holder of a Note to receivepayment of the principal of or interest on, such Note or to bring suit for the enforcement of anysuch payment, on or after the due date expressed in the Notes, which right will not be impairedor affected without the consent of the Holder.

The Issuer is required to deliver to the Trustee annually a statement regarding compliancewith the Indenture and, within 30 days after any Officer of the Issuer becoming aware of anyDefault, a statement specifying such Default and what action the Issuer is taking or proposes totake with respect thereto.

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Legal Defeasance and Covenant Defeasance

The Issuer may, at its option and at any time, elect to have its obligations discharged withrespect to the outstanding Notes and all obligations of any Guarantors discharged with respectto their Note Guarantees (“Legal Defeasance”). Legal Defeasance means that the Issuer and theGuarantors shall be deemed to have paid and discharged the entire obligations represented bythe Notes and the Note Guarantees, and the Indenture shall cease to be of further effect as to alloutstanding Notes and Note Guarantees, except as to:

(1) rights of Holders of outstanding Notes to receive payments in respect of the principal ofand interest on such Notes when such payments are due from the trust funds referredto below,

(2) the Issuer’s obligations with respect to the Notes concerning issuing temporary Notes,registration of Notes, mutilated, destroyed, lost or stolen Notes, and the maintenanceof an office or agency for payment and money for security payments held in trust,

(3) the rights, powers, trust, duties, and immunities of the Trustee, and the Issuer’sobligation in connection therewith, and

(4) the Legal Defeasance provisions of the Indenture.

In addition, the Issuer may, at its option and at any time, elect to have its obligations andthe obligations of the Guarantors released with respect to the provisions of the Indenturedescribed above under “—Change of Control” and under “—Certain Covenants” (other than thecovenant described under “—Certain Covenants—Limitations on Mergers, Consolidations, Etc.,”except to the extent described below) and the limitation imposed by clause (3) under “—CertainCovenants—Limitations on Mergers, Consolidations, Etc.” (such release and termination beingreferred to as “Covenant Defeasance”), and thereafter any omission to comply with suchobligations or provisions will not constitute a Default or Event of Default. Covenant Defeasancewill not be effective until such time as bankruptcy, receivership, rehabilitation and insolvencyevents no longer apply. In the event Covenant Defeasance occurs in accordance with theIndenture, the Events of Default described under clauses (3) through (6) under the caption“—Events of Default” and the Event of Default described under clause (7) under the caption“—Events of Default” (but only with respect to Significant Subsidiaries of the Issuer), in eachcase, will no longer constitute an Event of Default. The Issuer may exercise its Legal Defeasanceoption regardless of whether it previously exercised Covenant Defeasance.

In order to exercise either Legal Defeasance or Covenant Defeasance:

(1) the Issuer must irrevocably deposit with the Trustee, as trust funds, in trust solely forthe benefit of the Holders, U.S. legal tender, U.S. Government Obligations or acombination thereof, in such amounts as will be sufficient (without consideration of anyreinvestment of interest) in the opinion of a nationally recognized investment bank,appraisal firm or firm of independent public accountants selected by the Issuer, to paythe principal of and interest on the outstanding Notes on the stated date for paymentthereof or on the applicable redemption date, as the case may be,

(2) in the case of Legal Defeasance, the Issuer shall have delivered to the Trustee anopinion of counsel in the United States confirming that:

(a) the Issuer has received from, or there has been published by the Internal RevenueService, a ruling, or

(b) since the date of the Indenture, there has been a change in the applicableU.S. federal income tax law,

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in either case to the effect that, and based thereon this opinion of counsel shall confirmthat, the Holders of the outstanding Notes will not recognize income, gain or loss forU.S. federal income tax purposes as a result of the Legal Defeasance and will be subjectto U.S. federal income tax on the same amounts, in the same manner and at the sametimes as would have been the case if such Legal Defeasance had not occurred,

(3) in the case of Covenant Defeasance, the Issuer shall have delivered to the Trustee anopinion of counsel in the United States reasonably acceptable to the Trustee confirmingthat the Holders will not recognize income, gain or loss for U.S. federal income taxpurposes as a result of such Covenant Defeasance and will be subject to U.S. federalincome tax on the same amounts, in the same manner and at the same times as wouldhave been the case if the Covenant Defeasance had not occurred,

(4) no Default shall have occurred and be continuing on the date of such deposit (otherthan a Default resulting from the borrowing of funds to be applied to such deposit andthe grant of any Lien securing such borrowings),

(5) the Legal Defeasance or Covenant Defeasance shall not result in a breach or violationof, or constitute a Default under the Indenture or a default under any other materialagreement or instrument to which the Issuer or any of its Subsidiaries is a party or bywhich the Issuer or any of its Subsidiaries is bound (other than any such Default ordefault resulting solely from the borrowing of funds to be applied to such deposit andthe grant of any Lien securing such borrowings),

(6) the Issuer shall have delivered to the Trustee an Officers’ Certificate stating that thedeposit was not made by it with the intent of preferring the Holders over any other ofits creditors or with the intent of defeating, hindering, delaying or defrauding any otherof its creditors or others, and

(7) the Issuer shall have delivered to the Trustee an Officers’ Certificate and an opinion ofcounsel, each stating that the conditions precedent provided for in, in the case of theOfficers’ Certificate, clauses (1) through (6) and, in the case of the opinion of counsel,clauses (2) and/or (3) and (5) of this paragraph have been complied with.

If the funds deposited with the Trustee to effect Covenant Defeasance are insufficient to paythe principal of and interest on the Notes when due, then the Issuer’s obligations and theobligations of Guarantors under the Indenture will be revived and no such defeasance will bedeemed to have occurred.

Satisfaction and Discharge

The Indenture will be discharged and will cease to be of further effect (except as to rights ofregistration of transfer or exchange of Notes which shall survive until all Notes have beencanceled) as to all outstanding Notes when:

(1) either:

(a) all the Notes that have been authenticated and delivered (except lost, stolen ordestroyed Notes which have been replaced or paid and Notes for whose paymentmoney has been deposited in trust or segregated and held in trust by the Issuerand thereafter repaid to the Issuer or discharged from this trust) have beendelivered to the Trustee for cancellation, or

(b) all Notes not delivered to the Trustee for cancellation otherwise (i) have becomedue and payable, (ii) will become due and payable, or may be called forredemption, within one year or (iii) have been called for redemption pursuant to the

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provisions described under “—Optional Redemption,” and, in any case, the Issuerhas irrevocably deposited or caused to be deposited with the Trustee as trustfunds, in trust solely for the benefit of the Holders, U.S. legal tender,U.S. Government Obligations or a combination thereof, in such amounts as will besufficient (without consideration of any reinvestment of interest) to pay anddischarge the entire Indebtedness (including all principal and accrued interest) onthe Notes not theretofore delivered to the Trustee for cancellation,

(2) the Issuer has paid all other sums payable by it under the Indenture, and

(3) the Issuer has delivered irrevocable instructions to the Trustee to apply the depositedmoney toward the payment of the Notes at maturity or on the date of redemption, asthe case may be.

In addition, the Issuer must deliver an Officers’ Certificate and an opinion of counsel statingthat all conditions precedent to satisfaction and discharge have been complied with.

Transfer and Exchange

A Holder will be able to register the transfer of or exchange Notes only in accordance withthe provisions of the Indenture. The Registrar may require a Holder, among other things, tofurnish appropriate endorsements and transfer documents and to pay any taxes and feesrequired by law or permitted by the Indenture. Without the prior consent of the Issuer, theRegistrar is not required to register the transfer of or exchange any Note (1) selected forredemption, (2) for a period of 15 days before a selection of Notes to be redeemed or(3) between a record date and the next succeeding interest payment date.

The Notes will be issued in registered form and the registered Holder will be treated as theowner of such Note for all purposes.

Amendment, Supplement and Waiver

Except as otherwise provided in the next three succeeding paragraphs, the Indenture or theNotes may be amended with the consent (which may include consents obtained in connectionwith a tender offer or exchange offer for Notes) of the Holders of at least a majority in principalamount of the Notes then outstanding, and any existing Default under, or compliance with anyprovision of, the Indenture may be waived (other than any continuing Default in the payment ofthe principal or interest on the Notes) with the consent (which may include consents obtained inconnection with a tender offer or exchange offer for Notes) of the Holders of a majority inprincipal amount of the Notes then outstanding.

Without the consent of each Holder affected, an amendment or waiver may not (withrespect to any Notes held by a non-consenting Holder):

(1) reduce, or change the maturity of, the principal of any Note;

(2) reduce the rate of or extend the time for payment of interest on any Note;

(3) reduce any premium payable upon redemption of the Notes, change the date on whichany Notes are subject to redemption or waive any payment with respect to theredemption of the Notes; provided, however, that solely for the avoidance of doubt, andwithout any other implication, any purchase or repurchase of Notes (including pursuantto the covenants described above under the captions “—Change of Control” and“—Certain Covenants—Limitations on Asset Sales”) shall not be deemed a redemptionof the Notes;

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(4) make any Note payable in money or currency other than that stated in the Notes;

(5) modify or change any provision of the Indenture or the related definitions to affect theranking of the Notes or any Note Guarantee in a manner that adversely affects theHolders;

(6) reduce the percentage of Holders necessary to consent to an amendment or waiver tothe Indenture or the Notes;

(7) waive a default in the payment of principal of or interest on any Notes (except arescission of acceleration of the Notes by the Holders thereof as provided in theIndenture and a waiver of the payment default that resulted from such acceleration);

(8) impair the rights of Holders to receive payments of principal of or interest on the Noteson or after the due date therefor or to institute suit for the enforcement of any paymenton the Notes;

(9) release any Guarantor that is a Significant Subsidiary from any of its obligations underits Note Guarantee or the Indenture, except as permitted by the Indenture; or

(10) make any change in these amendment and waiver provisions.

Notwithstanding the foregoing, the Issuer and the Trustee may amend the Indenture, theNote Guarantees and the Notes without the consent of any Holder:

(1) to cure any ambiguity, defect, omission, mistake or inconsistency;

(2) to provide for uncertificated Notes in addition to or in place of certificated Notes;

(3) to provide for the assumption of the Issuer’s or a Guarantor’s obligations to the Holdersin the case of a merger, consolidation or sale of all or substantially all of the Issuer’s orsuch Guarantor’s assets in accordance with “—Certain Covenants—Limitations onMergers, Consolidations, Etc.”;

(4) to add any Note Guarantee or to effect the release of any Guarantor from any of itsobligations under its Note Guarantee or the Indenture (to the extent permitted by theIndenture);

(5) to make any change that would provide any additional rights or benefits to the Holdersor that does not materially adversely affect the rights of any Holder;

(6) to effect or maintain the qualification of the Indenture under the Trust Indenture Act;

(7) to secure the Notes or any Note Guarantees or any other obligation under theIndenture;

(8) to evidence and provide for the acceptance of appointment by a successor trustee;

(9) to conform the text of the Indenture or the Notes to any provision of this Description ofthe Notes to the extent that such provision in this Description of the Notes wasintended to be a verbatim recitation of a provision of the Indenture, the NoteGuarantees or the Notes; or

(10) to provide for the issuance of Additional Notes in accordance with the Indenture.

The consent of the Holders of the Notes is not necessary under the Indenture to approve theparticular form of any proposed amendment or waiver. It is sufficient if such consent approvesthe substance of the proposed amendment or waiver.

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After an amendment under the Indenture becomes effective, the Issuer is required to mail toHolders of the Notes a notice briefly describing such amendment. However, the failure to givesuch notice to all Holders of the Notes, or any defect therein, will not impair or affect the validityof the amendment.

No Personal Liability of Directors, Officers, Employees and Stockholders

No director, officer, employee, incorporator or stockholder of the Issuer or any Guarantorwill have any liability for any obligations of the Issuer under the Notes or the Indenture or of anyGuarantor under its Note Guarantee or for any claim based on, in respect of, or by reason of,such obligations or their creation. Each Holder by accepting a Note waives and releases all suchliability. The waiver and release are part of the consideration for issuance of the Notes and theNote Guarantees. The waiver may not be effective to waive liabilities under the federalsecurities laws. It is the view of the SEC that this type of waiver is against public policy.

Concerning the Trustee

U.S. Bank National Association is the Trustee under the Indenture and has been appointedby the Issuer as Registrar and Paying Agent with regard to the Notes. The Indenture containscertain limitations on the rights of the Trustee, should it become a creditor of the Issuer, toobtain payment of claims in certain cases, or to realize for its own account on certain assetsreceived in respect of any such claim as security or otherwise. The Trustee will be permitted toengage in other transactions; however, if it acquires any conflicting interest (within the meaningof the Trust Indenture Act) after a Default has occurred and is continuing, it must eliminate suchconflict within 90 days, apply to the SEC for permission to continue (if the Indenture has beenqualified under the Trust Indenture Act) or resign.

The Holders of a majority in principal amount of the then outstanding Notes will have theright to direct the time, method and place of conducting any proceeding for exercising anyremedy available to the Trustee, subject to certain exceptions. The Indenture provides that, if anEvent of Default occurs and is not cured or waived, the Trustee will be required, in the exerciseof its power, to use the degree of care of a prudent person in similar circumstances in theconduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation toexercise any of its rights or powers under the Indenture at the request of any Holder, unlesssuch Holder shall have offered to the Trustee security and indemnity satisfactory to the Trustee.

Governing Law

The Indenture, the Notes and the Note Guarantees will be governed by, and construed inaccordance with, the laws of the State of New York.

Certain Definitions

Set forth below is a summary of certain of the defined terms used in the Indenture.Reference is made to the Indenture for the full definition of all such terms.

“Acquired Indebtedness” means (1) with respect to any Person that becomes a RestrictedSubsidiary after the Issue Date, Indebtedness of such Person and its Subsidiaries (including, forthe avoidance of doubt, Indebtedness incurred in the ordinary course of such Person’s businessto acquire assets used or useful in its business) existing at the time such Person becomes aRestricted Subsidiary that was not incurred in connection with, or in contemplation of, suchPerson becoming a Restricted Subsidiary and (2) with respect to the Issuer or any Restricted

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Subsidiary, any Indebtedness of a Person (including, for the avoidance of doubt, Indebtednessincurred in the ordinary course of such Person’s business to acquire assets used or useful in itsbusiness), other than the Issuer or a Restricted Subsidiary, existing at the time such Person ismerged with or into the Issuer or a Restricted Subsidiary, or Indebtedness expressly assumedby the Issuer or any Restricted Subsidiary in connection with the acquisition of an asset orassets from another Person, which Indebtedness was not, in any case, incurred by such otherPerson in connection with, or in contemplation of, such merger or acquisition.

“Affiliate” of any Person means any other Person which directly or indirectly controls or iscontrolled by, or is under direct or indirect common control with, the referent Person. Forpurposes of this definition, “control” of a Person shall mean the power to direct themanagement and policies of such Person, directly or indirectly, whether through the ownershipof voting securities, by contract or otherwise.

“amend” means to amend, supplement, restate, amend and restate or otherwise modify,including successively, and “amendment” shall have a correlative meaning.

“asset” means any asset or property.

“Asset Acquisition” means

(1) an Investment by the Issuer or any Restricted Subsidiary in any other Person if, as aresult of such Investment, such Person shall become a Restricted Subsidiary, or shall be mergedwith or into the Issuer or any Restricted Subsidiary, or

(2) the acquisition by the Issuer or any Restricted Subsidiary of all or substantially all of theassets of any other Person (other than a Restricted Subsidiary) or any division or line ofbusiness of any such other Person (other than in the ordinary course of business).

“Asset Sale” means any sale, issuance, conveyance, transfer, lease, assignment or otherdisposition by the Issuer or any Restricted Subsidiary to any Person other than the Issuer or anyRestricted Subsidiary (including by means of a sale and leaseback transaction or a merger orconsolidation) (collectively, for purposes of this definition, a “transfer”), in one transaction or aseries of related transactions, of any assets of the Issuer or any of its Restricted Subsidiariesother than in the ordinary course of business. For purposes of this definition, the term “AssetSale” shall not include:

(1) transfers of cash or Cash Equivalents;

(2) transfers of assets (including Equity Interests) that are governed by, and made inaccordance with, the covenants described under “—Change of Control” or “—CertainCovenants—Limitations on Mergers, Consolidations, Etc.”;

(3) (a) any Restricted Payment that does not violate the covenant described above under thecaption “—Certain Covenants—Limitations on Restricted Payments”; including the issuance orsale of Equity Interests or the sale, lease or other disposition of products, services, equipment,inventory, accounts receivable or other assets pursuant to any such Restricted Payment and(b) the consummation of any Permitted Investment, including, without limitation, unwindingany Hedging Obligations, and including the issuance or sale of Equity Interests or the sale, leaseor other disposition of products, services, equipment, inventory, accounts receivable or otherassets pursuant to any such Permitted Investment;

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(4) the creation of or realization on any Lien permitted under the Indenture and anydisposition of assets resulting from the enforcement or foreclosure of any such Lien;

(5) the sale, lease (including any charter of a vessel, whether bareboat or otherwise) orother disposition of equipment, inventory, products, services, accounts receivable or otherassets in the ordinary course of business, including in connection with any compromise,settlement or collection of accounts receivable, and transfers of damaged, worn-out or obsoleteequipment or assets that, in the Issuer’s reasonable judgment, are no longer used or useful inthe business of the Issuer or its Restricted Subsidiaries;

(6) sales or grants of licenses or sublicenses to use the patents, trade secrets, know-howand other intellectual property, and licenses, leases or subleases of other assets, of the Issuer orany Restricted Subsidiary to the extent not materially interfering with the business of Issuer andthe Restricted Subsidiaries;

(7) the trade or exchange by the Issuer or any Restricted Subsidiary of any asset for anyother asset or assets; provided that the Fair Market Value of the asset or assets received by theIssuer or such Restricted Subsidiary in such trade or exchange (including any cash or CashEquivalents) is at least equal to the Fair Market Value (as determined in good faith by the Boardof Directors or an executive officer of the Issuer or of such Restricted Subsidiary withresponsibility for such transaction, which determination shall be conclusive evidence ofcompliance with this provision) of the asset or assets disposed of by the Issuer or suchRestricted Subsidiary pursuant to such trade or exchange; and, provided, further, that if anycash or Cash Equivalents are used in such trade or exchange to achieve an exchange ofequivalent value, that the amount of such cash and/or Cash Equivalents shall be deemedproceeds of an “Asset Sale,” subject to clause (12) below;

(8) any surrender or waiver of contract rights or the settlement, release or surrender ofcontract, tort or other claims of any kind;

(9) sales or transfers of Equity Interests of Unrestricted Subsidiaries;

(10) transfers of property subject to casualty or condemnation proceedings;

(11) voluntary termination of Hedging Obligations; and

(12) any single transfer or series of related transfers that involves assets having a FairMarket Value of less than $5.0 million.

“Board of Directors” means, with respect to any Person, (1) in the case of any corporation,the board of directors of such Person, (2) in the case of any partnership, the Board of Directorsof the general partner of such Person and (3) in any other case, the functional equivalent of theforegoing or, in each case, other than for purposes of the definition of “Change of Control,” anyduly authorized committee of such body.

“Business Day” means a day other than a Saturday, Sunday or other day on which bankinginstitutions in New York are authorized or required by law to close.

“Capitalized Lease” means a lease required to be capitalized for financial reportingpurposes in accordance with GAAP. Notwithstanding the foregoing, any lease that would havebeen classified as an operating lease pursuant to U.S. generally accepted accounting principlesas in effect on the Issue Date shall be deemed not to be a Capitalized Lease.

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“Capitalized Lease Obligations” of any Person means the obligations of such Person to payrent or other amounts under a Capitalized Lease, and the amount of such obligation shall be thecapitalized amount thereof determined in accordance with GAAP.

“Cash Equivalents” means:

(1) marketable obligations issued or directly and fully guaranteed or insured by theUnited States of America or any agency or instrumentality thereof (provided that the full faithand credit of the United States of America is pledged in support thereof), maturing within 365days of the date of acquisition thereof;

(2) demand and time deposits and certificates of deposit of any lender under any CreditFacility or any commercial bank having, or which is the principal banking subsidiary of a bankholding company organized under the laws of the United States, any state thereof or the Districtof Columbia having, capital and surplus aggregating in excess of $300.0 million and a rating of“BBB” (or such other similar equivalent rating) or higher by at least one nationally recognizedstatistical rating organization (as defined in Rule 436 under the Securities Act) maturing within365 days of the date of acquisition thereof;

(3) commercial paper issued by any Person incorporated in the United States rated, at thetime of acquisition thereof, at least A-1 or the equivalent thereof by S&P or at least P-1 or theequivalent thereof by Moody’s or having an equivalent rating by a nationally recognized ratingagency if both S&P and Moody’s cease publishing ratings of commercial paper issuersgenerally, and in each case maturing not more than one year after the date of acquisitionthereof;

(4) repurchase obligations with a term of not more than 30 days for underlying securities ofthe types described in clause (1) or (2) above or clause (5) below entered into with any bankmeeting the qualifications specified in clause (2) above;

(5) securities issued and fully guaranteed by any state, commonwealth or territory of theUnited States of America, or by any political subdivision or taxing authority thereof, rated, at thetime of acquisition thereof, at least “A” by Moody’s or S&P and having maturities of not morethan one year from the date of acquisition thereof;

(6) investments in money market or other mutual funds substantially all of whose assetscomprise securities of the types described in clauses (1) through (5) above;

(7) demand deposit accounts maintained in the ordinary course of business; and

(8) in the case of any Subsidiary of the Issuer organized or having its principal place ofbusiness outside the United States of America, investments denominated in the currency of thejurisdiction in which such Subsidiary is organized or has its principal place of business that aresimilar to the items specified in clauses (1) through (7) above.

“Change of Control” means the occurrence of any of the following events:

(1) the direct or indirect sale, transfer, conveyance or other disposition (other than by wayof merger or consolidation), in one transaction or a series of related transactions, of all orsubstantially all of the properties or assets of the Issuer and its Restricted Subsidiaries, taken asa whole, to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act), whichoccurrence is accompanied by a Rating Decline; provided that a Change of Control shall not bedeemed to occur by reason of a transaction with one or more Restricted Subsidiaries of theIssuer solely for the purpose of reorganizing the Issuer in a Permitted Jurisdiction;

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(2) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of theExchange Act), is or becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 underthe Exchange Act, except that for purposes of this clause that person or group shall be deemedto have “beneficial ownership” of all securities that any such person or group has the right toacquire, whether such right is exercisable immediately or only after the passage of time),directly or indirectly, of Voting Stock representing 50.0% or more of the voting power of thetotal outstanding Voting Stock of the Issuer, which occurrence is accompanied by a RatingDecline;

(3) during any period of two consecutive years, individuals who at the beginning of suchperiod constituted the Board of Directors (together with any new directors whose election tosuch Board of Directors or whose nomination for election by the stockholders of the Issuer wasrecommended by a vote of a majority of the directors of the Issuer then still in office who wereeither directors at the beginning of such period or whose election or nomination for electionwas previously recommended) cease for any reason to constitute a majority of the Board ofDirectors of the Issuer, which occurrence is accompanied by a Rating Decline;

(4) the adoption by the stockholders of the Issuer of a Plan of Liquidation; and

(5) any event that constitutes a Change of Control under the indentures governing theIssuer’s senior unsecured debt securities outstanding as of the Issue Date, for as long as anysuch senior unsecured debt securities (other than the Issuer’s convertible senior notes) areoutstanding and entitled to the benefits of an offer to purchase such securities as a result ofsuch Change of Control.

For purposes of this definition (a) an event or occurrence shall be deemed to be“accompanied by a Rating Decline” only if a Rating Decline occurs during the period beginningupon the first public announcement of the event or occurrence and ending 90 days after theevent or occurrence is completed or effective, and (b) a Person shall not be deemed to havebeneficial ownership of securities subject to a stock purchase agreement, merger agreement orsimilar agreement until the consummation of the transactions contemplated by suchagreement.

“Consolidated Amortization Expense” for any period means the amortization expense ofthe Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis inaccordance with GAAP.

“Consolidated Cash Flow” for any period means, without duplication, the sum of theamounts for such period of

(1) Consolidated Net Income, plus

(2) in each case only to the extent (and in the same proportion) deducted in determiningConsolidated Net Income and with respect to the portion of Consolidated Net Incomeattributable to any Restricted Subsidiary that is not a Guarantor only if a corresponding amountwould be permitted at the date of determination to be distributed to the Issuer by suchRestricted Subsidiary without prior approval (that has not been obtained), pursuant to the termsof its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules andgovernmental regulations applicable to such Restricted Subsidiary or its stockholders,

(a) Consolidated Income Tax Expense,

(b) Consolidated Amortization Expense (but only to the extent not included inConsolidated Interest Expense),

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(c) Consolidated Depreciation Expense, and

(d) Consolidated Interest Expense,

in each case determined on a consolidated basis in accordance with GAAP, minus

(3) the aggregate amount of all non-cash items, determined on a consolidated basis, to theextent such items increased Consolidated Net Income for such period (excluding any non-cashitems to the extent they represent the reversal of an accrual of a reserve for a potential cashitem that reduced Consolidated Cash Flow in any prior period), and excluding

(4) any gain (or loss), together with any related provisions for taxes on any such gain (or thetax effect of any such loss), realized during such period by the Issuer or any RestrictedSubsidiary upon (i) any Asset Sale by the Issuer or any Restricted Subsidiary, and (ii) anyextraordinary or nonrecurring gain (or extraordinary or nonrecurring loss), together with anyrelated provision for taxes on any such extraordinary or nonrecurring gain (or the tax effect ofany such extraordinary or nonrecurring loss), recorded or realized by the Issuer or anyRestricted Subsidiary during such period.

For purposes of this definition of “Consolidated Cash Flow,” “nonrecurring” means anygain or loss as of any date that is not reasonably likely to recur within the two years followingsuch date; provided that if there was a gain or loss similar to such gain or loss within the twoyears preceding such date, such gain or loss shall not be deemed nonrecurring.

“Consolidated Depreciation Expense” for any period means the depreciation expense of theIssuer and the Restricted Subsidiaries for such period, determined on a consolidated basis inaccordance with GAAP.

“Consolidated Income Tax Expense” for any period means the provision for taxes of theIssuer and the Restricted Subsidiaries, determined on a consolidated basis in accordance withGAAP.

“Consolidated Interest Coverage Ratio” means the ratio of Consolidated Cash Flow duringthe most recent four consecutive full fiscal quarters for which financial statements are available(the “Four-Quarter Period”) ending on or prior to the date of the transaction giving rise to theneed to calculate the Consolidated Interest Coverage Ratio (the “Transaction Date”) toConsolidated Interest Expense for the Four-Quarter Period. For purposes of this definition,Consolidated Cash Flow and Consolidated Interest Expense shall be calculated after givingeffect on a pro forma basis (including the pro forma effect of (x) any expense or cost reductionsthat have occurred or, in the reasonable judgment of the Issuer, are reasonably expected tooccur and (y) the expected income, based on current market rates, from any Vessel Acquisition(regardless of whether these operating improvements, cost savings or expected income couldthen be reflected in pro forma financial statements prepared in accordance with Regulation S-Xunder the Securities Act or any other regulation or policy of the SEC related thereto)) for theperiod of such calculation to:

(1) the incurrence of any Indebtedness by or the issuance of any Preferred Stock of theIssuer or any Restricted Subsidiary (and the application of the proceeds thereof) and anyrepayment, repurchase, retirement, extinguishment or redemption of other Indebtedness orother Preferred Stock (and the application of the proceeds therefrom) (other than the incurrenceor repayment of Indebtedness in the ordinary course of business for working capital purposespursuant to any revolving credit arrangement) occurring during the Four-Quarter Period or atany time subsequent to the last day of the Four-Quarter Period and on or prior to the

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Transaction Date, as if such incurrence, repayment, repurchase, retirement, extinguishment,issuance or redemption, as the case may be (and the application of the proceeds thereof),occurred on the first day of the Four-Quarter Period; and

(2) any Asset Sale, Vessel Acquisition or Asset Acquisition (including, without limitation,any Vessel Acquisition or Asset Acquisition giving rise to the need to make such calculation as aresult of the Issuer or any Restricted Subsidiary (including any Person who becomes aRestricted Subsidiary as a result of such Asset Acquisition) incurring Acquired Indebtedness andalso including any Consolidated Cash Flow attributable to such Vessel Acquisition or AssetAcquisition occurring during the Four-Quarter Period or at any time subsequent to the last dayof the Four-Quarter Period and on or prior to the Transaction Date), as if such Asset Sale, VesselAcquisition or Asset Acquisition (including the incurrence of, or assumption or liability for, anysuch Acquired Indebtedness) occurred on the first day of the Four-Quarter Period (and withoutregard to clause (2) of the definition of Consolidated Net Income).

In calculating Consolidated Interest Expense for purposes of determining the denominator(but not the numerator) of this Consolidated Interest Coverage Ratio:

(1) interest on outstanding Indebtedness determined on a fluctuating basis as of theTransaction Date and which will continue to be so determined thereafter shall be deemed tohave accrued during the Four-Quarter Period at a fixed rate per annum equal to the rate ofinterest on such Indebtedness in effect on the Transaction Date;

(2) if interest on any Indebtedness actually incurred on the Transaction Date may optionallybe determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrencyinterbank offered rate, or other rates, then the interest rate in effect on the Transaction Date willbe deemed to have been in effect during the Four-Quarter Period; and

(3) notwithstanding clause (1) or (2) above, interest on Indebtedness determined on afluctuating basis, to the extent such interest is covered by agreements relating to HedgingObligations, shall be deemed to have accrued during the Four-Quarter Period at the rate perannum resulting after giving effect to the operation of these agreements.

“Consolidated Interest Expense” for any period means the sum, without duplication, of thetotal interest expense of the Issuer and the Restricted Subsidiaries for such period, determinedon a consolidated basis in accordance with GAAP and including, without duplication,

(1) imputed interest on Capitalized Lease Obligations,

(2) commissions, discounts and other fees and charges owed with respect to letters of creditsecuring financial obligations, bankers’ acceptance financing and receivables financings,

(3) the net costs associated with Hedging Obligations related to interest rates,

(4) the interest portion of any deferred payment obligations,

(5) all other non-cash interest expense,

(6) capitalized interest,

(7) all dividend payments on any series of Disqualified Equity Interests of the Issuer or anyof its Restricted Subsidiaries or any Preferred Stock of any Restricted Subsidiary (other thandividends on Equity Interests payable solely in Qualified Equity Interests to the Issuer or aRestricted Subsidiary),

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(8) all interest payable with respect to discontinued operations, and

(9) all interest on any Indebtedness described in clause (7) or (8) of the definition ofIndebtedness;

provided that (a) amortization of debt issuance costs, debt discount or premium and otherfinancing fees and expenses shall be excluded from Consolidated Interest Expense and (b) non-cash interest expense attributable to the equity component of convertible debt, including underASC Topic 470, shall be excluded from Consolidated Interest Expense.

Notwithstanding the foregoing, if any lease or other liability is reclassified as indebtednessor as a Capitalized Lease Obligation due to a change in accounting principles after the IssueDate, the interest component of all payments associated with such lease or other liability shallbe excluded from Consolidated Interest Expense.

“Consolidated Net Income” for any period means the net income (or loss) of the Issuer andthe Restricted Subsidiaries for such period determined on a consolidated basis in accordancewith GAAP; provided that there shall be excluded from such net income (or loss) (to the extentotherwise included therein), without duplication:

(1) the net income (or loss) of any Person (other than a Restricted Subsidiary) in which anyPerson other than the Issuer and the Restricted Subsidiaries has an ownership interest, exceptto the extent that cash in an amount up to the Issuer’s share of any such income has actuallybeen received from such Person by the Issuer or any of its Restricted Subsidiaries during suchperiod; provided, however, that there shall be included in Consolidated Net Income for suchperiod any dividends or other distributions paid in cash to the Issuer or any of its RestrictedSubsidiaries by such Person in such period with respect to any portion of the net income ofsuch Person allocable to the Issuer or any of its Restricted Subsidiaries excluded fromConsolidated Net Income in a previous fiscal period pursuant to the preceding provisions of thisclause (1);

(2) except to the extent includible in the consolidated net income (or loss) of the Issuerpursuant to the foregoing clause (1), the net income (or loss) of any Person that accrued prior tothe date that (a) such Person becomes a Restricted Subsidiary or is merged into or consolidatedwith the Issuer or any Restricted Subsidiary or (b) the assets of such Person are acquired by theIssuer or any Restricted Subsidiary;

(3) the net income of any Restricted Subsidiary that is not a Guarantor during such period tothe extent that the declaration or payment of dividends or similar distributions by suchRestricted Subsidiary of that income is not permitted by operation of the terms of its charter orany agreement, instrument, judgment, decree, order, statute, rule or governmental regulationapplicable to that Subsidiary during such period, except that the Issuer’s equity in a net loss ofany such Restricted Subsidiary for such period shall be included in determining ConsolidatedNet Income;

(4) for the purposes of calculating the Restricted Payments Basket only, in the case of asuccessor to the Issuer by consolidation, merger or transfer of its assets, any income (or loss) ofthe successor prior to such merger, consolidation or transfer of assets;

(5) gains and losses due solely to fluctuations in currency values and the related tax effectsaccording to GAAP;

(6) unrealized gains and losses with respect to Hedging Obligations;

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(7) the cumulative effect of any change in accounting principles or polices sinceDecember 31, 2011;

(8) gains or losses attributable to discontinued operations;

(9) any gain (or loss), together with any related provisions for taxes on any such gain (or the taxeffect of any such loss), realized during such period by the Issuer or any Restricted Subsidiary upon(a) the acquisition of any securities, or the extinguishment of any Indebtedness, of the Issuer or anySubsidiary or (b) any Asset Sale by the Issuer or any Restricted Subsidiary;

(10) extraordinary gains and losses and the related tax effect;

(11) non-cash interest expense attributable to the equity component of convertible debt,including under ASC Topic 470; and

(12) all other non-cash items (other than Consolidated Amortization Expense, ConsolidatedDepreciation Expense or any non-cash charge that results in an accrual of a reserve for cashcharges in any future period).

In addition, any return of capital with respect to an Investment that increased the RestrictedPayments Basket pursuant to clause (3)(d) of the first paragraph under “—Certain Covenants—Limitations on Restricted Payments” or decreased the amount of Investments outstandingpursuant to clause (19) of the definition of “Permitted Investments” shall be excluded fromConsolidated Net Income for purposes of calculating the Restricted Payments Basket.

“Consolidated Tangible Assets” means, with respect to any Person as of any date, theamount which, in accordance with GAAP, would be set forth under the caption “Total Assets”(or any like caption) on a consolidated balance sheet of such Person and its RestrictedSubsidiaries, less all goodwill, patents, tradenames, trademarks, copyrights, franchises,experimental expenses, organization expenses and any other amounts classified as intangibleassets in accordance with GAAP.

“Contingent Obligation” shall mean, as to any Person, any obligation, agreement,understanding or arrangement of such Person guaranteeing or intended to guarantee anyIndebtedness, leases, dividends or other obligations (“primary obligations”) of any other Person(the “primary obligor”) in any manner, whether directly or indirectly, including, withoutlimitation, any obligation of such Person, whether or not contingent, (1) to purchase any suchprimary obligation or any property constituting direct or indirect security therefor; (2) toadvance or supply funds (a) for the purchase or payment of any such primary obligation or(b) to maintain working capital or equity capital of the primary obligor or otherwise to maintainthe net worth or solvency of the primary obligor; (3) to purchase property, securities or servicesprimarily for the purpose of assuring the owner of any such primary obligation of the ability ofthe primary obligor to make payment of such primary obligation; (4) with respect to bankers’acceptances and letters of credit, until a reimbursement obligation arises (which obligation shallconstitute Indebtedness); or (5) otherwise to assure or hold harmless the holder of such primaryobligation against loss in respect thereof; provided, however, that the term “ContingentObligation” shall not include endorsements of instruments for deposit or collection in theordinary course of business or any product warranties for deposit or collection in the ordinarycourse of business. The amount of any Contingent Obligation shall be deemed to be an amountequal to the stated or determinable amount of the primary obligation in respect of which suchContingent Obligation is made (or, if less, the maximum amount of such primary obligation forwhich such Person may be liable, whether severally or jointly, pursuant to the terms of the

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instrument evidencing such Contingent Obligation) or, if not stated or determinable, themaximum reasonably anticipated liability in respect thereof (assuming such Person is requiredto perform thereunder) as determined by such Person in good faith.

“Coverage Ratio Exception” has the meaning set forth in the proviso in the first paragraphof the covenant described under “—Certain Covenants—Limitations on AdditionalIndebtedness.”

“Credit Agreement” means the Credit Agreement dated April 3, 2012, as amended byAmendment No. 1 and Amendment No. 2, by and among the Issuer, as Borrower, the subsidiaryguarantors party thereto, Deutsche Bank AG New York Branch, as issuing bank, administrativeagent and collateral agent and the other lenders and financial institutions named therein,including any notes, guarantees, collateral and security documents, instruments andagreements executed in connection therewith (including Hedging Obligations related to theIndebtedness incurred thereunder), and in each case as amended or refinanced by one or moreCredit Facilities that are secured by the collateral thereunder on the same priority basis as theCredit Agreement in effect prior to such refinancing from time to time.

“Credit Facilities” means one or more debt facilities of the Issuer or any RestrictedSubsidiary (which may be outstanding at the same time and including, without limitation, theCredit Agreement) with banks or other institutional lenders or investors or indentures providingfor revolving credit loans, term loans, letters of credit or other long term indebtedness,including any guarantees, collateral documents, instruments and agreements executed inconnection therewith, and, in each case, as such agreements may be amended, refinanced orotherwise restructured, in whole or in part from time to time (including increasing the amountof available borrowings thereunder or adding Subsidiaries of the Issuer as additional borrowersor guarantors thereunder) with respect to all or any portion of the Indebtedness under suchagreement or agreements, any successor or replacement agreement or agreements or anyindenture or successor or replacement indenture and whether by the same or any other agent,lender, group of lenders or investors.

“Default” means (1) any Event of Default or (2) any event, act or condition that, after noticeor the passage of time or both, would be an Event of Default.

“Designation” has the meaning given to such term in the covenant described under“—Certain Covenants—Limitations on Designation of Unrestricted Subsidiaries.”

“Designation Amount” has the meaning given to such term in the covenant describedunder “—Certain Covenants—Limitations on Designation of Unrestricted Subsidiaries.”

“Discovery Offshore” means Discovery Offshore S.A., a Luxembourg company, and itssuccessors and assigns.

“Disqualified Equity Interests” of any Person means any class of Equity Interests of suchPerson that, by its terms, or by the terms of any related agreement or of any security into or forwhich it is convertible, puttable or exchangeable (in each case, at the option of the holderthereof), is, or upon the happening of any event or the passage of time would be, required to beredeemed by such Person, at the option of the holder thereof, or matures or is mandatorilyredeemable, pursuant to a sinking fund obligation or otherwise, in whole or in part, in any caseon or prior to the date which is 91 days after the final maturity date of the Notes; provided,however, that any class of Equity Interests of such Person that, by its terms, authorizes suchPerson to satisfy in full its obligations with respect to the payment of dividends or upon

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maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof orotherwise by the delivery of Equity Interests that are not Disqualified Equity Interests, and that isnot convertible into or puttable or exchangeable for Disqualified Equity Interests orIndebtedness, will not be deemed to be Disqualified Equity Interests so long as such Personsatisfies its obligations with respect thereto solely by the delivery of Equity Interests that are notDisqualified Equity Interests; provided, further, however, that any Equity Interests that wouldnot constitute Disqualified Equity Interests but for provisions thereof giving holders thereof (orthe holders of any security into or for which such Equity Interests are convertible, exchangeableor exercisable) the right to require the Issuer to repurchase or redeem such Equity Interestsupon the occurrence of a change in control or an asset sale occurring prior to the 91st day afterthe final maturity date of the Notes shall not constitute Disqualified Equity Interests if thechange of control or asset sale provisions applicable to such Equity Interests are no morefavorable to such holders than the provisions described under “—Change of Control” and“—Certain Covenants—Limitations on Asset Sales,” respectively, and such Equity Interestsspecifically provide that the Issuer will not repurchase or redeem any such Equity Interestspursuant to such provisions prior to the Issuer’s purchase of the Notes as required pursuant tothe provisions described under “—Change of Control” and “—Certain Covenants—Limitationson Asset Sales,” respectively.

“Domestic Restricted Subsidiary” means (1) each Restricted Subsidiary of the Issuerorganized or existing under the laws of the United States, any state thereof or the District ofColumbia and (2) any other Restricted Subsidiary that guarantees any Indebtedness under theCredit Agreement.

“Equity Interests” of any Person means (1) any and all shares or other equity interests(including common stock, preferred stock, limited liability company interests and partnershipinterests) in such Person and (2) all rights to purchase, warrants or options (whether or notcurrently exercisable), participations or other equivalents of or interests in (however designated)such shares or other interests in such Person, but excluding from all of the foregoing any debtsecurities convertible into Equity Interests, regardless of whether such debt securities includeany right of participation with Equity Interests.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“Excluded Contribution” means net cash proceeds or property or assets received by theIssuer as capital contributions to equity (other than through the issuance of Disqualified EquityInterests) of the Issuer after April 3, 2012 from the issuance or sale (other than to a RestrictedSubsidiary or an employee stock ownership plan or trust established by the Issuer or anySubsidiary of the Issuer for the benefit of their employees to the extent funded by the Issuer orany Restricted Subsidiary) of Equity Interests (other than Disqualified Equity Interest) of theIssuer to the extent designated as an Excluded Contribution.

“Fair Market Value” means, with respect to any asset, the price (after taking into accountany liabilities relating to such assets) that would be negotiated in an arm’s-length transactionfor cash between a willing seller and a willing and able buyer, neither of which is under anycompulsion to complete the transaction, as such price is determined in good faith bymanagement of the Issuer.

“Foreign Restricted Subsidiary” means any Restricted Subsidiary other than a DomesticRestricted Subsidiary.

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“GAAP” means generally accepted accounting principles set forth in the opinions andpronouncements of the Accounting Principles Board of the American Institute of Certified PublicAccountants and statements and pronouncements of the Financial Accounting Standards Board orin such other statements by such other entity as may be approved by a significant segment of theaccounting profession of the United States, as in effect from time to time. At any time after the IssueDate, if permitted by the SEC, the Issuer may elect to apply International Financial ReportingStandards (“IFRS”) in lieu of GAAP and, upon any such election, references herein to GAAP shallthereafter be construed to mean IFRS (except as otherwise provided in the indenture); provided thatcalculation or determination in the Indenture that requires the application of GAAP for periods thatinclude fiscal quarters ended prior to the Issuer’s election to apply IFRS shall remain as previouslycalculated or determined in accordance with GAAP. The Issuer shall give notice of any such electionmade in accordance with this definition to the Trustee and the Holders of Notes.

“guarantee” means a direct or indirect guarantee by any Person of any Indebtedness of anyother Person and includes any obligation, direct or indirect, contingent or otherwise, of suchPerson (1) to purchase or pay (or advance or supply funds for the purchase or payment of)Indebtedness of such other Person (whether arising by virtue of partnership arrangements, orby agreements to keep-well, to purchase assets, goods, securities or services (unless suchpurchase arrangements are on arm’s-length terms and are entered into in the ordinary course ofbusiness), to take-or-pay, or to maintain financial statement conditions or otherwise); or(2) entered into for purposes of assuring in any other manner the obligee of such Indebtednessof the payment thereof or to protect such obligee against loss in respect thereof (in whole or inpart); “guarantee,” when used as a verb, and “guaranteed” have correlative meanings.

“Guarantors” means each Domestic Restricted Subsidiary of the Issuer on the Issue Datethat is a party to the Indenture for purposes of providing a Note Guarantee, and each otherPerson that is required to, or at the election of the Issuer does, become a Guarantor by theterms of the Indenture after the Issue Date, in each case, until such Person is released from itsNote Guarantee in accordance with the terms of the Indenture.

“Hedging Obligations” of any Person means the obligations of such Person under swap,cap, collar, forward purchase or similar agreements or arrangements dealing with interest rates,currency exchange rates or commodity prices, either generally or under specific contingencies.

“Holder” means any registered holder, from time to time, of the Notes.

“incur” means, with respect to any Indebtedness or Obligation, incur, create, issue, assume,guarantee or otherwise become directly or indirectly liable, contingently or otherwise, withrespect to such Indebtedness or Obligation; provided that (1) the Indebtedness of a Personexisting at the time such Person became a Restricted Subsidiary shall be deemed to have beenincurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary and(2) none of the accrual of interest, the accretion of original issue discount or the accretion oraccumulation of dividends on any Equity Interests shall be deemed to be an incurrence ofIndebtedness.

“Indebtedness” of any Person at any date means, without duplication:

(1) all liabilities, contingent or otherwise, of such Person for borrowed money (whether ornot the recourse of the lender is to the whole of the assets of such Person or only to a portionthereof);

(2) all obligations of such Person evidenced by bonds, debentures, notes or other similarinstruments;

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(3) all reimbursement obligations of such Person in respect of letters of credit, letters ofguaranty, bankers’ acceptances and similar credit transactions;

(4) all obligations of such Person to pay the deferred and unpaid purchase price of propertyor services, except deferred compensation, trade payables, advances on contracts and accruedexpenses incurred by such Person in the ordinary course of business in connection withobtaining goods, materials or services;

(5) the maximum fixed redemption or repurchase price of all Disqualified Equity Interests ofsuch Person;

(6) all Capitalized Lease Obligations of such Person;

(7) all Indebtedness of others secured by a Lien on any asset of such Person, whether or notsuch Indebtedness is assumed by such Person;

(8) all Indebtedness of others guaranteed by such Person to the extent of such guarantee;provided that Indebtedness of the Issuer or its Subsidiaries that is guaranteed by the Issuer orthe Issuer’s Subsidiaries shall only be counted once in the calculation of the amount ofIndebtedness of the Issuer and its Subsidiaries on a consolidated basis;

(9) to the extent not otherwise included in this definition, net Hedging Obligations of suchPerson;

(10) all obligations of such Person under conditional sale or other title retention agreementsrelating to assets purchased by such Person; and

(11) all Contingent Obligations of such Person in respect of Indebtedness of others of thekinds referred to in clauses (1) through (10) above.

The amount of any Indebtedness which is incurred at a discount to the principal amount atmaturity thereof as of any date shall be deemed to have been incurred at the accreted valuethereof as of such date. The amount of Indebtedness of any Person at any date shall be theoutstanding balance at such date of all unconditional obligations as described above, themaximum liability of such Person for any such Contingent Obligations at such date and, in thecase of clause (7), the lesser of (a) the Fair Market Value of any asset subject to a Lien securingthe Indebtedness of others on the date of determination and (b) the amount of the Indebtednesssecured. For purposes of clause (5), the “maximum fixed redemption or repurchase price” ofany Disqualified Equity Interests that do not have a fixed redemption or repurchase price shallbe calculated in accordance with the terms of such Disqualified Equity Interests as if suchDisqualified Equity Interests were redeemed or repurchased on the applicable date on which anamount of Indebtedness outstanding shall be required to be determined pursuant to theIndenture. Notwithstanding the foregoing, in no event shall the reclassification of any lease orother liability as indebtedness due to a change in accounting principles after the Issue Date bedeemed to be an incurrence of Indebtedness for purposes of the Indenture.

“Independent Director” means a director of the Issuer who

(1) is independent with respect to the transaction at issue;

(2) does not have any material financial interest in the Issuer or any of its Affiliates (otherthan as a result of holding securities of the Issuer); and

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(3) has not and whose Affiliates or affiliated firm has not, at any time during the twelvemonths prior to the taking of any action hereunder, directly or indirectly, received, or entered intoany understanding or agreement to receive, any compensation, payment or other benefit, of anytype or form, from the Issuer or any of its Affiliates, other than customary directors’ fees forserving on the Board of Directors of the Issuer or any Affiliate and reimbursement of out-of-pocketexpenses for attendance at the Issuer’s or Affiliate’s board and board committee meetings.

“Intellectual Property” means all patents, patent applications, trademarks, trade names,service marks, copyrights, technology, trade secrets, proprietary information, domain names,know-how and processes necessary for the conduct of the Issuer’s or any RestrictedSubsidiary’s business as currently conducted.

“Investments” of any Person means:

(1) all direct or indirect investments by such Person in any other Person in the form ofloans, advances or capital contributions or other credit extensions constituting Indebtedness ofsuch other Person, and any guarantee of Indebtedness of any other Person;

(2) all purchases (or other acquisitions for consideration) by such Person of Indebtedness,Equity Interests or other securities of any other Person (other than any such purchase thatconstitutes a Restricted Payment of the type described in clause (2) of the definition thereof);

(3) all other items that would be classified as investments on a balance sheet of such Personprepared in accordance with GAAP (including, if required by GAAP, purchases of assets outsidethe ordinary course of business); and

(4) the Designation of any Subsidiary as an Unrestricted Subsidiary.

Except as otherwise expressly specified in this definition, the amount of any Investment(other than an Investment made in cash) shall be the Fair Market Value thereof on the date suchInvestment is made. The amount of an Investment pursuant to clause (4) shall be theDesignation Amount determined in accordance with the covenant described under “—CertainCovenants—Limitations on Designation of Unrestricted Subsidiaries.” If the Issuer or anyRestricted Subsidiary sells or otherwise disposes of any Equity Interests of any RestrictedSubsidiary, or any Restricted Subsidiary issues any Equity Interests, in either case, such that,after giving effect to any such sale or disposition, such Person is no longer a Subsidiary, theIssuer shall be deemed to have made an Investment on the date of any such sale or otherdisposition equal to the Fair Market Value of the Equity Interests of and all other Investments insuch Restricted Subsidiary retained. Notwithstanding the foregoing, purchases or redemptionsof Equity Interests of the Issuer shall be deemed not to be Investments.

“Issue Date” means the date on which Notes are first issued under the Indenture.

“Lien” means, with respect to any asset, any mortgage, deed of trust, lien (statutory or other),pledge, lease, easement, restriction, covenant, charge, security interest or other encumbrance ofany kind or nature in respect of such asset, whether or not filed, recorded or otherwise perfectedunder applicable law, including any conditional sale or other title retention agreement; provided,however, that for the avoidance of doubt, the interest of a Person as owner or lessor undercharters or leases of property shall not constitute “Liens” on or in respect of such property.

“Moody’s” means Moody’s Investors Service, Inc., and its successors.

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“Net Available Proceeds” means, with respect to any Asset Sale, the proceeds thereof in theform of cash or Cash Equivalents received by the Issuer or any of its Restricted Subsidiariesfrom such Asset Sale, net of

(1) brokerage commissions and other fees and expenses (including fees, discounts andexpenses of legal counsel, accountants and investment banks, consultants and placementagents) of such Asset Sale;

(2) provisions for taxes payable as a result of such Asset Sale (after taking into account anyavailable tax credits or deductions and any tax sharing arrangements);

(3) amounts required to be paid to any Person (other than the Issuer or any RestrictedSubsidiary and other than under the Credit Agreement) owning a beneficial interest in theassets subject to the Asset Sale or having a Lien thereon;

(4) payments of unassumed liabilities (not constituting Indebtedness) relating to the assetssold at the time of, or within 30 days after the date of, such Asset Sale; and

(5) appropriate amounts to be provided by the Issuer or any Restricted Subsidiary, as thecase may be, as a reserve required in accordance with GAAP or amounts placed by the Issuer orany Restricted Subsidiary in escrow against any adjustment in the sale price of such asset orassets or liabilities associated with such Asset Sale and retained by the Issuer or any RestrictedSubsidiary, as the case may be, after such Asset Sale, including pensions and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities underany indemnification obligations associated with such Asset Sale; provided, however, that anyamounts remaining after adjustments, revaluations or liquidations of such reserves or suchamounts held in escrow shall constitute Net Available Proceeds.

“Non-Recourse Debt” means Indebtedness of an Unrestricted Subsidiary or joint venture:

(1) as to which neither the Issuer nor any Restricted Subsidiary (a) provides credit supportof any kind (including any undertaking, agreement or instrument that would constituteIndebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutesthe lender; and

(2) no default with respect to which (including any rights that the holders thereof may haveto take enforcement action against an Unrestricted Subsidiary or joint venture) would permitupon notice, lapse of time or both any holder of any other Indebtedness (other than the NoteDocuments and the Senior Debt Documents, as defined in the indenture for the Secured Notes)of the Issuer or any Restricted Subsidiary to declare a default on the other Indebtedness orcause the payment thereof to be accelerated or payable prior to its stated maturity.

“Note Documents” means the Indenture and the Notes.

“Obligation” means any principal, interest, penalties, fees, indemnification,reimbursements, costs, expenses, damages and other liabilities payable under thedocumentation governing any Indebtedness.

“Officer” means any of the following of the Issuer: the Chairman of the Board of Directors,the Chief Executive Officer, the Chief Financial Officer, the President, any Vice President, theTreasurer or the Secretary.

“Officers’ Certificate” means a certificate signed by two Officers.

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“Pari Passu Indebtedness” means any Indebtedness of the Issuer or any Guarantor thatranks pari passu in right of payment with the Notes or the Note Guarantor, as applicable.

“Permitted Acquisition Indebtedness” means Indebtedness of the Issuer or any of itsRestricted Subsidiaries to the extent such Indebtedness was Indebtedness of:

(1) a Subsidiary prior to the date on which such Subsidiary became a RestrictedSubsidiary; or

(2) a Person that was merged or consolidated into the Issuer or a Restricted Subsidiary,

provided that, in each case, such Indebtedness was not incurred in connection with or incontemplation of such event and on the date such Subsidiary became a RestrictedSubsidiary or the date such Person was merged and consolidated into the Issuer or aRestricted Subsidiary, as applicable, after giving pro forma effect thereto:

(a) the Issuer or the Restricted Subsidiary, as applicable, would be permitted to incur atleast $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception, or

(b) the Consolidated Interest Coverage Ratio would be equal to or greater than theConsolidated Interest Coverage Ratio immediately prior to such transaction.

“Permitted Business” means the businesses engaged in by the Issuer and its Subsidiarieson the Issue Date as described in this offering memorandum and businesses that are reasonablyrelated thereto or reasonable extensions thereof.

“Permitted Investment” means:

(1) Investments by the Issuer or any Restricted Subsidiary in (a) any Restricted Subsidiary or(b) any Person that will become immediately after such Investment a Restricted Subsidiary orthat will merge or consolidate into the Issuer or any Restricted Subsidiary and any Investmentheld by any such Person at such time that was not incurred in contemplation of suchacquisition, merger, consolidation or transfer;

(2) Investments in the Issuer by any Restricted Subsidiary;

(3) loans and advances to, or reimbursements of, directors, employees and officers of theIssuer and the Restricted Subsidiaries (a) in the ordinary course of business (including payroll,travel and entertainment related advances and reimbursements) (other than any loans oradvances to any director or executive officer (or equivalent thereof) that would be in violation ofSection 402 of the Sarbanes-Oxley Act) and (b) to purchase Equity Interests of the Issuer not inexcess of $5.0 million at any one time outstanding;

(4) Hedging Obligations entered into for bona fide hedging purposes of the Issuer or anyRestricted Subsidiary and not for the purpose of speculation;

(5) Investments in cash and Cash Equivalents;

(6) receivables owing to the Issuer or any Restricted Subsidiary if created or acquired in theordinary course of business and payable or dischargeable in accordance with customary tradeterms; provided, however, that such trade terms may include such concessionary trade terms asthe Issuer or any such Restricted Subsidiary deems reasonable under the circumstances;

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(7) Investments in securities of trade creditors or customers received pursuant to any planof reorganization or similar arrangement upon the bankruptcy or insolvency of such tradecreditors or customers or received in compromise or resolution of litigation, arbitration or otherdisputes;

(8) Investments made by the Issuer or any Restricted Subsidiary as a result of considerationreceived in connection with (a) an Asset Sale made in compliance with the covenant describedunder “—Certain Covenants—Limitations on Asset Sales” or (b) a trade or exchange deemednot to be an Asset Sale pursuant to clause (7) of the definition of Asset Sale;

(9) lease, utility and other similar deposits in the ordinary course of business;

(10) Investments made by the Issuer or a Restricted Subsidiary for consideration consistingonly of Qualified Equity Interests of the Issuer or any of its Subsidiaries;

(11) stock, obligations or securities received in settlement of debts created in the ordinarycourse of business and owing to the Issuer or any Restricted Subsidiary or in satisfaction ofjudgments;

(12) Investments existing on the Issue Date or made pursuant to binding commitments ineffect on the Issue Date or Investments consisting of any extension, modification or renewal(without increasing the amount) of any Investments existing on the Issue Date;

(13) any payment on or with respect to, or purchase, redemption, defeasement or otheracquisition or retirement for value of (i) the Notes, (ii) the Senior Loan Obligations (as defined inthe indenture for the Secured Notes), (iii) any of the Issuer’s 3.375% Convertible Senior Notesdue 2038 issued pursuant to that certain Indenture, dated June 3, 2008, between the Issuer andThe Bank of New York Trust Company, as trustee, (iv) any of the Secured Notes, (v) any of theIssuer’s 10.25% Senior Notes due 2019 issued pursuant to that certain Indenture, dated as ofApril 3, 2012, among the Issuer, the guarantors named therein and U.S. Bank NationalAssociation, as trustee, (vi) any of the Issuer’s 8.750% Senior Notes due 2021 issued pursuant tothat certain Indenture, dated as of July 8, 2013, among the Issuer, the guarantors named thereinand U.S. Bank National Association, as trustee, (vii) any of the Issuer’s 7.50% Senior Notes due2021 issued pursuant to that certain Indenture, dated as of October 1, 2013, among the Issuer,the guarantors named therein and U.S. Bank National Association, as trustee, or (viii) any otherIndebtedness that is not Subordinated Indebtedness;

(14) advances, deposits and prepayments for purchases of any assets, including any EquityInterests;

(15) endorsements for collection of deposits in the ordinary course of business;

(16) guarantees of Indebtedness permitted under “Certain Covenants—Limitations onAdditional Indebtedness”;

(17) guarantees by the Issuer or any of its Restricted Subsidiaries of operating leases (otherthan Capitalized Lease Obligations) or of other obligations that do not constitute Indebtedness,in each case entered into by any Restricted Subsidiary in the ordinary course of business;

(18) Investments received as a result of a foreclosure by the Issuer or any of its RestrictedSubsidiaries with respect to any secured investment permitted under the Indenture that is indefault; and

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(19) other Investments in any Person having an aggregate Fair Market Value (measured onthe date each such Investment was made and without giving effect to subsequent changes invalue), when taken together with all other Investments made pursuant to this clause (19) sinceApril 3, 2012 and then outstanding, not to exceed the greater of (a) $100.0 million or (b) 7.5% ofthe Issuer’s Consolidated Tangible Assets at the time such Investment is made (net of, withrespect to the Investment in any particular Person made pursuant to this clause, the cash returnthereon received after April 3, 2012 as a result of any sale for cash, repayment, redemption,liquidating distribution or other cash realization (not included in Consolidated Net Income) notto exceed the amount of such Investments in such Person made after April 3, 2012 in reliance onthis clause).

In determining whether any Investment is a Permitted Investment, the Issuer may allocateor reallocate all or any portion of an Investment among the clauses of this definition and any ofthe provisions of the covenant described under the caption “—Covenants—Limitations onRestricted Payments.”

For the purposes of determining compliance with any U.S. dollar-denominated restrictionon Investments denominated in a foreign currency, the U.S. dollar-equivalent amount of suchInvestment shall be calculated based on the relevant currency exchange rate in effect on thedate that such Investment was made.

“Permitted Jurisdiction” means any State of the United States of America or the District ofColumbia, the Cayman Islands, Bermuda, Switzerland, the United Kingdom, the Kingdom of theNetherlands, the Grand Duchy of Luxembourg, Ireland, or any other member country of theEuropean Union.

“Permitted Liens” means the following types of Liens:

(1) Liens for taxes, assessments or governmental charges or levies which (a) are notoverdue or delinquent by more than 30 days or (b) are being contested in good faith byappropriate proceedings and as to which the Issuer or the Restricted Subsidiaries shall have setaside on its books such reserves as may be required pursuant to GAAP;

(2) Liens in respect of property of the Issuer or any Restricted Subsidiary imposed by law orcontract, which were not incurred or created to secure Indebtedness for borrowed money, suchas carriers’, warehousemen’s, materialmen’s, landlords’, workmen’s, suppliers’, repairmen’s,mechanics’, maritime and salvage Liens and other Liens arising in the ordinary course ofbusiness, and which do not in the aggregate materially detract from the value of the property ofthe Issuer or its Restricted Subsidiaries, taken as a whole, and do not materially impair the usethereof in the operation of the business of the Issuer and its Restricted Subsidiaries, taken as awhole;

(3) Liens (a) imposed by law or deposits made in connection therewith in the ordinarycourse of business in connection with workers’ compensation, unemployment insurance andother types of social security or similar legislation, (b) incurred in the ordinary course ofbusiness to secure the performance of tenders, statutory obligations (other than excise taxes),surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts,trade contracts, other contracts (other than agreements governing Indebtedness for borrowedmoney), performance and return of money bonds and other similar obligations (exclusive ofobligations for the payment of borrowed money) or (c) arising by virtue of deposits made in theordinary course of business to secure liability for premiums to insurance carriers;

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(4) Liens upon specific items of inventory or other goods and proceeds of any Personsecuring such Person’s obligations in respect of bankers’ acceptances issued or created for theaccount of such Person to facilitate the purchase, shipment or storage of such inventory or othergoods;

(5) Liens arising out of judgments or awards not resulting in a Default or an Event ofDefault;

(6) easements, rights of way, restrictions (including zoning restrictions), covenants,encroachments, protrusions and other similar charges or encumbrances, and minor titledeficiencies on or with respect to any Real Property, in each case whether now or hereafter inexistence, not (a) securing Indebtedness, (b) individually or in the aggregate materiallyimpairing the value or marketability of such Real Property and (c) individually or in theaggregate materially interfering with the conduct of the business of the Issuer and its RestrictedSubsidiaries at such Real Property;

(7) Liens securing reimbursement obligations with respect to commercial letters of creditwhich encumber documents and other assets relating to such letters of credit and products andproceeds thereof;

(8) Liens encumbering deposits made to secure obligations arising from statutory,regulatory, contractual or warranty requirements of the Issuer or any Restricted Subsidiary,including rights of offset and setoff;

(9) bankers’ Liens, rights of setoff and other similar Liens existing solely with respect tocash and Cash Equivalents on deposit in one or more accounts maintained by the Issuer or anyRestricted Subsidiary, in each case granted in the ordinary course of business in favor of thebank or banks with which such accounts are maintained, securing amounts owing to such bankwith respect to cash management and operating account arrangements, including thoseinvolving pooled accounts and netting arrangements; provided that, unless such Liens are non-consensual and arise by operation of law, in no case shall any such Liens secure (either directlyor indirectly) the repayment of any Indebtedness;

(10) leases with respect to the assets or properties of the Issuer and any RestrictedSubsidiary, in each case entered into in the ordinary course of the Issuer’s or such RestrictedSubsidiary’s business so long as such leases do not, individually or in the aggregate, (i) interferein any material respect with the ordinary conduct of the business of the Issuer or any RestrictedSubsidiary or (ii) materially impair the use (for its intended purposes) or the value of theproperty subject thereto;

(11) the filing of financing statements solely as a precautionary measure in connection withoperating leases or consignment of goods;

(12) Liens securing all of the Secured Notes originally issued on April 3, 2012;

(13) Liens securing Hedging Obligations entered into for bona fide hedging purposes of theIssuer or any Restricted Subsidiary and not for the purpose of speculation;

(14) Liens existing on the Issue Date securing Indebtedness outstanding on the Issue Date(other than the Secured Notes or Indebtedness under the Credit Facilities); provided that (a) theaggregate principal amount of the Indebtedness, if any, secured by such Liens does notincrease; and (b) such Liens do not encumber any property other than the property subjectthereto on the Issue Date (plus improvements, accessions, proceeds, replacements or dividendsor distributions in respect thereof);

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(15) Liens in favor of the Issuer or a Guarantor;

(16) Liens securing Obligations under the Credit Facilities relating to Indebtedness incurredand then outstanding pursuant to clause (1) of the second paragraph of “—Certain Covenants—Limitations on Additional Indebtedness”;

(17) Liens arising pursuant to Purchase Money Indebtedness incurred and then outstandingpursuant to clause (7) and (16) of the second paragraph of “—Certain Covenants—Limitationson Additional Indebtedness”; provided that (a) the Indebtedness secured by any such Lien(including refinancings thereof) does not exceed 100% of the cost of the property being acquiredor leased at the time of the incurrence of such Indebtedness and (b) any such Liens attach onlyto the property being financed pursuant to such Purchase Money Indebtedness (plusimprovements, accessions, proceeds, replacements or dividends or distributions in respectthereof) and do not encumber any other property of the Issuer or any Restricted Subsidiary;

(18) Liens securing Acquired Indebtedness permitted to be incurred under the Indenture;provided that the Liens do not extend to assets not subject to such Lien at the time ofacquisition (other than improvements thereon, accessions thereto, proceeds thereof,replacements, dividends or distributions in respect thereof) and are no more favorable to thelienholders than those securing such Acquired Indebtedness prior to the incurrence of suchAcquired Indebtedness by the Issuer or a Restricted Subsidiary;

(19) Liens on property or Equity Interests of a Person existing at the time such Person isacquired or merged with or into or consolidated with the Issuer or any Restricted Subsidiary(and not created in anticipation or contemplation thereof); provided that such Liens do notextend to property not subject to such Liens at the time of acquisition (other than improvementsthereon, accessions thereto, proceeds thereof, replacements, dividends or distributions inrespect thereof) and are no more favorable to the lienholders than the existing Lien;

(20) Liens to secure Refinancing Indebtedness of Indebtedness secured by Liens referred toin the foregoing clauses (12), (14), (17), (18) and (19); provided that in the case of Liens securingRefinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoingclauses (14), (17), (18 ) and (19), such Liens do not extend to any additional assets (other thanimprovements thereon, accessions thereto, proceeds thereof, replacements, dividends ordistributions in respect thereof);

(21) Liens on and pledges of the Equity Interests of any Unrestricted Subsidiary or any jointventure owned by the Issuer or any Restricted Subsidiary to the extent securing Non-RecourseDebt of such Unrestricted Subsidiary or joint venture;

(22) licenses of Intellectual Property granted by the Issuer or any Restricted Subsidiary inthe ordinary course of business and not interfering in any material respect with the ordinaryconduct of the business of the Issuer or such Restricted Subsidiary;

(23) Liens arising out of conditional sale, title retention, consignment or similararrangements for the sale of goods entered into by the Issuer or any Restricted Subsidiary in theordinary course of business in accordance with the past practices of the Issuer or suchRestricted Subsidiary;

(24) Liens on assets of any Foreign Restricted Subsidiary to secure Indebtedness of suchForeign Restricted Subsidiary which Indebtedness is permitted by the Indenture;

(25) Liens of franchisors arising in the ordinary course of business not securingIndebtedness;

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(26) Liens in favor of the Trustee as provided for in the Indenture on money or property heldor collected by the Trustee in its capacity as Trustee;

(27) options, put and call arrangements, rights of first refusal and similar rights (a) relatingto Investments in Subsidiaries, joint ventures, partnerships and the like or (b) provided for incontracts or agreements entered into in the ordinary course of business;

(28) Liens resulting from the deposit of funds or evidences of Indebtedness in trust for thepurpose of defeasing Indebtedness of the Issuer or any Restricted Subsidiary, which defeasanceis otherwise not prohibited by the Indenture; and

(29) other Liens with respect to obligations that do not in the aggregate exceed at any timeoutstanding $100.0 million.

“Person” means any individual, corporation, partnership, limited liability company, jointventure, incorporated or unincorporated association, joint-stock company, trust, unincorporatedorganization or government or other agency or political subdivision thereof or other entity ofany kind.

“Plan of Liquidation” with respect to any Person, means a plan that provides for,contemplates or the effectuation of which is preceded or accompanied by (whether or notsubstantially contemporaneously, in phases or otherwise): (1) the sale, lease, conveyance orother disposition of all or substantially all of the assets of such Person otherwise than as anentirety or substantially as an entirety; and (2) the distribution of all or substantially all of theproceeds of such sale, lease, conveyance or other disposition of all or substantially all of theremaining assets of such Person to holders of Equity Interests of such Person.

“Preferred Stock” means, with respect to any Person, any and all preferred or preferencestock or other preferred equity interests (however designated) of such Person whether nowoutstanding or issued after the Issue Date.

“principal” means, with respect to the Notes, the principal of, and premium, if any, on theNotes.

“Purchase Money Indebtedness” means Indebtedness, including Capitalized LeaseObligations, of the Issuer or any Restricted Subsidiary incurred for the purpose of financing allor any part of the purchase price of property, plant or equipment used in the business of theIssuer or any Restricted Subsidiary or the cost of installation, construction or improvementthereof; provided, however, that (except in the case of Capitalized Lease Obligations) (1) theamount of such Indebtedness shall not exceed such purchase price or cost and (2) suchIndebtedness shall be incurred within 180 days after such acquisition of such asset by the Issueror such Restricted Subsidiary or such installation, construction or improvement.

“Qualified Equity Interests” of any Person means Equity Interests of such Person other thanDisqualified Equity Interests; provided that such Equity Interests shall not be deemed QualifiedEquity Interests to the extent sold or owed to a Subsidiary of such Person or financed, directlyor indirectly, using funds (1) borrowed from such Person or any Subsidiary of such Person untiland to the extent such borrowing is repaid or (2) contributed, extended, guaranteed or advancedby such Person or any Subsidiary of such Person (including, without limitation, in respect of anyemployee stock ownership or benefit plan). Unless otherwise specified, Qualified EquityInterests refer to Qualified Equity Interests of the Issuer.

“Qualified Equity Offering” means (1) an offering for cash by the Issuer of its EquityInterests (other than Disqualified Equity Interests) or (2) a contribution of cash to the Issuer inexchange for its Equity Interests (other than Disqualified Equity Interests).

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“Rating Agencies” means Moody’s and S&P.

“Rating Decline” means a decrease in the rating of the notes by either Moody’s or S&P byone or more gradations (including gradations within rating categories as well as between ratingcategories). In determining whether the rating of the notes has decreased by one or moregradations, gradations within rating categories, namely + or - for S&P, and 1, 2, and 3 forMoody’s, will be taken into account; for example, in the case of S&P, a rating decline either fromBB+ to BB or BB- to B+ will constitute a decrease of one gradation.

“Real Property” means, collectively, all right, title and interest (including any leaseholdestate) in and to any and all parcels of or interests in real property owned, leased or operated byany Person, whether by lease, license or other means, together with, in each case, alleasements, hereditaments and appurtenances relating thereto, all improvements andappurtenant fixtures and equipment, all general intangibles and contract rights and otherproperty and rights incidental to the ownership, lease or operation thereof.

“Redesignation” has the meaning given to such term in the covenant described under“—Certain Covenants—Limitations on Designation of Unrestricted Subsidiaries.”

“refinance” means to refinance, repay, prepay, replace, renew or refund, in whole or in part.

“Refinancing Indebtedness” means Indebtedness of the Issuer or a Restricted Subsidiaryincurred in exchange for, or the proceeds of which are used to redeem, refinance, replace,defease, discharge, refund or otherwise retire for value, in whole or in part, any Indebtedness ofthe Issuer or any Restricted Subsidiary (the “Refinanced Indebtedness”); provided that:

(1) the principal amount (and accreted value, in the case of Indebtedness issued at adiscount) of the Refinancing Indebtedness does not exceed the principal amount (and accretedvalue, as the case may be) of the Refinanced Indebtedness plus the amount of accrued andunpaid interest on the Refinanced Indebtedness, any premium paid to the holders of theRefinanced Indebtedness and reasonable expenses incurred in connection with the incurrenceof the Refinancing Indebtedness;

(2) the obligor of the Refinancing Indebtedness does not include any Person (other than theIssuer or any Guarantor) that is not an obligor of the Refinanced Indebtedness;

(3) if the Refinanced Indebtedness was subordinated in right of payment to the Notes or theNote Guarantees, as the case may be, then such Refinancing Indebtedness, by its terms, issubordinate in right of payment to the Notes or the Note Guarantees, as the case may be, atleast to the same extent as the Refinanced Indebtedness;

(4) the Refinancing Indebtedness has a final stated maturity either (a) no earlier than theRefinanced Indebtedness or (b) after the maturity date of the Notes;

(5) the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on orprior to the maturity date of the Notes has a Weighted Average Life to Maturity at the time suchRefinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Lifeto Maturity of the portion of the Refinanced Indebtedness being repaid that is scheduled tomature on or prior to the maturity date of the Notes; and

(6) the proceeds of the Refinancing Indebtedness shall be used substantially concurrently withthe incurrence thereof to redeem, refinance, replace, defease, discharge, refund or otherwiseretire for value the Refinanced Indebtedness, unless the Refinanced Indebtedness is not then due

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and is not redeemable or prepayable at the option of the obligor thereof or is redeemable orprepayable only with notice, in which case such proceeds shall be held in a segregated account ofthe obligor of the Refinanced Indebtedness until the Refinanced Indebtedness becomes due orredeemable or prepayable or such notice period lapses and then shall be used to refinance theRefinanced Indebtedness; provided that in any event the Refinanced Indebtedness shall beredeemed, refinanced, replaced, defeased, discharged, refunded or otherwise retired for valuewithin one year of the incurrence of the Refinancing Indebtedness.

“Restricted Investment” means any Investment other than a Permitted Investment.

“Restricted Payment” means any of the following:

(1) the declaration or payment of any dividend or any other distribution on Equity Interestsof the Issuer or any Restricted Subsidiary or any payment made to the direct or indirect holders(in their capacities as such) of Equity Interests of the Issuer or any Restricted Subsidiary,including, without limitation, any payment in connection with any merger or consolidationinvolving the Issuer but excluding (a) dividends or distributions payable solely in QualifiedEquity Interests or through accretion or accumulation of such dividends on such Equity Interestsand (b) in the case of Restricted Subsidiaries, dividends or distributions payable to the Issuer orto a Restricted Subsidiary and pro rata (or on a basis more favorable to the Issuer) dividends ordistributions payable to minority stockholders of any Restricted Subsidiary;

(2) the purchase, redemption, defeasance or other acquisition or retirement for value of anyEquity Interests of the Issuer (including, without limitation, any payment in connection with anymerger or consolidation involving the Issuer) but excluding any such Equity Interests held bythe Issuer or any Restricted Subsidiary;

(3) any Restricted Investment; or

(4) any principal payment on, purchase, redemption, defeasance, prepayment, decrease orother acquisition or retirement for value prior to any scheduled maturity or prior to anyscheduled repayment of principal or sinking fund payment, as the case may be, in respect ofSubordinated Indebtedness (other than any Subordinated Indebtedness owed to and held bythe Issuer or any Restricted Subsidiary).

“Restricted Payments Basket” has the meaning given to such term in the first paragraph ofthe covenant described under “—Certain Covenants—Limitations on Restricted Payments.”

“Restricted Subsidiary” means any Subsidiary of the Issuer other than an UnrestrictedSubsidiary.

“S&P” means Standard & Poor’s Ratings Services, a division of the McGraw-HillCompanies, Inc., and its successors.

“SEC” means the U.S. Securities and Exchange Commission.

“Secretary’s Certificate” means a certificate signed by the Secretary of the Issuer.

“Secured Indebtedness” means any Indebtedness of the Issuer or any of its RestrictedSubsidiaries secured by a Lien on assets of the Issuer or such Restricted Subsidiary, excludingEquity Interests or Indebtedness of an Unrestricted Subsidiary.

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“Secured Leverage Ratio” means, for any Person on any Transaction Date, the ratio of(1) Secured Indebtedness of such Person and its Restricted Subsidiaries as of such TransactionDate (assuming any revolving credit facilities are fully drawn) (determined on a consolidatedbasis in accordance with GAAP) to (2) Consolidated Cash Flow of such Person for the then mostrecent four fiscal quarters ending prior to such Transaction Date for which financial statementsare internally available. In the event that the Issuer or any of its Restricted Subsidiaries Incurs orredeems any Secured Indebtedness subsequent to the commencement of the period for whichthe Secured Leverage Ratio is being calculated but prior to the event for which the calculation ofthe Secured Leverage Ratio is made, then the Secured Leverage Ratio shall be calculated givingpro forma effect to such Incurrence or redemption of Indebtedness as if the same had occurredat the beginning of the applicable four fiscal quarter period. The Secured Leverage Ratio shallbe calculated in a manner consistent with the definition of “Consolidated Interest CoverageRatio,” including any pro forma adjustments to Consolidated Cash Flow as set forth therein(including for acquisitions); provided that for purposes of any unsecured Indebtedness incurredunder clause (1) of the second paragraph of the covenant described under “—Limitations onAdditional Indebtedness” such unsecured Indebtedness will be deemed to be “SecuredIndebtedness” for purposes of the calculation of Secured Leverage Ratio.

“Secured Notes” means the Issuer’s 7.125% Senior Secured Notes due 2017 issuedpursuant to the indenture dated April 3, 2012 among the Issuer and the trustee, collateral agentand guarantors named therein.

“Securities Act” means the U.S. Securities Act of 1933, as amended.

“Significant Subsidiary” means (1) any Restricted Subsidiary that would be a “significantsubsidiary” as defined in Regulation S-X promulgated pursuant to the Securities Act as suchRegulation is in effect on the Issue Date and (2) any Restricted Subsidiary that, when aggregatedwith all other Restricted Subsidiaries that are not otherwise Significant Subsidiaries and as towhich any event described in clause (7) under “—Events of Default” has occurred and iscontinuing, or which are being released from their Guarantees (in the case of clause (9) of theprovisions described under “—Amendment, Supplement and Waiver”), would constitute aSignificant Subsidiary under clause (1) of this definition.

“Subordinated Indebtedness” means Indebtedness of the Issuer or any RestrictedSubsidiary that is expressly subordinated in right of payment to the Notes or the NoteGuarantees, respectively.

“Subsidiary” means, with respect to any Person:

(1) any corporation, limited liability company, association or other business entity of whichmore than 50% of the total voting power of the Equity Interests entitled (without regard to theoccurrence of any contingency) to vote in the election of the Board of Directors thereof is at thetime owned or controlled, directly or indirectly, by such Person or one or more of the otherSubsidiaries of such Person (or a combination thereof); and

(2) any partnership (a) the sole general partner or the managing general partner of which issuch Person or a Subsidiary of such Person or (b) the only general partners of which are suchPerson or of one or more Subsidiaries of such Person (or any combination thereof).

Unless otherwise specified, “Subsidiary” refers to a Subsidiary of the Issuer.

“Subsidiary Guarantor” means any Guarantor that is a Subsidiary.

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“Trust Indenture Act” means the Trust Indenture Act of 1939, as amended.

“Unrestricted Subsidiary” means (1) any Subsidiary that at the time of determination shallbe designated an Unrestricted Subsidiary by the Board of Directors of the Issuer in accordancewith the covenant described under “—Certain Covenants—Limitations on Designation ofUnrestricted Subsidiaries” and (2) any Subsidiary of an Unrestricted Subsidiary.

“U.S. Government Obligations” means direct non-callable obligations of, or guaranteed by,the United States of America for the payment of which guarantee or obligations the full faithand credit of the United States is pledged.

“Vessel Acquisition” means the acquisition by the Issuer or any Restricted Subsidiary, inone transaction or a series of related transactions, of one or more lift boats, jackup rigs,submersible rigs, semi-submersible rigs, barge rigs, drill ships or other maritime drilling rigs(whether new construction or otherwise) from a Person (other than a Restricted Subsidiary);provided that the aggregate consideration for such acquisition is $25.0 million or more.

“Voting Stock” with respect to any Person, means securities of any class of Equity Interestsof such Person entitling the holders thereof (whether at all times or only so long as no seniorclass of stock or other relevant equity interest has voting power by reason of any contingency)to vote in the election of members of the Board of Directors of such Person.

“Weighted Average Life to Maturity” when applied to any Indebtedness at any date, meansthe number of years obtained by dividing (1) the sum of the products obtained by multiplying(a) the amount of each then remaining installment, sinking fund, serial maturity or otherrequired payment of principal, including payment at final maturity, in respect thereof by (b) thenumber of years (calculated to the nearest one-twelfth) that will elapse between such date andthe making of such payment by (2) the then outstanding principal amount of such Indebtedness.

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BOOK ENTRY, DELIVERY AND FORM

The certificates representing the notes will be issued in fully registered form withoutinterest coupons.

The notes are being offered and sold to qualified institutional buyers in reliance onRule 144A (“Rule 144A Notes”). Notes also may be offered and sold in offshore transactions inreliance on Regulation S (“Regulation S Notes”). Except as set forth below, notes will be issuedin registered, global form in minimum denominations of $2,000 and integral multiples of $1,000in excess thereof. Rule 144A Notes initially will be represented by notes in registered, globalform without interest coupons (collectively, the “Rule 144A Global Notes”). Regulation S Notesinitially will be represented by notes in registered, global form without interest coupons(collectively, the “Regulation S Global Notes” and, together with the Rule 144A Global Notes,the “Global Notes”). The Global Notes will be deposited upon issuance with the trustee, ascustodian for DTC, in New York, New York, and registered in the name of DTC or its nominee, ineach case for credit to an account of a direct or indirect participant in DTC as described below.Beneficial interests in a Restricted Global Note may be transferred to a person who takesdelivery in the form of an interest in a Regulation S Global Note whether before, on or aftersuch time, only upon receipt by the Trustee of a written certification to the effect that suchtransfer is being made in accordance with Regulation S.

The Global Notes will be subject to certain restrictions on transfer set forth therein and inthe indenture and will bear the legend regarding such restrictions set forth under the heading“Notice to Investors” herein. Subject to such restrictions, Qualified Institutional Buyers (“QIBs”)or non-U.S. purchasers may elect to take physical delivery of their certificates (each a“Certificated Security”) instead of holding their interests through the Global Notes (and whichare then ineligible to trade through DTC) (collectively referred to herein as the “Non-GlobalPurchasers”). Upon the transfer to a QIB of any Certificated Security initially issued to a Non-Global Purchaser, such Certificated Security will, unless the transferee requests otherwise or theGlobal Notes have previously been exchanged in whole for Certificated Securities, beexchanged for an interest in the Global Notes. For a description of the restrictions on transfer ofCertificated Securities and any interest in the Global Notes, see “Notice to Investors.”

The Global Notes

We expect that, pursuant to procedures established by DTC, (i) upon the issuance of theGlobal Notes, DTC or its custodian will credit, on its internal system, the principal amount atmaturity of the individual beneficial interests represented by such Global Notes to therespective accounts of persons who have accounts with such depositary (“participants”) and(ii) ownership of beneficial interests in the Global Notes will be shown on, and the transfer ofsuch ownership will be effected only through, records maintained by DTC or its nominee (withrespect to interests of participants) and the records of participants (with respect to interests ofpersons other than participants). Such accounts initially will be designated by or on behalf ofthe initial purchasers and ownership of beneficial interests in the Global Notes will be limited toparticipants or persons who hold interests through participants. Holders may hold their interestsin the Global Notes directly through DTC if they are participants in such system, or indirectlythrough organizations which are participants in such system.

So long as DTC or its nominee is the registered owner or holder of the notes, DTC or suchnominee, as the case may be, will be considered the sole owner or holder of the notesrepresented by such Global Notes for all purposes under the indenture. No beneficial owner of aninterest in the Global Notes will be able to transfer that interest except in accordance with DTC’sprocedures, in addition to those provided for under the indenture with respect to the notes.

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Payments of the principal of, premium (if any) and interest (including Additional Interest, ifany) on, the Global Notes will be made to DTC or its nominee, as the case may be, as theregistered owner thereof. Neither we, the trustee nor any Paying Agent will have anyresponsibility or liability for any aspect of the records relating to or payments made on accountof beneficial ownership interests in the Global Notes or for maintaining, supervising orreviewing any records relating to such beneficial ownership interest.

We expect that DTC or its nominee, upon receipt of any payment of principal of, andpremium (if any) and interest (including Additional Interest, if any) on the Global Notes, willcredit participants’ accounts with payments in amounts proportionate to their respectivebeneficial interests in the principal amount of the Global Notes as shown on the records of DTCor its nominee. We also expect that payments by participants to owners of beneficial interests inthe Global Notes held through such participants will be governed by standing instructions andcustomary practice, as is now the case with securities held for the accounts of customers,registered in the names of nominees for such customers. Such payments will be theresponsibility of such participants.

Transfers between participants in DTC will be effected in the ordinary way through DTC’ssame-day funds system in accordance with DTC rules and will be settled in same-day funds. If aholder requires physical delivery of a Certificated Security for any reason, including to sell notesto persons in states that require physical delivery of the notes, or to pledge such securities, suchholder must transfer its interest in a Global Note, in accordance with the normal procedures ofDTC and with the procedures set forth in the indenture.

DTC has advised us that it will take any action permitted to be taken by a holder of notesonly at the direction of one or more participants to whose account the DTC interests in theGlobal Notes are credited and only in respect of such portion of the aggregate principal amountof notes as to which such participant or participants has or have given such direction. However,if there is an event of default under the indenture, DTC will exchange the applicable GlobalNotes for Certificated Securities, which it will distribute to its participants and which will belegended as set forth under the heading “Notice to Investors.”

DTC has advised us as follows: DTC is a limited purpose trust company organized under thelaws of the State of New York, a member of the Federal Reserve System, a “clearingcorporation” within the meaning of the Uniform Commercial Code and a “Clearing Agency”registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934 (the“Exchange Act”). DTC was created to hold securities for its participants and facilitate theclearance and settlement of securities transactions between participants through electronicbook-entry changes in accounts of its participants, thereby eliminating the need for physicalmovement of certificates. Participants include securities brokers and dealers, banks, trustcompanies and clearing corporations and certain other organizations. Indirect access to the DTCsystem is available to others such as banks, brokers, dealers and trust companies that clearthrough or maintain a custodial relationship with a participant, either directly or indirectly.

Although DTC has agreed to the foregoing procedures in order to facilitate transfers ofinterests in the Global Notes among participants of DTC they are under no obligation to performsuch procedures, and such procedures may be discontinued at any time. Neither we nor thetrustee will have any responsibility for the performance by DTC or its participants or indirectparticipants of its obligations under the rules and procedures governing their operations.

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Certificated Securities

Certificated Securities shall be issued in exchange for beneficial interests in the GlobalNotes (i) if requested by a holder of such interests or (ii) if DTC is at any time unwilling orunable to continue as a depositary for the Global Notes and a successor depositary is notappointed by the Company within 90 days.

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CERTAIN UNITED STATES FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS

Treasury Circular 230 Disclosure

TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230, HOLDERS ARE

HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS DOCUMENT

IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY

HOLDERS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON

HOLDERS UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”);

(B) SUCH DISCUSSION IS INCLUDED HEREIN BY THE COMPANY IN CONNECTION WITH THE

PROMOTION OR MARKETING (WITHIN THE MEANING OF CIRCULAR 230) BY THE COMPANY

OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) HOLDERS SHOULD

SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX

ADVISOR.

The following discussion summarizes certain U.S. federal income tax considerations and, inthe case of a non-U.S. holder (as defined below), U.S. federal estate tax considerations that maybe relevant to the acquisition, ownership and disposition of the notes. This discussion is basedupon the provisions of the Code, applicable U.S. Treasury Regulations promulgated thereunder,judicial authority and administrative interpretations, as of the date of this document, all of whichare subject to change or different interpretations, possibly with retroactive effect. We cannotassure you that the Internal Revenue Service, or IRS, will not challenge one or more of the taxconsequences described in this discussion, and we have not obtained, nor do we intend toobtain, a ruling from the IRS or an opinion of counsel with respect to the U.S. federal taxconsequences of acquiring, holding or disposing of the notes.

This discussion is limited to holders who purchase the notes in this offering for a priceequal to the issue price of the notes (i.e., the first price at which a substantial amount of thenotes is sold for cash other than to bond houses, brokers or similar persons or organizationsacting in the capacity of underwriters, placement agents or wholesalers) and who hold the notesas capital assets (generally, property held for investment). This discussion does not address theconsequences of holders who participate in the concurrent tender offer and who also purchasenotes pursuant to this offering. Further, this discussion does not address the tax considerationsarising under other U.S. federal tax laws (such as gift consequences or estate tax consequencesto U.S. holders) or the laws of any foreign, state, local or other jurisdiction or any income taxtreaty. In addition, this discussion does not address other tax considerations that may beimportant to a particular holder in light of the holder’s circumstances, or to certain categories ofinvestors that may be subject to special rules, such as:

• dealers in securities or currencies;

• traders in securities that have elected the mark-to-market method of accounting for theirsecurities;

• U.S. holders (as defined below) whose functional currency is not the U.S. dollar;

• persons holding notes as part of a hedge, straddle, conversion or other “syntheticsecurity” or risk reduction transaction;

• U.S. expatriates;

• financial institutions;

• insurance companies;

• regulated investment companies;

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• real estate investment trusts;

• persons subject to the alternative minimum tax;

• U.S. holders (as defined below) that hold their notes through non-U.S. brokers or othernon-U.S. intermediaries;

• entities that are tax-exempt for U.S. federal income tax purposes; and

• partnerships and other pass-through entities and holders of interests therein.

If an entity treated as a partnership for U.S. federal income tax purposes holds notes, thetax treatment of a partner of a partnership generally will depend upon the status of the partnerand the activities of the partnership. If you are a partner of a partnership considering aninvestment in the notes, you are urged to consult your own tax advisor about the U.S. federalincome tax consequences of acquiring, holding and disposing of the notes.

INVESTORS CONSIDERING THE PURCHASE OF NOTES ARE URGED TO CONSULT THEIR

OWN TAX ADVISORS REGARDING THE PARTICULAR U.S. FEDERAL, STATE, LOCAL AND

FOREIGN TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND

DISPOSITION OF THE NOTES AS WELL AS ANY PROPOSED CHANGE IN APPLICABLE TAX

LAWS.

Certain Additional Payments

In certain circumstances (see e.g. “Description of the Notes—Optional Redemption” and“Description of the Notes—Change of Control”), we may be obligated to pay amounts on thenotes that are in excess of stated interest or principal on the notes. We do not intend to treat thepossibility of paying such additional amounts as causing the notes to be treated as contingentpayment debt instruments. It is possible that the IRS may take a different position, in which casea holder might be required to accrue interest income at a higher rate than the stated interestrate and to treat as ordinary interest income any gain realized on the taxable disposition of thenote. The remainder of this discussion assumes that the notes will not be treated as contingentpayment debt instruments. Prospective investors should consult their own tax advisorsregarding the possible application of the contingent payment debt instrument rules to the notes.

Tax Consequences to U.S. Holders

You are a “U.S. holder” for purposes of this discussion if you are a beneficial owner of anote and you are for U.S. federal income tax purposes:

• an individual who is a U.S. citizen or U.S. resident alien;

• a corporation that was created or organized under the laws of the United States, anystate thereof or the District of Columbia;

• an estate whose income is subject to U.S. federal income taxation regardless of itssource; or

• a trust (1) if a court within the United States is able to exercise primary supervision overthe administration of the trust and one or more United States persons have the authorityto control all substantial decisions of the trust, or (2) that has a valid election in effectunder applicable U.S. Treasury Regulations to be treated as a United States person.

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Interest on the Notes

Interest on the notes generally will be taxable to you as ordinary income at the time it isreceived or accrued in accordance with your regular method of accounting for U.S. federalincome tax purposes.

Disposition of the Notes

You will generally recognize capital gain or loss on the sale, redemption, exchange,retirement or other taxable disposition of a note equal to the difference, if any, between theproceeds you receive (excluding any proceeds attributable to accrued but unpaid interest, whichwill be taxable as ordinary interest income to the extent you have not previously included suchamounts in income) and your adjusted tax basis in the notes. The proceeds you receive willinclude the amount of any cash and the fair market value of any other property received for thenote. Your adjusted tax basis in the note will generally equal the amount you paid for the note.Any gain or loss will be long-term capital gain or loss if you held the note for more than oneyear at the time of the sale, redemption, exchange, retirement or other disposition. Long-termcapital gains of individuals, estates and trusts generally are currently subject to a reduced rateof U.S. federal income tax. The deductibility of capital losses may be subject to limitations.

Additional Tax Relating to Net Investment Income

An additional 3.8% tax is imposed on the “net investment income” of certain United Statescitizens and resident aliens, and on the undistributed “net investment income” of certain estatesand trusts. Among other items, “net investment income” generally includes gross income frominterest, and net gain from the disposition of property, such as the notes, less certaindeductions. Prospective investors should consult their tax advisors with respect to the taxconsequences of this additional tax.

Information Reporting and Backup Withholding

Information reporting will apply to payments of interest on, and the proceeds of the sale,exchange or other disposition (including a redemption or retirement) of, notes held by you, andbackup withholding will apply to such amounts unless you provide the appropriate intermediarywith a taxpayer identification number, certified under penalties of perjury, as well as certainother information or otherwise establish an exemption from backup withholding. Backupwithholding is not an additional tax. Any amount withheld under the backup withholding rulesis allowable as a credit against your U.S. federal income tax liability, if any, and a refund may beobtained if the amounts withheld exceed your actual U.S. federal income tax liability and youtimely provide the required information and appropriate claim form to the IRS.

Tax Consequences to Non-U.S. Holders

You are a “non-U.S. holder” for purposes of this discussion if you are a beneficial owner ofnotes that, for U.S. federal income tax purposes, is an individual, corporation, estate or trustthat is not a U.S. holder.

Interest on the Notes

Payments to you of interest on the notes generally will be exempt from withholding of U.S.federal income tax under the “portfolio interest” exemption if you properly certify as to yourforeign status, as described below, and:

• you do not own, actually or constructively, 10% or more of the total combined votingpower of all classes of our stock entitled to vote;

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• you are not a “controlled foreign corporation” that is related to us (actually orconstructively);

• you are not a bank whose receipt of interest on the notes is in connection with anextension of credit made pursuant to a loan agreement entered into in the ordinarycourse of your trade or business; and

• interest on the notes is not effectively connected with your conduct of a U.S. trade orbusiness.

The portfolio interest exemption and several of the special rules for non-U.S. holdersdescribed below generally apply only if you appropriately certify as to your foreign status. Youcan generally meet this certification requirement by providing a properly executed IRSForm W-8BEN or appropriate substitute form to the withholding agent. If you hold the notesthrough a financial institution or other agent acting on your behalf, you may be required toprovide appropriate certifications to the agent. Your agent will then generally be required toprovide appropriate certifications to the applicable withholding agent, either directly or throughother intermediaries. Special rules apply to foreign partnerships, estates and trusts, and incertain circumstances certifications as to foreign status of partners, trust owners or beneficiariesmay have to be provided to the withholding agent. In addition, special rules apply to qualifiedintermediaries that enter into withholding agreements with the IRS.

If you cannot satisfy the requirements described above, payments of interest made to youwill be subject to U.S. federal withholding tax at a 30% rate, unless you provide the withholdingagent with a properly executed IRS Form W-8BEN (or successor form) claiming an exemptionfrom (or a reduction of) withholding under the benefits of an income tax treaty, or the paymentsof interest are effectively connected with your conduct of a trade or business in the UnitedStates and you meet the certification requirements described below. (See “—Income or GainEffectively Connected With a U.S. Trade or Business.”)

Disposition of the Notes

You generally will not be subject to U.S. federal income tax on any gain realized on the sale,redemption, exchange, retirement or other taxable disposition of a note unless:

• the gain is effectively connected with the conduct by you of a U.S. trade or business; or

• you are an individual who has been present in the United States for 183 days or more inthe taxable year of disposition and certain other requirements are met.

If your gain is described in the first bullet point above, you generally will be subject to U.S.federal income tax in the manner described under “—Income or Gain Effectively ConnectedWith a U.S. Trade or Business.” If you are a non-U.S. holder described in the second bullet pointabove, you will be subject to U.S. federal income tax at a flat rate of 30% (or lower applicabletreaty rate) on the gain derived from the sale or other disposition, which may be offset by U.S.source capital losses.

Income or Gain Effectively Connected with a U.S. Trade or Business

If any interest on the notes or gain from the sale, exchange or other taxable disposition ofthe notes is effectively connected with a U.S. trade or business conducted by you, then theinterest income or gain will be subject to U.S. federal income tax at regular graduated incometax rates, unless an applicable income tax treaty provides otherwise. Effectively connectedincome will not be subject to U.S. withholding tax if you satisfy certain certification

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requirements by providing to us or our paying agent a properly executed IRS Form W-8ECI (orIRS Form W-8BEN if a treaty exemption applies) or successor form. If you are a corporation, thatportion of your earnings and profits that is effectively connected with your U.S. trade orbusiness may also be subject to a “branch profits tax” at a 30% rate, unless an applicableincome tax treaty provides for a lower rate.

Information Reporting and Backup Withholding

Payments to you of interest on a note, and amounts withheld from such payments, if any,generally will be required to be reported to the IRS and to you. Copies of the information returnsreporting such interest payments and withholding may also be made available to the taxauthorities of the country in which you reside or are established under the provisions of aspecific treaty or agreement.

United States backup withholding tax generally will not apply to payments to you of intereston a note if the statement described in “—Tax Consequences to Non-U.S. Holders—Interest onthe Notes” is duly provided or you otherwise establish an exemption, provided that theapplicable withholding agent does not have actual knowledge or reason to know that you are aUnited States person.

Payment of the proceeds of a disposition of a note (including a redemption or retirement)effected by the U.S. office of a U.S. or foreign broker will be subject to information reportingrequirements and backup withholding unless you properly certify under penalties of perjury asto your foreign status on IRS Form W-8BEN (or other applicable Form W-8) and certain otherconditions are met or you otherwise establish an exemption. Information reportingrequirements and backup withholding generally will not apply to any payment of the proceedsof the disposition of a note effected outside the United States by a foreign office of a broker.However, unless such a broker has documentary evidence in its records that you are a non-U.S.holder and certain other conditions are met, or you otherwise establish an exemption,information reporting will apply to a payment of the proceeds of the disposition of a noteeffected outside the United States by such a broker if the broker is U.S. person or has certainrelationships with the United States.

Backup withholding is not an additional tax. Any amount withheld under the backupwithholding rules is allowable as a credit against your U.S. federal income tax liability, if any,and a refund may be obtained if the amounts withheld exceed your actual U.S. federal incometax liability and you timely provide the required information and appropriate claim form to theIRS.

U.S. Federal Estate Tax

If you are an individual and are not a resident of the United States (as specially defined forU.S. federal estate tax purposes) at the time of your death, the notes will not be included in yourestate for U.S. federal estate tax purposes provided that at the time of your death, interest onthe notes owned by you qualifies for the portfolio interest exemption under the rules describedabove (without regard to the certification requirement required to qualify for the portfoliointerest exemption).

THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME AND ESTATE TAX

CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. WE

URGE EACH PROSPECTIVE INVESTOR TO CONSULT ITS OWN TAX ADVISOR REGARDING THE

PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF

PURCHASING, HOLDING AND DISPOSING OF OUR NOTES, INCLUDING THE CONSEQUENCES

OF ANY PROPOSED CHANGE IN APPLICABLE LAWS.

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PRIVATE PLACEMENT

Subject to the terms and conditions set forth in the purchase agreement (the “PurchaseAgreement”) among us, the guarantors and the initial purchasers, we have agreed to sell to theinitial purchasers, and the initial purchasers have severally agreed to purchase from us, all ofthe notes.

The Purchase Agreement provides that the obligations of the initial purchasers to pay forand accept delivery of the notes are subject to, among other conditions, the delivery of certainlegal opinions by its counsel. The initial purchasers must purchase all of the notes if theypurchase any of the notes.

The initial purchasers have agreed to resell the notes (a) to QIBs in reliance on Rule 144Aand (b) outside the United States in compliance with Regulation S under the Securities Act. See“Notice to Investors.” The notes will initially be offered at the prices indicated on the cover pagehereof. After the initial offering of the notes, the offering prices and other selling terms of thenotes may from time to time be varied by the initial purchasers. The offering of the notes by theinitial purchasers is subject to receipt and acceptance and subject to the initial purchasers’ rightto reject any order.

The Purchase Agreement provides that we will indemnify the several initial purchasersagainst certain liabilities, including liabilities under the Securities Act, and will contribute topayments that the initial purchasers may be required to make in respect thereof.

Prior to the offering, there has been no active market for the notes. The initial purchasershave advised us that they presently intend to make a market in the notes as permitted byapplicable laws and regulations. The initial purchasers are not obligated, however, to make amarket in the notes and any such market making may be discontinued at any time at the solediscretion of the initial purchasers. Accordingly, no assurance can be given as to the liquidity of,or trading markets for, the notes.

The initial purchasers have represented, warranted and agreed that:

• they have only communicated and caused to be communicated and will onlycommunicate or cause to be communicated any invitation or inducement to engage ininvestment activity (within the meaning of Section 21 of the Financial Services andMarkets Act 2000 (“FSMA”)) received by them in connection with the issue or sale of thenotes included in this offering in circumstances in which Section 21(1) of the FSMA doesnot apply to us; and

• they have complied and will comply with all applicable provisions of the FSMA withrespect to anything done by them in relation to the notes included in this offering in,from or otherwise involving the United Kingdom.

In relation to each Member State of the European Economic Area which has implementedthe Prospectus Directive (each, a “Relevant Member State”), with effect from and including thedate on which the Prospectus Directive is implemented in that Relevant Member State (the“Relevant Implementation Date”) no offer of notes may be made to the public in that RelevantMember State other than:

A. to any legal entity which is a qualified investor as defined in the Prospectus Directive;

B. to fewer than 100 or, if the Relevant Member State has implemented the relevantprovision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified

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investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive,subject to obtaining the prior consent of the representatives; or

C. in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of notes shall require the Company or the initial purchasers topublish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement aprospectus pursuant to Article 16 of the Prospectus Directive.

This offering memorandum has been prepared on the basis that any offer of notes in anyRelevant Member State will be made pursuant to an exemption under the Prospectus Directivefrom the requirement to publish a prospectus for offers of notes. Accordingly any personmaking or intending to make an offer in that Relevant Member State of notes which are thesubject of the offering contemplated in this offering memorandum may only do so incircumstances in which no obligation arises for the Company or the initial purchasers to publisha prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neitherthe Company nor the initial purchasers have authorized, nor do they authorize, the making ofany offer of notes in circumstances in which an obligation arises for the Company or the initialpurchasers to publish a prospectus for such offer.

For the purpose of the above provisions, the expression “an offer to the public” in relationto any notes in any Relevant Member State means the communication in any form and by anymeans of sufficient information on the terms of the offer and the notes to be offered so as toenable an investor to decide to purchase or subscribe the notes, as the same may be varied inthe Relevant Member State by any measure implementing the Prospectus Directive in theRelevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC(including the 2010 PD Amending Directive, to the extent implemented in the Relevant MemberStates) and includes any relevant implementing measure in the Relevant Member State and theexpression “2010 PD Amending Directive” means Directive 2010/73/EU.

The notes may not be offered or sold by means of any document other than (i) incircumstances which do not constitute an offer to the public within the meaning of theCompanies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors” withinthe meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and anyrules made thereunder, or (iii) in other circumstances which do not result in the document beinga “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong),and no advertisement, invitation or document relating to the notes may be issued or may be inthe possession of any person for the purpose of issue (in each case whether in Hong Kong orelsewhere), which is directed at, or the contents of which are likely to be accessed or read by,the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other thanwith respect to notes which are or are intended to be disposed of only to persons outside HongKong or only to “professional investors” within the meaning of the Securities and FuturesOrdinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

This offering memorandum has not been registered as a prospectus with the MonetaryAuthority of Singapore. Accordingly, this offering memorandum and any other document ormaterial in connection with the offer or sale, or invitation for subscription or purchase, of thenotes may not be circulated or distributed, nor may the notes be offered or sold, or be made thesubject of an invitation for subscription or purchase, whether directly or indirectly, to persons inSingapore other than (i) to an institutional investor under Section 274 of the Securities andFutures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person, or any person

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pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 ofthe SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any otherapplicable provision of the SFA.

Where the notes are subscribed or purchased under Section 275 by a relevant person whichis: (a) a corporation (which is not an accredited investor) the sole business of which is to holdinvestments and the entire share capital of which is owned by one or more individuals, each ofwhom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor)whose sole purpose is to hold investments and each beneficiary is an accredited investor,shares, debentures and units of shares and debentures of that corporation or the beneficiaries’rights and interest in that trust shall not be transferable for 6 months after that corporation orthat trust has acquired the notes under Section 275 except: (1) to an institutional investor underSection 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), andin accordance with the conditions, specified in Section 275 of the SFA; (2) where noconsideration is given for the transfer; or (3) by operation of law.

The securities have not been and will not be registered under the Financial Instruments andExchange Law of Japan (the Financial Instruments and Exchange Law) and each InitialPurchaser has agreed that it will not offer or sell any securities, directly or indirectly, in Japan orto, or for the benefit of, any resident of Japan (which term as used herein means any personresident in Japan, including any corporation or other entity organized under the laws of Japan),or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan,except pursuant to an exemption from the registration requirements of, and otherwise incompliance with, the Financial Instruments and Exchange Law and any other applicable laws,regulations and ministerial guidelines of Japan.

We expect that delivery of the notes will be made against payment therefor on or about theclosing date specified on the cover page of this offering memorandum, which will be the tenthbusiness day following the date of pricing of the notes (this settlement cycle being referred to as“T+10“). Under Rule 15c6-1 of the U.S. Securities and Exchange Commission under theExchange Act, trades in the secondary market generally are required to settle in three businessdays, unless the parties to that trade expressly agree otherwise. Accordingly, purchasers whowish to trade notes on the date of pricing or the next succeeding six business days will berequired, by virtue of the fact that the notes initially will settle in T+10, to specify an alternatesettlement cycle at the time of any such trade to prevent a failed settlement and should consulttheir own advisor.

In connection with the offering, certain persons participating in the offering may engage intransactions that stabilize, maintain or otherwise affect the prices of the notes. Specifically, theinitial purchasers may bid for and purchase notes in the open markets to stabilize the prices ofthe notes. The initial purchasers may also overallot the offering, creating a syndicate shortposition, and may bid for and purchase notes in the open market to cover the syndicate shortposition. In addition, the initial purchasers may bid for and purchase notes in market makingtransactions and impose penalty bids. These activities may stabilize or maintain the respectivemarket prices of the notes above market levels that may otherwise prevail. The initialpurchasers are not required to engage in these activities, and may end these activities at anytime.

The initial purchasers and their respective affiliates are full service financial institutionsengaged in various activities, which may include securities trading, commercial and investmentbanking, financial advisory, investment management, investment reserves, principalinvestment, hedging, financing and brokerage activities. The initial purchasers or its affiliates

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from time to time have provided in the past and may provide in the future investment banking,commercial lending and financial advisory services to us and our affiliates in the ordinarycourse of business, for which they have received customary fees and expenses.

In the ordinary course of their various business activities, the initial purchasers and theirrespective affiliates may make or hold a broad array of investments and actively trade debt andequity securities (or related derivative securities) and financial instruments (including bankloans) for their own account and for the accounts of their customers, and such investment andsecurities activities may involve securities and/or instruments of the issuer. The initialpurchasers and their respective affiliates may also make investment recommendations and/orpublish or express independent research views in respect of such securities or instruments andmay at any time hold, or recommend to clients that they acquire, long and/or short positions insuch securities and instruments. Affiliates of certain initial purchasers are agents, arrangers and/or lenders under our revolving credit facility, and as consideration therefor received or willreceive customary fees and expenses in connection therewith. Additionally, Amegy BankNational Association has acted as a financial advisor to us in connection with this offering, andnot as an initial purchaser, and will receive a fee in such capacity payable directly by us.

The activities of Pareto Securities AS in the United States will be effected through ParetoSecurities Inc. in accordance with Rule 15a-6 under the Exchange Act.

RS Platou Markets AS is not a U.S. registered broker-dealer and, therefore, intends toparticipate in the offering outside of the United States and, to the extent that the offering byRS Platou Markets AS is within the United States, RS Platou Markets AS will offer to and placesecurities with investors through RS Platou Markets, Inc., an affiliated U.S. broker-dealer. Theactivities of RS Platou Markets AS in the United States will be effected only to the extentpermitted by Rule 15a-6 under the Exchange Act.

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NOTICE TO INVESTORS

The issuance and sale of the notes have not been registered under the Securities Act or anyother applicable securities laws and, unless so registered, the notes may not be offered, sold,pledged or otherwise transferred within the United States or to or for the account of any U.S.person, except pursuant to an exemption from, or in a transaction not subject to, the registrationrequirements of the Securities Act and any other applicable securities laws. The notes are beingoffered and issued, only (a) to “qualified institutional buyers” (as defined in Rule 144A under theSecurities Act), or QIBs, in a private transaction in reliance upon an exemption from theregistration requirements of the Securities Act and (b) outside the United States to persons otherthan U.S. persons in reliance upon Regulation S under the Securities Act.

Each purchaser of notes will be deemed to represent, warrant, and agree as follows (termsused in this paragraph that are defined in Rule 144A or Regulation S under the Securities Act areused herein as defined therein):

(1) It (A) (i) is a QIB and (ii) is acquiring the notes for its own account or for the accountof a QIB or (B) is not a U.S. person and is acquiring the notes in an offshore transactionpursuant to Regulation S.

(2) It understands that the notes are being offered in a transaction not involving anypublic offering in the United States within the meaning of the Securities Act, that the noteshave not been and will not be registered under the Securities Act and that (A) if in the futureit decides to offer, resell, pledge or otherwise transfer any of the notes, such notes may beoffered, resold, pledged or otherwise transferred only (i) in the United States to a personwhom the seller reasonably believes is a QIB in a transaction meeting the requirements ofRule 144A, (ii) outside the United States in a transaction complying with the provisions ofRule 904 under the Securities Act, (iii) pursuant to an exemption from registration under theSecurities Act, including provided by Rule 144 (if available and provided that prior to suchtransfer, the trustee is furnished with an opinion of counsel acceptable to the issuer thatsuch transfer is in compliance with the Securities Act), (iv) pursuant to an effectiveregistration statement under the Securities Act or (v) to us or any of our subsidiaries, ineach of cases (i) through (v) in accordance with any applicable securities laws of any Stateof the United States, and that (B) it will, and each subsequent holder is required to, notifyany subsequent purchaser of the notes from it of the resale restrictions referred to in clause(A) above.

(3) It understands that the notes will, unless otherwise agreed by the Issuer and theholder thereof, bear a legend substantially to the following effect:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACTOF 1933, AS AMENDED (THE “SECURITIES ACT”) AND, ACCORDINGLY, MAY NOT BEOFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THEUNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS,EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITIONHEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:

(1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER” (ASDEFINED IN RULE 144A UNDER THE “SECURITIES ACT”) (A “QIB”) OR (B) IT IS NOT AU.S. PERSON, IS NOT ACQUIRING THIS SECURITY FOR THE ACCOUNT OR FOR THEBENEFIT OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFF-SHORETRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT,

(2) AGREES THAT IT WILL NOT, WITHIN, THE TIME PERIOD REFERRED TO UNDERRULE 144(d)(1) UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF THE

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TRANSFER OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITYEXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) TO A PERSON WHOMTHE HOLDER REASONABLY BELIEVES IS A QIB OR AN ACCREDITED INVESTORPURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB OR ANACCREDITED INVESTOR, RESPECTIVELY, IN COMPLIANCE WITH RULE 144A UNDERTHE SECURITIES ACT OR AN AVAILABLE EXEMPTION FROM THE REGISTRATIONREQUIREMENTS OF THE SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN ANOFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIESACT, (D) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE144 UNDER THE SECURITIES ACT (IF AVAILABLE AND PROVIDED THAT PRIOR TOSUCH TRANSFER, THE TRUSTEE IS FURNISHED WITH AN OPINION OF COUNSELACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH THESECURITIES ACT) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENTUNDER THE SECURITIES ACT AND, IN EACH CASE, IN ACCORDANCE WITHAPPLICABLE STATE SECURITIES LAWS, AND

(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITYOR AN INTEREST HEREIN IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANTTO CLAUSE (2)(D) OR (2)(E) ABOVE) A NOTICE SUBSTANTIALLY TO THE EFFECT OFTHIS LEGEND.

IN CONNECTION WITH ANY TRANSFER THIS SECURITY OR ANY INTERESTHEREIN WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECKTHE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THEMANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. ASUSED HEREIN THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND“U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY RULE 902 OF REGULATIONS UNDER THE SECURITIES ACT.

(4) If you are an acquirer in a transaction that occurs outside the United States withinthe meaning of Regulation S, you acknowledge that until the expiration of the “40-daydistribution compliance period” within the meaning of Rule 903 of Regulation S under theSecurities Act, any offer or sale of these notes shall not be made by you to a U.S. person orfor the account or benefit of a U.S. person within the meaning of Rule 902 under theSecurities Act, except in compliance with applicable securities laws.

(5) It (a) is able to act on its own behalf in the transactions contemplated by this offeringmemorandum, (b) has such knowledge and experience in financial and business matters asto be capable of evaluating the merits and risks of its prospective investment in the notes,and (c) (or the account for which it is acting) has the ability to bear the economic risks of itsprospective investment in the notes and can afford the complete loss of such investment.

(6) It acknowledges that (a) none of us, the initial purchasers or any person acting onbehalf of any of the foregoing has made any statement, representation, or warranty,express or implied, to it with respect to the Issuer or the offer or sale of any notes, otherthan the information we have included in this offering memorandum, and (b) anyinformation it desires concerning the Issuer, the notes or any other matter relevant to itsdecision to acquire the notes (including a copy of the offering memorandum) is or has beenmade available to it.

(7) It shall not sell or otherwise transfer such notes to, and each purchaser representsand covenants that it is not acquiring the notes for or on behalf of, and will not transfer thenotes to (i) any “employee pension benefit plan” or “employee welfare plan” (each asdefined in Section 3 of the Employee Retirement Income Security Act of 1974, as amended(“ERISA”)), (ii) “plan” (as defined in Section 4975(e)(1) of the Code) or (iii) any entity whose

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assets include assets of any plans described above in subsections (i) and (ii) pursuant to29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA (each, a “Plan Entity”)except that such a purchase for or on behalf of a Plan Entity shall be permitted:

(A) to the extent such purchase is made by or on behalf of a bank collectiveinvestment fund maintained by the purchaser in which, at any time while the notes areheld by the purchaser, no Plan Entity (together with any other Plan Entities maintainedby the same employer or employee organization) has an interest in excess of 10% ofthe total assets in such collective investment fund and the conditions of ProhibitedTransaction Class Exemption 91-38 issued by the U.S. Department of Labor are satisfiedwith respect to the purchase and holding of the securities;

(B) to the extent such purchase is made by or on behalf of an insurance companypooled separate account maintained by the purchaser in which, at any time while thenotes are held by the purchaser, no Plan Entity (together with any other Plan Entitiesmaintained by the same employer or employee organization) has an interest in excessof 10% of the total of all assets in such pooled separate account and the conditions ofProhibited Transaction Class Exemption 90-1 issued by the U.S. Department of Laborare satisfied with respect to the purchase and holding of the securities;

(C) to the extent such purchase is made by or on behalf of an insurance companywith assets in its insurance company general account, if no Plan Entity (together withany other Plan Entity maintained by the same employer or employee organization) hasan interest in the general account, the amount of reserves and liabilities for whichexceed 10% of the total reserves and liabilities of the general account plus surplus,determined as set forth in Prohibited Transaction Class Exemption 95-60 issued by theU.S. Department of Labor, and the conditions of Sections I and IV of such exemptionare otherwise satisfied with respect to the purchase and holding of the securities;

(D) to the extent such purchase is made on behalf of a Plan Entity by a “qualifiedprofessional asset manager” as such term is used in Prohibited Transaction ClassExemption 84-14 issued by the U.S. Department of Labor, with respect to such PlanEntity, and the assets of such Plan Entity managed by such qualified professional assetmanager, when combined with the assets of other Plan Entities established ormaintained by the same employer (or affiliate thereof, as defined in such exemption) oremployee organization and managed by such qualified professional asset manager donot represent more than 20% of the total client assets managed by such qualifiedprofessional asset manager, and the conditions of Part I of such exemption areotherwise satisfied with respect to the purchase and holding of the securities;

(E) to the extent such plan is a “governmental plan” (as defined in Section 3 ofERISA) which is not subject to the provisions of Title I of ERISA or Section 4975 of theCode;

(F) to the extent such purchase is made on behalf of a Plan Entity by an “in-houseasset manager” (the “INHAM”) as defined in Part IV of Prohibited Transaction ClassExemption 96-23 issued by the U.S. Department of Labor, Plan Entities maintained byaffiliates of the INHAM and/or the INHAM have aggregate assets in excess of $250million, and the conditions of Part I of such exemption are otherwise satisfied withrespect to the purchase and holding of the securities;

(G) to the extent such purchase is made on behalf of a Plan Entity for “adequateconsideration” (as defined in Section 408(b)(17) of ERISA) and the conditions ofSection 408(b)(17) of ERISA are satisfied with respect to the purchase and holding ofthe securities; or

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(H) to the extent such purchase is made on behalf of a Plan Entity as to which anyother statutory, regulatory, administrative or other exemption from the prohibitedtransaction restrictions set forth in Section 406 of ERISA and Section 4975 of the Codeapplies.

(8) It acknowledges that the trustee will not be required to accept for registration oftransfer any notes acquired by it, except upon presentation of evidence satisfactory to thecompany and the trustee that the restrictions set forth herein have been complied with.

(9) It acknowledges that we, the initial purchasers and others will rely upon the truthand accuracy of the foregoing acknowledgments, representations and agreements andagrees that if any of the acknowledgments, representations or agreements deemed to havebeen made by its purchase of the notes are no longer accurate, it shall promptly notify usand the initial purchasers. If it is acquiring the notes as a fiduciary or agent for one or moreinvestor accounts, it represents that it has sole investment discretion with respect to eachsuch account and it has full power to make the foregoing acknowledgments,representations, and agreements on behalf of each account.

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LEGAL MATTERS

The validity of the notes offered hereby will be passed upon for us by Andrews Kurth LLP,Houston, Texas. Certain legal matters will be passed upon for the initial purchasers by Vinson &Elkins LLP, Houston, Texas.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The consolidated financial statements and schedule of Hercules Offshore, Inc. as ofDecember 31, 2013 and 2012 and for the three years ended December 31, 2013, incorporated byreference in the offering memorandum, have been audited by Ernst & Young LLP, independentregistered public accounting firm, as stated in their report incorporated by reference herein.

The consolidated and combined financial statements of Seahawk Drilling, Inc. as ofDecember 31, 2010 and 2009, and for each of the years in the three-year period endedDecember 31, 2010, incorporated by reference herein, have been audited by KPMG LLP,independent registered public accounting firm, as stated in their report incorporated byreference herein, which contains an explanatory paragraph that states that prior to August 24,2009 (the Spin-off Date), the combined financial statements have been prepared from theseparate records maintained by Seahawk Drilling, Inc.’s former parent, Pride International, Inc.,and may not necessarily be indicative of the conditions that would have existed or the results ofoperations if Seahawk Drilling, Inc. had been operated as an unaffiliated entity. In addition, theirreport contains an explanatory paragraph that states that Seahawk Drilling, Inc. and certain ofits subsidiaries filed voluntary petitions for relief under Chapter 11 of the United StatesBankruptcy Code on February 11, 2011 and sold substantially all operating assets and liabilitiesto Hercules Offshore, Inc. on April 27, 2011. These conditions and events raise substantial doubtabout Seahawk Drilling, Inc.’s ability to continue as a going concern. The consolidated andcombined financial statements do not include any adjustments that might result from theoutcome of this uncertainty.

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WHERE YOU CAN FIND MORE INFORMATION; INCORPORATION BY REFERENCE

We file annual, quarterly and current reports, proxy statements and other information withthe SEC. You can read and copy these materials at the SEC’s public reference room at100 F Street, N.E., Washington, D.C. 20549. You can obtain information about the operation ofthe SEC’s public reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintainsan Internet site that contains information we have filed electronically with the SEC, which youcan access over the Internet at http://www.sec.gov.

The information we incorporate by reference is an important part of this offeringmemorandum. The documents we incorporate by reference are:

• our current report on Form 8-K filed with the SEC on April 27, 2011, as amended by ouramended current reports on Form 8-K/A filed on July 8, 2011 and on March 20, 2012. Theunaudited historical consolidated financial statements of Seahawk Drilling, Inc., as ofand for the three-month period ending March 31, 2011, included in our Form 8-K/A filedwith the SEC on March 20, 2012, have not been subject to a review in accordance withStatement on Auditing Standards No. 100, Interim Financial Information, by KPMG LLP(or any public accountant);

• our annual report on Form 10-K for the year ended December 31, 2013, as filed with theSEC on February 27, 2014;

• our current reports on Form 8-K, as filed with the SEC on February 25, 2014 and March 7,2014.

You may request a copy of these filings, other than an exhibit to these filings unless wehave specifically incorporated that exhibit by reference into the filing, at no cost, by writing ortelephoning us at the following address:

Hercules Offshore, Inc.9 Greenway Plaza, Suite 2200

Houston, Texas 77046Telephone: (713) 350-5100

Attention: Investor Relations

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We have not authorized any dealer,salesperson or other person to give anyinformation or represent anything to you otherthan the information contained in this offeringmemorandum. You must not rely onunauthorized information or representations.

This offering memorandum does not offerto sell or ask for offers to buy any of thesecurities in any jurisdiction where it isunlawful, where the person making the offer isnot qualified to do so, or to any person whocannot legally be offered the securities.

The information in this offeringmemorandum is current only as of the date onits cover, and may change after that date. Forany time after the cover date of this offeringmemorandum, the issuers do not represent thattheir affairs are the same as described or that theinformation in this offering memorandum iscorrect—nor do the issuers imply those thingsby delivering this offering memorandum orselling securities to you.

TABLE OF CONTENTS

Important Notice to Readers . . . . . . . . . . . . iNotice to New Hampshire Residents . . . . . iiiNon-GAAP Financial Measures . . . . . . . . . . iiiSEC Review . . . . . . . . . . . . . . . . . . . . . . . . . . . ivForward-Looking Statements . . . . . . . . . . . vMarket and Industry Data . . . . . . . . . . . . . . . viiOffering Memorandum Summary . . . . . . . 1Company Overview . . . . . . . . . . . . . . . . . . . . 1Competitive Strengths . . . . . . . . . . . . . . . . . 2Business Strategies . . . . . . . . . . . . . . . . . . . . 3Recent Developments . . . . . . . . . . . . . . . . . . 4Principal Executive Offices . . . . . . . . . . . . . . 4The Offering . . . . . . . . . . . . . . . . . . . . . . . . . . 5Summary Condensed Consolidated

Financial Data . . . . . . . . . . . . . . . . . . . . . . . 9Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Risks Related to Our Business and Our

Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 33Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . 34Description of Other Indebtedness . . . . . . . 35Description of The Notes . . . . . . . . . . . . . . . 41Book Entry, Delivery and Form . . . . . . . . . . 98Certain United States Federal Income and

Estate Tax Considerations . . . . . . . . . . . . 101Private Placement . . . . . . . . . . . . . . . . . . . . . 106Notice to Investors . . . . . . . . . . . . . . . . . . . . . 110Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . 114Independent Registered Public

Accounting Firm . . . . . . . . . . . . . . . . . . . . . 114Where You Can Find More Information;

Incorporation By Reference . . . . . . . . . . . 115

$300,000,000

Hercules Offshore, Inc.

6.750% Senior Notes due 2022

OFFERING MEMORANDUM

Joint Book-Running Managers

Deutsche Bank Securities

Credit Suisse

Goldman, Sachs & Co.

UBS Investment Bank

Capital One Securities

Co-Managers

Comerica Securities

Cowen and Company

IBERIA Capital Partners L.L.C.

Pareto Securities

RS Platou Markets AS

Scotiabank

Stephens Inc.

Tudor, Pickering, Holt & Co.

March 12, 2014