<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 9, 1998.
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
HORIZON OFFSHORE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1629 76-0494934
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL IDENTIFICATION NO.)
OF INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
HORIZON OFFSHORE, INC.
2500 CITY WEST BOULEVARD, SUITE 2200
HOUSTON, TEXAS 77042
(713) 361-2600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DAVID W. SHARP
CHIEF FINANCIAL OFFICER
HORIZON OFFSHORE, INC.
2500 CITY WEST BOULEVARD, SUITE 2200
HOUSTON, TEXAS 77042
(713) 361-2600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
WILLIAM B. MASTERS WILLIAM N. FINNEGAN
JONES, WALKER, WAECHTER, POITEVENT, MICHAEL J. SWIDLER
CARRERE & DENEGRE, L.L.P. ANDREWS & KURTH L.L.P.
201 ST. CHARLES AVENUE 600 TRAVIS STREET, SUITE 4200
NEW ORLEANS, LOUISIANA 70170 HOUSTON, TEXAS 77002
PHONE: (504) 582-8000 PHONE: (713) 220-4200
FAX: (504) 582-8012 FAX: (713) 220-4285
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $1.00 par value per share..... $92,000,000 $27,140
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</TABLE>
(1) In accordance with Rule 457(o) under the Securities Act of 1933, as
amended, the number of shares being registered and the proposed maximum
offering price per share are not included in this table.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 9, 1998
PROSPECTUS
SHARES
HORIZON OFFSHORE, INC.
COMMON STOCK
--------
The shares of common stock, par value $1.00 per share (the "Common
Stock"), of Horizon Offshore, Inc. ( "Horizon" or the "Company") offered hereby
(the "Offering") are being sold by the Company. Prior to this Offering, there
has not been a public market for the Common Stock of the Company. It is
currently estimated that the initial public offering price for the Common Stock
will be between $ and $ per share. See "Underwriting" for information
relating to the factors considered in determining the initial public offering
price. Application has been made to have the Common Stock listed on the Nasdaq
National Market under the symbol "HOFF."
--------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS TO
TO PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share $ $ $
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Total(3) $ $ $
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</TABLE>
(1) For information concerning indemnification of the Underwriters, see
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $500,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up
to additional shares of Common Stock solely to cover over-
allotments, if any. See "Underwriting." If such option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions
and Proceeds to Company will be $ , $ and $ , respectively.
--------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
, 1998, at the office of Smith Barney Inc., 333 West 34th Street, New
York, New York, 10001.
--------
SALOMON SMITH BARNEY
PAINEWEBBER INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
, 1998
<PAGE>
[EQUIPMENT PHOTOGRAPHS]
----------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
INCLUDING OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS, AND IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and the notes thereto included elsewhere
in this Prospectus. Unless otherwise indicated, the information in this
Prospectus (i) assumes that the Underwriters' over-allotment option will not
be exercised and (ii) has been adjusted to give effect to a stock split of the
outstanding shares of Common Stock effected in January 1998. As used herein,
unless the context requires otherwise, references to Horizon or the Company
include its predecessors and subsidiaries.
THE COMPANY
Horizon provides marine construction services to the offshore oil and gas
industry primarily in the United States Gulf of Mexico (the "Gulf of Mexico"
or the "Gulf"). The Company's marine fleet is used primarily to install marine
pipelines to transport oil and gas from newly installed production platforms
and other subsea production systems. During 1997, the Company has (i)
assembled new leadership with an entrepreneurial philosophy, significant
operational expertise and established customer relationships, (ii)
aggressively expanded its operating capabilities through the addition of
strategic assets and (iii) focused on delivering superior execution to its
customers.
The Company has assembled a fleet of seven vessels, five of which are
expected to be operational during the first quarter of 1998. The remaining two
vessels are expected to be operational during the third quarter of 1998. The
Company's fleet will be capable of a wide range of marine construction
activities, including (i) installing up to 48-inch pipelines and smaller
diameter rigid and coiled-line pipe in water depths up to 800 feet, (ii)
providing pipebury, pipeline tie-in and hydrotest and commissioning services
and (iii) installing and salvaging production platforms and other marine
structures. Management expects that the Company's expanded fleet will allow it
to compete in the Gulf for substantially all pipeline installation projects in
shallow water depths of 200 feet and less and a substantial number of projects
in intermediate water depths of between 200 and 800 feet.
BUSINESS STRATEGY
The Company's business strategy is designed to capitalize on the positive
trends and current opportunities in the marine construction industry. Key
elements of the Company's strategy are to:
. MAINTAIN FOCUS IN GULF. Horizon intends to maintain its focus on the
shallow and intermediate water depths of the Gulf of Mexico because of
its strong competitive position in this market segment, its management
team's substantial expertise in this market segment and the positive
outlook for new oil and gas exploration and development activity in these
water depths. The Company also believes that it will benefit from the
continued consolidation in the marine construction industry in the Gulf
as a smaller number of publicly owned companies perform an increasing
portion of the available projects in shallow and intermediate waters.
. EXPAND OPERATING CAPABILITIES. Management believes that the ability to
offer a full range of pipeline construction services in varying water
depths is an important component in implementing the Company's strategy.
Although the Company historically has focused on installing smaller
diameter pipelines in shallow water depths, the Company has expanded its
operating capabilities substantially through the expansion of its fleet
since mid-1997. The acquisition of two pipelay/pipebury barges, one
pipebury barge and a diving support vessel will enable the Company to
install larger diameter pipelines in intermediate water depths and to
perform platform support services. Additionally, through the Company's
alliance with DSND (described below), the Company will gain immediate
access to DSND's deep water technology and expertise and anticipates
further expansion of its capabilities to include the ability to install
pipelines in deep water and to install coiled-line pipe under adverse
weather conditions.
. PURSUE SELECTED INTERNATIONAL EXPANSION OPPORTUNITIES. The Company is
considering and carefully evaluating expanding offshore into Mexico and
other selected international market areas in which members of the
Company's management team have extensive prior experience. Horizon has
been
3
<PAGE>
awarded a project offshore Venezuela to be performed in early 1998 and is
concentrating its international expansion efforts on areas with similar
operating conditions to those found in the Gulf, particularly offshore
West Africa and Venezuela.
. PROVIDE DERRICK SERVICES. The Company expects demand for platform
installation and removal services to increase as a result of increased
drilling activity and the implementation of governmental regulations
governing the abandonment of offshore wells and removal of platforms in
the Gulf of Mexico. The Company is upgrading the Phoenix Horizon so that
it will be capable of lifting 500 tons to install and salvage production
platforms and other marine structures. The Company also intends to
construct a derrick barge to be named the Pacific Horizon that will be
capable of lifting 800 tons which it believes will be available to
commence operations late in 1998.
. DELIVER SUPERIOR EXECUTION. During 1997, to implement its business
strategy, the Company identified and assembled the individuals which
comprise Horizon's current leadership. The team was selected primarily
due to its entrepreneurial philosophy, significant operational expertise
and established customer relationships in the Gulf and international
markets. Since assuming their present operational responsibilities in
mid-1997, management has focused on and delivered superior execution of
projects for its customers through improved asset utilization and
operating efficiencies. As a result of this focus, the Company has
improved its gross profit margins to 30.9% for the three months ended
October 31, 1997 from 5.5% in the prior year period and increased its
backlog to $16.4 million at December 31, 1997 from $2.9 million at
December 31, 1996.
STRATEGIC ALLIANCE
On December 4, 1997, the Company entered into a definitive agreement with Det
Sondenfjelds-Norske Dampskibsselskab ASA ("DSND") to form a strategic alliance.
DSND is a Norwegian-based full-service contractor in the subsea construction
business with operations in the North Sea and offshore Brazil. As part of the
DSND strategic alliance, (i) DSND acquired 30% of the Company's outstanding
Common Stock from a subsidiary of Elliott Associates, L.P. and Westgate
International, L.P., the Company's principal stockholders (collectively, the
"Principal Stockholders"), (ii) DSND agreed to sell to the Company the DSND
Stephaniturm, a 244-foot dynamically positioned diving support vessel, for
$17.5 million, and (iii) the Company and DSND agreed to form a joint venture
(the "DSND Joint Venture"), which will be 30% owned by the Company, to conduct
primarily deep water pipelaying operations in the Gulf, offshore Mexico and
Canada, and in the Caribbean. The DSND Joint Venture will have available to it
a reel pipelaying vessel that is being constructed and chartered by DSND. This
reel pipelaying vessel is anticipated to be deployed during the third quarter
of 1999 and to be able to install 10 inch diameter pipe in water depths as
great as 6,000 feet. The DSND Joint Venture will also have access to DSND's
other deep water pipelaying vessels for any deep water pipelaying projects that
may be obtained by the DSND Joint Venture.
Horizon believes the DSND alliance provides it with certain strategic
benefits, including:
. An association with a highly regarded international marine contractor
with a leading presence in pipeline installation and subsea construction
in the North Sea and offshore Brazil.
. The ability of the DSND Stephaniturm to lay coiled-line pipe and operate
in the Gulf under adverse weather conditions.
. Immediate access to deep water technology and the ability to provide
pipeline reel ship services in the deep and intermediate water depth
areas of the Gulf, offshore Mexico and Canada, and in the Caribbean.
4
<PAGE>
INDUSTRY CONDITIONS
Demand for marine construction services is primarily a function of the level
of oil and gas activity in the Gulf. Over the past several years, improvements
in seismic and drilling technology, production techniques and higher oil and
gas prices have resulted in more intensive drilling activity in the Gulf. The
number of active drilling rigs in the Gulf of Mexico increased from less than
60 in May 1992 to approximately 170 in November 1997 and many industry analysts
believe that the industry is operating at full capacity.
Due to the time required to drill an exploratory offshore well, formulate a
development plan and install a production platform, the demand for marine
construction services to install platforms and related pipelines in shallow and
intermediate water depths usually lags exploratory drilling by six months to
one year. The Company believes that its expanded fleet of marine vessels and
international operations will provide it with a competitive advantage in its
targeted market areas that, coupled with continued strong oil and gas activity,
should enable the Company to continue to grow profitably in the future.
The Company is incorporated under the laws of the State of Delaware. Its
principal office is located at 2500 City West Boulevard, Suite 2200, Houston,
Texas 77042, and its telephone number is (713) 361-2600.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the
Company........................... shares
Common Stock to be outstanding af-
ter the Offering.................. shares(1)
Use of Proceeds.................... The Company intends to use the net proceeds
of the Offering as follows (i) $17.5
million to acquire the DSND Stephaniturm,
(ii) approximately $14 million to construct
the Pacific Horizon and (iii) approximately
$32 million to repay indebtedness incurred
primarily for vessel acquisitions and
upgrades. The remaining proceeds, estimated
to be approximately $ million, will be
used for general corporate purposes,
including acquisitions, vessel and
facilities upgrades and working capital.
See "Use of Proceeds."
Proposed Nasdaq National Market
Symbol............................ HOFF
</TABLE>
- --------
(1) Does not include (i) 600,000 shares issuable upon exercise of options that
will be granted at the initial public offering price in connection with the
Offering and (ii) 1,300,000 additional shares reserved for issuance under
the Company's Stock Incentive Plan (the "Incentive Plan"). See
"Management--Stock Incentive Plan."
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. In particular, prospective investors should be aware of the potential
effects on the Company of the risks presented by the factors listed under "Risk
Factors."
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
The following table presents for the periods indicated certain summary
historical financial information and operating data of the Company. The
following data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated historical financial statements and related notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
INCEPTION SEPTEMBER 30,
THROUGH -------------------
DECEMBER 31, 1996(1)
1996(1) (UNAUDITED) 1997
------------ ----------- -------
(IN THOUSANDS, EXCEPT PER SHARE
AND OPERATING DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Contract revenues......... $14,088 $ 9,304 $22,200
Costs of contract reve-
nues..................... 21,616 8,607 18,895
------- ------- -------
Gross profit (loss)..... (7,528) 697 3,305
Selling, general and ad-
ministrative expenses.... 2,047 1,710 1,958
------- ------- -------
Operating income (loss). (9,575) (1,013) 1,347
Other income (expense):
Interest................ (1,662) (900) (1,198)
Gain on sale of asset... -- -- 614
Other................... 40 -- 31
------- ------- -------
Net income (loss) before
income taxes............. (11,197) (1,913) 794
Income tax benefit........ (1,617) -- --
------- ------- -------
Net income (loss)......... $(9,580) $(1,913) $ 794
======= ======= =======
Net income (loss) per
share.................... $ (0.68) $ (0.14) $ 0.06
======= ======= =======
OTHER FINANCIAL DATA:
EBITDA(2)................. $(8,860) $ (561) $ 2,138
Depreciation and
amortization............. 715 452 791
Capital expenditures...... 29,848 20,967 11,181
OPERATING DATA:
Number of vessels
operating at end of
period................... 2 2 2
Barge days(3)............. 347 193 384
Miles of pipe laid........ 65 48 79
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
----------------------------------
PRO PRO FORMA,
FORMA(4) AS ADJUSTED(5)
HISTORICAL (UNAUDITED)
---------- -----------------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $ 2,854 $ 2,866 $
-------
Property and equipment, net.................. 28,643 55,688
-------
Total assets................................. 42,562 69,619
-------
Long-term debt, net of current maturities.... 14,657 41,702
-------
Stockholders' equity......................... 18,388 18,400
-------
</TABLE>
6
<PAGE>
- --------
(1) Results are from inception (December 20, 1995) to the end of the period
indicated. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Results of Operations."
(2) The Company calculates EBITDA (earnings before interest expense, income
taxes, depreciation and amortization) as operating income plus depreciation
and amortization. EBITDA should not be considered as an alternative to net
income or any other measure of operating performance determined in
accordance with generally accepted accounting principles. EBITDA is widely
used by financial analysts as a measure of financial performance. The
Company's measurement of EBITDA may not be comparable to similarly titled
measures reported by other companies.
(3) Number of days vessels are offshore performing services, in transit or
waiting on inclement weather, while under contract.
(4) Reflects $27.0 million in vessel acquisitions and upgrades and related debt
incurred during the fourth quarter of 1997. Also reflects the proceeds from
the exercise of a warrant by a Principal Stockholder in December 1997.
(5) Pro forma, as adjusted to give effect to the Offering and the application
of the net proceeds from the Offering as described under "Use of Proceeds."
7
<PAGE>
RISK FACTORS
Prospective purchasers of the Common Stock should carefully consider the
risk factors set forth below, as well as other information contained in this
Prospectus.
INDUSTRY VOLATILITY
Demand for the Company's services depends on the condition of the oil and
gas industry and, in particular, the level of capital expenditures by oil and
gas companies for developmental construction. These activities traditionally
have been cyclical and influenced by prevailing oil and gas prices,
expectations about future demand and prices, the cost of exploring for,
producing and developing oil and gas reserves, the discovery rate of new oil
and gas reserves, sale and expiration dates of offshore leases in the United
States and abroad, political and economic conditions, governmental regulations
and the availability and cost of capital. Historically, oil and gas prices and
the level of exploration and development activity have fluctuated
substantially resulting in significant fluctuations in demand for pipeline and
other developmental construction services. Any significant decline in
worldwide demand for oil and gas or a prolonged reduction in oil or gas prices
in the future would likely depress development activity and could have a
material adverse effect on the Company's revenues and profitability. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--General" and "Business--Seasonality, Cyclicality and Factors
Affecting Demand."
RISKS OF RAPID GROWTH
The Company has grown rapidly over the last year through internal growth and
acquisitions of additional marine equipment. The Company increased the size of
its original fleet in 1997 from two to seven vessels by purchasing two
pipelay/pipebury barges, one pipebury barge, one barge that is being upgraded
and refurbished to serve as a derrick barge and one diving support vessel. The
Company also intends to acquire another diving support vessel and construct a
derrick barge with a portion of the proceeds of the Offering. Managing the
rapid growth experienced by the Company will be important for its future
success and will demand increased responsibilities for its executive
management team. Several factors, including the need for talented executive-
level personnel, increased marketing, estimating, bidding, planning and
administrative burdens and the increased logistical problems of expanding
operations in the Gulf and international market areas, operating new equipment
and commencing international operations, could present difficulties, which if
not managed successfully, could have a material adverse effect on the
Company's revenues and profitability.
1996 OPERATING LOSS; LACK OF OPERATING HISTORY
The Company was incorporated in December 1995 and incurred a $9.6 million
net loss for the period from its inception of operations through December 31,
1996. This loss resulted primarily from actions undertaken by the Company
under the direction of its former management team, in attempting to expand the
Company's operations into the Middle East. Under prior management, the Company
agreed to acquire and refurbish a barge for purposes of providing construction
services in the Middle East. In connection with the purchase, the Company
undertook certain actions to perform construction services for a customer of
the seller. The Company encountered title disputes over the barge, higher than
anticipated barge refurbishing costs and the subsequent rejection of the barge
by the customer. Present management of the Company has resolved title,
contractual and other legal disputes pertaining to the barge and related
project and is in the process of upgrading and refurbishing the barge, which
has been renamed the Phoenix Horizon. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business--
Legal Proceedings."
The Company, which was organized in December 1995, has limited experience in
conducting business and operations and its business strategy has been recently
developed. As with any new enterprise, the business plans and strategy of the
Company are being continually evaluated and revised and there can be no
assurance that the Company's business plans and strategies will be implemented
or, if implemented, that they will be successful.
8
<PAGE>
INTERNATIONAL OPERATIONS
A key element of the Company's strategy is to expand its operations into
international offshore oil and gas producing areas. The Company's
international operations will be subject to a number of risks inherent in any
business operating in foreign countries, including political, social and
economic instability, potential vessel seizure, increased operating costs,
nationalization of assets, currency restrictions and exchange rate
fluctuations, nullification, modification or renegotiation of contracts,
import-export quotas and other forms of public and governmental regulation,
all of which are beyond the control of the Company. Additionally, the ability
of the Company to compete in international market areas may be adversely
affected by foreign governmental regulations that favor or require the
awarding of contracts to local contractors, or by regulations requiring
foreign contractors to employ citizens of, establish foreign subsidiaries with
significant ownership positions reserved for citizens of, or purchase supplies
from, that country. Furthermore, any foreign subsidiaries of the Company may
face governmentally imposed restrictions from time to time on their ability to
transfer funds to the Company. No predictions can be made as to what foreign
governmental regulations applicable to the Company's operations may be enacted
in the future. Although it is impossible to predict the nature and the
likelihood of any of these types of events, if such an event should occur, it
could have a material adverse effect on the Company's financial condition and
results of operations. The Company encountered significant difficulties in
attempting to establish operations offshore Middle East under the supervision
of its prior management team and does not intend to pursue any opportunities
in the Middle East. See "--1996 Operating Loss; Lack of Operating History."
RISKS OF JOINT VENTURE OPERATIONS
The Company believes that many of its international operations will be
conducted through joint ventures, which will be jointly managed and controlled
by the Company and the joint venture partner. The DSND Joint Venture, which
will be owned 30% by the Company, will operate the vessels made available to
it by DSND to lay pipe in deep and intermediate water depths in the Gulf,
offshore Mexico and Canada, and in the Caribbean. The Company anticipates
entering into additional joint ventures with other entities if it expands into
other international market areas. Under the terms of the DSND Joint Venture,
the Company will not have the ability to control the business and affairs of
the joint venture. In addition, any future foreign joint ventures may, from
time to time, face governmentally imposed restrictions on their ability to
transfer funds to the Company. See "--International Operations."
SHORTAGE OF SKILLED WORKERS
The Company's ability to increase its profitability depends on its ability
to attract and retain workers. The Company's number of employees has increased
from three at January 1, 1996 to approximately 245 at December 1, 1997. The
Company expects that the total number of employees will increase further in
order to support the Company's anticipated growth. The Company estimates that
it will need to hire approximately 650 workers to staff the four barges it
recently purchased that are expected to be operational in 1998. As a result,
management must devote significant time, effort and expense to hire, train and
retain qualified workers. While the Company believes that its wage rates are
competitive and that its relationship with its workforce is good, a
significant increase in the wages paid by other employers could result in a
reduction in the Company's workforce, increases in the wage rates paid by the
Company, or both. If either of these events occur for any significant period
of time, the Company's profitability could be diminished and the growth
potential of the Company could be impaired. See "Business--Employees."
OPERATING RISKS
Offshore construction involves a high degree of operational risk. Hazards,
such as vessels capsizing, sinking, grounding, colliding and sustaining damage
from severe weather conditions, are inherent in offshore operations. These
hazards can cause significant personal injury or loss of life, severe damage
to and destruction of property and equipment, pollution or environmental
damage and suspension of operations. Litigation arising from such an
occurrence may result in the Company being named as a defendant in lawsuits
asserting large claims. The
9
<PAGE>
Company maintains such insurance protection as it deems prudent, including
hull insurance on its vessels. There can be no assurance that any such
insurance will be sufficient or effective under all circumstances or against
all hazards to which the Company may be subject. A successful claim for which
the Company is not fully insured could have a material adverse effect on the
Company. Moreover, no assurance can be given that the Company will be able to
maintain adequate insurance in the future at rates that it considers
reasonable. See "Business--Insurance."
COMPETITION
The Company's business is highly competitive. Marine construction companies
operating offshore in the Gulf of Mexico compete vigorously for available
projects. Contracts for the Company's services are generally awarded on a
competitive bid basis, and while customers may consider, among other things,
the availability and capabilities of equipment, and the reputation, safety
record and experience of the contractor, intense price competition is the
primary factor in determining which qualified contractor is awarded the job.
As the Company increases the portion of its operations conducted in water
depths in excess of 200 feet and internationally, it will encounter additional
competitors, many of whom have greater experience than the Company in such
markets. Many of the Company's competitors and potential competitors are
larger and have greater financial and other resources than the Company.
Competitors with greater financial resources may be willing to sustain losses
on certain projects to prevent further market entry by other competitors. In
addition, marine construction vessels have few alternative uses and, because
of their nature and the environment in which they work, have relatively high
maintenance costs whether or not operating. Because these costs are
essentially fixed, and in order to avoid the additional expenses associated
with temporarily idling or "stacking" its vessels, some competitors may from
time to time bid contracts at rates below those of the Company in order to
cover their variable operating expenses and contribute to their fixed
operating expenses. Moreover, increased activity levels in the Gulf of Mexico
may attract additional competitors or marine equipment to the Gulf of Mexico
market area. See "Business--Competition."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends on, among other things, the continued active
participation of the Company's executive officers and certain of the Company's
other key operating personnel. Several members of management and operating and
professional personnel have had extensive experience with other providers of
marine construction services in a variety of projects in domestic and
international market areas. The loss of the services of any one of these
persons could have a material adverse effect on the Company. The Company has
entered into employment agreements with each of its executive officers that
expire three years from the date of the Offering and has purchased $5.0
million of "key-man" life insurance with respect to Mr. Lam. See "Management."
CONTRACT BIDDING RISKS
Due to the nature of the offshore construction industry, substantially all
of the Company's projects are performed on a fixed-price basis. The revenue,
costs and gross profit realized on a contract will often vary from the
estimated amount because of changes in offshore job conditions and variations
in labor and equipment productivity from the original estimates. These
variations and the risk generally inherent in the marine construction industry
may result in gross profits realized by the Company being different from those
originally estimated and reduced profitability or losses on projects. In
addition, during the summer construction season, the Company typically bears
the risk of delays caused by adverse weather conditions.
PERCENTAGE-OF-COMPLETION ACCOUNTING
The Company's contract revenues are recognized on a percentage-of-completion
basis. Accordingly, contract revenue and cost estimates are reviewed
periodically as the work progresses, and adjustments are reflected in income
in the period when such revisions are determined. To the extent that these
adjustments result
10
<PAGE>
in a reduction or elimination of previously reported profits, the Company
would recognize a charge against current earnings that may be significant
depending on the size of the project or the adjustment. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Results of Operations" and the notes to the Company's consolidated financial
statements.
RISKS OF GROWTH STRATEGY
Future acquisitions of other complementary businesses and marine equipment
are a key element of the Company's growth and expansion strategy. The Company
may use a portion of the net proceeds of the Offering to pursue acquisitions
of additional marine equipment or acquisitions of other companies with
operations related or complementary to its current operations. See "Use of
Proceeds." There can be no assurance that the Company will be able to identify
and acquire acceptable marine equipment or acquisition candidates on financial
or other terms favorable to the Company. The acquisition and refurbishment or
construction of marine equipment involves potential delays and increased costs
due to unanticipated delays in equipment deliveries, scheduling service
providers, equipment condition and assembly or construction. Any inability on
the part of the Company to purchase additional marine equipment or other
complementary vessels on favorable financial or other terms or to integrate
and manage acquired businesses could have a material adverse effect on the
Company's revenues and profitability.
SEASONALITY AND WEATHER RISKS
The offshore construction industry in the Gulf of Mexico is highly seasonal
as a result of weather conditions and historically as a result of the timing
of capital expenditures by oil and gas companies. Historically, the greatest
demand for marine construction services has been during the period from May
through September. As a result, a disproportionate amount of the Company's
contract revenues are earned during the last half of each fiscal year. Because
of seasonality, full year results are not likely to be a direct multiple of
any particular quarter or combination of quarters. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations." The
Company intends to partially offset the seasonality of its operations in the
Gulf by pursuing selected international expansion opportunities. No assurances
can be given that such expansion opportunities, if successful, will result in
the anticipated offset of the seasonality of the Company's Gulf operations.
REGULATORY AND ENVIRONMENTAL MATTERS
The Company's operations and properties are subject to and affected by
various types of governmental regulation. Violations of various statutory and
regulatory programs that apply to the Company's operations can result in civil
penalties, remediation expenses, monetary damages, potential injunctions,
cease and desist orders and criminal penalties. Some environmental statutes
impose strict liability, rendering a person liable for environmental damage
without regard to negligence or fault on the part of such person. To date the
Company's cost of complying with such laws and regulations has not been
material, but because such laws and regulations are changed frequently, it is
not possible for the Company to accurately predict the cost or impact of such
laws and regulations on its future operations. In addition, the loss by the
Company of any of the licenses required for its operations for any reason
could have a material adverse effect on the Company's operations.
The Company depends on the demand for its services from the oil and gas
industry and is affected by changing taxes and other laws and regulations
relating to the oil and gas industry generally. The adoption of laws and
regulations curtailing exploration and development drilling for oil and gas in
the Company's areas of operations, or delays in taking action, for staffing,
economic, environmental or other policy reasons would adversely affect the
Company's operations by limiting demand for its services. The Company cannot
determine to what extent future operations and earnings of the Company may be
affected by new legislation, new regulations or changes in existing
regulations. See "Business--Regulation."
DEPENDENCE ON SIGNIFICANT CUSTOMERS
The Company's business depends on maintaining strong working relationships
with the oil and gas companies operating in the Gulf of Mexico. Santa Fe
Energy Resources Corporation accounted for approximately
11
<PAGE>
17% of the Company's revenues for the nine month period ended September 30,
1997. The loss of any significant customer for any reason could result in a
substantial loss of revenue and have a material adverse effect on the
Company's profitability. See "Business--Customers."
CONTROL BY EXISTING STOCKHOLDERS
Upon completion of the Offering, the Principal Stockholders and DSND will
beneficially own approximately % ( % if the over-allotment option is
exercised in full) of the outstanding shares of Common Stock. The Principal
Stockholders' and DSND's stock ownership gives them the ability to control the
election of the Company's directors and the business and affairs of the
Company. DSND has agreed with the Principal Stockholders and the Company to
vote its shares of Common Stock for the director nominees proposed for
election by the Company's Board of Directors. The Company intends to use
approximately $16.8 million of the net proceeds of the Offering to pay
indebtedness owed to the Principal Stockholders. The interests of the
Principal Stockholders and DSND may not always be the same as the interests of
the Company's other stockholders. See "Management--Stockholder's Agreement"
and "Principal Stockholders."
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
shares of Common Stock (excluding shares issuable upon the exercise
of outstanding options). All of the shares of Common Stock offered
hereby will be eligible for sale in the public market without restriction upon
completion of the Offering by persons who are not deemed to be affiliates of
the Company or acting as underwriters. All of the remaining outstanding shares
of Common Stock are "restricted securities" as that term is defined in Rule
144 under the Securities Act of 1933, as amended (the "Securities Act"). The
Company, the Principal Stockholders, DSND and each of the Company's directors
and executive officers have agreed not to offer, sell or otherwise dispose of
any shares of Common Stock in the public market for 180 days from the date of
this Prospectus without the prior written consent of Smith Barney Inc. See
"Underwriting." DSND and the Principal Stockholders also have rights to
require the Company under certain circumstances to register under the
Securities Act all of the shares of Common Stock owned by them. DSND and the
Principal Stockholders have waived their registration rights with respect to
the Offering. Although the Company cannot predict the timing or amount of
future sales of Common Stock or the effect that the availability of such
shares for sale will have on the market price prevailing from time to time,
sales of substantial amounts of Common Stock in the public market following
this Offering, including sales in connection with a registered offering of
Common Stock, could adversely affect the market price of the Common Stock. See
"Principal Stockholders" and "Shares Eligible for Future Sale."
NO PRIOR MARKET; POSSIBLE VOLATILITY OF MARKET PRICE
Prior to the Offering, there has been no public market for the Common Stock.
Although application has been made to list the Common Stock offered hereby on
the Nasdaq National Market, there can be no assurance that a market for the
Common Stock will develop or, if developed, will be sustained. The initial
public offering price of the Common Stock will be determined by negotiations
between the Company and the Underwriters. For the factors considered in such
negotiations, see "Underwriting." There can be no assurance that future market
prices at which the Common Stock will sell in the public market after the
Offering will not be lower than the initial public offering price. Following
the Offering, the market price of the Common Stock may fluctuate depending on
various factors, including the general economy, stock market conditions,
general trends in the marine construction business, fluctuations in oil and
gas prices, announcements by the Company or its competitors and variations in
the Company's quarterly and annual operating results.
DILUTION
Purchasers of the Common Stock in the Offering will incur immediate dilution
of $ per share in the pro forma net tangible book value of their
investment (assuming an initial public offering price of $ per share). See
"Dilution."
12
<PAGE>
ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION, BYLAWS AND THE DELAWARE GENERAL CORPORATION LAW
The Company's Certificate of Incorporation and Bylaws contain, among other
things, provisions establishing a classified Board of Directors, authorizing
shares of preferred stock with respect to which the Board of Directors of the
Company has the power to fix the rights, preferences, privileges and
restrictions without any further vote or action by the stockholders, and
requiring an 80% vote of stockholders in order to remove directors, amend the
Certificate of Incorporation, Bylaws and approve certain business combinations
with respect to an "interested stockholder." Such provisions could delay,
deter or prevent a merger, consolidation, tender offer, or other business
combination or change of control involving the Company that some or a majority
of the Company's stockholders might consider to be in their best interest,
including offers or attempted takeovers that might otherwise result in such
stockholders receiving a premium over the market price for the Common Stock.
The potential issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of the Company, may discourage
bids for the Common Stock at a premium over the market price of the Common
Stock and may adversely affect the market price of, and the voting and other
rights of the holders of, Common Stock. The Company has not issued, and
currently has no plans to issue, any shares of preferred stock. See
"Description of Capital Stock--Certain Charter and Bylaw Provisions."
DIVIDENDS
The Company currently intends to retain earnings, if any, to meet its
working capital requirements and to finance the future operation and growth of
the Company's business and, therefore, does not plan to declare or pay cash
dividends to holders of its Common Stock in the foreseeable future. In
addition, the ability of the Company to make distributions to its shareholders
is prohibited by its revolving credit and term loan facility with Den norske
Bank (the "Credit Facility"). See "Dividend Policy."
FORWARD-LOOKING STATEMENTS
This Prospectus contains certain statements that may be deemed "forward-
looking statements" within the meaning of Section 27A of the Securities Act
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All statements, other than statements of historical fact,
included in this Prospectus that address activities, events or developments
that the Company intends, expects, projects, believes or anticipates will or
may occur in the future, including, without limitation, statements regarding
the Company's business strategy, plans and objectives, statements expressing
beliefs and expectations regarding future demand for the Company's services
and other events and conditions that may influence the demand for and prices
received for marine construction services in the Gulf of Mexico and elsewhere
and the Company's performance in the future, statements concerning future
growth and expansion into international producing areas, including the
anticipated level of capital expenditures for, and the nature and scheduling
of construction projects and other such matters are forward-looking
statements. Such statements are based on certain assumptions and analyses made
by management of the Company in light of its experience and its perception of
historical trends, current conditions, expected future developments and other
factors it believes to be appropriate. The forward-looking statements included
in this Prospectus are also subject to a number of material risks and
uncertainties. Important factors that could cause actual results to differ
materially from the Company's expectations are discussed herein under the
captions "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations." Prospective investors are cautioned that
such forward-looking statements are not guarantees of future performance and
that actual results, developments and business decisions may differ from those
envisaged by such forward-looking statements.
13
<PAGE>
DIVIDEND POLICY
After the Offering, the Company intends to retain earnings, if any, to meet
its working capital requirements and to finance the future growth of its
business and, therefore, does not plan to declare or pay cash dividends to
holders of its Common Stock in the foreseeable future. In addition, the
Company is prohibited from making distributions to its stockholders by the
Credit Facility. See "Risk Factors--Dividends and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
DILUTION
Dilution is the difference between the initial public offering price per
share of the Common Stock offered hereby and the net tangible book value per
share of the Common Stock after giving effect to the Offering. Net tangible
book value per share of Common Stock represents the amount of the Company's
tangible net worth (total tangible assets less total liabilities) divided by
the total number of shares of Common Stock outstanding. The net tangible book
value of the Company at September 30, 1997 was $18.2 million, or $1.30 per
share of Common Stock, as adjusted for the effect of the issuance and sale of
3,076,480 shares of Common Stock in December 1997. After giving effect to the
Offering (assuming an initial public offering price of $ per share and
deducting the estimated underwriting discounts and commissions and offering
expenses), the net tangible book value of the Company at September 30, 1997
would have been approximately $ million or $ per share of Common Stock.
This represents an immediate increase in net tangible book value of $ per
share of Common Stock to current holders of Common Stock and an immediate
dilution of approximately $ per share to the new investors purchasing
shares in the Offering.
The following table illustrates this per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $
Net tangible book value per share as of September 30, 1997...... $1.30
Increase attributable to new investors..........................
-----
Adjusted net tangible book value per share after the Offering.....
-------
Dilution per share to new investors............................... $
=======
</TABLE>
The following table summarizes, on an as adjusted basis, at September 30,
1997, the number of shares of Common Stock to be issued by the Company in
connection with the Offering, the total consideration received by the Company
and the average price per share of Common Stock paid by existing stockholders
and by new investors in the Offering (assuming an initial public offering
price of $ per share) before deducting the underwriting discounts and
commissions and estimated offering expenses.
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
------------------ ------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ 14,076,480 % $28,136,500 % $2.00
New investors.................... % % $
---------- --- ----------- ---
Total.......................... % $ % $
========== === =========== ===
</TABLE>
The above computations do not give effect to (i) 600,000 shares issuable
upon exercise of options that will be granted at the initial public offering
price in connection with the Offering and (ii) 1,300,000 additional shares
reserved for issuance under the Company's Incentive Plan. See "Management--
Stock Incentive Plan."
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of Common Stock offered
hereby, after deducting underwriting discounts and commissions and estimated
offering expenses, will be approximately $ million, assuming an initial
public offering price of $ per share ($ million if the Underwriters'
over-allotment option is exercised in full). The Company will use $17.5
million of the net proceeds to purchase the DSND Stephaniturm from DSND and
anticipates using approximately $14 million to construct the Pacific Horizon.
The Company also intends to use $14.7 million of the net proceeds from the
Offering to repay all outstanding indebtedness under the Credit Facility and
$16.8 million to repay all outstanding indebtedness owed to the Principal
Stockholders. The Company will use the remaining estimated net proceeds
(approximately $ million) for general corporate purposes, including
acquisitions, vessel and facilities upgrades and working capital. The Company
does not currently have any contracts, understandings or arrangements with
respect to any other acquisitions.
Borrowings under the Credit Facility bear interest at 9% per annum and
mature on June 30, 2002. The aggregate amount of indebtedness of the Company
under the Credit Facility was $14.7 million as of December 31, 1997.
Borrowings from the Principal Stockholders bear interest at 10% per annum with
quarterly principal payments required commencing March 31, 2003 and final
maturity on December 31, 2005. The aggregate amount of indebtedness of the
Company to the Principal Stockholders was $16.8 million as of December 31,
1997, including accrued interest. Funds borrowed under the Credit Facility and
from the Principal Stockholders within the past year were used to acquire the
Lone Star Horizon, the Canyon Horizon, the Gulf Horizon and the Phoenix
Horizon and for general corporate purposes.
Upon completion of the Offering, the Company anticipates that the Credit
Facility will be amended to provide for a $30 million term loan facility and a
$20 million revolving credit facility. The full amount of the Credit Facility
will be available to the Company for general corporate purposes.
Pending application of the net proceeds, the Company intends to invest the
net proceeds in short-term, investment grade, interest-bearing debt
securities.
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 on an actual basis, pro forma to give effect to sales of
Common Stock and long-term debt incurred subsequent to September 30, 1997 to
purchase additional marine equipment and pro forma, as adjusted to give effect
to the Offering (at an assumed initial public offering price of $ per share)
and the application of the estimated net proceeds therefrom as described under
"Use of Proceeds." The table set forth below should be read in conjunction
with the Company's consolidated financial statements and the notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997
------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA, AS
ACTUAL PRO FORMA ADJUSTED
------------ ------------ --------------
(UNAUDITED)
<S> <C> <C> <C>
Long-term debt, less current maturi-
ties(1)............................. $ 14,657 $ 41,702 $
------------ ------------ ------------
Stockholders' equity:
Preferred stock, par value $1.00
per share; 5,000,000 shares
authorized; no shares issued and
outstanding....................... -- -- --
Common stock, par value $1.00 per
share; 35,000,000 shares
authorized; 11,000,000 shares
issued and outstanding (actual),
14,076,480 shares issued and
outstanding (pro forma)(2),
shares issued and
outstanding (pro forma, as
adjusted)(3)...................... 3,030 3,368
Additional paid-in capital......... 24,144 24,768
Subscription receivable............ -- (950)
Accumulated deficit................ (8,786) (8,786)
------------ ------------ ------------
Total stockholders' equity....... 18,388 18,400
------------ ------------ ------------
Total capitalization................. $ 33,045 $ 60,102 $
============ ============ ============
</TABLE>
- --------
(1) Reflects $27.0 million in vessel acquisitions and upgrades and related
debt incurred after September 30, 1997.
(2) Includes 3,076,480 shares of Common Stock issued in December 1997 upon a
Principal Stockholder's exercise of a warrant for 2,750,000 shares and a
subscription for 326,480 shares.
(3) Does not include (i) 600,000 shares issuable upon exercise of options that
will be granted at the initial public offering price in connection with
the Offering and (ii) 1,300,000 additional shares reserved for issuance
under the Incentive Plan.
16
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The selected financial and operating data for the periods ended December 31,
1996 and September 30, 1997 are derived from the audited financial statements
of the Company. The selected financial data as of and for the nine months
ended September 30, 1996 are derived from the unaudited financial statements
of the Company for such period. In the opinion of management, the unaudited
financial statements reflect all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the financial
condition and results of operations for this period. The following information
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's consolidated
financial statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
INCEPTION SEPTEMBER 30,
THROUGH -------------------
DECEMBER 31, 1996(1)
1996(1) (UNAUDITED) 1997
------------ ----------- -------
(IN THOUSANDS, EXCEPT PER SHARE
AND OPERATING DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Contract revenues......... $14,088 $ 9,304 $22,200
Costs of contract reve-
nues..................... 21,616 8,607 18,895
------- ------- -------
Gross profit (loss)..... (7,528) 697 3,305
Selling, general and ad-
ministrative expenses.... 2,047 1,710 1,958
------- ------- -------
Operating income (loss). (9,575) (1,013) 1,347
Other income (expense)
Interest expense........ (1,662) (900) (1,198)
Gain on sale of asset... -- -- 614
Other expense........... 40 -- 31
------- ------- -------
Net income (loss) before
income taxes............. (11,197) (1,913) 794
Income tax benefit........ (1,617) -- --
------- ------- -------
Net income (loss)......... $(9,580) $(1,913) $ 794
======= ======= =======
Net income (loss) per
share.................... $ (0.68) $ (0.14) $ 0.06
======= ======= =======
OTHER FINANCIAL DATA:
EBITDA(2)................. $(8,860) $ (561) $ 2,138
Depreciation and
amortization............. 715 452 791
Capital expenditures...... 29,848 20,967 11,181
OPERATING DATA:
Number of vessels
operating at end of
period................... 2 2 2
Barge days(3)............. 347 193 384
Miles of pipe laid........ 65 48 79
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................. $ 534 $ 2,854
Property and equipment, net..................... 29,138 28,643
Total assets.................................... 39,690 42,562
Long-term debt, net of current maturities....... 38,104 14,657
Stockholders' equity (deficit).................. (6,550) 18,388
</TABLE>
17
<PAGE>
- --------
(1) Results are from inception (December 20, 1995) to the end of the period
indicated. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations."
(2) The Company calculates EBITDA (earnings before interest expense, income
taxes, depreciation and amortization) as operating income plus
depreciation and amortization. EBITDA should not be considered as an
alternative to net income or any other measure of operating performance
determined in accordance with generally accepted accounting principles.
EBITDA is widely used by financial analysts as a measure of financial
performance. The Company's measurement of EBITDA may not be comparable to
similarly titled measures reported by other companies.
(3) Number of days vessels are offshore performing services, in transit or
waiting on inclement weather, while under contract.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
Company's consolidated financial statements and notes thereto included
elsewhere in this Prospectus. The following information contains forward-
looking statements, which are subject to risks and uncertainties. Should one
or more of these risks or uncertainties materialize, actual results may differ
from those expressed or implied by the forward-looking statements. See "Risk
Factors" and "Forward-Looking Statements."
GENERAL
The Company provides marine construction services to the oil and gas
industry primarily in the Gulf of Mexico. The Company's marine fleet is used
primarily to install marine pipelines to transport oil and gas from newly
installed production platforms and other subsea production systems. Over the
past several years, improvements in seismic and drilling technology and
production techniques, which have increased drilling success rates and
efficiencies, together with improved oil and gas prices have resulted in
increased exploration and development in the Gulf and have improved the
economics of developing smaller oil and gas fields, especially in shallow
water. According to Offshore Data Services reports, the number of offshore
rigs operating in the Gulf has increased from less than 60 in May 1992 to
approximately 170 in November 1997.
The present management team, which assumed its current role in July 1997,
has aggressively expanded the Company's operations and has assembled a fleet
of seven vessels, which includes four vessels capable of pipelaying
operations, one bury barge, one derrick vessel and one diving support vessel.
Two of the pipelaying vessels, the American Horizon and the Cajun Horizon,
were placed into service in April 1996 and July 1996, respectively. The
American Horizon and the Cajun Horizon installed 79 miles of pipe ranging in
diameter from three to ten inches during the nine months ended September 30,
1997 compared to 65 miles during the year ended December 31, 1996. In the
third quarter of 1997, the Company completed the purchase of the Phoenix
Horizon, which will be upgraded and refurbished to serve as a derrick vessel
and is anticipated to be placed into service during the third quarter of 1998.
Two pipelaying vessels, the Gulf Horizon and Lone Star Horizon, and a bury
barge, the Canyon Horizon, were acquired in the second half of 1997 and are
being upgraded and refurbished. The Gulf Horizon, Lone Star Horizon and the
diving support vessel, the Geosearch, are expected to be operational during
the first quarter of 1998 and the Canyon Horizon is expected to be placed into
service during the third quarter of 1998. The Company's expanded fleet will
allow it to compete in the Gulf for substantially all pipeline installation
projects in shallow water depths of 200 feet and less and a significant number
of projects in intermediate water depths between 200 and 800 feet.
The demand for offshore construction services in the Gulf depends largely on
the condition of the oil and gas industry and, in particular, the level of
capital expenditures by oil and gas companies for developmental construction.
These expenditures are influenced by prevailing oil and gas prices,
expectations about future demand and prices, the cost of exploring for,
producing and developing oil and gas reserves, the discovery rates of new oil
and gas reserves, sale and expiration dates of offshore leases in the United
States and abroad, political and economic conditions, governmental regulations
and the availability and cost of capital. Historically, oil and gas prices and
the level of exploration and development activity have fluctuated
substantially, impacting the demand for pipeline and marine construction
services.
Factors affecting the Company's profitability include competition, equipment
and labor productivity, contract estimating, weather conditions and the other
risks inherent in marine construction. The marine construction industry in the
Gulf is highly seasonal as a result of weather conditions with the greatest
demand for these services occurring during the second and third calendar
quarters of the year. Full year results are not a direct multiple of any
quarter or combination of quarters because of this seasonality. See "Risk
Factors."
19
<PAGE>
RESULTS OF OPERATIONS
The discussion below describes the Company's results of operations. Three
factors in particular make the results of the following periods difficult to
compare. First, the Company's new management team assumed its current role in
July 1997 and has implemented operational systems and procedures that include
improved bidding and profitability analyses for projects, project supervision
and review procedures, and increased equipment utilization achieved through
vessel and project scheduling. Second, in the fourth quarter of 1996, the
Company experienced difficulties in the Middle East primarily related to the
acquisition of a barge and related pipelay project which resulted in
significant financial losses described in the results of operations for the
period from inception to December 31, 1996. Third, the Company's two vessels
that operated in 1997, the American Horizon and Cajun Horizon, commenced
operations in April and July 1996, respectively.
Subsequent to September 30, 1997, the Company has made significant
acquisitions and improvements to its fleet. The Company anticipates that due
to the substantial growth in the size and operating capabilities of its fleet,
the Company's operating results in the future will not be comparable to the
Company's historical results. The Company's recent vessel acquisitions have
expanded its operating capabilities and increased its operating cost
structure. The Company's ability to integrate these vessels into its
operations will directly impact the Company's future results of operations.
The aggregate amount of selling, general and administrative expenses is also
expected to increase to support this growth.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1996
Contract Revenues. Contract revenues were $22.2 million for the first nine
months of 1997 compared to $9.3 million for the first nine months of 1996. The
American Horizon and the Cajun Horizon, which were placed into service in
April and July 1996, respectively, were operational for the entire nine months
of 1997. There was a significant increase in the number of construction
contracts awarded to the Company in 1997 as compared to 1996. The Company
installed 79 miles of pipe ranging from three to ten inches in diameter during
the nine months ended September 30, 1997 compared to 48 miles for the same
period in 1996. The Company's results of operations in the first nine months
of 1997 reflect the level of offshore activity in the Gulf and current
management's ability to competitively bid, win and successfully manage
projects.
Gross Profit. Gross profit increased to $3.3 million (14.9% of contract
revenues) for the nine months ended September 30, 1997 from $.7 million (7.5%
of contract revenues) for the comparable 1996 period due to improved project
management and price improvements. The improvement in gross profit as a
percent of contract revenues is attributable to more efficient execution of
projects, greater equipment utilization, an increase in the number of
contracts awarded and increased contract revenue.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $2.0 million (8.8% of contract revenues)
for the first nine months of 1997 from $1.7 million (18.4% of contract
revenues) for the first nine months of 1996 primarily due to the addition of
personnel and other expenses associated with the growth of the Company and
costs incurred in connection with the dispute discussed in Note 8 of the notes
to the Company's consolidated financial statements.
Interest Expense. Interest expense increased to $1.2 million for the first
nine months of 1997 from $.9 million for the first nine months of 1996 due to
additional borrowings primarily in the last quarter of 1996 to fund
acquisitions, capital improvements and working capital requirements. In April
1997, in connection with a recapitalization of the Company, the Principal
Stockholders contributed $21.0 million of debt to additional paid-in capital.
The Company applied $12.0 million of the proceeds from the sale of assets in
1997, as described below, to reduce debt to the Principal Stockholders.
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<PAGE>
Other Income. The Company sold one of its vessels to an unaffiliated third
party in February 1997 for $3.0 million cash resulting in the recognition of a
$.6 million gain.
Income Taxes. The Company uses the liability method of accounting for income
taxes. As of September 30, 1997, the Company had net operating loss
carryforwards of approximately $7.4 million, which expire in 2012 and may be
available to reduce future income taxes. For financial reporting purposes, a
valuation allowance has been established as of September 30, 1997 and December
31, 1996 to offset the Company's net deferred tax assets, including those
related to carryforwards, to the extent they were not realizable through the
sale of appreciated assets. See Note 7 of notes to the Company's consolidated
financial statements.
Net Income (Loss). Net income was $.8 million for the nine months ended
September 30, 1997 as compared to a net loss for the nine months ended
September 30, 1996 of $1.9 million.
INCEPTION (DECEMBER 20, 1995) THROUGH DECEMBER 31, 1996
Contract Revenues. Contract revenues were $14.1 million for the period from
inception (December 20, 1995) through December 31, 1996 (Fiscal 1996). The
American Horizon and the Cajun Horizon, which were placed into service in
April and July 1996, respectively, installed 65 miles of pipe ranging from
three to ten inches in diameter during 1996.
Gross Profit (Loss). The Company reported a $7.5 million gross loss for
Fiscal 1996, primarily due to $7.4 million (52.5% of contract revenues) in
charges relating to actions undertaken by the Company, under former
management, in attempting to expand operations into the Middle East. At the
time, the Company agreed to acquire and refurbish a barge for purposes of
providing construction services in the Middle East. In connection with the
acquisition, the Company undertook certain actions to perform construction
services for a customer of the seller. The Company encountered title disputes
over the barge, higher than anticipated refurbishing costs and the subsequent
rejection of the barge by the customer. Present management of the Company has
resolved title, contractual and other legal disputes pertaining to the barge
and related project and is in the process of upgrading and refurbishing the
barge, since renamed the Phoenix Horizon, to serve as a derrick barge in the
Gulf.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses totaled $2.0 million (14.5% of contract revenues) for
Fiscal 1996. The Company incurred $.5 million (3.5% of contract revenues) of
travel and other costs related to the Company's unsuccessful expansion into
the Middle East.
Interest Expense. Interest expense was $1.7 million for Fiscal 1996 due to
additional borrowings primarily in the last quarter of 1996 to fund
acquisitions, capital improvements and working capital requirements.
Income Tax Benefit. A tax benefit of $1.6 million was recorded in Fiscal
1996 based upon the Company's estimate of the timing of reversals of certain
temporary differences and on the generation of taxable income before such
reversals. The deferred tax asset relates to a $4.8 million gain from the sale
of assets which was included in taxable income for 1997. The Company accounted
for the $3.1 million gain on the sale, net of taxes of approximately $1.6
million, as a capital contribution.
Net Loss. The net loss of $9.6 million for Fiscal 1996 was primarily the
result of the $7.4 million (52.5% of contract revenues) in charges relating to
the Company's unsuccessful expansion into the Middle East.
LIQUIDITY AND CAPITAL RESOURCES
Working capital was $2.9 million at September 30, 1997 compared to $.5
million at December 31, 1996. The significant growth in the number of
construction contracts and related contract revenues in 1997 have
21
<PAGE>
resulted in an increase in contract receivables. Cash used in operations was
$1.2 million for the nine months ended September 30, 1997 and $9.6 million for
Fiscal 1996. The Company has used borrowings and proceeds from the sale of
assets to fund the cash used in operations and capital expenditures.
Capital expenditures during the first nine months of 1997 totalled $11.2
million, including $10.3 million primarily related to the acquisition of the
Gulf Horizon and improvements to existing marine equipment and $.9 million to
acquire a marine base in Houma, Louisiana. In Fiscal 1996 the Company made
$21.0 million of capital expenditures primarily to acquire and refurbish the
American Horizon and Cajun Horizon and relating to the acquisition of the
Phoenix Horizon. Four boats, acquired and upgraded for a total of $9.6 million
in 1996, were subsequently sold in 1997.
The Principal Stockholders funded substantially all of the Company's cash
requirements prior to the establishment of the Credit Facility. These advances
were represented by promissory notes bearing interest at the rate of 10% per
annum. In 1997, the Company was recapitalized through a series of
transactions. The Principal Stockholders contributed $21.0 million of the
principal indebtedness and accrued interest to additional paid-in capital. The
Company issued 10% Subordinated Notes due December 31, 2005 (the "Subordinated
Notes") to the Principal Stockholders to evidence the remaining outstanding
indebtedness and provide for any future advances in an aggregate amount not to
exceed $20 million (see Note 6 to the financial statements). The Company does
not anticipate making any further borrowings from the Principal Stockholders
after the Offering.
On October 27, 1997, the Company entered into the Credit Facility with Den
norske Bank, which was amended in December 1997, that currently provides for
$20 million of borrowings. The Credit Facility includes both a $13 million
term loan (the "Term Loan") to be repaid in 48 monthly installments of $.2
million beginning July 31, 1998 with the balance due at maturity and a $7
million revolving line of credit (the "Revolver") due June 30, 2002. The
Credit Facility is secured by substantially all assets of the Company,
including a mortgage on all vessels owned by the Company, as well as a support
agreement between Den norske Bank and one of the Principal Stockholders that
requires the Principal Stockholder to assume the liability under the Credit
Facility should the Company default on its obligations under the Credit
Facility. It is anticipated that the support agreement will be terminated
following the Offering. The Credit Facility requires that certain conditions
be met in order for the Company to obtain advances under the Term Loan.
Advances under the Revolver may be obtained in accordance with a borrowing
base defined as a percentage of accounts receivable balances. The Credit
Facility requires the Company to maintain certain financial ratios and
contains certain covenants that limit the ability of the Company to incur
additional indebtedness, pay dividends, create certain liens, sell assets and
limits capital expenditures to the extent such amounts are not funded by the
Principal Stockholders. Interest is calculated on advances under the Credit
Facility based upon either Den norske Bank's prime rate plus one half percent
or LIBOR plus three percent. Upon completion of the Offering, it is
anticipated that the Credit Facility will be amended to provide for a $30
million term loan facility, a $20 million revolving credit facility and
covenants consistent with the Company's improved financial condition, results
of operation and increased stockholders' equity.
On December 4, 1997, the Company entered into an agreement with DSND to form
a strategic alliance. DSND acquired 30% of the Company's Common Stock from the
Principal Stockholders. DSND has agreed to sell the DSND Stephaniturm to the
Company for $17.5 million. In addition the Company will obtain a 30% interest
in the DSND Joint Venture to be formed to operate a reel pipelay vessel in the
Gulf, offshore Canada, Mexico and in the Caribbean.
During the fourth quarter of 1997, the Company made capital expenditures of
$27.0 million to acquire, upgrade and refurbish the Lone Star Horizon, a
pipelay barge, and the Canyon Horizon, a bury barge, and incurred costs to
upgrade and refurbish the Phoenix Horizon and Gulf Horizon, acquire cranes,
other equipment and a marine base in Port Arthur, Texas. The Company increased
its borrowings under the Subordinated Notes by $7.4 million and borrowed $14.7
million under the Credit Facility to make the acquisitions and upgrades. As of
December 31, 1997 the amounts due under the Subordinated Notes totaled $16.8
million, including accrued
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<PAGE>
interest. The Company anticipates borrowing additional amounts under the
Subordinated Notes to fund equipment acquisitions and meet its working capital
requirements prior to completion of the Offering. As of December 31, 1997, the
Company had $13.0 million outstanding under the Term Loan and $1.7 million
outstanding under the Revolver bearing interest at 9.0% per annum. The
borrowings were used to fund capital expenditures described herein. The
Company will repay the outstanding borrowings under the Subordinated Notes and
the Credit Facility with the proceeds from the Offering. The Company will use
$17.5 million of the net proceeds of the Offering to acquire the DSND
Stephaniturm and approximately $14 million to construct the Pacific Horizon.
Planned capital expenditures for 1998 are estimated to total approximately
$32 million to complete improvements to the Company's fleet. Management
believes that the proceeds of the Offering and cash generated from operations,
together with available borrowings under the Credit Facility, will be
sufficient to fund the Company's currently planned capital projects and
working capital requirements for 1998. The Company's strategy, however, is to
make other acquisitions to expand its operating capabilities and expand into
selected international markets. To the extent the Company is successful in
identifying acquisition opportunities, it most likely will require additional
debt or equity financing depending on the size of any transaction.
23
<PAGE>
BUSINESS
THE COMPANY
Horizon provides marine construction services to the offshore oil and gas
industry primarily in the Gulf. The Company's marine fleet is used primarily
to install marine pipelines to transport oil and gas from newly installed
production platforms and other subsea production systems. During 1997, the
Company has (i) assembled new leadership with an entrepreneurial philosophy,
significant operational expertise and established customer relationships, (ii)
aggressively expanded its operating capabilities through the addition of
strategic assets and (iii) focused on delivering superior execution to its
customers.
The Company has assembled a fleet of seven vessels, five of which are
expected to be operational during the first quarter of 1998. The remaining two
vessels are expected to be operational during the third quarter of 1998. The
Company's fleet will be capable of a wide range of marine construction
activities, including (i) installing up to 48-inch pipelines and smaller
diameter rigid and coiled-line pipe in water depths up to 800 feet, (ii)
providing pipebury, pipeline tie-in and hydrotest and commissioning services
and (iii) installing and salvaging production platforms and other marine
structures. Management expects that the Company's expanded fleet will allow it
to compete in the Gulf for substantially all pipeline installation projects in
shallow water depths of 200 feet and less and a substantial number of projects
in intermediate water depths of between 200 and 800 feet.
BUSINESS STRATEGY
The Company's business strategy is designed to capitalize on the positive
trends and current opportunities in the marine construction industry. Key
elements of the Company's strategy are to:
. MAINTAIN FOCUS IN GULF. Horizon intends to maintain its focus on the
shallow and intermediate water depths of the Gulf of Mexico because of
its strong competitive position in this market segment, its management
team's substantial expertise in this market segment and the positive
outlook for new oil and gas exploration and development activity in these
water depths. The Company also believes that it will benefit from the
continued consolidation in the marine construction industry in the Gulf
as a number of publicly owned companies perform an increasing portion of
the available projects in shallow and intermediate waters.
. EXPAND OPERATING CAPABILITIES. Management believes that the ability to
offer a full range of pipeline construction services in varying water
depths is an important component in implementing the Company's strategy.
Although the Company historically has focused on installing smaller
diameter pipelines in shallow water depths, the Company has expanded its
operating capabilities substantially through the expansion of its fleet
since mid-1997. The acquisition of two pipelay/pipebury barges, one
pipebury barge and a diving support vessel will enable the Company to
install larger diameter pipelines in intermediate water depths and to
perform platform support services. Additionally, through the Company's
alliance with DSND (described below), the Company will gain immediate
access to DSND's deep water technology and expertise and anticipates
further expansion of its capabilities to include the ability to install
pipelines in deep water and to install coiled-line pipe under adverse
weather conditions.
. PURSUE SELECTED INTERNATIONAL EXPANSION OPPORTUNITIES. The Company is
considering and carefully evaluating expanding into offshore Mexico and
other selected international market areas in which members of the
Company's management team have extensive prior experience. Horizon has
been awarded a
project offshore Venezuela to be performed in early 1998 and is
concentrating its international expansion efforts on areas with similar
operating conditions to those found in the Gulf, particularly offshore
West Africa and Venezuela.
. PROVIDE DERRICK SERVICES. The Company expects demand for platform
installation and removal services to increase as a result of increased
drilling activity and the implementation of governmental regulations
governing the abandonment of offshore wells and removal of platforms in
the Gulf of Mexico. The Company is upgrading the Phoenix Horizon so that
it will be capable of lifting 500 tons to install and
24
<PAGE>
salvage production platforms and other marine structures. The Company
also intends to construct a derrick barge to be named the Pacific Horizon
that will be capable of lifting 800 tons. The Company has options to
acquire by September 1998 the crane, winches and quarters facilities and
believes that the barge will be constructed and be available to commence
operations late in 1998.
. DELIVER SUPERIOR EXECUTION. During 1997, to implement its business
strategy, the Company identified and assembled the individuals which
comprise Horizon's current leadership. The team was selected primarily
due to its entrepreneurial philosophy, significant operational expertise
and established customer relationships in the Gulf and international
markets. Since assuming their present operational responsibilities in
mid-1997, management has focused on and delivered superior execution of
projects for its customers through improved asset utilization and
operating efficiencies. As a result of this focus, the Company has
improved its gross profit margins to 30.9% for the three months ended
October 31, 1997 from 5.5% in the prior year period and increased its
backlog to $16.4 million at December 31, 1997 from $2.9 million at
December 31, 1996.
INDUSTRY CONDITIONS
Demand for marine construction services is primarily a function of the level
of oil and gas activity in the Gulf. Over the past several years, improvements
in seismic and drilling technology, production techniques and higher oil and
gas prices have resulted in more intensive drilling activity in the Gulf. The
number of active drilling rigs in the Gulf of Mexico increased from less than
60 in May 1992 to approximately 170 in November 1997 and many industry
analysts believe that the industry is operating at full capacity.
Due to the time required to drill an exploratory offshore well, formulate a
development plan and install a production platform, the demand for marine
construction services to install platforms and related pipelines in shallow
and intermediate water depths usually lags exploratory drilling by six months
to one year. The Company believes that its expanded fleet of marine vessels
and international operations will provide it with a competitive advantage in
its targeted market areas that, coupled with continued strong oil and gas
activity, should enable the Company to continue to grow profitably in the
future.
SCOPE OF OPERATIONS
The Company is a leading provider of marine construction services in the
shallow waters of the Gulf of Mexico. The Company installed approximately 103
miles of pipe of various diameters in various water depths in the Gulf during
the ten-months ended October 31, 1997. When the Company's current upgrade and
refurbishment program for its recently purchased vessels is completed, the
Company will be capable of installing and burying pipelines with an outside
diameter (including concrete coating) of up to 48 inches and smaller diameter
pipe in water depths up to 800 feet.
The Company's pipelay and pipebury vessels are highly specialized vessels,
capable of installing pipelines of various diameters. The Company's pipelay
vessels employ conventional S-lay technology, which is appropriate for shallow
and intermediate water depths. Conventional pipeline installation involves the
sequential assembly of pipeline joints through an assembly line of welding
stations that runs the length of the pipelay vessel, testing and coating the
welds on the deck of the pipelay barge and then lowering the pipe off the
stern and into the water via a ramp that is referred to as a "pontoon" or
"stinger." The ramp supports the pipe to some distance under the water and
prevents over-stressing as it curves into a horizontal position downward
toward the sea floor. The barge is then moved forward by its anchor winches
and the pipeline is laid on the sea floor. The suspended pipe forms an
elongated "S" shape as it undergoes a second bend above the contact point on
the sea floor. During the pipelay process, divers regularly inspect the
pipeline to ensure that there are no obstructions on the sea floor, that the
ramp is providing proper support and that the pipeline is settling correctly.
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<PAGE>
Pipelines installed on the Outer Continental Shelf that are greater than
8.75 inches in diameter or located in water depths of 200 feet or less are
required by the regulations of the United States Department of Interior's
Minerals Management Service ("MMS") to be buried at least three feet below the
sea floor. Each of the Company's shallow water pipelay vessels is equipped
with a towed jet sled that uses high pressure bursts of air and water to
create a trench underneath the pipeline as it settles into the seabed in order
to bury the pipe. In soft ocean floors and water depths of less than 200 feet
towed jet sleds generally are more efficient than using a bury barge or other
procedures followed by some competitors to bury small diameter pipelines and
is less likely to damage the pipeline being laid or any existing pipelines
which the pipeline may be crossing. Unlike a conventional "plow" trencher,
towed jet sleds use a high pressure stream of water which is pumped from the
barge to create a trench into which the pipe is then laid. The Company also
owns a bury barge, the Canyon Horizon, which is expected to be placed into
service during the third quarter of 1998 and will be capable of burying marine
pipelines to depths of more 20 feet in hard rocky ocean floors. The Company
will use this large bury barge for deep burying projects in shipping lanes,
harbors and hard ocean floors and its towed jet sleds for burying projects in
soft ocean floors thereby allowing the Company to match its burying approach
to the requirements of each specific contract.
The Company's fleet also includes a multi-purpose vessel, the M/V Geosearch,
that is being converted to serve as a diving support vessel to perform
pipeline support services such as tie-ins, hydrostatic testing and platform
commissioning services. This vessel is expected to commence operations during
the first quarter of 1998.
The Company expects to commence installing and removing or "salvaging"
offshore fixed platforms in the third quarter of 1998 when the upgrade of the
Phoenix Horizon is completed and the derrick barge Pacific Horizon is
constructed. Derrick barges are equipped with cranes designed to lift and
place platforms, structures or equipment into position for installation. In
addition, they can be used to disassemble and remove platforms and prepare
them for salvage or refurbishment. The Company believes that the need to
salvage platforms in the Gulf will increase as older structures are
decommissioned and are required to be removed pursuant to MMS regulations
relating to the abandonment of wells and removal of platforms.
The Company is awarded contracts from its customers by means of a highly
competitive bidding process. In preparing a bid, the Company must consider a
variety of factors, including its estimate of the time necessary to complete
the project. It must also take into account the location and duration of its
current projects and projects that have been awarded for future performance.
Present management of the Company has placed a strong emphasis on the
sequential structuring of its scheduled work in adjacent areas to reduce the
mobilization and de-mobilization time and cost associated with each project in
order to increase the Company's profitability on those projects. The Company
has also increased its bidding successes by employing and maintaining core
groups of experienced foremen and deck hands that routinely work together on
particular types of projects. The Company often obtains the services of
workers outside its core employee groups by subcontracting with other parties.
In subcontracting with other parties for certain key services, the Company
attempts to utilize the same personnel. The Company examines the results of
each bid it submits, reevaluates its bids, and implements a system of controls
to maintain and improve the accuracy of its bidding process. The accuracy of
the Company's various estimates in preparing a bid is critical to its
profitability. See "Risk Factors--Contract Bidding Risks."
The Company's contracts are typically of short duration, being completed in
periods as short as several days to periods of up to several months (when the
Company commences operating the larger pipelay vessels acquired in 1997). A
substantial number of the Company's projects are performed on a fixed-price or
"turnkey" basis, although some projects are performed on a cost-plus basis.
Under a fixed-price contract, the price stated in the contract is subject to
adjustment only for change orders placed by the customer. As a result, the
Company is responsible for all cost overruns. Furthermore, the profitability
of the Company under a fixed-price contract is reduced when the task takes
longer to complete than estimated and, conversely, the Company's profitability
is increased if the task is completed ahead of schedule. Under cost-plus
arrangements, the Company receives a specified fee in excess of its direct
labor and material cost and so is protected against cost overruns but does not
benefit directly from cost savings. See "Risk Factors--Contract Bidding
Risks."
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<PAGE>
MARINE EQUIPMENT
The Company owns a fleet of four pipelay/pipebury vessels, one pipebury
vessel and one derrick vessel. The Company holds one diving support vessel
under a lease/purchase agreement and will purchase an additional diving
support vessel with a portion of the proceeds of the Offering. The following
table describes the Company's marine vessels.
<TABLE>
<CAPTION>
MAXIMUM
MAXIMUM PIPELAY MONTH AND
VESSEL VESSEL TYPE LENGTH DERRICK LIFT DIAMETER YEAR ACQUIRED
------ ----------- ------ ------------ -------- -------------
(FEET) (TONS) (INCHES)
<S> <C> <C> <C> <C> <C>
Gulf Horizon(1)......... Pipelay/Pipebury 350 -- 36 July 1997
Lone Star Horizon(1).... Pipelay/Pipebury 320 -- 48 November 1997
Phoenix Horizon(2)...... Derrick 300 500 -- July 1997
Canyon Horizon(2)....... Pipebury 300 -- -- November 1997
American Horizon........ Pipelay/Pipebury 180 -- 18 February 1996
Cajun Horizon........... Pipelay/Pipebury 140 -- 12 June 1996
Geosearch (3)........... Diving Support Vessel 180 -- -- October 1997
DSND Stephaniturm (4)... Diving Support Vessel 244 -- 6 (4)
</TABLE>
- --------
(1) This vessel is being upgraded and refurbished and is expected to commence
operations during the first quarter of 1998.
(2) This vessel is being upgraded and refurbished and is expected to commence
operations during the third quarter of 1998.
(3) This vessel is expected to commence operations during the first quarter of
1998 and is held by the Company under a lease/purchase agreement pursuant
to which the Company will acquire title to the vessel upon expiration of
the lease term for a nominal sum.
(4) This vessel will be purchased from DSND for $17.5 million with a portion
of the proceeds of the Offering.
The following table describes the capabilities and the present or near-term
status of the Company's fleet:
<TABLE>
<CAPTION>
VESSEL CAPABILITIES STATUS
------ ------------ ------
<S> <C> <C>
Gulf Horizon............ Lays up to 369 pipe in shallow Currently being upgraded;
water and up to 129 pipe in scheduled for deployment in
intermediate water depths first quarter of 1998 in
Venezuela and the Gulf
Lone Star Horizon....... Lays up to 489 pipe in shallow Currently being upgraded;
water and up to 129 pipe in scheduled for deployment in
intermediate water depths the first quarter of 1998 in
the Gulf
Phoenix Horizon......... Derrick barge Currently being upgraded;
scheduled for deployment in
third quarter of 1998
Canyon Horizon.......... Buries up to 609 pipe in shallow Currently being upgraded;
water; buries pipe in ocean floor scheduled for deployment in
as deep as 208 below the sea third quarter of 1998 in Gulf
floor
American Horizon........ Lays up to 189 pipe in shallow Currently deployed in Gulf
water
Cajun Horizon........... Lays up to 129 pipe in shallow Currently deployed in Gulf
water
Geosearch............... Diving support vessel capable of Currently being upgraded;
pipeline tie-in, hydrotest, and scheduled for deployment in
reeling coiled tubing first quarter of 1998
DSND Stephaniturm....... Dynamically positioned diving To be purchased from DSND with
support vessel capable of laying proceeds of the Offering,
coiled tubing and pipeline tie- bareboat chartered by DSND and
in, hydrotest, and commissioning delivered to the Company in
services the third quarter of 1998
</TABLE>
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<PAGE>
The Company owns all of its marine vessels other than the Geosearch, which
is held under a lease/purchase arrangement pursuant to which the Company will
acquire title to the vessel upon expiration of the lease term. All of the
Company's vessels are subject to ship mortgages securing debt under the Credit
Facility. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources." Under governmental
regulations and its insurance policies, the Company is required to maintain
its vessels in accordance with standards of seaworthiness, safety and health
prescribed by governmental regulations and applicable vessel classification
societies. The Company believes it is in compliance with all governmental
regulations and insurance policies regulating such aspects of the operation
and maintenance of its vessels.
In the normal course of its operations, the Company also leases or charters
other vessels, such as diving support vessels, tugboats, cargo barges, utility
boats and support vessels.
THE DSND TRANSACTION
On December 4, 1997, the Company entered into a definitive agreement with
DSND to form a strategic alliance. DSND is a Norwegian-based full-service
contractor in the subsea construction business with operations in the North
Sea and offshore Brazil. As part of the DSND alliance, (i) DSND acquired 30%
of the Company's outstanding Common Stock for $12.0 million from the Principal
Stockholders, (ii) DSND agreed to sell to the Company the DSND Stephaniturm, a
244-foot North Sea class dynamically positioned diving support vessel, for
$17.5 million, which the Company will purchase with a portion of the proceeds
of the Offering and (iii) the Company and DSND agreed to form the DSND Joint
Venture, which will be 30% owned by the Company, to primarily conduct deep
water pipelaying operations in the Gulf, offshore Mexico and Canada, and in
the Caribbean. In connection with DSND's purchase of Common Stock, DSND
negotiated for, and obtained, an option to purchase from the Principal
Stockholders, if the Offering does not occur prior to December 31, 1998, up to
an additional 20% of the Company's outstanding Common Stock for $45.0 million.
The Company also obtained from DSND an option expiring 90 days after the
Offering to purchase a 12-man saturation diving system for $4.0 million.
The DSND Stephaniturm will be modified by the Company to lay coiled-line
pipe and support the Company's conventional pipelay vessels and will offer
saturation diving, riser installation tie-ins and commissioning services to
allow the Company to perform more complex projects and operate in deeper
water. The installation of coiled-line pipe is generally faster and cheaper
than the installation of small diameter rigid pipe, and the DSND Stephaniturm
is capable of working during most weather conditions experienced during the
winter in the Gulf, a period when many competitors are unable to continue
operating due to the limitations of their vessels. The Company believes that
upgrading the capability of the DSND Stephaniturm to lay coiled-line pipe will
strengthen the Company's position as a leader in pipeline installation in the
Gulf. The transfer of the DSND Stephaniturm will be deemed effective as of
January 1, 1998 and DSND will pay the Company $3.0 million of charter hire as
if the Company had bareboat chartered the vessel to DSND on January 1, 1998.
The vessel is expected to be delivered to Horizon during the third quarter of
1998.
The DSND Joint Venture will have available to it a reel pipelaying vessel
that is being constructed and chartered by DSND that is anticipated to be able
to install 10 inch diameter pipe in water depths as great as 6,000 feet. The
reel vessel is presently being constructed for DSND and is expected to be
available for operation during the third quarter of 1999. The Company believes
that the capability of the reel vessel to reel pipe will allow the Company to
compete more effectively in all water depths with other competitors that have
reel pipeline capability because of the faster installation rates and reduced
labor expense of reeling pipelines when compared to conventional pipelay
methods. The dynamically positioned reel vessel will also allow the Company to
participate in the deep water market segment to install small diameter
pipelines and provide subsea construction services. The DSND Joint Venture
will be able to charter this deep water pipelay vessel and its marine crew for
$75,000 per day to perform any pipelay projects awarded to the DSND Joint
Venture. DSND will charter the reel ship for five years from its completion in
1999 with five additional one year renewal options at DSND's sole election.
The DSND Joint Venture will be able to charter this vessel on a "first call"
basis as long as it is chartered by DSND. DSND will then provide at cost the
supervisory members of the construction crew with deep water pipelay
experience and Horizon will supply at cost all of the other construction crew
members. The
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<PAGE>
DSND Joint Venture will also have access to DSND's other deep water pipelaying
vessels on terms to be agreed for any deep water pipelaying projects that may
be obtained by the DSND Joint Venture.
Horizon believes the DSND alliance provides it with certain strategic
benefits, including:
. An association with a highly regarded international marine contractor
with a leading presence in providing pipeline installation and subsea
construction services in the North Sea and offshore Brazil.
. The ability of the DSND Stephaniturm to lay coiled-line pipe and operate
in the Gulf under adverse weather conditions.
. Immediate access to deep water technology and the ability to provide
pipeline reel ship services in the deep and intermediate water depth
areas of the Gulf and offshore Mexico and Canada, and in the Caribbean.
SAFETY AND QUALITY ASSURANCE
Management is concerned with the safety and health of the Company's
employees and maintains a stringent safety assurance program to reduce the
possibility of costly accidents. The Company's health, safety and
environmental ("HSE") department establishes guidelines to ensure compliance
with all applicable state and federal safety regulations and provides training
and safety education through new employee orientations, which include first
aid and CPR training. In addition, prospective employees must submit to
alcohol and drug testing. After each accident or other health or safety
occurrence, the HSE department promptly collects data concerning the incident,
performs further investigations, and evaluates its safety procedures to help
prevent similar incidents. Failure of employees to adhere to the Company's
health, safety and environmental guidelines may result in immediate
termination of employment. The Company believes that its safety program and
commitment to quality are vital to attracting and retaining customers and
employees and controlling costs.
CUSTOMERS
The Company's customers are primarily major and independent oil and gas
producers operating in the Gulf of Mexico. During the nine months ended
September 30, 1997, the Company provided offshore marine construction services
to approximately 26 customers, the largest of which, Santa Fe Energy Resources
Corporation, accounted for approximately 17% of the Company's revenues. As a
result of the emergence of a number of independent engineering firms during
the past several years that manage the award and provision of marine
construction services for many of the independent oil and gas producers, the
Company's management team has also concentrated on maintaining close
relationships with these engineering firms.
The Company's revenues do not depend on any one customer. The level of
construction services required by any particular customer depends on the size
of that customer's capital expenditure budget devoted to construction plans in
a particular year. Consequently, customers that account for a significant
portion of contract revenues in one fiscal year may represent an immaterial
portion of contract revenues in subsequent fiscal years. The Company's
contracts are typically of short duration, being completed in periods as short
as several days to two months.
BACKLOG
As of December 31, 1997, the Company's backlog supported by written
agreements amounted to $16.4 million, compared to the Company's backlog at
December 31, 1996 of $2.9 million. Management expects all of its current
backlog to be performed during the first two quarters of 1998. As the Company
moves into international market areas, where projects tend to have longer lead
times and result in earlier awards, its backlog may increase. The Company does
not consider its backlog amounts to be a reliable indicator of future revenues
because most of the Company's projects are awarded and performed within a
relatively short period of time.
29
<PAGE>
SEASONALITY, CYCLICALITY AND FACTORS AFFECTING DEMAND
The marine construction industry in the Gulf of Mexico historically has been
highly seasonal with contracts being awarded in the spring and early summer
and performed before the onset of adverse weather conditions in the winter.
The scheduling of much of the Company's work is affected by weather conditions
and other factors and many of the Company's projects are performed within a
relatively short period of time. The Company intends to offset partially the
seasonality of its operations in the Gulf by pursuing selected international
expansion opportunities.
The level of activity in the marine construction business in the Gulf of
Mexico has traditionally been seasonal and cyclical, depending primarily on
weather conditions offshore in the Gulf and the capital expenditure budgets of
oil and gas companies for developmental construction. The level and volatility
of oil and gas prices have a strong effect on exploration and production
activities offshore which ultimately affect the demand for the Company's
services. These expenditures are influenced by the price of oil and gas, the
cost of exploring for, producing and delivering oil and gas, sale and
expiration dates of offshore leases in the United States and abroad, discovery
rates of new oil and gas reserves in offshore areas, local and international
political and economic conditions and the ability of the oil and gas industry
to access capital. See "Risk Factors--Industry Volatility."
INSURANCE
The Company's operations are subject to the inherent risks of offshore
marine activity, including accidents resulting in the loss of life or
property, environmental mishaps, mechanical failures and collisions. The
Company insures against these risks at levels it believes are consistent with
industry standards. The Company believes that its insurance should protect it
against, among other things, the cost of replacing the constructive total loss
of its vessels. However, certain risks are either not insurable or insurance
is available only at rates that the Company considers not to be economical.
There can be no assurance that any such insurance will be sufficient or
effective under all circumstances or against all hazards to which the Company
may be subject.
COMPETITION
The offshore marine construction industry is highly competitive. Competition
is influenced by such factors as price, availability and capability of
equipment and personnel, and reputation and experience of management.
Contracts for work in the Gulf of Mexico are typically awarded on a
competitive bid basis one to three months prior to commencement of operations
with customers usually requesting bids from all companies they believe
technically qualified to perform the project. The Company's marketing staff
contacts offshore operators known to have projects scheduled to ensure the
Company has an opportunity to bid for these projects. Although the Company
believes customers consider, among other things, the availability and
technical capabilities of equipment and personnel, the condition of equipment
and the efficiency and safety record of the contractor, price is the primary
factor in determining which qualified contractor is awarded the contract.
Because of the lower degree of complexity and capital costs involved in
shallow water marine construction activities, there are a number of companies
with one or more pipelay barges capable of installing pipelines in shallow
water. The Company currently competes in the Gulf in water depths of 200 feet
or less primarily with Global Industries, Ltd. and Torch, Inc. and several
other smaller contractors. In projects in water depths of 200 feet or more or
where a higher degree of complexity is involved, competition generally is
limited to Global Industries, Ltd. and J. Ray McDermott, S.A. ("McDermott").
The Company believes that its reputation, experienced management team and
competitive pricing are its key advantages.
Internationally, the marine construction industry is dominated by a small
number of major international construction companies and government owned or
controlled companies that operate in specific areas or on a joint venture
basis with one or more of the major international construction companies. In
Mexico, the primary competitors for any operations that may be conducted by
the Company are joint ventures involving Mexican contractors and each of
Global Industries, Ltd. and McDermott. Competition in the West African
offshore construction market is limited primarily to McDermott/ETPM West, a
joint venture between a French contractor and McDermott, Global Industries,
Ltd. and a joint venture involving another French contractor.
30
<PAGE>
FACILITIES
The Company's corporate headquarters are located in Houston, Texas, in
approximately 46,000 square feet of leased space under a four-year lease which
expires in 2001.
The Company owns approximately 11 acres on the Houma Navigational Channel in
Houma, Louisiana, that includes a private, bulkheaded canal capable of docking
the Company's barges and vessels and allows the barges and vessels direct
access to the Gulf of Mexico. In December 1997, the Company acquired
approximately 23 acres with approximately 6,000 feet of water front on a
peninsula in Sabine Lake near Port Arthur, Texas with direct access to the
Gulf. The facility has more than 3,000 feet of deep water frontage in water
depths as deep as 30 feet for docking the Company's barges and vessels. The
Company intends to use this facility as its primary marine and support base
and as a storage facility for marine structures that may be salvaged by the
Company's fleet of marine equipment.
REGULATION
Many aspects of the offshore marine construction industry are subject to
extensive governmental regulation. The Company's United States operations are
subject to the jurisdiction of the United States Coast Guard, the National
Transportation Safety Board and the Customs Service, as well as private
industry organizations such as the American Bureau of Shipping. The Coast
Guard and the National Transportation Safety Board set safety standards and
are authorized to investigate vessel accidents and recommend improved safety
standards, and the Customs Service is authorized to inspect vessels at will.
The Company is required by various governmental and quasi-governmental
agencies to obtain certain permits, licenses and certificates with respect to
its operations. The kinds of permits, licenses and certificates required in
the operations of the Company depend upon a number of factors. The Company
believes that it has obtained or will be able to obtain, when required, all
permits, licenses and certificates necessary to the conduct of its business.
In addition, the Company depends on the demand for its services from the oil
and gas industry and, therefore, the Company's business is affected by laws
and regulations, as well as changing taxes and policies relating to the oil
and gas industry generally. In particular, the exploration and development of
oil and gas properties located on the Outer Continental Shelf of the United
States is regulated primarily by the MMS. The MMS must approve and grant
permits in connection with drilling and development plans submitted by oil and
gas companies. Delays in the approval of plans and issuance of permits by the
MMS because of staffing, economic, environmental or other reasons could
adversely affect the Company's operations by limiting demand for its services.
See "Risk Factors--Regulatory and Environmental Matters."
Certain employees of the Company are covered by provisions of the Jones Act,
the Death on the High Seas Act and general maritime law, which laws operate to
make liability limits established by state workers' compensation laws
inapplicable to these employees and permit the employees and their
representatives to pursue actions against the Company for job related injuries
with generally no limits on the Company's potential liability.
The operations of the Company are affected by numerous federal, state and
local laws and regulations relating to protection of the environment,
including the Outer Continental Shelf Lands Act, the Federal Water Pollution
Control Act of 1972 and the Oil Pollution Act of 1990. The technical
requirements of these laws and regulations are becoming increasingly complex
and stringent, and compliance is becoming increasingly difficult and
expensive. However, the Company does not believe that compliance with current
environmental laws and regulations is likely to have a material adverse effect
on the Company's business or financial condition. Certain environmental laws
provide for "strict liability" for remediation of spills and releases of
hazardous substances and some provide liability for damages to natural
resources or threats to public health and safety. Sanctions for noncompliance
may include revocation of permits, corrective action orders, administrative or
civil penalties, and criminal prosecution. The Company's compliance with these
laws and regulations has entailed certain changes in operating procedures and
approximately $75,000 in expenditures in fiscal 1997. It is possible that
changes in the environmental laws and enforcement policies thereunder, or
claims for damages to persons, property, natural resources or the environment
could result in substantial costs and liabilities to the Company. The
Company's insurance policies provide liability coverage for sudden and
accidental occurrences of pollution and/or clean-up
31
<PAGE>
and containment of the foregoing in amounts that the Company believes are
comparable to policy limits carried by others in the offshore construction
industry.
Several of the Company's vessels are documented or registered in the United
States, subjecting the Company to the citizenship restrictions of certain
federal laws and regulations. Under these laws and regulations, the Company's
chairman of the board, its chief executive officer and a specified minimum
number of its directors must be United States citizens. Certain provisions of
the Company's Bylaws are intended to aid in compliance with the foregoing
requirements regarding United States citizenship of certain of the Company's
directors and officers.
LEGAL PROCEEDINGS
In April 1997, Donald J. Sites, a former member and employee of a subsidiary
of the Company, filed actions in a Texas District Court against the
subsidiary, one of the Principal Stockholders, Jonathan D. Pollock, who is the
Chairman of the Board of the Company, and Howard D. Loyd, III, who is a former
Chief Executive Officer of the Company, alleging that he was wrongfully
terminated as an employee and consultant and the defendants deprived him of
his equity interest in the subsidiary of the Company. Mr. Sites seeks $10
million in compensatory damages and $20 million in punitive damages. The
defendants deny the allegations of Mr. Sites and intend to defend the
litigation vigorously. The Company subsidiary has also filed a counterclaim
against Mr. Sites seeking damages for acts of gross negligence in breach of
his duties, including actions taken by him in connection with the attempt to
expand the Company's operations in the Middle East. See "Risk Factors--1996
Operating Loss; Lack of Operating History." Although the Company believes that
Mr. Sites's claims are without merit, a successful outcome for Mr. Sites with
respect to his claims could have a material adverse effect on the business and
financial condition of the Company.
The Company is involved in various other routine legal proceedings primarily
involving claims for personal injury under the Jones Act and general maritime
laws which the Company believes are incidental to the conduct of its business.
The Company believes that none of these proceedings, if adversely determined,
would have a material adverse effect on the Company's business.
EMPLOYEES
As of December 1, 1997, the Company had approximately 245 employees,
including approximately 188 operating personnel and approximately 57
corporate, administrative and management personnel. These employees are not
unionized or employed pursuant to any collective bargaining agreement or any
similar agreement. The Company believes its relationship with its employees is
good.
The Company's ability to increase profitability depends substantially on its
ability to attract and retain skilled construction workers, primarily welders,
riggers and equipment operators. In addition, the Company's ability to expand
its operations depends on its ability to increase its workforce. The demand
for such workers is high, and the supply is extremely limited. In view of the
relationships developed by the Company's current management while engaged by
other providers of marine construction services and the entrepreneurial
emphasis of its management, the Company anticipates that it can compete
effectively for skilled, experienced workers. While the Company believes its
relationship with its skilled labor force is good, a significant increase in
the wages paid by competing employers could result in a reduction in the
Company's skilled labor force, increases in the wage rates paid by the
Company, or both. If either of these occurs to the extent such wage increases
could not be passed on to the Company's customers, the Company's growth and
profitability could be impaired. See "Risk Factors--Shortage of Skilled
Workers."
32
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The following table sets forth, as of December 31, 1997, certain information
with respect to the Company's directors, executive officers and key employees.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
---- --- --------------------------
<S> <C> <C>
Jonathan D. Pollock... 34 Chairman of the Board
Bill J. Lam........... 31 President, Chief Executive Officer and Director
David W. Sharp........ 44 Executive Vice President and Chief Financial Officer
James K. Cole......... 50 Senior Vice President
James Devine.......... 44 Director
Gunnar Hirsti......... 43 Director
Edward L. Moses, Jr... 61 Director
James E. Buckner...... 62 Vice President--Latin American Operations
Joseph R. Greer....... 57 Vice President and General Superintendent
Thomas N. Whittington. 37 Vice President--Procurement Services
Robert T. Stonecipher. 57 Manager--Technical Services
Michael L. Ballard.... 42 Manager--Special Projects
Thomas F. Cunningham.. 43 Director--Sub-Sea Operations
Russell L. Baldwin.... 40 Operations Manager
John R. Abadie........ 27 Manager--Estimating
William E. Breen...... 29 Projects Manager
Keith W. Huddleston... 46 Manager--Special Projects
</TABLE>
The following biographies describe the business experience of the directors
and executive officers of the Company during the past five years. Except as
described in "Executive Employment Agreements" below, all executive officers
of the Company serve at the pleasure of the Board of Directors of the Company.
The Company's Certificate and Bylaws provide for the Board of Directors to be
divided into three classes of directors serving staggered three-year terms.
One class of directors is elected at each annual meeting of stockholders of
the Company and serve for three-year terms or until their successors are
elected and qualified or until their earlier resignation or removal in
accordance with the Company's Certificate of Incorporation and Bylaws. For the
respective terms of office of Messrs. Lam, Sharp and Cole as Company officers,
see "--Executive Employment Agreements" below.
Jonathan D. Pollock has been the Chairman of the Board of the Company since
its inception. Mr. Pollock is a Portfolio Manager of Elliott Associates, L.P.,
a private investment firm and a principal stockholder in the Company. He is
responsible for the oil and gas investments of Elliott Associates, L.P. and
has been associated with Elliott Associates, L.P. since 1989. He is a director
of Tatham Offshore, Inc. ("Tatham Offshore"), an independent oil and gas
company. Mr. Pollock is also Chairman of the Board of Grant Geophysical, Inc.,
a seismic data acquisition company.
Bill J. Lam is the President, Chief Executive Officer and a Director of the
Company. Mr. Lam has been Chief Executive Officer and a Director since
December 1997. From July 1997 to November 1997 he was Vice President--
Operations of the Company. Prior to being employed by the Company, Mr. Lam has
held various supervisory positions for the following providers of marine
construction services to the offshore oil and gas industry: Lowe Offshore,
Inc. (from January 1997 to July 1997), McDermott (from January 1995 to January
1997) and OPI International, Inc. ("OPI") (from August 1990 to January 1995).
Mr. Lam graduated from Texas A&M University in 1990 with a B.A. degree in
economics.
33
<PAGE>
David W. Sharp is an Executive Vice President and the Chief Financial
Officer of the Company and has held those positions since December 1997. From
October 1996 to November 1997, Mr. Sharp was Vice President--Finance of the
Company. He held various positions with McDermott, including world-wide
project leader for the implementation of accounting and financial systems,
from January 1995 to October 1996. Prior thereto, he held various positions
with OPI, including controller-atlantic division and director of management
information of OPI from November 1990 to January 1995. Mr. Sharp is a
certified public accountant and graduated from the University of Texas in 1975
with a B.B.A. degree in business management.
James K. Cole is Senior Vice President of the Company and has held that
position since December 1997. From November 1996 to November 1997, Mr. Cole
was Vice President--Human Resources and Risk Management of the Company. He was
manager of corporate safety and health of McDermott from January 1995 to
September 1996 and director of corporate health, safety and environment for
OPI from April 1991 to January 1995. Mr. Cole graduated from Louisiana State
University (New Orleans) in 1973 with a B.A. degree in english. He served in
the United States Army from 1967 to 1969. On the advice of counsel, Mr. Cole
filed a voluntary petition for personal bankruptcy in July 1997.
James Devine has served as a director since January 1998. Mr. Devine has
been a commercial consultant to the oil and gas industry since 1996. From 1994
to 1996, he served as corporate vice president and general counsel of Coflexip
S.A. From 1989 to 1994, Mr. Devine served as a director and general counsel of
Stena Offshore AS and, from 1985 to 1989, as an attorney for Brown & Root,
Inc. in the United Kingdom. Prior thereto, he was in private practice as a
solicitor in Aberdeen, Scotland.
Gunnar Hirsti has served as a director since December 1997. Mr. Hirsti has
served as the Chief Executive Officer of DSND since July 1995. From 1990 to
July 1995 Mr. Hirsti was marketing director, general manager and managing
director of Stena Offshore AS. Mr. Hirsti joined Stena Offshore AS when Seatec
Offshore AS, a company founded and owned by Mr. Hirsti and four partners, was
acquired by Stena Offshore AS in 1990. Mr. Hirsti served as assistant
operations manager of Dyvi Offshore from 1984 to 1988 as well as in a number
of positions with Offshore Drilling Contractors from 1976 to 1984. Mr. Hirsti
holds an engineering degree with specialization in drilling.
Edward L. Moses, Jr. has served as a director of the Company since January
1998. Mr. Moses has also agreed to serve as a consultant to the Company's
executive management for a two-year period ending December 31, 1999 and has
received options to purchase 50,000 shares of Common Stock at an exercise
price equal to the initial per share public offering price. Mr. Moses has
served as senior vice president--engineering and production of DeepTech
International Inc. since 1992 and managing director of Deepwater Systems since
August 1993. From 1991 to 1992, he served as senior vice president of Tatham
Offshore. From 1989 to 1991, Mr. Moses served as vice president--engineering
of Tatham Offshore. Mr. Moses has worked for over 30 years in the oil and gas
industry. Prior to joining DeepTech International, Inc., he worked for 12
years as an independent consultant in the oil and gas industry. Prior thereto,
he spent 18 years working for Superior Oil Company where he served as manager
of international drilling operations. Mr. Moses is also a director of Tatham
Offshore. Mr. Moses has a B.S. in petroleum engineering from Texas A&M
University.
The following biographies describe the business experience of the key
employees of the Company during the past five years.
James E. Buckner is Vice President--Latin American Operations with the
Company and has held that position since December 1997. Since July 1997, Mr.
Buckner has served as an advisor to the Company. Prior to his service with the
Company, Mr. Buckner served as vice president--strategic ventures of Global
Industries, Ltd. from January 1996 until July 1997. Mr. Buckner also served as
a vice president of McDermott from January 1995 until January 1996, vice
president--pipeline contracts of OPI from April 1989 until January 1995 and as
a vice president of Cal Dive International, Inc. from May 1987 until April
1989. Mr. Buckner graduated from Louisiana State University with a B.S. degree
in mechanical engineering.
Joseph R. Greer is a Vice President and General Superintendent of the
Company. Mr. Greer has been a Vice President since December 1997 and General
Superintendent since February 1997. Prior to his service with
34
<PAGE>
the Company, Mr. Greer held the position of general superintendent, assistant
general superintendent or barge superintendent with the following providers of
marine construction services: McDermott (from January 1995 to February 1997),
OPI (from August 1990 to January 1995) and Brown & Root (from March 1968 to
August 1990).
Thomas N. Whittington is Vice President--Procurement Services with the
Company and has held that position since December 1997. From February 1997 to
December 1997, Mr. Whittington served as Manager of Purchasing. Prior to his
service with the Company, Mr. Whittington was senior purchasing agent for
McDermott from January 1995 until February 1997 and purchasing manager for OPI
from August 1986 until January 1995. Mr. Whittington also has five years
experience in marine operations management with Ingram Marine Constructors,
Inc. Mr. Whittington graduated from the University of Southern Mississippi in
1982 with B.S. degrees in business administration and industrial engineering.
Robert T. Stonecipher is Manager--Technical Services for the Company and has
held that position since October 1997. Prior to his service with the Company,
Mr. Stonecipher held various consulting and equipment management positions
with the following providers of marine construction services: Stonecipher
Enterprises, Inc. (from January 1997 until October 1997), Global Industries,
Inc. (from January 1995 to January 1997) and OPI (from January 1990 to January
1995). Mr. Stonecipher graduated from Louisiana State University in 1965 with
a B.S. degree in mechanical engineering.
Michael L. Ballard is Manager--Special Projects with the Company and has
held that position since December 1997. Prior to his service with the Company,
Mr. Ballard held various consulting and operational management positions with
the following providers of marine construction services: OPE Inc. (from
October 1994 until December 1997) as a principal and offshore construction
manager; OPI (from August 1990 until October 1994) as project manager and
barge superintendent; and, Brown & Root (from May 1985 until August 1990) as
barge superintendent. Mr. Ballard also has an additional seven years
experience in marine operations management with Shell Development Company and
Brown & Root. Mr. Ballard attended the University of Houston where he majored
in mathematics and computer science.
Thomas F. Cunningham is Director--Sub-Sea Operations with the Company and
has held that position since January 1998. Prior to his service with the
Company, Mr. Cunningham was project/vessel manager for Cal Dive International,
Inc. (from January 1995 until January 1998) and diving superintendent, project
manager and area manager for Offshore Petroleum Divers, Inc., a wholly-owned
subsidiary of OPI (from January 1990 until January 1995). Mr. Cunningham has
an additional 15 years experience as a diver and diving superintendent with
Seacon Services, McDermott International, Oceaneering International, Global
Divers and James Dean Divers. Mr. Cunningham attended Adirondack Community
College.
Russell L. Baldwin is Operations Manager for the Company and has held that
position since October 1997. Prior to his service with the Company, Mr.
Baldwin was an engineering consultant (from April 1997 to October 1997) and a
project manager for the following providers of marine construction services:
McDermott (from February 1995 to April 1997), OPI (from February 1994 to
February 1995) and Aker Omega, Inc. (from May 1992 to February 1994). Mr.
Baldwin graduated from Texas A&M University in 1980 with a B.S. degree in
civil engineering and is a licensed registered engineer.
John R. Abadie is Manager--Estimating with the Company and has held that
position since August 1997. Prior to his service with the Company, Mr. Abadie
was a project manager with the following providers of marine construction
services: McDermott (from January 1995 to August 1997) and OPI (from May 1993
to January 1995). Mr. Abadie graduated in 1993 from Louisiana Tech University
with a B.S. degree in civil engineering.
William E. Breen is Projects Manager with the Company and has held that
position since August 1997. Prior to joining the Company, Mr. Breen was
project manager and project engineer with the following providers of marine
construction services: SOFEC, Inc. (from January 1995 to August 1997) and OPI
(from August 1991 to January 1995). Mr. Breen graduated in 1991 from Texas A&M
University with a B.S. degree in ocean engineering.
35
<PAGE>
Keith W. Huddleston is Manager--Special Projects with the Company and has
held that position since November 1996. Prior to his service with the Company,
Mr. Huddleston held various engineering project management and consulting
positions with the following providers of marine construction services:
Momentum Engineering (from April 1996 to October 1996) and Keble Offshore
(from May 1991 to February 1996). Mr. Huddleston also had eight years of
experience with Brown & Root as a field engineer, project engineer and project
manager. Mr. Huddleston graduated from the University of Newcastle (England)
in 1972 with a B.S. degree in civil engineering.
The Company's Certificate and Bylaws provide for the Board of Directors to
be divided into three classes of directors with each class to be as nearly
equal in number of directors as possible, serving staggered three-year terms.
The term of the Class I director, Mr. Hirsti, will expire in 1999. The terms
of the Class II directors, Mr. Devine and Mr. Moses, will expire in 2000. The
terms of the Class III directors, Mr. Lam and Mr. Pollock, will expire in
2001. Each director serves until the end of his term or until his successor is
elected and qualified. See "Description of Capital Stock--Certain Charter and
Bylaw Provisions--Classified Board of Directors."
STOCKHOLDER'S AGREEMENT
As part of the DSND alliance, the Company, DSND and the Principal
Stockholders entered into a Stockholder's Agreement (the "Stockholder's
Agreement") pursuant to which, among other things, the Board of Directors will
consist of five directors, one of which will be nominated by DSND and the
other four by a majority vote of the entire Board of Directors. The
Stockholder's Agreement provides that Horizon and the Principal Stockholders
will take all necessary action to nominate the DSND designee to the Board of
Directors and that the Company will recommend that stockholders vote in favor
of the DSND nominee, and shall use reasonable efforts to solicit stockholders'
proxies in favor of such nominee.
The Stockholder's Agreement also provides that DSND and the Principal
Stockholders will vote all shares of Common Stock they are entitled to vote
for the election of all directors nominated by the Board of Directors,
including the nominee designated by DSND. See "Risk Factors--Control by
Existing Stockholders."
BOARD COMMITTEES
The Company's Board of Directors has established an Audit Committee and a
Compensation Committee. The Audit Committee reviews the Company's financial
statements and annual audit and meets with the Company's independent public
accountants to review the Company's internal controls and financial management
practices. The current members of the Audit Committee are Messrs. Devine,
Hirsti and Pollock, none of whom is an officer or employee of the Company or
any of its subsidiaries.
The Compensation Committee recommends to the Board of Directors compensation
for the Company's executive officers, administers the Company's Incentive Plan
and performs such other similar functions as may be prescribed by the Board of
Directors. The current members of the Compensation Committee are Messrs.
Devine, Moses and Pollock, none of whom is an officer or employee of the
Company or any of its subsidiaries.
DIRECTOR COMPENSATION
Each director who is not an employee of the Company is paid an annual
retainer of $12,000. All directors are reimbursed for reasonable out-of-pocket
expenses incurred by them in attending board and committee meetings.
Each director who is not an employee of the Company will be entitled to
receive non-qualified stock options under the Stock Incentive Plan of the
Company. For information with respect to such grants, see "--Stock Incentive
Plan" below.
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<PAGE>
EXECUTIVE COMPENSATION
The following table presents certain information regarding the compensation
awarded, earned or paid for services rendered in 1996 to the Company by its
present Chief Executive Officer and its former Chief Executive Officer
(collectively, the "Named Executive Officers"). None of the other executive
officers of the Company earned salary and bonus compensation for 1996 in
excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------
NAME AND POSITION SALARY BONUS
----------------- ------- --------
<S> <C> <C>
Bill J. Lam
President and Chief Executive Officer(1)..................... $ -- $ --
Howard D. Loyd, III
Former Chief Executive Officer(2)............................ $89,135 $100,000
</TABLE>
- --------
(1) Mr. Lam was employed by the Company in July 1997 and became its Chief
Executive Officer in December 1997; consequently, he did not receive a
salary or any other cash or other compensation from the Company in 1996.
(2) Mr. Loyd served as the Company's Chief Executive Officer from November
1996 to November 1997.
EXECUTIVE EMPLOYMENT AGREEMENTS
All of the Company's current executive officers have entered into employment
agreements with the Company. All such contracts also contain agreements of
each of the executive officers to refrain from using or disclosing proprietary
information of the Company, as defined therein, and to refrain from competing
with the Company in specified geographic areas for two years after the
termination of the officer's employment.
The term of the employment agreements for each Messrs. Lam, Sharp and Cole
expire on the third anniversary of the Offering and provide annual base
salaries of $200,000, $175,000 and $143,000, respectively. Each of the
executive officer's employment may be terminated at any time by the Company
for cause or for breach of the employment agreement.
STOCK INCENTIVE PLAN
In January 1998, the Company adopted and its stockholders approved the Stock
Incentive Plan (the "Incentive Plan") to provide long-term incentives to its
key employees and officers, including directors who are employees of the
Company, and consultants and advisors to the Company when designated by the
Compensation Committee of the Board of Directors (the "Eligible
Participants"), and non-employee directors. Under the Incentive Plan, which is
administered by the Compensation Committee of the Board of Directors, the
Company may grant incentive stock options, non-qualified stock options,
restricted stock, other stock-based awards or any combination thereof (the
"Incentives") to Eligible Participants. The Compensation Committee will
establish the exercise price of any stock options granted to Eligible
Participants under the Incentive Plan, but the exercise price may not be less
than the fair market value of the Common Stock on the date of grant. The
option exercise price may be paid in cash, in Common Stock, in a combination
of cash and Common Stock, or through a broker-assisted exercise arrangement
approved by the Compensation Committee.
A total of 1.9 million shares of Common Stock are available for issuance
under the Incentive Plan. Incentives with respect to no more than 400,000
shares of Common Stock may be granted to any single Eligible Participant in
one calendar year. Proportionate adjustments will be made to the number of
shares subject to the Incentive Plan, including the shares subject to
outstanding Incentives, in the event of any recapitalization, stock dividend,
stock split, combination of shares or other change in the Common Stock. In the
event of such adjustments, the purchase price of any outstanding option, the
performance objectives of any Incentive, and the shares of Common Stock
issuable pursuant to any Incentive will be adjusted as and to the extent
appropriate, in the reasonable discretion of the Compensation Committee, to
provide participants with the same relative rights before and after such
adjustment.
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<PAGE>
Restricted stock consists of shares of Common Stock that are transferred to
a participant for past services but are subject to restrictions regarding
their sale, pledge or other transfer by the participant for a specified period
(the "Restricted Period"). The Compensation Committee has the power to
determine the number of shares to be transferred to a participant as
restricted stock. All shares of restricted stock will be subject to such
restrictions as the Compensation Committee may designate in the incentive
agreement with the participant, including, among other things, that the shares
of Common Stock are required to be forfeited or resold to the Company in the
event of termination of employment or in the event specified performance goals
or targets are not met. A Restricted Period of at least three years is
required, except that if vesting is subject to the attainment of performance
goals, a minimum Restricted Period of one year is required. Subject to the
restrictions provided in the incentive agreement, each participant receiving
restricted stock will have the rights of a stockholder with respect thereto,
including voting rights and rights to receive dividends. To the extent that
restricted stock is intended to vest based upon the achievement of pre-
established performance goals rather than solely upon continued employment
over a period of time, the performance goals pursuant to which the restricted
stock shall vest shall be any or a combination of the following performance
measures: earnings per share, return on assets, an economic value added
measure, stockholder return, earnings, stock price, return on equity, return
on total capital, safety performance, reduction of expenses or increase in
cash flow of the Company, a division of the Company or a subsidiary of the
Company. For any performance period, such performance objectives may be
measured on an absolute basis or relative to a group of peer companies
selected by the Compensation Committee, relative to internal goals or relative
to levels attained in prior years.
The Compensation Committee is authorized to grant to Eligible Participants
an other stock-based award ("Other Stock-Based Award"), which consists of an
award, the value of which is based in whole or in part on the value of shares
of Common Stock, other than a stock option or a share of restricted stock.
Other Stock-Based Awards may be awards of shares of Common Stock or may be
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, shares of Common Stock. The Compensation
Committee shall determine the terms and conditions of any such Other Stock-
Based Award and may provide that such awards would be payable in whole or in
part in cash. Except in the case of an Other Stock-Based Award granted in
assumption of or in substitution for an outstanding award of a Company
acquired by the Company or with which the Company combines, the price at which
securities may be purchased pursuant to any Other Stock-Based Award or the
provision, if any, of any such award that is analogous to the purchase or
exercise price, shall not be less than 100% of the fair market value of the
securities to which such award relates on the date of grant. In the sole and
complete discretion of the Compensation Committee, an Other Stock-Based Award
may provide the holder thereof with dividends or dividend equivalents, payable
in cash or shares of Common Stock on a current or deferred basis. Other Stock-
Based Awards intended to qualify as "performance-based compensation" shall be
paid based upon the achievement of pre-established performance goals. The
performance goals pursuant to which Other Stock-Based Awards shall be earned
shall be any or a combination of the following performance measures: earnings
per share, return on assets, an economic value added measure, stockholder
return, earnings, stock price, return on equity, return on total capital,
safety performance, reduction of expenses or increase in cash flow of the
Company, a division of the Company or a subsidiary of the Company. For any
performance period, such performance goals may be measured on an absolute
basis or relative to a group of peer companies selected by the Compensation
Committee, relative to internal goals or relative to levels attained in prior
years. The grant of an Other Stock-Based Award to a participant shall not
create any rights in such participant as a stockholder of the Company until
the issuance of shares of Common Stock with respect to such Other Stock-Based
Award.
To assist a participant in acquiring shares of Common Stock pursuant to an
Incentive granted under the Incentive Plan, the Compensation Committee may
authorize the extension of a loan by the Company to the participant to cover
the aggregate purchase price of such shares and the maximum tax liability that
arises in connection with the Incentive. The terms of any such loan will be
determined by the Compensation Committee.
Upon consummation of the Offering, each director who is not an employee of
the Company (an "Outside Director") will be granted under the Incentive Plan a
non-qualified stock option to purchase 5,000 shares of Common Stock at an
exercise price equal to the initial per share public offering price. Each
person who
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<PAGE>
subsequently becomes an Outside Director will be granted under the Incentive
Plan, effective as of the date that he or she becomes an Outside Director, a
non-qualified stock option to purchase 5,000 shares of Common Stock at an
exercise price equal to the fair market value of a share of Common Stock as of
that date. In 1998 and in each subsequent year during which the Incentive Plan
is in effect and a sufficient number of shares of Common Stock are available
thereunder, each person who is an Outside Director as of the day following the
annual meeting of Company stockholders in such year will be granted under the
Incentive Plan a non-qualified stock option to purchase 5,000 shares of Common
Stock at an exercise price equal to the fair market value of a share of Common
Stock as of such date. Each non-qualified stock option granted to an Outside
Director shall become fully exercisable on the first anniversary of its grant
and shall expire on the tenth anniversary of its grant, unless such Outside
Director terminates his position as a Company director, in which event such
Outside Director's then exercisable non-qualified stock options will expire
within three months after his termination or, if his termination is as a
result of his death, disability or retirement after the age of 65, within
eighteen months after his termination, but in no event later than the tenth
anniversary of the grant thereof.
All outstanding stock options granted under the Incentive Plan will
automatically become fully exercisable, all restrictions or limitations on any
Incentives will lapse and all performance criteria and other conditions
relating to the payment of Incentives will be deemed to be achieved or waived
by the Company upon (i) approval by the stockholders of the Company of a
reorganization, merger or consolidation of the Company or sale of all or
substantially all of the assets of the Company, unless (x) all or
substantially all of the individuals and entities who were the beneficial
owners of the Company's outstanding Common Stock and voting securities
entitled to vote generally in the election of directors immediately prior to
such transaction have direct or indirect beneficial ownership, respectively,
of more than 50% of the then outstanding shares of common stock and more than
50% of the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors of the resulting
corporation; (y) except to the extent that such ownership existed prior to the
transaction, no person (excluding any corporation resulting from the
transaction or any employee benefit plan or related trust of the Company or
the resulting corporation) beneficially owns, directly or indirectly, 30% or
more of the then outstanding shares of common stock of the resulting
corporation or 30% or more of the combined voting power of the then
outstanding voting securities of the resulting corporation; or (z) a majority
of the board of directors of the resulting corporation were members of the
Company's board of directors at the time of the execution of the initial
agreement or of the action of the Board providing for the transaction; (ii)
approval by the stockholders of the Company of a complete liquidation or
dissolution of the Company; (iii) a person or group of persons becoming the
beneficial owner of more than 50% of the Company's Common Stock (subject to
certain exceptions); or (iv) the individuals who as of the adoption of the
Incentive Plan constitute the Board (the "Incumbent Board") or who
subsequently become a member of the Board with the approval of at least a
majority of the directors then comprising the Incumbent Board other than in
connection with an actual or threatened election contest cease to constitute
at least a majority of the Board (each, a "Significant Transaction").
The Compensation Committee also has the authority to take several actions
regarding outstanding Incentives upon the occurrence of a Significant
Transaction, including (i) requiring that all outstanding options remain
exercisable only for a limited time, (ii) making equitable adjustments to
Incentives as the Compensation Committee deems in its discretion necessary to
reflect the Significant Transaction or (iii) providing that an option under
the Incentive Plan shall become an option relating to the number and class of
shares of stock or other securities or property (including cash) to which the
participant would have been entitled in connection with the Significant
Transaction if the participant had been immediately prior to the Significant
Transaction the holder of record of the number of shares of Common Stock then
covered by such options.
When an optionee exercises a non-qualified option, the difference between
the exercise price and any higher fair market value of the Common Stock on the
date of exercise will be ordinary income to the optionee (subject to
withholding) and will generally be allowed as a deduction at that time for
federal income tax purposes to the Company.
Any gain or loss recognized by an optionee on disposition of the Common
Stock acquired upon exercise of a non-qualified option will generally be
capital gain or loss to the optionee. Under recent amendments to the
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<PAGE>
Code, the maximum capital gains rate for individuals on gain on certain
assets, such as shares of Common Stock, which are sold after July 28, 1997 and
which are held for more than eighteen months is reduced to 20%. The optionee's
basis in the Common Stock for determining gain or loss on the disposition will
be the fair market value of the Common Stock determined generally at the time
of exercise. The disposition by an optionee of Common Stock acquired upon
exercise of a non-qualified option will not result in any additional federal
income tax consequences to the Company.
When an optionee exercises an incentive stock option while employed by the
Company or a subsidiary or within three months after termination of employment
by reason of retirement or death (one year for disability), no ordinary income
will be recognized by the optionee at that time, but the excess (if any) of
the fair market value of the Common Stock acquired upon such exercise over the
option price will be an adjustment to taxable income for purposes of the
federal alternative minimum tax applicable to individuals. If the Common Stock
acquired upon exercise of the incentive stock option is not disposed of prior
to the expiration of one year after the date of acquisition and two years
after the date of grant of the option, the excess (if any) of the sale
proceeds over the aggregate option exercise price of such Common Stock will be
long-term capital gain, but the Company will not be entitled to any tax
deduction with respect to such gain. Generally, if the Common Stock is
disposed of prior to the expiration of such periods (a "Disqualifying
Disposition"), the excess of the fair market value of such Common Stock at the
time of exercise over the aggregate option exercise price (but not more than
the gain on the disposition if the disposition is a transaction on which a
loss, if realized, would be recognized) will be ordinary income at the time of
such Disqualifying Disposition (and the Company will generally be entitled to
a federal income tax deduction in a like amount). Any gain realized by the
optionee as the result of a Disqualifying Disposition that exceeds the amount
treated as ordinary income will be capital gain. If an incentive stock option
is exercised more than three months after termination of employment (one year
for disability), the federal income tax consequences are the same as described
above for non-qualified stock options.
If the exercise price of an option is paid by the surrender of previously
owned shares, the basis of the previously owned shares carries over to the
shares received in replacement therefor. If the option is a non-qualified
option, the income recognized on exercise is added to the basis. If the option
is an incentive stock option, the optionee will recognize gain if the shares
surrendered were acquired through the exercise of an incentive stock option
and have not been held for the applicable holding period. This gain will be
added to the basis of the shares received in replacement of the previously
owned shares.
Awards under the Incentive Plan that are granted, accelerated or enhanced
upon the occurrence of a change of control may give rise, in whole or in part,
to excess parachute payments within the meaning of Section 280G of the
Internal Revenue Code of 1986 (the "Code") to the extent that such payments,
when aggregated with other payments subject to Section 280G, exceed the
limitations contained therein. Such excess parachute payments will be
nondeductible to the Company and subject the recipient of the payments to a
20% excise tax.
If permitted by the Compensation Committee, at any time that a participant
is required to pay the Company the amount required to be withheld under
applicable tax laws in connection with the exercise of a stock option, the
participant may elect to have the Company withhold from the shares that the
participant would otherwise receive shares of Common Stock having a value
equal to the amount to be withheld. This election must be made prior to the
date on which the amount of tax to be withheld is determined.
The foregoing discussion summarizes the federal income tax consequences
pertaining to stock options granted under the Incentive Plan based on current
provisions of the Code, which are subject to change. This summary does not
cover any foreign, state or local tax consequences of participation in the
Incentive Plan.
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<PAGE>
The following table sets forth information about the stock options that are
anticipated to be granted pursuant to the provisions of the Incentive Plan in
1998 to (i) each of the Named Executive Officers, (ii) all executive officers
as a group, (iii) all directors who are not executive officers as a group and
(iv) all employees other than the executive officers as a group (which
includes all non-executive officers). Each such stock option will have an
exercise price equal to the initial per share public offering price.
NEW PLAN BENEFITS
STOCK INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
NAME AND POSITION UNDERLYING OPTIONS(1)
----------------- ---------------------
<S> <C>
Bill J. Lam
President and Chief Executive Officer.................... 20,000
Executive Officer Group................................... 60,000
Non-Executive Officer Director Group...................... 20,000
Non-Executive Officer Employee Group...................... 496,000
</TABLE>
- --------
(1) Half of the options granted to each employee, including executive
officers, become exercisable in three equal installments on each of the
first three anniversaries of the date of the Offering and will remain
exercisable until the tenth anniversary of the date of the Offering. The
remaining options granted to each employee will become exercisable if the
closing sales price of the Common Stock exceeds 150% of the initial public
offering price for 60 consecutive trading days and, if not otherwise
exercisable, five years from the date of the Offering.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors had no Compensation Committee or other committee
performing similar functions in 1997.
LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION
The Company's Certificate of Incorporation (the "Certificate") contains
provisions eliminating the personal liability of the directors to the Company
and its stockholders for monetary damages for breaches of their fiduciary
duties as directors to the fullest extent permitted by the Delaware General
Corporation Law. By virtue of these provisions, under current Delaware law a
director of the Company will not be personally liable for monetary damages for
a breach of his or her fiduciary duty except for liability for (a) a breach of
his or her duty of loyalty to the Company or to its stockholders, (b) acts or
omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (c) dividends or stock repurchases or redemptions
that are unlawful under Delaware law and (d) any transaction from which he or
she receives an improper personal benefit. In addition, the Certificate
provides that if Delaware law is amended to authorize the further elimination
or limitation of the liability of a director, then the liability of the
directors shall be eliminated or limited to the fullest extent permitted by
Delaware law, as amended. These provisions pertain only to breaches of duty by
directors as directors and not in any other corporate capacity, such as
officers, and limit liability only for breaches of fiduciary duties under
Delaware corporate law and not for violations of other laws such as the
federal securities laws.
As a result of the inclusion of such provisions, stockholders may be unable
to recover monetary damages against directors for actions taken by them that
constitute negligence or gross negligence or that are in violation of their
fiduciary duties, although it may be possible to obtain injunctive or other
equitable relief with respect to such actions. If equitable remedies are found
not to be available to stockholders in any particular case, stockholders may
not have any effective remedy against the challenged conduct. These provisions
may have the effect of reducing the likelihood of derivative litigation
against directors that might have benefitted the Company.
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<PAGE>
The Company believes that such provisions are necessary to attract and
retain qualified individuals to serve as directors. In addition, such
provisions will allow directors to perform their duties in good faith without
undue concern about personal liability if a court finds their conduct to have
been negligent or grossly negligent. On the other hand, the potential remedies
available to a Company stockholder will be limited, and it is possible,
although unlikely, that directors protected by these provisions may not
demonstrate the same level of diligence or care that they would otherwise
demonstrate.
The Company's Bylaws require the Company to indemnify its directors and
officers against certain expenses and costs, judgments, settlements and fines
incurred in the defense of any claim, including any claim brought by or in the
right of the Company, to which they were made parties by reason of being or
having been directors and officers, subject to certain conditions and
limitations.
In addition, each of the Company's directors has entered into an indemnity
agreement with the Company, pursuant to which the Company has agreed under
certain circumstances to purchase and maintain directors' and officers'
liability insurance. The agreements also provide that the Company will
indemnify the directors against any costs and expenses, judgments, settlements
and fines incurred in connection with any claim involving a director by reason
of his position as a director that are in excess of the coverage provided by
such insurance; provided that the director or executive officer meets certain
standards of conduct. A form of indemnity agreement containing such standards
of conduct is included as an exhibit to the Registration Statement of which
this Prospectus forms a part. Under the indemnity agreements, the Company is
not required to purchase and maintain directors' and officers' liability
insurance if it is not reasonably available or, in the reasonable judgment of
the Board of Directors, there is insufficient benefit to the Company from the
insurance.
42
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth as of the date of this Prospectus certain
information regarding beneficial ownership of the Common Stock by (i) each of
the Named Executive Officers, (ii) each director of the Company, (iii) all of
the Company's directors and executive officers as a group and (iv) each
stockholder known by the Company to be the beneficial owner of more than 5% of
the outstanding Common Stock.
<TABLE>
<CAPTION>
PERCENT OF
OUTSTANDING
COMMON STOCK
-----------------
NUMBER OF
SHARES BEFORE AFTER
BENEFICIALLY THE THE
NAME OF BENEFICIAL OWNER OWNED(1) OFFERING OFFERING
------------------------ ------------ -------- --------
<S> <C> <C> <C>
Elliott Associates, L.P.(2)..................... 4,383,280 31.1%
Westgate International, L.P.(3)................. 4,383,280 31.1%
Det Sondenfjelds-Norske Dampskibsselskab ASA(4). 4,125,000 29.3%
Jonathan D. Pollock(5).......................... 8,766,560 61.2%
Bill J. Lam..................................... 309,760 2.2%
David W. Sharp.................................. 265,540 1.9%
James K. Cole................................... 177,100 1.3%
James Devine.................................... 326,480 2.3%
Gunnar Hirsti................................... 4,125,000 29.3%
Edward L. Moses, Jr............................. -- --
All Executive Officers and Directors as a group
(7 persons).................................... 13,970,440 99.2%
</TABLE>
- --------
* Less than 1%.
(1) Unless otherwise indicated, the persons noted in the table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them. Does not include any options that will be
granted at the initial public offering price in connection with the
Offering, none of which are currently exercisable.
(2) The address of Elliott Associates, L.P. is 712 Fifth Avenue, New York, New
York 10019. Elliott Associates, L.P. beneficially owns such shares
indirectly through one of its subsidiaries.
(3) The address of Westgate International, L.P. is c/o Midland Bank & Trust
(Cayman), Post Office Box 1109, Georgetown, Grand Cayman, British West
Indies.
(4) The address of Det Sondenfjelds-Norske Dampskibsselskab ASA is Radhausgt
23, Post Office Box 752, Sentrum 0106 Oslo, Norway.
(5) Consists of 8,766,560 shares owned by the Principal Stockholders.
43
<PAGE>
CERTAIN TRANSACTIONS
Since its inception in December 1995, the Company has been controlled by the
Principal Stockholders. By means of capital stock investments and loans, the
Principal Stockholders have been the principal source of financing for the
working capital and asset acquisitions of the Company since its inception.
Through December 31, 1996, the Principal Stockholders had made advances to
the Company in the aggregate amount of approximately $36.7 million, including
accrued interest, which were used by the Company for working capital and to
purchase assets for use in the operations of the Company, including various
marine vessels. These advances were represented by promissory notes bearing
interest at the rate of 10% per annum.
In 1997, the Company was recapitalized in a series of transactions. In March
1997, the Principal Stockholders contributed $5.0 million of the principal
indebtedness and accrued interest owed to them by the Company as additional
capital. Subsequently in 1997, the Principal Stockholders contributed a total
of $16.0 million of the principal indebtedness owed to them by the Company as
additional capital. To evidence the outstanding borrowings from the Principal
Stockholders and to provide for future revolving credit loans from the
Principal Stockholders, in April 1997 the Company issued 10% subordinated
notes due March 31, 2003 (the "Notes") to the Principal Stockholders in an
aggregate amount not to exceed $20 million.
In May 1997, the Company sold three vessels to CGI Marine Corporation, a
wholly-owned subsidiary of the Principal Stockholders, for $12.0 million, the
proceeds of which were used to prepay indebtedness outstanding under the
Notes. The Company was also reimbursed for $1.2 million of expenses
attributable to the vessels. In December 1997, the Company sold a tugboat to
Horizon Barge & Towing, Inc., a wholly-owned subsidiary of the Principal
Stockholders ("Horizon Barge"), for a purchase price of $650,000. In
determining the purchase price for each of these transactions, the parties
relied on appraisals of the vessels prepared by independent third parties. All
such vessels were sold at a price equal to or exceeding the appraised value.
The Company considers such transactions to be on terms at least as favorable
to the Company as would be obtained from unaffiliated independent third
parties.
As a result of advances for working capital and asset acquisitions, the
contribution of portions of the Principal Stockholders' indebtedness to
additional capital of the Company, and the application of a portion of the
vessel sales proceeds to such indebtedness, the outstanding indebtedness of
the Company under the Notes fluctuated throughout 1997. The aggregate
indebtedness outstanding under the Notes as of December 31, 1997 was
approximately $16.8 million. The Company intends to use a portion of the
proceeds of the Offering to repay in full the indebtedness outstanding under
the Notes.
Effective as of September 30, 1997, the Company entered into a services
agreement with Horizon Barge to provide substantially all of the
administrative and support services necessary for the business and operations
of Horizon Barge, including certain administrative, accounting, financial, tax
and other services. The Company is reimbursed by Horizon Barge for all direct
costs and its allocable general and administrative costs plus a margin of 5%
incurred in providing these services. The services agreement terminates on
September 30, 1998 and is terminable prior to that date by the Company or
Horizon Barge at any time upon 60 days' notice.
Elliott Associates, L.P. has issued two letters of credit and provided two
guarantees in favor of a former customer in the Middle East and the seller of
the Phoenix Horizon, as required under the terms of a settlement agreement
among them and the Company. The letters of credit and the guarantees secure
the obligations of the Company under the settlement agreement. See "Risk
Factors--1996 Operating Loss; Lack of Operating History."
In connection with the Credit Facility, Elliott Associates, L.P. entered
into a support agreement with Den norske Bank whereby Elliott Associates, L.P.
agreed under certain conditions to purchase from Den norske Bank
44
<PAGE>
all amounts of principal, interest, fees, expenses and costs owed by the
Company under the Credit Facility. The support agreement also requires that
Elliott Associates, L.P. make advances to the Company to avoid certain
shortfalls under the Credit Facility. It is anticipated that the support
agreement will be terminated following the Offering.
DSND and the Company entered into a strategic alliance in December 1997
pursuant to which DSND acquired 30% of the Company's then outstanding shares
of Common Stock from the Principal Stockholders for $12.0 million and DSND and
the Company will establish the DSND Joint Venture. In addition, DSND has
agreed to sell the DSND Stephaniturm to the Company for $17.5 million and has
granted the Company the option to purchase for $4.0 million a 12-man, 1,000-
foot saturation diving system within 90 days after the Offering. The Company
agreed to pay a $750,000 fee to a company owned by Mr. Devine for assistance
in effecting the strategic alliance with DSND. In addition, in December 1997,
the Company sold 326,480 shares of Common Stock to a company controlled by Mr.
Devine for $950,000, the same per share price paid by DSND to purchase shares
from the Principal Stockholders. From time to time, Mr. Devine and companies
owned or controlled by him have provided services to the Principal
Stockholders and are expected to do so in the future. For information with
respect to such strategic alliance, the sale of the diving support vessel, and
the option to purchase the saturation diving system, see "Prospectus Summary--
The Company" and "Business--The DSND Transaction."
The Company has entered into the Stockholder's Agreement with DSND and a
registration rights agreement with the Principal Stockholders pursuant to
which DSND and each of the Principal Stockholders have, independently, limited
rights to require the Company to register under the Securities Act shares of
Common Stock owned by each of them. After the consummation of the Offering,
DSND and each of the Principal Stockholders are entitled to three demand
registrations. If either of the Principal Stockholders makes such a demand,
the other is entitled to include its shares in such registration. If the
Company proposes to register any Common Stock under the Securities Act in
connection with a public offering, DSND and each of the Principal Stockholders
may require the Company to include all or a portion of the shares of Common
Stock held by them, respectively. DSND and the Principal Stockholders have
waived their registration rights with respect to the Offering. The Company has
agreed to pay all the expenses of any of these registrations, other than
underwriting discounts and commissions. See "Risk Factors--Shares Eligible for
Future Resale."
In December 1997, the Principal Stockholders sold an aggregate of 752,400
shares of Common Stock to Messrs. Lam, Sharp and Cole for $2.2 million, the
same per share price paid by DSND. The Principal Stockholders advanced the
funds necessary to purchase the shares of Common Stock to Messrs. Lam, Sharp
and Cole by promissory notes bearing interest at 9.0% per annum and maturing
in March 2000. The Principal Stockholders also sold 106,040 shares of Common
Stock on the same terms to four other key employees of the Company. See
"Principal Stockholders."
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 35,000,000 shares of
Common Stock, $1.00 par value per share, and 5,000,000 shares of preferred
stock, $1.00 par value per share, issuable in series (the "Preferred Stock").
No shares of Preferred Stock are outstanding. Prior to the Offering, there has
been no public market for the Common Stock. Although application has been made
to have the Common Stock listed on the Nasdaq National Market, there can be no
assurance that a market for the Common Stock will develop or, if developed,
will be sustained. See "Risk Factors--No Prior Market; Possible Volatility of
Market Price." The following summary description of the capital stock of the
Company is qualified in its entirety by reference to the Company's Certificate
of Incorporation and Bylaws, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus forms a part.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share in the election
of directors and on all other matters submitted to a vote of stockholders;
stockholders may not cumulate votes for the election of directors. Subject to
any preferences accorded to the holders of the Preferred Stock, if and when
issued by the Board of Directors, holders of Common Stock are entitled to
dividends at such times and in such amounts as the Board of
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<PAGE>
Directors may determine. The Company currently does not intend to declare or
pay dividends for the foreseeable future. In addition, the Credit Facility
prohibits distributions to the Company's stockholders. See "Risk Factors--
Dividends," "Dividend Policy" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources." Upon the dissolution, liquidation or winding up of the Company,
after payment of debts, expenses and the liquidation preference plus any
accrued dividends on any outstanding shares of Preferred Stock, the holders of
Common Stock will be entitled to receive all remaining assets of the Company
ratably in proportion to the number of shares held by them. Holders of Common
Stock have no preemptive, subscription or conversion rights and are not
subject to further calls or assessments or rights of redemption by the
Company. The shares of Common Stock to be issued in the Offering will be
validly issued, fully paid and nonassessable.
PREFERRED STOCK
The Company's Board of Directors has the authority, without approval of the
stockholders, to issue shares of Preferred Stock in one or more series and to
fix the number of shares and rights, preferences and limitations of each
series. Among the specific matters with respect to the Preferred Stock that
may be determined by the Board of Directors are the dividend rights, the
redemption price, if any, the terms of a sinking fund, if any, the amount
payable in the event of any voluntary liquidation, dissolution or winding up
of the affairs of the Company, conversion rights, if any, and voting powers,
if any.
One of the effects of the existence of authorized but unissued Common Stock
and undesignated Preferred Stock may be to enable the Board of Directors to
make more difficult or to discourage an attempt to obtain control of the
Company by means of a merger, tender offer, proxy contest or otherwise, and
thereby to protect the continuity of the Company's management. If, in the
exercise of its fiduciary obligations, the Board of Directors were to
determine that a takeover proposal was not in the Company's best interest,
such shares could be issued by the Board of Directors without stockholder
approval in one or more transactions that might prevent or make more difficult
or costly the completion of the takeover transaction by diluting the voting or
other rights of the proposed acquiror or insurgent stockholder group, by
creating a substantial voting block in institutional or other hands that might
undertake to support the position of the incumbent Board of Directors, by
effecting an acquisition that might complicate or preclude the takeover, or
otherwise. In this regard, the Company's Certificate grants the Board of
Directors broad power to establish the rights and preferences of the
authorized and unissued Preferred Stock, one or more series of which could be
issued that would entitle holders (i) to vote separately as a class on any
proposed merger or consolidation, (ii) to cast a proportionately larger vote
together with the Common Stock on any such transaction or for all purposes,
(iii) to elect directors having terms of office or voting rights greater than
those of other directors, (iv) to convert Preferred Stock into a greater
number of shares of Common Stock or other securities, (v) to demand redemption
at a specified price under prescribed circumstances related to a change of
control or (vi) to exercise other rights designated to impede a takeover. The
issuance of shares of Preferred Stock pursuant to the Board of Directors'
authority described above may adversely effect the rights of holders of the
Common Stock.
In addition, certain other charter provisions that are described below may
have the effect of, either alone or in combination with each other or with the
existence of authorized but unissued capital stock, of making more difficult
or discouraging an acquisition of the Company deemed undesirable by the Board
of Directors.
CERTAIN CHARTER AND BYLAW PROVISIONS
Classified Board of Directors. The Company's Certificate and Bylaws divide
the members of the Board of Directors into three classes of directors with
each class to be as nearly equal in number of directors as possible serving
staggered three-year terms. See "Management--Directors, Executive Officers and
Key Employees."
Size of the Board of Directors; Removal of Directors; Filling of Vacancies
on the Board of Directors. The Company's Certificate and Bylaws provide that
the number of directors shall be fixed from time to time by the Board of
Directors, but shall not be fewer than the number required by Delaware law.
Under the Company's
46
<PAGE>
Certificate, a vote of 80% of the outstanding shares of capital stock entitled
to vote generally in an election of directors (the "Voting Stock") is required
to remove a director. The Company's Certificate and Bylaws also provide that a
newly created directorship resulting from an increase in the number of
directors may be filled by the Board of Directors and any vacancies on the
Board of Directors resulting from death, resignation, removal or other cause
may be filled only by the affirmative vote of a majority of all Continuing
Directors (as defined below).
Stockholder Action by Unanimous Consent. Under Delaware law, unless a
corporation's certificate of incorporation specifies otherwise, most action
that could be taken by its stockholders at an annual or special meeting may be
taken, instead, without a meeting and without notice to or a vote of other
stockholders, if a consent in writing is signed by holders of outstanding
stock having voting power that would be sufficient to take such action at a
meeting at which all outstanding shares were present and voted. The Company's
Certificate provides that stockholder action may be taken only at an annual or
special meeting of stockholders or by unanimous written consent. As a result,
stockholders may not act upon any matter except at a duly called meeting or by
unanimous written consent.
Amendment of the Bylaws. Under Delaware law, the power to adopt, amend or
repeal bylaws is conferred upon the stockholders; however, a corporation may
in its certificate of incorporation also confer upon the board of directors
the power to adopt, amend or repeal its bylaws. The Company's Certificate and
Bylaws grant the Board of Directors the power to adopt, amend and repeal the
Bylaws at any regular or special meeting of the Board of Directors but only
upon the affirmative vote of a majority of the Continuing Directors. The
Company's stockholders may adopt, amend or repeal the Bylaws but only at any
regular or special meeting of stockholders by an affirmative vote of 80% of
the Voting Stock.
Advance Notice of Stockholder Nominations and Stockholder Business. The
Company's Bylaws permit stockholders to nominate a person for election as a
director or bring other matters before a stockholders' meeting only if such
stockholder has been, for at least one year, the beneficial owner of at least
1% of the Voting Stock and only if written notice of such intent to nominate
or bring business before a meeting is given as described below.
The notice from a stockholder intending to nominate a person for election as
a director or to propose other matters at a stockholders' meeting must be
furnished to the Company's Secretary not more than 270 days and not less than
60 days in advance of the first anniversary of the preceding year's annual
stockholders' meeting, subject to certain exceptions applicable principally to
special meetings. In addition, the notice must contain information, including
the name, age and address of the stockholder proposing such action and any
persons acting in concert with such stockholder, the number of shares of
Voting Stock held by the stockholder and the dates such stock was acquired,
and a representation by such stockholder that he or she is a holder of record
of the Company's capital stock and intends to appear at the meeting in person
and make the nomination or bring up the specified matter.
In the case of nominations for directors, the notice must also include (i)
the name, age, address and principal occupation of each nominee, (ii) a
description of all arrangements between the nominating stockholder and each
nominee, (iii) other information required to be included in a proxy statement
pursuant to the proxy rules of the Securities and Exchange Commission and (iv)
the consent of each nominee to serve as a director of the Company if elected
and an affidavit of each such nominee certifying that such nominee meets the
qualifications necessary to serve as a director of the Company. In the case of
other proposed business, the notice must set forth a brief description of the
business, the reasons for conducting such business at the meeting and any
material interest of the stockholder therein. The Chairman of the
stockholders' meeting will have the power to disregard any nomination or other
matter that fails to comply with these procedures. In addition, the Company's
Secretary may require any stockholders submitting a notice of intent to make a
nomination or bring up other business to furnish such documentary information
as may be necessary to determine that such stockholder has been for at least
one year the beneficial owner of at least 1% of the Voting Stock.
47
<PAGE>
With respect to any proposal by a stockholder to bring before a meeting any
matter other than the nomination of directors, the Company's Bylaws provide
that the Company may disregard proposals that (i) are substantially
duplicative of a prior-received proposal to be voted upon at an upcoming
meeting, (ii) deal with substantially the same subject matter as a prior
proposal that was voted upon within the preceding five years and that failed
to receive affirmative votes in excess of certain specified levels, which
range, depending on the circumstances, between 3% and 10% or (iii) in the
judgment of the Board of Directors, are not proper subjects for action by
stockholders under Delaware law.
Amendment of Certain Provisions of the Certificate of Incorporation. Under
Delaware law, unless the certificate of incorporation specifies otherwise, a
corporation's certificate of incorporation may be amended by the affirmative
vote of the majority of the stockholders. The Company's Certificate requires
the affirmative vote of 80% of the Voting Stock to amend, alter or repeal
certain provisions of the Certificate regarding (i) stockholder unanimous
written consents, (ii) filling of vacancies and removal of members of the
Board of Directors, (iii) the limitation of liability of directors, (iv)
business combinations and (v) amendments to the Certificate and the Bylaws.
Special Meetings of the Stockholders. The Company's Bylaws permit the
stockholders to call special meetings of the stockholders only upon the
written request to the Company's Secretary of the beneficial owners of at
least 35% of the outstanding Voting Stock. This provision requires the request
to set forth a brief description of the action proposed to be taken at such
special meeting and the reasons for the action, the name and address of each
beneficial owner comprising the group making the request, any material
interest that each such person making the request may have in the matter, the
number of shares of Voting Stock of which each such person is the beneficial
owner and the dates upon which each person acquired his or her stock, a
representation that at least one such beneficial owner or a representative
thereof intends to appear in person at such meeting to propose the action
specified in the request and, if the proposed action includes a proposal to
amend the Company's Certificate or Bylaws, the language of the proposed
amendment. The Secretary may require any person or persons submitting a
request to furnish documentary support of the claim that the person or persons
as a group beneficially owns at least 35% of the outstanding Voting Stock. The
Secretary may also refuse to call a special meeting unless the request is made
in compliance with the foregoing procedures.
Business Combinations. Delaware law provides that a merger, sale of
substantially all of the assets or dissolution of a Company requires the
approval of the holders of a majority of the outstanding capital stock.
Pursuant to the Company's Certificate, if one of these transactions or certain
issuances, reclassifications or other transactions affecting the Company's
capital stock involves an Interested Stockholder (as defined below), the
transaction must be approved by a majority of the Continuing Directors (as
defined below) and by the affirmative vote of (A) the holders of 80% of the
Voting Stock, voting together as a single class, and (B) 75% of the Voting
Stock other than Voting Stock beneficially owned by the Interested
Stockholder. An Interested Stockholder is any person who (i) is a beneficial
owner of 10% of the Voting Stock or (ii) is an affiliate of the Company and,
at any time within two years prior to the date in question, was a beneficial
owner of 10% or more of the then outstanding Voting Stock, other than the
Company or its subsidiaries, the Principal Stockholders and any person whose
beneficial ownership of any capital of the Company arises solely as a result
of a trusteeship or a custodial relationship with any employee stock ownership
or other employee benefit plan of the Company. A Continuing Director is any
member of the Board of Directors who is not an Interested Stockholder or an
affiliate thereof and (i) was a director prior to the time the Interested
Stockholder became an Interested Stockholder or (ii) was recommended or
elected by a majority of the Continuing Directors at a meeting at which a
quorum consisting of a majority of the Continuing Directors was present. In
the absence of an Interested Stockholder, the Continuing Directors shall mean
all the directors then in office.
This additional voting requirement does not apply if the transaction has
been approved by a majority of the Continuing Directors, or if all of the
following conditions have been met: (i) the aggregate amount of consideration
received per share by the holders meet certain "fair price" criteria, (ii)
prior to the consummation of the transaction (a) there has been no failure to
declare or pay dividends on any outstanding Preferred Stock or
48
<PAGE>
Common Stock, (b) the Interested Stockholder has not received the benefits
(except proportionately as a stockholder) of any loans, advances or other
financial assistance or tax advantages provided by the Company, and (c) the
Interested Stockholder has not caused any material change in the Company's
equity capital structure and (iii) the Interested Stockholder has not become
the beneficial owner of any additional shares of Voting Stock except as part
of the transaction that resulted in such Interested Stockholder becoming an
Interested Stockholder or as a result of a pro rata stock dividend.
The Company is also subject to Section 203 of the Delaware General
Corporation Law, which prohibits Delaware corporations from engaging in a wide
range of specified transactions with any interested stockholder, defined to
include, among others, any person other than such corporation and any of its
majority-owned subsidiaries who owns 15% or more of any class or series of
stock entitled to vote generally in the election of directors, unless, among
other exceptions, the transaction is approved by (i) the Board of Directors
prior to the date the interested stockholder obtained such status or (ii) the
holders of two-thirds of the outstanding shares of each class or series of
stock entitled to vote generally in the election of directors, not including
those shares owned by the interested stockholder.
The provisions described above may tend to deter any potential unfriendly
offers or other efforts to obtain control of the Company that are not approved
by the Board of Directors and thereby deprive the stockholders of
opportunities to sell shares of Common Stock at prices higher than the
prevailing market price. On the other hand, these provisions will tend to
insure continuity of management and corporate policies and to induce any
person seeking control of the Company or a business combination with the
Company to negotiate on terms acceptable to the then elected Board of
Directors.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is .
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have
shares of Common Stock outstanding. The shares of Common Stock
sold in the Offering (plus any additional shares sold upon the Underwriters'
exercise of their over-allotment option) will be freely transferable without
restriction under the Securities Act by persons who are not deemed to be
affiliates of the Company or acting as underwriters, as those terms are
defined in the Securities Act. The remaining shares of Common
Stock held by existing stockholders were acquired in transactions not
requiring registration under the Securities Act and will be "restricted" stock
within the meaning of Rule 144. Consequently, such shares may not be resold
unless they are registered under the Securities Act or are sold pursuant to an
applicable exemption from registration, such as Rule 144 under the Securities
Act.
In general, under Rule 144 as currently in effect, if at least one year has
elapsed since shares of Common Stock that constitute restricted stock were
last acquired from the Company or an affiliate of the Company, the holder is
entitled to sell within any three-month period a number of shares that does
not exceed the greater of one percent of the total shares of Common Stock then
outstanding or the average weekly trading volume of the Common Stock in the
over-the-counter market during the four calendar weeks preceding the date on
which notice of the sale is filed with the Securities and Exchange Commission.
Sales under Rule 144 are subject to certain manner of sale provisions, notice
requirements and the availability of current public information about the
Company. If at least two years have elapsed since the shares were last
acquired from the Company or an affiliate, a person who has not been an
affiliate of the Company at any time during the three months preceding the
sale is entitled to sell such shares under Rule 144(k) without regard to
volume limitations, manner of sale provisions, notice requirements or the
availability of current public information concerning the Company. All of the
shares of restricted stock within the meaning of Rule 144 held by the
Principal Stockholders will be eligible for sale
49
<PAGE>
following the Offering in reliance on Rule 144, subject to volume limitations
and subject to the contractual "lock-up" restrictions described below.
The Company has granted the Principal Stockholders and DSND certain
registration rights with respect to the Common Stock held by each of them,
including the right, subject to certain conditions and limitations, to demand
registration of shares of Common Stock held by them and to include shares of
Common Stock held by them in any registration of securities proposed by the
Company. The exercise of such registration rights is subject to the
contractual "lock-up" restrictions described below. See "Certain
Transactions."
The Company, the Principal Stockholders, DSND and each of the Company's
directors and its executive officers have agreed that they will not, with
certain limited exceptions, issue, offer for sale, sell, or otherwise dispose
of any shares of Common Stock (other than stock issued or options granted
pursuant to the Incentive Plan) for 180 days following the date of this
Prospectus without the prior written consent of Smith Barney Inc. See
"Underwriting."
Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that a significant public market for the Common
Stock will develop or be sustained after the Offering. Any future sale of
substantial amounts of Common Stock in the open market may adversely affect
the market price of the Common Stock offered hereby.
50
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, the Underwriters named below
(the "Underwriters"), for whom Smith Barney Inc., PaineWebber Incorporated and
Raymond James & Associates, Inc., are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Company, and
the Company has agreed to sell to each Underwriter, the aggregate number of
shares of Common Stock set forth opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITERS SHARES
------------ ------
<S> <C>
Smith Barney Inc. .................................................
PaineWebber Incorporated...........................................
Raymond James & Associates, Inc....................................
-----
Total............................................................
=====
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
to pay for and accept delivery of the shares of Common Stock offered hereby
are subject to approval of certain legal matters by counsel and to certain
other conditions, including the condition that no stop order suspending the
effectiveness of the Registration Statement is in effect and no proceedings
for such purpose are pending or threatened by the Securities and Exchange
Commission and that there has been no material adverse change or development
involving a prospective material adverse change in the condition of the
Company from that set forth in the Registration Statement otherwise than as
set forth or contemplated in this Prospectus, and that certain certificates,
opinions and letters have been received from the Company and its counsel. The
Underwriters are obligated to take and pay for all of the above shares of
Common Stock if any such shares are taken.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the initial
public offering price set forth on the cover page hereof, and to certain
dealers at such initial public offering price less a selling concession not in
excess of $ per share. The Underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain other
Underwriters or to certain other brokers or dealers. After the initial
offering to the public, the offering price and other selling terms may be
changed by the Representatives. The Representatives have informed the Company
that the Underwriters do not intend to confirm sales to any accounts over
which they exercise discretionary authority.
The Company and the Underwriters have agreed in the Underwriting Agreement
to indemnify each other against certain liabilities, including liabilities
under the Securities Act, and to contribute to payments that such parties may
be required to make in respect thereof.
The Company has granted to the Underwriters an option to purchase up to an
additional shares of Common Stock, exercisable solely to cover over-
allotments, at the initial public offering price, less the underwriting
discounts and commissions shown on the cover page of this Prospectus. Such
option may be exercised at any time until 30 days after the date of the
Underwriting Agreement. To the extent that the option is exercised, each
Underwriter will be committed, subject to certain conditions, to purchase a
number of the additional shares of Common Stock that is proportionate to such
Underwriter's initial commitment as indicated on the preceding table.
The Company, the Principal Stockholders, DSND and the executive officers and
directors of the Company have agreed that they will not, without the prior
written consent of Smith Barney Inc., during the 180 days following the date
of this Prospectus, (i) offer, sell, contract to sell, pledge or otherwise
dispose of any shares of Common Stock or any securities convertible into, or
exchangeable for, shares of Common Stock, other than in the case of the
Company, shares issued or options granted pursuant to the Incentive Plan or
(ii) enter into any swap or other derivatives transaction that transfers to
another, in whole or in part, any of the economic benefits or risks of
ownership of such shares of Common Stock.
51
<PAGE>
In connection with the Offering and in compliance with applicable law, the
Underwriters may overallot (i.e., sell more Common Stock than the total amount
shown on the list of Underwriters and participations which appears above) and
may effect transactions which stabilize, maintain or otherwise affect the
market price of the Common Stock at levels above those which might otherwise
prevail in the open market. Such transactions may include placing bids for the
Common Stock or effecting purchases of the Common Stock for the purpose of
pegging, fixing or maintaining the price of the Common Stock or for the
purpose of reducing a syndicate short position created in connection with the
Offering. A syndicate short position may be covered by exercise of the option
described above in lieu of or in addition to open market purchases. In
addition, the contractual arrangements among the Underwriters include a
provision whereby, if the Representatives purchase Common Stock in the open
market for the account of the underwriting syndicate and the securities
purchased can be traced to a particular Underwriter or member of the selling
group, the underwriting syndicate may require the Underwriter or selling group
member in question to purchase the Common Stock in question at the cost price
to the syndicate or may recover from (or decline to pay to) the Underwriter or
selling group member in question the selling concession applicable to the
securities in question. The Underwriters are not required to engage in any of
these activities and any such activities, if commenced, may be discontinued at
any time.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the Offering.
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price will be negotiated between the Company and
the Representatives. Among the factors considered in determining the initial
public offering price of the Common Stock, in addition to prevailing market
conditions, are recent financial and operating results of the Company, the
proposed capital structure, assets and liabilities of the Company, estimates
of the business potential and earnings prospects of the Company, the prospects
for the industry in which the Company operates, an assessment of the Company's
management, consideration of the above factors in relation to market valuation
of companies in related businesses and other factors deemed relevant. The
initial public offering price set forth on the cover page of this Prospectus
should not, however, be considered an indication of the actual value of the
Common Stock. Such price will be subject to change as a result of market
conditions and other factors. There can be no assurance that an active trading
market will develop for the Common Stock or that the Common Stock will trade
in the public market subsequent to the Offering at or above the initial public
offering price.
52
<PAGE>
LEGAL MATTERS
The legality of the shares of Common Stock offered hereby will be passed
upon for the Company by Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P., New Orleans, Louisiana. Certain legal matters in connection with the
Common Stock offered hereby will be passed upon for the Underwriters by
Andrews & Kurth L.L.P., Houston, Texas.
EXPERTS
The Company's financial statements as of and for the periods ended December
31, 1996 and September 30, 1997, appearing elsewhere in this Prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto and are included herein in
reliance upon the authority of said firm as experts in giving said report.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1 under the Securities Act with respect to
the Common Stock being offered pursuant to this Prospectus. This Prospectus
does not contain all information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and
regulations of the Commission. Statements contained herein concerning the
provisions of any documents are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as an exhibit
to the Registration Statement. Each such statement is qualified in its
entirety by such reference. The Registration Statement, including exhibits
filed therewith, may be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's regional offices at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511 and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such materials may also be obtained at prescribed rates from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. The Commission maintains a World Wide Web site on the Internet
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission
(http://www.sec.gov).
The Company will be required to file reports and other information with the
Commission pursuant to the Securities Exchange Act of 1934, as amended. The
Company intends to furnish its stockholders with annual reports containing
audited financial statements certified by independent public accountants.
53
<PAGE>
HORIZON OFFSHORE, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants................................ F-2
Consolidated Balance Sheets............................................. F-3
Consolidated Statements of Operations................................... F-4
Consolidated Statements of Stockholders' Equity......................... F-5
Consolidated Statements of Cash Flows................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Horizon Offshore, Inc.:
We have audited the accompanying consolidated balance sheets of Horizon
Offshore, Inc. (a Delaware corporation), and subsidiaries as of September 30,
1997 and December 31, 1996, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the nine months
ended September 30, 1997 and for the period from inception (December 20, 1995)
through December 31, 1996. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Horizon Offshore, Inc., and
subsidiaries as of September 30, 1997 and December 31, 1996, and the results
of their operations and their cash flows for the nine months ended September
30, 1997 and for the period from inception (December 20, 1995) through
December 31, 1996, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Houston, Texas
November 20, 1997 (except with respect to the matters discussed in Note 10, as
to which the date is January 1, 1998)
F-2
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
ASSETS
------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.............................. $ 1,210 $ 2,650
Accounts receivable--
Contract receivables................................. 7,501 3,020
Costs in excess of billings.......................... 2,051 2,745
Related parties...................................... 1,549 155
Other current assets................................... 60 100
-------- -------
Total current assets............................... 12,371 8,670
PROPERTY AND EQUIPMENT, net.............................. 28,643 29,138
DEFERRED INCOME TAXES.................................... 66 1,617
OTHER ASSETS, net........................................ 1,482 265
-------- -------
$42,562 $39,690
======== =======
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable....................................... $ 3,665 $ 1,275
Accrued liabilties..................................... 552 884
Accrued job costs...................................... 2,155 3,125
Accrued interest and other............................. 346 1,852
Billings in excess of costs............................ 780 --
Current maturities of long-term debt................... 1,953 1,000
Income taxes payable................................... 66 --
-------- -------
Total current liabilities.......................... 9,517 8,136
LONG-TERM DEBT, net of current maturities................ 14,657 38,104
-------- -------
Total liabilities.................................. 24,174 46,240
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $1 par value, 5,000,000 shares
authorized, none issued and outstanding............... -- --
Common stock, $1 par value, 35,000,000 shares autho-
rized, 11,000,000 shares issued and outstanding....... 3,030 3,030
Additional paid-in capital............................. 24,144 --
Accumulated deficit.................................... (8,786) (9,580)
-------- -------
Total stockholders' equity (deficit)............... 18,388 (6,550)
-------- -------
$ 42,562 $39,690
======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
INCEPTION INCEPTION
NINE MONTHS ENDED (DECEMBER 20, 1995) (DECEMBER 20, 1995)
SEPTEMBER 30, THROUGH THROUGH
1997 SEPTEMBER 30, 1996 DECEMBER 31, 1996
----------------- ------------------- -------------------
(UNAUDITED)
<S> <C> <C> <C>
CONTRACT REVENUES....... $ 22,200 $ 9,304 $ 14,088
COST OF CONTRACT REVE-
NUES................... 18,895 8,607 21,616
---------- ---------- ----------
Gross profit (loss)... 3,305 697 (7,528)
SELLING, GENERAL AND
ADMINISTRATIVE
EXPENSES............... 1,958 1,710 2,047
---------- ---------- ----------
Operating income
(loss)............... 1,347 (1,013) (9,575)
OTHER INCOME (EXPENSE):
Interest.............. (1,198) (900) (1,662)
Gain on sale of asset. 614 -- --
Other................. 31 -- 40
---------- ---------- ----------
(553) (900) (1,622)
---------- ---------- ----------
NET INCOME (LOSS) BEFORE
INCOME TAXES........... 794 (1,913) (11,197)
INCOME TAX BENEFIT...... -- -- (1,617)
---------- ---------- ----------
NET INCOME (LOSS)....... $ 794 $ (1,913) $ (9,580)
========== ========== ==========
NET INCOME (LOSS) PER
SHARE.................. $ 0.06 $ (0.14) $ (0.68)
========== ========== ==========
SHARES USED IN COMPUTING
NET INCOME (LOSS) PER
SHARE.................. 14,016,324 14,016,324 14,016,324
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL STOCKHOLDERS'
----------------- PAID-IN ACCUMULATED EQUITY
SHARES AMOUNT CAPITAL DEFICIT (DEFICIT)
---------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, Inception...... -- $ -- $ -- $ -- $ --
Issuance of common
stock at $.28 per
share................ 11,000,000 3,030 -- -- 3,030
Net loss.............. -- -- -- (9,580) (9,580)
---------- ------ ------- ------- -------
BALANCE, December 31,
1996................... 11,000,000 3,030 -- (9,580) (6,550)
Contribution of
stockholders' debt to
additional paid-in
capital.............. -- -- 21,000 -- 21,000
Contribution related
to sale of assets to
related party, net of
tax effect of $1,617. -- -- 3,144 -- 3,144
Net income............ -- -- -- 794 794
---------- ------ ------- ------- -------
BALANCE, September 30,
1997................... 11,000,000 $3,030 $24,144 $(8,786) $18,388
========== ====== ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
INCEPTION INCEPTION
(DECEMBER 20, 1995) (DECEMBER 20, 1995)
NINE MONTHS ENDED THROUGH THROUGH
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 DECEMBER 31, 1996
------------------ ------------------- -------------------
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)................................ $ 794 $ (1,913) $ (9,580)
Adjustments to reconcile net income (loss) to net
cash used in operating activities--
Depreciation and amortization................... 791 452 715
Deferred income taxes........................... (66) -- (1,617)
Gain on sale of asset........................... (614) -- --
Changes in operating assets and liabilities--
Accounts receivable............................ (5,875) (2,764) (3,175)
Costs in excess of billings.................... 694 (2,355) (2,745)
Other current assets........................... 149 (177) --
Accounts payable............................... 2,390 1,047 1,014
Accrued liabilities............................ (332) 1,133 844
Accrued interest and other..................... 17 1,033 4,977
Billings in excess of costs.................... 780 -- --
Income taxes payable........................... 66 -- --
------- -------- --------
Net cash used in operating activities........ (1,206) (3,544) (9,568)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchases and additions to equipment............. (6,256) (19,967) (25,548)
Purchase of other assets......................... -- (150) (368)
Proceeds from sale of assets..................... 2,933 -- --
------- -------- --------
Net cash used in investing activities........ (3,323) (20,117) (25,916)
CASH FLOW FROM FINANCING ACTIVITIES:
Borrowings under notes payable and long-term
debt............................................ 4,591 22,704 35,104
Principal payments on long-term debt............. (1,502) -- --
Issuance of common stock......................... -- 3,030 3,030
------- -------- --------
Net cash provided by financing
activities.................................. 3,089 25,734 38,134
------- -------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS................................. (1,440) 2,073 2,650
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD........................................... 2,650 -- --
------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD........................................... $ 1,210 $ 2,073 $ 2,650
======= ======== ========
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest........................... $ 68 $ -- $ --
Non-cash investing and financing activities:
Purchase and additions to equipment with the
issuance of notes payable...................... $ 4,925 $ 1,000 $ 4,300
Gain on sale of assets to related party reflected
as a capital contribution, net of tax effect of
$1,617......................................... $3,144 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization
Horizon Offshore, Inc. (a Delaware corporation) and its subsidiaries
(Horizon or the Company), provide offshore construction services to the oil
and gas industry. These services generally consist of laying and burying
marine pipelines for the transportation of oil and gas. Work is performed
primarily on a fixed-price or day-rate basis or a combination thereof.
Horizon was incorporated in December 1995 and until December 1997 was wholly
owned by Elliott Associates, L.P. and Westgate International, L.P. (the
Principal Stockholders). The Principal Stockholders have funded substantially
all of the Company's cash requirements. Through December 31, 1996, the
Principal Stockholders advanced $36.7 million to the Company, including
accrued interest at 10% per annum, to fund its operating activities, working
capital requirements and capital expenditures for the acquisition and
improvement of assets and equipment. These advances were represented by
promissory notes bearing interest at the rate of 10% per annum.
In 1997, the Company was recapitalized through a series of transactions. The
Principal Stockholders converted $21 million of the principal indebtedness and
accrued interest to additional paid-in capital. The Company issued 10%
Subordinated Notes due December 31, 2005 (Subordinated Notes) to the Principal
Stockholders to evidence the remaining outstanding indebtedness and provide
for any future advances in an aggregate amount not to exceed $20 million.
Additionally, the Company issued a warrant to a Principal Stockholder to
purchase 12,500 shares at $1 per share, which approximated fair value at the
date of the transaction. The warrant was exercised subsequent to September 30,
1997. In 1997 the Company sold three boats and certain equipment to an
affiliated entity of the Principal Stockholders for a purchase price of $12
million and the proceeds were used to reduce the indebtedness under the
Subordinated Notes. The Company accounted for the $3.1 million gain on the
sale, net of taxes of approximately $1.6 million, as a capital contribution.
As of September 30, 1997 the balances outstanding on the Subordinated Notes
totaled $8.7 million (see note 6).
Business Risks
The Company's level of activity depends largely on the condition of the oil
and gas industry and, in particular, the level of capital expenditures by oil
and gas companies for developmental construction. These expenditures are
influenced by prevailing oil and gas prices, expectations about future demand
and prices, the cost of exploring for, producing and developing oil and gas
reserves, the discovery rates of new oil and gas reserves, sale and expiration
dates of offshore leases in the United States and abroad, political and
economic conditions, governmental regulations and the availability and cost of
capital. Historically, oil and gas prices and the level of exploration and
development activity have fluctuated substantially, impacting the demand for
pipeline and marine construction services.
Factors affecting the Company's profitability include competition, equipment
and labor productivity, contract estimating, weather conditions and the other
risks inherent in marine construction. The marine construction industry in the
Gulf is highly seasonal as a result of weather conditions with the greatest
demand for these services occurring during the second and third quarters of
the year. Full year results are not a direct multiple of any quarter or
combination of quarters because of this seasonality. See "Risk Factors."
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated.
F-7
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Revenue Recognition
Contract revenues are recognized on the percentage-of-completion method,
measured by the percentage of costs incurred to date to the total estimated
costs for each contract. This method is used because management considers
costs incurred to be the best available measure of progress on these
contracts. Changes in job performance, job conditions and estimated
profitability, including those arising from final contract settlements, may
result in revisions to costs and revenues and are recognized in the period in
which the revisions are determined. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are
determined. The asset "Costs in excess of billings" represents revenues
recognized in excess of amounts billed. The liability "Billings in excess of
costs" represents amounts billed in excess of revenues recognized.
Cost Recognition
Costs of contract revenues include all direct material and labor costs and
certain indirect costs which are allocated to contracts based on utilization,
such as supplies, tools, repairs and depreciation. Selling, general and
administrative costs are charged to expense as incurred.
Interest Capitalization
Interest is capitalized on the average amount of accumulated expenditures
for equipment that has been purchased and is undergoing major modifications
prior to being placed into service. Interest is capitalized using an effective
rate based on related debt until the equipment is placed into service.
Interest expense for the nine months ended September 30, 1997 is net of
interest capitalized in the amount of $.2 million.
Earnings Per Share
Per share data is based on the weighted average number of common shares and
common share equivalents outstanding for the period. Common and common
equivalent shares issued by the Company during the 12 months immediately
preceding the initial filing of the Registration Statement relating to the
Offering have been included in the calculation of the shares used in computing
earnings (loss) per share (for the periods prior to the completion of the
Offering) as if these shares were outstanding for such periods using the
treasury stock method.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." The
Company will adopt this pronouncement for periods ending after December 15,
1997 in accordance with the implementation requirements. SFAS No. 128
simplifies the standards required under current accounting rules for computing
earnings per share and replaces the presentation of primary earnings per share
and fully diluted earnings per share with a presentation of basic earnings per
share (basic EPS) and diluted earning per share (diluted EPS). Basic EPS
excludes dilution and is determined by dividing income available to common
stockholders by the weighted average number of common shares outstanding
during the period. Diluted EPS reflects the potential dilution that could
occur if securities and other contracts to issue common stock were exercised
or converted into common stock. Diluted EPS is computed similarly to fully
diluted earnings per share under current accounting rules. If the Company had
applied SFAS No. 128 for the periods ended September 30, 1997 and 1996 and for
the period ended December 31, 1996, there would have been no difference in the
reported earnings per share.
Cash and Cash Equivalents
The Company considers all cash in banks and highly liquid investments with
original maturity dates of three months or less to be cash equivalents.
Restricted cash of $.2 million is included in the cash balance at December 31,
1996, and such restriction was released in 1997.
F-8
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and Equipment
Equipment is carried at cost. Depreciation is provided using the straight-
line method based on the following estimated useful lives:
<TABLE>
<S> <C>
Barges, boats and related equipment........................ 15 to 18 years
Machinery.................................................. 8 years
Office furniture and equipment............................. 5 years
Leasehold improvements..................................... 3 years
</TABLE>
Major additions and improvements to barges, boats and related equipment are
capitalized over the useful life of the vessel. Maintenance and repairs
including major overhauls are expensed as incurred. When equipment is sold or
otherwise disposed of, the cost of the equipment and accumulated depreciation
are removed from the accounts and any gain or loss is reflected in income.
In 1996 the Company adopted SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement
establishes the recognition and measurement standards related to the
impairment of long-lived assets. The Company periodically assesses the
realizability of its long-term assets pursuant to the provisions of SFAS No.
121. Based on the Company's analysis of the undiscounted future cash flows for
its long-term assets, no impairments would have been recognized under SFAS No.
121.
Other Assets
Other assets consist principally of deferred interest and goodwill at
September 30, 1997. Deferred interest was imputed at 10 percent on aggregate
non-interest bearing debt of $7.4 million at September 30, 1997 and will be
amortized over the life of the debt agreements using the effective interest
rate method. Goodwill consists of the excess of price paid over amounts
allocated to the net assets purchased. Goodwill is amortized over 15 years
using the straight-line method.
At December 31, 1996, other assets include deferred dry docking costs of the
boats sold to an affiliated entity in April 1997 (see note 5).
Other assets consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Goodwill....................................... $ 151 $151
Deposits....................................... 9 4
Deferred dry-dock costs........................ -- 114
Deferred interest expense...................... 1,335 --
------ ----
1,495 269
Less--Accumulated amortization................. (13) (5)
------ ----
$1,482 $264
====== ====
</TABLE>
Federal Income Taxes
The Company uses the liability method of accounting for income taxes. Under
the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to temporary
differences between the financial statement carrying amounts of existing
assets and liabilities and their
F-9
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
respective tax bases. Deferred tax assets and liabilities are measured using
tax rates expected to apply to taxable income in the years in which those
temporary differences are expected to reverse. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
Interim Financial Information
The interim consolidated statement of operations for the nine months ended
September 30, 1996 is unaudited, and certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to fairly present the results of operations with
respect to the 1996 interim consolidated statement of operations have been
included.
Results for the period ended September 30, 1997 may not be indicative of the
Company's results for the entire fiscal year ended December 31, 1997.
Recent Accounting Pronouncements
In February 1997, SFAS No. 129, "Disclosure of Information About Capital
Structure," was issued, establishing standards for disclosing information
about an entity's capital structure. The Company will adopt this pronouncement
in 1998 in accordance with the implementation requirements.
In July 1997, SFAS No. 130, "Reporting Comprehensive Income," was issued,
establishing standards for reporting and display of comprehensive income and
its components. The Company will adopt this pronouncement in 1999 in
accordance with the implementation requirements.
Management believes neither SFAS No. 129 nor SFAS No. 130 will have a
material impact on the Company's financial statements.
2. ACCOUNTS RECEIVABLE:
Contract receivables are generally billed upon completion of each contract,
and retainage is not included in contract receivables until such time as it
becomes payable by the customer. Costs in excess of billings solely represent
costs incurred on jobs in process. Claims for extra work and changes in scope
of work are included in revenues when collection is determined by management
to be probable.
The Company has not experienced material losses from uncollected
receivables. The principal customers of the Company are the major and
independent oil and gas companies and their affiliates. The concentration of
customers in the energy industry may impact the Company's overall credit
exposure, either positively or negatively, since these customers may be
similarly affected by changes in economic or other conditions. However,
management believes that the diversification of the Company's portfolio of
receivables within the energy industry reduces any potential credit risk
associated with any particular customer. One customer accounted for 16.7
percent of revenues for the nine months ended September 30, 1997.
F-10
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Included in accounts receivable from a related parties at September 30, 1997
is $1.1 million due from an affiliated entity owned by the Principal
Stockholders for costs incurred by the Company related to the boats sold to
this affiliated entity (see note 1). Subsequent to September 30, 1997 the
affiliated entity repaid the full amount, and the Company then paid $1.2
million on the Subordinated Notes.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Barges, boats and related equipment................ $28,167 $29,293
Land and buildings................................. 847 --
Machinery.......................................... 245 206
Office furniture and equipment..................... 446 324
Leasehold improvements............................. 25 25
------- -------
29,730 29,848
Less--Accumulated depreciation..................... (1,087) (710)
------- -------
Property and equipment, net........................ $28,643 $29,138
======= =======
Depreciation expense is included in the following
expense accounts:
Costs of contract revenues....................... $ 717 $ 690
Selling, general and administrative.............. 66 20
------- -------
$ 783 $ 710
======= =======
</TABLE>
4. ACQUISITION OF ASSETS:
During 1996, the Company acquired certain marine equipment for $5 million.
This transaction was funded with $4 million cash and a $1 million demand note.
The assets acquired included a pipelay barge, tug boat and other related
equipment. The transaction was accounted for under the purchase method in
which the tangible assets acquired were recorded based on the Company's
estimate of fair value. Goodwill of $150,652 was recorded for the excess of
purchase price over the estimated fair value of tangible assets acquired and
is included in other assets.
In a separate transaction with an unrelated party in 1996, the Company paid
$5.4 million for an additional pipelay barge and $6.7 million for four boats
proposed to be used for offshore construction work. The Company expended an
additional $1.2 million and $2.9 million for improvements to the barge and the
four boats, respectively, during 1996. The Company sold the four boats during
1997 (see note 5).
Prior to December 31, 1996, members of the Company's former management team
undertook certain actions in an attempt to expand the Company's operations
into the Middle East. Under prior management, the Company agreed to acquire
and refurbish a barge for purposes of providing construction services in the
Middle East. The Company acquired the barge for $4.8 million, of which $1.5
million was paid in 1996 and $.3 million was paid in 1997. The remaining $3.0
million was financed with a note payable to the seller. The Company incurred
improvement costs to refurbish the barge of $3.3 million in 1996 and $6.1
million in the nine months ended September 30, 1997. In connection with the
purchase, the Company undertook certain actions to perform construction
services for a customer of the seller. The Company encountered title disputes
over the barge, higher than anticipated barge refurbishing costs and the
subsequent rejection of the barge by the customer. In August 1997, present
management of the Company resolved the title, contractual and other legal
disputes pertaining to
F-11
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the barge and the related project. Included in costs of contract revenues for
1996 is $7.4 million in charges related to the Company's attempt to expand
operations into the Middle East. The Company paid $.5 million to the customer
in the third quarter of 1997 and has a $4.4 million note payable to the
customer at September 30, 1997. The Principal Stockholders provided guarantees
of the Company's notes and secured two letters of credit in favor of the
seller and the customer, respectively. The Company has agreed to indemnify the
Principal Stockholders for any amounts paid with respect to the guarantees and
letters of credit. As amounts are drawn on the letters of credit to make
payments on the $3.0 million note payable to the seller and the $4.4 million
note payable to the customer, such amounts have been advanced pursuant to the
Subordinated Notes.
The Company acquired a fourth pipelay barge for $1.2 million in July 1997
and incurred improvements totaling $2.4 million as of September 30, 1997. In
July 1997, the Company acquired land and buildings in Louisiana for $.9
million to use as a marine base to support offshore operations.
5. DISPOSITION OF ASSETS:
The Company sold one of its boats to an unaffiliated third party in February
1997 for $3 million cash. A $.6 million gain was recognized on the sale.
As discussed in Note 1, three boats and certain equipment were sold to an
affiliated entity owned by the Principal Stockholders for $12.0 million. The
Company used the $12.0 million of sales proceeds to repay a portion of the
Principal Stockholders' debt. The Company accounted for the $3.1 million gain
on the sale, net of taxes of approximately $1.6 million, as a capital
contribution.
F-12
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. NOTES PAYABLE (IN THOUSANDS):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
10% Subordinated Notes payable to Highwood
Partners, L.P. due in quarterly installments
beginning March 31, 2003, maturing December 31,
2005. Interest at 10% due semi-annually beginning
September 30, 1997................................ $ 2,956 $20,419
10% Subordinated Note payable to Westgate
International, L.P. due in quarterly installments
beginning March 31, 2003, maturing December 31,
2005. Interest at 10% due semi-annually beginning
September 30, 1997................................ 5,732 14,685
Note payable to a foreign marine construction
company including imputed interest at 10%, due in
three annual installments of $1 million, maturing
August 3, 2000, secured by a letter of credit..... 3,000 3,000
Note payable to a foreign marine company including
imputed interest at 10%, due in monthly
installments beginning January 1, 1998, maturing
March 31, 2002, secured by a letter of credit..... 4,425 --
Note payable to a bank in monthly payments
including interest at 9.5%, secured by land and
buildings, maturing July 27, 2002................. 497 --
Note payable to an individual for purchase of
equipment payable on demand together with interest
at 6%............................................. -- 1,000
------- -------
Total long term debt............................. 16,610 39,104
Less--Current maturities......................... (1,953) (1,000)
------- -------
Long-term debt, net of current maturities........ $14,657 $38,104
======= =======
</TABLE>
Indebtedness to Related Parties
Through December 31, 1996, the Principal Stockholders advanced $36.7 million
to the Company, including accrued interest at 10% per annum, to fund its
operating activities, working capital requirements and capital expenditures
for the acquisition and improvement of assets and equipment. These advances
were represented by two promissory notes bearing interest at the rate of 10%
per annum. In 1997, the Company was recapitalized through a series of
transactions. The Principal Stockholders converted $21 million of the
principal indebtedness and accrued interest to additional paid-in capital. The
Company issued 10% Subordinated Notes due December 31, 2005 (Subordinated
Notes) to the Principal Stockholders to evidence the remaining outstanding
indebtedness and provide for any future advances in an aggregate amount not to
exceed $20 million. In 1997 the Company sold three boats and certain equipment
to an affiliated entity of the Principal Stockholders for a purchase price of
$12 million and the proceeds were used to reduce the indebtedness under the
Subordinated Notes.
Maturities of long-term debt for the each of the next five years ending
September 30 are as follows (in thousands):
<TABLE>
<S> <C>
September 30, 1998................................................ $ 1,953
September 30, 1999................................................ 2,142
September 30, 2000................................................ 2,068
September 30, 2001................................................ 1,070
September 30, 2002................................................ 285
Thereafter........................................................ 9,092
-------
$16,610
=======
</TABLE>
F-13
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. INCOME TAXES:
Income tax expense (benefit) for the nine months ended September 30, 1997
and the year ended December 31, 1996 consists of (in thousands):
<TABLE>
<CAPTION>
INCEPTION
NINE MONTHS (DECEMBER 20,
ENDED 1995) THROUGH
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Federal
Current..................................... $ 1,551 $ --
Deferred.................................... (1,551) (1,617)
------- -------
$ -- $(1,617)
======= =======
</TABLE>
The income tax expense (benefit) for the nine months ended September 30,
1997 and the year ended December 31, 1996 differs from the amount computed by
applying the statutory federal income tax rate of 34 percent to consolidated
income before income taxes as follows (dollars in thousands):
<TABLE>
<CAPTION>
INCEPTION
NINE MONTHS (DECEMBER 20,
ENDED 1995) THROUGH
SEPTEMBER 30, DECEMBER 31,
1997 1996
--------------- ----------------
<S> <C> <C> <C> <C>
Expense (benefit) computed at federal
statutory rate.............................. $ 270 34.0% $ (3,807) 34.0%
Increase (decrease) in provision from:
Nondeductible expenses..................... 26 3.3 -- --
Increase (decrease) in valuation allowance
for deferred tax assets................... (296) (37.3) 2,190 19.6
------ ------- -------- -----
$ -- -- $ (1,617) 14.4%
====== ======= ======== =====
</TABLE>
The tax effects of the temporary differences that give rise to the
significant portions of the deferred tax assets are presented below (in
thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Assets--
Net operating loss carryforward.................... $2,514 $2,942
Gain on asset sales................................ 863 --
Interest not currently deductible.................. 937 565
Fixed asset basis difference....................... 1,469 1,469
Alternative minimum tax............................ 66 --
------ ------
Total gross deferred tax asset................... 5,849 4,976
Liabilities--
Book/tax depreciation difference................... 3,890 1,169
------ ------
1,959 3,807
Less--Valuation allowance............................ (1,893) (2,190)
------ ------
Net deferred tax asset........................... $ 66 $1,617
====== ======
</TABLE>
The Company has established a valuation allowance for certain deferred tax
assets due to realization uncertainties inherent regarding future operating
results. The realization of a significant portion of net deferred
F-14
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
tax assets is based in part on the Company's estimates of the timing of
reversals of certain temporary differences and on the generation of taxable
income before such reversals. The Company recognized a net deferred tax asset
at December 31, 1996 for the benefit of utilizing the net operating loss
carryforward from the sale of appreciated assets to a related party in March
1997. The $1.6 million tax effect of the resulting gain was netted with the
gain and treated as a capital contribution in the accompanying financial
statements. The net operating loss carryforward of approximately $7.4 million
at September 30, 1997 expires in the year 2012. The Company's ability to
utilize the net operating loss carryforward could be limited by a change in
ownership as defined by federal income tax regulations.
8. COMMITMENTS AND CONTINGENCIES:
Litigation
In April 1997, Donald J. Sites, a former member and employee of a subsidiary
of the Company, filed actions in a Texas District Court against the
subsidiary, one of the Principal Stockholders, Jonathan D. Pollock, who is the
Chairman of the Board of the Company, and Howard D. Loyd, III, who is a former
Chief Executive Officer of the Company, alleging that he was wrongfully
terminated as an employee and consultant and the defendants deprived him of
his equity interest in the subsidiary of the Company. Mr. Sites seeks $10
million in compensatory damages and $20 million in punitive damages. The
defendants deny the allegations of Mr. Sites and intend to defend the
litigation vigorously. The Company subsidiary has also filed a counterclaim
against Mr. Sites seeking damages for acts of gross negligence in breach of
his duties, including actions taken by him in connection with the attempt to
expand the Company's operations in the Middle East. Although the Company
believes that Mr. Sites's claims are without merit, a successful outcome for
Mr. Sites with respect to his claims could have a material adverse effect on
the business and financial condition of the Company.
The Company is involved in various other routine legal proceedings primarily
involving claims for personal injury under the Jones Act and general maritime
laws which the Company believes are incidental to the conduct of its business.
The Company believes that none of these proceedings in the aggregate, if
adversely determined, would have a material adverse effect on the Company's
business.
Leases
The Company leases office space at various locations under noncancelable
operating leases with terms of one to five years. Rental expense under these
leases was $.1 million for the year ended December 31, 1996 and $.1 million
for the nine months ended September 30, 1997. Future minimum lease commitments
under these agreements for the next five years ended September 30 are as
follows (in thousands):
<TABLE>
<S> <C>
September 30, 1998................................................. $ 536
September 30, 1999................................................. 676
September 30, 2000................................................. 676
September 30, 2001................................................. 676
September 30, 2002................................................. 113
------
$2,677
======
</TABLE>
Insurance
The Company participates in certain retrospectively rated insurance
agreements. In the opinion of management the Company has adequately accrued
for all liabilities arising from these agreements.
Employment Agreements
The Company has entered into employment agreements with three of its
executive officers that expire three years from the date of the Company's
anticipated initial public offering and has purchased $5 million in "key-man"
life insurance with respect to its chief executive officer, for which the
Company is the named beneficiary.
F-15
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. EMPLOYEE BENEFIT PLAN:
The Company has a qualified profit-sharing plan for all eligible employees
and, at the discretion of management makes annual contributions to the plan.
The Company elected not to make any contributions to the plan for the period
from inception to September 30, 1997.
10. SUBSEQUENT EVENTS:
Credit Facility
On October 27, 1997, the Company entered into a credit facility, which was
amended in December 1997, with Den norske Bank providing for $20.0 million of
borrowings (Credit Facility). The Credit Facility includes both a $13.0
million term loan (the "Term Loan") to be repaid in forty-eight monthly
installments of $.2 million beginning July 31, 1998 and a $7.0 million
revolving line of credit (the "Revolver") due June 30, 2002. The Credit
Facility is secured by substantially all assets of the Company, including
mortgages on all vessels owned by the Company, as well as a support agreement
between Den norske Bank and one of the Principal Stockholders which requires
the Principal Stockholder to assume the liability under the Credit Facility
should the Company default on its obligations under the Credit Facility. The
Credit Facility requires that certain conditions be met in order for the
Company to obtain advances under the Term Loan. Advances for the Revolver may
be obtained in accordance with a borrowing base defined as a percentage of
accounts receivable balances. The Credit Facility requires the Company to
maintain certain financial ratios and contains certain covenants that limit
the ability of the Company to incur additional indebtedness, pay dividends,
create certain liens, sell assets and limits capital expenditures to the
extent such amounts are not funded by the Principal Stockholders. Interest is
calculated on advances under the Credit Facility based upon either Den norske
Bank's prime rate plus one half percent or LIBOR plus three percent. As of
December 5, 1997, the Company had $7.0 million outstanding under the Term Loan
and $ 3.4 million outstanding under the Revolver bearing interest at 9.0%.
DSND Alliance
On December 4, 1997, the Company entered into an agreement with Det
Sondenfjelds-Norske Dampskibsselskab ASA (DSND) to form a strategic alliance.
DSND is a Norwegian-based, full service contractor in the subsea construction
business. DSND acquired 30% of the Company's common stock from the Principal
Stockholders. If the Company consummates a public offering in 1998, DSND has
agreed to sell the DSND Stephaniturm, a dynamically positioned diving support
vessel, to the Company for $17.5 million and has given the Company an option
to purchase a saturation system for an additional $4.0 million. In addition
the Company will obtain a 30% interest in a joint venture to be formed to
operate a multi-purpose field supply and reel pipelay vessel in the Gulf,
offshore Mexico and Canada, and the Caribbean.
Stock Split
In January 1998, the Company effected a 220 for one stock split. The effect
of the stock split has been retroactively reflected in the accompanying
financial statements as of the earliest period.
Stock Options
In January 1998, the Company adopted and its stockholders approved the Stock
Incentive Plan (the Plan) to provide long-term incentives to its key employees
and officers, including directors who are employees of the Company and certain
other individuals as designated by the Compensation Committee of the Board of
Directors of the Company. The Plan has 1.9 million shares available for
issuance under the plan. No grants of options have been made as of the date of
this report.
F-16
<PAGE>
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Stock Sales
In December 1997, the Company agreed to sell, pursuant to a subscription
agreement, 326,480 shares of the Company's common stock at $2.91 per share,
the same per share price paid by DSND. In addition, the Principal Stockholders
sold 858,440 shares of the Company's common stock at $2.91 per share, the same
per share price paid by DSND, to officers and key employees of the Company.
Public Offering of Common Stock
Subsequent to September 30, 1997, the Board of Directors authorized the
filing of a registration statement with the Securities and Exchange Commission
permitting the Company to sell shares of its common stock to the public. If
the offering is consummated under the terms presently anticipated, the Company
intends to complete the purchase of the DSND Stephaniturm, construct a derrick
barge, pay off all debt under the Credit Facility and to the Principal
Stockholders, and use the remainder of the proceeds for general corporate
purposes. It is anticipated the Credit Facility will be increased upon
consummation of the Offering and the current agreement will be revised.
Acquisition of Assets
Subsequent to September 30, 1997 through December 31, 1997, the Company made
capital expenditures of $27.0 million to acquire the Lone Star Horizon, a
pipelay barge, and the Canyon Horizon, a bury barge, and incurred costs to
upgrade and refurbish the Phoenix Horizon and Gulf Horizon. Unaudited pro
forma property and equipment and total assets are $55.7 million and $69.6
million, respectively, after giving effect to these capital expenditures as
though the transactions had occurred on September 30, 1997. The Company
increased its borrowings under the Subordinated Notes by $7.4 million and
borrowed $14.7 million under the Credit Facility to make the acquisitions and
upgrades. Assuming the transactions had occurred on September 30, 1997,
unaudited pro forma long-term debt and total liabilities are $41.7 million and
$51.2 million, respectively.
F-17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPEC-
TUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT
RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO ANY PER-
SON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UN-
DER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................
Risk Factors..............................................................
Forward-Looking Statements................................................
Dividend Policy...........................................................
Dilution..................................................................
Use of Proceeds...........................................................
Capitalization............................................................
Selected Financial and Operating Data.....................................
Management's Discussion and Analysis of Financial Condition and Results of
Operations...............................................................
Business..................................................................
Management................................................................
Principal Stockholders....................................................
Certain Transactions......................................................
Description of Capital Stock..............................................
Shares Eligible for Future Sale...........................................
Underwriting..............................................................
Legal Matters.............................................................
Experts...................................................................
Additional Information....................................................
Index to Consolidated Financial Statements................................ F-1
</TABLE>
-----------
UNTIL , 1998 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICI-
PATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES
HORIZON OFFSHORE, INC.
COMMON STOCK
-------
PROSPECTUS
, 1998
-------
SALOMON SMITH BARNEY
PAINEWEBBER INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 1. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses payable in connection with the proposed sale of Common
Stock covered hereby are as follows:
<TABLE>
<S> <C>
SEC registration fee............................................ $ 27,140
NASD filing fee................................................. 9,700
Nasdaq listing fee.............................................. *
Printing expenses............................................... *
Legal fees and expenses......................................... *
Accounting fees and expenses.................................... *
Transfer agent fees and expenses................................ *
Miscellaneous expenses.......................................... *
--------
Total expenses................................................ $500,000
</TABLE>
- --------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify its directors and officers in a variety of
circumstances, which may include liabilities under the Securities Act of 1933,
as amended (the "Securities Act"). In addition, the Registrant's Bylaws, a
copy of which is included as Exhibit 3.2 and incorporated herein by reference,
provides for the indemnification of directors and officers against expenses
and liabilities incurred in connection with defending actions brought against
them for negligence or misconduct in their official capacities.
The Company maintains a liability policy to indemnify its officers and
directors against loss arising from claims by reason of their legal liability
for acts as officers and directors, subject to limitations and conditions to
be set forth in the policies.
In the Underwriting Agreement, a form of which is included as Exhibit 1.1,
the Underwriters have also agreed to indemnify the directors and certain of
the Company's officers against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments that such directors and
officers may be required to make in respect thereof.
Each of the Company's directors has entered into an indemnity agreement with
the Company, pursuant to which the Company has agreed under certain
circumstances to purchase and maintain directors' and officers' liability
insurance. The agreements also provide that the Company will indemnify the
directors against any costs and expenses, judgments, settlements and fines
incurred in connection with any claim involving a director by reason of his
position as director that are in excess of the coverage provided by any such
insurance, provided that the director meets certain standards of conduct. A
form of indemnity agreement containing such standards of conduct is included
as Exhibit 10.1 to this Registration Statement. Under the indemnity
agreements, the Company is not required to purchase and maintain directors'
and officers' liability insurance if it is not reasonably available or, in the
reasonable judgment of the Board of Directors, there is insufficient benefit
to the Company from the insurance.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In March 1996, the Company issued 37,500 shares of its Class A common stock,
$1.00 par value per share ("Class A Stock"), to Highwood Partners, L.P.
("Highwood"), an affiliate of Elliott Associates, L.P., for $2.2 million cash
and it issued 12,500 shares of its Class B nonvoting common stock, $1.00 par
value per share
II-1
<PAGE>
("Class B Stock"), to Westgate International, L.P. ("Westgate"), for $.8
million cash. On April 30, 1997, the Company issued $12,000,000 principal
amount of its 10% subordinated notes due March 31, 2003 ("Notes") to Highwood
and it issued $8,000,000 principal amount of its Notes to Westgate. On May 1,
1997, the Company issued to Westgate warrants (the "Warrants") to purchase
12,500 shares of its Class B Stock at a per share price of $1.00.
On December 2, 1997, the Company was recapitalized, and Westgate exercised
all the Warrants held by it. In accordance with the terms of the
recapitalization of the Company, all of the outstanding shares of Class A
Stock and Class B Stock were reclassified into an equal number of shares of
Common Stock.
In December 1997, the Company sold 326,480 shares to a company controlled by
James Devine for $950,000.
All of these securities were offered and sold without registration under the
Securities Act inasmuch as they are deemed not subject to registration
pursuant to the exception provided in Section 4(2) of the Securities Act as
securities sold in transactions not involving any public offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 Bylaws of the Company
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's Certificate
of Incorporation and Bylaws defining the rights of holders of Common
Stock
4.2 Specimen Common Stock certificate*
5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P.
10.1 Form of Indemnity Agreement by and between the Company and each of
its directors
10.2 Reimbursement and Indemnity Agreement between the Company and
Elliott Associates, L.P., dated as of June 10, 1997
10.3 The Company's Stock Incentive Plan
10.4 Form of Stock Option Agreement under the Company's Stock Incentive
Plan
10.5 Employment Agreement between the Company and Bill J. Lam
10.6 Employment Agreement between the Company and David W. Sharp
10.7 Employment Agreement between the Company and James K. Cole
10.8 Credit Agreement among Den norske Bank ASA, Horizon Vessels, Inc.
and Horizon Offshore Contractors, Inc., dated as of October 27, 1997
10.9 Amendment No. 1 to Credit Agreement dated as of December 30, 1997
among Den norske Bank ASA, Horizon Vessels, Inc. and Horizon
Offshore Contractors, Inc.
10.10 Alliance Agreement among Det Sondenfjelds-Norske Dampskibsselskab
ASA, the Company, Highwood Partners, L.P., and Westgate
International, L.P. dated as of December 4, 1997
10.11 Stockholder's Agreement among Det Sondenfjelds-Norske
Dampskibsselskab ASA, the Company, Highwood Partners, L.P., and
Westgate International, L.P., dated as of December 4, 1997
10.12 Memorandum of Agreement among DSND Shipping AS and HorizonVessels,
Inc. dated as of December 4, 1997, and "Barecon 89" Standard
Bareboat Charter
10.13 Option Agreement between the Company and DSND Oceantech, Ltd. dated
as of December 4, 1997
10.14 Registration Rights Agreement among the Company, Highwood Partners,
L.P., and Westgate International, L.P., dated as of December 4, 1997
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.15 10% Subordinated Note due March 31, 2003 payable to the order of
Westgate International, L.P.
10.16 10% Subordinated Note due March 31, 2003 payable to the order of
Highwood Partners, L.P.
10.17 Form of Purchase Agreement
10.18 Services Agreement between the Company and Horizon Barge & Towing,
Inc., dated as of September 30, 1997
10.19 Agreement for Purchase and Sale of Vessels between HLS Offshore,
L.L.C. and CGI Marine Corporation dated as of May 30, 1997
10.20 Vessel Purchase Agreement between Horizon Barge & Towing, Inc. and
Horizon Vessels, Inc. dated as of December 2, 1997
10.21 Settlement Agreement between HLS Offshore L.L.C., Mannai Marine Co.
Limited and RANA S.r.l. dated June 10, 1997
10.22 Consulting Agreement dated January 1, 1998 between the Company and
Edward L. Moses, Jr.*
10.23 Letter Agreement dated December 5, 1997 between the Company and
Crossbay Ventures Ltd.*
10.24 Letter Agreement dated December 5, 1997 between the Company and
Crossbay Ventures Ltd.*
11.1 Statement regarding computation of net income (loss) per share
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P. (included in Exhibit 5.1)
24.1 Power of Attorney (included in the Signature Page to this
Registration Statement)
27.1 Financial Data Schedule
</TABLE>
--------
* To be filed by amendment
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Houston, State of
Texas, on January 9, 1998.
HORIZON OFFSHORE, INC.
/s/ Jonathan D. Pollock
By __________________________________
Jonathan D. Pollock
Chairman of the Board
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints each of Jonathan D. Pollock, David W. Sharp and
Bill J. Lam, or any one of them, his true and lawful attorney-in-fact and
agent, with full power of substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorney-in-
fact and agent full power and authority to do and perform each and every act
and thing requisite and ratifying and confirming all that said attorney-in-
fact and agent or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Jonathan D. Pollock Chairman of the Board January 9, 1998
____________________________________
Jonathan D. Pollock
/s/ Bill J. Lam President and Director January 9, 1998
____________________________________ (Principal Executive
Bill J. Lam Officer)
/s/ David W. Sharp Chief Financial Officer January 9, 1998
____________________________________ (Principal Financial and
David W. Sharp Accounting Officer)
/s/ James Devine Director January 9, 1998
____________________________________
James Devine
/s/ Gunnar Hirsti Director January 9, 1998
____________________________________
Gunnar Hirsti
/s/ Edward L. Moses, Jr. Director January 9, 1998
____________________________________
Edward L. Moses, Jr.
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- --------------------------------------------------------- ----------
<C> <S> <C>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of the
Company
3.2 Bylaws of the Company
4.1 See Exhibits 3.1 and 3.2 for provisions of the Company's
Certificate of Incorporation and Bylaws defining the
rights of holders of Common Stock
4.2 Specimen Common Stock certificate*
5.1 Opinion of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P.
10.1 Form of Indemnity Agreement by and between the Company
and each of its directors
10.2 Reimbursement and Indemnity Agreement between the Company
and Elliott Associates, L.P., dated as of June 10, 1997
10.3 The Company's Stock Incentive Plan
10.4 Form of Stock Option Agreement under the Company's Stock
Incentive Plan
10.5 Employment Agreement between the Company and Bill J. Lam
10.6 Employment Agreement between the Company and David W.
Sharp
10.7 Employment Agreement between the Company and James K.
Cole
10.8 Credit Agreement among Den norske Bank ASA, Horizon
Vessels, Inc. and Horizon Offshore Contractors, Inc.,
dated as of October 27, 1997
10.9 Amendment No. 1 to Credit Agreement dated as of December
30, 1997 among Den norske Bank ASA, Horizon Vessels, Inc.
and Horizon Offshore Contractors, Inc.
10.10 Alliance Agreement among Det Sondenfjelds-Norske
Dampskibsselskab ASA, the Company, Highwood Partners,
L.P., and Westgate International, L.P. dated as of
December 4, 1997
10.11 Stockholder's Agreement among Det Sondenfjelds-Norske
Dampskibsselskab ASA, the Company, Highwood Partners,
L.P., and Westgate International, L.P., dated as of
December 4, 1997
10.12 Memorandum of Agreement among DSND Shipping AS and
HorizonVessels, Inc. dated as of December 4, 1997, and
"Barecon 89" Standard Bareboat Charter
10.13 Option Agreement between the Company and DSND Oceantech,
Ltd. dated as of December 4, 1997
10.14 Registration Rights Agreement among the Company, Highwood
Partners, L.P., and Westgate International, L.P., dated
as of December 4, 1997
10.15 10% Subordinated Note due March 31, 2003 payable to the
order of Westgate International, L.P.
10.16 10% Subordinated Note due March 31, 2003 payable to the
order of Highwood Partners, L.P.
10.17 Form of Purchase Agreement
10.18 Services Agreement between the Company and Horizon Barge
& Towing, Inc., dated as of September 30, 1997
10.19 Agreement for Purchase and Sale of Vessels between HLS
Offshore, L.L.C. and CGI Marine Corporation dated as of
May 30, 1997
10.20 Vessel Purchase Agreement between Horizon Barge & Towing,
Inc. and Horizon Vessels, Inc. dated as of December 2,
1997
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT PAGE
NUMBER DOCUMENT DESCRIPTION NUMBER
------- --------------------------------------------------------- ----------
<C> <S> <C>
10.21 Settlement Agreement between HLS Offshore L.L.C., Mannai
Marine Co. Limited and RANA S.r.l. dated June 10, 1997
10.22 Consulting Agreement dated January 1, 1998 between the
Company and Edward L. Moses, Jr.*
10.23 Letter Agreement dated December 5, 1997 between the
Company and Crossbay Ventures Ltd.*
10.24 Letter Agreement dated December 5, 1997 between the
Company and Crossbay Ventures Ltd.*
11.1 Statement regarding computation of net income (loss) per
share
21.1 Subsidiaries of the Company
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P. (included in Exhibit 5.1)
24.1 Power of Attorney (included in the Signature Page to this
Registration Statement)
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HORIZON OFFSHORE, INC.
I, the undersigned, Bill J. Lam, being the duly elected and qualified
President of Horizon Offshore, Inc. (the "Corporation"), a corporation organized
and existing under the laws of the State of Delaware, do hereby certify as
follows:
1. The Corporation's original Certificate of Incorporation was filed with
the Secretary of State of Delaware on December 19, 1995 under the name of HLS
Offshore, Inc.
2. Pursuant to Section 242 of the Delaware General Corporation Law (the
"DGCL"), the amendments to the Corporation's Certificate of Incorporation
contained herein have been duly adopted by resolution of the Board of Directors
of the Corporation and approved by the holders of the Corporation's Common Stock
by written consent dated December 2, 1997.
3. Pursuant to Section 245 of the DGCL, this Amended and Restated
Certificate of Incorporation was duly adopted by the Board of Directors of the
Corporation and restates the provisions of the Corporation's Certificate of
Incorporation, amends the Corporation's Certificate of Incorporation by adding
those provisions approved by the holders of the Common Stock pursuant to Section
242 of the DGCL by written consent and provides for the deletion of provisions
intentionally omitted in reliance upon Section 245(c) of the DGCL.
4. The Amended and Restated Certificate of Incorporation of the
Corporation shall read as follows:
ARTICLE I
NAME
The name of this corporation is Horizon Offshore, Inc. (the "Corporation").
ARTICLE II
REGISTERED OFFICE AND REGISTERED AGENT
The address of the Corporation's registered office in the State of Delaware
and its registered agent at such address is:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
County of New Castle
<PAGE>
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the DGCL.
ARTICLE IV
CAPITAL
1. Authorized Stock. The Corporation shall be authorized to issue an
aggregate of 40,000,000 shares of capital stock, of which 35,000,000 shares
shall be Common Stock, $1.00 par value per share (the "Common Stock"), and
5,000,000 shares shall be Preferred Stock, $1.00 par value per share (the
"Preferred Stock").
2. Preferred Stock. Preferred Stock may be issued from time to time in
one or more series. All shares of any one series of Preferred Stock shall be
identical except as to the dates of issue and the dates from which dividends on
shares of the series issued on different dates will cumulate if cumulative.
(a) Authority is hereby expressly granted to the Board of Directors to
authorize the issue of one or more series of Preferred Stock, and to fix by
resolution or resolutions providing for the issue of each such series the
voting powers, designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, of such series, to the full extent now or hereafter
permitted by law, including, without limitation, the following:
(1) the number of shares of such series, which may subsequently
be increased, except as otherwise provided by the resolution or
resolutions of the Board of Directors providing for the issue of such
series, or decreased, to a number not less than the number of shares
then outstanding, by resolution or resolutions of the Board of
Directors, and the distinctive designation thereof;
(2) the dividend rights of such series, the preferences, if any,
over any other class or series of stock, or of any other class or
series of stock over such series, as to dividends, the extent, if any,
to which shares of such series will be entitled to participate in
dividends with shares of any other series or class of stock, whether
dividends on shares of such series will be fully, partially or
conditionally cumulative, or a combination thereof, and any
limitations, restrictions or conditions on the payment of such
dividends;
(3) the rights of such series, and the preferences, if any, over
any other class or series of stock, or of any other class or series of
stock over such series, in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation and the
extent, if any, to which shares of any such series will be entitled to
participate in such event with any other series or class of stock;
2
<PAGE>
(4) the time or times during which, the price of prices at which,
and the terms and conditions on which the shares of such series may be
redeemed;
(5) the terms of any purchase, retirement or sinking funds which
may be provided for the shares of such series; and
(6) the terms and conditions, if any, upon which the shares of
such series will be convertible into or exchangeable for shares of any
other series, class or classes, or any other securities.
(b) The shares of Preferred Stock shall have no voting power or voting
rights with respect to any matter whatsoever, except as may be otherwise
required by law or may be provided in the resolution or resolutions of the
Board of Directors creating the series of which such shares are a part.
(c) No holders of any series of Preferred Stock will be entitled to
receive any dividends thereon other than those specifically provided for by
this Certificate of Incorporation or the resolution or resolutions of the
Board of Directors providing for the issue of such series of Preferred
Stock, nor will any accumulated dividends on Preferred Stock bear any
interest.
(d) In the event of any liquidation, dissolution or winding-up of the
Corporation, whether voluntary or involuntary, the holders of Preferred
Stock of each series will be entitled to receive only such amount or
amounts as will have been fixed by this Certificate of Incorporation or by
the resolution or resolutions of the Board of Directors providing for the
issue of such series.
3. Each share of Class A voting common stock, $1.00 par value per share,
of the Corporation and each share of Class B nonvoting common stock, $1.00 par
value per share, of the Corporation outstanding on the effective date of this
Amended and Restated Certificate of Incorporation shall be reclassified into one
share of the Common Stock, $1.00 par value per share, of the Corporation.
ARTICLE V
STOCKHOLDER ACTION
Action shall be taken by the stockholders only at an annual or special
meeting of stockholders or by action taken by the unanimous written consent of
all of the holders of Capital Stock that would be entitled to vote thereon if an
annual or special meeting of stockholders had been called for the taking of such
action.
ARTICLE VI
BOARD OF DIRECTORS
1. Powers. All of the powers of the Corporation are hereby conferred
upon the Board of Directors of the Corporation, insofar as such powers may be
lawfully vested by this Certificate
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of Incorporation in the Board of Directors. In furtherance and not in limitation
of those powers, the Board of Directors shall have the power to make, adopt,
alter, amend and repeal from time to time the Corporation's Bylaws, subject to
the provisions of Article IX, section 2.
2. Number of Directors. Subject to the restriction that the number of
directors shall not be less than the number required by the DGCL, the number of
directors may be fixed from time to time pursuant to the Corporation's Bylaws;
provided, however, that the number of directors shall not be reduced so as to
shorten the term of any director at the time in office.
3. Classification. The members of the Board of Directors, other than
those who may be elected by the holders of any one or more series of Preferred
Stock voting separately, shall be classified, with respect to the time during
which they shall hold office, into three classes, designated Class I, II and
III, as nearly equal in number as possible. Any increase or decrease in the
number of directors shall be apportioned by the Board of Directors so that all
classes of directors shall be as nearly equal in number as possible. At each
annual meeting of stockholders, directors chosen to succeed those whose terms
then expire shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election and until their successors are duly elected and qualified.
4. Vacancies. Subject to any requirements of law and the rights of any
class or series of Capital Stock having a preference over the Common Stock as to
dividends or upon liquidation, and except as provided in Article VI, section 6,
any vacancy on the Board of Directors (including any vacancy resulting from an
increase in the authorized number of directors or from a failure of the
stockholders to elect the full number of authorized directors) may,
notwithstanding any resulting absence of a quorum of directors, be filled only
by the Board of Directors, acting by a vote of a majority of all the Continuing
Directors, and any director so appointed shall serve until the next
stockholders' meeting held for the election of directors of the class to which
such director shall have been appointed and until his successor is duly elected
and qualified.
5. Removal. Subject to Article VI, section 6, and notwithstanding any
other provisions of this Certificate of Incorporation or the Corporation's
Bylaws, any director or the entire Board of Directors may be removed at any time
at a stockholders' meeting called for such purpose by the affirmative vote of
holders of not less than 80% of the Voting Stock, voting together as a single
class. At the same meeting in which the stockholders remove one or more
directors, the stockholders may elect a successor or successors for the
unexpired term of the director or directors removed. Except as set forth in this
Article VI, section 5, directors shall not be subject to removal.
6. Directors Elected by Preferred Stockholders. Notwithstanding anything
in this Certificate of Incorporation to the contrary, whenever the holders of
any one or more series of Preferred Stock shall have the right, voting
separately as a class, to elect one or more directors of the Corporation, the
provisions of this Certificate of Incorporation (as amended from time to time)
fixing the rights and preferences of such Preferred Stock shall govern with
respect to the nomination, election, term, removal, vacancies or other related
matters with respect to such directors.
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ARTICLE VII
CERTAIN BUSINESS COMBINATIONS
1. Supermajority Vote. In addition to any affirmative vote otherwise
required by law or this Certificate of Incorporation (notwithstanding the fact
that a lesser percentage may be specified by law or this Certificate of
Incorporation) and except as otherwise expressly provided in Article VII,
section 2:
(a) any merger, consolidation or share exchange of the Corporation or
any Subsidiary with an Interested Stockholder or with any other
corporation, whether or not itself an Interested Stockholder, which is, or
after such merger, consolidation or share exchange would be, an Affiliate
or Associate of an Interested Stockholder who was an Interested Stockholder
prior to the transaction;
(b) any sale, lease, transfer, exchange, mortgage, pledge, loan,
advance, or other similar disposition (in one or more series of
transactions), with or for the direct or indirect benefit of any Interested
Stockholder or any Affiliate or Associate thereof, of any assets of the
Corporation or any Subsidiary having, measured at the time the transaction
or transactions are approved by the Board of Directors, an aggregate book
value or Market Value as of the end of the Corporation's most recently
ended fiscal quarter of 5% or more of the lesser of (i) the total Market
Value of the outstanding stock of the Corporation or (ii) the Corporation's
net worth as of the end of its most recently ended fiscal quarter;
(c) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation or any Subsidiary;
(d) the issuance or transfer by the Corporation or any Subsidiary, in
one transaction or in a series of transactions in any twelve-month period,
of any Equity Securities of the Corporation or any Subsidiary that have an
aggregate Market Value of $1 million or more to any Interested Stockholder
or any Affiliate or Associate thereof, except pursuant to the exercise of
warrants or rights to purchase securities offered pro rata to all holders
of the Corporation's Voting Stock or by any other method affording
substantially proportionate treatment to the holders of Voting Stock;
(e) any reclassification or recapitalization of securities of the
Corporation, including any reverse stock split, any merger, consolidation
or share exchange of the Corporation with any Subsidiary, or any other
transaction (whether or not involving an Interested Stockholder) that has
the effect, directly or indirectly, in one transaction or a series of
transactions, of increasing by 5% or more the voting power (regardless of
when exercisable) or the proportionate amount of the outstanding shares of
any class or series of Equity Securities of the Corporation or any
Subsidiary directly or indirectly Beneficially Owned by any Interested
Stockholder or any Affiliate or Associate thereof;
(f) any loans, advances, guarantees, pledges or other financial
assistance or any tax credits or other tax advantages provided by the
Corporation or any Subsidiary to an
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Interested Stockholder or any Affiliate or Associate thereof, except
proportionately as a stockholder; or
(g) any agreement, contract or other arrangement providing directly or
indirectly for any of the foregoing;
shall require the approval by a majority of the Continuing Directors and the
affirmative vote of both (i) holders of not less than 80% of the Voting Stock,
voting together as a single class, and (ii) not less than 75% of the Voting
Stock (other than Voting Stock Beneficially Owned by the Interested Stockholder
who is, or whose Affiliate or Associate is, a party to the proposed Business
Combination) voting as a separate class. In addition, a proxy or information
statement describing the proposed Business Combination and complying with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder shall be mailed to all stockholders of the Corporation at least 30
days prior to the consummation of such Business Combination (regardless of
whether such proxy or information statement is required pursuant to such act).
2. Exceptions to Supermajority Vote Requirements. If all conditions
specified in either of paragraphs (a) or (b) below are met, the provisions of
Article VII, section 1, shall not be applicable to any Business Combination, and
such Business Combination shall require only the affirmative vote of holders of
not less than a majority of the Voting Stock, voting together as a single class,
and such other votes as may be required by law, any other provisions of this
Certificate of Incorporation or the Corporation's Bylaws, and shall further
require only the delivery of such proxy or information statements, if any, as
may be required by law:
(a) The Business Combination shall have been approved by a majority of
the Continuing Directors; or
(b) All of the following five conditions have been met:
(1) The aggregate amount of the cash and the Market Value as of
the Valuation Date of consideration other than cash to be received per
share by holders of Common Stock in such Business Combination is at
least equal to the highest of the following:
(A) the highest per share price, including any brokerage
commissions, transfer taxes and soliciting dealer's fees, paid by
the Interested Stockholder for any shares of Common Stock
acquired by it within the two-year period immediately prior to
the Announcement Date or in the transaction in which it became an
Interested Stockholder, whichever is higher;
(B) the Market Value per share of Common Stock on the
Announcement Date or on the Determination Date, whichever is
higher; or
(C) the price per share equal to the Market Value per share
of Common Stock determined pursuant to clause (B) immediately
preceding, multiplied by a fraction, the numerator of which is
the highest per share price,
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including any brokerage commissions, transfer taxes and
soliciting dealers' fees, paid by the Interested Stockholder for
any shares of Common Stock acquired by it within the two-year
period immediately prior to the Announcement Date, and the
denominator of which is the Market Value per share of Common
Stock on the first date in such two-year period on which the
Interested Stockholder acquired any shares of Common Stock.
(2) The aggregate amount of the cash and the Market Value as of
the Valuation Date of consideration other than cash to be received per
share by holders of shares of any class or series of outstanding stock
other than Common Stock is at least equal to the highest of the
following, whether or not the Interested Stockholder has previously
acquired any shares of any such class or series of stock:
(A) the highest per share price, including any brokerage
commissions, transfer taxes and soliciting dealers' fees, paid by
the Interested Stockholder for any shares of such class or series
of stock acquired by it within the two-year period immediately
prior to the Announcement Date or in the transaction in which it
became an Interested Stockholder, whichever is higher;
(B) the highest preferential amount per share to which the
holders of shares of such class or series of stock are entitled
in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
(C) the Market Value per share of such class or series of
stock on the Announcement Date or on the Determination Date,
whichever is higher; or
(D) the price per share equal to the Market Value per share
of such class or series of stock, determined pursuant to clause
(C) immediately preceding, multiplied by a fraction, the
numerator of which is the highest per share price, including any
brokerage commissions, transfer taxes and soliciting dealers'
fees, paid by the Interested Stockholder for any shares of any
such class or series of Voting Stock acquired by it within the
two-year period immediately prior to the Announcement Date, and
the denominator of which is the Market Value per share of the
same class or series of voting stock on the first day in such
two-year period on which the Interested Stockholder acquired any
shares or the same class or series of Voting Stock.
(3) The holders of any class or series of the Corporation's
outstanding stock shall receive the consideration in cash or in the
same form as the Interested Stockholder has previously paid for shares
of the same class or series of stock. If the Interested Stockholder
has paid for shares of any class of stock with varying forms of
consideration, the form of consideration for such class of stock shall
be either in cash or the form used to acquire the largest number of
shares of such class or series
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of stock previously acquired by it. In making any price calculation
under paragraph (b) of Article VII, section 2, appropriate adjustments
shall be made to reflect any reclassification or stock split
(including any reverse stock split), stock dividend, recapitalization,
reorganization or any similar transaction which has the effect or
increasing or reducing the number of outstanding shares of stock.
(4) After the Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business
Combination:
(A) there shall have been no failure to declare and pay at
the regular date therefor any full periodic dividends, whether or
not cumulative, on any outstanding Preferred Stock of the
Corporation or other capital stock entitled to a preference over
the Common Stock as to dividends or upon liquidation;
(B) there shall have been no reduction in the annual rate of
dividends paid on the Common Stock, except as necessary to
reflect any subdivision of the Common Stock, and no failure to
increase the annual rate of dividends as necessary to reflect any
reclassification (including any reverse stock split),
recapitalization, reorganization or other similar transaction
which has the effect of reducing the number of outstanding shares
of Common Stock; and
(C) the Interested Stockholder did not become the Beneficial
Owner of any additional shares of stock of the Corporation except
as part of the transaction which resulted in such Interested
Stockholder becoming an Interested Stockholder or by virtue of
proportionate stock splits or stock dividends.
The provisions of clauses (A) and (B) immediately preceding shall not
apply if no Interested Stockholder or any Affiliate or Associate
thereof voted as a director of the Corporation in favor of foregoing
or reducing dividends in the manner specified in such clauses and the
Interested Stockholder, within ten days after any such act or failure
to act that resulted in such loss or diminution of dividends, notifies
the Board of Directors of the Corporation in writing that the
Interested Stockholder disapproves thereof and requests in good faith
that the Board of Directors rectify such act or failure to act.
(5) After the Interested Stockholder has become an Interested
Stockholder, the Interested Stockholder shall not have received the
benefit, directly or indirectly, except proportionately as a
stockholder, of any loans, advances, guarantees, pledges or other
financial assistance provided by the Corporation or any Subsidiary,
whether in anticipation of or in connection with such Business
Combination or otherwise.
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3. Determinations. For the purpose of this Article VII, so long as
Continuing Directors constitute at least a majority of the entire Board of
Directors, the Board of Directors shall have the power to make a good faith
determination, on the basis of information known to them, of: (a) the number of
shares of Capital Stock of which any person or entity is the Beneficial Owner,
(b) whether any person or entity is an Interested Stockholder or an Affiliate or
Associate thereof, (c) whether any person or entity has an agreement,
arrangement or understanding with another as to the matters referred to in the
definition of Beneficial Owner herein, (d) whether any transaction constitutes a
Business Combination (including the power to determine in good faith the book
value or market value of the assets of the Corporation or any Subsidiary) or is
a transaction with or for the benefit of an Interested Stockholder, (e) whether
any of the events referred to in paragraph (b)(4) of Article VII, section 2,
have occurred, and (f) such other matters with respect to which a determination
is required under this Article VII. All such good faith determinations by the
Board of Directors shall be conclusive and binding on the Corporation and its
stockholders for all purposes of this Article VII.
ARTICLE VIII
LIMITATION OF LIABILITY AND INDEMNIFICATION
1. Limitation of Liability. No director shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, except (a) for breach of the director's duty of
loyalty to the Corporation or its stockholders, (b) for acts or omissions not in
good faith or that involve intentional misconduct of a knowing violation of law,
(c) pursuant to Section 174 of the DGCL, or (d) for any transaction from which
such director derived an improper personal benefit.
2. Authorization of Further Actions. The Board of Directors may (a)
cause the Corporation to enter into contracts with directors providing for the
limitation of liability set forth in this Article VIII to the fullest extent
permitted by law, (b) adopt Bylaws or resolutions, or cause the Corporation to
enter into contracts, providing for indemnification of directors and officers of
the Corporation and other persons (including without limitation directors and
officers of the Corporation's direct and indirect subsidiaries) to the fullest
extent permitted by law, and (c) cause the Corporation to exercise the powers
set forth in Section 145(g) of the DGCL, notwithstanding that some or all of the
members of the Board of Directors acting with respect to the foregoing may be
parties to such contracts or beneficiaries thereof.
3. Subsidiaries. The Board of Directors may cause the Corporation to
approve for its direct and indirect subsidiaries limitation of liability and
indemnification provisions comparable to the foregoing.
4. Amendments. Any amendment or repeal of this Article VIII shall not
adversely affect any elimination or limitation of liability of a director of the
Corporation under this Article VIII with respect to any action or inaction
occurring prior to the time of such amendment or repeal. No amendment or repeal
of any Bylaw or resolution relating to indemnification shall adversely affect
any person's entitlement to indemnification whose claim thereto results from
conduct occurring prior to the date of such amendment or repeal.
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ARTICLE IX
AMENDMENTS; DEFINITIONS
1. Amendments to Certificate of Incorporation. Articles V, VI, VII, VIII
and IX of this Certificate of Incorporation shall not be amended in any manner
(whether by modification or repeal of an existing Article or Articles or by
addition of a new Article or Articles), except upon resolutions adopted by the
affirmative vote of holders of not less than 80% of the Voting Stock, voting
together as a single class; provided, however, that if such resolutions shall
first be adopted by a majority of the Continuing Directors then such resolutions
shall be deemed adopted by the stockholders upon the affirmative vote of holders
of not less than a majority of the Voting Stock, voting as a single class.
2. Amendments to Bylaws. The Corporation's Bylaws may be altered,
amended, or repealed or new Bylaws may be adopted by:
(a) the stockholders, but only upon the affirmative vote of holders of
not less than 80% of the Voting Stock, voting together as a single class;
or
(b) the Board of Directors, but only upon the affirmative vote of a
majority of the Continuing Directors.
3. Definitions. For purposes of this Certificate of Incorporation:
(a) "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
promulgated under the Exchange Act (the term "registrant" in such Rule 12b-
2 meaning in this case the Corporation); provided, however, that in no
event shall the Corporation, any of its Subsidiaries, any Employee Benefit
Plan or any of the other persons or entities exempted from the definition
of Interested Stockholder in Article IX, section 3, be deemed to be an
Affiliate or Associate of any Interested Stockholder.
(b) "Announcement Date" means the first general public announcement of
the proposal or intention to make a proposal to consummate a Business
Combination or its first communication generally to stockholders of the
Corporation, whichever is earlier.
(c) A person shall be deemed to be the "Beneficial Owner" of and be
deemed to "Beneficially Own" any shares of capital stock (regardless
whether owned of record):
(1) Which that person or any of its Affiliates or Associates,
directly or indirectly, owns beneficially; or
(2) Which such person or any of its Affiliates or Associates has
(A) the right to acquire (whether exercisable immediately or only
after the passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding; or
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(3) Which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares of
voting capital stock of the Corporation or any Subsidiaries.
(d) "Business Combination" means any transaction referred to in any
one or more of the clauses (a) through (g) of Article VII, section 1.
(e) "Capital Stock" means any Common Stock, Preferred Stock or other
shares of capital stock of the Corporation.
(f) "Continuing Director" means (i) any member of the Board of
Directors who is not an Interested Stockholder or an Affiliate or Associate
thereof, and who was a director of the Corporation prior to the time the
Interested Stockholder became an Interested Stockholder, and (ii) any other
member of the Board of Directors who is not an Interested Stockholder or an
Affiliate or Associate thereof, and was recommended or elected by a
majority of the Continuing Directors at a meeting at which a quorum
consisting of a majority of the Continuing Directors was present, provided
that, in the absence of an Interested Stockholder, any reference to
"Continuing Directors" shall mean all the directors then in office.
(g) "Determination Date" means the date on which an Interested
Stockholder first became an Interested Stockholder.
(h) "Employee Benefit Plan" means any option, bonus, profit sharing,
employee stock ownership, dividend reinvestment, savings or similar plan of
the Corporation or any Subsidiary, or any trust related thereto.
(i) "Equity Security" means (1) any stock or similar security,
certificate of interest, or participation in any profit-sharing agreement,
voting trust certificate, or certificate of deposit for the foregoing, (2)
any security convertible, with or without consideration, into an equity
security, or any warrant or other security carrying any right to subscribe
to or purchase an equity security, or (3) any put, call, straddle, or other
option, right or privilege to acquire an equity security from or to sell an
equity security to another without being bound to do so.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Interested Stockholder" means any person (other than the
Corporation, any Subsidiary, any Employee Benefit Plan, any fiduciary with
respect to an Employee Benefit Plan acting in such capacity, any person
owning Capital Stock as of the date of filing this Amended and Restated
Certificate of Incorporation, or any Affiliate or Associate of any of the
foregoing) who (1) is the Beneficial Owner, directly or indirectly, of
shares of Capital Stock (including two or more classes or series voting
together as a single class) representing 10% or more of the Voting Stock or
(2) is an Affiliate or Associate of the Corporation and
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at any time within the two-year period immediately prior to the date in
question was the Beneficial Owner, directly or indirectly, of shares of
Capital Stock (including two or more classes or series voting together as a
single class) representing 10% or more of the Voting Stock. For the purpose
of determining whether a person is an Interested Stockholder, the number of
shares of Voting Stock deemed to be outstanding shall include shares deemed
owned by the person through application of paragraph (c) of Article IX,
section 3 but shall not include any other shares of Voting Stock that may
be issuable pursuant to any agreement, arrangement, or understanding or
upon exercise of conversion rights, warrants or options, or otherwise.
(l) "Market Value" means:
(1) in the case of stock, the highest closing sale price during
the 30 calendar day period immediately preceding the date in question
of a share of such stock on the Nasdaq National Market, or, if such
stock is not quoted on the Nasdaq National Market, then on any
national securities exchange on which the Common Stock is listed, or
if neither quoted on the Nasdaq National Market nor listed on a
national securities exchange, the highest closing sales price during
the 30 calendar day period immediately preceding the date in question,
the closing bid quotation with respect to a share of such stock during
the 30 calendar day period preceding the date in question as quoted by
Nasdaq or another generally recognized reporting system, or if no such
quotation is available, the fair market value on the date in question
of a share of such stock as determined by a majority of the Continuing
Directors at a meeting of the Board of Directors at which a quorum
consisting of at least a majority of the then Continuing Directors is
present; and
(2) in the case of property other than cash or stock, the fair
market value or such property on the date in question as determined by
a majority of the Continuing Directors at a meeting of the Board of
Directors at which a quorum consisting of at least a majority of the
then Continuing Directors is present.
(m) A "person" means any individual, firm, corporation or other
entity, or a group of persons acting or agreeing to act together in the
manner set forth in Rule 13d-5 under the Exchange Act.
(n) "Subsidiary" means any corporation, partnership or other entity of
which the Corporation, directly or indirectly, owns voting stock or similar
interests having a majority of the votes entitled to be cast.
(o) "Valuation Date" means:
(1) for a Business Combination voted upon by stockholders, the
later of the day prior to the date of the stockholders' vote or the
date 20 business days prior to the consummation of the Business
Combination; and
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(2) for a Business Combination not voted upon by stockholders,
the date of the consummation of the Business Combination.
(p) "Voting Stock" means the outstanding shares of Capital Stock
entitled to vote generally in an election of directors.
-----------------
IN WITNESS WHEREOF, the undersigned, being the President of the
Corporation, for the purpose of amending and restating the Corporation's
Certificate of Incorporation, does make this Amended and Restated Certificate of
Incorporation, hereby declaring and certifying that this is the act and deed of
the Corporation and the facts herein stated are true, and accordingly the
undersigned has hereunto set his hand this 2nd day of December, 1997.
HORIZON OFFSHORE, INC.
By: /s/ Bill J. Lam
----------------------------
Bill J. Lam
President
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EXHIBIT 3.2
BYLAWS
OF
HORIZON OFFSHORE, INC.
SECTION 1
OFFICES
1.1 Registered Office. The registered office of Horizon Offshore, Inc.
(the "Corporation") shall be in the City of Wilmington, County of New Castle,
State of Delaware.
1.2 Other Offices. The Corporation may also have offices at such other
places both within and without the State of Delaware as the Corporation's Board
of Directors may from time to time determine or the business of the Corporation
may require.
SECTION 2
MEETINGS OF STOCKHOLDERS
2.1 Annual Meetings. Annual meetings of stockholders shall be held for
the election of directors at such date, time and place either within or without
the State of Delaware as shall be designated by the Board of Directors and
stated in the notice of the meeting.
2.2 Special Meetings. (a) Special meetings of the stockholders for any
purpose or purposes may be called by the Chairman of the Board of Directors or
upon a vote of the majority of the Board of Directors, at such date, time and
place either within or without the State of Delaware as shall be stated in the
notice of the meeting.
(b) Except as otherwise provided in the Certificate of Incorporation
or required by applicable law, the Corporation's Secretary shall call a special
meeting of the stockholders, to be held on such date as the Secretary shall
determine, not less than 15 nor more than 60 days after the actual receipt of a
request in writing of any Beneficial Owner or Owners of at least 35% of the
Voting Stock. Such request shall set forth:
(i) a complete and accurate description of the matter not to
exceed 500 words, of the action proposed to be taken at such meeting, the
reasons for the action and any material interest of the stockholder in the
matter.
(ii) the name, business address and residential address of each
Beneficial Owner composing the group making the request, the number of
shares of Voting Stock of which each such person is the Beneficial Owner
and the dates on which each person acquired his or her Voting Stock;
(iii) a representation that at least one such Beneficial Owner
or a representative thereof intends to appear in person at the meeting to
propose the action specified in the request; and
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(iv) if any proposed action consists of or includes a proposal to
amend either the Certificate of Incorporation or the Bylaws, the language
of the proposed amendment.
The Corporation's Secretary may require any person or persons submitting a
request to call a special meeting of stockholders to furnish such documentary
information as may be reasonably required by the Corporation to determine that
such person or persons as a group Beneficially Owns at least 35% of the Voting
Stock. The Secretary may refuse to call a special meeting unless the request is
made in compliance with the foregoing procedure.
2.3 Notice of Stockholder Nominations and Stockholder Business. (a) At
any meeting of stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. Except as otherwise provided in the
Certificate of Incorporation or required by applicable law, nominations for the
election of directors at a meeting at which directors are to be elected or other
matters to be properly brought before any meeting of stockholders (other than
any special meeting of stockholders called pursuant to Section 2.2(b)) must be
(i) specified in the notice of meeting (or any supplement thereto) given by or
at the direction of the Board of Directors, including matters covered by Rule
14a-8 of the Securities and Exchange Commission, (ii) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (iii)
otherwise properly brought before the meeting by any person who (A) has been for
at least one year the Beneficial Owner of at least 1% of any class or series of
outstanding Voting Stock entitled to be voted on the proposed business and (B)
complies with the procedures set forth below.
(b) A notice of the intent of a stockholder to make a nomination or to
bring any other matter before the meeting shall be made in writing and received
by the Corporation's Secretary not more than 270 days and not less than 60 days
in advance of the first anniversary of the preceding year's annual meeting of
stockholders or, if a special meeting or an annual meeting of stockholders
scheduled to be held either 30 days earlier or later than such anniversary date,
such notice shall be received by the Corporation's Secretary within 15 days of
the earlier of the date on which notice of such meeting is first mailed to
stockholders or public disclosure of the meeting date is made.
(c) Every such notice by a stockholder shall set forth:
(i) the name, age, business address and residential address of
the stockholder who intends to make a nomination or bring up any other
matter, and any person acting in concert with such stockholder;
(ii) the number of shares of Voting Stock of which the
stockholder is the Beneficial Owner and the dates on which such person
acquired his or her Voting Stock;
(iii) a representation that the stockholder intends to appear in
person at the meeting to make the nomination or bring up the matter
specified in the notice;
(iv) with respect to notice of an intent to make a nomination, a
description of all agreements, arrangements or understandings among the
stockholder, any person acting in concert with the stockholder, each
proposed nominee and any other person or persons
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(naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder;
(v) with respect to notice of an intent to make a nomination, (A)
the name, age, business address and residential address of each person
proposed for nomination, (B) the principal occupation or employment of such
person, (C) the class and number of shares of capital stock of the
Corporation of which such person is the beneficial owner, and (D) any other
information relating to such person that would be required to be disclosed
in a proxy statement filed pursuant to the proxy rules of the Securities
and Exchange Commission had such nominee been nominated by the Board of
Directors; and
(vi) with respect to notice of an intent to bring up any other
matter, a complete and accurate description of the matter not to exceed 500
words, the reasons for conducting such business at the meeting, and any
material interest of the stockholder in the matter.
(d) The Corporation's Secretary may require any stockholder submitting
a notice of an intent to make a nomination or bring up other business to furnish
such documentary information as may be reasonably required by the Corporation to
determine that such stockholder has been for at least one year the Beneficial
Owner of at least 1% of any class or series of outstanding Voting Stock entitled
to be voted on the proposed business.
(e) Notice of an intent to make a nomination shall be accompanied by
the written consent of each nominee to serve as a director of the Corporation if
so elected and an affidavit of each such nominee certifying that he or she meets
the qualifications necessary to serve as a director of the Corporation. The
Corporation may require any proposed nominee to furnish such other information
as may be reasonably required by the Corporation to determine the eligibility
and qualifications of such person to serve as a director.
(f) With respect to any proposal by a stockholder to bring before a
meeting any matter other than the nomination of directors, the following shall
govern:
(i) If the Corporation's Secretary has received sufficient notice
of a proposal that may properly be brought before the meeting, a proposal
sufficient notice of which is subsequently received by the Secretary and
that is substantially duplicative of the first proposal shall not be
properly brought before the meeting. If in the judgment of the Board of
Directors a proposal deals with substantially the same subject matter as a
prior proposal submitted to stockholders at a meeting held within the
preceding five years, it shall not be properly brought before any meeting
held within three years after the latest such previous submission if (A)
the proposal was submitted at only one meeting during such preceding period
and it received affirmative votes representing less than 3% of the total
number of votes cast in regard thereto, (B) the proposal was submitted at
only two meetings during such preceding period and it received at the time
of its second submission affirmative votes representing less than 6% of the
total number of votes cast in regard thereto, or (C) the proposal was
submitted at three or more meetings during such preceding period and it
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received at the time of its latest submission affirmative votes
representing less than 10% of the total number of votes cast in regard
thereto.
(ii) Notwithstanding compliance with all of the procedures set
forth above in this Section, no proposal shall be deemed to be properly
brought before a meeting of stockholders if, in the judgment of the Board
of Directors, it is not a proper subject for action by stockholders under
Delaware Law.
(g) At the meeting of stockholders, the chairman shall declare out of
order and disregard any nomination or other matter that is not presented in
accordance with the foregoing procedures or that is otherwise contrary to the
foregoing terms and conditions.
(h) Nothing in this Section shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the Corporation's proxy
statement or to solicit their own proxies pursuant to the proxy rules of the
Securities and Exchange Commission.
2.4 Notice of Meeting. Whenever stockholders are required or permitted to
take any action at a meeting, a written notice of the meeting shall be given
which shall state the place, date and time of the meeting, and the purpose or
purposes for which the meeting is called. Unless otherwise provided by law, the
written notice of any meeting shall be given to each stockholder entitled to
vote at such meeting not less than 10 nor more than 60 days before the date of
the meeting. If mailed, such notice shall be deemed to be given when deposited
in the United States mail, postage prepaid, directed to the stockholder at such
stockholder's address as it appears on the records of the Corporation.
2.5 Stockholder List. The Secretary shall prepare and make, at least ten
days before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
2.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, with respect to each matter considered and voted
upon at any stockholders' meeting, the holders of a majority of the outstanding
shares of each class of Capital Stock, or series thereof, entitled to vote
thereon, present in person or represented by proxy, shall constitute a quorum,
provided that two or more classes or series shall be considered a single class
if the holders thereof are entitled to vote together as a single class with
respect to such matter. If, however, a quorum shall not be present or
represented at any meeting of the stockholders (or with respect to any matter to
be considered and voted upon thereat), the holders of any class of Capital Stock
or series thereof entitled to vote thereat (or with respect to any such matter),
present in person or represented by proxy, shall have the power to adjourn the
meeting (or the vote upon such matter, without prejudice to the right of the
stockholders to vote upon any matter as to which a quorum does exist) from time
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to time, without notice other than announcement at the meeting, until a quorum
shall be presented or represented. At such adjourned meeting at which a quorum
shall be present or represented any business may be transacted that might have
been transacted at the meeting as originally notified. If the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting (or with respect to
such matter).
2.7 Vote Required. When a quorum is present with respect to any matter
considered at any meeting of stockholders, the vote of the holders of a majority
of the Voting Stock shall decide such matter, unless the matter is one upon
which by express provision of law, the Certificate of Incorporation or these
Bylaws, a different vote is required, in which case such express provision shall
govern and control the decision of such matter.
2.8 Voting Rights of Stockholders. Unless otherwise provided in the
Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of
Voting Stock held of record by such holder. If the Certificate of Incorporation
provides for more or less than one vote for any share of Voting Stock on any
matter, every reference in these Bylaws to a majority or other proportion of
Voting Stock shall refer to such majority or other proportion of the votes of
such stock.
2.9 Proxies. (a) Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for such stockholder
by proxy, but no such proxy shall be voted or acted upon after three years from
its date, unless the proxy provides for a longer period.
(b) Execution of a proxy may be accomplished by a stockholder or his
or her authorized officer, director, employee or agent signing such writing or
causing his or her signature to be affixed to such writing by any reasonable
means including, without limitation, by facsimile signature. A stockholder may
authorize another person or persons to act for him as proxy by transmitting or
authorizing the transmission of a telegram, cablegram, or other means of
electronic transmission to the person who will be the holder of the proxy or to
a proxy solicitation firm, proxy support service organization or like agent duly
authorized by the person who will be the holder of the proxy to receive such
transmission, provided that any such telegram, cablegram or other means of
electronic transmission must either set forth or be submitted with information
from which it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the stockholder. If it is determined that such
telegrams, cablegrams or other electronic transmissions are valid, the
inspectors shall specify the information upon which they relied.
(c) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission may be substituted or used in lieu
of the original writing or transmission for any and all purposes for which the
original writing or transmission could be used, provided that such copy,
facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission.
(d) A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A stockholder may revoke any
proxy that is not irrevocable by attending the meeting and voting in
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person or by filing an instrument in writing revoking the proxy or another duly
executed proxy bearing a later date with the Secretary.
2.10 Unanimous Written Consent. Unless otherwise provided in the
Certificate of Incorporation, any action required to be taken at any annual or
special meeting of stockholders, or any action that may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, by the unanimous written consent of all holders
of Capital Stock that would be entitled to vote thereon if an annual or special
meeting had been called for the taking of such action.
2.11 Treasury Stock. Shares of Voting Stock held in the treasury of the
Corporation shall not be deemed to be outstanding shares for the purpose of
voting or determining the presence of a quorum or the total number of shares
entitled to vote on any matter.
2.12 Presiding Officer. All meetings of stockholders shall be presided
over by the Chairman of the Board of Directors, or in his absence, by a chairman
designated by the Board of Directors. The Secretary shall act as secretary of
the meeting, or in the absence of the Secretary by an Assistant Secretary, or in
their absence the chairman of the meeting may appoint any person to act as
secretary of the meeting.
2.13 Inspectors. Prior to a meeting of stockholders, the Board shall
appoint one or more inspectors to act at the meeting and make a written report
thereof. Each inspector shall take and sign an oath faithfully to execute the
duties of with strict impartiality and according to the best of his or her
ability. The inspectors shall (i) ascertain the number of shares outstanding
and the voting power of each, (ii) determine the shares represented at a meeting
and the validity of the proxies and ballots, (iii) count all votes and ballots,
(iv) determine and retain for a reasonable period a record of the disposition of
any challenges made to any determination by the inspectors, (v) certify their
determination of the number of shares represented at the meeting, and their
count of all votes and ballots, and (vi) perform such other functions as the
presiding officer of the meeting shall determine. The inspectors may appoint or
retain other persons or entities to assist them in the performance of their
duties.
2.14 Adjournments. Any annual or special meeting of stockholders may be
adjourned by the presiding officer from time to time to reconvene at the same or
some other place, and notice need not be given of any such adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the Corporation may transact any business
which might have been transacted at the original meeting. If the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
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SECTION 3
DIRECTORS
3.1 Powers. The business and affairs of the Corporation shall be managed
under the direction of a Board of Directors (the "Board"), except as otherwise
provided by Delaware Law or by the Certificate of Incorporation.
3.2 Number. Subject to the restriction that the number of directors shall
not be less than the number required by Delaware Law, and subject further to the
creation or lapse of directorships upon the occurrence of events specified in
the Certificate of Incorporation, the number of directors shall be fixed, from
time to time, by a resolution adopted by a majority of the Continuing Directors.
Until otherwise fixed by the directors, the number of directors constituting the
entire Board shall be five. No more than a minority of the number of directors
necessary to constitute a quorum shall be non-citizens of the United States.
The Secretary shall have the power to certify at any time as to the number of
directors authorized and as to the class to which each director has been elected
or assigned.
3.3 Classification of Board. The members of the Board, other than those
who may be elected by holders of any one or more series of Preferred Stock
voting separately, shall be classified, with respect to the time during which
they hold office, into three classes, designated Class I, II and III, as nearly
equal in number as possible. The initial directors in Class I shall be elected
for a term expiring at the annual meeting of stockholders to be held in 1998,
the initial directors in Class II shall be elected for a term expiring at the
annual meeting of stockholders to be held in 1999 and the initial directors in
Class III shall be elected for a term expiring at the annual meeting of
stockholders to be held in 2000.
3.4 Resignation. Any director may resign at any time upon written notice
to the Chairman of the Board. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective.
3.5 Nominations. Only persons who are nominated in accordance with the
procedures set forth in Section 2.3 shall be eligible for election as directors.
Notwithstanding any provision of these Bylaws to the contrary, the provisions of
Section 2.3 shall not apply to the election of any directors which the holders
of any class or series of Preferred Stock, voting separately as a class, may be
entitled to elect.
3.6 Election of Directors. Unless otherwise provided in the Certificate
of Incorporation, at each meeting of the stockholders for the election of
directors at which a quorum is present, directors shall be elected by a
plurality of the votes of the shares of Voting Stock present in person or
represented by proxy at the meeting.
3.7 Compensation. Unless otherwise restricted by the Certificate of
Incorporation or of these Bylaws, the Board shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of
attendance at each meeting of the Board. The directors may be paid a stated
salary as director or a fixed sum for attendance at each meeting of the Board or
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committee. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
SECTION 4
MEETINGS OF THE BOARD
4.1 Meetings. The Board may hold meetings, both regular and special,
either within or without the State of Delaware.
4.2 Regular Meetings. Regular meetings of the Board may be held without
notice at such time and at such place as shall from time to time be determined
by the Board.
4.3 Special Meetings. Special meetings of the Board may be called by the
Chairman of the Board on two days' notice to each director, either personally or
by mail, telephone or telegram. Special meetings shall be called by the Chairman
of the Board in like manner and on like notice on the written request of at
least 25% of the directors.
4.4 Quorum. At all meetings of the Board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board, except as may be otherwise specifically provided
by law or by the Certificate of Incorporation. If a quorum shall not be present
at any meeting of the Board, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
4.5 Action at Meeting. If a quorum is present when any meeting of the
Board is convened, the directors may continue to do business, taking action by
vote of a majority of a quorum as fixed in Section 4.4, until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum
or the refusal of any director present to vote.
4.6 Action by Consent. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board or of any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
4.7 Meetings by Telephone. Unless otherwise restricted by the Certificate
of Incorporation or these Bylaws, members of the Board or any committee
designated by the Board may participate in a meeting of the Board or any
committee, by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and such participation in a meeting shall constitute presence in person at the
meeting.
4.8 Presiding Officer. The Chairman of the Board shall preside at all
meetings of the Board or, in his absence, a chairman appointed by the Board.
The Secretary or in the absence of the Secretary, an Assistant Secretary, shall
act as secretary of each meeting, but in the absence of the Secretary and an
Assistant Secretary, the chairman of the meeting may appoint any person to act
as secretary of the meeting.
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SECTION 5
COMMITTEES OF THE BOARD
5.1 Designation of Committees. The Board may, by resolution passed by a
majority of the Continuing Directors, designate one or more committees, each
committee to consist of one or more of the directors of the Corporation. Such
committee or committees shall have such name or names as may be determined from
time to time by resolution adopted by the Board. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board to
act at the meeting in the place of any such absent or disqualified member.
5.2 Authority of Committees. Any such committee shall have those powers
of the Board in the management of the business and affairs of the Corporation
provided in the resolution of the Board designating such committee, provided
that no such committee shall have the power or authority to propose amendments
to the Certificate of Incorporation, adopt an agreement of merger or
consolidation, recommend to the stockholders the sale, lease or exchange of all
or substantially all of the Corporation's property or assets, recommend to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amend these Bylaws.
5.3 Minutes. Each committee shall keep regular minutes of its meetings
and report the same to the Board when required.
SECTION 6
NOTICES
6.1 Form of Notice. Unless provided otherwise by law, the Certificate of
Incorporation or these Bylaws, any notice that is required to be given to
stockholders shall be given in writing, by mail, addressed to such stockholder,
at his address as it appears on the records of the Corporation, with postage
thereon prepaid, and such notice shall be deemed to be given at the time when
the same shall be deposited in the United States mail. Notice to directors may
be given in like manner or may be given by telephone or facsimile transmission
or by sending the same by national commercial courier service for next-day
delivery.
6.2 Waiver. Whenever any notice is required to be given under law, the
Certificate of Incorporation or these Bylaws, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent thereto.
SECTION 7
OFFICERS
7.1 General. The officers of the Corporation shall be chosen by the Board
at its first meeting after each annual meeting of stockholders and shall be a
President, a Secretary and a Treasurer. The Board may also choose one or more
Vice Presidents and one or more Assistant
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Secretaries and Assistant Treasurers. Any number of offices may be held by the
same person, unless the Certificate of Incorporation or the Bylaws otherwise
provide.
7.2 Other Officers. The Board may appoint such other officers and agents
as it shall deem necessary who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
7.3 Compensation. The salaries of all officers and agents of the
Corporation shall be fixed by the Board.
7.4 Term. The officers of the Corporation shall hold office until their
successors are chosen and qualify. Subject to such obligations of the
Corporation as may exist under any contract of employment, any officer elected
or appointed by the Board may be removed at any time by the President or by the
affirmative vote of a majority of the Continuing Directors. Any vacancy
occurring in any office of the Corporation shall be filled by the Board.
7.5 Chairman of the Board. The Board may appoint a Chairman of the Board
who shall preside at meetings of the Board of Directors and the stockholders and
perform such other duties as may be designated by the Board of Directors or
these Bylaws. The Chairman of the Board shall not, solely by virtue of such
position, be an officer of the Corporation. The Chairman of the Board and any
person performing the duties of the Chairman of the Board at his request or in
his absence or in the event of his inability or refusal to act shall be a United
States citizen.
7.6 President. The President shall have the general powers, duties and
responsibilities of supervision and management inherent in such office as well
as such additional powers and duties as the Board may from time to time
prescribe. The President shall be the chief executive officer and chief
operating officer of the Corporation. The President shall control and direct
the Corporation's business and, except as the Board may otherwise direct, shall
supervise, direct and control the management and daily operations of the
business of the Corporation and have general charge of the Corporation's
property and supervision over the Corporation's officers, employees and agents.
At the request of the Chairman of the Board, or in his absence or during his
disability, the President shall perform the duties and exercise the functions of
the Chairman of the Board. Except as the Board may otherwise authorize, the
President shall execute bonds, mortgages and any other contracts of any nature
on behalf of the Corporation. The President and any person performing the
duties of the President in his absence or in the event of his inability or
refusal to act shall be a United States citizen.
7.7 Vice Presidents. In the absence of the President or in the event of
his inability or refusal to act, the Vice President (or in the event there be
more than one Vice President, the Vice Presidents in the order designated by the
Board, or in the absence of any designation, then in the order of their
election) shall perform the duties of the President, and when so acting, shall
have all the powers of and be subject to all the restrictions upon the
President. The Vice Presidents shall perform such other duties and have such
other powers as the Board may from time to time prescribe.
7.8 Secretary. The Secretary shall attend all meetings of the Board and
all meetings of the stockholders and record all the proceedings of the meetings
of the Corporation and of the Board
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in a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the Board, and shall
perform such other duties as may be prescribed by the Board or President, under
whose supervision he shall be. He shall have custody of the corporate seal of
the Corporation and he, or an Assistant Secretary, shall have authority to affix
the same to any instrument requiring it and when so affixed, it may be attested
by his signature or by the signature of such Assistant Secretary. The Board may
give general authority to any other officer to affix the seal of the Corporation
and to attest the affixing by his signature.
7.9 Assistant Secretary. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Board (or if
there be no such determination, then in the order of their election) shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board may from time to time
prescribe.
7.10 Treasurer. The Treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may be designated by the Board. He shall disburse the
funds of the Corporation as may be ordered by the Board, taking proper vouchers
for such disbursements, and shall render to the President and the Board, at its
regular meetings, or when the Board so requires, an account of all his
transactions as treasurer and of the financial condition of the Corporation. If
required by the Board, he shall give the Corporation a bond (which shall be
renewed every six years) in such sum and with such surety or sureties as shall
be satisfactory to the Board for the faithful performance of the duties of his
office and for the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his control
belonging to the Corporation.
7.11 Assistant Treasurer. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the Board (or
if there be no such determination, then in the order of their election) shall,
in the absence of the Treasurer or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the Treasurer and shall
perform such other duties and have such other powers as the Board may from time
to time prescribe.
SECTION 8
STOCK
8.1 Certificated or Uncertificated. The shares of the Corporation shall
be uncertificated or shall be represented by certificates signed in the name of
the Corporation by the Chairman of the Board or the President or a Vice
President and by the Secretary or an Assistant Secretary of the Corporation.
Upon the face or back of each stock certificate issued to represent any partly
paid shares, or upon the books and records of the Corporation in the case of
uncertificated partly paid shares, shall be set forth the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
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8.2 Summary of Rights. The powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series of each class of stock, and of each series of any class, and the
qualifications, limitations or restrictions of such preferences and rights shall
be set forth in full or summarized on the face or back of the certificate that
the Corporation shall issue to represent such class or series of stock; provided
that, except as otherwise provided in Section 202 of Delaware Law, or in any act
amending, supplementing or substituted for such section, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock, a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and rights.
8.3 Notice to Holders of Uncertificated Stock. Within a reasonable time
after the issuance or transfer of uncertificated stock, the Corporation shall
send to the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to Sections 151,
156, 202(a) or 218(a) of Delaware Law or a statement that the Corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and rights.
8.4 Facsimile Signatures. Any of or all the signatures on a certificate
may be facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
8.5 Lost Certificates. The Board may direct a new certificate or
certificates or uncertificated shares to be issued in place of any certificate
or certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates or uncertificated
shares, the Board may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
8.6 Transfer of Stock. Upon surrender to the Corporation or the transfer
agent of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Upon receipt of proper transfer instructions from the registered owner of
uncertificated shares such uncertificated shares shall be cancelled and issuance
of new equivalent uncertificated shares or certificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books
of the Corporation.
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8.7 Registered Stockholders. Except as otherwise provided by law, the
Corporation, and its directors, officers and agents, may recognize and treat a
person registered on its records as the owner of shares, as the owner in fact
thereof for all purposes, and as the person exclusively entitled to have and to
exercise all rights and privileges incident to the ownership of such shares, and
rights under this Section 8.7 shall not be affected by any actual or
constructive notice that the Corporation, or any of its directors, officers or
agents, may have to the contrary.
SECTION 9
INDEMNIFICATION
9.1 Indemnity. (a) Except with respect to an action or Claim (other than
as authorized in Section 9.2) commenced by an Indemnitee against the Corporation
or by an Indemnitee as a derivative action by or in the right of the Corporation
that has not been authorized by the Board, the Corporation shall indemnify,
defend and hold harmless any Indemnitee against Expenses reasonably incurred or
suffered in connection with any Claim against Indemnitee, whether the basis of
such Claim is alleged action or inaction in an official or other capacity while
serving as a director or officer of the Corporation or while serving at the
request of the Corporation as a director, officer or fiduciary of another
corporation, partnership, joint venture, trust or other enterprise or an
employee benefit plan of the Corporation (including appearances as a witness or
in connection with giving testimony or evidence), if:
(i) the Indemnitee is successful in his defense of the Claim on the
merits or otherwise, or
(ii) the Indemnitee has been found by the Determining Body to have
met the Standard of Conduct (as determined in accordance with the
procedures set forth in this Section 9.1), provided that no indemnification
shall be made in respect of any Claim by or in the right of the Corporation
as to which Indemnitee shall have been adjudicated in a final judgment to
be liable to the Corporation, unless, and only to the extent that the court
in which such Claim was brought shall determine upon application that,
despite such adjudication of liability but in view of all the circumstances
of the case, Indemnitee is fairly and reasonably entitled to indemnity for
such Expenses which the court shall deem proper.
(b) For purposes of this Section 9, the "Standard of Conduct" is met
when conduct by an Indemnitee with respect to which a Claim is asserted was
conduct performed in good faith which he reasonably believed to be in, or not
opposed to, the best interest of the Corporation, and, in the case of a Claim
which is a criminal action or proceeding, conduct that the Indemnitee had no
reasonable cause to believe was unlawful. The termination of any Claim by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not meet the Standard of Conduct.
(c) Promptly upon becoming aware of the existence of any Claim as to
which Indemnitee may be indemnified hereunder, Indemnitee shall notify the
Chairman of the Board of the Corporation, but the failure to promptly notify the
Chairman of the Board shall not relieve the Corporation from any obligation
under this Section 9. Upon receipt of such request, the Chairman of the Board
shall promptly advise the members of the Board of the request and that the
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establishment of a Determining Body with respect to Indemnitee's request for
indemnification as to the Claim will be presented at the next regularly
scheduled meeting of the Board. If a meeting of the Board is not regularly
scheduled within 90 calendar days of the date the Chairman of the Board receives
notice of the Claim, the Chairman of the Board shall cause a special meeting of
the Board of Directors to be called within such period in accordance with the
provisions of the Bylaws. After the Determining Body has been established, the
Determining Body shall inform the Indemnitee of the constitution of the
Determining Body and Indemnitee shall provide the Determining Body with all
facts relevant to the Claim known to such Indemnitee, and deliver to the
Determining Body all documents relevant to the Claim in Indemnitee's possession.
Before the 60th day after its receipt from the Indemnitee of such information
(the "Determination Date"), together with such additional information as the
Determining Body may reasonably request of Indemnitee prior to such date (the
receipt of which shall not begin a new 60-day period) the Determining Body shall
determine whether or not Indemnitee has met the Standard of Conduct and shall
advise Indemnitee of its determination. If Indemnitee shall have supplied the
Determining Body with all relevant information, including all additional
information reasonably requested by the Determining Body, any failure of the
Determining Body to make a determination by or on the Determination Date as to
whether the Standard of Conduct was met shall be deemed to be a determination
that the Standard of Conduct was met by Indemnitee.
(d) If at any time during the 60-day period ending on the
Determination Date, Indemnitee becomes aware of any relevant facts not
theretofore provided by him to the Determining Body, Indemnitee shall inform the
Determining Body of such facts, unless the Determining Body has obtained such
facts from another source. The provision of such facts to the Determining Body
shall not begin a new 60 day period.
(e) The Determining Body shall have no power to revoke a determination
that Indemnitee met the Standard of Conduct unless Indemnitee (i) submits to the
Determining Body at any time during the 60 days prior to the Determination Date
fraudulent information, (ii) fails to comply with the provisions of Section
9.1(d), or (iii) intentionally fails to submit information or documents relevant
to the Claim reasonably requested by the Determining Body prior to the
Determination Date.
(f) In the case of any Claim not involving any threatened or pending
criminal proceeding:
(i) if prior to the Determination Date the Determining Body has
affirmatively made a determination that Indemnitee met the Standard of
Conduct (not including a determination deemed to have been made by
inaction), the Corporation may, in its sole discretion, after notice to
Indemnitee, assume all responsibility for the defense of the Claim with
counsel satisfactory to Indemnitee (who shall not, except with the written
consent of Indemnitee, be counsel to the Corporation), and, in any event,
the Corporation and the Indemnitee each shall keep the other informed as to
the progress of the defense of the Claim, including prompt disclosure of
any proposals for settlement; provided that if the Corporation is a party
to the Claim and Indemnitee reasonably determines that there is any
conflict between the positions of the Corporation and Indemnitee, with
respect to the Claim or otherwise, then Indemnitee shall be entitled to
conduct his defense with counsel of his choice
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at the Corporation's expense in accordance with the terms and conditions of
this Section 9; and provided further that Indemnitee shall in any event be
entitled at his expense to employ counsel chosen by him to participate in
the defense of the Claim; and
(ii) The Corporation shall not be obligated to indemnify Indemnitee
for any amount paid in a settlement that the Corporation has not approved.
The Corporation shall fairly consider any proposals by Indemnitee for
settlement of the Claim. If the Corporation proposes a settlement of the
Claim and such settlement is acceptable to the person asserting the Claim,
or the Corporation believes a settlement proposed by the person asserting
the Claim should be accepted, it shall inform Indemnitee of the terms of
such proposed settlement and shall fix a reasonable date by which
Indemnitee shall respond. If Indemnitee agrees to such terms, he shall
execute such documents as shall be necessary to make final the settlement.
If Indemnitee does not agree with such terms, Indemnitee may proceed with
the defense of the Claim in any manner he chooses, provided that if
Indemnitee is not successful on the merits or otherwise, the Corporation's
obligation to indemnify such Indemnitee as to any Expenses incurred
following his disagreement shall be limited to the lesser of (A) the total
Expenses incurred by Indemnitee following his decision not to agree to such
proposed settlement or (B) the amount that the Corporation would have paid
pursuant to the terms of the proposed settlement.
(g) In the case of any Claim involving a proposed, threatened or
pending criminal proceeding, Indemnitee shall be entitled to conduct the defense
of the Claim with counsel of his choice and to make all decisions with respect
thereto; provided, that the Corporation shall not be obliged to indemnify
Indemnitee for any amount paid in settlement of such a Claim unless the
Corporation has approved such settlement.
(h) After notifying the Corporation of the existence of a Claim in
accordance with Section 9.1(c), Indemnitee may from time to time request the
Corporation to pay the Expenses (other than judgments, fines, penalties or
amounts paid in settlement) that he incurs in pursuing a defense of the Claim
prior to the time that the Determining Body determines whether the Standard of
Conduct has been met. The Disbursing Officer shall pay to Indemnitee the amount
requested (regardless of Indemnitee's apparent ability to repay such amount)
upon receipt of an undertaking by or on behalf of Indemnitee to repay such
amount along with any other amounts advanced or paid after the Determination
Date in accordance with the provisions of this Section 9.1, if (i) the
Determining Body determines prior to the Determination Date that Indemnitee did
not meet the Standard of Conduct or (ii) Indemnitee is prohibited from being
indemnified by the Corporation by virtue of the provisions of Delaware Law.
(i) After it has been determined that the Standard of Conduct has been
met, for so long as and to the extent that the Corporation is required to
indemnify Indemnitee under this Section 9, the provisions of Section 9.1(h)
shall continue to apply with respect to Expenses incurred after such time except
that (i) no undertaking shall be required of Indemnitee and (ii) the Disbursing
Officer shall pay to Indemnitee the amount of any fines, penalties or judgments
against him that have become final and for which he is entitled to
indemnification hereunder, and any amount of indemnification ordered to be paid
to him by a court.
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(j) Any determination by the Corporation with respect to settlement of
a Claim shall be made by the Determining Body.
(k) All determinations and judgments made by the Determining Body
hereunder shall be made in good faith.
(l) The Corporation and Indemnitee shall keep confidential to the
extent permitted by law and their fiduciary obligations all facts and
determinations provided pursuant to or arising out of the operation of this
Section 9 and the Corporation and Indemnitee shall instruct its or his agents
and employees to do likewise.
9.2 Enforcement. The rights provided by this Section 9 shall be
enforceable by Indemnitee in any court of competent jurisdiction. If Indemnitee
seeks a judicial adjudication of his rights under this Section 9 Indemnitee
shall be entitled to recover from the Corporation, and shall be indemnified by
the Corporation against, any and all Expenses actually and reasonably incurred
by him in connection with such proceeding but only if he prevails therein. If
it shall be determined that Indemnitee is entitled to receive part but not all
of the relief sought, then the Indemnitee shall be entitled to be reimbursed for
all Expenses incurred by him in connection with such judicial adjudication if
the amount to which he is determined to be entitled exceeds 50% of the amount of
his claim. Otherwise, the Expenses incurred by Indemnitee in connection with
such judicial adjudication shall be appropriately prorated.
9.3 Reformation. If any provision of this Section 9 is determined by a
court having jurisdiction over the matter to violate or conflict with applicable
law, the court shall be empowered to modify or reform such provision so that, as
modified or reformed, such provision provides the maximum indemnification
permitted by Delaware Law, and such provision, as so modified or reformed, and
the balance of this Section 9 shall be applied in accordance with their terms.
Without limiting the generality of the foregoing, if any portion of this Section
9 shall be invalidated on any ground, the Corporation shall nevertheless
indemnify an Indemnitee to the full extent permitted by any applicable portion
of this Section 9 that shall not have been invalidated and to the full extent
permitted by law with respect to that portion that has been invalidated.
9.4 Successors and Assigns. This Section 9 shall be binding upon the
Corporation, its successors and assigns, and shall inure to the benefit of the
Indemnitee's heirs, administrators, executors, personal representatives and
assigns and to the benefit of the Corporation, its successors and assigns.
9.5 Amendments. No amendment to or modification of this Section 9 or any
portion hereof shall limit any Indemnitee's entitlement to indemnification in
accordance with the provisions hereof with respect to any acts or omissions of
Indemnitee which occur or accrue prior to such amendment or modification.
9.6 Contribution. If the indemnity provided for in this Section 9 is for
any reason unavailable or insufficient to hold harmless an Indemnitee with
respect to any Expenses, the Corporation shall make a contribution to the
Indemnitee for such liabilities to which the Indemnitee may be subject in such
proportion as is appropriate to reflect the intent of this Section 9.
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9.7 Reliance. Each person who is serving as an Indemnitee shall be deemed
to be doing so in reliance upon the indemnification provided for in this Section
9. The rights of an Indemnitee hereunder shall be contract rights and shall
vest in the Indemnitee upon the occurrence of the event, or the first event in a
chain of events, giving rise to such Claim; provided that the adoption of the
Bylaws shall not affect any right or obligation of the Corporation or of any
Indemnitee which existed prior to such adoption.
9.8 Nonexclusivity. (a) The rights conferred herein on any person shall
(i) be severable, (ii) not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, certificate of incorporation,
contract or other agreement, authorization of stockholders or disinterested
directors or otherwise, and (iii) continue as to an Indemnitee who has ceased to
serve on behalf of the Corporation in respect of all claims arising out of
action (or inaction) occurring prior to such time.
(b) It is the intent of the Corporation to indemnify and hold harmless
Indemnitee to the fullest extent permitted by Delaware Law, as such law exists
or may be amended after the date the Bylaws are adopted, but, in the case of any
such amendment, only to the extent that such amendment permits the Company to
provide broader indemnification rights than Delaware Law permitted prior to the
amendment, notwithstanding any provision in Section 9 to the contrary.
9.9 Insurance. The Corporation may procure or maintain insurance or other
similar arrangement on behalf of any Indemnitee or any person who is or was an
employee or agent of the Corporation, or is serving at the request of the
Corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against any liability asserted against or
incurred by him in his capacity as such, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of Delaware Law. Without limiting the power
of the Corporation to procure or maintain any other kind of insurance or similar
arrangement, the Corporation may create a trust fund or other form of self-
insurance arrangement for the benefit of any Indemnitee or such other person to
the fullest extent authorized by Delaware Law.
SECTION 10
GENERAL PROVISIONS
10.1 Fixing Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express unanimous consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect to any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board may fix in advance a record date
which shall not be more than 60 nor less than ten days before the date of such
meeting, nor more than 60 days prior to any other action. Except as otherwise
provided in the Bylaws, a determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting, provided, however, that the Board may fix a new record date for
the adjourned meeting.
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10.2 Dividends. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation. Before payment
of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the directors shall
think conducive to the interest of the Corporation, and the directors may modify
or abolish any such reserve in the manner in which it was created.
10.3 Checks. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board may from time to time designate.
10.4 Fiscal Year. The fiscal year of the Corporation shall be fixed by
resolution of the Board.
10.5 Seal. The corporate seal shall have inscribed thereon the name of the
Corporation and shall be in such form as may be approved from time to time by
the incorporator, or, after the appointment of directors, the Board of
Directors. The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
SECTION 11
DEFINITIONS
The following terms, for all purposes of the Bylaws, shall have the
following meaning:
"Affiliate" or "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations
promulgated under the Securities Exchange Act of 1934, as amended (the term
"registrant" in such Rule 12b-2 meaning in this case the Corporation);
provided, however, that in no event shall the Corporation, any of its
Subsidiaries, any employee benefit plan or any of the other persons or
entities exempted from the definition of Interested Stockholder as provided
in the Certificate of Incorporation be deemed to be an Affiliate or
Associate of any Interested Stockholder.
A person shall be deemed to be the "Beneficial Owner" of any shares of
Capital Stock (regardless whether owned of record):
(1) Which that person or any of its Affiliates or
Associates, directly or indirectly, owns beneficially;
(2) Which such person or any of its Affiliates or Associates
has (A) the right to acquire (whether exercisable immediately or
only after the passage of time) pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion
rights, exchange rights, warrants or options,
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or otherwise, or (B) the right to vote pursuant to any agreement,
arrangement or understanding; or
(3) Which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates
or Associates has any agreement, arrangement or understanding for
the purpose of acquiring, holding, voting or disposing of any
shares of voting capital stock of the Corporation or any
Subsidiaries.
"Capital Stock" means any Common Stock, Preferred Stock or other
shares of capital stock of the Corporation.
"Certificate of Incorporation" shall mean the certificate of
incorporation of the Corporation, as it may be amended from time to time.
"Claim" shall mean any threatened, pending or completed claim, action,
suit or proceeding, including appeals, whether civil, criminal,
administrative or investigative and whether made judicially or extra-
judicially, including any action by or in the right of the Corporation, or
any separate issue or matter therein, as the context requires.
"Common Stock" shall mean the common stock of the Corporation, as
provided for in the Certificate of Incorporation.
"Continuing Director" shall have the meaning ascribed to it in the
Certificate of Incorporation.
"Delaware Law" shall mean the General Corporation Law of the State of
Delaware.
"Determining Body" shall mean (i) those members of the Board of
Directors who do not have a direct or indirect interest the Claim for which
indemnification is being sought ("Impartial Directors"), if there are at
least two Impartial Directors, (ii) a committee of at least two Impartial
Directors appointed by the Board or a duly authorized committee thereof
(regardless of whether the directors voting on such appointment are
Impartial Directors) and composed of Impartial Directors or (iii) if there
are fewer than two Impartial Directors or if the Board or a duly authorized
committee thereof so directs (regardless whether the members thereof are
Impartial Directors), independent legal counsel, which may be the regular
outside counsel of the Corporation, as determined by the Impartial
Directors or, if no such directors exist, the full Board.
"Disbursing Officer" shall mean the Treasurer of the Corporation or,
if the Treasurer has a direct or indirect interest in the Claim for which
indemnification is being sought, any officer who does not have such an
interest and who is designated by the Chairman of the Board to be the
Disbursing Officer with respect to indemnification requests related to the
Claim, which designation shall be made promptly after receipt of the
initial request for indemnification with respect to such Claim.
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"Expenses" shall mean any expenses or costs, including, without
limitation, attorney's fees, judgments, punitive or exemplary damages,
fines, excise taxes or amounts paid in settlement.
"Indemnitee" shall mean any person who is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation
as a director, officer or fiduciary of another corporation, partnership,
joint venture, trust or other enterprise (including, without limitation,
employee benefit plans of the Corporation).
"Preferred Stock" shall mean the preferred stock of the Corporation,
as provided for in the Certificate of Incorporation.
"Subsidiary" means any corporation, partnership or other entity of
which the Corporation, directly or indirectly, owns voting stock or similar
interests having a majority of the votes entitled to be cast.
"Voting Stock" means the outstanding shares of Capital Stock entitled
to vote generally in an election of directors.
SECTION 12
AMENDMENTS
The Corporation's Bylaws may be altered, amended, or repealed or new Bylaws
may be adopted by:
(a) the stockholders, but only upon the affirmative vote of holders of
not less than 80% of the Voting Stock, voting together as a single class;
or
(b) the Board, but only upon the affirmative vote of a majority of the
Continuing Directors.
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EXHIBIT 5.1
JONES, WALKER
WAECHTER, POITEVENT
CARRERE & DENEGRE, L.L.P.
January 9, 1998
Horizon Offshore, Inc.
2500 City West Boulevard
Suite 2200
Houston, Texas 77042
RE: Horizon Offshore, Inc.
Registration Statement on Form S-1
registering up to $92,000,000 of shares of Common Stock
Gentlemen:
We have acted as your counsel in connection with the preparation of the
registration statement on Form S-1 (the "Registration Statement") filed by you
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, on the date hereof, with respect to the registration of shares of
Common Stock, $1.00 par value per share (the "Shares"), of Horizon Offshore,
Inc. having an aggregate initial public offering price of up to $92,000,000.
In so acting, we have examined originals, or photostatic or certified
copies, of such records of the Company, certificates of officers of the Company
and of public officials, and such other documents as we have deemed relevant. In
such examination, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all documents submitted to us as certified or photostatic
copies and the authenticity of the originals of such documents.
Based upon the foregoing, we are of the opinion that the Shares, when
issued and sold upon the terms described in the Registration Statement, will be
validly issued and outstanding, fully paid and non-assessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the prospectus included
therein under the caption "Legal Matters." In giving this consent, we do not
admit that we are within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the general rules and
regulations of the Commission promulgated thereunder.
Very truly yours,
/S/ JONES, WALKER, WAECHTER, POITEVENT,
CARRERE & DENEGRE
JONES, WALKER, WAECHTER, POITEVENT,
CARRERE & DENEGRE, L.L.P.
<PAGE>
EXHIBIT 10.1
================================================================================
INDEMNITY AGREEMENT
Between
HORIZON OFFSHORE, INC.
and
_____________________
================================================================================
<PAGE>
INDEMNITY AGREEMENT
This Agreement is made by and between HORIZON OFFSHORE, INC., a Delaware
corporation (the "Corporation"), and _______________________ ("Indemnitee").
In consideration of Indemnitee's continued service after the date hereof,
the Corporation and Indemnitee do hereby agree as follows:
1. AGREEMENT TO SERVE. Indemnitee shall serve or continue to serve as a
director of the Corporation and any other corporation, subsidiary, partnership,
joint venture or trust or other enterprise of which he is serving at the request
of the Corporation and agrees to serve in that capacity for so long as he is
duly elected or appointed and qualified or until such earlier time as he tenders
his resignation in writing.
2. DEFINITIONS. As used in this Agreement:
(a) The term "Claim" shall mean any threatened, pending or completed
claim, action, suit or proceeding, including appeals, whether civil, criminal,
administrative or investigative and whether made judicially or extra-judicially,
including any action by or in the right of the Corporation or any separate issue
or matter therein, as the context requires.
(b) The term "Determining Body" shall mean (i) those members of the
Board of Directors who do not have a direct or indirect interest in the Claim
for which indemnification is being sought ("Impartial Directors"), if there are
at least two Impartial Directors, or (ii) a committee of at least two directors
appointed by the Board or a duly authorized committee thereof (regardless
whether the directors voting on such appointment are Impartial Directors) and
composed of Impartial Directors or (iii) if there are fewer than two Impartial
Directors or if the Board of Directors or a duly authorized committee thereof so
directs (regardless whether the members thereof are Impartial Directors),
independent legal counsel, which may be the regular outside counsel of the
Corporation, as determined by the Impartial Directors or, if no such directors
exist, the full Board of Directors.
(c) The term "Disbursing Officer" shall mean the Treasurer of the
Corporation or, if the Treasurer has a direct or indirect interest in the Claim
for which indemnification is being sought, any officer who does not have such an
interest and who is designated by the Chairman of the Board to be the Disbursing
Officer with respect to indemnification requests related to the Claim, which
designation shall be made promptly after receipt of the initial request for
indemnification with respect to such Claim.
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(d) The term "Expenses" shall mean any expenses or costs including,
without limitation, attorney's fees, judgments, punitive or exemplary damages,
fines, excise taxes or amounts paid in settlement. If any of the foregoing
amounts paid on behalf of Indemnitee are not deductible by Indemnitee for
federal or state income tax purposes, the Corporation shall reimburse Indemnitee
for any resulting tax liability with respect thereto by paying to Indemnitee an
amount which, after taking into account taxes on such amount, equals
Indemnitee's incremental tax liability as a result of such expense or cost.
3. LIMITATION OF LIABILITY. To the fullest extent permitted by the
Certificate of Incorporation and By-laws of the Corporation (each as in effect
on the date hereof and, if and to the extent such provisions are amended to
permit further limitations, in effect at any time prior to the determination of
liability that would exist but for the provisions of this Agreement) Indemnitee
shall not be liable for breach of his fiduciary duty as a director.
4. MAINTENANCE OF INSURANCE. The Corporation currently intends to
purchase policies of insurance that provide insurance protection to its
directors, officers and employees against some liabilities which may be incurred
by them on account of their services to the Corporation. The Corporation may,
but shall not be required to, continue all or part of such insurance in effect.
If such insurance is maintained by the Corporation, the insurance, to the extent
of the coverage it provides, shall be primary and indemnification shall be made
pursuant to this Agreement only to the extent that the director is not
reimbursed pursuant to such insurance coverage. If such insurance is not
maintained by the Corporation, the Indemnitee shall be entitled to
indemnification by the Corporation in accordance with the provisions of this
Agreement.
5. ADDITIONAL INDEMNITY.
(a) To the extent any Expenses incurred by Indemnitee are in excess of
the amounts reimbursed or indemnified pursuant to the provisions of Section 4
hereof, the Corporation shall indemnify, defend and hold harmless Indemnitee
against any Expenses actually and reasonably incurred by Indemnitee (as they are
incurred) in connection with any Claim against Indemnitee (whether as a subject
of or party to, or a proposed or threatened subject of or party to, the Claim),
or involving Indemnitee solely as a witness or person required to give evidence,
by reason of Indemnitee's position (i) as a director of the Corporation, (ii) as
a director of any subsidiary of the Corporation or as a fiduciary with respect
to any employee benefit plan of the Corporation, or (iii) as a director,
officer, partner, employee or agent of another corporation, partnership, joint
venture, trust or other for profit or not for profit entity or enterprise, if
such position is or was held at the request of the Corporation, whether relating
to service in such position before or after the effective date of this
Agreement, if (A) the Indemnitee is successful in his defense of the Claim on
the merits or otherwise or (B) the Indemnitee has been found by the Determining
Body to have met the Standard of Conduct (as hereinafter defined); provided that
no indemnification shall be made in respect of any Claim as to which Indemnitee
shall have been adjudicated in a final judgment to be liable for willful or
intentional misconduct in the performance of his duty to the Corporation or to
have obtained an improper personal benefit, unless, and only to the extent that,
a court shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such Expenses which the court
shall deem proper.
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(b) For purposes of this Agreement, the "Standard of Conduct" is met
when conduct by an Indemnitee with respect to which a Claim is asserted was
conduct performed in good faith which Indemnitee reasonably believed to be in,
or not opposed to, the best interest of the Corporation, and, in the case of a
Claim which is a criminal action or proceeding, conduct that the Indemnitee had
no reasonable cause to believe was unlawful. The termination of any Claim by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not meet the Standard of Conduct.
(c) Promptly upon becoming aware of the existence of any Claim as to
which Indemnitee may be indemnified for Expenses and as to which Indemnitee
desires to obtain indemnification, Indemnitee shall notify the Chairman of the
Board of the Corporation, but the failure to promptly notify the Chairman of the
Board shall not relieve the Corporation from any obligation under this
Agreement. Upon receipt of such request, the Chairman of the Board shall
promptly advise the members of the Board of Directors of the request and that
the establishment of a Determining Body with respect to Indemnitee's request for
indemnification as to the Claim will be presented at the next regularly
scheduled meeting of the Board. If a meeting of the Board of Directors is not
regularly scheduled within 120 calendar days of the date the Chairman of the
Board receives notice of the Claim, the Chairman of the Board shall cause a
special meeting of the Board of Directors to be called within such period in
accordance with the provisions of the Corporation's By-laws. After the
Determining Body has been established, the Determining Body shall inform the
Indemnitee of the constitution of the Determining Body and Indemnitee shall
provide the Determining Body with all facts relevant to the Claim known to such
Indemnitee, and deliver to the Determining Body all documents relevant to the
Claim in Indemnitee's possession. Before the 60th day after its receipt from
the Indemnitee of such information (the "Determination Date"), together with
such additional information as the Determining Body may reasonably request of
Indemnitee prior to such date (the receipt of which shall not begin a new 60-day
period) the Determining Body shall determine whether or not Indemnitee has met
the Standard of Conduct and shall advise Indemnitee of its determination. If
Indemnitee shall have supplied the Determining Body with all relevant
information, including all additional information reasonably requested by the
Determining Body, any failure of the Determining Body to make a determination by
or on the Determination Date as to whether the Standard of Conduct was met shall
be deemed to be a determination that the Standard of Conduct was met by
Indemnitee.
(d) If at any time during the 60-day period ending on the
Determination Date, Indemnitee becomes aware of any relevant facts not
theretofore provided by him to the Determining Body, Indemnitee shall inform the
Determining Body of such facts, unless the Determining Body has obtained such
facts from another source. The provision of such facts to the Determining Body
shall not begin a new 60 day period.
(e) The Determining Body shall have no power to revoke a determination
that Indemnitee met the Standard of Conduct unless Indemnitee (i) submits to the
Determining Body at any time during the 60 days prior to the Determination Date
fraudulent information, (ii) fails to comply with the provisions of Section 4(d)
hereof, or (iii) intentionally fails to submit information or documents relevant
to the Claim reasonably requested by the Determining Body prior to the
Determination Date.
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<PAGE>
(f) In the case of any Claim not involving any threatened or pending
criminal proceeding,
(i) if prior to the Determination Date the Determining Body has
affirmatively made a determination that the Indemnitee met the Standard of
Conduct (not including a determination deemed to have been made by inaction),
the Corporation may, except as otherwise provided below, individually or jointly
with any other indemnifying party similarly notified, assume the defense thereof
with counsel reasonably satisfactory to the Indemnitee (who shall not, except
with the written consent of Indemnitee, be counsel to the Corporation). If the
Corporation assumes the defense of the Claim, it shall notify Indemnitee of such
action and keep Indemnitee informed as to the progress of such defense,
including any proposed settlements, so that Indemnitee may make an informed
decision as to the need for separate counsel. After notice from the Corporation
that it is assuming the defense of the Claim, it will not be liable to
Indemnitee under this Agreement for any legal or other expenses subsequently
incurred by Indemnitee in connection with the defense other than reasonable
costs of investigation or as otherwise provided below. Indemnitee shall have
the right to employ its own counsel in such action, suit or proceeding but the
fees and expenses of such counsel incurred after such notice from the
Corporation of its assumption of the defense shall be at the expense of
Indemnitee unless (A) the employment of counsel by Indemnitee has been
authorized by the Corporation, (B) Indemnitee shall have concluded reasonably
that there may be a conflict of interest between the Corporation and Indemnitee
in the conduct of the defense of such action or (C) the Corporation shall not in
fact have employed counsel to assume the defense of such action, in each of
which cases the fees and expenses of counsel shall be at the expense of the
Corporation. The Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or in the right of the Company or as to
which Indemnitee shall have made the conclusion provided for in (B) above; and
(ii) the Corporation shall fairly consider any proposals by
Indemnitee for settlement of the Claim. If the Corporation proposes a settlement
of the Claim and such settlement is acceptable to the person asserting the
Claim, or the Corporation believes a settlement proposed by the person asserting
the Claim should be accepted, it shall inform Indemnitee of the terms of such
proposed settlement and shall fix a reasonable date by which Indemnitee shall
respond. If Indemnitee agrees to such terms, he shall execute such documents as
shall be necessary to make final the settlement. If Indemnitee does not agree
with such terms, Indemnitee may proceed with the defense of the Claim in any
manner he chooses, provided that if Indemnitee is not successful on the merits
or otherwise, the Corporation's obligation to indemnify such Indemnitee as to
any Expenses incurred following his disagreement shall be limited to the lesser
of (A) the total Expenses incurred by Indemnitee following his decision not to
agree to such proposed settlement or (B) the amount that the Corporation would
have paid pursuant to the terms of the proposed settlement. If, however, the
proposed settlement would impose upon Indemnitee any requirement to act or
refrain from acting that would materially interfere with the conduct of
Indemnitee's affairs, Indemnitee may refuse such settlement and continue his
defense of the Claim, if he so desires, at the Corporation's expense in
accordance with the terms and conditions of this Agreement without regard to the
limitations imposed by the immediately preceding sentence. In any event, the
Corporation shall not be obligated to indemnify Indemnitee for any amount paid
in a settlement that the Corporation has not approved.
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(g) In the case of any Claim involving a proposed, threatened or
pending criminal proceeding, Indemnitee shall be entitled to conduct the defense
of the Claim with counsel of his choice and to make all decisions with respect
thereto; provided that the Corporation shall not be obliged to indemnify
Indemnitee for any amount paid in settlement of such a Claim unless the
Corporation has approved such settlement.
(h) After notifying the Corporation of the existence of a Claim,
Indemnitee may from time to time request the Corporation to pay the Expenses
(other than judgments, fines, penalties or amounts paid in settlement) that he
incurs in pursuing a defense of the Claim prior to the time that the Determining
Body determines whether the Standard of Conduct has been met. The Disbursing
Officer shall pay to Indemnitee the amount requested (regardless of Indemnitee's
apparent ability to repay such amount) upon receipt of an undertaking by or on
behalf of Indemnitee to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation under the
circumstances.
(i) After it has been determined that the Standard of Conduct has been
met, for so long as and to the extent that the Corporation is required to
indemnify Indemnitee under this Agreement, the provisions of Section 5(h) shall
continue to apply with respect to Expenses incurred after such time except that
(i) no undertaking shall be required of Indemnitee and (ii) the Disbursing
Officer shall pay to Indemnitee the amount of any fines, penalties or judgments
against him which have become final and for which he is entitled to
indemnification hereunder, and any amount of indemnification ordered to be paid
to him by a court.
(j) Any determination by the Corporation with respect to settlement of
a Claim shall be made by the Determining Body.
(k) All determinations and judgments made by the Determining Body
hereunder shall be made in good faith.
(l) The Corporation and Indemnitee shall keep confidential to the
extent permitted by law and their fiduciary obligations all facts and
determinations provided pursuant to or arising out of the operation of this
Agreement and the Corporation and Indemnitee shall instruct its or his agents
and employees to do likewise.
6. ENFORCEMENT.
(a) The rights provided by this Agreement shall be enforceable by
Indemnitee in any court of competent jurisdiction.
(b) If Indemnitee seeks a judicial adjudication of his rights under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Corporation, and shall be indemnified by the
Corporation against, any and all expenses actually and reasonably incurred by
him in connection with such proceeding, but only if he prevails therein. If it
shall be determined that Indemnitee is entitled to receive part but not all of
the relief sought, then the Indemnitee shall be entitled to be reimbursed for
all expenses incurred by him in connection with such judicial adjudication if
the amount to which he is determined to be entitled exceeds 50% of the
5
<PAGE>
amount of his claim. Otherwise, the expenses incurred by Indemnitee in
connection with such judicial adjudication shall be appropriately prorated.
(c) In any judicial proceeding described in this Section 6, the
Corporation shall bear the burden of proving that Indemnitee is not entitled to
the relief sought, even if the Determining Body prior to the Determination Date
determined that Indemnitee failed to meet the Standard of Conduct. If prior to
the Determination Date the Determining Body failed to make a determination that
Indemnitee did not meet the Standard of Conduct, it shall not be a defense to
such suit that Indemnitee did not meet the Standard of Conduct.
7. SAVING CLAUSE. If any provision of this Agreement is determined by a
court having jurisdiction over the matter to violate or conflict with applicable
law, the court shall be empowered to modify or reform such provision so that, as
modified or reformed, such provision provides the maximum indemnification
permitted by law and such provision, as so modified or reformed, and the balance
of this Agreement, shall be applied in accordance with their terms. Without
limiting the generality of the foregoing, if any portion of this Agreement shall
be invalidated on any ground, the Corporation shall nevertheless indemnify an
Indemnitee to the full extent permitted by any applicable portion of this
Agreement that shall not have been invalidated and to the full extent permitted
by law with respect to that portion that has been invalidated.
8. NON-EXCLUSIVITY. (a) The indemnification and advancement of Expenses
provided by or granted pursuant to this Agreement shall not be deemed exclusive
of any other rights to which Indemnitee is or may become entitled under any
statute, certificate of incorporation, by-law, authorization of stockholders or
directors, agreement, or otherwise.
(b) It is the intent of the Corporation by this Agreement to indemnify
and hold harmless Indemnitee to the fullest extent permitted by law, so that if
applicable law would permit the Corporation to provide broader indemnification
rights than are currently permitted, the Corporation shall indemnify and hold
harmless Indemnitee to the fullest extent permitted by applicable law
notwithstanding that the other terms of this Agreement would provide for lesser
indemnification.
9. CONFIDENTIALITY. The Corporation and Indemnitee shall keep
confidential to the extent permitted by law and their fiduciary obligations all
information and determinations provided pursuant to or arising out of the
operations of this Agreement and the Corporation and Indemnitee shall instruct
its or his agents and employees to do likewise.
10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute the original.
11. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of Delaware.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Indemnitee and upon the Corporation, its successors and assigns, and shall inure
to the benefit of the Indemnitee's
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heirs, personal representatives, and assigns and to the benefit of the
Corporation, its successors and assigns.
13. AMENDMENT. No amendment, modification, termination or cancellation of
this Agreement shall be effective unless made in writing signed by the
Corporation and Indemnitee. Notwithstanding any amendment, modification,
termination or cancellation of this Agreement or any portion hereof, Indemnitee
shall be entitled to indemnification in accordance with the provisions hereof
with respect to any acts or omissions of Indemnitee which occur prior to such
amendment, modification, termination or cancellation.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and signed as of the date and year first above written.
HORIZON OFFSHORE, INC.
By:
-----------------------------
INDEMNITEE
--------------------------------
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EXHIBIT 10.2
REIMBURSEMENT AND INDEMNITY AGREEMENT
This REIMBURSEMENT AND INDEMNITY AGREEMENT, dated and effective as of June
10, 1997 (the "Agreement"), is by and between Horizon Offshore, Inc., a Delaware
corporation ("Horizon"), and Elliott Associates, L.P., a Delaware limited
partnership ("Elliott").
WITNESSETH:
-----------
WHEREAS, Elliott has caused to be issued that certain Letter of Credit (the
"Letter of Credit") required under the terms of the Settlement Agreement dated
as of the date hereof (the "Settlement Agreement") relating to the "ODS Mariner"
by and among HLS Offshore, L.L.C., Mannai Marine Company Limited and RANA
S.r.l.;
WHEREAS, Elliott has also provided the Guarantee (the "Guarantee") called
for by the Settlement Agreement; and
WHEREAS, Horizon has agreed to reimburse and indemnify Elliott for amounts
paid by it in respect of the Letter of Credit and Guarantee in accordance with
the terms whereof.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. Reimbursement and Indemnity Obligation.
(a) Horizon hereby irrevocably and unconditionally agrees to reimburse,
indemnify and hold Elliott harmless against the amounts required to be paid by
Elliott in respect of the Letter of Credit and Guarantee.
(b) Horizon hereby acknowledges and agrees that its obligation to
reimburse, indemnify and hold harmless Elliott shall be absolute and
unconditional irrespective of any act or omission on the part of Elliott or any
circumstance which might otherwise constitute a defense available to, or a
discharge of, his obligations hereunder. Horizon agrees that upon demand for
any payment from Elliott that he will tender to Elliott the amount due by it in
accordance with paragraph (a) above as and when requested by Elliott.
(c) If Horizon shall fail to make any payment required by this Agreement to
Elliott, Horizon and Elliott agree that, at Elliott's election, any such amount
shall be deemed to be advanced to Horizon without any further action on
Horizon's part pursuant to those certain Convertible Subordinated Notes (in such
amounts as Elliott may specify to Horizon) made by Horizon and payable to
affiliates of Elliott.
(d) If Horizon shall fail to make any payment required by this Agreement to
Elliott and
<PAGE>
Elliott shall not make the election specified in paragraph (c), then in addition
to any other rights that Elliott may have under applicable law or by agreement,
Elliott shall be entitled to set-off against and deduct from all amounts that
may be due and payable by Elliott to Horizon under any other agreement, the
amount of any payment that is due from Horizon pursuant to this Agreement which
is not paid upon demand plus interest thereon at ten percent (10%) per annum.
2. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas without the application of any conflicts of law
provisions.
(b) This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(c) This Agreement embodies the entire Agreement and understanding of the
parties hereto in respect of the subject matter contained herein. This
Agreement supersedes all prior agreements and understandings (whether written or
oral) between the parties with respect to such subject matter.
(d) This Agreement may be amended or modified only by written agreement of
the parties hereto.
(e) This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. Nothing in this
Agreement, express or implied, is intended to confer upon any person other than
the parties hereto and their respective successors and assigns, any rights,
remedies, obligations or liabilities under, or by reason of, this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first above written.
ELLIOTT ASSOCIATES, L.P. HORIZON OFFSHORE, INC.
By: Elliott Associates, Inc., By: /s/ H.D. Loyd, III
as General Partner ----------------------------
H. D. Loyd, III, President
By: /s/ Jonathan D. Pollock
-----------------------------------
Jonathan D. Pollock, Vice President
<PAGE>
EXHIBIT 10.3
STOCK INCENTIVE PLAN
OF
HORIZON OFFSHORE, INC.
January 1998
<PAGE>
HORIZON OFFSHORE, INC.
STOCK INCENTIVE PLAN
1. PURPOSE. The purpose of the Stock Incentive Plan (the "Plan") of
Horizon Offshore, Inc. ("Horizon") is to increase stockholder value and to
advance the interests of Horizon and its subsidiaries (collectively, the
"Company") by furnishing a variety of economic incentives (the "Incentives")
designed to attract, retain and motivate key employees, officers and directors
and to strengthen the mutuality of interests between such employees, officers
and directors and Horizon's stockholders. Incentives consist of opportunities
to purchase or receive shares of common stock, $1.00 par value per share, of
Horizon (the "Common Stock"), on terms determined under the Plan. As used in the
Plan, the term "subsidiary" means any corporation of which Horizon owns
(directly or indirectly) within the meaning of Section 425(f) of the Internal
Revenue Code of 1986, as amended (the "Code"), 50% or more of the total combined
voting power of all classes of stock.
2. ADMINISTRATION.
2.1. COMPOSITION. The Plan shall be administered by the Compensation
Committee of the Board of Directors of Horizon or by a subcommittee thereof
(the "Committee"). The Committee shall consist of not fewer than two
members of the Board of Directors, each of whom shall (a) qualify as a
"non-employee director" under Rule 16b-3 under the Securities Exchange Act
of 1934 (the "1934 Act") or any successor rule, and (b) qualify as an
"outside director" under Section 162(m) of the Code.
2.2. AUTHORITY. The Committee shall have plenary authority to award
Incentives under the Plan, to interpret the Plan, to establish any rules or
regulations relating to the Plan that it determines to be appropriate, to
enter into agreements with participants as to the terms of the Incentives
(the "Incentive Agreements") and to make any other determination that it
believes necessary or advisable for the proper administration of the Plan.
Its decisions in matters relating to the Plan shall be final and conclusive
on the Company and participants. The Committee may delegate its authority
hereunder to the extent provided in Section 3 hereof. The Committee shall
not have authority to award Incentives under the Plan to directors who are
not also employees of the Company ("Outside Directors"). Outside Directors
may receive awards under the Plan only as specifically provided in Section
9 hereof.
3. ELIGIBLE PARTICIPANTS. Key employees and officers of the Company
(including officers who also serve as directors of the Company) and consultants
and advisors to the Company shall become eligible to receive Incentives under
the Plan when designated by the Committee. Employees may be designated
individually or by groups or categories, as the Committee deems appropriate.
With respect to participants not subject to Section 16 of the 1934 Act or
Section 162(m) of the Code, the Committee may delegate to appropriate personnel
of the Company its authority to designate participants, to determine the size
and type of Incentives to be received by those participants and to determine or
modify performance objectives for those participants. Outside Directors may
participate in the Plan only as specifically provided in Section 9 hereof.
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4. TYPES OF INCENTIVES. Incentives may be granted under the Plan to
eligible participants in any of the following forms, either individually or in
combination, (a) incentive stock options and non-qualified stock options; (b)
restricted stock; and (c) other stock-based awards ("Other Stock-Based Awards").
5. SHARES SUBJECT TO THE PLAN.
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section
10.5, a total of 1,900,000 shares of Common Stock are authorized to be
issued under the Plan. Incentives with respect to no more than 400,000
shares of Common Stock may be granted through the Plan to a single
participant in one calendar year. In the event that an Incentive granted
hereunder expires or is terminated or canceled prior to exercise or
payment, any shares of Common Stock that were issuable thereunder may again
be issued under the Plan. In the event that shares of Common Stock are
issued as Incentives under the Plan and thereafter are forfeited or
reacquired by the Company pursuant to rights reserved upon issuance
thereof, such forfeited and reacquired shares may again be issued under the
Plan. If an Other Stock-Based Award is to be paid in cash by its terms,
the Committee need not make a deduction from the shares of Common Stock
issuable under the Plan with respect thereto. If and to the extent that an
Other Stock-Based Award may be paid in cash or shares of Common Stock, the
total number of shares available for issuance hereunder shall be debited by
the number of shares payable under such Incentive, provided that upon any
payment of all or part of such Incentive in cash, the total number of
shares available for issuance hereunder shall be credited with the
appropriate number of shares represented by the cash payment, as determined
in the sole discretion of the Committee. Additional rules for determining
the number of shares granted under the Plan may be made by the Committee,
as it deems necessary or appropriate.
5.2. TYPE OF COMMON STOCK. Common Stock issued under the Plan may be
authorized and unissued shares or issued shares held as treasury shares.
6. STOCK OPTIONS. A stock option is a right to purchase shares of Common
Stock from Horizon. Stock options granted under this Plan may be incentive
stock options or non-qualified stock options. Any option that is designated as
a non-qualified stock option shall not be treated as an incentive stock option.
Each stock option granted by the Committee under this Plan shall be subject to
the following terms and conditions:
6.1. PRICE. The exercise price per share shall be determined by the
Committee, subject to adjustment under Section 10.5; provided that in no
event shall the exercise price be less than the Fair Market Value of a
share of Common Stock on the date of grant, except that in connection with
an acquisition, consolidation, merger or other extraordinary transaction,
options may be granted at less than the then Fair Market Value in order to
replace options previously granted by one or more parties to such
transaction (or their affiliates) so long as the aggregate spread on such
replacement options for any recipient of such options is equal to or less
than the aggregate spread on the options being replaced.
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6.2. NUMBER. The number of shares of Common Stock subject to the
option shall be determined by the Committee, subject to Section 5.1 and
subject to adjustment as provided in Section 10.5.
6.3. DURATION AND TIME FOR EXERCISE. The term of each stock option
shall be determined by the Committee. Each stock option shall become
exercisable at such time or times during its term as shall be determined by
the Committee. Notwithstanding the foregoing, the Committee may accelerate
the exercisability of any stock option at any time, in addition to the
automatic acceleration of stock options under Section 10.11.
6.4. MANNER OF EXERCISE. A stock option may be exercised, in whole
or in part, by giving written notice to the Company, specifying the number
of shares of Common Stock to be purchased. The exercise notice shall be
accompanied by the full purchase price for such shares. The option price
shall be payable in United States dollars and may be paid by (a) cash; (b)
uncertified or certified check; (c) unless otherwise determined by the
Committee, by delivery of shares of Common Stock held by the optionee for
at least six months, which shares shall be valued for this purpose at the
Fair Market Value on the business day immediately preceding the date such
option is exercised; (d) unless otherwise determined by the Committee, by
delivering a properly executed exercise notice together with irrevocable
instructions to a broker approved by Horizon (with a copy to Horizon) to
promptly deliver to Horizon the amount of sale or loan proceeds to pay the
exercise price; or (e) in such other manner as may be authorized from time
to time by the Committee.
6.5. INCENTIVE STOCK OPTIONS. Notwithstanding anything in the Plan
to the contrary, the following additional provisions shall apply to the
grant of stock options that are intended to qualify as Incentive Stock
Options (as such term is defined in Section 422 of the Code):
A. Any Incentive Stock Option agreement authorized under the
Plan shall contain such other provisions as the Committee shall deem
advisable, but shall in all events be consistent with and contain or
be deemed to contain all provisions required in order to qualify the
options as Incentive Stock Options.
B. All Incentive Stock Options must be granted within ten years
from the date on which this Plan is adopted by the Board of Directors.
C. Unless sooner exercised, all Incentive Stock Options shall
expire no later than ten years after the date of grant.
D. No Incentive Stock Options shall be granted to any
participant who, at the time such option is granted, would own (within
the meaning of Section 422 of the Code) stock possessing more than 10%
of the total combined voting power of all classes of stock of the
employer corporation or of its parent or subsidiary corporation.
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E. The aggregate Fair Market Value (determined with respect to
each Incentive Stock Option as of the time such Incentive Stock Option
is granted) of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a participant during any
calendar year (under the Plan or any other plan of Horizon or any of
its subsidiaries) shall not exceed $100,000. To the extent that such
limitation is exceeded, such options shall not be treated, for federal
income tax purposes, as Incentive Stock Options.
7. RESTRICTED STOCK.
7.1. GRANT OF RESTRICTED STOCK. The Committee may award shares of
restricted stock to such officers and key employees as the Committee
determines pursuant to the terms of Section 3. An award of restricted
stock shall be subject to such restrictions on transfer and forfeitability
provisions and such other terms and conditions as the Committee may
determine, subject to the provisions of the Plan. An award of restricted
stock may also be subject to the attainment of specified performance goals
or targets. To the extent restricted stock is intended to qualify as
performance-based compensation under Section 162(m) of the Code, it must be
granted subject to the attainment of performance goals as described in
Section 7.2 below and meet the additional requirements imposed by Section
162(m).
7.2 PERFORMANCE-BASED RESTRICTED STOCK. To the extent that
restricted stock granted under the Plan is intended to vest based upon the
achievement of pre-established performance goals rather than solely upon
continued employment over a period of time, the performance goals pursuant
to which the restricted stock shall vest shall be any or a combination of
the following performance measures: earnings per share, return on assets,
an economic value added measure, stockholder return, earnings, stock price,
return on equity, return on total capital, safety performance, reduction of
expenses or increase in cash flow of Horizon, a division of Horizon or a
subsidiary. For any performance period, such performance objectives may be
measured on an absolute basis or relative to a group of peer companies
selected by the Committee, relative to internal goals or relative to
levels attained in prior years. The Committee may not waive any of the
pre-established performance goal objectives, except that such objectives
shall be waived as provided in Section 10.11 hereof, or as may be provided
by the Committee in the event of death, disability or retirement.
7.3. THE RESTRICTED PERIOD. At the time an award of restricted stock
is made, the Committee shall establish a period of time during which the
transfer of the shares of restricted stock shall be restricted (the
"Restricted Period"). The Restricted Period shall be a minimum of three
years, except that if the vesting of the shares of restricted stock is
based upon the attainment of performance goals, a minimum Restricted Period
of one year is permitted. Each award of restricted stock may have a
different Restricted Period. The expiration of the Restricted Period shall
also occur as provided under Section 10.3 and under the conditions
described in Section 10.11 hereof.
7.4. ESCROW. The participant receiving restricted stock shall enter
into an Incentive Agreement with the Company setting forth the conditions
of the grant. Certificates
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<PAGE>
representing shares of restricted stock shall be registered in the name of
the participant and deposited with the Company, together with a stock power
endorsed in blank by the participant. Each such certificate shall bear a
legend in substantially the following form:
The transferability of this certificate and the shares of Common Stock
represented by it are subject to the terms and conditions (including
conditions of forfeiture) contained in the Horizon Offshore, Inc.
Stock Incentive Plan (the "Plan"), and an agreement entered into
between the registered owner and Horizon Offshore, Inc. thereunder.
Copies of the Plan and the agreement are on file at the principal
office of Horizon Offshore, Inc.
7.5. DIVIDENDS ON RESTRICTED STOCK. Any and all cash and stock
dividends paid with respect to the shares of restricted stock shall be
subject to any restrictions on transfer, forfeitability provisions or
reinvestment requirements as the Committee may, in its discretion,
prescribe in the Incentive Agreement.
7.6. FORFEITURE. In the event of the forfeiture of any shares of
restricted stock under the terms provided in the Incentive Agreement
(including any additional shares of restricted stock that may result from
the reinvestment of cash and stock dividends, if so provided in the
Incentive Agreement), such forfeited shares shall be surrendered and the
certificates canceled. The participants shall have the same rights and
privileges, and be subject to the same forfeiture provisions, with respect
to any additional shares received pursuant to Section 10.5 due to a
recapitalization, merger or other change in capitalization.
7.7. EXPIRATION OF RESTRICTED PERIOD. Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to the
restricted stock shall lapse and a stock certificate for the number of
shares of restricted stock with respect to which the restrictions have
lapsed shall be delivered, free of all such restrictions and legends,
except any that may be imposed by law, to the participant or the
participant's estate, as the case may be.
7.8. RIGHTS AS A STOCKHOLDER. Subject to the terms and conditions of
the Plan and subject to any restrictions on the receipt of dividends that
may be imposed in the Incentive Agreement, each participant receiving
restricted stock shall have all the rights of a stockholder with respect to
shares of stock during the Restricted Period, including without limitation,
the right to vote any shares of Common Stock.
8. OTHER STOCK-BASED AWARDS.
8.1 TERMS OF OTHER STOCK-BASED AWARDS. The Committee is hereby
authorized to grant to eligible employees an "Other Stock-Based Award",
which shall consist of an award, the value of which is based in whole or in
part on the value of shares of Common Stock, that is not an instrument or
Award specified in Sections 6 or 7 of the Plan. Other Stock-Based Awards
may be awards of shares of Common Stock or may be denominated or payable
in, valued in whole or in part by reference to, or otherwise based on or
related to,
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shares of Common Stock (including, without limitation, securities
convertible or exchangeable into or exercisable for shares of Common
Stock), as deemed by the Committee, consistent with the purposes of the
Plan. The Committee shall determine the terms and conditions of any such
Other Stock-Based Award and may provide that such awards would be payable
in whole or in part in cash. Except in the case of an Other Stock-Based
Award granted in assumption of or in substitution for an outstanding award
of a company acquired by the Company or with which the Company combines,
the price at which securities may be purchased pursuant to any Other Stock-
Based Award granted under this Plan, or the provision, if any, of any such
award that is analogous to the purchase or exercise price, shall not be
less than 100% of the fair market value of the securities to which such
award relates on the date of grant.
8.2 DIVIDEND EQUIVALENTS. In the sole and complete discretion of the
Committee, an Other Stock-Based Award under this Section 8 may provide the
holder thereof with dividends or dividend equivalents, payable in cash or
shares of Common Stock on a current or deferred basis.
8.3 PERFORMANCE GOALS. Other Stock-Based Awards intended to qualify
as "performance-based compensation" under Section 162(m) of the Code shall
be paid based upon the achievement of pre-established performance goals.
The performance goals pursuant to which Other Stock-Based Awards granted
under the Plan shall be earned shall be any or a combination of the
following performance measures: earnings per share, return on assets, an
economic value added measure, stockholder return, earnings, stock price,
return on equity, return on total capital, safety performance, reduction of
expenses or increase in cash flow of the Company, a division of the Company
or a subsidiary. For any performance period, such performance goals may be
measured on an absolute basis or relative to a group of peer companies
selected by the Committee, relative to internal goals or relative to
levels attained in prior years. The Committee may not waive any of the
pre-established performance goal objectives if such Other Stock-Based Award
is intended to constitute "performance-based compensation" under Section
162(m), except that such objectives shall be waived as provided in Section
10.11 hereof, or as may be provided by the Committee in the event of death,
disability or retirement.
8.4. NOT A STOCKHOLDER. The grant of an Other Stock-Based Award to a
participant shall not create any rights in such participant as a
stockholder of the Company, until the issuance of shares of Common Stock
with respect to an award, at which time such stock shall be considered
issued and outstanding.
9. STOCK OPTIONS FOR OUTSIDE DIRECTORS.
9.1 GRANT OF OPTIONS. Upon consummation of the Company's initial
public offering (the "IPO") of its Common Stock, each Outside Director
shall be granted non-qualified options to purchase ________ shares of
Common Stock. At any time thereafter that an Outside Director first
becomes a member of the Board of Directors of Horizon, such Outside
Director shall also be granted non-qualified options to purchase ________
shares of
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Common Stock. In addition, beginning with the 1998 annual meeting of
stockholders and for as long as the Plan remains in effect and shares of
Common Stock remain available for issuance hereunder, each Outside Director
shall be automatically granted a non-qualified stock option to purchase
________ shares of Common Stock on the day following the annual meeting of
stockholders of Horizon.
9.2 EXERCISABILITY OF STOCK OPTIONS. The stock options granted to
Outside Directors under this Section 9 shall become exercisable one year
after grant and shall expire ten years following the date of grant.
9.3 EXERCISE PRICE. The exercise price of the options granted upon
consummation of the IPO shall be equal to the IPO price. The exercise
price of the options granted to Outside Directors thereafter shall be equal
to the Fair Market Value, as defined in the Plan, of a share of Common
Stock on the date of grant. The exercise price may be paid as provided in
Section 6.4 hereof.
9.4 EXERCISE AFTER TERMINATION OF BOARD SERVICE. In the event an
Outside Director ceases to serve on the Board, the stock options granted
hereunder must be exercised, to the extent otherwise exercisable at the
time of termination of Board service, within three months from termination
of Board service; provided, however, that in the event of termination of
Board service as a result of death, disability or retirement on or after
reaching age 65, the stock options must be exercised, to the extent
exercisable at the time of termination of Board service, within 18 months
from the date of termination of Board service; and further provided, that
no stock options may be exercised later than ten years after the date of
grant.
10. GENERAL.
10.1. DURATION. Subject to Section 10.10, the Plan shall remain in
effect until all Incentives granted under the Plan have either been
satisfied by the issuance of shares of Common Stock or the payment of cash
or been terminated under the terms of the Plan and all restrictions imposed
on shares of Common Stock in connection with their issuance under the Plan
have lapsed.
10.2. TRANSFERABILITY. No Incentives granted hereunder may be
transferred, pledged, assigned or otherwise encumbered by a participant
except: (a) by will; (b) by the laws of descent and distribution; (c)
pursuant to a domestic relations order, as defined in the Code, if
permitted by the Committee and so provided in the Incentive Agreement or an
amendment thereto; or (d) as to options only, if permitted by the Committee
and so provided in the Incentive Agreement or an amendment thereto, (i) to
Immediate Family Members, (ii) to a partnership in which Immediate Family
Members, or entities in which Immediate Family Members are the sole owners,
members or beneficiaries, as appropriate, are the sole partners, (iii) to a
limited liability company in which Immediate Family Members, or entities in
which Immediate Family Members are the sole owners, members or
beneficiaries, as appropriate, are the sole members, or (iv) to a trust for
the sole benefit of Immediate Family Members.
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<PAGE>
"Immediate Family Members" shall be defined as the spouse and natural or
adopted children or grandchildren of the participant and their spouses. To
the extent that an Incentive Stock Option is permitted to be transferred
during the lifetime of the participant, it shall be treated thereafter as a
nonqualified stock option. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of Incentives, or levy of attachment or
similar process upon Incentives not specifically permitted herein, shall be
null and void and without effect.
10.3. EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH. Except as
provided in Section 9.4 with respect to Outside Directors, in the event
that a participant ceases to be an employee of the Company for any reason,
including death, disability, early retirement or normal retirement, any
Incentives may be exercised, shall vest or shall expire at such times as
may be determined by the Committee in the Incentive Agreement. The
Committee has complete authority to modify the treatment of an Incentive in
the event of termination of employment of a participant by means of an
amendment to the Incentive Agreement. Consent of the participant to the
modification is required only if the modification materially impairs the
rights previously provided to the participant in the Incentive Agreement.
10.4. ADDITIONAL CONDITION. Anything in this Plan to the contrary
notwithstanding: (a) the Company may, if it shall determine it necessary
or desirable for any reason, at the time of award of any Incentive or the
issuance of any shares of Common Stock pursuant to any Incentive, require
the recipient of the Incentive, as a condition to the receipt thereof or to
the receipt of shares of Common Stock issued pursuant thereto, to deliver
to the Company a written representation of present intention to acquire the
Incentive or the shares of Common Stock issued pursuant thereto for his own
account for investment and not for distribution; and (b) if at any time the
Company further determines, in its sole discretion, that the listing,
registration or qualification (or any updating of any such document) of any
Incen tive or the shares of Common Stock issuable pursuant thereto is
necessary on any securities exchange or under any federal or state
securities or blue sky law, or that the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of,
or in connection with the award of any Incentive, the issuance of shares of
Common Stock pursuant thereto, or the removal of any restrictions imposed
on such shares, such Incentive shall not be awarded or such shares of
Common Stock shall not be issued or such restrictions shall not be removed,
as the case may be, in whole or in part, unless such listing, registration,
qualification, consent or approval shall have been effected or obtained
free of any conditions not acceptable to the Company.
10.5. ADJUSTMENT. In the event of any merger, consolidation or
reorganization of the Company with any other corporation or corporations,
there shall be substituted for each of the shares of Common Stock then
subject to the Plan, including shares subject to restrictions, options or
achievement of performance objectives, the number and kind of shares of
stock or other securities to which the holders of the shares of Common
Stock will be entitled pursuant to the transaction. In the event of any
recapitalization, stock dividend, stock split, combination of shares or
other change in the Common Stock, the number of shares of Common Stock then
subject to the Plan, including shares subject to outstanding Incentives,
shall be adjusted in proportion to the change in outstanding shares of
Common
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Stock. In the event of any such adjustments, the purchase price of any
option, the performance objectives of any Incentive, and the shares of
Common Stock issuable pursuant to any Incentive shall be adjusted as and to
the extent appropriate, in the reasonable discretion of the Committee, to
provide participants with the same relative rights before and after such
adjustment. No substitution or adjustment shall require the Company to
issue a fractional share under this Plan and the substitution or adjustment
shall be limited by deleting any fractional share.
10.6. INCENTIVE AGREEMENTS. The terms of each Incentive granted to
an employee, officer, consultant or advisor shall be stated in an agreement
approved by the Committee.
10.7. WITHHOLDING.
A. The Company shall have the right to withhold from any
payments made under the Plan or to collect as a condition of payment,
any taxes required by law to be withheld. At any time that a
participant is required to pay to the Company an amount required to be
withheld under applicable income tax laws in connection with the
issuance of Common Stock, the lapse of restrictions on Common Stock or
the exercise of an option, the participant may, subject to disapproval
by the Committee, satisfy this obligation in whole or in part by
electing (the "Election") to have the Company withhold shares of
Common Stock having a value equal to the amount required to be
withheld. The value of the shares to be withheld shall be based on
the Fair Market Value of the Common Stock on the date that the amount
of tax to be withheld shall be determined ("Tax Date").
B. Each Election must be made prior to the Tax Date. The
Committee may disapprove of any Election, may suspend or terminate the
right to make Elections, or may provide with respect to any Incentive
that the right to make Elections shall not apply to such Incentive.
If a participant makes an election under Section 83(b) of the Internal
Revenue Code with respect to shares of restricted stock, an Election
is not permitted to be made.
10.8. NO CONTINUED EMPLOYMENT. No participant under the Plan shall
have any right, because of his or her participation, to continue in the
employ of the Company for any period of time or to any right to continue
his or her present or any other rate of compensation.
10.9. DEFERRAL PERMITTED. Payment of cash or distribution of any
shares of Common Stock to which a participant is entitled under any
Incentive shall be made as provided in the Incentive Agreement. Payment
may be deferred at the option of the participant if provided in the
Incentive Agreement.
10.10. AMENDMENTS TO OR TERMINATION OF THE PLAN.
A. The Board may amend, suspend or terminate the Plan or any
portion thereof at any time, provided that no amendment shall be made
without stockholder
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approval if such approval is necessary to comply with any tax or
regulatory requirement, including any approval necessary to qualify
Incentives as "performance-based" compensation under Section 162(m) or
any successor provision, if such qualification is deemed necessary or
advisable by the Committee.
B. Any provision of this Plan or any Incentive Agreement to the
contrary notwithstanding, the Committee may cause any Incentive
granted hereunder to be canceled in consideration of a cash payment or
alternative Incentive made to the holder of such canceled Incentive
equal in value to such canceled Incentive. The determinations of
value under this subparagraph shall be made by the Committee in its
sole discretion.
10.11. CHANGE OF CONTROL.
A. "Change of Control" shall mean:
1. the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934
Act of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of more than 50% of the
outstanding shares of the Common Stock; provided, however, that
for purposes of this subsection 1., the following shall not
constitute a Change of Control:
(A) any acquisition of Common Stock directly or
indirectly from Horizon,
(B) any acquisition of Common Stock by Horizon,
(C) any acquisition of Common Stock by any employee
benefit plan (or related trust) sponsored or
maintained by Horizon or any corporation controlled
by Horizon, or
(D) any acquisition of Common Stock by any corporation
pursuant to a transaction that complies with
clauses (a), (b) and (c) of subsection (A)(3) of
this Section 10.11; or
2. individuals who, as of the date of adoption of the Plan
by the Board of Directors of Horizon (the "Adoption Date"),
constitute the Board (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the Adoption Date whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered a member of the Incumbent Board, unless such
individual's initial assumption of office occurs as a result of
an actual or threatened election contest with
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respect to the election or removal of directors or other actual
or threatened solicitation of proxies or consents by or on behalf
of a person other than the Incumbent Board; or
3. approval by the stockholders of Horizon of a
reorganization, merger or consolidation, or sale or other
disposition of all of substantially all of the assets of the
Company (a "Business Combination"), in each case, unless,
following such Business Combination,
(A) all or substantially all of the individuals and
entities who were the beneficial owners of Horizon's
outstanding common stock and Horizon's voting securities
entitled to vote generally in the election of directors
immediately prior to such Business Combination have direct
or indirect beneficial ownership, respectively, of more than
50% of the then outstanding shares of common stock, and more
than 50% of the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, of the corporation resulting from
such Business Combination (which, for purposes of this
paragraph (a) and paragraphs (b) and (c), shall include a
corporation which as a result of such transaction controls
the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries),
and
(B) except to the extent that such ownership existed
prior to the Business Combination, no person (excluding any
corporation resulting from such Business Combination or any
employee benefit plan or related trust of the Company or
such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 30% or more of
the then outstanding shares of common stock of the
corporation resulting from such Business Combination or 30%
or more of the combined voting power of the then outstanding
voting securities of such corporation, and
(C) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
4. approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
B. Upon a Change of Control, all outstanding options shall
automatically become fully exercisable, all restrictions or
limitations on any Incentives shall lapse and all performance criteria
and other conditions relating to the payment of
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Incentives shall be deemed to be achieved or waived by the Company,
without the necessity of any action by any person.
C. No later than 30 days after the approval by the Board of a
Change of Control of the types described in Subsections A.3 and A.4 of
this Section 10.11, and no later than 30 days after a Change of
Control of the type described in Subsections A.1 and A.2 of this
Section 10.11 of the Plan, the Committee (as the Committee was
composed immediately prior to such Change of Control and
notwithstanding any removal or attempted removal of some or all of the
members thereof as directors or Committee members), acting in its sole
discretion without the consent or approval of any participant, may act
to effect one or more of the alternatives listed below and such act by
the Committee may not be revoked or rescinded by persons not members
of the Committee immediately prior to the Change of Control:
1. require that all outstanding options be exercised on or
before a specified date (before or after such Change of Control)
fixed by the Committee, after which specified date all
unexercised options shall terminate,
2. make such equitable adjustments to Incentives then
outstanding as the Committee deems appropriate to reflect such
Change of Control (provided, however, that the Committee may
determine in its sole discretion that no adjustment is
necessary), or
3. provide that thereafter upon any exercise of an option
the participant shall be entitled to purchase under such option,
in lieu of the number of shares of Common Stock then covered by
such option, the number and class of shares of stock or other
securities or property (including, without limitation, cash) to
which the participant would have been entitled pursuant to the
terms of the agreement providing for the merger, consolidation,
asset sale, dissolution or other Change of Control of the type
described in Sections 10.11.A.3 and A.4 of the Plan, if,
immediately prior to such Change of Control, the participant had
been the holder of record of the number of shares of Common Stock
then covered by such options.
10.12. DEFINITION OF FAIR MARKET VALUE. Whenever "Fair Market Value"
of Common Stock shall be determined for purposes of this Plan, it shall be
determined as follows: (i) if the Common Stock is listed on an established
stock exchange or any automated quotation system that provides sale
quotations, the closing sale price for a share of the Common Stock on such
exchange or quotation system on the applicable date; (ii) if the Common
Stock is not listed on any exchange or quotation system, but bid and asked
prices are quoted and published, the mean between the quoted bid and asked
prices on the applicable date, and if bid and asked prices are not
available on such day, on the next preceding day on which such prices were
available; and (iii) if the Common Stock is not regularly quoted, the fair
market value of a share of Common Stock on the applicable date as
established by the Committee in good faith.
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10.13 LOANS. In order to assist a participant in acquiring shares of
Common Stock pursuant to an Incentive granted under the Plan, the Committee
may authorize, subject to the provisions of Regulation G of the Board of
Governors of the Federal Reserve System, at either the time of the grant of
the Incentive, at the time of the acquisition of Common Stock pursuant to
the Incentive, or at the time of the lapse of restrictions on shares of
restricted stock granted under the Plan, the extension of a loan to the
participant by the Company. The terms of any loans, including the interest
rate, collateral and terms of repayment, will be subject to the discretion
of the Committee. The maximum credit available hereunder shall be equal to
the aggregate purchase price of the shares of Common Stock to be acquired
pursuant to the Incentive plus the maximum tax liability that may be
incurred in connection with the Incentive.
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EXHIBIT 10.4
FORM OF STOCK OPTION AGREEMENT
FOR THE GRANT OF
NON-QUALIFIED STOCK OPTIONS UNDER THE
HORIZON OFFSHORE, INC.
STOCK INCENTIVE PLAN
THIS AGREEMENT is entered into by and between Horizon Offshore, Inc., a
Delaware corporation (the "Company"), and ____________ (the "Optionee").
WHEREAS the Company considers it desirable and in its best interest that
Optionee be given an inducement to acquire a proprietary interest in the Company
and an incentive to advance the interests of the Company by possessing an option
to purchase shares of the common stock of the Company, $1.00 par value per share
(the "Common Stock"), in accordance with the Horizon Offshore, Inc. Stock
Incentive Plan (the "Plan").
NOW, THEREFORE, in consideration of the premises, it is agreed by and
between the parties as follows:
I.
Grant of Option
The Company hereby grants to Optionee the right, privilege and option (the
"Option") to purchase _____ shares of Common Stock at an exercise price of $___
per share (the "Exercise Price"), effective as of __________ (the "Date of
Grant"). The Option shall be exercisable at the time specified in Section II
below. The Option is a non-qualified stock option and shall not be treated as
an incentive stock option under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
II.
Time of Exercise
2.1 Subject to the provisions of the Plan and the other provisions of this
Section II, the Optionee shall be entitled to exercise the Option as follows:
2.2 During Optionee's lifetime, the Option may be exercised only by him
or his guardian if he has been declared incompetent. In the event of death, the
Option may be exercised as provided herein by the Optionee's estate or by the
person to whom such right devolves as a result of the Optionee's death.
2.3 If an Optionee ceases to be an employee because of death or disability
within the meaning of Section 22(e)(3) of the Code ("Disability"), the Option
must be exercised, to the extent otherwise exercisable at the time of
termination of employment, within _____ from the date on which the Optionee
ceases to be an employee, but in no event later than ten years following the
Date of Grant.
<PAGE>
2.4 If an Optionee ceases to be an employee because of retirement, the
Option must be exercised, to the extent otherwise exercisable at the time of
termination of employment, within ______ from the date on which Optionee ceases
to be an employee, but in no event later than ten years following the Date of
Grant.
2.5 If Optionee's employment is terminated, other than as a result of
death, disability or retirement, the Option must be exercised, to the extent
otherwise exercisable at the time of termination of employment, within ______
from the date on which Optionee ceases to be an employee, but in no event later
than ten years following the date of grant.
2.6 The Option shall expire and may not be exercised later than ten years
following the Date of Grant.
III.
Method of Exercise of Option
3.1 Optionee may exercise all or a portion of the Option by delivering to
the Company a signed written notice of his intention to exercise the Option,
specifying therein the number of shares to be purchased. Upon receiving such
notice, and after the Company has received full payment of the Exercise Price,
the appropriate officer of the Company shall cause the transfer of title of the
shares purchased to Optionee on the Company's stock records and cause to be
issued to Optionee a stock certificate for the number of shares being acquired.
Optionee shall not have any rights as a shareholder until the stock certificate
is issued to him.
3.2 The Option may be exercised by the payment of the Exercise Price in
cash, in shares of Common Stock held for six months or in a combination of cash
and shares of Common Stock held for six months. The Optionee may also pay the
Exercise Price by delivering a properly executed exercise notice together with
irrevocable instructions to a broker approved by the Compensation Committee
(with a copy to the Company) to promptly deliver to the Company the amount of
sale or loan proceeds to pay the Exercise Price.
IV.
No Contract of Employment Intended
Nothing in this Agreement shall confer upon Optionee any right to continue
in the employment of the Company or any of its subsidiaries, or to interfere in
any way with the right of the Company or any of its subsidiaries to terminate
Optionee's employment relationship with the Company or any of its subsidiaries
at any time.
V.
Binding Effect
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators and
successors.
<PAGE>
VI.
Non-Transferability
The Option granted hereby may not be transferred, assigned, pledged or
hypothecated in any manner, by operation of law or otherwise, other than by
will, by the laws of descent and distribution or pursuant to a domestic
relations order, as defined in the Code, and shall not be subject to execution,
attachment or similar process.
VII.
Inconsistent Provisions
The Option granted hereby is subject to the provisions of the Plan as in
effect on the date hereof and as it may be amended. In the event any provision
of this Agreement conflicts with such a provision of the Plan, the Plan
provision shall control.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed on the day and year first above written.
HORIZON OFFSHORE, INC.
By:
-----------------------------------
Name:
Title:
OPTIONEE
----------------------------------------
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment Agreement (this "Agreement") between Horizon Offshore,
Inc., a Delaware corporation ("Company"), and Bill J. Lam ("Employee") is dated
as of January 1, 1998.
The Company and the Employee agree as follows:
1. Employment . The Company has hired the Employee and the Employee
agreed to be employed upon the terms and conditions hereinafter set forth.
2. Term. (a) Subject to the provisions for termination as hereinafter
provided, Employee's employment pursuant to the terms of this Agreement shall be
for the period expiring on the earlier to occur of (i) December 31, 2001 or (ii)
three years from the date that the Company's common stock commences trading on
the Nasdaq National Market or another securities market or exchange. Such
period of employment is referred to herein as the "Employment Term."
(b) If Employee continues to serve as an employee of the Company after the
Employment Term, such continued employment shall be subject to the terms of this
Agreement but shall be terminable at will by either the Company or Employee.
(c) Following Employee ceasing for whatever reason to be an employee of the
Company, each party shall have the right to enforce all rights, and shall be
bound by all obligations, of such party that are continuing rights and
obligations under the terms of this Agreement.
3. Duties. The Employee shall perform such duties, consistent with the
Employee's job title, as may be prescribed from time to time by the Board of
Directors of the Company (the "Board") or officers to whom such authority has
been delegated.
4. Compensation and Benefits. The Company will provide or will cause to
be provided to Employee a minimum annual base salary of $200,000. The Employee
shall be entitled to all benefits and perquisites provided to similarly situated
employees of the Company.
5. Termination of Employment.
(a) During the Employment Term, the Employee's status as an employee will
terminate immediately and automatically upon the earliest to occur of:
(i) the death or "Disability" (as defined below) of the Employee;
(ii) the discharge of the Employee by the Company "For Cause" (as
defined below);
(iii) the expiration of the Employment Term.
The Employee hereby accepts such employment subject to the terms and conditions
hereof.
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<PAGE>
(b) As used herein, "For Cause" shall mean any one or more of the
following:
(i) material or repeated violations by the Employee (after notice
thereof from the Company) of the terms of this Agreement of the
Employee's material or repeated failure (after notice thereof
from the Company) to perform the Employee's duties in a manner
consistent with the Employee's position;
(ii) excessive absenteeism on the part of the Employee not related
to illness;
(iii) the Employee's indictment for a felony;
(iv) the Employee's commission of fraud, embezzlement, theft or
other acts involving dishonesty, or crimes constituting moral
turpitude, in any case whether or not involving the Company,
that, in the opinion of the Board, renders the Employee's
continued employment harmful to the Company;
(v) substance abuse on the part of the Employee; or
(vi) the Employee acting in bad faith relative to the Company's
business interests.
(c) As used herein, "Disability" shall mean a physical or mental incapacity
of the Employee that, in the good faith determination of the Board has prevented
the Employee from performing the duties assigned the Employee by the Company for
60 consecutive days or for a period of more than 90 days in the aggregate in any
12-month period and that, in the determination of the Company after consultation
with a medical doctor appointed by the Company, may be expected to prevent the
Employee for any period of time thereafter from devoting the Employee's full
time and energies (or such lesser time and energies as may be acceptable to the
Company in its sole discretion) to the Employee's duties as provided hereunder.
The Employee's employment hereunder, except as otherwise agreed to in writing
between the Company and the Employee, shall cease as of the date of such
determination. The Employee agrees to submit to medical examinations, at the
Company's sole cost and expense, to determine whether a Disability exists
pursuant to reasonable requests that the Company may make from time to time.
During the period of any such physical or mental incapacity as provided above,
the salary otherwise payable to the Employee may, in the absolute discretion of
the Company, be reduced by the amount of any disability benefits or payments
received by the Employee from the Company or any disability or health plan
funded in whole or in part by the Company (excluding health insurance benefits
or other reimbursement of medical expenses attributable to insurance policies
that have not been funded in any part by the Company).
6. Trade Secrets, Etc. The Employee shall hold, both during the
Employment Term and thereafter, in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its subsidiaries or corporate affiliates and their
respective businesses and operations, which shall have been obtained by the
Employee during the Employee's employment (whether prior to or after the date
hereof) and which shall not have become public knowledge (other than by acts of
the Employee of his representatives
-2-
<PAGE>
in violation of this Agreement). The Employee agrees (i) that, without the prior
written consent of the Company or as may be otherwise required by law or legal
process, he will not communicate or divulge any such information, knowledge or
data to any party other than the Company and (ii) to deliver promptly to the
Company upon its written request any confidential information, knowledge or data
in his possession, whether produced by the Company or any of its subsidiaries
and corporate affiliates or by the Employee, that relates to the business of the
Company or any of its subsidiaries and joint ventures or any past, current or
prospective activity of the Company or any of its subsidiaries and joint
ventures. The Employee shall be permitted to retain copies of such data as are
necessary in order to enable the Employee to assert any rights under this
Agreement, provided that such data shall be used solely for such purpose.
7. Limited Covenant Not to Compete. (a) Throughout the Employment Term
and for a period of (i) two years following the termination of Employee's
employment with the Company if Employee's employment is terminated for any
reason during the Employment Term, and (ii) one year following the termination
of Employee's employment with the Company if Employee's employment is terminated
for any reason after the Employment Term, the Employee will not, directly or
indirectly, own, manage, operate, control, be employed by, participate in, or be
connected in any manner with the ownership, management, operation or control of
any company or other business enterprise engaged in a line or lines of business
similar to that of the Company or any of its subsidiaries or joint ventures,
within the State of Texas, Louisiana, Mississippi, Alabama or Florida (including
any area offshore in the Gulf of Mexico or any such state) or any other
jurisdiction, whether within or outside the United States in which the business
of the Company or any of its subsidiaries or joint ventures is carried on, so
long as the Company or any of its subsidiaries or joint ventures carries on a
like line of business therein; provided, however, that nothing contained herein
shall prohibit the Employee from making investments in any publicly held company
which do not exceed in the aggregate two percent of the equity interest of such
company.
(b) As part of the consideration for the compensation and benefits to
be paid to the Employee hereunder; to protect the trade secrets and confidential
information of Company and its affiliates that have been and will in the future
be disclosed or entrusted to the Employee, the business good will of the Company
and its affiliates that has been and will in the future be developed in the
Employee, or the business opportunities that have been and will in the future be
disclosed or entrusted to the Employee by the Company and its affiliates; and,
as an additional incentive for the Company to enter in this Agreement, the
Company and the Employee agree to the non-competition obligations hereunder.
The obligations of the Employee set forth in this Section 7 shall apply during
the term of this Agreement and shall survive termination of this Agreement
and/or the termination of the Employee's services under this Agreement
regardless of the reason for such termination.
8. No Tampering. Throughout the Employment Term and for two years
following the termination of Employee's employment by the Company for any
reason, the Employee shall not (a) request, induce or attempt to influence any
supplier of goods or services to the Company curtail or cancel any business they
may transact with the Company; (b) request, induce or attempt to influence any
customers of the Company that have done business with or potential customers
which have been in contact with the Company to curtail or cancel any business
they may transact with the Company;
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<PAGE>
or (c) request, induce or attempt to influence any employee of the Company to
terminate his or her employment with the Company.
9. Statements Concerning the Company. The Employee shall refrain, both
during the Employment Term and following the termination of Employee's
employment by the Company for any reason, from publishing any oral or written
statements about the Company, any of its affiliates, or any of such entities'
officers, employees, agents or representatives that are slanderous, libelous, or
defamatory; or that disclose private or confidential information about the
Company, any of its affiliates, or any of such entities' business affairs,
officers, employees, agents or representatives; or that constitute an intrusion
into the seclusion or private lives of the Company, any of its affiliates, or
any of such entities' officers, employees, agents or representatives or that
give rise to unreasonable publicity about the private lives of the Company, any
of its affiliates, or any of such entities' officers, employees, agents or
representatives; or that place the Company, any of its affiliates, or any of
such entities' officers, employee, agents or representatives in a false light
before the public; or that constitute a misappropriation of the name or likeness
of the Company, any of its affiliates, or any of such entities; officers,
employees, agents or representatives. A violation or threatened violation of
this prohibition may be enjoined by the courts. The rights afforded the Company
and its affiliates under this provision are in addition to any and all rights
and remedies otherwise afforded by law.
10. Injunctive Relief. In the event of a breach or threatened breach by
the Employee of the provisions of Sections 6, 7, 8 or 9 of this Agreement during
or after the term of this Agreement, the Company shall be entitled to injunctive
relief restraining the Employee from violation of such paragraph. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedy at law or in equity it may have in the event of breach or threatened
breach of this Agreement by the Employee.
11. Binding Effect.
(a) This Agreement shall be binding upon and inure to the benefit of
the Company and any of its successors or assigns.
(b) This Agreement is personal to the Employee and shall not be
assignable by the Employee without the consent of the Company (there being no
obligation to give such consent) other than such rights or benefits as are
transferred by will or the laws of descent and distribution.
(c) The Company will require any successor or assign (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or businesses of the Company (i) to assume
unconditionally and expressly this Agreement and (ii) to agree to perform all of
the obligations under this Agreement in the same manner and to the same extent
as would have been required of the Company had no assignment or succession
occurred, such assumption to be set forth in a writing reasonably satisfactory
to the Employee. In the event of any such assignment or succession, the term
"Company" as used in this Agreement shall refer also to such successor or
assign.
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<PAGE>
12. Notices. Any notice or other communication required under this
Agreement shall be in writing, shall be deemed to have been given and received
when delivered in person, or, if mailed, shall be deemed to have been given when
deposited in the United States mail, first class, registered or certified,
return receipt requested, with proper postage prepaid, and shall be deemed to
have been received on the third business day thereafter, and shall be addressed
as follows:
If to the Company, addressed to:
Horizon Offshore, Inc.
2500 City West Boulevard, Suite 2200
Houston, Texas 77042
If to the Employee, addressed to:
Horizon Offshore, Inc.
2500 City West Boulevard, Suite 2200
Houston, Texas 77042
or such other address as to which any party hereto may have notified the other
in writing.
13. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Texas.
14. Entire Agreement. This Agreement and the documents referred to
herein, contain or refer to the entire arrangement or understanding between the
Employee and the Company relating to the employment of the Employee by the
Company. No provision of the Agreement, may be modified or amended except by an
instrument in writing signed by or for both parties hereto.
15. Severability. If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall at any time or to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
16. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach thereof.
17. Remedies Not Exclusive. No remedy specified herein shall be deemed to
be such party's exclusive remedy, and accordingly, in addition to all of the
rights and remedies provided for in this Agreement, the parties shall have all
other rights and remedies provided to them by applicable law, rule or
regulation.
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<PAGE>
18. Beneficiaries. Whenever this Agreement provides for any payment to be
made to the Employee or his estate, such payment may be made instead to such
beneficiary or beneficiaries as the Employee may have designated in writing and
filed with the Company. The Employee shall have the right to revoke any such
designation from time to time and to redesignate any beneficiary or
beneficiaries by written notice to the Company.
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
just above written.
HORIZON OFFSHORE, INC.
By: /s/ David W. Sharp
-------------------------------------
Name: David W. Sharp
Title: Executive Vice President, Chief
Financial Officer, Secretary and
Treasurer
EMPLOYEE:
/s/ Bill J. Lam
-------------------------------------
Bill J. Lam
President, Chief Executive Officer and
Director
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<PAGE>
EXHIBIT 10.6
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment Agreement (this "Agreement") between Horizon Offshore,
Inc., a Delaware corporation ("Company"), and David W. Sharp ("Employee") is
dated as of January 1, 1998.
The Company and the Employee agree as follows:
1. Employment. The Company has hired the Employee and the Employee
agreed to be employed upon the terms and conditions hereinafter set forth.
2. Term. (a) Subject to the provisions for termination as hereinafter
provided, Employee's employment pursuant to the terms of this Agreement shall be
for the period expiring on the earlier to occur of (i) December 31, 2001 or (ii)
three years from the date that the Company's common stock commences trading on
the Nasdaq National Market or another securities market or exchange. Such
period of employment is referred to herein as the "Employment Term."
(b) If Employee continues to serve as an employee of the Company after the
Employment Term, such continued employment shall be subject to the terms of this
Agreement but shall be terminable at will by either the Company or Employee.
(c) Following Employee ceasing for whatever reason to be an employee of the
Company, each party shall have the right to enforce all rights, and shall be
bound by all obligations, of such party that are continuing rights and
obligations under the terms of this Agreement.
3. Duties. The Employee shall perform such duties, consistent with the
Employee's job title, as may be prescribed from time to time by the Board of
Directors of the Company (the "Board") or officers to whom such authority has
been delegated.
4. Compensation and Benefits. The Company will provide or will cause to
be provided to Employee a minimum annual base salary of $175,000. The Employee
shall be entitled to all benefits and perquisites provided to similarly situated
employees of the Company.
5. Termination of Employment.
(a) During the Employment Term, the Employee's status as an employee will
terminate immediately and automatically upon the earliest to occur of:
(i) the death or "Disability" (as defined below) of the Employee;
(ii) the discharge of the Employee by the Company "For Cause" (as
defined below);
(iii) the expiration of the Employment Term.
-1-
<PAGE>
The Employee hereby accepts such employment subject to the terms and conditions
hereof.
(b) As used herein, "For Cause" shall mean any one or more of the
following:
(i) material or repeated violations by the Employee (after notice
thereof from the Company) of the terms of this Agreement of the
Employee's material or repeated failure (after notice thereof
from the Company) to perform the Employee's duties in a manner
consistent with the Employee's position;
(ii) excessive absenteeism on the part of the Employee not related
to illness;
(iii) the Employee's indictment for a felony;
(iv) the Employee's commission of fraud, embezzlement, theft or
other acts involving dishonesty, or crimes constituting moral
turpitude, in any case whether or not involving the Company,
that, in the opinion of the Board, renders the Employee's
continued employment harmful to the Company;
(v) substance abuse on the part of the Employee; or
(vi) the Employee acting in bad faith relative to the Company's
business interests.
(c) As used herein, "Disability" shall mean a physical or mental incapacity
of the Employee that, in the good faith determination of the Board has prevented
the Employee from performing the duties assigned the Employee by the Company for
60 consecutive days or for a period of more than 90 days in the aggregate in any
12-month period and that, in the determination of the Company after consultation
with a medical doctor appointed by the Company, may be expected to prevent the
Employee for any period of time thereafter from devoting the Employee's full
time and energies (or such lesser time and energies as may be acceptable to the
Company in its sole discretion) to the Employee's duties as provided hereunder.
The Employee's employment hereunder, except as otherwise agreed to in writing
between the Company and the Employee, shall cease as of the date of such
determination. The Employee agrees to submit to medical examinations, at the
Company's sole cost and expense, to determine whether a Disability exists
pursuant to reasonable requests that the Company may make from time to time.
During the period of any such physical or mental incapacity as provided above,
the salary otherwise payable to the Employee may, in the absolute discretion of
the Company, be reduced by the amount of any disability benefits or payments
received by the Employee from the Company or any disability or health plan
funded in whole or in part by the Company (excluding health insurance benefits
or other reimbursement of medical expenses attributable to insurance policies
that have not been funded in any part by the Company).
6. Trade Secrets, Etc. The Employee shall hold, both during the
Employment Term and thereafter, in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its subsidiaries or corporate affiliates and their
respective businesses and operations, which shall have been obtained by the
Employee during the Employee's employment (whether prior to or after the date
hereof) and which
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<PAGE>
shall not have become public knowledge (other than by acts of the Employee of
his representatives in violation of this Agreement). The Employee agrees (i)
that, without the prior written consent of the Company or as may be otherwise
required by law or legal process, he will not communicate or divulge any such
information, knowledge or data to any party other than the Company and (ii) to
deliver promptly to the Company upon its written request any confidential
information, knowledge or data in his possession, whether produced by the
Company or any of its subsidiaries and corporate affiliates or by the Employee,
that relates to the business of the Company or any of its subsidiaries and joint
ventures or any past, current or prospective activity of the Company or any of
its subsidiaries and joint ventures. The Employee shall be permitted to retain
copies of such data as are necessary in order to enable the Employee to assert
any rights under this Agreement, provided that such data shall be used solely
for such purpose.
7. Limited Covenant Not to Compete. (a) Throughout the Employment Term
and for a period of (i) two years following the termination of Employee's
employment with the Company if Employee's employment is terminated for any
reason during the Employment Term, and (ii) one year following the termination
of Employee's employment with the Company if Employee's employment is terminated
for any reason after the Employment Term, the Employee will not, directly or
indirectly, own, manage, operate, control, be employed by, participate in, or be
connected in any manner with the ownership, management, operation or control of
any company or other business enterprise engaged in a line or lines of business
similar to that of the Company or any of its subsidiaries or joint ventures,
within the State of Texas, Louisiana, Mississippi, Alabama or Florida (including
any area offshore in the Gulf of Mexico or any such state) or any other
jurisdiction, whether within or outside the United States in which the business
of the Company or any of its subsidiaries or joint ventures is carried on, so
long as the Company or any of its subsidiaries or joint ventures carries on a
like line of business therein; provided, however, that nothing contained herein
shall prohibit the Employee from making investments in any publicly held company
which do not exceed in the aggregate two percent of the equity interest of such
company.
(b) As part of the consideration for the compensation and benefits to
be paid to the Employee hereunder; to protect the trade secrets and confidential
information of Company and its affiliates that have been and will in the future
be disclosed or entrusted to the Employee, the business good will of the Company
and its affiliates that has been and will in the future be developed in the
Employee, or the business opportunities that have been and will in the future be
disclosed or entrusted to the Employee by the Company and its affiliates; and,
as an additional incentive for the Company to enter in this Agreement, the
Company and the Employee agree to the non-competition obligations hereunder.
The obligations of the Employee set forth in this Section 7 shall apply during
the term of this Agreement and shall survive termination of this Agreement
and/or the termination of the Employee's services under this Agreement
regardless of the reason for such termination.
8. No Tampering. Throughout the Employment Term and for two years
following the termination of Employee's employment by the Company for any
reason, the Employee shall not (a) request, induce or attempt to influence any
supplier of goods or services to the Company curtail or cancel any business they
may transact with the Company; (b) request, induce or attempt to influence any
customers of the Company that have done business with or potential customers
which have been in contact with the Company to curtail or cancel any business
they may transact with the Company;
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<PAGE>
or (c) request, induce or attempt to influence any employee of the Company to
terminate his or her employment with the Company.
9. Statements Concerning the Company. The Employee shall refrain, both
during the Employment Term and following the termination of Employee's
employment by the Company for any reason, from publishing any oral or written
statements about the Company, any of its affiliates, or any of such entities'
officers, employees, agents or representatives that are slanderous, libelous, or
defamatory; or that disclose private or confidential information about the
Company, any of its affiliates, or any of such entities' business affairs,
officers, employees, agents or representatives; or that constitute an intrusion
into the seclusion or private lives of the Company, any of its affiliates, or
any of such entities' officers, employees, agents or representatives or that
give rise to unreasonable publicity about the private lives of the Company, any
of its affiliates, or any of such entities' officers, employees, agents or
representatives; or that place the Company, any of its affiliates, or any of
such entities' officers, employee, agents or representatives in a false light
before the public; or that constitute a misappropriation of the name or likeness
of the Company, any of its affiliates, or any of such entities; officers,
employees, agents or representatives. A violation or threatened violation of
this prohibition may be enjoined by the courts. The rights afforded the Company
and its affiliates under this provision are in addition to any and all rights
and remedies otherwise afforded by law.
10. Injunctive Relief. In the event of a breach or threatened breach by
the Employee of the provisions of Sections 6, 7, 8 or 9 of this Agreement during
or after the term of this Agreement, the Company shall be entitled to injunctive
relief restraining the Employee from violation of such paragraph. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedy at law or in equity it may have in the event of breach or threatened
breach of this Agreement by the Employee.
11. Binding Effect.
(a) This Agreement shall be binding upon and inure to the benefit of
the Company and any of its successors or assigns.
(b) This Agreement is personal to the Employee and shall not be
assignable by the Employee without the consent of the Company (there being no
obligation to give such consent) other than such rights or benefits as are
transferred by will or the laws of descent and distribution.
(c) The Company will require any successor or assign (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or businesses of the Company (i) to assume
unconditionally and expressly this Agreement and (ii) to agree to perform all of
the obligations under this Agreement in the same manner and to the same extent
as would have been required of the Company had no assignment or succession
occurred, such assumption to be set forth in a writing reasonably satisfactory
to the Employee. In the event of any such assignment or succession, the term
"Company" as used in this Agreement shall refer also to such successor or
assign.
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<PAGE>
12. Notices. Any notice or other communication required under this
Agreement shall be in writing, shall be deemed to have been given and received
when delivered in person, or, if mailed, shall be deemed to have been given when
deposited in the United States mail, first class, registered or certified,
return receipt requested, with proper postage prepaid, and shall be deemed to
have been received on the third business day thereafter, and shall be addressed
as follows:
If to the Company, addressed to:
Horizon Offshore, Inc.
2500 City West Boulevard, Suite 2200
Houston, Texas 77042
If to the Employee, addressed to:
Horizon Offshore, Inc.
2500 City West Boulevard, Suite 2200
Houston, Texas 77042
or such other address as to which any party hereto may have notified the other
in writing.
13. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Texas.
14. Entire Agreement. This Agreement and the documents referred to
herein, contain or refer to the entire arrangement or understanding between the
Employee and the Company relating to the employment of the Employee by the
Company. No provision of the Agreement, may be modified or amended except by an
instrument in writing signed by or for both parties hereto.
15. Severability. If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall at any time or to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
16. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach thereof.
17. Remedies Not Exclusive. No remedy specified herein shall be deemed to
be such party's exclusive remedy, and accordingly, in addition to all of the
rights and remedies provided for in this Agreement, the parties shall have all
other rights and remedies provided to them by applicable law, rule or
regulation.
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<PAGE>
18. Beneficiaries. Whenever this Agreement provides for any payment to be
made to the Employee or his estate, such payment may be made instead to such
beneficiary or beneficiaries as the Employee may have designated in writing and
filed with the Company. The Employee shall have the right to revoke any such
designation from time to time and to redesignate any beneficiary or
beneficiaries by written notice to the Company.
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
just above written.
HORIZON OFFSHORE, INC.
By: /s/ Bill J. Lam
-----------------------------------------
Name: Bill J. Lam
Title: President, Chief Executive Officer
and Director
EMPLOYEE:
/s/ David W. Sharp
-----------------------------------------
David W. Sharp,
Executive Vice President,
Chief Financial Officer, Secretary
and Treasurer
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<PAGE>
EXHIBIT 10.7
EMPLOYMENT AND NON-COMPETITION AGREEMENT
This Employment Agreement (this "Agreement") between Horizon Offshore,
Inc., a Delaware corporation ("Company"), and James K. Cole ("Employee") is
dated as of January 1, 1998.
The Company and the Employee agree as follows:
1. Employment. The Company has hired the Employee and the Employee
agreed to be employed upon the terms and conditions hereinafter set forth.
2. Term. (a) Subject to the provisions for termination as hereinafter
provided, Employee's employment pursuant to the terms of this Agreement shall be
for the period expiring on the earlier to occur of (i) December 31, 2001 or (ii)
three years from the date that the Company's common stock commences trading on
the Nasdaq National Market or another securities market or exchange. Such
period of employment is referred to herein as the "Employment Term."
(b) If Employee continues to serve as an employee of the Company after the
Employment Term, such continued employment shall be subject to the terms of this
Agreement but shall be terminable at will by either the Company or Employee.
(c) Following Employee ceasing for whatever reason to be an employee of the
Company, each party shall have the right to enforce all rights, and shall be
bound by all obligations, of such party that are continuing rights and
obligations under the terms of this Agreement.
3. Duties. The Employee shall perform such duties, consistent with the
Employee's job title, as may be prescribed from time to time by the Board of
Directors of the Company (the "Board") or officers to whom such authority has
been delegated.
4. Compensation and Benefits. The Company will provide or will cause to
be provided to Employee a minimum annual base salary of $143,000. The Employee
shall be entitled to all benefits and perquisites provided to similarly situated
employees of the Company.
5. Termination of Employment.
(a) During the Employment Term, the Employee's status as an employee will
terminate immediately and automatically upon the earliest to occur of:
(i) the death or "Disability" (as defined below) of the Employee;
(ii) the discharge of the Employee by the Company "For Cause" (as
defined below);
(iii) the expiration of the Employment Term.
The Employee hereby accepts such employment subject to the terms and conditions
hereof.
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<PAGE>
(b) As used herein, "For Cause" shall mean any one or more of the
following:
(i) material or repeated violations by the Employee (after notice
thereof from the Company) of the terms of this Agreement of the
Employee's material or repeated failure (after notice thereof
from the Company) to perform the Employee's duties in a manner
consistent with the Employee's position;
(ii) excessive absenteeism on the part of the Employee not related to
illness;
(iii) the Employee's indictment for a felony;
(iv) the Employee's commission of fraud, embezzlement, theft or other
acts involving dishonesty, or crimes constituting moral
turpitude, in any case whether or not involving the Company,
that, in the opinion of the Board, renders the Employee's
continued employment harmful to the Company;
(v) substance abuse on the part of the Employee; or
(vi) the Employee acting in bad faith relative to the Company's
business interests.
(c) As used herein, "Disability" shall mean a physical or mental incapacity
of the Employee that, in the good faith determination of the Board has prevented
the Employee from performing the duties assigned the Employee by the Company for
60 consecutive days or for a period of more than 90 days in the aggregate in any
12-month period and that, in the determination of the Company after consultation
with a medical doctor appointed by the Company, may be expected to prevent the
Employee for any period of time thereafter from devoting the Employee's full
time and energies (or such lesser time and energies as may be acceptable to the
Company in its sole discretion) to the Employee's duties as provided hereunder.
The Employee's employment hereunder, except as otherwise agreed to in writing
between the Company and the Employee, shall cease as of the date of such
determination. The Employee agrees to submit to medical examinations, at the
Company's sole cost and expense, to determine whether a Disability exists
pursuant to reasonable requests that the Company may make from time to time.
During the period of any such physical or mental incapacity as provided above,
the salary otherwise payable to the Employee may, in the absolute discretion of
the Company, be reduced by the amount of any disability benefits or payments
received by the Employee from the Company or any disability or health plan
funded in whole or in part by the Company (excluding health insurance benefits
or other reimbursement of medical expenses attributable to insurance policies
that have not been funded in any part by the Company).
6. Trade Secrets, Etc. The Employee shall hold, both during the
Employment Term and thereafter, in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its subsidiaries or corporate affiliates and their
respective businesses and operations, which shall have been obtained by the
Employee during the Employee's employment (whether prior to or after the date
hereof) and which shall not have become public knowledge (other than by acts of
the Employee of his representatives
-2-
<PAGE>
in violation of this Agreement). The Employee agrees (i) that, without the prior
written consent of the Company or as may be otherwise required by law or legal
process, he will not communicate or divulge any such information, knowledge or
data to any party other than the Company and (ii) to deliver promptly to the
Company upon its written request any confidential information, knowledge or data
in his possession, whether produced by the Company or any of its subsidiaries
and corporate affiliates or by the Employee, that relates to the business of the
Company or any of its subsidiaries and joint ventures or any past, current or
prospective activity of the Company or any of its subsidiaries and joint
ventures. The Employee shall be permitted to retain copies of such data as are
necessary in order to enable the Employee to assert any rights under this
Agreement, provided that such data shall be used solely for such purpose.
7. Limited Covenant Not to Compete. (a) Throughout the Employment Term
and for a period of (i) two years following the termination of Employee's
employment with the Company if Employee's employment is terminated for any
reason during the Employment Term, and (ii) one year following the termination
of Employee's employment with the Company if Employee's employment is terminated
for any reason after the Employment Term, the Employee will not, directly or
indirectly, own, manage, operate, control, be employed by, participate in, or be
connected in any manner with the ownership, management, operation or control of
any company or other business enterprise engaged in a line or lines of business
similar to that of the Company or any of its subsidiaries or joint ventures,
within the State of Texas, Louisiana, Mississippi, Alabama or Florida (including
any area offshore in the Gulf of Mexico or any such state) or any other
jurisdiction, whether within or outside the United States in which the business
of the Company or any of its subsidiaries or joint ventures is carried on, so
long as the Company or any of its subsidiaries or joint ventures carries on a
like line of business therein; provided, however, that nothing contained herein
shall prohibit the Employee from making investments in any publicly held company
which do not exceed in the aggregate two percent of the equity interest of such
company.
(b) As part of the consideration for the compensation and benefits to
be paid to the Employee hereunder; to protect the trade secrets and confidential
information of Company and its affiliates that have been and will in the future
be disclosed or entrusted to the Employee, the business good will of the Company
and its affiliates that has been and will in the future be developed in the
Employee, or the business opportunities that have been and will in the future be
disclosed or entrusted to the Employee by the Company and its affiliates; and,
as an additional incentive for the Company to enter in this Agreement, the
Company and the Employee agree to the non-competition obligations hereunder.
The obligations of the Employee set forth in this Section 7 shall apply during
the term of this Agreement and shall survive termination of this Agreement
and/or the termination of the Employee's services under this Agreement
regardless of the reason for such termination.
8. No Tampering. Throughout the Employment Term and for two years
following the termination of Employee's employment by the Company for any
reason, the Employee shall not (a) request, induce or attempt to influence any
supplier of goods or services to the Company curtail or cancel any business they
may transact with the Company; (b) request, induce or attempt to influence any
customers of the Company that have done business with or potential customers
which have been in contact with the Company to curtail or cancel any business
they may transact with the Company;
-3-
<PAGE>
or (c) request, induce or attempt to influence any employee of the Company to
terminate his or her employment with the Company.
9. Statements Concerning the Company. The Employee shall refrain, both
during the Employment Term and following the termination of Employee's
employment by the Company for any reason, from publishing any oral or written
statements about the Company, any of its affiliates, or any of such entities'
officers, employees, agents or representatives that are slanderous, libelous, or
defamatory; or that disclose private or confidential information about the
Company, any of its affiliates, or any of such entities' business affairs,
officers, employees, agents or representatives; or that constitute an intrusion
into the seclusion or private lives of the Company, any of its affiliates, or
any of such entities' officers, employees, agents or representatives or that
give rise to unreasonable publicity about the private lives of the Company, any
of its affiliates, or any of such entities' officers, employees, agents or
representatives; or that place the Company, any of its affiliates, or any of
such entities' officers, employee, agents or representatives in a false light
before the public; or that constitute a misappropriation of the name or likeness
of the Company, any of its affiliates, or any of such entities; officers,
employees, agents or representatives. A violation or threatened violation of
this prohibition may be enjoined by the courts. The rights afforded the Company
and its affiliates under this provision are in addition to any and all rights
and remedies otherwise afforded by law.
10. Injunctive Relief. In the event of a breach or threatened breach by
the Employee of the provisions of Sections 6, 7, 8 or 9 of this Agreement during
or after the term of this Agreement, the Company shall be entitled to injunctive
relief restraining the Employee from violation of such paragraph. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedy at law or in equity it may have in the event of breach or threatened
breach of this Agreement by the Employee.
11. Binding Effect.
(a) This Agreement shall be binding upon and inure to the benefit of
the Company and any of its successors or assigns.
(b) This Agreement is personal to the Employee and shall not be
assignable by the Employee without the consent of the Company (there being no
obligation to give such consent) other than such rights or benefits as are
transferred by will or the laws of descent and distribution.
(c) The Company will require any successor or assign (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the assets or businesses of the Company (i) to assume
unconditionally and expressly this Agreement and (ii) to agree to perform all of
the obligations under this Agreement in the same manner and to the same extent
as would have been required of the Company had no assignment or succession
occurred, such assumption to be set forth in a writing reasonably satisfactory
to the Employee. In the event of any such assignment or succession, the term
"Company" as used in this Agreement shall refer also to such successor or
assign.
-4-
<PAGE>
12. Notices. Any notice or other communication required under this
Agreement shall be in writing, shall be deemed to have been given and received
when delivered in person, or, if mailed, shall be deemed to have been given when
deposited in the United States mail, first class, registered or certified,
return receipt requested, with proper postage prepaid, and shall be deemed to
have been received on the third business day thereafter, and shall be addressed
as follows:
If to the Company, addressed to:
Horizon Offshore, Inc.
2500 City West Boulevard, Suite 2200
Houston, Texas 77042
If to the Employee, addressed to:
Horizon Offshore, Inc.
2500 City West Boulevard, Suite 2200
Houston, Texas 77042
or such other address as to which any party hereto may have notified the other
in writing.
13. Governing Law. This Agreement shall be governed by and interpreted in
accordance with the laws of the State of Texas.
14. Entire Agreement. This Agreement and the documents referred to
herein, contain or refer to the entire arrangement or understanding between the
Employee and the Company relating to the employment of the Employee by the
Company. No provision of the Agreement, may be modified or amended except by an
instrument in writing signed by or for both parties hereto.
15. Severability. If any term or provision of this Agreement, or the
application thereof to any person or circumstance, shall at any time or to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable, shall not be affected
thereby and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
16. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach thereof.
17. Remedies Not Exclusive. No remedy specified herein shall be deemed to
be such party's exclusive remedy, and accordingly, in addition to all of the
rights and remedies provided for in this Agreement, the parties shall have all
other rights and remedies provided to them by applicable law, rule or
regulation.
-5-
<PAGE>
18. Beneficiaries. Whenever this Agreement provides for any payment to be
made to the Employee or his estate, such payment may be made instead to such
beneficiary or beneficiaries as the Employee may have designated in writing and
filed with the Company. The Employee shall have the right to revoke any such
designation from time to time and to redesignate any beneficiary or
beneficiaries by written notice to the Company.
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
just above written.
HORIZON OFFSHORE, INC.
By: /s/ Bill J. Lam
------------------------------------------
Name: Bill J. Lam
Title: President, Chief Executive Officer
and Director
EMPLOYEE:
/s/ James K. Cole
------------------------------------------
James K. Cole,
Senior Vice President
-6-
<PAGE>
EXHIBIT 10.8
- --------------------------------------------------------------------------------
USD 16,000,000.00
CREDIT AGREEMENT
Provided by
DEN NORSKE BANK ASA
to
HORIZON VESSELS, INC.
and
HORIZON OFFSHORE CONTRACTORS, INC.
as Borrowers
HORIZON OFFSHORE, INC.
as Guarantor
Dated as of October 27, 1997
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Section 1. Definitions..................................................... 2
1.1 Certain Definitions............................................. 2
1.2 Accounting Terms................................................ 13
Section 2. Facility A...................................................... 13
2.1 Term Loan....................................................... 13
Section 3. Facility B...................................................... 14
3.1 Revolving Credit................................................ 14
3.2 Borrowing Base.................................................. 15
Section 4. The Note........................................................ 15
Section 5. Manner of Drawdown.............................................. 15
5.1 Manner of Drawdown.............................................. 16
5.2 Disbursement of Funds........................................... 16
5.3 Failure to Borrow; Delay........................................ 16
Section 6. Interest........................................................ 17
6.1 Rate of Interest................................................ 17
6.2 Payment of Interest............................................. 17
6.3 Conversion of LIBOR Advance to Prime Advance.................... 17
6.4 Overdue Payment of Principal and Interest....................... 18
6.5 Compliance with Law............................................. 18
Section 7. Loan Payments................................................... 19
7.1 Payments on Non-Business Days................................... 19
7.2 Repayment of Facility A......................................... 19
7.3 Repayment of Facility B......................................... 19
7.4 Voluntary Prepayments........................................... 20
7.5 Mandatory Prepayment............................................ 21
7.6 Payment Procedure............................................... 21
7.7 Net Payments.................................................... 21
7.8 Rights of Set-off............................................... 22
7.9 Changes in Circumstances........................................ 22
7.10 Unavailability of Dollars....................................... 25
7.11 Holding Account................................................. 26
7.12 Tax Treaty...................................................... 27
Section 8. Security........................................................ 28
<PAGE>
8.1 Mortgages....................................................... 28
8.2 Security Agreement.............................................. 28
8.3 Support Agreement............................................... 28
8.4 Guaranty........................................................ 28
8.5 Holding Account Agreement....................................... 28
8.6 Further Assurances.............................................. 28
Section 9. Conditions Precedent............................................ 29
9.1 Documents Required as Conditions Precedent to the Drawdown
of the First Advance............................................ 29
9.2 Additional Conditions Precedent to Subsequent Advances.......... 33
9.3 Waiver of Conditions Precedent.................................. 33
Section 10. Fees and Expenses............................................... 33
10.1 Fees............................................................ 33
10.2 Expenses........................................................ 34
10.3 General Indemnity............................................... 35
10.4 Survival........................................................ 37
Section 11. Representations and Warranties of Borrowers..................... 37
11.1 Due Incorporation, Qualification, Etc........................... 38
11.2 Capacity........................................................ 38
11.3 Authority and Enforceability.................................... 38
11.4 Governmental Approvals.......................................... 38
11.5 Compliance with Other Instruments............................... 39
11.6 Financial Statements............................................ 39
11.7 Material Adverse Events......................................... 40
11.8 Litigation, Etc................................................. 40
11.9 Principal Place of Business..................................... 40
11.10 Patent and Other Rights......................................... 41
11.11 Taxes........................................................... 41
11.12 Employee Retirement Income Security Act of 1974................. 41
11.13 Investment Company Act of 1940.................................. 41
11.14 Subsidiaries.................................................... 41
11.15 Environmental Compliance........................................ 42
Section 12. Affirmative Covenants of Borrowers.............................. 43
12.1 Financial Statements, Reports and Inspection.................... 43
12.2 Insurance....................................................... 46
12.3 Other Debt...................................................... 47
12.4 Maintenance of Existence; Conduct of Business................... 47
12.5 Financial Records............................................... 47
12.6 Maintenance of Vessels.......................................... 47
<PAGE>
12.7 Environmental Compliance........................................ 47
12.8 Environmental Notifications..................................... 48
12.9 Environmental Indemnification................................... 49
12.10 Notification of Total Loss...................................... 51
Section 13. Negative Covenants of Borrowers................................. 51
13.1 Liens........................................................... 51
13.2 Line of Business................................................ 52
13.3 Consolidation, Merger, Etc...................................... 53
13.4 Modification of Agreements...................................... 53
13.5 Indebtedness.................................................... 53
13.6 Reportable Event................................................ 53
13.7 Change of Legal Structure....................................... 53
13.8 Change of Place of Business..................................... 53
13.9 Management of Vessels........................................... 54
13.10 Subsidiaries.................................................... 54
13.11 Charter......................................................... 54
13.12 Modifications to Vessels........................................ 54
13.13 Sale of Vessel, Etc............................................. 54
13.14 Current Ratio................................................... 54
13.15 Working Capital................................................. 55
13.16 Fixed Charge Coverage Ratio..................................... 55
13.17 Debt Ratio...................................................... 55
13.18 Payments on Subordinated Debt................................... 55
13.19 Compliance with Federal Reserve Board Regulations............... 55
13.20 Loans and Investments........................................... 56
13.21 Contracts with Affiliates....................................... 56
13.22 Change of Management or Ownership............................... 56
13.23 Lease Expense................................................... 56
13.24 Capital Expenditures............................................ 56
13.25 Dividends....................................................... 56
13.26 Use of Vessels.................................................. 57
13.27 Fiscal Years.................................................... 57
Section 14. Events of Default............................................... 57
14.1 Events.......................................................... 57
Section 15. Minimum Value, Evaluation and Additional Security............... 60
15.1 Minimum Value................................................... 60
15.2 Evaluation...................................................... 61
15.3 Failure to Maintain Minimum Value............................... 61
Section 16. Elliott Payments................................................ 62
<PAGE>
Section 17. Miscellaneous................................................... 63
17.1 Entire Agreement................................................ 63
17.2 No Waiver....................................................... 63
17.3 Survival........................................................ 63
17.4 Notices......................................................... 64
17.5 Termination..................................................... 64
17.6 Severability of Provisions...................................... 64
17.7 Successors and Assigns.......................................... 65
17.8 Assignment and Participation.................................... 65
17.9 Counterparts.................................................... 66
17.10 Jurisdiction.................................................... 66
17.11 Choice of Law................................................... 67
17.12 Waiver of Jury Trial............................................ 67
17.13 Amendment and Waiver............................................ 68
17.14 No Oral Agreements.............................................. 68
17.15 Headings, Etc................................................... 68
17.16 Taxes........................................................... 68
17.17 Controlling Agreement........................................... 68
Schedule 1 - List of Vessels
Exhibit A - Promissory Note
Exhibit B - Request for Borrowing
Exhibit C - Borrowing Base Report
<PAGE>
CREDIT AGREEMENT
THIS CREDIT FACILITY AGREEMENT dated as of October __, 1997, among Horizon
Vessels, Inc., a corporation organized and existing under the laws of the State
of Delaware, Horizon Offshore Contractors, Inc., a corporation organized and
existing under the laws of the State of Delaware (individually a "Borrower" and
collectively the "Borrowers"), Horizon Offshore, Inc., a corporation organized
and existing under the laws of the State of Delaware (the "Guarantor") and Den
norske Bank ASA, a banking corporation organized and existing under the laws of
the Kingdom of Norway (the "Lender").
W I T N E S S E T H:
--------------------
WHEREAS, the Borrowers are in the offshore construction business; and
WHEREAS, the Borrowers have requested financing from the Lender in a
principal amount of up to Sixteen Million United States Dollars (USD
16,000,000.00) to repay existing debt of the Borrowers, assist with the cost of
upgrading the Vessels and provide working capital for the Borrowers; and
WHEREAS, the Lender is prepared to provide the financing described above on
the terms and conditions contained in this Credit Agreement;
NOW, THEREFORE, in consideration of the above recitals, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
<PAGE>
Section 1. Definitions.
1.1 Certain Definitions. As used herein, the following terms shall have
the following respective meanings:
"Advance" means a loan by the Lender to the Borrowers under this Credit
Agreement.
"Affiliate" of any Person means (i) any Person directly or indirectly
controlled by, controlling or under common control with such first Person and
(ii) any director or officer of such first Person or of any Person referred to
in clause (i) above. For the purposes of this definition "control" of any
Person includes (a) with respect to any corporation or other Person having
voting shares or the equivalent and elected directors, managers, or Persons
performing similar functions, the ownership or power to vote, directly or
indirectly shares or the equivalent representing 50% or more of the power to
vote in the election of directors, managers or Persons performing similar
functions, (b) ownership of 50% or more of the equity or beneficial interest in
any other entity and (c) the ability to direct the business and affairs of any
Person by acting as a general partner, manager or otherwise.
"Borrowing Base" means at any time an amount equal to 80% of the face value
of Eligible Accounts from a U.S. domiciled Person payable in USD.
"Breakage Cost" means any amount reasonably necessary to compensate the
Lender for costs or expenses incurred by the Lender in connection with the
payment or acceleration of the Loan, in whole or in part, whether voluntarily or
involuntarily , on a date which is not the last date of the then applicable
Interest Period for the portion of the Loan being paid, including (without
limitation) any loss incurred in obtaining, liquidating or employing deposits
from third parties.
"Business Day" means any day on which commercial banks are open for
business in Houston, Texas, New York, New York and London, England.
2
<PAGE>
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof having maturities of not more than one (1) year from the
date of acquisition, (ii) time deposits (including Eurodollar time deposits) and
certificates of deposit of any bank meeting the qualifications specified in
clause (iv) below with maturities of not more than 90 days from the date of
acquisition, (iii) fully secured repurchase obligations with a term of not more
than 90 days for underlying securities of the types described in clause (i)
entered into with any bank meeting the qualifications specified in clause (iv)
below, (iv) commercial paper issued by the parent corporation of any bank
referred to in this clause (iv) or any commercial bank of recognized standing
having capital and surplus in excess of USD 300,000,000.00 and commercial paper
rated at least A-2 or the equivalent thereof by Standard & Poor's Corporation or
at least P-2 or the equivalent thereof by Moody's Investor Services, Inc., and
in each case maturing within 90 days after the date of acquisition, and (v)
remarketed certificates of participation issued through any bank meeting the
qualifications specified in clause (iv) above rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Moody's Investor Services, Inc. and maturing within 90
days after the date of acquisition.
"Commitment" means a maximum of USD 16,000,000.00 as it may be reduced from
time to time pursuant to the provisions of this Agreement.
"Controlled Group" means a "controlled group of corporations" as defined in
Section 1563(a) of the Internal Revenue Code of 1986, as amended, determined
without regard to Section 1563(a)(4) and (e) (3) (C) of such Code, of which
either Borrower is a part.
3
<PAGE>
"Credit Facility" means the aggregate amount of Advances made hereunder and
the aggregate amount of the unused but still available portion of the
Commitment.
"Current Assets" means those assets of the Guarantor which would in
accordance with GAAP be classified on a consolidated basis as current assets of
a corporation conducting a business the same as or similar to the business of
the Guarantor.
"Current Liabilities" means Indebtedness of the Guarantor which would in
accordance with GAAP be classified on a consolidated basis as current
liabilities of a corporation conducting a business the same as or similar to the
business of the Guarantor but excluding the current maturities of the Borrowers'
or the Guarantor's long term debt.
"Current Ratio" means the ratio of the Guarantor's Current Assets to the
Guarantor's Current Liabilities.
"Debt Ratio" means the Guarantor's total consolidated Indebtedness divided
by the sum of consolidated Indebtedness, Elliott Advances, Elliott Indebtedness,
and stockholder's equity but excluding subordinated indebtedness of HLS
Offshore, L.L.C.
"Dollars" and the sign "USD" mean lawful money of the United Stated of
America.
"Drawdown Date" means the date upon which an Advance is made.
"EBITDA" means, for any period, the consolidated earnings of the Guarantor
during such period from continuing operations, before gains or losses on sales
of assets (to the extent such gains or losses are included in earnings from
continuing operations) and extraordinary items, as determined under GAAP,
federal, state, foreign and local income taxes, Interest Expense, depreciation
and amortization.
4
<PAGE>
"Eligible Accounts" means, at any time, the aggregate amount of the
Borrowers' accounts receivable for the shipment and sale of products or for
services rendered for which invoices have been issued and payment for which is
due within sixty (60) days. In determining accounts receivable constituting
Eligible Accounts, there shall be excluded (i) accounts receivable remaining
unpaid for a period of more than ninety (90) days from the date of invoice (or
due date in the case of instruments, lease agreements and chattel paper), (ii)
accounts receivable arising from sale to or services rendered for any subsidiary
or Affiliate of the Borrowers, if any, (iii) accounts receivable in which the
Lender does not have a first priority perfected security interest, (iv) accounts
receivable which are subject to a right of offset, claim or defense, (v)
accounts receivable due from suppliers of materials or inventory to the
Borrowers to the extent that the Borrowers are indebted to such suppliers with
respect to materials or supplies purchased by the Borrowers from such suppliers,
(vi) accounts receivable due from customers known to be insolvent or in
bankruptcy proceedings, and (vii) accounts receivable rejected in whole or in
part by the Lender in its sole discretion as containing unacceptable risk.
"Elliott" means Elliott Associates, L.P., a limited partnership organized
and existing under the laws of the State of Delaware.
"Elliott Advances" means equity contributions or subordinated loans made by
Elliott to the Borrowers pursuant to the Support Agreement and other advances
made by Elliott to the Borrowers which do not meet the requirements contained in
the definition of Elliott Indebtedness.
"Elliott Indebtedness" means (i) amounts advanced by Elliott to the
Borrowers in the form of subordinated debt subsequent to the first Drawdown Date
for the purpose of acquiring or upgrading marine construction vessels or
ancillary equipment related to such vessels or (ii) amounts
5
<PAGE>
paid by Elliott on behalf of the Borrowers subsequent to the first Drawdown Date
in respect of amounts owed on the PHOENIX HORIZON (EX MARINER); but in either
case the terms (including subordination) of which have been approved in writing
by the Lender.
"Elliott Payments" means payments by the Borrowers to Elliott of accrued
interest on Elliott Advances and Elliott Indebtedness and principal payments on
Elliott Indebtedness.
"Equipment" shall have the meaning set forth in Section 1.01 of the
Security Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Event of Default" means each of the Events of Default described in Section
14 hereof.
"Excess Cash Flow" means for any period, EBITDA minus the sum of total
Interest Expense for the Loan, principal payments on Facility A (both scheduled
and optional), Taxes paid and the proportional amount of the Borrowers' capital
expenditures, assuming USD 2,000,000.00 of capital expenditures annually.
"Facility A" means the USD 9,000,000.00 senior secured term loan provided
for in Section 2 of this Agreement.
"Facility B" means the USD 7,000,000.00 senior secured revolving loan
provided for in Section 3 of this Agreement.
"Fixed Charge Coverage Ratio" means for any period, EBITDA divided by the
sum total of Interest Expense on the Loan, scheduled payments of principal on
Facility A, actual Taxes paid and proportional capital expenditures of the
Borrowers for such period, assuming USD 2,000,000.00 of capital expenditures
annually.
"GAAP" means generally accepted accounting principles in effect from time
to time in the United States of America.
6
<PAGE>
"Governmental Agency" means any United States or foreign government or any
state, department or other political subdivision thereof or governmental body,
agency, authority, department or commission (including without limitation any
court or tribunal) exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government and any corporation,
partnership or other entity directly or indirectly owned by the foregoing.
"Guaranty" means the guaranty by the Guarantor of the Borrowers'
obligations under this Agreement and the Note in form and substance satisfactory
to the Lender.
"Hazardous Substances" means petroleum and used oil, or any other pollutant
or contaminant, hazardous, dangerous or toxic waste, substance or material as
defined int he Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Sec. 9601, et seq. (hereinafter called
"CERCLA"); the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
Sec. 9601, et seq. (hereinafter called "RCRA"); the Toxic Substances Control
Act, as amended, 15 U.S. C. Sec. 2601, et seq. (hereinafter called "TSCA"); the
Hazardous Materials Transportation Act, as amended, 49 U.S.C. Sec. 1801, et seq.
(hereinafter called "HMTA"); the Oil Pollution Act of 1990, 33 U.S.C. Sec. 2701
et seq. (hereinafter called "OPA"); or any other statute, law, ordinance, code
or regulation of any Governmental Agency relating to or imposing liability or
standards of conduct concerning the use, production, generation, treatment,
storage, recycling, handling, transportation, release, threatened release or
disposal of any waste, substance or material, currently in effect or at any time
hereafter adopted.
"Holding Account Agreement" means the agreement among The Frost National
Bank the Borrowers and the Lender establishing the lock box arrangement for the
accounts receivable of the Borrowers, in form and substance satisfactory to the
Lender.
7
<PAGE>
"Indebtedness" of the Borrowers or the Guarantor means all items of
indebtedness which, in accordance with GAAP, would be included in determining
liabilities as shown on the liability side of a balance sheet of the Borrowers
or the Guarantor, as of the date as of which indebtedness and liabilities is to
be determined and shall include all indebtedness and liabilities of others
assumed or guaranteed by the Borrowers or the Guarantor or in respect of which
the Borrowers or the Guarantor are secondarily or contingently liable (other
than by endorsement of instruments in the course of collection and performance
guarantees and similar transactions entered into in the ordinary course of
business) whether by reason of any agreement to acquire such indebtedness or to
supply or advance sums or otherwise but shall exclude deferred Taxes.
"Interest Expense" means, with respect to any Person, for any period of
determination, its interest expense determined in accordance with GAAP.
"Interest Payment Date" means, with respect to any Prime Advance, the last
Business Day of each month and, with respect to any LIBOR Advance, the end of
each Interest Period except if such Interest Period is longer than ninety (90)
days, every ninety (90) days and at the end of such Interest Period.
"Interest Period" means with respect to any LIBOR Advance, each period
selected by the Borrowers for which the rate of interest on such LIBOR Advance
is fixed being the period commencing on the date of the LIBOR Advance or the
date of the expiration of the preceding Interest Period for such LIBOR Advance
and ending on the corresponding day in the calendar month selected by the
Borrowers which is one (1) month, two (2) months, three (3) months or six (6)
months later or, if such month has no numerical corresponding day, on the last
Business Day of such month. If the last day of any such Interest Period is not
a Business Day, then such Interest Period
8
<PAGE>
shall end on the next succeeding Business Day, subject to Section 7.1 hereof. If
any Interest Period determined hereunder would extend beyond the Maturity Date,
such Interest Period shall end on the Maturity Date.
"LIBOR Advance" means a Facility A Advance or a Facility B Advance as to
which the Borrowers have selected LIBOR to determine the interest rate.
"LIBOR Rate" means in respect of any Interest Period, the rate of interest
per annum at which deposits in U.S. Dollars are offered to major banks in the
London interbank market at approximately 11:00 a.m. (London time), as reported
by the Telerate System page 3750 or such other page as may replace such page
3750 on such system (rounded upwards, if necessary, to the nearest one-sixteenth
of one percent) for the purpose of reporting London Interbank Offered Rates of
major banks under the heading for British Bankers Association Interest
Settlement Rates in the column designated "USD" (U. S. Dollar), two (2) Business
Days before the first day of an Interest Period. In the event that LIBOR
interest rates are not reported on the telerate System or such reported rates
are not applicable to the selected Interest Period, the Lender shall notify the
Borrowers and upon such notification, the LIBOR Rate shall mean in respect of
any Interest Period the rate of interest per annum (rounded upwards, if
necessary, to the nearest one sixteenth of one percent) at which the Lender is
able to acquire funds in Dollars equal to the outstanding amount of the Advance
for which the rate is to be determined for the duration of the relevant Interest
Period in the London Interbank Eurocurrency Market at or about 11:00 a.m. London
time on the second Business Day prior to the commencement of the relevant
Interest Period for value on the first day of such Interest Period, or at such
time in any alternative marker for such funds available to the Lender, as
notified by the Lender to the Borrowers, such notification, absent manifest
error, to be conclusive.
9
<PAGE>
"Loan" means the principal amounts advanced by the Lender hereunder and
outstanding.
"Loan Documents" means this Agreement, the Mortgages, the Security
Agreement, the Support Agreement, the Guaranty, the Holding Account Agreement
and the Note.
"Material adverse effect" or "materially adversely affected" means, unless
specified otherwise, to affect in a material manner the ability of the Borrowers
to perform their obligations under this Agreement or the ability of the
Guarantor to perform its obligations under the Guaranty.
"Maturity Date" means June 30, 2002.
"Mortgages" means the United States First Preferred Fleet Mortgage on the
U.S. flag Vessels and the Vanuatu First Preferred Ship Mortgage on the Vanuatu
flag Vessel, in form and substance satisfactory to the Lender.
"Note" means the secured promissory note of the Borrowers substantially in
the form of Exhibit A attached hereto, and all renewals, extensions,
rearrangements and replacements thereof.
"Obligations" means and includes all loans, advances, debts, liabilities,
obligations, letters of credit or any other financial accommodations, howsoever
arising, owing by either Borrower to the Lender of every kind and description
(whether or not for the payment of money); direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising pursuant to
the terms of this Agreement, the Note and the other Loan Documents, including,
without limitation, all interest and other expenses that the Borrowers are
obligated to pay thereunder.
"Person" means any natural person, corporation, partnership, limited
liability company, firm, association, government, Governmental Agency or any
other entity other than the Borrowers and whether acting in an individual,
fiduciary or other capacity.
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"Plan" means any employee pension benefit plan subject to Title IV of ERISA
and maintained by the Borrower or any member of a Controlled Group, or any such
plan, to which the Borrower or any member of a Controlled Group is required to
contribute on behalf of any of its employees.
"Prime Advance" means a Facility A Advance or a Facility B Advance as to
which the Borrowers have selected the Prime Rate to determine the interest rate
or as to which the Prime Rate has been applied pursuant to Section 6.3(b) below.
"Prime Rate" means the rate announced by the Lender at its New York, New
York office from time to time as its prime rate.
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA (29 U.S.C. (S)1343), except events for which the notice provision has been
waived by the Pension Benefit Guaranty Corporation.
"Request for Borrowing" means each request for borrowing given by the
Borrowers pursuant to Section 5.1(c) hereof, substantially in the form attached
hereto as Exhibit B.
"Revolving Loan Termination Date" means September 30, 1999.
"Revolving Loan Period" means the period of time beginning on the date of
this Agreement and ending on the Revolving Loan Termination Date.
"Security Agreement" means the security agreement on certain of the
Borrowers' assets and revenues from the Borrowers to the Lender in form and
substance satisfactory to the Lender.
"Support Agreement" means the agreement between Elliott and the Lender
concerning the purchase by Elliott of the term loan made pursuant to Section 2
below under certain circumstances
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and the obligation of Elliott to make Elliott Advances to the Borrowers, in form
and substance satisfactory to the Lender.
"Taxes" means any present or future taxes, levies, imposts, duties or other
charges of whatsoever nature imposed by any Governmental Agency or taxing
authority thereof.
"Term Loan Availability Date" means March 31, 1998.
"Term Loan Period" means the period of time beginning on the date of this
Agreement and ending on the Term Loan Availability Date.
"Total Assets" means the value of all of the assets of the Borrowers on a
consolidated basis using book value except that the Vessels shall be included in
such valuation at their fair market values as determined pursuant to Section
15.2 of this Agreement.
"Total Debt" means all indebtedness of the Guarantor on a consolidated
basis including, but not limited to, obligations under long term charters,
capital leasing obligations, guaranties of indebtedness, contingent liabilities
and subordinated debt, all according to GAAP.
"Total Loss" means in respect of any Vessel (i) actual or constructive or
compromised or arranged total loss of such Vessel; or (ii) requisition for title
or other compulsory acquisition of such Vessel otherwise than by requisition for
hire; or (iii) capture, seizure, arrest, detention or confiscation of such
Vessel by any government or by persons acting or purporting to act on behalf of
any government unless such Vessel is released from such capture, seizure,
arrest, detention or confiscation within thirty (30) days of the occurrence
thereof. A Total Loss shall be deemed to have occurred (a) in the event of an
actual total loss of a Vessel, on the date of such loss, (b) in the event of
damage to a Vessel which results in a constructive or compromised or arranged
total loss of such
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Vessel, on the date of the occurrence of the event giving rise to such damage,
or (c) in the case of any event referred to in clauses (ii) or (iii) above, on
the date of the occurrence of such event.
"Vessels" means the three (3) U.S. flag barges, the one (1) Vanuatu flag
barge and the one (1) U.S. flag tug listed on Schedule 1 attached hereto.
"Working Capital" means the excess of the Guarantor's Current Assets over
its Current Liabilities.
1.2 Accounting Terms. Except as expressly stated herein, all accounting
terms not specifically defined herein shall be construed in accordance with GAAP
consistent with those applied in preparation of the consolidated financial
statements of the Borrowers referred to in Section 12.1 hereof.
Section 2. Facility A.
2.1 Term Loan. (a) Upon the terms and subject to the conditions herein
set forth, the Lender agrees during the Term Loan Period to make the senior
secured term loan to the Borrowers in one or more Advances in a total principal
amount not to exceed USD 9,000,000.00.
(b) Facility A will be advanced in minimum increments of USD 100,000.00.
(c) The Facility A Advances are subject to the following further
provisions:
(i) up to USD 3,500,000.00 of Facility A may be advanced prior to
the reflagging of the PHOENIX HORIZON under Vanuatu flag;
(ii) up to USD 7,000,000.00 of Facility A may be advanced after the
PHOENIX HORIZON has been reflagged under Vanuatu flag and the
recording of the Vanuatu First Preferred Ship Mortgage on such vessel;
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(iii) up to USD 9,000,000.00 of Facility A may be advanced upon (A)
completion of the refurbishments to the GULF HORIZON; and (B) receipt
by the Lender of a survey from a marine surveyor acceptable to the
Lender showing a fair market value of at least USD 5,720,000.00 for
such vessel and in all other respects acceptable to the Lender;
(iv) should the conditions stated above for the second and third
increases in availability not be met by the Term Loan Availability
Date, the Lender's obligation to make additional Facility A Advances
shall automatically terminate; and
(v) should the conditions stated in (iii) above occur before those
stated in (ii) above, the Lender in its absolute discretion may allow
Facility A Advances up to USD 5,500,000.00.
Section 3. Facility B.
3.1 Revolving Credit. Upon the terms and subject to the
conditions herein set forth, the Lender agrees to make the senior secured
revolving credit available to the Borrowers by, from time to time prior to the
Revolving Loan Termination Date, making an Advance or Advances to the Borrowers
in principal amounts in the aggregate not to exceed USD 7,000,000.00 at any one
time. Within such limit, the Borrowers may borrow, repay pursuant to Section
7.3(a) and reborrow under this Section 3.1. Each borrowing by the Borrowers from
the Lender under this Section shall be in an aggregate principal amount of at
least USD 200,000.00 and in integral multiples of USD 100,000.00.
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3.2 Borrowing Base. (a) Notwithstanding any other provision
of this Agreement, the aggregate principal amount at any time outstanding under
Facility B shall not be in excess of the Borrowing Base.
(b) As an additional condition precedent to the initial Advance
and all subsequent Advances under Facility B, the Borrowers shall provide to the
Lender a Borrowing Base Report.
(c) If at any time the test of Section 3.2(a) above is not met,
the Borrowers shall at the Lender's direction either (i) within ten (10)
Business Days provide to the Lender sufficient additional collateral in form and
substance satisfactory to the Lender as shall be necessary to insure that the
test of Section 3.2(a) above is satisfied or (ii) within three (3) Business Days
prepay pursuant to Section 7.4 hereof an amount as may be necessary to reduce
the aggregate principal amount outstanding under Facility B to an amount which
will allow the test of Section 3.2(a) above to be met. The cure periods listed
above shall start running on the date notice of the Lender's decision is given
to the Borrowers.
Section 4. The Note.
(a) The Borrowers' joint and several obligations to pay the
principal of, and interest on, the Loan shall be evidenced by the Note.
(b) At the time of the making of each Advance, and upon each
payment of the principal of the Loan, the Lender shall, and is hereby authorized
to, make a notation on the Note specifying the date and the amount of such
Advance or such payment. Failure to make any such notation shall not limit or
otherwise affect the Borrowers' or any guarantor's obligations in respect of
this Agreement or the Note.
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Section 5. Manner of Drawdown.
5.1 Manner of Drawdown. The Borrowers may draw an Advance upon:
(a) The Lender's prior satisfaction that the relevant
conditions set out in Section 9 herein have been complied with;
(b) No event having occurred to the actual knowledge of the
Borrowers which, with or without notice or lapse of time, would constitute an
Event of Default;
(c) The Lender having received from the Borrowers an
irrevocable Request for Borrowing (i) before 10:00 a.m. New York time at least
three (3) and not more than ten (10) Business Days in the case of a LIBOR
Advance and (ii) before 3:00 p.m. New York time at least one (1) and not more
than ten (10) Business Days in the case of a Prime Advance prior to the Drawdown
Date selected by the Borrowers.
(d) The first Drawdown Date shall occur no later than
October 30, 1997.
5.2 Disbursement of Funds. Disbursement of each Advance
proceeds shall be made by the Lender to the Borrowers as directed by the
Borrowers in the Request for Borrowing.
5.3 Failure to Borrow; Delay. If the borrowing described in any
Request for Borrowing fails to take place or is delayed because any of the
conditions specified in Section 9 below are not satisfied, the Borrowers shall
jointly and severally indemnify the Lender against any loss incurred as a result
of the giving of such Request for Borrowing, including without limitation any
loss resulting from actions taken by the Lender to fund the requested Advance,
but excluding any loss resulting from the gross negligence or willful misconduct
of the Lender. A certificate of the Lender stating in reasonable detail the
amount of, and basis for, any such loss incurred by the Lender shall be
conclusive absent manifest error.
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Section 6. Interest.
6.1 Rate of Interest. (a) The Borrowers agree to pay interest
in respect of all amounts outstanding under any LIBOR Advance at a rate per
annum of the LIBOR Rate plus 3%.
(b) The Borrowers agree to pay interest in respect of all
amounts outstanding under any Prime Advance at a rate per annum of the Prime
Rate plus 1/2%.
(c) Interest on unpaid principal amounts of LIBOR Advances
shall be computed on the basis of a year of 360 days and the actual number of
days elapsed.
(d) Interest on unpaid principal amounts of Prime Advances
shall be computed on the basis of a year of 365 days or, when applicable, 366
days.
6.2 Payment of Interest. Interest shall be paid by the
Borrowers on each Interest Payment Date.
6.3 Conversion of LIBOR Advance to Prime Advance. (a) At the
end of any Interest Period for a LIBOR Advance, the Borrowers may, by
irrevocable written notice to the Lender received at least three (3) Business
Days prior to the end of such Interest Period, elect to convert such Advance to
a Prime Advance.
(b) The Borrowers shall notify the Lenders before 10:00 a.m.
New York time three (3) Business Days prior to the end of each Interest Period
for any LIBOR Advance as to the length selected by the Borrowers for the next
Interest Period. If no such notice is given, such LIBOR Advance shall
automatically convert to a Prime Advance.
6.4 Overdue Payment of Principal and Interest. Overdue
principal of, and (to the extent permitted by law) overdue interest in respect
of, amounts due under this Agreement shall bear
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interest, payable on demand, at a rate per annum which shall be 2% in excess of
the interest rate otherwise applicable pursuant to Section 6.1 above.
6.5 Compliance with Law. Notwithstanding any provision of this
Agreement or the Note to the contrary, in no event shall the aggregate amount of
consideration which constitutes interest under any applicable law which is
contracted for, charged or received hereunder or under this Agreement or the
Note ("Interest") exceed the maximum amount of nonusurious interest allowed by
law, and any excess shall be credited on this Agreement or the Note (or if all
obligations under this Agreement and the Note shall have been paid in full,
refunded to the Borrowers). For purposes of the foregoing, the maximum amount of
interest allowed by law shall be calculated by determining the amount of
interest that could be contracted for, charged or received during the term
hereof at the maximum rate of nonusurious interest allowed from time to time by
applicable law as is now or, to the extent allowed by law, as may hereafter be
in effect (the "maximum nonusurious interest rate") and, if at any time the rate
of Interest to accrue would exceed the maximum nonusurious interest rate, the
rate of Interest to accrue under this Note shall be limited to the maximum
nonusurious interest rate, but any subsequent reductions in the LIBOR Rate or
the Prime Rate shall not reduce the rate of Interest to accrue under this
Agreement or on the Note below the maximum nonusurious interest rate until the
total amount of Interest accrued and paid under this Agreement or on the Note
equals the amount of Interest which could have accrued if a rate per annum equal
to the LIBOR Rate plus 3% or the Prime Rate plus 1/2% had at all times been in
effect.
Section 7. Loan Payments
7.1 Payments on Non-Business Days. Whenever any payment to be
made hereunder or under the Note shall be stated to be due on a day which is not
a Business Day, the due date thereof
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shall be extended to the next succeeding Business Day; provided, however, that
if such next succeeding Business Day is in a new month, then the payment
required under this Agreement or the Note shall be made on the first Business
Day preceding the original date on which payment was due. If a payment of
principal has been extended pursuant to this Section 7.1, interest shall be
payable on such principal at the applicable rate during such extension.
7.2 Repayment of Facility A. All amounts outstanding under Facility A
shall be repaid by the Borrowers in forty-eight (48) monthly installments of USD
190,000.00 each payable on each Interest Payment Date commencing on July 31,
1998, or in a lesser number of installments depending upon the aggregate amount
of Advances made under Facility A; provided, however, that, in any event, the
final installment shall be in an amount sufficient to pay all amounts due under
this Agreement and the Note.
7.3 Repayment of Facility B. (a) The Borrowers may repay any amounts
outstanding under Facility B prior to the Revolving Loan Termination Date on the
following terms and conditions:
(i) any amounts outstanding under Facility B as LIBOR Advances may
be repaid upon irrevocable written notice to the Lender (3) days prior to
the end of an Interest Period without prepayment fee or penalty, but any
repayment made before the end of an Interest Period must be accompanied by
Breakage Costs;
(ii) any amounts outstanding under Facility B as Prime Advances may
be repaid upon irrevocable written notice to the Lender no later than 4:00
p.m. New York time on the day before repayment and without prepayment fee
or penalty.
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(b) The Borrowers shall jointly and severally repay all amounts
outstanding under Facility B to the Lender in one payment on the Revolving Loan
Termination Date.
7.4 Voluntary Prepayments. The Borrowers shall have the right to prepay
all amounts outstanding under Facility A in whole or in part, without premium or
penalty, from time to time pursuant to this Section 7.4 on the following terms
and conditions:
(a) the Borrowers shall give the Lender at least four (4) Business
Days' prior written notice of its intent to prepay such amounts, the amount
of such prepayment and the date of such prepayment;
(b) each such prepayment shall be in a principal amount of at least
USD 200,000.00 and in integral amounts of USD 100,000.00;
(c) if the amount being prepaid relates to a LIBOR Advance and the
prepayment is not at the end of an Interest Period, at the time of any
prepayment, the Borrowers shall pay all Breakage Costs and all interest
accrued on the principal amount of said prepayment; and
(d) each prepayment pursuant to this Section 7.4 shall be applied to
amounts outstanding under Facility A in inverse order of maturity.
7.5 Mandatory Prepayment. If there shall have occurred a sale or Total
Loss of any Vessel, on the earlier of (x) the date the sale or insurance
proceeds are received or (y) ninety (90) days after the date of occurrence of
the sale or Total Loss, the Borrowers shall (A) pay to the Lender an amount
equal to the insured value of such Vessel or the sale proceeds of such Vessel as
the case may be and (B) pay accrued interest thereon to the date of such
prepayment together with any Breakage Costs. The Lender shall apply payments
received pursuant to this Section 7.5 in accordance with Section 7.4(d) above.
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7.6 Payment Procedure. All payments and prepayments made by the Borrowers
under the Note or this Agreement shall be made by wire transfer in immediately
available funds before 12:00 noon, New York Time on the date such payment is
required to be made to the Lender pursuant to the Lender's written instructions.
Any payment received and accepted by the Lender after such time shall be
considered for all purposes (including the calculation of interest, to the
extent permitted by law) as having been made on the next following Business Day.
All payments and prepayments received shall be applied first to accrued interest
and then to the reduction of principal.
7.7 Net Payments. (a) All sums payable by the Borrowers under this
Agreement, or the Note, whether of principal, interest, fees or otherwise, shall
be paid in full without set-off or counterclaim and in such amounts as may be
necessary in order that all such payments (after deduction or withholding for or
on account of any Taxes, other than any Tax, on or measured by the income of the
Lender) shall not be less than the amounts otherwise specified to be paid under
this Agreement or the Note.
(b) A certificate as to any additional amounts payable to the Lender
under this Section 7.7 submitted to the Borrowers by the Lender shall show in
reasonable detail the amount payable and the calculations used to determine in
good faith such amount and shall be conclusive absent manifest error.
(c) With respect to each deduction or withholding for or on account of
any Taxes, the Borrowers shall promptly furnish to the Lender such certificates,
receipts and other documents as may be required (in the reasonable judgment of
the Lender) to establish any income tax credit to which the Lender may be
entitled. In the event that such a deduction or withholding for Taxes
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becomes so applicable, the Lender and the Borrowers will use their best efforts
to minimize the effect of such Taxes.
7.8 Rights of Set-off. The Lender shall, with respect to the Loan and all
other amounts payable hereunder, have all rights of set-off, banker's lien and
counterclaim as it is entitled to exercise under the law of the jurisdiction in
which such rights are exercised.
7.9 Changes in Circumstances. (a) If, by reason of any change subsequent
to the date of this Agreement in applicable law or regulation or regulatory
requirement or directive whether or not having the force of law or in the
interpretation or application thereof by the governmental or quasi-governmental
or judicial authority or central bank charged with the administration or
interpretation of such law or regulation (a "Change in Circumstance"), the
Lender shall determine in good faith that it has become unlawful or impossible
for it to perform its obligations hereunder, the Lender shall immediately notify
the Borrowers and, after such notice, the liability of the Lender to advance or
maintain the Advances shall immediately cease or, if any Advance has been made,
the Borrowers shall prepay to the Lender such Advance. In any such event, but
without prejudice to the aforesaid obligation of the Borrowers to prepay, the
Borrowers and the Lender shall negotiate in good faith for a period not to
exceed ninety (90) days commencing from the date notice is given by the Lender
as provided above, with a view to agreeing to terms for making or continuing to
make available the Commitment from another jurisdiction or funding of the
affected Advance from alternative sources.
(b) If the effect of any Change in Circumstance having effect after the
date hereof, is to:
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(i) change the basis of taxation to the Lender of payment of
principal or interest or any other payment due pursuant to the terms
of this Agreement or the Note (other than an increase in the rate of
taxation on the Lender's overall net income); or
(ii) impose or modify or deem applicable any reserve requirements or
require the making of any special deposits against or in respect of
any assets or liabilities of, deposits with or for the account of or
loans by the Lender; or
(iii) impose on the Lender any other condition affecting the
Commitment or the Loan or any part thereof, the result of which is
either to increase the cost to the Lender of making available or
maintaining the Commitment or the Loan or any part thereof or to
reduce the amount of any payment received by the Lender hereunder;
then and in any such case if such increase or reduction in the
opinion of the Lender materially affects the interests of the Lender;
(A) the Lender shall notify the Borrowers of any of the above
circumstances and the Lender shall use all reasonable efforts
(without any financial commitment on its part) to avoid the
effects of any such change and in particular, shall consider
(without any commitment on its part) fulfilling its obligations
under this Agreement through another office or transferring its
interest in this Agreement and the Note at par to one or more
of its Affiliates not affected by the Change in Circumstances
if such transfer can be accomplished without material added
cost to the Lender and in a manner compatible with its
operational procedures; or
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(B) If the efforts referred to in (A) above fail to have the
effect of eliminating the increased cost incurred by the Lender
or the reduction in the amount of any payment received, the
Borrowers shall within three (3) Business Days following demand
(whether made before or after any repayment of the amounts
outstanding under this Agreement and the Note) pay to the
Lender such amount as the Lender shall certify to be necessary
to compensate the Lender for such additional cost or reduction;
provided, however, that despite such payments, the Lender and
the Borrowers shall continue to use their best efforts to
reduce the effect of such Change in Circumstance; and
(C) At any time thereafter, so long as the Change in
Circumstance giving rise to the obligation to make the
compensating payment continues, the Borrowers may, upon giving
the Lender not less than ten (10) Business Days' written notice
which shall be irrevocable, prepay to the Lender the Loan.
(c) If any amounts outstanding under this Agreement are to be prepaid by
the Borrowers pursuant to any of the provisions of this Section 7.9, the
Borrowers shall simultaneously with such prepayment pay to the Lender all
Breakage Costs and all accrued interest and fees on the amounts to be prepaid.
(d) The certificate of determination of the Lender, as to any matters
referred to in this Section 7.9 shall show in reasonable detail the amount
payable and the calculations used in good faith to determine such amount and
shall, save for any manifest error, be conclusive and binding on
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the Borrowers.
7.10 Unavailability of Dollars.
(a) In the event that the Lender is not able to obtain Dollars in the
London Interbank Market, in the manner in effect on the date of this Agreement,
the Dollars required by the Lender to fund the Loan shall be made available from
such other financial sources as may be available to the Lender. In such an
event the rate of interest applicable to the Loan for the relevant Interest
Period will be for LIBOR Advances, the aggregate of 3% and for Prime Advances,
1/2% and the cost (expressed as a per annum percentage) to the Lender from such
financial sources and for periods as may be elected by the Lender. Each change
in such cost in respect of funding the Loan will cause an immediate
corresponding change in the rate of interest payable by the Borrowers. This
arrangement shall be temporary and should Dollars subsequently become available
to the Lender in the London Interbank Market, in the manner in effect on the
date of this Agreement, then from the conclusion of the then current Interest
Period for funding from alternative sources, the Loan will bear interest at the
rate detailed in Section 6.1(a) above.
(b) In the event that the Lender is unable (for any reason whatsoever) to
acquire the required Dollars from any source, the parties hereto shall meet to
discuss an alternative arrangement. In the absence of mutual agreement and at
the end of ten (10) Business Days after the meeting referred to above the
obligation of the Lender hereunder to make available the Loan shall be
extinguished forthwith and the Loan shall be repaid forthwith by the Borrowers
to the Lender along with all fees and Breakage Costs for the Loan.
7.11 Holding Account. (a) On or before the first Drawdown Date, the
Borrowers shall cause to be established in the name of the Borrowers for the
benefit of the Lender an account and lock box (the "Holding Account" and the
"Lock Box") at the Houston, Texas office of The Frost
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National Bank pursuant to the Holding Account Agreement. The Borrowers shall
instruct all of their customers and account debtors to make all payments to the
Lock Box or the Holding Account of all accounts receivable of the Borrowers,
including but not limited to Earnings as defined in the Security Agreement. Any
payments received directly by the Borrowers from their customers or account
debtors will be deposited immediately in the Holding Account. Until an Event of
Default shall have occurred, the Borrowers shall have the right to transfer from
the Holding Account any amounts in the Holding Account. After an Event of
Default shall have occurred all amounts in the Holding Account may be applied by
the Lender in payment of any amounts due and outstanding under this Agreement or
the Note.
(b) On each Interest Payment Date, the Revolving Loan Termination Date,
the Maturity Date and each day on which commitment fee is payable and only in
the event that the Borrowers have failed to make a payment in accordance with
the terms of this Agreement and the Note, all amounts in the Holding Account
(including interest accrued), shall be used first to pay interest due on such
Interest Payment Date, second to pay any commitment fee due on such date and
third to repay the principal amount outstanding on the Note which is due and
payable to the Lender on such date. After such payments have been made, all
other funds in the Holding Account shall be released to the Borrowers.
(c) The Holding Account shall terminate and any funds remaining in it
shall be paid the Borrowers upon the fulfillment of all of the Borrowers'
Obligations or upon the prior written consent of the Lender.
7.12 Tax Treaty. The Lender is organized under the laws of the
Kingdom of Norway and agrees:
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(a) To complete and deliver to the Borrowers on or before the first
Drawdown Date Internal Revenue Service Form 4224.
[THIS PORTION INTENTIONALLY LEFT BLANK]
(b) To complete and deliver to the Borrowers from time to time, provided
the Lender is eligible to do so, any successor or additional forms required in
order to secure an exemption from, or reduction in the rate of, income tax
withholding imposed by the United States of America. The Lender shall amend or
supplement any such form as required and permitted by applicable law to insure
that it is in full force and effect, accurate and complete at all times.
Section 8. Security.
8.1 Mortgages. The Credit Facility and all other amounts due under this
Agreement shall be secured in accordance with the provisions of the Mortgages.
8.2 Security Agreement. The Credit Facility and all other amounts due
under this Agreement shall be secured in accordance with the provisions of the
Security Agreement.
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8.3 Support Agreement. The Credit Facility and all other amounts due
under this Agreement shall be secured in accordance with the provisions of the
Support Agreement.
8.4 Guaranty. The Credit Facility and all other amounts due under this
Agreement shall be secured in accordance with the provisions of the Guaranty.
8.5 Holding Account Agreement. The Credit Agreement and all other amounts
due under this Agreement shall be secured in accordance with the terms of the
Holding Account Agreement.
8.6 Further Assurances. The Borrowers agree to execute and deliver to the
Lender such financing statements or other instruments or documents as the Lender
may reasonably request in order to perfect the security created by the Mortgage,
the Security Agreement and the Holding Account Agreement or otherwise required
by this Agreement.
Section 9. Conditions Precedent.
9.1 Documents Required as Conditions Precedent to the Drawdown of the
First Advance.
The obligation of the Lender to make the first Advance is subject
to the condition precedent that the Lender shall have received at or prior to
the first Drawdown Date all of the following, each dated on or before the first
Drawdown Date and each in form and substance satisfactory to the Lender.
(a) The executed Note and the other Loan Documents.
(b) Certified copies of the resolutions of the Boards of Directors of the
Borrowers and the Guarantor authorizing the execution and delivery by the
Guarantor and the Borrowers of the Loan Documents to which they are parties and
all documents evidencing other necessary corporate action with respect to the
Loan Documents.
(c) Certificates of the Secretaries or the Assistant Secretaries of the
Guarantor and the Borrowers certifying the names and true signatures of the
officers of the Guarantor and the
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Borrowers authorized to sign the Loan Documents on behalf of the Guarantor and
the Borrowers and the other documents or certificates to be executed by the
Guarantor and the Borrowers pursuant to this Agreement.
(d) Copies certified as of a recent date by the Secretaries or the
Assistant Secretaries of the Guarantor and the Borrowers of their By-Laws.
(e) Copies of the Guarantor's and the Borrowers' Certificates of
Incorporation certified by the relevant officials of their jurisdiction of
incorporation within thirty (30) days from the date of the first Drawdown Date
and certificates dated within thirty (30) days of the first Drawdown Date of the
relevant officials of their jurisdiction of incorporation as to the existence
and good standing of the Guarantor and the Borrower.
(f) Certified copy of the resolutions of the Board of Directors of the
general partner of Elliott authorizing the execution and delivery by Elliott of
the Support Agreement and all documents evidencing other necessary corporate
action with respect to the Support Agreement.
(g) Certificate of the Secretary or the Assistant Secretary of the
general partner of Elliott certifying a copy of excerpts from Elliott's Limited
Partnership Agreement respecting Elliott's partnership authority to enter into
the Loan Documents and the names and the signatures of the officers of such
general partner authorized to sign the Support Agreement on behalf of Elliott
and the other documents or certificates to be executed by Elliott pursuant to
this Agreement.
(h) Copies of Elliott's Certificate of Limited Partnership certified by
the relevant official of its jurisdiction of organization within thirty (30)
days from the date of the first Drawdown Date and a certificate dated within
thirty (30) days of the first Drawdown Date of such officials as to the
existence and good standing of Elliott.
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(i) An opinion of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
counsel to the Guarantor and the Borrowers, acceptable to the Lender.
(j) An opinion of Kleinberg, Kaplan, Wolff & Cohen, P.C., counsel to
Elliott, acceptable to the Lender.
(k) An opinion of Gardere Wynne Sewell & Riggs, L.L.P., special counsel
to the Lender, acceptable to the Lender.
(l) The Borrowers shall have executed and delivered to the Lender copies
of all documents and filings and shall have taken all actions necessary to
perfect the security interests created by the Mortgages, the Holding Account
Agreement and the Security Agreement as first priority perfected security
interests.
(m) All orders, consents, approvals, licenses, authorizations and
validations of, and filings, recordings and registrations with and exemptions by
any Governmental Agency or any Person (other than any routine filings which may
be required after the date hereof with appropriate governmental authorities in
connection with the operation of the Vessels) required to (i) authorize the
execution, delivery and performance by the Borrowers and the Guarantor of the
Loan Documents to which they are parties or (ii) prevent the execution, delivery
and performance by the Borrowers and the Guarantor of the Loan Documents to
which they are parties from resulting in a breach of any of the terms or
conditions of, or resulting in the imposition of any lien, charge or encumbrance
upon any properties of the Borrowers or the Guarantor pursuant to, or
constituting a default (with due notice or lapse of time or both), or resulting
in an occurrence of any event for which any holder or holders of Indebtedness
may declare the same due and payable under, any indenture, agreement, order,
judgment or instrument under which any Borrower or the Guarantor is a party
(other than the
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Mortgages, the Holding Account Agreement or the Security Agreement) or to the
Borrowers' knowledge after due inquiry by which the Borrowers or the Guarantor
or their property may be bound or affected, or under the Certificates of
Incorporation or By-Laws of the Borrowers or the Guarantor, shall have been
obtained or made.
(n) Evidence of the insurance required by Section 12.2 of this Agreement,
accompanied by a report of the Borrower's insurance broker that such insurance
complies with the terms of the Mortgages.
(o) Payment by the Borrowers of the fees referred to in Section 10.1
below required to be paid on or before the first Drawdown Date.
(p) Confirmation of class certificates for the CAJUN HORIZON and the
AMERICAN HORIZON from the American Bureau of Shipping showing such Vessels to be
classified as Maltese Cross A1 Barges dated within thirty (30) days of the first
Drawdown Date.
(q) Copies of evaluations dated no earlier than January 1, 1997 of the
fair market value of the Vessels without charter or other contractual
commitments by an independent ship broker or appraiser selected by the Borrowers
but acceptable to the Lender.
(r) All of the Indebtedness of the Borrowers to Elliott then in existence
or arising in the future (other than any such Indebtedness to be repaid on the
first Drawdown Date from the proceeds of an Advance) shall be fully subordinated
to the Obligations on terms and conditions acceptable to the Lender.
(s) There shall have been no material adverse change in the financial
condition of any Borrower or the Guarantor since the financial statements
delivered to the Lender for the period ending August 31, 1997.
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(t) If the first Drawdown Date is not the date hereof, certificates dated
the first Drawdown Date of an officer of the Borrowers and the Guarantor,
respectively, certifying that:
(i) The representations and warranties contained in Section 11
below and in Section 7 of the Guaranty are correct on and as of the first
Drawdown Date as through made on and as of such date except those expressly
made as of another date; and
(ii) No event has occurred and is continuing, or would result from
the first Advance which constitutes an Event of Default or with the passing
of time or the giving of notice would constitute an Event of Default.
9.2 Additional Conditions Precedent to Subsequent Advances. The
obligation of the Lender to make each subsequent Advance shall be subject to the
further condition precedent that the Lender shall have received certificates
(dated the date of such Advance) of an officer of the Borrowers and the
Guarantor, respectively, certifying that:
(a) The representations and warranties contained in Section 11 below and
in Section 7 of the Guaranty are correct on and as of the date such Advance is
made as though made on and as of such date except those expressly made as of
another date; and
(b) No event has occurred and is continuing, or would result from such
Advance, which constitutes an Event of Default or with the passing of time or
the giving of notice would constitute an Event of Default.
9.3 Waiver of Conditions Precedent. All of the conditions precedent
contained in this Section 9 are for the sole benefit of the Lender and the
Lender may waive any or all of them in its absolute discretion.
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Section 10. Fees and Expenses.
10.1 Fees. (a) The Borrowers shall jointly and severally pay to the
Lender a structuring fee of 2% of amounts available to be drawn under this
Agreement, payable as follows:
(i) on the date of this Agreement 2% of Facility B and 2% of the
amount referred to in Section 2.1(c)(i) above; and
(ii) on each date on which an additional amount of Facility A
becomes available pursuant to Section 2.1(c) above, an amount equal to 2%
of such additional amount.
(b) The Borrower shall pay to the Lender an administrative fee of USD
10,000.00 on the date of this Agreement.
(c) The Borrower shall pay to the Lender a commitment fee of one-half
of one percent (1/2%) per annum of (i) the daily undrawn portion of the Facility
B Commitment up to and including the Revolving Loan Termination Date and (ii)
the daily undrawn portion of the Facility A Commitment up to and including the
Term Loan Availability Date. Such commitment fee shall begin to accrue on the
date of this Agreement and shall be payable quarterly in arrears, the first such
payment to be made on December 31, 1997 and quarterly thereafter. The amount of
the commitment fee shall be computed on the basis of a year of 360 days and the
actual number of days elapsed.
10.2 Expenses. The Borrowers jointly and severally agree, whether or
not any Advance is made, to promptly pay or reimburse the Lender upon demand for
all reasonable fees and disbursement of the Lender, including, but not limited
to, travel and other out-of-pocket expenses of the Lender and the reasonable
fees and expenses of external counsel and technical consultants to the Lender,
incurred in connection with (a) the preparation, execution and delivery of the
Loan
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Documents, the making of Advances under this Agreement and all other documents
referred to herein and any amendments, renegotiation, refinancing or waivers to
or termination of any thereof, (b) the recording, filing and perfection of all
security interests created by the Loan Documents and (c) the protection of the
rights of the Lender under this Agreement and all other documents referred to
herein and the enforcement of payment of the Obligations, whether by judicial
proceedings or otherwise.
10.3 General Indemnity. The Borrowers hereby jointly and severally
agree to:
(a) pay and hold the Lender harmless from and against any and all
present and future stamp and other similar Taxes with respect to the Note and
the other Loan Documents and save the Lender harmless from and against any and
all liabilities with respect to or resulting from any delay or omission to pay
such Taxes, and will indemnify the Lender for the full amount of Taxes paid by
the Lender in respect of payments made or to be made hereunder and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes were correctly or legally asserted;
(b) indemnify the Lender, and its officers, directors, employees,
representatives, agents, attorneys and Affiliates (an "Indemnitee") from and
hold each of them harmless against and promptly upon demand pay or reimburse
each of them for, any and all actions, suits, proceedings (including any
investigations, litigation or inquiries), claims, demands and causes of action,
and, in connection therewith, all reasonable costs, losses, liabilities, damages
or expenses of any kind or nature whatsoever (collectively the "Indemnity
Matters") which may be incurred by or asserted against or involve any of them
(whether or not any of them is designated a party thereto) as a result of,
arising out of or in any way related to (i) any actual or proposed use by the
Borrowers of the
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proceeds of the Loan, (ii) the operations of the business of the Borrowers,
(iii) any bodily injury or death or property damage occurring in or upon or in
the vicinity of any Vessel or any other property owned or operated by the
Borrowers, (iv) the failure of the Borrowers to comply with any requirement of
any Government Agency, or (v) any other aspect of this Agreement, the Note and
the other Loan Documents, including, without limitation, the reasonable fees and
disbursements of counsel and all other expenses incurred in connection with
investigating, defending or preparing to defend any such action, suit,
proceeding (including any investigations, litigation or inquiries) or claim and
including all Indemnity Matters arising by reason of the negligence of any
Indemnitee;
(c) In the case of any indemnification hereunder, the Lender or other
Person indemnified hereunder shall give notice to the Borrowers within a
reasonable period of time of any such claim or demand being made against it and
the Borrower shall have the non-exclusive right to join in the defense against
any such claim or demand provided that if the Borrowers provide a defense, the
Indemnitee shall bear its own cost of defense unless there is a conflict of
interest between the Borrowers and such Indemnitee.
(d) No Indemnitee may settle any claim to be indemnified pursuant to
this Section 10.3 without the consent of the indemnitor, such consent not to be
unreasonably withheld; provided, that the indemnitor may not reasonably withhold
consent to any settlement that an Indemnitee proposes, if the indemnitor does
not have the financial ability to pay all of its obligations outstanding and
asserted against the Indemnitee at that time, including the maximum potential
claims against the Indemnitee to be indemnified pursuant to this Section 10.3.
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(e) Notwithstanding anything to the contrary in this Agreement, the
Borrowers shall have no indemnity obligation with respect to any Indemnitee
Matter caused by or resulting from the gross negligence or willful misconduct of
the Lender or any other Indemnitee.
(f) It is the parties' understanding that neither the Lender nor any
other Indemnitee does now, has never and does not intend in the future to
exercise any operational control or maintenance over the Vessels or any other
properties and operations owned or operated by the Borrowers, nor has any of
them in the past, presently, or intends in the future to, maintain an ownership
interest in the Vessels or any other properties owned or operated by the
Borrowers except as may arise upon enforcement of the Lender's rights under the
Mortgages or the Security Agreement.
(g) Should, however, the Lender or any other Indemnitee hereafter
exercise any ownership interest in or operational control over the Vessels or
any other properties owned or operated by the Borrowers, e.g., including but not
limited to, through foreclosure, then the above stated indemnity and hold
harmless shall be limited with respect to any actions or failures to act by the
Lender or other Indemnitee subsequent to exercising such interest or operational
control, to the extent such action or inaction by the Lender or other Indemnitee
is admitted by the Lender or other Indemnitee or is found by a court of
competent jurisdiction to have caused or made worse any condition for which
liability is asserted.
(h) The indemnity and hold harmless contained in this Section 10.3 shall
not extend to the Lender or any other Indemnitee in its or his capacity as an
equity investor in the Borrowers or as an owner of any property or interest as
to which the Borrowers are also an owner but only to the Lender's capacity as a
lender or a holder of security interests.
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10.4 Survival. The obligations of the Borrowers under this Section 10
shall survive payment of all other amounts due under this Agreement.
Section 11. Representations and Warranties of Borrowers.
Each Borrower represents and warrants to the Lender as follows:
11.1 Due Incorporation, Qualification, Etc. It is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is duly qualified and in good standing as a foreign corporation to
do business in the jurisdictions in which the failure to be so qualified would
have a material adverse effect on its business or financial condition, and it
has full corporate power and authority to own its properties and assets and to
conduct its business as presently conducted.
11.2 Capacity. It has full corporate power and authority to execute
and deliver, and to perform and observe the provisions of the Loan Documents to
which it is a party and to carry out the transactions contemplated hereby and
thereby.
11.3 Authority and Enforceability. The execution, delivery and
performance by such Borrower of the Loan Documents to which it is a party have
been or will be duly authorized by all necessary corporate action. This
Agreement (including the New York choice of law) constitutes, and the other Loan
Documents to which it is a party constitute, or will constitute, legal, valid
and binding obligations of such Borrowers enforceable against it in accordance
with their respective terms, subject to laws affecting creditors' rights
generally and applicable equitable principles. The Mortgage, the Security
Agreement and the Holding Account Agreement shall on the first Drawdown Date
create and constitute valid and perfected security interests in and to the
properties covered thereby, subject to the exceptions contained therein,
enforceable against all third parties, subject to
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laws affecting creditors' rights generally and applicable equitable principles,
and shall secure the Credit Facility.
11.4 Governmental Approvals. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with
(other than any routine filings which may be required after the date hereof with
appropriate governmental authorities in connection with the operation of the
Vessels or required in connection with the perfection of the security interests
created by any of the Loan Documents), or exemption by, any Governmental Agency,
is required to authorize the execution, delivery and performance by such
Borrower of the Loan Documents to which it is a party.
11.5 Compliance with Other Instruments. The execution and delivery of
this Agreement and compliance with its terms, the issuance of the Note and the
execution and delivery of the Mortgage, the Security Agreement and the Holding
Account Agreement and the compliance with their terms as contemplated herein, do
not result in a breach of any of the terms or conditions of, or result in the
imposition of any lien, charge or encumbrance (except those contemplated by this
Agreement) upon any properties of such Borrower pursuant to, or constitute a
default (with due notice or lapse of time or both), or result in an occurrence
of any event for which any holder or holders of Indebtedness may declare the
same due and payable under any indenture, agreement, order, judgment or
instrument under which such Borrower is a party or to such Borrower's knowledge,
after due inquiry, by which such Borrower or its property may be bound or
affected, or under the Certificate of Incorporation or By-Laws of such Borrower,
and, to such Borrower's knowledge, after due inquiry, do not violate any
provision of applicable law.
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11.6 Financial Statements. (a) The consolidated balance sheets of the
Borrowers and the Guarantor as of August 31, 1997 and the related consolidated
statements of income and cash flow of the Borrowers and the Guarantor for the
month and year to date period ended on that date, copies of which have been
furnished to the Lender, have been prepared in accordance with GAAP and fairly
present the financial conditions of the Borrowers and the Guarantor as of such
date and the results of the operations of the Borrowers and the Guarantor for
the period ended on such date.
(b) As of August 31, 1997 the Borrowers and the Guarantor have no
contingent liabilities which, if determined adversely to them (either singly or
in the aggregate), would have a material adverse effect.
11.7 Material Adverse Events. Since August 31, 1997 neither the
business, the prospects, the properties nor the condition (financial or
otherwise) of any Borrower or the Guarantor have been materially adversely
affected.
11.8 Litigation, Etc. Except as disclosed in writing to the Lender,
there are no actions, suits or proceedings pending, or to the knowledge of the
Borrowers threatened, against or affecting the Borrowers or the Guarantor, at
law or in equity which, if adversely determined, would have a material adverse
effect on the Borrowers or the Guarantor. To the Borrowers' knowledge, as of
August 31, 1997, neither Borrower or the Guarantor is in violation with respect
to any applicable laws or regulations which non-compliance would have a material
adverse effect nor is any Borrower or the Guarantor in violation or default with
respect to any order, writ, injunction, demand or decree of any court or any
Person or in violation or default (nor is there any waiver in effect which, if
not in effect, would result in a violation or default) in any material respect
under any indenture,
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agreement or other instrument under which any Borrower or the Guarantor is a
party or may be bound, default under which would have a material adverse effect.
11.9 Principal Place of Business. The chief executive office and
principal place of business of the Borrowers and the Guarantor is located at
9821 Katy Freeway, Suite 450, Houston, Texas 77024.
11.10 Patent and Other Rights. The Borrowers and the Guarantor have
the right to use all patents, licenses, trademarks, trade names, trade secrets,
copyrights and all rights with respect thereto, which are required to conduct
their businesses as now conducted without known conflict with the rights of
others which would materially and adversely affect such businesses.
11.11 Taxes. The Borrowers and the Guarantor have filed or caused to
be filed all tax returns which are required to be filed by them, pursuant to the
laws, regulations or orders of each Person with taxing power over the Borrowers
and the Guarantor or their assets. The Borrower and the Guarantor have paid, or
made provision for the payment of, all Taxes which have or may have become due
pursuant to said returns, or otherwise, or pursuant to any assessment received
by the Borrowers and the Guarantor, except such Taxes, if any, as are being
contested in good faith and as to which adequate reserves (determined in
accordance with GAAP) have been provided. The charges, accruals and reserves in
respect of Taxes on the books of the Borrowers and the Guarantor are adequate
(determined in accordance with GAAP). There are no proposed material tax
assessments against any Borrower or the Guarantor and no extension of time for
the assessment of federal, state or local Taxes of the Borrowers or the
Guarantor is in effect or has been requested.
11.12 Employee Retirement Income Security Act of 1974. No Reportable
Event has occurred and is continuing with respect to any Plan.
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11.13 Investment Company Act of 1940. Neither Borrower is an
"investment company" within the meaning of the Investment Company Act of 1940.
11.14 Subsidiaries. As of the date of this Agreement, the Borrowers
have no subsidiaries.
11.15 Environmental Compliance.
(a) The Borrowers have duly complied in all material respects with, and
the Vessels and their other properties and operations are in compliance in all
material respects with, the provisions of all applicable environmental, health
and safety laws, codes and ordinances and all rules and regulations promulgated
thereunder of all Governmental Agencies unless such compliance would violate the
laws or regulations of the jurisdiction in which a Vessel is located or
operating.
(b) As of the date of this Agreement, the Borrowers have received no
notice from any Governmental Agency, and have no knowledge, of any fact(s) which
constitute a violation of any applicable environmental, health or safety laws,
codes or ordinances, and any rules or regulations promulgated thereunder of all
Governmental Agencies, which relate to the use or ownership of any Vessel or
other properties owned or operated by the Borrowers.
(c) The Borrowers have been issued all required permits, licenses,
certificates and approvals of all Governmental Agencies relating to (i) air
emissions, (ii) discharges to surface water of ground water, (iii) noise
emissions, (iv) solid or liquid waste disposal, (v) the use, generation,
storage, transportation, treatment, recycling or disposal of Hazardous
Substances or (vi) other environmental, health or safety matters necessary for
the ownership or operation of the Vessels or other properties owned or operated
by the Borrowers and such permits, licenses, certificates and approvals are in
full force and effect on the date of this Agreement.
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(d) To the best of the Borrowers' knowledge, except in accordance with
a valid governmental permit, license, certificate or approval, there has been no
spill or unauthorized discharge or release of any Hazardous Substance to the
environment at, from or as a result of any operations on any Vessel or other
properties and operations owned or operated by the Borrowers required to be
reported to any Governmental Agency.
(e) There has been no material complaint, compliance order, compliance
schedule, notice letter, notice of citation or other similar notice from any
applicable environmental agency which concerns the operations of the Vessels or
other properties owned or operated by the Borrowers.
Section 12. Affirmative Covenants of Borrowers.
Until the payment in full of all amounts due under this Agreement and the
Note by the Borrowers, unless compliance shall have been waived by the Lender,
the Borrowers and the Guarantor agree that:
12.1 Financial Statements, Reports and Inspection.
(a) The Borrowers and the Guarantor will furnish to the Lender:
(i) as soon as possible and in any event within two (2)
Business Days after an officer of the Borrowers has knowledge of
the occurrence of any Event of Default or of any default in the
performance of the Loan Documents, or any event which with the
giving of notice or lapse of time, or both, would constitute an
Event of Default or such a default, which is continuing on the date
of such statement, the statement of the chief financial officer of
the Borrowers setting forth the details of such Event of Default or
event or default and the action which the Borrowers propose to take
with respect thereto;
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(ii) as soon as available and in any event within forty-five
(45) days after the close of each month of the Guarantor's fiscal
years, a copy of monthly consolidated financial statements for the
Guarantor prepared in accordance with GAAP and certified by the
chief financial officer or chief accounting officer of the
Guarantor together with consolidating statements of each Borrower;
(iii) as soon as available and in any event within ninety (90)
days after the close of the Guarantor's fiscal years, a copy of the
consolidated annual audited financial statements for such year for
the Guarantor certified by Arthur Andersen, LLP or other
independent public accountants of recognized standing acceptable to
the Lender;
(iv) as soon as available and in any event within forty-five
(45) days after the end of each month, an operations report in form
and substance satisfactory to the Lender;
(v) a Barge Activity Schedule as often it is produced for the
Borrowers' management, but in any event, not less than every two
weeks.
(vi) as soon as possible and in any event by December 1 of
each year an annual business plan for the Borrowers for the coming
year, including projections of utilization of the Vessels, expenses
and revenues;
(vii) such other financial information as the Lender may
reasonably request; and
(viii)(A) as soon as possible, and in any event, within 30 days
after either Borrower or the Guarantor knows that any Reportable
Event with respect to any Plan
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has occurred, a statement of an officer of the Borrowers or the
Guarantor setting forth details as to such Reportable Event and the
action which the Borrowers or the Guarantor propose to take with
respect thereto, together with a copy of the notice of such
Reportable Event given to the Pension Benefit Guaranty Corporation
if a copy of such notice is available to the Borrowers or the
Guarantor and (B) promptly after receipt thereof a copy of any
notice relating to a Reportable Event having a material adverse
effect, the Borrowers, or the Guarantor or any member of the
Controlled Group may receive from the Pension Benefit Guaranty
Corporation or the Internal Revenue Service with respect to any
Plan; provided, however, this Section 10.1(a)(vii)(B) shall not
apply to notice of general application promulgated by the
Department of Labor.
(b) The Borrowers or the Guarantor will, upon request, furnish to the
Lender such information as the Lender may reasonably request with respect to the
business, affairs or condition (financial or otherwise) of the Borrowers or the
Guarantor and will permit the Lender or its representatives at any reasonable
time or times during normal business hours upon three (3) Business Days' prior
notice, to inspect the properties of the Borrowers or the Guarantor, to inspect,
audit and examine the books or records of the Borrowers or the Guarantor and to
take extracts therefrom and will reimburse the Lender for all reasonable
expenses incurred in connection therewith.
(c) Within forty-five (45) days of the close of the first three
quarters of the Guarantor's fiscal year and on the dates that the annual reports
required pursuant to Section 10.1(a)(iii) above are provided to the Lender, the
Guarantor shall furnish to the Lender a certificate signed by the chief
financial officer or chief accounting officer of the Guarantor certifying that
(A) the representations
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and warranties contained in Section 11 of this Agreement are correct on and as
of the date of such certificate as though made on and as of such date except
those expressly made as of another date and (B) the Guarantor is in compliance
with all of the covenants contained in Sections 13.14, 13.15, 13.16 and 13.17 of
this Agreement, such certificates showing the relevant computations for such
compliance.
(d) As soon as possible and in any event within ninety (90) days of the
end of each of the Guarantor's fiscal years, a certificate from the Guarantor's
auditors referred to in Section 12.1(a)(iii) above, certifying that (A) such
auditor is not aware of any Events of Default and (B) the Guarantor is in
compliance with the covenants contained in Sections 13.14, 13.15, 13.16 and
13.17 of this Agreement, such certificates showing the relevant computations for
such compliance.
(e) In addition to the right of inspection referred to in Section
12.1(b) above, the Lender may call for up to four audits of the accounts
receivable of the Borrowers annually, or more if the Lender has reasonable cause
to believe that the value of such accounts receivable or the Borrowers'
accounting practices are in doubt. The costs of any such audits shall be for the
account of the Borrowers and the Borrowers shall cooperate with the Lenders and
its agents in connection with such audits.
(f) In addition to the requirements of Section 3.2(b) above, the
Borrowers shall provide to the Lender a Borrowing Base Report each Friday, or
the next succeeding Business Day, if any Friday is not a Business Day.
12.2 Insurance. The Borrowers shall insure, or cause to be insured,
the Vessels pursuant to the terms of Article I, Section 15 of the Mortgages.
The Borrowers will promptly notify the Lender of any material changes in such
insurances or any change in the underwriters or clubs
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providing such insurances. The Borrowers shall annually but no later than the
anniversary of the date of this Agreement furnish the Lender with evidence of
all such insurance policies currently in force.
12.3 Other Debt. The Borrowers will promptly pay and discharge any
and all Indebtedness, liens, charges, and all Taxes imposed upon them or upon
their income or profits, or upon any of their properties prior to the date on
which penalties accrue thereon, and lawful claims which, if unpaid, might become
a lien or charge upon the property of the Borrowers, except such as may in good
faith be contested or disputed, provided appropriate reserves are maintained in
accordance with GAAP.
12.4 Maintenance of Existence; Conduct of Business. The Borrowers and
the Guarantor will preserve and maintain their corporate existence, their
business as presently conducted, and all of their rights, privileges and
franchises necessary or desirable in the normal conduct of said business, and
will conduct their businesses in an orderly, efficient and regular manner.
12.5 Financial Records. The Borrowers and the Guarantor will keep
books of record and account in which proper entries will be made of their
transactions in accordance with GAAP.
12.6 Maintenance of Vessels. The Borrowers will maintain, or cause to
be maintained, the CAJUN HORIZON and the AMERICAN HORIZON in the highest
classification for such vessels with the American Bureau of Shipping or such
other classification society as the Lender may approve and will, within one
hundred eighty (180) days of the date of the advance referred to in Section
2.1(c)(i) above as to the PHOENIX HORIZON and within ninety (90) days of the
date of the advance referred to in Section 2.1(c)(iii) above as to the GULF
HORIZON, cause such Vessels
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to be classed in the highest classification for such Vessels with the American
Bureau of Shipping and thereafter to maintain such class as to all of the
Vessels other than the MR. EDDIE.
12.7 Environmental Compliance.
(a) The Borrowers will comply with and will use their best efforts to
cause their agents, contractors and sub-contractors (while such Persons are
acting within the scope of their contractual relationship with the Borrowers) to
so comply with (i) all applicable environmental, health and safety laws, codes
and ordinances, and all rules and regulations promulgated thereunder of all
Governmental Agencies and (ii) the terms and conditions of all applicable
permits, licenses, certificates and approvals of all Governmental Agencies now
or hereafter granted or obtained with respect to the Vessels or other properties
owned or operated by the Borrowers unless such compliance would violate the laws
or regulations of the jurisdictions in which the Vessels are located or
operating.
(b) The Borrowers will use their best efforts and safety practices to
prevent the unauthorized release, discharge, disposal, escape or spill of
Hazardous Substances on or about the Vessels or other properties owned or
operated by the Borrowers.
12.8 Environmental Notifications. The Borrowers shall notify the Lender,
in writing, within five (5) Business Days of any of the following events
occurring after the date of this Agreement:
(a) Any written notification made by the Borrowers to any U.S. or
foreign federal, state or local environmental agency required under any federal,
state or local environmental statute, regulation or ordinance relating to a
spill or unauthorized discharge or release of any Hazardous
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Substance to the environment at, from, or as a result of any operations on, the
Vessels or other properties and operations owned or operated by the Borrowers;
(b) Knowledge by an officer of the Borrowers of receipt of service by
the Borrowers of any complaint, compliance order, compliance schedule, notice
letter, notice of violation, citation or other similar notice or any judicial
demand by any U.S. or foreign court, federal, state or local environmental
agency, alleging (i) any spill, unauthorized discharge or release of any
Hazardous Substance to the environment from, or as a result of the operations
on, the Vessels or other properties owned or operated by the Borrowers or (ii)
violations of applicable laws, regulations or permits regarding the generation,
storage, handling, treatment, transportation, recycling, release or disposal of
Hazardous Substances on or as a result of operations on the Vessels or other
properties and operations owned or operated by the Borrowers.
(c) It is understood by the parties hereto that the above mentioned
notices are solely for the Lender's information, may not otherwise be required
by any U.S. or foreign federal, state or local environmental laws, regulations
or ordinances, and are to be considered confidential information by the Lender.
(d) the term "environmental agency" as used herein shall include, but
not be limited to, the United States Environmental Protection Agency, the United
States Coast Guard, the United States Minerals Management Service, the United
States Department of Transportation (in its administration of the Hazardous
Materials Transportation Act, 49 U.S.C. Sec. 1801, et seq.) and other analogous
or similar Governmental Agencies regulating or administering statutes,
regulations or ordinances relating to or imposing liability or standards of
conduct concerning the generation,
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storage, use, production, transportation, handling, treatment, recycling,
release or disposal of any Hazardous Substance.
12.9 Environmental Indemnification. (a) The Borrowers hereby agree to
indemnify and hold the Indemnitees harmless from and against any and all claims,
losses, liability, damages and injuries of any kind whatsoever asserted against
any Indemnitee with respect to or as a direct result of the presence, escape,
seepage, spillage, release, leaking, discharge or migration from the Vessels or
other properties owned or operated by the Borrowers of any Hazardous Substance,
including without limitation, any claims asserted or arising under any
applicable environmental, health and safety laws, codes and ordinances, and all
rules and regulations promulgated thereunder of all Governmental Agencies,
regardless of whether or not caused by or within the control of the Borrowers.
(b) It is the parties' understanding that neither the Lender nor any
other Indemnitee does now, has never and does not intend in the future to
exercise any operational control or maintenance over the Vessels or any other
properties and operations owned or operated by the Borrowers, nor has any of
them in the past, presently, or intends in the future to, maintain an ownership
interest in the Vessels or any other properties owned or operated by the
Borrowers except as may arise upon enforcement of the Lender's rights under the
Mortgages or the Security Agreement.
(c) Should, however, the Lender or any other Indemnitee hereafter
exercise any ownership interest in or operational control over the Vessels or
any other properties owned or operated by the Borrowers, e.g., including but not
limited to, through foreclosure, then the above stated indemnity and hold
harmless shall be limited with respect to any actions or failures to act by the
Lender or other Indemnitee subsequent to exercising such interest or operational
control, to the
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extent such action or inaction by the Lender or other Indemnitee is admitted by
the Lender or other Indemnitee or is found by a court of competent jurisdiction
to have caused or made worse any condition for which liability is asserted,
including but not limited to, the presence, escape, seepage, spillage, leaking,
discharge or migration on or from the Vessels or other properties owned or
operated by the Borrowers of any Hazardous Substance.
(d) The indemnity and hold harmless contained in this Section 12.9
shall not extend to the Lender or any other Indemnitee in its or his capacity as
an equity investor in the Borrowers or as an owner of any property or interest
as to which the Borrowers are also an owner but only to the Lender's capacity as
a lender or a holder of security interests.
12.10 Notification of Total Loss. In the event of any Total Loss or
requisition of any Vessel, the Borrowers shall give written or telegraphic
notice to the Lender not later than ten (10) days after they have actual
knowledge of such occurrence.
Section 13. Negative Covenants of Borrowers. Until the payment in full of
all amounts due under this Agreement and the Note by the Borrowers, the
Borrowers and the Guarantor agree that they will not without the prior written
consent of the Lender:
13.1 Liens. Create, incur, assume or suffer to exist any lien
(including any encumbrance or security interest) of any kind upon the Vessels or
any of their other assets, revenues or right to receive revenue whether now
owned or hereafter acquired, except for the liens and other encumbrances set
forth below (the "Permitted Liens"):
(a) liens for Taxes not at the time delinquent or thereafter payable
without penalty or being contested in good faith, provided provision is made to
the extent required by GAAP for the eventual payment thereof in the event it is
found that such are payable by the Borrowers;
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(b) liens of carriers, warehousemen, mechanics, materialmen and
landlords incurred in the ordinary course of business for sums not overdue or
being contested in good faith, provided provision is made to the extent required
by GAAP for the eventual payment thereof in the event it is found that such sums
are payable by the Borrowers;
(c) maritime liens:
(i) arising in the ordinary course of business by operation of
law that are being contested in good faith by appropriate proceedings and
for which reserves have been made to the reasonable satisfaction of the
Lender or
(ii) arising in connection with salvage and general average; or
(iii) arising in connection with crew wages claimed but not paid;
(d) liens incurred in the ordinary course of business in connection
with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders and
statutory obligations entered into in the ordinary course of business or to
secure obligations on surety or appeal bonds in the ordinary course of business
or easements, rights of way and similar encumbrances incurred in the ordinary
course of business and not interfering with the ordinary conduct of the business
of the Borrowers;
(e) judgment liens in existence less than thirty (30) days after the
entry thereof or with respect to which execution has been stayed or the payment
of which is covered in full by insurance;
(f) liens required by the terms of this Agreement; and
(g) purchase money security interests in connection with capital
expenditures permitted by Section 13.24 below.
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13.2 Line of Business. Enter into any new line of business unrelated
to their present activities after the date of this Agreement.
13.3 Consolidation, Merger, Etc. Consolidate with or merge with, or
sell (whether in one transaction or in a series of transactions) all or
substantially all of their assets to any Person.
13.4 Modification of Agreements. Amend, modify or otherwise change
any of the Loan Documents.
13.5 Indebtedness. Incur any Indebtedness, except:
(a) the Advances;
(b) accounts payable and accrued liabilities incurred in the ordinary
course of business;
(c) letters of credit, performance and bid bonds obtained by the
Borrowers in the ordinary course of their business up to an aggregate amount of
USD 1,000,000.00 at any time;
(d) supersedes bonds obtained by the Borrowers in the ordinary course
of their business;
(e) Elliott Indebtedness and Elliott Advances; and
(f) purchase money indebtedness in connection with capital expenditures
permitted by Section 13.24 below but with no more than USD 100,000.00 of such
debt being outstanding at any time.
13.6 Reportable Event. Cause or allow to occur a Reportable Event.
13.7 Change of Legal Structure. Cause or allow to occur any material
change in their present Articles of Incorporation or By-Laws or change their
jurisdiction of incorporation.
13.8 Change of Place of Business. Make any change in the address of
their principal place of business or their chief executive office except upon
thirty (30) days' prior written notice to the Lender.
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13.9 Management of Vessels. Change the flag, class, ownership,
management or control of the Vessels except for changes in the flag and
classification society of the PHOENIX HORIZON disclosed to the Lender prior to
the date of this Agreement.
13.10 Subsidiaries. Create or acquire any subsidiaries.
13.11 Charter. Cause or allow any Vessel to be bareboat chartered to
any party for a period longer than six (6) months without the prior written
consent of the Lender, which consent shall not be unreasonably withheld, or
cause or allow any vessels to be chartered in for a term in excess of twelve
(12) months.
13.12 Modifications to Vessels. Other than the upgrades and
modifications commenced on or before the date of this Agreement, cause or allow
any change in the physical characteristics of any Vessel that would, in the
reasonable judgment of the Lender, materially interfere with the suitability of
such Vessel for normal commercial offshore construction operations; the consent
of the Lender to any such modification not to be unreasonably withheld.
13.13 Sale of Vessel, Etc. Sell, transfer or assign any Vessel or
Equipment, or any right to receive the revenue from any Vessel provided,
however, that:
(i) the Borrowers may sell, transfer or assign any surplus or
scrap equipment from the Vessels or Equipment in the ordinary course of
business in an amount of up to USD 500,000.00 annually; and
(ii) the Borrowers may sell, transfer or assign any Equipment or
any other equipment from the Vessels if they first replace such items with
equipment of equal or greater value.
13.14 Current Ratio. Permit the Current Ratio to be less than 1.1 to 1
at any time.
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13.15 Working Capital. Permit its consolidated Working Capital to be
less than USD 750,000.00 at any time.
13.16 Fixed Charge Coverage Ratio. Permit its Fixed Charge Coverage
Ratio to be less than 1.0 to 1.0 on a rolling four quarter basis. The ratio may
be as low as 0.65 to 1.0 at the end of any one quarter; provided that it is not
less than 1.0 to 1.0 for any two consecutive quarters and not less than 1.0 to
1.0 for any consecutive four quarters.
13.17 Debt Ratio. Permit its Debt Ratio at any time to be greater than
35%.
13.18 Payments on Subordinated Debt. Pay any interest or principal on
any debt subordinated to the Loan except as an Elliott Payment.
13.19 Compliance with Federal Reserve Board Regulations. No part of
the proceeds of any Advance will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, or for the
purpose of purchasing or carrying or trading in any securities under such
circumstances as to involve the Borrowers or the Guarantor in a violation of
Regulation X of said Board or the Lender in a violation of Regulation U of said
Board. In particular, without limitation of the foregoing, neither the
Borrowers nor the Guarantor will use any part of the proceeds of any Advance to
be made hereunder to acquire for itself or for any other person any publicly-
held securities of any kind. The assets of the Borrowers and the Guarantor do
not and will not include any margin securities, and the Borrowers and the
Guarantor have no present intention of acquiring any margin securities. As used
in this Section 13.19, the terms "margin security" and "purpose of purchasing or
carrying" shall have the meanings assigned to them in the aforesaid Regulation
U, and the term "publicly-held", in respect of securities, shall have the
meaning assigned to it in Section
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220.7(a) of Regulation T of said Board. If requested by the Lender, the
Borrowers will furnish to the Lender a statement or statements in conformity
with the requirements of Federal Reserve Form U-1 referred to in said Regulation
U.
13.20 Loans and Investments. Advance funds to, or make investments in,
(whether by way of loan, stock purchase or capital contribution) any Person
other than in Cash Equivalents.
13.21 Contracts with Affiliates. Enter into any transaction with any
director, officer, employee, shareholder or Affiliate of the Borrowers or the
Guarantor except on terms no less favorable to the Borrowers than the Borrowers
could obtain in an arms length transaction with Persons not affiliated with the
Borrowers.
13.22 Change of Management or Ownership. Cause or allow to occur any
material change in their present management or ownership.
13.23 Lease Expense. Incur or pay more than USD 250,000.00 per year
for the lease or rental of equipment, vessels or real property other than rental
for their principal place of business referred to in Section 11.9 above.
13.24 Capital Expenditures. In 1998 and thereafter, make capital
expenditures in the aggregate greater than USD 2,000,000.00 per year unless any
amount in excess of the USD 2,000,000.00 limit is financed by Elliott Advances
or Elliott Indebtedness. Capital expenditures may only be made for the purpose
of the acquisition or upgrading of marine construction vessels and the
acquisition of equipment and accessories related to such vessels.
13.25 Dividends. Make any dividend payments or other distributions to
their stockholders or redeem or otherwise acquire any of their stock.
13.26 Use of Vessels. Cause or allow any Vessel to be used outside of
the Gulf of Mexico.
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13.27 Fiscal Years. Change or allow to change, the fiscal year of either
Borrower or the Guarantor from one ending on December 31.
Section 14. Events of Default.
14.1 Events. An "Event of Default" shall exist if any of the following
events shall occur and be continuing:
(a) The Borrowers shall default in the payment or prepayment when due
of any principal or interest on the Loan or any fees or other amount payable by
them hereunder or under any other Loan Document and such default shall continue
for three (3) Business Days after such amount is due; or
(b) The Borrowers or the Guarantor shall default in the payment when
due of any principal of or interest on any of their other Indebtedness in an
aggregate amount in excess of USD 25,000.00; or any event specified in any note,
agreement, indenture or other document evidencing or relating to any such
Indebtedness shall occur if the effect of such event is to cause, or (with the
giving of any notice or the lapse of time or both) to permit the holder or
holders of such Indebtedness (or a trustee or agent on behalf of such holder or
holders) to cause, such Indebtedness to become due prior to its stated maturity;
or
(c) Any representation, warranty or certification made or deemed made
herein or in any other Loan Document by the Borrowers or the Guarantor, or
Elliott or any certificate furnished to the Lender pursuant to the provisions
hereof or any other Loan Document, shall prove to have been false or misleading
as of the time made or furnished in any material respect; or
(d) The Borrowers, the Guarantor or Elliott shall fail to perform or
observe any provision of the Loan Documents to which they are parties and such
failure shall continue unremedied for a
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period of ten (10) Business Days after (i) the failure arises and (ii) the
Borrowers or the Guarantor have knowledge of such failure, or ten (10) Business
Days after the Lender gives the Borrowers notice of such failure; provided,
however, that if the default shall arise due to a failure to comply with any of
the financial covenants contained in Sections 13.14, 13.15, 13.16 or 13.17
above, the Borrowers shall use their best efforts to induce Elliott to make one
or more Elliott Advances in sufficient amounts so as to cure such default, but
if such default has not been cured within ten (10) Business Days, an Event of
Default under this Section 14.1(d) shall have occurred; or
(e) The Borrowers, the Guarantor or Elliott shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become due;
or
(f) The Borrowers, the Guarantor or Elliott shall (i) apply for or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property, (ii) make a general assignment for the benefit of its creditors,
(iii) commence a voluntary case under the U.S. Bankruptcy Code (as now or
hereafter in effect), (iv) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely and
appropriate manner, or acquiesce in writing to, any petition filed against it in
an involuntary case under the U.S. Bankruptcy Code, or (vi) take any corporate
action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application or
consent of the Borrowers, the Guarantor or Elliott in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution or
winding-up, or the composition or readjustment of its debts, (ii) the
appointment of a trustee, receiver, custodian, liquidator or the like of the
Borrowers, the Guarantor or Elliott or of all or any substantial part of the
assets of any of them, or (iii) similar relief in respect
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of the Borrowers, the Guarantor or Elliott under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts,
and such proceeding or case shall continue undismissed, or an order, judgment or
decree approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of sixty (60) days; or an order for relief
against the Borrowers, the Guarantor or Elliott shall be entered in an
involuntary case under the U.S. Bankruptcy Code; or
(h) A judgment for the payment of money in excess of USD 100,000.00
shall be rendered by a court against any of the Borrowers, the Guarantor or
Elliott and the same shall not be discharged (or provision shall not be made for
such discharge), or a stay of execution thereof shall not be procured, within
thirty (30) days from the date of entry thereof and the Borrowers, the Guarantor
or Elliott, respectively, shall not, within said period of thirty (30) days, or
such longer period during which execution of the same shall have been stayed,
appeal therefrom and cause the execution thereof to be stayed during such
appeal; or
(i) the Guaranty shall cease to be in full force and effect.
THEN, or at any time thereafter, while any such event remains unremedied or
uncured:
The Lender may, upon written notice to the Borrowers, terminate the
Commitment to make Advances and/or declare the entire outstanding unpaid
principal amount of the Note, all Breakage Costs and all interest accrued and
unpaid thereon and all other amounts payable hereunder and thereunder to be
forthwith due and payable, whereupon the same shall become immediately due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrowers. The Lender may
immediately and without expiration of any additional period of grace, enforce
payment of all obligations of the Borrowers under this Agreement
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and under the Note. In addition, the Lender may exercise any or all of such
remedies as may be available to it under applicable law or granted pursuant to
the Loan Documents.
Any declaration made pursuant to this Section 14.1 is subject to the
condition that, if at any time after the outstanding principal of the Note shall
have become due and payable, and before any foreclosure action has been taken by
the Lender under any of the Loan Documents to realize upon the security provided
by such documents, all Breakage Costs and all arrears of interest upon the Note
and all other obligations owed to the Lender (except that principal of the Note
which by such declaration shall have become payable) shall have been duly paid,
and every other default and Event of Default shall have been made good waived or
cured, then the Lender may, by written notice to the Borrowers, rescind and
annul such declaration and its consequences; but no such rescission or annulment
shall extend to or affect any subsequent default or Event of Default or impair
any right consequent thereon.
Section 15. Minimum Value, Evaluation and Additional Security.
15.1 Minimum Value. The total fair market value of the Vessels as
determined pursuant to Section 15.2 below shall not be less than 285% of the
Facility A Commitment at any time.
15.2 Evaluation. On two occasions annually, or at any other
additional time when, in the reasonable judgment of the Lender there has been an
adverse development in the fair market value of any Vessel, upon the written
request of the Lender, the Borrowers will promptly obtain at the Borrowers'
expense an evaluation of the Vessels by a reputable independent ship broker or
appraiser selected by the Borrowers but acceptable to the Lender. In the event
that any such evaluation establishes that the fair market value of the Vessels
is less than the amount required by Section
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15.1(a) above at the time of the evaluation, the Borrowers shall within twenty
(20) days of such shortfall (but at the Borrowers' option) either:
(a) provide additional collateral acceptable to the Lender to insure
that the fair market value of the Vessels as determined pursuant to this Section
15.2 and such additional collateral is equal to at least the amount required by
Section 15.1(a) above; or
(b) prepay the Loan in the manner provided for in Section 7.5 above in
an amount as is necessary to insure that the fair market value of the Vessels as
determined pursuant to this Section 15.2 is at least the amount required by
Section 15.1(a) above after such reductions have been made; or
(c) a combination of (a) and (b) above which shall result in the fair
market value of the Vessels and additional collateral as determined pursuant to
this Section 15.2 being at least the amount required by Section 15.1(a) above.
15.3 Failure to Maintain Minimum Value. The failure of the Borrowers
to take action under Section 15.2(a), (b) or (c) above after being required to
do so under Section 15.2 above which failure shall result in the fair market
value of Vessels and any additional collateral as determined pursuant to Section
15.2 above remaining below the amount required by Section 15.1(a) above for
twenty (20) or more days after the date of the shortfall shall constitute an
immediate Event of Default under Section 14.1 of this Agreement and shall give
the Lender the right to immediately exercise any or all of its rights under such
Section.
Section 16. Elliott Payments. (a) The Borrowers shall make no Elliott
Payments unless all of the following conditions have been met to the
satisfaction of the Lender:
(i) The second anniversary of the first Drawdown Date shall have
occurred;
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(ii) No Events of Default under Sections 14.1(a) and 14.1(b) above
shall have occurred;
(iii) No Events of Default under Sections 14.1(c) through (i) above
shall have occurred and be continuing at the time of the Elliott
Payment;
(iv) No default has occurred under the Support Agreement;
(v) The Current Ratio was 1.75 to 1.0 or greater at the end of
the most recent fiscal quarter;
(vi) Working Capital was USD 5,000,000.00 at the end of the most
recent fiscal quarter;
(vii) The Fixed Charge Coverage Ratio was 1.65 to 1.0 or greater
during the previous four fiscal quarters;
(viii) During the previous four fiscal quarters:
(A) the Fixed Charge Coverage Ratio was not less than 1.1
to 1.0 and
(B) the Fixed Charge Coverage ratio has not been less than
1.50 to 1.0 at the end of any two consecutive quarters.
(ix) The Debt Ratio was no higher than 25% up to an including
December 31, 1999 and no higher than 20% thereafter.
(b) If all of the above conditions have been satisfied, the Borrowers
may, commencing with the end of the quarter following the second anniversary of
the first Drawdown Date, make Elliott Payments in amounts not to exceed 50% of
Excess Cash Flow for the immediately preceding quarter.
Section 17. Miscellaneous.
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17.1 Entire Agreement. This Agreement with its Schedule and Exhibits
embodies the entire agreement and understanding between the parties hereto and
supersedes all prior agreements and understandings relating to the subject
matter hereof.
17.2 No Waiver. No failure to exercise, and no delay in exercising
any right, power or remedy hereunder or under any document delivered pursuant
hereto shall impair any right, power or remedy which the Lender may have, nor
shall any such delay be construed to be a waiver of any of such rights, powers
or remedies, or an acquiescence in any breach or default under this Agreement or
any document delivered pursuant hereto, nor shall any waiver of any breach or
default of the Borrowers hereunder be deemed a waiver of any default or breach
subsequently occurring. The rights and remedies herein specified are cumulative
and not exclusive of any rights or remedies which the Lender would otherwise
have.
17.3 Survival. All representations, warranties and agreements herein
contained on the part of the Borrowers shall survive the making of the Advances
hereunder and all such representations, warranties, and agreements shall be
effective as long as any amount arising pursuant to the terms of this Agreement
or the Note remains unpaid.
17.4 Notices. (a) All notices, requests, consents, demands, and other
communications provided for or permitted hereunder shall be effective three (3)
days after being duly deposited in the mails, certified, return receipt
requested, or upon receipt if delivered to Federal Express or similar courier
company or transmitted by telefax, addressed to the respective party at the
address set forth below.
Borrowers and Guarantor: Horizon Offshore, Inc.
Horizon Vessels, Inc.
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Horizon Offshore Contractors, Inc.
9821 Katy Freeway, Suite 450
Houston, Texas 77024
Telefax No. (713) 365-0989
Attention: President
Lender: Den norske Bank ASA
200 Park Avenue
New York, N.Y. 10166-0396
Telefax No. (212) 681-4123
Attention: Loan Administration
with copies to:
Den norske Bank ASA, Representative Office
333 Clay, Suite 4890
Houston, Texas 77002
Telefax No. (713) 757-1167
Attention: Byron L. Cooley
17.5 Termination. This Agreement shall terminate when all obligations
of the Borrowers incurred under the Loan Documents shall have been discharged in
full.
17.6 Severability of Provisions. In case any one or more of the
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
17.7 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Borrowers and the Lender and their respective
successors and permitted assigns; provided, however, that the Borrowers may not
transfer their rights to borrow under this Agreement without the prior written
consent of the Lender.
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17.8 Assignment and Participation. (a) Subject to compliance with the
provisions of this Section 17.8, the Lender shall have the right to assign or
grant participations in all or part of the obligations of the Borrowers
outstanding under this Agreement or the Note evidencing such obligations to
Affiliates of the Lender or to any foreign, federal or state banking
institution, savings and loan association or finance company.
(b) The Lender shall inform the Borrowers in advance as to any proposed
assignment by the Lender and the identity of the prospective assignee. The
consent of the Borrowers shall not be necessary for any assignment of all or any
part of the Lender's interest under this Agreement to any Affiliate of the
Lender, any foreign, federal or state banking institution, savings and loan
association or finance company or for any participation. As to any other
assignment the consent of the Borrowers shall be required.
(c) The Lender may sell participations (without the consent of the
Borrowers) to one or more parties, in or to all or a portion of its rights and
obligations under this Agreement, the Note and the other Loan Documents;
provided, that (i) the Lender"s obligations under this Agreement shall remain
unchanged, (ii) the Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations and (iii) the Borrowers and the
Guarantor shall continue to deal solely and directly with the Lender in
connection with this Agreement, the Note and the other Loan Documents.
(d) The Borrowers hereby agree to assist with any assignment made
pursuant to this Section 17.8 by executing and delivering any documents or
instruments reasonably requested by the Lender in connection with any such
assignment, including but not limited to, amendments to this Agreement, consents
to assignments or new promissory notes.
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17.9 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any party hereto may execute this Agreement by signing any such counterpart.
17.10 Jurisdiction. ALL ACTIONS OR PROCEEDINGS WITH RESPECT TO THIS
AGREEMENT AND THE NOTES MAY BE INSTITUTED IN THE COURTS OF THE STATE OF NEW YORK
OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK. BY
EXECUTION AND DELIVERY OF THIS AGREEMENT THE LENDER, THE BORROWERS AND THE
GUARANTOR IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO THE JURISDICTION OF EACH
SUCH COURT, AND IRREVOCABLY AND UNCONDITIONALLY WAIVE (i) ANY OBJECTION THE
BORROWERS, THE GUARANTOR, OR THE LENDER MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE IN ANY OF SUCH COURTS, AND (ii) ANY CLAIMS THAT ANY ACTION OR
PROCEEDING BROUGHT IN ANY OF SUCH COURTS HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. PROVIDED, HOWEVER, THAT NOTHING IN THIS SECTION 17.10 SHALL LIMIT OR
RESTRICT THE RIGHT OF THE LENDER TO BRING SUIT AGAINST THE BORROWERS, THE
GUARANTOR, THE VESSELS OR ANY EARNINGS OR REVENUES OF THE VESSELS ANYWHERE IN
THE WORLD TO ENFORCE THE SECURITY PROVIDED IN THE MORTGAGE AND THE SECURITY
AGREEMENT.
17.11 Choice of Law. THIS AGREEMENT AND THE NOTE ISSUED HEREUNDER AND
ALL ISSUES ARISING IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW
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YORK, EXCEPT THAT WITH RESPECT TO THE PROVISIONS OF THIS AGREEMENT AND THE NOTE
WHICH PROVIDE FOR OR RELATE TO THE PAYMENT OF INTEREST, PROVISIONS OF APPLICABLE
FEDERAL LAW WHICH PERMIT THE LENDER TO CHARGE THE HIGHER OF THE RATE PERMITTED
BY SUCH APPLICABLE LAW OR BY THE LAWS OF THE STATE IN WHICH THE LENDER IS
LOCATED SHALL BE DEEMED GOVERNING AND CONTROLLING.
17.12 Waiver of Jury Trial. THE BORROWERS, THE GUARANTOR AND THE
LENDER HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO
WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
17.13 Amendment and Waiver. Except as otherwise provided herein, no
provision of this Agreement may be amended, modified, supplemented, changed,
waived, discharged or terminated, unless all parties hereto consent in writing.
17.14 No Oral Agreements. THIS WRITTEN CREDIT AGREEMENT WITH ITS
SCHEDULE AND EXHIBITS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
CONCERNING THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
17.15 Headings, Etc. The table of contents of this Agreement and the
headings of various sections and subsections herein are for convenience of
reference only and shall not modify, define,
66
<PAGE>
expand or limit any of the terms or provisions hereof. References to sections or
subsections without reference to the document in which they are contained are
references to this Agreement.
17.16 Taxes. Any Taxes payable or ruled payable by any Government
Agency in respect of this Agreement, the Note or any other Loan Document, other
than any Tax on or measured by the income of the Lender, shall be paid by the
Borrowers, together with any interest and penalties.
17.17 Controlling Agreement. In the event of a conflict between the
provisions of this Agreement and those of any other Loan Document, the
provisions of this Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
HORIZON VESSELS, INC.
By: /s/ H.D. LOYD, III
--------------------------------
Name: H.D. Loyd, III
------------------------------
Title: President
-----------------------------
HORIZON OFFSHORE CONTRACTORS, INC.
By: /s/ H.D. LOYD, III
--------------------------------
Name: H.D. Loyd, III
------------------------------
Title: President
-----------------------------
HORIZON OFFSHORE, INC.
By: /s/ H.D. LOYD, III
--------------------------------
Name: H.D. Loyd, III
------------------------------
Title: President
-----------------------------
67
<PAGE>
DEN NORSKE BANK ASA
By: /s/ BYRON L. COOLEY
--------------------------------
Name: Byron L. Cooley
------------------------------
Title: Senior Vice President
-----------------------------
By: /s/ Morten Bjornsen
--------------------------------
Name: Morten Bjornsen
------------------------------
Title: Senior Vice President
-----------------------------
68
<PAGE>
*******************************************
All schedules and exhibits have been
omitted from this filing and will be furnished
to the Commission's staff upon request
*******************************************
69
<PAGE>
EXHIBIT 10.9
AMENDMENT NO. 1
TO
CREDIT AGREEMENT
AMENDMENT NO. 1 dated as of December 30, 1997 ("Amendment No. 1") to
the Credit Agreement dated as of October 27, 1997 (the "Credit Agreement"),
among HORIZON VESSELS, INC., a Delaware corporation, HORIZON OFFSHORE
CONTRACTORS, INC., a Delaware corporation (together, the "Borrowers"), HORIZON
OFFSHORE, INC., a Delaware corporation (the "Guarantor") and DEN NORSKE BANK
ASA, a Norwegian banking corporation (the "Lender").
W I T N E S S E T H:
-------------------
WHEREAS, pursuant to the Credit Agreement, the Lender made available to the
Borrowers a loan facility of up to USD 16,000,000 (the "Loan"), as evidenced by
the secured promissory note of the Borrowers dated October 27, 1997 (the
"Note"); and
WHEREAS, the Lender has agreed to make an additional USD 4,000,000
available to the Borrowers for working capital purposes, subject to such
additional amount being governed by the terms and conditions of the Credit
Agreement as amended hereby and evidenced by the Amended and Restated Promissory
Note of the Borrowers dated the date hereof, substantially in the form of
Exhibit A hereto; and
WHEREAS, as security for the Loan, as increased by this Amendment No. 1,
the U.S. flag lay barge LONE STAR HORIZON (ex LB 280), Official No. 285456 (the
"New Vessel") will be added to the United States First Preferred Fleet Mortgage
referred to in the Credit Agreement.
<PAGE>
NOW THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree to amend the Credit Agreement as follows:
1. The Definitions of the Credit Agreement are hereby amended as follows:
(a) The definition of "Commitment" is hereby amended to read as
follows:
"Commitment" means a maximum of USD 20,000,000.00 as it may be
reduced from time to time pursuant to the provisions of this
Agreement.
(b) The definition of "Facility A" is hereby amended to read as
follows:
"Facility A" means the USD 13,000,000.00 senior secured term loan
provided for in Section 2 of this Agreement.
(c) The definition of "Loan Documents" is hereby amended to read as
follows:
"Loan Documents" means this Agreement, the Mortgages, the
Security Agreement, the Support Agreement, the Guaranty, the Holding
Account Agreement, the Note, and the Amendment Documents, as each may
be amended, supplemented, restated or endorsed from time to time.
(d) The definition of "Note" is hereby amended to read as follows:
"Note" means the Amended and Restated Promissory Note of the
Borrowers, substantially in the form of Exhibit A to Amendment No. 1.
(e) The definition of "Vessels" is hereby amended to read as follows:
"Vessels" means the four (4) U.S. flag barges and the one (1)
Vanuatu flag barge listed on Schedule 1 attached to Amendment No. 1.
(f) The following new definitions are hereby added to the Definitions
of the Credit Agreement:
"Amendment Date" means December ___, 1997.
"Amendment No. 1" means the Amendment No. 1 to the Credit
Agreement dated as of December __, 1997.
2
<PAGE>
"New Vessel" means the United States flag vessel LONE STAR
HORIZON, Official No. 285456.
2. Term Loan. Section 2.1 of the Credit Agreement is hereby amended to
read as follows:
"2.1 Term Loan.
(a) Upon the terms and subject to the conditions herein set
forth, the Lender agrees during the Term Loan Period to make the
senior secured term loan to the Borrowers in one or more Advances in a
total principal amount not to exceed USD 13,000,000.00.
(b) Facility A will be advanced in minimum increments of USD
100,000.00.
(c) Up to USD 13,000,000 in Facility A Advances may be advanced
upon the execution by Borrower of an amendment to the Mort gages,
increasing the amounts secured thereby to USD 20,000,000 and adding
the New Vessel to the operation of the United States First Preferred
Fleet Mortgage."
3. Repayment of Facility A. Section 7.2 of the Credit Agreement is
hereby amended to read as follows:
"7.2 Repayment of Facility A. All amounts outstanding under Facility
A shall be repaid by the Borrowers in forty-seven (47) monthly installments
of USD 275,000 each payable on each Interest Payment Date commencing on
July 31, 1998, plus a final installment of all outstanding principal and
interest on the Maturity Date or in a lesser number of installments
depending upon the aggregate amount of Advances made under Facility A;
provided, however, that, in any event, the final installment shall be in an
amount sufficient to pay all amounts due under this Agreement and the
Note."
4. Conditions Precedent.
4.1 Documents Required as Conditions Precedent to Amendment No. 1. The
effectiveness of the modifications to the Credit Agreement contemplated by this
Amendment No. 1 is subject to the condition precedent that the Lender shall have
received at or prior to the
3
<PAGE>
Amendment Date all of the following, each dated on or before the Amendment Date
and each in form and substance satisfactory to the Lender and its counsel:
(a) Each of the following documents (the "Amendment Documents") shall
have been duly authorized and executed with original counterparts thereof
delivered to the Lender:
(i) This Amendment No. 1;
(ii) The Amended and Restated Promissory Note of Borrowers,
substantially in the form of Exhibit A to this Amendment No. 1;
(iii) Amendment No. 1 to the United States First Preferred Fleet
Mortgage;
(iv) Amendment No. 1 to Vanuatu First Preferred Ship Mortgage;
(v) Ratification of Guaranty executed by Guarantor; and
(vi) Ratification of Support Agreement executed by Elliott.
(b) The Borrowers and the Guarantor shall have each delivered to the
Lender evidence of good standing, a certificate of incumbency and duly
certified resolutions of their respective Boards of Directors and all such
other corporate documentation authorizing each to enter into the
transactions contemplated by this Amendment No. 1.
(c) The Lender shall have received an opinion of Borrowers' and
Guarantor's counsel in form and substance satisfactory to the Lender.
(d) The representations and warranties contained in Section 11 of the
Credit Agreement shall be true on the Amendment Date with the same effect
as though such representations and warranties had been made on and as of
such date, and no Event of Default specified in Article 14 of the Credit
Agreement and no event which, with the lapse
4
<PAGE>
of time or the giving of notice and the lapse of time specified in Article
14 of the Credit Agreement, would become such an Event of Default, shall
have occurred and be continuing.
(e) [Intentionally Omitted]
(f) Horizon Vessels, Inc. shall have provided to the Lender evidence
that it is the 100% owner of the New Vessel.
(g) The Borrowers shall have provided to the Lender evidence of the
insurance maintained on the New Vessel in form and substance satisfactory
to the Lender.
(h) The Borrowers shall have paid a facility fee to the Lender in the
amount of USD 80,000.
4.2 Waiver of Conditions Precedent. All of the conditions precedent
contained in this Section 4 are for the sole benefit of the Lender and the
Lender may waive any of them in its absolute discretion, and on such conditions
as it deems proper.
5. Representations of the Borrowers and Guarantor. The Borrowers and the
Guarantor represent and warrant that:
(a) Each of the Borrowers and the Guarantor is a corporation, duly
organized and validly existing in good standing under the laws of the State
of Delaware, and has the
5
<PAGE>
requisite power and authority (i) to carry on its business as presently
conducted; and (ii) to enter into and perform its obligations under the
Amendment Documents.
(b) The execution, delivery and performance by each of the Borrowers
and the Guarantor of the Amendment Documents and any other instrument or
agreement provided for by this Amendment No. 1 to which it is a party, have
been duly authorized by all necessary corporate action, do not require
stockholder approval other than such as has been duly obtained or given, do
not or will not contravene any of the terms of its Certificate of
Incorporation or Bylaws, and will not violate any provision of law or of
any order of any court or governmental agency or constitute (with or
without notice or lapse of time or both) a default under, or result (except
as contemplated by this Amendment No. 1) in the creation of any security
interests, lien, charge or encumbrance upon any of its properties or assets
pursuant to, any agreement, indenture or other instrument to which it is a
party or by which it may be bound other than is in favor of the Lender; the
Amendment Documents have been duly executed and delivered by the Borrowers
and the Guarantor and constitute the respective legal, valid and binding
agreements, enforceable in accordance with the respective terms thereof as
to which each of the Borrowers and the Guarantor is a party. The
enforceability of this Amendment No. 1, however, is subject to all
applicable bankruptcy, insolvency, reorganization, moratorium, and other
laws affecting the rights or creditors and to general equity principles.
(c) Except as set forth in the Credit Agreement, there are no suits or
proceedings pending or to its knowledge threatened against or affecting any
Borrower or Guarantor which
6
<PAGE>
if adversely determined would have a material adverse effect upon its
business, financial condition or operations.
(d) Other than such as have been obtained, no license, consent or
approval of any Governmental Agency or other regulatory authority is
required for the execution, delivery or performance of this Amendment No. 1
or any other Amendment Document or any instrument contemplated herein or
therein. The Borrowers are the holder of all certificates and
authorizations of governmental authorities required by law to enable it to
engage in the business transacted by them.
6. Expenses. The Borrowers and the Guarantor agree to promptly, whether
or not the modifications to the Credit Agreement contemplated by this Amendment
No. 1 become effective, (x) reimburse the Lender for all fees and disbursements
of external counsel to the Lender and all reasonable out of pocket fees and
disbursements of the Lender incurred in connection with the preparation,
execution and delivery of this Amendment No. 1 and all other documents referred
to herein, and all amendments or waivers to or termination of this Amendment No.
1 or any agreement referred to herein; and (y) reimburse the Lender for all fees
and disbursements of internal and external counsel to the Lender and all
reasonable out of pocket fees, disbursements and travel-related expenses of the
Lender incurred in connection with the protection of the rights of the Lender
under this Amendment No. 1 and all other documents referred to herein, whether
by judicial proceedings or otherwise. The obligations of the Borrowers and the
Guarantor under this Section 6 shall survive payment of the Loan.
7
<PAGE>
7. Wherever and in each such place the term "Credit Agreement" is used
throughout the Credit Agreement, such term shall be read to mean the Credit
Agreement as amended by this Amendment No. 1.
8. Except as specifically amended by this Amendment No. 1, all of the
terms and provisions of the Credit Agreement shall remain in full force and
effect.
9. All capitalized terms used herein but not defined herein shall have
the meanings given to them in the Credit Agreement.
10. THIS AMENDMENT NO. 1 TO CREDIT AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment
No. 1 to Credit Agreement on the date first written above.
HORIZON OFFSHORE CONTRACTORS, INC.
By:/s/ David W. Sharp
--------------------------------------
Name:David W. Sharp
---------------------------------
Title:Secretary
--------------------------------
HORIZON VESSELS, INC.
By:/s/ David W. Sharp
--------------------------------------
Name:David W. Sharp
---------------------------------
Title:Secretary
--------------------------------
8
<PAGE>
HORIZON OFFSHORE, INC.
By:/s/ David W. Sharp
--------------------------------------
Name:David W. Sharp
---------------------------------
Title:Chief Financial Officer, Secretary
and Treasurer
--------------------------------
DEN NORSKE BANK ASA
By:/s/ Byron L. Cooley
--------------------------------------
Name:Byron L. Cooley
---------------------------------
Title:Senior Vice President
--------------------------------
By: /s/ Morten Bjornsen
--------------------------------------
Name: Morten Bjornsen
---------------------------------
Title: Senior Vice President
--------------------------------
9
<PAGE>
EXHIBIT 10.10
================================================================================
ALLIANCE AGREEMENT
AMONG
DET SONDENFJELDS - NORSKE
DAMPSKIBSSELSKAB ASA
AND
HORIZON OFFSHORE, INC.
HIGHWOOD PARTNERS, L.P.
WESTGATE INTERNATIONAL, L.P.
Dated as of December 4, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
DEFINITIONS.................................................................. 1
Section 1.1 Definitions............................................... 1
ARTICLE II
PURCHASE AND SALE............................................................ 2
Section 2.1 Purchase and Sale of Shares............................... 2
Section 2.2 The Closing............................................... 2
Section 2.3 Closing Deliveries........................................ 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HORIZON.................................... 3
Section 3.1 Organization and Corporate Power.......................... 3
Section 3.2 Capital Stock and Related Matters......................... 4
Section 3.3 Authorization; No Breach.................................. 4
Section 3.4 Financial Statements...................................... 5
Section 3.5 Litigation; Observance of Agreements, Statutes and Orders. 5
Section 3.6 Taxes..................................................... 5
Section 3.7 Title to Property; Leases................................. 6
Section 3.8 Licenses, Permits, etc.................................... 6
Section 3.9 Environmental Matters..................................... 6
Section 3.10 Employee Benefit Plans.................................... 7
Section 3.11 Insurance................................................. 7
Section 3.12 No Finder's Fee........................................... 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS................................ 8
Section 4.1 Title to Shares........................................... 8
Section 4.2 Authorizations; No Breach................................. 8
Section 4.4 Limitations on Representations and Warranties............. 9
Section 4.5 No Finder's Fee........................................... 9
ARTICLE V
DSND'S REPRESENTATIONS AND WARRANTIES........................................ 9
Section 5.1 Organization and Corporate Power.......................... 9
Section 5.2 Authorization; No Breach.................................. 9
Section 5.3 Restricted Shares......................................... 10
Section 5.4 Purchaser Inquiry......................................... 10
Section 5.5 No Finder's Fee........................................... 10
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VI
DEEPWATER JOINT VENTURE...................................................... 10
Section 6.1 Joint Venture Entity...................................... 10
Section 6.2 Joint Venture Vessels..................................... 11
Section 6.3 Joint Venture Agreement................................... 11
Section 6.4 Non-Compete............................................... 11
ARTICLE VII
MISCELLANEOUS................................................................ 11
Section 7.1 DSND Option............................................... 12
Section 7.2 Notice of Intent to Sell.................................. 12
Section 7.3 Further Assurance......................................... 12
Section 7.4 Expenses.................................................. 12
Section 7.5 Survival.................................................. 12
Section 7.6 Entire Agreement.......................................... 12
Section 7.7 Successors and Assigns.................................... 13
Section 7.8 Governing Law............................................. 13
Section 7.9 Interpretation............................................ 13
</TABLE>
LIST OF EXHIBITS
Exhibit A Defined Terms
Exhibit B Form of Stockholder's Agreement
Exhibit C Form of Memorandum of Agreement and "Barecon 89" Standard
Bareboat Charter
Exhibit D Form of Option Agreement
Exhibit E Form of Opinion of Counsel to Horizon and the Sellers
Exhibit F Form of Opinion of Counsel to DSND
Exhibit G Layspread Specifications
-ii-
<PAGE>
ALLIANCE AGREEMENT
This ALLIANCE AGREEMENT (this "Agreement"), dated as of December 4, 1997,
is by and among Det Sondenfjelds - Norske Dampskibsselskab ASA , a Norwegian
corporation ("DSND"), Horizon Offshore, Inc., a Delaware corporation
("Horizon"), Highwood Partners, L.P., a Delaware limited partnership
("Highwood"), and Westgate International, L.P., a Cayman Islands exempted
limited partnership ("Westgate" and together with Highwood, the "Sellers").
WITNESSETH:
WHEREAS, Highwood and Westgate own an aggregate of 62,500 shares of the
common stock, US$1.00 par value per share (the "Common Stock"), of Horizon,
which represents all of the issued and outstanding shares of Common Stock of
Horizon;
WHEREAS, DSND and Horizon desire to form a strategic alliance pursuant to
which they will pursue initiatives in specific areas of the offshore marine
construction industry set forth herein;
WHEREAS, in order to support this strategic alliance and to permit DSND to
participate in the anticipated benefits of the alliance to the stockholders of
Horizon, DSND will acquire 30% of the outstanding Common Stock of Horizon from
the Sellers; and
WHEREAS, the respective Boards of Directors of each of DSND and Horizon
have determined that the transactions provided for in this Agreement are in the
best interests of their respective companies and stockholders and have approved
and adopted this Agreement.
NOW, THEREFORE, for and in consideration of the premises, and the
agreements, covenants, representations and warranties hereinafter set forth, and
other good and valuable consideration, the receipt and adequacy of which are
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. Defined terms used in this Agreement have the
meanings ascribed to them in this Agreement or in Exhibit "A" attached hereto.
<PAGE>
ARTICLE II
PURCHASE AND SALE
Section 2.1 Purchase and Sale of Shares. Subject to the terms of this
Agreement:
(a) Highwood shall sell to DSND, and DSND shall purchase from
Highwood, 9,375 shares of Common Stock at a price of USD 640 per share, for an
aggregate purchase price of USD 6,000,000, which purchase price shall be paid by
wire transfer of immediately available funds to such account as may be
designated by Highwood; and
(b) Westgate shall sell to DSND, and DSND shall purchase from
Westgate, 9,375 shares of Common Stock at a price of USD 640 per share, for an
aggregate purchase price of USD 6,000,000, which purchase price shall be paid by
wire transfer of immediately available funds to such account as may be
designated by Westgate.
Section 2.2 The Closing. The closing (the "Closing") of the purchase
and sale of the shares of Common Stock pursuant to Section 2.1 (the "Shares")
shall take place simultaneously with the execution of this Agreement at the
offices of Horizon, at 9821 Katy Freeway, Suite 450, Houston, Texas 77024.
Section 2.3 Closing Deliveries.
(a) At the Closing, Horizon and the Sellers shall execute and/or
deliver to the Buyer:
(i) Stock certificates evidencing the Shares duly endorsed for
transfer or accompanied by stock transfer powers duly endorsed in blank, free
and clear of all Liens;
(ii) The Stockholder's Agreement in the form attached hereto as
Exhibit "B" (the "Stockholder's Agreement") and Gunnar Hirsti shall be elected
as a director of Horizon;
(iii) The Memorandum of Agreement and "Barecon 89" Standard
Bareboat Charter in the form attached hereto as Exhibit "C" (collectively, the
"Vessel Purchase Documents");
(iv) The Option Agreement in the form attached hereto as Exhibit
"D" (the "Option Agreement");
(v) An opinion from Jones, Walker, Waechter, Poitevent, Carrere &
Denegre, L.L.P., counsel to Horizon and the Sellers, in the form of Exhibit "E"
attached hereto;
2
<PAGE>
(vi) certified copies of the resolutions duly adopted by Horizon's
board of directors authorizing the execution, delivery and performance of this
Agreement and each of the Stockholder's Agreement, the Vessel Purchase
Documents, the Option Agreement (collectively, the "Alliance Agreements") and
the other agreements contemplated hereby and the consummation of all other
transactions contemplated by this Agreement; and
(vii) certified copies of the resolutions duly adopted by the
requisite governing bodies of each Seller authorizing the execution, delivery
and performance of this Agreement.
(b) DSND shall execute and/or deliver to Horizon and the Sellers:
(i) The Stockholder's Agreement;
(ii) The Vessel Purchase Documents;
(iii) The Option Agreement;
(iv) An opinion from Gardere, Wynne Sewell & Riggs, L.L.P.,
special counsel to DSND, in the form attached hereto as of Exhibit "F"; and
(v) certified copies of the resolutions duly adopted by DSND's
board of directors authorizing the execution, delivery and performance of this
Agreement and each of the Alliance Agreements and the other agreements
contemplated hereby and the consummation of all other transactions contemplated
by this Agreement and the purchase of the Shares.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HORIZON
Horizon hereby represents and warrants to DSND that:
Section 3.1 Organization and Corporate Power. Horizon and each of its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and is duly
qualified or authorized to do business as a foreign corporation and is in good
standing in each of the jurisdictions in which the ownership or lease of
property or conduct of business requires it to so qualify, except for those
jurisdictions where the failure to be so qualified or authorized would not have
a Material Adverse Effect. Horizon and each of its Subsidiaries have all
requisite corporate power and authority necessary to own, lease and operate
their respective properties and to carry on their respective businesses as now
conducted, and Horizon has all requisite corporate power and authority to
execute and deliver this Agreement and each of the Alliance Agreements to which
it is a party, to consummate the
3
<PAGE>
transactions contemplated hereby and thereby and to duly perform its obligations
hereunder and thereunder.
Section 3.2 Capital Stock and Related Matters.
(a) The authorized capital stock of Horizon consists of 35,000,000 shares
of Common Stock, of which 62,500 shares are issued and outstanding, and
5,000,000 shares of preferred stock, USD 1.00 par value, none of which are
issued and outstanding. Neither Horizon nor any of its Subsidiaries has
outstanding any capital stock or securities convertible into or exchangeable for
any shares of its capital stock. Neither Horizon nor any of its Subsidiaries is
subject to: (i) any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any stock or
securities convertible into or exchangeable for its capital stock or any equity
interest in Horizon or any of its Subsidiaries, or (ii) except for shares
reserved for issuance under Horizon's stock incentive plan, any options,
warrants or other rights to acquire its capital stock or any equity interest in
Horizon or any of its Subsidiaries. All the outstanding shares of Common Stock
are duly authorized, validly issued, fully paid and nonassessable.
(b) There are no statutory or contractual stockholder's preemptive rights,
rights of first offer, rights of refusal, co-sale rights or similar rights with
respect to any capital stock of Horizon. Except for the Stockholder's Agreement,
there are no agreements with respect to the issuance, sale, redemption,
transfer, disposition or voting of capital stock of Horizon or any of its
Subsidiaries.
(c) Horizon owns 100% of the issued and outstanding capital stock of each
of its Subsidiaries and such capital stock is duly authorized, validly issued,
fully paid and nonassessable. Other than the ownership by Horizon of the
capital stock of each of its Subsidiaries, Horizon does not (i) beneficially own
or own of record any capital stock or security of any other Person or (ii) have
any other investment in any other Person.
Section 3.3 Authorization; No Breach. The execution, delivery and
performance of this Agreement and the Alliance Agreements to which Horizon is a
party have been duly authorized by all necessary corporate, action on the part
of Horizon. This Agreement and each of the Alliance Agreements to which Horizon
is a party have been duly and validly executed and delivered by, and constitute
valid and binding obligations of, Horizon enforceable in accordance with its
respective terms, except (i) as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditor's rights generally and
(ii) the availability of equity remedies may be limited by equitable principles
of general applicability. The execution and delivery by Horizon of this
Agreement and each of the Alliance Agreements to which Horizon is a party and
the fulfillment by Horizon of, and the compliance with, the respective terms of
this Agreement and the Alliance Agreements to which Horizon is a party do not
and shall not (a) (i) conflict with or
4
<PAGE>
result in a breach of the terms, conditions or provisions of, (ii) constitute a
default or any event that with the giving of notice, passage of time or both
would constitute a default under, (iii) give rise to any right of termination,
cancellation or acceleration or right to increase in any Material respect the
obligations or otherwise modify in any Material respect the terms of, (iv)
result in a violation of, or (v) require any consent, approval, waiver, order,
permit or exemption or other action by or notice, declaration or filing to or
with any Governmental Authority pursuant to, the Certificate of Incorporation,
By-laws of Horizon or any of its Subsidiaries or any law, contract, permit or
order, to which Horizon, any of its Subsidiaries or any of their respective
assets is subject or (b) result in the creation or imposition of any Lien upon
the capital stock, property or assets of Horizon or any of its Subsidiaries.
Section 3.4 Financial Statements. Horizon has delivered to DSND copies
of the audited consolidated financial statements of Horizon and its Subsidiaries
for the year ended December 31, 1996 and the unaudited consolidated financial
statements of Horizon and its Subsidiaries for the nine months ended September
30, 1997. All of such financial statements (including in each case any related
schedules and notes) fairly present in all material respects the consolidated
financial position of Horizon and its Subsidiaries as of their respective dates
and the consolidated results of their operations and cash flows for the
respective periods so specified and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set forth in the
notes thereto (subject, in the case of the interim financial statements, to
normal year-end adjustments).
Section 3.5 Litigation; Observance of Agreements, Statutes and Orders.
(a) Except for that pending litigation entitled Sites v. HLS Offshore,
L.L.C., No. 97-22241 of the docket of the 234th Judicial Court of the State of
Texas, there are no actions, suits or proceedings pending or, to the knowledge
of Horizon, threatened against or affecting Horizon or any Subsidiary or any
property of Horizon or any Subsidiary in any court or before any arbitrator of
any kind or before or by any Governmental Authority that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
(b) Neither Horizon nor any Subsidiary is in default under any term of any
agreement or instrument to which it is a party or by which it is bound, or any
order, judgment, decree or ruling of any court, arbitrator or governmental
authority or is in violation of any Applicable Law, (including without
limitation Environmental Laws) which default or violation, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect.
Section 3.6 Taxes. Horizon and its Subsidiaries have filed all tax
returns that are required to have been filed in any jurisdiction, and have paid
all taxes shown to be due and payable on such returns and all other taxes and
assessments levied upon them or their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and payable and before
they have become delinquent, except for any taxes and assessments (a) the
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amount of which is not individually or in the aggregate Material or (b) the
amount, applicability or validity of which is currently being contested in good
appropriate proceedings and with respect to which Horizon or a Subsidiary, as
the case may be, has established adequate reserves in accordance with GAAP.
Horizon knows of no basis for any other tax or assessment that could reasonably
be expected to have a Material Adverse Effect.
Section 3.7 Title to Property; Leases. Horizon and its Subsidiaries
have good and marketable title to all of their vessels and sufficient title to
their respective other properties that individually or in the aggregate are
Material, including all such properties reflected in the audited balance sheet
referred to in Section 3.4 or acquired by Horizon or any Subsidiary after that
date (except as sold or otherwise disposed of). All leases or vessel charters
that individually or in the aggregate are Material are valid and subsisting and
are in full force and effect in all material respects.
Section 3.8 Licenses, Permits, etc.
(a) Horizon and its Subsidiaries own or possess all licenses, permits,
franchises, authorizations, patents, copyrights, service marks, trademarks and
trade names, or rights thereto, that individually or in the aggregate are
Material, without known conflict with the rights of others;
(b) to the knowledge of Horizon, Horizon is not infringing in any material
respect any license, permit, franchise, authorization, patent, copyright,
service mark, trademark, trade name or other right owned by any other Person;
and
(c) to the knowledge of Horizon, there is no Material violation by any
Person of any right of Horizon or any of its Subsidiaries with respect to any
patent, copyright, service mark, trademark, trade name or other right owned or
used by Horizon or any of its Subsidiaries.
Section 3.9 Environmental Matters. Neither Horizon nor any Subsidiary
has knowledge of any claim or has received any notice of any claim, and no
proceeding has been instituted raising any claim against Horizon or any of its
Subsidiaries or any of their respective real properties now or formerly owned,
leased or operated by any of them or their vessels or other assets, alleging any
damage to the environment or violation of any Environmental Laws, except, in
each case, such as could not reasonably be expected to result in a Material
Adverse Effect. Except as otherwise disclosed to DSND in writing:
(a) neither Horizon nor any Subsidiary has knowledge of any facts which
would give rise to any claim, public or private, of violation of Environmental
Laws or damage to the environment emanating from, occurring on or in any way
related to real properties now or formerly owned, leased or operated by any of
them or to their vessels or other assets or their
6
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use, except, in each case, such as could not reasonably be expected to result in
a Material Adverse Effect;
(b) neither Horizon nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or operated
by any of them or any vessels or other properties and has not disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws, in each case
in any manner that could reasonably be expected to result in a Material Adverse
Effect; and
(c) all buildings on all real properties now owned, leased or operated
by Horizon or any of its Subsidiaries and any vessels or other properties are in
compliance with applicable Environmental Laws, except where failure to comply
could not reasonably be expected to result in a Material Adverse Effect.
Section 3.10 Employee Benefit Plans.
(a) Horizon has made available to DSND complete and correct copies of
all written Plans under which Horizon, any of its Subsidiaries or any ERISA
Affiliate, have any present or future obligations or liabilities in respect of
employees or former employees of Horizon, any of its Subsidiaries or any ERISA
Affiliate or their dependents or beneficiaries.
(b) Horizon and each ERISA Affiliate have operated and administered
each Plan in compliance with all Applicable Laws except for such instances of
noncompliance as have not resulted in and could not reasonably be expected to
result in a Material Adverse Effect. Neither Horizon nor any ERISA Affiliate has
incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in Section 3 of ERISA), and no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
liability by Horizon or any ERISA Affiliate, or in the imposition of any Lien on
any of the rights, properties or assets of Horizon or any ERISA Affiliate, in
either case pursuant to Title I or IV of ERISA or to such penalty or excise tax
provisions or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the aggregate Material.
Section 3.1 Insurance. Horizon maintains, or has caused the
Subsidiaries to maintain, with financially sound and reputable insurers,
insurance policies covering such perils and in such amounts as are usually
maintained on vessels engaged in the same or a similar business under blanket
fleet policies with respect to vessels of like size, character and marine
activity as the vessels owned or operated by Horizon; and such workmen's
compensation or longshoremen's and harbor workers' insurance as shall be
required by Applicable Law, including endorsements for borrowed servant,
voluntary compensation and in rem claims.
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Section 3.12 No Finder's Fee. None of Horizon, the Subsidiaries or their
officers, directors or employees or Sellers, on behalf of the Company or any
Subsidiaries, have employed any broker or finder or incurred any other liability
for any brokerage commission, finder's fee or similar compensation in connection
with the transactions contemplated by this Agreement, except for a brokerage
commission payable to Crossbay Ventures Ltd., which will be paid by Horizon.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
Each Seller hereby severally represents and warrants to DSND that:
Section 4.1 Title to Shares. Such Seller has good and valid title to
the Shares to be sold to DSND pursuant to this Agreement free and clear of all
Liens and upon consummation of the transactions contemplated hereby DSND will
acquire good and valid title to the Shares free and clear of any Liens, other
than (a) those that may arise by virtue of any action taken by or on behalf of
DSND, (b) restrictions on transfer that may be imposed by applicable federal or
state securities laws, and (c) the Stockholder's Agreement. The Shares
constitute 30% of the issued and outstanding shares of the Common Stock. No
other Person has any direct or indirect record or beneficial title or interest
in or claim of any nature whatsoever to any of such Seller's Shares, and there
are no contracts, commitments, undertakings, understandings or other
restrictions to which such Seller is a party that directly or indirectly
restricts or otherwise limits in any manner the voting, sale, transfer or other
disposition of such Shares.
Section 4.2 Authorizations; No Breach. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary
partnership action on the part of such Seller. This Agreement has been duly and
validly executed and delivered by and constitutes a valid and binding obligation
of such Seller, enforceable against such Seller in accordance with its terms,
except (a) as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditor's rights generally and (b) the
availability of equity remedies may be limited by equitable principles of
general applicability. The execution and delivery by such Seller of this
Agreement and the fulfillment by such Seller of, and the compliance by such
Seller with, the terms of this Agreement do not and shall not (i) conflict with
or result in a breach of the terms, conditions or provisions of, (ii) constitute
a default or an event that with the giving of notice, passage of time or both
would constitute a default under or (iii) result in a violation of or require
any consent, approval, waiver, order, permit or exemption or other action by or
notice, declaration or filing to or with any Governmental Authority pursuant to,
the organizational documents of such Seller or any Applicable Law, contract or
permit to which such Seller, or any of such Seller's assets, is subject.
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4.3 Access. The Sellers have caused Horizon to make available to DSND all
files, agreements, documents and accounts reasonably known to exist to the
Seller for the purposes of DSND's "due diligence"exercise.
Section 4.4 Limitations on Representations and Warranties. Except and
as to the extent expressly set forth in this Article IV or included in any
writing delivered by the Sellers concurrently herewith or subsequently hereto
expressly pursuant to this Agreement, the Sellers make no other representations
or warranties, and disclaim all liability and responsibility for any
representation, warranty, statement or information made or communicated (orally
or in writing), to DSND or any of its employees, agents, consultants or
representatives (including, without limitation, any opinion, belief, or advice
that may have been provided to DSND).
Section 4.5 No Finder's Fee. There are no brokerage commissions,
finder's fees or similar compensation payable by such Seller or its Affiliates
(other than Horizon as specified in Section 3.12 above) in connection with the
transactions contemplated by this Agreement.
ARTICLE V
DSND'S REPRESENTATIONS AND WARRANTIES
DSND hereby represents and warrants to Horizon and the Sellers that:
Section 5.1 Organization and Corporate Power. DSND is duly organized,
validly existing and in good standing under the laws of Norway. DSND has all
requisite corporate power and authority to execute and deliver this Agreement
and each of the Alliance Agreements, to consummate the transactions contemplated
hereby and thereby and to duly perform its obligations hereunder and thereunder.
Section 5.2 Authorization; No Breach. The execution, delivery and
performance of this Agreement and each of the Alliance Agreements have been duly
authorized by all necessary corporate action on the part of DSND. This
Agreement and each of the Alliance Agreements have been duly and validly
executed and delivered by, and constitute valid and binding obligations of, DSND
enforceable against DSND in accordance with its respective terms except (i) as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting creditor's rights generally and (ii) the availability
of equitable remedies may be limited by equitable principles of general
applicability. The execution and delivery by DSND of this Agreement and each of
the Alliance Agreements and the fulfillment of, and the compliance with, the
respective terms of this Agreement and each of the Alliance Agreements by DSND,
do not and shall not (i) conflict with, or result in a breach of, the terms,
conditions or provisions of, (ii) constitute a default under or any event that
with the giving of notice, passage of time or both would constitute a default
under, or (iii) result in a violation of, require any consent, approval, waiver,
order, permit or exemption or other action by or notice, declaration or filing
to or with any
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Governmental Authority pursuant to, the corporate organizational documents of
DSND, or any Applicable Law, contract, permit or order to which DSND is a named
party and subject.
Section 5.3 Restricted Shares. The Shares purchased hereunder are being
acquired by DSND for its own account with the present intention of holding such
securities for purposes of investment, and it has no present intention of
selling or distributing such securities in any transaction that would be in
violation of the Securities Act of 1933, as amended (the "Securities Act"), or
any applicable state securities laws; provided that nothing contained herein
shall prevent DSND and subsequent holders of the Shares from transferring such
securities in compliance with applicable law and the Stockholder's Agreement.
DSND understands that the Shares have not been registered under the Securities
Act, or any, state securities laws by reason of their contemplated issuance
hereunder in a transaction exempt from the registration requirements of the
Securities Act and applicable state securities laws, and that the reliance of
Horizon and others upon these exemptions is predicated in part upon this
representation by DSND. DSND further understands that the Shares may not be
transferred or resold without (i) registration thereof under the Securities Act
and applicable state securities laws or (ii) the availability of an exemption
from the registration requirements of the Securities Act and applicable state
securities laws.
Section 5.4 Purchaser Inquiry. DSND and its advisors have reviewed to
their satisfaction, the business, management and financial information made
available as part of DSND's "due diligence" exercise and have had an opportunity
to ask questions of, and receive answers from, Horizon concerning the business,
management and financial affairs of Horizon and its subsidiaries, which
questions, if any, have been answered to their satisfaction, and have had an
opportunity to obtain, and have received, any additional information deemed
necessary by them to form a decision concerning DSND's investment in Horizon
contemplated herein; provided, however, that none of the foregoing shall limit,
diminish or constitute a waiver of any representation, warranty or covenant made
under this Agreement by Horizon or any Seller.
Section 5.5 No Finder's Fee. There are no brokerage commissions,
finder's fees or similar compensation payable by DSND or its Affiliates (other
than Horizon as specified in Section 3.12 above or any as to which DSND will be
responsible for) in connection with the transactions contemplated by this
Agreement.
ARTICLE VI
DEEPWATER JOINT VENTURE
Section 6.1 Joint Venture Entity. Horizon and DSND agree to establish
(either directly or through Subsidiaries or Affiliates) a joint venture entity
(the "JV") to engage in deep water pipe laying and sub sea construction
activities. The JV shall be owned thirty percent (30%) by Horizon and seventy
percent (70%) by DSND.
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Section 6.2 Joint Venture Vessels.
(a) DSND shall obtain for the use of the JV a deep water pipelay
vessel of the MT 6019 design and associated marine crew and equipment (the
"Layspread") having the pipelay specification set forth in Exhibit "G" attached
hereto on terms to be agreed by Horizon and DSND but which shall include:
(i) The Layspread to be made available to the JV on a "call off" basis
with commitments made on a "first come - first served" basis;
(ii) The JV to pay a charter rate for the Layspread of USD 75,000
per day with transit time to and from a point of origin to be billed to the JV
at cost;
(iii) Contract terms to be BIMCO Supplytime 1989, suitably
amended;
(iv) The Layspread to be available to the JV from third quarter 1999
for a guaranteed minimum period of five (5) years and any additional periods for
which DSND has the use of the Layspread; and
(v) DSND to provide construction supervisory personnel with deep water
experience to the JV at cost. Horizon to provide other construction personnel
to the JV at cost.
(b) Subject to availability and the needs of the JV, DSND shall use
its best efforts to obtain for the use of the JV such other vessels and
equipment on such terms as shall be agreed by the parties to the JV.
Section 6.3 Joint Venture Agreement. The parties hereto agree to use
their best efforts to negotiate and execute a Joint Venture Agreement dealing
with the organization and operation of the JV by March 31, 1998.
Section 6.4 Non-Compete. DSND agrees not to compete with the JV for
work that could be performed by the Layspread in the following markets for the
period referred to in Section 6.2(a)(iv) above:
(a) North America
(b) Caribbean
(c) Venezuela
ARTICLE VII
MISCELLANEOUS
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Section 7.1 DSND Option. In the event the IPO is not completed within
1998 or the Board of Directors of Horizon declares that the IPO will not be
completed in 1998, DSND shall have an option to purchase that amount of the
Common Stock owned by the Sellers equal to twenty percent (20%) of the issued
and outstanding Common Stock of Horizon for a total purchase price of USD
45,000,000. Such purchase shall be completed within thirty (30) days of the
exercise of the option. The option shall be exercised by written notice from
DSND to Horizon within thirty (30) days after the Board's decision or December
31, 1998, whichever is earlier. If the option is exercised the Board of
Directors will be reconstituted so that DSND and the Sellers each designate an
equal number of directors.
Section 7.2 Notice of Intent to Sell. Whether or not the IPO is
completed, in the event that the Sellers decide to sell all or any portion of
the Common Stock owned by them to any Person then engaged (either directly or
through a Subsidiary or an Affiliate) in the offshore construction industry, the
Sellers shall give DSND at least twenty (20) business days prior written notice
of such intention and shall give DSND the opportunity to make an offer within
such period for such Common Stock.
Section 7.3 Further Assurance. After the Closing, the parties shall
execute and deliver such other and further instruments and perform such other
and further acts as may be reasonably necessary or desirable for the
implementation of this Agreement or the consummation of the transactions
contemplated by this Agreement.
Section 7.4 Expenses. Horizon will pay all of its expenses, including
attorneys' fees, incurred in connection with the negotiation of this Agreement,
the performance of its obligations hereunder and the consummation of the
transactions contemplated hereby. DSND and each of the Sellers will pay all of
their own expenses incurred in connection with the negotiation of this
Agreement, the performance of their respective obligations hereunder and the
consummation of the transactions contemplated hereby.
Section 7.5 Survival. The representations and warranties set forth in
Articles III, IV and V of this Agreement and in any certificate or instrument
delivered in connection herewith shall survive the Closing and continue in full
force and effect until the third anniversary of the Closing, following which no
party may bring any action or present any claim for the inaccuracy or breach of
such representations and warranties. Notwithstanding the foregoing, the
representations and warranties set forth in Section 4.1 shall survive the
Closing and continue in full force and effect for the applicable statutes of
limitations.
Section 7.6 Entire Agreement. This Agreement (including the exhibits
hereto) represents the entire understanding and agreement among the parties
hereto with respect to the subject matter hereof.
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Section 7.7 Successors and Assigns. Except as otherwise expressly
provided herein, all agreements contained in this Agreement by or on behalf of
any of the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties.
Section 7.8 Governing Law. The internal law, and not the conflict of
laws principles, of the State of Delaware shall govern this Agreement as well as
the construction, validity and interpretation of this Agreement and the exhibits
hereto.
Section 7.9 Interpretation. The parties acknowledge and agree that: (a)
each party and its counsel reviewed and negotiated the terms and provisions of
this Agreement and have contributed to its revision; (b) the rule of
construction to the effect that any ambiguities are resolved against the
drafting party shall not be employed in the interpretation of this Agreement;
and (c) the terms and provisions of this Agreement shall be construed fairly as
to all parties hereto, regardless of which party was generally responsible for
the preparation of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
DET SONDENFJELDS - NORSKE
DAMPSKIBSSELSKAB ASA
By: /s/ Dirk Blaauw
--------------------------------
Name: Dirk Blaauw
Title: Chief Financial Officer
HIGHWOOD PARTNERS, L.P.
By: Highwood Associates, Inc.
Its General Partner
By: /s/ Jon Pollock
--------------------------------
Name: Jonathan D. Pollock
Title: President
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.
Its Attorney-in-Fact
By: /s/ Paul Singer
---------------------------------
Name: Paul Singer
Title:
HORIZON OFFSHORE, INC.
By: /s/ Bill Lam
-----------------------------------
Name: Bill Lam
Title: President
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***********************************
Exhibits B, C and D to the Alliance Agreement are being filed
as separate exhibits to this Registration Statement and the remaining
exhibits to the Alliance Agreement have been omitted from this
filing and will be furnished to the Commission's staff upon request
***********************************
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EXHIBIT 10.11
================================================================================
STOCKHOLDER'S AGREEMENT
AMONG
DET SONDENFJELDS - NORSKE
DAMPSKIBSSELSKAB ASA
HORIZON OFFSHORE, INC.
HIGHWOOD PARTNERS, L.P.
AND
WESTGATE INTERNATIONAL, L.P.
Dated as of December 4, 1997
================================================================================
<PAGE>
STOCKHOLDER'S AGREEMENT
This Stockholder's Agreement (this "Agreement") is entered into this 4th
day of December 1997, by and among Horizon Offshore, Inc., a Delaware
corporation ("Horizon"), Det Sondenfjelds-Norske Dampskibsselskab ASA, a
Norwegian corporation ("DSND"), Highwood Partners, L.P., a Delaware limited
partnership ("Highwood"), and Westgate International, L.P., a Cayman Islands
exempted limited partnership ("Westgate").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Alliance Agreement dated as of the date
hereof (the "Alliance Agreement") entered into by and between Horizon and DSND,
DSND has acquired the Purchased Stock (as defined below); and
WHEREAS, the parties hereto desire to set forth certain additional
agreements among them relating to the DSND Group's (as defined below)
acquisition and ownership of Horizon Securities.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
Section 1. Defined Terms. The following capitalized terms when used in
this Agreement shall have the following meanings:
"Affiliate" or "Associate" shall have the respective meanings assigned
thereto in Rule 405 as presently promulgated under the Securities Act.
"Board of Directors" means the board of directors of Horizon.
"Common Stock" means the common stock, $1.00 par value per share, of
Horizon.
"Demand Registration" means a Demand Registration as defined in Section
3(a) hereof.
"DSND Group" means DSND and its Affiliates and Associates.
"Elliott Group" means Highwood, Westgate and their respective Affiliates
and Associates.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Horizon Securities" means, collectively, the Purchased Stock and any other
securities, warrants or options or rights of any nature (whether or not issued
by Horizon) that are convertible into, exchangeable for, or exercisable for the
purchase of, or otherwise give the holder thereof any rights in respect of the
Common Stock, or any class or series of Horizon's capital stock that is entitled
to vote generally for the election of directors or otherwise.
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"Piggyback Registration" means a Piggyback Registration as defined in
Section 3(b) hereof.
"Purchased Stock" means the shares of Common Stock acquired by DSND
pursuant to the Alliance Agreement.
"Registrable Securities" means (a) the Purchased Stock and (b) any other
securities issued by Horizon after the date hereof with respect to the Purchased
Stock (and with respect to the Common Stock generally) by means of exchange,
reclassification, dividend, distribution, split up, combination, subdivision,
recapitalization, merger, spin-off, reorganization or otherwise; provided,
however, that as to any Registrable Securities, such securities shall cease to
constitute Registrable Securities for the purposes of this Agreement if and when
(i) such securities shall have been sold in satisfaction of all applicable
resale provisions of Rule 144 under the Securities Act, (ii) as expressed in an
opinion of counsel delivered to and satisfactory to Horizon and the transfer
agent for the Common Stock that such securities can be sold without any
restriction under Rule 144(k) under the Securities Act and the transfer of such
securities does not require registration under the Securities Act, or (iii) such
securities cease to be issued and outstanding for any reason.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
Section 2. Voting of Horizon Securities. Subject to the provisions
hereof, the DSND Group, the Elliott Group and Horizon agree that:
(a) Each member of the DSND Group and the Elliott Group that is a
holder of record of Horizon Securities entitled to vote shall be present in
person or by proxy, and each member of the DSND Group and the Elliott Group that
is a beneficial owner of Horizon Securities entitled to vote shall cause the
holder of record to be present, in person or by proxy, at all meetings of
stockholders of Horizon so that all Horizon Securities owned of record or
beneficially by the DSND Group and the Elliott Group and that are entitled to
vote may be counted for the purpose of determining the presence of a quorum at
such meetings.
(b) The number of directors of Horizon's board of directors shall be
established as five directors, and Gunnar Hirsti shall be elected as a director
of Horizon on the date hereof. From and after the date hereof, the DSND Group
shall have the right to designate one director of Horizon.
(c) Horizon and the Elliott Group shall take all necessary or
appropriate action to assist in the nomination for election as a director the
person designated by the DSND Group pursuant to the provisions of this Section
2. Horizon shall vote all management proxies in favor of such nominee, except
for such proxies that specifically indicate to the contrary. Horizon shall
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<PAGE>
recommend that its stockholders vote in favor of such nominees, and shall use
reasonable efforts to solicit from its stockholders proxies voted in favor of
such nominees.
(d) The DSND Group and the Elliott Group shall vote all Horizon
Securities they are entitled to vote and shall cause all Horizon Securities they
are entitled to vote to be voted for the election of all nominees for director
nominated by the Board of Directors, including the nominee of the DSND Group
designated pursuant to this Section 2.
(e) If any director designated by DSND shall decline or be unable to
serve for any reason, or if such designee resigns or is removed, the Board of
Directors shall promptly upon the request of DSND nominate or elect, as the case
may be, a new DSND designee to replace such resigned or removed DSND designee.
(f) DSND shall use its best efforts to cause its designee to serve on
the Board of Directors to promptly provide to Horizon, as Horizon may from time
to time reasonably request, information regarding such designee for inclusion in
any form, report, schedule, registration statement, definitive proxy statement
or other documents required to be filed by Horizon with the SEC.
Section 3. Registration Rights.
(a) Demand Registration. (i) At any time commencing 185 days after
the date that the Common Stock is registered under Section 12(b) or (q) of the
Exchange Act, DSND may at any time and from time to time make a written request
for registration under the Securities Act of not less than 5% of the outstanding
Common Stock (a "Demand Registration"); provided that Horizon shall not be
obligated to effect more than one Demand Registration in any 12-month period or
more than an aggregate of three Demand Registrations pursuant to this Section
3(a). Such request will specify the number of shares of Registrable Securities
proposed to be sold and will also specify the intended method of disposition
thereof. A registration will not count as a Demand Registration until it has
become effective; provided, however, that a Demand Registration that is either
withdrawn or not declared effective at DSND's request shall count as a Demand
Registration unless DSND also bears all of the expenses specified in Section
3(e) hereof (as being payable by Horizon) with respect to such Demand
Registration.
(ii) If DSND so elects, the offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of an
underwritten offering. DSND shall select the managing Underwriters and any
additional investment bankers and managers to be used in connection with the
offering; provided that such managing Underwriters and additional investment
bankers must be reasonably satisfactory to Horizon.
(b) Piggyback Registration. If Horizon proposes to file a
registration statement under the Securities Act with respect to an offering of
Common Stock (i) for Horizon's own account (other than a registration statement
on Form S-4 or S-8 (or any substitute form that may be adopted by the SEC)) or
(ii) for the account of any of its holders of Common Stock (other than DSND),
then
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<PAGE>
Horizon shall give written notice of such proposed filing to DSND as soon
as practicable (but in no event less than 30 days before the anticipated filing
date), and such notice shall offer DSND the opportunity to register such number
of shares of Registrable Securities as DSND may request on the same terms and
conditions as Horizon's or such holder's Common Stock (a "Piggyback
Registration").
(c) Reduction of Offering. Notwithstanding anything contained herein,
if the managing Underwriter of an offering described in Section 3(b) delivers a
written opinion to Horizon that the size of the offering that DSND, Horizon and
any other Persons whose securities are included in such offering intend to make
are such that the success of the offering would be materially and adversely
affected, then the amount of Registrable Securities to be offered for the
account of DSND and any other Person shall be reduced to the extent necessary to
reduce the total amount of Common Stock to be included in such offering to the
amount recommended by such managing Underwriter; provided that if Common Stock
is being offered for the account of Persons other than Horizon, then the
proportion by which the amount of such Registrable Securities intended to be
offered for the account of DSND is reduced shall not exceed the proportion by
which the amount of Common Stock intended to be offered for the account of such
other Persons is reduced.
(d) Filings; Information. Whenever DSND requests that any Registrable
Securities be registered pursuant to Section 3(a) hereof, Horizon will use its
best efforts to effect the registration of such Registrable Securities as
promptly as is practicable, and in connection with any such request:
(i) Horizon will as expeditiously as possible prepare and file
with the SEC a registration statement on any form for which Horizon then
qualifies and which counsel for Horizon shall deem appropriate and
available for the sale of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution thereof,
and use its reasonable efforts to cause such filed registration statement
to become and remain effective for a period of not less than 90 days (or
such shorter period which will terminate when all Registrable Securities
covered by such registration statement have been sold); provided that if
Horizon shall furnish to DSND a certificate signed by Horizon's Chairman of
the Board stating that in his good faith judgment it would be detrimental
or otherwise disadvantageous to Horizon for such a registration statement
to be filed as expeditiously as possible, Horizon shall have a period of
not more than 120 days within which to file such registration statement
measured from the date of Horizon's receipt of DSND's request for
registration in accordance with Section 3(a) hereof.
(ii) Horizon will, if requested, prior to filing such
registration statement or any amendment or supplement thereto, furnish to
DSND and each applicable managing Underwriter, if any, copies thereof, and
thereafter furnish to DSND and each such Underwriter, if any, such number
of copies of such registration statement, amendment and supplement thereto
(in each case including all exhibits thereto and documents incorporated by
reference therein) and the prospectus included in such
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registration statement (including each preliminary prospectus) as DSND or
each such Underwriter may reasonably request in order to facilitate the
sale of the Registrable Securities.
(iii) After the filing of the registration statement, Horizon will
promptly notify DSND of any stop order issued or, to Horizon's knowledge,
threatened to be issued by the SEC and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered.
(iv) Horizon will endeavor to qualify the Registrable Securities
for offer and sale under such other securities or blue sky laws of such
jurisdictions in the United States as DSND reasonably requests; provided
that Horizon will not be required to (A) qualify generally to do business
in any jurisdiction where it would not otherwise be required to qualify but
for this subparagraph 3(d)(iv), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction.
(v) Horizon will as promptly as is practicable notify DSND, at
any time when a prospectus relating to the sale of the Registrable
Securities is required by law to be delivered in connection with sales by
an Underwriter or dealer, of the occurrence of any event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading and promptly make available to DSND and to
the Underwriters any such supplement or amendment. DSND agrees that, upon
receipt of any notice from Horizon of the occurrence of any event of the
kind described in the preceding sentence, DSND will forthwith discontinue
the offer and sale of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until receipt by DSND and
the Underwriters of the copies of such supplemented or amended prospectus
and, if so directed by Horizon, DSND will deliver to Horizon all copies,
other than permanent file copies then in DSND's possession, of the most
recent prospectus covering such Registrable Securities at the time of
receipt of such notice. In the event Horizon shall give such notice,
Horizon shall extend the period during which such registration statement
shall be maintained effective as provided in Section 3(d)(i) by the number
of days during the period from and including the date of the giving of such
notice to the date when Horizon shall make available to DSND such
supplemented or amended prospectus.
(vi) Horizon will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as
are reasonably required in order to expedite or facilitate the sale of such
Registrable Securities.
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(vii) Horizon will furnish to DSND and to each Underwriter a
signed counterpart, addressed to DSND or such Underwriter, of an opinion
or opinions of counsel to Horizon and a comfort letter or comfort letters
from Horizon's independent public accountants, each in customary form and
covering such matters of the type customarily covered by opinions or
comfort letters, as the case may be, as DSND or the managing Underwriter
reasonably requests.
(viii) Horizon will make generally available to its security
holders, as soon as reasonably practicable, an earnings statement covering
a period of 12 months, beginning within three months after the effective
date of the registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and the rules and
regulations of the SEC thereunder.
(ix) Horizon will use its best efforts to cause all such
Registrable Securities to be listed on each securities exchange or over-
the-counter market on which the Common Stock is then listed.
Horizon may require DSND promptly to furnish in writing to Horizon
such information regarding DSND, the plan of distribution of the Registrable
Securities and other information as Horizon may from time to time reasonably
request or as may be legally required in connection with such registration.
(e) Registration Expenses. In connection with any Demand Registration
or any Piggyback Registration, Horizon shall pay the following expenses incurred
in connection with such registration: (i) filing fees with the SEC, (ii) fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) printing expenses, (iv)
fees and expenses incurred in connection with the listing of the Registrable
Securities, (v) fees and expenses of counsel and independent certified public
accountants for Horizon and (vi) the reasonable fees and expenses of any
additional experts retained by Horizon in connection with such registration.
DSND shall pay any underwriting fees, discounts or commissions attributable to
the sale of Registrable Securities and any out-of-pocket expenses of DSND.
(f) Indemnification by Horizon. Horizon agrees to indemnify and hold
harmless DSND, its officers and directors, and each Person, if any, who controls
DSND within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act from and against any and all losses, claims, damages and
liabilities caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus relating to
the Registrable Securities (as amended or supplemented if Horizon shall have
furnished any amendments or supplements thereto) or any preliminary prospectus,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information, relating to DSND or the plan of distribution
furnished in writing to Horizon by
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or on behalf of DSND expressly for use therein; provided that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of DSND if a copy of the most current prospectus at the time of
the delivery of the Registrable Securities was not provided to purchaser and
such current prospectus would have cured the defect giving rise to such loss,
claim, damage or liability. Horizon also agrees to indemnify any Underwriters of
the Registrable Securities, their officers and directors and each person who
controls such Underwriters on substantially the same basis as that of the
indemnification of DSND provided in this subparagraph.
(g) Indemnification by DSND. DSND agrees to indemnify and hold
harmless Horizon, its officers and directors, and each Person, if any, who
controls Horizon within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from Horizon to DSND, but only with reference to information relating to DSND or
the plan of distribution furnished in writing by or on behalf of DSND expressly
for use in any registration statement or prospectus relating to the Registrable
Securities, or any amendment or supplement thereto, or any preliminary
prospectus. DSND also agrees to indemnify and hold harmless any Underwriters of
the Registrable Securities, their officers and directors and each person who
controls such Underwriters on substantially the same basis as that of the
indemnification of Horizon provided in this subparagraph.
(h) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to Section 3(f) or
Section 3(g), such Person (the "Indemnified Party") shall promptly notify the
Person against whom such indemnity may be sought (the "Indemnifying Party") in
writing and the Indemnifying Party shall have the right to assume the defense of
such proceeding and retain counsel reasonably satisfactory to such Indemnified
Party to represent such Indemnified Party and any others the Indemnifying Party
may designate in such proceeding and shall pay the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnified Party
and the Indemnifying Party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that the Indemnifying Party shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) at any time for all such Indemnified Parties.
In the case of any such separate firm for the Indemnified Parties, such firm
shall be designated in writing by the Indemnified Parties. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Indemnifying Party shall indemnify and hold
harmless such Indemnified Parties from and against any loss or liability (to the
extent stated above) by reason of such settlement or judgment.
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(i) Contribution. If the indemnification provided for in this
Agreement is unavailable to an Indemnified Party in respect of any losses,
claims, damages or liabilities referred to herein, then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (i) in such proportion as is appropriate to
reflect the relative benefits received by Horizon, DSND and the Underwriters
from the offering of the securities, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
but also the relative fault of Horizon, DSND and the Underwriters in connection
with the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as any other relevant equitable considerations. The
relative benefits received by Horizon, DSND and the Underwriters shall be deemed
to be in the same respective proportions as the total proceeds from the offering
(net of underwriting discounts and commissions but before deducting expenses)
received by each of Horizon and DSND and the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover of the prospectus, bear to the aggregate public offering price of
the securities. The relative fault of Horizon, DSND and the Underwriters shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
Horizon and DSND agree that it would not be just and equitable if
contribution pursuant to this Section 3(i) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 3(i), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and DSND shall not be
required to contribute any amount in excess of the amount by which the net
proceeds of the offering (before deducting expenses) received by DSND exceeds
the amount of any damages which DSND has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(j) Participation in Underwritten Registrations. No holder of
Registrable Securities may participate in a registered offering contemplated
hereunder unless such holder (a) agrees to sell its Registrable Securities on
the basis provided in any underwriting arrangements approved by the persons
entitled hereunder to approve such arrangements and (b) completes and
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executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangements and this Section 3.
(k) Rule 144. Horizon covenants that it will file any reports
required to be filed by it under the Securities Act and the Exchange Act and
that it will take such further action as DSND may reasonably request to the
extent required from time to time to enable DSND to sell Registrable Securities
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 under the Securities Act, as such rule may be
amended from time to time, or any similar rule or regulation hereafter adopted
by the SEC. Upon the request of DSND, Horizon will deliver to DSND a written
statement as to whether it has complied with such reporting requirements.
(l) Holdback Agreements. DSND agrees not to offer, sell, contract to
sell or otherwise dispose of any Registrable Securities, or any securities
convertible into or exchangeable or exercisable for such securities, during the
14 days prior to, and during the 180-day period beginning on, the effective date
of such registration statement other than (i) the Registrable Securities to be
sold pursuant to such registration statement, and (ii) any shares of Common
Stock sold upon the exercise of an option or warrant or the conversion of a
security outstanding at such date.
Section 4. Legend and Stop Transfer Order. To assist in effectuating
the provisions of this Agreement, the DSND Group hereby consents (i) to the
placement of the following legend on all certificates representing ownership of
Horizon Securities owned of record by any member of the DSND Group or by any
person where a member of the DSND Group is the beneficial owner thereof, until
such shares are sold, transferred or disposed in a manner permitted hereby to a
person who is not then a member of the DSND Group:
"The shares represented by this certificate are subject to the
provisions of a Stockholder's Agreement and may not be sold, transferred,
pledged, hypothecated or otherwise disposed of except in accordance
therewith. Copies of the Stockholder's Agreement are on file at the office
of the Corporate Secretary of Horizon Offshore, Inc."
(ii) to the entry of stop transfer orders with the transfer agent or
agents of Horizon Securities against the transfer of Horizon Securities except
in compliance with the requirements of this Agreement, or if Horizon acts as its
own transfer agent with respect to any Horizon Securities, to the refusal by
Horizon to transfer any such securities except in compliance with the
requirements of this Agreement. Horizon agrees to remove promptly all legends
and stop transfer orders with respect to the transfer of Horizon Securities
being made to a person who is not then a member of the DSND Group in compliance
with the provisions of this Agreement.
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Section 5. Miscellaneous.
(a) Notices. Any notice or other communication required or permitted
hereunder shall be in writing or by telephone or facsimile transmission with
subsequent written confirmation, and may be personally served or sent by United
States mail and shall be deemed to have been given upon receipt by the party
notified. For purposes hereof, the addresses of the parties hereto (until notice
of a change thereof is delivered as provided in this Section 5) shall be as set
forth opposite each party's name on the signature page hereof.
(b) Termination. The respective covenants and agreements of Horizon
and DSND contained in this Agreement will continue in full force and effect
until the earliest to occur of any of the following: (i) the mutual written
agreement of Horizon and DSND or (ii) December 4, 2007. Notwithstanding the
termination of this Agreement, nothing contained herein shall relieve any party
hereto from liability for breach of any of its covenants or agreements contained
in this Agreement.
(c) Waivers and Amendments; Noncontractual Remedies; Preservation of
Remedies. This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by Horizon and the holders of a majority of the Horizon Securities held
by the DSND Group or, in the case of a waiver, by the party waiving compliance.
No delay on the part of any party in exercising a right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any party of any such right, power or privilege, nor any single or partial
exercise of any such right, power or privilege, preclude a further exercise
thereof or the exercise of any other such right, power or privilege. The rights
and remedies herein provided are cumulative and are not exclusive of any rights
or remedies that any party may otherwise have at law or in equity. The rights
and remedies of any party based upon, arising out of or otherwise in respect of
any breach of any provision of this Agreement shall in no way be limited by the
fact that the act, omission, occurrence or other state of facts upon which any
claim of any such breach is based may also be the subject matter of any other
provision of this Agreement (or of any other Agreement between the parties) as
to which there is no breach.
(d) Severability. If any provision of this Agreement or the
applicability of any such provision to a person or circumstances shall be
determined by any court of competent jurisdiction to be invalid or unenforceable
to any extent, the remainder of this Agreement or the application of such
provision to persons or circumstances other than those for which it is so
determined to be invalid and unenforceable, shall not be affected thereby, and
each provision of this Agreement shall be valid and shall be enforced to the
fullest extent permitted by law. To the extent permitted by applicable law each
party hereto hereby waives any provision or provisions of law which would
otherwise render any provision of this Agreement invalid, illegal or
unenforceable in any respect.
(e) Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts and when so executed shall constitute one
Agreement, notwithstanding that all parties are not signatories to the same
counterpart.
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(f) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such state.
(g) Successors and Assigns. Subject to Section 4, this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
successors and assigns of the parties hereto except that the rights contained in
Section 3 above shall not be assignable.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written.
Address: HORIZON OFFSHORE, INC.
9821 Katy Freeway, Suite 450
Houston, Texas 77024 By: /s/ Bill Lam
------------------------------------
Bill Lam
President
DET SONDENFJELDS - NORSKE
DAMPSKIBSSELSKAB ASA
Address:
Det Sondenfjelds - Norske By: /s/ Dirk Blaauw
Dampskibsselskab ASA ------------------------------------
Radhusgt 23 Name: Dirk Blaauw
P. O. Box 752 Sentrum Title: Chief Financial Officer
0106 Oslo, Norway
HIGHWOOD PARTNERS, L.P.
By: Highwood Associates, Inc.
Its General Partner
By: /s/ Jonathan D. Pollock
------------------------------------
Name: Jonathan D. Pollock
Title: President
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WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.
Its Attorney-in-Fact
By: /s/ Paul Singer
------------------------------------
Name: Paul Singer
Title:
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EXHIBIT 10.12
MEMORANDUM OF AGREEMENT
DECEMBER 1997
DSND Shipping AS, Radhusgaten 23, 0158 Oslo, Norway, hereinafter called the
Sellers, have agreed to sell, and Horizon Vessels, Inc., hereinafter called the
Buyers, have agreed to buy:
Name: DSV "DSND Stephaniturm"
Classification Society/Class: Lloyds
Built: 1978
By: Hitzler, Lauenburg, Germany
Flag: Bahamian
Place of Registration: Nassau
Call Sign: C6MN9
Grt/Nrt: 1954/586
Register Number: 725330
hereinafter called the Vessel, on the following terms and conditions:
DEFINITIONS
"Banking days" are days on which banks are open both in the country of the
currency stipulated for the Purchase Price in Clause 1 and in the place of
closing stipulated in Clause 8.
"In writing" or 'written" means a letter handed over from the Sellers to
the Buyers or vice versa, a registered letter, telex, telefax or other modern
form of written communication.
"Classification Society" or "Class" means the Society referred to in
line 4.
1. PURCHASE PRICE
USD 17,500,000 (USDollar-seventeen millionfivehundredthousand)
2. (CLAUSE 2 INTENTIONALLY DELETED)
3. PAYMENT
The said Purchase Price shall be paid in full free of bank charges to Fokus
Bank ASA, Oslo, Norway, account no. ____________, on delivery of the Vessel, but
not later than 3 banking days after the Vessel is in every respect physically
ready for delivery in accordance with the terms and conditions of this Agreement
and Notice of Readiness has been given in accordance with Clause 5.
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4. INSPECTIONS
(a) The Buyers have inspected and accepted the Vessel's classification
records. The Buyers have also inspected the Vessel and have accepted the Vessel
and the sale is outright and definite, subject only to the terms and conditions
of this Agreement.
(b) Clause 4(b) intentionally deleted.
5. NOTICES, TIME AND PLACE OF DELIVERY
(a) The Sellers shall keep the Buyers well informed of the Vessel's
[SUBJECT TO THE IPO HAVING SUCCESSFULLY TAKEN PLACE, REFERENCE CLAUSE 17 AND
19]. When the Vessel is at the place of delivery and in every respect
physically ready for delivery in accordance with this Agreement, the Sellers
shall give the Buyers a written Notice of Readiness for delivery.
(b) The Vessel shall be delivered and taken over at sea, in the North Sea.
Expected time of delivery: REFERENCE CLAUSE 17 AND 19
Date of canceling (see Clauses 5c, 6b(iii) and 14); REFERENCE CLAUSE 17
AND 19
(c) Should the Vessel become an actual, constructive or compromised total
loss or otherwise sustain any damage not existing when the Vessel was inspected
by the Buyers, the Buyers shall, upon paying to the Sellers the Purchase Price
in full, see below, receive all insurance proceeds therefor and receive a credit
against the Purchase Price in the amount of any deductible or the amount of
damage not otherwise insured (in which case the Sellers shall deliver to the
Buyers any and all documents necessary to establish that payment of the
insurance proceeds for such damage to the Vessel will be made to the Buyers).
The Sellers shall insure the Vessel with such underwriters and in such forms of
insurance and with deductibles as are acceptable to the Buyers. The Sellers,
upon reasonable notice by the Buyers, shall provide the Buyers with original
cover notes evidencing such insurance, including evidence of hull and machinery
insurance for the full replacement value of the Vessel and protection and
indemnity insurance covering the Vessel.
6. CLAUSE 6 INTENTIONALLY DELETED.
7. SPARES/BUNKERS, ETC.
The Sellers shall deliver the Vessel to the Buyers with everything
belonging to her on board and on shore. All spare parts and spare equipment
including spare tall-end shaft(s) and/or spare propeller(s)/propeller blade(s),
if any, belonging to the Vessel at the time of inspection used or unused,
whether on board or not shall become the Buyers' property including spares on
order. Forwarding charges, if any, shall be for the Buyers' account. The
Sellers are required to replace spare parts including spare tail-end shaft(s)
and spare propeller(s)/propeller blade(s) which are taken out of spare and used
as replacement prior to delivery, but the replaced items shall be the property
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of the Buyers. The radio installation and navigational equipment shall be
included in the sale without extra payment if they are the property of the
Sellers. Unused stores and provisions shall be included in the sale and be
taken over by the Buyers without extra payment.
The Buyers shall take over the remaining bunkers and unused lubricating
oils in storage tanks and sealed drums and pay the current net market price
(excluding barging expenses) at the port and date of delivery of the Vessel.
Payment under this Clause shall be made at the same time and place and in
the same currency as the Purchase Price.
8. DOCUMENTATION
The place of closing: Oslo/London
In exchange for payment of the Purchase Price the Sellers shall furnish the
Buyers with delivery documents, namely:
(a) Legal Bill of Sale in a form recordable in (THE
COUNTRY IN WHICH THE BUYERS ARE TO REGISTER THE VESSEL) warranting full title
and warranting that the Vessel is free from all encumbrances, mortgages and
maritime liens or any other debts or claims whatsoever, duly notarially attested
and legalized by the consul of such country or other competent authority.
(b) Current Certificate of Ownership Issued by the competent authorities of
the flag state of the Vessel.
(c) Confirmation of Class Issued within 72 hours prior to delivery.
(d) Current Certificate Issued by the competent authorities stating that
the Vessel is free from registered encumbrances.
(e) Certificate of Deletion of the Vessel from the Vessel's registry or
other official evidence of deletion appropriate to the Vessel's registry at the
time of delivery, or, in the event that the registry does not as a matter of
practice issue such documentation immediately, a written undertaking by the
Sellers to effect deletion to the Buyers promptly and latest within four weeks
after the Purchase Price has been paid and the Vessel has been delivered.
(f) Any such additional documents as may reasonably be required by the
competent authorities for the purpose of registering the Vessel, provided the
Buyers notify the Sellers of any such documents as soon as possible after the
date of this Agreement.
At the time of delivery the Buyers and Sellers shall sign and deliver to
each other a Protocol of Delivery and Acceptance confirming the date and time of
delivery of the Vessel from the Sellers to the Buyers.
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At the time of delivery the Sellers shall hand to the Buyers the
classification certificate(s) as well as all plans etc., which are on board the
Vessel. Other certificates which are on board the Vessel shall also be handed
over to the Buyers unless the Sellers are required to retain same, in which case
the Buyers to have the right to take copies. Other technical documentation
which may be in the Sellers' possession shall be promptly forwarded to the
Buyers at their expense, if they so request. The Sellers may keep the Vessel's
log books but the Buyers to have the right to take copies of same.
9. ENCUMBRANCES
The Sellers warrant that the Vessel, at the time of delivery, is free from
all charters, encumbrances, mortgages and maritime liens or any other debts
whatsoever. The Sellers hereby undertake to indemnify the Buyers for any claims
relating to title of the Vessel and against all consequences of liabilities or
claims arising against the Vessel which have been incurred prior to the time of
delivery, whether or not the claims have actually been made at or before the
delivery.
10. TAXES, ETC.
Any taxes, fees and expenses in connection with the purchase and
registration under the Buyers' flag shall be for the Buyers' account, whereas
similar charges in connection with the closing of the Sellers' register shall be
for the Sellers' account.
11. CONDITION ON DELIVERY
Subject to the Buyers rights under clause 5c, the Vessel with everything
belonging to her shall be at the Sellers' risk and expense until she is
delivered to the Buyers, but subject to the terms and conditions of this
Agreement she shall be delivered and taken over as she was at the time of
inspection, fair wear and tear excepted. However, the Vessel shall be delivered
with her class maintained without condition/recommendation*, free of average
damage affecting the Vessel's class, and with her classification certificates
and national certificates, as well as all other certificates the Vessel had at
the time of inspection, valid and unextended without condition/recommendation*
by Class or the relevant authorities at the time of delivery.
"Inspection" in this Clause 11, shall mean the Buyers' inspection according
to Clause 4(a) or 4(b), if applicable, or the Buyers' inspection prior to the
signing of this Agreement. If the Vessel is taken over without inspection, the
date of this Agreement shall be the relevant date.
* Notes, if any, in the surveyor's report which are accepted by the
Classification Society without condition/recommendation are not to be taken
into account.
12. NAME/MARKINGS
The Buyers undertake not to change the name of the Vessel or alter funnel
markings until the expiry of the charter agreement referred to in Clause 18.
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13. BUYERS' DEFAULT
Should the Purchase Price not be paid in accordance with Clause 3, the
Sellers have the right to cancel the Agreement. The Sellers shall be entitled
to claim compensation for their losses and for all expenses incurred together
with interest.
14. SELLERS' DEFAULT
Should the Sellers fail to give Notice of Readiness in accordance with
Clause 5(a) or fail to be ready to validly complete a legal transfer by the date
stipulated in line 61 the Buyers shall have the option of canceling this
Agreement provided always that the Sellers shall be granted a maximum of three
banking days after Notice of Readiness has been given to make arrangements for
the documentation set out in Clause 8. If after Notice of Readiness has been
given but before the Buyers have taken delivery, the Vessel ceases to be
physically ready for delivery and is not made physically ready again in every
respect by the date stipulated in line 61 and new Notice of Readiness given, the
Buyers shall retain their option to cancel.
Should the Sellers fail to give Notice of Readiness by the date stipulated
in line 61 or fail to be ready to validly complete a legal transfer as aforesaid
they shall make due compensation to the Buyers for their loss and for all
expenses together with interest if their failure is due to proven negligence and
whether or not the Buyers cancel this Agreement.
15. (CLAUSE 15 INTENTIONALLY DELETED)
16. ARBITRATION
(a) and (b) intentionally deleted.
(c) Any dispute arising out of this Agreement shall be referred to
arbitration in Oslo, Norway, subject to the procedures applicable there. The
laws of the Kingdom of Norway shall govern this Agreement.
17. INITIAL PUBLIC OFFERING
This Agreement is subject to a successful Initial Public Offering (IPO) of
the common stock of Horizon Offshore, Inc. in the US. If the IPO does not occur
on or before December 31, 1998, this Agreement will be cancelled by the Sellers
and considered null and void.
18. CHARTER AGREEMENT
This Agreement is subject to the Sellers and the Buyers entering into a
charter agreement for the chartering by the Sellers of the Vessel on such terms
as follows from Annex A hereto, with effect as from the delivery of the Vessel
and valid for 240 days as from the 1st January 1998.
-5-
<PAGE>
19. PAYMENT AND DELIVERY
Subject to the closing of the IPO as described above, physical delivery of
the Vessel shall take place within one week after the proceeds of the IPO have
been received, and the Sellers shall give Buyers 5 days notice of estimated time
of delivery. The Buyers shall keep the Sellers informed on the progress of the
IPO.
Payment of the purchase price shall be made in full simultaneously with the
physical delivery of the vessel.
For accounting purposes, and irrespective of the date of physical delivery
of the Vessel, delivery shall be deemed to have taken place on 1st January 1998.
Oslo/Houston, December 1997
DSND SHIPPING AS
/s/ DIRK BLAAUW
-------------------
Dirk Blaauw
HORIZON VESSELS, INC.
/s/ BILL LAM
-------------------
Bill Lam
-6-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
1. Shipbroker THE BALTIC AND INTERNATIONAL MARITIME COUNCIL (BIMCO)
STANDARD BAREBOAT CHARTER
CODE NAME: "BARECON 89" PART I
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2. Place and date
December 1997
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3. Owners/Place of business 4. Bareboat charters (Charterers)/Place of business
Horizon Vessels, Inc. DSND Shipping AS
Radhusgt. 23
0158 Oslo
Norway
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5. Vessels' name. Call Sign and Flag (Cl. 9(c))
"DSND Stephaniturm"
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6. Type of Vessel 7. GRT/NRT
Diving Support Vessel 1954/586
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8. When/Where built 9. Total DWT (abt.) in metric tons on summer freeboard
1978 / Hitzler, Lauenburg, Germany 1954
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10. Class (Cl. 9) Lloyds 100 Al 11. Date of last special survey by the Vessel's classificaton society
Diving Support Vessel DPAA LMG 22nd April 1997
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12. Further particulars of Vessel (also inidcate minimum number of months' validity of class certificates agreed acc. to Cl. 14)
6 months
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13. Port or Place of delivery (Cl. 2) 14. Time for Delivery (Cl. 3) 15. Cancelling Date (Cl. 4)
1st January 1998 or
North Sea Sector upon delivery of the N/A
Vessel to the Owners, if later
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16. Port or Place of redelivery (Cl. 14)
North Sea
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17. Running days' notice if other than stated in Cl. 3 18. Frequency of dry-docking if other than stated in Cl. 9(f)
18 / 30 months
-----------------------------------------------------------------------------------------------------------------------------------
19. Trading Limits (Cl. 9)
N/A - world wide
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20. Charter period 21. Charter hire (Cl. 10)
240 days as from USD 12,500 per day and for
1st January 1998 240 days
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22. Rate of interest payable acc. to Cl. 10(f) and, if 23. Currency and method of payment (Cl. 10)
applicable, aop. to PART IV
2% p.a. above LIBOR USD
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
"Barecon 89" Standard Bareboat Charter PART I
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
24. Place of payment; also state 25. Bank guarantee/bond (sum and place)
beneficiary and bank account (Cl. 10) (Cl. 22) (optional)
N/A
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26. Mortgage(s), if any, (state whether Cl. 11(a) or 27. Insurance (marine and war risks) (state value acc. to Cl. 12(f)
(b) applies; if 11(b) applies state date of Deed(s) or, if applicable, acc. to Cl. 13(k))
of Covenant and same of Mortgagee(s)/Place of (also state if Cl. 13 applies)
business (Cl. 11)
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28. Additional insurance cover, if any, for Owners' 29. Additional insurance cover, if any, for Charters'
12(b)) or, account limited to (Cl. if applicable, (Cl. 13(g)) account limited to (Cl. 12(b)) or, if applicable, (Cl. 13(g))
- ------------------------------------------------------------------------------------------------------------------------------------
30. Latent defects (only to be filled in 31. War cancellation (indicate countries agreed ) (Cl. 24)
if period other than stated in Cl. 2)
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32. Brokerage commission and to whom payable (Cl. 25)
N/A
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33. Law and arbitration (state 25.1, 26.2, or 34. Number of additional clauses covering special provisions,
26.3 of Cl. 26 as agreed; if 26.3 agreed, also if agreed
state place of arbitration) (Cl. 26)
26.3 - arbitration in Oslo,
Norwegian law
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35. Newbuilding Vessel (indicate with 36. Name and place of Builders (only to be filled in if
"yes" or "no" whether Part II applies) (optional) Part III applies)
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37. Vessel's Yard Building No. (only to 38. Date of Building Contract (only to be filled in if
be filled in if Part III applies) Part III applies)
- ------------------------------------------------------------------------------------------------------------------------------------
39. Hire/Purchse agreement (indicate with 40. Bareboat Charter Registry (indicate with "yes" or "no" whether
"yes" or "no" whether Part IV applies) Part V applies) (optional)
(optional)
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41. Flag and Country of Bareboat Charter Registry 42. Country of Underlying Registry (only to be filled in if
(only to be filled in if Part V applies) Part V applies)
- ------------------------------------------------------------------------------------------------------------------------------------
PREAMBLE - It is mutually agreed that this Contract shall be performed subject to the conditions contained in this Charter which
shall include PART I and PART II, in the event of a conflict of conditions, the provisions of PART I shall prevail over those of
PART II to the extent of such conflict but no further. It is further mutually agreed that PART III and/or PART IV and/or PART V
shall only apply and shall only form part of this Charter if expressly agreed and stated in the Forms 36, 38 and 40. If PART III
and/or PART IV and/or PART V apply, it is further mutually agreed that in the event of a conflict of conditions, the provisions of
PART I and PART II shall prevail over those of PART III and/or PART IV and/or PART V to the extent of such conflict but no further.
</TABLE>
-8-
<PAGE>
Signature (Owners) Signature (Charterers)
Horizon Vessels, Inc. DSND Shipping AS
/s/ BILL LAM /s/ DIRK BLAAUW
----------------------- ----------------------
Bill Lam Dirk Blaauw
-9-
<PAGE>
Part II
"Barecon 89" Standard Bareboat
1. Definitions
In this Charter, the following terms shall have the meanings hereby
assigned to them:
"The Owners" shall mean the person or company registered as Owners of the
Vessel.
"The Charterers" shall mean the Bareboat charterers and shall not be
construed to mean a time charterer or a voyage charterer.
2. Delivery (not applicable to newbuilding vessels)
The Vessel shall be delivered and taken over by the Charterers at the port
or place indicated in Box 13. in such ready berth as the Charterers may direct.
The Owners shall before and at the time of delivery exercise due diligence to
make the Vessel seaworthy and in every respect ready in hull, machinery and
equipment for service under the Charter. The Vessel shall be properly documented
at time of delivery.
The delivery to the Charterers of the Vessel and the taking over of the
Vessel by the Charterers shall constitute a full performance by the Owners of
all the Owners' obligations under Clause 2. and thereafter the Charterers shall
not be entitled to make or assert any claim against the Owners on account of any
conditions, representations or warranties expressed or implied with respect to
the Vessel including latent defects.
3. Time for Delivery (not applicable to newbuilding vessels)
The Vessel to be delivered not before the date indicated in Box 14 unless
with the Charterers' consent.
Unless otherwise agreed in Box 17, the Owners to give the Charterers not
less than 30 running days' preliminary and not less than 14 days' definite
notice of the date on which the Vessel is expected to be ready for delivery.
The Owners to keep the Charterers closely advised of possible changes in
the Vessel's position.
4. Cancelling (not applicable to newbuilding vessels)
Should the Vessel not be delivered latest by the cancelling date indicated
in Box 15, the Charterers to have the option of cancelling this Charter without
prejudice to any claim the Charterers may otherwise have on the Owners under the
Charter.
If it appears that the Vessel will be delayed beyond the cancelling date,
the Owners shall, as soon as they are in a position to state with reasonable
certainty the day on which the Vessel should be ready, give notice thereof to
the Charterers asking whether they will exercise their option of cancelling, and
the option must then be declared within one hundred and sixty-eight (168) hours
of the receipt by the Charterers of such notice. If the Charterers do not then
exercise their option of cancelling, the seventh day after the readiness date
stated in the Owners' notice shall be regarded as a new cancelling date for the
purpose of the Clause.
5. Trading Limits
The Vessel shall be employed in lawful trades for the carriage of suitable
-10-
<PAGE>
lawful merchandise within the trading limits indicated in Box 19.
The Charterers undertake not to employ the Vessel or suffer the Vessel to
be employed otherwise than in conformity with the terms of the Instruments of
Insurance (including any warranties expressed or implied therein) without first
obtaining the consent to such employment of the Insurers and complying with such
requirements as to extra premium or otherwise as the Insurers may prescribe. If
required, the Charterers shall keep the Owners and the Mortgagees advised of the
Intended employment of the Vessel.
The Charterers also undertake not to employ the Vessel or suffer her
employment in any trade or business which is forbidden by the law of any country
to which the Vessel may sail or is otherwise illicit or in carrying illicit or
prohibited goods or in any manner whatsoever which may render her liable to
condemnation, destruction, seizure or confiscation.
Notwithstanding any other provisions contained in this charter it is agreed
that nuclear fuels or radioactive products or waste are specifically excluded
from the cargo permitted to be loaded or carried under this Charter. This
exclusion does not apply to radio-isotopes used or intended to be used for any
industrial commercial, agricultural, medical or scientific purposes provided the
Owners' prior approval has been obtained to loading thereof.
6. Survey on Delivery and Re-Delivery
The Owners and Charterers shall agree in writing at the time of delivery
and redelivery hereunder on the quantity of bunkers and unused lubrication oils
and sealed drums, and any difference shall be compensated by the respective
party, ref. line 371-373.
7. Inspection
Inspection. -- The Owners shall have the right at any time to inspect or
survey the Vessel or Instruct a duly authorized surveyor to carry out such
survey on their behalf to ascertain the condition of the Vessel and satisfy
themselves that the Vessel is being properly repaired and maintained.
Inspection or survey in dry-dock shall be made only when the Vessel shall be in
dry-dock for the Charterers' purpose. However, the Owners shall have the right
to require the Vessel to be dry-docked for inspection if the Charterers are not
docking her at normal classification intervals. The fees for such inspection or
survey shall in the event of the Vessel being found to be in the condition
provided in Clause 9 of this Charter be payable by the Owners and shall be paid
by the Charterers only in the event of the Vessel being found to require repairs
or maintenance in order to achieve the condition so provided. All time taken in
respect of inspection, survey or repairs shall count as time on hire and shall
form part of the Charter period.
The Charterers shall also permit the Owners to inspect the Vessel's log
books whenever requested and shall whenever required by the Owners furnish them
with full information regarding any casualties or other accidents or damage to
the Vessel. For the purpose of this Clause, the Charterers shall keep the Owners
advised of the intended employment of the Vessel.
9. Maintenance and Operation
(a) The Vessel shall during the Charter period be in the full possession
and at the absolute disposal for all purposes of the Charterers and under their
complete control in every respect. The Charterers shall maintain the Vessel, her
machinery, boilers, appurtenances and spare parts in a good state
-11-
<PAGE>
of repair, in efficient operating condition and in accordance with good
commercial maintenance practice and, except as provided for in Clause 13(f),
they shall keep the Vessel with unexpired classification of the class indicated
in Box 10 and with other required certificates in force at all times.
The Charterers to take immediate shape to have the necessary repairs done
within a reasonable time failing which the Owners shall have the right of
withdrawing the Vessel from the service of the Charterers without noting any
protest and without prejudice to any claim the Owners may otherwise have against
the Charterers under the Charter.
Unless otherwise agreed, in the event of any improvement, structural
changes or expensive new equipment becoming necessary for the continued
operation of the Vessel by reason of new class requirements or by compulsory
legislation costing more than 5 per cent of the Vessel's marine insurance value
as stated in Box 27, then the extent, if any, to which the rate of hire shall be
varied and the ratio in which the cost of compliance shall be shared between the
parties concerned in order to achieve a reasonable distribution thereof as
between the Owners and the Charterers having regard, inter alia, to the length
of the period remaining under the Charter, shall in the absence of agreement, be
referred to arbitration, according to Clause 26.
The Charterers are required to establish and maintain financial security or
responsibility in respect of all or other pollution damages as required by any
government, including federal, state or municipal or other division of authority
thereof, to enable the Vessel, without penalty or charge, lawfully to enter,
remain at, or leave any port, place, territorial or contiguous waters of any
country, state or municipality in performance of the Charter without any delay.
This obligation shall apply whether or not such requirements have been lawfully
imposed by such government or division of authority thereof. The Charterers
shall make and maintain all arrangements by bond or otherwise as may be
necessary to satisfy such requirements at the Charterers' sole expense and the
Charterers shall indemnify the Owners against all consequences whatsoever
(including loss of time) for any failure or inability to do so.
(b) The Charterers shall at their own expense and by their own procurement
man, victual, navigate, operate, supply, fuel, and repair the Vessel whenever
required during the Charter period and they shall pay all charges and expenses
of every kind and nature whatsoever incidental to their use and operation of the
Vessel under this Charter, including any foreign general municipality and/or
state taxes. The Master, officers and crew of the Vessel shall be the servants
of the Charterers for all purposes whatsoever, even if for any reason appointed
by the Owners.
Charterers shall comply with the regulation regarding officers and crew in
force in the country of the Vessel's flag or any other applicable law.
(c) During the currency of this Charter, the Vessel shall retain her
present name as indicated in Box 5 and shall remain under and fly the flag as
indicated in Box 5. Provided, however, that the Charterers shall have the
liberty to paint the Vessel in their own colours, install and display their
funnel insignia and fly their own house flag. Painting and re-painting,
installment and re-installment to be for the Charterers' account and time used
thereby to count as time on hire.
(d) The Charterers shall make no structural changes in the Vessel or
changes in the machinery, boilers, appurtenances or spare
-12-
<PAGE>
parts thereof without in each instance first securing the Owners' approval
thereof. If the Owners so agree, the Charterers shall, if the Owners so require,
restore the Vessel to its former condition before the termination of the
Charter.
(e) The Charterers shall have the use of all outfit, equipment, and
appliances on board the Vessel at the time of delivery, provided the name of
their substantial equivalent shall be returned to the Owners on redelivery in
the same good order and condition as when received, ordinary wear and tear
excepted. The Charters shall from time to time during the Charter period replace
such items of equipment as shall be so damaged or worn as to be unfit for use.
The Charterers are to procure that all repairs to or replacement of any damaged,
worn or lost parts or equipment be effected in such manner (both as regards
workmanship and quality of material) as not to diminish the value of the Vessel.
The Charterers have the right to fit additional equipment at their expense and
risk but the Charterers shall remove such equipment at the end of the period of
requested by the Owners.
Any equipment including radio equipment ono hire on the Vessel at time of
delivery shall be kept and maintained by the Charterers and the Charterers shall
assume the obligations and liabilities of the Owners under any issued contracts
in connection therewith and shall reimburse the Owners for all expenses incurred
in connection therewith, also for any new equipment required in order to comply
with radio requirements.
(f) The Charterers shall dry-dock the Vessel and clean and paint her
underwater parts whenever the same may be necessary, but not less than once in
every eighteen calendar months after delivery unless otherwise agreed in Box 18.
10. Hire
(a) The Charterers shall pay to the Owners for the hire of the Vessel at
the lump sum per calendar month as indicated in Box 21 commencing on and from
the date and hour of that delivery to the Charterers and at and after the agreed
lump sum for any part of a month. Hire to continue until the date and hour when
the Vessel is redelivered by the Charterers to her Owners.
(b) Payment of Hire, except for the first and last month's Hire, if sub-
clause (c) of this Clause is applicable, shall be made in cash without discount
every month in advance on the first day of each month in the currency and in the
manner indicated in Box 23 and at the place mentioned in Box 24.
(c) Payment of Hire for the first and last month's Hire if less than a full
month shall be calculated proportionally according to the number of days in the
particular calendar month and advance payment to be effected accordingly.
(d) Should the Vessel be lost or missing, Hire to cease from the date and
time when she was lost or last heard of. Any Hire paid in advance to be
adjusted accordingly.
(e) Time shall be of the essence in relation to payment of Hire hereunder,
in default of payment beyond a period of seven running days, then Owners shall
have the right to withdraw the Vessel from the services of the Charterers
without noting any protest and without interferences by any court or any other
formality whatsoever, and shall, without prejudice to any other claim the Owners
may otherwise have against the Charterers under the Charter, be entitled to
damages in respect of all costs and losses incurred as a result of the
Charterers' default and the ensuing withdrawal of the Vessel.
-13-
<PAGE>
(f) Any delay in payment of Hire shall entitle the Owners to an interest at
the rate per annum as agreed in Box 22. If Box 22 has not been filled in the
current market rate in the country where the Owners have their Principal Place
of Business shall apply.
11. Mortgage
(a) Owners warrant that they may mortgage the Vessel.
(b) The Vessel chartered under this Charter is financed by a mortgage
according to the Deed(s) of Covenant annexed to this Charter and as stated in
Box 26. By their counter-signature on the Deed(s) of Covenant, the Charterers
undertake to have acquainted themselves with all terms, conditions and
provisions of the said Deed(s) of Covenant. The Charterers undertake that they
will comply with all such instructions or directions in regard to the employment
insurances, repairs and maintenances of the Vessel, etc., as laid down on the
Deed(s) of Covenant or as may be directed from time to time during the currency
of the Charter by the Mortgagee(s) in conformity with the Deed(s) of Covenant.
(c) The Owners warrant that they have not effected any mortgage(s) other
than stated in Box 26 and that they will not effect any other mortgage(s)
without the prior consent of the Charterers.
(-Optional- Clauses 11(a) and (b) are alternatives: Indicate alternative
agreed in Box 26).
12. Insurance and Repairs
(a) During the Charter period the Vessel shall be kept insured by
Charterers at their expense against marine, war and Protection and Indemnity
risks in such form as the Owners shall in writing approve, which approval shall
not be unreasonably withheld. Such marine, war and P. and I. Insurance shall be
arranged by the Charterers to protect the interests of both the Owners and the
Charterers and mortgagees (if any), and the Charterers shall be at liberty to
protect under such insurances the interests of any managers they may appoint.
All insurance policies shall be in the joint names of the Owners and the
Charterers as their interests may appear.
If the Charterers fail to arrange and keep any of the insurances provided for
under the provisions of sub-clause (a) above in the manner described therein,
the Owners shall notify the Charterers whereupon the Charterers shall rectify
the position within seven running days, telling which Owners shall have the
right to withdraw the Vessel from the service of the Charterers without
prejudice to any claim the Owners may otherwise have against the Charterers.
The Charterers shall, subject to the approval of the Owners and the
Underwriters, effect all insured repairs and shall undertake settlement of all
costs in connection with such repairs as well as insured charges, expenses and
liabilities (reimbursement to be secured by the Charterers from the
Underwriters) to the extent of coverage under the insurance herein provided for.
The Charterers also to remain responsible for and to effect repairs and
settlement of costs and expenses incurred thereby in respect of all other
repairs not covered by the insurance and/or not exceeding any possible
franchise(s) deductibles provided for in the insurances.
All time used for repairs under the provisions of sub-clause (a) of this Clause
and for repairs of latent defects according to Clause 2 above including any
deviation shall count as time on hire and shall form part of the Charter period.
-14-
<PAGE>
(b) If the conditions of the above insurance permit additional insurances
to be placed by the parties, such cover shall be limited to the amount for each
party set out in Box 28 and Box 29, respectively. The Owners or the Charterers
as the case may be shall immediately furnish the other party with particulars of
any additional insurance effected, including copies of any cover notes or
policies and the written consent of the insurers of any such required insurance
in any case where the consent of such insurers is necessary.
(c) Should the Vessel become an actual, constructive, compromised or agreed
total loss under the insurance required under sub-clause(s) of Clause 12, all
insurance payments for such loss shall be paid to the Mortgagee, if any. In the
manner described in the Deed(s) of Covenant, who shall distribute the moneys
between themselves, the Owners and the Charterers according to their respective
interests. The Charterers undertake to notify the Owners and the Mortgagees, if
any, of any occurrences in consequence of which the Vessel is likely to become a
Total Loss as defined in this Clause.
(d) If the Vessel becomes an actual, constructive, compromised or agreed
total loss under the insurances arranged by the Charterers in accordance with
sub-clause (a) of this Clause, this Charter shall terminate as of the date of
such loss.
(e) The Owners shall upon the request of the Charterers, promptly execute
such documents as may be required to enable the Charterers to abandon the Vessel
to insurers and claim a constructive total loss.
(f) For the purposes of insurance coverage against marine and war risks
under the provisions of sub-clause (a) of this Clause, the value of the Vessel
is the sum indicated in Box 27.
13. Clause 13 Intentionally Deleted
14. Redelivery
The Charterers shall at the expiration of the Charter period redeliver the
Vessel at a safe and ice-free port or place as indicated in Box 16. The
Charterers shall give the Owners not less than 30 running days' preliminary and
not less than 14 days' definite notice of expected data, range of ports of
redelivery or port or places of redelivery. Any changes thereafter in Vessel's
position shall be notified immediately to the Owners.
Should the Vessel be ordered on a voyage by which the Charter period may be
exceeded the Charterers to have the use of the Vessel to enable them to complete
the voyage, provided it could be reasonably circulated that the voyage would
allow redelivery about the time fixed for the termination of the Charter.
The Vessel shall be redelivered to the Owners in the same or as good structure,
state, condition and class as that in which she was delivered, fair wear and
tear not affecting class excepted.
The Vessel upon redelivery shall have her survey cycles up to date and class
certificates valid for at least the number of months agreed in Box 12.
15. Non-Lien and Indemnity
The Charterers will not suffer, nor permit to be continued, any lien or
encumbrance incurred by them or their agents, which might have priority over the
title and interest of the Owners in the Vessel.
-15-
<PAGE>
The Charterers further agree to fasten to the Vessel in a conspicuous place and
to keep so fastened during the Charter period a notice reading as follows:
"This Vessel is the property of (name of Owners). It is under charter to (name
of Charterers) and by the terms of the Charter Party neither the Charterers nor
the Master have any right, power or authority to create, incur or permit to be
imposed on the Vessel any lien whatsoever."
The Charterers shall indemnify and hold the Owners harmless against any lien of
whatsoever nature arising upon the Vessel during the Charter period while she is
under the control of the Charterers, and against any claims against the Owners
arising out of or in relation to the operation of the Vessel by the Charterers.
Should the Vessel be arrested by reason of crimes or liens arising out of her
operation hereunder by the Charterers, the Charterers shall at their own expense
take all reasonable steps to secure that within a reasonable time the Vessel is
released and at their own expense put up bail to secure release of the Vessel.
16. Lien
The Owners to have a lien upon all cargoes and sub-freights belonging to
the Charterers and any Bill of Lading freight for all claims under the Charter,
and the Charterers to have a lien on the Vessel for all moneys paid in advance
and not earned.
17. Salvage
All salvage and towage performed by the Vessel shall be for the Charterers'
benefit and the cost of repairing damage occasioned thereby shall be borne by
the Charterers.
18. Wreck Removal
In the event of the Vessel becoming a wreck or obstruction to navigation
the Charterers shall indemnify the Owners against any sums whatsoever which the
Owners shall become liable to pay and shall pay in consequence of the Vessel
becoming a wreck or obstruction to navigation.
19. General Average
General Average, if any, shall be adjusted according to the York-Antwerp
Rules 1974 or any subsequent modification thereof current at the time of the
casualty.
The Charter Hire not to contribute to General Average.
20. Assignment and Sub-Demise
The Charterers shall not assign this Charter nor sub-demise the Vessel
except with the prior consent in writing of the Owners which shall not be
unreasonably withheld and subject to such terms and conditions as the Owners
shall approve.
21. Bills of Lading
The Charterers are to procure that all Bills of Lading issued for carriage
of goods under this Charter shall contain a Paramount Clause incorporating any
legislation relating to Carrier's liability for cargo compulsorily applicable in
the trade; if no such legislation exists, the Bills of Lading shall incorporate
this British Carriage of Goods by Sea Act. The Bills of Lading shall also
contain the amended New Jason Clause and the Both-to-Blame Collision Clause.
The Charterers agree to indemnify the Owners against all consequences or
liabilities arising from the Master, officers or agents signing Bills of Lading
or other documents.
-16-
<PAGE>
22. Bank Guarantee
The Charterers undertake to furnish, before delivery of the Vessel, a first
class bank guarantee or bond in the sum and at the place as indicated in Box 25
as guarantee for full performance of their obligations under this Charter.
Optional, only to apply if Box 25 filled in.
23. Requisition/Acquisition
(a) In the event of the Requisition for Hire of the Vessel by any
governmental or other competent authority (hereinafter referred to as
"Requisition for Hire"). Irrespective of the date during the Charter period when
"Requisition for Hire may occur and Irrespective of the length thereof and
whether or not it be for an indefinite or a limited ________________________.
24. War
(a) The Vessel unless the consent of the Owners be first obtained not to be
ordered nor continue to any piece or on any voyage nor be used on any service
which will bring her within a zone which is dangerous as the result of any
actual or threatened act of war, war, hostilities, operations, acts of piracy or
of hostility or malicious damage against this or any other vessel or its cargo
by any person, body or State whatsoever, revolution, civil war, civil commotion
or the operation of international law, nor be exposed in any way to Sanctions,
nor carry any goods that may in any way expose her to any risks of seizure,
capture, penalties or any other interference of any kind whatsoever by the
belligerent or fighting powers or parties or by any Government or Ruler.
(b) The Vessel to have liberty to comply with any orders or directions as
to departure, arrival, routes, ports of call, stoppages, destination, delivery
or in any other wise whatsoever given by the Government of the nation under
whose flag the Vessel sails or any other Government or any person (or body)
acting or purporting to act with the authority of such Government or by any
committee or person having under the terms of the war risks insurance on the
Vessel the right to give any such orders or directions.
(c) In the event of outbreak of war (whether there be a declaration of war
or not) between any two or more of the countries as stated in Box 31, both the
Owners and the Charterers shall have the right to cancel this Charter, whereupon
the Charterers shall redeliver the Vessel to the Owners in accordance with
Clause 14, if she has cargo on board after discharge thereof at destination, or
if debarred under this Clause from reaching or entering it at a near open and
safe port as directed by the Owners, or if she has no cargo on board, at the
port at which she then is or if at sea at a near open and safe port as directed
by the Owners. In all cases hire shall continue to be paid in accordance with
Clause 10 and except as aforesaid all other provisions of this Charter shall
apply until redelivery.
25. Commission
The Owners to pay a commission at the rate indicated in Box 32 to the
Brokers named in Box 32 on any Hire paid under the Charter but in no case less
than is necessary to cover the actual expenses of the Brokers and a reasonable
fee for their work. If the full Hire is not paid owing to breach of Charter by
either of the parties the party liable therefor to indemnify the Brokers against
heir loss of commission.
Should the parties agree to cancel the Charter, the Owners to indemnify the
Broker against any loss of commission but in such case the commission not to
exceed the brokerage on one year's Hire.
-17-
<PAGE>
EXHIBIT 10.13
================================================================================
OPTION AGREEMENT
BETWEEN
HORIZON OFFSHORE, INC.
and
DSND OCEANTECH, LTD.
================================================================================
<PAGE>
OPTION AGREEMENT
THIS OPTION AGREEMENT (this "Agreement"), dated as of December 4, 1997, is
by and between Horizon Offshore, Inc., a Delaware corporation ("Horizon"), and
DSND Oceantech, Ltd., an English corporation ("DSND").
W I T N E S S E T H:
WHEREAS, DSND is the owner of a deck-mounted 12-man, 1,000 foot saturation
diving system described more fully in Exhibit "A" attached hereto (the "Sat
System"); and
WHEREAS, upon the terms and subject to the conditions of this Agreement,
DSND desires to grant an option to, and Horizon desires to receive an option to
purchase, the Sat System.
NOW, THEREFORE, in consideration of the representations, warranties and
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
Section 1. Grant. DSND hereby grants to Horizon an irrevocable option
(the "Option") to purchase the Sat System for US $4,000,000. The Option may be
exercised at any time beginning on the date that Horizon's common stock
commences trading on the Nasdaq National Market or another securities exchange
in the United States at any time during 1998 following a firm commitment
underwritten offering of common stock of Horizon and expiring 90 days thereafter
(the "Option Period").
Section 2. Exercise of Option. Horizon may exercise all or any part of
the Option at any time during the Option Period by providing DSND not less than
ten days notice of the date that the Closing (as hereinafter defined) shall
occur.
Section 3. Closing; Payment.
(a) The closing (the "Closing") of the purchase of the Sat System
shall take place at the offices of Horizon at 9821 Katy Freeway, Suite 450,
Houston, Texas 77024 at such date as Horizon may specify pursuant to Section 2.
(b) Payment. At the Closing, Horizon shall pay to or for the account
of DSND by wire transfer US $4,000,000.
(c) Closing Deliveries. At the Closing, DSND shall deliver to
Horizon, or to such wholly-owned subsidiary of Horizon as Horizon may request,
the following:
(a) A bill of sale in the form attached hereto as Exhibits "B"
transferring legal title to the Sat System with warranties free from all
mortgages, security interest, duties, claims, liens, libels and similar
encumbrances of any kind (collectively, "Encumbrances") dated and effective as
of the Closing;
<PAGE>
(b) Releases of any recorded Encumbrances on the Sat System; and
(c) To the extent not previously delivered to Horizon, copies of
all certificates of regulatory bodies, plans, drawings and other technical
documents, logs and instructional manuals for the Sat System.
Section 4. Conditions. Notwithstanding anything to the contrary
herein, DSND agrees that the Sat System shall, at the Closing, be in
substantially the same condition as on the date hereof, ordinary wear and tear
excepted. If the Sat System shall suffer any damage (other than an actual or
constructive total loss) and such damage or loss is not repaired prior to the
Closing, then DSND agrees to be responsible following the Closing (it being the
intent of Horizon and DSND that the Closing not be delayed as a result of the
need to make any such repairs) for such repairs to the Sat System.
Section 5. Miscellaneous.
(a) Further Assurances After the Closing, DSND will execute and
deliver to Horizon such additional instruments of conveyance, and DSND shall
take such other and further actions as Horizon may reasonably request to more
completely sell, transfer, and assign to Horizon and vest in Horizon such title
to the Sat System as provided for in this Agreement.
(b) Expenses. Horizon and DSND shall each pay their own out-of-pocket
fees and expenses arising in connection with any transactions contemplated by
this Agreement.
(c) Notices. All notices and other communications hereunder must be
in writing and shall be deemed to have given upon receipt of delivery by: (i)
personal delivery to the designated person, (ii) certified or registered mail,
postage prepaid, return receipt requested, (iii) a nationally recognized
overnight courier service (against a receipt therefor) or (iv) facsimile
transmission with confirmation of receipt. All such notices must be addressed
as follows or such other address as to which any party hereto may have notified
the other in writing:
If to Horizon, to:
Horizon Offshore, Inc.
9821 Katy Freeway, Suite 450
Houston, Texas 77024
Attention: Bill Lam
Facsimile transmission No.: 713-365-0989
2
<PAGE>
if to DSND, to:
DSND Oceantech, Ltd.
Radhusgt 23
P. O. Box 752 Sentrum
0106 Oslo, Norway
Attention:
Facsimile transmission No.: 47 22 41 86 50
(d) Entire Agreement. This Agreement (including exhibits) constitutes
the entire agreement and supersedes all prior agreements, and understandings and
communications, both written and oral, among the parties with respect to the
subject matter hereof. The Exhibits to this Agreement are a part of this
Agreement as if fully set forth herein.
Section (e) Governing Law. THIS AGREEMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO
ANY APPLICABLE PRINCIPLES OF CONFLICTS OF LAW.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers as of the date first written
above.
HORIZON OFFSHORE, INC.
By: /s/ Bill Lam
--------------------------------
Bill Lam
President
DSND OCEANTECH, LTD.
By:/s/ Dirk Blaauw
---------------------------------
Name: Dirk Blaauw
Title: Chief Financial Officer
3
<PAGE>
*****************************
The exhibit to the Option Agreement has
been omitted and will be furnished
to the Commission's staff upon request
*****************************
4
<PAGE>
EXHIBIT 10.14
================================================================================
REGISTRATION RIGHTS AGREEMENT
AMONG
HIGHWOOD PARTNERS, L.P.
WESTGATE INTERNATIONAL, L.P.
AND
HORIZON OFFSHORE, INC.
Dated as of December 4, 1997
================================================================================
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is entered into this
4th day of December 1997, by and among Horizon Offshore, Inc., a Delaware
corporation ("Horizon"), and Highwood Partners, L.P., a Delaware limited
partnership, ("Highwood"), and Westgate International L.P., a Cayman Islands
exempted limited partnership ("Westgate")
W I T N E S S E T H:
WHEREAS, Highwood and Westgate were the original stockholders of Horizon,
have funded its capital requirements and currently own all of the issued and
outstanding shares of common stock of Horizon; and
WHEREAS, Horizon desires to grant certain registration rights to Highwood
and Westgate as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
Section 1. Defined Terms. The following capitalized terms when used in
this Agreement shall have the following meanings:
"Common Stock" means the common stock, $1.00 par value per share, of
Horizon.
"Demand Registration" means a Demand Registration as defined in Section
2(a).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" means Highwood and Westgate and any of their respective permitted
successors and assigns as holders of Registrable Securities.
"Piggyback Registration" means a Piggyback Registration as defined in
Section 2(b).
"Registrable Securities" means (a) the Common Stock held by Highwood and
Westgate on the date hereof and (b) any other securities issued by Horizon after
the date hereof with respect to such Common Stock (and with respect to the
Common Stock generally) by means of exchange, reclassification, dividend,
distribution, split up, combination, subdivision, recapitalization, merger,
spin-off, reorganization or otherwise; provided, however, (i) such securities
shall have been sold in satisfaction of all applicable resale provisions of Rule
144 under the Securities Act; (ii) as expressed in an opinion of counsel
delivered to and satisfactory to Horizon and the transfer agent for the Common
Stock that such securities can be sold without any restriction under Rule 144(k)
under the Securities Act and the transfer of such securities does not require
registration under the Securities Act, or (iii) such securities cease to be
issued and outstanding for any reason.
-2-
<PAGE>
"Requesting Holders" means Holders requesting the filing of a Registration
Statement pursuant to Section 2(a).
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
Section 2. Registration Rights.
(a) Demand Registration. (i) At any time commencing 185 days after
the date that the Common Stock is registered under Sections 12(b) or (g) of the
Exchange Act, the Holders of a majority of the Registrable Securities (the
"Requesting Holders") may at any time and from time to time make a written
request for registration under the Securities Act of not less than 5% of the
outstanding Common Stock (a "Demand Registration"); provided that Horizon shall
not be obligated to effect more than one Demand Registration in any 12-month
period or more than an aggregate of three Demand Registrations pursuant to this
Section 2(a). Such request will specify the number of shares of Registrable
Securities proposed to be sold and will also specify the intended method of
disposition thereof. A registration will not count as a Demand Registration
until it has become effective; provided, however, that a Demand Registration
that is either withdrawn or not declared effective at the Holder's request shall
count as a Demand Registration unless the Holder's also bear all of the expenses
specified in Section 2(e) (as being payable by Horizon) with respect to such
Demand Registration.
(ii) If the Requesting Holders so elect, the offering of such
Registrable Securities pursuant to such Demand Registration shall be in the form
of an underwritten offering. The Requesting Holders shall select the managing
Underwriters and any additional investment bankers and managers to be used in
connection with the offering; provided that such managing Underwriters and
additional investment bankers must be reasonably satisfactory to Horizon.
(b) Piggyback Registration. If Horizon proposes to file a
registration statement under the Securities Act with respect to an offering of
Common Stock (i) for Horizon's own account (other than a registration statement
on Form S-4 or S-8 (or any substitute form that may be adopted by the SEC)) or
(ii) for the account of any of its holders of Common Stock (other than the
Holders), then Horizon shall give written notice of such proposed filing to the
Holders as soon as practicable (but in no event less than 10 days before the
anticipated filing date), and such notice shall offer the Holders the
opportunity to register such number of shares of Registrable Securities as the
Holders may request on the same terms and conditions as Horizon's or such
holder's Common Stock (a "Piggyback Registration").
(c) Reduction of Offering. Notwithstanding anything contained herein,
if the managing Underwriter of an offering described in Section 2(b) delivers a
written opinion to Horizon
-3-
<PAGE>
that the size of the offering that the Holders, Horizon and any other Persons
whose securities are included in such offering intend to make are such that the
success of the offering would be materially and adversely affected, then the
amount of Registrable Securities to be offered for the account of the Holders
and any other Person shall be reduced to the extent necessary to reduce the
total amount of Common Stock to be included in such offering to the amount
recommended by such managing Underwriter; provided that if Common Stock is being
offered for the account of Persons other than Horizon, then the proportion by
which the amount of such Registrable Securities intended to be offered for the
account of the Holders is reduced shall not exceed the proportion by which the
amount of Common Stock intended to be offered for the account of such other
Persons is reduced.
(d) Filings; Information. Whenever the Requesting Holders request
that any Registrable Securities be registered pursuant to Section 2(a), Horizon
will use its reasonable efforts to effect the registration of such Registrable
Securities as promptly as is practicable, and in connection with any such
request:
(i) Horizon will as expeditiously as possible prepare and file
with the SEC a registration statement on any form for which Horizon then
qualifies and which counsel for Horizon shall deem appropriate and
available for the sale of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution thereof,
and use its reasonable efforts to cause such filed registration statement
to become and remain effective for a period of not less than 90 days (or
such shorter period which will terminate when all Registrable Securities
covered by such registration statement have been sold); provided that if
Horizon shall furnish to the Requesting Holders a certificate signed by
Horizon's Chairman of the Board stating that in his good faith judgment it
would be detrimental or otherwise disadvantageous to Horizon or its
stockholders for such a registration statement to be filed as expeditiously
as possible, Horizon shall have a period of not more than 120 days within
which to file such registration statement measured from the date of
Horizon's receipt of the Requesting Holders' request for registration in
accordance with Section 2(a).
(ii) Horizon will, if requested, prior to filing such
registration statement or any amendment or supplement thereto, furnish to
the Requesting Holders and each applicable managing Underwriter, if any,
copies thereof, and thereafter furnish to the Requesting Holders and each
such Underwriter, if any, such number of copies of such registration
statement, amendment and supplement thereto (in each case including all
exhibits thereto and documents incorporated by reference therein) and the
prospectus included in such registration statement (including each
preliminary prospectus) as the Requesting Holders or each such Underwriter
may reasonably request in order to facilitate the sale of the Registrable
Securities.
(iii) After the filing of the registration statement, Horizon
will promptly notify the Requesting Holders of any stop order issued or, to
Horizon's knowledge,
-4-
<PAGE>
threatened to be issued by the SEC and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered.
(iv) Horizon will endeavor to qualify the Registrable Securities
for offer and sale under such other securities or blue sky laws of such
jurisdictions in the United States as the Requesting Holders reasonably
request; provided that Horizon will not be required to (A) qualify
generally to do business in any jurisdiction where it would not otherwise
be required to qualify but for this subparagraph 2(d)(iv), (B) subject
itself to taxation in any such jurisdiction or (C) consent to general
service of process in any such jurisdiction.
(v) Horizon will as promptly as is practicable notify the
Requesting Holders at any time when a prospectus relating to the sale of
the Registrable Securities is required by law to be delivered in connection
with sales by an Underwriter or dealer, of the occurrence of any event
requiring the preparation of a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and promptly make
available to the Requesting Holders and to the Underwriters any such
supplement or amendment. The Requesting Holders agree that, upon receipt
of any notice from Horizon of the occurrence of any event of the kind
described in the preceding sentence, the Requesting Holders will forthwith
discontinue the offer and sale of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until receipt
by the Requesting Holders and the Underwriters of the copies of such
supplemented or amended prospectus and, if so directed by Horizon, the
Requesting Holders will deliver to Horizon all copies, other than permanent
file copies then in the Requesting Holders' possession, of the most recent
prospectus covering such Registrable Securities at the time of receipt of
such notice. In the event Horizon shall give such notice, Horizon shall
extend the period during which such registration statement shall be
maintained effective as provided in Section 2(d)(i) by the number of days
during the period from and including the date of the giving of such notice
to the date when Horizon shall make available to the Requesting Holders
such supplemented or amended prospectus.
(vi) Horizon will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as
are reasonably required in order to expedite or facilitate the sale of such
Registrable Securities.
(vii) Horizon will furnish to the Requesting Holders and to each
Underwriter a signed counterpart, addressed to the Requesting Holders or
such Underwriter, of an opinion or opinions of counsel to Horizon and a
comfort letter
-5-
<PAGE>
or comfort letters from Horizon's independent public accountants, each in
customary form and covering such matters of the type customarily covered by
opinions or comfort letters, as the case may be, as the Requesting Holders
or the managing Underwriter reasonably requests.
(viii) Horizon will make generally available to its security
holders, as soon as reasonably practicable, an earnings statement covering
a period of 12 months, beginning within three months after the effective
date of the registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and the rules and
regulations of the SEC thereunder.
(ix) Horizon will use its reasonable efforts to cause all such
Registrable Securities to be listed on each securities exchange or over-
the-counter market on which the Common Stock is then listed.
Horizon may require the Requesting Holders promptly to furnish in writing
to Horizon such information regarding the Requesting Holders, the plan of
distribution of the Registrable Securities and other information as Horizon may
from time to time reasonably request or as may be legally required in connection
with such registration.
(e) Registration Expenses. In connection with any Demand Registration
or any Piggyback Registration, Horizon shall pay the following expenses incurred
in connection with such registration: (i) filing fees with the SEC, (ii) fees
and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), (iii) printing expenses, (iv)
fees and expenses incurred in connection with the listing of the Registrable
Securities, (v) fees and expenses of counsel and independent certified public
accountants for Horizon and (vi) the reasonable fees and expenses of any
additional experts retained by Horizon in connection with such registration.
Each Holder shall pay any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities and any out-of-pocket
expenses of the Holders.
(f) Indemnification by Horizon. Horizon agrees to indemnify and hold
harmless each Holder, its officers and directors, and each Person, if any, who
controls each Holder within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act from and against any and all losses,
claims, damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities (as amended or supplemented if
Horizon shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information, relating to the
Holder or the plan of distribution furnished in writing to Horizon by or on
behalf of the Holder expressly for use therein; provided that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure
to the benefit of the Holder if
-6-
<PAGE>
a copy of the most current prospectus at the time of the delivery of the
Registrable Securities was not provided to purchaser and such current prospectus
would have cured the defect giving rise to such loss, claim, damage or
liability. Horizon also agrees to indemnify any Underwriters of the Registrable
Securities, their officers and directors and each person who controls such
Underwriters on substantially the same basis as that of the indemnification of
the Holder provided in this subparagraph.
(g) Indemnification by the Holder. Each Holder agrees to indemnify
and hold harmless Horizon, its officers and directors, and each Person, if any,
who controls Horizon within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from Horizon to the Holder, but only with reference to information
relating to the Holder or the plan of distribution furnished in writing by or on
behalf of the Holder expressly for use in any registration statement or
prospectus relating to the Registrable Securities, or any amendment or
supplement thereto, or any preliminary prospectus. Each Holder also agrees to
indemnify and hold harmless any Underwriters of the Registrable Securities,
their officers and directors and each person who controls such Underwriters on
substantially the same basis as that of the indemnification of Horizon provided
in this subparagraph.
(h) Conduct of Indemnification Proceedings. In case any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to Section 2(f) or
Section 2(g), such Person (the "Indemnified Party") shall promptly notify the
Person against whom such indemnity may be sought (the "Indemnifying Party") in
writing and the Indemnifying Party shall have the right to assume the defense of
such proceeding and retain counsel reasonably satisfactory to such Indemnified
Party to represent such Indemnified Party and any others the Indemnifying Party
may designate in such proceeding and shall pay the fees and disbursements of
such counsel related to such proceeding. In any such proceeding, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) the Indemnifying Party and the Indemnified Party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnified Party
and the Indemnifying Party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them. It is understood that the Indemnifying Party shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm of attorneys
(in addition to any local counsel) at any time for all such Indemnified Parties.
In the case of any such separate firm for the Indemnified Parties, such firm
shall be designated in writing by the Indemnified Parties. The Indemnifying
Party shall not be liable for any settlement of any proceeding effected without
its written consent, but if settled with such consent, or if there be a final
judgment for the plaintiff, the Indemnifying Party shall indemnify and hold
harmless such Indemnified Parties from and against any loss or liability (to the
extent stated above) by reason of such settlement or judgment.
(i) Contribution. If the indemnification provided for in this
Agreement is unavailable to an Indemnified Party in respect of any losses,
claims, damages or liabilities referred
-7-
<PAGE>
to herein, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such losses, claims, damages or liabilities (i)
in such proportion as is appropriate to reflect the relative benefits received
by Horizon, each Holder and the Underwriters from the offering of the
securities, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) but also the relative fault
of Horizon, each Holder and the Underwriters in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by Horizon, each Holder and the Underwriters shall be deemed to be in
the same respective proportions as the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses) received
by each of Horizon and each Holder and the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover of the prospectus, bear to the aggregate public offering price of
the securities. The relative fault of Horizon, the Holders and the Underwriters
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by such party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
Horizon and the Holders agree that it would not be just and equitable
if contribution pursuant to this Section 5(i) were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 5(i), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and each Holder shall
not be required to contribute any amount in excess of the amount by which the
net proceeds of the offering (before deducting expenses) received by the Holder
exceeds the amount of any damages which the Holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(j) Participation in Underwritten Registrations. No Holder of
Registrable Securities in a registered offering contemplated hereunder shall be
permitted to participate unless such Holder (a) agrees to sell its Registrable
Securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements
-8-
<PAGE>
and other documents reasonably required under the terms of such underwriting
arrangements and this Section 2.
(k) Rule 144. Horizon covenants that it will file any reports
required to be filed by it under the Securities Act and the Exchange Act and
that it will take such further action as the Holder may reasonably request to
the extent required from time to time to enable the Holder to sell Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144 under the Securities Act, as such rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC. Upon the request of a Holder Horizon will deliver to the
Holder a written statement as to whether it has complied with such reporting
requirements.
(l) Holdback Agreements. Each Holder agrees not to offer, sell,
contract to sell or otherwise dispose of any Registrable Securities, or any
securities convertible into or exchangeable or exercisable for such securities,
during the 14 days prior to, and during the 180-day period beginning on, the
effective date of such registration statement other than (i) the Registrable
Securities to be sold pursuant to such registration statement, and (ii) any
shares of Common Stock sold upon the exercise of an option or warrant or the
conversion of a security outstanding at such date.
Section 3. Miscellaneous
(a) Notices. Any notice or other communication required or permitted
hereunder shall be in writing or by telephone or facsimile transmission with
subsequent written confirmation, and may be personally served or sent by United
States mail and shall be deemed to have been given upon receipt by the party
notified. For purposes hereof, the addresses of the parties hereto (until
notice of a change thereof is delivered as provided in this Section 3) shall be
as set forth opposite each party's name on the signature page hereof.
(b) Termination. This Agreement will terminate upon the earlier of
(i) the date upon which Horizon and each Holder of Registrable Securities
outstanding on that date mutually agree in writing to terminate this Agreement
and (ii) December 4, 2007.
(c) Transfer of Registration Rights. The rights to cause Horizon to
register securities granted to Holders under Section 2 may be assigned by a
Holder to a transferee or assignee of any Registrable Securities, provided, that
Horizon is given written notice at the time of or within a reasonable time after
said transfer, stating the name and address of such transferee or assignee and
identifying the securities with respect to which such registration rights are
being assigned; and provided further that the registration rights granted by
Horizon in Section 2 may only be transferred to, and the definition of "Holders"
shall only include, transferees who meet either of the following criteria:
such transferee is (i) a holder of 5% or more of the market value of the
Registrable Securities, or (ii) a "qualified institutional buyer" or "accredited
investor" within the meaning of the rules adopted under the Securities Act.
-9-
<PAGE>
(d) Waivers and Amendments; Noncontractual Remedies; Preservation of
Remedies. This Agreement may be amended, superseded, cancelled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by Horizon and the Holders of a majority of the Registrable Securities
or, in the case of a waiver, by the party waiving compliance. No delay on the
part of any party in exercising a right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any waiver on the part of any party of
any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude a further exercise thereof or the
exercise of any other such right, power or privilege. The rights and remedies
herein provided are cumulative and are not exclusive of any rights or remedies
that any party may otherwise have at law or in equity. The rights and remedies
of any party based upon, arising out of or otherwise in respect of any breach of
any provision of this Agreement shall in no way be limited by the fact that the
act, omission, occurrence or other state of facts upon which any claim of any
such breach is based may also be the subject matter of any other provision of
this Agreement (or of any other Agreement between the parties) as to which there
is no breach.
(e) Severability. If any provision of this Agreement or the
applicability of any such provision to a person or circumstances shall be
determined by any court of competent jurisdiction to be invalid or unenforceable
to any extent, the remainder of this Agreement or the application of such
provision to persons or circumstances other than those for which it is so
determined to be invalid and unenforceable, shall not be affected thereby, and
each provision of this Agreement shall be valid and shall be enforced to the
fullest extent permitted by law. To the extent permitted by applicable law each
party hereto hereby waives any provision or provisions of law which would
otherwise render any provision of this Agreement invalid, illegal or
unenforceable in any respect.
(f) Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts and when so executed shall constitute one
Agreement, notwithstanding that all parties are not signatories to the same
counterpart.
(g) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such state.
(h) Successors and Assigns. Subject to Section 3(c), this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
successors and assigns of the parties hereto.
-10-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
above written.
Address: HORIZON OFFSHORE, INC.
9821 Katy Freeway, Suite 450
Houston, Texas 77024 By: /s/ Bill Lam
-------------------------------
Bill Lam
President
Address: HIGHWOOD PARTNERS, L.P.
By: Highwood Associates, Inc.,
Its General Partner
C/o Horizon Offshore
9821 Katy Freeway, Suite 450
Houston, Texas 77024 By: /s/ Jonathan D. Pollock
------------------------------
Name: Jonathan D. Pollock
Title: President
Address: WESTGATE INTERNATIONAL, L.P.
By:Martley International, Inc.
C/o Midland Bank Trust Corporation Its Attorney-in-Fact
(Cayman) Limited
P. O. Box 1109, By: /s/ Paul Singer
Mary Street -------------------------------
Grand Cayman, Name: Paul Singer
Cayman Islands, BVI Title:
-11-
<PAGE>
EXHIBIT 10.15
_________________________________
HORIZON OFFSHORE, INC.
10% SUBORDINATED NOTE
DUE MARCH 31, 2003
_________________________________
$8,000,000.00 Houston, Texas
December 4, 1997
FOR VALUE RECEIVED, Horizon Offshore, Inc., a Delaware corporation (the
"Maker"), promises to pay to the order of Westgate International, L.P.
("Payee"), as provided below, at 712 Fifth Avenue, New York, New York 10019 (or
at such other address as any holders hereof may designate in writing), the sum
of eight million and no/100 dollars ($8,000,000.00), or such lesser amount as
may have been advanced by the Payee on or before March 31, 2003 (the "Conversion
Date"), together with interest on the unpaid principal balance at the rate of
10% per annum, on the earlier to occur of December 31, 2005 or such earlier date
as such amount may become due and payable in accordance with the terms hereof
(the "Maturity Date"). Payment for all amounts due hereunder shall be made in
lawful money of the United States of America paid at the address of the Payee,
or in such other form or by such other means as the Maker and any holder shall
agree. This Note is made by Maker in substitution of that certain 10%
Convertible Subordinated Note dated April 30, 1997 to eliminate the ability of
the Payee to convert the Maker's indebtedness thereunder into common stock of
the Maker and does not represent a novation, rearrangement or other extension of
the indebtedness thereunder.
1. PAYMENT. The unpaid principal balance of this Note shall be paid in
twelve installments, on March 31, June 30, September 30 and December 31 of each
year, commencing March 31, 2003. The first eleven installments of principal
shall be in the amount of one-twentieth of the unpaid principal balance on the
Conversion Date, and the last installment of principal shall be paid on the
Maturity Date in the amount of all of the remaining unpaid principal balance.
The outstanding principal amount of this Note from time to time shall bear
interest until paid at the rate of 10 percent (10%) per annum. Interest shall
be calculated on a 365 day per year basis and paid for the actual number of days
elapsed (including the first but excluding the last day) during any period and
shall be paid semi-annually on March 31 and September 30 of each year,
commencing September 30, 1997, and with a final interest payment in the amount
of all outstanding interest then unpaid being due on the Maturity Date.
<PAGE>
If a payment of principal or interest falls due on a Saturday, Sunday, or
any other day on which financial institutions are generally not open for
business in Houston, Texas, payment shall be made on the next preceding business
day.
Any amount paid pursuant to Section 2 shall be applied first to any accrued
and unpaid interest then accrued, if any, and, then to the principal amounts due
hereunder in the inverse order of maturity.
2. PREPAYMENT. The Maker may at any time prepay any amount (and reborrow
until the Conversion Date in accordance with the terms hereof) outstanding under
the Note in whole or in part without notice or penalty.
3. SUBORDINATION. The indebtedness evidenced by this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of all the Maker's Senior
Indebtedness, as hereinafter defined.
3.1 Senior Indebtedness. As used in this Note, the term "Senior
Indebtedness" shall mean the principal of, premium, if any, and unpaid interest
on the following, whether outstanding at the date hereof or thereafter incurred,
together with all charges, fees, costs and expenses required to be paid by the
Maker under the terms thereof: (i) indebtedness of the Maker for money borrowed
evidenced by promissory notes, debentures or other written obligations, (ii)
indebtedness of the Maker evidenced by debentures, bonds or other securities
issued under the provisions of an indenture or similar instrument, (iii)
indebtedness of others of any of the kinds described in the preceding clauses
(i) and (iii) assumed or guaranteed by the Maker, and (iv) renewals, extensions
and refundings of, and indebtedness and obligations of a successor person issued
in exchange for or in replacement of, indebtedness or obligations of the kinds
described in the preceding clauses (i) through (iii); provided, however, that
the following shall not constitute Senior Indebtedness; (i) any indebtedness or
obligation as to which, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is expressly provided that such
indebtedness or obligation is subordinate in right of payment to all other
indebtedness of the Maker not expressly subordinated to such indebtedness or
obligation; (ii) any indebtedness or obligation which by its terms refers
explicitly to the Note and states that such indebtedness or obligation shall not
be senior in right of payment thereto; and (iii) any indebtedness or obligation
of the Maker in respect of the Note.
3.2 Prior Payment to Senior Indebtedness Upon Acceleration of the
Note. If this Note is declared due and payable prior to its maturity under
circumstances when Section 3.4 shall not be applicable, the Holder of the Note
shall be entitled to payments only after (i) there shall first have been paid in
full all Senior Indebtedness outstanding, or contingently payable pursuant to a
guaranty or other contingent obligation, at the time such Note becomes due and
payable because of any such event, or (ii) payment or other adequate provision
shall have been provided for in a manner satisfactory to the holders of such
Senior Indebtedness.
3.3 Payment When Senior Indebtedness in Default. If there has
occurred and is continuing a default in the payment of all or any portion of any
Senior Indebtedness, unless and until such default shall have been cured or
waived, the Maker shall not make any payment on or with
2
<PAGE>
respect to the Note or acquire this Note (or any portion thereof) for cash,
property, securities or otherwise during the period (a "Payment Default Blockage
Period") in which such default is continuing; or (b) if an event (not involving
the non-payment of any Senior Indebtedness) shall have occurred or, with the
giving of notice, or passage of time, or both, would occur, that would allow
holders of any Senior Indebtedness to accelerate or otherwise demand the payment
thereof, and, in the case of this clause (b) the holders of the Senior
Indebtedness give written notice of such event to the Maker (the date that such
notice is received by the Maker is the "Notice Date"), the Maker shall not make
any payment on or with respect to the Note or acquire this Note (or any portion
hereof) for cash, property, securities or otherwise during the period (a
"Nonpayment Default Blockage Period" and together with Payment Default Blockage
Period, each also sometimes herein called a "Blockage Period") commencing on the
Notice Date and ending on the earlier of (1) 180 days after the Notice Date if
at the end of such 180 day period such event is not the subject of judicial
proceedings and such Senior Indebtedness shall not have been accelerated, (2)
the date such event is cured or waived to the satisfaction of the holders of the
Senior Indebtedness, or (3) the date the holders of such Senior Indebtedness
shall have given notice to the Maker of the voluntary termination of such
Nonpayment Default Blockage Period. By virtue of accepting this Note and the
benefits hereof, during any Blockage Period, the Note Holder shall not be
entitled, and will not take any action, including any judicial process, to
accelerate, demand payment or enforce any Indebtedness in respect of this Note
or any other claim with regard to the Note. Interest will accrue on any
installment of the principal (and on the interest) actually payable during any
Blockage Period. Upon the expiration of any Blockage Period, principal and
interest will be paid in accordance with the terms of this Note, except that the
principal and interest payable during the Blockage Period will be deferred, and
become principal due on the Maturity Date. Any such deferred principal shall
continue to bear interest, and any deferred interest shall bear interest. All
such deferred principal and interest amounts shall be payable only on the
Maturity Date. All interest on the deferred interest and principal shall be paid
on the same dates as interest is paid under Section 1 hereof.
3.4 Payment Over of Proceeds Upon Dissolution, Etc. (i) In the event
of any liquidation, dissolution or winding-up of the Maker, or of any execution,
sale, receivership, insolvency, bankruptcy, liquidation, readjustment,
reorganization, or other similar proceeding relative to the Maker or a
substantial part of its property, all principal and interest owing on all Senior
Indebtedness shall first be paid in full before any payment is made upon the
indebtedness evidenced by the Note, and in any event any payment or distribution
of any kind, whether in cash, property or securities (other than in securities
or other evidences of indebtedness, the payment of which is subordinated to the
payment of all Senior Indebtedness which may at the time be outstanding), which
shall be made upon or in respect of the Note shall be paid to the holders of
such Senior Indebtedness for application in payment thereof in accordance with
the priorities then existing among such holders unless and until such Senior
Indebtedness shall have been paid or satisfied in full.
(ii) The consolidation of the Maker with, or the merger of the Maker
into, another person, or the liquidation or dissolution of the Maker following
the transfer of its properties and assets substantially as an entirety to
another person, shall not be deemed a dissolution, winding-up, liquidation,
reorganization, or other similar proceeding for the purposes of this Section if
the person formed by such consolidation or into which the Maker is merged or
which acquires such properties
3
<PAGE>
and assets substantially as an entirety, as the case may be, shall, as a part of
such consolidation, merger, or transfer, comply with the conditions set forth in
Section 3.3
3.5 Subrogation to Rights of Holders of Senior Indebtedness. After
the indefeasible payment in full of all Senior Indebtedness, the Holder of the
Note shall be subrogated (equally and ratably with the holders of all
indebtedness of the Maker which by its express terms is subordinated to Senior
Indebtedness of the Maker to the same extent as the Note is subordinated and
which is entitled to like rights of subrogation) to the rights of the holders of
Senior Indebtedness to receive payments or distributions of assets of the Maker
applicable to the Senior Indebtedness until all amounts owing on the Note shall
be paid in full, and for the purpose of such subrogation, no such payments or
distributions to the holders of Senior Indebtedness by or on behalf of the Maker
or by or on behalf of the Holder of the Note by virtue of this Section which
otherwise would have been made to the Holder of the Note shall, as between the
Maker and the Holder of the Note, be deemed to be payments by the Maker to or on
account of Senior Indebtedness.
3.6 No Waiver of Subordination Provisions. No right of any holder of
any Senior Indebtedness to enforce subordination as herein provided shall at any
time or in any way be affected or impaired by any failure to act on the part of
the Maker or the holders of Senior Indebtedness, or by any noncompliance by the
Maker with any of the terms, provisions and covenants of this Note, regardless
of any knowledge thereof that any such holder of Senior Indebtedness may have or
be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may without the consent of or notice to the
Holder of the Note, without incurring responsibility to the Holder and without
impairing or releasing the subordination provided in this Note or the obligation
hereunder of the Holder of the Note to the holders of Senior Indebtedness, do
any one or more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii)
release any person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Maker and any other person.
3.7 Undertaking. By its acceptance of this Note, the Holder agrees
to execute and deliver such documents as may be reasonably requested from time
to time by the Maker or the lender of any Senior Indebtedness in order to
implement the foregoing provisions of this Section 3.
4. DEFAULT.
4.1 Events of Default. The following events or actions shall
constitute an event of default ("Events of Default"):
(i) If the Maker shall default in the payment of any installment of
interest on the Note for more than 10 days after the same shall have become due
and payable; or
4
<PAGE>
(ii) If the Maker shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts as they
become due, or shall file a voluntary petition in bankruptcy, or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking for itself any reorganization, arrangement, composition, readjustment,
dissolution or similar relief under any present or future statute, law or
regulation, or shall file any answer admitting the material allegations of a
petition filed against the Maker in any such proceeding, or shall seek or
consent to or acquiesce in the appointment of any trustee, receiver or
liquidator of the Maker or of all or any substantial part of the properties of
the Maker, or the Maker or its directors or majority stockholders shall take any
action providing for the dissolution or liquidation or suspension of the
business of the Maker; or
(iii) If within sixty (60) days after the commencement of any
proceeding against the Maker seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceeding shall not have
been dismissed, or if, within sixty (60) days after the appointment without the
consent or acquiescence of the Maker of any trustee, receiver or liquidator of
the Maker or of all or any substantial part of the properties of the Maker, such
appointment shall not have been vacated.
4.2 Remedies Upon Default. If any Event of Default shall occur, the
holder of the Note may, by written notice to the Maker, declare the principal
amount of the Note to be due and payable. Subject to the foregoing and subject
to the subordination provisions herein, thereafter, the holder of such
accelerated Note may proceed to protect and enforce its rights under the Note by
a suit in equity, action at law or other appropriate proceeding whether for the
specific performance of any agreements contained herein or for an injunction
against a violation of any of the terms or provisions hereof; or in aid of the
exercise of any power granted hereby or at law; provided, however, than any sums
otherwise payable to or collectible by the holder shall be subject to the
subordination provisions of the Note and be held for the benefit of holders of
Senior Indebtedness as provided in the Note. No right shall operate as a waiver
thereof or otherwise prejudice the rights of such holder and no consent or
waiver shall extend beyond the particular case and purpose involved. No remedy
conferred hereby shall be exclusive of any other remedy referred to herein or
now or hereafter available at law, in equity, by statute or otherwise.
5. WAIVER PROVISIONS/COSTS. Maker and any and all endorsers and
guarantors of this Note waive presentment for payment, notice of nonpayment,
notice of intent to accelerate and notice of acceleration, protest, notice of
protest, notice of dishonor or nonpayment, bringing of suit, diligence in taking
any action to collect amounts called for hereunder or enforcing any of the
security hereof, and agree to any substitution, exchange or release of any of
such security or the release of any party primarily or secondarily liable hereon
and further agree that it will not be necessary for any holder hereof, in order
to enforce payment by them of this Note, to first institute suit or exhaust its
remedies against any maker or others liable herefor, or to enforce its rights
against any security hereof, and consent to any extensions or postponements of
time of payment of this Note or any other indulgences with respect hereto,
without notice thereof to any of them and hereby bind themselves, in solido for
the payment hereof in principal, interest, costs and attorneys' fees, and shall
be directly and primarily liable for the payment of all sums owing and to be
owing hereon, regardless of and without any notice, diligence, act or omission
as or with respect to the collection of any amount
5
<PAGE>
called for hereunder or in connection with any lien at any time existing as
security for any amount called for hereunder.
6. CHOICE OF LAW. THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN AND IS
INTENDED TO BE PERFORMED IN THE STATE OF TEXAS, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF SUCH STATE.
IN WITNESS WHEREOF, the Maker has caused this Note to be issued this 4th
day of December, 1997.
HORIZON OFFSHORE, INC.
By: /s/ Bill Lam
----------------------------------
Bill Lam
President
6
<PAGE>
EXHIBIT 10.16
_________________________________
HORIZON OFFSHORE, INC.
10% SUBORDINATED NOTE
DUE MARCH 31, 2003
_________________________________
$12,000,000.00 Houston, Texas
December 4, 1997
FOR VALUE RECEIVED, Horizon Offshore, Inc., a Delaware corporation (the
"Maker"), promises to pay to the order of Highwood Partners, L.P. ("Payee"), as
provided below, at 712 Fifth Avenue, New York, New York 10019 (or at such other
address as any holders hereof may designate in writing), the sum of twelve
million and no/100 dollars ($12,000,000.00), or such lesser amount as may have
been advanced by the Payee on or before March 31, 2003 (the "Conversion Date"),
together with interest on the unpaid principal balance at the rate of 10% per
annum, on the earlier to occur of December 31, 2005 or such earlier date as such
amount may become due and payable in accordance with the terms hereof (the
"Maturity Date"). Payment for all amounts due hereunder shall be made in lawful
money of the United States of America paid at the address of the Payee, or in
such other form or by such other means as the Maker and any holder shall agree.
This Note is made by Maker in substitution of that certain 10% Convertible
Subordinated Note dated April 30, 1997 to eliminate the ability of the Payee to
convert the Maker's indebtedness thereunder into common stock of the Maker and
does not represent a novation, rearrangement or other extension of the
indebtedness thereunder.
1. PAYMENT. The unpaid principal balance of this Note shall be paid in
twelve installments, on March 31, June 30, September 30 and December 31 of each
year, commencing March 31, 2003. The first eleven installments of principal
shall be in the amount of one-twentieth of the unpaid principal balance on the
Conversion Date, and the last installment of principal shall be paid on the
Maturity Date in the amount of all of the remaining unpaid principal balance.
The outstanding principal amount of this Note from time to time shall bear
interest until paid at the rate of 10 percent (10%) per annum. Interest shall
be calculated on a 365 day per year basis and paid for the actual number of days
elapsed (including the first but excluding the last day) during any period and
shall be paid semi-annually on March 31 and September 30 of each year,
commencing September 30, 1997, and with a final interest payment in the amount
of all outstanding interest then unpaid being due on the Maturity Date.
<PAGE>
If a payment of principal or interest falls due on a Saturday, Sunday, or
any other day on which financial institutions are generally not open for
business in Houston, Texas, payment shall be made on the next preceding business
day.
Any amount paid pursuant to Section 2 shall be applied first to any accrued
and unpaid interest then accrued, if any, and, then to the principal amounts due
hereunder in the inverse order of maturity.
2. PREPAYMENT. The Maker may at any time prepay any amount (and reborrow
until the Conversion Date in accordance with the terms hereof) outstanding under
the Note in whole or in part without notice or penalty.
3. SUBORDINATION. The indebtedness evidenced by this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of all the Maker's Senior
Indebtedness, as hereinafter defined.
3.1 Senior Indebtedness. As used in this Note, the term "Senior
Indebtedness" shall mean the principal of, premium, if any, and unpaid interest
on the following, whether outstanding at the date hereof or thereafter incurred,
together with all charges, fees, costs and expenses required to be paid by the
Maker under the terms thereof: (i) indebtedness of the Maker for money borrowed
evidenced by promissory notes, debentures or other written obligations, (ii)
indebtedness of the Maker evidenced by debentures, bonds or other securities
issued under the provisions of an indenture or similar instrument, (iii)
indebtedness of others of any of the kinds described in the preceding clauses
(i) and (iii) assumed or guaranteed by the Maker, and (iv) renewals, extensions
and refundings of, and indebtedness and obligations of a successor person issued
in exchange for or in replacement of, indebtedness or obligations of the kinds
described in the preceding clauses (i) through (iii); provided, however, that
the following shall not constitute Senior Indebtedness; (i) any indebtedness or
obligation as to which, in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is expressly provided that such
indebtedness or obligation is subordinate in right of payment to all other
indebtedness of the Maker not expressly subordinated to such indebtedness or
obligation; (ii) any indebtedness or obligation which by its terms refers
explicitly to the Note and states that such indebtedness or obligation shall not
be senior in right of payment thereto; and (iii) any indebtedness or obligation
of the Maker in respect of the Note.
3.2 Prior Payment to Senior Indebtedness Upon Acceleration of the
Note. If this Note is declared due and payable prior to its maturity under
circumstances when Section 3.4 shall not be applicable, the Holder of the Note
shall be entitled to payments only after (i) there shall first have been paid in
full all Senior Indebtedness outstanding, or contingently payable pursuant to a
guaranty or other contingent obligation, at the time such Note becomes due and
payable because of any such event, or (ii) payment or other adequate provision
shall have been provided for in a manner satisfactory to the holders of such
Senior Indebtedness.
3.3 Payment When Senior Indebtedness in Default. If there has
occurred and is continuing a default in the payment of all or any portion of any
Senior Indebtedness, unless and until such default shall have been cured or
waived, the Maker shall not make any payment on or with
2
<PAGE>
respect to the Note or acquire this Note (or any portion thereof) for cash,
property, securities or otherwise during the period (a "Payment Default Blockage
Period") in which such default is continuing; or (b) if an event (not involving
the non-payment of any Senior Indebtedness) shall have occurred or, with the
giving of notice, or passage of time, or both, would occur, that would allow
holders of any Senior Indebtedness to accelerate or otherwise demand the payment
thereof, and, in the case of this clause (b) the holders of the Senior
Indebtedness give written notice of such event to the Maker (the date that such
notice is received by the Maker is the "Notice Date"), the Maker shall not make
any payment on or with respect to the Note or acquire this Note (or any portion
hereof) for cash, property, securities or otherwise during the period (a
"Nonpayment Default Blockage Period" and together with Payment Default Blockage
Period, each also sometimes herein called a "Blockage Period") commencing on the
Notice Date and ending on the earlier of (1) 180 days after the Notice Date if
at the end of such 180 day period such event is not the subject of judicial
proceedings and such Senior Indebtedness shall not have been accelerated, (2)
the date such event is cured or waived to the satisfaction of the holders of the
Senior Indebtedness, or (3) the date the holders of such Senior Indebtedness
shall have given notice to the Maker of the voluntary termination of such
Nonpayment Default Blockage Period. By virtue of accepting this Note and the
benefits hereof, during any Blockage Period, the Note Holder shall not be
entitled, and will not take any action, including any judicial process, to
accelerate, demand payment or enforce any Indebtedness in respect of this Note
or any other claim with regard to the Note. Interest will accrue on any
installment of the principal (and on the interest) actually payable during any
Blockage Period. Upon the expiration of any Blockage Period, principal and
interest will be paid in accordance with the terms of this Note, except that the
principal and interest payable during the Blockage Period will be deferred, and
become principal due on the Maturity Date. Any such deferred principal shall
continue to bear interest, and any deferred interest shall bear interest. All
such deferred principal and interest amounts shall be payable only on the
Maturity Date. All interest on the deferred interest and principal shall be paid
on the same dates as interest is paid under Section 1 hereof.
3.4 Payment Over of Proceeds Upon Dissolution, Etc. (i) In the event
of any liquidation, dissolution or winding-up of the Maker, or of any execution,
sale, receivership, insolvency, bankruptcy, liquidation, readjustment,
reorganization, or other similar proceeding relative to the Maker or a
substantial part of its property, all principal and interest owing on all Senior
Indebtedness shall first be paid in full before any payment is made upon the
indebtedness evidenced by the Note, and in any event any payment or distribution
of any kind, whether in cash, property or securities (other than in securities
or other evidences of indebtedness, the payment of which is subordinated to the
payment of all Senior Indebtedness which may at the time be outstanding), which
shall be made upon or in respect of the Note shall be paid to the holders of
such Senior Indebtedness for application in payment thereof in accordance with
the priorities then existing among such holders unless and until such Senior
Indebtedness shall have been paid or satisfied in full.
(ii) The consolidation of the Maker with, or the merger of the Maker
into, another person, or the liquidation or dissolution of the Maker following
the transfer of its properties and assets substantially as an entirety to
another person, shall not be deemed a dissolution, winding-up, liquidation,
reorganization, or other similar proceeding for the purposes of this Section if
the person formed by such consolidation or into which the Maker is merged or
which acquires such properties
3
<PAGE>
and assets substantially as an entirety, as the case may be, shall, as a part of
such consolidation, merger, or transfer, comply with the conditions set forth in
Section 3.3
3.5 Subrogation to Rights of Holders of Senior Indebtedness. After
the indefeasible payment in full of all Senior Indebtedness, the Holder of the
Note shall be subrogated (equally and ratably with the holders of all
indebtedness of the Maker which by its express terms is subordinated to Senior
Indebtedness of the Maker to the same extent as the Note is subordinated and
which is entitled to like rights of subrogation) to the rights of the holders of
Senior Indebtedness to receive payments or distributions of assets of the Maker
applicable to the Senior Indebtedness until all amounts owing on the Note shall
be paid in full, and for the purpose of such subrogation, no such payments or
distributions to the holders of Senior Indebtedness by or on behalf of the Maker
or by or on behalf of the Holder of the Note by virtue of this Section which
otherwise would have been made to the Holder of the Note shall, as between the
Maker and the Holder of the Note, be deemed to be payments by the Maker to or on
account of Senior Indebtedness.
3.6 No Waiver of Subordination Provisions. No right of any holder of
any Senior Indebtedness to enforce subordination as herein provided shall at any
time or in any way be affected or impaired by any failure to act on the part of
the Maker or the holders of Senior Indebtedness, or by any noncompliance by the
Maker with any of the terms, provisions and covenants of this Note, regardless
of any knowledge thereof that any such holder of Senior Indebtedness may have or
be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may without the consent of or notice to the
Holder of the Note, without incurring responsibility to the Holder and without
impairing or releasing the subordination provided in this Note or the obligation
hereunder of the Holder of the Note to the holders of Senior Indebtedness, do
any one or more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness
or any instrument evidencing the same or any agreement under which Senior
Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with
any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii)
release any person liable in any manner for the collection of Senior
Indebtedness; and (iv) exercise or refrain from exercising any rights against
the Maker and any other person.
3.7 Undertaking. By its acceptance of this Note, the Holder agrees
to execute and deliver such documents as may be reasonably requested from time
to time by the Maker or the lender of any Senior Indebtedness in order to
implement the foregoing provisions of this Section 3.
4. DEFAULT.
4.1 Events of Default. The following events or actions shall
constitute an event of default ("Events of Default"):
(i) If the Maker shall default in the payment of any installment of
interest on the Note for more than 10 days after the same shall have become due
and payable; or
4
<PAGE>
(ii) If the Maker shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts as they
become due, or shall file a voluntary petition in bankruptcy, or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking for itself any reorganization, arrangement, composition, readjustment,
dissolution or similar relief under any present or future statute, law or
regulation, or shall file any answer admitting the material allegations of a
petition filed against the Maker in any such proceeding, or shall seek or
consent to or acquiesce in the appointment of any trustee, receiver or
liquidator of the Maker or of all or any substantial part of the properties of
the Maker, or the Maker or its directors or majority stockholders shall take any
action providing for the dissolution or liquidation or suspension of the
business of the Maker; or
(iii) If within sixty (60) days after the commencement of any
proceeding against the Maker seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such proceeding shall not have
been dismissed, or if, within sixty (60) days after the appointment without the
consent or acquiescence of the Maker of any trustee, receiver or liquidator of
the Maker or of all or any substantial part of the properties of the Maker, such
appointment shall not have been vacated.
4.2 Remedies Upon Default. If any Event of Default shall occur, the
holder of the Note may, by written notice to the Maker, declare the principal
amount of the Note to be due and payable. Subject to the foregoing and subject
to the subordination provisions herein, thereafter, the holder of such
accelerated Note may proceed to protect and enforce its rights under the Note by
a suit in equity, action at law or other appropriate proceeding whether for the
specific performance of any agreements contained herein or for an injunction
against a violation of any of the terms or provisions hereof; or in aid of the
exercise of any power granted hereby or at law; provided, however, than any sums
otherwise payable to or collectible by the holder shall be subject to the
subordination provisions of the Note and be held for the benefit of holders of
Senior Indebtedness as provided in the Note. No right shall operate as a waiver
thereof or otherwise prejudice the rights of such holder and no consent or
waiver shall extend beyond the particular case and purpose involved. No remedy
conferred hereby shall be exclusive of any other remedy referred to herein or
now or hereafter available at law, in equity, by statute or otherwise.
5. WAIVER PROVISIONS/COSTS. Maker and any and all endorsers and
guarantors of this Note waive presentment for payment, notice of nonpayment,
notice of intent to accelerate and notice of acceleration, protest, notice of
protest, notice of dishonor or nonpayment, bringing of suit, diligence in taking
any action to collect amounts called for hereunder or enforcing any of the
security hereof, and agree to any substitution, exchange or release of any of
such security or the release of any party primarily or secondarily liable hereon
and further agree that it will not be necessary for any holder hereof, in order
to enforce payment by them of this Note, to first institute suit or exhaust its
remedies against any maker or others liable herefor, or to enforce its rights
against any security hereof, and consent to any extensions or postponements of
time of payment of this Note or any other indulgences with respect hereto,
without notice thereof to any of them and hereby bind themselves, in solido for
the payment hereof in principal, interest, costs and attorneys' fees, and shall
be directly and primarily liable for the payment of all sums owing and to be
owing hereon, regardless of and without any notice, diligence, act or omission
as or with respect to the collection of any amount
5
<PAGE>
called for hereunder or in connection with any lien at any time existing as
security for any amount called for hereunder.
6. CHOICE OF LAW. THIS NOTE HAS BEEN EXECUTED AND DELIVERED IN AND IS
INTENDED TO BE PERFORMED IN THE STATE OF TEXAS, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF SUCH STATE.
IN WITNESS WHEREOF, the Maker has caused this Note to be issued this 4th
day of December, 1997.
HORIZON OFFSHORE, INC.
By: /s/ Bill Lam
-------------------------------------
Bill Lam
President
6
<PAGE>
EXHIBIT 10.17
FORM OF PURCHASE AGREEMENT
This PURCHASE AGREEMENT (this "Agreement") is by and among
____________________ ("Purchaser"), Highwood Partners, L.P., a Delaware limited
partnership ("Highwood"), and Westgate International, L.P., a Cayman Islands
exempted limited partnership ("Westgate," together with Highwood, the
"Sellers").
WITNESSETH:
WHEREAS, Highwood and Westgate own an aggregate of 43,750 shares of the
common stock, $1.00 par value per share (the "Common Stock"), of Horizon
Offshore, Inc., a Delaware corporation ("Horizon"); and
WHEREAS, the Sellers desire to sell a total of _______ shares of Common
Stock (the "Shares") to the Purchaser with each of the Sellers selling 50% of
the Shares being sold on the terms and conditions set forth herein.
NOW, THEREFORE, for and in consideration of the premises, and the
agreements, covenants, representations and warranties hereinafter set forth, and
other good and valuable consideration, the receipt and adequacy of which are
acknowledged, the parties hereto agree as follows:
ARTICLE 1 - PURCHASE AND SALE
1.1 Purchase. Subject to the terms and conditions hereof, Sellers hereby
sell to Purchaser, and Purchaser hereby purchases from Sellers, the Shares.
1.2 Purchase Price. In consideration of his purchase of the Shares,
Purchaser agrees to pay to each of the Sellers $________ (a total of $______),
which shall be payable to each of the Sellers by the Purchaser by executing and
delivering a promissory note in the form of Exhibit "A" attached hereto (the
"Note") to each of the Sellers.
1.3 Documentation. In connection with the consummation of the
transactions contemplated by this Article 1:
(a) Each of the Sellers shall furnish or cause to be furnished to
Purchaser a certificate representing the Shares sold by such Seller to the
Purchaser registered in the Purchaser's name; and
(b) Purchaser shall execute and deliver and furnish to each of the
Sellers (i) a Note and (ii) a Security Agreement in the form of Exhibit "B"
attached hereto (the "Pledge Agreement").
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<PAGE>
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES
2.1 Representations of Seller. Each Seller severally represents and
warrants to Purchaser that (a) the Seller has full legal right, power and
capacity to enter into and perform this Agreement and this Agreement constitutes
a valid and binding obligation of such Seller, enforceable against such Seller
in accordance with its terms, and (b) the Seller has good and marketable title
to the Shares and Purchaser will acquire, own, and will have, good and
marketable title to the Shares subject to the terms of this Agreement, the Note
and the Pledge Agreement.
2.2 Representations of Purchaser. Purchaser represents and warrants to
Seller that Purchaser has full legal right, power and capacity to enter into and
perform his obligations under this Agreement, the Note and the Pledge Agreement.
This Agreement, the Note and the Pledge Agreement constitute valid and binding
obligations of Purchaser, enforceable against Purchaser in accordance with their
respective terms. The execution, delivery and performance of this Agreement,
the Note and the Pledge Agreement by Purchaser do not and shall not violate or
conflict with, or result in a default under, any agreement or commitment to
which Purchaser is a party or is bound.
ARTICLE 3 - MISCELLANEOUS
3.1 Expenses. Except as otherwise expressly provided herein, each of the
parties hereto shall pay all of his or its own expenses relating to the
transactions contemplated by this Agreement, including without limitation the
fees and expenses of its counsel.
3.2 Choice of Law. The validity of this Agreement, the construction of
its terms and the determination of the rights and duties of the parties hereto
shall be governed by and construed in accordance with the laws of the State of
Texas applicable to contracts made and to be performed wholly within such State.
3.3 Notices. Any notice or other communication permitted or required to
be given or made by any party to another must be in writing and may be given by
hand delivery, overnight express mail, telecopy transmission (with written
confirmation of delivery), or certified or registered U.S. mail (with postage
paid and return receipt requested). For purposes of notice, the addresses of the
parties shall, until changed by delivery of a notice hereunder, be as set forth
on the signature page hereof.
3.4 Successors and Assigns; Parties in Interest. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, successors and assigns, except that
neither the rights nor the obligations of any party arising under this Agreement
may be transferred or assigned thereby without the prior written consent of the
other party hereof. Nothing in this Agreement is intended or shall be construed
to confer upon or to give any person other than the parties hereto any rights or
remedies under or by reason of this Agreement, except as expressly provided for
herein.
-2-
<PAGE>
3.5 Counterpart Execution. This Agreement may be executed in one or more
counterparts, all of which shall be deemed to be an original.
3.6 Integrated Agreement; Amendments. This Agreement and the Exhibits
hereto constitute the entire understanding and agreement among the parties with
respect to the subject matter hereof, and there are no agreements,
understandings, restrictions, representations or warranties among the parties
other than those set forth herein provided for. This Agreement may be amended
or modified at any time in all respects, but only by an instrument in writing
duly executed by the parties hereto.
3.7 Further Assurances. Each party shall deliver or cause to be delivered
to the other, at such times as shall be reasonably required, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement.
3.8 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future applicable laws, or
by any court, agency or other governmental authority, such provision shall be
fully severable and this Agreement shall be construed and enforced as if such
illegal, invalid, or unenforceable provision had never comprised a part of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement. Furthermore,
in lieu of each such illegal, invalid, or unenforceable provision there shall be
added automatically as part of this Agreement a provision as similar in terms to
such severed provision as may be possible, such that the Agreement, with such
added provision, will be legal, valid, and enforceable under applicable law.
Notwithstanding anything in this Section to the contrary, if it is apparent that
this Agreement would have never been entered into by the parties absent the
illegal, invalid, or unenforceable provision, such provision shall not be
severed and the entire Agreement shall be rendered null and void.
3.9 Waiver. The failure by any party to enforce any of its rights
hereunder shall not be deemed to be a waiver of such rights, unless such waiver
is an express written waiver duly signed by the waiving party. Waiver of any
one breach shall not be deemed to be a waiver of any other breach of the same or
any other provision hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed all as of the day and year first above written.
HIGHWOOD PARTNERS, L.P.
Address: By: Highwood Associates, Inc.
Highwood Associates, Inc. Its General Partner
c/o Horizon Offshore, Inc.
9821 Katy Freeway, Suite 450 By:________________________________
Houston, Texas 77024 Jonathan D. Pollock
President
Address: WESTGATE INTERNATIONAL, L.P.
c/o Midland Bank Trust By: Martley International, Inc.
(Cayman) Limited Its Attorney-in-Fact
P. O. Box 1109, Mary Street
Grand Cayman, Cayman Islands By:________________________________
BWI Jonathan D. Pollock
Attorney-in-Fact
Address:
________________________________
Purchaser
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<PAGE>
*******************************************
All schedules and exhibits have
been omitted and will be furnished
to the Commission's staff upon request
*******************************************
-5-
<PAGE>
EXHIBIT 10.18
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this "Agreement"), dated and effective as of
September 30, 1997, is by and between Horizon Offshore, Inc., a Delaware
corporation ("Horizon Offshore"), and Horizon Barge & Towing, Inc., a Delaware
corporation ("Horizon Barge").
W I T N E S S E T H :
WHEREAS, Horizon Barge desires that Horizon Offshore or one or more of its
subsidiaries as designated by Horizon Offshore furnish Horizon Barge with
certain administrative and other support services described in this Agreement on
an interim basis to support and complement the services provided by its own
administrative and support staff and other available resources.
NOW, THEREFORE, in consideration of the covenants and agreements set forth
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Rights and Duties of Horizon Offshore.
(a) Upon the terms and subject to the conditions set forth herein, Horizon
Offshore agrees from and after the date hereof to provide the administrative and
other support services described in Section 2, together with all customary,
ancillary or related activities that are associated with or incidental to such
services (collectively, the "Services") to Horizon Barge.
(b) Horizon Barge acknowledges and agrees that Horizon Offshore may, at its
election, cause one or more of it subsidiaries or third party contractors or
service providers to perform the Services.
Section 2. Description of Services. Horizon Offshore and Horizon Barge
agree that Horizon Offshore shall provide the following Services:
(a) accounting and financial services, including maintenance of books and
records, accounting systems and payroll and benefit systems;
(b) tax services, including the preparation and filing of, and assistance
with respect to federal, foreign, state and local tax returns;
(c) insurance and risk management services, including, but not limited to
the purchase and maintenance of insurance and the processing and administration
of insurance claims;
<PAGE>
(d) employee personnel services, including advisory services relating to
employee, employee benefit and other personnel matters;
(e) management information and system services, including computer
operations, data input, systems and programming and technical support; and
(f) such other services as may mutually be agreed upon by the parties
hereto.
Section 3. Administration of Services.
(a) Each department head within Horizon Offshore shall keep the appropriate
officers and employees of Horizon Barge fully informed of the Services performed
pursuant to this Agreement and shall cooperate with such officers and employees
with respect to the performance of Services by such department. Horizon Barge
shall have complete and full access to all data, records, files, statements,
invoices, billings and other information generated by or in the custody of
Horizon Offshore relating to the Services provided pursuant to this Agreement.
(b) Horizon Barge acknowledges and agrees that the Services shall be
provided only with respect to the business of Horizon Barge and its
subsidiaries.
(c) Horizon Barge represents and warrants that the Services will not be
used in violation of any applicable federal, state or local law or any rules or
regulations promulgated thereunder.
(d) Each party shall (i) maintain confidential and secret all confidential
information that may be disclosed by the other party in connection with the
provision of the Services hereunder, (ii) restrict disclosure of such
confidential information to those of its employees who have a need to know such
information in order to comply with its obligations hereunder and (iii) employ
the same standards of care with respect to such confidential information as it
uses to protect its own confidential information. The obligations of this
Section 3(d) shall survive the expiration and termination of this Agreement for
a period of five years.
Section 4. Compensation.
(a) Horizon Offshore shall be compensated for the performance of the
Services as follows:
(i) Horizon Barge shall reimburse Horizon Offshore for the actual
cost of any goods or third party services purchased, leased or
otherwise procured by Horizon Offshore for the direct benefit of
Horizon Barge in accordance with this Agreement ("Direct Costs");
and
(ii) Horizon Barge shall reimburse Horizon Offshore for the actual
cost of any item purchased for Horizon Barge by Horizon Offshore
and the actual charge by third parties for the same or similar
operating service ("Operating Costs"); and
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<PAGE>
(iii) Horizon Barge shall reimburse Horizon Offshore for all indirect
general and administrative costs incurred by Horizon Offshore in
performing the services hereunder, including all corporate
overhead costs and expenses such as accounting, administrative,
secretarial or other services, office rent, telephone, employee
compensation and benefits, taxes, depreciation and other expense
items of a general and administrative nature and any other
expenses incurred by Horizon Offshore that are reasonably
necessary to the performance of the Services, plus 5.0%,
representing a reasonable return on Horizon Offshore's investment
required to perform the Services required hereunder ("Indirect
Costs"), subject to adjustment as provided in paragraph (f)
below.
(b) Horizon Offshore shall invoice Horizon Barge by the last day of each
month for all Direct Costs, Operating Costs and Indirect Costs incurred for the
immediately preceding month. All invoices shall provide Horizon Barge with an
account of all Direct Costs, Operating Costs and Indirect Costs. All amounts
shown on each invoice shall be due and payable within 30 days of the date of the
invoice.
Section 5. Terms of Agreement: Termination. This Agreement shall
commence on the date hereof and shall continue for one year from such date
unless earlier terminated by either party by giving 60 days prior written
notice.
Section 6. Limitation of Liability; Indemnification.
(a) Horizon Offshore makes no representation or warranty whatsoever,
express or implied, with respect to the Services. In no event shall Horizon
Offshore be liable to Horizon Barge for (i) any loss, cost or expense resulting
from any act or omission taken at the express direction of Horizon Barge or (ii)
any special, indirect or consequential damages resulting from any error or
omission in the performance of the Services or from the breach of this
Agreement.
(b) Neither Horizon Offshore nor Horizon Barge shall be liable for any loss
or damage or any nonperformance, partial or whole, under this Agreement, caused
by any strike, labor troubles, riot, act of a public enemy, insurrection, act of
God, or any law, rule or regulation promulgated by any governmental body or
agency, or any demand or requisition of any governmental body or agency, or any
other cause beyond the control of the parties hereto.
(c) Horizon Barge shall reimburse, indemnify and hold harmless Horizon
Offshore and its successors, assigns, affiliates, directors, officers, employees
and agents from and against any and all judgments, losses, damages, liabilities,
demands, actions, suits, taxes, charges, costs, claims, expenses and
disbursements (including legal fees and expenses) of any kind and nature
whatsoever that may at any time be imposed on, incurred by or asserted against
Horizon Offshore (including any claims against Horizon Offshore for
indemnification by any such person) or any such person (whether or not
indemnified by Horizon Offshore or any other person) in connection with any suit
or proceeding, whether judicial or administrative, relating to or arising out of
any acts or omissions
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<PAGE>
performed or omitted by Horizon Offshore or any such person in connection with
or arising out of the performance of the Services unless such act or omission by
Horizon Offshore or such person constituted bad faith, willful misfeasance,
gross negligence, recklessness or a willful, material breach of this Agreement.
Section 7. Relationship of Parties.
Nothing contained in this Agreement (a) shall constitute Horizon Offshore
and Horizon Barge as members of any partnership, joint venture, association,
syndicate, unincorporated business or other separate entity, (b) shall be
construed to impose any liability as such on either of them, (c) shall be deemed
to confer on either of them any express, implied or apparent authority to incur
any obligation or liability on behalf of the other, or (d) shall be deemed to,
or in fact, create any benefit for, or impose any obligation on the parties in
favor of, any person not party to this Agreement.
Section 8. Miscellaneous.
(a) This Agreement constitutes the entire agreement between the parties
hereto with respect to the matters set forth in this Agreement. This Agreement
shall not be amended, modified or supplemented except by an instrument in
writing executed by each of the parties hereto.
(b) Each of the parties hereto shall use its best efforts to take or cause
to be taken, to the extent necessary, all actions necessary, proper or advisable
to consummate the transactions contemplated by this Agreement.
(c) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery, certified or registered mail, return receipt
requested or telecopy transmission with confirmation of receipt to the address
of each of the parties set forth opposite the signature of such party on the
signature page hereof. All notices and communications shall be deemed given
upon receipt thereof.
(d) This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Texas.
(e) This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
(f) The section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
(g) In the event that any provision of this Agreement shall be determined
to be invalid or unenforceable, in whole or in part, it is the parties intention
that such determination shall not be held to affect the validity or
enforceability of any other provision of this Agreement, which provisions shall
otherwise remain in full force and effect.
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<PAGE>
(h) This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and assigns. This Agreement
shall not be assignable by any party hereto without the prior written consent of
the other party.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Addresses for Notices: HORIZON OFFSHORE, INC.
9821 Katy Freeway, Suite 450
Houston, Texas 77024
By: /s/ David. W. Sharp
--------------------------------
David W. Sharp
Chief Financial Officer
HORIZON BARGE & TOWING, INC.
9821 Katy Freeway, Suite 450
Houston, Texas 77024
By: /s/ Howard D. Loyd, III
-------------------------------
Howard D. Loyd, III
President
5
<PAGE>
EXHIBIT 10.19
AGREEMENT FOR PURCHASE AND SALE OF VESSELS
THIS AGREEMENT entered into as of the 30th day of May, 1997, by and between
HLS OFFSHORE, L.L.C., a limited liability company under the laws of the State of
Texas, having its registered office and principal place of business at 9821 Katy
Freeway, Suite 450, Houston, Texas 77024 (hereinafter referred to as "Seller")
and CGI MARINE CORPORATION, a corporation incorporated under the laws of the
State of Delaware, having its registered office and principal place of business
at 1209 Orange Street, Wilmington, Delaware (hereinafter referred to as
"Buyer"), in consideration of the covenants and provisions herein.
ARTICLE I - DEFINITIONS
1.1 As used herein, the following terms shall have the following
definitions:
"Lien" shall have the meaning set forth in Section 2.2 herein.
"Purchase Price" shall mean the sum of U. S. $12,000,000.00.
"Vessel" and "Vessels" shall have the definition set forth in Section
2.1 of this Agreement.
ARTICLE II - AGREEMENT FOR SALE AND PURCHASE OF VESSELS
2.1 Seller hereby sells, transfers, assigns, and conveys to Buyer en bloc
for the Purchase Price all right, title, and interest in and to the M/V STELLA
DENA, OFF. NO. 1010, M/V MORECAMBE DIVER, OFF. NO. 1011, and M/V ATLET 7, OFF.
NO. 957, all of Vanuatu flag (hereinafter each a "Vessel" and collectively the
"Vessels") including without limitation all equipment, apparel, appurtenances,
furniture, fittings, and all other items now onboard or identified to or
belonging to the Vessels.
<PAGE>
2.2 Seller guarantees and warrants to Buyer and its successors and assigns
that the Vessels are owned by Seller free and clear of all mortgages, liens,
claims, debts, and encumbrances whatsoever ("Liens"). In the event that any of
the Vessels is arrested, seized, or attached as a result thereof, Seller will
promptly bond the claim against such Vessel thereby securing its release or
otherwise discharge the claim. Seller further represents and warrants that the
Vessels are not subject to any contract, option, commitment, or other agreement
or understanding, whether oral or in writing, that permits any person, company,
or entity to purchase, lease, or otherwise utilize the Vessels.
2.3 Seller acknowledges that Buyer has produced for inspection the
following documents:
A) Current Certificates of Registry for the Vessels;
B) All classification society certificates, trading and safety
certificates, plans, specifications, drawings of the Vessels in
Seller's possession;
C) A certified copy of a resolutions of the Seller's Board of Directors
authorizing the sale, transfer of title, and delivery of the Vessels
to Buyer;
D) Two (2) original recordable bills of sale duly notarized for each
Vessel; and
E) Protocol of Acceptance and Delivery for each Vessel.
2.4 THE SALE OF THE VESSELS IS ON AN "AS IS, WHERE IS" BASIS. SELLER
HEREBY EXPRESSLY DISCLAIMS AND NEGATES TO BUYER ALL WARRANTIES, EXPRESSED OR
IMPLIED, EXCEPT FOR THE WARRANTIES CONTAINED IN SECTION 2.2 HEREIN, INCLUDING
WITHOUT LIMITATION ANY IMPLIED OR EXPRESSED WARRANTY OF MERCHANTABILITY, ANY
IMPLIED OR EXPRESSED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, ANY IMPLIED
OR EXPRESSED WARRANTY
-2-
<PAGE>
OF SEAWORTHINESS, DESIGN, PERFORMANCE, CONDITION, CLASS, CERTIFICATE, OR
MAINTENANCE.
ARTICLE III- RISK OF LOSS AND INDEMNITY
3.1 The risk of loss of the Vessels or any damage thereto shall be with
Buyer from and after the date hereof.
3.2 Seller hereby agrees to indemnify, defend and hold Buyer, its parent,
subsidiary and affiliated corporations, and its and their respective agents,
attorneys, representative, employees, officers, directors, shareholders,
successors and assigns, free and harmless of and from any and all claims,
actions, demands, losses, liabilities, penalties and damages (including all
costs, expenses, and reasonable attorneys' fees), no matter when the same may be
asserted, arising from or relating to any and all breaches of Seller's
representations and warranties or obligations under this Agreement. Without
limiting the generality of the foregoing, Seller agrees to indemnify Buyer for
damages as a result of the assertion, filing or recordation of any Lien, or
claim for recognition of any Lien or other adverse claim of title, against the
Vessels, accruing or arising prior to the time of Closing.
3.3 Buyer hereby agrees to indemnify, defend and hold Seller, its parent,
subsidiary and affiliated corporations, and its and their respective agents,
attorneys, representative, employees, officers, directors, shareholders,
successors and assigns, free and harmless of and from any and all claims,
actions, demands, losses, liabilities, penalties and damages (including all
costs, expenses, and reasonable attorneys' fees), no matter when the same may be
asserted, arising from or relating to any and all breaches of Buyer's
representations and warranties or obligations under this Agreement.
-3-
<PAGE>
ARTICLE IV - COSTS AND EXPENSES
4.1 Seller shall bear all costs, expenses, and taxes incurred or accruing
prior to the date hereof in connection with the ownership, operation or sale of
the Vessels. Buyer shall bear all costs, expenses, and taxes incurred or
accruing after the date hereof in connection with the ownership, operation or
sale of the Vessel. All sales, use, stamp, or similar taxes incurred or
accruing as a result of this transaction shall be for the sole account of Buyer.
Each party shall bear its own attorneys fees and costs in connection with the
preparation of this Agreement and the consummation of the transactions
contemplated hereby. Each party shall be responsible for all fees and other
compensation and/or expenses payable to any brokers engaged by such party in
connection with the sale and purchase of the Vessels, and shall indemnify,
defend, and hold harmless the other party from any claims therefor.
ARTICLE V- MISCELLANEOUS
5.1 The making, performance, interpretation, and construction of this
Agreement shall be determined and governed exclusively by and in accordance with
the substantive laws of the State of Texas, exclusive of any conflict of law
rules which may refer to the laws of another jurisdiction.
5.2 Headings used in this Agreement are for convenience of reference
only, and are not intended, to any extent or for any purpose, to limit or define
the text of any provision hereof. THIS AGREEMENT CONSTITUTES THE ENTIRE
AGREEMENT OF THE SELLER AND BUYER CONCERNING THE SALE, AND ALL OTHER PRIOR
NEGOTIATIONS, AGREEMENTS, COMMUNICATIONS, AND WRITINGS ARE DEEMED TO BE MERGED
AND INCORPORATED HEREIN. This Agreement shall not
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<PAGE>
be modified or amended in any manner except in writing executed by duly
authorized officers of the Seller and the Buyer. This Agreement may be executed
in several counterparts and each counterpart when so executed and delivered
shall constitute a complete original instrument, and it shall not be necessary
in making proof of this Agreement or any counterpart hereof to produce or
account for any of the other counterparts. All covenants which by their nature
survive closing, including but not limited to Seller's covenant to bond or
otherwise discharge any Liens for which the Vessels are seized or attached, and
all representations and warranties of the parties shall survive closing.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the 30th day of May, 1997.
HLS OFFSHORE, L.L.C.
SELLER
By: /s/ H. D. Loyd, III
--------------------------------------
Name: H. D. Loyd, III
Title: President
CGI MARINE CORPORATION
BUYER
By: /s/ Jonathan D. Pollock
-------------------------------------
Name: Jonathan D. Pollock
Title: President
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<PAGE>
EXHIBIT 10.20
VESSEL PURCHASE AGREEMENT
This VESSEL PURCHASE AGREEMENT (this "Agreement"), dated and effective as
of December 2, 1997, is by and between Horizon Barge & Towing, Inc., a Delaware
corporation (the "Buyer"), and Horizon Vessels, Inc., a Delaware corporation
(the "Seller").
W I T N E S S E T H:
--------------------
WHEREAS, the Seller is the owner of the anchor handling tug boat known as
the Mr. Eddie and the parts, equipment, machinery, implements, accessories,
appurtenances, supplies and inventory related to the Mr. Eddie (collectively,
the "Vessel"); and
WHEREAS, the Seller desires to sell the Vessel and the Buyer desires to
purchase the Vessel upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the Buyer and Seller hereto represent and agree as follows:
1.1 Sale of the Vessel. The Buyer does buy and the Seller does hereby
sell the Vessel to the Buyer by delivering the Bill of Sale in the form attached
hereto as Exhibit "A" transferring to Buyer the Vessel free and clear of any
claims, liens or encumbrances.
1.2 Purchase Price. The Buyer shall, subject to the terms hereof, pay
$650,000 to the Seller for the Vessel.
1.3 "As is, Where is" Sale. The Vessel is being sold on an "as is, where
is" basis and the Buyer shall accept delivery of the Vessel from the Seller in
such condition. Except as set forth in Section 1.4, no representations or
warranties, either expressed or implied, are made with respect to the
maintenance, repair, condition, design, operation, seaworthiness, value,
marketability, merchantability, usefulness or suitability for any purpose, of
the Vessel.
1.4 Title: No Encumbrance. The Seller has good, valid and marketable
title to the Vessel and the Seller shall take such steps as are necessary to
ensure that the Vessel shall be free and clear of all mortgages, security
interests, debts, claims, liens, libels and encumbrances of any kind whatsoever.
The Seller will warrant and defend the Buyer's title in and to the Vessel
against the claims and demands of all persons whomsoever.
1.5 Indemnification of Buyer by Seller. The Seller hereby agrees to pay
and assume liability for, and does hereby agree to indemnify, protect, save and
keep harmless the Buyer, from and against any and all liabilities, obligations,
losses, damages, penalties, claims (including claims by any employee of Seller
or any of its servants, crew or agents), actions, suits and related costs,
expenses and disbursements, including reasonable legal fees and expenses, of
whatsoever kind and nature, imposed on, asserted against or incurred by Buyer
(collectively, "Losses"), in any way relating to or arising out of or alleged to
be attributable to, related to or arising out of any claims, liens, and
encumbrances
<PAGE>
arising as a matter of law from events occurring prior to the date hereof or any
Losses sustained by Buyer arising out of or related to Seller's ownership or
operation of the Vessel prior to the date hereof.
1.6 Indemnification of Seller by Buyer. Buyer hereby agrees to pay and
assume liability for, and does hereby agree to indemnify, protect, save and keep
harmless the Seller, from and against any and all Losses imposed on, asserted
against or incurred by the Seller, in any way relating to or arising out of or
alleged to be attributable to, related to or arising out of any Losses
sustained by Seller arising out of or related to the ownership or operation of
the Vessel after the date hereof.
1.7 Governing Law. This Agreement shall be construed in accordance with
U.S. maritime law and the substantive laws of the State of Texas.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
BUYER:
HORIZON BARGE & TOWING, INC.
By: /s/ Howard D. Loyd, III
----------------------------------
Howard D. Loyd, III
President
SELLER:
HORIZON VESSELS, INC.
By: /s/ Bill Lam
----------------------------------
Bill Lam
President
2
<PAGE>
***********************************
The exhibit to the Vessel Purchase Agreement
has been omitted from this filing
and will be furnished to the Commission's
staff upon request
***********************************
3
<PAGE>
EXHIBIT 10.21
DATED 10 June 1997
BETWEEN
HLS OFFSHORE L.L.C.
-and-
MANNAI MARINE CO. LIMITED
-and-
RANA S.r.l
(in concordato preventivo)
______________________________
SETTLEMENT AGREEMENT
______________________________
Curtis Davis Garrard
Lancaster House
Northumberland Close
Heathrow Airport
Staines
TW19 7LN
Tel: 0181 400 2400
Fax: 0181 400 2420
Ref: SRC/IMG/101271.0001
<PAGE>
THIS AGREEMENT is made the tenth day of June 1997
BETWEEN
(1) HLS OFFSHORE L.L.C. of 9821 Katy Freeway, Suite 450, Houston, Texas 77024,
USA ("HLS");
(2) MANNAI MARINE COMPANY LIMITED of PO Box 8776, Doha, Qatar ("Mannai"); and
(3) RANA S.R.L (in concordato preventivo) of Via A. Vecchi, 7-4S023 Marina di
Ravenna, Italy ("RANA").
HLS, Mannai and RANA are hereinafter collectively referred to as the "Parties"
WHEREAS:
(A) In April 1996 Mannai successfully bid for a contract to perform certain
construction and pipelay works (the "Project Works") set out in an
invitation to Tender, GTC 104/96, by Qatar General Petroleum Corporation
("QGPC"); it was agreed that certain aspects of the Project Works (the
"Subcontract Works") would be performed by RANA as subcontractor employing
its pipelay barge "ODS Mariner" (the "Vessel");
(B) By a Memorandum of Agreement dated 3 April 1996 (the "MOA") Mannai agreed
that it would subcontract the Subcontract Works to RANA who agreed, subject
to a formal subcontract, to perform the same;
(C) Mannai issued a letter of intent dated 19 April 1996 to RANA in respect of
the Subcontract Works (the "LOI") and authorized RANA to undertake the
Project Works;
(D) As RANA was not in a position to mobilise the Vessel and also to provide a
bank guarantee in accordance with the LOI, Mannai and RANA entered into an
agreement dated 23 May 1996 (the "23 May Agreement") in terms of which
Mannai agreed to provide an advance and also to waive the obligations to
provide the bank guarantee and, as security for the above, RANA agreed to
create a charge on the Vessel; no charge was in fact ever created.
(E) On 31 July 1996 HLS and RANA entered into agreements (respectively the
"Purchase Agreement" and the "Assignment Agreement") whereby (i) HLS agreed
to purchase and RANA agreed to sell the Vessel for US$3.8 million and (ii)
RANA agreed, subject to the terms of the Purchase Agreement, to assign to
HLS its rights and obligations under the MOA and LOI; the purchase price
for the Vessel has not yet been paid by HLS;
2
<PAGE>
(F) On 11 August 1996 HLS, Mannai and RANA entered into an agreement (the "11
August Agreement") whereby RANA assigned to HLS all of its rights and
obligations under the MOA, LOI and the 23 May Agreement to the extent only
of the pipelay aspects of the Subcontract Works and HLS and RANA agreed
with Mannai that they would upgrade the Vessel at their expense in order to
perform the pipelay works. Under the 11 August Agreement HLS agreed to
provide a performance bond for Qrs 3.2 million in favour of Mannai for the
pipelay portion of the sub-contract works. By a letter dated 15 August
1996 (the "15 August Letter") HLS gave a right to place a lien on the
vessel if HLS was not in a position to secure the performance bond by 29
August 1996. RANA disputes HLS' entitlement to grant such a right to place
a lien on the Vessel. HLS failed to provide the performance bond to Mannai
as required by the 15 August letter.
(G) HLS thereafter refurbished the Vessel in anticipation of performance of the
pipelay works and in October 1996 the Vessel was mobilised by HLS to
perform the pipelay works;
(H) The Vessel was rejected by QGPC/Mannai in December 1996 after they had
repeatedly advised that the Vessel was not in conformity with the technical
specifications for the performance of the Project Works, as a result of
which HLS demobilised the Vessel;
(I) Mannai has since commenced proceedings in Sharjah (Petition Number 35/96;
Suit 3/97) against HLS and RANA claiming alleged losses in the approximate
sum of DHS 22,625,000 arising from alleged breaches by HLS and RANA of the
11 August Agreement (the "Sharjah Proceedings") and in support of such
claims has obtained a provisional Order from the Sharjah Courts dated 30
December 1996 detaining the Vessel in Sharjah and a further Order dated 5
April 1997 restraining the removal from the Vessel of equipment and
materials fixed or ancillary to the Vessel (together the "Attachment
Orders"): HLS and RANA denies such claims;
(J) HLS has asserted claims against RANA arising out of or in connection with
its failure to transfer title to the Vessel to HLS in accordance with the
Purchase Agreement, alleged breaches of, and misrepresentations in relation
to, the Assignment Agreement and claims a possessory lien over and in
respect of the Vessel by reason of the monies expended on the refurbishment
of the Vessel (the "Possessory Lien"); RANA denies such claims;
(K) On or about 16 October 1996 RANA applied to the Tribunal of Ravenna, Italy
(the "Ravenna Court") in order that the proceedings of "concordato
preventivo" be permitted; by Decree dated 23 October 1996 the Ravenna Court
ordered that the proceedings be commenced;
(L) By order dated 24 December 1996 the Ravenna Court approved the sale of the
Vessel by RANA to HLS for US$3,306,804 and by decree dated 15 January 1997
the Director General of the Ministry of Transport and Navigation authorised
the sale of the Vessel by RANA to HLS;
3
<PAGE>
(M) The parties now wish to settle the claims in the Sharjah Proceedings and
all outstanding claims and liabilities arising between them under or in
connection with each of the agreements and matters referred to above to
enable the Attachment Orders to be lifted and the Vessel to be released
from Sharjah and for the sale of the Vessel by RANA to HLS to be completed
subject to the terms and conditions hereinafter appearing.
NOW THEREFORE IT IS AGREED AS FOLLOWS:
1. Sale of the Vessel
1.1. Upon execution of this Agreement by all parties, the Purchase Agreement and
the Assignment Agreement shall be deemed terminated by HLS and RANA by
mutual consent. RANA and HLS shall thereupon be deemed to have entered into
a replacement agreement for the sale and purchase of the Vessel on terms
set out in Appendix A hereto. Pursuant to such replacement agreement (the
"Sale Agreement") RANA will deliver and transfer title, with vacant
possession and free of all claims, debts, liens, charges and encumbrances,
to the Vessel to HLS (or an Italian or other company registered in the
European Union nominated by HLS bearing the name "Atlantide Crociere" or
"HLS Italy") at the shipyard in Sharjah of International Marine Services
(or other place as may be agreed between them) on the terms and conditions
set out in Appendix A.
1.2. Under the terms of the Sale Agreement, payment for the Vessel is to be made
by an Initial Instalment of US$300,000 payable upon and following Departure
as set out in Clause 1.5 below and by Subsequent Instalments totaling
US$3,000,000 payable in three equal instalments no later than the first,
second and third anniversary respectively of Departure. Payment of all of
the Instalments shall be unconditionally and irrevocably guaranteed by a
first class Italian bank reasonably acceptable to RANA in the terms of the
draft attached hereto as Appendix B, which guarantee (the "Sale Agreement
Guarantee") is to be delivered by HLS to RANA within 14 days of the date of
execution of this Agreement.
1.3. Upon delivery of the Vessel and subject (a) to the prior delivery by HLS to
RANA of the Sale Agreement Guarantee as aforesaid and (b) the provisions of
Clause 3 hereof, all present and future claims, demands and liabilities of
any nature whatsoever (other than pursuant to this Agreement) arising as
between HLS and RANA and all of their respective affiliated and/or
associated and/or subsidiary companies under, or in connection with, the
MOA, LOI, 23 May Agreement, 11 August Agreement (the "Project Agreements")
or any of them, the Purchase Agreement, the Assignment Agreement and the
Possessory Lien or howsoever otherwise shall be fully and finally
compromised and settled. In circumstances in which HLS shall nominate
another company to take delivery of the Vessel pursuant to Clause 1.1
hereof, HLS shall be deemed to have contracted as trustee on its own behalf
and on behalf of such company of the benefit of the aforesaid compromise
and settlement.
4
<PAGE>
1.4. In consequence of the above, RANA shall forthwith upon delivery to it of
the Sale Agreement Guarantee discontinue and withdraw all applications or
other process made in the Sharjah Proceedings on terms that no party hereto
shall be responsible for the payment to any other of any costs of such
proceedings and shall obtain as soon as practicable the discharge of all
orders or other directions granted on applications made by RANA in or
ancillary to the Sharjah Proceedings. HLS shall, however, reimburse to
RANA its properly documented legal costs arising out of or in connection
with the Sharjah Proceedings or the negotiation and execution of this
Agreement to the extent that the same have been reasonably incurred but in
any event not exceeding US$40,000.
1.5. Subject to, but immediately following, the performance (a) by RANA of its
obligations under Clauses 1.1 and 1.4 hereof and (b) by Mannai of its
obligations under Clause 2.6 below, HLS shall at its expense arrange for
the Vessel to leave the territorial waters of Sharjah under tow. The point
in time at which the Vessel shall thereafter leave Sharjah territorial
waters shall be referred to herein as "Departure". Provided, however, that
HLS shall have no obligation under this Clause to secure Departure of the
Vessel where this is impeded or prevented by any arrest or detention of the
Vessel or any other legal process brought in respect of the claims of any
third party howsoever arising.
1.6. The parties hereto agree to co-operate in order to achieve the objectives
set out in this Agreement.
2. Settlement of Claims
2.1. Subject to, and conditional upon, delivery of the Vessel as aforesaid, and
in consideration of the withdrawal of the Sharjah Proceedings and the
Attachment Orders and the settlement of all claims between the parties
referred to in Clause 2.5, HLS shall pay to Mannai upon and following
Departure the sum of US$4,925,000 (Four Million Nine Hundred and Twenty
Five Thousand United States Dollars) (the "Settlement Sum"). Payment of
the Settlement Sum shall be made by instalments (the "Mannai Instalments")
as detailed in Clause 2.2 below to such account or accounts as Mannai shall
direct in writing.
2.2. Subject to Clause 3 below, the first Mannai Instalment, which shall be in
the amount of US$500,000, is to be paid upon Departure. HLS shall
thereafter pay the balance of the Settlement Sum in forty-eight monthly
instalments commencing on the first day of the month which falls five
months after Departure. In the calendar year commencing on that date, HLS
shall pay the amount of $1,275,000 (the "First Calendar Year Payment") in
ten equal instalments of US$104,166, followed by an instalment of
US$129,166 and by one final instalment of US$104,174, all payable on the
first day of each month. In each of the second, third and fourth calendar
years, HLS shall pay the amount of US$1,050,000 (the "Second. Third and
Fourth Calendar Year Payments" respectively) in 12 equal instalments of
US$87,500, all payable on the first day of each month of each year
respectively. In the event that any instalment becomes due on a day which
is not a "Banking Day", the instalment shall
5
<PAGE>
be due on the next Banking Day. A "Banking Day" for these purposes is a day
on which ordinary banking transactions are undertaken in New York and
Qatar.
2.3. No interest shall accrue or be payable on the Mannai Instalments.
2.4. HLS shall arrange for the payment of each of Mannai's instalments through
an irrevocable and unconditional Letter of Credit (the "Claims L/C") issued
by a first class international bank acceptable to Mannai in the terms of
the draft attached hereto as Appendix C.
2.5. Subject to and conditional upon the delivery to Mannai of the Claims L/C
and withdrawal of the Sharjah Proceedings and the Attachment Orders, all
present and future claims, demands and liabilities of any nature whatsoever
(save and except any claims made in proceedings arising upon the
termination of this Agreement, including proceedings for the arrest or
detention of the Vessel) arising as between Mannai, HLS and RANA and all of
their respective affiliated and/or associated and/or subsidiary companies
under or in connection with the Project Agreements or any of them or
howsoever otherwise are hereby fully and finally compromised and settled.
Without limiting the foregoing, the Settlement Sum shall in particular
encompass all claims by either party for principal, interest and costs
(including any costs orders already made) in the Sharjah Proceedings. In
circumstances in which HLS shall nominate another company to take delivery
of the Vessel pursuant to Clause 1.1 hereof, HLS shall be deemed to have
contracted as trustee on its own behalf and on behalf of such company of
the benefit of the aforesaid compromise and settlement.
2.6. In consequence of the above, Mannai shall forthwith upon receipt of (i) the
Claims L/C and (ii) letters from each of HLS' solicitors, Curtis Davis
Garrard, and RANA's solicitors, Ince and Co., confirming that the Vessel
has been sold by RANA to HLS, discontinue and withdraw the Sharjah
Proceedings on terms that neither party shall be responsible for the
payment to the other of any costs of such proceedings and obtain as soon as
practicable the discharge of all orders or other directions granted on
applications made by Mannai in or ancillary to the Sharjah Proceedings,
including the Attachment Orders.
2.7. In consideration of HLS entering into this Agreement, Mannai shall ensure
that the Vessel is not prevented from departing from Sharjah territorial
waters by reason of any and all claims of International parts, Equipment
and Trading Company of Doha in relation to the Vessel howsoever arising and
shall, following Departure, settle such claims, providing HLS with written
confirmation of the same.
3. Termination
3.1 Notwithstanding any other provision of this Agreement, it is expressly
agreed and understood that, if the Vessel has not departed from Sharjah
territorial waters for any reason whatsoever by midnight local time on 20
July 1997, Mannai shall be entitled to give notice in writing to RANA and
HLS that the provisions of Clause 2.5 hereof are to be treated as null
6
<PAGE>
and void, in which event the same, together with the provisions of Clause
1.3 hereof, shall cease to be binding on any party hereto and any steps
taken by any of the parties pursuant to or arising out of this Agreement
shall be deemed to be without prejudice to any and all of the parties'
rights in relation to the Project Agreements, the Purchase and Assignment
Agreements, the Sharjah Proceedings and the Possessory Lien. Mannai shall
in such circumstances be entitled to take such action as it considers
appropriate to attach or arrest the Vessel and in such event, HLS shall
pay to Mannai its documented costs up to a maximum sum of US$75,000
incurred by the latter in obtaining the Attachment Orders in the Sharjah
proceedings;
3.2. It is furthermore expressly agreed and understood that, if the Vessel has
not departed from Sharjah territorial waters for any reason whatsoever by
midnight local time on 3 August 1997, this Agreement (including the
mutual release of claims set out in Clauses 1.3 and 2.5 above and the
choice of law and jurisdiction in Clause 4) shall become null and void as
if the same had never been concluded and any steps taken by any of the
parties pursuant to or arising out of this Agreement shall be deemed to
be without prejudice to any and all of the parties' rights in relation to
the Project Agreements, the Purchase and Assignment Agreements, the
Sharjah Proceedings and the Possessory Lien. In such event-
3.2.1. The Bill of Sale to be executed by RANA in favour of HLS and placed in
escrow with their solicitors, Ince and Co. pending Departure shall,
subject to the prior return by RANA to HLS of the Sale Agreement
Guarantee, be returned to RANA by Ince and Co;
3.2.2. HLS shall pay to Mannai its documented costs up to a maximum sum of
US$75,000 incurred by the latter in obtaining the Attachment Orders in
the Sharjah proceedings (but less any such sums paid pursuant to Clause
3.1 above);
3.2.3. Subject to satisfaction, either by or on behalf of HLS, of the obligation
contained in Clause 3.2.2 hereof, the Claims L/C shall forthwith be
returned by Mannai to HLS.
4. Law and Jurisdiction
4.1. This Agreement shall be governed by English law and all disputes and
differences arising out of or in connection with this Agreement shall be
subject to the exclusive jurisdiction of the English High Court of
Justice in London. For the purposes of any proceedings hereunder the
parties hereby irrevocably appoint the following agents for the service
of process:
HLS
Curtis Davis Garrard
Lancaster House
Northumerland Close
Heathrow Airport
7
<PAGE>
Staines
TW19 7LN
Telephone no: (44) 181 400 2400
Telefax no: (44) 181 400 2420
Ref: SRC/IMG
Mannai
Mannai Investment Co Ltd
Whitehall House
6th Floor,
41 Whitehall
London
London
SW1A 2BY
Telephone no: (44) 171 839 0850
Telefax no: (44) 171 839 0851
Ref: Managing Director
RANA
Ince and Co
Knollys House
11 Byward Street
London
EC3
Telephone no: (44) 171 623 2011
Telefax no: (44) 272 623 3225
Ref: 38
5. Confidentiality
5.1 The terms of this Agreement shall be kept strictly confidential to the
parties and their legal advisors.
6. Recitals
8
<PAGE>
6.1. The recitals shall form an integral part of this Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement by their
respective duly authorised representatives the day and year first above written.
/s/ Curtis Davis Garrard
- -------------------------------------
Curtis Davis Garrard
As solicitors and agents only
for and on behalf of
HLS OFFSHORE, L.L.C.
/s/ Sylen S. Nawalkar,
- -------------------------------------
Sylen S. Nawalker, Corporate Vice-President and duly authorised attorney
For and on behalf of
MANNAI MARINE COMPANY LIMITED
/s/ V. Marigri
- -------------------------------------
V Marigri
Duly authorised officer
For and on behalf of
RANA S.R.L
9
<PAGE>
***********************************
All appendices have been omitted
from this filing and will be furnished
to the Commission's staff upon request
***********************************
10
<PAGE>
EXHIBIT 11.1
HORIZON OFFSHORE, INC. AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF NET INCOME
(LOSS) PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<TABLE>
<CAPTION>
INCEPTION
(DECEMBER 20, 1995) INCEPTION
THROUGH (DECEMBER 20, 1995)
NINE MONTHS ENDED SEPTEMBER 30, 1996 THROUGH
SEPTEMBER 30, 1997 (UNAUDITED) DECEMBER 31, 1996
------------------ -------------------- -------------------
<S> <C> <C> <C>
NET INCOME (LOSS)...................................... $ 794 $ (1,913) $ (9,580)
================ =============== ===============
Weighted average shares outstanding.................... 11,000,000 11,000,000 11,000,000
Dilutive effect of shares issued within twelve months
preceding offering date............................... 267,105 267,105 267,105
Dilutive effect of shares issued pursuant to warrant
exercised during 1997................................. 2,749,219 2,749,219 2,749,219
---------------- --------------- ---------------
SHARES USED IN COMPUTING NET INCOME (LOSS) PER SHARE... 14,016,324 14,016,324 14,016,324
================ =============== ===============
NET INCOME (LOSS) PER SHARE............................ $ 0.06 $ (0.14) $ (0.68)
================ =============== ===============
</TABLE>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
The following is a list of all significant subsidiaries, as defined in Rule
1-02(w) of Regulation S-X, of the Company.
Company State of Incorporation
------- ----------------------
Horizon Vessels, Inc. Delaware
Horizon Offshore Contractors, Inc. Delaware
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
-----------------------
Arthur Andersen LLP
Houston, Texas
January 8, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATON EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF HORIZON OFFSHORE, INC. AND SUBSIDIARIES AS OF
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996 AND THE RELATED CONSOLIDATED STATEMENTS
OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND FOR THE PERIOD
FROM INCEPTION (DECEMBER 20, 1995) THROUGH DECEMBER 31, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> OTHER 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> DEC-20-1995 JAN-01-1997
<PERIOD-END> DEC-31-1996 SEP-30-1997
<CASH> 2,650 1,210
<SECURITIES> 0 0
<RECEIVABLES> 5,920 11,101
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 8,670 12,371
<PP&E> 29,848 29,730
<DEPRECIATION> 710 1,087
<TOTAL-ASSETS> 39,690 42,562
<CURRENT-LIABILITIES> 8,136 9,517
<BONDS> 0 0
0 0
0 0
<COMMON> 3,030 3,030
<OTHER-SE> (9,580) 15,358
<TOTAL-LIABILITY-AND-EQUITY> 39,690 42,562
<SALES> 14,088 22,200
<TOTAL-REVENUES> 14,088 22,200
<CGS> 21,616 18,895
<TOTAL-COSTS> 21,616 18,895
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,662 1,198
<INCOME-PRETAX> (11,197) 794
<INCOME-TAX> (1,617) 0
<INCOME-CONTINUING> (9,580) 794
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (9,580) 794
<EPS-PRIMARY> (.98) .08
<EPS-DILUTED> (.98) .08
</TABLE>
