SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
HORIZON OFFSHORE, INC.
(Name of Registrant as Specified in its Charter)
_____________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4. Proposed maximum aggregate value of transaction:
5. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
2. Form, Schedule or Registration Statement No.:
3. Filing Party:
4. Date Filed:
<PAGE>
[HORIZON LOGO]
To our stockholders:
You are cordially invited to our 1999 annual meeting of stockholders to be
held in the board room at Horizon Offshore, Inc., 2500 CityWest Boulevard, Suite
2200, Houston, Texas, on Thursday, May 6, 1999, at 10:00 a.m. Central Time.
The attached notice of annual meeting and proxy statement describe the
matters to be transacted at the meeting, which include the election of one
director and such other business as may properly come before the meeting.
Our board has nominated Gunnar Hirsti for re-election to the board of
directors and urges you to vote for his re-election.
Please sign, date and return the enclosed proxy card promptly. This will
save us the additional expenses associated with soliciting proxies and ensure
that your shares are represented at the annual meeting. If you attend the annual
meeting, you may vote in person even if you have previously mailed a proxy card.
Sincerely,
Bill J. Lam
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
[HORIZON LOGO]
---------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 6, 1999
---------------------------------------------------
DATE: Thursday, May 6, 1999
TIME: 10:00 a.m. Central Time
PLACE: Board Room, Horizon Offshore, Inc.,
2500 CityWest Boulevard, Suite 2200,
Houston, Texas
PURPOSE: o To elect a director; and
o To transact such other business as may properly
come before the meeting.
RECORD DATE: Close of business on March 29, 1999.
Your vote is important. Whether or not you plan to attend the meeting,
please complete, sign and date the enclosed proxy card and return it promptly in
the enclosed envelope. You may revoke your proxy at any time before it is voted.
We appreciate your cooperation.
By Order of the Board of Directors
David W. Sharp
SECRETARY
Houston, Texas
April 15, 1999
<PAGE>
HORIZON OFFSHORE, INC.
2500 CITYWEST BOULEVARD
SUITE 2200
HOUSTON, TEXAS 77042
APRIL 15, 1999
------------------------
PROXY STATEMENT
------------------------
WE WILL BEGIN MAILING THIS PROXY STATEMENT TO OUR STOCKHOLDERS ON OR ABOUT
APRIL 15, 1999.
We are furnishing this proxy statement to our stockholders in connection
with a solicitation of proxies by our board of directors for use at our 1999
annual meeting of stockholders to be held on Thursday, May 6, 1999 at 10:00 a.m.
Central Time in the board room at Horizon Offshore, Inc., 2500 CityWest
Boulevard, Suite 2200, Houston, Texas.
WHO CAN VOTE
If you held any of our common stock at the close of business on March 29,
1999 then you will be entitled to notice of and to vote at our 1999 annual
meeting. On that date, we had outstanding 18,667,680 shares of our common stock.
QUORUM
The presence of a majority of our common stock entitled to vote, present in
person or represented by proxy, is necessary to constitute a quorum. We will
count shares of common stock present at the meeting that abstain from voting or
that are the subject of broker non-votes as present for purposes of determining
a quorum. A broker non-vote occurs when a nominee holding common stock for a
beneficial owner does not vote on a particular matter because the nominee does
not have discretionary voting power with respect to that item and has not
received voting instructions from the beneficial owner.
VOTING RIGHTS
Each share of our common stock that you hold entitles you to one vote on
all matters that come before the annual meeting. Inspectors of election will
count votes cast at the annual meeting. The director will be elected by a
plurality of the shares voted. All other matters are generally decided by
majority vote of the common stock present at the meeting, except as otherwise
provided by statute, our certificate of incorporation and our bylaws.
Abstentions and broker non-votes will have no effect on the election of
directors. An abstention as to all other matters will have the effect of a vote
against those matters. Broker non-votes as to all other matters will not be
counted as votes for or against and will not be included in calculating the
number of votes necessary for approval of those matters.
HOW YOUR PROXY WILL BE VOTED
The board of directors is soliciting a proxy in the enclosed form to
provide you with an opportunity to vote on all matters scheduled to come before
the meeting, whether or not you attend in person.
GRANTING YOUR PROXY
If you properly execute and return a proxy in the enclosed form, your stock
will be voted as you specify. If you make no specifications, the proxy
representing your common stock will be voted in favor of the proposed director
nominee.
We expect no matter to be presented for action at the annual meeting other
than the items described in this proxy statement. The enclosed proxy will,
however, confer discretionary authority with respect to any
2
<PAGE>
other matter that may properly come before the meeting. The person named in the
enclosed proxy intends to vote in accordance with his judgment on any matters
that may properly come before the meeting.
REVOKING YOUR PROXY
If you submit a proxy, you may subsequently revoke it or submit a revised
proxy at any time before your proxy is voted. You may also attend the annual
meeting in person and vote by ballot, which would cancel any proxy that you
previously submitted.
PROXY SOLICITATION
We will pay all expenses of soliciting proxies for the 1999 annual meeting.
In addition to solicitations by mail, we have made arrangements for brokers and
nominees to send proxy materials to their principals and, upon their request, we
will reimburse them for their reasonable expenses in doing so. Some of our
representatives, who will receive no compensation for their services, may also
solicit proxies by telephone, telecopy, personal interview or other means.
STOCKHOLDER PROPOSALS
If you want us to consider including a proposal in next year's proxy
statement, you must deliver it IN WRITING to David W. Sharp, Corporate
Secretary, Horizon Offshore, Inc., 2500 CityWest Boulevard, Suite 2200, Houston,
Texas 77042 by December 16, 1999.
If you want to present a proposal at next year's annual meeting but do not
wish to have it included in our proxy statement, you must submit it IN WRITING
to David W. Sharp, at the above address, by March 6, 2000 in accordance with the
specific procedural requirements in our bylaws. If you would like a copy of
these procedures, please contact David W. Sharp. If you fail to comply with our
bylaw procedures and deadline, we may preclude presentation of the matter at the
next annual meeting.
3
<PAGE>
ELECTION OF A DIRECTOR
GENERAL
Our board of directors has fixed the number of directors at five. Our
certificate of incorporation divides our board of directors into three classes.
The members of each class serve for three years, with one class to be elected at
each annual meeting. The term of Mr. Hirsti will expire at the 1999 annual
meeting.
Our board has nominated Mr. Hirsti for an additional three-year term. The
person named in the enclosed form of proxy intends to vote your proxy for the
re-election of Mr. Hirsti, unless you direct him to vote otherwise. If Mr.
Hirsti should decline or be unable to serve for any reason, votes will instead
be cast for a substitute nominee designated by our board of directors.
Our board of directors has nominated and urges you to vote FOR the
re-election of Mr. Hirsti.
The following table provides you with certain information, as of March 31,
1999, about Mr. Hirsti and each of the other directors:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION NOMINATED
AND DIRECTORSHIPS IN DIRECTOR FOR TERM
NAME AGE OTHER PUBLIC CORPORATIONS SINCE EXPIRING
- ------------------------------------- --- -------------------------------------------------- -------- ---------
<S> <C> <C> <C> <C>
NOMINEE:
Gunnar Hirsti........................ 44 Mr. Hirsti has served as the Chief Executive 1997 2002
Officer of Det Sondenfjelds-Norske Damp-
skibsselskab ASA 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.
CONTINUING DIRECTORS:
Jonathan D. Pollock.................. 35 Mr. Pollock has served as the Chairman of our 1997 2001
board of directors since our inception. Mr.
Pollock is a portfolio manager of Elliott As-
sociates, L.P., a private investment firm and one
of our principal stockholders. Mr. Pollock 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
also portfolio manager and manager for the London
office of Stonington Management Corporation. Mr.
Pollock is a director of Tatham Offshore, Inc.
("Tatham Offshore"), an independent oil and gas
company, and of Grant Geophysical, Inc., a seismic
data acquisition company. Mr. Pollock is chairman
of the board of Prime Natural Resources, Inc., an
oil exploration company, and of Odyssea Marine,
Inc., a diversified marine services and
independent power producer.
</TABLE>
(TABLE CONTINUED ON FOLLOWING PAGE)
4
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION NOMINATED
AND DIRECTORSHIPS IN DIRECTOR FOR TERM
NAME AGE OTHER PUBLIC CORPORATIONS SINCE EXPIRING
- ------------------------------------- --- -------------------------------------------------- -------- ---------
<S> <C> <C> <C> <C>
Bill J. Lam.......................... 32 Mr. Lam has served as our President and Chief 1997 2001
Executive Officer since December 1997. From July
1997 to November 1997 Mr. Lam was our Vice
President--Operations. Prior to being employed by
us, Mr. Lam 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), J. Ray McDermott, S.A. (from January 1995
to January 1997) and OPI International, Inc. (from
August 1990 to January 1995).
James Devine......................... 40 Mr. Devine has been a commercial consultant to the 1998 2000
oil and gas industry since 1996. From 1994 to
1996, Mr. Devine has 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 N.V.
Edward L. Moses, Jr.................. 62 Mr. Moses has served as a consultant to our 1998 2000
executive management since January 1998. Mr. Moses
is also the president and chief executive officer
and a director of Prime Natural Resources, Inc.
Mr. Moses served as senior vice
president--engineering and production of DeepTech
International Inc. from 1992 until January 1998
and managing director of Deepwater Systems from
August 1993 until January 1998. From 1991 to 1992,
he served as senior vice president of Tatham
Offshore.
</TABLE>
------------------------
Our board of directors has primary responsibility for our management and
affairs. During 1998, our board of directors held five meetings. Each director
attended 75% or more of the aggregate number of meetings held during 1998 of the
board of directors and committees of which he was a member.
To provide for effective direction and management of our business, our
board has established an audit committee and a compensation committee. Our board
does not have a nominating committee. The following tables provide you with
information about our audit and compensation committees. None of the members of
these committees is an officer or employee of us or any of our subsidiaries.
<TABLE>
<CAPTION>
NUMBER OF
MEETINGS HELD
AUDIT COMMITTEE MEMBERS: FUNCTIONS OF THE COMMITTEE: IN 1998
- ------------------------ --------------------------- --------------
<S> <C> <C>
Gunnar Hirsti o Reviews our financial 1
James Devine statements and annual audit
Jonathan D. Pollock o Exercises general oversight of
the integrity and reliability of our
accounting and financial
reporting practices and the
effectiveness of our system of
internal special controls
o Meets with the Company's
independent auditors to review their
reported results and assessment
of internal controls
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF
MEETINGS HELD
COMPENSATION COMMITTEE MEMBERS: FUNCTIONS OF THE COMMITTEE: IN 1998
- ------------------------------- --------------------------- --------------
<S> <C> <C>
James Devine o Analyzes, reviews and makes 2
Edward L. Moses, Jr. recommendations to our board
Jonathan D. Pollock concerning compensation
programs
o Administers our stock incentive
plan
</TABLE>
DIRECTOR COMPENSATION
Each member of our board of directors who is not an employee of our company
receives an annual fee of $12,000. We reimburse all directors for reasonable out
of pocket expenses incurred in attending board and committee meetings.
Upon completion of the initial public offering of our common stock in April
1998, we granted each non-employee director an option to purchase 5,000 shares
of our common stock at an exercise price of $13.00 per share. Each person who
becomes a non-employee director in the future will also receive an option to buy
5,000 shares at an exercise price equal to the fair market value of our common
stock on the date such person becomes a director.
In addition, in each year during which our stock incentive plan is in
effect and a sufficient number of shares are available under the plan, on the
day following each annual meeting of stockholders, each non-employee director
will receive an option to purchase 5,000 shares of common stock at an exercise
price equal to the fair market value of our common stock on such date. Each
stock option will become fully exercisable on the first anniversary of its grant
and will expire ten years from the date of grant, unless the non-employee
director ceases to be a director. In that case, the exercise period will be
shortened.
On January 1, 1998, we entered into a consulting agreement with Edward L.
Moses, Jr. for a two-year period ending December 31, 1999. We granted Mr. Moses
an option under the consulting agreement to purchase 50,000 shares of our common
stock at the initial offering price of $13.00 per share. The consulting contract
contains an agreement of Mr. Moses to refrain from using or disclosing
confidential information during the term of the contract or after the
termination of the contract.
6
<PAGE>
STOCK OWNERSHIP
The following table provides you with information, as of March 31, 1999,
regarding beneficial ownership of our common stock of (1) each stockholder that
we know to be the beneficial owner of more than 5% of our outstanding common
stock, determined in accordance with Rule 13d-3 under the Securities Exchange
Act of 1934, (2) each of our directors, (3) each of our executive officers, and
(4) all of our directors and executive officers as a group. Unless otherwise
indicated, the shares are held with sole voting and investment power.
<TABLE>
<CAPTION>
NO. OF SHARES
ACQUIRABLE PERCENT
NO. OF THROUGH OF
NAME OF BENEFICIAL OWNER SHARES(1) STOCK OPTIONS CLASS
- ------------------------------------- ------------ -------------- -------
<S> <C> <C> <C>
Elliott Associates, L.P.(2).......... 4,812,500 -- 25.8%
Westgate International, L.P.(3)...... 4,812,500 -- 25.8%
Det Sondenfjelds-Norske
Dampskibsselskab ASA(4)............ 4,125,000 -- 22.1%
Jonathan D. Pollock(5)............... 9,625,000 5,000 51.6%
Bill J. Lam(6)....................... 309,760 3,333 1.7%
David W. Sharp(6).................... 265,540 3,333 1.4%
James K. Cole(6)..................... 177,100 3,333 1.0%
James Devine......................... 326,480 5,000 1.8%
Gunnar Hirsti(7)..................... 4,125,000 5,000 22.1%
Edward L. Moses, Jr. ................ -- 17,500 *
All executive officers and directors
as a group (7 persons)............. 13,970,440 42,500 74.8%
</TABLE>
- ------------
* Less than 1%
(1) Excludes shares subject to options that will be exercisable within 60 days,
which shares are set forth separately in the next column.
(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. Includes 429,220 shares owned by
our executive officers and four of our key employees as to which Elliott
Associates, L.P. has voting power as a result of the shares securing the
executive officers' and key employees' indebtedness incurred to acquire
these shares. See "Certain Transactions."
(3) The address of Westgate International, L.P. is c/o Midland Bank & Trust
(Cayman), Post Office 1109, Georgetown, Grand Cayman, British West Indies.
Westgate International, L.P. beneficially owns such shares indirectly
through one of its subsidiaries. Includes 429,220 shares owned by our
executive officers and four of our key employees as to which Westgate
International, L.P. has voting power as a result of the shares securing the
executive officers' and key employees' indebtedness incurred to acquire
these shares. See "Certain Transactions." Westgate International, L.P. and
Elliott Associates, L.P. (the "Principal Stockholders") are under common
management.
(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 and 858,440
owned by our executive officers and four of our key employees as to which
the Principal Stockholders have voting power as a result of the shares
securing the executive officers' and key employees' indebtedness incurred to
acquire these shares. Mr. Pollock is employed by a corporation which is
under common management with the Principal Stockholders. Mr. Pollock
disclaims beneficial ownership of the shares owned by the Principal
Stockholders and our executive officers. See "Certain Transactions."
(6) Voting power for these shares is held by the Principal Stockholders as
described in Notes (2) and (3) above.
(7) Consists of 4,125,000 shares owned by Det Sondenfjelds-Norske
Dampskibsselskab ASA.
7
<PAGE>
EXECUTIVE OFFICER COMPENSATION
SUMMARY OF COMPENSATION
The following table provides you with information about the compensation we
paid to our Chief Executive Officer and to each of our other executive officers
for services rendered during the fiscal year ended December 31, 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------------- SECURITIES
NAME AND OTHER ANNUAL UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2) OPTIONS COMPENSATION
- ------------------------------------- --------- ---------- ---------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Bill J. Lam.......................... 1998 $ 202,928 $ 105,000 -- 20,000 $ 3,015(3)
President and Chief
Executive Officer
David W. Sharp....................... 1998 $ 176,760 $ 75,000 -- 20,000 --
Executive Vice President
and Chief Financial Officer
James K. Cole........................ 1998 $ 143,003 $ 61,912 -- 20,000 $ 5,963(3)
Senior Vice President
</TABLE>
- ------------
(1) This column reflects annual incentive bonuses and special bonuses for
extraordinary services. Special bonuses were paid in the following amounts:
Bill J. Lam, $75,000; David W. Sharp, $50,000; and James K. Cole, $50,000.
For additional information regarding the annual and special bonuses see
"Compensation Committee Report on Executive Compensation."
(2) Perquisites and other personal benefits paid to each of the executive
officers in 1998 did not exceed the lesser of $50,000 or 10% of such
executive officer's salary and bonus for that year.
(3) Consists of premiums that we paid on term life insurance policies that we
maintain for these executive officers for which we are not the named
beneficiary.
STOCK OPTIONS
The following table shows all stock options that we granted to our
executive officers in 1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM(2)
OPTIONS EMPLOYEES (PER EXPIRATION ----------------------
NAME GRANTED(1) IN 1998 SHARE) DATE 5% 10%
- ---------------------------------------- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bill J. Lam............................. 20,000 2.9% $ 13.00 3/30/08 $ 163,513 $ 414,373
David W. Sharp.......................... 20,000 2.9% $ 13.00 3/30/08 $ 163,513 $ 414,373
James K. Cole........................... 20,000 2.9% $ 13.00 3/30/08 $ 163,513 $ 414,373
</TABLE>
- ------------
(1) Half of the options become exercisable in three equal annual increments,
beginning on April 1, 1999. The remaining options will become exercisable if
the average of the closing sales price of a share of our common stock for 60
consecutive trading days exceeds $19.50, and, if not otherwise exercisable,
on April 1, 2003.
(2) We calculated the appreciation over the term of the options, beginning with
the fair market value on the date of grant of the options, which was $13.00
8
<PAGE>
The following table shows all outstanding stock options held by each of our
executive officers as of December 31, 1998. As of that date, none of the stock
options were in-the-money. None of our executive officers exercised stock
options in 1998.
OPTIONS AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
STOCK OPTIONS AT YEAR END
-------------------------
EXERCISABLE/UNEXERCISABLE
-------------------------
<S> <C>
Bill J. Lam............................. 0/20,000
David W. Sharp.......................... 0/20,000
James K. Cole........................... 0/20,000
</TABLE>
EXECUTIVE EMPLOYMENT AGREEMENTS
We have entered into employment agreements with all of our current
executive officers. All such contracts also contain agreements of each of the
executive officers to refrain from using or disclosing confidential information,
and to refrain from competing with us in specified geographic areas during the
officer's employment and for one year after the termination of such officer's
employment.
The term of the employment agreements for each of Messrs. Lam, Sharp and
Cole is from January 1, 1998 until April 1, 2001. The agreements provide for
annual base salaries of $200,000, $175,000 and $143,000, respectively. We may
terminate each of the executive officer's employment at any time for cause or
for breach of the employment agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, Messrs. Devine, Moses and Pollock served on
the compensation committee. No member served as an officer or employee of our
company or any of our subsidiaries prior to or while serving on our compensation
committee. In 1998, none of our executive officers served as a director or
member of the compensation committee of another entity, any of whose executive
officers served on our board of directors or on our compensation committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The compensation committee was established in January 1998 in connection
with our initial public offering. Our board of directors granted the
compensation committee the authority, among other things, to review, analyze,
and recommend compensation programs to our board of directors and to administer
and grant awards under our Stock Incentive Plan. The current members of the
compensation committee are James Devine, Edward L. Moses, Jr. and Jonathan D.
Pollock. None of the members of the committee is a former or current officer or
employee of our company.
The compensation committee has structured its executive compensation
policies to:
o Emphasize performance-based compensation that balances rewards for
short-term and long-term results;
o Provide a competitive level of compensation that will assist us in
attracting and retaining qualified executives; and
o Link executive compensation to the interests of our stockholders.
During 1998, our executive compensation program was comprised of salaries,
annual and special cash incentive bonuses and long-term incentives in the form
of stock options.
SALARY
We entered into employment agreements with each of our executive officers
prior to our initial public offering. The terms of such agreements were the
result of arms-length negotiations between us and each
9
<PAGE>
executive officer. The agreements establish the base salary for each officer
during the term of the agreement. You can find further information regarding the
employment agreements of the executive officers under "Executive Employment
Agreements," above. We based the salaries in part on compensation levels
necessary to attract and retain these executive officers and overall competitive
and market conditions. We will review the salaries for the executives annually
and, if appropriate, adjust based on individual performance, increases in
general levels of compensation for executives at comparable firms and our
overall financial results.
BONUSES
We pay annual cash incentive bonuses to our executives in an effort to
provide a fully competitive compensation package, which is linked to the
attainment of our short-term goals. We paid 1998 bonuses based on achievement of
our short-term financial and operational goals. In addition, we elected to pay
special bonuses to each of our executive officers in recognition of their key
roles and extraordinary efforts required to complete our initial public
offering.
STOCK-BASED INCENTIVE COMPENSATION
We provide long-term incentives to our executives in the form of stock
options under our Stock Incentive Plan. The purpose of our stock incentive
program is to align the executive officers' interest with that of our
stockholders by focusing on intermediate and long-term results. In 1998, we
sought to accomplish these objectives by granting 20,000 stock options to each
of our executives.
POSITION REGARDING COMPLIANCE WITH SECTION 162(M) OF THE INTERNAL REVENUE
CODE
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
deduction allowable to us for compensation paid to each of our executive
officers in any year to $1 million. Qualified performance-based compensation is
excluded from this deduction limitation if certain requirements are met. Stock
options granted by us have been structured to qualify as performance-based.
Although none of our executive officers reached the deductibility cap in 1998,
the committee plans to continue to evaluate our cash and stock incentive
programs as to the advisability of future compliance with Section 162(m).
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
We paid Mr. Lam a salary of $202,928 in 1998. We also paid Mr. Lam an
annual incentive bonus of $30,000, based on the achievement of our short-term
financial and operational strategic goals, and a special bonus of $75,000 in
recognition of his extraordinary services relating to our initial public
offering.
During 1998, Mr. Lam received grants of stock options for 20,000 shares of
common stock as discussed above. Mr. Lam's stock options were granted on the
same terms as those granted to the other executive officers as described in this
proxy statement.
THE COMPENSATION COMMITTEE
JONATHAN D. POLLOCK EDWARD L. MOSES, JR. JAMES DEVINE
10
<PAGE>
PERFORMANCE GRAPH
The graph and corresponding table below compares the total stockholder
return on our common stock since our initial public offering on April 1, 1998
until December 31, 1998 with the total return on the S&P 500 Index and our Peer
Group Index for the same period. Our Peer Group consists of Global Industries,
Ltd., Stolt Comex Seaway S.A., Transcoastal Marine Services, Inc., Cal Dive
International, Inc. and Coflexip Stena Offshore Group, S.A. The information in
the graph is based on the assumption of a $100 investment on April 1, 1998 at
the initial public offering price of $13 per share and assumes the reinvestment
of dividends.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
TOTAL STOCKHOLDER RETURN
----------------------------------
INDEX APRIL 1, 1998 DECEMBER 31, 1998
- ---------------------------------------- ------------- -----------------
Horizon Offshore, Inc................... $ 100.0 $ 42.31
Peer Group Index........................ $ 100.0 $ 41.32
S & P 500 Index......................... $ 100.0 $110.91
11
<PAGE>
CERTAIN TRANSACTIONS
Through December 31, 1996, Elliott Associates, L.P. and Westgate
International, L.P. (the "Principal Stockholders") made advances to us to fund
our working capital requirements and asset acquisitions in the aggregate amount
of approximately $36.7 million, including accrued interest. In 1997, we were
recapitalized in a series of transactions. The Principal Stockholders
contributed $21 million of the principal outstanding indebtedness and accrued
interest owed by us as additional capital. Subsequently, in April 1997, we
issued 10% subordinated notes due March 31, 2003 to the Principal Stockholders
to evidence our remaining indebtedness and provide for future revolving credit
loans from the Principal Stockholders in an amount not to exceed $24 million. In
April 1998, we repaid our $23.8 million indebtedness under the subordinated
notes with proceeds from our initial public offering.
On July 31, 1998, our board of directors approved the repurchase of up to
$10 million of our outstanding common stock. During 1998, we repurchased a total
of 1,155,000 shares of common stock. The shares were purchased from time to time
in the open market and in privately negotiated transactions. We borrowed $7.6
million under a promissory note due March 31, 2003 from a wholly-owned
subsidiary of Elliott Associates, L.P. to fund the repurchases. We repaid the
$7.6 million outstanding balance and paid $0.1 million in interest and canceled
the promissory note in December 1998.
Effective as of September 30, 1997, we entered into a services agreement
with Odyssea Marine, Inc. ("Odyssea"), an entity wholly-owned by the Principal
Stockholders, to provide administrative and support services, including certain
administrative, accounting, financial, tax and other services. We were
reimbursed by Odyssea for all direct costs and an allocable portion of our
general and administrative costs plus a margin of 5% incurred in providing these
services. The services agreement terminated on September 30, 1998. During 1998,
we billed Odyssea $12,000 for reimbursement of our general and administrative
expenses.
On August 18, 1998 we entered into a master services agreement with Odyssea
to charter certain marine vessels from Odyssea. During the 1998 fiscal year,
Odyssea billed us $6.8 million and we paid Odyssea $5.7 million for services
rendered under the agreement. As of December 31, 1998 we owed Odyssea $1.1
million.
On August 28, 1998 we entered into an agreement with Prime Natural
Resources, Inc. ("Prime"), an entity that is 78% owned by the Principal
Stockholders, to perform marine construction work. Prime awarded the contract to
us on the basis of a competitive bid process. We billed Prime $1.6 million for
services rendered under the agreement during 1998. As of December 31, 1998, we
had an outstanding receivable balance of $1.3 million.
In 1997, Elliott Associates, L.P. 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 by a settlement agreement among them and our
company. The letters of credit and guarantees secure our obligations under the
settlement agreement. During 1998, Den norske Bank issued two letters of credit
on behalf of our company to secure any obligation paid by Elliott Associates,
L.P. under their letters of credit.
In connection with our credit facility with Den norske Bank, which
originally provided for up to $30 million in borrowings, Elliott Associates,
L.P. entered into a support agreement with Den norske Bank whereby Elliott
Associates, L.P. agreed, among other things, to purchase from Den norske Bank
all amounts of principal, interest, fees, expenses and costs owed by us under
the credit facility. Following our initial public offering in April 1998, the
credit facility with Den norske Bank was amended and restated to provide for up
to $50 million in borrowings, and the support agreement between Elliott
Associates, L.P. and Den norske Bank was terminated.
On December 4, 1997, we entered into a strategic alliance with Det
Sondenfjelds-Norske Dampskibsselskab ASA ("DSND"), pursuant to which, among
other things, DSND agreed to sell us the DSND Stephaniturm, a diving support
vessel. On April 15, 1998, we acquired the vessel from DSND for $18.3 million
with a portion of the proceeds of our initial public offering. We have chartered
the vessel to DSND
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until December 31, 1999. In 1998, our Company recognized $4.9 million in
revenues related to this charter. We had an outstanding receivable balance of
$1.5 million from DSND as of December 31, 1998.
We have entered into a stockholders' 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 us
to register under the Securities Act of 1933 shares of our common stock owned by
each of them. 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 we
propose to register any shares of our common stock under the Securities Act in
connection with a public offering, DSND and each of the Principal Stockholders
may require us to include all or a portion of the shares of common stock held by
them.
In December 1997, the Principal Stockholders sold an aggregate of 752,400
shares of our common stock to Messrs. Lam, Sharp and Cole for $2.2 million, the
same 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 on June 30,
2001. The Principal Stockholders also sold 106,040 shares of our common stock on
the same terms to four of our other key employees. The shares purchased were
pledged to the Principal Stockholders to secure the executive officers' and key
employees' obligations under the promissory notes.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and 10% beneficial owners to file with the SEC
reports of ownership and changes in ownership of our equity securities. During
1998, all such forms were timely filed.
RELATIONSHIP WITH INDEPENDENT
PUBLIC ACCOUNTANTS
Our consolidated financial statements for the year ended December 31, 1998,
were audited by the firm of Arthur Andersen LLP. Our board of directors has
approved the retention of Arthur Andersen LLP for the fiscal year ending
December 31, 1999. We expect that representatives of Arthur Andersen LLP will be
present at our 1999 annual meeting, and they will have the opportunity to make
any statement if they desire to do so. They will also be available to respond to
appropriate questions from you.
BY ORDER OF THE BOARD OF DIRECTORS
David W. Sharp
SECRETARY
Houston, Texas
April 15, 1999
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HORIZON OFFSHORE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 6, 1999
The undersigned hereby appoints David W. Sharp proxy for the undersigned,
with full power of substitution, to represent and to vote, as designated on the
reverse side, all of the shares of common stock of Horizon Offshore, Inc. (the
"Company") that the undersigned is entitled to vote at the annual meeting of
stockholders of the Company to be held on May 6, 1999, and any adjournments
thereof.
(PLEASE SEE REVERSE SIDE)
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PLEASE MARK [X]
YOUR VOTE AS
INDICATED IN
THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEE LISTED BELOW.
1. Election of a Director
FOR the election of Gunnar Hirsti WITHHOLD AUTHORITY to vote for the election
as a director of the Company of Gunnar Hirsti as a director of the Company
[ ] [ ]
2. In his discretion, to vote upon such other business as may properly come
before the annual meeting and any adjournment thereof
Please specify your choices by marking the appropriate
boxes above. If no specific directions are given, this
proxy will be voted FOR the nominee listed above. The
individual designated above will vote in his discretion on
any other matter that may properly come before the
meeting.
Dated ____________________________________________, 1999
________________________________________________________
Signature of Shareholder
________________________________________________________
Signature if held jointly
Please sign exactly as name appears hereon. When
signing as executor, administrator, attorney, trustee or
guardian please give full title as such. If a corporation,
please sign full corporate name by president or other
authorized officer. If a partnership, please sign in
partnership name by authorized persons.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
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