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>
AND CHIEF EXECUTIVE OFFICER
[INSERT HORIZON LOGO HERE]
To our stockholders:
You are cordially invited to our 2000 annual meeting of stockholders to be
held in the board room at Horizon Offshore, Inc., 2500 CityWest Boulevard, Suite
2200, Houston, Texas, on Tuesday, May 2, 2000, 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 includes the election of two
directors, a vote to approve an amendment to our Stock Incentive Plan and such
other business as may properly come before the meeting.
Our board has nominated James Devine and Edward L. Moses, Jr. for
re-election to the board of directors and urges you to vote for their
re-election. Our board has also approved an amendment to our Stock Incentive
Plan and urges you to vote for the approval of the amendment.
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>
[INSERT HORIZON LOGO HERE]
---------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 2, 2000
---------------------------------------------------
DATE: Tuesday, May 2, 2000
TIME: 10:00 a.m. Central Time
PLACE: Board Room, Horizon Offshore, Inc.,
2500 CityWest Boulevard, Suite 2200,
Houston, Texas
PURPOSE: o To elect two directors;
o To vote on an amendment to our
Stock Incentive Plan to increase the
number of shares of common stock that
may be issued under the plan; and
o To transact such other business
as may properly come before the
meeting.
RECORD DATE: Close of business on March 31, 2000.
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 14, 2000
<PAGE>
HORIZON OFFSHORE, INC.
2500 CITYWEST BOULEVARD
SUITE 2200
HOUSTON, TEXAS 77042
APRIL 14, 2000
------------------------
PROXY STATEMENT
------------------------
WE WILL BEGIN MAILING THIS PROXY STATEMENT TO OUR STOCKHOLDERS ON OR ABOUT
APRIL 14, 2000.
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 2000
annual meeting of stockholders to be held on Tuesday, May 2, 2000 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 31,
2000 then you will be entitled to notice of and to vote at our 2000 annual
meeting. On that date, we had 18,807,979 shares of outstanding 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 directors will be elected by a
plurality of the shares voted. The proposed amendment must be approved by a
majority of the total votes cast in person or by proxy on the amendment. All
other matters are generally decided by the affirmative vote of a majority vote
of the outstanding common stock, 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 or the approval of the proposed amendment. An abstention as to any
other matters will have the effect of a vote against the proposals. 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
nominees and the amendment to our Stock Incentive Plan.
2
<PAGE>
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 other matter that
may properly come before the meeting. The persons named in the enclosed proxy
intend to vote in accordance with their 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 2000 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. Certain 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 7, 2000.
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 2, 2001 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 DIRECTORS
GENERAL
Our board of directors has fixed the number of directors at six. 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 terms of Messrs. Devine and Moses will expire at the
2000 annual meeting.
Our board has nominated Messrs. Devine and Moses for additional three-year
terms. The persons named in the enclosed form of proxy intend to vote your proxy
for the re-election of Messrs. Devine and Moses, unless you direct them to vote
otherwise. If either Mr. Devine or Mr. Moses 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 Messrs. Devine and Moses.
The following table provides you with certain information, as of March 31,
2000, about Messrs. Devine and Moses and each of our 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:
James Devine......................... 41 Mr. Devine has served as our Chairman of the Board 1998 2003
since October 1999. He has been a commercial
consultant to the oil and gas industry since 1996.
From 1994 to 1996, Mr. Devine served as Corporate
Vice President and General Counsel of Coflexip
Stena Offshore Group.
Edward L. Moses, Jr. ................ 63 Mr. Moses served as a consultant to our executive 1998 2003
management from January 1998 until December 1999.
Mr. Moses has also served as the President and
Chief Executive Officer of Prime Natural
Resources, Inc., an oil exploration company, since
January 1998 and has been Chairman of the Board of
Prime since January 1999. Previously, Mr. Moses
served as Senior Vice President Engineering and
Production of DeepTech International Inc. from
1992 until January 1998 and as managing director
of Deepwater Systems from August 1993 until
January 1998.
</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>
CONTINUING DIRECTORS:
Jonathan D. Pollock.................. 36 Mr. Pollock served as our Chairman of the Board 1995 2001
from our inception until October 1999. Mr. Pollock
has been employed for more than five years by
Stonington Management Corporation as a portfolio
manager of the oil and gas investments of Elliott
Associates, L.P., a private investment firm and
one of our principal stockholders. He is also
manager of the London office of Stonington
Management Corporation. Mr. Pollock is a director
of Prime Natural Resources and Grant Geophysical,
Inc., a seismic data acquisition company. He is
also Chairman of the Board of Odyssea Marine,
Inc., a diversified marine services and
independent power producer.
Bill J. Lam.......................... 33 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).
Michael R. Latina.................... 27 Mr. Latina has, since January 1998, been a 2000 2002
portfolio manager of the oil and gas investments
of Elliott Associates, L.P. for Stonington
Management Corporation. Previously, he was
employed as an analyst for Stonington Management
Corporation from February 1996 to December 1997
and as an investment banker for Bear, Stearns &
Co., Inc. from August 1994 to February 1996. Mr.
Latina is a director of Prime Natural Resources,
Odyssea Marine, Grant Geophysical and Intedyne,
L.L.C., a provider of drilling tools to the oil
and gas industry. He is also a director of Baycorp
Holdings, Inc., an independent wholesale generator
of electricity, and Houston Street Exchange, Inc.,
a leading online trading exchange for energy
commodities.
</TABLE>
(TABLE CONTINUED ON FOLLOWING PAGE)
5
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION NOMINATED
AND DIRECTORSHIPS IN DIRECTOR FOR TERM
NAME AGE OTHER PUBLIC CORPORATIONS SINCE EXPIRING
- ------------------------------------- --- -------------------------------------------------- -------- ---------
<S> <C> <C> <C>
Derek Leach.......................... 49 Mr. Leach has been Project Director of Petrodrill 2000 2002
Engineering since February 1998. He has
approximately 23 years of experience in the subsea
construction business during which time he has
worked for Coflexip Stena Offshore Group, S.A.,
Whartom Williams Taylor and Vickers Oceanics. From
1996 to 1998, Mr. Leach was the Senior Executive
Vice President of Coflexip Stena Offshore and was
responsible for worldwide subsea construction
activity and offshore vessel and equipment
operations. From 1995 to 1996, he was Coflexip
Stena's Senior Vice President -- North Sea
Operations and Offshore Resources.
</TABLE>
Our board of directors has primary responsibility for directing our
management and affairs. During 1999, our board of directors held five meetings.
Each director attended 75% or more of the aggregate number of meetings held
during 1999 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>
AUDIT COMMITTEE MEMBERS: FUNCTIONS OF THE COMMITTEE:
- ---------------------------------------------------------------------
<S> <C>
Derek Leach o Reviews our financial statements and annual
Jonathan D. Pollock audit
o Exercises general oversight of the integrity
and reliability of our accounting and
financial reporting practices and the
effectiveness of our system of internal
controls
o Meets with our independent auditors to review
their reported results and assessment of
internal controls
</TABLE>
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE MEMBERS: FUNCTIONS OF THE COMMITTEE:
- ---------------------------------------------------------------------
<S> <C>
Edward L. Moses, Jr. o Analyzes, reviews and makes recommendations
Jonathan D. Pollock to our board concerning compensation
programs
o Administers our Stock Incentive Plan
</TABLE>
Neither the audit committee nor the compensation committee held any
physical meetings in 1999. Both committees took all actions by unanimous written
consent.
DIRECTOR COMPENSATION
In 1999, each member of our board of directors who was not one of our
employees received an annual fee of $12,000. For the year 2000 and subsequent
years, we have increased this fee to $25,000 per annum. We reimburse all
directors for reasonable out of pocket expenses incurred in attending board and
committee meetings.
Each person who becomes a non-employee director also receives an option to
buy 5,000 shares of common stock at an exercise price equal to the fair market
value of our common stock on the date such
6
<PAGE>
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 that ended December 31, 1999. We granted Mr.
Moses an option under the consulting agreement to purchase 50,000 shares of our
common stock at our initial public offering price of $13.00 per share. The
consulting agreement contained an agreement of Mr. Moses to refrain from using
or disclosing confidential information during the term of the contract or after
its termination.
7
<PAGE>
STOCK OWNERSHIP
The following table provides you with information, as of March 31, 2000
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 -- 25.6%
Westgate International, L.P.(3)...... 4,812,500 -- 25.6%
Jonathan D. Pollock(4)............... 9,625,000 10,000 51.2%
Wellington Management Company,
LLP(5)............................. 1,518,900 -- 8.1%
Wall Street Associates(6)............ 1,632,900 -- 8.7%
Bill J. Lam(7)....................... 309,760 16,665 1.7%
David W. Sharp(7).................... 265,540 14,666 1.5%
R. Clay Etheridge.................... 500 -- *
James K. Cole(7)..................... 177,100 11,665 1.0%
Derek Leach.......................... -- -- *
Michael R. Latina(4)................. 9,625,000 -- 51.2%
James Devine......................... 326,480 10,000 1.8%
Edward L. Moses, Jr.................. -- 60,000 *
All executive officers and directors
as a group (9 persons)............. 9,845,940 122,996 52.7%
</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 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 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, 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, 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, and Elliott Associates, (the
Principal Stockholders) are under common management.
(4) 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 and Mr. Latina are employed by a
corporation that is under common management with the Principal Stockholders.
Mr. Pollock and Mr. Latina disclaim beneficial ownership of the shares owned
by the Principal Stockholders, our executive officers and our key employees.
See "Certain Transactions."
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
8
<PAGE>
(5) Based on a Schedule 13G/A, dated February 9, 2000, filed with the Securities
and Exchange Commission. In its Schedule 13G/A, Wellington Management
Company, LLP reported shared dispositive power with respect to 1,518,900
shares, and shared voting power with respect to 963,300 shares, as a result
of acting as investment advisor to its own clients. The address of
Wellington Management Company, LLP is 75 State Street, Boston, Massachusetts
02109.
(6) Based on a Schedule 13G, dated February 14, 2000, filed with the Securities
and Exchange Commission. In its Schedule 13G, Wall Street Associates
reported sole dispositive power with respect to 1,632,900 shares, and sole
voting power with respect to 109,400 shares, as a result of securities
ownership owned by advisory clients of Wall Street Associates. Wall Street
Associates disclaims beneficial ownership of all such securities. The
address of Wall Street Associates is 1200 Prospect Street, Suite 100,
LaJolla, CA 92037
(7) Voting power for these shares is held by the Principal Stockholders as
described in Notes (2) and (3) above.
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, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------------- SECURITIES ALL OTHER
OTHER ANNUAL UNDERLYING COMPENSA-
POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS TION(2)
- ------------------------------------- --------- ---------- ---------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Bill J. Lam.......................... 1999 $ 218,722 $ -- -- 130,000 $4,044
President and Chief 1998 $ 202,928 $ 105,000 -- 20,000 3,015
Executive Officer
James Devine(3)...................... 1999 $ 39,554 $ -- -- 150,000 --
Chairman of the Board
R. Clay Etheridge(4)................. 1999 $ 53,272 $ 40,000(5) -- 135,000 $5,610
Executive Vice President
and Chief Operating Officer
David W. Sharp....................... 1999 $ 184,393 $ -- -- 84,000 $4,498
Executive Vice President 1998 $ 176,760 $ 75,000 -- 20,000 --
and Chief Financial
Officer
James K. Cole........................ 1999 $ 143,005 $ -- -- 40,000 $7,103
Senior Vice President 1998 $ 143,003 $ 61,912 -- 20,000 5,963
</TABLE>
- ------------
(1) Perquisites and other personal benefits paid to each of the executive
officers in 1999 did not exceed the lesser of $50,000 or 10% of such
executive officer's salary and bonus for that year.
(2) 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.
(3) Mr. Devine became our Chairman of the Board on October 11, 1999.
(4) Mr. Etheridge became an Executive Vice President and our Chief Operating
Officer on September 13, 1999.
(5) Mr. Etheridge received a $40,000 bonus upon the commencement of his
employment with us.
9
<PAGE>
STOCK OPTIONS
The following table shows all stock options that we granted to our
executive officers in 1999.
OPTION GRANTS IN 1999
<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 1999(1) SHARE) DATE 5% 10%
- ---------------------------------------- ---------- ---------- -------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Bill J. Lam............................. 10,000 10.8% $ 5.50 1/1/09 $ 34,589 $ 87,656
20,000 7.00 3/23/09 88,045 223,123
100,000 5.94 10/8/09 373,563 946,683
James Devine............................ 150,000 12.5% $ 5.94 10/11/09 $ 560,345 $ 1,420,024
R. Clay Etheridge....................... 90,000 11.2% $ 7.75 9/1/09 $ 438,654 $ 1,111,635
45,000 5.94 10/8/09 168,104 426,007
David W. Sharp.......................... 9,000 7.0% $ 5.50 1/1/09 $ 31,130 $ 78,890
15,000 7.00 3/23/09 66,034 167,343
60,000 5.94 10/8/09 224,138 568,010
James K. Cole........................... 8,000 3.3% $ 5.50 1/1/09 $ 27,671 $ 70,125
7,000 7.00 3/23/09 30,816 78,093
25,000 5.94 10/8/09 93,390 236,671
</TABLE>
- ------------
(1) Each respective percentage includes all options granted to that executive
officer in 1999.
(2) We have calculated the appreciation over the term of the options, beginning
with the exercise price of each respective option.
The following table shows all outstanding stock options held by each of our
executive officers as of December 31, 1999. None of our executive officers
exercised stock options in 1999.
OPTIONS AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
STOCK OPTIONS AT YEAR END
-------------------------
EXERCISABLE/UNEXERCISABLE
-------------------------
<S> <C>
Bill J. Lam............................. 16,665/133,335
James Devine............................ 5,000/155,000
R. Clay Etheridge....................... 0/135,000
David W. Sharp.......................... 14,666/89,334
James K. Cole........................... 11,665/48,335
</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.
Our employment agreement with Mr. Lam originally provided for a term of
January 1, 1998 until April 1, 2001 at an annual base salary of $200,000. On
August 16, 1999, Mr. Lam's base salary was increased to $250,000. On April 1,
2000, in recognition of Mr. Lam's extraordinary effort and achievements in the
performance of his duties as our President and Chief Executive Officer, we
entered into an amendment of his employment agreement to provide for an
extension of the term of the agreement until June 30, 2003 and an additional
increase in his base salary to $300,000. Mr. Cole's employment agreement has a
term of January 1, 1998 to April 1, 2001 and provides for an annual base salary
of $143,000. Mr. Sharp's employment agreement also has a term of January 1, 1998
to April 1, 2001 and originally
10
<PAGE>
provided for an annual base salary of $175,000. On August 16, 1999, Mr. Sharp's
base salary was increased to $200,000. The term of the employment agreement for
Mr. Etheridge is from September 1, 1999 until August 31, 2002 and provides for
an annual base salary of $200,000. We may terminate each of the executive
officer's employment at any time for cause or for breach of the employment
agreement.
On October 11, 1999, we entered into an employment agreement with Mr.
Devine under which he will serve as our Chairman of the Board and assist us with
our international expansion efforts. The agreement provides for a salary of
$150,000 per year and has a three year term ending October 11, 2002. In
connection with his employment agreement, Mr. Devine was granted an option,
which vests annually in three equal increments, to purchase 150,000 shares of
our common stock under our Stock Incentive Plan at a price of $5.9375 per share,
the closing price of our common stock on the date of the grant. Mr. Devine will
also receive options to purchase 5,000 shares of our common stock on the day
following the annual meeting of our stockholders during the term of the
agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the compensation committee served as an officer or employee of
our company or any of our subsidiaries prior to or while serving on our
compensation committee. In 1999, 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 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 1999, our executive compensation program was comprised of salaries
and long term incentives in the form of stock options. We did not pay any annual
or special bonuses in 1999 other than a $40,000 guaranteed bonus to Mr.
Etheridge upon the commencement of his employment with us.
SALARY
We have entered into employment agreements with each of our executive
officers. The terms of such agreements were the results of arms-length
negotiations between us and each 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 may 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.
11
<PAGE>
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 1999, we
sought to accomplish these objectives by granting a total of 539,000 stock
options to our executive officers.
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 deduction limitation in
1999, the compensation 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 $218,722 in 1999. Effective April 1, 2000, Mr.
Lam's base salary has been increased to $300,000 per year. We did not pay Mr.
Lam an annual incentive bonus in 1999.
During 1999, Mr. Lam received grants of stock options for 130,000 shares of
common stock. 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.
PROPOSED AMENDMENT TO THE STOCK INCENTIVE PLAN
GENERAL
The board believes that our growth depends significantly upon the efforts
of our officers and key employees and that such individuals are best motivated
to put forth maximum effort on our behalf if they own an equity interest in us.
In accordance with this philosophy, in 1998 the board adopted and the
shareholders approved our Stock Incentive Plan (the Plan).
Under the Plan, key employees, officers, directors who are our employees
and consultants and advisors (the Eligible Persons) are eligible to receive: (i)
incentive and non-qualified stock options; (ii) restricted stock; and (iii)
other stock-based awards (collectively, the Incentives) when designated by the
compensation committee. Our non-employee directors receive option grants under
the Plan as described under "Stock Options for Outside Directors," below,
without action by the compensation committee. Presently, 170 of our employees,
including our executive officers and five non-employee directors, participate in
the Plan.
THE PROPOSED AMENDMENT
The board has amended the Plan, subject to shareholder approval at the 2000
annual meeting, to increase the number of shares of common stock subject to the
Plan to 2,400,000 from 1,900,000 (the Amendment) and has directed that the
Amendment be submitted for approval by our shareholders at the annual meeting.
The board recommends that our shareholders approve the Amendment. The board
is committed to creating and maintaining a compensation system based to a
significant extent on grants of equity-based incentive awards. The board
considers equity-based incentives an important component of its efforts to
attract and retain talented individuals and an increasing need as we require
additional executive talent. In addition, the board believes that option grants
help us to attain our long-term goals by linking the compensation of key
employees to shareholder returns. The board believes that approval of the
Amendment
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<PAGE>
will allow us to continue to provide management and employees with a proprietary
interest in our growth and performance.
SHARES ISSUABLE THROUGH THE PLAN
The 2,400,000 shares of common stock authorized to be issued under the Plan
pursuant to the Amendment represent approximately 12.8% of the shares of common
stock outstanding on March 31, 2000. As of December 31, 1999, options to acquire
2,022,000 shares of common stock had been granted under the Plan to officers,
directors and employees. Options to acquire 94,587 shares of common stock were
granted subject to approval of the Amendment at the annual meeting. Incentives
with respect to no more than 400,000 shares of common stock may be granted
through the Plan to a single participant in any one calendar year.
Proportionate adjustments will be made to the number of shares of common
stock subject to the Plan, including 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.
On March 31, 2000, the closing sale price of a share of common stock, as
reported on the Nasdaq National Market, was $9.25.
ADMINISTRATION OF THE PLAN
The compensation committee administers the Plan, has authority to award
Incentives under the Plan, to interpret the Plan, to establish rules or
regulations relating to the Plan, to make any other determination that it
believes necessary or advisable for the proper administration of the Plan and to
delegate its authority as appropriate. With respect to participants not subject
to Section 16 of the Securities Exchange Act of 1934 or Section 162(m) of the
Internal Revenue Code of 1986 (the Code), the compensation committee may
delegate its authority to grant Incentives under the Plan to any of our
appropriate personnel.
AMENDMENTS TO THE PLAN
The board may amend or discontinue the Plan at any time, provided that no
amendment shall be made without stockholder approval if such approval is
necessary to comply with any tax or regulatory requirement, including any
approval necessary to qualify Incentives as "performanced-based" compensation
under Section 162(m) of the Code or any successor provision, if such
qualification is deemed necessary or advisable by the compensation committee.
Except in limited circumstances no amendment or discontinuance of the Plan may
change or impair any previously-granted Incentive without the consent of the
recipient thereof.
TYPES OF INCENTIVES
STOCK OPTIONS. A stock option is a right to purchase shares of common
stock from us. The compensation committee may grant non-qualified stock options
or incentive stock options to purchase shares of common stock. The committee
will determine the number and exercise price of the options, provided that the
option exercise price may not be less than the fair market value of the common
stock on the date of grant, except that, under certain circumstances, and 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. The term of the options and the time or times that the options
become exercisable will also be determined by the compensation committee,
provided that the term of an incentive stock option may not exceed 10 years.
The option exercise price may be paid in cash, by check, in shares of
common stock that, unless otherwise permitted by the compensation committee,
have been held for a least six months, or through a broker-assisted exercise.
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<PAGE>
Incentive stock options will be subject to certain additional requirements
necessary in order to qualify as incentive stock options under Section 422 of
the Code.
RESTRICTED STOCK. 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 of time (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 us in the
event of termination of employment or in the event that 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 terms
and conditions of the Plan and any restrictions on the receipt of dividends that
may be imposed in the incentive agreement, each participant receiving restricted
stock will have the rights of a shareholder with respect thereto, including,
without limitation, the right to vote any shares of common stock. 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,
shareholder return, earnings, stock price, return on equity, return on total
capital, safety performance, reduction of expenses or increase in our cash flow,
one of our divisions 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 compensation committee, relative to
internal goals or relative to levels attained in prior years.
OTHER STOCK-BASED AWARDS. The compensation committee is authorized to
grant to Eligible Persons 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 our common stock.
The compensation committee determines 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 us or with which we combine, 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, may not be less than
100% of the fair market value of the securities to which such award relates on
the date of grant. 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 may be earned shall be any or a combination of
the following performance measures: earnings per share, return on assets, an
economic value added measure, shareholder return, earnings, stock price, return
on equity, return on total capital, safety performance, reduction of expenses or
increase in our cash flow, one of our divisions 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 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 will not create any rights
in such participant as one of our shareholders until the issuance of shares of
common stock with respect to such Other Stock-Based Award.
STOCK OPTIONS FOR OUTSIDE DIRECTORS
Upon completion of our initial public offering of common stock in December
1998, each director who was not also one of our employees (an Outside Director)
was granted non-qualified options to purchase
14
<PAGE>
5,000 shares of common stock at an exercise price equal to the initial public
offering price. Each new Outside Director is also granted non-qualified options
to purchase 5,000 shares of common stock at such time as he first becomes a
member of the board. In addition, for as long as the Plan remains in effect and
shares of common stock remain available for issuance thereunder, each Outside
Director will be automatically granted a non-qualified stock option to purchase
5,000 shares of common stock on the date following the annual meeting of our
shareholders, without any action on the part of the compensation committee.
These options become exercisable one year after grant and have exercise prices
per share equal to the fair market value of a share of common stock on the date
of grant. Director options expire ten years after the date of grant, except that
to the extent otherwise exercisable, director options must be exercised within
three months from termination of board service or, in the event of death,
disability or retirement on or after reaching age 65, within eighteen months
thereafter.
CHANGE OF CONTROL
All outstanding stock options granted under the 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 us upon (i) approval by
our shareholders of a reorganization, merger or consolidation of us or sale of
all or substantially all of our assets, unless (x) all or substantially all of
the individuals and entities who were the beneficial owners of our 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 trusts of
us 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; and (z) a majority of the board
of directors of the resulting corporation were members of our 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 our shareholders of our
complete liquidation or dissolution; (iii) a person or group of persons becoming
the beneficial owner of more than 50% of our common stock (subject to certain
exceptions); or (iv) the individuals who as of the adoption of the 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
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.
TRANSFERABILITY OF INCENTIVES
Incentives are transferable only by will, by the laws of descent and
distribution and pursuant to a domestic relations order, except that stock
options may also be transferred, if permitted by the compensation committee and
if so provided in the incentive agreement or an amendment thereto, to immediate
family members, to a family partnership, to a family limited liability company
or to a trust for the sole benefit of immediate family members.
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<PAGE>
EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH
If a participant ceases to be one of our employees for any reason,
including death, disability or retirement, any Incentive may be exercised, shall
vest or shall expire at such time or times as may be determined by the
compensation committee in the incentive agreement with the participant. The
compensation committee has 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 is required only if the
modification materially impairs the rights previously provided to the
participant in the incentive agreement.
PAYMENT OF WITHHOLDING TAXES IN STOCK
A participant may, but is not required to, satisfy his or her withholding
tax obligation by electing to have us withhold, from the shares the participant
would otherwise receive upon exercise or vesting of an Incentive, shares of
common stock having a value equal to the amount required to be withheld. This
election must be made prior to the date on which the amount of tax to be
withheld is determined and is subject to the compensation committee's right of
disapproval.
AWARDS TO BE GRANTED
The grant of awards to officers and employees under the Plan is entirely in
the discretion of the compensation committee. The compensation committee has
granted, subject to approval of the Amendment, options to purchase an aggregate
of 84,587 shares of common stock to our employees and options to purchase an
aggregate of 10,000 shares of common stock to our Outside Directors. The
exercise price with respect to 24,587 options granted to our employees is $5.94
per share, with respect to 50,000 options granted to our employees is $5.69 per
share and with respect to 10,000 options granted to our employees is $5.81 per
share. All such option grants to our employees vest in three equal installments,
over three years. The exercise price with respect to the 10,000 options granted
to Outside Directors is $6.31 per share and such options vest in one year after
the grant date.
The following table sets forth information with respect to benefits under
the Plan, as proposed to be amended, that were granted subject to shareholder
approval of the Amendment, by (i) each of the officers identified herein as a
"Named Executive Officer," (ii) all executive officers as a group, (iii) all
directors, other than executive officers, as a group, and (iv) all employees,
other than executive officers, as a group.
AMENDED PLAN BENEFITS
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
NAME AND POSITION UNDERLYING OPTIONS
- ------------------------------------- --------------------
<S> <C>
Bill J. Lam
President and Chief Executive
Officer........................ 10,690
James Devine
Chairman of the Board........... 50,000
R. Clay Etheridge
Executive Vice President and
Chief Operating Officer........ 4,811
David W. Sharp
Executive Vice President and
Chief Financial Officer........ 6,414
James K. Cole
Senior Vice President........... 2,672
Executive Officer Group.............. 74,587
Outside Directors other than
Executive Officers................. 10,000
Non-Executive Officer Employee
Group.............................. 10,000
</TABLE>
16
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
Under existing federal income tax provisions, a participant who receives
stock options or who receives shares of restricted stock that are subject to
restrictions that create a "substantial risk of forfeiture" (within the
meaning of Section 83 of the Code) will not normally realize any income, nor
will we normally receive any deduction for federal income tax purposes, in the
year such Incentive is granted.
When a non-qualified stock option granted pursuant to the Plan is
exercised, the employee will realize ordinary income measured by the difference
between the aggregate fair market value of the shares of common stock on the
exercise date and the aggregate purchase price of the shares of common stock as
to which the option is exercised, and, subject to Section 162(m) of the Code, we
will be entitled to a deduction in the year the option is exercised equal to the
amount the employee is required to treat as ordinary income.
An employee generally will not recognize any income upon the exercise of
any incentive stock option, but the excess of the fair market value of the
shares at the time of exercise over the option price will be an item of
adjustment, which may, depending on particular factors relating to the employee,
subject the employee to the alternative minimum tax imposed by Section 55 of the
Code. An employee will recognize capital gain or loss in the amount of the
difference between the exercise price and the sale price on the sale or exchange
of stock acquired pursuant to the exercise of an incentive stock option,
provided the employee does not dispose of such stock within either two years
from the date of grant or one year from the date of exercise of the incentive
stock option (the Required Holding Periods). An employee disposing of such
shares before the expiration of the Required Holding Period will recognize
ordinary income generally equal to the difference between the option price and
the fair market value of the stock on the date of exercise. The remaining gain,
if any, will be capital gain. We will not be entitled to a federal income tax
deduction in connection with the exercise of an incentive stock option, except
where the employee disposes of the common stock received upon exercise before
the expiration of the Required Holding Periods.
An employee who receives restricted stock will normally recognize taxable
income on the date the shares become transferable or no longer subject to
substantial risk of forfeiture or on the date of their earlier disposition. The
amount of such taxable income will be equal to the amount by which the fair
market value of the shares of common stock on the date such restrictions lapse
(or any earlier date on which the shares are disposed of) exceeds their purchase
price, if any. An employee may elect, however, to include in income in the year
of purchase or grant the excess of the fair market value of the shares of common
stock (without regard to any restrictions) on the date of purchase or grant over
its purchase price. Subject to the limitations imposed by Section 162(m) of the
Code, we will be entitled to a deduction for compensation paid in the same year
and in the same amount as income is realized by the employee. Dividends
currently paid to the participant will be taxable compensation income to the
participant and deductible by us.
A participant who receives a stock award under the Plan will realize
ordinary income in the year of the award equal to the fair market value of the
shares of common stock covered by the award on the date it is made and, subject
to Section 162(m) of the Code, we will be entitled to a deduction equal to the
amount the employee is required to treat as ordinary income.
When the exercisability or vesting of an Incentive granted under the Plan
is accelerated upon a change of control, any excess on the date of the change in
control of the fair market value of the shares or cash issued under Incentives
over the purchase price of such shares may be characterized as "parachute
payments" (within the meaning of Section 280G of the Code) if the sum of such
amounts and any other such contingent payments received by the employee exceeds
an amount equal to three times the "base amount" for such employee. The base
amount generally is the average of the annual compensation of such employee for
the five years preceding such change in ownership or control. An "excess
parachute payment" with respect to any employee, is the excess of the present
value of the parachute payments to such person, in the aggregate, over and above
such person's base amount. If the amounts received by an employee upon a change
in control are characterized as parachute payments, such employee will be
subject to a 20% excise tax on the excess parachute payments pursuant to Section
4999 of the Code, and we will be denied any deduction with respect to such
excess parachute payments.
17
<PAGE>
This summary of federal income tax consequences does not purport to be
complete. Reference should be made to the applicable provisions of the Code.
There also may be state and local income tax consequences applicable to
transactions involving Incentives.
VOTE REQUIRED
The affirmative vote of the majority of the total votes cast in person or
by proxy is required for approval of the Amendment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
THE PROPOSED AMENDMENT TO THE STOCK INCENTIVE PLAN.
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<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, 1999 with the total return on the S&P 500 Index and our Peer
Group Index for the same period. Our Peer Index Graph 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.
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
<TABLE>
<CAPTION>
TOTAL STOCKHOLDER RETURN
----------------------------------------------------
INDEX APRIL 1, 1998 DECEMBER 31, 1998 DECEMBER 31, 1999
- ----- ------------- ----------------- -----------------
<S> <C> <C> <C>
Horizon Offshore, Inc.... $ 100.0 $ 42.31 $ 41.38
Peer Group Index......... $ 100.0 $ 40.09 $ 57.43
S & P 500 Index.......... $ 100.0 $110.87 $132.51
</TABLE>
19
<PAGE>
CERTAIN TRANSACTIONS
On August 18, 1998 we entered into a master services agreement with Odyssea
Marine, Inc. (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. During the 1999 fiscal year,
Odyssea billed us $3.7 million and we paid Odyssea $4.8 million for services
rendered under the agreement. As of December 31, 1999, we owed Odyssea $30,000
for services rendered.
On August 28, 1998 we entered into an agreement with Prime Natural
Resources, Inc. (Prime), an entity that is majority 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 and billed Prime $5.4 million
for services rendered under the agreement during 1999. As of December 31, 1998,
we had an outstanding receivable balance of $1.3 million, compared to $3.1
million as of December 31, 1999. As of March 31, 2000, we had no outstanding
receivable balance.
We have entered into a registration rights agreement with the Principal
Stockholders pursuant to which the Principal Stockholders have limited rights to
require us to register under the Securities Act of 1933 shares of our common
stock owned by them. 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, either 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
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. In connection with the
amendment of his employment agreement, the term of Mr. Lam's promissory notes
was extended to June 30, 2003. 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
1999, a Form 4 on behalf of Mr. Devine was inadvertently filed late due to a
clerical error.
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<PAGE>
RELATIONSHIP WITH INDEPENDENT
PUBLIC ACCOUNTANTS
Our consolidated financial statements for the year ended December 31, 1999,
were audited by the firm of Arthur Anderson LLP. Our board of directors has
approved the retention of Arthur Anderson LLP for the fiscal year ending
December 31, 2000. We expect that representatives of Arthur Anderson LLP will be
present at our 2000 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 14, 2000
21
<PAGE>
HORIZON OFFSHORE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS ON MAY 2, 2000
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 2, 2000, and any adjournments
thereof.
(PLEASE SEE REVERSE SIDE)
^FOLD AND DETACH HERE^
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A PLEASE MARK [X]
VOTE FOR THE NOMINEE LISTED BELOW. YOUR VOTE AS
INDICATED IN
THIS EXAMPLE
1. Election of Directors
FOR the election of Edward L. Moses, Jr. WITHHOLD AUTHORITY to vote for all
and James Devine as directors of the nominees listed below:
Company Edward L. Moses, Jr.; James Devine
[ ] [ ]
Instruction: To withhold authority to vote for an individual nominee, write that
nominee's name in the space provided below.
________________________________________________________________________________
2. An amendment to the Company's Stock Incentive Plan FOR AGAINST ABSTAIN
to increase the number of shares of common stock [ ] [ ] [ [
that may be issued under the plan.
3. 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 nominees listed above and
FOR the amendment to the Stock Incentive Plan. The
individual designated above will vote in his discretion on
any other matter that may properly come before the
meeting.
Dated ____________________________________________, 2000
________________________________________________________
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.
- --------------------------------------------------------------------------------
^FOLD AND DETACH HERE^
