sv4za
As filed with the Securities and Exchange Commission on
November 2, 2007
Registration No. 333-145550
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 3
to
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
CAL DIVE INTERNATIONAL,
INC.
(Exact name of registrant as
specified in its charter)
|
|
|
|
|
Delaware
|
|
1389
|
|
61-1500501
|
(State or other jurisdiction
of
incorporation or organization)
|
|
(Primary Standard Industrial
Classification Code Number)
|
|
(I.R.S. Employer
Identification Number)
|
400 North Sam Houston Parkway,
E., Suite 1000
Houston, Texas 77060
(281) 618-0400
(Address, including zip code,
and telephone number, including area code, of registrants
principal executive offices)
Lisa Manget Buchanan
400 North Sam Houston Parkway,
E., Suite 1000
Houston, Texas 77060
(281) 618-0400
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies To:
|
|
|
|
|
David S. Peterman
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010
Telephone: (713) 651-5151
Facsimile: (713) 651-5246
|
|
William B. Gibbens, III
Horizon Offshore, Inc.
2500 CityWest Boulevard, Suite 2200
Houston, Texas 77042
Facsimile: (713) 361-2693
|
|
William B. Masters
Jones, Walker, Waechter, Poitevent,
Carrère & Denègre, L.L.P.
201 St. Charles Avenue, Suite 5100
New Orleans, Louisiana 70170
Facsimile: (504) 582-8012
|
Approximate date of commencement of proposed sale to the
public: As soon as practicable after the
effectiveness of this registration statement and the
satisfaction or waiver of all other conditions to the merger
described herein.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following
box. o
If this Form is filed to register additional securities of an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering. o
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment that
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, or until the Registration
Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
The
information contained in this information statement/proxy
statement/prospectus is not complete and may be changed. These
securities may not be sold until the registration statement
filed with the Securities and Exchange Commission, of which this
document is a part, is effective. This information
statement/proxy statement/prospectus is not an offer to sell
these securities, and it is not soliciting an offer to buy these
securities, in any state where the offer or sale is not
permitted.
|
SUBJECT TO COMPLETION, DATED
November 2, 2007
INFORMATION STATEMENT/PROXY STATEMENT/PROSPECTUS
Proposed Merger Your Vote Is Very Important
Cal Dive International, Inc. and Horizon Offshore, Inc.
have agreed on a merger transaction involving our two companies.
We must obtain the approval of Horizons stockholders
before we can complete the merger. We are sending this
information statement/proxy statement/prospectus to Horizon
stockholders to ask them to vote in favor of the adoption of the
merger agreement. Cal Dive has already obtained the
approval of the issuance of its shares of common stock in the
merger by its majority stockholder. We are sending this
information statement/proxy statement/prospectus to the other
Cal Dive stockholders in order to inform them of such
approval and of the proposed merger.
If Horizon stockholders approve and adopt the merger agreement
and the merger is subsequently completed, Horizon will merge
into a subsidiary of Cal Dive, and each share of Horizon
common stock will be converted into the right to receive $9.25
in cash, without interest, and 0.625 of a share of Cal Dive
common stock, plus additional cash for any fractional share. The
implied value of the stock portion of the merger consideration
will fluctuate as the market price of Cal Dive common stock
fluctuates. You should obtain current stock price quotations for
Cal Dive common stock and Horizon common stock.
Cal Dive common stock is quoted on the New York Stock
Exchange under the symbol DVR. Horizon common stock
is quoted on the Nasdaq Global Market under the symbol
HOFF.
This information statement/proxy statement/prospectus is being
furnished to Horizon stockholders in connection with the
solicitation of proxies by Horizon for use at its special
meeting of stockholders and to Cal Dive stockholders in
order to advise them of the proposed merger and that the
requisite approval of Cal Dive stockholders has already
been obtained. The date, time, and place of the special meeting
of the Horizon stockholders are:
|
Date: December 10, 2007
|
Time: 10:00 a.m.
|
Place: Horizons Corporate Offices
2500 CityWest Boulevard, Suite 2200
Houston, Texas 77042
|
This document is a prospectus related to the issuance of shares
of Cal Dive common stock in connection with the merger, a
proxy statement for Horizon to use in soliciting proxies for its
special meeting of stockholders, and an information statement
for those Cal Dive stockholders who were not party to the
approval that has already been obtained. Attached is an
important document containing answers to frequently asked
questions and a summary description of the merger (beginning on
page 1), followed by more detailed information about
Cal Dive, Horizon, the proposed merger, and the merger
agreement. We urge you to read this document carefully and in
its entirety. In particular, you should consider the matters
discussed under Risk Factors beginning on
page 13 of this information statement/proxy
statement/prospectus.
|
|
|
|
|
|
Quinn J. Hébert
|
|
David W. Sharp
|
President and Chief Executive Officer
|
|
President and Chief Executive Officer
|
Cal Dive International, Inc.
|
|
Horizon Offshore, Inc.
|
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of the
securities to be issued in connection with the merger or passed
upon the adequacy or accuracy of this information
statement/proxy statement/prospectus. Any representation to the
contrary is a criminal offense.
This information statement/proxy statement/prospectus is dated
November 7, 2007, and is first being mailed to
Cal Dive and Horizon stockholders on or about
November 8, 2007.
REFERENCES
TO ADDITIONAL INFORMATION
As used in this information statement/proxy
statement/prospectus, Cal Dive refers to
Cal Dive International, Inc. and its consolidated
subsidiaries and Horizon refers to Horizon Offshore,
Inc. and its consolidated subsidiaries, in each case, except
where the context otherwise requires or as otherwise indicated.
This information statement/proxy statement/prospectus
incorporates by reference important business and financial
information about Horizon from documents that it has filed with
the Securities and Exchange Commission but that have not been
included in or delivered with this information statement/proxy
statement/prospectus. For a listing of documents incorporated by
reference into this information statement/proxy
statement/prospectus, please see the section entitled
Where You Can Find More Information beginning on
page 186 of this information statement/proxy
statement/prospectus.
You can obtain any of the documents incorporated by reference
into this information statement/proxy statement/prospectus from
Horizon through the SEC Filings link located on the
investor relations page of its website at
www.horizonoffshore.com or from the Securities and
Exchange Commission through its website at www.sec.gov.
We are not incorporating the contents of the websites of the
Securities and Exchange Commission, Horizon or any other person
into this document. We are only providing the information about
how you can obtain certain documents that are specifically
incorporated by reference into this information statement/proxy
statement/prospectus at these websites for your convenience.
Horizon will provide you with copies of the documents
relating to Horizon incorporated by reference, excluding any
exhibits to those documents, without charge, if you request it
in writing or by telephone from:
HORIZON OFFSHORE, INC.
2500 CityWest Boulevard, Suite 2200
Houston, Texas 77042
Attn.: William B. Gibbens, III, Secretary
Telephone:
(713) 361-2600
In order for you to receive timely delivery of the documents
in advance of the Horizon special meeting, Horizon should
receive your request no later than November 26, 2007.
Horizon has supplied all information contained in or
incorporated by reference in this information statement/proxy
statement/prospectus relating to Horizon. Cal Dive has
supplied all information contained in this information
statement/proxy statement/prospectus relating to Cal Dive.
Cal Dive and Horizon have both contributed to information
relating to the merger.
Cal Dive International, Inc.
NOTICE OF APPROVAL GIVEN AND ACTION TO BE TAKEN
To the Stockholders of Cal Dive International, Inc.:
WE ARE NOT ASKING YOU FOR YOUR PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY. THE ACTIONS DESCRIBED BELOW HAVE ALREADY
BEEN APPROVED BY WRITTEN CONSENT OF HOLDERS OF A MAJORITY OF CAL
DIVE INTERNATIONAL, INC.S OUTSTANDING SHARES OF VOTING
STOCK. A VOTE OF THE REMAINING STOCKHOLDERS IS NOT NECESSARY.
Pursuant to the requirements of Section 14(c) of the
Securities Exchange Act of 1934 and Section 228(d) of the
General Corporation Law of the State of Delaware, this
information statement is being mailed on or about
November 8, 2007 to holders of record as of June 11,
2007 of shares of common stock, par value $0.01
(Cal Dive Common Stock), of Cal Dive
International, Inc., a Delaware corporation
(Cal Dive).
This information statement is being furnished in connection with
the Agreement and Plan of Merger, dated as of June 11,
2007, entered into by and among Cal Dive, Cal Dive
Acquisition, LLC, a wholly-owned subsidiary of Cal Dive
(Merger Sub), and Horizon Offshore, Inc.
(Horizon). If Horizon stockholders approve and adopt
the merger agreement and the merger is subsequently completed,
Horizon will merge into Merger Sub, and each share of Horizon
common stock will be converted into the right to receive $9.25
in cash, without interest, and 0.625 of a share of Cal Dive
Common Stock, plus additional cash for any fractional share. We
currently anticipate that a total of approximately
20.4 million shares of Cal Dive Common Stock will be
issued in the merger.
Approval of the issuance of the Cal Dive Common Stock in
the merger by the holders of a majority of the outstanding
shares of Cal Dive Common Stock is required pursuant to the
rules of the New York Stock Exchange. However, on June 11,
2007, Helix Energy Solutions Group, Inc., which on that date
owned a majority of the outstanding shares of Cal Dive
Common Stock, executed a written consent approving such
issuance. Therefore, no further action on the part of
Cal Dive stockholders is required in connection with the
proposed merger.
A special meeting of Horizon stockholders has been scheduled for
December 10, 2007. We currently anticipate that the
consummation of the merger and the other transactions
contemplated by the merger agreement will occur promptly
following the Horizon stockholder meeting, provided the merger
agreement is approved and adopted by the holders of a majority
of the outstanding shares of Horizon common stock, and subject
to the satisfaction of other customary conditions to closing.
By Order of the Board of Directors,
Lisa M. Buchanan
Secretary
November 7, 2007
Horizon Offshore, Inc.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 10, 2007
To the Stockholders of Horizon Offshore, Inc.:
You are cordially invited to attend the special meeting of
stockholders of Horizon Offshore, Inc., a Delaware corporation
(Horizon), to be held on December 10, 2007, at
10:00 a.m., Central Time, at Horizons corporate
offices located at 2500 CityWest Boulevard, Suite 2200, Houston,
Texas 77042. As described in this information statement/proxy
statement/prospectus, the special meeting will be held for the
following purposes:
1. To consider and vote upon a proposal to approve and
adopt the Agreement and Plan of Merger, dated as of
June 11, 2007, by and among Cal Dive International,
Inc. (Cal Dive), Cal Dive Acquisition,
LLC, a wholly-owned subsidiary of Cal Dive (Merger
Sub), and Horizon. If Horizon stockholders approve and
adopt the merger agreement and the merger is subsequently
completed, Horizon will merge into Merger Sub, and each share of
Horizon common stock will be converted into the right to receive
$9.25 in cash, without interest, and 0.625 of a share of
Cal Dive common stock, par value $0.01 per share, plus
additional cash for any fractional share;
2. To consider and vote upon a proposal to adjourn or
postpone the special meeting, if necessary, to solicit
additional proxies in favor of the approval and adoption of the
merger agreement; and
3. To consider and transact any other business as may
properly be brought before the special meeting or any
adjournments or postponements thereof.
The merger proposal is more fully described in the accompanying
information statement/proxy statement/prospectus, which you
should read carefully in its entirety before voting.
THE BOARD OF DIRECTORS OF HORIZON HAS CAREFULLY CONSIDERED
THE TERMS OF THE MERGER AGREEMENT AND THE MERGER AND BELIEVES
THAT THE MERGER IS ADVISABLE AND FAIR TO, AND IN THE BEST
INTERESTS OF, HORIZON AND ITS STOCKHOLDERS. THE BOARD OF
DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
MERGER AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
The Board of Directors of Horizon has fixed the close of
business on October 17, 2007 as the record date for the
determination of stockholders entitled to notice of, and to vote
at, the special meeting or any reconvened meeting following an
adjournment or postponement thereof. Only stockholders of record
at the close of business on such record date are entitled to
notice of and to vote at such meeting. A complete list of such
stockholders will be available for examination at the special
meeting and at Horizons offices at 2500 CityWest
Boulevard, Suite 2200, Houston, Texas 77042, for ten days
prior to the special meeting during ordinary business hours for
the examination by any such stockholder for any purpose germane
to the special
meeting.
It is important that your stock be represented at the special
meeting regardless of the number of shares you hold. Please
promptly mark, date, sign, and return the enclosed proxy in the
accompanying envelope, whether or not you intend to be present
at the special meeting. In some cases, you may be able to
instruct your bank or brokerage firm how to exercise your proxy
by telephone or the Internet. See Information About the
Special Meeting and Voting beginning on page 35. Your
proxy is revocable at any time prior to its use at the special
meeting.
Please do not send your Horizon common stock certificates
with the enclosed proxy. If the merger is completed, the
exchange agent will send you instructions regarding the
surrender of your stock certificates.
In connection with the proposed merger, you may exercise
appraisal rights as provided in the Delaware General Corporation
Law. The procedure for exercising your appraisal rights is
summarized under the heading Appraisal Rights in the
attached information statement/proxy statement/prospectus.
By order of the Board of Directors,
William B. Gibbens, III
Secretary
November 7, 2007
TABLE OF
CONTENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
1
|
|
|
|
|
8
|
|
|
|
|
8
|
|
|
|
|
8
|
|
|
|
|
9
|
|
|
|
|
9
|
|
|
|
|
9
|
|
|
|
|
10
|
|
|
|
|
10
|
|
|
|
|
10
|
|
|
|
|
10
|
|
|
|
|
11
|
|
|
|
|
11
|
|
|
|
|
11
|
|
|
|
|
12
|
|
|
|
|
12
|
|
|
|
|
12
|
|
|
|
|
12
|
|
|
|
|
12
|
|
|
|
|
13
|
|
|
|
|
13
|
|
|
|
|
18
|
|
|
|
|
27
|
|
|
|
|
28
|
|
|
|
|
28
|
|
|
|
|
30
|
|
|
|
|
32
|
|
|
|
|
33
|
|
|
|
|
34
|
|
|
|
|
34
|
|
|
|
|
35
|
|
|
|
|
35
|
|
|
|
|
35
|
|
|
|
|
35
|
|
|
|
|
35
|
|
|
|
|
36
|
|
|
|
|
36
|
|
|
|
|
37
|
|
|
|
|
37
|
|
|
|
|
37
|
|
|
|
|
37
|
|
|
|
|
38
|
|
|
|
|
38
|
|
i
|
|
|
|
|
|
|
Page
|
|
|
|
|
39
|
|
|
|
|
39
|
|
|
|
|
39
|
|
|
|
|
45
|
|
|
|
|
46
|
|
|
|
|
47
|
|
|
|
|
54
|
|
|
|
|
55
|
|
|
|
|
62
|
|
|
|
|
62
|
|
|
|
|
62
|
|
|
|
|
62
|
|
|
|
|
65
|
|
|
|
|
65
|
|
|
|
|
66
|
|
|
|
|
66
|
|
|
|
|
67
|
|
|
|
|
67
|
|
|
|
|
67
|
|
|
|
|
67
|
|
|
|
|
67
|
|
|
|
|
67
|
|
|
|
|
68
|
|
|
|
|
68
|
|
|
|
|
69
|
|
|
|
|
69
|
|
|
|
|
72
|
|
|
|
|
72
|
|
|
|
|
72
|
|
|
|
|
72
|
|
|
|
|
72
|
|
|
|
|
73
|
|
|
|
|
73
|
|
|
|
|
73
|
|
|
|
|
73
|
|
|
|
|
74
|
|
|
|
|
74
|
|
|
|
|
75
|
|
|
|
|
75
|
|
|
|
|
76
|
|
|
|
|
77
|
|
|
|
|
77
|
|
|
|
|
79
|
|
ii
|
|
|
|
|
|
|
Page
|
|
|
|
|
80
|
|
|
|
|
80
|
|
|
|
|
81
|
|
|
|
|
81
|
|
|
|
|
81
|
|
|
|
|
81
|
|
|
|
|
82
|
|
|
|
|
82
|
|
|
|
|
82
|
|
|
|
|
83
|
|
|
|
|
83
|
|
|
|
|
84
|
|
|
|
|
84
|
|
|
|
|
84
|
|
|
|
|
94
|
|
|
|
|
96
|
|
|
|
|
97
|
|
|
|
|
97
|
|
|
|
|
97
|
|
|
|
|
112
|
|
|
|
|
112
|
|
|
|
|
112
|
|
|
|
|
114
|
|
|
|
|
116
|
|
|
|
|
116
|
|
|
|
|
116
|
|
|
|
|
123
|
|
|
|
|
124
|
|
|
|
|
132
|
|
|
|
|
133
|
|
|
|
|
133
|
|
|
|
|
134
|
|
|
|
|
134
|
|
|
|
|
135
|
|
|
|
|
170
|
|
|
|
|
176
|
|
|
|
|
176
|
|
|
|
|
176
|
|
|
|
|
177
|
|
|
|
|
179
|
|
|
|
|
180
|
|
|
|
|
180
|
|
|
|
|
180
|
|
iii
|
|
|
|
|
|
|
Page
|
|
|
|
|
181
|
|
|
|
|
185
|
|
|
|
|
185
|
|
|
|
|
185
|
|
|
|
|
186
|
|
|
|
|
186
|
|
ANNEXES
No person is authorized to give any information or to make
any representation with respect to the matters described in this
information statement/proxy statement/prospectus other than
those contained herein or in the documents incorporated by
reference herein and, if given or made, such information or
representation must not be relied upon as having been authorized
by Cal Dive or Horizon. This information statement/proxy
statement/prospectus does not constitute an offer to sell or a
solicitation of an offer to buy the securities offered by this
information statement/proxy statement/prospectus or a
solicitation of a proxy in any jurisdiction where, or to any
person whom, it is unlawful to make such an offer or
solicitation. Neither the delivery hereof nor any distribution
of securities made hereunder shall, under any circumstances,
create an implication that there has been no change in the
affairs of Cal Dive or Horizon since the date hereof or
that the information contained or incorporated by reference in
this information statement/proxy statement/prospectus is correct
as of any time subsequent to the date hereof.
iv
QUESTIONS
AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING
The following questions and answers briefly address some
commonly asked questions about the special meeting and the
merger. They may not include all the information that is
important to you. We urge you to read carefully this entire
information statement/proxy statement/prospectus, including the
annexes and the other documents we refer to in this information
statement/proxy statement/prospectus.
Frequently
Used Terms
We have generally avoided the use of technical defined terms in
this information statement/proxy statement/prospectus but a few
frequently used terms may be helpful for you to have in mind at
the outset. We refer to:
|
|
|
|
|
Cal Dive International, Inc., a Delaware corporation, as
Cal Dive;
|
|
|
|
Horizon Offshore, Inc., a Delaware corporation, as
Horizon;
|
|
|
|
Cal Dive Acquisition, LLC, a newly formed Delaware limited
liability company and a wholly-owned subsidiary of
Cal Dive, as Merger Sub;
|
|
|
|
Helix Energy Solutions Group, Inc., a Minnesota corporation, as
Helix;
|
|
|
|
the merger of Horizon into Merger Sub and the conversion of
shares of Horizon common stock into the right to receive cash
and shares of Cal Dive common stock as the
merger;
|
|
|
|
the Agreement and Plan of Merger, dated as of June 11,
2007, among Cal Dive, Merger Sub, and Horizon as the
merger agreement;
|
|
|
|
the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, as the HSR
Act or the
Hart-Scott-Rodino
Act; and
|
|
|
|
the General Corporation Law of the State of Delaware as the
DGCL.
|
About the
Merger
|
|
|
Q1: |
|
What am I voting on? |
|
A1: |
|
Cal Dive is proposing to acquire Horizon. Horizon stockholders
are being asked to vote to approve and adopt the merger
agreement. In the merger, Horizon will merge into Merger Sub.
Merger Sub would be the surviving entity in the merger and would
remain a wholly-owned subsidiary of Cal Dive, and Horizon would
no longer be a separate company. |
|
|
|
Horizon is also seeking your approval of a proposal to adjourn
or postpone the special meeting, if necessary, to solicit
additional proxies in favor of approval and adoption of the
merger agreement. |
|
Q2: |
|
What will I receive in exchange for my Horizon shares? |
|
A2: |
|
Upon completion of the merger, you will receive a combination of
$9.25 in cash, without interest, and 0.625 of a share of Cal
Dive common stock, for each share of Horizon common stock that
you own. We refer to the aggregate amount of the stock
consideration and cash consideration to be received by Horizon
stockholders pursuant to the merger as the merger consideration.
The merger consideration is not subject to any adjustment. No
fractional shares will be issued. In lieu of any fractional
shares, the holder of any fractional share will receive cash
equal to the product of such fractional share and the average
closing sales price of Cal Dives common stock on the New
York Stock Exchange for the 20 trading days immediately
preceding the third trading day before the closing. |
|
Q3: |
|
Do I have the option to receive all cash consideration or all
stock consideration for my Horizon shares? |
|
A3: |
|
No. All Horizon stockholders will receive the fixed
combination of the cash consideration and the stock
consideration for each share of Horizon common stock that they
own. |
1
|
|
|
Q4: |
|
What are the U.S. federal income tax consequences of the
merger to me? |
|
A4: |
|
The merger is intended to constitute a
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as
amended, or the Code. As a result of the merger qualifying as a
reorganization within the meaning of
Section 368(a) of the Code, the consequences to a Horizon
stockholder who exchanges, in the merger, his Horizon shares for
cash and Cal Dive shares will be to recognize gain (but not
loss) in an amount equal to the lesser of: |
|
|
|
the amount of cash received pursuant to the merger
(excluding any cash received in lieu of fractional shares of Cal
Dive common stock), and
|
|
|
|
the amount, if any, by which the sum of the fair
market value of the shares of Cal Dive common stock as of the
effective time of the merger and the amount of cash received
pursuant to the merger for those Horizon shares exceeds his
adjusted tax basis in those Horizon shares.
|
|
|
|
The merger is conditioned on the receipt of legal opinions to
the effect that the merger will constitute a
reorganization within the meaning of
Section 368(a) of the Code. |
|
|
|
For a more complete discussion of the U.S. federal income tax
consequences of the merger, see Material U.S. Federal
Income Tax Consequences beginning on page 68 of this
information statement/proxy statement/prospectus. |
|
|
|
Tax matters are very complicated and the tax consequences
of the merger to any particular Horizon stockholder will depend
on that stockholders particular situation. Horizon
stockholders should consult their own tax advisor to determine
the specific tax consequences of the merger to them. |
|
Q5: |
|
What is the required vote to approve and adopt the merger
agreement? |
|
A5: |
|
Holders of a majority of the outstanding shares of Horizon
common stock entitled to vote at the special meeting must vote
to approve and adopt the merger agreement to complete the
merger. Cal Dive has already received approval of the issuance
of its common stock in the merger by the holder of a majority of
its outstanding shares. |
|
Q6: |
|
What happens if I do not vote? |
|
A6: |
|
Because the required vote of Horizon stockholders is based upon
the number of outstanding shares of Horizon common stock
entitled to vote rather than upon the number of shares actually
voted, abstentions from voting and broker non-votes
will have the same effect as a vote AGAINST approval and
adoption of the merger agreement. If you return a properly
signed proxy card but do not indicate how you want to vote, your
proxy will be counted as a vote FOR approval and adoption of the
merger agreement and FOR approval of any proposal to adjourn or
postpone the special meeting to solicit additional proxies in
favor of approval and adoption of the merger agreement. |
|
Q7: |
|
How does the Horizon board of directors recommend I vote? |
|
A7: |
|
The board of directors of Horizon unanimously recommends that
Horizons stockholders vote FOR approval and adoption of
the merger agreement. The Horizon board of directors believes
the merger is advisable and in the best interests of Horizon and
its stockholders. |
|
Q8: |
|
Do I have appraisal rights with respect to the merger? |
|
A8: |
|
Yes. Under Delaware law, a Horizon stockholder has the right to
dissent from the merger and, in lieu of receiving the merger
consideration, obtain payment in cash of the fair value of your
shares of Horizon common stock as determined by the Delaware
Chancery Court. To exercise appraisal rights, a Horizon
stockholder must strictly follow the procedures prescribed by
Section 262 of the DGCL. See The Merger
Appraisal Rights beginning on page 62 of this
information statement/proxy statement/prospectus. In addition,
the full text of the applicable provisions of Delaware law is
included as Annex D to this information statement/proxy
statement/prospectus. |
2
|
|
|
Q9: |
|
Will the rights of a Horizon stockholder change as a result
of the merger? |
|
A9: |
|
Yes. Through the date of the merger, the rights of Cal Dive
stockholders will continue to be governed by Cal Dives
certificate of incorporation and bylaws, and the rights of
Horizon stockholders will continue to be governed by
Horizons certificate of incorporation and bylaws. Upon
completion of the merger, Horizon stockholders will become Cal
Dive stockholders and their rights will then be governed by Cal
Dives certificate of incorporation and bylaws. Please read
carefully the summary of the material differences between the
rights of Cal Dive stockholders and Horizon stockholders under
Comparison of Stockholders Rights beginning on
page 181 of this information statement/proxy
statement/prospectus. |
|
Q10: |
|
What will happen to shares of Cal Dive common stock in the
merger? |
|
A10: |
|
Each outstanding share of Cal Dive common stock will remain
outstanding as a share of Cal Dive common stock. |
|
Q11: |
|
Will Horizon stockholders be able to trade the Cal Dive
common stock that they receive in the merger? |
|
A11: |
|
The shares of Cal Dive common stock issued in connection with
the merger will be freely tradable, unless you are an affiliate
of Horizon, and will be quoted on the New York Stock Exchange
under the symbol DVR. Generally, persons who are
deemed to be affiliates (generally directors, officers and 10%
or greater stockholders) of Horizon must comply with
Rule 145 under the Securities Act of 1933 if they wish to
sell or otherwise transfer any of the shares of Cal Dive common
stock they receive in the merger. You will be notified if you
are an affiliate of Horizon. |
|
Q12: |
|
Are there risks associated with the merger or owning Cal Dive
common stock that I should consider in deciding how to vote? |
|
A12: |
|
Yes. There are risks associated with all business combinations,
including the merger of our two companies. In particular, the
implied value of the stock consideration will fluctuate as the
market price of Cal Dive common stock fluctuates. Accordingly,
the value of the Cal Dive common stock that Horizon stockholders
will receive in return for their Horizon common stock may be
less than or more than the value of the Cal Dive common stock as
of the date of the merger agreement or the date of this
information statement/proxy statement/prospectus. There are a
number of other risks that are discussed in this document and in
other documents incorporated by reference in this document.
Please read with particular care the more detailed
description of the risks associated with the merger and the
ownership of Cal Dive common stock discussed under Risk
Factors beginning on page 13 of this information
statement/proxy statement/prospectus. |
|
Q13: |
|
When do you expect the merger to be completed? |
|
A13: |
|
We are working on completing the merger as quickly as possible
following the Horizon stockholder meeting. To complete the
merger, we must obtain the approval of the Horizon stockholders
at the Horizon stockholder meeting and satisfy or waive all
other closing conditions under the merger agreement. However, we
cannot assure you when or if the merger will occur. See
The Merger Agreement Conditions
Precedent beginning on page 81 of this information
statement/proxy statement/prospectus. If the merger occurs, we
will promptly make a public announcement of this fact. |
|
Q14: |
|
What will happen to my Horizon shares after completion of the
merger? |
|
A14: |
|
Upon completion of the merger, your shares of Horizon common
stock will be canceled and will represent only the right to
receive your portion of the merger consideration (or the fair
value of your Horizon common stock if you seek appraisal rights)
and any declared but unpaid dividends that you may be owed. In
addition, trading in shares of Horizon common stock on the
Nasdaq Global Market will cease and price quotations for shares
of Horizon common stock will no longer be available. |
3
About the
Special Meeting
|
|
|
Q15: |
|
When and where is the Horizon special stockholder meeting? |
|
A15: |
|
The Horizon special stockholder meeting will take place on
December 10, 2007, at 10:00 a.m., Central Time, and
will be held at Horizons corporate offices located at 2500
CityWest Boulevard, Suite 2200, Houston, Texas 77042. |
|
Q16: |
|
What will happen at the special meeting? |
|
A16: |
|
At the Horizon special meeting, Horizon stockholders will vote
on a proposal to approve and adopt the merger agreement and on a
proposal to approve adjournments or postponements of the special
meeting, if necessary, to permit further solicitation of proxies
if there are not sufficient votes at the time of the special
meeting to approve and adopt the merger proposal. We cannot
complete the merger unless, among other things, Horizons
stockholders vote to approve and adopt the merger agreement. |
|
Q17: |
|
Who is entitled to vote at the special meeting? |
|
A17: |
|
Only holders of record of Horizon common stock at the close of
business on October 17, 2007, which is the date
Horizons board of directors has fixed as the record date
for the special meeting, are entitled to receive notice of and
vote at the special meeting. |
|
Q18: |
|
What is a quorum? |
|
A18: |
|
A quorum is the number of shares that must be present to hold
the meeting. The quorum requirement for the Horizon special
meeting is the holders of a majority of the issued and
outstanding shares of Horizon common stock as of the record
date, present in person or represented by proxy and entitled to
vote at the special meeting. A proxy submitted by a stockholder
may indicate that all or a portion of the shares represented by
the proxy are not being voted with respect to a particular
matter. Proxies that are marked abstain or for which
votes have otherwise been withheld and proxies relating to
street name shares that are returned to the relevant
company but not voted will be treated as shares present for
purposes of determining the presence of a quorum on all matters. |
|
Q19: |
|
How many shares can vote? |
|
A19: |
|
On the record date, Horizon had outstanding
32,614,215 shares of common stock, which constitute
Horizons only outstanding voting securities. Each Horizon
stockholder is entitled to one vote on each proposal for each
share of Horizon common stock held as of the record date. |
|
Q20: |
|
What vote is required? |
|
A20: |
|
The affirmative vote of the holders of a majority of the
outstanding shares of Horizon common stock entitled to vote at
the Horizon special meeting is required to adopt the merger
agreement. The approval of a proposal to adjourn or postpone the
special meeting, if necessary, to permit further solicitation of
proxies, if there are not sufficient votes at the time of the
special meeting to approve the other proposal(s), requires the
vote of a majority of shares present in person or by proxy at
the special meeting and actually voted at that special meeting. |
|
|
|
If a quorum is not present at the Horizon special meeting, the
holders of a majority of the shares entitled to vote who are
present in person or by proxy at the meeting may adjourn the
meeting. |
|
|
|
Even if the votes set forth above are obtained at the special
meeting, we cannot assure you that the merger will be completed,
because the completion of the merger is subject to the
satisfaction or waiver of other conditions discussed in this
information statement/proxy statement/prospectus. |
|
Q21: |
|
What do I need to do now? |
|
A21: |
|
After carefully reading and considering the information
contained and referred to in this information statement/proxy
statement/prospectus, including its annexes, please authorize
your shares of Horizon common stock to be voted by returning
your completed, dated, and signed proxy card in the enclosed
return envelope, or vote by telephone or Internet, as soon as
possible. To be sure that your vote is |
4
|
|
|
|
|
counted, please submit your proxy as instructed on your proxy
card even if you plan to attend the special meeting in person.
DO NOT enclose or return your stock certificate(s) with your
proxy card. If you hold shares registered in the name of a
broker, bank, or other nominee, that broker, bank, or other
nominee has enclosed or will provide a voting instruction card
for use in directing your broker, bank, or other nominee how to
vote those shares. |
|
Q22: |
|
May I vote in person? |
|
A22: |
|
Yes. You may attend the special meeting of Horizons
stockholders and vote your shares in person rather than by
signing and returning your proxy card. If you wish to vote in
person and your shares are held by a broker, bank, or other
nominee, you need to obtain a proxy from the broker, bank, or
nominee authorizing you to vote your shares held in the
brokers, banks, or nominees name. |
|
Q23: |
|
If my shares are held in street name, will my
broker, bank, or other nominee vote my shares for me? |
|
A23: |
|
Yes, but your broker, bank, or other nominee may vote your
shares of Horizon common stock only if you instruct your broker,
bank, or other nominee how to vote. If you do not provide your
broker, bank, or other nominee with instructions on how to vote
your street name shares, your broker, bank, or other
nominee will not be permitted to vote them on the merger
agreement. You should follow the directions your broker, bank,
or other nominee provides to ensure your shares are voted at the
special meeting. Please check the voting form used by your
broker, bank, or other nominee to see if it offers telephone or
Internet voting. |
|
Q24: |
|
May I change my vote? |
|
A24: |
|
Yes. You may change your vote at any time before your proxy is
voted at the special meeting. If your shares of Horizon common
stock are registered in your own name, you can do this in one of
three ways. |
|
|
|
First, you can deliver to Horizon, prior to the
special meeting, a written notice stating that you want to
revoke your proxy. The notice should be sent to the attention of
William B. Gibbens, III, Secretary, Horizon Offshore, Inc.,
2500 CityWest Boulevard, Suite 2200, Houston, Texas 77042,
to arrive by the close of business on December 7, 2007.
|
|
|
|
Second, prior to the special meeting, you can
complete and deliver a new proxy card. The proxy card should be
sent to the addressee indicated on the pre-addressed envelope
enclosed with your initial proxy card to arrive by the close of
business on December 7, 2007. The latest dated and signed
proxy actually received by this addressee before the special
meeting will be counted, and any earlier proxies will be
considered revoked.
|
|
|
|
If you vote your proxy electronically through the Internet or by
telephone, you can change your vote by submitting a different
vote through the Internet or by telephone, in which case your
later-submitted proxy will be recorded and your earlier proxy
revoked. |
|
|
|
Third, you can attend the Horizon special meeting
and vote in person. Any earlier proxy will thereby be revoked
automatically. Simply attending the special meeting, however,
will not revoke your proxy, as you must vote at the special
meeting to revoke a prior proxy.
|
|
|
|
If you have instructed a broker to vote your shares, you must
follow directions you receive from your broker to change or
revoke your vote. |
|
|
|
If you are a street-name stockholder and you vote by proxy, you
may later revoke your proxy instructions by informing the holder
of record in accordance with that entitys procedures. |
|
Q25: |
|
How will the proxies vote on any other business brought up at
the special meetings? |
|
A25: |
|
By submitting your proxy, you authorize the persons named on the
proxy card to use their judgment to determine how to vote on any
other matter properly brought before the special meeting. The
proxies will vote your shares in accordance with your
instructions. If you sign, date, and return your proxy |
5
|
|
|
|
|
without giving specific voting instructions, the proxies will
vote your shares FOR the proposals. If you do not
return your proxy, or if your shares are held in street name and
you do not instruct your bank, broker or nominee on how to vote,
your shares will not be voted at the special meeting. |
|
|
|
The board of directors of Horizon does not intend to bring any
other business before the meeting, and it is not aware that
anyone else intends to do so. If any other business properly
comes before the meeting, it is the intention of the persons
named on the proxy cards to vote as proxies in accordance with
their best judgment. |
|
Q26: |
|
What is a broker non-vote? |
|
A26: |
|
A broker non-vote occurs when a bank, broker, or
other nominee submits a proxy that indicates that the broker
does not vote for some or all of the proposals, because the
broker has not received instructions from the beneficial owners
on how to vote on these proposals and does not have
discretionary authority to vote in the absence of instructions. |
|
Q27: |
|
Will broker non-votes or abstentions affect the results? |
|
A27: |
|
If you are a Horizon stockholder, broker non-votes and
abstentions will have the same effect as a vote against the
proposal to adopt the merger agreement, but will have no effect
on the outcome of the proposal relating to adjournments or
postponements of the special meeting, if necessary, to permit
further solicitation of proxies. If your shares are held in
street name, we urge you to instruct your bank, broker, or
nominee on how to vote your shares for those proposals on which
you are entitled to vote. |
|
Q28: |
|
What happens if I choose not to submit a proxy or to vote? |
|
A28: |
|
If a Horizon stockholder does not submit a proxy or vote at the
Horizon special meeting, it will have the same effect as a vote
against the proposal to adopt the merger agreement, but will
have no effect on the outcome of the proposal relating to
adjournments or postponements of the special meeting, if
necessary, to permit further solicitation of proxies. |
|
Q29: |
|
Why is it important for me to vote? |
|
A29: |
|
We cannot complete the merger without holders of a majority of
the outstanding shares of Horizon common stock entitled to vote
voting in favor of the approval and adoption of the merger
agreement. |
|
Q30: |
|
What happens if I sell my shares of Horizon common stock
before the special meeting? |
|
A30: |
|
The record date for the special meeting is October 17,
2007, which is earlier than the date of the special meeting. If
you hold your shares of Horizon common stock on the record date
you will retain your right to vote at the special meeting. If
you transfer your shares of Horizon common stock after the
record date but prior to the date on which the merger is
completed, you will lose the right to receive the merger
consideration for shares of Horizon common stock. The right to
receive the merger consideration will pass to the person who
owns your shares of Horizon common stock when the merger is
completed. |
General
|
|
|
Q31: |
|
Should I send in my Horizon stock certificates now? |
|
A31: |
|
No. PLEASE DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR
PROXY CARD. After the merger is completed, you will receive
written instructions informing you how to send in your stock
certificates to receive the merger consideration. |
|
Q32: |
|
What does it mean if I get more than one proxy card? |
|
A32: |
|
Your shares are probably registered in more than one account.
You should vote each proxy card you receive. |
6
|
|
|
Q33: |
|
Where can I find more information about the special meeting,
the merger, Horizon, or Cal Dive? |
|
A33: |
|
You can find more information about Horizon or Cal Dive in each
of the companies respective filings with the Securities
and Exchange Commission and, with respect to Cal Dive, with the
New York Stock Exchange, and, with respect to Horizon, the
Nasdaq Global Market. If you have any questions about the
special meeting, the merger or how to submit your proxy, or if
you need additional copies of this information statement/proxy
statement/prospectus or the enclosed proxy card or voting
instructions, you should contact Horizon at the address or phone
number below. If your broker holds your shares, you can also
call your broker for additional information. |
Horizon Offshore, Inc.
2500 CityWest Boulevard, Suite 2200
Houston, Texas 77042
(713) 361-2600
Attn: William B. Gibbens, III
7
This summary highlights selected information from this
information statement/proxy statement/prospectus, including
material terms of the merger, and may not contain all of the
information that is important to you. To understand the merger
fully and for a more complete description of the legal terms of
the merger, you should carefully read this entire document,
including its Annexes, and the documents to which we refer you.
See Where You Can Find More Information beginning on
page 186 of this information statement/ proxy
statement/prospectus.
The
Companies (page 84 for Cal Dive and page 133 for
Horizon)
Cal Dive International, Inc.
400 N. Sam Houston Parkway E., Suite 1000
Houston, Texas 77060
(281) 618-0400
Cal Dive International, Inc., headquartered in Houston,
Texas, is a marine contractor that provides manned diving,
pipelay and pipe burial services to the offshore oil and natural
gas industry, including diving support services such as
construction, inspection, maintenance, repair, and
decommissioning of offshore production and pipeline
infrastructure, on the Gulf of Mexico Outer Continental Shelf,
and in the Middle East (United Arab Emirates, Oman, Egypt and
Saudi Arabia), Southeast Asia, and Australia. Cal Dive has
a fleet of 26 vessels, including 23 surface and saturation
diving support vessels as well as three shallow water pipelay
vessels.
Horizon Offshore, Inc.
2500 CityWest Boulevard, Suite 2200
Houston, Texas 77042
(713) 361-2600
Horizon Offshore, Inc., headquartered in Houston, Texas,
provides marine construction services for the offshore oil and
gas and energy industries. The companys fleet of nine
vessels is used to perform a wide range of marine construction
services, including installation and repair of marine pipelines
to transport oil and gas and other subsea production systems and
the installation and abandonment of production platforms in the
Gulf of Mexico, Northeast United States, Latin America,
Southeast Asia, and West Africa.
General
On June 11, 2007, the companies agreed to the merger
between Horizon and Merger Sub under the terms of the merger
agreement described in this information statement/proxy
statement/prospectus and attached as Annex A. The merger
agreement is the legal document that governs the merger, and we
urge you to read that agreement.
At the effective time of the merger, Horizon will merge with and
into Merger Sub. Merger Sub will be the surviving company and
remain a wholly-owned subsidiary of Cal Dive. The separate
corporate existence of Horizon will cease at the effective time
of the merger.
Merger
Consideration (page 72)
At the effective time of the merger, each outstanding share of
Horizon common stock (other than any shares owned directly or
indirectly by Horizon or Cal Dive and those shares held by
dissenting stockholders) will be converted into the right to
receive a combination of $9.25 in cash, without interest, and
0.625 of a share of Cal Dive common stock. We refer to the
aggregate amount of the stock consideration and cash
consideration to be received by Horizon stockholders pursuant to
the merger as the merger consideration.
8
Fractional
Shares (page 72)
No fractional shares of Cal Dive common stock will be
issued in the merger. Instead, you will be entitled to receive
cash, without interest, in an amount equal to the fraction of a
share of Cal Dive common stock you might otherwise have
been entitled to receive multiplied by the market value of a
Cal Dive share. The market value of a share of
Cal Dive common stock will be determined using the average
of the closing sales price per share of Cal Dive common
stock on the New York Stock Exchange for the 20 trading days
ending on the third trading day before the date the merger
closes.
Treatment
of Horizon Stock Options and Restricted Stock
(page 73)
At the effective time of the merger, Horizon stock options,
whether or not vested, will cease to represent a right to
acquire shares of Horizon common stock and will thereafter
constitute a fully vested option to acquire (on the same terms
and conditions as were applicable to such Horizon stock option)
the number (rounded down to the nearest whole number) of shares
of Cal Dive common stock determined by multiplying the
number of shares of Horizon common stock that were issuable upon
exercise of such Horizon stock option immediately prior to the
effective time of the merger by the sum of 0.625 (the exchange
ratio) plus the fraction resulting from dividing $9.25 (the cash
portion of the merger consideration) by the closing price per
share of the Cal Dive common stock on the New York Stock
Exchange on the last trading day immediately preceding the date
on which the merger closes. The exercise price or base price per
share of Cal Dive common stock subject to any such
converted stock option shall be an amount (rounded up to the
nearest one hundredth of a cent) equal to the exercise price or
base price per share of Horizon common stock at which such
Horizon stock option was exercisable immediately prior to the
effective time of the merger divided by the sum of 0.625 plus
the fraction resulting from dividing $9.25 by the closing price
per share of the Cal Dive common stock on the New York
Stock Exchange on the last trading day immediately preceding the
date on which the merger closes.
All shares of Horizon restricted stock that have been issued but
have not vested prior to the effective time of the merger will
become fully vested immediately prior to the effective time of
the merger, and will be converted into the right to receive the
merger consideration.
In evaluating the merger, the merger agreement or the issuance
of shares of Cal Dive common stock in the merger, you
should carefully review this information statement/proxy
statement/prospectus and especially consider the factors
discussed in the section entitled Risk Factors
beginning on page 13.
Material
U.S. Federal Income Tax Consequences of the Merger to Horizon
Stockholders (page 68)
The merger is intended to constitute a
reorganization within the meaning of
Section 368(a) of the Code, so that Horizon stockholders
will generally, for U.S. federal income tax purposes,
recognize gain (but not loss), as a result of the merger, in an
amount not to exceed the amount of cash received as part of the
merger consideration. The merger is conditioned on the receipt
of legal opinions to the effect that the merger will constitute
a reorganization within the meaning of
Section 368(a) of the Code.
For a more complete discussion of the U.S. federal income
tax consequences of the merger, see Material
U.S. Federal Income Tax Consequences beginning on
page 68.
Tax
matters are very complicated and the tax consequences of the
merger to any particular Horizon stockholder will depend on that
stockholders particular situation. Horizon stockholders
should consult their own tax advisor to determine the specific
tax consequences of the merger to them.
Recommendation
of the Horizon Board of Directors (page 46)
The Horizon board of directors has unanimously determined that
the merger is advisable and in your best interests and
unanimously recommends that you vote FOR the approval and
adoption of the merger agreement and any adjournment or
postponement of the special meeting.
9
Opinion
of Lehman Brothers Inc. Financial Advisor to Horizon
(page 47)
In connection with the proposed merger, Horizons financial
advisor, Lehman Brothers Inc., delivered to Horizons board
of directors a written opinion, dated June 11, 2007, as to
the fairness, from a financial point of view, to the holders of
Horizon common stock of the merger consideration. The full text
of Lehman Brothers written opinion is attached to this
information statement/proxy statement/prospectus as
Annex B. We encourage you to read that opinion carefully in
its entirety for a description of the procedures followed,
assumptions made, matters considered, and limitations on the
review undertaken by Lehman Brothers in rendering its opinion.
Lehman Brothers opinion was provided for the use and
benefit of Horizons board of directors in connection with
its evaluation of the merger and does not address the merits of
the proposed merger or constitute a recommendation to any
stockholder as to how he or she should vote on the merger or any
matter relevant to the merger agreement. The opinion addresses
only the fairness, from a financial point of view, of the merger
consideration to be received to Horizons stockholders, as
of the date of the opinion.
Ownership
of Cal Dive Following the Merger
Horizon stockholders will receive a total of approximately
20.4 million shares of Cal Dive common stock in the
merger. The shares of Cal Dive to be received by Horizon
stockholders in the merger will represent approximately 19.5% of
the outstanding Cal Dive common stock after the merger.
Helix owns approximately 61.5 million shares of
Cal Dive common stock, representing approximately 72.9% of
the outstanding Cal Dive common stock prior to the merger,
or approximately 58.7% of the outstanding Cal Dive common
stock after the merger. This information is based on the number
of Cal Dive and Horizon shares outstanding on
November 1, 2007.
Board
of Directors of Cal Dive Following the Merger
Cal Dive has agreed that, as of the effective time of the
merger, Cal Dive will cause David W. Sharp, a Director and
the President and Chief Executive Officer of Horizon, and John
T. Mills, Chairman of the Board of Horizon, to be appointed to
the Cal Dive board of directors for initial terms expiring
at the 2010 annual meeting of Cal Dives stockholders.
Market
Prices and Share Information (page 34)
Cal Dive common stock is quoted on the New York Stock
Exchange under the symbol DVR. Horizon common stock
is quoted on the Nasdaq Global Market under the symbol
HOFF. The following table shows the closing sale
prices of Cal Dive and Horizon common stock as reported on
the New York Stock Exchange and the Nasdaq Global Market,
respectively, on June 11, 2007, the last business day
preceding the announcement by Cal Dive and Horizon of the
execution of the merger agreement, and on November 1, 2007,
the last practicable day before the distribution of this
information statement/proxy statement/prospectus. This table
also shows the merger consideration equivalent proposed for each
share of Horizon common stock, which we calculated by
multiplying the closing price of Cal Dive common stock on
those dates by the exchange ratio of 0.625 and adding the cash
consideration of $9.25.
|
|
|
|
|
|
|
|
|
|
|
Closing Price per Share
|
|
|
|
June 11, 2007
|
|
|
November 1, 2007
|
|
|
Cal Dive common stock
|
|
$
|
16.00
|
|
|
$
|
12.73
|
|
Horizon common stock
|
|
$
|
16.95
|
|
|
$
|
15.33
|
|
Merger consideration equivalent
|
|
$
|
19.25
|
|
|
$
|
17.21
|
|
Because the 0.625 exchange ratio is fixed and will not be
adjusted as a result of changes in the market price of
Cal Dive common stock, the merger consideration equivalent
will fluctuate with the market price of Cal Dive common
stock. The merger agreement does not include a price-based
termination right or provisions that would limit the impact of
increases or decreases in the market price of Cal Dive
common stock. You should obtain current market quotations for
the shares of both companies from a newspaper, the Internet, or
your broker prior to voting on the merger agreement.
10
Interests
of Horizon Directors and Executive Officers in the Merger
(page 66)
When you consider the Horizon boards recommendation that
Horizon stockholders vote in favor of the merger agreement and
any adjournment or postponement of the special meeting, you
should be aware that some Horizon officers and directors may
have interests in the merger that may be different from, or in
addition to, the interests of other Horizon stockholders
generally. The Horizon board of directors was aware of these
interests and considered them, among other matters, in
unanimously approving and adopting the merger agreement and
unanimously recommending that Horizon stockholders vote to
approve and adopt the merger agreement. At the close of business
on the record date for the Horizon special meeting, directors
and executive officers of Horizon and their affiliates were
entitled to vote approximately 1.6% of the shares of Horizon
common stock outstanding on that date.
Conditions
to Completion of the Merger (page 81)
Completion of the merger depends on a number of conditions being
satisfied or waived. These conditions include the following:
|
|
|
|
|
absence of any temporary restraining order, preliminary or
permanent injunction, or other order issued by a court of
competent jurisdiction or other law, legal restraint, or
prohibition having the effect of making the merger illegal or
otherwise prohibiting the consummation of the merger;
|
|
|
|
receipt of approvals and authorizations required under the
antitrust laws, including expiration or early termination of the
waiting period under the
Hart-Scott-Rodino
Act, to consummate the transactions contemplated by the merger
agreement;
|
|
|
|
approval for listing of the Cal Dive shares to be issued in
the merger on the New York Stock Exchange, subject to official
notice of issuance;
|
|
|
|
continued effectiveness of the registration statement of which
this information statement/proxy statement/prospectus is a part,
the absence of a stop order by the Securities and Exchange
Commission suspending the effectiveness of the registration
statement and the absence of any continuing or threatened
proceeding or investigation by the Securities and Exchange
Commission to suspend such effectiveness;
|
|
|
|
adoption of the merger agreement by the holders of a majority of
the outstanding Horizon shares entitled to vote at the Horizon
special meeting;
|
|
|
|
accuracy as of the closing of the merger of the representations
and warranties made by each of Cal Dive, Merger Sub, and
Horizon to the extent specified in the merger agreement;
|
|
|
|
Cal Dives, Merger Subs, and Horizons
performance in all material respects of their respective
covenants and agreements under the merger agreement; and
|
|
|
|
receipt of opinions by Cal Dive and Horizon from their
respective tax counsel to the effect that the merger will
constitute a reorganization within the meaning of
Section 368(a) of the Code.
|
Regulatory
Matters (page 62)
The merger is subject to antitrust laws. Under the
Hart-Scott-Rodino
Act, the parties cannot complete the merger until they have
notified and furnished information to the Federal Trade
Commission, or the FTC, and the Antitrust Division of the United
States Department of Justice, or the DOJ, and specified waiting
periods expire or are terminated. On July 27, 2007,
Cal Dive and Horizon submitted the pre-merger notification
filings to the FTC and DOJ and on August 29, 2007 Cal Dive
resubmitted its notification filing to provide the DOJ
additional time to review the transaction. On September 28,
2007, Cal Dive and Horizon received a request for additional
information from the DOJ. The request was issued under the
notification requirements of the Hart-Scott-Rodino Act and has
the effect of extending the waiting period for a period of
30 calendar days from the date of the parties
substantial compliance with the request. On November 2,
2007, Cal Dive and Horizon received notice of early termination
of the waiting period under the
Hart-Scott-Rodino
Act.
11
Termination
of the Merger Agreement (page 82)
Before the effective time of the merger, the merger agreement
may be terminated by either party under certain circumstances
specified in the merger agreement, including after a termination
date of December 11, 2007, due to the breach by the other
party of any of its representations, warranties, covenants, or
agreements in the merger agreement or under certain
circumstances if the approval of Horizons stockholders is
not obtained or Horizon receives and accepts a superior proposal
to the merger.
Non
Solicitation Provisions and Acquisition Proposals
(page 77)
Subject to certain conditions, from June 11, 2007 to
July 27, 2007, Horizon was permitted to solicit acquisition
proposals from third parties, discuss and negotiate acquisition
proposals with third parties and release any third party from,
or waive any provision of, any confidentiality or standstill
agreement to which Horizon was a party to the extent necessary
to allow Horizon to conduct such solicitation, negotiations or
discussions. Horizon received no acquisition proposals during
that time period. Since July 27, 2007, subject to certain
conditions, Horizon is required to cease discussions and
negotiations with third parties regarding acquisition proposals
and until the effective time of the merger may not solicit or
seek such proposals, engage in any substantive discussions
regarding such proposals, provide any information to third
parties regarding such proposals, enter into any agreement
relating to any such proposals or release any third party from,
or waive any provision of, any confidentiality or standstill
agreement relating to any such proposals.
Fees
and Expenses (page 83)
If Horizon terminates the merger agreement, Horizon must pay to
Cal Dive, in certain circumstances set forth in the merger
agreement, $18.9 million.
Whether or not the merger is consummated, each of Cal Dive,
Merger Sub and Horizon will bear its own costs and expenses in
connection with the merger agreement and the related
transactions, except (i) expenses incurred in connection
with the filing, printing, and mailing, but not preparation, of
the registration statement of which this information
statement/proxy statement/prospectus is a part and
(ii) expenses incurred in connection with any consultants
that Cal Dive and Horizon shall have agreed to retain to
assist in obtaining the approvals and clearances under the
antitrust laws, which, in each case, shall be shared equally by
Cal Dive and Horizon.
Accounting
Treatment (page 62)
The combination of the two companies will be accounted for as an
acquisition of Horizon by Cal Dive using the purchase
method of accounting.
Comparison
of Stockholders Rights (page 181)
As a result of the merger, the holders of Horizon common stock
will become holders of Cal Dive common stock. Each of
Horizon and Cal Dive is a Delaware corporation governed by
the Delaware General Corporation Law, but the rights of Horizon
stockholders are also currently governed by the certificate of
incorporation and bylaws of Horizon while the rights of
Cal Dive stockholders are governed by the certificate of
incorporation and bylaws of Cal Dive.
See page 181 for summaries of material differences between
the rights of Horizon stockholders and Cal Dive
stockholders arising because of differences in the certificates
of incorporation and bylaws of the two companies.
12
In addition to the other information included and
incorporated by reference into this information statement/proxy
statement/prospectus, including the matters addressed under the
caption Cautionary Statement Regarding Forward-Looking
Statements on page 27, you should carefully read and
consider the following risk factors in evaluating the proposals
to be voted on at the special meeting of Horizon stockholders
and in determining whether to vote for approval and adoption of
the merger agreement. Please also refer to the additional risk
factors identified in the periodic reports and other documents
incorporated by reference into this information statement/proxy
statement/prospectus and see Where You Can Find More
Information beginning on page 186.
Risks
Relating to the Merger
The
exchange ratio will not be adjusted in the event the value of
Cal Dive common stock declines before the merger is completed.
As a result, the value of the shares of Cal Dive common stock at
the time that Horizon stockholders receive them could be less
than the value of those shares today.
In the merger, Horizon stockholders will be entitled to receive
a combination of $9.25 in cash, without interest, and 0.625 of a
share of Cal Dive common stock for each share of Horizon
common stock owned, plus additional cash for any fractional
share. Cal Dive and Horizon will not adjust the exchange
ratio for the portion of the merger consideration to be paid in
Cal Dive common stock as a result of any change in the
market price of shares of Cal Dive common stock between the
date of this information statement/proxy statement/prospectus
and the date that you receive shares of Cal Dive common
stock in exchange for your shares of Horizon common stock. The
market price of Cal Dive common stock will likely be
different, and may be lower, on the date you receive your shares
of Cal Dive common stock than the market price of shares of
Cal Dive common stock as of the date of this information
statement/proxy statement/prospectus. During the period from
December 14, 2006, the date Cal Dives common
stock was first listed on the New York Stock Exchange, until
November 1, 2007, the most recent practical date prior to
the mailing of this information statement/proxy
statement/prospectus, Cal Dive common stock traded in a
range from a low of $11.83 to a high of $18.04 and ended that
period at $12.73. See Comparative Historical and Pro Forma
Per Share Information beginning on page 33 for more
detailed share price information. Differences in
Cal Dives stock price may be the result of changes in
the business, operation, or prospects of Cal Dive, market
reactions to the proposed merger, commodity prices, general
market and economic conditions, or other factors. If the market
price of Cal Dive common stock declines after Horizon
stockholders vote on the merger, Horizon stockholders may
receive less value than expected when they voted. Neither
Cal Dive nor Horizon is permitted to terminate the merger
agreement or resolicit the vote of Horizon stockholders because
of changes in the market prices of their respective common stock.
The
merger is subject to certain conditions to closing that, if not
satisfied or waived, will result in the merger not being
completed.
The merger is subject to customary conditions to closing, as set
forth in the merger agreement. The conditions to the merger
include, among others, the receipt of required approvals from
Horizons stockholders. If any of the conditions to the
merger are not satisfied or, if waiver is permissible, not
waived, the merger will not be completed. In addition, under
circumstances specified in the merger agreement, Cal Dive
or Horizon may terminate the merger agreement. As a result, we
cannot assure you that we will complete the merger. See
The Merger Agreement Conditions
Precedent beginning on page 81 for a discussion of
the conditions to the completion of the merger.
Certain
directors and the executive officers of Horizon have interests
and arrangements that are different from, or in addition to,
those of Horizons stockholders and that may influence or
have influenced their decision to support or approve the
merger.
When considering the recommendation of Horizons board of
directors with respect to the merger, holders of Horizon common
stock should be aware that certain of Horizons directors
and its executive officers have
13
interests in the merger that are different from, or in addition
to, their interests as Horizon stockholders and the interests of
Horizon stockholders generally. These interests include, among
other things, the following:
|
|
|
|
|
the appointment of two of Horizons current directors to
Cal Dives board of directors, one of whom also serves
as an executive officer;
|
|
|
|
it is expected that all of Horizons executive
officers employment will terminate as a result of the
merger, and under the terms of employment agreements entered
into between Horizon and its executive officers, those officers
are entitled to certain specified severance benefits;
|
|
|
|
as of the effective time of the merger, acceleration of vesting
of Horizon stock options and restricted stock for directors and
executive officers;
|
|
|
|
indemnification of directors and executive officers of Horizon
against certain liabilities arising both before and, in some
cases, after the merger; and
|
|
|
|
liability insurance for directors and executive officers of
Horizon.
|
As a result, these directors and executive officers may be more
likely to support and to vote to approve the merger than if they
did not have these interests. Holders of Horizon common stock
should consider whether these interests may have influenced
these directors and executive officers to support or recommend
approval of the merger. As of the close of business on the
record date for the Horizon special meeting, these directors and
executive officers were entitled to vote approximately 1.6% of
the shares of Horizon common stock outstanding on that date.
These and additional interests of certain directors and
executive officers of Horizon are more fully described in the
sections entitled Interests of Horizon Directors and
Executive Officers in the Merger beginning on page 66
of this information statement/proxy statement/prospectus.
Cal
Dive may face difficulties in achieving the expected benefits of
the merger.
Cal Dive and Horizon currently operate as separate
companies. Cal Dives management has no experience
running the combined business, and Cal Dive may not be able
to realize the operating efficiencies, synergies, cost savings,
or other benefits expected from the merger. In addition, the
costs that Cal Dive incurs in implementing synergies,
including its ability to amend, renegotiate, or terminate prior
contractual commitments of Cal Dive and Horizon, may be
greater than expected. Cal Dive also may suffer a loss of
employees, customers, or suppliers, a loss of revenues, or an
increase in operating or other costs or other difficulties
relating to the merger.
Cal
Dives actual financial position and results of operations
may differ significantly and adversely from the pro forma
amounts included in this information statement/proxy
statement/prospectus.
The unaudited pro forma operating data contained in this
information statement/proxy statement/prospectus is not
necessarily indicative of the results that actually would have
been achieved had the proposed merger and Cal Dives
other currently contemplated financing transactions related to
the merger been consummated on January 1, 2007, or that may
be achieved in the future. We can provide no assurances as to
how the operations and assets of both companies would have been
run if they had been combined, or how they will be run in the
future, which, together with other factors, could have a
significant effect on the results of operations and financial
position of the combined company.
Horizon
will be subject to business uncertainties and contractual
restrictions while the merger is pending.
Uncertainty about the effect of the merger on employees,
suppliers, partners, regulators, and customers may have an
adverse effect on Horizon and potentially on Cal Dive.
These uncertainties may impair Horizons ability to
attract, retain, and motivate key personnel until the merger is
consummated, and could cause suppliers, customers, and others
that deal with Horizon to defer purchases or other decisions
concerning Horizon, or to seek to change existing business
relationships with Horizon. Employee retention may be
particularly challenging during the pendency of the merger, as
employees may experience uncertainty about their future roles
with Cal Dive. If key employees depart because of issues
relating to the uncertainty or
14
difficulty of integration or a desire not to remain with
Cal Dive, Cal Dives business following the
merger could be harmed. In addition, the merger agreement
restricts Horizon from making certain acquisitions and taking
other specified actions until the merger occurs. These
restrictions may prevent Horizon from pursuing attractive
business opportunities that may arise prior to the completion of
the merger. See The Merger Agreement Covenants
and Agreements beginning on page 75 for a description
of the restrictive covenants applicable to Horizon.
The
merger agreement limits Horizons ability to pursue
alternatives to the merger.
The merger agreement contains provisions that could adversely
impact competing proposals to acquire Horizon. These provisions
include a limited time period during which Horizon generally was
permitted to solicit acquisition proposals or offers for a
competing transaction. Since the expiration of such period,
Horizon is prohibited from generally soliciting any acquisition
proposal or offer for a competing transaction. The merger
agreement also includes a provision that requires Horizon to pay
to Cal Dive a fee of $18.9 million if the merger
agreement is terminated in connection with an alternative
transaction. In addition, even if the board of directors of
Horizon determines that a competing proposal to acquire Horizon
is superior, Horizon may not exercise its right to terminate the
merger agreement unless it notifies Cal Dive of its
intention to do so at least three business days prior to taking
such action. See The Merger Agreement
Covenants and Agreements beginning on page 75 and
The Merger Agreement Termination
beginning on page 82.
Cal Dive required Horizon to agree to these provisions as a
condition to Cal Dives willingness to enter into the
merger agreement. These provisions, however, might discourage a
third party that might have an interest in acquiring all or a
significant part of Horizon from considering or proposing that
acquisition, even if that party were prepared to pay
consideration with a higher value than the current proposed
merger consideration. Furthermore, the termination fee may
result in a potential competing acquiror proposing to pay a
lower per share price to acquire Horizon than it might otherwise
have proposed to pay.
Failure
to complete the merger could negatively impact the stock price
and the future business and financial results of
Horizon.
Although Horizon has agreed that its board of directors will,
subject to fiduciary exceptions, recommend that its stockholders
approve and adopt the merger agreement, there is no assurance
that the merger agreement and the merger will be approved, and
there is no assurance that the other conditions to the
completion of the merger will be satisfied. If the merger is not
completed, Horizon will be subject to several risks, including
the following:
|
|
|
|
|
Horizon may be required to pay Cal Dive a termination fee
of $18.9 million if the merger agreement is terminated
under certain circumstances and Horizon enters into or completes
an alternative transaction;
|
|
|
|
The current market price of Horizon common stock may reflect a
market assumption that the merger will occur, and a failure to
complete the merger could result in a negative perception by the
stock market of Horizon generally and a resulting decline in the
market price of Horizon common stock;
|
|
|
|
Certain costs relating to the merger (such as legal, accounting,
and financial advisory fees) are payable by Horizon whether or
not the merger is completed;
|
|
|
|
There may be substantial disruption to the business of Horizon
and a distraction of its management and employees from
day-to-day operations, because matters related to the merger
(including integration planning) may require substantial
commitments of time and resources, which could otherwise have
been devoted to other opportunities that could have been
beneficial to Horizon;
|
|
|
|
Horizons business could be adversely affected if it is
unable to retain key employees or attract qualified
replacements; and
|
|
|
|
Horizon would continue to face the risks that it currently faces
as an independent company, as further described in the documents
that Horizon has filed with the SEC that are incorporated by
reference into this information statement/proxy
statement/prospectus.
|
15
In addition, Horizon would not realize any of the expected
benefits of having completed the merger. If the merger is not
completed, these risks may materialize and materially adversely
affect Horizons business, financial results, financial
condition, and stock price.
The
price of Cal Dive common stock may be affected by factors
different from those affecting the price of Horizon common
stock.
Holders of Horizon common stock will receive Cal Dive
common stock in the merger. Cal Dives business is
different in many ways from that of Horizon, and
Cal Dives results of operations, as well as the price
of Cal Dives common stock, may be affected by factors
different from those affecting Horizons results of
operations and the price of Horizon common stock. The price of
Cal Dive common stock may fluctuate significantly following
the merger, including fluctuation due to factors over which
Cal Dive has no control. For a discussion of
Cal Dives business and certain factors to consider in
connection with its business, including risk factors associated
with its business, see Risks Relating to
Cal Dive, Information About Cal Dive
and Cal Dives Historical Consolidated Financial
Statements and Supplementary Data and the notes thereto
included in this information statement/proxy
statement/prospectus. For a discussion of Horizons
business and certain factors to consider in connection with its
business, including risk factors associated with its business,
see Horizons Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, which is
incorporated by reference into this information statement/proxy
statement/prospectus. See also the other documents incorporated
by reference into this information statement/proxy
statement/prospectus under the caption Where You Can Find
More Information beginning on page 186 of this
information statement/proxy statement/prospectus.
Cal
Dive will have higher levels of indebtedness following the
merger than either Cal Dive or Horizon had before the
merger.
You should consider that, following the merger, Cal Dive
will have higher levels of debt and interest expense than
Cal Dive and Horizon, together, had immediately prior to
the merger. As of September 30, 2007, after giving effect
to the merger and other currently contemplated related
financings, the combined company and its subsidiaries are
expected to have approximately $447 million of indebtedness
outstanding. See Unaudited Condensed Combined Pro Forma
Financial Data on page 170 of this information
statement/proxy statement/prospectus. The significant level of
combined indebtedness after the merger may have an effect on the
combined companys future operations, including:
|
|
|
|
|
limiting its ability to obtain additional financing on
satisfactory terms to fund its working capital requirements,
capital expenditures, acquisitions, investments, debt service
requirements, and other general corporate requirements;
|
|
|
|
increasing its vulnerability to general economic downturns,
competition, and industry conditions, which could place it at a
competitive disadvantage compared to its competitors that are
less leveraged;
|
|
|
|
increasing its exposure to rising interest rates because a
portion of its borrowings will be at variable interest rates;
|
|
|
|
reducing the availability of its cash flow to fund its working
capital requirements, capital expenditures, acquisitions,
investments, and other general corporate requirements because it
will be required to use a substantial portion of its cash flow
to service debt obligations; and
|
|
|
|
limiting its flexibility in planning for, or reacting to,
changes in its business and the industry in which it operates.
|
See Proposed Financings on page 185 of this
information statement/ proxy statement/prospectus.
16
The
opinion obtained by Horizon from its financial advisor does not
reflect changes in circumstances between signing the merger
agreement and the completion of the merger.
Lehman Brothers, Horizons financial advisor, delivered a
fairness opinion to the Horizon board of directors.
The opinion states that, as of June 11, 2007, the
consideration to be received by Horizon stockholders pursuant to
the merger agreement was fair from a financial point of view to
Horizon stockholders. The opinion does not reflect changes that
may occur or may have occurred after June 11, 2007,
including changes to the operations and prospects of Horizon or
Cal Dive, changes in general market and economic
conditions, or other factors. Any such changes, or other factors
on which the opinion is based, may significantly alter the value
of Horizon or Cal Dive or the prices of shares of Horizon
common stock or Cal Dive common stock by the time the
merger is completed. The opinion does not speak as of the time
the merger will be completed or as of any date other than the
date of such opinion. For a description of the opinion that
Horizon received from its financial advisor, see The
Merger Opinion of Lehman Brothers Inc.
Financial Advisor to Horizon beginning on page 47.
For a description of the other factors considered by
Horizons board of directors in determining to approve the
merger, see The Merger Horizons Reasons
for the Merger beginning on page 45 and The
Merger Recommendation of the Horizon Board of
Directors beginning on page 46.
The
shares of Cal Dive common stock to be received by Horizon
stockholders as a result of the merger will have different
rights from the shares of Horizon common stock.
Horizon stockholders will become Cal Dive stockholders, and
their rights as stockholders will be governed by the certificate
of incorporation and bylaws of Cal Dive and Delaware
corporate law. The rights associated with Horizon common stock
are different from the rights associated with Cal Dive
common stock. See Comparison of Stockholders
Rights beginning on page 181 for a discussion of the
different rights associated with Cal Dive common stock.
Helix
will continue to control Cal Dive and Horizon stockholders will
exercise less influence over management.
Helix will continue to own approximately 58.7% of the
outstanding Cal Dive common stock following the merger.
Consequently, Horizon stockholders will have no meaningful
influence over the management and policies of Cal Dive.
The
merger may be completed even though Cal Dive or Horizon suffers
a material adverse change.
In general, neither party may refuse to complete the merger if
the other party suffers a material adverse change between
June 11, 2007, the date of the signing of the merger
agreement, and the closing of the merger unless such material
adverse change caused a representation, warranty or covenant of
such other party to be materially breached. Accordingly, certain
types of changes would not prevent the merger from going
forward, even if the change would have a material adverse effect
on Cal Dive or Horizon, including the following:
|
|
|
|
|
changes in laws, rules or regulations applicable to
Cal Dive or Horizon;
|
|
|
|
changes in general regulatory or economic conditions in the
United States or other countries in which Cal Dive or
Horizon operate;
|
|
|
|
changes in, or events or conditions generally affecting, the
industries in which Cal Dive and Horizon operate;
|
|
|
|
changes in the market price of oil or natural gas;
|
|
|
|
changes in the market price of Cal Dives or
Horizons common stock; or
|
|
|
|
any changes or effects arising out of the negotiation, public
announcement or pending nature of the merger.
|
17
In addition, the parties could elect to complete the merger even
if one or both suffers a material adverse change.
Risks
Relating to Cal Dive
Cal
Dives business largely depends on offshore exploration,
development, and production activity in the oil and natural gas
industry, which is currently at a historically high level and
could decline in the future.
Cal Dives business is substantially dependent upon
the condition of the oil and natural gas industry and, in
particular, the willingness of oil and natural gas companies to
make capital expenditures for offshore exploration, development,
and production operations. The level of capital expenditures
generally depends on the prevailing views of future oil and
natural gas prices, which are influenced by numerous factors,
including but not limited to:
|
|
|
|
|
changes in United States and international economic conditions;
|
|
|
|
demand for oil and natural gas, especially in the United States,
China, and India;
|
|
|
|
worldwide political conditions, particularly in significant
oil-producing regions such as the Middle East, West Africa, and
Latin America;
|
|
|
|
actions taken by the Organization of Petroleum Exporting
Countries, or OPEC;
|
|
|
|
the availability and discovery rate of new oil and natural gas
reserves in offshore areas;
|
|
|
|
the cost of offshore exploration for, and production and
transportation of, oil and natural gas;
|
|
|
|
the ability of oil and natural gas companies to generate funds
or otherwise obtain external capital for exploration,
development, and production operations;
|
|
|
|
the sale and expiration dates of offshore leases in the United
States and overseas;
|
|
|
|
technological advances affecting energy exploration, production,
transportation, and consumption;
|
|
|
|
weather conditions;
|
|
|
|
environmental or other government regulations; and
|
|
|
|
tax policies.
|
Oil and natural gas prices have been at historically high levels
and recent capital spending levels may not remain the same or
increase. A sustained period of low offshore drilling and
production activity or the return of lower commodity prices
would likely have a material adverse effect on
Cal Dives business, financial condition, or results
of operations.
Market
conditions in the marine contracting industry are highly
cyclical and subject to rapid change. Due to the short-term
nature of most of Cal Dives contracts, adverse changes in
market conditions can have an immediate impact on Cal
Dives results of operations.
Historically, the marine contracting industry has been highly
cyclical, with periods of high demand and high dayrates often
followed by periods of low demand and low dayrates. Periods of
low demand intensify the competition in the industry and can
result in vessels and diving systems being idle. Cal Dive
may be required to idle vessels or diving systems or reduce
contract rates in response to market conditions in the future.
On the Gulf of Mexico Outer Continental Shelf, or OCS, contracts
are generally short-term, and oil and natural gas companies tend
to respond quickly to changes in commodity prices. Due to the
historical short-term nature of many of Cal Dives
contracts, changes in market conditions can have an immediate
impact on Cal Dives results of operations. In
addition, customers generally have the right to terminate
Cal Dives contracts with little or no notice and
without penalty. As a result of the cyclicality of
Cal Dives industry, it expect its results of
operations to be volatile.
18
Cal
Dives business is concentrated on the Gulf of Mexico OCS,
and the mature nature of this region could result in less
exploration, development, and production activities in the area,
thereby reducing demand for Cal Dives
services.
The Gulf of Mexico OCS is a mature oil and natural gas
production region that has experienced substantial exploration,
development, and production activity for many years. Because a
large number of oil and natural gas prospects in this region
have already been drilled, additional prospects of sufficient
size and quality could be more difficult to identify. Moreover,
oil and natural gas companies may be unable to obtain the
financing necessary to drill prospects in this region. The
decrease in the size of oil and natural gas prospects, the
decrease in production, or the failure to obtain such financing
may result in reduced exploration, development, and production
activity in the Gulf of Mexico and reduced demand for
Cal Dives services.
Intense
competition in Cal Dives industry may reduce its
profitability and weaken its financial condition.
The businesses in which Cal Dive operates are highly
competitive. Cal Dives contracts traditionally have
been awarded on a competitive bid basis, and while customers may
consider, among other things, the reputation, safety record, and
experience of the contractor, price competition is often the
primary factor in determining which qualified contractor is
awarded a job. This competition has become more intense in
recent years as mergers among oil and natural gas companies have
reduced the number of available customers. Contract pricing is
partially dependent on the supply of competing vessels.
Generally, excess offshore service capacity puts downward
pressure on contract rates. If other companies construct new
vessels or relocate existing vessels to its markets, competition
may further increase thus driving down the rates Cal Dive
may charge its customers. Cal Dive believes that the
competition for contracts will continue to be intense in the
foreseeable future. The impairment of Cal Dives
ability to compete successfully may reduce its profitability and
weaken its financial condition.
If Cal
Dive fails to manage its growth effectively, its results of
operations could be harmed.
Cal Dive has a history of growing through acquisitions of
companies and assets. Cal Dive must plan and manage its
acquisitions effectively to achieve revenue growth and maintain
profitability in its evolving market. If it fails to manage
current and future acquisitions effectively, its results of
operations could be adversely affected. Cal Dives
growth has placed, and is expected to continue to place,
significant demands on its personnel, management, and other
resources. Cal Dive must continue to improve its
operational, financial, management, and legal/compliance
information systems to keep pace with the growth of our business.
Any future acquisitions could present a number of risks,
including but not limited to:
|
|
|
|
|
incorrect assumptions regarding the future results of acquired
operations or assets or expected cost reductions or other
synergies expected to be realized as a result of acquiring
operations or assets;
|
|
|
|
failure to integrate the operations or management of any
acquired operations or assets successfully and timely;
|
|
|
|
diversion of managements attention from existing
operations or other priorities; and
|
|
|
|
Cal Dives inability to secure, on terms it finds
acceptable, sufficient financing that may be required for any
such acquisition or investment.
|
If Cal Dive is unsuccessful in completing acquisitions of
other businesses or assets, its business, financial condition,
or results of operations could be adversely affected. In
addition, if it is unsuccessful in integrating its acquisitions
in a timely and cost-effective manner, its business, financial
condition, or results of operations could be adversely affected.
19
Cal
Dives operations outside of the United States are subject
to additional political, economic, and other uncertainties that
could adversely affect its business, financial condition, or
results of operations, and its exposure to such risks will
increase as it expands its international
operations.
An element of Cal Dives business strategy is to
expand into international oil and natural gas producing areas
such as the Middle East, Southeast Asia, and Australia. Its
operations outside of the United States are subject to risks
inherent in foreign operations, including but not limited to:
|
|
|
|
|
political, social, and economic instability;
|
|
|
|
the loss of revenue, property, and equipment from hazards such
as expropriation, nationalization, war, insurrection, acts of
terrorism, and other political risks;
|
|
|
|
increased operating costs;
|
|
|
|
increases in taxes and governmental royalties;
|
|
|
|
renegotiation or abrogation of contracts with governmental
entities;
|
|
|
|
changes in laws and policies governing operations of
foreign-based companies;
|
|
|
|
import-export quotas;
|
|
|
|
currency restrictions and exchange rate fluctuations;
|
|
|
|
world economic cycles;
|
|
|
|
limited market access; and
|
|
|
|
other uncertainties arising out of foreign government
sovereignty over our international operations.
|
In addition, laws and policies of the United States affecting
foreign trade and taxation may also adversely affect
Cal Dives international operations.
As Cal Dives international operations expand, the
exposure to these risks will increase. Cal Dives
business, financial condition, or results of operations could be
susceptible to adverse events beyond its control that may occur
in the particular country or region in which it is active.
Cal
Dive is the subject of an agreed final judgment that prevents it
from making acquisitions of certain saturation diving systems
without the consent of the U.S. Department of Justice, which
could adversely affect its ability to make strategic
acquisitions and increase its revenues and
profitability.
As part of the Acergy and Torch acquisitions in 2005, Helix
entered into an agreed final judgment with the
U.S. Department of Justice, or DOJ, to remedy certain
anti-competitive effects of the acquisitions alleged by the DOJ.
The final judgment requires Helix, until January 2009, to notify
the DOJ of any proposed direct or indirect acquisition of a
saturation diving chamber that has been operated in the Gulf of
Mexico at any time since October 1, 2002 or any interest in
a company that owns or operates such a chamber. Cal Dive is
also subject to and will continue to be bound by the consent
decree. Since Cal Dive is not able to make any acquisition
of this type without obtaining the consent of the DOJ, its
ability to satisfy its customers demands for services that
require it to use saturation diving chambers and to generate
revenues from these services may be limited.
The
loss of the services of one or more of Cal Dives key
employees, or its failure to attract and retain other highly
qualified personnel in the future, could disrupt its operations
and adversely affect its financial results.
Cal Dives industry has lost a significant number of
experienced subsea professionals over the years due to, among
other reasons, the cyclicality of the business.
Cal Dives continued success depends on the active
participation of its key employees. The loss of one or more of
its key people could adversely affect its operations.
Cal Dive believes that its success and continued growth are
also dependent upon its ability to attract and retain skilled
personnel. Unionization or a significant increase in the wages
paid by other employers
20
could result in a reduction in its workforce, increases in the
wage rates it pays, or both. If either of these events occurs
for any significant period of time, Cal Dives
revenues and profitability could be diminished and its growth
potential could be impaired.
The
operation of marine vessels is risky, and Cal Dive may incur
losses or other liabilities that are not covered by insurance
and could have a material adverse effect on its financial
condition and results of operations.
Marine contracting involves a high degree of operational risk.
Hazards, such as vessels sinking, grounding, colliding, and
sustaining damage from severe weather conditions, are inherent
in marine operations. These hazards can cause personal injury or
loss of life, severe damage to and destruction of property and
equipment, pollution or environmental damage, and suspension of
operations. Damage arising from such occurrences may result in
lawsuits asserting large claims. Cal Dive maintains such
insurance protection as it deems prudent, including Jones Act
employee coverage, which is the maritime equivalent of
workers compensation, and hull insurance on its vessels.
Such insurance may not be sufficient or effective under all
circumstances or against all hazards to which it may be subject.
A successful claim for which it is not fully insured could have
a material adverse effect on its business, financial condition,
or results of operations. Moreover, its ability to maintain
adequate insurance in the future at rates that it considers
reasonable may be limited. As a result of market conditions,
premiums and deductibles for certain of its insurance policies
have increased substantially and could escalate further. In some
instances, certain insurance could become unavailable or
available only for reduced amounts of coverage. For example,
insurance carriers are now requiring broad exclusions for losses
due to war risk and terrorist acts and limitations for wind
storm damage. The current insurance on its vessels, in some
cases, is in amounts approximating book value, which is less
than replacement value. In the event of property loss due to a
catastrophic marine disaster, mechanical failure or collision,
insurance may not cover a substantial loss of revenues,
increased costs and other liabilities, and could have a material
adverse effect on Cal Dives operating performance if
it were to lose any of its large vessels.
Cal
Dive has substantial debt obligations that could restrict its
operations and impair its financial condition.
Cal Dive currently has a $250 million five-year
revolving credit facility. Cal Dive expects to enter into a
new $675 million five-year revolving credit facility in
connection with the merger which will replace its current
facility. At September 30, 2007, Cal Dive had
outstanding debt of $117 million under its current credit
facility. Immediately following the merger, Cal Dive
expects to have $447 million outstanding under its new
credit facility.
This substantial indebtedness could have adverse consequences on
Cal Dive, including:
|
|
|
|
|
increasing its vulnerability to adverse economic, regulatory,
and industry conditions;
|
|
|
|
limiting its ability to compete and its flexibility in planning
for, or reacting to, changes in its business and the industry;
|
|
|
|
limiting its ability to borrow additional funds; and
|
|
|
|
requiring it to dedicate a substantial portion of its cash flow
from operations to payments on its debt, thereby reducing funds
available for working capital, capital expenditures,
acquisitions, and other purposes.
|
If Cal Dives cash flow and capital resources are
insufficient to service its debt obligations, it may be forced
to reduce or delay its business activities and capital
expenditures, sell assets, seek additional equity or debt
capital, or restructure or refinance its debt. However, these
measures might be unsuccessful or inadequate in permitting it to
meet its scheduled debt service obligations. Cal Dive may
be unable to restructure or refinance its obligations or obtain
additional equity financing or sell assets on satisfactory terms
or at all. As a result, an inability to meet its debt
obligations could cause it to default on those obligations. A
default under
21
any debt instrument could, in turn, result in defaults under
other debt instruments. Any such defaults could materially
impair its financial condition and liquidity.
Cal
Dives contracting business declines in winter, and adverse
weather conditions in the Gulf of Mexico can adversely affect
its revenues.
Marine operations conducted in the Gulf of Mexico are typically
seasonal and depend, in part, on weather conditions.
Historically, Cal Dive has experienced its lowest vessel
utilization rates during the first quarter, and to a lesser
extent during the fourth quarter, when weather conditions are
least favorable for offshore exploration, development, and
construction activities. As is common in the industry,
Cal Dive typically bears the risk of delays caused by some,
but not all, adverse weather conditions. Accordingly, its
results in any one quarter are not necessarily indicative of
annual results or continuing trends.
Cal
Dives original estimates of the costs associated with its
qualified turnkey projects and capital projects may be incorrect
and result in reduced profitability, losses, or cost over-runs
on those projects.
Many of Cal Dives projects are performed on a
qualified turnkey basis where a defined work scope is delivered
for a fixed price and extra work, which is subject to customer
approval, is billed separately. The revenue, cost, and gross
profit realized on a turnkey contract can vary from the
estimated amount because of changes in offshore job conditions,
variations in labor, and equipment productivity from the
original estimates, and the performance of others, such as
alliance partners. These variations and risks inherent in the
marine construction business may result in Cal Dive
experiencing reduced profitability or losses on projects. In
addition, estimates for capital projects, including
recertification costs, may have cost over-runs due to unknown
factors associated with the work to be performed and market
conditions.
Cal
Dive is subject to extensive federal, state, local, and other
laws and regulations that could adversely affect the cost,
manner, or feasibility of conducting its
operations.
Cal Dives subsea construction, intervention,
inspection, maintenance, and decommissioning operations are
subject to extensive laws and regulations. In order to conduct
its operations in compliance with these laws and regulations,
Cal Dive must obtain and maintain numerous permits,
approvals, and certificates from various federal, state, and
local governmental authorities. Due to adverse operating market
conditions or unfavorable financing conditions, there may be
occasions when certain recertification efforts may be postponed,
rendering certain vessel operations temporarily out of
commission, until more favorable market or cost of capital
conditions arise. In addition, Cal Dives costs of
compliance may increase if existing laws and regulations are
revised or reinterpreted, or if new laws and regulations become
applicable to its operations that may, for instance, require it
to obtain additional permits, approvals, and certificates for
proposed projects. Any actual or alleged violation of permit
requirements or failure to obtain any required permit could
result in restrictions or prohibitions on its operations or
criminal sanctions. Alternatively, Cal Dive may have to
incur substantial expenditures to obtain, maintain, or renew
authorizations to conduct existing projects. If a project is
unable to function as planned due to changing requirements or
local opposition, Cal Dive may suffer expensive delays,
extended periods of non-operation, or significant loss of value
in a project. All such costs may have a negative effect on
Cal Dives business, financial condition, or results
of operations. Failure to comply with such laws and regulations,
as interpreted and enforced, could have a material adverse
effect on Cal Dives business, financial condition, or
results of operations.
Cal
Dive may incur substantial costs and liabilities with respect to
environmental, health, and safety laws and
regulations.
Cal Dive may incur substantial costs and liabilities as a
result of environmental, health, and safety requirements
relating to, among other things, its subsea construction and
intervention, inspection, maintenance, and decommissioning
operations. These costs and liabilities could arise under a wide
range of environmental, health, and safety laws, including
regulations and enforcement policies, which have tended to
become increasingly strict over time. Failure to comply with
these laws and regulations may result in assessment of
administrative, civil, and criminal penalties, imposition of
cleanup and site restoration costs and liens, and the
22
issuance of orders enjoining or limiting its current or future
operations. Compliance with these laws and regulations also
increases the cost of its operations and may prevent or delay
the commencement or continuance of a given operation. In
addition, claims for damages, including damages for natural
resources, to persons or property may result from environmental
and other impacts of its operations.
Strict, joint, and several liability to remediate contamination
may be imposed under certain environmental laws, which could
cause it to become liable for, among other things, the conduct
of others or for consequences of its own actions that were in
compliance with all applicable laws at the time those actions
were taken. New or modified environmental, health, or safety
laws, regulations, or enforcement policies could be more
stringent and impose unforeseen liabilities or significantly
increase compliance costs. Therefore, the costs to comply with
environmental, health, or safety laws or regulations or the
liabilities incurred in connection with them could significantly
and adversely affect its business, financial condition, or
results of operations.
Cal
Dive has a limited operating history as an independent company
and its historical financial information is not necessarily
representative of the results it would have achieved as an
independent publicly traded company and may not be a reliable
indicator of its future results.
Cal Dives historical financial information included
in this information statement/proxy statement/prospectus does
not necessarily reflect the financial condition, results of
operations, or cash flows it would have achieved as an
independent publicly traded company during the periods presented
or those results it will achieve in the future. This is
primarily a result of the following factors:
|
|
|
|
|
Cal Dives historical financial results reflect
allocations of corporate expenses from Helix. Those allocations
may be different from the comparable expenses it would have
incurred had it operated as an independent publicly traded
company.
|
|
|
|
Cal Dives working capital requirements and funding
for maintenance capital expenditures, strategic investments, and
acquisitions have historically been part of the corporate-wide
cash management program of Helix. Following Cal Dives
initial public offering in December 2006, it has been solely
responsible for the provision of funds to finance its working
capital and other cash requirements.
|
Helix
owns a controlling interest in Cal Dive and will continue to own
a controlling interest of Cal Dive after the merger. The
interests of Helix may conflict with those of Cal Dives
other stockholders, and other stockholders voting power
may be limited.
Helix currently owns approximately 73% of the outstanding shares
of Cal Dives common stock. If the merger is
completed, Helix will own approximately 58.7% of
Cal Dives common stock. For so long as Helix
continues to own shares of Cal Dives common stock
representing more than 50% of the total voting power, it will
have the ability to direct the election and removal of all
members of Cal Dives board of directors and to
exercise a controlling influence over Cal Dives
business and affairs, including any determinations with respect
to mergers or other business combinations involving
Cal Dive, or acquisition or disposition of assets, the
incurrence of indebtedness by Cal Dive, the issuance of any
additional common stock or other equity securities by
Cal Dive, the repurchase or redemption of common stock or
preferred stock by Cal Dive and the payment of dividends by
Cal Dive. Similarly, Helix has the power to determine or
significantly influence the outcome of matters submitted to a
vote of Cal Dives stockholders, including the power
to prevent an acquisition or any other change in control of
Cal Dive. Because Helixs interests as
Cal Dives controlling stockholder may differ from the
interests of Cal Dives other stockholders, actions
taken by Helix with respect to Cal Dive may not be
favorable to such other stockholders.
Prior to the completion of its initial public offering,
Cal Dive also entered into a Master Agreement, a Corporate
Services Agreement, and a number of other agreements with Helix
setting forth various matters governing its relationship with
Helix while it remains a significant stockholder in
Cal Dive. These agreements govern Cal Dives
relationship with Helix and allow Helix to retain control over,
among other things, the provision of corporate services to
Cal Dive and its ability to make certain acquisitions or to
merge or consolidate or to sell all or substantially all its
assets. The rights of Helix under these agreements may allow
Helix to delay or prevent an acquisition of Cal Dive that
our other stockholders may consider favorable.
23
Cal Dive will not be able to terminate these agreements or
amend them in a manner it deems more favorable so long as Helix
continues to own shares of Cal Dive common stock
representing more than 50% of the total voting power of its
common stock.
Conflicts
of interest may arise between Helix and Cal Dive that could be
resolved in a manner unfavorable to Cal Dive.
Questions relating to conflicts of interest may arise between
Helix and Cal Dive in a number of areas relating to its
past and ongoing relationships. Cal Dives current
board of directors is comprised of six persons, two of whom
serve as directors and executive officers of Helix and one of
whom serves as a director of Helix. Notwithstanding the fact
that following the completion of the merger Cal Dives
board will be increased to eight directors and two Horizon
directors will join Cal Dives board, for as long as
Helix continues to own shares of Cal Dive common stock
representing more than 50% of the total voting power of its
common stock, it will have the ability to direct the election
and removal of all the members of Cal Dives board of
directors and to exercise a controlling influence over
Cal Dives business and affairs.
Areas in which conflicts of interest between Helix and
Cal Dive could arise include, but are not limited to, the
following:
|
|
|
|
|
Cross officerships, directorships, and stock
ownership. The ownership interests of
Cal Dives directors or executive officers in the
common stock of Helix or service as a director or officer of
both Helix and Cal Dive could create, or appear to create,
conflicts of interest when directors and executive officers are
faced with decisions that could have different implications for
the two companies. For example, these decisions could relate to
(i) the nature, quality, and cost of services rendered to
Cal Dive by Helix, (ii) disagreement over the
desirability of a potential acquisition or other corporate
opportunity, (iii) employee retention or recruiting, or
(iv) Cal Dives dividend policy.
|
|
|
|
Intercompany transactions. From time to time,
Helix or its affiliates may enter into transactions with
Cal Dive or its subsidiaries or other affiliates. Although
the terms of any such transactions will be established based
upon negotiations between employees of Helix and Cal Dive
and, when appropriate, subject to the approval of the
independent directors on Cal Dives board or a
committee of disinterested directors, the terms of any such
transactions may not be as favorable to Cal Dive or its
subsidiaries or affiliates as may otherwise be obtained in
arms length negotiations. Under the Master Agreement, at
Helixs request, Cal Dive will continue to contract
vessels and related equipment owned by Cal Dive to Helix,
at prevailing market rates.
|
|
|
|
Intercompany agreements. Cal Dive has
entered into certain agreements with Helix pursuant to which
Helix has agreed to provide Cal Dive with certain
accounting, tax, and other services and Cal Dive has agreed
to provide Helix with certain training, supply chain,
operational facilities, and operational human resources
services. Payments for these services will allow Helix and
Cal Dive to fully recover the allocated direct costs of
providing the services, plus all out-of-pocket costs and
expenses. In addition, Cal Dive has entered into a number
of intercompany agreements covering matters such as tax sharing
and Cal Dives responsibility for certain liabilities
previously undertaken by Helix for certain of its businesses.
Cal Dive negotiated the terms of these agreements with
Helix in the context of a parent-subsidiary relationship. The
terms were not the result of arms length negotiations. In
addition, conflicts could arise in the interpretations of any
extension or renegotiation of these agreements in the future.
|
If
Helix engages in the same type of business Cal Dive conducts or
takes advantage of business opportunities that might be
attractive to Cal Dive, Cal Dives ability to operate
successfully and expand its business may be
hampered.
Cal Dives amended and restated certificate of
incorporation provides that, subject to any contractual
provision to the contrary, Helix will have no obligation to
refrain from:
|
|
|
|
|
engaging in the same or similar business activities or lines of
business as Cal Dive, or
|
|
|
|
doing business with any of Cal Dives clients,
customers, or vendors.
|
24
In addition, the corporate opportunity policy set forth in
Cal Dives amended and restated certificate of
incorporation addresses potential conflicts of interest between
Cal Dive, on the one hand, and Helix and its officers and
directors who are officers or directors of Cal Dive, on the
other hand. The policy provides that if Helix acquires knowledge
of a potential transaction or matter which may be a corporate
opportunity for both Helix and Cal Dive, Cal Dive will
have renounced its interest in the corporate opportunity. It
also provides that if one of Cal Dives directors or
officers who is also a director or officer of Helix learns of a
potential transaction or matter that may be a corporate
opportunity for both Helix and Cal Dive, Cal Dive will
have renounced its interest in the corporate opportunity, unless
that opportunity is expressly offered to that person in writing
solely in his or her capacity as Cal Dives director
or officer.
If one of Cal Dives officers or directors, who also
serves as a director or officer of Helix, learns of a potential
transaction or matter that may be a corporate opportunity for
both Helix and Cal Dive, Cal Dives amended and
restated certificate of incorporation provides that the director
or officer will have no duty to communicate or present that
corporate opportunity to Cal Dive and will not be liable to
Cal Dive or its stockholders for breach of fiduciary duty
by reason of Helixs actions with respect to that corporate
opportunity.
This policy could result in Helix having rights to corporate
opportunities in which both Cal Dive and Helix have an
interest.
Future
sales or distributions of Cal Dives shares by Helix could
depress the market price for shares of Cal Dive common
stock.
Helix may sell all or part of the shares of Cal Dive common
stock that it owns or distribute those shares to its
stockholders, including pursuant to demand registration rights
that were granted to Helix. Sales or distributions by Helix of
substantial amounts of Cal Dives common stock in the
public market or to its stockholders could adversely affect
prevailing market prices for Cal Dives common stock.
Helix is not subject to any contractual obligation that would
prohibit it from selling, spinning off, splitting off, or
otherwise disposing of any shares of Cal Dives common
stock.
Cal
Dive will not have control over certain tax decisions and could
be liable for income taxes owed by Helix.
Prior to the closing of its initial public offering,
Cal Dive and certain of its subsidiaries were included in
Helixs consolidated group for U.S. federal income tax
purposes. In addition, Cal Dive or one or more of its
subsidiaries may be included in the combined, consolidated, or
unitary tax returns of Helix or one or more of its subsidiaries
for foreign, state, and local income tax purposes. Under
Cal Dives Tax Matters Agreement with Helix, Helix
will have the right to prepare and file income tax returns that
include Cal Dive or its subsidiaries if Helix has any
responsibility for the taxes shown on such income tax returns.
The Tax Matters Agreement provides that Helix will have sole
authority to respond to and conduct all tax proceedings
(including tax audits) relating to such income tax returns. This
arrangement may result in conflicts of interest between Helix
and Cal Dive. For example, under the Tax Matters Agreement,
Helix will be able to choose to contest, compromise, or settle
any adjustment or deficiency proposed by the relevant taxing
authority in a manner that may be beneficial to Helix and
detrimental to Cal Dive.
Moreover, notwithstanding the Tax Matters Agreement,
U.S. federal tax law provides that each member of a
consolidated group is liable for the groups entire tax
obligation. Thus, to the extent Helix or other members of the
consolidated group fail to make any U.S. federal income tax
payments required by law for tax periods for which Cal Dive
or its subsidiaries are included in Helixs consolidated
group, Cal Dive could be liable for the shortfall. Similar
principles may apply for foreign, state, and local income tax
purposes where Cal Dive files combined, consolidated, or
unitary returns with Helix or its subsidiaries for foreign,
state, and local income tax purposes.
25
Cal
Dive could be responsible for taxes resulting from the transfer
of assets to it by Helix.
To effect the separation affected in connection with
Cal Dives initial public offering, Helix and its
affiliates transferred to Cal Dive the assets related to
its business. Under the Tax Matters Agreement, Helix is
generally responsible for any taxes resulting from such
transfer. However, under the Tax Matters Agreement,
Cal Dive has agreed to be responsible for any additional
taxes that may result from actions it takes.
Cal
Dives stock ownership by Helix, provisions in Cal
Dives agreements with Helix, and Cal Dives corporate
governance documents and Delaware law may delay or prevent an
acquisition of Cal Dive that its other stockholders may consider
favorable.
For as long as Helix continues to own shares of Cal Dive
common stock representing more than 50% of the total voting
power of its common stock, Helix will have the ability to
control decisions regarding an acquisition of Cal Dive by a
third party. In addition, Cal Dives amended and
restated certificate of incorporation, bylaws, and Delaware law
contain provisions that could make it more difficult for a third
party to acquire Cal Dive without the consent of
Cal Dives board of directors. These provisions
include restrictions on the ability of Cal Dives
stockholders to remove directors, supermajority voting
requirements for stockholders to amend Cal Dives
organizational documents, restrictions on a classified board of
directors, and limitations on action by Cal Dives
stockholders by written consent. Some of these provisions, such
as the limitation on stockholder action by written consent, only
become effective once Helix no longer controls Cal Dive. In
addition, Cal Dives board of directors has the right
to issue preferred stock without stockholder approval, which
could be used to dilute the stock ownership of a potential
hostile acquirer. Delaware law also imposes certain restrictions
on mergers and other business combinations between Cal Dive
and any holder of 15% or more of Cal Dives
outstanding voting stock. These restrictions under Delaware law
do not apply to Helix until it beneficially owns less than 15%
of Cal Dives common stock and subsequently increases
its shareholdings to once again beneficially own at least 15% of
Cal Dives common stock. Although Cal Dive
believes these provisions protect its stockholders from coercive
or otherwise unfair takeover tactics and thereby provide for an
opportunity to receive a higher bid by requiring potential
acquirers to negotiate with Cal Dives board of
directors, these provisions apply even if the offer may be
considered beneficial by some stockholders.
Conflicts
of interest may arise due to the vesting schedule of grants of
restricted stock to Cal Dives executive
officers.
Following completion of its initial public offering,
Cal Dive granted shares of restricted stock to its
executive officers, of which 53% began to vest upon the closing
of the IPO, another approximately 29% will begin to vest upon
the first anniversary of the closing of the merger and the
remainder of which will commence to vest upon the first
anniversary of the date on which Helix no longer owns shares of
stock representing 51% or more of the total voting power of
Cal Dives common stock. This could create, or appear
to create, conflicts of interest when Cal Dives
management is faced with a transaction or transactions that
could reduce Helixs ownership of Cal Dives
common stock to below 51% but that could have different
implications for Cal Dives other stockholders.
26
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This information statement/proxy statement/prospectus, including
the documents incorporated by reference, contains
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements are generally accompanied by
words such as anticipate, expect,
intend, plan, believe,
seek, could, should,
will, project, estimate,
look forward to and similar expressions which convey
uncertainty of future events or outcomes.
The expectations set forth in this information
statement/proxy statement/prospectus and the documents
incorporated by reference regarding, among other things,
accretion, returns on invested capital, achievement of annual
savings and synergies, achievement of strong cash flow,
sufficiency of cash flow to fund capital expenditures, and
achievement of debt reduction targets are only the parties
expectations regarding these matters. Actual results could
differ materially from these expectations depending on factors
such as:
|
|
|
|
|
the factors described under Risk Factors beginning
on page 13 of this information statement/proxy
statement/prospectus;
|
|
|
|
the factors that generally affect Cal Dives and
Horizons businesses as further outlined in
Managements Discussion and Analysis of Financial
Condition and Results of Operations included in this
information statement/proxy statement/prospectus, in the case of
Cal Dive, and in Horizons Annual Report on
Form 10-K
for the year ended December 31, 2006 and Quarterly Report
on
Form 10-Q
for the quarter ended September 30, 2007, in the case of
Horizon, and elsewhere in this information statement/proxy
statement/prospectus, including the performance of contracts by
suppliers, customers and partners, employee management issues,
and complexities of global political and economic
developments; and
|
|
|
|
the fact that, following the merger, the actual results of the
combined company could differ materially from the expectations
set forth in this information statement/proxy
statement/prospectus and the documents incorporated by reference
depending on additional factors such as:
|
|
|
|
|
|
the combined companys cost of capital;
|
|
|
|
the ability of the combined company to identify and implement
cost savings, synergies, and efficiencies in the time frame
needed to achieve these expectations;
|
|
|
|
the combined companys actual capital needs, the absence of
any material incident of property damage or other hazard that
could affect the need to effect capital expenditures, and any
currently unforeseen merger or acquisition opportunities that
could affect capital needs; and
|
|
|
|
the costs incurred in implementing synergies including, but not
limited to, our ability to terminate, amend, or renegotiate
prior contractual commitments of Cal Dive and Horizon.
|
Actual actions that the combined company may take may differ
from time to time as the combined company may deem necessary or
advisable in the best interest of the combined company and its
stockholders to attempt to achieve the successful integration of
the companies, the synergies needed to make the transaction a
financial success, and to react to the economy and the combined
companys market for its services.
27
SELECTED
HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL
INFORMATION
Selected
Cal Dive Historical Financial Data
For periods prior to December 14, 2006,
Cal Dives historical financial and other data have
been prepared on a combined basis from Helixs consolidated
financial statements using the historical results of operations
and bases of the assets and liabilities of the shallow water
marine contracting business of Helix and give effect to
allocations of expenses from Helix. Cal Dives
historical financial data will not necessarily be indicative of
its future performance nor will such data necessarily reflect
what Cal Dives consolidated and combined financial
position and results of operations would have been had
Cal Dive operated as an independent publicly traded company
during the periods shown.
Cal Dive has prepared its consolidated and combined
financial statements as if Cal Dive International, Inc. had
been in existence as a separate company throughout all relevant
periods. The consolidated and combined results of operations
data and cash flow data for the years ended December 31,
2006, 2005, 2004 and 2003 and the consolidated and combined
balance sheet data as of December 31, 2006, 2005 and 2004
presented below were derived from Cal Dives audited
consolidated and combined financial statements and the related
notes thereto included elsewhere in this information
statement/proxy statement/prospectus. The consolidated and
combined results of operations data and cash flow data for the
year ended December 31, 2002 and for the nine months ended
September 30, 2007 and 2006, and the consolidated and
combined balance sheet data as of December 31, 2003 and
2002 and September 30, 2007 and 2006 presented below were
derived from Cal Dives unaudited consolidated and
combined financial statements. The operating results for the
nine months ended September 30, 2007 and 2006 include all
adjustments (consisting of only normal recurring adjustments)
that Cal Dive believes are necessary for a fair statement
of results for such interim periods.
The operating results of the acquired vessels from the Torch
asset purchase are included in Cal Dives historical
consolidated and combined statements of operations since the
acquisition date of August 31, 2005. The operating results
of the assets acquired from Acergy during 2005 are included in
Cal Dives historical consolidated and combined
statements of operations since the acquisition date of
November 1, 2005. Cal Dives consolidated and
combined statements of operations do not include the operating
results of the DLB801 or the Kestrel prior to
their acquisitions in January and March 2006, respectively.
Cal Dives operating results of the assets acquired
from Fraser Diving are included in the accompanying historical
consolidated and combined statements of operations since the
acquisition date of July 31, 2006.
Results for the nine months ended September 30, 2007 are
not necessarily indicative of the results expected for the
fiscal year ending December 31, 2007 or any future period.
You should read the information contained in this table in
conjunction with Cal Dives Managements
Discussion and Analysis of Financial Condition and Results of
Operations and the historical audited consolidated and
combined financial statements and the accompanying notes thereto
of Cal Dive included elsewhere in this information
statement/proxy statement/prospectus.
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except per share and marine contracting
activity data)
|
|
|
Results of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues
|
|
$
|
509,917
|
|
|
$
|
224,299
|
|
|
$
|
125,786
|
|
|
$
|
135,488
|
|
|
$
|
139,887
|
|
|
$
|
461,412
|
|
|
$
|
372,918
|
|
Cost of Sales
|
|
|
287,387
|
|
|
|
152,586
|
|
|
|
101,583
|
|
|
|
108,479
|
|
|
|
116,167
|
|
|
|
287,956
|
|
|
|
204,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit
|
|
|
222,530
|
|
|
|
71,713
|
|
|
|
24,203
|
|
|
|
27,009
|
|
|
|
23,720
|
|
|
|
173,456
|
|
|
|
168,887
|
|
Gain on sale of assets
|
|
|
349
|
|
|
|
270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,852
|
|
|
|
322
|
|
Selling and administrative expenses
|
|
|
37,431
|
|
|
|
16,730
|
|
|
|
12,318
|
|
|
|
10,337
|
|
|
|
8,055
|
|
|
|
33,870
|
|
|
|
25,210
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
185,448
|
|
|
|
55,253
|
|
|
|
11,885
|
|
|
|
16,672
|
|
|
|
15,665
|
|
|
|
141,438
|
|
|
|
143,999
|
|
Equity in earnings (losses) of investment, inclusive of
impairment charge
|
|
|
(487
|
)
|
|
|
2,817
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,841
|
)
|
|
|
(587
|
)
|
Net interest income (expense)
|
|
|
163
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,040
|
)
|
|
|
364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
185,124
|
|
|
|
58,115
|
|
|
|
11,885
|
|
|
|
16,672
|
|
|
|
15,665
|
|
|
|
123,557
|
|
|
|
143,776
|
|
Provision for income taxes
|
|
|
65,710
|
|
|
|
20,385
|
|
|
|
4,211
|
|
|
|
5,870
|
|
|
|
5,510
|
|
|
|
44,387
|
|
|
|
50,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
119,414
|
|
|
$
|
37,730
|
|
|
$
|
7,674
|
|
|
$
|
10,802
|
|
|
$
|
10,155
|
|
|
$
|
79,170
|
|
|
$
|
93,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.91
|
|
|
$
|
0.61
|
(1)
|
|
$
|
0.12
|
(1)
|
|
$
|
0.18
|
(1)
|
|
$
|
0.17
|
(1)
|
|
$
|
0.95
|
|
|
$
|
1.52
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.91
|
|
|
$
|
0.61
|
(1)
|
|
$
|
0.12
|
(1)
|
|
$
|
0.18
|
(1)
|
|
$
|
0.17
|
(1)
|
|
$
|
0.94
|
|
|
$
|
1.52
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
24,515
|
|
|
$
|
15,308
|
|
|
$
|
15,510
|
|
|
$
|
15,209
|
|
|
$
|
14,193
|
|
|
$
|
28,702
|
|
|
$
|
17,047
|
|
Capital expenditures
|
|
|
38,086
|
|
|
|
36,407
|
|
|
|
2,912
|
|
|
|
2,784
|
|
|
|
12,980
|
|
|
|
26,390
|
|
|
|
21,055
|
|
Acquisition of business
|
|
|
100,128
|
|
|
|
42,917
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,660
|
|
Dividends paid to Helix
|
|
|
464,401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flow Data(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows provided by (used in)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
86,439
|
|
|
$
|
32,228
|
|
|
$
|
28,610
|
|
|
$
|
26,370
|
|
|
$
|
15,691
|
|
|
$
|
103,512
|
|
|
$
|
107,832
|
|
Investing activities
|
|
|
(121,157
|
)
|
|
|
(79,547
|
)
|
|
|
(2,912
|
)
|
|
|
(2,584
|
)
|
|
|
(4,310
|
)
|
|
|
(25,873
|
)
|
|
|
(106,036
|
)
|
Financing activities
|
|
|
57,373
|
|
|
|
47,319
|
|
|
|
(25,698
|
)
|
|
|
(23,786
|
)
|
|
|
(11,381
|
)
|
|
|
(84,000
|
)
|
|
|
252
|
|
Marine Contracting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Activity Data (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of vessels(3)
|
|
|
25
|
|
|
|
22
|
|
|
|
13
|
|
|
|
13
|
|
|
|
13
|
|
|
|
25
|
|
|
|
25
|
|
Utilization(4)
|
|
|
91
|
%
|
|
|
79
|
%
|
|
|
63
|
%
|
|
|
68
|
%
|
|
|
61
|
%
|
|
|
77
|
%
|
|
|
95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
$
|
168,747
|
|
|
$
|
110,484
|
|
|
$
|
46,565
|
|
|
$
|
43,270
|
|
|
$
|
52,556
|
|
|
$
|
193,855
|
|
Net property and equipment
|
|
|
222,247
|
|
|
|
113,604
|
|
|
|
76,329
|
|
|
|
91,533
|
|
|
|
100,605
|
|
|
|
230,562
|
|
Total assets
|
|
|
452,153
|
|
|
|
277,884
|
|
|
|
144,817
|
|
|
|
156,280
|
|
|
|
172,904
|
|
|
|
486,252
|
|
Total current liabilities
|
|
|
58,814
|
|
|
|
73,869
|
|
|
|
27,438
|
|
|
|
21,165
|
|
|
|
28,431
|
|
|
|
91,227
|
|
Total liabilities
|
|
|
294,392
|
|
|
|
100,101
|
|
|
|
52,309
|
|
|
|
45,748
|
|
|
|
49,388
|
|
|
|
246,821
|
|
Long-term debt
|
|
|
201,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,000
|
|
Total stockholders equity
|
|
|
157,761
|
|
|
|
177,783
|
|
|
|
92,508
|
|
|
|
110,532
|
|
|
|
123,516
|
|
|
|
239,431
|
|
|
|
|
(1)
|
|
Basic and diluted net income per
share for these periods are based upon 61,506,691 shares,
reflecting a 61,506.691 to 1 stock split effected immediately
prior to Cal Dives initial public offering.
|
|
(2)
|
|
For all periods through
December 14, 2006: (i) cash flows from financing
activities have been reflected as (a) cash transfers from
Cal Dive to Helix equal to substantially all cash provided by
operating activities and (b) cash transfers from Helix to
Cal Dive equal to the amount of cash used in investing
activities, (ii) substantially all excess cash has been
transferred to Cal Dives owner, and (iii) these cash
transfers have been reflected as changes in total
stockholders equity.
|
|
(3)
|
|
As of the end of the period and
excluding acquired vessels prior to their in-service dates,
vessels taken out of service prior to their disposition and
vessels jointly owned by a third party.
|
|
(4)
|
|
Average vessel utilization is
calculated by dividing the total number of days the vessels
generated revenues by the total number of days the vessels were
available for operation in each period and does not reflect
acquired vessels prior to their in-service dates, vessels in
drydocking, vessels taken out of service for upgrades or prior
to their disposition and vessels jointly owned by a third party.
|
29
Selected
Horizon Historical Financial Data
Horizons selected financial data for the five-year period
ended December 31, 2006 is derived from its audited
financial statements and Horizons selected financial data
for the nine months ended September 30, 2007 and 2006 is
derived from its unaudited financial statements. You should read
the information below together with Managements
Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and
notes thereto incorporated by reference into this information
statement/proxy statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except per share data)
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract revenues
|
|
$
|
547,289
|
|
|
$
|
325,044
|
|
|
$
|
254,209
|
|
|
$
|
270,313
|
|
|
$
|
283,410
|
|
|
$
|
351,844
|
|
|
$
|
430,618
|
|
Cost of contract revenues
|
|
|
400,040
|
|
|
|
268,280
|
|
|
|
226,391
|
|
|
|
263,812
|
|
|
|
253,016
|
|
|
|
301,194
|
|
|
|
313,811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
147,249
|
|
|
|
56,764
|
|
|
|
27,818
|
|
|
|
6,501
|
|
|
|
30,394
|
|
|
|
50,650
|
|
|
|
116,807
|
|
Selling, general and administrative expenses
|
|
|
33,167
|
|
|
|
30,922
|
|
|
|
30,687
|
|
|
|
21,749
|
|
|
|
21,845
|
|
|
|
24,011
|
|
|
|
25,641
|
|
Gain on insurance settlement
|
|
|
(14,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,300
|
)
|
Reserve for claims and receivables
|
|
|
18,458
|
|
|
|
1,711
|
|
|
|
5,692
|
|
|
|
33,092
|
|
|
|
|
|
|
|
|
|
|
|
18,458
|
|
Impairment of property, equipment and intangibles
|
|
|
100
|
|
|
|
|
|
|
|
22,361
|
|
|
|
21,332
|
|
|
|
9,852
|
|
|
|
|
|
|
|
|
|
Impairment loss on assets held for sale
|
|
|
|
|
|
|
2,261
|
|
|
|
3,268
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
109,824
|
|
|
|
21,870
|
|
|
|
(34,190
|
)
|
|
|
(69,672
|
)
|
|
|
(1,303
|
)
|
|
|
26,639
|
|
|
|
87,008
|
|
Other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amount capitalized
|
|
|
(13,989
|
)
|
|
|
(67,572
|
)
|
|
|
(25,995
|
)
|
|
|
(9,542
|
)
|
|
|
(4,585
|
)
|
|
|
(8,521
|
)
|
|
|
(10,771
|
)
|
Interest income
|
|
|
2,967
|
|
|
|
777
|
|
|
|
286
|
|
|
|
67
|
|
|
|
91
|
|
|
|
2,654
|
|
|
|
1,686
|
|
Loss on debt extinguishment
|
|
|
(2,402
|
)
|
|
|
(23,138
|
)
|
|
|
(1,719
|
)
|
|
|
(868
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,402
|
)
|
Other income (expense), net
|
|
|
25
|
|
|
|
53
|
|
|
|
152
|
|
|
|
(88
|
)
|
|
|
(2,831
|
)
|
|
|
(35
|
)
|
|
|
358
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
96,425
|
|
|
|
(68,010
|
)
|
|
|
(61,466
|
)
|
|
|
(80,103
|
)
|
|
|
(8,628
|
)
|
|
|
20,737
|
|
|
|
75,879
|
|
Income tax provision (benefit)
|
|
|
29,415
|
|
|
|
3,046
|
|
|
|
2,103
|
|
|
|
(7,599
|
)
|
|
|
(3,079
|
)
|
|
|
5,829
|
|
|
|
22,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
67,010
|
|
|
$
|
(71,056
|
)
|
|
$
|
(63,569
|
)
|
|
$
|
(72,504
|
)
|
|
$
|
(5,549
|
)
|
|
$
|
14,908
|
|
|
$
|
53,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share basic
|
|
$
|
2.18
|
|
|
$
|
(16.09
|
)
|
|
$
|
(51.45
|
)
|
|
$
|
(68.58
|
)
|
|
$
|
(5.42
|
)
|
|
$
|
0.47
|
|
|
$
|
1.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share diluted
|
|
$
|
2.14
|
|
|
$
|
(16.09
|
)
|
|
$
|
(51.45
|
)
|
|
$
|
(68.58
|
)
|
|
$
|
(5.42
|
)
|
|
$
|
0.46
|
|
|
$
|
1.72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
Year Ended December 31,
|
|
|
Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except per share data)
|
|
|
Statement of Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
52,059
|
|
|
$
|
(2,338
|
)
|
|
$
|
2,095
|
|
|
$
|
(53,065
|
)
|
|
$
|
48,487
|
|
|
$
|
24,606
|
|
|
$
|
10,091
|
|
Net cash provided by (used in) investing activities
|
|
|
(4,550
|
)
|
|
|
4,478
|
|
|
|
(4,776
|
)
|
|
|
(14,683
|
)
|
|
|
(59,752
|
)
|
|
|
(15,914
|
)
|
|
|
(3,944
|
)
|
Net cash provided by (used in) financing activities
|
|
|
6,421
|
|
|
|
2,845
|
|
|
|
30,541
|
|
|
|
71,790
|
|
|
|
9,474
|
|
|
|
(11,428
|
)
|
|
|
11,315
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
204,523
|
|
|
$
|
74,119
|
|
|
$
|
29,022
|
|
|
$
|
26,107
|
|
|
$
|
30,385
|
|
|
$
|
203,314
|
|
Total assets
|
|
|
523,019
|
|
|
|
402,721
|
|
|
|
394,277
|
|
|
|
409,541
|
|
|
|
420,533
|
|
|
|
549,038
|
|
Long-term debt, net of current maturities
|
|
|
99,399
|
|
|
|
103,979
|
|
|
|
170,347
|
|
|
|
146,886
|
|
|
|
90,062
|
|
|
|
89,674
|
|
31
Selected
Unaudited Condensed Combined Pro Forma Financial Data
We derived the following unaudited condensed combined pro forma
financial data from Cal Dives audited consolidated
and combined financial statements for the year ended
December 31, 2006, Horizons audited consolidated
financial statements for the year ended December 31, 2006,
Cal Dives unaudited condensed consolidated and
combined financial statements for the nine months ended
September 30, 2007 and Horizons unaudited condensed
consolidated financial statements for the nine months ended
September 30, 2007. The statement of operations data
assumes the merger was effected on January 1, 2006. The
balance sheet data gives effect to the merger as if it had
occurred on September 30, 2007. The accounting policies for
Cal Dive and Horizon are comparable. The financial results
may have been different had the companies always been combined.
Further, the pro forma combined financial data does not reflect
the effect of asset dispositions, if any, that may be required
by order of regulatory authorities, restructuring charges that
will be incurred to fully integrate and operate the combined
organization more efficiently or anticipated synergies resulting
from the merger. Expected costs associated with the combination
of the companies operations, such as severance costs for
redundant functions, integrating information technology systems
and other arrangements, are in the process of being evaluated by
Cal Dive. These costs are not expected to exceed
$25 million, of which approximately $13.5 million
relates to additional purchase price consideration for change of
control payments for Horizons executive officers. You
should read this information in conjunction with
Cal Dives Managements Discussion and Analysis
of Financial Condition and Results of Operations,
Cal Dives Financial Statements and Supplementary Data
and the notes thereto and the Unaudited Condensed Combined Pro
Forma Financial Data included in this information
statement/proxy statement/prospectus and Horizons
Managements Discussion and Analysis of Financial Condition
and Results of Operations and Horizons consolidated
financial statements and notes thereto included in
Horizons Annual Report on
Form 10-K
and Quarterly Reports on
Form 10-Q
incorporated by reference in this information statement/proxy
statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Nine Months Ended
|
|
|
|
December 31, 2006
|
|
|
September 30, 2007
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Statement of Operations data:
|
|
|
|
|
|
|
|
|
Net revenues and other income
|
|
$
|
1,040,978
|
|
|
$
|
790,990
|
|
Net income
|
|
|
175,174
|
|
|
|
81,793
|
|
Net income applicable to common stockholders
|
|
|
175,174
|
|
|
|
81,793
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.11
|
|
|
$
|
0.79
|
|
Diluted
|
|
$
|
2.11
|
|
|
$
|
0.79
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
September 30, 2007
|
|
|
|
(In thousands)
|
|
|
Balance Sheet data:
|
|
|
|
|
Total assets
|
|
$
|
1,319,325
|
|
Long-term debt
|
|
|
447,317
|
|
Stockholders equity
|
|
|
562,719
|
|
32
COMPARATIVE
HISTORICAL AND PRO FORMA PER SHARE INFORMATION
Set forth below are the Cal Dive and Horizon historical and
pro forma amounts per share of common stock for income from
continuing operations and book value. The exchange ratio for the
pro forma computations is 0.625 of a share of Cal Dive
common stock for each share of Horizon common stock. The merger
consideration is $9.25 in cash, without interest, and 0.625 of a
share of Cal Dive common stock for each share of Horizon
common stock outstanding immediately prior to completion of the
merger.
The Horizon pro forma (equivalent) information shows the effect
of the merger from the perspective of an owner of Horizon common
stock. The information was computed by multiplying the
Cal Dive pro forma combined information by the exchange
ratio of 0.625. This computation does not include the benefit to
Horizon stockholders of the cash component of the merger
consideration.
You should read the information below together with the
historical financial statements and related notes contained
herein, in the case of Cal Dive, and in the Horizon Annual
Report on
Form 10-K
for the year ended December 31, 2006 and Quarterly Report
on
Form 10-Q
for the quarter ended September 30, 2007, in the case of
Horizon, and other information filed with the SEC and
incorporated by reference in this information statement/proxy
statement/prospectus. See Where You Can Find More
Information beginning on page 186.
The unaudited pro forma combined data below is for illustrative
purposes only. The pro forma adjustments for the balance sheet
are based on the assumption that the transaction was consummated
on each of the respective dates presented below. The pro forma
adjustments for the statements of operations are based on the
assumption that the transaction was consummated on
January 1, 2006.
The financial results may have been different had the companies
always been combined. You should not rely on this information as
being indicative of the historical results that would have been
achieved had the companies always been combined or of the future
results of the combined company. See Unaudited Condensed
Combined Pro Forma Financial Data beginning on
page 170 for a discussion of the pro forma financial data
used in the comparative per-share amounts in the table below.
|
|
|
|
|
|
|
|
|
|
|
Nine Months
|
|
|
|
|
|
|
Ended
|
|
|
Year Ended
|
|
|
|
September 30, 2007
|
|
|
December 31, 2006
|
|
|
Cal Dive historical
|
|
|
|
|
|
|
|
|
Net income applicable to common stockholders basic
|
|
$
|
0.95
|
|
|
$
|
1.91
|
|
Net income applicable to common stockholders diluted
|
|
$
|
0.94
|
|
|
$
|
1.91
|
|
Cash dividends(2)
|
|
$
|
|
|
|
$
|
|
|
Book value at end of period
|
|
$
|
2.84
|
|
|
$
|
1.87
|
|
Cal Dive pro forma combined
|
|
|
|
|
|
|
|
|
Net income applicable to common stockholders basic
|
|
$
|
0.79
|
|
|
$
|
2.11
|
|
Net income applicable to common stockholders diluted
|
|
$
|
0.79
|
|
|
$
|
2.11
|
|
Cash dividends
|
|
$
|
|
|
|
$
|
|
|
Book value at end of period
|
|
$
|
5.41
|
|
|
$
|
4.60
|
|
Horizon historical
|
|
|
|
|
|
|
|
|
Net income applicable to common stockholders basic
|
|
$
|
0.47
|
|
|
$
|
2.18
|
|
Net income applicable to common stockholders diluted
|
|
$
|
0.46
|
|
|
$
|
2.14
|
|
Cash dividends
|
|
$
|
|
|
|
$
|
|
|
Book value at end of period
|
|
$
|
9.59
|
|
|
$
|
9.18
|
|
Horizon pro forma combined (equivalent)(1)
|
|
|
|
|
|
|
|
|
Net income applicable to common stockholders basic
|
|
$
|
0.49
|
|
|
$
|
1.32
|
|
Net income applicable to common stockholders diluted
|
|
$
|
0.49
|
|
|
$
|
1.32
|
|
Cash dividends
|
|
$
|
|
|
|
$
|
|
|
Book value at end of period
|
|
$
|
3.38
|
|
|
$
|
2.88
|
|
|
|
|
(1) |
|
Does not reflect the $9.25 in cash per share of Horizon common
stock to be received as part of the merger consideration. |
|
(2) |
|
In connection with the Cal Dive initial public offering in
December 2006, total dividends paid to Helix were
$464 million. |
33
COMPARATIVE
MARKET VALUE INFORMATION
The following table sets forth the closing price per share of
Cal Dive common stock and the closing price per share of
Horizon common stock on June 11, 2007 (the last business
day preceding the announcement by Cal Dive and Horizon of
the execution of the merger agreement) and November 1, 2007
(the most recent practicable trading date prior to the date of
this information statement/proxy statement/prospectus). The
table also presents the equivalent market value per share of
Horizon common stock on June 11, 2007 and November 1,
2007, for receipt of a combination of $9.25 in cash, without
interest, and 0.625 of a share of Cal Dive common stock,
for each share of Horizon common stock owned by Horizon
stockholders.
Horizon stockholders are urged to obtain current market
quotations for shares of Cal Dive common stock and Horizon
common stock before making a decision with respect to the merger.
No assurance can be given as to the market prices of
Cal Dive common stock or Horizon common stock at the
closing of the merger. Because the exchange ratio will not be
adjusted for changes in the market price of Cal Dive common
stock, the market value of the shares of Cal Dive common
stock that holders of Horizon common stock will receive at the
effective time of the merger may vary significantly from the
market value of the shares of Cal Dive common stock that
holders of Horizon common stock would have received if the
merger were consummated on the date of the merger agreement or
on the date of this information statement/proxy
statement/prospectus.
|
|
|
|
|
|
|
|
|
|
|
Closing Price
|
|
|
|
per Share
|
|
|
|
June 11,
|
|
|
November 1,
|
|
|
|
2007
|
|
|
2007
|
|
|
Cal Dive common stock
|
|
$
|
16.00
|
|
|
$
|
12.73
|
|
Horizon common stock
|
|
$
|
16.95
|
|
|
$
|
15.33
|
|
Merger consideration equivalent
|
|
$
|
19.25
|
|
|
$
|
17.21
|
|
On June 13, 2007, two putative stockholder derivative
lawsuits were filed in state district court in Harris County,
Texas relating to the merger: Edward Fritsche ex rel. Horizon
Offshore, Inc. v. John T. Mills, et al., Cause
No. 2007-35288
(61st State District Court); and Edith Olanoff ex rel.
Horizon Offshore, Inc. v. John T. Mills, et al., Cause
No. 2007-36084
(80th State District Court). These two lawsuits are
substantially similar and are brought against the members of
Horizons board of directors and Cal Dive. Both also
name Horizon as a nominal defendant, as is customary
in putative derivative lawsuits. The plaintiffs allege, among
other things, that Horizons board of directors breached
its fiduciary duty by utilizing a defective sales process in
connection with the merger. As currently pleaded, neither
lawsuit seeks to recover money damages. However, even though no
application for a temporary restraining order or a temporary
injunction has yet been filed, both seek to enjoin the merger.
Only one of the lawsuits (Fritsche) has actually been
served upon Horizon and Cal Dive or any of the other
defendants. On July 30, 2007, Cal Dive and Horizon
filed responses denying the allegations and asserting, among
other things, that the plaintiffs did not properly state a cause
of action. No hearing or trial has been set. Additional lawsuits
could be filed in the future.
34
INFORMATION
ABOUT THE SPECIAL MEETING AND VOTING
This information statement/proxy statement/prospectus is being
furnished to Horizon stockholders by Horizons board of
directors in connection with the solicitation of proxies from
the holders of Horizon common stock for use at the special
meeting of Horizon stockholders and any adjournments or
postponements of the special meeting. This information
statement/proxy statement/prospectus also is being furnished to
Horizon stockholders as a prospectus of Cal Dive in
connection with the issuance by Cal Dive of shares of
Cal Dive common stock to Horizon stockholders in connection
with the merger.
The special meeting of stockholders of Horizon will be held on
December 10, 2007 at 10:00 a.m., Central Time, at
Horizons corporate offices located at 2500 CityWest
Boulevard, Suite 2200, Houston, Texas 77042.
At the special meeting, Horizon stockholders will be asked:
|
|
|
|
|
to consider and vote upon a proposal to approve and adopt the
merger agreement;
|
|
|
|
to consider and vote upon a proposal to adjourn or postpone the
special meeting, if necessary, to solicit additional proxies in
favor of the approval and adoption of the merger
agreement; and
|
|
|
|
to consider and transact any other business as may properly be
brought before the special meeting or any adjournments or
postponements thereof.
|
At this time, the Horizon board of directors is unaware of any
matters, other than those set forth in the preceding sentence,
that may properly come before the special meeting.
Stockholders
Entitled to Vote
The close of business on October 17, 2007 has been fixed
by Horizons board as the record date for the determination
of those holders of Horizon common stock who are entitled to
notice of, and to vote at, the special meeting and at any
adjournments or postponements thereof.
At the close of business on the record date, there were
32,614,215 shares of Horizon common stock outstanding and
entitled to vote, held by approximately 101 holders of
record. A list of the stockholders of record entitled to vote at
the special meeting will be available for examination by Horizon
stockholders for any purpose germane to the meeting. The list
will be available at the meeting and for ten days prior to the
meeting during ordinary business hours by contacting
Horizons Secretary at 2500 CityWest Boulevard,
Suite 2200, Houston, Texas 77042.
Each holder of record of shares of Horizon common stock as of
the record date is entitled to cast one vote per share at the
special meeting on each proposal. The presence, in person or by
proxy, of the holders of a majority of the issued and
outstanding shares of Horizon common stock outstanding as of the
record date constitutes a quorum for the transaction of business
at the special meeting. The affirmative vote of the holders of a
majority of the shares of Horizon common stock entitled to vote
at the special meeting is required to approve and adopt the
merger agreement.
As of the record date for the special meeting, directors and
executive officers of Horizon and their affiliates beneficially
owned an aggregate of 514,126 shares of Horizon common
stock entitled to vote at the special meeting. These shares
represent approximately 1.6% of the Horizon common stock
outstanding and entitled to vote as of the record date.
As of the record date for the special meeting, Cal Dive and
its directors, executive officers, and their affiliates owned
none of the outstanding shares of Horizon common stock.
35
How
Shares Will Be Voted at the Special Meeting
All shares of Horizon common stock represented by properly
executed proxies received before or at the special meeting, and
not properly revoked, will be voted as specified in the proxies.
Properly executed proxies that do not contain voting
instructions will be voted FOR the approval and adoption of the
merger agreement and any adjournment or postponement of the
special meeting.
A properly executed proxy marked Abstain with
respect to any proposal will be counted as present for purposes
of determining whether there is a quorum at the special meeting.
However, because the approval and adoption of the merger
agreement requires the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote at the
special meeting, an abstention will have the same effect as a
vote AGAINST approval and adoption of the merger agreement.
If you hold shares of Horizon common stock in street
name through a bank, broker, or other nominee, the bank,
broker, or nominee may vote your shares only in accordance with
your instructions. If you do not give specific instructions to
your bank, broker, or nominee as to how you want your shares
voted, your bank, broker, or nominee will indicate that it does
not have authority to vote on the proposal, which will result in
what is called a broker non-vote. Broker non-votes
will be counted for purposes of determining whether there is a
quorum present at the special meeting, but because approval and
adoption of the merger agreement requires the affirmative vote
of the holders of a majority of the outstanding shares entitled
to vote at the special meeting, broker non-votes will have the
same effect as a vote AGAINST approval and adoption of the
merger agreement.
If any other matters are properly brought before the special
meeting, the proxies named in the proxy card will have
discretion to vote the shares represented by duly executed
proxies in their sole discretion.
You may vote in person at the special meeting or by proxy. We
recommend you vote by proxy even if you plan to attend the
special meeting. You can always change your vote at the special
meeting.
You may vote by proxy card by completing and mailing the
enclosed proxy card. If you properly submit your proxy card in
time to vote, one of the individuals named as your proxy will
vote your shares of common stock as you have directed. You may
vote for or against the proposals submitted at the special
meeting or you may abstain from voting.
If you hold shares of Horizon common stock through a broker or
other custodian, please follow the voting instructions provided
by that firm. If you do not return your proxy card, or if your
shares are held in a stock brokerage account or held by a bank,
broker, or nominee, or, in other words, in street
name and you do not instruct your bank, broker, or nominee
on how to vote those shares, those shares will not be voted at
the special meeting.
A number of banks and brokerage firms participate in a program
that also permits stockholders whose shares are held in
street name to direct their vote by the Internet or
telephone. This option, if available, will be reflected in the
voting instructions from the bank or brokerage firm that
accompany this information statement/proxy statement/prospectus.
If your shares are held in an account at a bank or brokerage
firm that participates in such a program, you may direct the
vote of these shares by the Internet or telephone by following
the voting instructions enclosed with the proxy from the bank or
brokerage firm. The Internet and telephone proxy procedures are
designed to authenticate stockholders identities, to allow
stockholders to give their proxy voting instructions and to
confirm that those instructions have been properly recorded.
Votes directed by the Internet or telephone through such a
program must be received by 11:59 p.m., New York,
New York time, on December 7, 2007. Requesting a proxy
prior to the deadline described above will automatically cancel
any voting directions you have previously given by the Internet
or telephone with respect to your shares. Directing the voting
of your shares will not affect your right to vote in person if
you decide to attend the meeting; however, you must first obtain
a signed and properly executed proxy from your bank, broker, or
nominee to vote your shares held in street name at the special
meeting.
36
If you submit your proxy but do not make specific choices, your
proxy will be voted FOR each of the proposals presented.
If you are a registered stockholder, you may revoke your proxy
at any time before the shares are voted at the special meeting
by:
|
|
|
|
|
completing, signing, and timely submitting a new proxy to the
addressee indicated on the pre-addressed envelope enclosed with
your initial proxy card by the close of business on
December 7, 2007; the latest dated and signed proxy
actually received by such addressee before the special meeting
will be counted, and any earlier proxies will be considered
revoked;
|
|
|
|
notifying Horizons Secretary, at 2500 CityWest Boulevard,
Suite 2200, Houston, Texas 77042, in writing, by the close
of business on December 7, 2007, that you have revoked your
earlier proxy; or
|
|
|
|
voting in person at the special meeting.
|
Merely attending the special meeting will not revoke any prior
votes or proxies; you must vote at the special meeting to revoke
a prior proxy.
If you hold shares of Horizon common stock through a broker or
other custodian and you vote by proxy, you may later revoke your
proxy instructions by informing the holder of record in
accordance with that entitys procedures.
Voting
by Participants in the Horizon Benefit Plans
Under the Horizon stock incentive plans, a grantee of restricted
shares of Horizon common stock has all the rights of a Horizon
stockholder with respect to those shares, including the right to
vote. Accordingly, holders of shares of Horizon restricted stock
will be entitled to vote at the special meeting in the same way
as holders of non-restricted shares of Horizon common stock.
Beneficial holders of shares of Horizon common stock held within
the Horizon 401(k) plan control the voting of those shares.
In addition to solicitation by mail, directors, officers, and
employees of Horizon may solicit proxies for the special meeting
from Horizon stockholders personally or by telephone, facsimile,
and other electronic means without compensation other than
reimbursement for their actual expenses.
The expenses incurred in connection with the filing, printing,
and mailing of this document will be shared equally by
Cal Dive and Horizon. Arrangements also will be made with
brokerage firms and other custodians, nominees, and fiduciaries
for the forwarding of solicitation material to the beneficial
owners of shares of Horizon common stock held of record by those
persons, and Horizon will, if requested, reimburse the record
holders for their reasonable out-of-pocket expenses in so doing.
Horizon has engaged the services of Mellon Investor Services
LLC, a proxy solicitation firm, to distribute proxy solicitation
material to brokers, banks and other nominees and to assist in
the solicitation of proxies from its stockholders for an
anticipated fee of approximately $9,000, plus mailing expenses.
Recommendation
of the Horizon Board of Directors
The Horizon board of directors has unanimously approved the
merger agreement and the transactions it contemplates, including
the merger. The Horizon board of directors determined that the
merger is advisable and in the best interests of Horizon and its
stockholders and unanimously recommends that you vote FOR
approval and adoption of the merger agreement. See The
Merger Horizons Reasons for the Merger
beginning on page 45 and The Merger
Recommendation of the Horizon Board of Directors beginning
on page 46 for a more detailed discussion of the Horizon
board of directors recommendation.
37
Special
Meeting Admission
If you wish to attend the special meeting in person, you must
present a form of personal identification. If you are a
beneficial owner of Horizon common stock that is held by a bank,
broker, or other nominee, you will need proof of ownership of
Horizon common stock to be admitted to the meeting. A recent
brokerage statement or a letter from your bank or broker are
examples of proof of ownership.
No cameras, recording equipment, electronic devices, large bags,
briefcases, or packages will be permitted in the meeting.
PLEASE DO NOT SEND IN ANY HORIZON COMMON STOCK CERTIFICATES
WITH YOUR PROXY CARD. After the merger is completed, you will
receive written instructions from the exchange agent informing
you how to surrender your stock certificates to receive the
merger consideration.
Adjournment
and Postponements
The special meeting may be adjourned from time to time, to
reconvene at the same or some other place, by approval of the
holders of common stock representing a majority of the votes
present in person or by proxy at the special meeting, whether or
not a quorum exists, without further notice other than by an
announcement made at the special meeting, so long as the new
time and place for the special meeting are announced at that
time. If the adjournment is for more than thirty days, or if
after the adjournment a new record date is determined for the
adjourned special meeting, a notice of the adjourned special
meeting must be given to each stockholder of record entitled to
vote at the special meeting. If a quorum is not present at the
Horizon special meeting, holders of Horizon common stock may be
asked to vote on a proposal to adjourn or postpone the Horizon
special meeting to solicit additional proxies. If a quorum is
not present at the Horizon special meeting, the holders of a
majority of the shares entitled to vote who are present in
person or by proxy may adjourn the meeting. If a quorum is
present at the Horizon special meeting but there are not
sufficient votes at the time of the special meeting to approve
the other proposal(s), holders of Horizon common stock may also
be asked to vote on a proposal to approve the adjournment or
postponement of the special meeting to permit further
solicitation of proxies.
38
Horizons board of directors is using this document to
solicit proxies from the holders of Horizon common stock for use
at the Horizon special meeting, at which holders of Horizon
common stock will be asked to vote upon approval and adoption of
the merger agreement. In addition, Cal Dive is sending this
document to Horizon stockholders as a prospectus in connection
with the issuance of shares of Cal Dive common stock in
exchange for shares of Horizon common stock in the merger.
Cal Dive is also sending this document to Cal Dive
stockholders who have not already voted to approve the issuance
of Cal Dive common stock in the merger in order to inform
them that the holder of a majority of Cal Dives
outstanding shares of common stock has already approved the
issuance of Cal Dive common stock in the merger and of the
proposed merger.
The boards of directors of Horizon and Cal Dive have
unanimously approved the merger agreement providing for the
merger of Horizon into Merger Sub. Merger Sub, which is
wholly-owned by Cal Dive, will be the surviving entity in
the merger, and upon completion of the merger, the separate
corporate existence of Horizon will terminate. We expect to
complete the merger in the fourth quarter of 2007.
The board of directors and executive management of Helix
periodically discussed strategic options over the past several
years, including growth by acquisition. In February 2006, Helix
formed Cal Dive as a wholly-owned subsidiary to facilitate
the transfer of Helixs shallow water marine contracting
business. In October 2006, Helix concluded that effecting an
initial public offering of Cal Dive was its best strategic
option at that time for its shallow water marine contracting
business.
During this same period, Horizons board of directors and
executive management regularly reviewed its business strategy
with the goal of maximizing stockholder value. This process
included periodically evaluating alternatives, including, among
other things, Horizons capital structure, financing
alternatives and mergers and acquisitions. During this process,
Horizon met with representatives of various investment banks,
including Lehman Brothers, on several occasions to discuss its
business, current financial market conditions and its various
financial and strategic alternatives.
Cal Dive completed its initial public offering in December
2006. In January 2007, Cal Dive engaged Banc of America
Securities LLC as its financial advisor to assist it in
evaluating potential acquisition opportunities. On
January 23, 2007, a team from Banc of America Securities
met with executive management of Cal Dive and reviewed
financial aspects of a potential acquisition of Horizon.
At a regularly scheduled meeting of Cal Dives board
of directors on February 5, 2007, executive management made
a brief presentation about potential acquisition targets,
including Horizon. At a follow up meeting of
Cal Dives board on February 28, 2007, executive
management provided a more detailed presentation regarding the
potential acquisition of Horizon, including acquisition
structures and financing alternatives. The Cal Dive board
authorized executive management to continue to explore the
potential acquisition of Horizon.
In early 2007, during the course of its review of Horizons
financial performance and business strategy, Horizons
board of directors began to focus on potential merger, sale and
financing alternatives to maximize stockholder value. As part of
this review, Horizons board of directors focused on
Horizons long-term ability to successfully compete in the
highly competitive global marine construction industry and
whether an appropriate business combination would provide an
increase in scale that would enable Horizon to more effectively
compete for large construction projects, address market demands,
achieve cost and operating efficiencies and obtain other
benefits. Horizons consideration of pursuing a combination
was fostered in large measure by the negative market dynamics
and operating results the company experienced from 2002 through
2005. Over the past two years, Horizons operating results
had improved substantially primarily as a result of the strong
operating results in the U.S. Gulf of Mexico, but executive
management and the board continued to
39
be concerned about Horizon having the scale and service
offerings to successfully compete for and perform large
construction projects in the global marine construction market.
On March 7, 2007, at an investor conference in Orlando,
Florida, Owen Kratz, Cal Dives Chairman, and Quinn
Hébert, Cal Dives President and Chief Executive
Officer, approached David Sharp, Horizons President and
Chief Executive Officer, regarding the possibility of the
combination of the two companies. At this meeting
Messrs. Kratz, Hébert and Sharp had preliminary,
high-level discussions regarding valuation of Horizon, strategic
fit and potential operating efficiencies that could be attained
by a combination, particularly as it related to diving services
required for marine construction services. Following this
meeting, Messrs. Hébert and Sharp met to further
discuss, among other things, the business philosophy of the two
management teams and explored in greater detail whether a
potential combination would be beneficial to the two companies.
At this meeting, Mr. Hébert informed Mr. Sharp
that in order for Cal Dive to formulate a more definitive
proposal, Cal Dive would need to review and evaluate
certain non-public Horizon operational and financial
information. Accordingly, Mr. Hébert requested that
Horizon consider entering into a confidentiality agreement with
Cal Dive and provided Mr. Sharp with
Cal Dives initial request for information about
Horizon.
Upon Mr. Sharps return to Houston, Texas, he
consulted with other members of the executive management team
and John Mills, Horizons non-executive Chairman of the
Board. Mr. Mills then consulted with the other Horizon
board members and further discussed Cal Dives
expression of interest at its regularly scheduled board meeting
held on March 8, 2007. Horizons executive management
and board of directors were of the view that the combination of
Cal Dive and Horizon represented a good strategic fit and
should be pursued if appropriate valuation and terms could be
negotiated. Following this process, Horizon contacted Lehman
Brothers about serving as its financial advisor.
On March 9, 2007, Cal Dive provided Horizon with
Cal Dives proposed confidentiality agreement, which
included a 90 day exclusivity period for Cal Dive to
conduct its due diligence of Horizon. During such
90-day
period, Horizon would have been prohibited from talking with any
other party about a possible business combination with Horizon.
After consulting with the Horizon board, Mr. Sharp advised
Mr. Hébert that Horizon would not enter into the
confidentiality agreement as proposed. During the period between
March 9-15,
2007, the parties and their advisors discussed
Cal Dives proposed approach to a combination,
including the lack of reciprocity in due diligence in a stock
transaction and the absence of a preliminary indication of
interest from Cal Dive regarding valuation. The parties and
their advisors also discussed the various means by which a
combination could be effected and whether or not the combination
should be subject to a pre-signing market check or auction.
During these discussions, representatives of Cal Dive
explained that they were extremely concerned about
confidentiality and did not want Horizon to conduct a
pre-signing market check or conduct an auction. Instead,
Cal Dive suggested that if the parties reached agreement on
terms, Cal Dive would be prepared to provide Horizon with a
contractual right to canvass the market for a superior proposal
for a specified period of time, which is commonly known as a
go-shop period. Cal Dive also indicated that it
expected a termination fee of 3%-5% if a superior proposal arose
as a result of this process. As part of discussions by
Horizons executive management and Mr. Mills, Charles
Buckner, chairman of the finance and risk committee of
Horizons board, Lehman Brothers and Jones, Walker,
Waecheter, Poitevent, Carrère & Denègre,
LLP, Horizons principal outside counsel, the relative
benefits of, and recent experiences and precedents with, a
go-shop period were discussed. The potential benefits of
utilizing a go-shop period discussed included greater ability
relative to a pre-signing market check or auction process, to
maintain confidentiality and avoid market speculation about a
potential transaction which in turn would lessen the risk to
Horizon if a potential transaction could not be negotiated on
satisfactory terms, while still providing Horizon the right to
canvass the market for an alternative transaction after a
potential transaction was announced. Horizons executive
management and board were also concerned about the impact that a
breach of confidentiality could have with its key employees and
potential recruitment by competitors, particularly if a
transaction was not successfully negotiated and closed.
Executive management of both companies then spent the next week
negotiating various aspects of the confidentiality agreement,
exclusivity, and due diligence, without resolution.
Mr. Hébert circulated a memorandum to the
Cal Dive board on March 14, 2007, advising the board
of the status of the negotiations and updating it regarding its
valuation analysis of Horizon.
40
On March 16, 2007, Lehman Brothers contacted Banc of
America Securities to indicate that Horizon would not pursue
discussions with Cal Dive without a preliminary
understanding being reached regarding valuation and process.
Later that day, Messrs. Sharp and Hébert discussed
Horizons position and agreed that while the valuation and
process related considerations remained outstanding they should
continue to discuss potential advantages of a combination,
including anticipated operating efficiencies and any potential
synergies, the widened service offering and the extent of the
enhanced platform for future expansion.
Mr. Hébert and Kregg Lunsford, Cal Dives
Chief Financial Officer, and Mr. Sharp and Ron Mogel,
Horizons Chief Financial Officer, met at an energy
industry conference in New York City on March 19, 2007 and
discussed at a high level the potential fit for the two
companies and financial and administrative matters to help the
two companies further assess operating efficiencies and
potential synergies. Following that meeting,
Messrs. Hébert, Lunsford, Sharp, and Mogel engaged in
frequent further discussions in an attempt to resolve the
outstanding issues with respect to the confidentiality
arrangement and conduct of a mutual due diligence review of the
companies.
On March 27, 2007, Cal Dive submitted the same
non-reciprocal confidentiality agreement it had submitted
previously with the 90 day exclusivity provision deleted.
Horizon again communicated its position that it would not allow
detailed due diligence to proceed without preliminary agreement
on price and process. Mr. Sharp did, however, indicate to
Mr. Hébert that Horizon would be prepared to allow the
executive management teams to meet to discuss high-level
information regarding the anticipated operating efficiencies,
potential synergies and strategic fit of the two companies
without executing a confidentiality agreement. The meeting of
executive management of Cal Dive and Horizon occurred in
Houston, Texas on March 30, 2007. At the conclusion of the
meeting, Mr. Hébert indicated that Cal Dive would
likely be in a position to present Horizon with a non-binding
indication of interest setting forth its proposed valuation
within the following few weeks.
During April 2007, there were several discussions between
Messrs. Hébert and Sharp, but without any meaningful
progress.
In early May 2007, Mr. Sharp advised Mr. Hébert
that Horizon would continue the discussions only if
Cal Dive provided a more definitive indication of the price
it was prepared to offer for Horizon. On May 7, 2007,
Cal Dives executive management presented the
Cal Dive board with updated information regarding its
valuation of Horizon and the opportunities presented by the
potential acquisition, including that Horizon had requested a
more firm indication of the price that Cal Dive was
prepared to pay for the Horizon common stock. The Cal Dive
board approved moving forward with the proposed transaction, and
authorized the Cal Dive executive management to submit a
non-binding indication of interest to Horizon.
On May 11, 2007, Messrs. Hébert, Lunsford, Sharp,
and Mogel discussed potential valuation. Mr. Sharp
indicated to Mr. Hébert that, notwithstanding the
perceived strategic fit of the companies, he did not expect
Horizons board to react favorably to a transaction having
less than a 20% market premium over some period prior to the
agreement. Mr. Hébert informed Mr. Sharp that
Cal Dive was evaluating a purchase price in the range of
$17.00 to $18.00 per share of Horizon common stock.
On May 14, 2007, Cal Dive presented Horizon with a
confidential, non-binding indication of interest, indicating
that Cal Dive was prepared to offer $9.25 in cash and 0.625
of a share of Cal Dive common stock for each outstanding
share of Horizon common stock. The indication of interest also
stated it was subject to the completion of satisfactory due
diligence, the negotiation of a mutually satisfactory merger
agreement and its approval by Cal Dives board, and
customary closing conditions, but no financing contingency.
Cal Dives closing price on the New York Stock
Exchange on May 14, 2007 was $14.56, and Horizons
closing price on the Nasdaq Global Market on that date was
$15.60. Using that closing price for Cal Dive common stock,
the implied value of the proposed consideration totaled
approximately $18.35 for each share of Horizon common stock.
Cal Dive stressed that it was firm on price, but might be
flexible on process and other issues. Cal Dives
indication of interest stated that it would expire at
5:00 p.m. Central daylight time on May 18, 2007
unless accepted by Horizon prior to that time.
41
On May 15, 2007, Horizons board of directors met to
discuss the indication of interest. The meeting was chaired by
Mr. Mills. Also in attendance were representatives of
Lehman Brothers and Jones Walker. Prior to Lehman Brothers
attendance, the board discussed generally the terms contemplated
by Cal Dives indication of interest, formally
approved the retainer of Lehman Brothers as Horizons
financial advisor and agreed to the financial and other terms of
the retainer. After joining the meeting, Jones Walker and Lehman
Brothers discussed with the board the terms reflected in the
indication of interest and other issues and process
considerations and the general corporate duties of directors.
The board of directors discussed the valuation proposed by
Cal Dive as well as process considerations such as the
benefits and drawbacks of a pre-signing market check, auction
process or go-shop period. The board agreed that confidentiality
was extremely important to the process given the relatively
small size of the marine construction industry and competitive
market conditions. The board concluded that prior to reacting to
Cal Dives valuation proposal or process
considerations, the board should receive a formal valuation
analysis of the strategic options identified by the board to
allow it to fully evaluate the Cal Dive proposal against
other available strategic options. The board noted that it would
review Lehman Brothers evaluation at its next regularly
scheduled meeting on May 23, 2007. The board also discussed
whether to form a special board committee to assist in the
process considerations if potential financial buyers were
identified as part of the overall process. Horizon also retained
Richards Layton & Finger, P.A. as its special Delaware
counsel to assist the board in its process considerations and to
advise regarding matters of Delaware corporate law.
On May 16, 2007, Messrs. Sharp and Mills separately
called Mr. Hébert and advised him that Horizons
board had determined that it was possibly interested, but that
Horizon would not be able to respond by the May 18 deadline.
Also on May 16, 2007, Cal Dive held a board meeting at
which executive management provided an update on the status of
the negotiations.
On May 23, 2007, Horizons board, along with
representatives of Lehman Brothers, Jones Walker and Richards
Layton met to discuss the strategic evaluation conducted by
Lehman Brothers. After summarizing the principal economic terms
of the Cal Dive indication of interest, Lehman Brothers
presented the board with its detailed evaluation of other
strategic options available to Horizon ranging from executing
its present business plan, refinancing Horizons existing
debt through issuing convertible notes, pursuing a leveraged
buyout or acquiring another company. The board extensively
discussed the timing, risks and potential effects of each of the
strategic alternatives, the underlying assumptions of each and
the difficulty of predicting future operating results in the
marine construction industry. The board then discussed
Cal Dives indication of interest and the process by
which Horizon would assess whether another transaction offering
greater value was available. With respect to the process, the
board discussed with its advisors the relative benefits of, and
recent experiences and precedents with, a go-shop period. The
potential benefits of utilizing a go-shop period discussed
included greater ability relative to a pre-signing market check
or auction process to maintain confidentiality and avoid market
speculation about a potential transaction, which in turn would
lessen the risk to Horizon if a potential transaction could not
be negotiated on satisfactory terms, while still providing
Horizon the right to canvass the market for an alternative
transaction after a potential transaction was announced.
Horizons executive management and board also expressed
concern about the impact that a breach of confidentiality could
have with its key employees and potential recruitment by
competitors, particularly if a transaction was not successfully
negotiated and closed. The board concluded the meeting by
instructing Lehman Brothers to make a counter proposal to Banc
of America Securities that the per share stock consideration be
increased from 0.625 to 0.700 of a share and that Cal Dive
agree to a 45 day go-shop period with a 1% termination fee
payable if a superior proposal arose as a result of that process.
On May 24, 2007, Horizons board, along with
representatives of Lehman Brothers, Jones Walker and Richards
Layton, met to receive an update from Lehman Brothers on the
results of their discussions with Banc of America Securities.
Lehman Brothers reported that Bank of American Securities
indicated Cal Dive was unwilling to alter its proposed
consideration, but was agreeable to working with Horizon to
address its concerns with respect to having a meaningful and
effective mechanism to pursue a superior alternative
transaction. The board concluded, after due consideration,
including the tenor of the negotiations leading to
Cal Dives proposal and its agreement to address
Horizons process concerns, that attempting to initiate
further price negotiations was unlikely to produce a positive
result and could put the existing proposal at risk. The
42
board instructed Lehman Brothers to contact Banc of America
Securities and indicate that Horizon was prepared to proceed
with reciprocal financial and legal due diligence.
On May 25, 2007, Cal Dive submitted a proposed mutual
confidentiality agreement to Horizon, which included a
30 day exclusivity period (subject to exclusions for
unsolicited superior proposals). Representatives of the
companies negotiated the terms of the confidentiality agreement
over the weekend, and each signed the agreed upon form of
confidentiality agreement on May 29, 2007, the first
business day after the Memorial Day holiday weekend. Following
the execution of the confidentiality agreement, Horizon and
Cal Dive, together with their respective financial and
legal representatives, commenced work on a detailed due
diligence process. The parties developed a comprehensive
reciprocal diligence work plan and began taking steps to
facilitate the parties diligence reviews. On June 1,
2007, representatives of both companies, including their
financial advisors and legal counsel, met in Houston, Texas, and
conducted a mutual due diligence review of each other. Late
afternoon on June 1, 2007, Fulbright & Jaworski
L.L.P., Cal Dives principal outside counsel,
delivered its proposed merger agreement to Horizon and
Horizons representatives.
On June 3, 2007, Horizons executive management, along
with representatives of Lehman Brothers, Jones Walker and
Richards Layton, discussed their comments to the draft merger
agreement and the need to substantially negotiate its terms.
On June 4, 2007, Messrs. Sharp and Hébert met to
discuss and exchange ideas regarding the management of the
combined company and operating efficiencies that could be
accomplished. That same day, Horizons board, along with
representatives of Lehman Brothers, Jones Walker and Richards
Layton, met to receive an update on the due diligence process
and issues raised by the draft merger agreement. It was agreed
that Mr. Sharp and Bill Gibbens, Horizons general
counsel, would meet later that day with Mr. Hébert and
Lisa Buchanan, Cal Dives general counsel, to discuss
high level issues raised by the draft merger agreement,
including the lack of reciprocity and scope of the
representations, lack of reciprocity and scope of the
pre-closing covenants, lack of representation of Horizon
directors on the board of the combined company, the conditions
to the consummation of the merger, including the definition of
material adverse effect, the go-shop process and
non-solicitation provisions, and Cal Dives request to
have the right to match any superior proposal that may be
received during the go-shop process. At the meeting, the board
also decided to formally establish a special committee
consisting of Horizons four independent directors to
review, evaluate and, as appropriate, negotiate any transaction
with any financial buyer that might indicate an interest in
acquiring Horizon as part of the process. The special committee
was established so as to be available in the event a conflict of
interest developed among one or more members of the board if a
financial buyer surfaced and the terms proposed by any financial
buyer included the possibility of retaining management. In the
event a proposal was made by a financial buyer, the special
committee was delegated the full power and authority by
Horizons board to, among other things, (i) review,
evaluate and, as appropriate, negotiate the terms and conditions
of any such possible transaction proposed by a financial buyer
involving Horizon, including but not limited to a third party
acquisition of Horizon, (ii) determine whether any possible
transaction proposed by a financial buyer is fair to, and in the
best interests of, Horizon and its stockholders, and
(iii) recommend to Horizons full board what action,
if any, should be taken by the company with respect to any
possible transaction proposed by a financial buyer. Since no
proposal was ever received from a financial buyer, the Special
Committee never formally met. Following the meeting,
Messrs. Sharp, Hébert and Gibbens and
Ms. Buchanan met to discuss Horizons high level
concerns about the draft merger agreement.
On June 5, 2007, Cal Dive distributed a revised merger
agreement to Horizon.
On June 7, 2007, Horizons board, along with
representatives of Lehman Brothers, Jones Walker and Richards
Layton, met to update the Board on the contractual issues
remaining in the merger agreement. Later that day, Jones Walker
communicated outstanding issues and proposed resolution to
Cal Dive and Fulbright.
On the morning of June 8, 2007, Cal Dive held a
telephonic meeting with its board of directors, and executive
management updated the board on the status of the negotiations
and the open issues. Beginning at
mid-day on
June 8, 2007, executive management of the companies and
their legal counsel met in Houston, Texas, and negotiated the
open issues on the merger agreement. During the meeting, the
principal outstanding issues were negotiated, including
eliminating any match right, fixing the termination fee at 1.5%
for superior
43
proposals arising as a result of the go-shop process and 3%
thereafter, revising the terms of the process for entertaining
any unsolicited superior proposals to meet Horizons
requests and other remaining issues regarding the
representations, covenants and closing conditions. On
June 9, 2007, Horizons board, along with
representatives of Lehman Brothers and Richards Layton, met so
that the board could be updated on the results of the
June 8th meeting between company representatives.
Later that day, Fulbright circulated to representatives of both
companies a revised draft merger agreement reflecting the
revisions agreed to at the June 8th meeting.
On June 10, 2007, Lehman Brothers conducted its final due
diligence with Helixs executive management regarding the
inter-company relationships between Cal Dive and Helix, and
Helixs present intention regarding its controlling
ownership position in Cal Dive.
Mid-morning on June 11, 2007, Horizon advised Cal Dive
of Horizons outstanding issues with the merger agreement.
Throughout the day on June 11, 2007, the companies and
their legal counsel and financial advisors participated in
numerous telephone calls and exchanged numerous emails
attempting to resolve the remaining open issues between the
companies.
At 3:00 pm Central daylight time on June 11, 2007,
Cal Dive held a telephonic meeting of its board of
directors. At this meeting, Banc of America Securities reviewed
with the board its financial analysis of the merger
consideration and delivered to Cal Dives board an
oral opinion, which was confirmed by delivery of a written
opinion dated June 11, 2007, to the effect that, as of that
date and based on and subject to various assumptions and
limitations described in its opinion, the merger consideration
to be paid by Cal Dive was fair, from a financial point of
view, to Cal Dive. Also at that meeting, the Cal Dive
board approved the transaction as it was then contemplated by
Cal Dive and authorized executive management to continue to
work to resolve the open issues. Cal Dive also received the
written consent of Helix, its majority stockholder, to the
issuance of Cal Dive common stock in the transaction.
At 4:00 pm Central daylight time on June 11, 2007, Horizon
held a meeting of its board of directors, and the Horizon
executive management updated the board on the status of the
negotiations. At Horizons board meeting, executive
management made final presentations regarding the results of its
business and operational due diligence investigations and the
financial and strategic implications of the proposed
combination. The board also reviewed with counsel the material
terms of the merger agreement. During the meeting, Lehman
Brothers rendered its opinion that, as of the date of the
meeting and based upon and subject to the factors, assumptions,
matters, procedures, limitations and qualifications set forth in
such opinions, the consideration to be received by the holders
of Horizon common stock in the merger was fair, from a financial
point of view, to such holders. The board was also advised by
counsel with respect to its fiduciary obligations in connection
with considering and approving the merger agreement. Following
further discussion and based on the totality of the information
presented and the fairness opinion issued by Lehman Brothers,
Horizons board, among other things, declared the merger
advisable and in the best interests of Horizons
stockholders, unanimously approved the merger agreement, and
resolved to recommend that Horizons stockholders vote to
adopt the merger agreement.
Representatives of the companies continued to negotiate the
remaining issues on the merger agreement until late afternoon on
June 11, 2007. At around 8:00 pm Central daylight time on
June 11, 2007, the merger agreement was signed by
Mr. Hébert on Cal Dives behalf and
Mr. Sharp on Horizons behalf. Promptly thereafter,
the companies issued a joint press release announcing the
merger. Horizon separately issued a press release prior to the
market opening on June 12, 2007, announcing the go-shop
period and process.
Promptly following the execution and announcement of the merger
agreement, Lehman Brothers, on behalf of Horizon, began
contacting third parties to determine whether any were
interested in making an acquisition proposal for Horizon. These
parties were identified by Lehman Brothers and approved by
Horizons board of directors, and included strategic and
financial buyers. In all, Lehman Brothers contacted 14 strategic
buyers and 47 financial buyers. Of these 61 potential bidders,
only two expressed an interest in engaging in preliminary
discussions toward an acquisition proposal. Each of these two
potential bidders was presented with a confidentiality agreement
substantially similar to the form entered into between Horizon
and Cal Dive, with the exception that Horizon was not
subject to any confidentiality obligations and there was no
44
exclusivity provision. After negotiations, only one of the
potential bidders entered into a confidentiality agreement with
Horizon. The other potential bidder declined to enter into the
confidentiality agreement and informed Lehman Brothers that it
was no longer interested in discussing a potential acquisition
proposal of Horizon. An information packet containing relevant
materials on Horizon was sent to the interested party on
June 15, 2007. On June 25, 2007, that party notified
Lehman Brothers that it did not wish to pursue an acquisition
proposal involving Horizon. There have been no other indications
of interest with respect to a potential acquisition proposal for
Horizon.
Horizons
Reasons for the Merger
At its meeting on June 11, 2007, the Horizon board of
directors, after an extensive review and thorough discussion of
all facts and issues it considered relevant with respect to the
merger, concluded unanimously that the merger agreement and the
transaction contemplated thereby were advisable and in the best
interests of Horizons stockholders. The Horizon board of
directors authorized and approved the merger agreement and the
transactions contemplated by the merger agreement, including the
merger, and agreed to recommend to the stockholders of Horizon
that they vote in favor of approval and adoption of the merger
agreement. The Horizon board of directors unanimously recommends
that its stockholders vote FOR the approval and adoption of the
merger agreement.
In reaching their conclusion, the members of the Horizon board
of directors relied on their personal knowledge of Horizon and
the marine construction industry and on the advice of management
and Horizons legal and financial advisors. The Horizon
board of directors also reviewed the information provided by
Horizon and its advisors. The Horizon board of directors
considered numerous factors to be in favor of the merger,
including, among others things, the following:
|
|
|
|
|
the merger will provide Horizons stockholders with an
opportunity to participate in the ownership of a larger,
financially stronger company that is expected to be better
positioned to respond to opportunities and developments in the
marine construction industry in which efficiency and global
competitiveness are increasingly of critical importance while
still providing immediate value through the cash component of
the merger consideration;
|
|
|
|
the boards belief that the combined company would be a
leader in the marine construction industry, stronger both
operationally and financially, with the ability to compete for
large international construction projects, better able to meet
changing customer needs, compete more effectively in an
increasingly global market, and deliver increased value to its
stockholders;
|
|
|
|
the boards belief that the combined company would have a
more efficient operating platform with a greater scope of
complementary marine construction and diving support services,
as compared to Horizon on a stand-alone basis, providing
significant opportunities for more efficient project execution,
performance and operation;
|
|
|
|
the opinion provided by Lehman Brothers dated June 11,
2007, to the effect that, as of the date of the opinion and
based upon the procedures followed, assumptions made, matters
considered and limitations on the scope of review set forth in
the opinions, the merger consideration was fair, from a
financial point of view, to the holders of Horizon common stock
(the full text of the written opinion of Lehman Brothers setting
forth the procedures followed, assumptions made, matters
considered and limitations on the scope of review in connection
with the opinions is attached as Annex B to this document);
|
|
|
|
the current economic, industry and market trends affecting each
of Horizon and Cal Dave, including those which favor efficient
consolidation to improve domestic and global competitiveness, as
well as anticipated operating efficiencies and potential
synergies from the merger;
|
|
|
|
the current and historical trading prices of Horizon and
Cal Dive common stock;
|
|
|
|
the proposed composition of the combined companies board
of directors, including the fact that David Sharp,
President and Chief Executive Officer of Horizon, and John
Mills, Chairman of the
|
45
|
|
|
|
|
Board, would join Cal Dives board of directors,
thereby ensuring that Cal Dives board consisted of a
majority of independent directors;
|
|
|
|
|
|
Horizon could during the
45-day
go-shop period actively solicit alternative
transaction proposals, enter into discussions with third parties
regarding any such proposals and terminate the merger agreement
in order to enter into a transaction with a third party on terms
more favorable to Horizons stockholders, upon the payment
to Cal Dive of a termination fee equal to 1.5% of the
merger consideration ($9.4 million); and
|
|
|
|
the review and analysis of each of Horizons and
Cal Dives business, financial condition, earnings,
risks and prospects.
|
In reaching its determination, the Horizon board of directors
also considered and evaluated, among other things:
(i) other strategic alternatives that may have been
available to Horizon, including the successful execution of its
current business plan; (ii) the other terms of the merger
agreement, including the ability to pursue superior alternative
transaction proposals that may be identified following the
45-day
go-shop period; (iii) the tax consequences of
the merger for Horizons stockholders; and (iv) the
right of Horizons stockholders to dissent under the merger
agreement.
The Horizon board of directors also considered a variety of
risks and other potentially negative factors concerning the
combination, including the following:
|
|
|
|
|
the risk that the anticipated cost efficiencies and potential
synergies will not be achieved in the expected time frame or at
all;
|
|
|
|
the problems inherent in combining the operations of two large
companies, including the possibility that management may be
distracted from regular business concerns by the need to
integrate operations, unforeseen difficulties in integrating
operations and systems, problems assimilating and retaining
employees and potential adverse short-term effects on operating
results of the combined company;
|
|
|
|
the timing of receipt and the terms of approvals and actions
from relevant governmental and regulatory authorities, including
the possibility of delay in obtaining satisfactory approvals or
the imposition of unfavorable terms, conditions or concessions
on the approvals;
|
|
|
|
Cal Dive will continue to be controlled by Helix and
subject to the risks arising as a result set forth under
Risk Factors Risks Relating to
Cal Dive; and
|
|
|
|
the interests that certain Horizon executive officers and
directors may have with respect to the merger in addition to
their interests as Horizon stockholders.
|
The Horizon board of directors believed that, overall, the
potential benefits of the combination to Horizon and
Horizons stockholders outweighed these risks and negative
factors.
This discussion of the information and factors considered by the
Horizon board of directors is not intended to be exhaustive but
addresses the major information and factors considered by the
Horizon board of directors in its consideration of the merger.
In reaching its conclusion, the Horizon board of directors did
not find it practical to assign, and did not assign, any
relative or specific weight to the different factors that were
considered and individual members of the Horizon board of
directors may have given different weight to different factors.
Recommendation
of the Horizon Board of Directors
After careful consideration of the matters discussed above, the
Horizon board of directors concluded that the proposed merger is
in the best interest of the stockholders of Horizon.
FOR THE REASONS SET FORTH ABOVE, THE BOARD OF DIRECTORS OF
HORIZON HAS UNANIMOUSLY ADOPTED THE MERGER AGREEMENT AS BEING IN
THE BEST INTERESTS OF HORIZON AND ITS STOCKHOLDERS, AND
UNANIMOUSLY RECOMMENDS THAT HORIZONS STOCKHOLDERS VOTE FOR
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
46
Opinion
of Lehman Brothers Inc. Financial Advisor to
Horizon
Horizon engaged Lehman Brothers to act as its financial advisor
in connection with the merger. Lehman Brothers rendered its oral
opinion to Horizons board of directors, which was
subsequently confirmed in writing, on June 11, 2007, that,
as of the date of the opinion and based upon and subject to
certain matters and qualifications stated in the opinion letter,
from a financial point of view, the consideration to be offered
to the stockholders is fair to such stockholders.
The full text of Lehman Brothers opinion dated
June 11, 2007, is included as Annex B to this
information statement/proxy statement/prospectus and is
incorporated herein by reference. Holders of Horizons
common stock should read Lehman Brothers opinion letter in
its entirety for a discussion of the procedures followed,
factors considered, assumptions made and qualifications and
limitations of the review undertaken by Lehman Brothers in
connection with its opinion. This summary of the Lehman Brothers
opinion is qualified in its entirety by reference to the full
text of the opinion.
Lehman Brothers advisory services and opinion were
provided for the information and assistance of the board of
directors of Horizon in connection with its consideration of the
proposed transaction. Lehman Brothers opinion was limited
solely to the fairness of the merger consideration. Lehman
Brothers opinion is not intended to be and does not
constitute a recommendation to any stockholder as to how that
stockholder should vote or act with respect to the proposed
merger or any other matter described in this information
statement/proxy statement/prospectus. Lehman Brothers was not
requested to consider, and its opinion does not address, the
relative merits of the merger compared to any alternative
business strategies that might exist for Horizon or the effect
of any other transaction in which Horizon might engage.
In arriving at its opinion, Lehman Brothers reviewed, among
other things:
|
|
|
|
|
the merger agreement and the specific terms of the merger;
|
|
|
|
such publicly available information concerning Horizon and
Cal Dive that Lehman Brothers believed to be relevant to
its analysis, including, without limitation, the Annual Reports
on
Form 10-K
for the year ended December 31, 2006 and the Quarterly
Reports on
Form 10-Q
for the quarter ended March 31, 2007 for each of Horizon
and Cal Dive;
|
|
|
|
financial and operating information with respect to the
business, operations and prospects of Horizon furnished to us by
Horizon, including financial projections of Horizon prepared by
management of Horizon;
|
|
|
|
financial and operating information with respect to the
business, operations and prospects of Cal Dive furnished to
us by Cal Dive, including financial projections of
Cal Dive prepared by the management of Cal Dive;
|
|
|
|
the trading histories of Horizon common stock from June 9,
2006 to June 8, 2007 and Cal Dive common stock from
December 13, 2006 (the date of Cal Dives initial
public offering) to June 8, 2007, and a comparison of those
trading histories with each other and with those of other
companies that Lehman Brothers deemed relevant;
|
|
|
|
a comparison of the historical financial results and present
financial condition of Horizon and Cal Dive with each other
and with those of other companies that Lehman Brothers deemed
relevant;
|
|
|
|
a comparison of the financial terms of the merger with the
financial terms of certain other transactions that Lehman
Brothers deemed relevant;
|
|
|
|
the potential pro forma impacts of the merger on the current and
future financial performance of the combined company; including
the amounts and timing of the cost savings and operating
synergies expected to result from the Proposed Transaction;
|
|
|
|
published estimates by independent equity research analysts with
respect to the future financial performance of Horizon and
Cal Dive; and
|
47
|
|
|
|
|
the relative contributions of Horizon and Cal Dive to the
current and future financial performance of the combined company
on a pro forma basis.
|
In addition, Lehman Brothers had discussions with the
managements of Horizon and Cal Dive concerning their
respective businesses, operations, assets, and financial
conditions, and undertook such other studies, analyses and
investigations that Lehman Brothers deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied
upon the accuracy and completeness of the financial and other
information used by Lehman Brothers without assuming any
responsibility for independent verification of such information
and further relied upon the assurances of the managements of
Horizon and Cal Dive that they were not aware of any facts
or circumstances that would make such information inaccurate or
misleading. With respect to the financial projections of Horizon
and Cal Dive, upon advice of Horizon and Cal Dive,
respectively, Lehman Brothers assumed that such projections had
been reasonably prepared on a basis reflecting the then best
currently available estimates and judgments of the managements
of Horizon and Cal Dive as to the future financial
performance of Horizon and Cal Dive, respectively, and that
each of Horizon and Cal Dive would perform substantially in
accordance with such projections. In arriving at its opinion,
Lehman Brothers did not conduct a physical inspection of the
properties and facilities of Horizon or Cal Dive and did
not make or obtain from third parties any evaluations or
appraisals of the assets or liabilities of Horizon or
Cal Dive. Lehman Brothers opinion necessarily is
based upon market, economic and other conditions as they existed
on, and could be evaluated as of, the date of its opinion letter.
In arriving at its opinion, Lehman Brothers did not ascribe a
specific range of value to Horizon or Cal Dive, but rather
made its determination as to the fairness to Horizons
stockholders, from a financial point of view, of the
consideration to be paid for Horizon in the merger on the basis
of the financial, comparative and other analyses described
below. The preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods
of financial, comparative and other analysis and the application
of those methods to the particular circumstances, and,
therefore, such an opinion is not readily susceptible to summary
description. Furthermore, in arriving at its fairness opinion,
Lehman Brothers did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative
judgments as to the significance and relevance of each analysis
and factor. Accordingly, Lehman Brothers believes that its
analyses must be considered as a whole and that considering any
portion of such analyses and the factors considered, without
considering all analyses and factors, could create a misleading
or incomplete view of the process underlying the opinion. In its
analyses, Lehman Brothers made numerous assumptions with respect
to industry performance, general business and economic
conditions and other matters, many of which are beyond the
control of Horizon or Cal Dive. Any estimates contained in
the analyses are not necessarily indicative of actual values or
predictive of future results or values, which may be
significantly more or less favorable than as set forth in the
analyses. In addition, analyses relating to the value of
businesses do not purport to be appraisals or to reflect the
prices at which businesses could actually be sold.
The following is a summary of the material financial analyses
prepared and used by Lehman Brothers in connection with
rendering its opinion to the board of directors of Horizon. Some
of the summaries of the financial, comparative and other
analyses include information presented in tabular format. In
order to fully understand the methodologies used by Lehman
Brothers and the results of its financial, comparative and other
analyses, the tables must be read together with the text of each
summary. The tables alone do not constitute a complete
description of the financial, comparative and other analyses.
Accordingly, the information presented in the tables and
described below must be considered as a whole. Considering any
portion of such analyses and of the factors considered, without
considering all analyses and factors as a whole, could create a
misleading or incomplete view of the process underlying Lehman
Brothers opinion.
Valuation
Analysis Used to Compare to Merger Consideration
Lehman Brothers prepared separate valuations of Horizon and
Cal Dive before considering the pro forma impact of the
expected synergies resulting from the merger. In determining
valuation, Lehman Brothers used the following methodologies for
Horizon: (i) comparable company analysis;
(ii) comparable transactions
48
analysis; (iii) discounted cash flow analysis;
(iv) premium analysis; and (v) research price target
analysis. In determining valuation for Cal Dive, Lehman
Brothers used the following methodologies: (i) comparable
company analysis; (ii) comparable transactions analysis;
(iii) discounted cash flow analysis; and (iv) research
price target analysis. Each of these methodologies was used to
generate a reference enterprise value range for each of Horizon
and Cal Dive. The enterprise value range for each company
was adjusted for appropriate on- and off-balance sheet
assets and liabilities to arrive at a common equity value range
(in aggregate dollars) for each company. The equity value range
was divided by fully diluted shares outstanding, which is
comprised of primary shares and the dilutive effect of
outstanding options and restricted units, to derive an equity
value range per share. The per share equity value ranges for
Horizon are then compared to the merger consideration. Lehman
Brothers also analyzed the implied Horizon valuation per share
based on the implied Cal Dive valuation that Horizon
stockholders would receive after taking into account the merger
consideration. The per share equity value ranges derived for
Horizon using the various valuation methodologies listed above
supported the conclusion that the merger consideration was fair
to Horizons stockholders from a financial point of view.
The various valuation methodologies noted above and the implied
equity value per share ranges are included in the following
table. This table should be read together with the more
detailed descriptions set forth below. In particular, in
applying the various valuation methodologies to the particular
businesses, operations and prospects of Horizon and
Cal Dive, and the particular circumstances of the merger,
Lehman Brothers made qualitative judgments as to the
significance and relevance of each analysis. In addition, Lehman
Brothers made numerous assumptions with respect to industry
performance, general business and economic conditions and other
matters, many of which are beyond the control of Horizon or
Cal Dive. Accordingly, the methodologies and the implied
equity value per share ranges derived from these methodologies
set forth in the table must be considered as a whole and in the
context of the narrative description of the financial analyses,
including the assumptions underlying these analyses. Considering
the equity value per share ranges set forth in the table without
considering the full narrative description of the financial
analyses, including the assumptions underlying these analyses,
could create a misleading or incomplete view of the process
underlying, and conclusions represented by,
Lehman Brothers opinion.
Summary
of Horizon Offshore Valuation Analysis
|
|
|
|
|
|
|
Summary Description of
|
|
Implied Equity
|
Valuation Methodology
|
|
Valuation Methodology
|
|
Value per Share
|
|
Comparable Company Analysis
|
|
Market valuation benchmark based on trading multiples of
selected comparable companies for selected financial and
asset-based measures
|
|
$13.00 - $22.50
|
Comparable Transactions Analysis
|
|
Market valuation benchmark based on consideration paid in
selected comparable transactions
|
|
$13.86 - $22.27
|
Discounted Cash Flow Analysis
|
|
Net present valuation of management projections of after-tax
cash flows assuming selected discount rates and terminal value
multiples
|
|
|
|
|
Case I: Growth Case
|
|
$20.40 - $26.87
|
|
|
Case II: Base Case
|
|
$14.56 - $18.48
|
|
|
Case III: Downside Case
|
|
$10.62 - $13.48
|
Premium Analysis
|
|
Market valuation based on comparable corporate transactions to
calculate the premiums paid by the acquirers to the acquired
companys stockholders
|
|
$18.59 - $21.97
|
Research Price Target Analysis
|
|
Market valuation based on equity research analysts current
price targets
|
|
$14.25 - $23.00
|
Nominal Merger Consideration to be Paid by Cal Dive in the
Merger (Based on Cal Dive Stock Price as of June 8, 2007)
|
|
|
|
$19.23
|
49
Summary
of Cal Dive International Valuation Analysis
|
|
|
|
|
|
|
Summary Description of
|
|
Implied Equity
|
Valuation Methodology
|
|
Valuation Methodology
|
|
Value per Share
|
|
Comparable Company Analysis
|
|
Market valuation benchmark based on trading multiples of
selected comparable companies for selected financial and
asset-based measures
|
|
$11.50 - $20.50
|
Comparable Transactions Analysis
|
|
Market valuation benchmark based on consideration paid in
selected comparable transactions
|
|
$ 9.92 - $15.80
|
Discounted Cash Flow Analysis
|
|
Net present valuation of management projections of after-tax
cash flows assuming selected discount rates and terminal value
multiples
|
|
|
|
|
Case I: Growth Case
|
|
$17.12 - $23.39
|
|
|
Case II: Base Case
|
|
$13.62 - $17.86
|
|
|
Case III: Downside Case
|
|
$ 9.00 - $11.98
|
Research Price Target Analysis
|
|
Market valuation based on equity research analysts current
price targets
|
|
$15.00 - $18.00
|
Cal Dive Stock Price as of June 8, 2007
|
|
|
|
$15.96
|
Comparable
Company Analysis
With respect to Horizon, Lehman Brothers reviewed the public
stock market trading multiples for the following oil field
service companies:
|
|
|
|
|
Cal Dive International
|
|
|
|
Global Industries
|
|
|
|
Superior Offshore International
|
|
|
|
Helix Energy Solutions
|
|
|
|
McDermott International
|
|
|
|
Acergy
|
|
|
|
Subsea 7
|
Using publicly available information, Lehman Brothers calculated
and analyzed equity and capitalization multiples of certain
projected financial criteria (such as cash flow from operations,
referred to as CFPS, earnings before interest, taxes,
depreciation and amortization, referred to as EBITDA, and
earnings per share, referred to as EPS). The adjusted
capitalization of each company was obtained by adding its
outstanding debt to the sum of the market value of its common
equity, the value of its preferred stock (market value if
publicly traded, liquidation value if not) and the book value of
any minority interest minus its cash balance. The projected 2007
and projected 2008 CFPS multiple ranges were determined to be
5.0x to 10.0x and 4.0x to 9.0x, respectively. The projected 2007
and projected 2008 EBITDA multiple ranges were determined to be
5.0x to 7.5x and 4.0x to 6.5x, respectively. For EPS, the
appropriate multiple ranges were determined to be 10.0x to 15.0x
and 8.0x to 13.0x for projected 2007 and projected 2008,
respectively.
The comparable companies methodology yielded valuations for
Horizon that imply a per share equity value range of $13.00 to
$22.50.
With respect to Cal Dive, Lehman Brothers reviewed the
public stock market trading multiples for the following oil
field service companies:
50
|
|
|
|
|
Global Industries
|
|
|
|
Superior Offshore International
|
|
|
|
Helix Energy Solutions
|
|
|
|
McDermott International
|
|
|
|
Acergy
|
|
|
|
Subsea 7
|
Using publicly available information and certain published
equity research estimates, Lehman Brothers calculated and
analyzed the common equity market value multiples of certain
projected financial criteria (such as EPS and CFPS) and the
adjusted capitalization multiples of certain projected financial
criteria (such as EBITDA). The projected 2007 and projected 2008
EPS multiple ranges were determined to be 10.0x to 15.0x and
8.0x to 13.0x, respectively. The projected 2007 and projected
2008 CFPS multiple ranges were determined to be 5.0x to 10.0x
and 4.0x to 9.0x, respectively. The projected 2007 and projected
2008 EBITDA multiple ranges were determined to be 5.0x to 7.5x
and 4.0x to 6.5x, respectively.
The comparable companies methodology yielded valuations for
Cal Dive that imply a per share equity value range of
$11.50 to $20.50.
Because of the inherent differences between the corporate
structure, businesses, operations and prospects of Horizon and
Cal Dive and the corporate structure, businesses,
operations and prospects of the companies included in the
comparable company groups, Lehman Brothers believed that it was
inappropriate to, and therefore did not, rely solely on the
quantitative results of the analysis and, accordingly, also made
qualitative judgments concerning differences between the
financial and operating characteristics of Horizon and
Cal Dive and companies in the comparable company groups
that would affect the public trading values of Horizon and
Cal Dive and such comparable companies.
Comparable
Transactions Analysis
Lehman Brothers conducted a comparable transactions analysis to
assess how similar transactions were valued. In the case of
Horizon and Cal Dive, Lehman Brothers reviewed certain
publicly available information on selected oil field service
transactions it deemed comparable to Horizon and Cal Dive.
In selecting the comparable transactions, Lehman Brothers
selected certain oil field service transactions which were
announced from January 1999 to June 2007, including:
|
|
|
|
|
McDermott International / Secunda International Ltd.
|
|
|
|
Helix Energy Solutions / Acergy
|
|
|
|
SEACOR Holdings / Seabulk Holdings
|
|
|
|
Oceaneering International / Subsea 7
|
|
|
|
Helix Energy Solutions / Canyon Offshore
|
|
|
|
Global Industries / Suez
|
|
|
|
McDermott International / J. Ray McDermott
|
For the transactions analysis, relevant transaction multiples
were analyzed including the total purchase price (equity
purchase price plus assumed obligations) divided by the latest
twelve months, referred to as LTM, EBITDA and the total purchase
price (equity purchase price plus assumed obligations) divided
by the projected next twelve months, referred to as Forward,
EBITDA. The appropriate LTM EBITDA multiple range was determined
to be 4.0x to 8.0x and the projected 2007 Forward EBITDA
multiple range was determined to be 4.5x to 5.5x.
51
The comparable transactions methodology yielded valuations for
Horizon that imply a per share equity value range of $13.86 to
$22.27. The comparable transactions methodology yielded
valuations for Cal Dive that imply a per share equity value
range of $9.92 to $15.80.
Because the market conditions, rationale and circumstances
surrounding each of the transactions analyzed were specific to
each transaction and because of the inherent differences between
the businesses, operations and prospects of Horizon and
Cal Dive and the acquired businesses analyzed, Lehman
Brothers believed that it was inappropriate to, and therefore
did not, rely solely on the quantitative results of the analysis
and, accordingly, also made qualitative judgments concerning
differences between the characteristics of these transactions
and the merger that would affect the acquisition values of
Horizon and Cal Dive and such acquired companies.
Discounted
Cash Flow Analysis
Lehman Brothers prepared an after-tax cash flow model for the
period from January 1, 2007 through December 31, 2011
for both Horizon and Cal Dive utilizing information and
projections provided by both companies. With respect to the
Horizon and Cal Dive discounted cash flow analyses, Lehman
Brothers used discount rates of 10% to 13% and terminal EBITDA
multiples of 5.0x to 7.0x. The discount rates used were based on
Lehman Brothers review of the financial terms of similar
transactions in the sector of oil field service companies. The
terminal value multiples were selected based on the trading
multiples of similar publicly traded companies and the multiples
of recently completed or proposed acquisitions of similar
companies. Lehman Brothers ran three discounted cash flow cases,
including a growth case, a base case and a downside case.
Projections for each case were prepared by Horizon and
Cal Dive management.
The discounted cash flow methodology yielded valuations for
Horizon that imply a per share equity value range of $20.40 to
$26.87 in the growth case, $14.56 to $18.48 in the base case and
$10.62 to $13.48 in the downside case. The discounted cash flow
methodology yielded valuations for Cal Dive that imply a
per share equity value range of $17.12 to $23.39 in the growth
case, $13.62 to $17.86 in the base case and $9.00 to $11.98 in
the downside case.
Premium
Analysis
Lehman Brothers reviewed certain publicly available information
related to selected corporate transactions to calculate the
amount of the premiums paid by the acquirers to the acquired
companys stockholders. Lehman Brothers analyzed the
following precedent transactions that were announced from
January 1996 to June 2007:
|
|
|
|
|
Hercules Offshore / TODCO
|
|
|
|
Tenaris / Hydril
|
|
|
|
Universal / Hanover
|
|
|
|
Superior Energy / Warrior Energy
|
|
|
|
IPSCO / NS Group
|
|
|
|
CGG / Veritas
|
|
|
|
Tenaris / Maverick Tube
|
|
|
|
SEACOR Holdings / Seabulk Holdings
|
|
|
|
National Oilwell / Varco
|
|
|
|
BJ Services / OSCA
|
|
|
|
Technip / Coflexip
|
|
|
|
Key Energy / Dawson Production
|
52
|
|
|
|
|
Baker Hughes / Western Atlas
|
|
|
|
EVI / Weatherford Enterra
|
|
|
|
Halliburton / Dresser
|
|
|
|
Camco / Production Operators
|
|
|
|
Baker Hughes / Petrolite
|
|
|
|
BJ Services / Nowsco Well Service
|
For each of the precedent transactions analyzed, Lehman Brothers
calculated the premiums paid by the acquirer by comparing the
per share purchase price in each transaction to the historical
stock price of the acquired company as of
1-day,
5-days, and
20-days
prior to the announcement date, as well as based upon the
52-week high prior to the announcement date. Lehman Brothers
compared the premiums paid in the precedent transactions to the
premium level implied by merger consideration to be paid for
Horizon in the merger based on closing prices as of June 8,
2007. The table below sets forth the summary results of the
analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage Premium/(Discount) to the Price
|
|
|
|
Prior to Transaction Announcement
|
|
|
|
1-Day
|
|
|
5-Days
|
|
|
20-Days
|
|
|
52-Week High
|
|
|
Selected Transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Median
|
|
|
27.2
|
%
|
|
|
28.0
|
%
|
|
|
31.4
|
%
|
|
|
5.2
|
%
|
Mean
|
|
|
28.1
|
%
|
|
|
29.6
|
%
|
|
|
31.8
|
%
|
|
|
1.8
|
%
|
Max
|
|
|
83.6
|
%
|
|
|
58.4
|
%
|
|
|
81.1
|
%
|
|
|
31.7
|
%
|
Min
|
|
|
2.4
|
%
|
|
|
5.6
|
%
|
|
|
(4.4
|
)%
|
|
|
(41.7
|
)%
|
Implied Premium based on Horizons closing stock price as
of June 8, 2007
|
|
|
13.8
|
%
|
|
|
11.9
|
%
|
|
|
22.6
|
%
|
|
|
(21.5
|
)%
|
Research
Analyst Target Analysis
Lehman Brothers took into consideration price targets from the
Wall Street equity research analysts that cover Horizon and
Cal Dive. As of June 8, 2007, Horizon had six analysts
that covered the company. Five of these analysts had a
Buy rating on Horizon and one analyst had a
Hold rating on Horizon. The average target price for
Horizon was $18.88. The price targets for Horizon ranged from
$14.25 per share to $23.00 per share. As of June 8, 2007,
Cal Dive had five analysts that covered the company. Four
of these analysts had a Buy rating on Cal Dive
and one analyst had no rating on Cal Dive. The average
target price for Cal Dive was $17.00. The price targets for
Cal Dive ranged from $15.00 per share to $18.00 per share.
Historical
Common Stock Trading Analysis
Lehman Brothers reviewed the daily historical closing prices of
Horizon common stock and Cal Dive common stock for the
period from December 14, 2006 (the date of
Cal Dives initial public offering) to June 8,
2007. Lehman Brothers analyzed the ratio of the closing share
price for Horizon to the closing share price of Cal Dive on
the same day over the period. Lehman Brothers noted that the
implied ratio has generally trended downward over that time. The
implied ratio based on each companys 52-week high was
equal to 1.488x. The implied ratio based on Horizons high
closing price since Cal Dives IPO was equal to
1.061x. The implied ratio as of June 8, 2007, was equal to
1.059x, with the implied ratio based on closing stock prices of
each company for the period five days and 20 days prior to
June 8, 2007, was 1.056x and 1.064x, respectively. The
implied ratio based on each companys
10-days,
20-days and
30-days
average closing stock prices prior to June 8, 2007 was
1.072x, 1.071x and 1.076x, respectively. The implied ratio based
on the merger consideration and Cal Dives closing
stock price as of June 8, 2007 was 1.205x.
Contribution
Analysis
Lehman Brothers analyzed the relative income statement
contribution of Horizon and Cal Dive to the combined
company based on 2007 and 2008 financial data as projected by
publicly available research. The
53
contribution analysis treats all cash flow and earnings the same
regardless of capitalization, expected growth rates, upside
potential or risk profile. In its analysis, Lehman Brothers did
not adjust for the expected synergies. Using Wall Street equity
research, this analysis indicated that Horizon would contribute
approximately 43% and 42% to 2007 and 2008 projected revenues,
respectively. Horizon would contribute 26% and 28% of the
combined companys net income, 28% and 29% of the combined
companys earnings before interest and taxes, 29% and 30%
of the combined companys EBITDA and 33% and 33% of the
combined companys CFPS for projected 2007 and 2008,
respectively.
Lehman Brothers also analyzed the relative contribution of
Horizon and Cal Dive to the combined company based on the
projected enterprise value as of June 8, 2007, and the
merger consideration of each company as of June 8, 2007.
This analysis indicated that Horizon will contribute 30% and 32%
of the combined companys enterprise value and of the
merger consideration, respectively.
Pro
Forma Merger Consequences Analysis
Lehman Brothers analyzed the pro forma impact of the merger on
the combined companys projected earnings and CFPS. In the
pro forma merger consequences, Lehman Brothers prepared a pro
forma merger model which incorporated the financial projections
prepared by management of Horizon and Cal Dive for the
years 2007 through 2008, as well as the synergies expected to
result from the merger. Lehman Brothers also analyzed the
financial projections for 2007 and 2008 based on Wall Street
equity research as well as the synergies expected to result from
the merger. Lehman Brothers then compared the earnings and CFPS
of Cal Dive on a standalone basis to the earnings and CFPS
in the pro forma combined company. Lehman Brothers noted that
the merger is accretive to the combined companys pro forma
earnings and CFPS in 2007 and 2008 based on both
managements and Wall Streets estimates.
Miscellaneous
Lehman Brothers is an internationally recognized investment
banking firm engaged in, among other things, the valuation of
businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids,
secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other
purposes. The Horizon board of directors selected Lehman
Brothers because of its expertise, reputation and familiarity
with Horizon and because its investment banking professionals
have substantial experience in transactions comparable to the
merger.
Lehman Brothers has previously rendered certain financial
advisory and investment banking services to Horizon, for which
it has received customary compensation. Pursuant to the terms of
an engagement letter agreement between Lehman Brothers and
Horizon, Horizon has agreed to pay Lehman Brothers customary
fees for its financial advisory services in connection with the
merger. In addition, Horizon has agreed to reimburse Lehman
Brothers for its reasonable expenses incurred in connection with
its engagement, and to indemnify Lehman Brothers and certain
related persons against certain liabilities in connection with
its engagement, including certain liabilities which may arise
under federal securities laws.
In the ordinary course of its business, Lehman Brothers actively
trades in the debt and equity securities of Horizon and
Cal Dive for its own account and for the accounts of its
customers and, accordingly, may at any time hold a long or short
position in such securities.
Cal
Dives Reasons for the Merger
Following a review and discussion of all relevant information
regarding the merger and the issuance of Cal Dive common
stock in the merger, the Board of Directors of Cal Dive has
determined that the merger is beneficial to Cal Dive and
its stockholders for the following reasons:
|
|
|
|
|
The combination of Cal Dives diving assets with
Horizons derrick barges and complementary pipelay and pipe
burial assets creates a company with a full spectrum of offshore
construction services.
|
54
|
|
|
|
|
The merger with Horizon provides Cal Dive with an immediate
presence in attractive offshore regions outside the
U.S. Gulf of Mexico and an enhanced ability to leverage the
combined companys assets in new geographic regions.
|
|
|
|
The merger achieves fleet expansion and diversity for
Cal Dive more cost effectively and in a more timely fashion
than could be achieved through new construction.
|
|
|
|
The increased operating capabilities provide Cal Dive with
the ability to generate significant new business opportunities
and the potential for additional synergies through cost savings.
|
|
|
|
The merger is expected to be accretive to Cal Dive for 2008
earnings per share.
|
|
|
|
The balanced cash and equity consideration provides
Cal Dive with benefits to its projected earnings per share
as well as maintaining conservative capitalization and majority
ownership by Helix.
|
|
|
|
The combined company after the merger is expected to generate
significant free cash flow, allowing for debt reduction and the
pursuit of strategic initiatives.
|
Opinion
of Banc of America Securities LLC Financial Advisor
to Cal Dive
Cal Dive retained Banc of America Securities as its
financial advisor in connection with the merger. Banc of America
Securities is an internationally recognized investment banking
firm which is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for
corporate and other purposes. Cal Dive selected Banc of
America Securities to act as its financial advisor in connection
with the merger on the basis of Banc of America Securities
experience in transactions similar to the merger, its reputation
in the energy services sector and investment community and its
familiarity with Cal Dive and its business.
On June 11, 2007, at a meeting of Cal Dives
board of directors held to evaluate the merger, Banc of America
Securities delivered to Cal Dives board of directors
an oral opinion, which was confirmed by delivery of a written
opinion dated June 11, 2007, to the effect that, as of the
date of the opinion and based on and subject to various
assumptions and limitations described in the opinion, the merger
consideration to be paid by Cal Dive pursuant to the merger
agreement was fair, from a financial point of view, to
Cal Dive.
The full text of Banc of America Securities written
opinion to Cal Dives board of directors, which
describes, among other things, the assumptions made, procedures
followed, factors considered and limitations on the review
undertaken, is attached as Annex C to this document and is
incorporated by reference in its entirety into this document.
Cal Dive shareholders are encouraged to read the opinion
carefully in its entirety. The following summary of Banc of
America Securities opinion is qualified in its entirety by
reference to the full text of the opinion. Banc of America
Securities delivered its opinion to Cal Dives board
of directors for the benefit and use of Cal Dives
board of directors in connection with and for purposes of its
evaluation of the merger consideration to be paid by
Cal Dive pursuant to the merger agreement. Banc of America
Securities opinion does not address any other aspect of
the merger and does not constitute a recommendation to any
shareholder as to how to vote at the special meeting.
In connection with rendering its opinion, Banc of America
Securities:
|
|
|
|
|
reviewed certain publicly available business and financial
information of Cal Dive and Horizon, respectively;
|
|
|
|
reviewed certain internal financial statements and other
financial, business and operating information and data
concerning Cal Dive and Horizon, respectively;
|
|
|
|
reviewed certain financial forecasts relating to Cal Dive
prepared by the management of Cal Dive;
|
|
|
|
reviewed certain financial forecasts relating to Horizon
prepared by the management of Horizon and an alternative version
of the Horizon forecasts incorporating adjustments thereto made
by the management of Cal Dive;
|
55
|
|
|
|
|
reviewed and discussed with senior executives of Cal Dive
information relating to certain cost savings and strategic and
operational benefits anticipated by the management of
Cal Dive to result from the merger;
|
|
|
|
discussed the past and current operations, financial condition
and prospects of Horizon with senior executives of Cal Dive
and Horizon, and discussed the past and current operations,
financial condition and prospects of Cal Dive with senior
executives of Cal Dive;
|
|
|
|
reviewed the potential pro forma financial impact of the merger
on the future financial performance of Cal Dive, including
the potential effect on Cal Dives estimated earnings
per share;
|
|
|
|
reviewed the relative financial contributions of Cal Dive
and Horizon to the future financial performance of the combined
company on a pro forma basis following consummation of the
merger;
|
|
|
|
reviewed the reported prices and trading activity for
Cal Dive common stock and Horizon common stock;
|
|
|
|
compared the financial performance of Cal Dive and Horizon
and the prices and trading activity of Cal Dive common
stock and Horizon common stock with each other and with that of
certain other publicly traded companies that Banc of America
Securities deemed relevant;
|
|
|
|
compared certain financial terms of the merger to financial
terms, to the extent publicly available, of certain other
acquisition transactions that Banc of America Securities deemed
relevant;
|
|
|
|
participated in discussions and negotiations among
representatives of Cal Dive, Horizon and their respective
advisors;
|
|
|
|
reviewed the merger agreement; and
|
|
|
|
performed such other analyses and considered such other factors
as Banc of America Securities deemed appropriate.
|
In arriving at its opinion, Banc of America Securities assumed
and relied on, without independent verification, the accuracy
and completeness of the financial and other information reviewed
by it. Banc of America Securities also assumed, upon
Horizons advice, that the financial forecasts relating to
Horizon provided to or discussed with Banc of America Securities
by Horizons management were reasonably prepared on bases
reflecting the best currently available estimates and good faith
judgment of the management of Horizon as to the future financial
performance of Horizon. Banc of America Securities further
assumed, at the direction of Cal Dive, that the forecasts
relating to Cal Dive, Horizon and the cost savings and
strategic, financial and operational benefits anticipated by
Cal Dives management to result from the merger were
reasonably prepared on bases reflecting the best currently
available estimates and good faith judgment of the management of
Cal Dive as to the future financial performance of Horizon,
Cal Dive and the other matters covered thereby. In
addition, Banc of America Securities assumed, with
Cal Dives consent, that the merger will be
consummated as provided in the merger agreement, with full
satisfaction of all covenants and conditions set forth therein
and without any waivers, and that all third party consents,
approvals and agreements necessary for the consummation of the
merger will be obtained without any adverse effect on
Cal Dive, Horizon or the contemplated benefits of the
merger to Cal Dive.
Banc of America Securities did not make any independent
valuation or appraisal of Cal Dive or Horizon, and Banc of
America Securities was not furnished with any such valuations or
appraisals. Banc of America Securities expressed no view or
opinion as to any terms or aspects of the merger other than the
merger consideration to the extent expressly set forth herein
(including, without limitation, the form or structure of the
merger). In addition, Banc of America Securities expressed no
view or opinion as to the relative merits of the merger in
comparison to other transactions available to Cal Dive or
in which Cal Dive might engage or as to whether any
transaction might be more favorable to Cal Dive as an
alternative to the merger, nor did Banc of America Securities
express any opinion as to the underlying business decision of
the board of directors of Cal Dive to proceed with or
effect the merger. Banc of America Securities expressed no
opinion as to what the value of Cal Dive common stock
actually would be when issued pursuant to the merger or the
prices at which
56
Cal Dive common stock or Horizon common stock would trade
at any time. Except as described above, Cal Dive imposed no
limitations on the investigations made or procedures followed by
Banc of America Securities in rendering its opinion.
Banc of America Securities opinion was necessarily based
on economic, market and other conditions as in effect on, and
the information made available to Banc of America Securities as
of, the date of its opinion. Accordingly, although subsequent
developments may affect its opinion, Banc of America Securities
did not assume any obligation to update, revise or reaffirm its
opinion.
The following represents a summary of the material financial
analyses presented by Banc of America Securities to
Cal Dives board of directors in connection with its
opinion. The financial analyses summarized below include
information presented in tabular format. In order to fully
understand the financial analyses performed by Banc of America
Securities, the tables must be read together with the text of
each summary. The tables alone do not constitute a complete
description of the financial analyses performed by Banc of
America Securities. Considering the data in the tables below
without considering the full narrative description of the
financial analyses, including the methodologies and assumptions
underlying the analyses, could create a misleading or incomplete
view of the financial analyses performed by Banc of America
Securities. For purposes of the analyses summarized below,
the implied blended value per share of the merger consideration
was calculated based on Cal Dives closing share price
on June 8, 2007 of $15.96. Banc of America Securities
multiplied this price by the exchange ratio in the merger of
0.625, and added the resulting product ($9.98) to the cash
consideration in the merger of $9.25 to arrive at an implied
blended value for the merger consideration of $19.23 per Horizon
share.
Horizon
Financial Analyses
Analysis of Selected Publicly Traded
Companies. Banc of America Securities reviewed
publicly available financial and stock market information for
the following six selected marine construction companies:
|
|
|
|
|
Acergy S.A.;
|
|
|
|
Global Industries, Ltd.;
|
|
|
|
McDermott International, Inc.;
|
|
|
|
Oceaneering International, Inc.;
|
|
|
|
Superior Offshore International, Inc.; and
|
|
|
|
TETRA Technologies, Inc.
|
Using publicly available information, Banc of America Securities
reviewed, among other things, the following multiple ratios:
(i) enterprise value per share to estimated 2007 earnings
before interest, taxes, depreciation and amortization (commonly
referred to as EBITDA), (ii) enterprise value per share to
estimated 2008 EBITDA, (iii) trading price per share on
June 8, 2007 to estimated 2007 earnings per share (commonly
referred to as EPS) and (iv) trading price per share on
June 8, 2007 to estimated 2008 EPS. Banc of America
Securities then applied a range of selected multiples derived
from the selected companies to corresponding data for Horizon.
Projected EBITDA and EPS were based on First Call consensus
estimates. Estimated financial data for Horizon were based on
estimates prepared by the management of Horizon, as adjusted by
the management of Cal Dive. This analysis indicated the
following implied per share equity reference ranges for Horizon,
as compared to the implied blended per share value of the merger
consideration:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied Blended per
|
|
|
|
|
|
|
|
|
Share Value of
|
Implied per Share Equity Reference Ranges for Horizon Based
on:
|
|
Merger
|
2007E EBITDA
|
|
2008E EBITDA
|
|
2007E EPS
|
|
2008E EPS
|
|
Consideration
|
|
$16.50 - $22.25
|
|
$15.75 - $22.50
|
|
$14.00 - $22.50
|
|
$15.25 - $24.00
|
|
$
|
19.23
|
|
No company or business used in this analysis is identical to
Horizon or its business. Accordingly, an evaluation of the
results of these analyses is not entirely mathematical. Rather,
this analysis involves complex considerations and judgments
concerning differences in financial and operating
characteristics and other factors
57
that could affect the public trading or other values of the
companies or business segments to which Horizon was compared.
Analysis of Selected Precedent Transactions. Banc of
America Securities reviewed financial information relating to
the following selected transactions in the offshore drilling,
marine transportation and marine construction industries:
|
|
|
|
|
|
|
Announcement Date
|
|
|
Acquiror
|
|
Target
|
|
|
3/19/07
|
|
|
Hercules Offshore, Inc.
|
|
TODCO
|
|
2/20/06
|
|
|
SeaDrill Limited
|
|
Smedvig asa
|
|
3/16/05
|
|
|
SEACOR Holdings Inc.
|
|
Seabulk International, Inc.
|
|
5/15/02
|
|
|
ENSCO International Incorporated
|
|
Chiles Offshore Inc.
|
|
5/8/02
|
|
|
Saipem SPA
|
|
Bouygues Construction SA
|
|
9/4/01
|
|
|
Santa Fe International Inc
|
|
Global Marine Inc.
|
|
7/3/01
|
|
|
Technip
|
|
Coflexip Stena Offshore Group S.A.
|
|
5/24/01
|
|
|
Pride International, Inc.
|
|
Marine Drilling Companies, Inc.
|
|
8/21/00
|
|
|
Transocean Sedco Forex Inc
|
|
R&B Falcon Corporation
|
|
7/12/99
|
|
|
Transocean Offshore Inc
|
|
Sedco Forex, Inc.
|
|
8/10/98
|
|
|
R&B Falcon Corporation
|
|
Cliffs Drilling Company
|
|
7/10/97
|
|
|
Falcon Drilling Company, Inc.
|
|
Reading & Bates Corporation
|
Using publicly available information, Banc of America Securities
calculated equity values as a multiple of latest
12 months EBITDA. Banc of America Securities
normalized these multiples by dividing them by the ratio of
historical multiples of selected publicly traded companies
prevailing at the time of the relevant transaction to current
multiples of selected publicly traded companies. Banc of America
Securities then applied a range of selected latest
12 months EBITDA multiples derived from the selected
transactions to corresponding data for Horizon. Estimated
financial data for the selected transactions were based on
public filings and other publicly available information.
Estimated financial data for Horizon were based on estimates
prepared by the management of Horizon, as adjusted by the
management of Cal Dive. The analysis indicated the
following per share reference range for the value of the Horizon
shares, as compared to the implied blended per share value of
the merger consideration:
|
|
|
Implied per Share Equity Reference
|
|
|
Range for Horizon Based on LTM
|
|
Implied Blended per Share Value of
|
EBITDA
|
|
Merger Consideration
|
|
$19.00 - $26.25
|
|
$19.23
|
No company, transaction or business used in this analysis is
identical to Horizon or the merger. Accordingly, an evaluation
of the results of these analyses is not entirely mathematical.
Rather, this analysis involves complex considerations and
judgments concerning differences in financial and operating
characteristics and other factors that could affect the
acquisition or other values of the companies, business segments
or transactions to which Horizon and the merger were compared.
Discounted Cash Flow Analysis. Banc of America
Securities performed a discounted cash flow analysis in which it
calculated the estimated present value of the projected
unlevered free cash flows that Horizon was expected to generate
during the second half of 2007 through 2011 and the terminal
value of Horizon at the end of such period. The terminal value
range for Horizon was calculated based on Horizons 2011
estimated EBITDA and terminal value multiples ranging from 6.0x
to 8.0x. Cash flows and terminal values were discounted to
present value using discount rates ranging from 14.0% to 16.0%.
Estimated financial data for Horizon were based on estimates
prepared by the management of Horizon, as adjusted by the
management of Cal Dive. This analysis indicated the
following implied per share equity reference range for Horizon,
as compared to the implied blended per share value of the merger
consideration:
|
|
|
Implied per Share Equity Reference
|
|
Implied Blended per Share Value of
|
Range for Horizon
|
|
Merger Consideration
|
|
$18.25 - $23.75
|
|
$19.23
|
58
Premiums Paid Analysis. Banc of America
Securities reviewed the premiums paid in 13 selected oilfield
services transactions announced since January 1, 2000 and
involving transaction values between $500 million and
$3 billion, including six all cash transactions, three all
stock transactions and four transactions utilizing mixed
consideration. Banc of America Securities reviewed the purchase
prices paid in the selected transactions (analyzing all selected
transactions (including stock-only, cash/stock and cash-only
transactions) and cash-only transactions separately) relative to
the target companies closing stock prices one day, and the
average of the target companies closing stock prices for
the one week and four weeks, prior to public announcement of the
transaction. Banc of America Securities then applied the mean
and median premiums implied over these periods derived from each
type of selected transaction to the closing price of Horizon
common stock one day, and the average of the closing prices of
Horizon common stock for the one week and four weeks, prior to
June 8, 2007 to obtain a range of implied per share values
for Horizon common stock. This analysis yielded the following
mean and median premiums in the selected transactions, and the
implied per share values for Horizon common stock, as compared
to the implied per share value for the merger consideration of
$19.23:
All
Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied per Share
|
|
|
|
|
|
|
|
|
|
Value of Horizon
|
|
|
|
|
|
|
Premium
|
|
|
Common Stock
|
|
Period Prior to Announcement
|
|
Horizon Share Price
|
|
|
Mean
|
|
|
Median
|
|
|
Mean
|
|
|
Median
|
|
|
One Day
|
|
$
|
16.90
|
|
|
|
22.8
|
%
|
|
|
18.8
|
%
|
|
$
|
20.75
|
|
|
$
|
20.08
|
|
One Week
|
|
$
|
16.94
|
|
|
|
23.5
|
%
|
|
|
24.6
|
%
|
|
$
|
20.92
|
|
|
$
|
21.11
|
|
Four Weeks
|
|
$
|
15.69
|
|
|
|
30.4
|
%
|
|
|
29.0
|
%
|
|
$
|
20.45
|
|
|
$
|
20.23
|
|
Cash Only
Transactions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied per Share
|
|
|
|
|
|
|
|
|
|
Value of Horizon
|
|
|
|
|
|
|
Premium
|
|
|
Common Stock
|
|
Period Prior to Announcement
|
|
Horizon Share Price
|
|
|
Mean
|
|
|
Median
|
|
|
Mean
|
|
|
Median
|
|
|
One Day
|
|
$
|
16.90
|
|
|
|
24.7
|
%
|
|
|
26.7
|
%
|
|
$
|
21.07
|
|
|
$
|
21.41
|
|
One Week
|
|
$
|
16.94
|
|
|
|
26.7
|
%
|
|
|
28.2
|
%
|
|
$
|
21.46
|
|
|
$
|
21.71
|
|
Four Weeks
|
|
$
|
15.69
|
|
|
|
31.6
|
%
|
|
|
38.9
|
%
|
|
$
|
20.66
|
|
|
$
|
21.79
|
|
No company, transaction or business used in this analysis is
identical to Horizon or the merger. Accordingly, an evaluation
of the results of these analyses is not entirely mathematical.
Rather, this analysis involves complex considerations and
judgments concerning differences in financial and operating
characteristics and other factors that could affect the
acquisition or other values of the companies, business segments
or transactions to which Horizon and the merger were compared.
Cal
Dive Financial Analyses
Analysis of Selected Publicly Traded
Companies. Banc of America Securities reviewed
publicly available financial and stock market information for
the following six selected marine construction companies:
|
|
|
|
|
Acergy S.A.;
|
|
|
|
Global Industries, Ltd.;
|
|
|
|
McDermott International, Inc.;
|
|
|
|
Oceaneering International, Inc.;
|
|
|
|
Superior Offshore International, Inc.; and
|
|
|
|
TETRA Technologies, Inc.
|
59
Using publicly available information, Banc of America Securities
reviewed, among other things, the following multiple ratios:
(i) enterprise value per share to estimated 2007 EBITDA,
(ii) enterprise value per share to estimated 2008 EBITDA,
(iii) trading price per share on June 8, 2007 to
estimated 2007 EPS and (iv) trading price per share on
June 8, 2007 to estimated 2008 EPS. Banc of America
Securities then applied a range of selected multiples derived
from the selected companies to corresponding data for
Cal Dive. Projected EBITDA and EPS were based on First Call
consensus estimates. Estimated financial data for Cal Dive
were based on internal estimates prepared by the management of
Cal Dive. This analysis indicated the following implied per
share equity reference ranges for Cal Dive, as compared to
the $15.96 closing price per share of Cal Dive common stock
on June 8, 2007:
|
|
|
|
|
|
|
Implied per Share Equity Reference Range for Cal Dive Based
on:
|
2007E EBITDA
|
|
2008E EBITDA
|
|
2007E EPS
|
|
2008E EPS
|
|
$15.75 - $21.50
|
|
$14.00-$20.50
|
|
$15.00-$24.25
|
|
$15.00-$23.50
|
No company or business used in this analysis is identical to
Cal Dive or its business. Accordingly, an evaluation of the
results of these analyses is not entirely mathematical. Rather,
this analysis involves complex considerations and judgments
concerning differences in financial and operating
characteristics and other factors that could affect the public
trading or other values of the companies or business segments to
which Cal Dive was compared.
Discounted Cash Flow Analysis. Banc of America
Securities performed a discounted cash flow analysis in which it
calculated the estimated present value of the projected
unlevered free cash flows that Cal Dive was expected to
generate during the second half of 2007 through 2011 and the
terminal value of Cal Dive at the end of such period. The
terminal value range for Cal Dive was calculated based on
Cal Dives 2011 estimated EBITDA and terminal value
multiples ranging from 6.0x to 8.0x. Cash flows and terminal
values were discounted to present value using discount rates
ranging from 12.5% to 14.5%. Estimated financial data for
Cal Dive were based on internal estimates prepared by the
management of Cal Dive. This analysis indicated the
following implied per share equity reference range for
Cal Dive, as compared to the $15.96 closing price per share
of Cal Dive common stock on June 8, 2007:
|
|
|
|
|
Implied per Share Equity Reference
|
|
Closing Price of Cal Dive Common
|
Range for Horizon
|
|
Stock on June 8, 2007
|
|
$14.75 - $20.25
|
|
$
|
15.96
|
|
Pro
Forma Merger Accretion/Dilution Analysis
Banc of America Securities analyzed the potential pro forma
effect of the merger on Cal Dives estimated 2007 and
2008 EPS based on financial forecasts and estimates prepared by
the management of Cal Dive after giving effect to cost
savings and strategic, financial and operational benefits
anticipated by Cal Dives management to result from
the merger. Based on the implied per share value of the merger
consideration, this analysis indicated that the merger could be
accretive to Cal Dives estimated 2007 and 2008 EPS.
The actual results achieved by the combined company may vary
from projected results and the variations may be material.
Other
Factors
In rendering its opinion, Banc of America Securities also
reviewed and considered other factors, including:
|
|
|
|
|
historical trading prices and trading volumes of
(i) Horizons shares since June 2006, when Horizon
completed its financial reorganization and resumed trading on
Nasdaq, and (ii) Cal Dives shares since
Cal Dives initial public offering on
December 14, 2006;
|
|
|
|
the historical ratio of Horizons closing share price to
Cal Dives closing share price since
Cal Dives initial public offering on
December 14, 2006;
|
60
|
|
|
|
|
the relative value of Horizon shares and Cal Dive shares
using the reference ranges of implied values obtained under the
selected publicly traded companies, selected precedent
transactions and discounted cash flow analyses described above;
|
|
|
|
the relative contributions of Horizon and Cal Dive to the
EBITDA, net income, cash flow, equity value and firm value of
the combined company; and
|
|
|
|
publicly available research analysts reports for Horizon
and Cal Dive, including revenue, EBITDA, EPS and cash flow
per share estimates reflected in those reports.
|
Miscellaneous
As noted above, the discussion set forth above is merely a
summary of the material financial analyses performed by Banc of
America Securities and is not a comprehensive description of all
analyses undertaken by Banc of America Securities in connection
with its opinion. The preparation of a financial opinion is a
complex analytical process involving various determinations as
to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular
circumstances and, therefore, a financial opinion is not readily
susceptible to partial analysis or summary description. Banc of
America Securities believes that its analyses and the summary
above must be considered as a whole. Banc of America Securities
further believes that selecting portions of its analyses and the
factors considered or focusing on information presented in
tabular format, without considering all analyses and factors or
the narrative description of the analyses, could create a
misleading or incomplete view of the processes underlying Banc
of America Securities analyses and opinion. Banc of
America Securities did not assign any specific weight to any of
the analyses described above. The fact that any specific
analysis has been referred to in the summary above is not meant
to indicate that such analysis was given greater weight than any
other analysis.
In performing its analyses, Banc of America Securities
considered industry performance, general business and economic
conditions and other matters, many of which are beyond the
control of Cal Dive and Horizon. The estimates of the
future performance of Cal Dive and Horizon provided by the
managements of Cal Dive and Horizon in or underlying Banc
of America Securities analyses are not necessarily
indicative of actual values or actual future results, which may
be significantly more or less favorable than those estimates or
those suggested by Banc of America Securities analyses.
These analyses were prepared solely as part of Banc of America
Securities analysis of the financial fairness of the
merger consideration to be paid by Cal Dive pursuant to the
merger agreement and were provided to Cal Dives board
of directors in connection with the delivery of Banc of America
Securities opinion. The analyses do not purport to be
appraisals or to reflect the prices at which a company might
actually be sold or the prices at which any securities have
traded or may trade at any time in the future. Accordingly, the
estimates used in, and the ranges of valuations resulting from,
any particular analysis described above are inherently subject
to substantial uncertainty and should not be taken to be Banc of
America Securities view of the actual value of
Cal Dive or Horizon.
The type and amount of consideration payable in the merger were
determined through negotiations between Cal Dive and
Horizon, rather than by any financial advisor, and were approved
by Cal Dives board of directors. The decision to
enter into the merger agreement was solely that of
Cal Dives board of directors. Banc of America
Securities opinion and analyses were only one of many
factors considered by Cal Dives board of directors in
making its determination to approve the merger agreement and to
recommend that Cal Dive shareholders approve the issuance
of Cal Dive common shares as contemplated by the merger
agreement, and should not be viewed as determinative of the
views of Cal Dives board of directors or management
with respect to the merger or the merger consideration.
Cal Dive has agreed to pay Banc of America Securities for
its services in connection with the merger an aggregate fee of
$4 million, a portion of which was payable in connection
with the delivery of Banc of America Securities opinion
and a significant portion of which is contingent upon the
consummation of the merger. Cal Dive also has agreed to
indemnify Banc of America Securities, any controlling person of
Banc of America Securities and each of their respective
directors, officers, employees, agents, affiliates and
representatives against specified liabilities, including
liabilities under the federal securities laws.
61
Banc of America Securities and its affiliates will be
participating in the financing to be undertaken by Cal Dive
in connection with the merger, for which services Banc of
America Securities and its affiliates will receive significant
compensation, including acting as administrative agent, joint
lead arranger, book-running manager and lender under a new
credit facility for Cal Dive. In addition, Banc of America
Securities or its affiliates have provided, currently are
providing and in the future may provide financial advisory and
financing services to Cal Dive, Helix Energy Solutions
Group, Inc., Cal Dives majority shareholder, and
certain other affiliates of Cal Dive, and have received and
in the future may receive fees for the rendering of these
services, including, among other things, having acted or
currently acting as (i) book-runner in connection with
Cal Dives initial public offering,
(ii) administrative agent, arranger, book arranger, book
manager
and/or
lender for certain credit facilities of Helix and certain of its
affiliates. In the ordinary course of its business, Banc of
America Securities or its affiliates may actively trade or hold
securities or loans of Cal Dive, Helix or Horizon for its
own accounts or for the accounts of customers and, accordingly,
it or its affiliates may at any time hold long or short
positions in such securities or loans.
The combination of the two companies will be accounted for as an
acquisition of Horizon by Cal Dive using the purchase
method of accounting.
Opinions
that the Merger Constitutes a Reorganization under
Section 368(a) of the Internal Revenue Code
The completion of the merger is conditioned on, among other
things, the receipt of opinions from tax counsel for each of
Cal Dive and Horizon that the merger will qualify as a
reorganization under Section 368(a) of the Internal Revenue
Code.
The merger is subject to review by the DOJ and the FTC under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976. The HSR Act, and the rules
promulgated under it by the FTC, prevent transactions, such as
the merger, from being completed until required information and
materials are furnished to the DOJ and the FTC and certain
waiting periods are terminated or expire. The initial waiting
period is 30 days after both parties have filed the
applicable notifications, but this period may be extended if the
reviewing agency issues a formal request for additional
information and documentary material, referred to as a second
request. On July 27, 2007, Cal Dive and Horizon
submitted the pre-merger notification filings with the DOJ and
the FTC and on August 29, 2007, Cal Dive resubmitted its
notification filing to provide the DOJ additional time to review
the transaction. On September 28, 2007, Cal Dive and
Horizon received a second request from the DOJ. The second
request extends the waiting period for a period of
30 calendar days from the date of the parties
substantial compliance with the request. On November 2,
2007, Cal Dive and Horizon received notice of early termination
of the waiting period under the
Hart-Scott-Rodino
Act.
The DOJ, the FTC and others may also challenge the merger on
antitrust grounds either before or after expiration or
termination of the waiting period. Accordingly, at any time
before or after the completion of the merger, the DOJ, the FTC
or another regulatory agency could take action under the
antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the completion of the
merger or permitting completion subject to regulatory
concessions or conditions. We cannot assure you that a challenge
to the merger will not be made or that, if a challenge is made,
it will not prevail.
Other than as we describe in this document, the merger does not
require the approval of any other U.S. federal or state or
foreign agency.
Under the DGCL, any Horizon stockholder who does not wish to
accept the merger consideration has the right to dissent from
the merger and to seek an appraisal of, and to be paid the fair
value (exclusive of any
62
element of value arising from the accomplishment or expectation
of the merger) for his or her shares of Horizon common stock, so
long as the stockholder complies with the provisions of
Section 262 of the DGCL.
Holders of record of Horizon common stock who do not vote in
favor of the merger agreement and who otherwise comply with the
applicable statutory procedures summarized in this information
statement/proxy statement/prospectus will be entitled to
appraisal rights under Section 262 of the DGCL. A person
having a beneficial interest in shares of Horizon common stock
held of record in the name of another person, such as a broker
or nominee, must act promptly to cause the record holder to
follow the steps summarized below properly and in a timely
manner to perfect appraisal rights.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE
LAW PERTAINING TO APPRAISAL RIGHTS UNDER THE DGCL AND IS
QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF SECTION 262
OF THE DGCL, WHICH IS REPRINTED IN ITS ENTIRETY AS ANNEX D.
ALL REFERENCES IN SECTION 262 OF THE DGCL AND IN THIS
SUMMARY TO A STOCKHOLDER OR HOLDER ARE
TO THE RECORD HOLDER OF THE SHARES OF COMMON STOCK AS TO WHICH
APPRAISAL RIGHTS ARE ASSERTED.
Under Section 262 of the DGCL, holders of shares of Horizon
common stock who follow the procedures set forth in
Section 262 of the DGCL will be entitled to have their
shares of Horizon common stock appraised by the Delaware
Chancery Court and to receive payment in cash of the fair
value of those Horizon shares, exclusive of any element of
value arising from the accomplishment or expectation of the
merger, together with a fair rate of interest, if any, as
determined by that court.
Under Section 262 of the DGCL, when a proposed merger is to
be submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
must notify each of its stockholders who was a stockholder on
the record date for the meeting with respect to shares for which
appraisal rights are available, that appraisal rights are so
available, and must include in that required notice a copy of
Section 262 of the DGCL.
This information statement/proxy statement/prospectus
constitutes the required notice to the holders of those Horizon
shares and the applicable statutory provisions of the DGCL are
attached to this information statement/proxy
statement/prospectus as Annex D. Any Horizon stockholder
who wishes to exercise his or her appraisal rights or who wishes
to preserve his or her right to do so should review the
following discussion and Annex D carefully, because failure
to timely and properly comply with the procedures specified in
Annex D will result in the loss of appraisal rights under
the DGCL.
A holder of Horizon shares wishing to exercise his or her
appraisal rights (a) must not vote in favor of the merger
agreement and (b) must deliver to Horizon prior to the vote
on the merger agreement at the Horizon special meeting, a
written demand for appraisal of his or her Horizon shares. This
written demand for appraisal must be in addition to and separate
from any proxy or vote abstaining from or against the merger.
This demand must reasonably inform Horizon of the identity of
the stockholder and of the stockholders intent thereby to
demand appraisal of his or her shares. A holder of Horizon
common stock wishing to exercise his or her appraisal rights
must be the record holder of these Horizon shares on the date
the written demand for appraisal is made and must continue to
hold these Horizon shares until the consummation of the merger.
Accordingly, a holder of Horizon common stock who is the record
holder of Horizon common stock on the date the written demand
for appraisal is made, but who thereafter transfers these
Horizon shares prior to consummation of the merger, will lose
any right to appraisal in respect of these Horizon shares.
Only a holder of record of Horizon common stock is entitled to
assert appraisal rights for the Horizon shares registered in
that holders name. A demand for appraisal should be
executed by or on behalf of the holder of record, fully and
correctly, as the holders name appears on the
holders stock certificates. If the Horizon shares are
owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, execution of the demand should be made in
that capacity, and if the Horizon common stock is owned of
record by more than one owner as in a joint tenancy or tenancy
in common, the demand should be executed by or on behalf of all
joint owners. An authorized agent, including one or more joint
owners, may execute a demand for appraisal on behalf of a holder
of record. The agent, however, must identify the record owner or
63
owners and expressly disclose the fact that, in executing the
demand, the agent is agent for the owner or owners. A record
holder such as a broker who holds Horizon common stock as
nominee for several beneficial owners may exercise appraisal
rights with respect to the Horizon shares held for one or more
beneficial owners while not exercising appraisal rights with
respect to the Horizon common stock held for other beneficial
owners. In this case, the written demand should set forth the
number of Horizon shares as to which appraisal is sought. When
no number of Horizon shares is expressly mentioned, the demand
will be presumed to cover all Horizon common stock in brokerage
accounts or other nominee forms, and those who wish to exercise
appraisal rights under Section 262 of the DGCL are urged to
consult with their brokers to determine the appropriate
procedures for the making of a demand for appraisal by such a
nominee.
ALL WRITTEN DEMANDS FOR APPRAISAL SHOULD BE SENT OR DELIVERED
TO HORIZON OFFSHORE, INC., 2500 CITYWEST BOULEVARD,
SUITE 2200, HOUSTON, TEXAS 77042, ATTENTION: SECRETARY.
Within ten days after the effective time of the merger,
Cal Dive will notify each stockholder who has properly
asserted appraisal rights under Section 262 of the DGCL and
has not voted in favor of the merger agreement.
Within 120 days after the effective time of the merger, but
not thereafter, Cal Dive or any stockholder who has
complied with the statutory requirements summarized above may
file a petition in the Delaware Chancery Court demanding a
determination of the fair value of the shares of Horizon common
stock held by those stockholders. None of Cal Dive, Merger
Sub, or Horizon is under any obligation to and none of them has
any present intention to file a petition with respect to the
appraisal of the fair value of the Horizon shares. Accordingly,
it is the obligation of stockholders wishing to assert appraisal
rights to initiate all necessary action to perfect their
appraisal rights within the time prescribed in Section 262
of the DGCL.
Within 120 days after the effective time of the merger, any
Horizon stockholder who has complied with the requirements for
exercise of appraisal rights will be entitled, upon written
request, to receive from Cal Dive a statement setting forth
the aggregate number of Horizon shares not voted in favor of
adoption of the merger agreement and with respect to which
demands for appraisal have been received and the aggregate
number of holders of those Horizon shares. That statement must
be mailed to those stockholders within ten days after a written
request therefor has been received by Cal Dive.
If a petition for an appraisal is filed timely, at a hearing on
the petition, the Delaware Chancery Court will determine the
stockholders entitled to appraisal rights. After determining
those stockholders, the Delaware Chancery Court will appraise
the fair value of their Horizon shares, exclusive of
any element of value arising from the accomplishment or
expectation of the merger, together with a fair rate of
interest, if any, to be paid upon the amount determined to be
the fair value. Stockholders considering seeking appraisal
should be aware that the fair value of their Horizon shares as
determined under Section 262 of the DGCL could be more
than, the same as, or less than the value of the merger
consideration they would receive pursuant to the merger
agreement if they did not seek appraisal of their Horizon shares
and that investment banking opinions as to fairness from a
financial point of view are not necessarily opinions as to fair
value under Section 262 of the DGCL. The Delaware Supreme
Court has stated that proof of value by any techniques or
methods which are generally considered acceptable in the
financial community and otherwise admissible in court
should be considered in the appraisal proceedings.
The Delaware Chancery Court will determine the amount of
interest, if any, to be paid upon the amounts to be received by
stockholders whose Horizon shares have been appraised. The costs
of the appraisal proceeding may be determined by the Delaware
Chancery Court and taxed upon the parties as the Delaware
Chancery Court deems equitable. The Delaware Chancery Court may
also order that all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts used in the appraisal
proceeding, be charged pro rata against the value of all of the
Horizon shares entitled to appraisal.
Any holder of Horizon common stock who has duly demanded an
appraisal in compliance with Section 262 of the DGCL will
not, after the effective time of the merger, be entitled to vote
the Horizon
64
shares subject to that demand for any purpose or be entitled to
the payment of dividends or other distributions on those Horizon
shares (except dividends or other distributions payable to
holders of record of Horizon common stock as of a record date
prior to the effective time of the merger).
If any stockholder who properly demands appraisal of his or her
Horizon common stock under Section 262 of the DGCL fails to
perfect, or effectively withdraws or loses, his or her right to
appraisal, as provided in Section 262 of the DGCL, the
Horizon shares of that stockholder will be converted into the
right to receive the merger consideration receivable with
respect to these Horizon shares in accordance with the merger
agreement. A stockholder will fail to perfect, or effectively
lose or withdraw, his or her right to appraisal if, among other
things, no petition for appraisal is filed within 120 days
after the consummation of the merger, or if the stockholder
delivers to Horizon or Cal Dive, as the case may be, a
written withdrawal of his or her demand for appraisal. Any
attempt to withdraw an appraisal demand in this matter more than
60 days after the consummation of the merger will require
the written approval of the surviving company.
Failure to follow the steps required by Section 262 of the
DGCL for perfecting appraisal rights may result in the loss of
these rights, in which event a Horizon stockholder will be
entitled to receive the merger consideration receivable with
respect to his or her Horizon shares in accordance with the
merger agreement.
Delisting
and Deregistration of Horizon Common Stock
If the merger is completed, the shares of Horizon common stock
will be delisted from the Nasdaq Global Market and will be
deregistered under the Securities Exchange Act of 1934. The
stockholders of Horizon will become stockholders of
Cal Dive and their rights as stockholders will be governed
by Cal Dives certificate of incorporation and bylaws
and by the laws of the State of Delaware. See Comparison
of Stockholders Rights beginning on page 181 of
this information statement/proxy statement/prospectus.
Federal
Securities Laws Consequences; Resale Restrictions
All shares of Cal Dive common stock that will be
distributed to Horizon stockholders as a result of the merger
will be freely transferable, except for restrictions applicable
to persons who are deemed to be affiliates of
Horizon. Persons who are deemed to be affiliates of Horizon may
resell Cal Dive shares received by them only in
transactions permitted by the resale provisions of Rule 145
or as otherwise permitted under the Securities Act of 1933.
Persons who may be deemed to be affiliates of Horizon generally
include executive officers, directors, and individuals or
entities who are significant stockholders of Horizon. The merger
agreement requires Horizon to use its reasonable best efforts to
cause each of its directors, executive officers, and individuals
or entities who Horizon believes may be deemed to be affiliates
of Horizon to execute and deliver to Cal Dive a written
agreement to the effect that those persons will not sell,
assign, or transfer any of the Cal Dive shares issued to
them as a result of the merger unless that sale, assignment, or
transfer has been registered under the Securities Act of 1933,
is in conformity with Rule 145, or is otherwise exempt from
the registration requirements under the Securities Act of 1933.
This information statement/proxy statement/prospectus does not
cover any resales of the Cal Dive shares to be received by
Horizons stockholders in the merger, and no person is
authorized to make any use of this information statement/proxy
statement/prospectus in connection with any resale.
65
INTERESTS
OF HORIZON DIRECTORS AND EXECUTIVE OFFICERS IN THE
MERGER
In considering the recommendation of the Horizon board of
directors with respect to the merger, Horizon stockholders
should be aware that some directors and executive officers of
Horizon have interests in the merger that are different from, or
in addition to, the interests of Horizon stockholders generally.
The Horizon board of directors was aware of those interests and
took them into account in approving and adopting the merger
agreement and recommending that Horizon stockholders vote to
approve and adopt the merger agreement. Those interests are
summarized below.
Stock
Options and Restricted Stock
At the effective time of the merger, Horizon stock options,
whether or not vested, will cease to represent a right to
acquire shares of Horizon common stock and will thereafter
constitute a fully vested option to acquire (on the same terms
and conditions as were applicable to such Horizon stock option)
the number (rounded down to the nearest whole number) of shares
of Cal Dive common stock determined by multiplying the
number of shares of Horizon common stock that were issuable upon
exercise of such Horizon stock option immediately prior to the
effective time of the merger by the sum of 0.625 (the exchange
ratio) plus the fraction resulting from dividing $9.25 (the cash
portion of the merger consideration) by the closing price per
share of the Cal Dive common stock on the New York Stock
Exchange on the last trading day immediately preceding the date
on which the merger closes. The exercise price or base price per
share of Cal Dive common stock subject to any such
converted stock option shall be an amount (rounded up to the
nearest one hundredth of a cent) equal to the exercise price or
base price per share of Horizon common stock at which such
Horizon stock option was exercisable immediately prior to the
effective time of the merger divided by the sum of 0.625 plus
the fraction resulting from dividing $9.25 by the closing price
per share of the Cal Dive common stock on the New York
Stock Exchange on the last trading day immediately preceding the
date on which the merger closes.
Similarly, all shares of Horizon restricted common stock issued
under Horizon stock incentive plans that have not vested
immediately prior to the effective time of the merger, will
become fully vested immediately prior to the effective time of
the merger, and the holders of those restricted shares will be
entitled to receive the corresponding merger consideration. See
The Merger Agreement Treatment of Horizon
Stock Options and Restricted Stock beginning on
page 73.
The following table shows, as of November 1, 2007, the
number of shares of Horizon common stock subject to vested and
unexercised stock options held by Horizons executive
officers and directors, and the number of shares of restricted
Horizon common stock held by Horizons executive officers
and directors that will vest as a result of the merger based on
the closing price of Horizon common stock of $15.33 per share on
November 1, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of
|
|
|
|
|
|
Value of
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Common
|
|
|
Common
|
|
Name and Principal Position
|
|
Options
|
|
|
Options
|
|
|
Stock
|
|
|
Stock
|
|
|
David. W. Sharp,
|
|
|
|
|
|
|
|
|
|
|
88,179
|
|
|
$
|
1,351,784
|
|
President, Chief Executive Officer and Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ronald D. Mogel,
|
|
|
|
|
|
|
|
|
|
|
9,122
|
|
|
$
|
139,840
|
|
Vice President, Chief Financial Officer and Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George G. Reuter,
|
|
|
|
|
|
|
|
|
|
|
73,736
|
|
|
$
|
1,130,373
|
|
Executive Vice President and Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William B. Gibbens, III,
|
|
|
|
|
|
|
|
|
|
|
73,183
|
|
|
$
|
1,121,895
|
|
Executive Vice President, General Counsel and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John T. Mills,
|
|
|
10,800
|
|
|
|
|
|
|
|
4,529
|
|
|
$
|
69,430
|
|
Chairman of the Board
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles O. Buckner,
|
|
|
10,800
|
|
|
|
|
|
|
|
4,529
|
|
|
$
|
69,430
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ken R. LeSuer,
|
|
|
11,000
|
|
|
|
|
|
|
|
4,529
|
|
|
$
|
69,430
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raymond L. Steele,
|
|
|
10,400
|
|
|
|
|
|
|
|
4,529
|
|
|
$
|
69,430
|
|
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
Change
in Control Severance Agreements
Pursuant to employment agreements between Horizon and each of
David W. Sharp, George G. Reuter, William B. Gibbens, III,
and Ronald D. Mogel, if Horizon (or any successor) terminates
the employment of any of these individuals within 180 days
of certain change in control events other than for disability or
cause, as defined in their employment agreements, or if any of
them terminates his employment following the defined change in
control events as a result of either not having an equivalent or
greater capacity, position or duties than he had prior to the
change in control, such individual will be entitled to receive
(a) a lump sum payment equal to two times his annual base
salary in effect at the time of termination plus an amount equal
to the average of all bonuses paid or payable to such individual
annually for the preceding three fiscal years, and
(b) life, health, accident and disability insurance for a
period of two years following the date of termination. Based on
their current compensation, if the employment of each of these
individuals is terminated following the merger in a manner that
would trigger such payments, Mr. Sharp would be entitled to
receive $5.3 million, Mr. Reuter would be entitled to
receive $3.2 million, Mr. Gibbens would be entitled to
receive $3.1 million and Mr. Mogel would be entitled
to receive $1.9 million. Cal Dive currently
anticipates that the employment of each of Messrs. Sharp,
Reuter, Gibbens, and Mogel will be terminated following the
merger and thus the foregoing amounts would become payable to
them.
Positions
of Certain Horizon Directors After the Merger
The merger agreement requires the board of directors of
Cal Dive to take action prior to or as of the effective
time of the merger to cause the number of directors comprising
the full board of directors of Cal Dive immediately
following the effective time of the merger to be increased by
two persons, and to cause David W. Sharp and John T.
Mills to be elected to fill such additional board positions of
Cal Dive for an initial term expiring at the annual meeting
of Cal Dives stockholders to be held in 2010, or
until their successors are duly elected or appointed.
Indemnification
of Horizon Officers and Directors
Under the merger agreement, Cal Dive has agreed to
indemnify and hold harmless all past and present officers and
directors of Horizon for acts or omissions occurring at and
prior to the effective time of the merger and to promptly
advance reasonable litigation expenses incurred by these
officers and directors in connection with investigating,
preparing and defending any action arising out of these acts or
omissions.
For a period of at least six years after the effective time of
the merger, Cal Dive has agreed that it will provide
Horizons current officers and directors with an insurance
and indemnification policy that provides for coverage of events
occurring prior to the effective time that is no less favorable
than the existing policy. However, Cal Dive will not be
required to pay annual premiums for this insurance in the
aggregate in excess of $1,000,000.
Ownership
of Horizon Common Stock
Horizon directors and officers beneficially owned, as of the
record date, approximately 1.6% of the outstanding Horizon
common stock, including those shares of Horizon common stock
underlying outstanding stock options.
Retention
Bonus Plan for Salaried Personnel
For a description of the retention bonus plan covering all
salaried and hourly full-time employees of Horizon as of
June 12, 2007, see The Merger Agreement
Covenants and Agreements Employee Benefit
Matters on page 79.
67
MATERIAL
U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is the opinion of Fulbright & Jaworski
L.L.P., counsel to Cal Dive, and Jones, Walker, Waechter,
Poitevent, Carrère & Denègre, L.L.P.,
counsel to Horizon, and sets forth, subject to the limitations,
qualifications, and assumptions stated herein, the material
U.S. federal income tax consequences of the merger that may
be relevant to Horizon stockholders who hold shares of Horizon
common stock as a capital asset for U.S. federal income tax
purposes (generally, assets held for investment) and who or that
are for U.S. federal income tax purposes:
|
|
|
|
|
an individual who is a citizen or resident of the United States
(including certain former citizens and former long-term
residents);
|
|
|
|
a corporation, or other entity taxable as a corporation for
U.S. federal tax purposes, created or organized in or under
the laws of the United States or any state thereof or the
District of Columbia;
|
|
|
|
an estate the income of which is subject to U.S. federal
income taxation regardless of its source; or
|
|
|
|
a trust (i) that is subject to the primary supervision of a
court within the United States and the control of one or more
United States persons as defined in section 7701(a)(30) of
the Code or (ii) that has a valid election in effect under
applicable Treasury regulations to be treated as a United States
person.
|
This discussion is addressed only to those Horizon stockholders
who exchange shares of Horizon common stock for cash and shares
of Cal Dive common stock in the merger.
This discussion is based upon the Internal Revenue Code of 1986,
as amended, or the Code, Treasury regulations promulgated
thereunder, court decisions, published rulings of the Internal
Revenue Service, or the IRS, and other applicable authorities,
all as in effect on the date of this information statement/proxy
statement/prospectus
and all of which are subject to change or differing
interpretations, possibly with retroactive effect.
This discussion does not address all of the U.S. federal
income tax consequences that may be relevant to Horizon
stockholders in light of their particular circumstances or to
Horizon stockholders who may be subject to special treatment
under U.S. federal income tax laws, such as tax exempt
organizations, foreign persons or entities, S corporations
or other pass-through entities, financial institutions,
insurance companies, broker-dealers, persons who hold Horizon
shares as part of a hedge, straddle, wash sale, synthetic
security, conversion transaction, or other integrated investment
comprised of Horizon shares and one or more investments, persons
whose functional currency (as defined in the Code)
is not the U.S. dollar, persons who exercise appraisal
rights, and persons who acquired Horizon shares in compensatory
transactions. Further, this discussion does not address any
aspect of state, local, or foreign taxation.
While receipt of opinions of counsel that the merger constitutes
a reorganization within the meaning of
Section 368(a) of the Code are conditions to the closing,
an opinion of counsel is not a guaranty of a result as it merely
represents counsels best legal judgment. None of the tax
opinions given in connection with the merger or the opinions
described below will be binding on the IRS, and neither
Cal Dive nor Horizon intends to request any ruling from the
IRS as to the U.S. federal income tax consequences of the
merger. As a result, no assurance can be given that the IRS will
not assert, or that a court will not sustain, a position
contrary to any of the tax aspects described below. In addition,
if any of the facts, representations, or assumptions upon which
those opinions are based is inconsistent with the actual facts,
the U.S. federal income tax consequences of the merger
could be adversely affected. Horizon stockholders are urged to
consult their own tax advisors as to the U.S. federal
income tax consequences of the merger, as well as the effects of
state, local, and foreign tax laws.
If a partnership (or other entity classified as a partnership
for U.S. federal tax purposes) is a beneficial owner of
Horizon shares, the tax treatment of a partner in that
partnership will generally depend on the status of the partner
and the activities of the partnership. Horizon stockholders that
are partnerships and partners in
68
these partnerships are urged to consult their tax advisors
regarding the U.S. federal income tax consequences of the
merger to them.
THIS SUMMARY IS NOT A SUBSTITUTE FOR AN INDIVIDUAL ANALYSIS
OF THE TAX CONSEQUENCES OF THE MERGER TO YOU. WE URGE YOU TO
CONSULT YOUR TAX ADVISOR REGARDING THE PARTICULAR FEDERAL,
STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE MERGER AND THE
OWNERSHIP AND DISPOSITION OF SHARES OF CAL DIVE COMMON STOCK
RECEIVED IN THE MERGER IN LIGHT OF YOUR OWN SITUATION.
Cal Dive and Horizon intend for the merger to constitute a
reorganization within the meaning of
Section 368(a) of the Code. In connection with the filing
of the registration statement, which includes this information
statement/proxy statement/prospectus, and subject to the
limitations, qualifications, and assumptions stated therein,
Fulbright & Jaworski L.L.P. has delivered an opinion
to Cal Dive, and Jones, Walker, Waechter, Poitevent,
Carrère & Denègre, L.L.P. has delivered an
opinion to Horizon, to the effect that the merger will
constitute a reorganization within the meaning of
Section 368(a) of the Code. Additionally, it is a condition
to the closing of the merger that Fulbright & Jaworski
L.L.P. and Jones, Walker, Waechter, Poitevent,
Carrère & Denègre, L.L.P. deliver opinions,
dated as of the closing, to Cal Dive and Horizon,
respectively, to the effect that the merger will constitute a
reorganization within the meaning of
Section 368(a) of the Code.
The opinions referred to above of Fulbright & Jaworski
L.L.P., counsel to Cal Dive, and Jones, Walker, Waechter,
Poitevent, Carrère & Denègre, L.L.P.,
counsel to Horizon, are and will be based on U.S. federal
income tax law in effect as of the date of these opinions. In
rendering the opinions, Fulbright & Jaworski L.L.P.
and Jones, Walker, Waechter, Poitevent, Carrère &
Denègre, L.L.P. have relied, or will rely, on certain
assumptions, including assumptions regarding the absence of
changes in existing facts and the completion of the merger
strictly in accordance with the merger agreement and the
registration statement. These opinions have also relied, or will
also rely, on certain representations and covenants of the
management of Cal Dive and Horizon and have assumed, or
will assume, that these representations are true, correct, and
complete without regard to any knowledge limitation, and that
these covenants will be complied with. If any of these
assumptions or representations are inaccurate in any way, or any
of the covenants are not complied with, these opinions could be
adversely affected.
Tax
Consequences of the Merger to Horizon Stockholders
The
Merger
As a result of the merger qualifying as a
reorganization within the meaning of
Section 368(a) of the Code, the consequences to a Horizon
stockholder who exchanges, in the merger, his Horizon shares for
cash and Cal Dive shares will be to recognize gain (but not
loss) in an amount equal to the lesser of:
|
|
|
|
|
the amount of cash received pursuant to the merger (excluding
any cash received in lieu of fractional shares of Cal Dive
common stock), and
|
|
|
|
the amount, if any, by which the sum of the fair market value of
the shares of Cal Dive common stock as of the effective
time of the merger and the amount of cash received pursuant to
the merger for those Horizon shares exceeds his adjusted tax
basis in those Horizon shares.
|
For this purpose, a Horizon stockholder must calculate gain or
loss separately for each identifiable block (that is, stock
acquired at the same time for the same price) of Horizon shares
exchanged in the merger. Except to the extent any cash received
is treated as a dividend as discussed below, a Horizon
stockholders recognized gain generally will be capital
gain and will be long-term capital gain if he held the exchanged
Horizon shares for more than one year.
69
If the receipt of cash in the merger by a Horizon stockholder
has the effect of a distribution of a dividend, the cash
received will be treated as dividend income to the extent of his
ratable share of Horizons accumulated earnings and profits
(as calculated for U.S. federal income tax purposes). In
general, the determination as to whether the receipt of cash has
the effect of a distribution of a dividend depends upon whether
and to what extent the transactions related to the merger will
be deemed to reduce the Horizon stockholders percentage
ownership of Cal Dive following the merger. For purposes of
that determination, a Horizon stockholder will be treated as if
he first exchanged all of his Horizon shares solely for
Cal Dive shares, and then a portion of the Cal Dive
shares was immediately redeemed by Cal Dive for the cash
that the Horizon stockholder actually received in the merger.
Gain recognized in the deemed redemption generally will be
treated as a dividend to the extent of the Horizon
stockholders ratable share of the undistributed earnings
and profits of Horizon unless the deemed redemption results in a
meaningful reduction in the Horizon
stockholders deemed stock ownership of Cal Dive.
In making this determination of whether there is a
meaningful reduction in the Horizon
stockholders deemed ownership of Cal Dive, the
Horizon stockholder will, under the constructive ownership
rules, be deemed to own not only the Cal Dive shares
actually owned, but also Cal Dive shares that are owned by
certain related persons and entities or that he or such persons
or entities have the right to acquire pursuant to an option. The
IRS has ruled that a stockholder in a publicly held corporation
whose relative stock interest is minimal and who exercises no
control with respect to corporate affairs is generally
considered to have a meaningful reduction if that
stockholder has any reduction in his percentage stock ownership
under the above analysis. These rules are complex and dependent
upon the specific factual circumstances particular to each
Horizon stockholder. Each Horizon stockholder should consult his
tax advisor as to the application of these rules to his
particular situation.
Cash payments received by Horizon stockholders in lieu of
fractional shares of Cal Dive common stock will be treated
as if such Cal Dive shares were issued in the merger and
then redeemed by Cal Dive. If a Horizon stockholder
receives cash in lieu of a fractional share of Cal Dive
stock, subject to the discussion above regarding possible
dividend treatment, he will generally recognize capital gain or
loss equal to the difference between the cash received in lieu
of that fractional share and the portion of his adjusted tax
basis in Horizon shares surrendered that is allocable to that
fractional share. The capital gain or loss will be long-term
capital gain or loss if the holding period for Horizon shares
exchanged for cash in lieu of the fractional share of
Cal Dive common stock is more than one year as of the date
of the merger. The deductibility of capital losses is subject to
limitations.
A Horizon stockholder will have an aggregate tax basis in the
Cal Dive shares received in the merger (including any
fractional shares of Cal Dive common stock deemed received
by the Horizon stockholder) equal to his aggregate adjusted tax
basis in his Horizon shares surrendered in the merger:
|
|
|
|
|
reduced by the amount of cash received in the merger by him for
those Horizon shares (excluding any cash received in lieu of a
factional share of Cal Dive common stock); and
|
|
|
|
increased by the amount of gain (including the portion of this
gain that is treated as a dividend as described above)
recognized by him in the merger (excluding any gain recognized
as a result of any cash received in lieu of a fractional share
of Cal Dive common stock).
|
A Horizon stockholders holding period in the Cal Dive
shares received in the merger will include his holding period in
his Horizon shares surrendered in exchange for those
Cal Dive shares, if those Horizon shares are held as
capital assets as of the effective time of the merger.
Horizon stockholders who hold Horizon shares with differing
bases or holding periods should consult their tax advisors with
regard to identifying the bases or holding periods of the
particular Cal Dive shares received in the merger.
Horizon stockholders are entitled to appraisal rights under
Delaware law in connection with the merger. If a Horizon
stockholder receives cash pursuant to the exercise of appraisal
rights, he will generally recognize gain or loss measured by the
difference between the cash received and his adjusted tax basis
in his Horizon shares. This gain should be long-term capital
gain or loss if the Horizon stockholder held Horizon shares for
70
more than one year. Any Horizon stockholder that plans to
exercise appraisal rights in connection with the merger is urged
to consult his tax advisor to determine the related tax
consequences.
If the merger does not qualify as a reorganization
within the meaning of Section 368(a) of the Code, then each
Horizon stockholder would recognize gain or loss equal to the
difference between the sum of the cash and the fair market value
of the Cal Dive shares received in the merger (including
cash received in lieu of fractional shares of Cal Dive
common stock) and his adjusted tax basis in his Horizon shares
surrendered in exchange therefor. Additionally, in such case,
Horizon would be deemed to have sold its assets, subject to its
liabilities, to Cal Dive in a taxable sale, with gain or
loss for this purpose being measured by the difference between
(i) the sum of the amount of Horizons liabilities,
plus the amount of cash and the fair market value of the
Cal Dive shares received by the Horizon stockholders at the
time of the merger and (ii) Horizons adjusted tax
basis in its assets at the time of the merger. This gain or loss
would be reported on Horizons final tax return, subject to
the effect of any tax carryovers and the effect of its other
income or loss for that period, and Merger Sub would become
liable for any such tax liability by virtue of the merger.
Information
Reporting and Backup Withholding
Under U.S. federal income tax laws, the exchange agent will
generally be required to report to a Horizon stockholder and to
the IRS any reportable payments made to such Horizon stockholder
in the merger. Additionally, a Horizon stockholder may be
subject to a backup withholding tax with respect to any cash
received in the merger (including cash in lieu of fractional
shares of Cal Dive common stock), unless the Horizon
stockholder provides the exchange agent with his correct
taxpayer identification number, which in the case of an
individual is his social security number, or, in the
alternative, establishes a basis for exemption from backup
withholding. If the correct taxpayer identification number or an
adequate basis for exemption is not provided, a Horizon
stockholder will be subject to backup withholding on any
reportable payment. To prevent backup withholding, each Horizon
stockholder must complete the IRS
Form W-9
or a substitute
Form W-9
which will be provided by the exchange agent with the
transmittal letter. Any amounts withheld under the backup
withholding rules from a payment to a Horizon stockholder will
be allowed as a credit against his U.S. federal income tax
liability and may entitle him to a refund, if the required
information is furnished to the IRS.
Additionally, if a Horizon stockholder who receives
Cal Dive shares in the merger is considered a
significant holder, such Horizon stockholder will be
required (i) to file a statement with his U.S. federal
income tax return providing certain facts pertinent to the
merger, including the tax basis in the Horizon shares
surrendered and the fair market value of the Cal Dive
shares received in the merger and (ii) to retain permanent
records of these facts relating to the merger. A
significant holder for this purpose is any Horizon
stockholder who, immediately before the merger, (i) owned
at least 5% (by vote or value) of the Horizon common stock or
(ii) owned Horizon securities with a tax basis of
$1 million or more.
The foregoing discussion is for general information only and
not intended to be legal or tax advice to any particular Horizon
stockholder. Tax matters regarding the merger are very
complicated, and the tax consequences of the merger to any
particular Horizon stockholder will depend on that
stockholders particular situation. Horizon stockholders
should consult their own tax advisor to determine the specific
tax consequences of the merger, including tax return reporting
requirements, the applicability of U.S. federal, state,
local, and foreign tax laws and the effect of any proposed
change in the tax laws to them.
71
The following summary of the merger agreement is qualified by
reference to the complete text of the merger agreement, which is
attached as Annex A and incorporated by reference into this
information statement/proxy statement/prospectus.
The merger agreement contains representations and warranties
Cal Dive and Horizon made to each other. The assertions
embodied in those representations and warranties are qualified
by information in confidential disclosure schedules that Horizon
and Cal Dive have provided to each other in connection with
signing the merger agreement. The disclosure schedules contain
information that modifies, qualifies and creates exceptions to
the representations and warranties set forth in the attached
merger agreement. Accordingly, you should keep in mind that the
representations and warranties are modified in important part by
the underlying disclosure schedules. The disclosure schedules
contain information that has been included in Horizons or
Cal Dives general prior public disclosures, as well
as additional information, some of which is non-public. Neither
Cal Dive nor Horizon believe the disclosure schedules
contain information that the securities laws require them to
publicly disclose except as discussed in this information
statement/proxy statement/prospectus. Moreover, information
concerning the subject matter of the representations and
warranties may have changed since the date of the merger
agreement, and that information may or may not be fully
reflected in the companies public disclosures.
On the terms and subject to the conditions of the merger
agreement, and in accordance with the DGCL, at the effective
time of the merger, Horizon will merge with and into
Cal Dive Acquisition, LLC, a Delaware limited liability
company and wholly-owned subsidiary of Cal Dive, which we
refer to as Merger Sub. Merger Sub will continue as the
surviving company and a wholly-owned subsidiary of
Cal Dive. The separate corporate existence of Horizon will
cease. The effectiveness of the merger will not affect the
separate corporate existence of Horizons subsidiaries,
which will become subsidiaries of Merger Sub following the
merger.
The closing date of the merger will occur as promptly as
practical following the Horizon stockholder meeting and when all
other conditions to the merger, other than those conditions that
by their nature are to be satisfied at the closing, have been
satisfied or waived. However, we cannot assure you when or if
the merger will occur.
As soon as practicable after the closing of the merger, Merger
Sub and Horizon will file a certificate of merger with the
Secretary of State of the State of Delaware. The effective time
of the merger will be the time Merger Sub and Horizon file the
certificate of merger with the Secretary of State of the State
of Delaware or at a later time as we may agree and specify in
the certificate of merger.
At the effective time of the merger, each outstanding share of
Horizon common stock (other than any shares owned directly or
indirectly by Horizon or Cal Dive and those shares held by
dissenting stockholders) will be converted into the right to
receive a combination of 0.625 of a share of Cal Dive
common stock and $9.25 in cash, without interest. We refer to
the aggregate amount of the stock consideration and cash
consideration to be received by Horizon stockholders pursuant to
the merger as the merger consideration.
No fractional shares of Cal Dive common stock will be
issued in the merger. Instead, a Horizon stockholder will be
entitled to receive cash, without interest, in an amount equal
to the fraction of a share of Cal Dive common stock such
stockholder might otherwise have been entitled to receive
multiplied by the market value of a Cal Dive share. The
market value of a share of Cal Dive common stock will be
determined
72
using the average of the closing sales price per share of
Cal Dive common stock on the New York Stock Exchange for
the 20 trading days ending on the third trading day before the
date the merger closes.
Potential
Adjustment to Merger Consideration
In the event that, before the effective time of the merger, any
change in the outstanding shares of capital stock of
Cal Dive or Horizon occurs as a result of any stock split,
combination, reclassification, consolidation, exchange or other
similar transaction, or any distribution of shares of
Cal Dive or Horizon stock is declared with a record date
occurring prior to the effective time of the merger, the number
of shares of Cal Dive common stock to be received by
holders of Horizon common stock will be appropriately adjusted
to provide Horizon stockholders with the same economic effect as
was contemplated by the merger agreement prior to the occurrence
of that event.
Treatment
of Horizon Stock Options and Restricted Stock
At the effective time of the merger, Horizon stock options,
whether or not vested, will cease to represent a right to
acquire shares of Horizon common stock and will thereafter
constitute a fully vested option to acquire (on the same terms
and conditions as were applicable to such Horizon stock option)
the number (rounded down to the nearest whole number) of shares
of Cal Dive common stock determined by multiplying the
number of shares of Horizon common stock that were issuable upon
exercise of such Horizon stock option immediately prior to the
effective time of the merger by the sum of 0.625 (the exchange
ratio) plus the fraction resulting from dividing $9.25 (the cash
portion of the merger consideration) by the closing price per
share of the Cal Dive common stock on the New York Stock
Exchange on the last trading day immediately preceding the date
on which the merger closes. The exercise price or base price per
share of Cal Dive common stock subject to any such
converted stock option shall be an amount (rounded up to the
nearest one hundredth of a cent) equal to the exercise price or
base price per share of Horizon common stock at which such
Horizon stock option was exercisable immediately prior to the
effective time of the merger divided by the sum of 0.625 plus
the fraction resulting from dividing $9.25 by the closing price
per share of the Cal Dive common stock on the New York
Stock Exchange on the last trading day immediately preceding the
date on which the merger closes.
All shares of Horizon restricted stock that have been issued but
have not vested prior to the effective time of the merger will
become fully vested at the effective time of the merger, and
will be converted into the right to receive the merger
consideration.
At the effective time of the merger, each outstanding share of
Horizon common stock (other than shares held by Horizon,
Cal Dive and stockholders who properly exercise their
appraisal rights) will automatically be canceled and retired,
will cease to exist and will be converted into the right to
receive the merger consideration. Shares of Horizon common stock
owned by Horizon, Cal Dive or any of their subsidiaries
will be canceled in the merger without payment of any merger
consideration.
Prior to the completion of the merger, Cal Dive will
deposit with the exchange agent, for the benefit of the holders
of Horizon common stock, an amount in cash and certificates
representing shares of Cal Dive common stock (or
instructions authorizing uncertificated shares of Cal Dive
common stock) sufficient to effect the conversion of Horizon
common stock into the cash and stock consideration to be paid in
the merger. Cal Dive has appointed Wells Fargo Shareowner
Services to act as exchange agent for the merger.
As soon as reasonably practicable after the effective time of
the merger, Cal Dive will send, or will cause the exchange
agent to send, to each holder of Horizon common stock a letter
of transmittal for use in the exchange and instructions
explaining how to surrender Horizon shares to the exchange
agent. Holders of Horizon common stock who surrender their
certificates to the exchange agent, together with a properly
completed letter of transmittal, will receive the appropriate
merger consideration. Holders of unexchanged
73
shares of Horizon common stock will not be entitled to receive
any dividends or other distributions payable by Cal Dive
after the closing until their shares are properly surrendered
At the effective time of the merger, the stock transfer books of
Horizon will be closed and no further issuances or transfers of
Horizon common stock will be made. If, after the effective time,
valid Horizon stock certificates are presented to the surviving
company, they will be cancelled and exchanged as described above
to the extent allowed by applicable law.
The exchange agent will deliver to Cal Dive any shares of
Cal Dive common stock or funds set aside by Cal Dive
to pay the merger consideration that are not claimed by former
Horizon stockholders within twelve months after the effective
time of the merger. Thereafter, Cal Dive will act as the
exchange agent and former Horizon stockholders may look only to
Cal Dive for payment for their shares of the merger
consideration. None of Horizon, Cal Dive, the surviving
company, the exchange agent or any other person will be liable
to any former Horizon stockholder for any amount properly
delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
HORIZON STOCK CERTIFICATES SHOULD NOT BE RETURNED WITH THE
ENCLOSED PROXY CARD. HORIZON STOCK CERTIFICATES SHOULD BE
RETURNED WITH THE TRANSMITTAL LETTER AND ACCOMPANYING
INSTRUCTIONS WHICH WILL BE PROVIDED TO HORIZON STOCKHOLDERS
FOLLOWING THE EFFECTIVE TIME OF THE MERGER.
Managers
and Officers of the Surviving Company After the Merger
Under the merger agreement, the managers and officers of Merger
Sub immediately prior to the effective time of the merger will
be the managers and officers of the surviving company at and
after the effective time of the merger.
Representations
and Warranties
The merger agreement contains customary and substantially
reciprocal representations and warranties made by each party to
the other. These representations and warranties relate to, among
other things:
|
|
|
|
|
corporate organization, qualification, good standing and
organizational power;
|
|
|
|
ownership of equity interests;
|
|
|
|
corporate power and authority to enter into the merger
agreement, and due execution, delivery and enforceability of the
merger agreement;
|
|
|
|
absence of a breach of charter documents or bylaws as a result
of the merger;
|
|
|
|
absence of breaches of material agreements, instruments or
obligations, or violations of applicable law as a result of the
merger reasonably expected to have a material adverse effect;
|
|
|
|
consents, approvals, orders, authorizations, registrations,
declarations, filings and permits required to enter into the
merger agreement or to complete the transactions contemplated by
the merger agreement;
|
|
|
|
timely and accurate filings with the Securities and Exchange
Commission in compliance with applicable rules and regulations;
|
|
|
|
financial statements;
|
|
|
|
capital structure;
|
|
|
|
absence of undisclosed liabilities;
|
|
|
|
absence of specified adverse changes or events since
March 31, 2007;
|
|
|
|
material contracts;
|
|
|
|
compliance with laws, material agreements and permits;
|
74
|
|
|
|
|
governmental regulation;
|
|
|
|
material litigation, material judgments or injunctions and
absence of undisclosed investigations or litigation;
|
|
|
|
absence of certain restrictive agreements or arrangements;
|
|
|
|
tax matters;
|
|
|
|
employee benefit plans and labor matters;
|
|
|
|
insurance matters;
|
|
|
|
title to assets;
|
|
|
|
environmental matters;
|
|
|
|
books and records;
|
|
|
|
brokers and finders fees;
|
|
|
|
disclosure controls and procedures and internal control over
financial reporting;
|
|
|
|
required vote/approval by Cal Dive stockholders;
|
|
|
|
recommendation of Horizon board of directors and opinion of
financial advisor;
|
|
|
|
vessels; and
|
|
|
|
inapplicability of Delaware anti-takeover statute.
|
The representations and warranties in the merger agreement are
subject to materiality and knowledge qualifications in many
respects and do not survive the closing or termination of the
merger agreement, but they form the basis of specified
conditions to the obligations of Cal Dive and Horizon to
complete the merger.
Each of Cal Dive and Horizon has undertaken various
covenants in the merger agreement. The following summarizes the
more significant of these covenants:
Operating
Covenants Horizon
Prior to the effective time of the merger, unless Cal Dive
consents otherwise in writing, with certain exceptions, Horizon
has agreed that neither Horizon nor any of its subsidiaries will:
|
|
|
|
|
enter into any new material line of business or incur or commit
to any capital expenditures or any obligations or liabilities in
connection therewith other than capital expenditures and
obligations or liabilities in connection therewith incurred or
committed to in the ordinary course of business consistent with
past practice or contemplated by the 2007 capital budget of
Horizon and previously disclosed to Cal Dive;
|
|
|
|
split, combine or reclassify any of its outstanding capital
stock;
|
|
|
|
declare, set aside or pay any dividends or other distributions
with respect to its capital stock (other than regular dividends
from a Horizon subsidiary to Horizon or to another subsidiary
consistent with past practice);
|
|
|
|
issue, sell or agree to issue or sell any securities or other
equity interests, including its capital stock, any rights,
options or warrants to acquire its capital stock, or securities
(other than shares of Horizon common stock issued pursuant to
the exercise of its stock options or restricted stock awards
outstanding on the date of the merger agreement or permitted to
be granted in accordance with their terms and shares of capital
stock of Horizons subsidiaries under certain permitted
circumstances);
|
75
|
|
|
|
|
amend or propose to amend Horizons amended and restated
certificate of incorporation or bylaws (except as may be
required to comply with the terms of the merger agreement or
applicable law);
|
|
|
|
purchase, cancel, retire, redeem or otherwise acquire any of its
outstanding capital stock or other securities or other equity
interests, except pursuant to the terms of the Horizon benefit
plans;
|
|
|
|
acquire any corporation, partnership or other business entity or
any interest therein (other than acquisitions made or in the
ordinary course of business that could not reasonably be
expected to prevent or materially delay the or impede the merger
transactions);
|
|
|
|
sell, lease, transfer or otherwise dispose of any of its assets
other than in the ordinary course or as previously disclosed;
|
|
|
|
make any loans, advances or capital contributions to, or
investments in any other person (other than loans or investments
by Horizon or one of its subsidiaries to or in Horizon or
another subsidiary, or certain other loans made in the ordinary
course of business consistent with past practice or previously
disclosed); or
|
|
|
|
incur any indebtedness other than in the ordinary course of
business consistent with past practice, to refinance
pre-existing indebtedness or to fund acquisitions that are
otherwise permitted under the merger agreement.
|
Prior to the effective time of the merger, unless Cal Dive
consents otherwise in writing, with certain exceptions, Horizon
has agreed that Horizon and its subsidiaries will:
|
|
|
|
|
carry on their respective businesses in the usual, regular, and
ordinary course in all material respects, in substantially the
same manner as previously conducted, and in compliance in all
material respects with applicable laws;
|
|
|
|
use their reasonable best efforts to keep available the services
of their respective present officers and key employees, preserve
intact their present lines of business, maintain their rights
and franchises, and preserve their relationships with customers,
suppliers, and others having business dealings with them to the
end that their ongoing businesses shall not be impaired in any
material respect at the effective time of the merger; and
|
|
|
|
use their reasonable best efforts to cause the merger to qualify
as a reorganization within the meaning of the Code.
|
Operating
Covenants Cal Dive
Prior to the effective time of the merger, unless Horizon
consents otherwise in writing, with certain exceptions,
Cal Dive has agreed that neither Cal Dive nor any of
its subsidiaries will:
|
|
|
|
|
split, combine or reclassify any of its outstanding capital
stock;
|
|
|
|
declare, set aside or pay any dividends or other distributions
with respect to its capital stock (other than regular dividends
from a Cal Dive subsidiary to Cal Dive or to another
subsidiary consistent with past practice);
|
|
|
|
issue, sell or agree to issue or sell any securities or other
equity interests, including its capital stock, any rights,
options or warrants to acquire its capital stock, or securities
(other than shares of Cal Dive common stock issued pursuant
to the exercise of its stock options or restricted stock awards
outstanding on the date of the merger agreement or permitted to
be granted in accordance with their terms);
|
|
|
|
amend or propose to amend Cal Dives amended and
restated certificate of incorporation or bylaws (except as may
be required to comply with the terms of the merger agreement or
applicable law);
|
|
|
|
purchase, cancel, retire, redeem or otherwise acquire any of its
outstanding capital stock or other securities or other equity
interests, except pursuant to the terms of the Cal Dive
benefit plans or pursuant to a stock repurchase plan implemented
in the ordinary course;
|
76
|
|
|
|
|
acquire any corporation, partnership or other business entity or
any interest therein (other than acquisitions made in the
ordinary course of business that could not reasonably be
expected to prevent or materially delay the or impede the merger
transactions);
|
|
|
|
sell, lease, transfer or otherwise dispose of any of its assets
other than in the ordinary course or as previously disclosed;
|
|
|
|
make any loans, advances or capital contributions to, or
investments in any other person (other than loans or investments
by Cal Dive or one of its subsidiaries to or in
Cal Dive or another subsidiary, or certain other loans made
in the ordinary course of business consistent with past practice
or previously disclosed by Cal Dive); or
|
|
|
|
incur any indebtedness other than in the ordinary course of
business consistent with past practice, to refinance
pre-existing indebtedness or to fund acquisitions that are
otherwise permitted under the merger agreement.
|
Prior to the effective time of the merger, unless Horizon
consents otherwise in writing, with certain exceptions,
Cal Dive has agreed that Cal Dive and its subsidiaries
will:
|
|
|
|
|
carry on their respective businesses in the usual, regular, and
ordinary course in all material respects, in substantially the
same manner as previously conducted, and in compliance in all
material respects with applicable laws;
|
|
|
|
use their reasonable best efforts to preserve intact their
present lines of business, maintain their rights and franchises,
and preserve their relationships with customers, suppliers, and
others having business dealings with them to the end that their
ongoing businesses shall not be impaired in any material respect
at the effective time of the merger; and
|
|
|
|
use their reasonable best efforts to cause the merger to qualify
as a reorganization within the meaning of the Code.
|
No
Control of Other Partys Business
The parties to the merger agreement have agreed that nothing
contained in the merger agreement will give Horizon the right to
control or direct Cal Dive or Merger Subs business or
operations, or give Cal Dive or Merger Sub the right to
control or direct Horizons business or operations, prior
to the effective time of the merger.
Non-Solicitation
Provisions and Acquisition Proposals
For purposes of the merger agreement, an Acquisition
Proposal means any proposal or offer (whether or not in
writing) with respect to, or a transaction to effect:
|
|
|
|
|
a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, liquidation,
dissolution, or similar transaction involving Horizon, or
|
|
|
|
any purchase or sale of 50% or more of the consolidated assets
(including stock of Horizons subsidiaries) of Horizon and
its subsidiaries, taken as a whole, or
|
|
|
|
any purchase or sale of, or tender or exchange offer for,
Horizons equity securities that, if consummated, would
result in any person (or the stockholders of such person)
beneficially owning securities representing 50% or more of
Horizons total voting power (or of the surviving parent
entity in such transaction) (other than a proposal or offer made
by a party to the merger agreement or an affiliate
thereof), or
|
|
|
|
an announcement of an intention to make any such proposal,
offer, or transaction.
|
77
From June 11, 2007 until 12:01 a.m. on July 27,
2007, Horizon was permitted to:
|
|
|
|
|
initiate, solicit, encourage or seek, directly or indirectly,
any inquiries relating to the making or implementation of and
Acquisition Proposals;
|
|
|
|
continue or otherwise engage or participate in any negotiations
or discussions with any third party with respect to Acquisition
Proposals, including by providing third parties with non-public
information pursuant to an acceptable confidentiality agreement
(provided that the same information is also provided or
otherwise made available to Cal Dive either before or
substantially at the same time it is given to the third party,
subject to limited exceptions set forth in the merger
agreement); and
|
|
|
|
release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which Horizon is a
party to the extent necessary to allow Horizon to conduct such
solicitation, negotiations or discussions.
|
Horizon received no Acquisition Proposals during that period.
Since July 27, 2007, Horizon and its subsidiaries are
required to cease discussions and negotiations with third
parties regarding Acquisition Proposals; and until the effective
time of the merger (or the termination of the merger agreement,
if earlier), may not:
|
|
|
|
|
initiate, solicit, knowingly encourage, or seek, directly or
indirectly, any inquiries relating to or the making or
implementation of any Acquisition Proposal;
|
|
|
|
engage in any negotiations or substantive discussions with any
third party relating to an Acquisition Proposal (except for
discussions solely in order to clarify and understand the terms
and conditions of a written Acquisition Proposal, which are
allowed prior to Horizons stockholders approving the
merger agreement with Cal Dive);
|
|
|
|
provide or otherwise make available any information to any third
party relating to an Acquisition Proposal;
|
|
|
|
enter into any letter of intent, agreement in principle, merger
agreement, acquisition agreement, option agreement, or similar
agreement with any person relating to an Acquisition
Proposal; or
|
|
|
|
release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which it is a party
relating to an Acquisition Proposal;
|
provided that, since July 27, 2007 but prior to the
adoption of the merger agreement by Horizons stockholders,
as long as Horizon, its subsidiaries or their representatives
have not have materially violated any of the non-solicitation
provisions contained in the merger agreement, in response to an
unsolicited written Acquisition Proposal that Horizons
board determines, in its good faith judgment (after consultation
with a financial advisor of nationally recognized reputation and
outside legal counsel), constitutes or is reasonably likely to
lead to a Superior Proposal (as defined below), Horizon may,
after giving Cal Dive prompt notice of such determination
(in which it must identify the person and the material terms and
conditions of the Acquisition Proposal), (i) engage or
participate in negotiations or discussions relating to such
Acquisition Proposal with the person making such Acquisition
Proposal (and its representatives), provided that Horizon shall
keep Cal Dive apprised of the status and material terms of
such Acquisition Proposal, and (ii) provide the person
making such Acquisition Proposal with non-public information
pursuant to an acceptable confidentiality agreement (provided
that the same information is also provided or otherwise made
available to Cal Dive either before or substantially at the
same time it is given to the third party, subject to limited
exceptions set forth in the merger agreement).
Notwithstanding the rules above, Horizons board may not:
|
|
|
|
|
withdraw, modify, or qualify (or propose to withdraw, modify, or
qualify) in any manner adverse to Cal Dive, its
recommendation that the merger agreement be approved by
Horizons stockholders;
|
78
|
|
|
|
|
take any action or make any statement in connection with the
meeting of Horizons stockholders held for the purpose of
adopting the merger agreement that is inconsistent with its
recommendation that the merger agreement be approved by
Horizons stockholders;
|
|
|
|
approve or recommend, or cause Horizon to enter into, any letter
of intent, agreement in principle, merger agreement, acquisition
agreement, option agreement, or similar agreement with respect
to, any Acquisition Proposal; or
|
|
|
|
propose to do any of the foregoing;
|
except that if Horizons board of directors, after
consultation with its outside legal counsel, determines, in its
good faith judgment, that failure to take such action would
constitute a violation of its fiduciary duties under applicable
law, Horizons board may, prior to the adoption of the
merger agreement by Horizons stockholders,
|
|
|
|
|
modify, change, or contradict its recommendation that the merger
agreement be approved; and/or
|
|
|
|
enter into a definitive agreement providing for an Acquisition
Proposal if (i) Horizon, its subsidiaries, and their
representatives have not materially violated the rules described
above, (ii) such action is in response to a Acquisition
Proposal that the board has determined, in its good faith
judgment, constitutes a Superior Proposal, and
(iii) Horizon, concurrently with the entering into of such
definitive agreement, terminates the merger agreement pursuant
to its terms, and pays the appropriate termination fee as
specified therein;
|
provided that, prior to such action, Horizons board of
directors must give Cal Dive at least three business days
prior written notice that it intends to take such action.
A Superior Proposal means an Acquisition Proposal
made by a person other than a party to the merger agreement that
Horizons board of directors in good faith concludes
(following receipt of the advice of its financial advisors and
outside counsel), taking into account, among other things,
legal, financial, regulatory and other aspects of the proposal,
including any conditions to consummation, as well as any
revisions to the terms of the merger or the merger agreement
proposed by Cal Dive, (i) would, if consummated,
result in a transaction that is more favorable to Horizon and
its stockholders (in their capacities as stockholders), from a
financial point of view, than the transactions contemplated by
the merger agreement; and (ii) is reasonably capable of
being completed on the terms so proposed.
Nothing in the non-solicitation provisions of the merger
agreement prohibits Horizon or its board of directors from
taking and disclosing to Horizons stockholders a position
contemplated by
Rules 14d-9
and 14e-2(a)
of the Exchange Act; or from making any disclosure to
Horizons stockholders with respect to a tender or exchange
offer by a third party; provided that neither Horizon nor its
board of directors, nor any committee thereof, may approve or
recommend, or propose publicly to approve or recommend, an
Acquisition Proposal unless Horizon has first terminated the
merger agreement as set forth therein and paid the fee required
by the terms thereof.
Generally, Cal Dive will grant Horizon employees full
credit for past service with Horizon for purposes of
eligibility, vesting and benefit accrual under any employee
benefit plans maintained by Cal Dive or any of its
subsidiaries. Cal Dive will take any actions as are
necessary so that each Horizon employee who continues as an
employee of Cal Dive or any of its subsidiaries will not be
subject to preexisting condition exclusions or waiting periods
for coverages under any Cal Dive benefit plan.
The merger agreement provides that with the prior approval of
Cal Dive, Horizon may adopt a cash incentive plan for the
benefit of certain individuals identified by Horizon as key to
the continued operation of Horizon and its subsidiaries
business and the consummation of the merger.
In accordance with this provision, with Cal Dives
prior approval, Horizons board of directors has adopted a
retention bonus plan covering all salaried and hourly full-time
employees of Horizon as of June 12, 2007 other than
employees who are parties to employment agreements with Horizon
(i.e., full-time employees
79
other than Horizons executive officers). The retention
plan provides that covered employees who are terminated by
Horizon without cause (as defined in the plan), or who
voluntarily terminate their employment for good reason (as
defined in the plan), on or after June 12, 2007 but prior
to the date that is 60 days after the closing of the merger
would be entitled to receive a retention bonus. The retention
bonus would be based on the employees length of service
both before and after June 12, 2007, but the plan provides
for additional weight to be given to service after June 12,
2007. Under the plan, covered employees would be entitled to
receive a retention bonus equal to the sum of (i) two weeks
of the base compensation (as defined in the plan) earned by the
employee as of June 12, 2007 times the employees
number years of service with the Horizon (but no less than two
months of base compensation) and (ii) 25% of the
employees base compensation based on the period between
(and including) June 12, 2007 and the last day of
employment. The plan also provides that if an employee is
terminated due to death, disability or retirement on a date when
he or she would have been entitled to a benefit under the plan,
the employee (or his or her heirs) will be entitled to receive
the retention bonus.
Directors
and Officers Indemnification and Insurance
Each of Horizons certificate of incorporation and bylaws
and Cal Dives certificate of incorporation and bylaws
contains a provision eliminating the personal liability of its
directors to the relevant company or its stockholders for
monetary damages for breach of fiduciary duty as a director to
the extent permitted under applicable law. The effect of this
provision is to eliminate the personal liability of directors to
the company or its stockholders for monetary damages for actions
involving a breach of their fiduciary duty. The certificate of
incorporation and bylaws of Cal Dive generally provide for
the mandatory indemnification of, and payment of expenses
incurred by, its directors and officers to the fullest extent
permitted under applicable law. The certificate of incorporation
and bylaws of Horizon generally provide for the mandatory
indemnification of, and payment of expenses incurred by,
directors and officers to the fullest extent permitted by
applicable law. Horizon and Cal Dive have both obtained
directors and officers liability insurance, which
insures against liabilities that its directors and officers may
incur in these capacities.
Following the effective time of the merger, Cal Dive and
the surviving company will indemnify and hold harmless, and
provide advancements of expenses to, each person who is or was
an officer, director, or employee of Horizon or any of its
subsidiaries at or prior to the signing of the merger agreement
or at or prior to the effective time of the merger. This
indemnification will include indemnification against all losses,
expenses (including attorneys fees), claims, damages,
liabilities and amounts that are paid in settlement arising out
of actions or omissions occurring at or prior to the effective
time of the merger (whether asserted or claimed prior to, at or
after the effective time of the merger) that are based on the
fact that the person is or was a director, officer, employee,
controlling stockholder or agent of Horizon or any of its
subsidiaries. Cal Dive will not be liable for any
settlement effected without its written consent.
For six years after the effective time of the merger,
Cal Dive will also maintain in effect directors and
officers liability insurance covering acts or omissions
occurring prior to the effective time of the merger with respect
to those directors and officers of Horizon who were covered by,
and on terms and in amounts no less favorable than those of,
Horizons directors and officers liability
insurance at the time the merger agreement was executed.
Cal Dive will not be required to pay premiums for the
insurance described in this paragraph in excess of
$1 million in the aggregate for the six-year period.
Horizon has agreed to use its reasonable best efforts to cause
each person or entity identified by Horizon who may be deemed an
affiliate, as defined by Rule 145 under the Securities Act
of 1933, to deliver to Cal Dive prior to the date of the
closing of the merger a written agreement that restricts the
affiliates ability to sell, transfer or otherwise dispose
of any Cal Dive shares issued to such affiliate in
connection with the merger, except:
|
|
|
|
|
in compliance with Rule 145 under the Securities Act of
1933;
|
|
|
|
pursuant to an effective registration statement under the
Securities Act of 1933; or
|
80
|
|
|
|
|
in reliance upon an opinion of counsel reasonably acceptable to
Cal Dive, to the effect that the sale, transfer or other
disposition is exempt from registration under the Securities Act
of 1933.
|
The parties have agreed to use their reasonable best efforts to
cause the merger to qualify as a reorganization within the
meaning of Section 368(a) of the Code.
In addition to those covenants described above, the merger
agreement contains additional agreements between Cal Dive
and Horizon relating to, among other things:
|
|
|
|
|
convening and holding the Horizon special meeting;
|
|
|
|
preparing, filing and distributing this information
statement/proxy statement/prospectus and filing the registration
statement of which this information statement/proxy
statement/prospectus is a part;
|
|
|
|
providing access to information to each other;
|
|
|
|
using their reasonable best efforts regarding filings with and
obtaining waivers, consents and approvals from governmental and
other agencies and organizations, including HSR filings;
|
|
|
|
making public announcements;
|
|
|
|
payment of fees and expenses in connection with the merger;
|
|
|
|
tax matters;
|
|
|
|
vessel matters;
|
|
|
|
matters related to Section 16 of the Exchange Act;
|
|
|
|
appointing David W. Sharp and John T. Mills as additional
members of the Cal Dive board of directors for initial
terms expiring at the annual meeting of Cal Dives
stockholders to be held in 2010; and
|
|
|
|
listing of the shares of Cal Dive common stock to be issued
in connection with the merger on the New York Stock
Exchange, subject to official notice of issuance.
|
Conditions
to Each Partys Obligation to Effect the
Merger
Unless waived in whole or in part by both Cal Dive and
Horizon, the obligations of Cal Dive and Horizon to
complete the merger are subject to the following conditions:
|
|
|
|
|
absence of any temporary restraining order, preliminary or
permanent injunction or other order issued by a court of
competent jurisdiction or other law, legal restraint or
prohibition having the effect of making the merger illegal or
otherwise prohibiting the consummation of the merger; and
|
|
|
|
receipt of approvals and authorizations required under the
antitrust laws, including expiration or early termination of the
waiting period under the
Hart-Scott-Rodino
Act, to consummate the transactions contemplated by the merger
agreement;
|
|
|
|
approval for listing of the Cal Dive shares to be issued in
the merger on the New York Stock Exchange, subject to official
notice of issuance.
|
|
|
|
continued effectiveness of the registration statement of which
this information statement/proxy statement/prospectus is a part,
the absence of a stop order by the Securities and Exchange
Commission suspending the effectiveness of the registration
statement and the absence of any continuing or threatened
proceeding or investigation by the Securities and Exchange
Commission to suspend such effectiveness; and
|
81
|
|
|
|
|
adoption of the merger agreement by the holders of at least a
majority of the outstanding Horizon shares entitled to vote at
the Horizon special meeting.
|
Conditions
to Obligations of Cal Dive
Unless waived in whole or in part by Cal Dive, the
obligations of Cal Dive to effect the merger are subject to
the following additional conditions:
|
|
|
|
|
accuracy of the representations and warranties made by Horizon
to the extent specified in the merger agreement;
|
|
|
|
Horizons performance in all material respects of its
covenants and agreements under the merger agreement; and
|
|
|
|
receipt of an opinion satisfactory to Cal Dive of its tax
counsel to the effect that the merger will constitute a
reorganization within the meaning of Section 368(a) of the
Code.
|
Conditions
to Obligations of Horizon
Unless waived in whole or in part by Horizon, the obligations of
Horizon to effect the merger are subject to the following
additional conditions:
|
|
|
|
|
accuracy of the representations and warranties made by
Cal Dive to the extent specified in the merger agreement;
|
|
|
|
Cal Dives performance in all material respects of
their covenants and agreements under the merger
agreement; and
|
|
|
|
receipt of an opinion satisfactory to Horizon of its tax counsel
to the effect that the merger will constitute a reorganization
within the meaning of Section 368(a) of the Code.
|
Before the effective time of the merger, the merger agreement
may be terminated:
|
|
|
|
|
by mutual written consent of Cal Dive and Horizon;
|
|
|
|
by either Cal Dive or Horizon, if:
|
|
|
|
|
|
the parties fail to consummate the merger on or before
December 11, 2007, unless the failure is the result of a
failure to fulfill an obligation under the merger agreement by
the party seeking the termination;
|
|
|
|
any governmental authority has issued a final and nonappealable
order, decree or ruling or has taken any other final and
nonappealable action that restrains, enjoins or prohibits the
merger, or has failed to issue an order, decree, ruling, or
failed to take any action that is necessary to obtain approval
under the HSR Act, to list the shares to be issued in the merger
on the NYSE, or obtain and maintain effectiveness of the
registration statement, unless the party seeking the termination
has not used all reasonable efforts to remove such injunction,
order or decree, or to obtain such approvals; or
|
|
|
|
adoption of the merger agreement by the Horizon stockholders is
not obtained by reason of the failure to obtain the required
vote of Horizons stockholders.
|
|
|
|
|
|
Horizons board of directors (1) fails to recommend
the approval or recommendation of the merger agreement or
(2) makes a change in its recommendation that
Horizons stockholders approve the merger agreement;
|
82
|
|
|
|
|
Horizon breaches its obligations under the merger agreement by
reason of a failure to call the Horizon stockholders meeting or
a failure to comply in any material respect with requirements
set forth in the merger agreement regarding the preparation of
this information statement/proxy statement/prospectus;
|
|
|
|
Horizon enters into a definitive agreement providing for an
Acquisition Proposal or Superior Proposal (unless Horizon does
so in accordance with its fiduciary out as provided under the
terms of the merger agreement);
|
|
|
|
Horizon breaches in any material respect its covenant not to
solicit, initiate or knowingly encourage any inquiries, offers
or proposals that constitute, or are reasonably likely to lead
to, an alternate acquisition proposal or engaged in certain
prohibited activities with respect thereto; or
|
|
|
|
Horizon breaches any of its representations or warranties set
forth in the merger agreement or Horizon fails to perform its
covenants or agreements under the merger agreement and, in
either case, Horizon has not cured the breach or failure within
the earlier of (x) 20 days of receiving notice from
Cal Dive of such breach or failure or
(y) December 11, 2007, provided that Cal Dive is
not then in material beach of any of its covenants,
representations of warranties under the merger agreement.
|
|
|
|
|
|
prior to approval by Horizons stockholders of the merger
agreement, the Horizon board of directors approves a Superior
Proposal in accordance with the terms set forth in the merger
agreement; or
|
|
|
|
Cal Dive breaches any of its representations or warranties
set forth in the merger agreement or Cal Dive fails to
perform its covenants or agreements under the merger agreement
and, in either case, Cal Dive has not cured the breach or
failure within the earlier of (x) 20 days of receiving
notice from Horizon of such breach or failure or
(y) December 11, 2007, provided that Horizon is not
then in material beach of any of its covenants, representations
of warranties under the merger agreement.
|
If the merger agreement is validly terminated, the agreement
will become void without any liability on the part of any party
unless that party is in breach. However, certain provisions of
the merger agreement, including, among others, those provisions
relating to expenses and termination fees, will continue in
effect notwithstanding termination of the merger agreement.
If Horizon terminates the merger agreement, Horizon must pay to
Cal Dive, in certain circumstances set forth in the merger
agreement, $18.9 million.
Whether or not the merger is consummated, each of Cal Dive,
Merger Sub and Horizon will bear its own costs and expenses in
connection with the merger agreement and the related
transactions, except (i) expenses incurred in connection
with the filing, printing, and mailing, but not preparation, of
the registration statement of which this information
statement/proxy statement/prospectus is a part and
(ii) expenses incurred in connection with any consultants
that Cal Dive and Horizon shall have agreed to retain to
assist in obtaining the approvals and clearances under the
antitrust laws, which, in each case, shall be shared equally by
Cal Dive and Horizon.
Cal Dive, Merger Sub and Horizon may amend the merger
agreement in writing at any time before the effective time of
the merger. However, after the approval of the merger agreement
by the Horizon stockholders, no amendment may be made that would
require further approval by the Horizon stockholders.
83
Cal Dive, Merger Sub and Horizon may at any time before the
effective time of the merger and to the extent legally allowed:
|
|
|
|
|
extend the time for the performance of any of the obligations or
the other acts of the other parties;
|
|
|
|
waive any inaccuracies in the representations and warranties
contained in the merger agreement or in any document delivered
pursuant to the merger agreement; or
|
|
|
|
waive performance of any of the covenants or agreements, or
satisfaction of any of the conditions, contained in the merger
agreement.
|
INFORMATION
ABOUT CAL DIVE
General
Cal Dive International, Inc. (also referred to in this
Section as Cal Dive, we, or
our) is a marine contractor providing manned diving,
pipelay, and pipe burial services to the offshore oil and
natural gas industry. Based on the size of our fleet, we believe
that we are the market leader in the diving support business,
which involves services such as construction, inspection,
maintenance, repair, and decommissioning of offshore production
and pipeline infrastructure, on the Gulf of Mexico Outer
Continental Shelf, or OCS. We also provide these services in
select international offshore markets, such as the Middle East
(United Arab Emirates, Oman, Egypt, and Saudi Arabia), Southeast
Asia, and Australia. Based in Houston, Texas, we currently own
and operate a diversified fleet of 26 vessels, including 23
surface and saturation diving support vessels as well as three
shallow water pipelay vessels. We believe that our fleet of
diving support vessels is the largest in the world. Our
customers include major and independent oil and natural gas
producers, pipeline transmission companies, and offshore
engineering and construction firms.
Since 1975, we have provided essential marine contracting
services in support of oil and natural gas infrastructure
throughout the production lifecycle, including production
platforms, risers, subsea production systems, and pipelines, on
the Gulf of Mexico OCS. Our services include saturation, surface
and mixed gas diving, enabling us to provide a full complement
of marine contracting services in water depths of up to
1,000 feet. We provide our saturation diving services in
water depths of 200 to 1,000 feet through our fleet of
eight saturation diving vessels and eight portable saturation
diving systems, which we believe is the largest saturation
diving support fleet in the world. In addition, we believe that
our fleet of diving support vessels is among the most
technically advanced in the world because a number of these
vessels have features such as dynamic positioning, or DP,
hyperbaric rescue chambers, multi-chamber systems for
split-level operations and moon pool deployment, which allow us
to operate effectively in challenging offshore environments. We
provide surface and mixed gas diving services in water depths
typically less than 300 feet through our 15 surface diving
vessels. We also have three vessels dedicated exclusively to
pipelay and pipe burial services in water depths of up to
approximately 400 feet. Pipelay and pipe burial operations
typically require extensive use of our diving services;
therefore, we consider these services to be complementary.
We believe the combination of the scheduling flexibility
afforded by our large fleet, the wide range of capabilities of
our assets and the advanced technical skills of our personnel
distinguishes us from our competitors on the Gulf of Mexico OCS
and makes us a leading services provider in this region.
Furthermore, we believe that our superior operating
capabilities, international experience, existing relationships
with globally focused customers and proven acquisition expertise
will allow us to achieve a similar leadership position in other
economically attractive offshore markets, such as the Middle
East, Southeast Asia and Australia.
We were organized in February 2006 as a Delaware corporation to
facilitate the transfer of Helixs shallow water marine
contracting business to us. Prior to that, we operated as a
division of Helix. In December 2006, we completed an
initial public offering of 22,173,000 shares of our common
stock, which are listed on the New York Stock Exchange under the
symbol DVR. In connection with the offering, we
84
distributed to Helix approximately $264.4 million in net
proceeds from the offering, $200 million in proceeds from
borrowings under our credit facility and approximately
$11 million in tax benefits over a ten-year period
resulting from a
step-up in
basis of certain assets transferred to us by Helix. We also
issued an aggregate of 618,321 shares of restricted stock
to our executive officers and employees in connection with our
initial public offering. Helix owns 61,506,691 shares of
our common stock, representing approximately 73% of the total
voting power of our common stock. We are headquartered in
Houston, Texas and have offices in New Orleans, Fourchon and New
Iberia, Louisiana; Singapore; Perth, Australia; and Dubai, U.A.E.
Certain
Definitions
Defined below are certain terms helpful to understanding the
services rendered and equipment utilized in the marine
contracting industry:
|
|
|
|
|
Dive support vessel (DSV): Specially equipped
vessel that performs services and acts as an operational base
for divers, ROVs and specialized equipment.
|
|
|
|
Drydock: The process of docking a vessel so
that it is fully supported out of the water for the purposes of
regulatory certification, inspection, maintenance and repair.
Drydocking allows full work access to the vessel hull.
|
|
|
|
Dynamic positioning (DP): Computer-directed
thruster systems that use satellite-based positioning and other
positioning technologies to ensure the proper counteraction to
wind, current and wave forces, enabling the vessel to maintain
its position without the use of anchors. Two DP systems (DP-2)
are necessary to provide the redundancy required to support safe
deployment of divers, while only a single DP system is necessary
to support ROV operations.
|
|
|
|
EIA: United States Department of Energy,
Energy Information Administration.
|
|
|
|
4 point mooring: A mooring system that uses
four anchors, which are spooled out to the sea floor by
deck-mounted anchor winches, to secure a vessel in open waters.
|
|
|
|
Gulf of Mexico OCS: The Outer Continental
Shelf in the Gulf of Mexico, defined as the area in the Gulf of
Mexico extending from the shoreline to water depths up to
1,000 feet.
|
|
|
|
Hyperbaric rescue chamber (HRC): An additional
chamber, connected to the saturation diving system, that acts as
a floating pressurized lifeboat in the event of a vessel
emergency.
|
|
|
|
Mixed gas diving: Diving technique used in
water depths between 170 and 300 feet. The inert nitrogen
normally found in air is replaced with helium, which provides
longer bottom times at greater depths and eliminates the
narcotic effect of nitrogen under pressure.
|
|
|
|
MMS: United States Department of Interior,
Minerals Management Service.
|
|
|
|
Moon pool: An opening in the bottom center of
a vessel through which a saturation diving system or ROV may be
deployed, allowing safer deployment in adverse weather
conditions.
|
|
|
|
Multi-purpose support vessel (MSV): A DP DSV
that is capable of performing coring and well operations in
addition to working in diving and ROV modes.
|
|
|
|
Pipelay and pipe burial: Pipelay barges
provide an offshore work station that allow for the welded
assembly of multiple sections of pipe on deck. After completing
nondestructive testing, the barge pulls forward on the anchor
spread moorings and lays out the pipeline on the seafloor. In
water depths less than 200 feet, the pipeline is required
to have a minimum of three feet of burial cover. Burial is
accomplished by digging and jetting out a trenched ditch from
under the pipeline.
|
|
|
|
Portable saturation diving system: Saturation
diving system that is transportable to various offshore
locations. These systems are typically deployed on barges and
rigs that do not consistently require deep dive support.
|
85
|
|
|
|
|
Qualified turnkey: Lump-sum bid sent in
response to a clients request for quote. Our bid response
contains the following: a defined scope of work, a lump-sum
price to complete that work, extra work rates for anything
outside the defined scope of work and a list of clarifications
and qualifications applicable to the project or contract.
|
|
|
|
Remotely operated vehicle (ROV): Robotic
vehicles used to complement, support and increase the efficiency
of diving and subsea operations and for tasks beyond the
capability of manned diving operations.
|
|
|
|
Saturation diving: Provides for efficient work
time on the seafloor in water depths between 200 and
1,000 feet. Divers stay under pressure in a vessel-mounted
chamber and are transported to the sea floor in a diving bell.
One-time decompression is conducted after completion of the job
or a 30-day
period, whichever is shorter. A split-level saturation diving
system has an additional chamber that allow extra divers to
store at a different pressure level, which allows
the divers to work at different depths.
|
|
|
|
Surface diving: Diving operations conducted in
shallower waters, typically limited to depths of approximately
170 feet. At greater depths, bottom times become limited
and decompression times increase significantly. Compressed air
and communications are supplied to the diver through a dive
umbilical tethered to the surface. Based on factors of depth and
time, divers must decompress after each dive.
|
|
|
|
Surface diving system: Dive equipment
components required for air or gas surface diving operations,
which typically includes air compressors, dive hoses,
communication radios, air/gas manifolds and decompression
chambers.
|
Recent
Acquisitions and Investments
In the past two years, we have substantially increased the size
of our fleet and expanded our operating capabilities on the Gulf
of Mexico OCS through the following strategic acquisitions:
|
|
|
|
|
In August 2005, we acquired six vessels and a portable
saturation diving system from Torch Offshore, Inc., or Torch,
for an aggregate purchase price of $26.2 million (including
assets held for sale).
|
|
|
|
In late 2005 and early 2006, we acquired all of the diving and
shallow water pipelay business of Acergy US, Inc. (formerly
known as Stolt Offshore Inc.), or Acergy, operating in the Gulf
of Mexico and Trinidad, including nine vessels and one portable
saturation diving system, for an aggregate purchase price of
$124.3 million.
|
Pursuant to our international growth strategy, in July 2006, we
completed the acquisition of the business of Singapore-based
Fraser Diving International Limited, or Fraser Diving, which
includes six portable saturation diving systems and 15 surface
diving systems operating primarily in the Middle East, Southeast
Asia and Australia.
Upon closing these transactions and completing subsequent
divestitures, we added a net total of 13 vessels, including
three saturation diving vessels, seven portable saturation
diving systems and significant diving equipment to our fleet.
Geographic
Areas
Revenues by geographic region were as follows for the periods
set forth (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2007
|
|
|
2006
|
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
United States
|
|
$
|
439,474
|
|
|
|
86.2
|
%
|
|
$
|
190,739
|
|
|
|
85.0
|
%
|
|
$
|
106,232
|
|
|
|
84.5
|
%
|
|
$
|
360,474
|
|
|
|
78.1
|
%
|
|
$
|
323,166
|
|
|
|
86.7
|
%
|
International
|
|
|
70,443
|
|
|
|
13.8
|
%
|
|
|
33,560
|
|
|
|
15.0
|
%
|
|
|
19,554
|
|
|
|
15.5
|
%
|
|
|
100,938
|
|
|
|
21.9
|
%
|
|
|
49,752
|
|
|
|
13.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
509,917
|
|
|
|
100
|
%
|
|
$
|
224,299
|
|
|
|
100
|
%
|
|
$
|
125,786
|
|
|
|
100
|
%
|
|
$
|
461,412
|
|
|
|
100
|
%
|
|
$
|
372,918
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
Property and equipment, net of depreciation, by geographic
region was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2007
|
|
|
2006
|
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
United States
|
|
$
|
173,173
|
|
|
|
77.9
|
%
|
|
$
|
91,094
|
|
|
|
80.2
|
%
|
|
$
|
52,671
|
|
|
|
69.0
|
%
|
|
$
|
168,003
|
|
|
|
72.9
|
%
|
|
$
|
160,292
|
|
|
|
72.4
|
%
|
International
|
|
|
49,074
|
|
|
|
22.1
|
%
|
|
|
22,510
|
|
|
|
19.8
|
%
|
|
|
23,658
|
|
|
|
31.0
|
%
|
|
|
62,559
|
|
|
|
27.1
|
%
|
|
|
61,238
|
|
|
|
27.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
222,247
|
|
|
|
100
|
%
|
|
$
|
113,604
|
|
|
|
100
|
%
|
|
$
|
76,329
|
|
|
|
100
|
%
|
|
$
|
230,562
|
|
|
|
100
|
%
|
|
$
|
221,531
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marine
Contracting Industry
Similar to most sectors within the oilfield services industry,
marine contracting is cyclical and typically driven by actual or
anticipated changes in oil and natural gas prices and capital
spending by upstream producers. Sustained high commodity prices
historically have led to increases in expenditures for offshore
drilling and completion activities and, as a result, greater
demand for our services. Therefore, we expect our results of
operations will be much stronger in a high commodity price
environment compared to those achieved in a low commodity price
environment. Current business conditions are strong, and we
believe the outlook for our business remains very favorable
based on the following industry trends:
|
|
|
|
|
Increased capital spending by oil and natural gas
producers. Supported by a high commodity price
environment, oil and natural gas producers have significantly
increased their spending on drilling, completions and
acquisitions. According to Spears & Associates, annual
offshore drilling and completion spending worldwide has risen
from $29.4 billion in 2000 to $54.6 billion in 2006
and is expected to reach $71.9 billion by 2010. In the Gulf
of Mexico, the growth in spending has been driven in part by
smaller independent producers, which have aggressively acquired
offshore properties and invested more heavily than previous
operators to improve production. Additionally, several of the
larger oil and natural gas companies have renewed their interest
in the Gulf of Mexico and are actively pursuing deep-shelf
drilling projects (15,000 feet or more below the mudline in
water depths up to 1,000 feet) that offer excellent
potential for natural gas reserve discoveries. The level of
upstream spending in offshore regions has generally served as a
leading indicator of demand for marine contracting services.
|
|
|
|
Rising international offshore activity. Many
oil and natural gas producers have recently expanded their
operations in international offshore regions with large untapped
reserves, such as Southeast Asia, West Africa and the Middle
East. According to Spears & Associates, international
offshore drilling and completion spending accounts for 67% of
worldwide offshore drilling and completion spending and is
expected to continue growing at a high rate. In many
international markets, significant production infrastructure
work is required over the next several years to develop new oil
and natural gas discoveries. We believe that we are well
positioned to capture a growing share of this work given our
superior operating capabilities relative to the smaller regional
providers that presently serve these markets. In addition, the
size and complexity of these projects often necessitates the
funding capabilities and expertise of the major oil and natural
gas companies, large independents or national oil companies,
which are less sensitive to changes in commodity prices than
many producers in the Gulf of Mexico. Therefore, international
demand for our services is typically more stable and predictable
than on the Gulf of Mexico OCS.
|
|
|
|
Aging production infrastructure in the Gulf of
Mexico. According to the MMS, there are nearly
4,000 oil and natural gas production platforms in the Gulf of
Mexico, of which approximately 60% are more than 15 years
old. Virtually all of the older platforms and other
infrastructure in the Gulf of Mexico lie in water depths of
1,000 feet or less, which is our core market. These
structures are generally subject to extensive periodic
inspections, require frequent maintenance and will ultimately be
decommissioned as mandated by various regulatory agencies.
Consequently, we believe demand for our inspection, maintenance,
repair and decommissioning services will remain strong. Demand
for these services is less discretionary, and therefore more
stable, than that derived from exploration, development and
production activities.
|
87
|
|
|
|
|
Growing U.S. demand for natural gas. The
majority of our customers on the Gulf of Mexico OCS are drilling
for, producing and transporting natural gas. The Gulf of Mexico
is a key region for natural gas supply, producing an estimated
19% of total U.S. natural gas production during the
five-year period ending in 2006, according to the EIA. The EIA
reports that U.S. demand for natural gas has increased 26%
since 1985 and is expected to grow an additional 23% through
2030. The EIA projects a need for approximately 14% growth in
annual U.S. natural gas production and an increase in
liquefied natural gas imports to meet this demand. Due to the
declining productivity of many mature U.S. fields, the
number of domestic natural gas wells drilled annually has
increased significantly in recent years. We would expect the
continuation of this trend to result in strong demand for our
services on the Gulf of Mexico OCS. Additionally, if major
hurricanes cause offshore infrastructure damage similar to that
caused by Hurricanes Ivan, Katrina and Rita, we expect demand
for our services again will rise significantly.
|
Competitive
Strengths
Our competitive strengths include:
|
|
|
|
|
Leader in the Gulf of Mexico OCS diving services
market. We believe the size of our fleet and
workforce makes us the market leader for diving services on the
Gulf of Mexico OCS. We currently own and operate a diversified
fleet of 26 vessels and employ approximately 1,300 diving
and marine personnel. We believe our size advantage allows us to
provide the highest quality diving services on the Gulf of
Mexico OCS and contributes to our leading share of diving
services contracts in this market. Furthermore, we expect to
achieve similar leadership in new offshore markets due to our
superior operating capabilities, international experience,
existing relationships with globally focused customers and
proven acquisition expertise.
|
|
|
|
High-quality asset base. Our diverse fleet of
vessels and diving systems, particularly our saturation diving
fleet, is among the most technically advanced in the industry.
Our saturation diving fleet has a combination of modern
features, including DP, multi-chamber systems for split-level
operations and moon pool deployment, that allow us to operate
effectively in challenging offshore environments. The diversity
of our fleet also enables us to provide a wide range of marine
contracting services. We possess complementary diving, pipelay
and pipe burial capabilities that are often required for more
complex subsea projects. As a result, we can effectively execute
this higher margin business while enhancing the utilization of
our diving support vessels.
|
|
|
|
Highly skilled workforce. The quality of our
workforce has been, and will continue to be, a vital contributor
to our success. We invest significant resources in training
programs to ensure that our divers, supervisors and support
staff have the best technical, operational and safety skills in
the industry, which allows us to deliver innovative solutions to
our customers. In addition, our market leadership provides an
advantage with regard to employee retention, which is a major
issue in our sector in the current tight labor environment. The
compensation of our divers is typically determined by their
logged diving time, so divers and others are strongly
incentivized to work for us due to our high vessel utilization,
which is driven by our relationships with the most active Gulf
of Mexico producers and proven operating history. We believe
these qualities, along with our commitment to effective training
and safety, help us to attract and retain skilled employees.
|
|
|
|
Excellent, long-standing customer
relationships. We have built a reputation as a
premier diving services contractor during our more than
30 years operating in the Gulf of Mexico. We have developed
a large and stable customer base, which includes virtually all
of the top 20 energy producers in the Gulf of Mexico, by
consistently providing superior and comprehensive services on
schedule while maintaining a strong safety track record.
|
|
|
|
Successful acquisition track record. We have a
proven track record of identifying and executing acquisitions
that complement our fleet and workforce and enhance our service
capabilities. In 2005, we added 13 vessels, including three
premium saturation diving vessels, and two portable saturation
diving systems to our fleet. More recently, in July 2006, we
completed the acquisition of six portable
|
88
|
|
|
|
|
saturation diving systems and 15 surface diving systems
operating primarily in the Middle East, Southeast Asia and
Australia from Singapore-based Fraser Diving. We attribute much
of the growth of our business to our success making
acquisitions, and we believe that acquisitions will remain a key
element of our growth strategy. Furthermore, we believe that our
ability to integrate acquisitions efficiently is one of our core
organizational competencies. We have consistently demonstrated
the ability to add to our revenue base and retain key personnel
from acquired businesses, while improving margins by leveraging
our existing cost structure.
|
|
|
|
|
|
Proven management team with extensive experience in the
marine contracting business. Most of our executive officers
and senior managers have spent the majority of their respective
careers in the marine contracting business, working at various
levels of the industry in the Gulf of Mexico and
internationally. This senior management team, which has an
average of 22 years of industry experience, includes
recognized leaders in diving services and offshore construction.
Several of these individuals serve in high-ranking positions in
industry organizations for standards and safety. We believe the
knowledge and experience of our management team provides a
valuable competitive advantage.
|
Business
Strategy
The principal elements of our strategy include:
|
|
|
|
|
Strengthen leadership position on the Gulf of Mexico
OCS. We will seek to expand our leadership
position in the Gulf of Mexico OCS diving services market by
enhancing the capabilities of our existing assets, making
acquisitions of complementary assets or businesses and
continuing to provide a high level of customer service. Pursuant
to this strategy, we have increased the crane capacity of the DP
DSV Kestrel and plan to convert the DSV Midnight Star surface
diving vessel to a saturation diving vessel in 2008. We believe
these upgrades will increase the demand for those assets, and we
intend to invest future available capital in similar fleet
enhancements. As evidence of our continued success in this
market, in 2006 we entered into a new diving services contract
with a major oil company, the largest such contract in our
history based on potential revenues of approximately
$80 million for work that we expect to continue through
February 2008.
|
|
|
|
Expand into high-growth international markets through
acquisitions. Several international regions, such
as the Middle East, Southeast Asia and Australia, offer
excellent growth potential attributable to the recent and
planned increases in upstream capital spending and the highly
fragmented nature of the existing marine contracting markets. We
are continually evaluating potential acquisition targets that
can provide us with a more meaningful presence in these markets.
Our goal is to replicate our Gulf of Mexico OCS leadership in
the most attractive international offshore regions by leveraging
our operating capabilities, international experience, customer
relationships and acquisition expertise. Pursuant to this
strategy, in July 2006, we completed an acquisition of the
business of Singapore-based Fraser Diving.
|
|
|
|
Continue to attract, develop and retain highly skilled
personnel. Our market leadership and future
growth plans are predicated on our ability to employ the most
highly-skilled divers, supervisors and support staff in the
industry. We invest significant resources in developing the
technical, operational and safety skills of our workforce. We
will continue to invest significant resources in training and
development courses that will provide our workforce with
superior knowledge and skills relevant to diving operations and
safety, as well as facilitate their long-term career
development. We will also continue our practice of structuring
compensation and benefit plans that are competitive with our
peers and properly incentivize our workforce.
|
|
|
|
Maintain a disciplined cost structure. We seek
to contain the costs of our operations and identify new
opportunities to reduce costs. We believe that our cost
discipline will enhance our profitability in strong market
environments and better position us to withstand market
downturns. Furthermore, the size and diversity of our fleet
provide meaningful economies of scale and scope advantages,
which we have realized through the efficient integration of
recent acquisitions and ongoing cost-savings initiatives.
|
89
|
|
|
|
|
Optimize our mix of dayrate and qualified turnkey
work. We seek to optimize the allocation of our
resources between dayrate and qualified turnkey work in order to
diversify our sources of revenue and enhance overall
profitability. We believe that this strategy allows us to
respond effectively to the increasing demand from larger
customers for integrated solutions while ensuring that a segment
of our fleet is positioned to capitalize on attractive
opportunities in the spot market. As business conditions change,
we will adjust our resource allocation.
|
|
|
|
Maintain financial flexibility. We intend to
maintain our financial flexibility in the near term by utilizing
our strong operating cash flows to reduce the debt incurred by
us in connection with our initial public offering. As of
December 31, 2006, we had $201 million of outstanding
debt and $49 million of borrowing capacity, and as of
September 30, 2007, we had $117 million of outstanding
debt and $132.5 million of borrowing capacity, under our
revolving credit agreement, which we believe is sufficient to
support our business. In connection with the merger, we intend
to replace this credit facility with a new $675 million
facility consisting of a $375 million senior secured term
loan and a $300 million senior secured revolving credit
facility. We intend to achieve a more conservative capital
structure over the long term so that we may continue to actively
pursue value-enhancing growth initiatives and mitigate some of
the financial risk associated with a market downturn.
|
History
We trace our origins to California Divers Inc., which pioneered
the use of mixed gas diving in the early 1960s when oilfield
exploration off the Santa Barbara coast moved to water
depths beyond 250 feet. We commenced operations in the Gulf
of Mexico in 1975. Since that time our growth strategy has
included acquisitions and investments that enhanced our services
and increased our technological capabilities as evidenced by
these representative milestones in our history:
|
|
|
|
|
|
1980
|
|
|
Acquired International Oilfield Divers, our first acquisition in
the Gulf of Mexico market
|
|
1984
|
|
|
Completed a major conversion of the Cal Diver I,
introducing the first DSV dedicated for use in the Gulf of Mexico
|
|
1986
|
|
|
Began providing subsea construction, maintenance and inspection
work on a qualified turnkey basis, enabling clients to better
control project costs
|
|
1989
|
|
|
Launched shallow water salvage business
|
|
1994
|
|
|
Acquired our first DP DSV, the Witch Queen, improving our
abilities to operate in winter months and work in deeper waters
|
|
1996
|
|
|
Acquired and enhanced the Uncle John, the first
semi-submersible MSV dedicated for use in the Gulf of Mexico in
heavy construction and saturation mode
|
|
1997
|
|
|
Acquired Aquatica, Inc. (previously known as Acadiana Divers) in
Lafayette, Louisiana to expand our call out diving support
capabilities
|
|
2001
|
|
|
Acquired Professional Divers of New Orleans, adding an
additional 4 point surface DSV and three utility boats
|
|
2005
|
|
|
Acquired six DSVs and a portable saturation diving system from
Torch
|
|
|
|
|
Acquired all of the diving and shallow water pipelay business of
Acergy operating in the Gulf of Mexico and Trinidad, including
nine vessels and one portable saturation diving system
|
|
2006
|
|
|
Acquired the business of Singapore-based Fraser Diving and its
six portable saturation diving systems and 15 surface diving
systems operating primarily in the Middle East, Southeast Asia
and Australia
|
|
|
|
|
Entered into a new diving services contract with a major oil
company, the largest such contract in our history based on
potential revenues of approximately $80 million, for work
that we expect to continue through 2007.
|
With the recent Torch, Acergy and Fraser Diving acquisitions, we
have substantially increased the size of our fleet and expanded
our operating capabilities. Upon closing these transactions and
completing subsequent divestitures, we added a net total of
13 vessels, including three premium saturation diving
vessels, seven portable saturation diving systems and
significant other diving equipment to our fleet.
90
Seasonality
Historically, we have experienced our lowest vessel utilization
rates during the first quarter and, to a lesser extent during
the fourth quarter, when weather conditions are least favorable
for offshore exploration, development and construction
activities. As is common in the industry, we typically bear the
risk of delays caused by some, but not all, adverse weather
conditions. We believe that the technical capabilities of our
fleet and ability to operate effectively in challenging offshore
environments will provide an advantage during winter months and
reduce the impact of weather-related delays.
Customers
Our customers include major and independent oil and natural gas
producers, pipeline transmission companies and offshore
engineering and construction firms. The level of marine
contracting capital spending by customer varies from year to
year due to the concentrated nature of construction and
installation expenditures and the unpredictability of repair
work. Consequently, customers that account for a significant
portion of contract revenues in one fiscal year may represent an
immaterial portion of contract revenues in subsequent fiscal
years. The percent of consolidated revenue of major customers
was as follows: 2006 Chevron 15.6%;
2005 BP 13% and Lighthouse R&D Enterprises 11%;
2004 Lighthouse R&D Enterprises 12% and Shell
11%. We estimate we provided marine contracting services to over
100 customers in 2006.
Contracting
and Tendering
Our services are performed under contracts that are typically
awarded through a competitive bid process. Contract terms vary
depending on the services required and are often determined
through negotiation. Most of our contracts can be categorized as
either dayrate or qualified turnkey. Under dayrate contracts, we
are paid a daily rate, which consists of a base rate for our
vessel and crews as well as cost reimbursements for materials
and ancillary activities, for as long as we provide our
services. Qualified turnkey contracts, on the other hand, define
the services that we will provide for an agreed upon fixed price
and certain cost protections. This type of contract is most
commonly used for complex subsea projects on which customers
desire greater control over costs.
We seek to optimize our mix of dayrate and qualified turnkey
contracts based on prevailing market conditions. As part of that
effort, we also attempt to strike the appropriate balance
between short-term and long-term dayrate contracts. Our goal is
to diversify our sources of revenue while maximizing
profitability in a given business environment. For instance, our
volume of dayrate contracts increased dramatically following the
hurricanes in the Gulf of Mexico during 2004 and 2005, given the
difficulty of accurately defining the scope of required services
prior to commencing such a project.
Our recent acquisitions expanded our operating capabilities. We
now offer a comprehensive range of manned diving, pipelay and
pipe burial services. These businesses are complementary since
pipeline installation and completion work often requires
significant diving support. As a result, we frequently enter
into contracts to provide each of these services for a
particular project. This type of arrangement allows customers to
negotiate contract terms and share project information with us
as a single contractor, rather than multiple contractors, and
enhances the utilization of our fleet.
Competitors
The marine contracting business is highly competitive.
Competition for marine contracting work in the Gulf of Mexico
has historically been based on price, the location and type of
equipment available, the ability to deploy such equipment and
the safety and quality of such services. In recent years, price
has been the primary factor in obtaining contracts, but our
ability to acquire specialized vessels, to attract and retain
skilled personnel, and to demonstrate a good safety record have
also been important competitive factors. Our principal
competitors for diving services include Global Industries, Ltd.,
Tetra Technologies Inc. (through its wholly-owned subsidiary,
Epic Divers & Marine, L.L.C.), Oceaneering
International, Inc. and Superior Offshore International, Inc.,
as well as a number of smaller companies that often compete
solely on price. Based on the
91
size of our fleet, we are the largest saturation and surface
diving service provider on the Gulf of Mexico OCS. Our principal
competitors for shallow water pipelay services on the Gulf of
Mexico OCS include Global Industries, Horizon Offshore, Inc. and
several independent companies. Other foreign-based marine
contractors have either positioned, or announced their intention
to deploy, certain vessels, equipment and personnel to perform
services on the Gulf of Mexico OCS in response to demand for
hurricane-related repair projects. However, we believe that our
reputation, asset capabilities, highly experienced personnel and
low-cost structure are key advantages for us in this market.
Employees
As of September 30, 2007, we had approximately
1,400 employees, approximately 200 of whom were salaried
personnel. As of that date, we also contracted with third
parties to utilize approximately 350
non-U.S. citizens
to crew our foreign-flagged vessels. None of our employees
belong to a union or are employed pursuant to any collective
bargaining agreement or any similar arrangement. We believe our
relationship with our employees and foreign crew members is good.
Training
and Safety
We have established a corporate culture in which safety is one
of our core values. Our goal, based upon the belief that all
incidents are preventable, is to provide an injury-free
workplace by emphasizing the importance of safe behavior by our
employees. Our behavioral safety procedures and training
programs were developed by management personnel who have worked
at entry level positions within the industry and know firsthand
the mental and physical challenges of the ocean worksite. As a
result, we believe that our overall safety management system is
among the best in the industry. Nevertheless, we are constantly
engaged in a company-wide effort to enhance our behavioral
safety procedures and training programs with a constant focus on
awareness and open communication between management and all
offshore and onshore employees. We currently document all daily
observations and analyze data both at the immediate worksite and
at the corporate level. Worksite conditions inspections, known
as Hazard Hunts, are conducted bi-weekly with
required actions by and close out dates. Annual
progressive audits are carried out throughout our fleet,
facilities and worksites by our environmental, health and safety
department to provide an avenue of understanding and mechanism
to identify training requirements throughout our diverse fleet.
Management site visits are conducted monthly to assist in face
to face communication across the fleet and each member of senior
management is responsible for personally talking to crewmembers
from at least two of our vessels each month to evidence our
safety commitment and improve our offshore safety culture.
Government
Regulation
The marine contracting industry is subject to extensive
governmental and industry rules and regulations, including those
of the U.S. Coast Guard, the U.S. Environmental
Protection Agency, the MMS and the U.S. Customs Service, as
well as private industry organizations such as the American
Bureau of Shipping. We also support and voluntarily comply with
standards of the Association of Diving Contractors
International. Among the more significant standards we follow
are those established by the Coast Guard, which sets safety
standards, authorizes investigations into vessel and diving
accidents and recommends improved safety standards. We are
required by various other governmental and quasi-governmental
agencies to obtain various permits, licenses and certificates
with respect to our operations.
In addition, we depend on the demand for our services from the
oil and natural gas industry and, therefore, our business is
affected by laws and regulations, as well as changing taxes and
policies relating to the oil and natural gas industry generally.
In particular, the development and operation of oil and natural
gas properties located on the OCS of the United States is
regulated primarily by the MMS. In addition, because our
operations rely on offshore oil and natural gas production, if
the government were to restrict the availability of offshore oil
and natural gas leases, such action could materially adversely
affect our business, financial condition and results of
operations.
92
Environmental
Regulation
Our operations are subject to a variety of federal, state and
local as well as international laws and regulations governing
environmental protection, health and safety, including those
relating to the discharge of materials into the environment.
Numerous governmental departments issue rules and regulations to
implement and enforce laws that are often complex and costly to
comply with and that carry substantial administrative, civil and
possibly criminal penalties for failure to comply. Under these
laws and regulations, we may be liable for remediation or
removal costs, damages, including damages to natural resources,
and other costs associated with releases of hazardous materials,
including oil, into the environment, and such liability may be
imposed on us even if the acts that resulted in the releases
were in compliance with all applicable laws at the time such
acts were performed. Some of the environmental laws and
regulations that are applicable to our business operations are
discussed in the following paragraphs.
The Oil Pollution Act of 1990, as amended, or OPA, imposes a
variety of requirements on Responsible Parties
related to the prevention of oil spills and liability for
damages resulting from such spills in waters of the United
States. A Responsible Party includes the owner or
operator of an onshore facility, a vessel or a pipeline, and the
lessee or permittee of the area in which an offshore facility is
located. OPA imposes liability on each Responsible Party for oil
spill removal costs and for other public and private damages
from oil spills. Failure to comply with OPA may result in the
assessment of civil and criminal penalties. OPA establishes
liability limits of $350 million for onshore facilities,
all removal costs plus $75 million for offshore facilities
and the greater of $600 per gross ton or $500,000 for vessels
other than tank vessels. The liability limits are not
applicable, however, if the spill is caused by gross negligence
or willful misconduct or results from violation of a federal
safety, construction, or operating regulation; or if a party
fails to report a spill or fails to cooperate fully in the
cleanup. Few defenses exist to the liability imposed under OPA.
OPA also imposes ongoing requirements on a Responsible Party,
including preparation of an oil spill contingency plan and
maintenance of proof of financial responsibility to cover a
majority of the costs in a potential spill. With respect to
financial responsibility, OPA requires the Responsible Party for
certain offshore facilities to demonstrate financial
responsibility of not less than $35 million, with the
financial responsibility requirement potentially increasing up
to $150 million if the risk posed by the quantity or
quality of oil that is explored for or produced indicates that a
greater amount is required. The MMS has promulgated regulations
implementing these financial responsibility requirements for
covered offshore facilities. Under the MMS regulations, the
amount of financial responsibility required for an offshore
facility is increased above the minimum amounts if the
worst case oil spill volume calculated for the
facility exceeds certain limits established in the regulations.
OPA also requires owners and operators of vessels over
300 gross tons to provide the Coast Guard with evidence of
financial responsibility to cover the cost of cleaning up oil
spills from such vessels. We currently own and operate six
vessels over 300 gross tons. Satisfactory evidence of
financial responsibility has been provided to the Coast Guard
for all of our vessels.
The Federal Water Pollution Control Act, or the Clean Water Act,
and analogous state laws impose strict controls on the discharge
of pollutants, including oil and other substances, into the
navigable waters of the United States and state waters and
impose potential liability for the costs of remediating releases
of such pollutants. The controls and restrictions imposed under
the Clean Water Act and analogous state laws have become more
stringent over time, and it is possible that additional
restrictions will be imposed in the future. Permits must be
obtained to discharge pollutants into state and federal waters.
Certain state regulations and the general permits issued under
the Federal National Pollutant Discharge Elimination System
program prohibit the discharge of produced waters and sand,
drilling fluids, drill cuttings and certain other substances
related to the exploration for and production of oil and natural
gas into certain coastal and offshore waters. The Clean Water
Act and analogous state laws provide for civil, criminal and
administrative penalties for any unauthorized discharge of oil
and other hazardous substances and impose liability on
responsible parties for the costs of cleaning up any
environmental contamination caused by the release of a hazardous
substance and for natural resource damages resulting from the
release. Our vessels routinely transport diesel fuel to offshore
93
rigs and platforms and also carry diesel fuel for their own use.
Offshore vessels operated by us have facility and vessel
response plans to deal with potential spills of oil or its
derivatives.
The Comprehensive Environmental Response, Compensation, and
Liability Act, or CERCLA, contains provisions requiring the
remediation of releases of hazardous substances into the
environment and imposes liability, without regard to fault or
the legality of the original conduct, on certain classes of
persons including current and former owners and operators of
contaminated sites where the release occurred and those
companies that transport, dispose of or arrange for disposal of
hazardous substances released at the site. Under CERCLA, such
persons may be subject to joint and several liability for the
costs of cleaning up the hazardous substances that have been
released into the environment, for damages to natural resources
and for the costs of certain health studies. Neighboring parties
and third parties may also file claims for personal injury and
property damage allegedly caused by the release of hazardous
substances into the environment. In the ordinary course of
business, we handle hazardous substances. Governmental agencies
or third parties could seek to hold us responsible under CERCLA
for all or part of the costs to clean up a site at which such
hazardous substances may have been released or deposited.
We have incurred in the past, and expect to incur in the future,
capital and other expenditures related to environmental
compliance. Such expenditures, however, are included within our
overall capital and operating budgets and are not separately
accounted for. We do not anticipate that compliance with
existing environmental laws and regulations will have a material
effect upon our capital expenditures, earnings or competitive
position. However, changes in the environmental laws and
regulations, or claims for damages to persons, property, natural
resources or the environment, could result in substantial costs
and liabilities, and thus there can be no assurance that we will
not incur material environmental costs or liabilities in the
future.
Our
Vessels
We currently own and operate a diversified fleet of
26 vessels, including 23 surface and saturation diving
support vessels capable of operating in water depths of up to
1,000 feet as well as three shallow water pipelay vessels.
Our fleet of diving support vessels comprises 15 surface diving
support vessels capable of working in water depths up to
300 feet and eight saturation diving support vessels that
typically work in water depths of 200 to 1,000 feet. Four
of our saturation diving support vessels have DP capabilities.
94
The following table provides select information about each of
the vessels we own:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Placed in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service by
|
|
|
|
|
|
|
|
DP or Anchor
|
|
|
|
Flag State
|
|
Cal Dive(1)
|
|
Length (Feet)
|
|
|
Berths
|
|
|
Moored
|
|
|
Saturation Diving
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DP DSV Eclipse
|
|
Bahamas
|
|
3/2002
|
|
|
367
|
|
|
|
109
|
|
|
|
DP
|
|
DP DSV Mystic Viking
|
|
Bahamas
|
|
6/2001
|
|
|
253
|
|
|
|
60
|
|
|
|
DP
|
|
DP DSV Kestrel
|
|
Vanuatu
|
|
9/2006
|
|
|
323
|
|
|
|
80
|
|
|
|
DP
|
|
DP MSV Uncle John
|
|
Bahamas
|
|
11/1996
|
|
|
254
|
|
|
|
102
|
|
|
|
DP
|
|
DSV American Constitution
|
|
Panama
|
|
11/2005
|
|
|
200
|
|
|
|
46
|
|
|
|
4 point
|
|
DSV Cal Diver I
|
|
U.S.
|
|
7/1984
|
|
|
196
|
|
|
|
40
|
|
|
|
4 point
|
|
DSV Cal Diver II
|
|
U.S.
|
|
6/1985
|
|
|
166
|
|
|
|
32
|
|
|
|
4 point
|
|
DSV Midnight Star(2)
|
|
Vanuatu
|
|
6/2006
|
|
|
197
|
|
|
|
42
|
|
|
|
4 point
|
|
Surface Diving
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
American Diver
|
|
U.S.
|
|
11/2005
|
|
|
105
|
|
|
|
22
|
|
|
|
|
|
American Liberty
|
|
U.S.
|
|
11/2005
|
|
|
110
|
|
|
|
22
|
|
|
|
|
|
Cal Diver IV
|
|
U.S.
|
|
3/2001
|
|
|
120
|
|
|
|
24
|
|
|
|
|
|
DSV American Star
|
|
U.S.
|
|
11/2005
|
|
|
165
|
|
|
|
30
|
|
|
|
4 point
|
|
DSV American Triumph
|
|
U.S.
|
|
11/2005
|
|
|
164
|
|
|
|
32
|
|
|
|
4 point
|
|
DSV American Victory
|
|
U.S.
|
|
11/2005
|
|
|
165
|
|
|
|
34
|
|
|
|
4 point
|
|
DSV Cal Diver V
|
|
U.S.
|
|
9/1991
|
|
|
166
|
|
|
|
34
|
|
|
|
4 point
|
|
DSV Dancer
|
|
U.S.
|
|
3/2006
|
|
|
173
|
|
|
|
34
|
|
|
|
4 point
|
|
DSV Mr. Fred
|
|
U.S.
|
|
3/2000
|
|
|
166
|
|
|
|
36
|
|
|
|
4 point
|
|
Fox
|
|
U.S.
|
|
10/2005
|
|
|
130
|
|
|
|
42
|
|
|
|
|
|
Mr. Jack
|
|
U.S.
|
|
1/1998
|
|
|
120
|
|
|
|
22
|
|
|
|
|
|
Mr. Jim
|
|
U.S.
|
|
2/1998
|
|
|
110
|
|
|
|
19
|
|
|
|
|
|
Polo Pony
|
|
U.S.
|
|
3/2001
|
|
|
110
|
|
|
|
25
|
|
|
|
|
|
Sterling Pony
|
|
U.S.
|
|
3/2001
|
|
|
110
|
|
|
|
25
|
|
|
|
|
|
White Pony
|
|
U.S.
|
|
3/2001
|
|
|
116
|
|
|
|
25
|
|
|
|
|
|
Pipelay
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brave
|
|
U.S.
|
|
11/2005
|
|
|
275
|
|
|
|
80
|
|
|
|
Anchor
|
|
Rider
|
|
U.S.
|
|
11/2005
|
|
|
275
|
|
|
|
80
|
|
|
|
Anchor
|
|
DLB801(3)
|
|
Panama
|
|
1/2006
|
|
|
351
|
|
|
|
230
|
|
|
|
Anchor
|
|
|
|
|
(1) |
|
Represents the date Cal Dive placed the vessel in service and
not its date of commissioning. |
|
(2) |
|
Expected to be converted in 2008 to full saturation diving
capabilities. |
|
(3) |
|
The DLB801 was purchased in January 2006 and a 50% interest in
the vessel was subsequently sold to an unaffiliated purchaser
that same month. The vessel is now under a
10-year
charter lease agreement with the purchaser of the 50% interest.
The charter lease agreement includes an option by the other
holder to purchase our 50% interest in the vessel beginning in
January 2009. |
In addition to our saturation diving vessels, we currently own
ten portable saturation diving systems, including six acquired
from Fraser Diving.
Pursuant to an agreed final judgment with the DOJ permitting us
to complete the Acergy acquisition in November 2005, we agreed
to divest ourselves of the Midnight Carrier, the
Seaway Defender and a portable saturation diving system.
We completed the sale of the portable saturation diving system
and the Seaway Defender during 2006, and as of
December 31, 2006, the Midnight Carrier was held for
sale. The Midnight Carrier was subsequently sold on
January 26, 2007.
95
The Rider, Kestrel, Eclipse, Mystic
Viking and Uncle John are subject to vessel mortgages
securing our $250 million revolving credit facility. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and
Capital Resources Revolving Credit Facility.
We incur routine drydock, inspection, maintenance and repair
costs pursuant to U.S. Coast Guard regulations and in order
to maintain our vessels in class under the rules of the
applicable class society. For 2006, these costs were
$18.9 million. These costs can fluctuate widely from year
to year based on the number of vessels, the scope of the related
work plan, availability of drydock capacity and general
prevailing market conditions. In addition to complying with
these requirements, we have our own vessel maintenance program
that we believe permits us to continue to provide our customers
with well maintained, reliable vessels. In the normal course of
business, we charter other vessels on a short-term basis, such
as tugboats, cargo barges, utility boats and dive support
vessels.
Our
Facilities
Our corporate headquarters are located at 400 N. Sam
Houston Parkway E., Suite 1000, Houston, Texas. Our primary
subsea and marine services operations are based in Port of
Iberia, Louisiana. All of our facilities are leased except for
approximately
61/2
acres that are owned by us at our Port of Iberia, Louisiana
facility. The remaining terms of these leases range from two to
14 years. Future minimum rentals under these non-cancelable
leases are approximately $4.4 million at December 31,
2006, with $1.0 million due in 2007, $0.8 million in
2008, $0.6 million in 2009, $0.3 million in 2010,
$0.3 million in 2011 and $1.4 million thereafter.
Total rental expense under these operating leases was
approximately $0.8 million, $0.7 million and
$0.5 million for the years ended December 31, 2006,
2005 and 2004, respectively.
|
|
|
|
|
Location
|
|
Function
|
|
Size
|
|
Houston, Texas
|
|
Corporate Headquarters, Project Management and Sales Office
|
|
20,000 square feet
|
Port of Iberia, Louisiana
|
|
Operations, Offices and Warehouse
|
|
23 acres (Buildings: 68,602 sq. feet)
|
Fourchon, Louisiana
|
|
Marine, Operations, Living Quarters
|
|
26 acres (Buildings: 2,300 sq. feet)
|
New Orleans, Louisiana
|
|
Sales Office
|
|
2,724 square feet
|
Singapore
|
|
Marine, Operations, Offices, Project Management and Warehouse
|
|
29,772 square feet
|
Dubai, United Arab Emirates
|
|
Sales Office and Warehouse
|
|
12,916 square feet
|
Perth, Australia
|
|
Operations, Offices and Project Management
|
|
28,738 square feet
|
Insurance
and Legal Proceedings
Our operations are subject to the inherent risks of offshore
marine activity, including accidents resulting in personal
injury and the loss of life or property, environmental mishaps,
mechanical failures, fires and collisions. We insure against
these risks at levels consistent with industry standards. We
also carry workers compensation, maritime employers
liability, general liability and other insurance customary in
our business. All insurance is carried at levels of coverage and
deductibles we consider financially prudent. Our services are
provided in hazardous environments where accidents involving
catastrophic damage or loss of life could occur, and litigation
arising from such an event may result in our being named a
defendant in lawsuits asserting large claims. Although there can
be no assurance the amount of insurance we carry is sufficient
to protect us fully in all events, or that such insurance will
continue to be available at current levels of cost or coverage,
we believe that our insurance protection is adequate for our
business operations. A successful liability claim for which we
are underinsured or uninsured could have a material adverse
effect on our business, financial condition or results of
operations.
We are involved in various legal proceedings, primarily
involving claims for personal injury under the General Maritime
Laws of the United States and the Jones Act as a result of
alleged negligence. In addition,
96
we from time to time incur other claims, such as contract
disputes, in the normal course of business. Under our agreements
with Helix, we have assumed and will indemnify Helix for
liabilities related to our business.
Market
for Cal Dives Common Stock and Related Shareholder
Matters
Our common stock began trading on the New York Stock Exchange
under the symbol DVR on December 14, 2006.
Prior to that, all of our common stock was held by Helix. The
following table sets forth, for the periods indicated, the high
and low closing sales price per share of our common stock:
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
|
Price
|
|
|
|
High
|
|
|
Low
|
|
|
Fiscal Year 2006
|
|
|
|
|
|
|
|
|
Fourth Quarter (from December 14)
|
|
$
|
12.75
|
|
|
$
|
12.07
|
|
Fiscal Year 2007
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
12.68
|
|
|
$
|
11.83
|
|
Second Quarter
|
|
$
|
17.54
|
|
|
$
|
12.35
|
|
Third Quarter
|
|
$
|
18.04
|
|
|
$
|
13.32
|
|
Fourth Quarter (through November 1)
|
|
$
|
15.33
|
|
|
$
|
12.73
|
|
As of September 30, 2007, there were approximately 75
registered stockholders (approximately 7,600 beneficial owners)
of our common stock.
Other than dividends that we declared prior to the effectiveness
of our initial public offering and paid to Helix in connection
with our offering, we have not paid cash dividends on our common
stock and do not anticipate paying any dividends on the shares
of our common stock in the foreseeable future. We currently
intend to retain earnings, if any, for the future operation and
growth of our business. In addition, our financing arrangements
prohibit the payment of cash dividends on our common stock. See
Managements Discussion and Analysis of Financial
Condition and Results of Operations Liquidity and
Capital Resources Revolving Credit
Facility.
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
The following management discussion and analysis should be read
in conjunction with our historical consolidated and combined
financial statements and their notes included elsewhere in this
information statement/proxy statement/prospectus. This
discussion contains forward-looking statements that reflect our
current views with respect to future events and financial
performance. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of
certain factors, such as those set forth under Risk
Factors and elsewhere in this information statement/proxy
statement/prospectus.
Our
Business
We generate revenue principally by providing marine contracting
services to major and independent oil and natural gas producers,
pipeline transmission companies and offshore engineering and
construction firms. We perform our services under dayrate or
qualified turnkey contracts that are typically awarded through a
competitive bid process. Contract terms vary according to market
conditions and services rendered. See Business
Contracting and Tendering.
Major
Influences on Results of Operations
Our business is substantially dependent upon the condition of
the oil and natural gas industry and, in particular, the
willingness of oil and natural gas companies to make capital
expenditures for offshore exploration, drilling and production
operations. The level of capital expenditures generally depends
on the
97
prevailing views of future oil and natural gas prices, which are
influenced by numerous factors, including but not limited to:
|
|
|
|
|
changes in United States and international economic conditions;
|
|
|
|
demand for oil and natural gas, especially in the United States,
China and India;
|
|
|
|
worldwide political conditions, particularly in significant
oil-producing regions such as the Middle East, West Africa and
Latin America;
|
|
|
|
actions taken by OPEC;
|
|
|
|
the availability and discovery rate of new oil and natural gas
reserves in offshore areas;
|
|
|
|
the cost of offshore exploration for, and production and
transportation of, oil and natural gas;
|
|
|
|
the ability of oil and natural gas companies to generate funds
or otherwise obtain external capital for exploration,
development and production operations;
|
|
|
|
the sale and expiration dates of offshore leases in the United
States and overseas;
|
|
|
|
technological advances affecting energy exploration, production,
transportation and consumption;
|
|
|
|
weather conditions;
|
|
|
|
environmental or other government regulations; and
|
|
|
|
tax policies.
|
The primary leading indicators we rely upon to forecast the
performance of our business are crude oil and natural gas prices
and drilling activity on the Gulf of Mexico OCS, as measured by
mobile offshore rig counts. Demand for our services generally
lags successful drilling activity by six to 18 months. In
recent years, crude oil and natural gas prices have increased
substantially, with the quarterly average of the NYMEX West
Texas Intermediate (WTI) near month crude oil daily average
contract price increasing from $28.91 per barrel in the second
quarter of 2003 to a high of $75.38 per barrel in the third
quarter of 2007 and the quarterly average of the Henry Hub
natural gas daily average spot price increasing from $4.87 per
one million British thermal units, or Mmbtu, in the third
quarter of 2003 to a high of $12.31 per Mmbtu in the fourth
quarter of 2005. However, oil and natural gas prices can be
extremely volatile. As of September 30, 2007, the NYMEX WTI
near month crude oil closing contract price was $81.66 and the
Henry Hub natural gas closing spot price was $6.14. The majority
of our customers on the Gulf of Mexico OCS are drilling for,
producing and transporting natural gas. Therefore, we expect
sustained directional changes in natural gas prices will have a
greater impact on demand for our services than changes in crude
oil prices. While U.S. natural gas prices generally
declined in recent months primarily due to moderate weather and
the restoration of shut-in Gulf of Mexico production, we believe
long-term price trends will be driven by U.S. natural gas
demand, the productivity of existing fields and new discoveries,
and the availability of imports. From 2003 to 2005, the rig
count on the Gulf of Mexico OCS increased more modestly than rig
counts in other offshore regions due to the mobilization of rigs
from the Gulf of Mexico to other regions and the impairment of
offshore rigs caused by hurricane activity in the Gulf of Mexico
in 2004 and 2005. While demand for our marine contracting
services is typically highly correlated with offshore rig
counts, increases in subsea project complexity and capital
spending per project as well as a sharp rise in the demand for
hurricane-related repair work have been the primary drivers of
the record utilization and day rates we have achieved recently
across our fleet of vessels.
We believe vessel utilization is one of the most important
performance measurements for our business. Utilization provides
a good indication of demand for our vessels and, as a result,
the contract rates we may charge for our services. As a marine
contractor, our vessel utilization is typically lower during the
first quarter, and to a lesser extent during the fourth quarter,
due to winter weather conditions in the Gulf of Mexico.
Accordingly, we normally plan our drydock inspections and other
routine and preventive maintenance programs during this period.
The bid and award process during the first two quarters
typically leads to the commencement of construction activities
during the second and third quarters. As a result, we have
historically generated a majority of our revenues in the last
six months of the year.
98
In recent periods, however, we have not experienced the typical
seasonal trends in our business due to the impact of Hurricanes
Ivan, Katrina and Rita in the Gulf of Mexico. The severe
offshore infrastructure damage caused by these storms has
generated significant year-round demand for our services from
oil and gas companies trying to restore shut-in production as
soon as possible. We believe this production restoration focus,
along with the limited number of qualified marine contractors,
has created a large backlog of platform installation and removal
work.
The outlook for our business remains very favorable based on our
projected demand for construction, inspection, maintenance and
repair services in the Gulf of Mexico as well as our significant
international growth opportunities; however, market conditions
are easing from the peak levels experienced in recent quarters
as the amount of hurricane-related repair activity moderates,
and we are returning to more customary seasonal conditions. As
shown in the table below, during the fourth quarter of 2006 and
first three quarters of 2007, our average fleet utilization
rates, while strong, were below the levels achieved in the
fourth quarter of 2005 and the first three quarters of 2006. We
believe that our fleet utilization and contract pricing,
particularly for our saturation diving and pipelay vessels, will
remain strong in the remainder of 2007 and 2008, but we expect
they will continue to ease from the recent record levels.
However, if future storms cause severe damage to Gulf of Mexico
infrastructure, we would expect another sharp rise in the demand
for our services.
The following table sets forth key indicators and performance
metrics for our business:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004
|
|
|
2005
|
|
|
2006
|
|
|
2007
|
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
Q4
|
|
|
Q1
|
|
|
Q2
|
|
|
Q3
|
|
|
U.S. natural gas prices(1)
|
|
$
|
5.61
|
|
|
$
|
6.08
|
|
|
$
|
5.44
|
|
|
$
|
6.26
|
|
|
$
|
6.39
|
|
|
$
|
6.94
|
|
|
$
|
9.74
|
|
|
$
|
12.31
|
|
|
$
|
7.75
|
|
|
$
|
6.53
|
|
|
$
|
6.08
|
|
|
$
|
6.60
|
|
|
$
|
7.16
|
|
|
$
|
7.54
|
|
|
$
|
6.16
|
|
NYMEX oil prices(2)
|
|
$
|
35.15
|
|
|
$
|
38.32
|
|
|
$
|
43.88
|
|
|
$
|
48.28
|
|
|
$
|
49.84
|
|
|
$
|
53.17
|
|
|
$
|
63.19
|
|
|
$
|
60.03
|
|
|
$
|
63.48
|
|
|
$
|
70.70
|
|
|
$
|
70.48
|
|
|
$
|
60.21
|
|
|
$
|
58.27
|
|
|
$
|
65.03
|
|
|
$
|
75.38
|
|
Gulf of Mexico rigs(3)
|
|
|
117
|
|
|
|
115
|
|
|
|
118
|
|
|
|
122
|
|
|
|
130
|
|
|
|
132
|
|
|
|
130
|
|
|
|
127
|
|
|
|
131
|
|
|
|
132
|
|
|
|
125
|
|
|
|
116
|
|
|
|
116
|
|
|
|
106
|
|
|
|
103
|
|
Platform installations(4)
|
|
|
25
|
|
|
|
29
|
|
|
|
37
|
|
|
|
28
|
|
|
|
36
|
|
|
|
23
|
|
|
|
19
|
|
|
|
15
|
|
|
|
20
|
|
|
|
30
|
|
|
|
19
|
|
|
|
15
|
|
|
|
17
|
|
|
|
19
|
|
|
|
14
|
|
Platform removals(4)
|
|
|
23
|
|
|
|
51
|
|
|
|
77
|
|
|
|
39
|
|
|
|
11
|
|
|
|
50
|
|
|
|
44
|
|
|
|
9
|
|
|
|
3
|
|
|
|
14
|
|
|
|
49
|
|
|
|
10
|
|
|
|
18
|
|
|
|
15
|
|
|
|
30
|
|
Number of our vessels(5)
|
|
|
13
|
|
|
|
13
|
|
|
|
13
|
|
|
|
13
|
|
|
|
13
|
|
|
|
13
|
|
|
|
13
|
|
|
|
22
|
|
|
|
23
|
|
|
|
24
|
|
|
|
25
|
|
|
|
25
|
|
|
|
25
|
|
|
|
25
|
|
|
|
25
|
|
Our average utilization rate(6)
|
|
|
54
|
%
|
|
|
57
|
%
|
|
|
62
|
%
|
|
|
77
|
%
|
|
|
65
|
%
|
|
|
72
|
%
|
|
|
77
|
%
|
|
|
94
|
%
|
|
|
96
|
%
|
|
|
98
|
%
|
|
|
91
|
%
|
|
|
80
|
%
|
|
|
75
|
%
|
|
|
77
|
%
|
|
|
78
|
%
|
|
|
|
(1) |
|
Quarterly average of the Henry Hub natural gas daily average
spot price (the midpoint index price per Mmbtu for deliveries
into a specific pipeline for the applicable calendar day as
reported by Platts Gas Daily in the Daily Price
Survey table). |
|
(2) |
|
Quarterly average of NYMEX West Texas Intermediate near month
crude oil daily average contract price. |
|
(3) |
|
Average monthly number of rigs contracted, as reported by
ODS-Petrodata Offshore Rig Locator. |
|
(4) |
|
Source: Minerals Management Service; installation and removal of
platforms in the Gulf of Mexico. |
|
(5) |
|
As of the end of the period and excluding acquired vessels prior
to their in-service dates, vessels taken out of service prior to
their disposition and vessels jointly owned by a third party. |
|
(6) |
|
Average vessel utilization is calculated by dividing the total
number of days the vessels generated revenues by the total
number of days the vessels were available for operation in each
quarter and does not reflect acquired vessels prior to their
in-service dates, vessels in drydocking, vessels taken out of
service for upgrades or prior to their disposition and vessels
jointly owned by a third party. |
Factors
Impacting Comparability of Our Financial Results
Our historical results of operations for the periods presented
may not be comparable with prior periods or to our results of
operations in the future for the reasons discussed below.
99
Recent
Acquisitions
In August 2005, we acquired six vessels and a portable
saturation diving system from Torch at a cost of
$26.2 million (including assets held for sale). In November
2005, we completed the acquisition of the diving and shallow
water pipelay business of Acergy, which included seven diving
support vessels, a portable saturation diving system, general
diving equipment and operating bases located in Louisiana, at a
purchase price of $42.9 million. Under the terms of the
regulatory approval required to remedy certain anti-competitive
effects of the Acergy and Torch acquisitions alleged by the DOJ,
we were required to divest two diving support vessels and a
portable saturation diving system from the combined
acquisitions. We completed the sale of the portable saturation
diving system and one diving support vessel in 2006, and
completed the sale of the second diving support vessel in
January 2007. In addition, we acquired the DLB801 from
Acergy for $38.0 million in January 2006. We subsequently
sold a 50% interest in the vessel in January 2006 for
approximately $19.0 million and entered into a
10-year
charter lease agreement with the purchaser. The lessee has an
option to purchase the remaining 50% interest in the vessel
beginning in January 2009. We also acquired the Kestrel
from Acergy for approximately $39.9 million in March
2006. Going forward, we believe these acquired assets will be
significant contributors to our financial results.
In July 2006, we completed the purchase of the business of
Singapore-based Fraser Diving, which includes six portable
saturation diving systems and 15 surface diving systems
operating primarily in the Middle East, Southeast Asia and
Australia, for an aggregate purchase price of approximately
$29.3 million, subject to post-closing adjustments.
Our
Relationship with Helix
For periods prior to our IPO, our condensed consolidated and
combined financial statements have been derived from the
financial statements and accounting records of Helix using the
historical results of operations and historical bases of assets
and liabilities of our business. Certain management,
administrative and operational services of Helix have been
shared between Helixs shallow water marine contracting
business and other Helix business segments for all periods
presented. For purposes of financial statement presentation, the
costs included in our condensed consolidated and combined
statements of operations for these shared services have been
allocated to us based on actual direct costs incurred,
headcount, work hours or revenues. We and Helix consider these
allocations to be a reasonable reflection of our respective
utilization of services provided. Pursuant to the Corporate
Services Agreement between Helix and us, we are required to
utilize these services from Helix in the conduct of our business
until such time as Helix owns less than 50% of the total voting
power of our common stock. Additionally, Helix primarily used a
centralized approach to cash management and the financing of its
operations. Accordingly, all related acquisition activity
between Helix and us and all other cash transactions for the
period prior to our initial public offering have been reflected
in our stockholders equity as Helixs net investment.
We believe the assumptions underlying the condensed consolidated
and combined financial statements are reasonable. However, the
effect of these assumptions, the separation from Helix and our
operating as a standalone public entity could impact our results
of operations and financial position prospectively by increasing
expenses in areas that include but are not limited to litigation
and other legal matters, compliance with the Sarbanes-Oxley Act
and other corporate compliance matters, insurance and claims
management and the related cost of insurance, as well as general
overall purchasing power.
Vessel
Utilization
We believe vessel utilization is one of the most important
performance measurements for our business. As a marine
contractor, our vessel utilization is typically lower during the
first quarter, and to a lesser extent during the fourth quarter,
due to winter weather conditions in the Gulf of Mexico. In
recent periods, we have not experienced the typical seasonal
trends in our business due to the impact of Hurricanes Ivan,
Katrina and Rita in the Gulf of Mexico. However, market
conditions are easing from the peak levels experienced in recent
quarters as the amount of hurricane-related repair activity
moderates, and we are returning to more customary
100
seasonal conditions. As shown in the table below, this has
impacted primarily our surface diving vessels, while utilization
for our saturation diving and pipelay vessels has remained
strong.
The following table shows the size of our fleet and effective
utilization of our vessels during the year ended
December 31, 2006 and 2005 and the nine months ended
September 30, 2007 and 2006:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
2006
|
|
|
2005
|
|
|
2007
|
|
|
2006
|
|
|
|
Number of
|
|
|
Utilization
|
|
|
Number of
|
|
|
Utilization
|
|
|
Number of
|
|
|
Utilization
|
|
|
Number of
|
|
|
Utilization
|
|
|
|
Vessels(1)
|
|
|
(2)
|
|
|
Vessels(1)
|
|
|
(2)
|
|
|
Vessels(1)
|
|
|
(2)
|
|
|
Vessels(1)
|
|
|
(2)
|
|
|
Saturation diving
|
|
|
8
|
|
|
|
92
|
%
|
|
|
6
|
|
|
|
91
|
%
|
|
|
8
|
|
|
|
90
|
%
|
|
|
8
|
|
|
|
94
|
%
|
Surface and mixed gas diving
|
|
|
15
|
|
|
|
90
|
%
|
|
|
14
|
|
|
|
72
|
%
|
|
|
15
|
|
|
|
67
|
%
|
|
|
15
|
|
|
|
95
|
%
|
Shallow water pipelay
|
|
|
2
|
|
|
|
87
|
%
|
|
|
2
|
|
|
|
92
|
%(3)
|
|
|
2
|
|
|
|
97
|
%
|
|
|
2
|
|
|
|
99
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Entire fleet
|
|
|
25
|
|
|
|
91
|
%
|
|
|
22
|
|
|
|
79
|
%
|
|
|
25
|
|
|
|
77
|
%
|
|
|
25
|
|
|
|
95
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As of the end of the period and excluding acquired vessels prior
to their in-service dates, vessels taken out of service prior to
their disposition and vessels jointly owned with a third party. |
|
(2) |
|
Effective vessel utilization is calculated by dividing the total
number of days the vessels generated revenues by the total
number of days the vessels were available for operation in each
quarter and does not reflect acquired vessels prior to their
in-service dates, vessels in drydocking, vessels taken out of
service for upgrades or prior to their disposition and vessels
jointly owned with a third party. |
|
(3) |
|
Includes activity for only November and December 2005. |
Critical
Accounting Estimates and Policies
Our accounting policies are described in the notes to our
audited consolidated and combined financial statements included
elsewhere in this information statement/proxy
statement/prospectus . We prepare our financial statements in
conformity with GAAP. Our results of operations and financial
condition, as reflected in our financial statements and related
notes, are subject to managements evaluation and
interpretation of business conditions, changing capital market
conditions and other factors that could affect the ongoing
viability of our business and our customers. We believe the most
critical accounting policies in this regard are those described
below. While these issues require us to make judgments that are
somewhat subjective, they are generally based on a significant
amount of historical data and current market data.
Revenue
Recognition
Revenues are derived from contracts that are typically of short
duration. These contracts contain either lump-sum turnkey
provisions or provisions for specific time, material and
equipment charges, which are billed in accordance with the terms
of such contracts. We recognize revenue as it is earned at
estimated collectible amounts.
Revenues generated from specific time, materials and equipment
contracts are generally earned on a dayrate basis and recognized
as amounts are earned in accordance with contract terms. In
connection with these contracts, we may receive revenues for
mobilization of equipment and personnel. In connection with new
contracts, revenues related to mobilization are deferred and
recognized over the period in which contracted services are
performed using the straight-line method. Incremental costs
incurred directly for mobilization of equipment and personnel to
the contracted site, which typically consist of materials,
supplies and transit costs, are also deferred and recognized
over the period in which contracted services are performed using
the straight-line method. Our policy to amortize the revenues
and costs related to mobilization on a straight-line basis over
the estimated contract service period is consistent with the
general pace of activity, level of services being provided and
dayrates being earned over the service period of the contract.
Mobilization costs to move vessels when a contract does not
exist are expensed as incurred.
101
Revenue on significant turnkey contracts is recognized on the
percentage-of-completion method based on the ratio of costs
incurred to total estimated costs at completion. In determining
whether a contract should be accounted for using the
percentage-of-completion method, we consider whether:
|
|
|
|
|
the customer provides specifications for the construction of
facilities or for the provision of related services;
|
|
|
|
we can reasonably estimate our progress towards completion and
our costs;
|
|
|
|
the contract includes provisions as to the enforceable rights
regarding the goods or services to be provided, consideration to
be received and the manner and terms of payment;
|
|
|
|
the customer can be expected to satisfy its obligations under
the contract; and
|
|
|
|
we can be expected to perform our contractual obligations.
|
Under the percentage-of-completion method, we recognize
estimated contract revenue based on costs incurred to date as a
percentage of total estimated costs. Changes in the expected
cost of materials and labor, productivity, scheduling and other
factors affect the total estimated costs. Additionally, external
factors, including weather or other factors outside of our
control, may also affect the progress and estimated cost of a
projects completion and, therefore, the timing of income
and revenue recognition. We routinely review estimates related
to our contracts and reflect revisions to profitability in
earnings on a current basis. If a current estimate of total
contract cost indicates an ultimate loss on a contract, we
recognize the projected loss in full when it is first
determined. We recognize additional contract revenue related to
claims when the claim is probable and legally enforceable.
Unbilled revenue represents revenue attributable to work
completed prior to period end that has not yet been invoiced.
All amounts included in unbilled revenue at December 31,
2006 and September 30, 2007 are expected to be billed and
collected within one year.
Accounts
Receivable and Allowance for Uncollectible Accounts
Accounts receivable are stated at the historical carrying amount
net of write offs and allowance for uncollectible accounts. We
establish an allowance for uncollectible accounts receivable
based on historical experience and any specific customer
collection issues that we have identified. Uncollectible
accounts receivable are written off when a settlement is reached
for an amount that is less than the outstanding historical
balance or when we have determined the balance will not be
collected.
Related
Party Cost Allocations
Helix has provided us certain management and administrative
services including: internal audit, tax, treasury and other
financial services; insurance (including claims) and related
services; information systems, network and communication
services; employee benefit services (including direct third
party group insurance costs and 401(k) contribution matching
costs discussed below); and corporate facilities management
services. Total allocated costs from Helix for such services
were approximately $16.5 million, $8.5 million and
$7.3 million for the years ended December 31, 2006,
2005 and 2004, respectively, and $2.7 million and
$10.9 million for the nine months ended September 30,
2007 and 2006, respectively. These costs have been allocated
based on headcount, work hours and revenues, as applicable.
Included in the costs for years prior to 2007 are costs related
to the participation by the Companys employees in Helix
employee benefit plans, including employee medical insurance and
a defined contribution 401(k) retirement plan. These costs are
recorded as a component of operating expenses and were
approximately $5.8 million, $3.3 million and
$2.5 million for the years ended December 31, 2006,
2005 and 2004, respectively, and $4.3 million for the nine
months ended September 30, 2006. In January 2007, the
Company began paying directly for its own employee medical
insurance and 401(k) contribution costs.
We provide Helix operational and field support services
including: training and quality control services; marine
administration services; supply chain and base operation
services; environmental, health and safety
102
services; operational facilities management services; and human
resources. Total allocated cost to Helix for such services were
approximately $5.6 million, $4.1 million and
$3.2 million for the years ended December 31, 2006,
2005 and 2004, respectively, and $2.7 million and
$4.3 million for the nine months ended September 30,
2007 and 2006, respectively. These costs have been allocated
based on headcount, work hours and revenues, as applicable.
Property
and Equipment
Property and equipment are recorded at cost. Depreciation is
provided primarily on the straight-line method over the
estimated useful life of the asset. Our estimates of useful
lives of our assets are as follows: vessels 15 to
20 years; portable saturation diving systems, machinery and
equipment five to 10 years; and buildings and
leasehold improvements four to 20 years.
For long-lived assets to be held and used, excluding goodwill,
we base our evaluation of recoverability on impairment
indicators such as the nature of the assets, the future economic
benefit of the assets, any historical or future profitability
measurements and other external market conditions or factors
that may be present. If such impairment indicators are present
or other factors exist that indicate that the carrying amount of
the asset may not be recoverable, we determine whether an
impairment has occurred through the use of an undiscounted cash
flows analysis of the asset at the lowest level for which
identifiable cash flows exist. Our marine vessels are assessed
on a
vessel-by-vessel
basis. If an impairment has occurred, we recognize a loss for
the difference between the carrying amount and the fair value of
the asset. The fair value of the asset is measured using quoted
market prices or, in the absence of quoted market prices, is
based on managements estimate of discounted cash flows. We
recorded no impairment charges in 2006, and $790,000 and
$3.9 million in 2005 and 2004, respectively, on certain
vessels that met the impairment criteria. The assets impaired in
2005 were subsequently sold in 2006 and 2005 for an aggregate
gain on the disposals of approximately $322,000. There were no
such impairments during the first three quarters of 2007.
Assets are classified as held for sale when we have a plan for
disposal of certain assets and those assets meet the held for
sale criteria. At December 31, 2006 and 2005, we classified
certain assets intended to be disposed of within a
12-month
period as assets held for sale totaling $0.7 million and
$7.9 million, respectively. The asset held for sale at
December 31, 2006 was sold in January 2007 for its carrying
amount.
Recertification
Costs and Deferred Drydock Charges
Our vessels are required by regulation to be recertified after
certain periods of time. These recertification costs are
incurred while the vessel is in drydock. In addition, routine
repairs and maintenance are performed and, at times, major
replacements and improvements are performed. We expense routine
repairs and maintenance as they are incurred. We defer and
amortize drydock and related recertification costs over the
length of time for which we expect to receive benefits from the
drydock and related recertification, which is generally
30 months. Vessels are typically available to earn revenue
for the
30-month
period between drydock and related recertification processes. A
drydock and related recertification process typically lasts one
to two months, a period during which the vessel is not available
to earn revenue. Major replacements and improvements, which
extend the vessels economic useful life or functional
operating capability, are capitalized and depreciated over the
vessels remaining economic useful life. Inherent in this
process are estimates we make regarding the specific cost
incurred and the period that the incurred cost will benefit.
As of December 31, 2006 and 2005, and September 30,
2007 capitalized deferred drydock charges (included in other
assets, net) totaled $20.1 million, $8.3 million and
$26.8 million, respectively. During the years ended
December 31, 2006, 2005 and 2004, drydock amortization
expense was $7.1 million, $5.5 million and
$4.3 million, respectively. For the nine months ended
September 30, 2007 and 2006, drydock amortization expense
was $11.7 million and $4.8 million, respectively. We
expect drydock amortization expense to increase in future
periods since the size of our fleet has increased significantly
and there was only limited amortization expense associated with
the vessels we acquired in the Torch and Acergy acquisitions
during the year ended December 31, 2006.
103
Goodwill
We test for the impairment of goodwill on at least an annual
basis. We test for the impairment of other intangible assets
when impairment indicators such as the nature of the assets, the
future economic benefit of the assets, any historical or future
profitability measurements and other external market conditions
are present. Our goodwill impairment test involves a comparison
of the fair value with its carrying amount. The fair value is
determined using discounted cash flows and other market-related
valuation models. We completed our annual goodwill impairment
test as of November 1, 2006. At December 31, 2006 and
2005, and September 30, 2007 we had goodwill of
$26.7 million, $27.8 million and $26.8 million,
respectively. None of our goodwill was impaired based on the
impairment test performed as of November 1, 2006. We will
continue to test our goodwill annually on a consistent
measurement date unless events occur or circumstances change
between annual tests that would more likely than not reduce the
fair value of a reporting unit below its carrying amount.
Equity
Investment
In July 2005, we acquired a 40% minority ownership interest in
OTSL, a Trinidad and Tobago entity, in exchange for our DP DSV
Witch Queen. OTSL provides marine contracting services to
the oil and gas industry in and around Trinidad and Tobago, as
well as the U.S. Gulf of Mexico. Our investment in OTSL
totaled $10.9 million and $11.5 million as of
December 31, 2006 and 2005, respectively. We periodically
review the investment in OTSL for impairment. Recognition of an
impairment would occur when the decline in an investment is
deemed other than temporary. During the second quarter 2007,
OTSL generated significant operating losses, lost several
project bids and ultimately decided to exit the saturation
diving market. Based on these events, we determined that these
events were indicators of an impairment in our investment in
OTSL. Additionally, OTSL had a significant working capital
deficit which would require a cash infusion before the end of
the year to fund operations and working capital requirements. As
a result, we evaluated this investment to determine whether a
permanent loss in value had occurred. To determine whether OTSL
had the ability to sustain a level of earnings that would
justify the carrying amount of the investment, we considered the
near-term and longer-term operating and financial prospects of
the entity and our longer-term intent of retaining the
investment in the entity. Based on this evaluation, we
determined that there was an other than temporary impairment in
OTSL and the full value of our investment in OTSL was impaired.
We recognized equity losses of OTSL, inclusive of the impairment
charge, of $11.8 million in the second quarter of 2007. In
accordance with the terms of the OTSL agreement, we are not
required to make additional investments and we have no plans to
make additional investments in OTSL.
Earnings
per Share
Basic earnings per share (EPS) is computed by
dividing the net income available to common stockholders by the
weighted-average shares of outstanding common stock. The
calculation of diluted EPS is similar to basic EPS, except the
denominator includes dilutive common stock equivalents and the
income included in the numerator excludes the effects of the
impact of dilutive common stock equivalents, if any. Basic and
diluted earnings per share for the fiscal years ending
December 31, 2006 and 2005 were the same. We granted
618,321 restricted shares to certain officers and employees in
December 2006 which were anti-dilutive in this calculation. The
computation of basic and diluted EPS amounts for the nine months
ended September 30, 2007 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2007
|
|
|
|
Income
|
|
|
Shares
|
|
|
Earnings applicable per common share basic
|
|
$
|
79,170
|
|
|
|
83,680
|
|
Restricted shares
|
|
|
|
|
|
|
108
|
|
Employee stock purchase plan
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Earnings applicable per common share diluted
|
|
$
|
79,170
|
|
|
|
83,790
|
|
|
|
|
|
|
|
|
|
|
104
For the nine months ended September 30, 2006, basic and
diluted earnings per share were the same as there were no
dilutive securities outstanding during that period.
Income
Taxes
Prior to December 14, 2006, our operations are included in
a consolidated federal income tax return filed by Helix. We will
file our own short period return for the period
December 14, 2006 through the end of fiscal year 2006.
However, for financial reporting purposes, our provision for
income taxes has been computed as if we completed and filed
separate federal income tax returns except that all tax benefits
recognized on employee stock plans are retained by Helix.
Deferred income taxes are based on the differences between
financial reporting and tax bases of assets and liabilities. We
utilize the liability method of computing deferred income taxes.
The liability method is based on the amount of current and
future taxes payable using tax rates and laws in effect at the
balance sheet date. Income taxes have been provided based upon
the tax laws and rates in the countries in which operations are
conducted and income is earned. A valuation allowance for
deferred tax assets is recorded when it is more likely than not
that some or all of the benefit from the deferred tax asset will
not be realized.
Workers
Compensation Claims
Our onshore employees are covered by workers compensation.
Offshore employees, including divers, tenders and marine crews,
are covered by our maritime employers liability insurance
policy, which covers Jones Act exposures. We incur workers
compensation claims in the normal course of business, which
management believes are substantially covered by insurance. We,
together with our insurers and legal counsel, analyze each claim
for potential exposure and estimate the ultimate liability of
each claim.
Stock-Based
Compensation Plans
Until December 2006, we had no stock-based compensation plans;
however, prior to then certain of our employees participated in
Helixs stock-based compensation plans. Helix used the
intrinsic value method of accounting for its stock-based
compensation programs through December 31, 2005.
Accordingly, prior to January 1, 2006, no compensation
expense was recognized by Helix or us if the exercise price of
an employee stock option was equal to the common share market
price on the grant date. All tax benefits recognized on employee
stock plans are retained by Helix. See
Recently Issued Accounting Principles.
On December 9, 2006, our board of directors adopted, and
Helix, as our sole stockholder at that time, approved, the
Cal Dive International, Inc. 2006 Long-Term Incentive Plan.
Under this plan, as amended and restated and approved by our
stockholders on May 7, 2007, we may issue up to
9,000,000 shares of our common stock to our officers,
employees and non-employee directors as restricted stock,
restricted stock units or stock options. On December 19,
2006 in connection with the closing of our initial public
offering, our board granted an aggregate of 618,321 shares
of restricted stock to certain of our officers and employees.
The shares generally vest in equal increments over a two-year or
five-year period, depending on the specific award. Of these
restricted shares, an aggregate of 184,275 shares have not
commenced vesting but approximately 109,781 shares will
begin to vest in annual 20% increments over a five-year period
beginning on the first anniversary of the closing of our
acquisition of Horizon, and the remainder will begin to vest in
annual 20% increments over a five-year period beginning on the
first anniversary of the date that Helix reduces its ownership
percentage below 51% of our common stock. The market value
(based on the price at which our common stock was sold to the
public in our IPO) of the restricted stock was $13.00 per share,
or $8,038,173, at the date of grant. Compensation cost for each
award is the product of market value of each share and the
number of shares granted.
During the nine months ended September 30, 2007, we made
restricted share grants of: (i) 24,894 shares on
February 5, 2007 which vest 20% per year over a five-year
period, (ii) 4,836 shares on March 31, 2007 which
vest 100% on January 1, 2009, (iii) 1,643 shares
on May 29, 2007 which vest 20% per year over a five-year
period, (iv) 3,250 shares on June 30, 2007 which
vest 100% on January 1, 2009 and (v) 3,520 shares on
105
September 30, 2007 which vest 100% on January 1, 2009.
The market value of the restricted shares was $12.05, $12.21,
$15.21, $16.63 and $15.00 per share at the date of grant,
respectively.
Compensation cost is recognized over the respective vesting
periods on a straight-line basis. For the nine months ended
September 30, 2007, compensation expense related to
restricted shares was $1.6 million. Future compensation cost
associated with unvested restricted stock awards at
September 30, 2007 totaled approximately $7.2 million.
Major
Customers and Concentration of Credit Risk
Our customers consist primarily of major and independent oil and
natural gas producers, pipeline transmission companies and
offshore engineering and construction firms. The capital
expenditures of our customers are generally dependent on their
views of future oil and gas prices and successful offshore
drilling activity. We perform ongoing credit evaluations of our
customers and provide allowances for probable credit losses when
necessary. The percent of revenue of major customers was as
follows: 2006 Chevron (15.6%); 2005 BP
(13%) and Lighthouse R&D Enterprises (11%); and
2004 Lighthouse R&D Enterprises (12%) and Shell
(11%).
Recently
Issued Accounting Principles
In December 2004, the FASB issued SFAS No. 123R, which
replaces SFAS No. 123 and supersedes APB Opinion
No. 25, Accounting for Stock Issued to Employees.
SFAS No. 123R requires all share-based payments to
employees, including grants of employee stock options, to be
recognized in the financial statements based on their fair
values beginning with the first interim period in fiscal 2006,
with early adoption encouraged. The pro forma disclosures
previously permitted under SFAS No. 123 will no longer
be an alternative to financial statement recognition. Along with
Helix, we adopted SFAS No. 123R on January 1,
2006. Under SFAS No. 123R, we use the Black-Scholes
fair value model for valuing share-based payments and recognize
compensation cost on a straight-line basis over the respective
vesting period. We selected the modified-prospective method of
adoption, which requires that compensation expense be recorded
for all unvested stock options and restricted stock beginning in
2006 as the requisite service is rendered. In addition to the
compensation cost recognition requirements,
SFAS No. 123R also requires the tax deduction benefits
for an award in excess of recognized compensation cost be
reported as a financing cash flow rather than as an operating
cash flow, which was required under SFAS No. 95,
Statement of Cash Flows. The adoption did not have a material
impact on our consolidated and combined results of operations
and cash flows.
In June 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes
an Interpretation of FASB Statement No. 109
(FIN 48), which clarifies the accounting for
uncertainty in income taxes recognized in accordance with FASB
Statement No. 109, Accounting for Income
Taxes (SFAS No. 109).
FIN 48 clarifies the application of SFAS No. 109
by defining criteria that an individual tax position must meet
for any part of the benefit of that position to be recognized in
the financial statements. Additionally, FIN 48 provides
guidance on the measurement, derecognition, classification and
disclosure of tax positions, along with accounting for the
related interest and penalties. The provisions of FIN 48
are effective for fiscal years beginning after December 15,
2006, with the cumulative effect of the change in accounting
principle recorded as an adjustment to opening retained
earnings. We adopted the provisions of FIN 48 on
January 1, 2007. The impact of the adoption of FIN 48
was immaterial to our financial position, results of operations
and cash flows. We record tax related interest in interest
expense and tax penalties in operating expenses as allowed under
FIN 48. As of September 30, 2007, we had no material
unrecognized tax benefits and no material interest and penalties
were recognized.
In September 2006, the FASB issued Statement No. 157,
Fair Value Measurements.
(SFAS No. 157) defines fair value,
establishes a framework for measuring fair value in accordance
with generally accepted accounting principles and expands
disclosures about fair value measurements. The provisions of
SFAS No. 157 are effective for fiscal years beginning
after November 15, 2007. We are currently evaluating the
impact, if any, of this statement.
106
In February 2007, the FASB issued Statement No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities
(SFAS No. 159). SFAS No. 159
allows entities to voluntarily choose, at specified election
dates, to measure many financial assets and financial
liabilities at fair value. The election is made on an
instrument-by-instrument
basis and is irrevocable. If the fair value option is elected
for an instrument, SFAS No. 159 specifies that all
subsequent changes in fair value for that instrument shall be
reported in earnings. The provisions of SFAS No. 159
are effective for fiscal years beginning after November 15,
2007. We are currently evaluating the impact, if any, of this
statement.
Results
of Operations
Comparison
of Nine Months Ended September 30, 2007 and 2006
Revenues. For the nine months ended
September 30, 2007, our revenues increased
$88.5 million, or 23.7%, to $461.4 million, compared
to $372.9 million for the nine months ended
September 30, 2006. This increase was primarily a result of
the initial deployment of certain assets we acquired through the
Torch, Acergy and Fraser Diving acquisitions subsequent to the
first quarter of 2006. Incremental revenue derived from these
assets was $121.5 million in the first nine months of 2007.
As an offset to this increase, we did not operate two vessels
(one owned and one chartered) in the first three quarters of
2007 that we operated in the first three quarters of 2006.
Revenue from these two vessels in the first three quarters of
2006 was $15.0 million. Additionally, the 2007 nine month
increase was partially offset by an increased number of
out-of-service
days relating to regulatory dry docks and vessel upgrades during
2007.
Gross profit. Gross profit for the nine months
ended September 30, 2007 increased $4.6 million, or
2.7%, to $173.5 million, compared to $168.9 million
for the nine months ended September 30, 2006. This increase
was attributable to increased gross profit derived from the
initial deployment of certain assets we acquired through the
Torch, Acergy and Fraser Diving acquisitions subsequent to the
first quarter of 2006, offset by increased
out-of-service
days referred to above and increased depreciation and deferred
drydock amortization. Gross margins decreased to 37.6% for the
nine months ended September 30, 2007 from 45.3% in the nine
months ended September 30, 2006 due to increased
out-of-service
days, certain lower margin contracts entered into and assumed in
connection with the Fraser acquisition and increased
depreciation and amortization related to deferred drydock costs
on newly deployed vessels and other vessel upgrades.
Selling and administrative expenses. Selling
and administrative expenses of $33.9 million for the nine
months ended September 30, 2007 were $8.7 million
higher than the $25.2 million incurred in the nine months
ended September 30, 2006 primarily due to a
$2.0 million anticipated cash settlement, subject to final
negotiation of a court-approved settlement agreement with the
Department of Justice related to a civil claim alleging that the
Company violated the consent decree entered into in connection
with the Acergy and Torch acquisitions by failing to divest
certain divestiture assets in accordance with the terms of the
consent decree. In the nine months ended September 30,
2007, selling and administration expenses were also higher due
to $1.2 million in external fees relating to the ongoing
integration efforts related to our pending acquisition of
Horizon Offshore, increased investment in international overhead
and infrastructure, increased employee benefit insurance rates
and new public company costs including investor relations, legal
and audit expenses. Selling and administrative expenses were
7.3% of revenues for the nine months ended September 30,
2007, and 6.8% of revenues for the nine months ended
September 30, 2006.
Equity in losses of investment, inclusive of impairment
charge. During the second quarter 2007, the
Company determined that its remaining investment in OTSL was
impaired and recorded an impairment charge equal to the amount
of its remaining investment.
Net interest income (expense). Net interest
expense in the first nine months of 2007 was $7.0 million
as compared to net interest income of $0.4 million in the
first nine months of 2006. Interest expense in 2007 is related
to debt assumed in connection with the Companys IPO in
December 2006.
Income taxes. Income taxes were
$44.4 million and $50.5 million for the nine months
ended September 30, 2007 and 2006, respectively. The
effective tax rate for the respective periods was 35.9% for 2007
and 35.1% for 2006. The rate increase was primarily due to
minimal tax benefit relating to equity in
107
losses and the impairment of the Companys investment in
OTSL and no tax benefit from the anticipated settlement with the
Department of Justice which was expensed during the second
quarter of 2007.
Net income. Net income of $79.2 million
for the nine months ended September 30, 2007 was
$14.1 million less than net income of $93.2 million
for the nine months ended September 30, 2006 as a result of
the factors described above.
Comparison
of Years Ended 2006 and 2005
Revenues. For the year ended December 31,
2006, our revenues increased 127% to $509.9 million,
compared to $224.3 million for the year ended
December 31, 2005. This increase was primarily a result of
the Torch and Acergy acquisitions in the third and fourth
quarters of 2005, respectively. Revenues derived from assets
purchased in these acquisitions were $237.2 million in the
year ended December 31, 2006 compared to $28.7 million
in 2005. In addition, the increase was due to improved market
demand, much of which was the result of infrastructure damage
caused by recent hurricanes in the Gulf of Mexico. This resulted
in significantly improved utilization rates (91% in 2006 as
compared to 79% in 2005) and an overall increase in pricing
for our services.
Gross profit. Gross profit for the year ended
December 31, 2006 increased 210% to $222.5 million,
compared to $71.7 million for the year ended
December 31, 2005. This increase was attributable to
additional gross profit derived from the Torch and Acergy
acquisitions, improved utilization rates and increased average
contract pricing. Gross profit derived from assets purchased in
these acquisitions was $118.0 million in 2006 compared to
$11.1 million in 2005. Gross margins increased to 44% for
the year ended December 31, 2006 from 32% in the year ended
December 31, 2005 due to the factors noted above.
Selling and administrative expenses. Selling
and administrative expenses of $37.4 million for the year
ended December 31, 2006 were $20.7 million higher than
the $16.7 million incurred in the year 2005 primarily due
to additional administrative and sales personnel hired to
support the acquired Torch and Acergy vessels in the third and
fourth quarters of 2005, respectively. Selling and
administrative expenses were 7.3% of revenues for the year ended
December 31, 2006, and 7.5% of revenues for the year ended
December 31, 2005.
Income taxes. Income taxes increased to
$65.7 million for the year ended December 31, 2006,
compared to $20.4 million in the year ended
December 31, 2005, primarily due to increased
profitability. The effective tax rate for the respective periods
was 35.5% for 2006 and 35.1% for 2005.
Net Income. Net income of $119.4 million
for 2006 was $81.7 million greater than 2005 as a result of
the factors described above.
Comparison
of Years Ended 2005 and 2004
Revenues. For the year ended December 31,
2005, our revenues increased 78% to $224.3 million,
compared to $125.8 million for the year ended
December 31, 2004. This increase was primarily due to
improved market demand, much of which was the result of
infrastructure damage caused by recent hurricanes in the Gulf of
Mexico. This resulted in significantly improved utilization
rates (79% in 2005 as compared to 63% in 2004) and an
overall increase in pricing for our services. In addition,
revenues increased in 2005 compared with 2004 as a result of the
Torch and Acergy acquisitions in the third and fourth quarters
of 2005, respectively, with much of the impact of the
acquisitions occurring in the fourth quarter. Revenues derived
from assets purchased in these acquisitions were
$28.7 million in 2005.
Gross profit. Gross profit for the year ended
December 31, 2005 increased 196% to $71.7 million,
compared to $24.2 million for the year ended
December 31, 2004. The increase was primarily due to
improved utilization rates, increased average contract pricing
and additional gross profit derived from the Torch and Acergy
acquisitions. Gross profit derived from assets purchased in
these acquisitions was $11.1 million in 2005. Gross profit
in 2005 and 2004 was negatively impacted by asset impairments on
certain vessels totaling $0.8 million and
$3.9 million, respectively, for conditions meeting our
asset impairment criteria. Gross margins increased to 32% in
2005 from 19% in 2004 due to the factors noted above.
108
Selling and administrative expenses. Selling
and administrative expenses of $16.7 million for the year
ended December 31, 2005 were $4.4 million higher than
the $12.3 million incurred in 2004 due to additional
administrative and sales personnel hired to support the acquired
Torch and Acergy vessels in the third and fourth quarter of
2005, respectively, and increased incentive compensation as a
result of increased profitability. Selling and administrative
expenses were 7% of revenues in 2005, compared to 10% of
revenues in 2004, due to the significant increase in revenue
from 2004 to 2005.
Income taxes. Income taxes increased to
$20.4 million for the year ended December 31, 2005,
compared to $4.2 million in 2004, primarily due to
increased profitability. The effective tax rate was 35.1% for
2005 and 35.4% for 2004.
Net Income. Net income of $37.7 million
for 2005 was $30.1 million greater than 2004 as a result of
the factors described above.
Liquidity
and Capital Resources
We require capital to fund ongoing operations, organic growth
initiatives and acquisitions. Our working capital requirements
and funding for maintenance capital expenditures, strategic
investments and acquisitions have historically been part of the
corporate-wide cash management program of Helix. As a part of
such program, Helix swept all available cash from our operating
accounts periodically and did so on the day immediately prior to
the effectiveness of our initial public offering. Subsequent to
the offering, we are solely responsible for funding our working
capital and other cash requirements.
Our primary sources of liquidity are cash flows generated from
our operations, available cash and cash equivalents and
availability under a revolving credit facility we secured prior
to completion of our offering. We use these sources of liquidity
to fund our working capital requirements, maintenance capital
expenditures, strategic investments and acquisitions. In
connection with our business strategy, we regularly evaluate
acquisition opportunities, including vessels and marine
contracting businesses. We believe that our liquidity will
provide the necessary capital to fund these transactions and
achieve our planned growth. We expect to be able to fund our
activities for 2007 with cash flows generated from our
operations and available borrowings under our revolving credit
facility.
In November 2006, we entered into a five-year $250 million
revolving credit facility with certain financial institutions.
The revolving loans under this facility mature in November 2011.
On December 8, 2006, we borrowed $79 million under the
revolving credit facility and distributed $78 million of
those proceeds to Helix as a dividend. On December 21,
2006, we borrowed an additional $122 million under the
revolving credit facility, all of which was distributed to Helix
as a dividend. At September 30, 2007, we had outstanding
debt of $117 million and accrued interest of $138,000 under
this credit facility. At October 26, 2007, we had
outstanding debt of $98.0 million under the facility. We
may pay down or borrow from this revolving credit facility as
business needs merit. See Revolving Credit Facility
below.
Cash
Flows
Operating activities. Cash flow from operating
activities in the first nine months of 2007 was
$103.5 million, a decrease of $4.3 million from the
$107.8 million provided during the nine months ended
September 30, 2006. The primary driver for this decrease as
compared to the prior year nine month period was a
$2.6 million decrease in income from operations.
Cash flow from operating activities was $86.4 million
during 2006, an increase of $54.2 million from the
$32.2 million provided during the year ended
December 31, 2005. The primary driver of this increase was
net income, which rose to $119.4 million during the year
ended December 31, 2006 from $37.7 million during the
year ended December 31, 2005. However, increases in
accounts receivable of $38.1 million negatively impacted
cash flow from operations. This change in accounts receivable
was primarily the result of the Torch and Acergy acquisitions as
well as higher vessel utilization and higher contract rates for
our services.
Cash flow from operating activities was $32.2 million
during 2005, an increase of $3.6 million from the
$28.6 million generated during 2004. While net income for
2005 increased to $37.7 million from $7.7 million
109
in 2004, this increase in profitability was offset by a
$55.3 million increase in accounts receivable. Cash flow
from operating activities was positively impacted by an increase
in accounts payable and accrued liabilities of
$46.4 million. The increases in accounts receivable and
accounts payable were primarily due to the Torch and Acergy
acquisitions, higher vessel utilization and larger incentive
compensation accruals resulting from increased profitability. In
addition, cash flow from operating activities was negatively
impacted by an increase in non-current assets of
$6.4 million primarily due to cash expenditures for
regulatory vessel drydocks.
Investing Activities. Investing activities
consist principally of strategic business and asset
acquisitions, capital improvements to existing vessels and
purchases of operations support facilities and equipment. Net
cash used in investing activities was $25.9 million and
$106.0 million for the nine months ended September 30,
2007 and 2006, respectively, and $121.2 million,
$79.5 million and $2.9 million for the years ended
December 31, 2006, 2005 and 2004, respectively.
Capital expenditures in the nine months ended September 30,
2007 included $26.4 million primarily related to vessel
upgrades, equipment purchases and leasehold improvements.
Acquisitions and capital expenditures in the first nine months
of 2006 included the purchases of the DLB801 in January
2006 for approximately $38.0 million and the Kestrel
in March 2006 for approximately $39.9 million, and the
completion of the Fraser Driving acquisition for
$22.5 million (net of $2.3 million of cash acquired),
as well as $21.1 million primarily related to vessel
upgrades, equipment purchases and leasehold improvements.
We incurred $121.3 million for capital expenditures and
business acquisitions net of proceeds from property sales of
$16.9 million for the year ended December 31, 2006,
compared to capital expenditures of $76.4 million net of
proceeds from property sales of $3.0 million during the
year ended December 31, 2005. Acquisitions and capital
expenditures in the year ended December 31, 2006 included
the purchases of the DLB801 in January 2006 for
approximately $38.0 million, the Kestrel in March
2006 for approximately $39.9 million and the completion of
the Fraser Diving acquisition for $22.0 million (net of
$2.3 million of cash acquired and $5.0 million of
purchase consideration paid 2005) as well as
$38.1 million primarily related to vessel upgrades,
equipment purchases and leasehold improvements.
We incurred $76.4 million for capital expenditures and
business acquisitions during 2005, net of proceeds from sale of
property, compared to $2.9 million during 2004. The 2005
capital acquisitions and expenditures included
$42.9 million for the Acergy acquisition,
$26.2 million for the acquisition of the Torch assets
(including assets held for sale), and $10.0 million
primarily related to vessel upgrades.
Financing activities. Prior to our IPO, we
historically operated within Helixs corporate cash
management program. We financed seasonal operating requirements
through Helixs internally generated funds and borrowings
under credit facilities on a consolidated basis. In connection
with our IPO in December 2006, we borrowed $201 million
under our revolving credit facility. In the first nine months of
2007 we repaid $84.0 million of this debt.
Capital
Expenditures
We incur capital expenditures for recertification costs relating
to regulatory drydocks (included in other assets, net) as well
as costs for major replacements and improvements, which extend
the vessels economic useful life. Capital expenditures
incurred for these activities in 2006 include $18.9 million
for recertification costs and $35.5 million related to
steel replacement and vessel improvements costs. Total capital
expenditures inclusive of drydock costs forecasted for 2007
include $23.8 million for recertification costs and
$41.2 million for vessel improvements, equipment purchases
and leasehold improvements. We also incur capital expenditures
for strategic investments and acquisitions. During the year
ended December 31, 2006, we incurred $39.9 million for
the purchase of the Kestrel and $38.0 million for
the purchase of the DLB801. In July 2006, we completed
the Fraser Diving acquisition for an aggregate purchase price of
approximately $29.3 million, subject to post-closing
adjustments. We also incurred $4.0 million to purchase a
portable saturation diving system. During the nine months ended
September 30, 2007, we incurred $18.4 million for
recertification costs and $26.4 million for vessel
improvements, equipment purchases and leasehold improvements.
110
Revolving
Credit Facility
We, along with CDI Vessel Holdings LLC, or Vessel, one of our
subsidiaries that acted as borrower, have entered into a secured
credit facility with Bank of America, N.A. as administrative
agent, J.P. Morgan Securities Inc. and Banc of America
Securities LLC as joint lead arrangers, and other financial
institutions as lenders and ancillary agents identified therein,
pursuant to which Vessel may have outstanding at any one time up
to $250 million in revolving loans under a five-year
revolving credit facility. The loans mature in November 2011.
The following is a summary description of the terms of the
credit agreement and other loan documents.
Loans under the revolving credit facility may consist of loans
bearing interest in relation to the Federal Funds Rate or to
Bank of Americas base rate, known as Base Rate Loans, and
loans bearing interest in relation to a LIBOR rate, known as
LIBOR Rate Loans. Assuming there is no event of default, Base
Rate Loans will bear interest at a per annum rate equal to the
base rate plus a margin ranging from 0% to 0.5%, while LIBOR
Rate Loans will bear interest at the LIBOR rate plus a margin
ranging from 0.625% to 1.75%. In addition, a commitment fee
ranging from 0.20% to 0.375% will be payable on the portion of
the lenders aggregate commitment which from time to time
is not used for a borrowing or a letter of credit. Margins on
the loans and the commitment fee will fluctuate in relation to
our consolidated leverage ratio as provided in the credit
agreement.
The credit agreement and the other documents entered into in
connection with the credit agreement include terms and
conditions, including covenants, that we consider customary for
this type of transaction. The covenants include restrictions on
our and our subsidiaries ability to grant liens, incur
indebtedness, make investments, merge or consolidate, sell or
transfer assets and pay dividends. In addition, the credit
agreement obligates us to meet minimum financial requirements of
EBITDA to fixed charges, funded debt to EBITDA, collateral value
to outstanding loans and other specified obligations of us to
the lenders and limitations on amount of capital expenditures
incurred. The credit facility is secured by vessel mortgages on
five of our vessels with an aggregate net book value of
$126.3 million at September 30, 2007, a pledge of all
of the stock of all of our domestic subsidiaries and 66% of the
stock of one of our foreign subsidiaries, and a security
interest in, among other things, all of our equipment,
inventory, accounts receivable and general intangible assets. At
September 30, 2007, we were in compliance with all debt
covenants.
At September 30, 2007 there was $132.5 million
available under the revolving credit facility, and at
October 26, 2007 there was $151.5 million available
under the facility.
Contractual
and Other Obligations
We lease several facilities and accommodations for certain
employees located outside the United States under noncancelable
operating leases. Future minimum rentals under the leases are
approximately $5.2 million at December 31, 2006, with
$1.4 million due in 2007, $1.0 million due in 2008,
$0.8 million due in 2009, $0.4 million due in 2010,
$0.3 million due in 2011, and $1.3 million due
thereafter. Total rental expense under these operating leases
was approximately $1.0 million, $0.7 million and
$0.5 million for the years ended December 31, 2006,
2005 and 2004, respectively.
In September 2006 we chartered a vessel for one year for use in
the Middle East region. At September 30, 2007, the
remaining charter commitment is $2.4 million.
111
At September 30, 2007, our contractual obligations for
long-term debt, payables and operating leases were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less Than
|
|
|
|
|
|
|
|
|
More Than
|
|
|
|
Total
|
|
|
1 Year
|
|
|
1-3 Years
|
|
|
3-5 Years
|
|
|
5 Years
|
|
|
|
(In thousands)
|
|
|
Payable to Helix
|
|
$
|
7,513
|
|
|
$
|
2,677
|
|
|
$
|
2,643
|
|
|
$
|
1,622
|
|
|
$
|
571
|
|
Noncancelable operating leases and charters
|
|
|
13,156
|
|
|
|
3,805
|
|
|
|
2,510
|
|
|
|
867
|
|
|
|
4,974
|
|
Long-term debt
|
|
|
117,000
|
|
|
|
|
|
|
|
|
|
|
|
117,000
|
|
|
|
|
|
Acquisition of Horizon(1)
|
|
|
302,500
|
|
|
|
302,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash obligations
|
|
$
|
440,169
|
|
|
$
|
308,982
|
|
|
$
|
5,153
|
|
|
$
|
120,489
|
|
|
$
|
5,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Related to the cash portion of our pending Horizon acquisition.
We have obtained a commitment for long-term financing to fund
the cash portion of the acquisition. |
Off-Balance
Sheet Arrangements
As of September 30, 2007, we have no off-balance
sheet arrangements. For information regarding our principles of
consolidation, see Note 2 to our consolidated and combined
financial statements contained elsewhere herein.
We could be exposed to market risk related to interest rates in
the future. We have approximately $117 million outstanding
under our revolving credit facility as of September 30,
2007. Changes based on the floating interest rates under this
facility could result in an increase or decrease in our annual
interest expense and related cash outlay. The impact of market
risk is estimated using a hypothetical increase in interest
rates by 100 basis points. Based on this hypothetical
assumption, we would have incurred an additional
$1.2 million in interest expense for the nine months ended
September 30, 2007.
Changes
in and Disagreements with Accountants on Accounting and
Financial Disclosure
During its last two fiscal years, Cal Dive has had no
change in its independent accountants nor has Cal Dive had
any disagreements with its independent accountants on accounting
and financial disclosure.
Directors
and Executive Officers
Directors
of Cal Dive
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Class
|
|
|
|
Owen Kratz
|
|
|
53
|
|
|
I (continuing in office until 2010)
|
|
|
David E. Preng
|
|
|
61
|
|
|
I (continuing in office until 2010)
|
|
|
William L. Transier
|
|
|
53
|
|
|
II (continuing in office until 2009)
|
|
|
Martin Ferron
|
|
|
51
|
|
|
II (continuing in office until 2009)
|
|
|
Quinn J. Hébert
|
|
|
44
|
|
|
III (continuing in office until 2008)
|
|
|
Todd A. Dittmann
|
|
|
40
|
|
|
III (continuing in office until 2008)
|
|
|
Owen Kratz has served on our board of directors since
February 2006 and is Chairman of the Board. He is currently
Executive Chairman of Helix. He was Chairman of Helix from May
1998 to September 2006 and served as Chief Executive Officer of
Helix from April 1997 to September 2006. Mr. Kratz served
as President of Helix from 1993 until February 1999, and as a
Director since 1990. He served as Chief Operating Officer of
Helix from 1990 through 1997. Mr. Kratz joined Helix in
1984 and has held various offshore positions, including
saturation diving supervisor, and has had management
responsibility for client relations, marketing
112
and estimating. Mr. Kratz has a Bachelor of Science degree
in Biology and Chemistry from the State University of New York
at Stony Brook.
David E. Preng has served on our Board of Directors since
December 2006. He has served as President and CEO of
Preng & Associates, an executive search firm, since
1980. Previously, he spent six years in the executive search
industry with two international and one national search firm.
Mr. Preng was a director of Remington Oil and Gas Corp.
prior to its acquisition by Helix in July 2006. Mr. Preng
is also Chairman of the Board of Directors of Maverick Oil and
Gas, Inc., an oil and gas exploration, development and
production company, and a director of BPI Energy Holdings Inc.,
a company engaged in the exploration, production and commercial
sale of coalbed methane. Mr. Preng holds a Bachelor of
Science degree in Finance from Marquette University and an
M.B.A. from DePaul University.
William L. Transier has served on the Companys
Board of Directors since December 2006. He has served as
Chairman, Chief Executive Officer and President of Endeavour
International Corporation, an international oil and gas
exploration and production company focused on the North Sea
since October 2006. He served as Co-Chief Executive Officer of
Endeavour from its formation in February 2004 through September
2006. He served as Executive Vice President and Chief Financial
Officer of Ocean Energy, Inc. from March 1999 to April 2003,
when Ocean Energy merged with Devon Energy Corporation. From
September 1998 to March 1999, Mr. Transier served as
Executive Vice President and Chief Financial Officer of Seagull
Energy Corporation when Seagull Energy merged with Ocean Energy.
From May 1996 to September 1998, he served as Senior Vice
President and Chief Financial Officer of Seagull Energy
Corporation. Prior thereto, Mr. Transier served in various
roles including partner from June 1986 to April 1996 in the
audit department of KPMG LLP. He graduated from the University
of Texas with a B.B.A. in Accounting and has a M.B.A. from Regis
University. He is also a director of Helix and Reliant Energy,
Inc., a provider of electricity and energy services to retail
and wholesale customers in the United States.
Martin Ferron has served on the Companys Board of
Directors since February 2006. He is currently the President and
Chief Executive Officer and a member of the board of directors
of Helix. He was elected to the Board of Directors of Helix in
September 1998 and has served as President of Helix since
February 1999 and as Chief Executive Officer of Helix since
October 2006. He also served as Chief Operating Officer of Helix
from January 1998 until August 2005. Mr. Ferron has
27 years of worldwide experience in the oilfield industry,
seven of which were in senior management positions with
McDermott Marine Construction and Oceaneering International
Services Limited immediately prior to his joining Helix.
Mr. Ferron has a Civil Engineering degree from City
University, London; a Masters Degree in Marine Technology from
the University of Strathclyde, Glasgow; and a M.B.A. from the
University of Aberdeen. Mr. Ferron is also a Chartered
Civil Engineer.
Quinn J. Hébert has served as our President and
Chief Executive Officer since November 2005 and has been a
member of our Board of Directors since May 2006. He served as
the President, Vice President Commercial, and General Counsel of
Acergy US Inc. (formerly Stolt Offshore) for the North Americas
Region from 1998 to 2005. Mr. Hébert terminated his
working relationship with Acergy on October 31, 2005. Prior
to his employment with Acergy, Mr. Hébert served as
Vice President, General Counsel and Secretary of American
Oilfield Divers, Inc. (also known as Ceanic Corporation).
Mr. Héberts professional career began as an
associate attorney at Jones, Walker, Waechter, Poitevent,
Carrère & Denègre, LLP in New Orleans,
Louisiana. Mr. Hébert holds a Bachelor of Arts in
History from Louisiana State University and Juris Doctor from
Boston College Law School.
Todd A. Dittmann has served on our Board of Directors
since December 2006. He has served as Managing Director of D.B.
Zwirn & Co., L.P., a private investment firm, since
April 2004. From April 1997 to April 2004, he worked for
Jefferies & Co., where he most recently served as
Managing Director in the Energy Investment Banking Group. From
1996 to April 1997, he served as Vice President in the Energy
Investment Banking Group of Paine Webber. From 1990 until 1996,
he held various positions in commercial and investment banking
at Chase Manhattan Bank and its predecessors. Mr. Dittmann
received an M.B.A. and a B.B.A. in Finance from the University
of Texas at Austin. He is a Chartered Financial Analyst.
113
Executive
Officers of Cal Dive
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Quinn J. Hébert
|
|
|
44
|
|
|
President and Chief Executive Officer, Director
|
Scott T. Naughton
|
|
|
53
|
|
|
Executive Vice President and Chief Operating Officer
|
G. Kregg Lunsford
|
|
|
39
|
|
|
Executive Vice President, Chief Financial Officer, and Treasurer
|
Lisa Manget Buchanan
|
|
|
47
|
|
|
Vice President, General Counsel, and Secretary
|
Quinn J. Hébert see biography above
under Directors of Cal Dive.
Scott T. Naughton has served as Cal Dives
Executive Vice President and Chief Operating Officer since
November 2005. He became Vice President of Helixs Shelf
Contracting Services segment in May 1998. Mr. Naughton
terminated his working relationship with Helix on March 6,
2006. Mr. Naughton has been in the commercial diving
industry since 1972, working offshore for 14 years as both
a diver and a supervisor. He joined Helix in 1981 following its
acquisition of J & J Marine Diving, and worked as an
Operations Manager and a Project Manager.
G. Kregg Lunsford has served as Cal Dives
Executive Vice President, Chief Financial Officer, and Treasurer
since January 2006. He became the Vice President of Finance and
Audit for Helix in February 2003. Mr. Lunsford terminated
his working relationship with Helix on March 6, 2006.
Mr. Lunsford was a senior manager in the Transaction
Advisory Services practice of Ernst & Young LLP and
Arthur Andersen LLP from March 2001 until February 2003. Prior
to this he served as Director of Corporate Development with
PSINet Consulting Solutions and as Manager of Corporate
Development with Consolidated Graphics, Inc. from April 1998
until March 2001. Mr. Lunsford began his career in the
audit practice of Arthur Andersen LLP in September 1992 and was
promoted to manager in 1996. He held this position until April
1998. Mr. Lunsford graduated magna cum laude from Sam
Houston State University with a B.B.A. in Accounting in 1992 and
is a certified public accountant.
Lisa Manget Buchanan has served as Cal Dives
Vice President, General Counsel, and Secretary since June 2006.
Ms. Buchanan joined Jones, Walker, Waechter, Poitevent,
Carrère & Denègre, LLP as an associate
attorney in September 1987 and became a partner of the firm in
January 1994, a position she held until June 2006.
Ms. Buchanan holds a Bachelor of Science in Commerce from
the University of Virginia and a Juris Doctor from Louisiana
State University Law Center.
Certain
Relationships and Related Transactions
In contemplation of its initial public offering, Cal Dive
entered into several agreements with Helix addressing the rights
and obligations of each respective company, including a Master
Agreement, a Corporate Services Agreement, an Employee Matters
Agreement, a Registration Rights Agreement, and a Tax Matters
Agreement. The Master Agreement describes and provides a
framework for the separation of Cal Dives business
from Helixs business, allocates liabilities (including
those potential liabilities related to litigation) between the
parties, allocates responsibilities, and provides standards for
each companys conduct going forward (e.g., coordination
regarding financial reporting), and sets forth the
indemnification obligations of each party. In addition, the
Master Agreement provides Helix with a preferential right to use
a specified number of Cal Dives vessels at market
rates in accordance with the terms of such agreement.
Pursuant to the Corporate Services Agreement, each party has
agreed to provide specified services to the other party,
including administrative and support services for the time
period specified therein. Generally, after Helix ceases to own
more than 50% of the total voting power of Cal Dives
common stock, all services may be terminated by either party
upon 60 days notice, but a longer notice period is
applicable for selected services. Each of the services is
provided in exchange for a monthly charge as calculated for each
service (based on relative revenues, number of users for a
particular service, or other specified measure). In general,
under the Corporate Services Agreement Helix provides
Cal Dive with services related to the tax, treasury, audit,
insurance (including claims), and information technology
functions; and Cal Dive provides Helix with
114
services related to the human resources, training and
orientation functions, and certain supply chain and
environmental, health and safety services.
Pursuant to the Employee Matters Agreement, except as otherwise
provided in that agreement, Cal Dive has generally accepted
and assumed all employment related obligations with respect to
all individuals who were employees of Cal Dive as of the
initial public offering closing date, including expenses related
to existing options and restricted stock. Those employees are
entitled to retain their Helix stock options and restricted
stock grants under their original terms except as mandated by
applicable law. The Employee Matters Agreement also permits
Cal Dives employees to participate in the Helix
Employee Stock Purchase Plan for the offering period that ends
June 30, 2007, and Cal Dive has agreed to pay Helix at
the end of the offering period the fair market value of the
shares of Helixs stock purchased by such employees.
Pursuant to the Tax Matters Agreement, Helix is generally
responsible for all federal, state, local, and foreign income
taxes that are attributable to Cal Dive for all tax periods
ending on the initial public offering; and Cal Dive is
generally responsible for all such taxes beginning after the
initial public offering. In addition, the agreement provides
that for a period of up to ten years, Cal Dive is required
to make payments totaling $11.3 million to Helix equal to
90% of tax benefits derived by Cal Dive from tax basis
adjustments resulting from the boot gain recognized
by Helix as a result of the distributions made to Helix as part
of our initial public offering transaction. As of
September 30, 2007, the current tax benefit payable to
Helix related to this obligation is $0.4 million.
Pursuant to the Registration Rights Agreement, Cal Dive has
agreed to provide Helix with registration rights relating to
shares of Cal Dive common stock held by Helix. Subject to
certain limitations, Helix may require Cal Dive to register
under the Securities Act all or any portion of its shares, a
so-called demand request; however, Cal Dive is
not obligated to effect more than two demand registrations
during the first 12 months after our initial public
offering or more than three demand registrations during any
12-month
period thereafter. Helix also has so-called
piggy-back registration rights. The demand and
piggy-back registrations are each subject to market cutback
exceptions.
Helix will pay all costs and expenses in connection with any
demand registration and Cal Dive will pay all
costs and expenses in connection with any piggy-back
registration, except underwriting discounts, commissions, or
fees attributable to shares of Cal Dive common stock sold
by Helix. The rights of Helix under the Registration Rights
Agreement will remain in effect until the shares of
Cal Dive common stock held by Helix (i) have been sold
pursuant to an effective registration statement under the
Securities Act, (ii) have been sold pursuant to
Rule 144 under the Securities Act, (iii) have been
transferred in a transaction where subsequent public
distribution of the shares would not require registration under
the Securities Act, or (iv) are no longer outstanding.
In the ordinary course of business, Cal Dive provided
marine contracting services to Helix and recognized revenues of
$20.0 million in 2006 and $49.0 million in the first
nine months of 2007. Helix provided remotely operated vehicle
services to Cal Dive and Cal Dive recognized operating
expenses of $6.1 million in 2006 and $5.2 million in
the first nine months of 2007.
Including the current tax benefit payable to Helix resulting
from the tax
step-up
benefit noted above, net amounts payable to and receivable from
Helix are settled with cash at least quarterly. At
September 30, 2007 the net amount receivable from Helix was
$3.8 million and will be settled in the fourth quarter of
2007.
All of these agreements were entered into at a time when
Cal Dive was a wholly-owned subsidiary of Helix. In
addition to Helix currently holding approximately 73% of the
outstanding Cal Dive common stock, two members of
Cal Dives six-member Board of Directors are executive
officers and directors of Helix, and another of
Cal Dives Directors also serves as a director of
Helix. The Master Agreement provides that all proposed
transactions between Cal Dive and Helix after the initial
public offering, any material amendment to the agreements
described above, and any consent or approval proposed to be
granted by Cal Dive for Helixs benefit, in each case,
that would ordinarily be submitted for approval by the
Cal Dive Board of Directors, will be subject to the
approval of a majority of the independent directors (as defined
by applicable NYSE rules).
115
In addition, the Cal Dive Board has adopted a policy with
respect to related persons transactions pursuant to which Audit
Committee approval will be required for all such transactions.
The Cal Dive Audit Committee will also, on an annual basis,
review and assess ongoing relationships with each related person
to ensure that they continue to be in compliance with such
policy.
Board
of Directors Independence
The Board has affirmatively determined that
Messrs. Dittmann, Preng and Transier are independent
directors, as that term is defined under NYSE
Rule 303A and applicable rules under the Securities
Exchange Act of 1934 (the Exchange Act). In making
this determination, the Board considered
Mr. Transiers service as a director of Helix;
however, there were no other transactions, relationships or
arrangements between any of the independent directors and the
Company to consider in this regard. The non-independent
directors are Messrs. Kratz, Ferron and Hébert. Under
NYSE Rule 303A, as a newly listed company, we will first be
required to have a majority of independent directors on our
Board by the first anniversary of our listing date, or
December 14, 2007. The Boards independent directors
regularly meet in executive session at the end of each Board and
Committee meeting.
Upon consummation of the proposed merger, David Sharp, President
and Chief Executive Officer of Horizon, and John Mills, Chairman
of the Board of Horizon, will join Cal Dives Board of
Directors. The Company expects that its Board will determine
them to be independent directors, ensuring that
Cal Dives Board of Directors will consist of a
majority of independent directors.
Compensation
Committee Interlocks and Insider Participation
No member of the Compensation Committee of the Board of
Directors of the Company was, during fiscal 2006, an officer or
employee of the Company or any of its subsidiaries, or was
formerly an officer of the Company or any of its subsidiaries,
or had any relationships requiring disclosure by the Company
under Item 404 of
Regulation S-K.
During fiscal 2006, no executive officer of the Company served
as (i) a member of the compensation committee (or other
board committee performing equivalent functions) of another
entity, one of whose executive officers served on the
Compensation Committee of the Board of Directors, (ii) a
director of another entity, one of whose executive officers
served on the Compensation Committee, or (iii) a member of
the compensation committee (or other board committee performing
equivalent functions) of another entity, one of whose executive
officers served as a Director of the Company.
Compensation
Discussion and Analysis
Responsibility
for Our Compensation Program
In February 2006, we became a separate wholly-owned subsidiary
of Helix Energy Solutions Group, Inc. Prior to that time, our
business operated as a part of Helix. We completed our initial
public offering of our Common Stock in December 2006. While our
business was operated as part of Helix, the compensation of the
persons now serving as our Chief Executive Officer, Chief
Operating Officer and Chief Financial Officer, who were formerly
employed by Helix, was determined by Helixs Chief
Executive Officer working in conjunction with our Chief
Executive Officer. While we operated as a subsidiary of Helix
and prior to our initial public offering, executive compensation
decisions were made by our then-existing three-member Board, two
of the members of which also served on Helixs board of
directors. At the time of our initial public offering, our Board
established a Compensation Committee that, going forward, will
have the responsibility for our executive compensation program.
Compensation
Philosophy and Objectives
The primary objectives of our compensation program, including
the compensation program for the executive officers named in the
summary compensation table below, or Named Executive
Officers, are to attract and retain key employees, to
motivate them to achieve superior performance and to support and
116
implement our business strategies, and to reward those employees
(including the Named Executive Officers) for successful
performance in a manner commensurate with those rewards given to
their peers in the industry. We attempt to provide incentive and
rewards intended to create a positive environment in which the
employees, including the Named Executive Officers, are
enthusiastic about our Company and its objectives, core values
and culture, and are working toward the successful long-term
performance of the Company.
All elements of the compensation program are designed to:
|
|
|
|
|
be competitive with the Companys peer group;
|
|
|
|
reflect the complexity/difficulty of the position;
|
|
|
|
reflect performance of both the individual and the
Company; and
|
|
|
|
reflect internal fairness within the Company.
|
We use each element of compensation to satisfy one or more of
our stated compensation objectives. Annual executive
compensation consists of a base salary, cash bonus, long-term
equity incentive awards and certain benefits, including health,
disability and life insurance. To ensure appropriate linkage
between our objectives and our compensation levels, we intend to
periodically review the goals and the levels of each element of
compensation. In establishing executive compensation,
Cal Dive strives to develop a compensation program that
achieves the foregoing objectives by establishing the following
targets:
|
|
|
|
|
base salaries, once combined with our annual cash bonus
opportunity and long term equity incentive grants, should be at
levels competitive with peer companies that compete with
Cal Dive for executive talent;
|
|
|
|
the annual cash bonus for an executive officer should reflect
the achievement of Company-wide financial objectives, department
budget goals and the achievement of personal performance goals
and objectives;
|
|
|
|
in the event the executive achieves the Company, department and
personal performance objectives, such executives total
cash compensation should be at the 50th or
75th percentile of the members of our peer group with whom
we compete for executive talent; and
|
|
|
|
long-term equity incentive compensation should be at the
50th or 75th percentile of the peer group based upon
the complexity of the officers duties and recent
performance by the individual and the Company.
|
Design
of the Compensation Program
The Compensation Committee is responsible for establishing the
compensation policies and administering the compensation
programs for our Named Executive Officers, and for administering
the grant of stock-based incentive awards under the
Companys 2006 Plan. The Compensation Committees
charter (i) empowers the Compensation Committee to review,
evaluate, and approve the Companys executive officer
compensation agreements, plans, policies and programs,
(ii) delegates to the Compensation Committee all authority
of the Board required or appropriate to fulfill such purpose,
and (iii) grants to the Compensation Committee the sole
authority to retain and terminate any independent compensation
consultant.
In determining each executive officers base salary for
2006, Helixs Chief Executive Officer working together with
our Chief Executive Officer reviewed the information and peer
group data provided by the compensation consultants, as
discussed below, and Helix managements recommendation
regarding each of these components, and then determined a base
salary intended to place each executive officer at approximately
the 50th percentile of the applicable peer group. A total
cash bonus opportunity for 2006 was also determined for each
such officer by Helixs Chief Executive Officer working
together with our Chief Executive Officer at the time that we
became a subsidiary of Helix in an amount necessary to place
such officer at the 50th or 75th percentile of total
cash compensation for companies in the peer group (although it
was recognized that in certain cases a reduction, or additional
discretionary award may be warranted and awarded by our Board).
The
117
cash bonus program for 2006, which was similar in structure to
Helixs, for each of our Named Executive Officers was based
on achieving the following goals:
|
|
|
|
|
40% achieving personal performance criteria or goals;
|
|
|
|
40% Cal Dive exceeding budgeted pre-tax income
for the year; and
|
|
|
|
|
20%
|
Helixs Marine Contracting Services Group (of which
Cal Dive was a member) exceeding its budgeted pre-tax
income for the year.
|
In measuring an executive officers performance for
purposes of the cash bonus, the Compensation Committee considers
numerous factors including discipline with respect to the
Companys finances and individual goals or criteria that,
going forward, will be established by the officer and the
Compensation Committee at the beginning of the applicable fiscal
year. For 2006, the bonus criteria were determined by
Helixs Chief Executive Officer working in conjunction with
our Chief Executive Officer. The Compensation Committee may also
consider intangible criteria including demonstrating leadership
qualities and adherence to the Companys culture and core
values. The Compensation Committee has the authority to grant a
portion of the total bonus in its discretion. For the 2007
fiscal year, the amount of such discretionary portion is
expressly established at an amount up to 30% of the personal
performance portion of the target bonus, or 12% of the total
target bonus. In addition, the Compensation Committee retains
the authority to adjust any cash bonus or alter any of the
criteria or goals based on changes in circumstances during the
applicable year.
In addition, each officer receives a long-term equity incentive
award (restricted stock) in an amount based on the value of the
underlying award necessary to place the applicable officer in
the 50th or 75th percentile for equity incentive
compensation for companies in the peer group. In determining
each executive officers equity incentive grant, the
Compensation Committee reviews the information and peer group
data provided by the compensation consultants, as discussed
below, and the Chief Executive Officers recommendation
regarding the grant. The Chief Executive Officer reviews the
data and makes his recommendation to the Compensation Committee
prior to its meeting. The Compensation Committee has ample time
to review the data and the recommendation prior to its December
meeting. Beginning in 2007, the Compensation Committee will
approve the equity grants to be issued in December based upon
the closing price of the stock on the date of grant.
No element of an officers compensation is directly linked
to any other element and the Compensation Committee does not
have an exact formula for allocating between cash and non-cash
compensation. We strive to design a compensation package to use
total cash compensation (salary plus annual cash bonus) to
recognize each individual officers responsibilities, role
in the organization, and experience and contributions to the
Company and to use long-term equity-based incentives (including
restricted stock awards and through a tax-qualified employee
stock purchase plan) to align employee and stockholder
interests, as well as to attract, retain and motivate employees.
We pay close attention to our peer groups practices. The
Compensation Committee retains the authority to adjust any
element of the executive officers compensation based upon
objective or intangible criteria. In addition, included in the
cash bonus for the year 2007, the Compensation Committee has the
authority to grant a purely discretionary amount, which has been
expressly established at 12% of the total proposed bonus.
Generally speaking, the elements of the Companys
compensation program, as well as the percentage mix of the
various elements, are in line with those of our peer companies,
as is evidenced by data obtained by the Company from its
compensation consultant, as described below. Our compensation
package mix for executive officers for fiscal 2006 ranges from
15% to 29% in cash compensation and 85% to 71% in non-cash
compensation. The compensation mix for 2006 was more heavily
weighted in non-cash compensation than usual due to the
Cal Dive initial public offering. In 2006, each of the
Named Executive Officers other than Mr. Hébert
received two grants of restricted stock during the year, one
from Helix and one at the closing of the Cal Dive initial
public offering. In future years we expect only one annual grant
of equity incentives to the Named Executive Officers, and would
expect for 2007 that total cash compensation (assuming the total
bonus opportunities were earned) and expected long term equity
grants would result in a mix ranging from 32% to 41% in cash
compensation and 68% to 59% in non-cash compensation. It is our
belief that the compensation program as adopted by the
Compensation Committee achieves our objectives of attracting and
retaining key
118
executive officers, motivating such officers to achieve superior
performance and rewarding such officers for successfully
achieving their objectives.
Compensation
Consultants
We plan to perform an annual comparison of our compensation
levels with that of similar positions at companies in our peer
group as described below. Pursuant to the authority granted to
the Compensation Committee by its charter, the Compensation
Committee may periodically review peer group compensation and
engage independent compensation consultants to assist in this
process.
In 2005, Helix retained the services of Mercer Human Resource
Consulting (Mercer), an independent consultant that
specializes in executive compensation matters, to assist in its
compensation determinations for the calendar year 2006. As part
of the services Mercer provided to Helix in 2005, Mercer also
provided data with respect to compensation levels for our
executive officers. Mercer has provided similar services to
Helix for a number of years. The Helix Compensation Committee
selected Mercer based upon the recommendation of certain
directors and a review of Mercers experience and
qualifications as compared to similar organizations. Mercer
reports to, and acts at the direction of, the Helix Compensation
Committee. Helix management worked closely with Mercer to
determine an appropriate peer group (as discussed below) and
received Mercers reports and data. Moreover, the Helix
Compensation Committee retained ultimate control and authority
over Mercer.
Mercer was engaged to assess the competitiveness of the Helix
compensation package for all employees located in the United
States. Mercer did a survey of the current compensation of the
applicable employees and provided information regarding the
compensation practices for executive officers of Helixs
peer group. Mercer utilized a peer group as proposed by
Helixs management and approved by Helixs
Compensation Committee. In order to ensure that the most
appropriate companies are included in the peer group, management
includes companies consisting of Helixs (and our) direct
competitors in the energy services industry that are comparable
in size (based on revenue and market capitalization) to Helix
and other companies in our industry that Helixs management
believes compete with Helix for executive talent. The peer group
is determined on an annual basis based on the recommendations of
management. The officer compensation peer group companies for
2006 were Cooper Cameron Corporation, Global Industries, Ltd.,
Oil States International, Inc., Grant Prideco Inc., Oceaneering
International, Inc., Tidewater Inc., Superior Energy Services
Inc., W-H Energy Services, Inc. and Veritas DGC Inc.
Mercer provided data on total compensation (base salary, total
cash compensation including bonus, and long-term incentive
awards) with respect to the 25th percentile, market median
(50th percentile), and 75th percentile of the peer
group. This data was presented to the Helix Board, the Helix
Chief Executive Officer and the Helix Chief Financial Officer
and our Chief Executive Officer for their review and analysis.
The survey results were taken into consideration by our Chief
Executive Officer when determining his recommendations regarding
base salary, cash bonus and equity incentive compensation for
each of the other executive officers. The Helix Compensation
Committee and certain members of Helixs management
received Mercers report within a time frame that provided
adequate time for analysis and discussion before the last
Compensation Committee meeting of the year. After reviewing the
data in such report, our Chief Executive Officer evaluated each
persons compensation based upon each executive
officers current and historical compensation, the
compensation of peers in similarly situated positions in Helix,
information provided by the compensation consultant regarding
the compensation practices of similarly situated competitors,
and the difficulty and complexity of the position.
Compensation
Components and Processes
As described above, annual executive compensation consists of a
base salary, cash bonus and long-term equity incentive awards
plus benefits. The Compensation Committee will review, approve
and adopt each component of such compensation, other than
benefits that are available to all employees, for the next
fiscal year at its meeting in December of each year and intends
to also approve grants of restricted stock awards to all
executive officers and certain other eligible employees. At its
first meeting of the following year, once
119
performance results for the preceding year for individual,
department and company-wide performance criteria are available,
the Compensation Committee approves the cash bonus for each of
the executive officers payable with respect to the preceding
year.
The Compensation Committee is provided with the survey data, and
a recommendation of the Chief Executive Officer with respect to
the appropriate percentile of cash compensation (salary and
bonus) and long term incentive compensation (in terms of total
value of equity grants) to award to each executive officer. The
recommendations of the Chief Executive Officer regarding cash
compensation and equity grants are based on the difficulty and
complexity of the position. In the event that senior management
determines that the data obtained from Mercer does not reflect
the job responsibilities and complexity of the employees
position at the Company, managements recommendation
regarding cash compensation is adjusted to reflect what we
believe to be the market value of such services. The decision
with respect to total compensation for executive officers
ultimately lies with the Compensation Committee, which has an
ample opportunity to review the survey and make inquiries of
management.
Senior members of the management team including our Chief
Financial Officer, our Chief Operating Officer and our President
and Chief Executive Officer provide recommendations regarding
many aspects of our compensation program, including executive
compensation. The Compensation Committee does not, however,
delegate any of its functions or authority to management (other
than the issuance of certain equity incentive compensation
awards to new non-executive officer hires or promotions).
Base
Salary
Annual base salary typically will be determined for each officer
at the end of the preceding year. Base salary for our Named
Executive Officers for 2006 was set by the Chief Executive
Officer of Helix together with our Chief Executive Officer prior
to the time that we became a separate subsidiary of Helix or by
our three-member Board for those named executive officers who
joined us after that time. For 2007, base salary for our Named
Executive Officers was set by our three-member Board in December
2006 prior to the closing of our initial public offering and
prior to the establishment of our Compensation Committee. For
future years, we intend to have the Compensation Committee set
annual base salary at the regularly scheduled December meeting
of our Compensation Committee. In setting base salary, the Chief
Executive Officer and the Compensation Committee will review the
information provided by Mercer regarding the compensation of
officers with comparable qualifications, experience and
responsibilities at companies in our peer group, and the
recommendations of our Chief Executive Officer as to the salary
levels of the executive officers who report to him. It is not
our policy to pay executive officers at the highest level
relative to his or her peers, but rather to set their base
salary at a level that is at approximately the
50th percentile of our peer group taking into account their
responsibilities and the complexity of their respective
positions. We believe that this, once combined with our annual
cash bonus opportunity and long term equity incentive grants,
gives us the opportunity to attract and retain talented
managerial employees both at the senior executive level and
below.
Cash
Bonus
The annual incentive compensation plan provides a cash bonus
designed to award our employees, including our Named Executive
Officers, for the achievement of certain goals. Prior to payment
of a bonus with respect to the prior year, management reviews
each of the components of each officers annual cash bonus
award. Management then determines whether the goals and criteria
were achieved during the prior year and makes a recommendation
to the Compensation Committee. The Compensation Committee
expects to award bonuses for the previous year at its first
meeting of the year based upon its review of the data provided
by management, and bonuses are typically paid in March. The
total cash bonus opportunity for each Named Executive Officer is
set at a level necessary to place such officer at the
50th or 75th percentile of total cash compensation for
companies in the peer group.
The cash bonus program for 2006, for each of our Named Executive
Officers was based on achieving the following goals:
|
|
|
|
|
40% achieving personal performance criteria or goals;
|
120
|
|
|
|
|
40% Cal Dive exceeding budgeted pre-tax income for the
year; and
|
|
|
|
20% Helixs Marine Contracting Services Group (of which
Cal Dive was a member) exceeding its budgeted pre-tax
income for the year.
|
For 2007, there will be two components of the bonus payment for
the Named Executive Officers:
|
|
|
|
|
40% achieving personal performance criteria or goals; and
|
|
|
|
60% the Company exceeding its budgeted pre-tax income for the
year.
|
Performance criteria linked to an individuals attaining
individual performance goals is established by the officer and
the Chief Executive Officer and provided to the Compensation
Committee. These performance criteria are established at the
beginning of the year and are provided to the Compensation
Committee at its first meeting of the applicable year. In
addition, with respect to the cash bonus for the year 2007,
there is a portion of the bonus equal to 12% of the total
potential bonus that will be within the discretion of the
Compensation Committee.
Company economic performance is determined by whether the
Company has met its financial objectives for the year. This
component is based on exceeding the pre-tax income budget
determined prior to the beginning of the year. The Compensation
Committee retains the authority to adjust any element of the
executive officers annual cash bonus payment whether
resulting from performance criteria or one of the budget related
goals.
Personal performance criteria for our Named Executive Officers
for 2006, which primarily included the successful integration of
the Acergy and Torch acquisitions, the completion of the
acquisition of Fraser Diving and the completion of the initial
public offering of Cal Dive, were exceeded and full bonus
amounts under this component of the total bonus were earned.
Budgeted pre-tax income for the year for each of Cal Dive
and Helixs Marine Contracting Services Group (of which
Cal Dive was a member) were also exceeded, and full bonus
amounts were earned under these components of the total bonus as
well.
Ms. Buchanan, our Vice President and General Counsel,
joined our Company in mid-2006 and her cash bonus was set at the
time she was hired and was not based on the criteria described
for the other executive officers. Mr. Lunsford, our
Executive Vice President and Chief Financial Officer, was paid
an additional $59,000 discretionary bonus for 2006 for his
efforts throughout 2006 in the initial public offering process
and the syndication of the Companys $250 million
revolving credit facility.
Long-Term
Equity Compensation
We grant long-term equity compensation in order to provide
long-term incentives to employees, providing an important
retention tool with respect to such employees, including the
executive officers. Each of our executive officers received
restricted stock grants from us and from Helix in 2006. We
believe that long-term equity incentive compensation advances
the best interests of the Company, its affiliates and its
stockholders, by providing those persons who have substantial
responsibility for the management and growth of our company with
additional performance incentives as well as the opportunity to
obtain or increase their proprietary interest in the Company,
thereby encouraging them to continue in their employment with
the Company. We believe that as a result of their proprietary
interest in the Company, the economic interests of our executive
officers are more closely aligned to those of the stockholders.
As a result of the changes to regulatory, tax and accounting
treatment of certain types of long-term equity incentives, we
currently believe that restricted stock awards are the most
efficient way to reward executive officers and provide them with
the chance to receive a proprietary interest in the Company, but
we will periodically reevaluate that determination and may grant
other types of equity based incentive compensation in the future.
It is intended that each executive officer receive a long-term
equity incentive award in an amount based on the value of the
underlying award necessary to place the applicable officer in
the 50th or 75th percentile for equity incentive
compensation for officers in similar positions at companies in
the peer group. Our Chief Executive Officer received a grant of
Helix restricted stock in November 2005 when he joined our
Company. This grant vested in part at the time of our initial
public offering and the balance vested in February 2007. In
121
determining each other executive officers equity incentive
grant made in 2006, the Compensation Committee of Helix reviewed
the information and peer group data provided by the compensation
consultants and our Chief Executive Officers
recommendation. We then determined a dollar value for the
restricted stock award for each executive officer and divided
that amount by, in the case of the Helix restricted stock, the
trading price at the time of grant, and in the case of the
Cal Dive restricted stock, the initial public offering
price. In 2007 and future years, management will review the data
each year and make its recommendation to the Compensation
Committee at its December meeting.
To encourage the executive officers to remain with our Company,
the Helix restricted stock vests in annual increments over a
five-year period, and 53% of the Cal Dive restricted stock
granted at the initial public offering vests in 20% annual
increments over a five-year period and the balance will vest in
20% annual increments over a five-year period beginning on the
first anniversary of the date that Helix no longer owns at least
51% of the total voting power of our Common Stock.
With respect to future restricted stock grants to all employees,
including grants to the Named Executive Officers, the practice
of the Company will be to make the grants in December, and the
amount of the grant is based on dividing the dollar value of
each proposed grant by the closing price for the Companys
Common Stock on the date of grant. In addition, restricted stock
may be awarded on certain other dates during the year including
the start date of new employees and the promotion date of
existing employees.
Perquisites
We limit the perquisites that we make available to our executive
officers, particularly in light of recent developments with
respect to corporate abuse involving perquisites. Our executives
are entitled to few benefits that are not otherwise available to
all of our employees. In this regard it should be noted that we
do not provide pension arrangements, post-retirement health
coverage, or similar benefits for our executives or employees.
Severance
Benefits
We currently have Employment Agreements with
Messrs. Hébert, Naughton and Lunsford that provide
severance benefits if the officer is terminated under certain
circumstances that are described in detail below under
Potential Payments Upon Termination or Change in
Control.
Section 162(m)
of the Internal Revenue Code
Section 162(m) of the Internal Revenue Code of 1986, as
amended, prohibits us from deducting more than $1 million
in compensation paid to certain executive officers in a single
year. An exception to the $1 million limit is provided for
performance-based compensation that meets certain
requirements, including approval by the stockholders. The annual
cash compensation paid and the restricted stock granted to our
executive officers have not been structured to qualify as
performance-based compensation. Our Compensation Committee
intends to monitor compensation levels and to consider in the
future qualifying the annual incentive bonus and restricted
stock grants under Section 162(m).
The Compensation Committees policy is to structure
compensation that will be fully deductible where doing so will
further the purpose of our executive compensation programs. The
Committee also considers it important to retain flexibility to
design compensation programs that recognize a full range of
criteria important to our success, even where compensation
payable under the programs may not be fully deductible.
Other
Benefits
All employees (including our executive officers) who participate
in our 401(k) plan receive matching funds in an amount equal to
50% of the employees contribution, up to 5% of salary
(including bonus) subject to contribution limits.
122
The Cal Dive International, Inc. non-employee director
compensation structure has three components: director fees,
expenses and stock-based compensation. The non-employee
Directors (other than Messrs. Kratz, Ferron and
Hébert, who are employed by Cal Dive or Helix) receive
an annual directors fee of $30,000 and $1,500 per Board
Meeting for attending each of four regularly scheduled quarterly
meetings plus any special board meetings. Furthermore, each of
the non-employee Directors receives an annual committee retainer
fee of $3,500 for each committee on which such Director serves
and a fee of $1,000 ($2,000 for the Chair of the Compensation
Committee and Corporate Governance and Nominating Committee,
$3,000 for the Chair of the Audit Committee) for each committee
meeting attended. The Company also pays the reasonable
out-of-pocket expenses incurred by each director in connection
with attending the meetings of the Board of Directors and any
committee thereof.
Non-employee directors have the option of taking Board and
Committee fees (but not expenses) in the form of restricted
stock, pursuant to the terms of the 2006 Plan. An election to
take fees in the form of cash or stock is made by a Director
prior to the beginning of the subject fiscal year, although for
2007 the non-employee Directors made their elections in February
2007. Directors taking fees in the form of restricted stock
receive an award in an amount equal to 125% of the cash
equivalent at the date of the actual grant (i.e., the last
business day of each fiscal quarter), which vest as to the full
100% on January 1st of the second year following the
grant. For fiscal year 2007, Messrs. Dittmann and Preng
have elected to take their Board and Committee fees in the form
of restricted stock.
On joining the Board and on each anniversary thereafter, a
non-employee Director receives a grant of $100,000 worth of
shares of restricted stock. All such grants of restricted stock
are made pursuant to the terms of 2006 Plan and vest ratably
over five years, subject to immediate vesting on the occurrence
of a Change of Control (as defined in the 2006 Plan).
Cal Dive had no non-employee Directors until
December 19, 2006 and the Company paid no cash compensation
and made no grants of restricted stock to the non-employee
Directors in 2006. The non-employee Directors received their
initial awards of restricted stock on February 5, 2007.
Directors who are also employees of Cal Dive or Helix do
not receive cash or equity compensation for service on the Board
in addition to compensation payable for their service as
employees.
123
Summary
Compensation Table
The following table provides a summary of the cash and non-cash
compensation for the fiscal year ended December 31, 2006
for each of: (i) the chief executive officer, (ii) the
chief financial officer, and (iii) each of the other
executive officers of Cal Dive. Cal Dive has only four
executive officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Compensation
|
|
|
Compensation
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus(1)
|
|
|
Awards(2)
|
|
|
Awards(2)
|
|
|
(1)(3)
|
|
|
(4)
|
|
|
Total
|
|
|
Quinn J. Hébert
|
|
|
2006
|
|
|
$
|
250,000
|
|
|
$
|
|
|
|
$
|
1,537,868
|
|
|
$
|
|
|
|
$
|
200,000
|
|
|
$
|
7,147
|
|
|
$
|
1,995,015
|
|
President and Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott T. Naughton
|
|
|
2006
|
|
|
|
190,000
|
|
|
|
|
|
|
|
53,138
|
|
|
|
|
|
|
|
185,000
|
|
|
|
5,500
|
|
|
|
433,638
|
|
Executive Vice
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President and Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
G. Kregg Lunsford
|
|
|
2006
|
|
|
|
165,000
|
|
|
|
59,000
|
|
|
|
39,375
|
|
|
|
48,880
|
|
|
|
141,000
|
|
|
|
10,935
|
|
|
|
464,190
|
|
Executive Vice
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President and Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lisa Buchanan(5)
|
|
|
2006
|
|
|
|
89,060
|
|
|
|
62,500
|
|
|
|
15,015
|
|
|
|
|
|
|
|
|
|
|
|
3,729
|
|
|
|
170,304
|
|
Vice President, General
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Counsel and Secretary
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The compensation reflected is based on 2006s performance
but was paid in 2007. |
|
(2) |
|
Relates to grants of Helix restricted stock and stock options.
The dollar value of restricted stock and stock options set forth
in these columns is equal to the compensation cost recognized by
Helix during 2006 for financial statement purposes in accordance
with FAS 123R. This valuation method values restricted
stock and stock options granted during 2006 and previous years.
A discussion of the assumptions used in calculating the
compensation cost is set forth in Note 13 to Helixs
Consolidated Financial Statements included in its 2006 Annual
Report on
Form 10-K.
The only grants of Cal Dive restricted stock to the Named
Executive Officers were made on December 19, 2006, and
compensation expense related to such awards was not material to
the year ended December 31, 2006. See Note 12 to our
Consolidated and Combined Financial Statements included in our
2006 Annual Report on
Form 10-K. |
|
(3) |
|
Messrs. Hébert, Naughton and Lunsford were eligible
for annual cash incentives, based on achievement of certain
individual performance criteria and corporate profit-sharing
incentives, under Helixs Senior Management Compensation
Plan. The actual payments to such officers consisted of bonuses
based on individual performance objectives together with Cal
Dive and Helixs Marine Contracting Services Group each
exceeding certain pre-established pre-tax income goals. The
exact amount of these annual incentives was determined by the
Companys Board prior to the Companys initial public
offering and the establishment of its Compensation Committee. |
|
(4) |
|
Consists of matching contributions by the Company through its
Retirement Plan and the compensation cost computed under
FAS 123R of purchases of Helix common stock pursuant to the
Helix Employee Stock Purchase Plan (ESPP). The Companys
Retirement Plan is a 401(k) retirement savings plan under which
the Company currently matches 50% of employees pre-tax
contributions up to 5% of cash compensation (including bonus)
subject to contribution limits. The Helix ESPP is a qualified,
non-compensatory plan that allows employees to acquire shares of
Helix common stock through payroll deductions (limited to 10% of
an employees base salary) over a six-month period. The
purchase price is equal to 85% of the fair market value of the
common stock on either the first or last day of the subscription
period, whichever is lower. |
|
(5) |
|
Ms. Buchanans employment with the Company began on
June 30, 2006. |
124
Grants
of Plan-Based Awards
In December 2006, we adopted the 2006 Long Term Incentive Plan
which provides that we may grant up to 7,000,000 shares of
our Common Stock in the form of options, restricted stock or
restricted stock units subject to the terms and conditions of
the 2006 Plan. The Cal Dive board adopted the Amended and
Restated 2006 Plan, which was approved by the stockholders at
the 2007 Annual Meeting. The Amended and Restated 2006 Plan
increased the number of shares that may be issued to
9,000,000 shares. As of September 30, 2007,
649,224 shares of restricted stock had been granted
pursuant to the 2006 Plan.
Prior to our initial public offering, our Named Executive
Officers also received grants of restricted stock under
Helixs 2005 Long Term Incentive Plan.
The following table sets forth certain information with respect
to the Cal Dive and Helix restricted stock granted during
the fiscal year ended December 31, 2006 to each of our
Named Executive Officers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future
|
|
|
All Other
|
|
|
Grant Date Fair
|
|
|
|
|
|
|
|
|
|
Payments of
|
|
|
Stock Awards:
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
No. of Shares
|
|
|
Stock and
|
|
|
|
|
|
|
Approval
|
|
|
Incentive Plans(3)
|
|
|
of Stock or
|
|
|
Option
|
|
Name
|
|
Grant Date
|
|
|
Date
|
|
|
Maximum ($)
|
|
|
Units (#)
|
|
|
Awards ($)(4)
|
|
|
Quinn J. Hébert
|
|
|
12/19/06
|
(1)
|
|
|
12/9/06
|
(1)
|
|
$
|
200,000
|
|
|
|
192,307
|
(1)
|
|
$
|
2,499,991
|
|
Scott T. Naughton
|
|
|
12/19/06
|
(1)
|
|
|
12/9/06
|
(1)
|
|
|
185,000
|
|
|
|
90,000
|
(1)
|
|
|
1,170,000
|
|
|
|
|
1/3/06
|
(2)
|
|
|
12/13/05
|
(2)
|
|
|
|
|
|
|
4,970
|
(2)
|
|
|
178,373
|
|
G. Kregg Lunsford
|
|
|
12/19/06
|
(1)
|
|
|
12/9/06
|
(1)
|
|
|
141,000
|
|
|
|
57,153
|
(1)
|
|
|
742,989
|
|
|
|
|
1/3/06
|
(2)
|
|
|
12/13/05
|
(2)
|
|
|
|
|
|
|
3,735
|
(2)
|
|
|
134,049
|
|
Lisa Buchanan
|
|
|
12/19/06
|
(1)
|
|
|
12/9/06
|
(1)
|
|
|
0
|
|
|
|
52,615
|
(1)
|
|
|
683,995
|
|
|
|
|
6/30/06
|
(2)
|
|
|
6/26/06
|
(2)
|
|
|
|
|
|
|
4,180
|
(2)
|
|
|
150,145
|
|
|
|
|
(1) |
|
Represents grant of Cal Dive restricted stock under our 2006
Plan. The grants are valued based on the offering price in our
initial public offering of $13.00 per share and became effective
on the closing date of our initial public offering. A total of
53% of the Cal Dive restricted stock vests 20% per year over a
five-year period and the remaining 47% vests 20% per year over a
five-year period beginning on the first anniversary of the date
on which Helix no longer owns 51% of our Common Stock. All
shares vest in full upon a change of control. |
|
(2) |
|
Represents grant of Helix restricted stock under the Helix 2005
Long Term Incentive Plan. Except for the grant to
Ms. Buchanan, these grants were approved at the December
meeting of the Helix Compensation Committee to take effect on
the first business day of the following year based upon the
closing price of the stock on the last business day of the
previous year. The grant to Ms. Buchanan was made on
June 30, 2006, upon the commencement of her employment with
Cal Dive. The grants are valued based on the fair market value
on the grant date, which is equal to the closing sale price as
reported on the New York Stock Exchange on the grant date. The
Helix restricted stock vests 20% per year over a five-year
period and all shares vest upon a change of control of Helix. |
|
(3) |
|
Reflects maximum payments under Helixs Senior Management
Compensation Plan, which does not provide for thresholds or
targets. We are unable to provide a representative target amount
based on the previous fiscal years performance as we were
not operated as a separate entity prior to fiscal 2006. |
|
(4) |
|
The dollar values of restricted stock are equal to the aggregate
grant date fair value computed in accordance with FAS 123R.
A discussion of the assumptions used in calculating the grant
date fair value is set forth in Note 13 of Helixs
Consolidated Financial Statements contained in its 2006 Annual
Report on
Form 10-K
and Note 12 of our Consolidated and Combined Financial
Statements included in our 2006 Annual Report on
Form 10-K. |
125
Outstanding
Equity Awards at Fiscal Year-End
The following table sets forth certain information with respect
to the value of all unexercised options and unvested restricted
stock previously awarded to the Named Executive Officers as of
the end of the fiscal year ended December 31, 2006.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
No. of
|
|
|
No. of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
No. of Shares
|
|
|
Market Value of
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
or Units of
|
|
|
Shares or Units
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Stock That
|
|
|
of Stock That
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Have Not
|
|
|
Have Not
|
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price ($)
|
|
|
Date
|
|
|
Vested (#)
|
|
|
Vested ($)
|
|
|
Quinn J. Hébert
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,916
|
(1)
|
|
$
|
1,314,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
192,307
|
(2)
|
|
|
2,413,453
|
|
Scott T. Naughton
|
|
|
10,000
|
|
|
|
|
|
|
|
10.94
|
|
|
|
4/3/11
|
|
|
|
3,571
|
(3)
|
|
|
112,027
|
|
|
|
|
20,000
|
|
|
|
|
|
|
|
10.92
|
|
|
|
2/20/12
|
|
|
|
4,970
|
(4)
|
|
|
155,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
(2)
|
|
|
1,129,500
|
|
G. Kregg Lunsford
|
|
|
8,000
|
|
|
|
16,000
|
(5)
|
|
|
8.57
|
|
|
|
2/17/13
|
|
|
|
2,570
|
(3)
|
|
|
80,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,735
|
(4)
|
|
|
117,167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,153
|
(2)
|
|
|
717,270
|
|
Lisa Buchanan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,180
|
(6)
|
|
|
131,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,615
|
(2)
|
|
|
660,318
|
|
|
|
|
(1) |
|
Shares of Helix restricted stock granted on November 1,
2005. All shares vested on February 1, 2007. |
|
(2) |
|
Shares of Cal Dive restricted stock granted on December 19,
2006. Shares with respect to 53% vest in annual 20% increments
over a five-year period, and the balance vests in annual 20%
increments over a five-year period beginning on the first
anniversary of the date that Helix no longer owns at least 51%
of the total voting power of our Common Stock. |
|
(3) |
|
Shares of Helix restricted stock granted on January 3,
2005. The shares vest 20% per year over a five-year period. |
|
(4) |
|
Shares of Helix restricted stock granted on January 3,
2006. The shares vest 20% per year over a five-year period. |
|
(5) |
|
Options for Helix common stock were granted February 17,
2003. The options vest 20% per year over a five-year period. |
|
(6) |
|
Shares of Helix restricted stock granted on June 30, 2006.
The shares vest 20% per year over a five-year period. |
Option
Exercises and Stock Vested
The following table sets forth certain information regarding the
vesting of restricted stock during the fiscal year ended
December 31, 2006 for each of the Named Executive Officers.
There were no exercises of stock options during 2006.
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
No. of Shares Acquired
|
|
|
Value Realized
|
|
Name
|
|
on Vesting (#)(1)
|
|
|
on Vesting ($)
|
|
|
Quinn J. Hébert
|
|
|
16,156
|
|
|
$
|
552,858
|
|
G. Kregg Lunsford
|
|
|
642
|
|
|
|
25,301
|
|
Scott T. Naughton
|
|
|
893
|
|
|
|
35,193
|
|
Lisa M. Buchanan
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
All shares reported relate to Helix restricted stock. No shares
of Cal Dive restricted stock vested during 2006. |
126
Employment
Agreements and Change of Control Provisions Related to Named
Executive Officers
All of our Named Executive Officers, other than
Ms. Buchanan, have entered into employment agreements with
Helix. These agreements were assumed by us as of the closing of
our initial public offering pursuant to the terms of the Master
Agreement and the Employee Matters Agreement between Helix and
us. Each of these employment agreements have similar terms
involving salary, bonus and benefits (with amounts that vary due
to differing responsibilities).
Each of the executive employment agreements provide, among other
things, that if we pay specific amounts, then until the first or
second anniversary date of termination of the executives
employment with us (depending on the event of termination), the
executive shall not, directly or indirectly either for himself
or any other individual or entity, participate in any business
which engages or which proposes to engage in the business of
providing diving services in the Gulf of Mexico or any other
business actively engaged in by us on the date of termination of
employment, so long as such executive continues to receive
payments, including his base salary and insurance benefits
received by the senior executives.
If a Named Executive Officer, other than Ms. Buchanan,
terminates his employment for Good Cause or is
terminated Without Cause during a certain specified
period following a Change of Control, such executive
would (a) receive a lump sum payment in the following
amount: (i) for Mr. Hébert, two times the annual
base salary together with an amount equal to the annual bonus
paid to the executive with respect to the most recently
completed fiscal year, (ii) for Mr. Naughton, two
times the annual base salary plus annual bonus paid to the
executive with respect to the most recently completed fiscal
year and (iii) for Mr. Lunsford, one times the annual
base salary due to termination Without Cause and two
times the annual base salary due to termination for Good
Cause, in each case together with an amount equal to the
annual bonus paid to the executive with respect to the most
recently completed fiscal year, (b) have all options and
restricted stock held by such executive vest, and
(c) continue to receive welfare plan and other benefits for
a period of two years or as long as such plan or benefits allow.
For purposes of the employment agreements, Good
Cause includes both that (a) the CEO or COO shall
cease employment and (b) two of the following: (i) a
material change in the executives position, authority,
duties or responsibilities, (ii) changes in the office or
location at which the executive is based without his consent
(such consent not to be unreasonably withheld), (iii) a
significant change in the executives reporting
relationships, or (iv) certain breaches of the agreement. A
Change of Control for purposes of the employment
agreements would occur if a person or group becomes the
beneficial owner, directly or indirectly, of securities
representing 45% or more of the combined voting power of our
outstanding securities. The employment agreements provide that,
if any payment to one of the covered executives will be subject
to any excise tax under Section 4999 of the Internal
Revenue Code, a
gross-up
payment would be made to place the executive in the same net
after-tax position as would have been the case if no excise tax
had been payable.
Potential
Payments Upon Termination or Change in Control
The following information and table set forth the amount of
payments to each of our Named Executive Officers in the event of
a termination of employment as a result of normal and early
retirement, involuntary termination by the Company without
Cause, death, disability, voluntary termination by
the Named Executive Officer, termination by the Company for
Cause, and termination without Cause or
by the Executive for Good Cause following a change
in control. The table also sets forth the amount of payments to
each of our Named Executive Officers in the event of a change in
control without a termination of employment.
As described above, we have employment agreements with all of
our Named Executive Officers other than Ms. Buchanan. We do
not otherwise have any severance policy or arrangement that
provides for payments to a Named Executive Officer in the event
of a termination of employment except provisions contained in
the agreements governing their equity incentive awards.
127
Assumptions and General Principles. The
following assumptions and general principles apply with respect
to the following table and any termination of employment of a
Named Executive Officer:
|
|
|
|
|
The amounts shown in the table assume that each Named Executive
Officer was terminated on December 31, 2006.
|
|
|
|
A Named Executive Officer is entitled to receive amounts earned
during his term of employment regardless of the manner in which
the Named Executive Officers employment is terminated.
These amounts include base salary and unused vacation pay. These
amounts are not shown in the table because they are not
severance payments.
|
|
|
|
In general, a Named Executive Officer must continue to be
employed at the time of payment to be entitled to receive annual
cash incentive compensation pursuant to our incentive
compensation plan. In the event a termination occurs prior to
that time, the Compensation Committee has discretion to award
the Named Executive Officer an annual cash incentive
compensation payment that would approximate a prorated amount of
the payment the Named Executive Officer would have received
under the plan and takes into consideration the Named Executive
Officers performance and contributions to achieving the
performance criteria under the plan to the date of termination.
Discretionary annual cash incentive compensation payments are
not typically awarded in the event of a voluntary termination or
a termination for Cause. In addition, the employment agreements
with Messrs. Hébert, Naughton and Lunsford
specifically provide for the payment of a prorated amount of the
annual cash incentive compensation upon terminations due to the
death or disability of the Named Executive Officer, prorated to
the date of such event. We have assumed that the Compensation
Committee would use its discretion to treat Ms. Buchanan
the same as the other Named Executive Officers in such events.
|
|
|
|
Because we have assumed a December 31, 2006 termination
date, our Compensation Committee has the discretion to pay each
of the Named Executive Officers the amount of the annual cash
incentive payment earned under the plan for 2006, except in
cases of voluntary termination or termination for Cause.
Therefore, the amount set forth in the table for annual cash
incentive compensation payment is the actual annual incentive
compensation paid to each Named Executive Officer for 2006
performance. This amount is also the sum of the amounts set
forth in the Non-Equity Incentive Plan Compensation
and Bonus columns of the 2006 Summary Compensation
Table.
|
|
|
|
A Named Executive Officer may exercise any stock options that
are exercisable prior to the date of termination and is entitled
to receive unrestricted shares of Common Stock with respect to
any restricted stock awards for which the vesting period has
expired prior to the date of termination, or, in the case below,
December 31, 2006. Except for stock options and restricted
stock that vest upon a change in control, any amounts related to
these stock options and restricted stock awards are not included
in the table because they are not severance payments.
|
Normal and Early Retirement. A Named Executive
Officer is eligible to elect retirement at any age. The Named
Executive Officers are not entitled to any additional payments
or benefits upon retirement other than (i) any amounts
accrued and vested in such Named Executive Officers
account under our 401(k) Plan, and (ii) any amounts accrued
in such Named Executive Officers account under the Helix
Employee Stock Purchase Plan. Any unvested stock options or
restricted stock would be forfeited upon retirement. All
employees who have reached at least age 55 with at least
10 years of service upon retirement are also entitled to
continue their participation in the Companys health
benefit plans until they reach age 65, upon paying both the
employee and the employer portion of the premiums for such
coverage. Since this benefit is available without discrimination
to all employees, it is not included in the table below. We are
assuming for purposes of the table below that the Compensation
Committee would award the Named Executive Officers their 2006
annual cash incentive compensation upon retirement on
December 31, 2006.
Involuntary Termination. The employment
contracts for Messrs. Naughton and Lunsford require the
Company to give the executive 12 months notice of an
involuntary termination, which has the effective of providing to
the executive all of the benefits of employment such executive
would have enjoyed for the full year following such termination,
including base salary, annual cash incentive compensation,
continued vesting
128
of stock options and restricted stock and other employee
benefits. Mr. Héberts contract provides for an
initial term expiring November 1, 2007, and the
12-month
termination notice provision described above is required only
for involuntary terminations that take place after such date.
Thus, if Mr. Héberts employment were
involuntarily terminated without cause as of December 31,
2006, his contract would only provide for 10 months of
continued base salary, annual cash incentive compensation,
restricted stock vesting and other benefits, rather than the
full year provided in the agreements for Messrs Naughton and
Lunsford.
There is a contradictory provision in Mr. Naughtons
agreement that provides that upon a termination of
Mr. Naughtons employment by the Company without
Cause prior to a change in control,
Mr. Naughton will be entitled to receive an amount equal to
the greater of (i) six months salary or
(ii) four weeks salary plus two weeks salary
for every year of salaried employment by the Company, plus
continuation of Mr. Naughtons participation in the
Companys benefit plans for six months. Since the benefits
Mr. Naughton would receive under the
12-month
notice provision described above are greater than those provided
under this provision, the larger amounts are set forth in the
table below.
Death and Disability. The Named Executive
Officers are not entitled to any payments or benefits upon
death, other than any proceeds under the Companys life
insurance benefits provided to all Company employees, for which
the employees pay the premiums. Likewise upon disability the
Named Executive Officers are only entitled to such benefits as
they may receive under the Companys long term disability
policy available to all employees. Since these benefits are paid
for by the executive and are no more favorable for the Named
Executive Officers than for any other Company employee, no
amounts are shown in the table below for these benefits. All
unvested stock options and restricted stock would be forfeited.
Voluntary Termination and Termination for
Cause. A Named Executive Officer is not entitled
to receive any additional forms of severance payments or
benefits upon his voluntary decision to terminate employment or
upon termination for Cause. All unvested stock options or
restricted stock would be forfeited.
Change in Control. Pursuant to the terms of
the agreements governing the awards of stock options or
restricted stock to the Named Executive Officers, upon the
occurrence of a change in control, all outstanding stock options
will immediately vest and become exercisable and all shares of
restricted stock will immediately vest and become unrestricted.
The amounts set forth in the table for stock options reflect the
difference between the closing price of Helixs common
stock on December 29, 2006 and the exercise prices for each
option for which vesting would accelerate (no Named Executive
Officer has any options to purchase Cal Dive stock). The
amounts set forth in the table for restricted stock reflect the
number of shares of restricted stock for which vesting would
accelerate multiplied by the closing price of either
Helixs or Cal Dives Common Stock, as
applicable, on December 29, 2006. No other benefits are
payable to our Named Executive Officers upon a Change in Control
without a termination of employment.
The Helix 2005 Long Term Incentive Plan, and the Cal Dive
2006 Plan, in the form as of December 31, 2006, define a
change in control as (i) any sale of all or substantially
all of the assets of the subject company or a consolidation or
merger of the subject company in which the company was not the
surviving company, other than a merger where a majority of the
board of the surviving company continues for a two year period
after the merger to be persons who were directors of the subject
company prior to the merger, (ii) a liquidation or
dissolution of the subject company, or (iii) the
acquisition by any person of 20% or more of the outstanding
securities of the subject company, and within two years
thereafter, the persons who constituted the board of the subject
company prior to the acquisition cease to constitute at least a
majority of the board.
Termination of Employment following a Change in
Control. The employment agreements with the Named
Executive Officers other than Ms. Buchanan provide that
upon a termination of employment without Cause
following a change in control or if the Named Executive Officer
terminates his employment in certain circumstances defined in
the agreement that constitute Good Cause, in
addition to the accelerated vesting of stock options and
restricted stock described above, each will receive:
|
|
|
|
|
Mr. Hébert will receive a lump sum severance payment
in an amount equal to two times (a) his base salary during
the year prior to termination together with (b) an amount
equal to the annual cash incentive compensation received by
Mr. Hébert for the last complete year of employment;
|
129
|
|
|
|
|
Mr. Naughton will receive a lump sum severance payment in
an amount equal to two times (a) his base salary plus
(b) the annual cash incentive compensation paid to
Mr. Naughton for his last complete year of employment;
|
|
|
|
|
|
Mr. Lunsford will receive a lump sum severance payment in
an amount equal to one times (in the case of a termination
without Cause following a change in control), or two
times (in the case of a termination by Mr. Lunsford for
Good Cause following a change in control)
(a) his base salary together with (b) an amount equal
to the annual cash incentive bonus received by Mr. Lunsford
for the last complete year of employment;
|
|
|
|
|
|
two years of continued participation in the Companys
health care and life insurance benefit plans; and
|
|
|
|
an amount equal to the excise tax and taxes thereon charged, if
any, to the Named Executive Officer as a result of any change in
control payments.
|
The definition of change in control contained in the employment
agreements are described above under Employment Agreements
and Change of Control Provisions Related to Named Executive
Officers.
130
ESTIMATED
PAYMENTS ON TERMINATION OR CHANGE IN CONTROL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Event
|
|
Q. Hébert
|
|
|
S. Naughton
|
|
|
G. K. Lunsford
|
|
|
L. Buchanan
|
|
|
Normal and Early Retirement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 annual cash incentive compensation
|
|
$
|
200,000
|
|
|
$
|
185,000
|
|
|
$
|
200,000
|
|
|
$
|
62,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
200,000
|
|
|
$
|
185,000
|
|
|
$
|
200,000
|
|
|
$
|
62,500
|
|
Death
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 annual cash incentive compensation
|
|
$
|
200,000
|
|
|
$
|
185,000
|
|
|
$
|
200,000
|
|
|
$
|
62,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
200,000
|
|
|
$
|
185,000
|
|
|
$
|
200,000
|
|
|
$
|
62,500
|
|
Disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 annual cash incentive compensation
|
|
$
|
200,000
|
|
|
$
|
185,000
|
|
|
$
|
200,000
|
|
|
$
|
62,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
200,000
|
|
|
$
|
185,000
|
|
|
$
|
200,000
|
|
|
$
|
62,500
|
|
Voluntary Termination and Termination for Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No payments
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Involuntary Termination Without Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 annual cash incentive compensation
|
|
$
|
200,000
|
|
|
$
|
185,000
|
|
|
$
|
200,000
|
|
|
$
|
62,500
|
|
Continued base salary
|
|
|
208,333
|
|
|
|
190,000
|
|
|
|
165,000
|
|
|
|
0
|
|
Continued cash incentive compensation
|
|
|
166,667
|
|
|
|
185,000
|
|
|
|
200,000
|
|
|
|
0
|
|
Continued health, disability and life insurance benefits
|
|
|
10,426
|
|
|
|
2,916
|
|
|
|
7,796
|
|
|
|
0
|
|
Continued vesting of Helix stock options
|
|
|
0
|
|
|
|
0
|
|
|
|
182,400
|
|
|
|
0
|
|
Continued vesting of Helix restricted stock
|
|
|
1,314,905
|
|
|
|
59,195
|
|
|
|
43,573
|
|
|
|
0
|
|
Continued vesting of Cal Dive restricted stock
|
|
|
0
|
|
|
|
119,727
|
|
|
|
76,030
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,900,331
|
|
|
$
|
741,838
|
|
|
$
|
874,799
|
|
|
$
|
62,500
|
|
Change in Control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated Helix stock options
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
364,800
|
|
|
$
|
0
|
|
Accelerated Helix restricted stock
|
|
|
1,314,905
|
|
|
|
267,931
|
|
|
|
197,788
|
|
|
|
131,126
|
|
Accelerated Cal Dive restricted stock
|
|
|
2,413,453
|
|
|
|
1,129,500
|
|
|
|
717,270
|
|
|
|
660,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,728,358
|
|
|
$
|
1,397,431
|
|
|
$
|
1,279,858
|
|
|
$
|
791,444
|
|
Change in Control with Involuntary Termination Without
Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 annual cash incentive compensation
|
|
$
|
200,000
|
|
|
$
|
185,000
|
|
|
$
|
200,000
|
|
|
$
|
0
|
|
Cash severance payment
|
|
|
900,000
|
|
|
|
750,000
|
|
|
|
365,000
|
|
|
|
0
|
|
Accelerated Helix stock options
|
|
|
0
|
|
|
|
0
|
|
|
|
364,800
|
|
|
|
0
|
|
Accelerated Helix restricted stock
|
|
|
1,314,905
|
|
|
|
267,931
|
|
|
|
197,788
|
|
|
|
131,126
|
|
Accelerated Cal Dive restricted stock
|
|
|
2,413,453
|
|
|
|
1,129,500
|
|
|
|
717,270
|
|
|
|
660,318
|
|
Continued health, disability and life insurance benefits
|
|
|
20,852
|
|
|
|
5,832
|
|
|
|
15,593
|
|
|
|
0
|
|
Excise tax gross up
|
|
|
1,142,037
|
|
|
|
684,002
|
|
|
|
357,491
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,991,247
|
|
|
$
|
3,022,265
|
|
|
$
|
2,217,942
|
|
|
$
|
791,444
|
|
Change in Control with Termination by Executive With Good
Cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 annual cash incentive compensation
|
|
$
|
200,000
|
|
|
$
|
185,000
|
|
|
$
|
200,000
|
|
|
$
|
0
|
|
Cash severance payment
|
|
|
900,000
|
|
|
|
750,000
|
|
|
|
730,000
|
|
|
|
0
|
|
Accelerated Helix stock options
|
|
|
0
|
|
|
|
0
|
|
|
|
364,800
|
|
|
|
0
|
|
Accelerated Helix restricted stock
|
|
|
1,314,905
|
|
|
|
267,931
|
|
|
|
197,788
|
|
|
|
131,126
|
|
Accelerated Cal Dive restricted stock
|
|
|
2,413,453
|
|
|
|
1,129,500
|
|
|
|
717,270
|
|
|
|
660,318
|
|
Continued health, disability and life insurance benefits
|
|
|
20,852
|
|
|
|
5,832
|
|
|
|
15,593
|
|
|
|
0
|
|
Excise tax gross up
|
|
|
1,142,037
|
|
|
|
684,002
|
|
|
|
525,115
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,991,247
|
|
|
$
|
3,022,265
|
|
|
$
|
2,750,566
|
|
|
$
|
791,444
|
|
131
Beneficial
Ownership of Cal Dives Common Stock
The following table sets forth, as of September 30, 2007,
certain information regarding beneficial ownership of our Common
Stock by (i) each of our named executive officers,
(ii) each director of Cal Dive, (iii) all of
Cal Dives directors and executive officers as a
group, and (iv) each stockholder known by Cal Dive to
be the beneficial owner of more than 5% of the outstanding
Cal Dive common stock, all in accordance with
Rule 13d-3
of the Exchange Act. Based on information furnished to
Cal Dive by such stockholders, unless otherwise indicated,
all shares indicated as beneficially owned are held with sole
voting and investment power.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
|
|
|
|
Number of Shares
|
|
|
Outstanding
|
|
Name of Beneficial Owner
|
|
Beneficially Owned
|
|
|
Common Stock
|
|
|
Owen Kratz
|
|
|
10,000
|
|
|
|
*
|
|
Martin R. Ferron
|
|
|
10,000
|
|
|
|
*
|
|
Quinn J. Hébert
|
|
|
193,447
|
|
|
|
*
|
|
Todd A. Dittmann
|
|
|
14,366
|
|
|
|
*
|
|
David E. Preng
|
|
|
13,836
|
|
|
|
*
|
|
William L. Transier
|
|
|
8,298
|
|
|
|
*
|
|
G. Kregg Lunsford
|
|
|
57,153
|
|
|
|
*
|
|
Scott T. Naughton
|
|
|
90,000
|
|
|
|
*
|
|
Lisa M. Buchanan
|
|
|
53,315
|
|
|
|
*
|
|
Helix Energy Solutions Group, Inc.
|
|
|
61,506,691
|
|
|
|
72.94
|
%
|
400 N. Sam Houston Parkway, E.
|
|
|
|
|
|
|
|
|
Suite 400
|
|
|
|
|
|
|
|
|
Houston, Texas 77060
|
|
|
|
|
|
|
|
|
All executive officers and directors as a group (9 persons)
|
|
|
450,415
|
|
|
|
*
|
|
132
INFORMATION
ABOUT HORIZON
General
Development of Horizons Business
Horizon Offshore, Inc. and its subsidiaries (also referred to in
this section as Horizon, the company,
we or us) provide marine construction
services for the offshore oil and gas and energy industries.
During 2006 and 2007, we provided marine construction services
in the U.S. Gulf of Mexico, Latin America, Southeast
Asia/Mediterranean, and West Africa. We are also currently
performing a project in the Northeastern U.S. that is
expected to be completed in 2007.
Our primary services include:
|
|
|
|
|
laying, burying or repairing marine pipelines;
|
|
|
|
providing
hook-up and
commissioning services;
|
|
|
|
installing offshore production platforms and other
structures; and
|
|
|
|
disassembling and salvaging offshore production platforms and
other structures.
|
Our marine fleet has a range of capabilities and performs
construction projects, primarily in water depths up to
1,000 feet. Our fleet consists of nine operational vessels.
The following table describes our marine vessels.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
Maximum
|
|
|
|
|
|
|
|
|
Derrick
|
|
|
Pipelay
|
|
|
|
|
|
Length
|
|
|
Lift
|
|
|
Diameter
|
|
Vessel(1)
|
|
Vessel Type
|
|
(Feet)
|
|
|
(Tons)
|
|
|
(Inches)
|
|
|
American Horizon
|
|
Pipelay/Pipebury
|
|
|
180
|
|
|
|
|
|
|
|
18
|
|
Lone Star Horizon
|
|
Pipelay/Pipebury
|
|
|
320
|
|
|
|
|
|
|
|
39
|
|
Brazos Horizon
|
|
Pipelay/Pipebury
|
|
|
210
|
|
|
|
|
|
|
|
18
|
|
Pecos Horizon
|
|
Pipelay/Pipebury
|
|
|
250
|
|
|
|
|
|
|
|
24
|
|
Canyon Horizon
|
|
Pipebury
|
|
|
330
|
|
|
|
|
|
|
|
|
|
Atlantic Horizon
|
|
Derrick
|
|
|
420
|
|
|
|
550
|
|
|
|
|
|
Pacific Horizon
|
|
Derrick
|
|
|
350
|
|
|
|
1,000
|
|
|
|
|
|
Sea Horizon
|
|
Derrick/Pipelay
|
|
|
360
|
|
|
|
1,200
|
|
|
|
36
|
|
Texas Horizon
|
|
Diving Support/Pipelay and Dynamically Positioned
|
|
|
341
|
|
|
|
|
|
|
|
10
|
|
|
|
|
(1) |
|
Fire destroyed the Gulf Horizon pipelay/pipebury barge in 2004.
The vessel is inactive in Port Arthur and Horizon has no plans
to repair it. |
Our four pipelay and pipebury vessels are able to install, bury
and repair pipelines with an outside diameter (including
concrete coating) of up to 39 inches. These vessels employ
conventional S-lay technology that is appropriate for operating
on the U.S. continental shelf and the international areas
where we currently operate. Conventional pipeline installation
involves the sequential assembly of pieces of pipe through an
assembly line of welding stations that run the length of the
pipelay vessel. Welds are then inspected and coated on the deck
of the pipelay barge. The pipe is then supported off the stern
and into the water via a ramp that is referred to as a
pontoon or stinger. The ramp supports
the pipe to some distance under the water and prevents
over-stressing as it curves into a horizontal position toward
the sea floor. The barge is then moved forward by its anchor
winches and the pipeline is laid on the sea floor. The suspended
pipe forms an elongated S shape as it undergoes a
second bend above the contact point. During the pipelay process,
divers regularly inspect the pipeline to ensure that the ramp is
providing proper support and that the pipeline is settling
correctly.
Pipelines installed on the U.S. continental shelf located
in water depths of 200 feet or less are required by the
regulations of the United States Department of Interiors
Minerals Management Service to be buried at least three feet
below the sea floor. Jet sleds towed behind pipelay/pipebury
barges are used to bury pipelines on smaller pipe installation
projects. Towed jet sleds are less likely to damage the pipeline
being laid or any
133
existing pipelines that the pipeline may cross. Towed jet sleds
use a high-pressure stream of air and water that is pumped from
the barge to create a trench into which the pipe settles. For
larger pipe burying projects, or where deeper trenching is
required, we use the Canyon Horizon, our dedicated bury
barge. We match our burying approach to the requirements of each
specific contract by using the Canyon Horizon for larger
projects and our towed jet sleds behind pipelay barges for
smaller projects.
We also install and remove or salvage offshore fixed platforms.
We operate two derrick barges equipped with cranes designed to
lift and place platforms, structures or equipment into position
for installation. In addition, they are used to disassemble and
remove platforms and prepare them for salvage or refurbishment.
The Pacific Horizon has a lift capacity of 1,000 tons,
and the Atlantic Horizon has a 550-ton lift capacity.
The Sea Horizon, our 360-foot long and 100-foot wide
combination vessel that has both pipelay and derrick
capabilities, is utilized to install up to 36 diameter
pipe. The Sea Horizon is also utilized to install and
remove offshore fixed platforms and has a lift capacity of 1,200
tons.
The Texas Horizon is a dynamically positioned DP 2
deepwater construction and pipelay vessel. It is capable of
providing diving and remotely operated vessel (ROV) support, as
well as installing small diameter rigid pipe, flexible pipe,
coiled tubing and umbilicals in deep water.
Our customers award contracts by means of a highly competitive
bidding process. In preparing a bid, we must consider a variety
of factors, including estimated time necessary to complete the
project, the recovery of equipment costs and the location and
duration of current and future projects. We place a strong
emphasis on attempting to sequentially structure scheduled work
in adjacent areas. Sequential scheduling reduces mobilization
and demobilization time and costs associated with each project
resulting in increased profitability. We employ core groups of
experienced offshore personnel that work together on particular
types of projects to increase our bidding accuracy. We often
obtain the services of workers outside of our core employee
groups by subcontracting with other parties. Our management
examines the results of each bid submitted, reevaluates bids,
and has implemented a system of controls to maintain and improve
the accuracy of the bidding process. The accuracy of the various
estimates made in preparing a bid is critical to our
profitability.
Our contracts in the U.S. Gulf of Mexico are typically of
short duration, being completed in periods as brief as several
days to periods of up to several months for projects involving
our larger pipelay vessels. International construction projects
typically have longer lead times and extended job durations.
Historically, our projects are performed on a fixed-price or a
combination of a fixed-price and day-rate basis in the case of
extra work to be performed under the contract. Due to the damage
caused by the hurricane activity during 2004 and 2005 in the
U.S. Gulf of Mexico, we contracted and performed the
majority of our repair and salvage work during 2006 on a
day-rate basis because of the nature and often indeterminate
scope of the repairs. As we conclude most of our pipeline repair
work, we are seeing contracts transition back to a fixed-price
basis. From time to time, we perform projects on a
cost-reimbursement basis. Under a fixed-price contract, the
price stated in the contract is subject to adjustment only for
change orders approved by the customer. As a result, we are
responsible for all cost overruns.
Directors
and Executive Officers
For information regarding Horizons directors and executive
officers, please see Horizons Annual Report on
Form 10-K,
which is incorporated by reference in this information
statement/proxy statement/prospectus.
Beneficial
Ownership of Horizons Common Stock
For information regarding beneficial ownership of Horizons
common stock, please see Horizons Annual Report on
Form 10-K,
which is incorporated by reference in this information
statement/proxy statement/prospectus.
134
CAL
DIVES FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
|
|
|
|
|
|
|
Page
|
|
Audited Financial Statements
|
|
|
|
|
|
|
|
136
|
|
|
|
|
137
|
|
|
|
|
138
|
|
|
|
|
139
|
|
|
|
|
140
|
|
|
|
|
141
|
|
Interim Financial Statements
|
|
|
|
|
|
|
|
160
|
|
|
|
|
161
|
|
|
|
|
162
|
|
|
|
|
163
|
|
135
Report
of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders of
Cal Dive International, Inc.
We have audited the accompanying consolidated and combined
balance sheets of Cal Dive International, Inc. and
subsidiaries as of December 31, 2006 and 2005, and the
related consolidated and combined statements of operations,
changes in stockholders equity, and cash flows for each of
the three years in the period ended December 31, 2006.
These financial statements are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. We were not engaged to perform an
audit of the Companys internal control over financial
reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of
the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated and
combined financial position of Cal Dive International, Inc.
and subsidiaries at December 31, 2006 and 2005, and the
consolidated and combined results of their operations and their
cash flows for each of the three years in the period ended
December 31, 2006, in conformity with U.S. generally
accepted accounting principles.
As discussed in Note 2 to the consolidated and combined
financial statements, effective January 1, 2006, the
Company adopted Statement of Financial Accounting Standards
No. 123 (revised 2004), Share-Based Payment.
/s/ Ernst & Young LLP
Houston, Texas
February 28, 2007
136
Cal Dive
International, Inc. and Subsidiaries
Consolidated and Combined Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
22,655
|
|
|
$
|
|
|
Accounts receivable
|
|
|
|
|
|
|
|
|
Trade, net of allowance for doubtful accounts $169 and $26,
respectively
|
|
|
93,748
|
|
|
|
75,713
|
|
Unbilled revenue
|
|
|
33,869
|
|
|
|
13,608
|
|
Net receivable from Helix
|
|
|
1,626
|
|
|
|
|
|
Deferred income taxes
|
|
|
1,869
|
|
|
|
1,939
|
|
Assets held for sale
|
|
|
698
|
|
|
|
7,936
|
|
Notes receivable
|
|
|
3,008
|
|
|
|
1,500
|
|
Other current assets
|
|
|
11,274
|
|
|
|
9,788
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
168,747
|
|
|
|
110,484
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
293,929
|
|
|
|
173,841
|
|
Less Accumulated depreciation
|
|
|
(71,682
|
)
|
|
|
(60,237
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
222,247
|
|
|
|
113,604
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Equity investment
|
|
|
10,871
|
|
|
|
11,513
|
|
Goodwill
|
|
|
26,666
|
|
|
|
27,814
|
|
Other assets, net
|
|
|
23,622
|
|
|
|
14,469
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
452,153
|
|
|
$
|
277,884
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
39,810
|
|
|
$
|
32,034
|
|
Accrued liabilities
|
|
|
19,004
|
|
|
|
41,835
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
58,814
|
|
|
|
73,869
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
201,000
|
|
|
|
|
|
Long-term payable to Helix
|
|
|
11,028
|
|
|
|
|
|
Deferred income taxes
|
|
|
20,824
|
|
|
|
22,621
|
|
Other long term liabilities
|
|
|
2,726
|
|
|
|
3,611
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
294,392
|
|
|
|
100,101
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock, 240,000 shares authorized, $0.01 par
value,
|
|
|
|
|
|
|
|
|
Issued and outstanding: 84,298 shares in 2006, no shares
issued in 2005
|
|
|
843
|
|
|
|
|
|
Capital in excess of par value of common stock
|
|
|
154,898
|
|
|
|
|
|
Helixs net investment
|
|
|
|
|
|
|
179,681
|
|
Retained earnings
|
|
|
2,020
|
|
|
|
|
|
Unearned compensation
|
|
|
|
|
|
|
(1,898
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
157,761
|
|
|
|
177,783
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
452,153
|
|
|
$
|
277,884
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated and combined financial statements.
137
Cal Dive
International, Inc. and Subsidiaries
Consolidated and Combined Statements of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Net revenues
|
|
$
|
509,917
|
|
|
$
|
224,299
|
|
|
$
|
125,786
|
|
Cost of sales
|
|
|
287,387
|
|
|
|
152,586
|
|
|
|
101,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
222,530
|
|
|
|
71,713
|
|
|
|
24,203
|
|
Gain on sale of assets
|
|
|
349
|
|
|
|
270
|
|
|
|
|
|
Selling and administrative expenses
|
|
|
37,431
|
|
|
|
16,730
|
|
|
|
12,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
185,448
|
|
|
|
55,253
|
|
|
|
11,885
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings (losses) of investment
|
|
|
(487
|
)
|
|
|
2,817
|
|
|
|
|
|
Net interest income
|
|
|
163
|
|
|
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
185,124
|
|
|
|
58,115
|
|
|
|
11,885
|
|
Provision for income taxes
|
|
|
65,710
|
|
|
|
20,385
|
|
|
|
4,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
$
|
119,414
|
|
|
$
|
37,730
|
|
|
$
|
7,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income per share
|
|
$
|
1.91
|
|
|
$
|
0.61
|
|
|
$
|
0.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average basic and diluted shares outstanding
|
|
|
62,600
|
|
|
|
61,507
|
|
|
|
61,507
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated and combined financial statements.
138
Cal Dive
International, Inc. and Subsidiaries
Consolidated and Combined Statements of Changes in
Stockholders Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helixs
|
|
|
Stock,
|
|
|
Capital
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
Net
|
|
|
$.01 par
|
|
|
in Excess
|
|
|
Retained
|
|
|
Unearned
|
|
|
Stockholders
|
|
|
|
Investment
|
|
|
Value
|
|
|
of Par
|
|
|
Earnings
|
|
|
Compensation
|
|
|
Equity
|
|
|
|
(In thousands)
|
|
|
Balances at December 31, 2003
|
|
$
|
110,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
110,532
|
|
Net income
|
|
|
7,674
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,674
|
|
Capital contributions by Helix
|
|
|
2,912
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,912
|
|
Cash transfers to Helix
|
|
|
(28,610
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,610
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2004
|
|
$
|
92,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
92,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
37,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,730
|
|
Stock grants in Helixs stock plan
|
|
|
2,124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,124
|
)
|
|
|
|
|
Amortization of stock grants in Helixs stock plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
226
|
|
|
|
226
|
|
Capital contributions by Helix
|
|
|
79,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
79,547
|
|
Cash transfers to Helix
|
|
|
(32,228
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,228
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2005
|
|
$
|
179,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,898
|
)
|
|
$
|
177,783
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reversal of unearned compensation
|
|
|
(1,898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,898
|
|
|
|
|
|
Amortization of stock grants in Helixs stock plan
|
|
|
2,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,930
|
|
Net income prior to IPO
|
|
|
117,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117,394
|
|
Capital contributions by Helix prior to IPO
|
|
|
121,157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121,157
|
|
Cash transfers to Helix prior to IPO
|
|
|
(64,784
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(64,784
|
)
|
Contributed capital related to Helix deferred tax asset
|
|
|
1,261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,261
|
|
Dividends to Helix
|
|
|
(464,401
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(464,401
|
)
|
Capitalization of Cal Dive International, Inc.
|
|
|
108,660
|
|
|
|
615
|
|
|
|
(109,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted share grants
|
|
|
|
|
|
|
6
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net proceeds from initial public offering
|
|
|
|
|
|
|
222
|
|
|
|
264,179
|
|
|
|
|
|
|
|
|
|
|
|
264,401
|
|
Net income subsequent to IPO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,020
|
|
|
|
|
|
|
|
2,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances at December 31, 2006
|
|
$
|
|
|
|
$
|
843
|
|
|
$
|
154,898
|
|
|
$
|
2,020
|
|
|
$
|
|
|
|
$
|
157,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated and combined financial statements.
139
Cal Dive
International, Inc. and Subsidiaries
Consolidated and Combined Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
119,414
|
|
|
$
|
37,730
|
|
|
$
|
7,674
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
24,515
|
|
|
|
15,308
|
|
|
|
15,510
|
|
Asset impairment charges
|
|
|
|
|
|
|
790
|
|
|
|
3,900
|
|
Equity in (earnings) loss of investment
|
|
|
487
|
|
|
|
(2,817
|
)
|
|
|
|
|
Stock compensation expense
|
|
|
2,930
|
|
|
|
226
|
|
|
|
|
|
Deferred income taxes
|
|
|
11,737
|
|
|
|
11
|
|
|
|
(970
|
)
|
Gain on sale of assets
|
|
|
(349
|
)
|
|
|
(270
|
)
|
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
(38,105
|
)
|
|
|
(55,305
|
)
|
|
|
54
|
|
Other current assets
|
|
|
(5,281
|
)
|
|
|
(3,494
|
)
|
|
|
258
|
|
Accounts payable and accrued liabilities
|
|
|
(10,081
|
)
|
|
|
46,431
|
|
|
|
6,272
|
|
Other noncurrent, net
|
|
|
(18,828
|
)
|
|
|
(6,382
|
)
|
|
|
(4,088
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities:
|
|
|
86,439
|
|
|
|
32,228
|
|
|
|
28,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(38,086
|
)
|
|
|
(36,407
|
)
|
|
|
(2,912
|
)
|
Acquisition of businesses
|
|
|
(100,128
|
)
|
|
|
(42,917
|
)
|
|
|
|
|
Equity investment
|
|
|
155
|
|
|
|
(1,696
|
)
|
|
|
|
|
Loan to Offshore Technology Solutions Limited
|
|
|
|
|
|
|
(1,500
|
)
|
|
|
|
|
Proceeds from sales of property
|
|
|
16,902
|
|
|
|
2,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities:
|
|
|
(121,157
|
)
|
|
|
(79,547
|
)
|
|
|
(2,912
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Draws on credit facility
|
|
|
201,000
|
|
|
|
|
|
|
|
|
|
Proceeds from initial public offering
|
|
|
264,401
|
|
|
|
|
|
|
|
|
|
Dividends paid to Helix
|
|
|
(464,401
|
)
|
|
|
|
|
|
|
|
|
Cash transfers from Helix for investing activities
|
|
|
121,157
|
|
|
|
79,547
|
|
|
|
2,912
|
|
Cash transfers to Helix from operating activities
|
|
|
(64,784
|
)
|
|
|
(32,228
|
)
|
|
|
(28,610
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
57,373
|
|
|
|
47,319
|
|
|
|
(25,698
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
22,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
22,655
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated and combined financial statements.
140
Cal Dive
International, Inc. and Subsidiaries
Notes to Consolidated and Combined Financial
Statements
|
|
1.
|
Organization
and Basis of Presentation
|
Prior to December 14, 2006, Cal Dive International,
Inc., its subsidiaries and its operations (CDI or
the Company) were wholly-owned by Helix Energy
Solutions Group, Inc. (Helix). On February 27,
2006, Helix announced a plan to separate its shallow water
marine contracting business into a separate company. As part of
the plan, on December 11, 2006, Helix and its subsidiaries
contributed and transferred to the Company all of the assets and
liabilities of the shallow water marine contracting business,
and on December 14, 2006 the Company, through an initial
public offering (IPO), issued 22,173,000 shares
of its common stock representing approximately 27% of the
Companys common stock. Following the contribution and
transfer by Helix, the Company owns and operates a diversified
fleet of 26 vessels, including 23 surface and saturation
diving support vessels capable of operating in water depths of
up to 1,000 feet, as well as three shallow water pipelay
vessels.
These consolidated and combined financial statements reflect the
financial position and results of the shallow water marine
contracting business of Helix and related assets and
liabilities, results of operations and cash flows for this
segment as carved out of the accounts of Helix and as though the
shallow water marine contracting business had been a separate
stand-alone company for the respective periods presented.
Prior to December 14, 2006, the shallow water marine
contracting business of Helix operated within Helixs
corporate cash management program. For purposes of presentation
in the Consolidated and Combined Statements of Cash Flows, net
cash flows provided by the operating activities of the Company
are presented as cash transfers to Helix under cash flows from
financing activities. Additionally, net cash flows used in
investing activities of the Company are presented as cash
transfers from Helix under cash flows from financing activities.
This presentation results in the consolidated and consolidated
and combined financial statements reflecting no cash balances
for all periods prior to December 14, 2006 as if all excess
cash has been transferred to Helix prior the IPO. These
consolidated and combined financial statements have been
prepared using Helixs historical basis in the assets and
liabilities and the historical results of operations relating to
the shallow water marine contracting business of Helix.
Cash transfers to Helix and cash transfers from Helix as
disclosed under cash flows from financing activities have also
been reflected as changes to the balances in total
stockholders equity for respective periods prior to
December 14, 2006 as presented in the Consolidated and
Combined Statements of Changes in Stockholders Equity.
Certain management, administrative and operational services of
Helix have been shared between the shallow water marine
contracting business and other Helix business segments for all
periods presented. For purposes of financial statement
presentation, the costs for these shared services has been
allocated to the Company based on actual direct costs incurred,
or allocated based on headcount, work hours and revenues. See
Note 3 Related Party Transactions.
Prior to December 14, 2006, the operations of the Company
have been included in the consolidated federal income tax
returns of Helix. The Companys provision for income taxes
has been computed as if the Company completed and filed separate
federal income tax returns for all periods presented except that
no benefits for employee stock option exercises related to Helix
common stock have been recognized or reflected herein. Tax
benefits recognized on these employee stock options have been,
and will continue to be, retained by Helix.
|
|
2.
|
Summary
of Significant Accounting Policies
|
Principles
of Consolidation and Combination
The accompanying consolidated and consolidated and combined
financial statements include the accounts of the Company and its
subsidiaries, which prior to December 14, 2006 constituted
the shallow water marine
141
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
contracting business of Helix, and a 40% interest in Offshore
Technology Solutions Limited (OTSL). All
intercompany accounts and transactions have been eliminated. The
Company accounts for its interest in OTSL under the equity
method of accounting, as the Company does not have voting or
operational control of OTSL.
Use of
Estimates
The preparation of consolidated and combined financial
statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the consolidated and combined financial
statements and the reported amounts of revenues and expenses
during the reporting period. On an ongoing basis, the Company
evaluates its estimates, including those related to bad debts,
equity investments, intangible assets and goodwill, property and
equipment, income taxes, workers compensation insurance
and contingent liabilities. The Company bases its estimates on
historical experience and on various other assumptions believed
to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results could differ from those estimates.
Revenue
Recognition
We recognize our revenue according to the type of contract
involved. Revenues are derived from contracts that are typically
of short duration. These contracts contain either lump-sum
turnkey provisions or provisions for specific time, material and
equipment charges, which are billed in accordance with the terms
of such contracts. The Company recognizes revenue as it is
earned at estimated collectible amounts.
Revenues generated from specific time, materials and equipment
contracts are generally earned on a dayrate basis and recognized
as amounts are earned in accordance with contract terms. In
connection with these contracts, the Company may receive
revenues for mobilization of equipment and personnel. In
connection with new contracts, revenues related to mobilization
are deferred and recognized over the period in which contracted
services are performed using the straight-line method.
Incremental costs incurred directly for mobilization of
equipment and personnel to the contracted site, which typically
consist of materials, supplies and transit costs, are also
deferred and recognized over the period in which contracted
services are performed using the straight-line method. Our
policy to amortize the revenues and costs related to
mobilization on a straight-line basis over the estimated
contract service period is consistent with the general pace of
activity, level of services being provided and dayrates being
earned over the service period of the contract. Mobilization
costs to move vessels when a contract does not exist are
expensed as incurred.
Revenue on significant turnkey contracts is recognized on the
percentage-of-completion method based on the ratio of costs
incurred to total estimated costs at completion. In determining
whether a contract should be accounted for using the
percentage-of-completion method, we consider whether:
|
|
|
|
|
the customer provides specifications for the construction of
facilities or for the provision of related services;
|
|
|
|
we can reasonably estimate our progress towards completion and
our costs;
|
|
|
|
the contract includes provisions as to the enforceable rights
regarding the goods or services to be provided, consideration to
be received and the manner and terms of payment;
|
|
|
|
the customer can be expected to satisfy its obligations under
the contract; and
|
|
|
|
the Company can be expected to perform its contractual
obligations.
|
Under the percentage-of-completion method, the Company
recognizes estimated contract revenue based on costs incurred to
date as a percentage of total estimated costs. Changes in the
expected cost of materials
142
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
and labor, productivity, scheduling and other factors affect the
total estimated costs. Additionally, external factors, including
weather or other factors outside of the Companys control,
may also affect the progress and estimated cost of a
projects completion and, therefore, the timing of income
and revenue recognition. The Company routinely reviews estimates
related to its contracts and reflects revisions to profitability
in earnings on a current basis. If a current estimate of total
contract cost indicates an ultimate loss on a contract, the
Company recognizes the projected loss in full when it is first
determined. The Company recognizes additional contract revenue
related to claims when the claim is probable and legally
enforceable.
Unbilled revenue represents revenue attributable to work
completed prior to period end which has not yet been invoiced.
All amounts included in unbilled revenue at December 31,
2006 are expected to be billed and collected within one year.
Accounts
Receivable and Allowance for Uncollectible
Accounts
Accounts receivable are stated at the historical carrying
amount, net of write-offs and allowance for uncollectible
accounts. The Company establishes an allowance for uncollectible
accounts receivable based on historical experience and any
specific customer collection issues that the Company has
identified. Uncollectible accounts receivable are written-off
when a settlement is reached for an amount that is less than the
outstanding historical balance, or when the Company has
determined the balance will not be collected.
Property
and Equipment
Property and equipment are recorded at cost. Depreciation is
provided primarily on the straight-line method over the
estimated useful lives of the assets. Depreciation expenses were
$16.9 million, $9.8 million and $11.2 million for
the years ended December 31, 2006, 2005 and 2004,
respectively. The following is a summary of the components of
property and equipment (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
December 31,
|
|
|
|
Useful Life
|
|
|
2006
|
|
|
2005
|
|
|
Vessels
|
|
|
15 to 20 years
|
|
|
$
|
232,678
|
|
|
$
|
142,036
|
|
Portable saturation diving systems, machinery and equipment
|
|
|
5 to 10 years
|
|
|
|
55,798
|
|
|
|
25,749
|
|
Buildings and leasehold improvements
|
|
|
4 to 20 years
|
|
|
|
5,453
|
|
|
|
6,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
|
|
|
$
|
293,929
|
|
|
$
|
173,841
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The cost of repairs and maintenance is charged to operations as
incurred, while the cost of improvements is capitalized. Total
repair and maintenance charges were $16.4 million,
$7.5 million and $3.9 million for the years ended
December 31, 2006, 2005 and 2004, respectively.
For long-lived assets to be held and used, excluding goodwill,
the Company bases its evaluation of recoverability on impairment
indicators such as the nature of the assets, the future economic
benefit of the assets, any historical or future profitability
measurements and other external market conditions or factors
that may be present. If such impairment indicators are present
or other factors exist that indicate the carrying amount of the
asset may not be recoverable, the Company determines whether an
impairment has occurred through the use of an undiscounted cash
flows analysis of the asset at the lowest level for which
identifiable cash flows exist. The Companys marine vessels
are assessed on a vessel by vessel basis. If an impairment has
occurred, the Company recognizes a loss for the difference
between the carrying amount and the fair value of the asset. The
fair value of the asset is measured using quoted market prices
or, in the absence of quoted market prices, is based on an
estimate of discounted cash flows. The Company recorded no
impairment charges in 2006 and $790,000 and $3.9 million in
2005 and 2004, respectively, on certain vessels that met the
impairment criteria. Such charges are included in cost of sales
in the accompanying Consolidated and
143
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
Combined Statements of Operations. The assets impaired in 2005
were subsequently sold in 2005 and 2006, for an aggregate gain
on the disposals of approximately $322,000.
Assets are classified as held for sale when the Company has a
plan for disposal of certain assets and those assets meet the
held for sale criteria. At December 31, 2006 and 2005 the
Company classified certain assets intended to be disposed of
within a
12-month
period as assets held for sale totaling $0.7 million and
$7.9 million, respectively. The asset held for sale at
December 31, 2006 was sold in January 2007 for its carrying
amount.
Recertification
Costs and Deferred Drydock Charges
The Companys vessels are required by regulation to be
recertified after certain periods of time. These recertification
costs are incurred while the vessel is in drydock. In addition,
routine repairs and maintenance are performed and, at times,
major replacements and improvements are performed. The Company
expenses routine repairs and maintenance as they are incurred.
The Company defers and amortizes drydock and related
recertification costs over the length of time for which the
Company expects to receive benefits from the drydock and related
recertification, which is generally 30 months. Vessels are
typically available to earn revenue for the
30-month
period between drydock and related recertification processes. A
drydock and related recertification process typically lasts one
to two months, a period during which the vessel is not available
to earn revenue. Major replacements and improvements, which
extend the vessels economic useful life or functional
operating capability, are capitalized and depreciated over the
vessels remaining economic useful life. Inherent in this
process are estimates the Company makes regarding the specific
cost incurred and the period that the incurred cost will benefit.
As of December 31, 2006 and 2005, capitalized deferred
drydock and related recertification costs (included in other
assets, net) totaled $20.1 million and $8.3 million,
respectively. During the years ended December 31, 2006,
2005 and 2004, drydock amortization expense was
$7.1 million, $5.5 million and $4.3 million,
respectively.
Goodwill
The Company tests for the impairment of goodwill on at least an
annual basis. The Company tests for the impairment of other
intangible assets when impairment indicators such as the nature
of the assets, the future economic benefit of the assets, any
historical or future profitability measurements and other
external market conditions are present. The Companys
goodwill impairment test involves a comparison of the fair value
with its carrying amount. The fair value is determined using
discounted cash flows and other market-related valuation models.
The Company completed its annual goodwill impairment test as of
November 1, 2006. At December 31, 2006 and 2005 the
Company had goodwill of $26.7 million and
$27.8 million, respectively. None of the Companys
goodwill was impaired based on the impairment test performed as
of November 1, 2006. See Note 5 to the consolidated
and combined financial statements included herein. The Company
will continue to test its goodwill annually on a consistent
measurement date unless events occur or circumstances change
between annual tests that would more likely than not reduce the
fair value of a reporting unit below its carrying amount.
Equity
Investment
The Company periodically reviews the investment in OTSL for
impairment. Recognition of a loss would occur when the decline
in an investment is deemed other than temporary. In determining
whether the decline is other than temporary, the Company
considers the cyclical nature of the industry in which the
investment operates, its historical performance, its performance
in relation to peers and the current economic environment. OTSL
has generated net operating losses during 2006 which is an
impairment indicator. As a result, the Company evaluated this
investment to determine whether a permanent loss in value had
occurred. To
144
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
determine whether OTSL had the ability to sustain an earnings
capacity that would justify the carrying amount of the
investment, the Company determined the current fair value of the
investment utilizing a discounted cash flow valuation model to
compute the fair value and compared this to its carrying amount.
Based on this evaluation, OTSL currently has the ability to
sustain an earnings capacity which would justify the carrying
amount of the investment. The fair value computed using the
discounted cash flow model supports the determination that the
existence of operating losses during 2006 is not indicative of a
permanent loss in value, and as a result there is no impairment
at December 31, 2006.
Income
Taxes
Prior to December 14, 2006, the operations of the Company
are included in a consolidated federal income tax return filed
by Helix. The Company will file its own short period return for
the period December 14, 2006 through the end of fiscal year
2006. However, for financial reporting purposes, the
Companys provision for income taxes has been computed on
the basis as if the Company completed and filed separate federal
income tax returns for all periods presented except that all tax
benefits recognized on employee stock plans are retained by
Helix. Deferred income taxes are based on the differences
between financial reporting and tax bases of assets and
liabilities. The Company utilizes the liability method of
computing deferred income taxes. The liability method is based
on the amount of current and future taxes payable using tax
rates and laws in effect at the balance sheet date. Income taxes
have been provided based upon the tax laws and rates in the
countries in which operations are conducted and income is
earned. A valuation allowance for deferred tax assets is
recorded when it is more likely than not that some or all of the
benefit from the deferred tax asset will not be realized.
Earnings
Per Share
Basic earnings per share (EPS) is computed by
dividing the net income available to common stockholders by the
weighted-average shares of outstanding common stock. The
calculation of diluted EPS is similar to basic EPS, except the
denominator includes dilutive common stock equivalents and the
income included in the numerator excludes the effects of the
impact of dilutive common stock equivalents, if any. Basic and
diluted earnings per share for the respective periods were the
same. The Company granted 618,321 restricted shares to certain
officers and employees in December 2006 (see
Note 12) which were anti-dilutive in this calculation.
Stock-Based
Compensation Plans
Prior to December 14, 2006, the Company did not have any
stock-based compensation plans. However, prior to then certain
employees of the Company participated in Helixs
stock-based compensation plans. Helix used the intrinsic value
method of accounting for its stock-based compensation programs
through December 31, 2005. Accordingly, no compensation
expense was recognized by Helix or the Company when the exercise
price of an employee stock option was equal to the common share
market price on the grant date. All tax benefits recognized on
employee stock plans are retained by Helix.
145
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
The following table reflects the Companys pro forma
results as if the fair value accounting method under the
provisions of SFAS No. 123, Accounting for Stock-Based
Compensation (SFAS No. 123) had been used
for the Companys employees who participated in the Helix
plans, with the pro forma expense being allocated to the Company
based on the options outstanding to employees of the Company (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
Net income as reported
|
|
$
|
37,730
|
|
|
$
|
7,674
|
|
Plus: Stock-based employee compensation cost included in
reported net income
|
|
|
226
|
|
|
|
|
|
Less: Total stock-based compensation costs determined under the
fair value method
|
|
|
(576
|
)
|
|
|
(1,087
|
)
|
|
|
|
|
|
|
|
|
|
Pro forma net income
|
|
$
|
37,380
|
|
|
$
|
6,587
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net income per share:
|
|
|
|
|
|
|
|
|
As reported
|
|
$
|
0.61
|
|
|
$
|
0.12
|
|
Pro forma
|
|
$
|
0.61
|
|
|
$
|
0.11
|
|
For the purposes of pro forma disclosures, the fair value of
each option grant was estimated by Helix on the date of grant
using the Black-Scholes option pricing model with the following
weighted average assumptions used: expected dividend yield of
0%; expected lives ranging from three to 10 years,
risk-free interest rate of 4.0% in 2004, and expected volatility
of 56% in 2004. There were no stock option grants in 2005 or
2006. The fair value of shares issued under the Helix Employee
Stock Purchase Plan was based on the 15% discount received by
the employees. The weighted average per share fair value of the
options granted by Helix in 2004 was $8.80. The estimated fair
value of the options is amortized to pro forma expense over the
vesting period, which ranges from three to five years. See
Recently Issued Accounting Principles in this
footnote for a discussion of the Companys adoption of
SFAS No. 123 (revised 2004), Share-Based Payment
(SFAS No. 123R), and see Note 12 for
a discussion of stock-based compensation plans.
Major
Customers and Concentration of Credit Risk
The Companys customers consist primarily of major and
independent oil and natural gas producers, pipeline transmission
companies and offshore engineering and construction firms. The
capital expenditures of the Companys customers are
generally dependent on their views of future oil and gas prices
and successful offshore drilling activity. The Company performs
ongoing credit evaluations of its customers and provides
allowances for probable credit losses when necessary. The
percent of revenue of major customers was as follows:
2006 Chevron (15.6%); 2005 BP (13%) and
Lighthouse R&D Enterprises (11%); and 2004
Lighthouse R&D Enterprises (12%) and Shell (11%).
Statement
of Cash Flow Information
The Company defines cash and cash equivalents as cash and all
highly liquid financial instruments with original maturities of
less than three months. Prior to December 14, 2006, all
cash transactions were settled and managed through Helix bank
accounts and related facilities. The Company had no cash or cash
equivalents as of December 31, 2005 and 2004.
Recently
Issued Accounting Principles
In December 2004, the FASB issued SFAS No. 123R, which
replaces SFAS No. 123 and supersedes APB Opinion
No. 25, Accounting for Stock Issued to Employees.
SFAS No. 123R requires all share-based payments to
employees, including grants of employee stock options, to be
recognized in the consolidated and combined
146
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
financial statements based on their fair values beginning with
the first interim period in fiscal 2006, with early adoption
encouraged. The pro forma disclosures previously permitted under
SFAS No. 123 no longer will be an alternative to
financial statement recognition. Helix and the Company adopted
SFAS No. 123R on January 1, 2006. Under
SFAS No. 123R, the Company uses the Black-Scholes fair
value model for valuing share-based payments and recognizes
compensation cost on a straight-line basis over the respective
vesting period. The Company selected the modified-prospective
method of adoption which requires that compensation expense be
recorded for all unvested stock options and restricted stock
beginning in 2006 as the requisite service is rendered. In
addition to the compensation cost recognition requirements,
SFAS No. 123R also requires the tax deduction benefits
for an award in excess of recognized compensation cost be
reported as a financing cash flow rather than as an operating
cash flow, which was required under SFAS No. 95,
Statement of Cash Flows. The adoption did not have a material
impact on the Companys consolidated results of operations
and cash flows.
In June 2006, the FASB issued FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes an
Interpretation of FASB Statement No. 109
(FIN 48), which clarifies the accounting for
uncertainty in income taxes recognized in accordance with FASB
Statement No. 109, Accounting for Income Taxes
(SFAS 109). FIN 48 clarifies the
application of SFAS 109 by defining criteria that an
individual tax position must meet for any part of the benefit of
that position to be recognized in the consolidated and combined
financial statements. Additionally, FIN 48 provides
guidance on the measurement, derecognition, classification and
disclosure of tax positions, along with accounting for the
related interest and penalties. The provisions of FIN 48
are effective for fiscal years beginning after December 15,
2006, with the cumulative effect of the change in accounting
principle recorded as an adjustment to opening retained
earnings. We adopted the provisions of FIN 48. The impact
of the adoption of FIN 48 was immaterial to the
Companys consolidated and combined financial position,
results of operations and cash flows.
In September 2006, the FASB issued Statement No. 157, Fair
Value Measurements (SFAS 157). SFAS 157
defines fair value, establishes a framework for measuring fair
value in accordance with generally accepted accounting
principles and expands disclosures about fair value
measurements. The provisions of SFAS 157 are effective for
fiscal years beginning after November 15, 2007. The Company
is currently evaluating the impact, if any, of this statement.
|
|
3.
|
Related
Party Transactions
|
Prior to December 14, 2006, the Companys working
capital requirements have historically been part of the
corporate cash management program of Helix. The operating cash
flows generated by the Company have been reflected as cash
transfers to Helix in stockholders net investment, a
component of total stockholders equity. The cash funding
for investing activities of the Company have been reflected as
cash transfers from Helix in stockholders net investment.
Helix provides to the Company certain management and
administrative services including: (i) accounting,
treasury, payroll and other financial services; (ii) legal
and related services; (iii) information systems, network
and communication services; (iv) employee benefit services
(including direct third party group insurance costs and 401(k)
contribution matching costs discussed below); and
(v) corporate facilities management services. Total
allocated costs from Helix for such services were approximately
$16.5 million, $8.5 million and $7.3 million for
the years ended December 31, 2006, 2005, and 2004,
respectively.
Included in these costs are costs related to the participation
by the Companys employees in Helix employee benefit plans
through December 31, 2006, including employee medical
insurance and a defined contribution 401(k) retirement plan.
These costs are recorded as a component of operating expenses
and were approximately $5.8 million, $3.3 million and
$2.5 million for the years ended December 31, 2006,
2005, and 2004, respectively. Helixs defined contribution
401(k) retirement plan and the Companys cost related to
its employees participation are further disclosed in
Note 12.
147
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
The Company provides to Helix operational and field support
services including: (i) training and quality control
services; (ii) marine administration services;
(iii) supply chain and base operation services;
(iv) environmental, health and safety services;
(v) operational facilities management services; and
(vi) human resources. Total allocated costs to Helix for
such services were approximately $5.6 million
$4.1 million and $3.2 million for the years ended
December 31, 2006, 2005, and 2004, respectively.
Prior to December 14, 2006, the operations of the Company
were included in a consolidated federal income tax return filed
by Helix. The Companys provision for income taxes has been
computed on the basis that the Company has completed and filed
separate consolidated federal income tax returns except that no
benefits for employee stock option exercises related to Helix
stock have been recognized or reflected herein. Tax benefits
recognized on these employee stock options exercises have been
and will continue to be retained by Helix. The Companys
accounting policy and provision for income taxes are further
disclosed in Notes 1, 2 and 10.
In contemplation of our IPO, the Company entered into several
agreements with Helix addressing the rights and obligations of
each respective company, including a Master Agreement, a
Corporate Services Agreement, an Employee Matters Agreement, a
Registration Rights Agreement and a Tax Matters Agreement. The
Master Agreement describes and provides a framework for the
separation of our business from Helixs business, allocates
liabilities (including those potential liabilities related to
litigation) between the parties, allocates responsibilities and
provides standards for each companys conduct going forward
(e.g., coordination regarding financial reporting), and sets
forth the indemnification obligations of each party. In
addition, the Master Agreement provides Helix with a
preferential right to use a specified number of our vessels at
market rates in accordance with the terms of such agreement.
Pursuant to the Corporate Services Agreement, each party agrees
to provide specified services to the other party, including
administrative and support services for the time period
specified therein. Generally, after Helix ceases to own 50% or
more of the total voting power of our common stock, all services
may be terminated by either party upon 60 days notice, but
a longer notice period is applicable for selected services. Each
of the services shall be provided in exchange for a monthly
charge as calculated for each service (based on relative
revenues, number of users for a particular service, or other
specified measure). In general, under the Corporate Services
Agreement Helix provides us with services related to the tax,
treasury, audit, insurance (including claims) and information
technology functions; and we provide Helix with services related
to the human resources, training and orientation functions, and
certain supply chain and environmental, health and safety
services.
Pursuant to the Employee Matters Agreement, except as otherwise
provided, we have generally accepted and assumed all employment
related obligations with respect to all individuals who were
employees of the Company as of the IPO closing date, including
expenses related to existing options and restricted stock. Those
employees are entitled to retain their Helix stock options and
restricted stock grants under their original terms except as
mandated by applicable law. The Employee Matters Agreement also
permits our employees to participate in the Helix Employee Stock
Purchase Plan for the offering period that ends June 30,
2007, and we agree to pay Helix at the end of the offering
period the fair market value of the shares of Helixs stock
purchased by such employees.
Pursuant to the Tax Matters Agreement, Helix is generally
responsible for all federal, state, local and foreign income
taxes that are attributable to the Company for all tax periods
ending on the IPO; we are generally responsible for all such
taxes beginning after the IPO. In addition, the agreement
provides that for a period of up to ten years, the Company is
required to make annual payments totaling $11.3 million to
Helix equal to 90% of tax benefits derived by the Company from
tax basis adjustments resulting from the Boot gain
recognized by Helix as a result of the distributions made to
Helix as part of the IPO transaction. The current tax payable to
Helix related to this obligation is $0.3 million. See
Note 10 for a more detailed discussion of the Tax Matters
Agreement.
148
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
In the ordinary course of business, the Company provided marine
contracting services to Helix and recognized revenues of
$20.0 million, $1.6 million, and $1.7 in 2006, 2005
and 2004, respectively. Helix provided ROV services to the
Company and the Company recognized operating expenses of
$6.1 million, $2.9 million, and $5.7 million in
2006, 2005 and 2004, respectively.
Excluding the payable to Helix resulting from a tax
step-up
benefit, noted above, net amounts payable to and receivable from
Helix are settled with cash at least quarterly. At
December 31, 2006 the net amount receivable (excluding
$0.3 million related to a current tax payable) from Helix
was $1.6 million and was settled in January 2007.
|
|
4.
|
Acquisition
of Torch Offshore, Inc. Assets
|
In a bankruptcy auction held in June 2005, Helix was the
successful bidder for seven vessels and a portable saturation
system, subject to the terms of an amended and restated asset
purchase agreement, executed in May 2005, with Torch Offshore,
Inc. and its wholly owned subsidiaries, Torch Offshore, L.L.C.
and Torch Express, L.L.C. This transaction received regulatory
approval, including completion of a review pursuant to a Second
Request from the U.S. Department of Justice, in August 2005
and subsequently closed. The total purchase price for the Torch
vessels was approximately $85.9 million, including certain
costs incurred related to the transaction. The acquisition was
an asset purchase with the acquisition price allocated to the
assets acquired based upon their estimated fair values. Pursuant
to the terms of the Master Agreement, Helix conveyed to the
Company six of the seven vessels and the portable saturation
system at its cost of approximately $26.2 million
(including assets held for sale). The results of the acquired
vessels are included in the accompanying Consolidated and
Combined Statements of Operations since the date of the
purchase, August 31, 2005.
|
|
5.
|
Acquisition
of Acergy (formerly known as Stolt Offshore) Business
|
In April 2005, Helix agreed to acquire the diving and shallow
water pipelay assets of Acergy that operate in the waters of the
Gulf of Mexico and Trinidad. The transaction included: seven
diving support vessels; two diving and pipelay vessels (the
Kestrel and the DLB801); a portable saturation diving system;
various general diving equipment and Louisiana operating bases
at the Port of Iberia and Fourchon. The transaction required
regulatory approval, including the completion of a review
pursuant to a Second Request from the U.S. Department of
Justice. On October 18, 2005, Helix received clearance from
the U.S. Department of Justice to close the asset purchase
from Acergy. Under the terms of the clearance, Helix agreed to
divest two diving support vessels and a portable saturation
diving system from the combined asset package acquired through
this transaction and the Torch transaction which closed
August 31, 2005. Accordingly, Helix has since disposed of
one diving support vessel and a portable saturation diving
system prior to December 31, 2006, and disposed of the
remaining diving support vessel in January 2007. These assets
were included in assets held for sale totaling $0.7 and
$7.8 million as of December 31, 2006 and 2005,
respectively. On November 1, 2005, Helix closed the
transaction to purchase the Acergy diving assets operating in
the Gulf of Mexico. Helix acquired the DLB801 in January 2006
for approximately $38.0 million and the Kestrel in March
2006 for approximately $39.9 million.
The Acergy acquisition was accounted for as a business
combination with the acquisition price allocated to the assets
acquired and liabilities assumed based upon their fair values,
with the excess being recorded as goodwill. The final valuation
of net assets was completed in the second quarter of 2006. The
total transaction value for all of the assets was approximately
$124.3 million. The results of the acquired assets are
included in the accompanying Consolidated and Combined
Statements of Operations since the date of the purchase. Pro
forma combined operating results adjusted to reflect the results
of operations of the DLB801 and the Kestrel prior to their
acquisition from Acergy in January and March 2006, respectively,
are not provided because the 2006 pre-acquisition results
related to these vessels were immaterial.
149
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
The allocation of the Acergy purchase price was as follows (in
thousands):
|
|
|
|
|
Vessels
|
|
$
|
94,484
|
|
Goodwill
|
|
|
11,693
|
|
Portable saturation system and diving equipment
|
|
|
9,494
|
|
Facilities, land and leasehold improvements
|
|
|
4,314
|
|
Customer relationship intangible asset
|
|
|
3,698
|
|
Materials and supplies
|
|
|
631
|
|
|
|
|
|
|
Total
|
|
$
|
124,314
|
|
|
|
|
|
|
The customer relationship intangible asset is amortized over
eight years on a straight-line basis, or approximately $463,000
per year. At December 31, 2006 the net carrying amount for
this intangible asset is $3.2 million.
Subsequent to the purchase of the DLB801, Helix sold a 50%
interest in the vessel in January 2006 for approximately
$19.0 million. Helix received $6.5 million in cash in
2005 and a $12.5 million interest-bearing promissory note
in 2006. Helix has received $11.0 million of the promissory
note and expects to collect the remaining balance in 2007.
Subsequent to the sale of the 50% interest, Helix entered into a
10-year
charter lease agreement with the purchaser, in which the lessee
has an option to purchase the remaining 50% interest in the
vessel beginning in January 2009. This lease was accounted for
as an operating lease. Included in Helixs lease accounting
analysis was an assessment of the likelihood of the lessee
performing under the full term of the lease. The carrying amount
of the DLB801 at December 31, 2006, was approximately
$17.3 million. In addition, if the lessee exercises the
purchase option under the lease agreement, the lessee is able to
credit $2.4 million of its lease payments per year against
the remaining 50% interest in the DLB801 not already owned. If
the lessee elects not to exercise its option to purchase the
remaining 50% interest in the vessel, minimum future rentals to
be received on this lease are $66.2 million through January
2016.
Pursuant to the terms of the Master Agreement, Helix conveyed to
the Company at its costs all the assets acquired from Acergy
including its remaining 50% interest in the DLB801 and the
related
10-year
charter lease agreement.
Unaudited pro forma combined operating results of the Company
and the Acergy acquisition for the years ended December 31,
2005 and 2004, respectively, were as follows as if the
acquisition occurred January 1, 2004 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
Net revenues
|
|
$
|
464,543
|
|
|
$
|
287,717
|
|
Income (loss) before income taxes
|
|
$
|
64,136
|
|
|
$
|
(24,645
|
)
|
Net income (loss)
|
|
$
|
41,644
|
|
|
$
|
(16,071
|
)
|
|
|
6.
|
Acquisition
of Fraser Diving International Ltd (FDI)
Business
|
To expand the Companys international operations, in July
2006, the Company acquired the business of Singapore-based
Fraser Diving International Ltd for an aggregate purchase price
of approximately $29.3 million, subject to post-closing
adjustments including the assumption of $2.2 million of
liabilities. FDI owned six portable saturation diving systems
and 15 surface diving systems that operated primarily in the
Middle East, Southeast Asia and Australia. As a part of the
transaction, in December 2005, the Company paid
$2.5 million to FDI for the purchase of one of the portable
saturation diving systems. The acquisition was accounted for as
a business combination with the acquisition price allocated to
the assets acquired and liabilities assumed based
150
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
upon their estimated fair values. The following table summarizes
the estimated preliminary fair values of the assets acquired and
liabilities assumed at the date of acquisition (in thousands):
|
|
|
|
|
Portable saturation diving systems and surface diving systems
|
|
$
|
23,685
|
|
Diving support equipment, support facilities and other equipment
|
|
|
3,004
|
|
Cash and cash equivalents
|
|
|
2,332
|
|
Accounts receivable
|
|
|
1,817
|
|
Prepaid expenses and deposits
|
|
|
691
|
|
|
|
|
|
|
Total assets acquired
|
|
|
31,529
|
|
Accounts payable and accrued liabilities
|
|
|
(2,243
|
)
|
|
|
|
|
|
Net assets acquired
|
|
$
|
29,286
|
|
|
|
|
|
|
The allocation of the purchase price was based upon preliminary
valuations. Estimates and assumptions are subject to change upon
the receipt and managements review of the final
valuations. The primary area of the purchase price allocation
that is not yet finalized relate to post closing purchase price
adjustments. The final valuation of net assets is expected to be
completed no later than one year from the acquisition date. The
results of FDI are included in the accompanying consolidated and
combined statements of operations since the date of purchase.
In July 2005, Helix acquired a 40% minority ownership interest
in OTSL in exchange for Helixs DP DSV Witch Queen.
Helixs investment in OTSL totaled $10.9 million and
$11.5 million at December 31, 2006 and 2005,
respectively. OTSL provides marine construction services to the
oil and natural gas industry in and around Trinidad and Tobago,
as well as the U.S. Gulf of Mexico. Effective
December 31, 2003, Helix adopted and applied the provisions
of FASB Interpretation (FIN) No. 46,
Consolidation of Variable Interest Entities, as revised
December 31, 2003, for all variable interest entities.
FIN 46 requires the consolidation of variable interest
entities in which an enterprise absorbs a majority of the
entitys expected losses, receives a majority of the
entitys expected residual returns, or both, as a result of
ownership, contractual or other financial interests in the
entity. OTSL qualified as a variable interest entity
(VIE) under FIN 46. Helix (and the Company) has
determined that it is not the primary beneficiary of OTSL and,
thus, has not consolidated the financial results of OTSL. The
Company accounts for its investment in OTSL under the equity
method of accounting.
Further, in conjunction with its investment in OTSL, Helix
entered into a one-year, unsecured $1.5 million working
capital loan, bearing interest at 6% per annum, with OTSL.
Interest is due quarterly beginning September 30, 2005 with
a lump-sum principal payment due on June 30, 2006. Helix
agreed to extend the lump-sum principal payment due date and
increase the interest rate to three-month LIBOR plus 4%. The
note and accrued interest were repaid in January 2007.
In the third and fourth quarters of 2005 and the first quarter
of 2006, OTSL contracted the Witch Queen to Helix for certain
services to be performed in the U.S. Gulf of Mexico. Helix
incurred costs under its contract with OTSL totaling
approximately $11.1 million during the third and fourth
quarters of 2005 and $7.7 million in 2006. The charter
ended in March 2006.
The Company periodically reviews the investment in OTSL for
impairment. Recognition of a loss would occur when the decline
in an investment is deemed other than temporary. In determining
whether the decline is other than temporary, the Company
considers the cyclical nature of the industry in which the
investment operates, its historical performance, its performance
in relation to peers and the current economic environment. OTSL
has generated net operating losses during 2006 which is an
impairment indicator. As a result, the Company evaluated this
investment to determine whether a permanent loss in value had
occurred. To
151
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
determine whether OTSL had the ability to sustain an earnings
capacity that would justify the carrying amount of the
investment, the Company determined the current fair value of the
investment utilizing a discounted cash flow valuation model to
compute the fair value and compared this to its carrying amount.
Based on this evaluation, OTSL currently has the ability to
sustain an earnings capacity which would justify the carrying
amount of the investment. The fair value computed using the
discounted cash flow model supports the determination that the
existence of operating losses during 2006 is not indicative of a
permanent loss in value, and as a result there is no impairment
at December 31, 2006.
Pursuant to the terms of the Master Agreement, Helix conveyed to
the Company its ownership interest and rights in OTSL along with
the related unsecured $1.5 million working capital loan.
Accrued liabilities consisted of the following as of
December 31, 2006 and 2005 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Accrued payroll and related benefits
|
|
$
|
7,500
|
|
|
$
|
5,370
|
|
Accrued insurance
|
|
|
3,367
|
|
|
|
3,172
|
|
Insurance claims to be reimbursed
|
|
|
1,870
|
|
|
|
2,678
|
|
Accrued income taxes payable
|
|
|
1,201
|
|
|
|
20,374
|
|
Deposits
|
|
|
|
|
|
|
10,000
|
|
Other
|
|
|
5,066
|
|
|
|
241
|
|
|
|
|
|
|
|
|
|
|
Total accrued liabilities
|
|
$
|
19,004
|
|
|
$
|
41,835
|
|
|
|
|
|
|
|
|
|
|
In November 2006, the Company entered into a five-year
$250 million revolving credit facility with certain
financial institutions. The loans mature in November 2011. Loans
under the revolving credit facility may consist of loans bearing
interest in relation to the Federal Funds Rate or to the
lenders base rate, known as Base Rate Loans, and loans
bearing interest in relation to a LIBOR rate, known as LIBOR
Rate Loans. Assuming there is no event of default, Base Rate
Loans will bear interest at a per annum rate equal to the base
rate plus a margin ranging from 0% to 0.5%, while LIBOR Rate
Loans will bear interest at the LIBOR rate plus a margin ranging
from 0.625% to 1.75%. In addition, a commitment fee ranging from
0.20% to 0.375% will be payable on the portion of the
lenders aggregate commitment which from time to time is
not used for a borrowing or a letter of credit. For this credit
facility, the Company incurred and capitalized $378,000 in fees
which will be amortized over a five-year period.
The credit agreement and the other documents entered into in
connection with the credit agreement include terms and
conditions, including covenants. The covenants include
restrictions on the Companys ability to grant liens, incur
indebtedness, make investments, merge or consolidate, sell or
transfer assets and pay dividends. In addition, the credit
agreement obligates the Company to meet minimum financial
requirements specified in the agreement. At December 31,
2006, the Company was in compliance with all debt covenants. The
credit facility is secured by vessel mortgages on five of its
vessels with an aggregate net book value of $120.7 million,
a pledge of all of the stock of all of its domestic subsidiaries
and 66% of the stock of one of its foreign subsidiaries, and a
security interest in, among other things, all of its equipment,
inventory, accounts and general tangible assets.
On December 8, 2006, the Company borrowed $79 million
under the revolving credit facility and distributed
$78 million of those proceeds to Helix as a dividend. On
December 21, 2006, the Company
152
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
borrowed an additional $122 million under the revolving
credit facility, which was distributed to Helix as a dividend.
At December 31, 2006, the Company had outstanding debt of
$201 million and accrued interest of $543,000 under this
credit facility.
Prior to December 14, 2006, the operations of the Company
are included in consolidated federal income tax returns filed by
Helix. The Company will file its own short period return for the
period December 14, 2006 through the end of fiscal year
2006. Therefore, the tax assets and liabilities at
December 31, 2006 are reflective of the Companys tax
position on a stand alone basis. The Companys provision
for income taxes has been computed on the basis as if the
Company has completed and filed separate consolidated federal
income tax returns for all periods presented except that no
benefits for employee stock option exercises related to Helix
stock have been recognized or reflected herein. Tax benefits
recognized on employee stock options exercises are retained by
Helix.
Components of the provision for income taxes reflected in the
statements of operations consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Current
|
|
$
|
53,973
|
|
|
$
|
20,374
|
|
|
$
|
5,181
|
|
Deferred
|
|
|
11,737
|
|
|
|
11
|
|
|
|
(970
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
65,710
|
|
|
$
|
20,385
|
|
|
$
|
4,211
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current foreign income tax expense totaled $0.5 million and
$2.3 million in 2006 and 2005, respectively. No foreign
income tax was incurred in 2004.
Income taxes have been provided based on the U.S. statutory
rate of 35% adjusted for items that are allowed as deductions
for federal income tax reporting purposes but not for book
purposes. The primary differences between the statutory rate and
the Companys effective rate were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Other
|
|
|
0.5
|
|
|
|
0.1
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective rate
|
|
|
35.5
|
%
|
|
|
35.1
|
%
|
|
|
35.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
153
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
Deferred income taxes result from the effect of transactions
that are recognized in different periods for financial and tax
reporting purposes. The nature of these differences and the
income tax effect of each as of December 31, 2006 and 2005
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$
|
20,770
|
|
|
$
|
19,506
|
|
Deferred drydock costs
|
|
|
7,024
|
|
|
|
2,894
|
|
Prepaid and other
|
|
|
831
|
|
|
|
1,555
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
$
|
28,625
|
|
|
$
|
23,955
|
|
|
|
|
|
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
(292
|
)
|
|
$
|
(646
|
)
|
Reserves, accrued liabilities and other
|
|
|
(9,378
|
)
|
|
|
(2,627
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
(9,670
|
)
|
|
$
|
(3,273
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability
|
|
$
|
18,955
|
|
|
$
|
20,682
|
|
|
|
|
|
|
|
|
|
|
Prior to December 14, 2006, all tax obligations owed by the
Company have been paid or are settled by Helix. Tax obligations
and their settlements are activities included as a part of the
cash flows from operating activities in the consolidated and
combined statements of cash flows. Current taxes payable at
December 31, 2006 are $1.2 million.
In December 2006, we entered into the Tax Matters Agreement with
Helix. The following is a summary of the material terms of the
Tax Matters Agreement:
|
|
|
|
|
Liability for Taxes. Each party has agreed to
indemnify the other in respect of all taxes for which it is
responsible under the Tax Matters Agreement. Helix is generally
responsible for all federal, state, local and foreign income
taxes that are imposed on or are attributable to the Company or
any of its subsidiaries for all tax periods (or portions
thereof) ending on or before the Companys initial public
offering (or December 14, 2006). The Company is generally
responsible for all federal, state, local and foreign income
taxes that are imposed on or are attributable to the Company or
any of its subsidiaries for all tax periods (or portions
thereof) beginning after its initial public offering (or
December 14, 2006). The Company is also responsible for all
taxes other than income taxes imposed on or attributable to the
Company or any of its subsidiaries for all tax periods.
|
|
|
|
Tax Benefit Payments. As a result of certain
taxable income recognition by Helix in conjunction with the
Companys initial public offering, the Company will become
entitled to certain tax benefits that are expected to be
realized by the Company in the ordinary course of its business
and otherwise would not have been available to the Company.
These benefits are generally attributable to increased tax
deductions for amortization of tangible and intangible assets
and to increased tax basis in nonamortizable assets. Under the
Tax Matters Agreement, for the next ten years, the Company will
be required to make annual payments to Helix equal to 90% of the
amount of taxes which the Company saves for each tax period as a
result of these increased tax benefits. The timing of the
Companys payments to Helix under the Tax Matters Agreement
will be determined with reference to when the Company actually
realizes the projected tax savings. This timing will depend
upon, among other things, the amount of our taxable income and
the timing at which certain assets are sold or disposed. At
December 31, 2006, this tax benefit is $12.6 million
and is included as a component of non-current deferred income
taxes. At December 31, 2006, a corresponding current
payable and long-term payable
|
154
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
|
|
|
|
|
of $0.3 million and $11.0 million, respectively, to
Helix is reflected in these consolidated and combined financial
statements.
|
|
|
|
|
|
Preparation and Filing of Tax Returns. Helix
will prepare and file all income tax returns that include the
Company or any of its subsidiaries if Helix is responsible for
any portion of the taxes reported on such tax returns. The Tax
Matters Agreement also provides that Helix will have the sole
authority to respond to and conduct all tax proceedings
(including tax audits) relating to such income tax returns.
|
|
|
11.
|
Commitments
and Contingencies
|
Lease
Commitments
The Company leases several facilities and accommodations for
certain employees located outside the U.S. under
noncancelable operating leases. Future minimum rentals under
these leases are approximately $5.2 million at
December 31, 2006, with $1.4 million due in 2007,
$1.0 million in 2008, $0.8 million in 2009,
$0.4 million in 2010, $0.3 million in 2011 and
$1.3 million thereafter. Total rental expense under these
operating leases was approximately $1.0 million,
$0.7 million and $0.5 million for the years ended
December 31, 2006, 2005 and 2004, respectively.
In September 2006 the Company chartered a vessel for one year
for use in the Middle East region. At December 31, 2006,
the remaining charter commitment is $14.6 million. Expenses
for this charter for the year ended December 31, 2006 were
$2.2 million.
Insurance
Through Helix, the Company carries Hull and Increased Value
insurance, which provides coverage for physical damage to an
agreed amount for each vessel. The Company maintains deductibles
that vary between $250,000 and $350,000 based on the value of
each vessel. The Company also carries Protection and Indemnity
(P&I) insurance which covers liabilities arising from the
operation of the vessel and General Liability insurance, which
covers liabilities arising from construction operations. The
deductible on both the P&I and General Liability is
$100,000 per occurrence. Onshore employees are covered by
Workers Compensation. Offshore employees, including divers
and tenders and marine crews, are covered by a Maritime
Employers Liability insurance policy, which covers Jones Act
exposures and includes a deductible of $100,000 per occurrence
plus a $1 million annual aggregate. In addition to the
liability policies named above, the Company carries various
layers of Umbrella Liability for a total limit of $300,000,000
in excess of primary limits. The Companys self-insured
retention on its medical and health benefits program for
employees is $130,000 per participant.
The Company incurs workers compensation and other
insurance claims in the normal course of business, which
management believes are covered by insurance. The Company, its
insurers and legal counsel analyze each claim for potential
exposure and estimate the ultimate liability of each claim.
Amounts due from insurance companies, above the applicable
deductible limits, are reflected in other current assets in the
consolidated and combined balance sheets. Such amounts were
$1.9 million and $2.7 million as of December 31,
2006 and 2005, respectively. See related accrued liabilities at
Note 8. The Company has not historically incurred
significant losses as a result of claims denied by its insurance
carriers.
Litigation
and Claims
The Company is involved in various legal proceedings, primarily
involving claims for personal injury under the General Maritime
Laws of the United States and the Jones Act as a result of
alleged negligence. In addition, the Company from time to time
incurs other claims, such as contract disputes, in the normal
course of business. Although these matters have the potential of
significant additional liability, the Company believes the
outcome of all such matters and proceedings will not have a
material adverse effect on its consolidated
155
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
and combined financial position, results of operations or cash
flows. Pursuant to the terms of the Master Agreement, the
Company assumed and will indemnify Helix for liabilities related
to its business.
|
|
12.
|
Employee
Benefit Plans
|
Defined
Contribution Plan
Prior to December 15, 2006, the Companys employees
were eligible to participate in the defined contribution 401(k)
retirement plan provided by Helix for the purpose of providing
retirement benefits for substantially all employees. Effective
December 15, 2006, all account balances maintained under
the Helix 401(k) plans for the Companys employees were
transferred to a new Cal Dive defined contribution 401(k)
plan provided by the Company for the purpose of providing
retirement benefits for substantially all of the Companys
employees. Under both plans, both the employees and Helix or the
Company, as applicable, make contributions to the plan. Helix,
or the Company, as applicable, matches a portion of an
employees contribution, and Helixs or the
Companys , as applicable, contributions are in the form of
cash and are determined annually as 50% of each employees
contribution up to 5% of the employees salary. The
Companys costs related to its employees participating in
this plan totaled $1.4 million, $405,000 and $215,000 for
the years ended December 31, 2006, 2005 and 2004,
respectively.
Stock-Based
Compensation Plans
Helix
Plans
Until December 14, 2006, the Company did not have any
stock-based compensation plans. However, prior to then certain
employees of the Company participated in Helixs
stock-based compensation plans. Helix used the intrinsic value
method of accounting for its stock-based compensation programs
through December 31, 2005. Accordingly, no compensation
expense was recognized by the Company when the exercise price of
an employee stock option was equal to the common share market
price on the grant date and all other terms were fixed. In
addition, under the intrinsic value method, on the date of grant
for restricted shares, the Company recorded unearned
compensation (a component of stockholders equity) that
equaled the product of the number of shares granted and the
closing price of Helixs common stock on the grant date,
and expense was recognized over the vesting period of each grant
on a straight-line basis. All tax benefits recognized on
employee stock plans are retained by Helix.
The Company adopted Statement of Financial Accounting Standards
No. 123 (revised 2004) Share-Based Payment
and began accounting for stock-based compensation plans under
the fair value method beginning January 1, 2006 and
continues to use the Black-Scholes fair value model for valuing
share-based payments and recognizes compensation cost on a
straight-line basis over the respective vesting period. No
forfeitures were estimated for outstanding unvested options and
restricted shares as historical forfeitures have been
immaterial. The Company has selected the modified-prospective
method of adoption, which requires that compensation expense be
recorded for all unvested stock options and restricted stock
beginning in 2006 as the requisite service is rendered. In
addition to the compensation cost recognition requirements, tax
deduction benefits for an award in excess of recognized
compensation cost is reported as a financing cash flow rather
than as an operating cash flow. The adoption did not have a
material impact on our consolidated and consolidated and
combined results of operations. There were no stock option
grants in 2006 or 2005.
Under an incentive plan provided by Helix, a maximum of 10% of
the total shares of Helix common stock issued and outstanding
may be granted to key executives and selected employees of Helix
and the Company who are likely to make a significant positive
impact on the reported net income of Helix as well as
non-employee members of the board of directors. The incentive
plan is administered by a committee that determines, subject to
approval of the Helix compensation committee of the board of
directors, the type of award to be made to each participant and
sets forth in the related award agreement the terms, conditions
and
156
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
limitations applicable to each award. The committee may grant
stock options, stock appreciation rights, or stock and cash
awards. Awards granted to employees under the incentive plan
typically vest 20% per year for a five-year period or 33% per
year for a three-year period, have a maximum exercise life of
three, five or 10 years and, subject to certain exceptions,
are not transferable.
On January 3, 2005, Helix granted certain CDI executives
16,670 restricted shares under the Incentive Plan. The shares
vest 20% per year for a five-year period. The market value
(based on the quoted price of the common stock on the business
day prior to the date of the grant) of the restricted shares was
$19.56 per share, or $326,000, at the date of the grant and was
recorded as unearned compensation, a component of
stockholders equity through December 31, 2005 and
charged to expense over the respective vesting periods through
December 31, 2005.
On November 1, 2005, a certain key executive of the Company
was granted 58,072 restricted shares under the Incentive Plan of
Helix. The shares vest in two tranches. Tranche 1 (41,916
restricted shares) vests on February 1, 2007, and
Tranche 2 (16,156 restricted shares) vested upon the
closing of the Companys IPO (December 19,
2006) and were expensed. The market value of the
restrictive shares was $30.95 per share, or $1.8 million,
at the date of the grant and was recorded by the Company as
unearned compensation, a component of stockholders equity
through December 31, 2005.
The balance in unearned compensation at December 31, 2005
was $1.9 million and was reversed in January 2006 upon
adoption of the fair value method. The amounts related to
restricted share grants are being charged to expense over the
respective vesting periods. For the year ended December 31,
2006, the Company recognized $2.9 million of compensation
expense related to unvested stock options and restricted shares.
On January 3, 2006, Helix granted certain CDI executives
22,885 restricted shares under the Incentive Plan. The shares
vest 20% per year for a five-year period. The market value of
the restricted shares was $35.89 per share, or $821,000, at the
date of the grant.
Until June 30, 2007, the Companys employees are also
eligible to participate in a qualified, non-compensatory
Employee Stock Purchase Plan (ESPP) provided by
Helix, which allows employees to acquire shares of common stock
through payroll deductions over a six-month period. The purchase
price is equal to 85% of the fair market value of the common
stock on either the first or last day of the subscription
period, whichever is lower. Purchases under the plan are limited
to 10% of an employees base salary. Under this plan
97,598, 79,878 and 93,580 shares of common stock were
purchased in the open market at a weighted average share price
of $33.12, $23.11 and $13.58 during 2006, 2005 and 2004,
respectively. The Companys employees represent
approximately 56% of the total participation in this plan in
2006.
Cal
Dive Plans
Under an incentive plan adopted by the Company on
December 9, 2006, up to 7,000,000 shares of the
Companys common stock may be issued to key personnel and
non-employee directors; of which no more than
5,000,000 shares may be issued in the form of restricted
stock or pursuant to restricted stock unit awards. The plan is
administered by the compensation committee of the board of
directors, which has broad authority to select the persons to
whom awards will be made, fix the terms and conditions of each
award, and construe, interpret and apply the provisions of the
plan and any award made under the plan. The Companys Chief
Executive Officer has the authority to grant options (for no
more than 100,000 shares per fiscal year) as inducements to
hire candidates who will not be officers. The committee may
grant stock options, restricted stock or restricted stock units.
Awards granted to employees under the plan typically vest 20%
per year over a five-year period, or 50% per year over a
two-year period, have a maximum exercise life of 10 years,
and subject to certain exceptions, are not transferable.
On December 19, 2006 in connection with the closing of the
IPO, the Company granted certain officers and employees an
aggregate of 618,321 restricted shares under the incentive plan.
The shares vest in equal
157
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
increments over a two-year or five-year period, depending on the
specific award. The market value (based on the price at which
the Companys common stock was sold to the public in its
IPO) of the restricted shares was $13.00 per share, or
$8,038,173, at the date of grant. Compensation cost for each
award is the product of market value of each share and the
number of shares granted. The following table summarizes
information about our restricted shares during the years ended
December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
Shares
|
|
|
Fair Value(1)
|
|
|
Restricted shares outstanding at beginning of year
|
|
|
|
|
|
|
|
|
Granted
|
|
|
618,321
|
|
|
$
|
13.00
|
|
Vested
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
|
618,321
|
|
|
$
|
13.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the average grant date market value. |
Compensation cost is recognized over the respective vesting
periods on a straight-line basis. For the year ended
December 31, 2006, compensation expense related to
restricted shares was not material. Future compensation cost
associated with unvested restricted stock awards at
December 31, 2006 totaled approximately $8.0 million.
The weighted average vesting period related to nonvested
restricted stock awards at December 31, 2006 was
approximately 3.9 years.
On December 9, 2006, the Company also adopted the
Cal Dive International, Inc. Employee Stock Purchase Plan,
which allows employees to acquire shares of common stock through
payroll deductions over a six-month period. The purchase price
is equal to 85% of the fair market value of the common stock on
either the first or the last day of the subscription period,
whichever is lower. Purchases under the plan are limited to 10%
of an employees base salary. The Company may issue a total
of 1,500,000 shares of common stock under the plan. The
Companys employees may first participate in the plan for
the subscription period that will commence on July 1, 2007.
|
|
13.
|
Allowance
for Uncollectible Accounts
|
The following table sets forth the activity in the
Companys allowance for uncollectible accounts for each of
the three years in the period ended December 31, 2006 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Beginning balance
|
|
$
|
26
|
|
|
$
|
4,641
|
|
|
$
|
5,087
|
|
Additions
|
|
|
603
|
|
|
|
411
|
|
|
|
1,225
|
|
Deductions
|
|
|
(460
|
)
|
|
|
(5,026
|
)
|
|
|
(1,671
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
169
|
|
|
$
|
26
|
|
|
$
|
4,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Note 2 for discussion regarding the Companys
accounting policy on accounts receivable and allowance for
uncollectible accounts.
|
|
14.
|
Business
Segment Information
|
The Company has one reportable segment, Marine Contracting. The
Company performs a portion of its marine contracting services in
foreign waters. For the years ended December 31, 2006, 2005
and 2004, the Company derived revenues of $70.4 million,
$33.6 million and $19.6 million, respectively, from
foreign locations. Net property and equipment in foreign
locations were $49.1 million and $22.5 million at
158
Cal Dive
International, Inc. and Subsidiaries
Notes to
Consolidated and Combined Financial
Statements (Continued)
December 31, 2006 and 2005, respectively. The remainder of
the Companys revenues were generated in the U.S. Gulf
of Mexico.
|
|
15.
|
Quarterly
Financial Information (Unaudited)
|
The offshore marine construction industry in the Gulf of Mexico
may be seasonal as a result of weather conditions and the timing
of capital expenditures by the oil and gas companies.
Historically, a substantial portion of our services has been
performed during the summer and fall months. As a result,
historically a disproportionate portion of our revenues and net
income is earned during such period. The following is a summary
of consolidated quarterly financial information for 2006 and
2005 (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
March 31
|
|
|
June 30
|
|
|
September 30
|
|
|
December 31
|
|
|
|
(In thousands, except per share data)
|
|
|
Fiscal 2006 Revenues
|
|
$
|
119,790
|
|
|
$
|
124,765
|
|
|
$
|
128,363
|
|
|
$
|
136,999
|
|
Gross profit
|
|
|
50,206
|
|
|
|
60,944
|
|
|
|
57,737
|
|
|
|
53,643
|
|
Net income applicable to common shareholders
|
|
$
|
30,774
|
|
|
$
|
33,420
|
|
|
$
|
29,051
|
|
|
$
|
26,169
|
|
Weighted Avg. Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
61,507
|
|
|
|
61,507
|
|
|
|
61,507
|
|
|
|
65,845
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
0.50
|
|
|
$
|
0.54
|
|
|
$
|
0.47
|
|
|
$
|
0.40
|
|
Fiscal 2005 Revenues
|
|
$
|
37,292
|
|
|
$
|
40,699
|
|
|
$
|
49,246
|
|
|
$
|
97,062
|
|
Gross profit
|
|
|
12,406
|
|
|
|
8,794
|
|
|
|
17,667
|
|
|
|
32,846
|
|
Net income applicable to common shareholders
|
|
$
|
6,245
|
|
|
$
|
3,733
|
|
|
$
|
10,120
|
|
|
$
|
17,632
|
|
Weighted Avg. Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
61,507
|
|
|
|
61,507
|
|
|
|
61,507
|
|
|
|
61,507
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
$
|
0.10
|
|
|
$
|
0.06
|
|
|
$
|
0.16
|
|
|
$
|
0.29
|
|
159
Cal Dive
International, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
(in thousands, except per share par value)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
16,294
|
|
|
$
|
22,655
|
|
Accounts receivable
|
|
|
|
|
|
|
|
|
Trade, net of allowance for doubtful accounts of $0 and $169,
respectively
|
|
|
134,050
|
|
|
|
93,748
|
|
Unbilled revenue
|
|
|
16,979
|
|
|
|
33,869
|
|
Net receivable from Helix
|
|
|
3,837
|
|
|
|
1,626
|
|
Deferred income taxes
|
|
|
3,137
|
|
|
|
1,869
|
|
Assets held for sale
|
|
|
|
|
|
|
698
|
|
Notes receivable
|
|
|
1,943
|
|
|
|
3,008
|
|
Other current assets
|
|
|
17,615
|
|
|
|
11,274
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
193,855
|
|
|
|
168,747
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
318,746
|
|
|
|
293,929
|
|
Less Accumulated depreciation
|
|
|
(88,184
|
)
|
|
|
(71,682
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
230,562
|
|
|
|
222,247
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Equity investment
|
|
|
|
|
|
|
10,871
|
|
Goodwill
|
|
|
26,802
|
|
|
|
26,666
|
|
Other assets, net
|
|
|
35,033
|
|
|
|
23,622
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
486,252
|
|
|
$
|
452,153
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
49,839
|
|
|
$
|
39,810
|
|
Accrued liabilities
|
|
|
41,388
|
|
|
|
19,004
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
91,227
|
|
|
|
58,814
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
117,000
|
|
|
|
201,000
|
|
Long-term payable to Helix
|
|
|
7,074
|
|
|
|
11,028
|
|
Deferred income taxes
|
|
|
29,725
|
|
|
|
20,824
|
|
Other long term liabilities
|
|
|
1,795
|
|
|
|
2,726
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
246,821
|
|
|
|
294,392
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock, 240,000 shares authorized, $0.01 par
value, issued and outstanding: 84,331 and 84,298 shares,
respectively
|
|
|
843
|
|
|
|
843
|
|
Capital in excess of par value of common stock
|
|
|
157,399
|
|
|
|
154,898
|
|
Retained earnings
|
|
|
81,189
|
|
|
|
2,020
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
239,431
|
|
|
|
157,761
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
486,252
|
|
|
$
|
452,153
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated and combined financial statements.
160
Cal Dive
International, Inc. and Subsidiaries
Condensed Consolidated and Combined Statements of
Operations
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Net revenues
|
|
$
|
461,412
|
|
|
$
|
372,918
|
|
Cost of sales
|
|
|
287,956
|
|
|
|
204,031
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
173,456
|
|
|
|
168,887
|
|
Gain on sale of assets
|
|
|
1,852
|
|
|
|
322
|
|
Selling and administrative expenses
|
|
|
33,870
|
|
|
|
25,210
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
141,438
|
|
|
|
143,999
|
|
|
|
|
|
|
|
|
|
|
Equity in losses of investment, inclusive of impairment charge
|
|
|
(10,841
|
)
|
|
|
(587
|
)
|
Net interest income (expense)
|
|
|
(7,040
|
)
|
|
|
364
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
123,557
|
|
|
|
143,776
|
|
Provision for income taxes
|
|
|
44,387
|
|
|
|
50,531
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
79,170
|
|
|
$
|
93,245
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.95
|
|
|
$
|
1.52
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
0.94
|
|
|
$
|
1.52
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
83,680
|
|
|
|
61,507
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
83,790
|
|
|
|
61,507
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed
consolidated and combined financial statements.
161
Cal Dive
International, Inc. and Subsidiaries
Condensed
Consolidated and Combined Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2007
|
|
|
2006
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
79,170
|
|
|
$
|
93,245
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
28,702
|
|
|
|
17,047
|
|
Stock compensation expense
|
|
|
2,501
|
|
|
|
1,821
|
|
Equity in (earnings) losses of investment, inclusive of
impairment charge
|
|
|
10,841
|
|
|
|
728
|
|
Deferred income taxes
|
|
|
7,633
|
|
|
|
4,561
|
|
Gain on sale of assets
|
|
|
(1,852
|
)
|
|
|
(322
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
(25,624
|
)
|
|
|
(14,793
|
)
|
Assets held for sale
|
|
|
698
|
|
|
|
|
|
Other current assets
|
|
|
(1,618
|
)
|
|
|
(3,741
|
)
|
Accounts payable and accrued liabilities
|
|
|
31,585
|
|
|
|
20,749
|
|
Other noncurrent, net
|
|
|
(28,524
|
)
|
|
|
(11,463
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
103,512
|
|
|
|
107,832
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(26,390
|
)
|
|
|
(21,055
|
)
|
Acquisition of businesses
|
|
|
|
|
|
|
(100,660
|
)
|
Proceeds from sales of property
|
|
|
517
|
|
|
|
15,679
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(25,873
|
)
|
|
|
(106,036
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
Repayments on credit facility
|
|
|
(84,000
|
)
|
|
|
|
|
Cash transfers from Helix for investing activities
|
|
|
|
|
|
|
106,036
|
|
Cash transfers to Helix from operating activities
|
|
|
|
|
|
|
(105,784
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(84,000
|
)
|
|
|
252
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(6,361
|
)
|
|
|
2,048
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
Balance, beginning of period
|
|
|
22,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of period
|
|
$
|
16,294
|
|
|
$
|
2,048
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Information:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
7,873
|
|
|
$
|
|
|
Income taxes paid
|
|
$
|
26,854
|
|
|
$
|
|
|
The accompanying notes are an integral part of these condensed
consolidated and combined financial statements.
162
Cal Dive
International, Inc. and Subsidiaries
Notes to Condensed Consolidated and Combined Financial
Statements (unaudited)
|
|
1.
|
Preparation
of Interim Financial Statements
|
Prior to December 14, 2006, Cal Dive International,
Inc., its subsidiaries and its operations (the
Company) were wholly-owned by Helix Energy Solutions
Group, Inc. (Helix). On February 27, 2006,
Helix announced a plan to separate its shallow water marine
contracting business into a separate company. As part of the
plan, on December 11, 2006, Helix and its subsidiaries
contributed and transferred to the Company all of the assets and
liabilities of the shallow water marine contracting business,
and on December 14, 2006 the Company, through an initial
public offering (IPO), issued 22,173,000 shares
of its common stock representing approximately 27% of the
Companys common stock. Following the contribution and
transfer by Helix, the Company owns and operates a diversified
fleet of 26 vessels, including 23 surface and saturation
diving support vessels capable of operating in water depths of
up to 1,000 feet, as well as three shallow water pipelay
vessels.
Prior to the Companys IPO, these condensed consolidated
and combined financial statements reflect the financial position
and results of the shallow water marine contracting business of
Helix and related assets and liabilities, results of operations
and cash flows for this segment as carved out of the accounts of
Helix and as though the shallow water marine contracting
business had been a separate stand-alone company for the
respective periods presented.
Prior to December 14, 2006, the shallow water marine
contracting business of Helix operated within Helixs
corporate cash management program. For purposes of presentation
in the condensed consolidated and combined statements of cash
flows, net cash flows provided by the operating activities of
the Company prior to the IPO are presented as cash transfers to
Helix under cash flows from financing activities for periods
prior to December 14, 2006. Additionally, net cash flows
used in investing activities of the Company prior to the IPO are
presented as cash transfers from Helix under cash flows from
financing activities for periods prior to December 14,
2006. This presentation results in the condensed consolidated
and combined financial statements reflecting no cash balances
for all periods prior to December 14, 2006 as if all excess
cash has been transferred to Helix prior to the IPO. These
condensed consolidated and combined financial statements have
been prepared using Helixs historical basis in the assets
and liabilities and the historical results of operations
relating to the shallow water marine contracting business of
Helix.
Certain management, administrative and operational services of
Helix have been shared between the shallow water marine
contracting business and other Helix business segments for all
periods presented. For purposes of financial statement
presentation, the costs for these shared services has been
allocated to the Company based on actual direct costs incurred,
headcount, work hours and revenues. See Note 2
Related Party Transactions.
These interim condensed consolidated and combined financial
statements are unaudited and have been prepared pursuant to
instructions for quarterly reports required to be filed with the
Securities and Exchange Commission (SEC) and do not
include all information and footnotes normally included in
annual financial statements prepared in accordance with
U.S. generally accepted accounting principles.
The accompanying condensed consolidated and combined financial
statements have been prepared in conformity with
U.S. generally accepted accounting principles and are
consistent in all material respects with those applied in our
annual report on
Form 10-K
for the year ended December 31, 2006. The preparation of
these financial statements requires us to make estimates and
judgments that affect the amounts reported in the financial
statements and the related disclosures. Actual results may
differ from our estimates. Management has reflected all
adjustments (which were normal recurring adjustments unless
otherwise disclosed herein) that it believes are necessary for a
fair presentation of the condensed consolidated and combined
balance sheets, results of operations and cash flows, as
applicable. Operating results for the period ended
September 30, 2007 are not necessarily indicative of the
results that may be expected for the year ending
December 31, 2007. Our balance sheet as of
December 31, 2006 included herein has been derived from the
audited balance sheet as of
163
Cal Dive
International, Inc. and Subsidiaries
Notes to Condensed Consolidated and Combined Financial
Statements (Unaudited) (Continued)
December 31, 2006 included in our 2006 Annual Report on
Form 10-K.
These condensed consolidated and combined financial statements
should be read in conjunction with the annual consolidated and
combined financial statements and notes thereto included in our
2006 Annual Report on
Form 10-K.
|
|
2.
|
Related
Party Transactions
|
Helix provides to the Company certain management and
administrative services including: (i) internal audit, tax,
treasury and other financial services; (ii) insurance
(including claims) and related services; (iii) information
systems, network and communication services; (iv) employee
benefit services (including direct third party group insurance
costs and 401(k) contribution matching costs discussed below);
and (v) corporate facilities management services. Total
allocated costs from Helix for such services were approximately
$2.7 million for the nine months ended September 30,
2007, and $10.9 million for the nine months ended
September 30, 2006.
Included in the costs for 2006 are costs related to the
participation by the Companys employees in Helix employee
benefit plans, including employee medical insurance and a
defined contribution 401(k) retirement plan. These costs are
recorded as a component of operating expenses and were
approximately $4.3 million for nine months ended
September 30, 2006. In January 2007, the Company began
paying directly for its own employee medical insurance and
401(k) contribution costs.
The Company provides to Helix operational and field support
services including: (i) training and quality control
services; (ii) marine administration services;
(iii) supply chain and base operation services;
(iv) environmental, health and safety services;
(v) operational facilities management services; and
(vi) human resources. Total allocated costs to Helix for
such services were approximately $2.7 million for the nine
months ended September 30, 2007, and $4.3 million for
the nine months ended September 30, 2006.
Prior to December 14, 2006, the operations of the Company
were included in a consolidated federal income tax return filed
by Helix. The Companys provision for income taxes has been
computed on the basis that the Company has completed and filed
separate consolidated federal income tax returns except that no
benefits for employee stock option exercises related to Helix
stock have been recognized or reflected herein. Tax benefits
recognized on these employee stock options exercises have been
and will continue to be retained by Helix.
In contemplation of our IPO, the Company entered into several
agreements with Helix addressing the rights and obligations of
each respective company, including a Master Agreement, a
Corporate Services Agreement, an Employee Matters Agreement, a
Registration Rights Agreement and a Tax Matters Agreement.
Pursuant to the Tax Matters Agreement, for a period of up to ten
years, the Company is required to make payments totaling
$11.3 million to Helix equal to 90% of tax benefits derived
by the Company from tax basis adjustments resulting from the
Boot gain recognized by Helix as a result of the
distributions made to Helix as part of the IPO transaction. As
of September 30, 2007, the current and long-term tax
benefit payables to Helix related to this obligation are
$0.4 million and $7.1 million, respectively.
In the ordinary course of business, the Company provided marine
contracting services to Helix and recognized revenues of
$49.0 million in the nine months ended September 30,
2007, and $18.8 million in the nine months ended
September 30, 2006. Helix provided ROV services to the
Company, and the Company recognized operating expenses of
$5.2 million in the nine months ended September 30,
2007, and $4.1 million for the nine months ended
September 30, 2006.
Including the current tax benefit payable to Helix resulting
from the tax
step-up
benefit, noted above, net amounts payable to and receivable from
Helix are settled with cash at least quarterly. At
September 30, 2007 the net amount receivable from Helix was
$3.8 million and will be settled in the fourth quarter of
2007.
164
Cal Dive
International, Inc. and Subsidiaries
Notes to Condensed Consolidated and Combined Financial
Statements (Unaudited) (Continued)
|
|
3.
|
Details
of Certain Accounts (in thousands)
|
Other current assets consisted of the following as of
September 30, 2007 and December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Other receivables
|
|
$
|
3,664
|
|
|
$
|
3,134
|
|
Insurance claims to be reimbursed
|
|
|
5,809
|
|
|
|
1,870
|
|
Other prepaids
|
|
|
5,056
|
|
|
|
1,679
|
|
Supplies and spare parts inventory
|
|
|
3,086
|
|
|
|
2,295
|
|
Other
|
|
|
|
|
|
|
2,296
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,615
|
|
|
$
|
11,274
|
|
|
|
|
|
|
|
|
|
|
Other assets, net, consisted of the following as of
September 30, 2007 and December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Deferred drydock expenses, net
|
|
$
|
26,813
|
|
|
$
|
20,069
|
|
Equipment deposits
|
|
|
5,032
|
|
|
|
|
|
Intangible assets with definite lives, net
|
|
|
2,812
|
|
|
|
3,159
|
|
Deferred financing costs
|
|
|
376
|
|
|
|
378
|
|
Other
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
35,033
|
|
|
$
|
23,622
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities consisted of the following as of
September 30, 2007 and December 31, 2006:
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Accrued payroll and related benefits
|
|
$
|
13,813
|
|
|
$
|
7,500
|
|
Accrued insurance
|
|
|
5,599
|
|
|
|
3,367
|
|
Insurance claims to be reimbursed
|
|
|
5,809
|
|
|
|
1,870
|
|
Accrued income taxes payable
|
|
|
10,945
|
|
|
|
1,201
|
|
Other
|
|
|
5,222
|
|
|
|
5,066
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
41,388
|
|
|
$
|
19,004
|
|
|
|
|
|
|
|
|
|
|
In July 2005, we acquired a 40% minority ownership interest in
OTSL in exchange for our DP DSV, Witch Queen. OTSL provides
marine construction services to the oil and gas industry in and
around Trinidad and Tobago. During the second quarter 2007, the
Company determined that there was an other than temporary
impairment in OTSL and the full value of its investment in OTSL
was impaired. The Company recognized equity losses of OTSL,
inclusive of the impairment charge, of $11.8 million in the
second quarter of 2007.
In November 2006, the Company entered into a five-year
$250.0 million revolving credit facility with certain
financial institutions. On December 8, 2006, the Company
borrowed $79.0 million under the revolving credit facility
and distributed $78.0 million of those proceeds to Helix as
a dividend. On December 21, 2006, the Company borrowed an
additional $122.0 million under the revolving credit
facility, all of which was distributed to Helix as a dividend.
During the nine months ended September 30, 2007, the
Company recorded
165
Cal Dive
International, Inc. and Subsidiaries
Notes to Condensed Consolidated and Combined Financial
Statements (Unaudited) (Continued)
interest expense of $7.5 million under this facility. At
September 30, 2007, the Company had outstanding debt of
$117.0 million and accrued interest of $138,000 under this
credit facility.
At September 30, 2007 and December 31, 2006, the
Company was in compliance with all debt covenants. The credit
facility is secured by vessel mortgages on five of its vessels
with an aggregate net book value of $126.3 million at
September 30, 2007, a pledge of all of the stock of all of
its domestic subsidiaries and 66% of the stock of one of its
foreign subsidiaries, and a security interest in, among other
things, all of its equipment, inventory, accounts receivable and
general tangible assets.
|
|
6.
|
Commitments
and Contingencies
|
Insurance
The Company incurs maritime employers liability,
workers compensation and other insurance claims in the
normal course of business, which management believes are covered
by insurance. The Company analyzes each claim for potential
exposure and estimates the ultimate liability of each claim.
Amounts due from insurance companies, above the applicable
deductible limits, are reflected in other current assets in the
condensed consolidated and combined balance sheets. Such amounts
were $5.8 million and $1.9 million as of
September 30, 2007 and December 31, 2006,
respectively. The Company has not historically incurred
significant losses as a result of claims denied by its insurance
carriers.
Litigation
and Claims
The Company is involved in various legal proceedings, primarily
involving claims for personal injury under the General Maritime
Laws of the United States and the Jones Act as a result of
alleged negligence. In addition, the Company from time to time
incurs other claims, such as contract disputes, in the normal
course of business. Although these matters have the potential of
significant additional liability, the Company believes the
outcome of all such matters and proceedings will not have a
material adverse effect on its condensed consolidated and
combined financial position, results of operations or cash
flows. Pursuant to the terms of the Master Agreement, the
Company assumed and will indemnify Helix for liabilities related
to the Companys business.
|
|
7.
|
Stock-Based
Compensation Plans
|
Helix
Plans
Until December 14, 2006, the Company did not have any
stock-based compensation plans. However, prior to that date
certain employees of the Company participated in Helixs
stock-based compensation plans.
The Company adopted Statement of Financial Accounting Standards
No. 123 (revised 2004) Share-Based Payment
and began accounting for stock-based compensation plans under
the fair value method beginning January 1, 2006 and
continues to use the Black-Scholes fair value model for valuing
share-based payments and recognizes compensation cost on a
straight-line basis over the respective vesting period. No
forfeitures were estimated for outstanding unvested options and
restricted shares as historical forfeitures have been
immaterial. There were no stock option grants in the first three
quarters of 2007 or 2006.
For the nine months ended September 30, 2007, $333,000 was
recognized as compensation expense related to restricted shares
in Helix incentive plans. For the nine months ended
September 30, 2006, $1.8 million was recognized as
compensation expense related to restricted shares in Helix
incentive plans.
Until June 30, 2007, the Companys employees were also
eligible to participate in a qualified, non-compensatory
Employee Stock Purchase Plan (ESPP) provided by
Helix, which allows employees to acquire shares of Helix common
stock through payroll deductions over a six-month period. The
purchase price is equal to 85% of the fair market value of the
common stock on either the first or last day of the subscription
166
Cal Dive
International, Inc. and Subsidiaries
Notes to Condensed Consolidated and Combined Financial
Statements (Unaudited) (Continued)
period, whichever is lower. Purchases under the plan are limited
to 10% of an employees base salary up to $25,000 of our
stock value. The Company recognized compensation expense related
to stock purchases under the Helix ESPP of $548,000 for the six
months ended June 30, 2007, and $673,000 for the nine
months ended September 30, 2006.
Cal Dive
Plans
Under an incentive plan adopted by the Company on
December 9, 2006, as amended and restated and approved by
the Companys stockholders on May 7, 2007, up to
9,000,000 shares of the Companys common stock may be
issued to key personnel and non-employee directors.
During the nine months ended September 30, 2007, we made
restricted share grants of: (i) 24,894 shares on
February 5, 2007, which vest 20% per year over a five-year
period, (ii) 4,836 shares on March 31, 2007,
which vest 100% on January 1, 2009,
(iii) 1,643 shares on May 29, 2007, which vest
20% per year over a five-year period,
(iv) 3,250 shares on June 30, 2007, which vest
100% on January 1, 2009 and (v) 3,520 shares on
September 30, 2007, which vest 100% on January 1,
2009. The market value of the restricted shares was $12.05,
$12.21, $15.21, $16.63 and $15.00 per share at the date of
grant, respectively.
Compensation cost is recognized over the respective vesting
periods on a straight-line basis. For the nine months ended
September 30, 2007, compensation expense related to
restricted shares was $1.6 million. Future compensation
cost associated with unvested restricted stock awards at
September 30, 2007 totaled approximately $7.2 million.
On December 9, 2006, the Company also adopted the
Cal Dive International, Inc. Employee Stock Purchase Plan,
which allows employees to acquire shares of common stock through
payroll deductions over a six-month period. The purchase price
is equal to 85% of the fair market value of the common stock on
either the first or the last day of the subscription period,
whichever is lower. Purchases under the plan are limited to 10%
of an employees base salary up to $25,000 of our stock
value. The Company may issue a total of 1,500,000 shares of
common stock under the plan. The Companys employees first
participated in the plan for the subscription period that
commenced on July 1, 2007. The Company recognized
compensation expense related to stock purchase under the
Cal Dive ESPP of $300,000 for the nine months ended
September 30, 2007.
The effective tax rate of 35.9% for the nine months ended
September 30, 2007 was higher than the effective tax rate
of 35.2% for the first nine months of 2006 due primarily to
second quarter 2007 non-cash equity losses and related
impairment charge in connection with the Companys
investment in OTSL for which minimal tax benefit was recorded
and a nondeductible cash settlement of $2.0 million to be
paid for a civil claim by the Department of Justice related to
the consent decree the Company entered into in connection with
the Acergy and Torch acquisitions in 2005. This increase was
partially offset by lower effective tax rates in foreign
jurisdictions.
The Company adopted the provisions of FASB Interpretation
No. 48, Accounting for Uncertainty in Income Taxes
(FIN 48) on January 1, 2007. The impact of
the adoption of FIN 48 was immaterial on our financial
position, results of operations and cash flows. The Company
records tax related interest in interest expense and tax
penalties in operating expenses as allowed under FIN 48. As
of September 30, 2007, we had no material unrecognized tax
benefits and no material interest and penalties were recognized.
The Company files tax returns in the U.S. and in various
state, local and
non-U.S. jurisdictions.
The Company anticipates that any potential adjustments to its
state, local and
non-U.S. jurisdiction
tax returns by tax authorities would not have a material impact
on its financial position. For tax periods prior to
December 14, 2006, the operations of the Company were
included in a consolidated federal income tax return filed by
Helix.
167
Cal Dive
International, Inc. and Subsidiaries
Notes to Condensed Consolidated and Combined Financial
Statements (Unaudited) (Continued)
Helix is generally responsible for all federal, state, local and
foreign income taxes that are imposed on or attributable to the
Company or its subsidiaries for all tax periods (or portions
thereof) ending prior to the Companys initial public
offering (or December 14, 2006). The Company is generally
responsible for all federal, state, local and foreign income
taxes that are imposed on or attributable to the Company or its
subsidiaries for all tax periods (or portions thereof) ending
after the Companys initial public offering (or
December 14, 2006). The Companys initial return for
the tax period ended December 31, 2006 remains subject to
examination by the U.S. Internal Revenue Service.
|
|
9.
|
Business
Segment Information
|
The Company has one reportable segment, Marine Contracting. The
Company performs a portion of its marine contracting services in
foreign waters. The Company derived revenues of
$100.9 million for the nine months ended September 30,
2007, and $49.8 million for the nine months ended
September 30, 2006, from foreign locations. The remainder
of the Companys revenues were generated in the
U.S. Gulf of Mexico.
|
|
10.
|
Recently
Issued Accounting Principles
|
In September 2006, the FASB issued Statement No. 157, Fair
Value Measurements (SFAS No. 157).
SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in accordance with generally
accepted accounting principles and expands disclosures about
fair value measurements. The provisions of
SFAS No. 157 are effective for fiscal years beginning
after November 15, 2007. We are currently evaluating the
impact, if any, of this statement.
In February 2007, the FASB issued Statement No. 159, The
Fair Value Option for Financial Assets and Financial Liabilities
(SFAS No. 159). SFAS No. 159
allows entities to voluntarily choose, at specified election
dates, to measure many financial assets and financial
liabilities at fair value. The election is made on an
instrument-by-instrument
basis and is irrevocable. If the fair value option is elected
for an instrument, SFAS No. 159 specifies that all
subsequent changes in fair value for that instrument shall be
reported in earnings. The provisions of SFAS No. 159
are effective for fiscal years beginning after November 15,
2007. We are currently evaluating the impact, if any, of this
statement.
|
|
11.
|
Acquisition
of Horizon Offshore, Inc.
|
On June 11, 2007 the Company and Horizon Offshore, Inc.
(Horizon) announced that they had entered into an
agreement under which the Company will acquire Horizon in a
transaction valued at approximately $650.0 million,
including approximately $22.0 million of Horizons net
debt as of March 31, 2007. Under the terms of the
agreement, Horizon stockholders will receive a combination of
0.625 shares of Cal Dive common stock and $9.25 in
cash for each share of Horizon common stock outstanding, or an
estimated total of 20.4 million Cal Dive shares and
$302.5 million in cash. The boards of directors of
Cal Dive and Horizon unanimously approved the transaction.
Closing of the transaction is subject to regulatory approvals
and other customary conditions, as well as Horizon stockholder
approval, and is expected to occur in the fourth quarter of
2007. In limited circumstances, if Horizon fails to close the
transaction, it must pay the Company a termination fee of
$18.9 million. The cash portion of the transaction will be
funded through a $675.0 million commitment from a bank,
consisting of a $375.0 million senior secured term loan and
a $300.0 million senior secured revolving credit facility.
On September 28, 2007, the parties each received a request
for additional information from the Antitrust Division of the
U.S. Department of Justice. The request was issued under
the notification requirements of the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and has the
effect of extending the waiting period for a period of 30
calendar days from the date of the parties substantial
compliance with the request.
168
Cal Dive
International, Inc. and Subsidiaries
Notes to Condensed Consolidated and Combined Financial
Statements (Unaudited) (Continued)
Basic earnings per share (EPS) is computed by
dividing the net income available to common stockholders by the
weighted-average shares of outstanding common stock. The
calculation of diluted EPS is similar to basic EPS, except that
the denominator includes dilutive common stock equivalents and
the income included in the numerator excludes the effects of the
impact of dilutive common stock equivalents, if any. The
computation of basic and diluted EPS amounts were as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
September 30, 2007
|
|
|
|
|
|
|
|
|
|
Income
|
|
|
Shares
|
|
|
|
|
|
|
|
|
Earnings applicable per common share Basic
|
|
$
|
79,170
|
|
|
|
83,680
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares
|
|
|
|
|
|
|
108
|
|
|
|
|
|
|
|
|
|
Employee stock purchase plan
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings applicable per common share Diluted
|
|
$
|
79,170
|
|
|
|
83,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, 2006, basic and
diluted earnings per share were the same as there were no
dilutive securities outstanding during this period.
169
UNAUDITED
CONDENSED COMBINED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial statements combine
the historical consolidated balance sheets and statements of
operations of Cal Dive and Horizon, giving effect to the
merger using the purchase method of accounting.
We are providing the information to aid you in your analysis of
the financial aspects of the merger. The historical statements
of operations for the year ended December 31, 2006 were
derived from the audited financial statements of Cal Dive
and Horizon contained in each companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, which reports
are included in this information statement/proxy
statement/prospectus, in the case of Cal Dive, or
incorporated into this information statement/proxy
statement/prospectus by reference, in the case of Horizon. The
historical unaudited statements of operations for the nine
months ended September 30, 2007, and the historical
unaudited balance sheets as of September 30, 2007, were
derived from the unaudited financial statements of Cal Dive
and Horizon contained in each companys Quarterly Report on
Form 10-Q
for the period ended September 30, 2006, which reports are
included in this information statement/proxy
statement/prospectus, in the case of Cal Dive, or
incorporated into this information statement/proxy
statement/prospectus by reference, in the case of Horizon.
You should read the following unaudited pro forma combined
financial statements together with the historical financial
statements and related notes contained elsewhere in this
information statement/proxy statement/prospectus or incorporated
by reference into this information statement/proxy
statement/prospectus.
The unaudited pro forma combined statements of operations
assumes the merger was effected on January 1, 2006. The
unaudited pro forma combined balance sheet gives effect to the
merger as if it had occurred on September 30, 2007. Horizon
uses the units-of-production method to calculate depreciation on
its barges, vessels and related equipment, while Cal Dive
uses the straight-line method for its vessels. The pro forma
financial data includes adjustments to reflect the Horizon
depreciation on its barges, vessels and related equipment using
the straight-line method over the estimated useful lives of the
respective assets. The remaining accounting policies for
Cal Dive and Horizon are comparable.
The unaudited pro forma combined information is for illustrative
purposes only. The financial results may have been different had
the companies always been combined. Further, the unaudited pro
forma combined financial statements do not reflect the effect of
asset dispositions, if any, that may be required by order of
regulatory authorities; restructuring charges that will be
incurred to fully integrate and operate the combined
organization more efficiently or anticipated synergies resulting
from the merger. Expected costs associated with the combination
of the companies operations, such as severance costs for
redundant functions, integrating information technology systems
and other arrangements, are in the process of being evaluated by
Cal Dive. These costs are not expected to exceed
$25 million, of which approximately $13.5 million
relates to additional purchase price consideration for change in
control payments for Horizon executive officers. You should not
rely on the pro forma combined financial information as being
indicative of the historical results that would have been
achieved had the companies always been combined or the future
results that Cal Dive will experience.
170
Cal Dive
International, Inc.
Unaudited
Condensed Combined Pro Forma Statement of Operations for the
Year
Ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cal Dive and
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Horizon Pro Forma
|
|
|
|
Cal Dive
|
|
|
Horizon*
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands, except per share amounts)
|
|
|
Net revenues
|
|
$
|
509,917
|
|
|
$
|
547,289
|
|
|
$
|
(16,228
|
)(a)
|
|
$
|
1,040,978
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
262,872
|
|
|
|
373,786
|
|
|
|
(16,228
|
)(a)
|
|
|
620,430
|
|
Depreciation and amortization
|
|
|
24,515
|
|
|
|
26,254
|
|
|
|
4,259
|
(b)
|
|
|
55,028
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
222,530
|
|
|
|
147,249
|
|
|
|
(4,259
|
)
|
|
|
365,520
|
|
(Gain) loss on sale of assets and insurance settlement, reserves
and impairments
|
|
|
(349
|
)
|
|
|
4,258
|
|
|
|
|
|
|
|
3,909
|
|
Selling and administrative expenses
|
|
|
37,431
|
|
|
|
33,167
|
|
|
|
|
|
|
|
70,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
185,448
|
|
|
|
109,824
|
|
|
|
(4,259
|
)
|
|
|
291,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in earnings of investment
|
|
|
(487
|
)
|
|
|
|
|
|
|
|
|
|
|
(487
|
)
|
Net interest income (expense) and other
|
|
|
163
|
|
|
|
(13,399
|
)
|
|
|
(13,049
|
)(c)
|
|
|
(26,285
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
185,124
|
|
|
|
96,425
|
|
|
|
(17,308
|
)
|
|
|
264,241
|
|
Provision for income taxes
|
|
|
65,710
|
|
|
|
29,415
|
|
|
|
(6,058
|
)(d)
|
|
|
89,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
119,414
|
|
|
$
|
67,010
|
|
|
|
(11,250
|
)
|
|
$
|
175,174
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.91
|
|
|
$
|
2.18
|
|
|
|
|
|
|
$
|
2.11
|
|
Diluted
|
|
$
|
1.91
|
|
|
$
|
2.14
|
|
|
|
|
|
|
$
|
2.11
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
62,600
|
|
|
|
30,712
|
|
|
|
(10,276
|
)(e)
|
|
|
83,036
|
|
Diluted
|
|
|
62,600
|
|
|
|
31,263
|
|
|
|
(10,827
|
)(e)
|
|
|
83,036
|
|
|
|
|
* |
|
Certain amounts have been reclassified to conform to Cal
Dives presentation. |
|
(a) |
|
Reflects the elimination of sales and related operating expenses
between Cal Dive and Horizon. |
|
(b) |
|
Reflects (i) estimated increases in depreciation and
amortization related to the
step-up
of the acquired assets to their fair value of $7.5 million
and (ii) an adjustment of $3.3 million to decrease
Horizon depreciation to reflect depreciation calculations under
the straight-line method instead of the units-of-production
method used by Horizon. Adjustment calculated as the incremental
depreciation based on the purchase price applied to 2006 for
Horizon using the straight-line method. Adjustment assumes no
material changes in the estimated useful lives for acquired
assets as a result of the preliminary purchase price allocation. |
|
(c) |
|
Reflects the increase in long-term debt to fund the cash portion
of the purchase price at estimated annual interest rate of 7.45%
for the year ended December 31, 2006 (based upon the terms
of the proposed credit facilities of three month LIBOR plus
225 basis points see Proposed
Financings on page 185 of this information
statement/proxy statement/prospectus). A 1/8% increase in the
average three month LIBOR rate would increase pre-tax interest
expense by approximately $560,000 for the year ended
December 31, 2006. |
|
(d) |
|
The pro forma adjustment to income tax reflects the statutory
federal and state income tax impacts of the pro forma
adjustments to Cal Dives pretax income with an applied tax
rate of 35%. |
|
(e) |
|
Pro forma weighted average shares outstanding have been adjusted
to reflect the conversion of Horizons outstanding common
stock to shares of Cal Dive common stock (at a rate of one
Horizon share for 0.625 Cal Dive share) assuming the transaction
was consummated at the beginning of the period presented. |
171
Cal Dive
International, Inc.
Unaudited
Condensed Combined Pro Forma Statement of Operations for the
Nine
Months
Ended September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cal Dive and
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Horizon Pro Forma
|
|
|
|
Cal Dive
|
|
|
Horizon*
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
|
|
|
(In thousands, except per share amounts)
|
|
|
|
|
|
Net revenues
|
|
$
|
461,412
|
|
|
$
|
351,844
|
|
|
$
|
(22,266
|
)(a)
|
|
$
|
790,990
|
|
Cost of sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
259,677
|
|
|
|
283,414
|
|
|
|
(22,266
|
)(a)
|
|
|
520,825
|
|
Depreciation and amortization
|
|
|
28,279
|
|
|
|
17,780
|
|
|
|
6,167
|
(b)
|
|
|
52,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
173,456
|
|
|
|
50,650
|
|
|
|
(6,167
|
)
|
|
|
217,939
|
|
(Gain) loss on sale of assets
|
|
|
(1,852
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,852
|
)
|
Selling and administrative expenses
|
|
|
33,870
|
|
|
|
24,011
|
|
|
|
|
|
|
|
57,881
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
141,438
|
|
|
|
26,639
|
|
|
|
(6,167
|
)
|
|
|
161,910
|
|
Equity in earnings (loss) of investment
|
|
|
(10,841
|
)
|
|
|
|
|
|
|
|
|
|
|
(10,841
|
)
|
Net interest income (expense) and other
|
|
|
(7,040
|
)
|
|
|
(5,902
|
)
|
|
|
(12,733
|
)(c)
|
|
|
(25,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
123,557
|
|
|
|
20,737
|
|
|
|
(18,900
|
)
|
|
|
125,394
|
|
Provision for income taxes
|
|
|
44,387
|
|
|
|
5,829
|
|
|
|
(6,615
|
)(d)
|
|
|
43,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
79,170
|
|
|
$
|
14,908
|
|
|
$
|
(12,285
|
)
|
|
$
|
81,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.95
|
|
|
$
|
0.47
|
|
|
|
|
|
|
$
|
0.79
|
|
Diluted
|
|
$
|
0.94
|
|
|
$
|
0.46
|
|
|
|
|
|
|
$
|
0.79
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
83,680
|
|
|
|
32,004
|
|
|
|
(11,568
|
)(e)
|
|
|
104,116
|
|
Diluted
|
|
|
83,790
|
|
|
|
32,132
|
|
|
|
(11,740
|
)(e)
|
|
|
104,182
|
|
|
|
|
* |
|
Certain amounts have been reclassified to conform to Cal
Dives presentation. |
|
(a) |
|
Reflects the elimination of sales and related operating expenses
between Cal Dive and Horizon. |
|
(b) |
|
Reflects (i) estimated increases in depreciation and
amortization related to the
step-up
of the acquired assets to their fair value of $5.7 million
and (ii) an adjustment of $0.5 million to increase
Horizon depreciation to reflect depreciation calculations under
the straight-line method instead of the units-of-production
method used by Horizon. Adjustment calculated as the incremental
depreciation based on the purchase price applied to the first
nine months of 2007 for Horizon using the straight-line method.
Adjustment assumes no material changes in the estimated useful
lives for acquired assets as a result of the preliminary
purchase price allocation. |
|
(c) |
|
Reflects the increase in long-term debt to fund the cash portion
of the purchase price at estimated annual interest rate of 7.64%
for the nine month period ended September 30, 2007 (based
upon the terms of the proposed credit facilities of three month
LIBOR plus 225 basis points see Proposed
Financings on page 185 of this information
statement/proxy statement/prospectus). A 1/8% increase in the
average three month LIBOR rate would increase pre-tax interest
expense by approximately $420,000 for the nine months ended
September 30, 2007. |
|
(d) |
|
The pro forma adjustment to income tax reflects the statutory
federal and state income tax impacts of the pro forma
adjustments to Cal Dives pretax income with an applied tax
rate of 35%. |
|
(e) |
|
Pro forma weighted average shares outstanding have been adjusted
to reflect the conversion of Horizons outstanding common
stock to shares of Cal Dive common stock (at a rate of one
Horizon share for 0.625 Cal Dive share) assuming the transaction
was consummated at the beginning of the period presented. |
172
Cal Dive
International, Inc.
Unaudited
Condensed Combined Pro Forma Balance Sheet as of
September 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cal Dive and
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
Horizon Pro Forma
|
|
|
|
Cal Dive
|
|
|
Horizon*
|
|
|
Adjustments
|
|
|
Combined
|
|
|
|
(In thousands)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
16,294
|
|
|
$
|
94,154
|
|
|
$
|
(82,779
|
)(a),(b)
|
|
$
|
27,669
|
|
Short-term investments
|
|
|
|
|
|
|
6,225
|
|
|
|
(6,225
|
)(b)
|
|
|
|
|
Accounts receivable -
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade, net
|
|
|
134,050
|
|
|
|
135,195
|
|
|
|
(7,595
|
)(f)
|
|
|
261,650
|
|
Costs in excess of billings
|
|
|
|
|
|
|
75,395
|
|
|
|
|
|
|
|
75,395
|
|
Unbilled revenue
|
|
|
16,979
|
|
|
|
|
|
|
|
(6,606
|
)(f)
|
|
|
10,373
|
|
Net receivable from Helix
|
|
|
3,837
|
|
|
|
|
|
|
|
|
|
|
|
3,837
|
|
Income tax receivable
|
|
|
|
|
|
|
4,540
|
|
|
|
|
|
|
|
4,540
|
|
Deferred income taxes
|
|
|
3,137
|
|
|
|
|
|
|
|
|
|
|
|
3,137
|
|
Notes receivable
|
|
|
1,943
|
|
|
|
|
|
|
|
|
|
|
|
1,943
|
|
Other current assets
|
|
|
17,615
|
|
|
|
10,680
|
|
|
|
|
|
|
|
28,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
193,855
|
|
|
|
326,189
|
|
|
|
(103,205
|
)
|
|
|
416,839
|
|
Net property and equipment
|
|
|
230,562
|
|
|
|
194,408
|
|
|
|
135,592
|
(a)
|
|
|
560,562
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract receivables, long-term
|
|
|
|
|
|
|
14,328
|
|
|
|
|
|
|
|
14,328
|
|
Goodwill
|
|
|
26,802
|
|
|
|
|
|
|
|
259,939
|
(a),(d)
|
|
|
286,741
|
|
Other assets, net
|
|
|
35,033
|
|
|
|
14,113
|
|
|
|
(8,291
|
)(e)
|
|
|
40,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
486,252
|
|
|
$
|
549,038
|
|
|
$
|
284,035
|
|
|
$
|
1,319,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
49,839
|
|
|
$
|
12,096
|
|
|
$
|
|
|
|
$
|
61,935
|
|
Accrued liabilities
|
|
|
41,388
|
|
|
|
87,009
|
|
|
|
(682
|
)(g)
|
|
|
127,715
|
|
Billings in excess of costs
|
|
|
|
|
|
|
2,656
|
|
|
|
|
|
|
|
2,656
|
|
Current maturities of long-term debt
|
|
|
|
|
|
|
13,961
|
|
|
|
(13,961
|
)(b)
|
|
|
|
|
Current taxes payable
|
|
|
|
|
|
|
7,153
|
|
|
|
|
|
|
|
7,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
91,227
|
|
|
|
122,875
|
|
|
|
(14,643
|
)
|
|
|
199,459
|
|
Long-term debt, net of current maturities
|
|
|
117,000
|
|
|
|
89,674
|
|
|
|
240,643
|
(b)
|
|
|
447,317
|
|
Long-term payable to Helix
|
|
|
7,074
|
|
|
|
|
|
|
|
|
|
|
|
7,074
|
|
Deferred income taxes
|
|
|
29,725
|
|
|
|
22,979
|
|
|
|
47,457
|
(d)
|
|
|
100,161
|
|
Other long term liabilities
|
|
|
1,795
|
|
|
|
800
|
|
|
|
|
|
|
|
2,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
246,821
|
|
|
|
236,328
|
|
|
|
273,457
|
|
|
|
756,606
|
|
Total stockholders equity
|
|
|
239,431
|
|
|
|
312,710
|
|
|
|
10,578
|
(c)
|
|
|
562,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
486,252
|
|
|
$
|
549,038
|
|
|
$
|
284,035
|
|
|
$
|
1,319,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Certain amounts have been reclassified to conform to Cal
Dives presentation. |
173
|
|
|
(a) |
|
The following is a preliminary estimate of the deemed purchase
price for Horizon on a purchase accounting basis, and takes into
account the merger consideration of $9.25 in cash plus 0.625 of
a share of Cal Dive common stock for each of Horizons
32,614,215 estimated diluted shares of common stock (which
includes shares of restricted stock which will become fully
vested at the effective time of the merger): |
|
|
|
|
|
|
|
(In thousands)
|
|
|
Cash
|
|
$
|
301,681
|
|
32,614,215 Horizon estimated diluted shares times $9.25 per share
|
|
|
|
|
Cal Dive Stock
|
|
|
323,288
|
|
32,614,215 Horizon estimated diluted shares times 0.625 times
$15.86 per share (which represents the weighted-average price of
Cal Dive common stock for a
five-day
period beginning two available trading days before the
announcement of the merger)
|
|
|
|
|
Transaction Related Costs
|
|
|
14,004
|
|
Estimated direct transactions fees payable by Cal Dive to be
capitalized as part of the purchase price for Horizon (including
legal fees, underwriting fees, accounting fees, early
termination fees on Horizon debt and other fees)
|
|
|
|
|
|
|
|
|
|
Total Purchase Price
|
|
$
|
638,974
|
|
|
|
|
|
|
Purchase Price Allocation
|
|
|
|
|
Current assets
|
|
$
|
326,189
|
|
Property and equipment
|
|
|
330,000
|
|
Other long-term assets
|
|
|
20,150
|
|
Goodwill
|
|
|
259,939
|
|
Current liabilities
|
|
|
(136,394
|
)
|
Deferred income taxes and other long term liabilities
|
|
|
(71,236
|
)
|
Long-term debt, net of current maturities
|
|
|
(89,674
|
)
|
|
|
|
|
|
|
|
$
|
638,974
|
|
|
|
|
|
|
For purposes of this pro forma analysis, the above deemed
purchase price has been allocated based on a preliminary
assessment of the fair value of the assets and liabilities of
Horizon at September 30, 2007. The preliminary assessment
of fair value resulted in approximately $260 million of
goodwill, which will be subject to periodic impairment testing
instead of amortization, in accordance with Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets.
An independent appraisal firm has been engaged to assist us in
finalizing the allocation of the purchase price. The preliminary
assessment of the fair values used in these pro forma statements
were based on projections of future net cash flows, discounted
to present value and historical book values, which we believe do
not differ materially from their fair values for respective
assets and liabilities.
Under the purchase method of accounting for business
combinations, this preliminary assessment of fair value resulted
in goodwill of $260 million. Included in this amount is a
$47 million increase in net deferred tax liabilities
arising from differences between the allocated financial bases
and historical tax bases of Horizons net assets (due to
the non-taxable nature of this transaction, Horizons tax
basis in its assets would carry over to Cal Dive). Goodwill
reflects the anticipated benefits of the merger that are in
addition to the fair value of the individual assets and
liabilities described above.
|
|
|
(b) |
|
Reflects the following debt retirement and debt refinancing to
occur in conjunction with this merger: (i) the retirement
of all Horizon long-term debt, inclusive of the current portion
of long-term debt, (ii) $75 million of cash, cash
equivalents and short-term investments balances used for
retirement of Horizon long-term debt, and (iii) increase in
long-term debt to retire remaining portion of Horizon debt and
fund the cash portion of the purchase price at estimated
interest rate of three month LIBOR plus 225 basis points
(based upon the terms of the proposed credit
facilities see Proposed Financings on
page 185 of this |
174
|
|
|
|
|
information statement/proxy statement/prospectus), which
averaged 7.45% for 2006 and 7.64% for the nine months ended
September 30, 2007. |
|
(c) |
|
Reflects the elimination of book value of Horizon equity and the
issuance of 20.4 million shares of Cal Dive common stock to
be issued to Horizon stockholders as consideration in the
acquisition. |
|
(d) |
|
Reflects the deferred tax
gross-up
relating to the acquired property and equipment based on
purchase price paid. A combined statutory federal and blended
state income tax rate of 35.0% was used for this adjustment. |
|
(e) |
|
Reflects (i) the write-off of capitalized drydock costs for
the Horizon barges of $11.5 million, (ii) the
capitalization of deferred financing costs estimated to be
$5.2 million for the proposed credit facilities referred to
in note (b) above, and (iii) the write-off of deferred
financing costs of $2.0 million for prepayment of Horizon
debt to be retired. |
|
(f) |
|
Reflects the elimination of accounts receivable and unbilled
revenue between Cal Dive and Horizon. |
|
(g) |
|
Reflects the elimination of accrued liabilities between Horizon
and Cal Dive the estimated accrual for change of control
payments to be made to the Horizon executive officers of
$13.5 million. |
175
DESCRIPTION
OF CAL DIVE CAPITAL STOCK
At October 31, 2007, 84,328,915 shares of
Cal Dive common stock were issued and outstanding. All
issued and outstanding shares of Cal Dive common stock are
fully paid, validly issued, and non-assessable. No shares of
preferred stock are presently outstanding.
This description is intended as a summary only and is qualified
in its entirety by reference to Cal Dives amended and
restated certificate of incorporation and bylaws, which are
incorporated by reference as exhibits to the registration
statement of which this information statement/proxy
statement/prospectus is a part and incorporated herein by
reference. For additional information concerning
Cal Dives capital stock, see Comparison Of
Certain Stockholders Rights beginning on
page 181.
Cal Dive is authorized to issue 240,000,000 shares of
common stock, $0.01 par value per share.
Subject to any preferences, limitations and relative rights that
may be fixed for any series of preferred stock that may be
created by the board of directors from time to time, the holders
of common stock of Cal Dive are entitled, among other
things, (1) to share ratably in dividends if, when and as
declared by the board of directors out of funds legally
available therefor, (2) to one vote per share on all
matters voted on by the stockholders, and (3) in the event
of liquidation, to share ratably in the distribution of assets
remaining after payment of debts, expenses and the liquidation
preference of any outstanding preferred stock. Holders of shares
of Cal Dive common stock have no cumulative voting rights
or preemptive rights to subscribe for or purchase any additional
shares of capital stock issued by Cal Dive.
Cal Dives common stock is not convertible or
redeemable and there are no sinking fund provisions therefor.
Cal Dives board of directors, without any action by
Cal Dives stockholders, is authorized to issue up to
5,000,000 shares of preferred stock, $0.01 par value
per share, in one or more series, and to determine the rights
and preferences of each such series, including:
|
|
|
|
|
the designation of the series;
|
|
|
|
the number of shares of the series, which number
Cal Dives board of directors may thereafter increase
or decrease (but not below the number of shares thereof then
outstanding);
|
|
|
|
whether dividends, if any, will be cumulative or noncumulative
and the dividend rate of the series;
|
|
|
|
the dates at which dividends, if any, will be payable;
|
|
|
|
the redemption rights and price or prices, if any, for shares of
the series;
|
|
|
|
the terms and amount of any sinking fund provided for the
purchase or redemption of shares of the series;
|
|
|
|
the amounts payable on, and the preferences, if any, of shares
of the series in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of
Cal Dive;
|
|
|
|
whether the shares of the series shall be convertible into
shares of any other class or series, or any other security, of
Cal Dive or any other entity, and, if so, the specification
of such other class or series of such other security, the
conversion price or prices or rate or rates, any adjustments
thereof, the date or dates at which such shares shall be
convertible and all other terms and conditions upon which such
conversion may be made;
|
|
|
|
restrictions on the issuance of shares of the same series or of
any other class or series; and
|
|
|
|
the voting rights, if any, of the holders of shares of the
series.
|
No shares of preferred stock are presently outstanding. It is
not possible to state the actual effect of the issuance of any
shares of Cal Dives preferred stock upon the rights
of holders of its common stock until
176
Cal Dives board of directors determines the specific
rights of the holders of such preferred stock. However, the
effects might include, among other things:
|
|
|
|
|
restricting dividends on Cal Dives common stock;
|
|
|
|
diluting the voting power of Cal Dives common stock;
|
|
|
|
impairing the liquidation rights of Cal Dives common
stock; or
|
|
|
|
delaying or preventing a change in control of Cal Dive
without further action by its stockholders.
|
See also Preferred Stock under the heading
Purposes and Effects of Certain Provisions of
Cal Dives Articles of Incorporation and Bylaws
below for a discussion on the effect that the issuance of
preferred stock might have on attempts to take over
Cal Dive.
Purposes
and Effects of Certain Provisions of Cal Dives Amended and
Restated Certificate of Incorporation and Bylaws
Some provisions of Delaware law and Cal Dives amended
and restated certificate of incorporation and bylaws could make
the acquisition of Cal Dive by means of a tender or
exchange offer, a proxy contest or otherwise more difficult.
These provisions, summarized below, are expected to discourage
coercive takeover practices and inadequate takeover bids aimed
at Cal Dive. These provisions also are designed to
encourage persons seeking to acquire control of Cal Dive to
first negotiate with its board of directors. Cal Dive
believes that the benefits of the potential ability to negotiate
with the proponent of an unfriendly or unsolicited proposal to
acquire or restructure Cal Dive outweigh the disadvantages
of discouraging those proposals because negotiation of them
could result in an improvement of their terms.
This description is intended as a summary only and is qualified
in its entirety by reference to Cal Dives amended and
restated certificate of incorporation and bylaws, which are
incorporated by reference as exhibits to the registration
statement of which this information statement/proxy
statement/prospectus is a part and incorporated herein by
reference.
Classified
Board of Directors; Removal of Directors
Cal Dives directors are currently divided into three
classes, only one class of which is subject to re-election in
any given year. The classification of directors has the effect
of making it more difficult for stockholders to change the
composition of the board of directors. At least two annual
meetings of stockholders generally will be required to effect a
change in a majority of the board of directors. Such a delay may
help ensure that Cal Dives directors, if confronted
by a stockholder attempting to force a proxy contest, a tender
or exchange offer or an extraordinary corporate transaction,
would have sufficient time to review the proposal as well as any
available alternatives to the proposal and to act in what they
believe to be the best interest of the stockholders.
The classification provisions will apply to every election of
directors, regardless of whether a change in the composition of
the board of directors would be beneficial to Cal Dive and
its stockholders and whether a majority of Cal Dives
stockholders believes that such a change would be desirable.
These provisions could thus increase the likelihood that
incumbent directors will retain their positions. In addition,
the classification provisions may discourage accumulations of
large blocks of Cal Dive common stock that are effected for
purposes of changing the composition of the board of directors.
Accordingly, stockholders could be deprived of certain
opportunities to sell their shares of common stock at a higher
market price than might otherwise be the case.
Cal Dives amended and restated certificate of
incorporation provides that directors may be removed, with or
without cause, by the affirmative vote of shares representing a
majority of the votes entitled to be cast by the outstanding
capital stock in the election of Cal Dives board of
directors as long as Helix and its subsidiaries (excluding
Cal Dive and its subsidiaries) owns shares representing at
least a majority of the votes entitled to be cast by the
outstanding capital stock in the election of directors. Once
Helix and its subsidiaries (excluding Cal Dive and its
subsidiaries) cease to own shares representing at least a
majority of the votes
177
entitled to be cast by the outstanding capital stock in the
election of Cal Dives board of directors,
Cal Dives amended and restated certificate of
incorporation requires that directors may only be removed for
cause and only then by the affirmative vote of not less than 80%
of votes entitled to be cast by the outstanding capital stock in
the election of its board of directors.
Preferred
Stock
Cal Dives amended and restated certificate of
incorporation authorizes its board of directors, without any
action by its stockholders, to designate and issue shares of
preferred stock in one or more series and to designate the
rights, preferences and privileges of each series, which may be
greater than the rights of Cal Dives common stock. No
shares of preferred stock are presently outstanding.
Although Cal Dives board of directors has no
intention at the present time of doing so, it could issue a
series of preferred stock that, depending on the terms of such
series, might impede the completion of a proxy contest, merger,
tender or exchange offer or other attempt to obtain control of
Cal Dive. The board of directors will make any
determination to issue such shares based on its judgment as to
the best interests of Cal Dive and its stockholders. The
board of directors, in so acting, could issue preferred stock
having terms that could discourage an acquisition attempt
through which an acquirer may be otherwise able to change the
composition of the board of directors, including a tender or
exchange offer or other transaction that some, or a majority of
Cal Dives stockholders, might believe to be in their
best interests or in which stockholders might receive a premium
for their stock over the then current market price of such stock.
Stockholder
Action by Written Consent
Cal Dives amended and restated certificate of
incorporation permits its stockholders to act by written consent
without a meeting as long as Helix and its subsidiaries
(excluding Cal Dive and its subsidiaries) continue to
beneficially own shares representing at least a majority of the
votes entitled to be cast by the outstanding capital stock in
the election of Cal Dives board of directors. Once
Helix and its subsidiaries (excluding Cal Dive and its
subsidiaries) cease to beneficially own at least a majority of
the votes entitled to be cast by the outstanding capital stock
in the election of Cal Dives board of directors,
Cal Dives amended and restated certificate of
incorporation eliminates the right of its stockholders to act by
written consent.
Amendment
of Cal Dives Bylaws
Cal Dives amended and restated certificate of
incorporation and bylaws provide that the provisions of its
bylaws relating to the calling of meetings of stockholders,
notice of meetings of stockholders, stockholder action by
written consent, advance notice of stockholder business or
director nominations, the authorized number of directors, the
classified board structure, the filling of director vacancies or
the removal of directors (and any provision relating to the
amendment of any of these provisions) may only be amended by the
vote of a majority of its entire board of directors or, as long
as Helix and its subsidiaries (excluding Cal Dive and its
subsidiaries) own shares representing at least a majority of the
votes entitled to be cast by the outstanding capital stock in
the election of Cal Dives board of directors, by the
vote of holders of a majority of the votes entitled to be cast
by outstanding capital stock in the election of its board of
directors. Once Helix and its subsidiaries (excluding
Cal Dive and its subsidiaries) cease to own shares
representing at least a majority of the votes entitled to be
cast by the outstanding capital stock in the election of its
board of directors, Cal Dives amended and restated
certificate of incorporation and bylaws provide that these
provisions may only be amended by the vote of a majority of
Cal Dives entire board of directors or by the vote of
holders of at least 80% of the votes entitled to be cast by the
outstanding capital stock in the election of its board of
directors.
Amendment
of Certain Provisions of Cal Dives Amended and Restated
Certificate of Incorporation
The amendment of any of the above provisions in
Cal Dives amended and restated certificate of
incorporation requires approval by holders of shares
representing at least a majority of the votes entitled to be
cast by the outstanding capital stock in the election of
Cal Dives board of directors, as long as Helix and
its subsidiaries (excluding Cal Dive and its subsidiaries)
own shares representing at least a majority of the votes
178
entitled to be cast by the outstanding capital stock in the
election of Cal Dives board of directors. Once Helix
and its subsidiaries (excluding Cal Dive and its
subsidiaries) cease to own shares representing at least a
majority of the votes entitled to be cast by the outstanding
capital stock in the election of Cal Dives board of
directors, Cal Dives amended and restated certificate
of incorporation and bylaws provide that these provisions may
only be amended by the vote of a majority of its entire board of
directors followed by the vote of holders of at least 80% of the
votes entitled to be cast by the outstanding capital stock in
the election of its board of directors.
Stockholder
Meetings
Cal Dives amended and restated certificate of
incorporation and bylaws provide that a special meeting of its
stockholders may be called only by (i) Helix, so long as
Helix and its subsidiaries (excluding Cal Dive and its
subsidiaries) beneficially own at least a majority of the votes
entitled to be cast by the outstanding capital stock in the
election of Cal Dives board of directors, or
(ii) the Chairman of Cal Dives board of
directors or Cal Dives board of directors.
Requirements
for Advance Notification of Stockholder Nominations and
Proposals
Cal Dives bylaws establish advance notice procedures
with respect to stockholder proposals and nomination of
candidates for election as directors other than nominations made
by or at the direction of Cal Dives board of
directors or a committee thereof.
Delaware
Anti-Takeover Law
Section 203 of the DGCL, an anti-takeover law, does not
apply to Helix until it beneficially owns less than 15% of
Cal Dives common stock and subsequently increases its
shareholdings to once again beneficially own at least 15% of
Cal Dives common stock.
In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a business combination with an
interested stockholder for a period of three years following the
date the person became an interested stockholder, unless the
business combination or the transaction in which the person
became an interested stockholder is approved in a prescribed
manner. Generally, a business combination includes a
merger, asset or stock sale, or other transaction resulting in a
financial benefit to the interested stockholder. Generally, an
interested stockholder is a person that, together
with affiliates and associates, owns, or within three years
prior to the determination of interested stockholder status, did
own, 15% or more of a corporations voting stock. This may
have an anti-takeover effect with respect to transactions not
approved in advance by Cal Dives board of directors,
including discouraging attempts that might result in a premium
over the market price for the shares of Cal Dives
common stock.
No
Cumulative Voting
Cal Dives amended and restated certificate of
incorporation and bylaws do not provide for cumulative voting in
the election of its board of directors.
Limitation
on Foreign Ownership of Common Stock
In order to preserve its ability to enjoy the benefits of
U.S. domestic trade for certain of its vessels,
Cal Dive must maintain U.S. citizenship for
U.S. coastwise trade purposes as defined in the Merchant
Marine Act, 1936, the Merchant Marine Act, 1920, the Shipping
Act, 1916, and other federal laws that restrict domestic trade.
In order to maintain U.S. citizenship for these purposes,
Cal Dives amended and restated certificate of
incorporation contains provisions that limit foreign ownership
of Cal Dives common stock. Cal Dives
amended and restated certificate of incorporation provides that
any attempted or purported transfer of its common stock in
violation of these restrictions will be ineffective to transfer
shares of such common stock. In addition, Cal Dives
amended and restated certificate of incorporation contains
provisions requiring
179
the following persons to be U.S. citizens:
(1) Cal Dives chairman of the board,
(2) Cal Dives chief executive officer and
(3) a majority of Cal Dives board of directors
necessary to constitute a quorum.
Cal Dives amended and restated certificate of
incorporation provides that its directors and officers, who are
also directors, officers, and employees or consultants of Helix
or its affiliates, shall have no duty to refrain from engaging
directly or indirectly in the same or similar business
activities or lines of business as Cal Dive does and such
persons shall not be liable to Cal Dive or its stockholders
for breach of any fiduciary duty by reason of such activities.
If any such person named above shall acquire knowledge of a
potential transaction or matter that may be a corporate
opportunity to Cal Dive, such person shall have no
obligation to communicate such corporate opportunity to
Cal Dive and shall not be liable to Cal Dive or its
stockholders for breach of fiduciary duty by reason of the fact
that such corporate opportunity is not communicated or offered
to Cal Dive. This provision in Cal Dives amended
and restated certificate of incorporation will automatically
terminate at such time as Helix and all persons named above in
the aggregate directly or indirectly own less than 20% of
Cal Dives outstanding common stock and no director or
officer of Cal Dive or one of Cal Dives
affiliates is also a director or officer of Helix or one of
Helixs affiliates.
Transfer
Agent and Registrar
Wells Fargo Shareowner Services acts as transfer agent and
registrar for the Cal Dive common stock.
New
York Stock Exchange Listing
Cal Dives common stock is listed on the NYSE under
the symbol DVR.
180
COMPARISON
OF STOCKHOLDERS RIGHTS
As a result of the merger, holders of Horizon common stock will
become holders of Cal Dive common stock. The rights of the
stockholders of Cal Dive will be governed by applicable
Delaware law, including the General Corporation Law of the State
of Delaware, or DGCL, and by Cal Dives amended and
restated certificate of incorporation and amended and restated
bylaws. Prior to the merger, the rights of the stockholders of
Horizon are governed by applicable Delaware law, including the
DGCL, and by Horizons amended and restated certificate of
incorporation and amended and restated bylaws. The following is
a summary of the material differences between the rights of
Cal Dive stockholders and Horizon stockholders.
The following summary does not provide a complete description of
the specific rights of Cal Dive stockholders under its
amended and restated certificate of incorporation and amended
and restated bylaws as compared with the rights of Horizon
stockholders under its certificate of incorporation and bylaws.
The identification of specific differences in the rights of
these holders as material is not intended to indicate that other
equally important or more significant differences do not exist.
These summaries are qualified in their entirety by reference to
the governing laws and corporate instruments of Cal Dive
and Horizon to which you are referred.
|
|
|
|
|
|
|
Cal Dive
|
|
Horizon
|
|
Applicable State Takeover Laws
|
|
Cal Dives amended and restated certificate of
incorporation provides that Helix shall not be deemed to be an
interested stockholder within the meaning of
Section 203 of the DGCL until Helix beneficially owns less than
15% of Cal Dives common stock and subsequently increases
its shareholdings to once again beneficially own at least 15% of
Cal Dives common stock. Otherwise, Cal Dive is governed by
Section 203 of the DGCL.
|
|
Horizon is governed by Section 203 of the DGCL.
|
Amendments to Bylaws
|
|
Cal Dives amended and restated certificate of
incorporation and bylaws provide that the provisions of its
bylaws relating to the calling of meetings of stockholders,
notice of meetings of stockholders, stockholder action by
written consent, advance notice of stockholder business or
director nominations, the authorized number of directors, the
classified board structure, the filling of director vacancies or
the removal of directors (and any provision relating to the
amendment of any of these provisions) may only be amended by the
vote of a majority of its entire board of directors or, as long
as Helix and its subsidiaries (excluding Cal Dive and its
subsidiaries) own shares representing at least a majority of the
votes entitled to be cast by the outstanding capital stock in
the election of Cal Dives board of directors, by the vote
of holders of a majority of the votes entitled to be cast by
outstanding capital stock in the election of its board of
directors. Once Helix and its subsidiaries (excluding Cal Dive
and its
|
|
Horizons bylaws provide that the board of directors will
have the power to alter or repeal the bylaws upon the
affirmative vote of majority of the entire board. Horizons
bylaws also provide that they may be altered or repealed by the
stockholders upon the affirmative vote of holders of not less
than the majority of the outstanding capital stock entitled to
vote generally in the election of directors.
|
181
|
|
|
|
|
|
|
Cal Dive
|
|
Horizon
|
|
|
|
subsidiaries) cease to own shares representing at least a
majority of the votes entitled to be cast by the outstanding
capital stock in the election of its board of directors, Cal
Dives amended and restated certificate of incorporation
and bylaws provide that these provisions may only be amended by
the vote of a majority of Cal Dives entire board of
directors or by the vote of holders of at least 80% of the votes
entitled to be cast by the outstanding capital stock in the
election of its board of directors.
|
|
|
Amendments to Certificate of Incorporation
|
|
Cal Dives amended and restated certificate of
incorporation and amended and restated bylaws provide that the
provisions of its amended and restated certificate of
incorporation relating to the calling of meetings of
stockholders, notice of meetings of stockholders, stockholder
action by written consent, advance notice of stockholder
business or director nominations, the authorized number of
directors, the classified board structure, the filling of
director vacancies or the removal of directors (and any
provision relating to the amendment of any of these provisions)
may only be amended with approval by holders of shares
representing at least a majority of the votes entitled to be
cast by the outstanding capital stock in the election of Cal
Dives board of directors, as long as Helix and its
subsidiaries (excluding Cal Dive and its subsidiaries) own
shares representing at least a majority of the votes entitled to
be cast by the outstanding capital stock in the election of Cal
Dives board of directors. Once Helix and its subsidiaries
(excluding Cal Dive and its subsidiaries) cease to own shares
representing at least a majority of the votes entitled to be
cast by the outstanding capital stock in the election of Cal
Dives board of directors, Cal Dives amended and
restated certificate of incorporation and amended and restated
bylaws provide that these provisions may only be amended by the
vote of a majority of its entire board of directors followed by
the vote of holders of at least 80% of the votes entitled to be
cast by the outstanding capital stock in the election of its
board of directors.
|
|
Horizons certificate of incorporation may be amended in
accordance with Delaware law, which requires the board of
directors to adopt a resolution setting forth the amendment to
the certificate of incorporation and to declare its advisability
before the stockholders may vote thereon. Delaware law further
provides that amendments to the certificate of incorporation
generally require the approval of the holders of a majority of
the outstanding stock entitled to vote thereon, and if the
amendment would increase or decrease the number of authorized
shares of any class or series or the par value of such shares or
would adversely affect the rights, powers or preferences of such
class or series, a majority of the outstanding stock of such
class or series also must approve the amendment.
|
182
|
|
|
|
|
|
|
Cal Dive
|
|
Horizon
|
|
Action By Stockholders Without a Meeting
|
|
Cal Dives amended and restated certificate of
incorporation permits its stockholders to act by written consent
without a meeting as long as Helix and its subsidiaries
(excluding Cal Dive and its subsidiaries) continue to
beneficially own shares representing at least a majority of the
votes entitled to be cast by the outstanding capital stock in
the election of Cal Dives board of directors. Once Helix
and its subsidiaries (excluding Cal Dive and its subsidiaries)
cease to beneficially own at least a majority of the votes
entitled to be cast by the outstanding capital stock in the
election of Cal Dives board of directors, Cal Dives
amended and restated certificate of incorporation eliminates the
right of its stockholders to act by written consent.
|
|
Horizons bylaws provide that any action which was to be
taken at any meeting of holders of capital stock, may be taken
without a meeting, without prior notice and without a vote, if a
consent in writing, setting forth the action so taken, shall be
signed by holders of capital stock that would be entitled to
vote thereon if an annual or special meeting had been called for
the taking of such action, having at least the minimum number of
votes that would be necessary to take such action at a meeting
of all holders of capital stock entitled to vote thereon.
|
Ability to Call Special Meetings
|
|
Cal Dives amended and restated certificate of
incorporation and amended and restated bylaws provide that a
special meeting of its stockholders may be called only by (i)
Helix, so long as Helix and its subsidiaries (excluding Cal Dive
and its subsidiaries) beneficially own at least a majority of
the votes entitled to be cast by the outstanding capital stock
in the election of Cal Dives board of directors, or (ii)
the chairman of Cal Dives board of directors or upon the
vote of the majority of Cal Dives board of directors.
|
|
Horizons bylaws permit a special meeting of stockholders
to be called by (i) the chairman of Horizons board of
directors or (ii) upon a vote of the majority of Horizons
board of directors.
|
Classified Board; Removal of Directors
|
|
Cal Dives directors are currently divided into three
classes, only one class of which is subject to re- election in
any given year. In addition, Cal Dives amended and
restated certificate of incorporation provides that directors
may be removed, with or without cause, by the affirmative vote
of shares representing a majority of the votes entitled to be
cast by the outstanding capital stock in the election of Cal
Dives board of directors as long as Helix and its
subsidiaries (excluding Cal Dive and its subsidiaries) owns
shares representing at least a majority of the votes entitled to
be cast by the outstanding capital stock in the election of
directors. Once Helix and its subsidiaries (excluding Cal Dive
and its subsidiaries) cease to own
|
|
Horizons organizational documents do not provide for a
classified board. Neither Horizons certificate of
incorporation nor its bylaws alter the rule under Delaware law
that a director of a corporation may be removed with or without
cause by the affirmative vote of a majority of shares entitled
to vote for the election of directors. Accordingly,
Horizons directors may be removed with or without cause by
the affirmative vote of a majority of shares entitled to vote
for the election of directors.
|
183
|
|
|
|
|
|
|
Cal Dive
|
|
Horizon
|
|
|
|
shares representing at least a majority of the votes entitled
to be cast by the outstanding capital stock in the election of
Cal Dives board of directors, Cal Dives amended and
restated certificate of incorporation requires that directors
may only be removed for cause and only then by the affirmative
vote of not less than 80% of votes entitled to be cast by the
outstanding capital stock in the election of its board of
directors.
|
|
|
Vacancies on Board of Directors
|
|
Cal Dives amended and restated bylaws provide that newly
created directorships resulting from any increase in the
authorized number of directors or any vacancies in Cal
Dives board of directors resulting from death,
resignation, retirement, disqualification, removal from office
or other cause shall be filled, subject to any rights of
preferred stock, solely by the affirmative vote of a majority of
the remaining directors then in office, even though less than a
quorum of the board of directors, or by the sole remaining
director; provided, however, that, until Helix and its
subsidiaries (excluding Cal Dive and its subsidiaries) cease to
beneficially own shares representing a majority of the votes
entitled to be cast by the outstanding capital stock in the
election of Cal Dives board of directors, if such vacancy
was caused by an action of the stockholders, such vacancy shall
be filled only by the by the affirmative vote of holders of a
majority of the votes entitled to be cast by outstanding capital
stock in the election of its board of directors.
|
|
Horizons organizational documents follow the provisions of
Delaware law, which state that a vacancy on a corporations
board of directors or a newly created directorship resulting
from any increase in the authorized number of directors may be
filled by a majority of the directors then in office, although
less than a quorum.
|
Limitation or Elimination of Directors Personal
Liability
|
|
Cal Dives amended and restated certificate of
incorporation contains a provision eliminating the personal
liability of its directors for breach of fiduciary duty as a
director, subject to the foregoing limitations.
|
|
Horizons certificate of incorporation contains a provision
eliminating the personal liability of its directors for breach
of fiduciary duty as a director, subject to the foregoing
limitations.
|
Indemnification and Insurance
|
|
Cal Dives amended and restated certificate of
incorporation and amended and restated bylaws provide for
indemnification of officers and directors to the fullest extent
permitted by Delaware law.
|
|
The bylaws of Horizon provide for indemnification of officers
and directors to the fullest extent permitted by Delaware law.
|
184
|
|
|
|
|
|
|
Cal Dive
|
|
Horizon
|
|
Inspection of Stockholder Lists
|
|
Cal Dives amended and restated bylaws follow the
provisions of Delaware law, which state that any stockholder,
upon written demand under oath stating the purpose of the
demand, has the right during the usual hours for business to
inspect for any proper purpose a list of the corporations
stockholders and to make copies of or extracts from the list.
In addition, Cal Dives amended and restated bylaws also
specifically provide that, as long as Helix and its subsidiaries
(excluding Cal Dive and its subsidiaries) own shares
representing at least a majority of the votes entitled to be
cast by the outstanding capital stock in the election of
directors, upon the request of Helix, the stock list shall be
provided to Helix promptly.
|
|
Horizons bylaws follow the provisions of Delaware law,
which state that any stockholder, upon written demand under oath
stating the purpose of the demand, has the right during the
usual hours for business to inspect for any proper purpose a
list of the corporations stockholders and to make copies
of or extracts from the list.
|
Cal Dive has an underwritten commitment letter from Bank of
America that provides, subject to the satisfaction of specified
conditions and completion of definitive documentation, for
financing in an amount necessary to finance the cash portion of
the merger consideration and to pay related costs. Cal Dive
currently intends to obtain the financing contemplated by the
commitment letter or financing from other sources reasonably
acceptable to Cal Dive to consummate the merger. The
proposed financing is expected to consist of a term loan
facility and a revolving loan facility. If the merger occurs, it
is contemplated that at the effective time of the merger the
cash portion of the merger consideration and
Cal Dives capital and liquidity needs will be
financed with a combination of the bank financing, other debt
financings, and cash on hand.
The validity of the shares of Cal Dive common stock to be
issued in the merger will be passed on for Cal Dive by
Fulbright & Jaworski L.L.P. Certain tax consequences
of the merger will be passed on for Cal Dive by
Fulbright & Jaworski L.L.P. and for Horizon by Jones,
Walker, Waechter, Poitevent, Carrère &
Denègre, L.L.P.
The consolidated and combined financial statements of
Cal Dive at December 31, 2006 and 2005, and for each
of the three years in the period ended December 31, 2006,
appearing in this Prospectus and Registration Statement have
been audited by Ernst & Young LLP, independent
registered public accounting firm, as set forth in their report
thereon, appearing elsewhere herein, and are included in
reliance upon such report given on the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements and managements
assessment of the effectiveness of internal control over
financial reporting appearing in Horizon Offshore, Inc.s
Annual Report on
Form 10-K
for the year ended December 31, 2006, incorporated by
reference in this registration statement, have been audited by
Grant Thornton LLP, independent registered public accountants,
as indicated in their reports with respect
185
thereto, and are incorporated by reference herein in reliance
upon the authority of said firm as experts in accounting and
auditing.
Statistical information regarding offshore drilling and
completion spending included in this information statement/proxy
statement/prospectus has been derived from information compiled
and classified by Spears & Associates, Inc.
Horizon will hold an annual meeting in 2008 only if the merger
has not been consummated. In the event the merger is not
consummated, Horizon must receive by December 31, 2007 any
proposal of a stockholder intended to be presented at
Horizons 2008 annual meeting and to be included in
Horizons proxy materials related to the 2008 annual
meeting pursuant to
Rule 14a-8
under the Securities Exchange Act of 1934. Proposals of
stockholders submitted outside the processes of
Rule 14a-8
under the Securities Exchange Act of 1934 in connection with the
2008 annual meeting, or
non-Rule 14a-8
proposal, must be received by Horizon by March 11, 2008 to
be considered timely. Horizons proxy related to the 2008
annual meeting will give discretionary authority to the proxy
holders to vote with respect to all proposals received by
Horizon after March 11, 2008. Notices of stockholder
proposals should be delivered personally or mailed to the
Secretary of Horizon at its principal offices.
WHERE
YOU CAN FIND MORE INFORMATION
Cal Dive and Horizon file annual, quarterly and current
reports, proxy statements, and other information with the
Securities and Exchange Commission. You may read and copy
materials that Cal Dive and Horizon have filed with the
Securities and Exchange Commission at the following Securities
and Exchange Commission public reference room:
100 F Street, N.E., Washington, D.C. 20549
Please call the Securities and Exchange Commission at
1-800-SEC-0330
for further information on the operation of the public reference
room.
The Cal Dive common stock is traded on the New York Stock
Exchange under the symbol DVR, and its Securities
and Exchange Commission filings can also be read at the
following address:
11 Wall Street, New York, NY 10005
The Securities and Exchange Commission filings of both companies
are also available to the public on the Securities and Exchange
Commissions internet website at
http://www.sec.gov,
which contains reports, proxy, and information statements, and
other information regarding companies that file electronically
with the Securities and Exchange Commission. In addition,
Cal Dives Securities and Exchange Commission filings
are also available to the public on Cal Dives
website,
http://www.caldive.com
and Horizons filings with the Securities and Exchange
Commission are also available to the public on Horizons
website,
http://www.horizonoffshore.com.
Information contained on Cal Dives web site and
Horizons web site is not incorporated by reference into
this information statement/proxy statement/prospectus, and you
should not consider information contained on those web sites as
part of this prospectus.
Horizon incorporates by reference into this information
statement/proxy statement/prospectus the documents listed below
and any future filings Horizon makes with the Securities and
Exchange Commission under Sections 13(a), 13(c), 14, or
15(d) of the Securities Exchange Act of 1934, including any
filings after the date of this information statement/proxy
statement/prospectus, until the special meeting. The information
incorporated by reference is an important part of this
information statement/proxy statement/prospectus. Any statement
in a document incorporated by reference into this information
statement/proxy statement/prospectus will be deemed to be
modified or superseded for purposes of this information
statement/proxy statement/prospectus to the extent a statement
contained in this information statement/proxy
statement/prospectus or any other subsequently filed document
that is incorporated by reference into this information
statement/proxy statement/
186
prospectus modifies or supersedes such statement. Any statement
so modified or superseded will not be deemed, except as so
modified or superseded, to constitute a part of this information
statement/proxy statement/prospectus.
Horizon
Securities and Exchange Commission Filings
Commission
file number:
001-16857
|
|
|
|
|
Horizons Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006 filed on
March 15, 2007.
|
|
|
|
Horizons Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007 filed on
May 10, 2007.
|
|
|
|
Horizons Quarterly Report on
Form 10-Q
for the fiscal quarter ended June 30, 2007 filed on
August 7, 2007.
|
|
|
|
Horizons Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 2007 filed on November 1, 2007.
|
|
|
|
Horizons Current Reports on
Form 8-K
filed on January 5, 2007, February 1, 2007,
February 5, 2007, March 14, 2007, April 5, 2007,
May 11, 2007, May 24, 2007, June 12, 2007,
June 15, 2007, June 21, 2007 and October 1, 2007.
|
The documents incorporated by reference into this information
statement/proxy statement/prospectus are available from us upon
request. Horizon will provide a copy of any and all information
that is incorporated by reference into this information
statement/proxy statement/prospectus (not including exhibits to
the information unless those exhibits are specifically
incorporated by reference into this information statement/proxy
statement/prospectus) to any person without charge, upon written
or oral request.
187
Agreement and Plan of Merger dated as of June 11,
2007
AGREEMENT
AND PLAN OF MERGER
DATED AS OF JUNE 11, 2007
BY AND AMONG
CAL DIVE INTERNATIONAL, INC.,
CAL DIVE ACQUISITION, LLC
AND
HORIZON OFFSHORE, INC.
TABLE OF
CONTENTS
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE I THE MERGER
|
|
|
A-1
|
|
1.1
|
|
The Merger
|
|
|
A-1
|
|
1.2
|
|
Effective Time of the Merger
|
|
|
A-1
|
|
1.3
|
|
Effects of the Merger
|
|
|
A-1
|
|
1.4
|
|
Closing
|
|
|
A-1
|
|
1.5
|
|
Certificate of Formation
|
|
|
A-1
|
|
1.6
|
|
Limited Liability Company Agreement
|
|
|
A-1
|
|
1.7
|
|
Managers and Officers
|
|
|
A-2
|
|
ARTICLE II CONSIDERATION/ EXCHANGE PROCEDURES
|
|
|
A-2
|
|
2.1
|
|
Effect of the Merger on Capital Stock
|
|
|
A-2
|
|
2.2
|
|
Dissenting Shares
|
|
|
A-2
|
|
2.3
|
|
Stock Options and Equity Awards
|
|
|
A-3
|
|
2.4
|
|
Surrender and Payment
|
|
|
A-3
|
|
2.5
|
|
No Fractional Shares
|
|
|
A-4
|
|
2.6
|
|
Lost Certificates
|
|
|
A-5
|
|
2.7
|
|
Withholding Rights
|
|
|
A-5
|
|
2.8
|
|
No Further Ownership Rights in Company Common Stock
|
|
|
A-5
|
|
2.9
|
|
Investment of Cash by the Exchange Agent
|
|
|
A-5
|
|
2.10
|
|
Further Assurances
|
|
|
A-5
|
|
2.11
|
|
Shares Held by Company Affiliates
|
|
|
A-5
|
|
ARTICLE III REPRESENTATIONS AND WARRANTIES
|
|
|
A-6
|
|
3.1
|
|
Representations and Warranties of the Company
|
|
|
A-6
|
|
3.2
|
|
Representations and Warranties of Cal Dive
|
|
|
A-15
|
|
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS
|
|
|
A-24
|
|
4.1
|
|
Covenants of the Company
|
|
|
A-24
|
|
4.2
|
|
Covenants of Cal Dive
|
|
|
A-26
|
|
4.3
|
|
Governmental Filings
|
|
|
A-27
|
|
4.4
|
|
No Control of Other Partys Business
|
|
|
A-28
|
|
ARTICLE V ADDITIONAL AGREEMENTS
|
|
|
A-28
|
|
5.1
|
|
Preparation of Information Statement/Proxy Statement/Prospectus;
Stockholders Meeting
|
|
|
A-28
|
|
5.2
|
|
Access to Information
|
|
|
A-29
|
|
5.3
|
|
Required Actions
|
|
|
A-30
|
|
5.4
|
|
Acquisition Proposals
|
|
|
A-31
|
|
5.5
|
|
Fees and Expenses
|
|
|
A-33
|
|
5.6
|
|
Directors and Officers Indemnification and Insurance
|
|
|
A-33
|
|
5.7
|
|
Employee Benefits; Retention Plan
|
|
|
A-33
|
|
5.8
|
|
Public Announcements
|
|
|
A-34
|
|
5.9
|
|
Listing of Shares of Cal Dive Common Stock
|
|
|
A-34
|
|
5.10
|
|
Affiliates
|
|
|
A-34
|
|
5.11
|
|
Section 16 Matters
|
|
|
A-34
|
|
5.12
|
|
Tax Matters
|
|
|
A-34
|
|
5.13
|
|
Vessel Matters
|
|
|
A-35
|
|
A-i
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE VI CONDITIONS PRECEDENT
|
|
|
A-35
|
|
6.1
|
|
Conditions to Each Partys Obligation to Effect the Merger
|
|
|
A-35
|
|
6.2
|
|
Additional Conditions to Obligations of Cal Dive
|
|
|
A-35
|
|
6.3
|
|
Additional Conditions to Obligations of the Company
|
|
|
A-36
|
|
ARTICLE VII TERMINATION
|
|
|
A-36
|
|
7.1
|
|
Termination
|
|
|
A-36
|
|
7.2
|
|
Effect of Termination
|
|
|
A-37
|
|
ARTICLE VIII CERTAIN DEFINITIONS
|
|
|
A-38
|
|
ARTICLE IX GENERAL PROVISIONS
|
|
|
A-45
|
|
9.1
|
|
Non-Survival of Representations, Warranties and Agreements
|
|
|
A-45
|
|
9.2
|
|
Notices
|
|
|
A-45
|
|
9.3
|
|
Interpretation
|
|
|
A-46
|
|
9.4
|
|
Counterparts
|
|
|
A-46
|
|
9.5
|
|
Entire Agreement; No Third Party Beneficiaries
|
|
|
A-46
|
|
9.6
|
|
Governing Law
|
|
|
A-46
|
|
9.7
|
|
Severability
|
|
|
A-46
|
|
9.8
|
|
Assignment
|
|
|
A-47
|
|
9.9
|
|
Submission to Jurisdiction; Waivers
|
|
|
A-47
|
|
9.10
|
|
Enforcement
|
|
|
A-47
|
|
9.11
|
|
Amendment
|
|
|
A-47
|
|
9.12
|
|
Extension; Waiver
|
|
|
A-47
|
|
LIST OF
EXHIBITS
|
|
|
|
|
|
|
|
|
Exhibit
|
|
Title
|
|
|
|
|
Exhibit A
|
|
|
Form of Affiliate Agreement
|
|
|
A-49
|
|
A-ii
This AGREEMENT AND PLAN OF MERGER, dated as of June 11,
2007 (this Agreement), is by and among
CAL DIVE INTERNATIONAL, INC., a Delaware corporation
(Cal Dive), CAL DIVE ACQUISITION
LLC, a Delaware limited liability company and wholly owned
subsidiary of Cal Dive (Merger
Sub), and HORIZON OFFSHORE, INC., a Delaware
corporation (the Company).
W I T N E
S S E T H:
WHEREAS, the Parties intend to effect a strategic business
combination through the merger of the Company with and into
Merger Sub (the Merger), with the
Merger Sub being the surviving company (the
Surviving Company);
WHEREAS, the respective boards of directors of Cal Dive and
the Company, and the sole member of Merger Sub, have each
approved the Merger and this Agreement and the plan of merger
contained in this Agreement (the Plan of
Merger); and
WHEREAS, for federal income tax purposes, the Parties intend
that the Merger qualify as a reorganization within
the meaning of Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants, and
agreements set forth in this Agreement, and intending to be
legally bound hereby, the Parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and
subject to the conditions herein, at the Effective Time, the
Company shall be merged with and into Merger Sub, with Merger
Sub as the Surviving Company in the Merger, and the separate
existence of the Company shall thereupon cease. As a result of
and immediately after the Merger, Merger Sub will remain a
wholly owned subsidiary of Cal Dive.
1.2 Effective Time of the
Merger. The Merger shall become effective as
set forth in the certificate of merger duly filed with the
Secretary of State of the State of Delaware (the
Certificate of Merger), which filing
shall be made as soon as practicable on the Closing Date. As
used in this Agreement, the term Effective
Time shall mean the date and time when the Merger
becomes effective, as set forth in the Certificate of Merger.
The Certificate of Merger shall be in such form as is required
by, and executed and acknowledged in accordance with, the DGCL
and the DLLCA, and as mutually agreed by Cal Dive and the
Company.
1.3 Effects of the Merger. The
Merger shall have the effects set forth in the applicable
provisions of the DGCL and the DLLCA.
1.4 Closing. The closing of the
transactions contemplated by this Agreement (the
Closing) will take place at the
offices of Fulbright & Jaworski L.L.P., 1301 McKinney,
Houston, Texas 77010 as promptly as practicable (but in any
event within two Business Days) following the satisfaction or
waiver of the conditions set forth in Article VI,
other than those conditions that by their nature are to be
satisfied at the Closing but subject to the fulfillment or
waiver of those conditions (the Closing
Date).
1.5 Certificate of Formation. At
the Effective Time, the certificate of formation of Merger Sub
as in effect immediately prior to the Effective Time shall be
the certificate of formation of the Surviving Company, until
thereafter changed or amended as provided therein or by
applicable law.
1.6 Limited Liability Company
Agreement. At the Effective Time, the limited
liability company agreement of Merger Sub as in effect
immediately prior to the Effective Time shall be the limited
liability company agreement of the Surviving Company, until
thereafter changed or amended as provided therein or by
applicable law.
A-1
1.7 Managers and Officers. The
managers and officers of Merger Sub shall, from and after the
Effective Time, become the initial managers and officers of the
Surviving Company until their successors shall have been duly
elected, appointed, or qualified or until their earlier death,
resignation, or removal in accordance with the certificate of
formation and the limited liability company agreement of the
Surviving Company.
ARTICLE II
CONSIDERATION/
EXCHANGE PROCEDURES
2.1 Effect of the Merger on Capital
Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any Party or
the holder of any of their securities:
(a) Subject to the other provisions of this
Article II, each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time
other than Exception Shares (which shares shall be cancelled and
shall cease to exist with no payment being made with respect
thereto) and Dissenting Shares (which shares shall be treated in
accordance with Section 2.2) shall be converted into
and shall thereafter represent the right to receive the
following consideration, without interest (collectively, the
Merger Consideration):
Each share of Company Common Stock shall be converted into the
right to receive the combination of (x) $9.25 in cash (the
Per Share Cash Amount) and
(y) 0.625 of a share of validly issued, fully paid, and
non-assessable shares of Cal Dive Common Stock (the
Exchange Ratio), subject to adjustment
in accordance with Section 2.1(c).
(b) At the Effective Time, all of the shares of Company
Common Stock converted into the Merger Consideration pursuant to
this Article II shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist,
and each holder of a certificate (each a
Certificate) previously representing
any such shares of Company Common Stock shall thereafter cease
to have any rights with respect to such securities, except the
right to receive (i) the Merger Consideration and
(ii) any cash to be paid in lieu of any fractional share of
Cal Dive Common Stock in accordance with Section 2.5.
(c) If at any time during the period between the date of
this Agreement and the Effective Time, any change in the
outstanding shares of capital stock of Cal Dive or the
Company shall occur by reason of any reclassification,
recapitalization, stock split or combination, exchange or
readjustment of shares, or any stock dividend thereon with a
record date during such period, the Per Share Cash Amount, the
Exchange Ratio, and any other similarly dependent items, as the
case may be, shall be appropriately adjusted to provide the
holders of shares of Company Common Stock the same economic
effect as contemplated by this Agreement prior to such event.
(d) At the Effective Time, all Exception Shares, if any,
shall be cancelled and retired and shall cease to exist and no
stock of Cal Dive, cash, or other consideration shall be
delivered in exchange therefor. For the avoidance of doubt, this
Section 2.1(d) shall not apply to shares of Company
Common Stock held in trust or otherwise set aside from shares
held in the Companys treasury pursuant to a Company
Benefit Plan other than a Company Stock Plan.
(e) Each issued and outstanding membership interest of
Merger Sub shall be converted into and become an equivalent
fully paid and nonassessable membership interest of the
Surviving Company.
2.2 Dissenting
Shares. Notwithstanding anything in this
Agreement to the contrary, with respect to each share of Company
Common Stock as to which the holder thereof has neither voted in
favor of the Merger nor consented thereto in writing and who
shall have delivered a written demand for appraisal of such
shares in the manner provided by the DGCL and who, as of the
Effective Time, shall not have effectively withdrawn or lost
such right to appraisal (each, a Dissenting
Share), if any, such share will not be converted
into, or represent the right to receive, the Merger
Consideration. Such holder shall be entitled to payment, solely
from the Surviving Company, of the appraised value of the
Dissenting Shares held by them to the extent permitted by and in
accordance with the provisions of Section 262 of the
DGCL; provided, however, that (i) if any holder of
Dissenting Shares, under the circumstances permitted by and in
accordance with the DGCL, shall have
A-2
effectively withdrawn his demand for appraisal of such
Dissenting Shares or lost his right to appraisal and payment for
his shares of Company Common Stock under Section 262
of DGCL, (ii) if any holder of Dissenting Shares shall have
failed to establish his entitlement to appraisal rights as
provided in Section 262 of the DGCL, or
(iii) if any holder of Dissenting Shares takes or fails to
take any action the consequence of which is that such holder is
not entitled to payment for his shares under the DGCL, such
holder or holders (as the case may be) shall forfeit the right
to appraisal of such shares of Company Common Stock and such
Company Common Stock shall thereupon cease to constitute
Dissenting Shares, and each of such holders shares of
Company Common Stock shall be converted solely into the right to
receive the Merger Consideration. The Company shall give
Cal Dive prompt notice of any demands received by the
Company for appraisal of shares of Company Common Stock, and
Cal Dive shall have the right to participate in all
negotiations and proceedings with respect to such demands. The
Company shall not settle, make any payments with respect to, or
offer to settle any claim with respect to Dissenting Shares
without the prior written consent of Cal Dive.
2.3 Stock Options and Equity Awards.
(a) The Board of Directors of the Company shall take such
action as is necessary so that at the Effective Time, each
outstanding option to purchase shares of Company Common Stock (a
Company Stock Option) granted under
the Company Stock Plans, whether or not vested, shall cease to
represent a right to acquire shares of Company Common Stock and
shall thereafter constitute a fully vested option (a
Converted Cal Dive Option) to
acquire (on the same terms and conditions as were applicable to
such Company Stock Option pursuant to the relevant Company Stock
Plan under which it was issued and the agreement evidencing the
grant thereof prior to the Effective Time, each as amended by
this Section 2.3) the number (rounded down to the
nearest whole number) of shares of Cal Dive Common Stock
determined by multiplying (A) the number of shares of
Company Common Stock that were issuable upon exercise of such
Company Stock Option immediately prior to the Effective Time by
(B) the Stock Award Exchange Ratio. The exercise price or
base price per share of Cal Dive Common Stock subject to
any such Converted Cal Dive Option shall be an amount
(rounded up to the nearest one hundredth of a cent) equal to
(A) the exercise price or base price per share of Company
Common Stock at which such Company Stock Option was exercisable
immediately prior to the Effective Time divided by (B) the
Stock Award Exchange Ratio. Notwithstanding the foregoing, any
Company Stock Option which is an incentive stock
option (as defined in Section 422 of the Code) shall
be adjusted in accordance with the requirements of
Section 424 of the Code. Prior to the Effective Time, the
Company shall make any amendments to the terms of the Company
Stock Plans and underlying agreements as are necessary to give
effect to the transactions contemplated by this
Section 2.3(a), including amending each agreement
evidencing a Converted Cal Dive Option to provide that, as
of the Effective Time, any reference to the Company shall be
deemed a reference to Cal Dive and any reference to Company
Common Stock shall be deemed a reference to Cal Dive Common
Stock.
(b) Immediately prior to the Effective Time, each
outstanding restricted share of Company Common Stock granted
pursuant to a Company Stock Plan shall vest, and thereafter
represent the right to receive the Merger Consideration.
Following the Effective Time, no holder of a Company incentive
award or other compensatory award shall have any right to
receive shares of Company Common Stock in respect of such award.
(c) Prior to the Effective Time, the Company (or its Board
of Directors or the appropriate committee thereof) shall take
all corporate action necessary for the adjustment of Company
Stock Options contemplated by this Section 2.3.
Cal Dive shall take all corporate action necessary to
assume as of the Effective Time the Companys obligations
with respect to the Converted Cal Dive Options and to
reserve for issuance a sufficient number of shares of
Cal Dive Common Stock for delivery upon the exercise of the
Converted Cal Dive Options pursuant to the terms set forth
in this Section 2.3.
2.4 Surrender and Payment.
(a) At or prior to the Effective Time, Cal Dive shall
appoint Wells Fargo Bank Minnesota, N.A. or such other exchange
agent reasonably acceptable to Cal Dive and the Company
(the Exchange Agent) for the purpose
of payment of the Merger Consideration. At or prior to the
Effective Time, Cal Dive shall deposit with the Exchange
Agent, in trust for the benefit of the holders of shares of
Company Common Stock, (a) cash
A-3
and (b) certificates representing shares of Cal Dive
Common Stock, to be paid and issued pursuant to
Section 2.1(a) and Section 2.3(a) and
(b), and pursuant to Section 2.5 in respect
of fractional shares of Cal Dive Common Stock. Any cash and
certificates representing Cal Dive Common Stock deposited
with the Exchange Agent (including cash in lieu of fraction
shares to be paid pursuant to Section 2.5) shall
hereinafter be referred to as the Exchange
Fund. Promptly after the Effective Time,
Cal Dive will send, or will cause the Exchange Agent to
send, to each holder of record of shares of Company Common Stock
immediately prior to the Effective Time, a letter of transmittal
for use in such exchange (which shall specify that the delivery
shall be effected, and risk of loss and title shall pass, only
upon proper delivery of the Certificates to the Exchange Agent)
in such form as the Company and Cal Dive may reasonably
agree, for use in effecting delivery of shares of Company Common
Stock to the Exchange Agent. Exchange of any book-entry shares
shall be effected in accordance with Cal Dives
customary procedures with respect to securities represented by
book entry.
(b) Each holder of shares of Company Common Stock
(including restricted shares) that have been converted into a
right to receive the Merger Consideration, upon surrender to the
Exchange Agent of a Certificate, together with a properly
completed letter of transmittal, will be entitled to receive
(i) one or more shares of Cal Dive Common Stock (which
shall be in non-certificated book-entry form unless a physical
certificate is requested) representing, in the aggregate, the
whole number of shares of Cal Dive Common Stock, if any,
that such holder has the right to receive pursuant to
Section 2.1 and (ii) a check in the amount
equal to the cash portion of the Merger Consideration, if any,
that such holder has the right to receive pursuant to Section
2.1 and this Article II, including cash payable
in lieu of fractional shares pursuant to
Section 2.5. No interest shall be paid or
accrued on any Merger Consideration or cash in lieu of
fractional shares. Until so surrendered, each such Certificate
shall, after the Effective Time, represent for all purposes only
the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be
paid to or registered in the name of a Person other than the
Person in whose name the applicable surrendered Certificate is
registered, it shall be a condition to such payment or the
registration thereof that the surrendered Certificate shall be
properly endorsed or otherwise be in proper form for transfer
and that the Person requesting such delivery of the Merger
Consideration shall pay to the Exchange Agent any transfer or
other similar Taxes required as a result of such registration in
the name of a Person other than the registered holder of such
Certificate or establish to the satisfaction of the Exchange
Agent that such Tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further
registration of transfers of shares of Company Common Stock. If,
after the Effective Time, Certificates are presented to the
Exchange Agent, the Surviving Company, or Cal Dive, they
shall be cancelled and exchanged for the consideration provided
for, and in accordance with the procedures set forth, in this
Article II.
(e) Any portion of the Exchange Fund that remains unclaimed
by the holders of shares of Company Common Stock one year after
the Effective Time shall be returned to Cal Dive upon
demand, and any holder who has not exchanged his shares of
Company Common Stock for the Merger Consideration in accordance
with this Section 2.4 prior to that time shall
thereafter look only to Cal Dive for delivery of the Merger
Consideration in respect of such holders shares.
Notwithstanding the foregoing, none of the Company,
Cal Dive, or the Exchange Agent shall be liable to any
holder of shares for any Merger Consideration from the Exchange
Fund properly delivered to a public official pursuant to
applicable abandoned property laws.
(f) Any portion of the Merger Consideration deposited with
the Exchange Agent pursuant to Section 2.4 to pay
for shares of Company Common Stock for which appraisal rights
shall have been perfected shall be returned to Cal Dive,
upon demand.
2.5 No Fractional Shares. In lieu
of any fractional share of Cal Dive Common Stock to which a
holder of Company Common Stock would otherwise be entitled
(after taking into account all Company Certificates delivered by
or on behalf of such holder), such holder, upon surrender of a
Company Certificate as described in Section 2.4,
shall be paid an amount in cash (without interest) determined by
multiplying (i) the Market Price by (ii) the fraction
of a share of Cal Dive Common Stock to which such holder
would otherwise be entitled.
A-4
2.6 Lost Certificates. If any
Certificate shall have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen, or destroyed and, if required by
Cal Dive or the Surviving Company, the posting by such
Person of a bond, in such reasonable amount as the Surviving
Company may direct, as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange
Agent will issue in exchange for such lost, stolen, or destroyed
Certificate the Merger Consideration to be paid in respect of
the shares of Company Common Stock represented by such
Certificate as contemplated by this Article II.
2.7 Withholding Rights. Each of
the Surviving Company and Cal Dive shall be entitled to
deduct and withhold from the consideration otherwise payable to
any Person pursuant to Article II such amounts as it
is required to deduct and withhold with respect to the making of
such payment under any provision of federal, state, local, or
foreign Tax law. To the extent that amounts are so deducted or
withheld by the Surviving Company or Cal Dive, as the case
may be, and paid over to the applicable Governmental Entity,
such deducted or withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock or other Person in respect of
which such deduction and withholding was made by the Surviving
Company or Cal Dive, as the case may be.
2.8 No Further Ownership Rights in Company Common
Stock. All shares of Cal Dive Common
Stock issued and cash paid upon conversion of shares of Company
Common Stock in accordance with the terms of this
Article II (including any cash paid pursuant to
Section 2.4 or 2.5) shall be deemed to have
been issued or paid in full satisfaction of all rights
pertaining to the shares of Company Common Stock.
2.9 Investment of Cash by the Exchange
Agent. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by Cal Dive,
provided that no such investment or loss thereon shall affect
the amounts payable or the timing of the amounts payable to the
Companys stockholders pursuant to the other provisions of
this Article II. Any interest and other income
resulting from such investments shall promptly be paid to
Cal Dive. Such funds shall be invested in short term
investments in direct obligations of the United States of
America, obligations for which the full faith and credit of the
United States of America is pledged to provide for the payment
of all principal and interest or commercial paper obligations
receiving the highest rating from either Moodys Investors
Service, Inc. or Standard & Poors or a
combination thereof as directed by Cal Dive.
2.10 Further Assurances. At and
after the Effective Time, the officers and directors of the
Surviving Company shall be authorized to execute and deliver, in
the name and on behalf of the Surviving Company, Merger Sub, or
the Company, any deeds, bills of sale, assignments, or
assurances and to take and do, in the name and on behalf of the
Surviving Company, Merger Sub, or the Company, any other actions
and things necessary to vest, perfect, or confirm of record or
otherwise in Cal Dive or the Surviving Company any and all
right, title, and interest in, to, and under any of the rights,
properties, or assets acquired or to be acquired by the
Surviving Company as a result of, or in connection with, the
Merger.
2.11 Shares Held by Company
Affiliates. Anything to the contrary herein
notwithstanding, no shares of Cal Dive Common Stock (or
certificates therefor) shall be issued in exchange for any
Certificate to any Affiliate of the Company (identified pursuant
to Section 5.10) until such Person shall have
delivered to Cal Dive duly executed letters as contemplated
by Section 5.10. Such Persons shall be
subject to the restrictions described in such letters.
A-5
ARTICLE III
REPRESENTATIONS
AND WARRANTIES
3.1 Representations and Warranties of the
Company. Except as disclosed in the Company
Disclosure Schedule (subject to the last sentence of
Section 9.3(a)) or, in the case of
Sections 3.1(f) - (o), in the Company SEC
Documents filed with the SEC prior to the date of this
Agreement, the Company hereby represents and warrants to
Cal Dive as follows:
(a) Corporate Organization.
(i) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware. The Company has the corporate power and authority to
own or lease all of its properties and assets and to carry on
its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or
location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, except where
the failure to be so licensed or qualified would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on the Company. True and complete
copies of the Amended and Restated Certificate of Incorporation
and By-Laws of the Company, as amended and in effect as of the
date of this Agreement, have previously been made available by
the Company to Cal Dive.
(ii) Each Subsidiary of the Company (A) is duly
organized and validly existing under the laws of its
jurisdiction of organization, (B) is duly qualified to do
business and in good standing in all jurisdictions (whether
federal, state, local, or foreign) where its ownership or
leasing of property or the conduct of its business requires it
to be so qualified, and (C) has all requisite corporate
power and authority to own or lease its properties and assets
and to carry on its business as now conducted, in each case,
except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company.
(b) Capitalization.
(i) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock and
5,000,000 shares Company Preferred Stock. As of
May 31, 2007, 32,697,655 shares of Company Common
Stock were issued and outstanding, and no shares of Company
Preferred Stock were issued and outstanding. As of May 31,
2007, 79,290 shares of Company Common Stock were subject to
Company Stock Options. Other than such Company Stock Options, as
of May 31, 2007, no shares of Company Common Stock were
issuable in connection with outstanding awards under the Company
Stock Plans or other compensatory arrangements. The Company has
no Voting Debt issued or outstanding. Since May 31, 2007,
(i) no Company Common Stock has been issued except in
connection with the exercise of Company Stock Options, and
(ii) no options, warrants, securities convertible into, or
commitments made with respect to the issuance of, shares of
Company Common Stock have been issued, granted, or made. All
issued and outstanding shares of Company Common Stock have been
duly authorized and validly issued and are fully paid,
nonassessable, and free of preemptive rights, with no personal
liability attaching to the ownership thereof. Except pursuant to
the terms of Company Stock Options and other stock awards issued
pursuant to Company Stock Plans, the Company does not have and
is not bound by any outstanding subscriptions, options,
warrants, calls, commitments, or agreements of any character
calling for the purchase or issuance of any shares of Company
Capital Stock or any other equity securities of the Company or
any securities of the Company representing the right to purchase
or otherwise receive any shares of Company Capital Stock. There
are no stockholder agreements, voting trusts, or other
agreements or understandings to which the Company is a party or
by which it is bound relating to the voting of any shares of the
Company Capital Stock.
(ii) Except for the Subsidiaries listed in Section
3.1(b) of the Company Disclosure Schedule, the Company does
not own, directly or indirectly, any capital stock, equity
interest, or other ownership interest in any Person. Except as
disclosed in Section 3.1(b) of the Company
Disclosure
A-6
Schedule, the Company owns, directly or indirectly, all of the
issued and outstanding shares of capital stock or other equity
ownership interests of each such Subsidiary of the Company, free
and clear of any Liens (other than Liens securing Indebtedness
listed in Section 3.1(e)(v) of the Company
Disclosure Schedule), and all of such shares or equity ownership
interests are duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. No
Subsidiary of the Company has or is bound by any outstanding
subscriptions, options, warrants, calls, commitments, or
agreements of any character calling for the purchase or issuance
of any shares of capital stock or any other equity security of
such Subsidiary or any securities representing the right to
purchase or otherwise receive any shares of capital stock or any
other equity security of such Subsidiary. No Subsidiary of the
Company owns any shares of Company Capital Stock (or any options
or other interests convertible into or measured by reference to
the value of Company Capital Stock).
(c) Authority; No Violation.
(i) The Company has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly approved by the
Board of Directors of the Company. The Board of Directors of the
Company has directed that this Agreement be submitted to the
Companys stockholders at a meeting of the Companys
stockholders for the purpose of adopting this Agreement (the
Company Stockholders Meeting), and,
except for the adoption of this Agreement by the affirmative
vote of the holders of a majority of the outstanding shares of
Company Common Stock (the Company Stockholder
Approval), no other corporate proceedings on the
part of the Company are necessary to approve this Agreement and
to consummate the transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by
the Company and (assuming due authorization, execution, and
delivery by Cal Dive and Merger Sub) constitutes a valid
and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, and other similar laws relating to or affecting
creditors rights generally, and general equitable
principles (whether considered in a proceeding in equity or at
law).
(ii) Neither the execution and delivery of this Agreement
by the Company, nor the consummation by the Company of the
transactions contemplated hereby, nor compliance by the Company
with any of the terms or provisions hereof, will
(A) violate any provision of the Amended and Restated
Certificate of Incorporation or By-Laws of the Company, or
(B) assuming that the consents and approvals referred to in
Section 3.1(d) are duly obtained, (I) violate any
statute, code, ordinance, rule, regulation, judgment, order,
writ, decree, or injunction applicable to the Company or any of
its Subsidiaries or any of their respective properties or
assets, or (II) violate, conflict with, result in a breach
of any provision of or the loss of any benefit under, constitute
a default (or an event that, with notice or lapse of time, or
both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under,
accelerate the performance required by, accelerate any right or
benefit provided by, or result in the creation of any Lien upon
any of the respective properties or assets of the Company or any
of its Subsidiaries under, any of the terms, conditions, or
provisions of any contract, arrangement, commitment, or
understanding to which the Company or any of its Subsidiaries is
a party or to which any of their assets is subject, except (in
the case of clause (B) above) for such violations,
conflicts, breaches, losses, defaults, terminations,
cancellations, accelerations or Liens that, would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on the Company or the Surviving
Company.
(d) Consents and Approvals. Except for
(i) compliance with any applicable requirements under the
HSR Act, (ii) the filing with the SEC of an information
statement/proxy statement/prospectus relating to the matters to
be submitted to the Companys stockholders at the Company
Stockholders Meeting (such information statement/proxy
statement/prospectus, and any amendments or supplements thereto,
the Information Statement/Proxy
Statement/Prospectus), and any filings required
under the Exchange Act,
A-7
(iii) the filing of the Certificate of Merger pursuant to
the DGCL and the DLLCA, (iv) any consents, authorizations,
approvals, filings, or exemptions in connection with compliance
with the rules of the Nasdaq Global Market, (v) such
filings and approvals as are required to be made or obtained
under the securities or Blue Sky laws of various
states in connection with the issuance of the shares of
Cal Dive Common Stock pursuant to this Agreement (the
consents, approvals, filings, and registration required under or
in relation to clauses (ii) through (v) above, the
Company Necessary Consents) and
(vi) such other consents, approvals, filings, and
registrations the failure of which to obtain or make would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on the Company or the Surviving
Company, no consents or approvals of or filings or registrations
with any Governmental Entity by the Company are necessary in
connection with (A) the execution and delivery by the
Company of this Agreement or (B) the consummation by the
Company of the transactions contemplated by this Agreement.
(e) Financial Reports and SEC Documents.
(i) Since December 31, 2004, the Company has filed
with the SEC all material forms, statements, reports, and
documents required to be filed by it under the Exchange Act and
the Securities Act. The Companys Annual Reports on
Form 10-K
for the fiscal years ended December 31, 2005, and 2006, and
all other reports, registration statements, definitive proxy
statements, or information statements filed by the Company or
any of its Subsidiaries subsequent to December 31, 2006
under the Securities Act or under the Exchange Act in the form
filed with the SEC (collectively, the Company SEC
Documents), (A) complied in all material
respects as to form with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be, and
(B) as of their respective filing dates (except as amended
or supplemented prior to the date of this Agreement),
(x) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading,
and (y) each of the balance sheets contained in or
incorporated by reference into any such Company SEC Document
(including the related notes and schedules thereto) fairly
presents the financial position of the entity or entities to
which it relates as of its date, and each of the statements of
income and changes in stockholders equity and cash flows
or equivalent statements in such Company SEC Documents
(including any related notes and schedules thereto) fairly
presents the results of operations, changes in
stockholders equity, and changes in cash flows, as the
case may be, of the entity or entities to which it relates for
the periods to which it relates, in each case in accordance with
GAAP consistently applied during the periods involved, except,
in each case, as may be noted therein, subject to normal
year-end audit adjustments in the case of unaudited statements.
(ii) The records, systems, controls, data, and information
of the Company and its respective Subsidiaries are recorded,
stored, maintained, and operated under means that are under the
exclusive ownership and direct control of the Company or its
Subsidiaries or accountants, except for any non-exclusive
ownership and non-direct control that would not reasonably be
expected to have a materially adverse effect on the system of
internal accounting controls described in the following
sentence. The Company and its Subsidiaries have devised and
maintain a system of internal accounting controls sufficient to
provide reasonable assurances regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP, including that:
(A) transactions are executed only in accordance with
managements authorization; (B) transactions are
recorded as necessary to permit preparation of the financial
statements of the Company and its Subsidiaries and to maintain
accountability for the assets of the Company and its
Subsidiaries; (C) access to such assets is permitted only
in accordance with managements authorization; and
(D) accounts, notes, and other receivables and inventory
are recorded accurately, and proper and adequate procedures are
implemented to permit the collection thereof on a current and
timely basis. The Company (x) has designed disclosure
controls and procedures (within the meaning of
Rules 13a-15(e)
and
15d-15(e) of
the Exchange Act) to ensure that material information relating
to the Company and its Subsidiaries is made Known to the
management of the Company by others
A-8
within those entities as appropriate to allow timely decisions
regarding required disclosure and to make the certifications
required by the Exchange Act with respect to the Company SEC
Documents, and (y) has disclosed, based on its most recent
evaluation prior to the date of this Agreement, to its auditors
and the audit committee of its Board of Directors (I) any
significant deficiencies in the design or operation of internal
controls which could adversely affect in any material respect
its ability to record, process, summarize, and report financial
data and any material weaknesses in internal controls and
(II) any fraud, whether or not material, that involves
management or other employees who have a significant role in its
internal controls.
(iii) Since December 31, 2006, (A) the Company
has not received or otherwise obtained Knowledge of any
complaint, allegation, assertion, or claim, whether written or
oral, regarding the accounting practices, procedures,
methodologies, or methods of the Company or any of its
Subsidiaries or their respective internal accounting controls,
including any complaint, allegation, assertion, or claim that
the Company or any of its Subsidiaries has engaged in
questionable accounting practices, and (B) no attorney
representing the Company or any of its Subsidiaries, whether or
not employed by the Company or any of its Subsidiaries, has
reported evidence of a violation of securities laws, breach of
fiduciary duty, or similar violation by the Company or any of
its officers, directors, employees, or agents to the
Companys Board of Directors or any committee thereof or to
the General Counsel or Chief Executive Officer of the Company.
(iv) The Company is in compliance with the provisions of
the Sarbanes-Oxley Act and to its Knowledge, the certifications
provided pursuant to Sections 302 and 906 thereof with each
Company SEC Document, at the time of filing or submission of
each such certification, were accurate.
(v) Section 3.1(e)(v) of the Company Disclosure
Schedule lists the Indebtedness of the Company and its
Subsidiaries as of May 31, 2007. Except as disclosed in
Section 3.1(e)(v) of the Company Disclosure Schedule, all
Indebtedness of the Company and its Subsidiaries can be prepaid
in whole or part, at any time and from time to time prior to the
respective stated maturity dates thereof, without any premium,
penalty, breakage fee or other termination fee. No Indebtedness
of the Company or its Subsidiaries imposes any obligations on
the Company or its Subsidiaries to publicly register such
Indebtedness or similar Indebtedness in exchange therefore.
(f) Absence of Undisclosed
Liabilities. Neither the Company nor any of its
Subsidiaries had at March 31, 2007, or has incurred since
that date, any liabilities, or obligations (whether absolute,
accrued, contingent, or otherwise) of any nature, except
liabilities, obligations, or contingencies that (i) are
accrued or reserved against in the financial statements in the
Company Current
10-Q or
reflected in the notes thereto, (ii) were incurred in the
ordinary course of business consistent with past practice,
(iii) would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company, or (iv) have been discharged or paid in full prior
to the date hereof.
(g) Absence of Certain Changes or
Events. Since March 31, 2007, the Company
and each of its Subsidiaries has conducted its business only in
the ordinary course, and since such date there has not been:
(i) any event, change, effect or development that,
individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect on the Company;
(ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or
property) with respect to any Company Capital Stock or any
repurchase for value by the Company of any Company Capital Stock;
(iii) any split, combination, or reclassification of any
Company Capital Stock or any issuance or the authorization of
any issuance of any other securities in respect of, in lieu of,
or in substitution for, shares of Company Capital Stock;
(iv) (A) any granting by the Company to any director,
executive officer or employee who made total compensation of
$75,000 or more for fiscal year 2006 of the Company of
(x) any increase in
A-9
compensation or employee benefits, except in the ordinary course
of business consistent with prior practice or as was required
under employment agreements included in the Company SEC
Documents or (y) any equity compensation (other than to
directors on May 24, 2007 as provided in the Company Stock
Plans), (B) except as permitted by
Section 5.7(b), any granting by the Company to any
such director, executive officer or employee of any increase in
severance or termination pay, except as was required under any
employment, severance, or termination agreements included in the
Company SEC Documents, or (C) any entry by the Company
into, or any amendment of, any employment, severance, or
termination agreement with any such director, executive officer
or employee; or
(v) any change in financial accounting methods, principles,
or practices by the Company or any of its Subsidiaries
materially affecting the consolidated assets, liabilities, or
results of operations of the Company, except insofar as may have
been required by a change in GAAP.
(h) Legal Proceedings. The Company
Disclosure Schedule contains an accurate and complete list of
each suit, action, proceeding, or investigation pending or, to
the Knowledge of the Company, threatened, against or affecting
the Company or any of its Subsidiaries, and each judgment,
decree, injunction, or order of any Governmental Entity or
arbitrator outstanding against the Company or its Subsidiaries.
Except as disclosed in Section 3.1(h) of the Company
Disclosure Schedule, none of such suits, actions, proceedings,
investigations, judgments, decrees, injunctions or orders,
individually or in the aggregate, have, or would reasonably be
expected to have, a Material Adverse Effect on the Company.
(i) Compliance with Applicable Law. The
Company and each of its Subsidiaries hold all licenses,
franchises, permits, and authorizations, and have complied in
all respects with and are not in default in any respect under
any, applicable law, statute, order, rule, or regulation of any
Governmental Entity relating to the Company or any of its
Subsidiaries or any of its assets or properties, including the
Company Vessels, except where the failure to hold such license,
franchise, permit, or authorization or such noncompliance or
default would not, either individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company.
(j) Environmental Liability. Except for
matters that individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the
Company, (A) the Company and each of its Subsidiaries are
and have been in compliance with all applicable Environmental
Laws and have obtained or applied for all Environmental Permits
necessary for their operations as currently conducted,
(B) there have been no Releases of any Hazardous Materials
that could be reasonably likely to form the basis of any
Environmental Claim against the Company or any of its
Subsidiaries, (C) there are no Environmental Claims pending
or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries, (D) none of the Company
and its Subsidiaries is subject to any agreement, order,
judgment, decree, letter, or memorandum by or with any
Governmental Entity or third party imposing any liability or
obligation under any Environmental Law; (E) none of the
Company and its Subsidiaries has retained or assumed, either
contractually or by operation of law, any liability or
obligation that could reasonably be expected to have formed the
basis of any Environmental Claim against the Company or any of
its Subsidiaries, (F) no portion of any property currently
or formerly owned, leased, or operated by the Company or any of
its Subsidiaries is part of a site listed on the National
Priorities List under CERCLA or any similar ranking or listing
under any state law, and (G) all Hazardous Materials
generated by the Company and each of its Subsidiaries have been
transported, stored, treated, and disposed of by carriers or
treatment, storage, and disposal facilities authorized or
maintaining valid Environmental Permits.
(k) Employee Benefit Plans; Labor Matters.
(i) Each Company Benefit Plan is listed in Section
3.1(k) of the Company Disclosure Schedule. With respect to
each Company Benefit Plan, the Company has made available (or,
if it has not made available, will promptly after the date
hereof make available) to Cal Dive a correct and complete
copy of each writing or writings constituting such Company
Benefit Plan or, if unwritten, a complete description of such
Company Benefit Plan. The Internal Revenue Service has issued a
favorable
A-10
determination letter or opinion letter with respect to each
Company Benefit Plan that is intended to be a qualified
plan within the meaning of Section 401(a) of the Code
and the related trust that has not been revoked, and, to the
Knowledge of the Company, there are no existing circumstances
and no events have occurred that could result in the revocation
of such favorable determination letter or opinion letter.
(ii) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company, (A) each of the Company Benefit Plans has been
operated and administered in all material respects in accordance
with its terms and applicable law and administrative rules and
regulations of any Governmental Entity, including, but not
limited to, ERISA and the Code, and (B) there are no
pending or, to the Knowledge of the Company, threatened claims
(other than claims for benefits in the ordinary course),
lawsuits, arbitrations, audits or examinations that have been
asserted or instituted against the Company Benefit Plans, any
fiduciaries thereof with respect to their duties to the Company
Benefit Plans or the assets of any of the trusts under any of
the Company Benefit Plans.
(iii) Neither the Company nor a Company ERISA Affiliate
sponsors, maintains, contributes to or has an obligation to
contribute to, and has not at any time within the past six
(6) years sponsored, maintained, contributed to, or had an
obligation to contribute to, a Pension Plan that is subject to
Section 412 of the Code, Section 302 of ERISA, or
Title IV of ERISA.
(iv) The Company and each of its Affiliates has reserved
the right to amend, terminate, or modify at any time all Company
Benefit Plans providing for retiree health or life insurance
coverage.
(v) Neither the Company nor any of its Affiliates is a
party to any material collective bargaining or other labor union
contract applicable to individuals employed by the Company or
any of its Affiliates, and no such collective bargaining
agreement or other labor union contract is being negotiated by
the Company or any of its Affiliates. Except as would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on the Company, (A) there is no
labor dispute, strike, slowdown, or work stoppage against the
Company or any of its Affiliates pending or, to the Knowledge of
the Company, threatened against the Company or any of its
Affiliates, (B) no unfair labor practice or labor charge or
complaint is pending, or to the Knowledge of the Company,
threatened with respect to the Company or any of its Affiliates,
and (C) the Company and its Affiliates are in compliance
with all applicable laws relating to employment, employment
practices, wages, hours, terms, and conditions of employment,
employment discrimination, disability rights, workers
compensation, employee leaves, occupational safety and health,
and the collection and payment of employment Taxes.
(vi) Neither the Company nor any Company ERISA Affiliate
sponsors, maintains, contributes to, or has an obligation to
contribute to, and has not at any time within the past six
(6) years sponsored, maintained, contributed to, or had an
obligation to contribute to, a Multiemployer Plan, and neither
the Company nor a Company ERISA Affiliate has incurred or
assumed any liability (primary, secondary, contingent, or
otherwise and including any withdrawal liability), with respect
to a Multiemployer Plan.
(vii) Neither the Company nor any Company ERISA Affiliate
has, at any time, participated in any union-sponsored
multiemployer welfare benefit fund maintained pursuant to any
employee welfare benefit plan as defined in
Section 3(1) of ERISA.
(viii) No Company Benefit Plan provides medical, surgical,
hospitalization, pharmaceutical, or life insurance benefits
(whether or not insured by a third party) for employees or
former employees of the Company or any Affiliate of the Company,
for periods extending beyond their retirements or other
terminations of service, other than coverage mandated by
Section 4980 of the Code or similar state law, and no
commitments have been made to provide such coverage.
A-11
(ix) Section 3.1(k) of the Company Disclosure
Schedule sets forth an accurate and complete list of each
Company Benefit Plan under which the execution and delivery of
this Agreement or the consummation of the transactions
contemplated hereby could (either alone or in conjunction with
any other event, such as termination of employment), result in,
cause the accelerated vesting, funding, or delivery of, or
increase the amount or value of, any payment or benefit to any
employee, officer, or director of the Company or any of its
Affiliates, or could limit the right of the Company or any of
its Affiliates to amend, merge, terminate, or receive a
reversion of assets from any Company Benefit Plan or related
trust or any material employment agreement or related trust.
Except as set forth in Section 3.1(k) of the Company
Disclosure Schedule, no director, officer or employee of the
Company or its Subsidiaries shall be paid or entitled to be paid
any amount (whether in cash, in property, or in the form of
benefits, accelerated cash, property, or benefits, or otherwise)
in connection with the transactions contemplated hereby (either
solely as a result thereof or as a result of such transactions
in conjunction with any other event) that will be an
excess parachute payment within the meaning of
Section 280G of the Code.
(x) Section 3.1(k) of the Company Disclosure
Schedule sets forth an accurate and complete list of each
Company Benefit Plan that is a non-qualified deferred
compensation plan (as defined under
Section 409A(d)(1) of the Code), and each such plan has
been operated and administered in good faith compliance with
Section 409A of the Code and all Internal Revenue Service
guidance promulgated or issued thereunder since January 1,
2005.
(l) Taxes.
(i) All Tax Returns of or relating to any Tax that are
required to be filed by, on behalf of, or with respect to each
of the Company and each of its Subsidiaries, have been duly and
timely filed in accordance with applicable Tax law with the
appropriate Governmental Entity, and all such Tax Returns are
true, complete, and accurate in all respects, except to the
extent that any failure to have filed or any inaccuracies in
such Tax Returns would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company. Each of the Company and each of its Subsidiaries has
timely paid to the appropriate Governmental Entity all Taxes
required to be paid by it, and has timely withheld from employee
wages and amounts owing to any creditor or third party and
remitted to the proper Governmental Entities all amounts
required under applicable Tax law to be so withheld and
remitted, except to the extent that any failure to pay or
withhold and remit such Taxes would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect on the Company.
(ii) There are no pending or, to the Knowledge of the
Company, threatened audits, examinations, investigations,
deficiencies, claims, or other administrative or court
proceedings in respect of Taxes relating to the Company or any
of its Subsidiaries, except for those that would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on the Company.
(iii) There are no Liens for Taxes upon the assets of the
Company or any of its Subsidiaries, other than Liens for current
Taxes not yet due and payable.
(iv) Neither the Company nor any of its Subsidiaries has
requested any extension of time within which to file any Tax
Returns in respect of any taxable year (or other period) that
have not since been filed, nor made any request for waivers of
the time to assess any Taxes that are pending or outstanding,
except where such request or waiver would not, individually or
in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.
(v) Neither the Company nor any of its Subsidiaries has any
liability for Taxes of any Person under Treasury
Regulation Section 1.1502-6 or any analogous state, local,
or foreign law by reason of having been a member of any
consolidated, combined, or unitary group, other than the
affiliated group of which the Company is currently the common
parent corporation. Neither the Company nor
A-12
any of its Subsidiaries is a party to or has any obligation
under any Tax sharing agreement with any Person other than the
Company
and/or any
of its Subsidiaries.
(vi) Neither the Company nor any of its Subsidiaries has
constituted either a distributing corporation or a
controlled corporation within the meaning of
Section 355(a)(1)(A) of the Code in a distribution of stock
intended to qualify for tax-free treatment under
Section 355 of the Code (other than a distribution of a
Company Subsidiary by a Company Subsidiary to the Company or
another Company Subsidiary) (A) in the two years prior to
the date of this Agreement (or will constitute such a
corporation in the two years prior to the Closing Date) or
(B) in a distribution that otherwise constitutes part of a
plan or series of related transactions
within the meaning of Section 355(e) of the Code in
conjunction with the Merger.
(m) Contracts.
(i) As of the date of this Agreement, neither the Company
nor any of its Subsidiaries is a party to or bound by any
contract, arrangement, commitment, or understanding (whether
written or oral) (A) which is a material
contract (as such term is defined in Item 601(b)(10) of
Regulation S-K
of the SEC) to be performed after the date of this Agreement
that has not been filed as an exhibit to or incorporated by
reference in the Company SEC Documents, or (B) which
materially restricts the ability of the Company to engage in any
line of business. Each contract, arrangement, commitment or
understanding of the type described in clause (A) of this
Section 3.1(m), whether or not set forth in the
Company Disclosure Schedule or in the Company SEC Documents, is
referred to herein as a Company
Contract (for purposes of clarification, each
material contract (as such term is defined in
Item 601(b)(10) of
Regulation S-K
of the SEC) to be performed after the date of this Agreement,
whether or not filed with the SEC, is a Company Contract).
(ii) (A) Each Company Contract is valid and binding on
the Company and any of its Subsidiaries that is a party thereto,
as applicable, and in full force and effect (subject to the
effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors rights generally, and general
equitable principles (whether considered in a proceeding in
equity or at law)), (B) the Company and each of its
Subsidiaries has in all material respects performed all
obligations required to be performed by it to date under each
Company Contract, except where such noncompliance would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on the Company, and (C) neither
the Company nor any of its Subsidiaries Knows of, or has
received notice of, the existence of any event or condition
which constitutes, or after notice or lapse of time or both will
constitute, a material default on the part of the Company or any
of its Subsidiaries under any such Company Contract, except
where such default would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company.
(n) Title to Properties.
(i) The Company and its Subsidiaries have good and
defensible title to, or valid leasehold interests in, all of
their assets and properties purported to be owned or leased by
the Company or its Subsidiaries as described in the Company SEC
Documents, including the Company Vessels, except for such assets
and properties as are no longer used or useful in the conduct of
its businesses or as have been disposed of in the ordinary
course of business consistent with past practice and are free
and clear of all Liens, except for (A) Permitted Liens,
(B) such imperfections of title, easements, rights of way,
and similar Liens, leases, subleases or licenses, or other
matters and failures of title as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect on the Company or materially interfere with the use of
such assets or properties by the Surviving Company from and
after the Closing, (C) Liens securing Indebtedness set
forth in Section 3.1(c)(v) of the Company Disclosure
Schedule, and (D) Liens, that, in the aggregate, do not and
will not materially interfere with the ability of the Company
and its Subsidiaries to conduct business as currently conducted.
A-13
(ii) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company, the Company and its Subsidiaries (a) have complied
in all respects with the terms of all leases of their assets and
properties to which they are a party and under which they are in
occupancy, and all such leases are in full force and effect and
(b) enjoy peaceful and undisturbed possession under all
such leases.
(o) Insurance. Section 3.1(o)
of the Company Disclosure Schedule accurately sets forth in
reasonable detail (i) all insurance policies maintained by
the Company, and (ii) a list of all claims and the claims
history related thereto for the 12 months prior to the date
hereof that have not been or are not covered by insurance.
(p) Reorganization under the Code. As of
the date of this Agreement, neither the Company nor any of its
Subsidiaries has taken or agreed to take any action or knows of
any fact that is reasonably likely to prevent or impede
(i) the Merger from qualifying as a
reorganization within the meaning of
Section 368(a) of the Code, or (ii) the ability of
counsel to render the opinions described in
Sections 6.2(c) and 6.3(c) of this Agreement.
(q) State Takeover Statutes; Absence of Supermajority
Provision. The Company has taken all action to
assure that no state takeover statute or similar statute or
regulation, including, without limitation, Section 203 of the
DGCL, shall apply to the Merger. The Company has taken such
action with respect to any other anti-takeover provisions in the
Certificate of Incorporation or the By-Laws, as amended, of the
Company to the extent necessary to consummate the Merger on the
terms set forth in this Agreement.
(r) Opinion of Financial Advisor. The
Company has received the opinion of Lehman Brothers Inc., dated
as of the date hereof, to the effect that the Merger
Consideration to be received by holders of Company Common Stock
in the Merger is fair to such stockholders from a financial
point of view.
(s) Board Approval. The Board of
Directors of the Company, at a meeting duly called and held, has
by unanimous vote of those directors present (i) determined
that this Agreement and the transactions contemplated hereby are
advisable and in the best interests of the Companys
stockholders, (ii) approved this Agreement, and
(iii) recommended that this Agreement be adopted by the
holders of Company Common Stock.
(t) Brokers Fees. Neither the
Company nor any of its Subsidiaries nor any of their respective
officers or directors has employed any broker or finder or
incurred any liability for any brokers fees, commissions,
or finders fees in connection with the transactions
contemplated by this Agreement, except for the fees to be paid
to Lehman Brothers Inc.
(u) Ownership of Cal Dive Capital
Stock. As of the date of this Agreement, the
Company does not beneficially own any shares of Cal Dive
Capital Stock.
(v) Vessel Related Matters.
(i) (A) (I) Each of the Company Vessels has been and
is duly classified by the Classification Society set forth in
Section 3.1(v)(i)(A)(I) of the Company Disclosure
Schedule;
(II) The Company has taken all necessary action required by
the relevant Classification Society to maintain the
classification of each Company Vessel; and
(III) There are no outstanding
and/or
overdue recommendations of the Classification Society for any of
the Company Vessels which could reasonably be expected to lead
to a withdrawal of the respective Company Vessels class.
(B) No material modification or alteration consistent with
industry practice is needed to be effected with respect to any
of the Company Vessels:
(I) To comply with the laws, regulations or requirements of
the Country of Registry or any other laws or regulations
applicable to any of the Company Vessels;
A-14
(II) To comply with the requirements of any relevant
Classification Society under which such Company Vessel is
classified; or
(III) To comply with the requirements of any policy of
insurance covering each Company Vessel.
(C) The Company has taken all necessary action as is
required by the Country of Registry for each of the Company
Vessels, or otherwise, to timely renew any certificate of
documentation (or similar evidence of title
and/or
registration for the Country of Registry of any of the Company
Vessels).
(ii) No Event of Loss with respect to any of the Company
Vessels has occurred and is continuing that could reasonably be
expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
(iii) Each Company Vessel is in satisfactory operating
condition for the purpose and in the waters in which such Vessel
is working.
(w) Certain Business Practices. Since
January 1, 2005, neither the Company nor any of its
Subsidiaries nor, to the Knowledge of the Company, any director,
officer, agent, or employee of the Company or any of its
Subsidiaries has, in the course of his or her duties on behalf
of the Company or any of its Subsidiaries (i) used any
funds for unlawful contributions, gifts, entertainment, or other
expenses relating to political activity or for the business of
the Company or any of its Subsidiaries, (ii) made any bribe
or kickback, illegal political contribution, unlawful payment
from corporate funds to foreign or domestic government officials
or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, or (iii) made any other unlawful
payment.
3.2 Representations and Warranties of
Cal Dive. Except as disclosed in the
Cal Dive Disclosure Schedule (subject to the last sentence
of Section 9.3(a)) or, in the case or
Sections 3.2(f) - (m), in the
Cal Dive SEC Documents filed with the SEC prior to the date
of this Agreement, Cal Dive hereby represents and warrants
to the Company as follows:
(a) Corporate Organization.
(i) Cal Dive is a corporation duly organized, validly
existing, and in good standing under the laws of the State of
Delaware. Cal Dive has the corporate power and authority to
own or lease all of its properties and assets and to carry on
its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the
nature of the business conducted by it or the character or
location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, except where
the failure to be so licensed or qualified would not, either
individually or in the aggregate, have a Material Adverse Effect
on Cal Dive. True and complete copies of the Certificate of
Incorporation and the By-Laws of Cal Dive, as amended and
in effect as of the date of this Agreement, have previously been
made available by Cal Dive to the Company.
(ii) Each Subsidiary of Cal Dive (A) is duly
organized and validly existing under the laws of its
jurisdiction of organization, (B) is duly qualified to do
business and in good standing in all jurisdictions (whether
federal, state, local, or foreign) where its ownership or
leasing of property or the conduct of its business requires it
to be so qualified, and (C) has all requisite corporate
power and authority to own or lease its properties and assets
and to carry on its business as now conducted, in each case,
except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
Cal Dive.
(iii) Merger Sub was formed by Cal Dive solely for the
purpose of engaging in the transactions contemplated hereby and
has not engaged in any business and has incurred no liabilities
other than in connection with the transactions contemplated by
this Agreement.
A-15
(b) Capitalization.
(i) The authorized capital stock of Cal Dive consists
of 240,000,000 shares of Cal Dive Common Stock and
5,000,000 shares Cal Dive Preferred Stock. As of
April 30, 2007, 84,322,012 shares of Cal Dive
Common Stock were issued and outstanding, and no shares of
Cal Dive Preferred Stock were issued and outstanding. No
shares of Cal Dive Common Stock are subject to issued and
outstanding stock options under the Cal Dive Stock Plans.
As of April 30, 2007, no shares of Cal Dive Common
Stock were issuable in connection with outstanding awards under
the Cal Dive Stock Plans or other compensatory
arrangements. Cal Dive has no Voting Debt issued or
outstanding. Since April 30, 2007, (i) no
Cal Dive Common Stock has been issued, and (ii) no
options, warrants, securities convertible into, or commitments
made with respect to the issuance of shares of Cal Dive
Common Stock have been issued, granted, or made. All issued and
outstanding shares of Cal Dive Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable,
and free of preemptive rights, with no personal liability
attaching to the ownership thereof. Except as disclosed in
Section 3.2(b)(i) of the Cal Dive Disclosure
Schedule, Cal Dive does not have and is not bound by any
outstanding subscriptions, options, warrants, calls,
commitments, or agreements of any character calling for the
purchase or issuance of any shares of Cal Dive Capital
Stock or any other equity securities of Cal Dive or any
securities of Cal Dive representing the right to purchase
or otherwise receive any shares of Cal Dive Capital Stock.
Except as described in the Cal Dive SEC Documents, there
are no stockholder agreements, voting trusts, or other
agreements or understandings to which Cal Dive is a party
or by which it is bound relating to the voting of any shares of
the Cal Dive Capital Stock.
(ii) Except for the Subsidiaries listed in Section
3.2(b)(ii) of the Cal Dive Disclosure Schedule,
Cal Dive does not own, directly or indirectly, any capital
stock, equity interest, or other ownership interest in any
Person. Except as disclosed in Section 3.2(b)(ii) of
the Cal Dive Disclosure Schedule, Cal Dive owns,
directly or indirectly, all of the issued and outstanding shares
of capital stock or other equity ownership interests of each
such Subsidiary of Cal Dive, free and clear of any Liens
other than those described in the Cal Dive Current
10-Q, and
all of such shares or equity ownership interests are duly
authorized and validly issued and are fully paid, nonassessable
and free of preemptive rights, with no personal liability
attaching to the ownership thereof. No Subsidiary of
Cal Dive has or is bound by any outstanding subscriptions,
options, warrants, calls, commitments, or agreements of any
character calling for the purchase or issuance of any shares of
capital stock or any other equity security of such Subsidiary or
any securities representing the right to purchase or otherwise
receive any shares of capital stock or any other equity security
of such Subsidiary. No Subsidiary of Cal Dive owns any
shares of Cal Dive Capital Stock (or any options or other
interests convertible into or measured by reference to the value
of Cal Dive Capital Stock).
(c) Authority; No Violation.
(i) Cal Dive has full corporate and Merger Sub has
full limited liability company power and authority to execute
and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby have been duly and validly approved by the board of
directors and stockholders of Cal Dive and the managers and
sole member of Merger Sub, and no other entity proceedings on
the part of Cal Dive or Merger Sub are necessary to approve
this Agreement and to consummate the transactions contemplated
hereby. This Agreement has been duly and validly executed and
delivered by each of Cal Dive and Merger Sub and (assuming
due authorization, execution and delivery by the Company)
constitutes a valid and binding obligation of Cal Dive and
Merger Sub, enforceable against Cal Dive and Merger Sub in
accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium
and other similar laws relating to or affecting creditors
rights generally, and general equitable principles (whether
considered in a proceeding in equity or at law).
A-16
(ii) Neither the execution and delivery of this Agreement
by Cal Dive and Merger Sub nor the consummation by
Cal Dive and Merger Sub of the transactions contemplated
hereby, nor compliance by Cal Dive and Merger Sub with any
of the terms or provisions hereof, will (A) violate any
provision of the Certificate of Incorporation or By-Laws of
Cal Dive or the certificate of formation or limited
liability company agreement of Merger Sub, or (B) assuming
that the consents and approvals referred to in
Section 3.2(d) are duly obtained, (I) violate
any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree, or injunction applicable to Cal Dive or any
of its Subsidiaries or any of their respective properties or
assets, or (II) violate, conflict with, result in a breach
of any provision of or the loss of any benefit under, constitute
a default (or an event that, with notice or lapse of time, or
both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under,
accelerate the performance required by, accelerate any right or
benefit provided by, or result in the creation of any Lien upon
any of the respective properties or assets of Cal Dive or
any of its Subsidiaries under, any of the terms, conditions, or
provisions of any contract, arrangement, commitment, or
understanding to which Cal Dive or any of its Subsidiaries
is bound or to which any of their assets is subject, except (in
the case of clause (B) above) for such violations,
conflicts, breaches, losses, defaults, terminations,
cancellations, accelerations or Liens that would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Cal Dive or the Surviving
Company.
(d) Consents and Approvals. Except for
(i) compliance with any applicable requirements under the
HSR Act, (ii) the filing with the SEC of the Information
Statement/Proxy Statement/Prospectus and a registration
statement on
Form S-4
with respect to the issuance of the Cal Dive Common Stock
in the Merger (such
Form S-4,
and any amendments or supplements thereto, the
Form S-4)
and any filings under the Exchange Act, (iii) the filing of
the Certificate of Merger pursuant to the DGCL and the DLLCA,
(iv) any consents, authorizations, approvals, filings, or
exemptions in connection with compliance with the rules of the
NYSE, (v) such filings and approvals as are required to be
made or obtained under the securities or Blue Sky
laws of various states in connection with the issuance of the
shares of Cal Dive Common Stock pursuant to this Agreement
(the consents, approvals, filings, and registration required
under or in relation to clauses (ii) through
(v) above, Cal Dive Necessary
Consents) and (vi) such other consents,
approvals, filings, and registrations the failure of which to
obtain or make would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
Cal Dive or the Surviving Company, no consents or approvals
of or filings or registrations with any Governmental Entity are
necessary in connection with (A) the execution and delivery
by Cal Dive of this Agreement or (B) the consummation
by Cal Dive and Merger Sub of the transactions contemplated
by this Agreement.
(e) Financial Reports and SEC Documents.
(i) Since December 14, 2006, Cal Dive has filed
with the SEC all material forms, statements, reports, and
documents required to be filed by it under the Exchange Act and
the Securities Act. The Companys Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, and all other
reports, registration statements, definitive proxy statements,
or information statements filed by Cal Dive or any of its
Subsidiaries subsequent to December 31, 2006 under the
Securities Act or under the Exchange Act in the form filed with
the SEC (collectively, the Cal Dive SEC
Documents), (A) complied in all material
respects as to form with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be, and
(B) as of their respective filing dates (except as amended
or supplemented prior to the date of this Agreement),
(x) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of
the circumstances under which they were made, not misleading,
and (y) each of the balance sheets contained in or
incorporated by reference into any such Cal Dive SEC
Document (including the related notes and schedules thereto)
fairly presents the financial position of the entity or entities
to which it relates as of its date, and each of the statements
of income and changes in stockholders equity and cash
flows or equivalent statements in such Cal Dive SEC
Documents (including any related notes and schedules thereto)
A-17
fairly presents the results of operations, changes in
stockholders equity, and changes in cash flows, as the
case may be, of the entity or entities to which it relates for
the periods to which it relates, in each case in accordance with
GAAP consistently applied during the periods involved, except,
in each case, as may be noted therein, subject to normal
year-end audit adjustments in the case of unaudited statements.
(ii) The records, systems, controls, data, and information
of Cal Dive and its respective Subsidiaries are recorded,
stored, maintained, and operated under means that are under the
exclusive ownership and direct control of Cal Dive or its
Subsidiaries or accountants, except for any non-exclusive
ownership and non-direct control that would not reasonably be
expected to have a materially adverse effect on the system of
internal accounting controls described in the following
sentence. Cal Dive and its Subsidiaries have devised and
maintain a system of internal accounting controls sufficient to
provide reasonable assurances regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP, including that:
(A) transactions are executed only in accordance with
managements authorization; (B) transactions are
recorded as necessary to permit preparation of the financial
statements of Cal Dive and its Subsidiaries and to maintain
accountability for the assets of Cal Dive and its
Subsidiaries; (C) access to such assets is permitted only
in accordance with managements authorization; and
(D) accounts, notes and other receivables and inventory are
recorded accurately, and proper and adequate procedures are
implemented to permit the collection thereof on a current and
timely basis. Cal Dive (x) has designed disclosure
controls and procedures (within the meaning of
Rules 13a-15(e)
and
15d-15(e) of
the Exchange Act) to ensure that material information relating
to Cal Dive and its Subsidiaries is made Known to the
management of such entity (or its general partner) by others
within those entities as appropriate to allow timely decisions
regarding required disclosure and to make the certifications
required by the Exchange Act with respect to the Cal Dive
SEC Documents, and (y) has disclosed, based on its most
recent evaluation prior to the date of this Agreement, to its
auditors and the audit committee of its Board of Directors
(I) any significant deficiencies in the design or operation
of internal controls which could adversely affect in any
material respect its ability to record, process, summarize, and
report financial data and any material weaknesses in internal
controls and (II) any fraud, whether or not material, that
involves management or other employees who have a significant
role in its internal controls.
(iii) Since December 14, 2006, (A) Cal Dive
has not received or otherwise obtained Knowledge of any material
complaint, allegation, assertion, or claim, whether written or
oral, regarding the accounting practices, procedures,
methodologies, or methods of Cal Dive or any of its
Subsidiaries or their respective internal accounting controls,
including any material complaint, allegation, assertion, or
claim that Cal Dive or any of its Subsidiaries has engaged
in questionable accounting practices, and (B) no attorney
representing Cal Dive or any of its Subsidiaries, whether
or not employed by Cal Dive or any of its Subsidiaries, has
reported evidence of a material violation of securities laws,
breach of fiduciary duty, or similar violation by Cal Dive
or any of its officers, directors, employees, or agents to the
Cal Dive Board of Directors or any committee thereof or to
the General Counsel or Chief Executive Officer of Cal Dive.
(iv) Cal Dive is in compliance with the provisions of
the Sarbanes-Oxley Act and to its Knowledge, the certifications
provided pursuant to Sections 302 and 906 thereof with each
Company SEC Document, at the time of filing or submission of
each such certification, were accurate.
(v) Section 3.2(e)(v) of the Cal Dive
Disclosure Schedule lists the Indebtedness of Cal Dive and
its Subsidiaries as of May 31, 2007. Except as disclosed in
Section 3.2(e)(v) of the Cal Dive Disclosure
Schedule, all Indebtedness of Cal Dive and its Subsidiaries
can be prepaid, in whole or part, at any time and from time to
time prior to the respective stated maturity dates thereof,
without any premium, penalty, breakage fee, or other termination
fee. No Indebtedness of Cal Dive or its Subsidiaries
imposes any obligations on Cal Dive or its Subsidiaries to
publicly register such Indebtedness or similar Indebtedness in
exchange therefore.
A-18
(f) Absence of Undisclosed
Liabilities. Neither Cal Dive nor any of its
Subsidiaries had at March 31, 2007, or has incurred since
that date through the date hereof, any liabilities or
obligations (whether absolute, accrued, contingent, or
otherwise) of any nature, except liabilities, obligations, or
contingencies that (i) are accrued or reserved against in
the financial statements in the Cal Dive Current
10-Q or
reflected in the notes thereto, (ii) were incurred in the
ordinary course of business consistent with past practice,
(iii) would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
Cal Dive, or (iv) have been discharged or paid in full
prior to the date hereof.
(g) Absence of Certain Changes or
Events. Since March 31, 2007, Cal Dive
and each of its Subsidiaries has conducted its business only in
the ordinary course, and since such date there has not been:
(i) any event, change, effect or development that,
individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect on Cal Dive;
(ii) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or
property) with respect to any Cal Dive Capital Stock or any
repurchase for value by Cal Dive of any Cal Dive
Capital Stock;
(iii) any split, combination, or reclassification of any
Cal Dive Capital Stock or any issuance or the authorization
of any issuance of any other securities in respect of, in lieu
of, or in substitution for shares of Cal Dive Capital Stock;
(iv) (A) any granting by Cal Dive to any
director, executive officer, or employee who made total
compensation of $75,000 or more for fiscal year 2006 of
Cal Dive of (x) any increase in compensation or
employee benefits, except in the ordinary course of business
consistent with prior practice or as was required under
employment agreements included in the Cal Dive SEC
Documents, or (y) any equity compensation (other than as
set forth on Section 3.2(b)(i) of the Cal Dive
Disclosure Schedule), (B) any granting by Cal Dive to
any such director or executive officer of any increase in
severance or termination pay, except as was required under any
employment, severance, or termination agreements included in the
Cal Dive SEC Documents, or (C) any entry by
Cal Dive into, or any amendment of, any employment,
severance, or termination agreement with any such director,
executive officer, or employee; or
(v) any change in financial accounting methods, principles,
or practices by Cal Dive or any of its Subsidiaries
materially affecting the consolidated assets, liabilities, or
results of operations of Cal Dive, except insofar as may
have been required by a change in GAAP.
(h) Legal
Proceedings. Section 3.2(h) of the
Cal Dive Disclosure Schedule contains an accurate and
complete list of each suit, action, proceeding, or investigation
pending or, to the Knowledge of Cal Dive, threatened,
against or affecting Cal Dive or any of its Subsidiaries,
and each judgment, decree, injunction, or order of any
Governmental Entity or arbitrator outstanding against
Cal Dive or its Subsidiaries. None of such suits, actions,
proceedings, investigations, judgments, decrees, injunctions, or
orders, individually or in the aggregate, have, or would
reasonably be expected to have, a Material Adverse Effect on
Cal Dive.
(i) Compliance with Applicable
Law. Cal Dive and each of its Subsidiaries
hold all licenses, franchises, permits, and authorizations
necessary for the lawful conduct of their respective businesses,
and have complied in all respects with and are not in default in
any respect under any, applicable law, statute, order, rule, or
regulation of any Governmental Entity relating to Cal Dive
or any of its Subsidiaries or any of its assets or properties,
including the Cal Dive Vessels, except where the failure to
hold such license, franchise, permit, or authorization or such
noncompliance or default would not, either individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect on Cal Dive.
(j) Environmental Liability. Except for
matters that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
Cal Dive, (A) Cal Dive and each of its
Subsidiaries are and have been in compliance with all applicable
Environmental Laws and have obtained
A-19
or applied for all Environmental Permits necessary for their
operations as currently conducted, (B) there have been no
Releases of any Hazardous Materials that could be reasonably
likely to form the basis of any Environmental Claim against
Cal Dive or any of its Subsidiaries, (C) there are no
Environmental Claims pending or, to the Knowledge of
Cal Dive, threatened against Cal Dive or any of its
Subsidiaries, (D) none of Cal Dive and its
Subsidiaries is subject to any agreement, order, judgment,
decree, letter or memorandum by or with any Governmental Entity
or third party imposing any liability or obligation under any
Environmental Law, (E) none of Cal Dive and its
Subsidiaries has retained or assumed, either contractually or by
operation of law, any liability or obligation that could
reasonably be expected to have formed the basis of any
Environmental Claim against Cal Dive or any of its
Subsidiaries, (F) no portion of any property currently or
formerly owned, leased, or operated by Cal Dive or any of
its Subsidiaries is part of a site listed on the National
Priorities List under CERCLA or any similar ranking or listing
under any state law, and (G) all Hazardous Materials
generated by Cal Dive and each of its Subsidiaries have
been transported, stored, treated, and disposed of by carriers
or treatment, storage and disposal facilities authorized or
maintaining valid Environmental Permits.
(k) Employee Benefit Plans; Labor Matters.
(i) Each Cal Dive Benefit Plan is listed in Section
3.2(k) of the Cal Dive Disclosure Schedule. With
respect to each Cal Dive Benefit Plan, Cal Dive has
made available (or, if it has not made available, will promptly
after the date hereof make available) to the Company a correct
and complete copy of each writing or writings constituting such
Cal Dive Benefit Plan or, if unwritten, a complete
description of such Cal Dive Benefit Plan. The Internal
Revenue Service has issued a favorable determination letter or
opinion letter with respect to each Cal Dive Benefit Plan
that is intended to be a qualified plan within the
meaning of Section 401(a) of the Code and the related trust
that has not been revoked, and, to the Knowledge of
Cal Dive, there are no existing circumstances and no events
have occurred that could result in the revocation of such
favorable determination letter.
(ii) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
Cal Dive, (A) each of the Cal Dive Benefit Plans
has been operated and administered in all material respects in
accordance with its terms and applicable law and administrative
rules and regulations of any Governmental Entity, including, but
not limited to, ERISA and the Code, and (B) there are no
pending or, to the Knowledge of Cal Dive, threatened claims
(other than claims for benefits in the ordinary course),
lawsuits, arbitrations, audits, or examinations that have been
asserted or instituted against the Cal Dive Benefit Plans,
any fiduciaries thereof with respect to their duties to the
Cal Dive Benefit Plans or the assets of any of the trusts
under any of the Cal Dive Benefit Plans.
(iii) Neither Cal Dive nor a Cal Dive ERISA
Affiliate sponsors, maintains, contributes to or has an
obligation to contribute to, and has not at any time within the
past six (6) years sponsored, maintained, contributed to,
or had an obligation to contribute to, a Pension Plan that is
subject to Section 412 of the Code, Section 302 of
ERISA, or Title IV of ERISA.
(iv) Cal Dive and each of its Affiliates has reserved
the right to amend, terminate, or modify at any time all
Cal Dive Benefit Plans providing for retiree health or life
insurance coverage.
(v) Neither Cal Dive nor any of its Affiliates is a
party to any material collective bargaining or other labor union
contract applicable to individuals employed by Cal Dive or
any of its Affiliates, and no such collective bargaining
agreement or other labor union contract is being negotiated by
Cal Dive or any of its Affiliates. Except as would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Cal Dive, (A) there is no
labor dispute, strike, slowdown, or work stoppage against
Cal Dive or any of its Affiliates pending or, to the
Knowledge of Cal Dive, threatened against Cal Dive or
any of its Affiliates, (B) no unfair labor practice or
labor charge or complaint is pending, or to the Knowledge of
Cal Dive, threatened with respect to Cal Dive or any
of its Affiliates, and (C) Cal Dive and its Affiliates
are in compliance with all applicable laws relating to
employment, employment practices, wages, hours, terms, and
conditions of employment,
A-20
employment discrimination, disability rights, workers
compensation, employee leaves, occupational safety and health,
and the collection and payment of employment Taxes.
(vi) Neither Cal Dive nor any Cal Dive ERISA
Affiliate sponsors, maintains, contributes to, or has an
obligation to contribute to, and has not at any time within the
past six (6) years sponsored, maintained, contributed to,
or had an obligation to contribute to, a Multiemployer Plan, and
neither Cal Dive nor a Cal Dive ERISA Affiliate has
incurred or assumed any liability (primary, secondary,
contingent, or otherwise and including any withdrawal
liability), with respect to a Multiemployer Plan.
(vii) Neither Cal Dive nor any Cal Dive ERISA
Affiliate has, at any time, participated in any union-sponsored
multiemployer welfare benefit fund maintained pursuant to any
employee welfare benefit plan as defined in
Section 3(1) of ERISA.
(viii) No Cal Dive Benefit Plan provides medical,
surgical, hospitalization, pharmaceutical, or life insurance
benefits (whether or not insured by a third party) for employees
or former employees of Cal Dive or any Affiliate of
Cal Dive, for periods extending beyond their retirements or
other terminations of service, other than coverage mandated by
Section 4980 of the Code or similar state law, and no
commitments have been made to provide such coverage.
(ix) Neither the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby
could (either alone or in conjunction with any other event, such
as termination of employment), result in, cause the accelerated
vesting, funding, or delivery of, or increase the amount or
value of, any payment or benefit to any employee, officer, or
director of Cal Dive or any of its Affiliates, or could
limit the right of Cal Dive or any of its Affiliates to
amend, merge, terminate, or receive a reversion of assets from
any Cal Dive Benefit Plan or related trust or any material
employment agreement or related trust. No director, officer, or
employee of Cal Dive or its Subsidiaries shall be paid or
entitled to be paid any amount (whether in cash, in property, or
in the form of benefits, accelerated cash, property, or
benefits, or otherwise) in connection with the transactions
contemplated hereby (either solely as a result thereof or as a
result of such transactions in conjunction with any other event)
will be an excess parachute payment within the
meaning of Section 280G of the Code.
(x) Cal Dive does not maintain any Cal Dive
Benefit Plan that is a non-qualified deferred compensation
plan (as defined under Section 409A(d)(1) of the
Code).
(l) Taxes.
(i) All Tax Returns of or relating to any Tax that are
required to be filed by, on behalf of, or with respect to each
of Cal Dive and each of its Subsidiaries, have been duly
and timely filed in accordance with applicable Tax law with the
appropriate Governmental Entity, and all such Tax Returns are
true, complete, and accurate in all respects, except to the
extent that any failure to have filed or any inaccuracies in
such Tax Returns would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
Cal Dive. Each of Cal Dive and each of its
Subsidiaries has timely paid to the appropriate Governmental
Entity all Taxes required to be paid by it, and has timely
withheld from employee wages and amounts owing to any creditor
or third party and remitted to the proper Governmental Entities
all amounts required under applicable Tax law to be so withheld
and remitted, except to the extent that any failure to pay or
withhold and remit such Taxes would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect on Cal Dive.
(ii) There are no pending or, to the Knowledge of
Cal Dive, threatened audits, examinations, investigations,
deficiencies, claims, or other administrative or court
proceedings in respect of Taxes relating to Cal Dive or any
of its Subsidiaries, except for those that would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Cal Dive.
A-21
(iii) There are no Liens for Taxes upon the assets of
Cal Dive or any of its Subsidiaries, other than Liens for
current Taxes not yet due and payable.
(iv) Neither Cal Dive nor any of its Subsidiaries has
requested any extension of time within which to file any Tax
Returns in respect of any taxable year (or other period) that
have not since been filed, nor made any request for waivers of
the time to assess any Taxes that are pending or outstanding,
except where such request or waiver would not, individually or
in the aggregate, reasonably be expected to have a Material
Adverse Effect on Cal Dive.
(v) Neither Cal Dive nor any of its Subsidiaries has
any liability for Taxes of any Person under Treasury
Regulation Section 1.1502-6 or any analogous state, local,
or foreign law by reason of having been a member of any
consolidated, combined, or unitary group, other than
(a) the affiliated group of which Cal Dive is
currently the common parent corporation and (b) the
affiliated group of which Helix is currently the common parent
corporation. Except for the Tax Matters Agreement by and between
Cal Dive and Helix, neither Cal Dive nor any of its
Subsidiaries is a party to or has any obligation under any Tax
sharing agreement with any Person other than Cal Dive
and/or any
of its Subsidiaries.
(m) Contracts.
(i) As of the date of this Agreement, neither Cal Dive
nor any of its Subsidiaries is a party to or bound by any
contract, arrangement, commitment, or understanding (whether
written or oral) (A) which is a material
contract (as such term is defined in Item 601(b)(10) of
Regulation S-K
of the SEC) to be performed after the date of this Agreement
that has not been filed as an exhibit to or incorporated by
reference in the Cal Dive SEC Documents, or (B) which
materially restricts the ability of Cal Dive or the
Surviving Company to engage in any line of business. Each
contract, arrangement, commitment or understanding of the type
described in clause (A) of this Section 3.2(m),
whether or not set forth in the Cal Dive Disclosure
Schedule or in the Company SEC Documents, is referred to herein
as a Cal Dive Contract (for
purposes of clarification, each material contract
(as such term is defined in Item 601(b)(10) of
Regulation S-K
of the SEC) to be performed after the date of this Agreement,
whether or not filed with the SEC, is a Cal Dive Contract).
(ii) (A) Each Cal Dive Contract is valid and
binding on Cal Dive and any of its Subsidiaries that is a
party thereto, as applicable, and in full force and effect
(subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors rights generally, and
general equitable principles (whether considered in a proceeding
in equity or at law)), (B) Cal Dive and each of its
Subsidiaries has in all material respects performed all
obligations required to be performed by it to date under each
Cal Dive Contract, except where such noncompliance would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect on Cal Dive, and
(C) neither Cal Dive nor any of its Subsidiaries knows
of, or has received notice of, the existence of any event or
condition which constitutes, or after notice or lapse of time or
both will constitute, a material default on the part of
Cal Dive or any of its Subsidiaries under any such
Cal Dive Contract, except where such default would not,
individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect on Cal Dive.
(n) Title to Properties.
(i) Cal Dive and its Subsidiaries have good and
defensible title to, or valid leasehold interests in, all of
their assets and properties purported to be owned or leased by
Cal Dive or its Subsidiaries as described in the
Cal Dive SEC Documents, including the Cal Dive
Vessels, except for such assets and properties as are no longer
used or useful in the conduct of its businesses or as have been
disposed of in the ordinary course of business consistent with
past practice and are free and clear of all Liens, except for
(A) Permitted Liens, (B) defects in title set forth on
Section 3.2(n) of the Cal Dive Disclosure Schedule,
(C) such imperfections of title, easements, rights of way,
and similar Liens, leases, subleases or licenses, or other
matters and failures of title as would not, individually or
A-22
in the aggregate, reasonably be expected to have a Material
Adverse Effect on Cal Dive, (D) Liens securing the
Indebtedness identified in the Cal Dive Current
10-Q,
(E) Liens set forth in Section 3.2(n) of the
Cal Dive Disclosure Schedule, and (F) Liens, that, in
the aggregate, do not and will not materially interfere with the
ability of Cal Dive and its Subsidiaries to conduct
business as currently conducted.
(ii) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on
Cal Dive, Cal Dive and its Subsidiaries (a) have
complied in all respects with the terms of all leases of their
assets and properties to which they are a party and under which
they are in occupancy, and all such leases are in full force and
effect and (b) enjoy peaceful and undisturbed possession
under all such leases.
(o) Insurance. Section 3.2(o)
of the Cal Dive Disclosure Schedule accurately sets forth
in reasonable detail (i) all insurance policies maintained
by Cal Dive, and (ii) a list of all claims and the
claims history related thereto for the 12 months prior to
the date hereof that have not been or are not covered by
insurance.
(p) Reorganization under the Code. As of
the date of this Agreement, neither Cal Dive nor any of its
Subsidiaries has taken or agreed to take any action or knows of
any fact that is reasonably likely to prevent or impede
(i) the Merger from qualifying as a
reorganization within the meaning of
Section 368(a) of the Code, or (ii) the ability of
counsel to render the opinions described in
Sections 6.2(c) and 6.3(c) of this Agreement.
(q) Opinion of Financial
Advisors. Cal Dive has received the opinion
of Banc of America Securities LLC, as of the date hereof, to the
effect that the Merger Consideration to be paid by Cal Dive
is fair to Cal Dive from a financial point of view.
(r) Board and Stockholder Approval. The
Board of Directors of Cal Dive, at a meeting duly called
and held, has by unanimous vote of those directors present
(i) determined that this Agreement and the transactions
contemplated hereby are advisable and in the best interests of
Cal Dive stockholders, (ii) approved this Agreement,
and (iii) recommended that the issuance of the
Cal Dive Common Stock pursuant to the Merger be approved by
the holders of Cal Dive Common Stock. This Agreement, the
Merger, and the issuance of the Cal Dive Common Stock
pursuant to the Merger have been approved by the written consent
of the holders of the requisite number of shares of
Cal Dive Common Stock.
(s) Brokers Fees. Neither
Cal Dive nor any of its Subsidiaries nor any of their
respective officers or directors has employed any broker or
finder or incurred any liability for any brokers fees,
commissions or finders fees in connection with the
transactions contemplated by this Agreement, except for the fees
to be paid to Banc of America Securities LLC.
(t) Vessel Related Matters.
(i) (A) (I) Each of the Cal Dive Vessels has been
and is duly classified by the Classification Society set forth
on Section 3.2(t)(i)(A)(I) of the Cal Dive
Disclosure Schedule;
(II) Cal Dive has taken all necessary action required
by the relevant Classification Society to maintain the
classification of each Cal Dive Vessel; and
(III) There are no outstanding
and/or
overdue recommendations of the Classification Society for any of
the Cal Dive Vessels which could reasonably be expected to
lead to a withdrawal of the respective Cal Dive
Vessels class.
(B) No material modification or alteration consistent with
industry practice is needed to be effected with respect to any
of the Cal Dive Vessels:
(I) To comply with the laws, regulations or requirements of
the Country of Registry or any other laws or regulations
applicable to any of the Cal Dive Vessels;
A-23
(II) To comply with the requirements of any relevant
Classification Society under which such Cal Dive Vessel is
classified; or
(III) To comply with the requirements of any policy of
insurance covering each Cal Dive Vessel.
(B) Cal Dive has taken all necessary action as is
required by the Country of Registry for each of the
Cal Dive Vessels, or otherwise, to timely renew any
certificate of documentation (or similar evidence of title
and/or
registration for the Country of Registry of any of the
Cal Dive Vessels).
(ii) No Event of Loss with respect to any of the
Cal Dive Vessels has occurred and is continuing that could
reasonably be expected to have individually or in the aggregate,
a Material Adverse Effect on Cal Dive.
(iii) Each Cal Dive Vessel is in satisfactory
operating condition for the purpose and in the waters in which
such Vessel is working.
(u) Certain Business Practices. Since
December 31, 2006, neither Cal Dive nor any of its
Subsidiaries nor, to the Knowledge of Cal Dive, any
director, officer, agent, or employee of Cal Dive or any of
its Subsidiaries has, in the course of his or her duties on
behalf of Cal Dive or any of its Subsidiaries (i) used
any funds for unlawful contributions, gifts, entertainment, or
other expenses relating to political activity or for the
business of the Company or any of its Subsidiaries,
(ii) made any bribe or kickback, illegal political
contribution, unlawful payment from corporate funds to foreign
or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any
provision of the Foreign Corrupt Practices Act of 1977, or
(iii) made any other unlawful payment.
(v) Ownership of Company Capital
Stock. As of the date of this Agreement, neither
Cal Dive nor Merger Sub beneficially owns any shares of
Company Capital Stock.
(w) Funds. Cal Dive has, or will
have at the Effective Time, sufficient funds to satisfy the
obligation to pay the aggregate Per Share Cash Amount in the
Merger.
ARTICLE IV
COVENANTS
RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of the
Company. Except as expressly contemplated or
permitted by this Agreement or disclosed in
Section 4.1 of the Company Disclosure Schedule,
without the prior written consent of Cal Dive, which shall
not be unreasonably withheld or delayed, the Company agrees that
from the date of this Agreement until the Effective Time, as
follows:
(a) Ordinary Course.
(i) The Company and its Subsidiaries shall carry on their
respective businesses in the usual, regular, and ordinary course
in all material respects, in substantially the same manner as
heretofore conducted, and in compliance in all material respects
with applicable laws, and shall use their reasonable best
efforts to keep available the services of their respective
present officers and key employees, preserve intact their
present lines of business, maintain their rights and franchises,
and preserve their relationships with customers, suppliers, and
others having business dealings with them to the end that their
ongoing businesses shall not be impaired in any material respect
at the Effective Time.
(ii) The Company shall not, and shall not permit any of its
Subsidiaries to, (A) enter into any new material line of
business or (B) incur or commit to any capital expenditures
or any obligations or liabilities in connection therewith other
than capital expenditures and obligations or liabilities in
connection therewith incurred or committed to in the ordinary
course of business consistent with past practice or contemplated
by the 2007 capital budget of the Company and previously
disclosed to Cal Dive (the Company Capital
Budget).
A-24
(b) Dividends; Changes in Share
Capital. The Company shall not, and shall not
permit any of its Subsidiaries to, and shall not propose to,
(i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, except the
declaration and payment of regular dividends from a Subsidiary
of the Company to the Company or to another Subsidiary of the
Company in accordance with past practice, (ii) split,
combine, or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of its
capital stock or (iii) repurchase, redeem, or otherwise
acquire any shares of its capital stock or any securities
convertible into or exercisable for any shares of its capital
stock, except for the purchase from time to time by the Company
of Company Common Stock in connection with the Company Benefit
Plans in the ordinary course of business consistent with past
practice .
(c) Issuance of Securities. The Company
shall not, and shall not permit any of its Subsidiaries to,
issue, or authorize or propose the issuance of, any shares of
its capital stock of any class, any Voting Debt, or any
securities convertible into or exercisable for, or any rights,
warrants, calls, or options to acquire, any shares of capital
stock or Voting Debt, or enter into any commitment, arrangement,
undertaking, or agreement with respect to any of the foregoing,
other than (i) the issuance of (A) Company Common
Stock upon the exercise of Company Stock Options existing as of
the date hereof or permitted to be granted after the date hereof
and in accordance with their terms or, (B) restricted
Company Common Stock permitted to be granted after the date
hereof, or (ii) sales or dispositions of capital stock of a
Subsidiary of the Company in connection with a disposition
permitted pursuant to Section 4.1(f).
(d) Governing Documents. Except to the
extent required to comply with its obligations hereunder or with
applicable law, the Company shall not amend or propose to so
amend its Amended and Restated Certificate of Incorporation or
By-Laws.
(e) No Acquisitions. The Company shall
not, and shall not permit any of its Subsidiaries to, acquire or
agree to acquire by merger or consolidation, or by purchasing a
substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any
corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree
to acquire any assets, other than acquisitions in the ordinary
course of business consistent with past practice that are
contemplated by the Company Capital Budget and that do not
present a material risk of making it materially more difficult
to obtain any approval or authorization required in connection
with the Merger under Regulatory Law and that could not
reasonably be expected to prevent or materially delay or impede
the consummation of the transactions contemplated by this
Agreement.
(f) No Dispositions. The Company shall
not, and shall not permit any of its Subsidiaries to, sell,
lease, or otherwise dispose of, or agree to sell, lease, or
otherwise dispose of, any of its assets (including capital stock
of Subsidiaries of the Company), other than dispositions
(i) in the ordinary course of business consistent with past
practice, (ii) referred to in the Company SEC Documents
filed prior to the date of this Agreement or
(iii) contemplated by the Company Capital Budget.
(g) Investments; Indebtedness. Other than
as contemplated by the Company Capital Budget, the Company shall
not, and shall not permit any of its Subsidiaries to
(i) enter into any joint venture, partnership, or other
similar arrangement, (ii) make any loans, advances, or
capital contributions to, or investments in, any other Person,
other than (A) loans or investments by the Company or a
Subsidiary of the Company to or in the Company or any Subsidiary
of the Company, (B) in the ordinary course of business
consistent with past practice (provided that none of such
transactions referred to in this clause (B) presents a
material risk of making it more difficult to obtain any approval
or authorization required in connection with the Merger under
Regulatory Law), and (C) any capital contributions to or
other obligations in respect of any joint ventures of the
Company or any of its Subsidiaries pursuant to an agreement in
existence on or prior to the date of this Agreement, or
(iii) incur any Indebtedness other than in the ordinary
course of business consistent with past practice, to refinance
pre-existing Indebtedness or to fund acquisitions permitted by
Section 4.1(e).
(h) Tax-Free Qualification. The Company
shall use its reasonable best efforts to, and to cause each of
its Subsidiaries to, (i) cause the Merger to qualify as a
reorganization within the meaning of
A-25
Section 368(a) of the Code and (ii) obtain the
opinions of counsel referred to in Sections 6.2(c)
and 6.3(c). The Company shall use its reasonable
best efforts not to, and shall use its reasonable best efforts
not to permit any of its Subsidiaries to, take any action
(including any action otherwise permitted by this
Section 4.1) that would prevent or impede the Merger
from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
(i) Certain Actions. Subject to
Sections 5.4 and 7.1, the Company and its
Subsidiaries shall not take any action or omit to take any
action for the purpose of preventing, delaying, or impeding the
consummation of the Merger or the other transactions
contemplated by this Agreement.
(j) Related Actions. The Company shall
not, and shall not permit any of its Subsidiaries to, agree or
commit to do any of the foregoing.
4.2 Covenants of Cal Dive.
(a) Cal Dive agrees that from the date of this
Agreement until the Effective Time, except as expressly
contemplated or permitted by this Agreement or disclosed in
Section 4.2 of the Cal Dive Disclosure
Schedule, without the prior written consent of the Company,
which shall not be unreasonably withheld or delayed:
(i) Ordinary Course. Cal Dive and
its Subsidiaries shall carry on their respective businesses in
the usual, regular, and ordinary course in all material
respects, in substantially the same manner as heretofore
conducted, and in compliance in all material respects with
applicable laws, and shall use their reasonable best efforts to
preserve intact their present lines of business, maintain their
rights and franchises, and preserve their relationships with
customers, suppliers, and others having business dealings with
them to the end that their ongoing businesses shall not be
impaired in any material respect at the Effective Time.
(ii) Dividends; Changes in Share
Capital. Cal Dive shall not, and shall not
permit any of its Subsidiaries to, and shall not propose to,
(A) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, except the
declaration and payment of regular dividends from a Subsidiary
of Cal Dive to Cal Dive or to another Subsidiary of
Cal Dive in accordance with past dividend practice,
(B) split, combine, or reclassify any of its capital stock
or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for,
shares of its capital stock, or (C) repurchase, redeem, or
otherwise acquire any shares of its capital stock or any
securities convertible into or exercisable for any shares of its
capital stock, except for the purchase from time to time by
Cal Dive of Cal Dive Common Stock in connection with
the Cal Dive Benefit Plans in the ordinary course of
business consistent with past practice or pursuant to a stock
repurchase plan implemented in the ordinary course.
(iii) Issuance of
Securities. Cal Dive shall not, and shall
not permit any of its Subsidiaries to, issue, deliver, sell,
pledge, or dispose of, or authorize or propose the issuance,
delivery, sale, pledge, or disposition of, any shares of its
capital stock of any class, any Voting Debt, or any securities
convertible into or exercisable for, or any rights, warrants,
calls, or options to acquire, any such shares or Voting Debt, or
enter into any commitment, arrangement, undertaking, or
agreement with respect to any of the foregoing, other than
(A) the issuance of (I) Cal Dive Common Stock
upon the exercise of Cal Dive Stock Options existing as of
the date hereof or permitted to be granted after the date hereof
and in accordance with their terms or (II) restricted
Cal Dive Common Stock permitted to be granted after the
date hereof, or (B) sales or dispositions of capital stock
of a Subsidiary of Cal Dive in connection with a
disposition permitted pursuant to Section 4.2(a)(vi).
(iv) Governing Documents. Except to the
extent required to comply with its obligations hereunder or with
applicable law, Cal Dive shall not amend or propose to so
amend its Certificate of Incorporation or By-Laws.
(v) No Acquisitions. Cal Dive shall
not, and shall not permit any of its Subsidiaries to, acquire or
agree to acquire by merger or consolidation, or by purchasing a
substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any
corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree
to acquire any
A-26
assets, other than acquisitions in the ordinary course of
business consistent with past practice that do not present a
material risk of making it materially more difficult to obtain
any approval or authorization required in connection with the
Merger under Regulatory Law and that could not reasonably be
expected to prevent or materially delay or impede the
consummation of the transactions contemplated by this Agreement.
(vi) No Dispositions. Cal Dive shall
not, and shall not permit any of its Subsidiaries to, sell,
lease, or otherwise dispose of, or agree to sell, lease, or
otherwise dispose of, any of its assets (including capital stock
of Subsidiaries of Cal Dive), other than dispositions
(A) in the ordinary course of business consistent with past
practice or (B) referred to in the Cal Dive SEC
Documents filed prior to the date of this Agreement.
(vii) Investments;
Indebtedness. Cal Dive shall not, and shall
not permit any of its Subsidiaries to (A) enter into any
joint venture, partnership, or other similar arrangement,
(B) make any loans, advances, or capital contributions to,
or investments in, any other Person, other than (I) loans
or investments by Cal Dive or a Subsidiary of Cal Dive
to or in Cal Dive or any Subsidiary of Cal Dive,
(II) in the ordinary course of business consistent with
past practice (provided that none of such transactions referred
to in this clause (B) (II) presents a material risk of
making it more difficult to obtain any approval or authorization
required in connection with the Merger under Regulatory Law),
and (III) any capital contributions to or other obligations
in respect of any joint ventures of Cal Dive or any of its
Subsidiaries pursuant to an agreement in existence on or prior
to the date of this Agreement, or (C) incur any
Indebtedness other than in the ordinary course of business
consistent with past practice, to refinance pre-existing
Indebtedness or to fund acquisitions permitted by Section
4.2(a)(iv) or to refinance the Companys Indebtedness
and pay the Cash Consideration to the holders of Company Common
Stock.
(viii) Tax-Free
Qualification. Cal Dive shall use its
reasonable best efforts to, and to cause each of its
Subsidiaries to,(A) cause the Merger to qualify as a
reorganization within the meaning of
Section 368(a) of the Code and (B) obtain the opinions
of counsel referred to in Sections 6.2(c) and
6.3(c). Cal Dive shall use its reasonable
best efforts not to, and shall use its reasonable best efforts
not to permit any of its Subsidiaries to, take any action
(including any action otherwise permitted by this
Section 4.2) that would prevent or impede the Merger
from qualifying as a reorganization within the
meaning of Section 368(a) of the Code. Provided the opinion
condition contained in Section 6.2(c) of this
Agreement has been satisfied, Cal Dive shall report the
Merger for U.S. federal income tax purposes as a
reorganization within the meaning of
Section 368(a) of the Code.
(ix) Certain Actions. Subject to
Section 7.1, Cal Dive and its Subsidiaries
shall not take any action or omit to take any action for the
purpose of preventing, delaying, or impeding the consummation of
the Merger or the other transactions contemplated by this
Agreement.
(x) Related Actions. Cal Dive shall
not, and shall not permit any of its Subsidiaries to, agree or
commit to do any of the foregoing.
(b) The Board of Directors of Cal Dive shall take
action prior to or as of the Effective Time to cause the number
of directors comprising the full Board of Directors of
Cal Dive immediately following the Effective Time to be
increased by two persons, and cause David Sharp and John Mills
to be elected to fill such additional Board positions of
Cal Dive for an initial term expiring at the annual meeting
of Cal Dives stockholders to be held in 2010, or
until their successors are duly elected or appointed.
4.3 Governmental
Filings. Cal Dive and the Company shall
(a) confer on a reasonable basis with each other and
(b) report to each other (to the extent permitted by
applicable law or regulation or any applicable confidentiality
agreement) with respect to transition planning. Cal Dive,
Merger Sub and the Company shall file all reports required to be
filed by each of them with the SEC (and all other Governmental
Entities) between the date of this Agreement and the Effective
Time and shall, if requested by the Other Party and (to the
extent permitted by applicable law or regulation or any
applicable confidentiality agreement) deliver to the Other Party
copies of all such reports, announcements, and publications
promptly upon request.
A-27
4.4 No Control of Other Partys
Business. Nothing contained in this Agreement
shall give the Company, directly or indirectly, the right to
control or direct Cal Dive or Merger Subs
operations or give Cal Dive or Merger Sub, directly or
indirectly, the right to control or direct the Companys
operations prior to the Effective Time. Prior to the Effective
Time, each of Cal Dive, Merger Sub and the Company shall
exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its respective
operations.
ARTICLE V
ADDITIONAL
AGREEMENTS
5.1 Preparation of Information Statement/Proxy
Statement/Prospectus; Stockholders Meeting.
(a) As promptly as reasonably practicable following the
date hereof, Cal Dive and the Company shall cooperate in
preparing and shall cause to be filed with the SEC mutually
acceptable proxy materials that shall constitute the Information
Statement/Proxy Statement/Prospectus and Cal Dive and the
Company shall prepare, and Cal Dive shall file with the
SEC, the
Form S-4.
The Information Statement/Proxy Statement/Prospectus will be
included as a prospectus in and will constitute a part of the
Form S-4
as Cal Dive prospectus. Each of Cal Dive and the
Company shall use reasonable best efforts to have the
Information Statement/Proxy Statement/Prospectus cleared by the
SEC and the
Form S-4
declared effective by the SEC and to keep the
Form S-4
effective as long as is necessary to consummate the Merger and
the transactions contemplated hereby. Cal Dive and the
Company shall, as promptly as practicable after receipt thereof,
provide the Other Party with copies of any written comments, and
advise each other of any oral comments, with respect to the
Information Statement/Proxy Statement/Prospectus or
Form S-4
received from the SEC. Cal Dive and the Company shall
cooperate and provide the Other Party with a reasonable
opportunity to review and comment on any amendment or supplement
to the Information Statement/Proxy Statement/Prospectus and the
Form S-4
prior to filing such with the SEC, and each will provide the
Other Party with a copy of all such filings made with the SEC.
Notwithstanding any other provision herein to the contrary, no
amendment or supplement (including by incorporation by
reference) to the Information Statement/Proxy
Statement/Prospectus or the
Form S-4
shall be made without the approval of both Cal Dive and the
Company, which approval shall not be unreasonably withheld or
delayed; provided, that with respect to documents filed by a
Party hereto that are incorporated by reference in the
Form S-4
or Information Statement/Proxy Statement/Prospectus, this right
of approval shall apply only with respect to information
relating to the Other Party or its business, financial
condition, or results of operations; and provided, further, that
a Party, in connection with a Change in the Company Board
Recommendation, may amend or supplement the Information
Statement/Proxy Statement/Prospectus or
Form S-4
(including by incorporation by reference) pursuant to a
Qualifying Amendment to effect such a Change in the Company
Board Recommendation, and in such event, this right of approval
shall apply only with respect to information relating to the
Other Party or its business, financial condition, or results of
operations. Cal Dive and the Company will use reasonable
best efforts to cause the Information Statement/Proxy
Statement/Prospectus to be mailed to Cal Dives
stockholders and the Companys stockholders, respectively,
as promptly as practicable after the
Form S-4
is declared effective under the Securities Act. Each of
Cal Dive and the Company will advise the Other Party,
promptly after it receives notice thereof, of the time when the
Form S-4
has become effective, the issuance of any stop order, the
suspension of the qualification of the Cal Dive Common
Stock issuable in connection with the Merger for offering or
sale in any jurisdiction, or any request by the SEC for
amendment of the Information Statement/Proxy
Statement/Prospectus or the
Form S-4.
If, at any time prior to the Effective Time, any information
relating to Cal Dive or the Company, or any of their
respective Affiliates, officers or directors, is discovered by
Cal Dive or the Company that should be set forth in an
amendment or supplement to any of the
Form S-4
or the Information Statement/Proxy Statement/Prospectus so that
any of such documents would not include any misstatement of a
material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading, the Party discovering such
information shall promptly notify the Other Party and, to the
extent required by law, rules or regulations, an appropriate
amendment or supplement describing such information shall be
promptly filed with the SEC and disseminated to the stockholders
of Cal Dive and the Company.
A-28
(b) The Company covenants and agrees that (i) none of
the information to be supplied by the Company or its
Subsidiaries in the Form
S-4 or the
Information Statement/Proxy Statement/Prospectus will, at the
time of the mailing of the Information Statement/Proxy
Statement/Prospectus and any amendments or supplements thereto,
and at the time of the Company Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they are made, not misleading, and
(ii) the Information Statement/Proxy Statement/Prospectus
will comply, as of its Mailing Date, as to form in all material
respects with all applicable law, including the provisions of
the Securities Act and the Exchange Act, except that no
representation is made by the Company with respect to
information supplied by Cal Dive for inclusion therein.
(c) Cal Dive covenants and agrees that (i) none
of the information to be supplied by Cal Dive or its
Subsidiaries in the
Form S-4
or the Information Statement/Proxy Statement/ Prospectus will,
at the time of the mailing of the Information Statement/Proxy
Statement/Prospectus and any amendments or supplements thereto,
and at the time of the Company Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they are made, not misleading, and
(ii) the Information
Statement/Proxy
Statement/Prospectus will comply, as of its Mailing Date, as to
form in all material respects with all applicable law, including
the provisions of the Securities Act and the Exchange Act,
except that no representation is made by Cal Dive with
respect to information supplied by the Company for inclusion
therein.
(d) The Company shall use commercially reasonable efforts
to cause to be delivered to Cal Dive and Merger Sub two
letters from Grant Thornton LLP, the Companys independent
public accountants, one dated a date within two Business Days
before the date on which the
S-4 shall
become effective and one dated within two Business Days before
the Effective Time, each addressed to Cal Dive and Merger
Sub and customary in scope and substance for letters delivered
by independent public accountants in connection with
registration statements similar to the
S-4.
(e) Cal Dive shall use commercially reasonable efforts
to cause to be delivered to the Company two letters from
Ernst & Young LLP, Cal Dives independent
public accountants, one dated a date within two Business Days
before the date on which the
S-4 shall
become effective and one dated within two Business Days before
the Effective Time, each addressed to the Company and customary
in scope and substance for letters delivered by independent
public accountants in connection with registration statements
similar to the
S-4.
(f) The Company shall duly take all lawful action to call,
give notice of, convene, and hold the Company Stockholders
Meeting for the purpose of obtaining the Company Stockholder
Approval and shall use its reasonable best efforts to solicit
the Company Stockholder Approval, as promptly as reasonably
practicable after the date on which the
Form S-4
becomes effective under the Securities Act. The Board of
Directors of the Company shall recommend the adoption of the
Plan of Merger by the Companys stockholders to the effect
as set forth in Section 3.1(s) (the Company
Board Recommendation), and shall not, except as
permitted under Section 5.4, (i) withdraw,
modify, or qualify (or propose to withdraw, modify, or qualify)
in any manner adverse to Cal Dive the Company Board
Recommendation or (ii) take any action or make any
statement in connection with the Company Stockholders Meeting
inconsistent with the Company Board Recommendation
(collectively, a Change in the Company Board
Recommendation).
5.2 Access to Information. Upon
reasonable notice, each of Cal Dive and the Company shall
(and shall cause its Subsidiaries to) afford to the officers,
employees, accountants, counsel, financial advisors, and other
representatives of the Other Party reasonable access during
normal business hours, during the period prior to the Effective
Time, to all its properties, books, contracts, commitments,
records, and officers and, during such period, each of
Cal Dive and the Company shall (and shall cause its
Subsidiaries to) furnish promptly to the Other Party (a) a
copy of each report, schedule, registration statement, and other
document filed, published, announced, or received by it during
such period pursuant to the requirements of U.S. federal or
state securities laws (other than documents that such Party
hereto is not permitted to disclose under applicable law), and
(b) all other information concerning it and its business,
properties, and personnel as such Other Party may reasonably
request; provided, however, that any Party hereto may restrict
the foregoing access to the extent that (i) any law,
treaty, rule, or regulation of any Governmental Entity
applicable to such Party or any contract requires
A-29
such Party or its Subsidiaries to restrict or prohibit access to
any such properties or information, (ii) counsel for such
Party advises that such information should not be disclosed in
order to ensure compliance with the Antitrust Laws,
(iii) the information is subject to the attorney-client
privilege, work product doctrine, or any other applicable
privilege concerning pending or legal proceedings or government
investigations, or (iv) the information is subject to
confidentiality obligations to a third Person. Any investigation
by either Cal Dive or the Company shall not affect the
representations and warranties of the Other Party. Each Party
will keep confidential, and will cause its representatives to
keep confidential, all information and documents obtained
pursuant to this Agreement in accordance with, and shall
otherwise be subject to, the provisions of the Confidentiality
Agreement.
5.3 Required Actions.
(a) Subject to the terms and conditions of this Agreement,
each Party hereto will use its reasonable best efforts to take,
or cause to be taken, all actions, and do, or cause to be done,
all things necessary, proper, or advisable under this Agreement
and applicable laws and regulations to consummate the Merger and
the other transactions contemplated by this Agreement as soon as
practicable after the date hereof, including preparing as
promptly as practicable all necessary applications, notices,
petitions, filings, ruling requests, and other documents and
obtaining as promptly as practicable all Company Necessary
Consents or Cal Dive Necessary Consents, as appropriate,
and all other consents, waivers, licenses, orders,
registrations, approvals, permits, rulings, authorizations, and
clearances necessary to be obtained from any third party
and/or any
Governmental Entity in order to consummate the Merger and the
other transactions contemplated by this Agreement (collectively,
the Required Approvals). In
furtherance and not in limitation of the foregoing, each of
Cal Dive and the Company agrees to prepare, as promptly as
reasonably practicable, and to make (A) an appropriate
filing of a Notification and Report Form pursuant to the HSR Act
with respect to the transactions contemplated hereby and
(B) all other necessary filings with other Governmental
Entities relating to the Merger at such time as Cal Dive
and the Company reasonably determine in their good faith
judgment will permit the consummation of the transactions
contemplated hereby in a timely basis, and, to prepare and
supply as promptly as practicable any additional information or
documentation that may be requested pursuant to such laws or by
such Governmental Entities, and to use reasonable best efforts
to cause the expiration or termination of the applicable waiting
periods under the HSR Act and the receipt of Required Approvals
under such other laws or from such third parties and
Governmental Entities as soon as practicable. In furtherance and
not in limitation of the foregoing, each of Cal Dive and
the Company agrees not to extend any waiting period under the
HSR Act or enter into any agreement with the FTC or the DOJ not
to consummate the transactions contemplated by this Agreement,
except with the prior written consent of the Other Party.
(b) The Parties shall each cooperate and consult with each
other in connection with the actions referenced in
Section 5.3(a) to obtain all Required Approvals. In
particular, each Party shall to the extent permitted by law
(i) furnish to the Other Party as promptly as reasonably
practicable any information concerning such Party and its
business, properties, and personnel as the Other Party may
reasonably request in connection with any filing or submission
and in connection with any investigation or other inquiry,
including any proceeding initiated by a private party, and
(ii) permit the Other Party to review in advance, and
accept all of the Other Partys reasonable comments in
connection with, any proposed written communication between it
and any Governmental Entity. In addition, each Party shall
(i) promptly inform the Other Party of any communication
(or other correspondence or memoranda) received by such Party
from, or given by such Party to, the DOJ, the FTC, or any other
Governmental Entity and of any material communication received
or given in connection with any proceeding by a private party,
in each case regarding any of the transactions contemplated
hereby, and (ii) consult with the Other Party in advance,
to the extent practicable and not prohibited by law, of any
meeting or conference with the DOJ, the FTC, or any other
Governmental Entity or, in connection with any proceeding by a
private party, with any other Person, and to the extent
permitted by the DOJ, the FTC, or such other applicable
Governmental Entity or other Person, give the Other Party the
opportunity to attend and participate in such meetings and
conferences.
(c) In furtherance and not in limitation of the covenants
of the Parties contained in Sections 5.3(a) and
5.3(b), if Cal Dive and the Company agree, they
shall use their reasonable best efforts to defend all litigation
under the federal or state antitrust laws of the United States
which if adversely determined would, in the
A-30
reasonable opinion of Cal Dive and the Company (based on
the advice of outside counsel to each), be likely to result in
the failure of the condition set forth in
Section 6.1(a) to be satisfied, and to appeal any
order, judgment or decree, which if not reversed, would result
in the failure of such condition. Notwithstanding the foregoing,
nothing contained in this Agreement shall be construed so as to
require Cal Dive, Merger Sub, or the Company, or any of
their respective Subsidiaries or Affiliates, to sell, license,
dispose of, or hold separate, or to operate in any specified
manner, any assets or businesses of Cal Dive, Merger Sub,
the Company, or the Surviving Company or any of their respective
Subsidiaries or Affiliates (or to require Cal Dive, Merger
Sub, the Company, or any of their respective Subsidiaries or
Affiliates to agree to any of the foregoing). The obligations of
each Party under Section 5.3(a) to use its
reasonable best efforts with respect to antitrust matters shall
be limited to compliance with the reporting provisions of the
HSR Act and with its obligations under this
Section 5.3(c).
(d) Each Party hereto and its respective Board of Directors
shall, if any state takeover statute or similar statute becomes
applicable to this Agreement, the Merger, or any other
transactions contemplated hereby, take all action reasonably
necessary to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise to
minimize the effect of such statute or regulation on this
Agreement, the Merger, and the other transactions contemplated
hereby.
5.4 Acquisition Proposals.
(a) Notwithstanding anything contained herein to the
contrary, during the period beginning on the date of this
Agreement and continuing until 12:01 a.m. (prevailing
Central time) on the No-Shop Period Start Date, the Company and
its Subsidiaries and their respective Representatives
(collectively, the Company
Representatives), shall have the right to,
directly or indirectly: (i) initiate, solicit, encourage,
or seek, directly or indirectly, any inquiries relating to or
the making or implementation of any Acquisition Proposal;
(ii) continue or otherwise engage or participate in any
negotiations or discussions with any third party, with respect
to, Acquisition Proposals, including providing or otherwise
making available information to any Person, provided that, prior
to doing so, such third party has entered into an Acceptable
Confidentiality Agreement with the Company; provided further,
that all such information (to the extent such information has
not been previously provided or otherwise made available to
Cal Dive) is provided or otherwise made available to
Cal Dive substantially concurrently with the time it is
provided or otherwise made available to such Person subject to
the right of the Company to withhold such portions of
information relating to pricing or other matters that are highly
sensitive if the exchange of such information, as reasonably
determined by the Companys outside legal counsel, would be
reasonably likely to result in antitrust difficulties for the
Company or in connection with the Merger; and (iii) release
any third party from, or waive any provision of, any
confidentiality or standstill agreement to which it is a party
to the extent necessary to permit the Company to conduct the
activity set forth in clauses (i) and (ii) above;
provided that the Company will promptly (in any event within one
calendar day) notify Cal Dive of its receipt of any
Acquisition Proposal including the general terms of any such
Acquisition Proposal, and will keep Cal Dive apprised of
the status of any such Acquisition Proposal. Within two Business
Days following the beginning of the No-Shop Period Start Date,
the Company shall notify Cal Dive of the number of Excluded
Parties and the material terms and conditions of each Excluded
Parties Acquisition Proposal; provided, however, that
notwithstanding anything to the contrary contained in this
Section 5.4, the Company shall not be required to
provide the identity of any Excluded Party or other Person who
has submitted an Acquisition Proposal unless and until the
Company terminates this Agreement in accordance with
Section 7.1(h).
(b) Except as expressly permitted by this
Section 5.4 and except with respect to any Excluded
Party, the Company shall, and shall cause its Subsidiaries and
Company Representatives to, (i) on the No-Shop Period Start
Date, immediately cease any and all existing activities,
discussions, or negotiations with any third parties conducted
heretofore with respect to any Acquisition Proposal, and
(ii) from the No-Shop Period Start Date until the Effective
Time or, if earlier, the termination of this Agreement in
accordance with Article VII, not (A) initiate,
solicit, knowingly encourage, or seek, directly or indirectly,
any inquiries relating to or the making or implementation of any
Acquisition Proposal, (B) engage in any negotiations or
substantive discussions with, or provide or otherwise make
available any information to any third party relating to a
Acquisition Proposal,
A-31
(C) enter into any letter of intent, agreement in
principle, merger agreement, acquisition agreement, option
agreement, or similar agreement with any Person relating to a
Acquisition Proposal, or (D) release any third party from,
or waive any provision of, any confidentiality or standstill
agreement to which it is a party relating to an Acquisition
Proposal. Notwithstanding the foregoing, prior to the adoption
of this Agreement by the Companys stockholders, the
Company may in any event have discussions with any Person that
has made a written Acquisition Proposal after the date hereof
solely in order to clarify and understand the terms and
conditions of such proposal.
(c) Notwithstanding anything to the contrary contained in
this Section 5.4 but subject to the last sentence of
this paragraph and provided the Company and the Company
Representatives shall not have materially violated any of the
restrictions set forth in this Section 5.4, at any time
following the No-Shop Period Start Date and prior to the
adoption of this Agreement by the Companys stockholders,
in response to an unsolicited written Acquisition Proposal that
the Companys Board of Directors determines, in its good
faith judgment (after consultation with a financial advisor of
nationally recognized reputation and outside legal counsel),
constitutes or is reasonably likely to lead to a Superior
Proposal, the Company may, after giving Cal Dive prompt
notice of such determination (which notice shall indicate the
identity of the Person and the material terms and conditions of
the Acquisition Proposal), (i) engage or participate in
negotiations or discussions relating to such Acquisition
Proposal with the Person making such Acquisition Proposal (and
its Representatives), provided that the Company shall keep
Cal Dive apprised of the status and material terms of such
Acquisition Proposal, and (ii) provide or otherwise make
available information to the Person making such Acquisition
Proposal (and its representatives) only pursuant to an
Acceptable Confidentiality Agreement; provided that all such
information (to the extent such information has not been
previously provided or otherwise made available to
Cal Dive) is provided or otherwise made available to
Cal Dive substantially concurrently with the time it is
provided or otherwise made available to such Person subject to
the right of the Company to withhold such portions of
information relating to pricing or other matters that are highly
sensitive if the exchange of such information, as reasonably
determined by the Companys outside legal counsel, would be
reasonably likely to result in antitrust difficulties for the
Company or in connection with the Merger. Notwithstanding the
foregoing, the Parties agree that, notwithstanding the
commencement of the No-Shop Period Start Date, the Company may
continue to engage in the activities described in
Section 5.4(a) with respect to any Excluded Parties,
including with respect to any amended proposal submitted by such
Excluded Parties following the No-Shop Period Start Date, and
the restrictions in this Section 5.4(c) shall not
apply with respect thereto, provided that to the extent
applicable to an Excluded Party, the provisions of
Section 5.4(d) shall apply.
(d) Except as set forth in this Section 5.4(d)
or Section 5.4(e), the Board of Directors of the
Company shall not (i) effect a Change in the Company Board
Recommendation, (ii) approve or recommend, or cause the
Company to enter into, any letter of intent, agreement in
principle, merger agreement, acquisition agreement, option
agreement, or similar agreement with respect to, any Acquisition
Proposal, or (iii) propose to do any of the foregoing.
Notwithstanding the foregoing, if the Board of Directors of the
Company, after consultation with its outside legal counsel,
determines, in its good faith judgment, that failure to take
such action would constitute a violation of its fiduciary duties
under applicable law, the Board of Directors of the Company may,
prior to the adoption of this Agreement by the Companys
stockholders, (A) enter into a definitive agreement
providing for an Acquisition Proposal, if (I) the Company
and the Company Representatives shall not have materially
violated this Section 5.4 and (II) such action is in
response to a Acquisition Proposal that the Board of Directors
has determined, in its good faith judgment, constitutes a
Superior Proposal, and (III) the Company, concurrently with
the entering into of such definitive agreement, terminates this
Agreement in accordance with Section 7.1(h) and pays
the fee required by Section 7.2(b)(i),
and/or
(B) effect a Change in the Company Board Recommendation;
provided, that prior to such action, the Board of Directors of
the Company shall have given Cal Dive at least three
Business Days prior written notice that the Company intends to
take such action.
(e) Nothing contained in this Agreement shall prohibit the
Company or its Board of Directors from taking and disclosing to
the Companys stockholders a position contemplated by
Rules 14d-9
and 14e-2(a)
of the Exchange Act; or from making any disclosure to the
Companys stockholders with respect to a tender or
A-32
exchange offer by a third party; provided that neither the
Company nor its Board of Directors, nor any committee thereof,
shall approve or recommend, or propose publicly to approve or
recommend, an Acquisition Proposal unless the Company has first
terminated this Agreement pursuant to Section 7.1(h)
hereof and paid the fee required by
Section 7.2(b)(i).
5.5 Fees and Expenses. Subject to
Section 7.2, whether or not the Merger is
consummated, all Expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid
by the Party hereto incurring such Expenses, except
(a) Expenses incurred in connection with the filing,
printing, and mailing, but not preparation, of the Information
Statement/Proxy Statement/Prospectus and
Form S-4
and (b) Expenses incurred in connection with any
consultants that Cal Dive and the Company shall have agreed
to retain to assist in obtaining the approvals and clearances
under the Antitrust Laws, which, in each case, shall be shared
equally by Cal Dive and the Company.
5.6 Directors and Officers
Indemnification and Insurance.
(a) Following the Effective Time, Cal Dive and the
Surviving Company shall (i) jointly and severally indemnify
and hold harmless, and provide advancement of expenses to, all
past and present directors, officers and employees of the
Company and its Subsidiaries (in all of their capacities)
(A) without limitation to subclause (B) below, to the
same extent such individuals are indemnified or have the right
to advancement of expenses as of the date of this Agreement by
the Company pursuant to its Amended and Restated Certificate of
Incorporation and By-Laws and indemnification agreements, if
any, in existence on the date hereof with, or for the benefit
of, any such individuals and (B) without limitation to
subclause (A) above, to the fullest extent permitted by
law, in each case for acts or omissions occurring at or prior to
the Effective Time (including for acts or omissions occurring in
connection with the approval of this Agreement and the
consummation of the transactions contemplated hereby) and
(ii) include and cause to be maintained in effect in the
certificate of formation and limited liability company agreement
of the Surviving Company (or any successor to the Surviving
Company) for a period of six years after the Effective Time,
provisions regarding elimination of liability of directors or
managers, indemnification of officers, directors, managers, and
employees and advancement of expenses that are no less
advantageous to the intended beneficiaries than the
corresponding provisions contained in the current Amended and
Restated Certificate of Incorporation and By-Laws of the
Company. After the Effective Time, Cal Dive shall cause the
Surviving Company to obtain and fully pay (up to a maximum
aggregate cost not to exceed $1,000,000 for such six-year
period) for tail insurance policies (including Side
A coverage for such covered individuals) with a claims period of
at least six years from the Effective Time from an insurance
carrier with the same or better credit rating as the
Companys current insurance carrier with respect to
directors and officers liability insurance in an
amount and scope at least as favorable as the Companys
existing policies with respect to matters existing or occurring
at or prior to the Effective Time.
(b) The obligations of Cal Dive and the Surviving
Company under this Section 5.6 shall not be
terminated or modified in such a manner as to adversely affect
any indemnitee to whom this Section 5.6 applies
without the prior written consent of such affected indemnitee
(it being expressly agreed that the indemnitees to whom this
Section 5.6 applies shall be third-party beneficiaries of
this Section 5.6).
5.7 Employee Benefits; Retention Plan.
(a) For all purposes under the Benefit Plans of
Cal Dive and its Subsidiaries providing benefits to any
Company Employees after the Effective Time (the New
Plans), Cal Dive will, or will cause its
Subsidiaries to, give each Company Employee full credit for his
or her years of service for purposes of eligibility, vesting and
benefit accrual (excluding benefit accrual under any defined
benefit pension plans or eligibility for post-retirement medical
or insurance benefits) under any Benefit Plans or arrangements
maintained by Cal Dive or any of its Subsidiaries for each
such Company Employees service with the Company or any
Company Subsidiary to the same extent such service was credited
under similar plans of the Company immediately prior to the
Effective Time. In addition, and without limiting the generality
of the foregoing: (i) each Company Employee shall be
immediately eligible to participate, without any waiting time,
in any and all New Plans to the extent coverage under such New
Plan replaces coverage under a Company Benefit Plan in which
such Company Employee participated immediately before the
Effective Time (such plans, collectively, the Old
A-33
Plans); and (ii) for purposes of each
New Plan providing medical, dental, pharmaceutical,
and/or
vision benefits to any Company Employee, Cal Dive shall
cause all pre-existing condition exclusions and actively-at-work
requirements of such New Plan to be waived for such employee and
his or her covered dependents, and Cal Dive shall cause any
eligible expenses incurred by such employee and his or her
covered dependents during the portion of the plan year of the
Old Plan ending on the date such employees participation
in the corresponding New Plan begins to be taken into account
under such New Plan for purposes of satisfying all deductible,
coinsurance, and maximum out-of-pocket requirements applicable
to such employee and his or her covered dependents for the
applicable plan year as if such amounts had been paid in
accordance with such New Plan.
(b) Prior to the Effective Time, the Company may, in its
discretion, adopt a cash incentive plan, which may constitute a
Company Benefit Plan, intended to retain in the employ of the
Company certain individuals identified by the Company as key to
the continued operation of the Companys and its
Subsidiaries business and the consummation of the Merger
and the other transactions contemplated by this Agreement;
provided, that such plan shall be subject to the prior approval
of Cal Dive, which approval shall not be unreasonably
withheld or delayed.
5.8 Public Announcements. Each of
Cal Dive and the Company shall consult with the Other Party
before issuing any press release or making any public statement
with respect to this Agreement or the transactions contemplated
hereby, and will not issue any such press release or make any
such public statement without the prior written consent of the
Other Party, which consent will not be unreasonably withheld or
delayed. Notwithstanding the foregoing, each of Cal Dive
and the Company shall be entitled to respond to questions from
stockholders, respond to inquiries from financial analysts and
media representatives in a manner consistent with its past
practice and make such disclosure as may be required by
applicable law or by obligations pursuant to any listing
agreement with the NYSE or the Nasdaq Global Market without
prior consultation with the Other Party to the extent such
consultation is not reasonably practicable.
5.9 Listing of Shares of Cal Dive Common
Stock. Cal Dive shall cause the shares
of Cal Dive Common Stock to be issued in the Merger and the
shares of Cal Dive Common Stock to be reserved for issuance
upon exercise of the Company Stock Options to be approved for
listing on the NYSE, subject to official notice of issuance,
prior to the Closing Date.
5.10 Affiliates. Promptly
following the date of mailing of the Information Statement/Proxy
Statement/Prospectus, the Company shall deliver to Cal Dive
a letter identifying all Persons who, in the judgment of the
Company, may be deemed at the time this Agreement is submitted
for the Company Stockholders Approval, Affiliates of the Company
for purposes of Rule 145 under the Securities Act and
applicable SEC rules and regulations, and such list shall be
updated as necessary to reflect changes from the date thereof.
The Company shall use reasonable best efforts to cause each
Person identified on such list to deliver to Cal Dive not
later than ten days prior to the Effective Time, a written
agreement in the form attached as Exhibit A hereto
(an Affiliate Agreement).
5.11 Section 16
Matters. Prior to the Effective Time,
Cal Dive and the Company shall take all such steps as may
be required to cause any dispositions of the Company Common
Stock (including derivative securities with respect to the
Company Common Stock) or acquisitions of Cal Dive Common
Stock (including derivative securities with respect to
Cal Dive Common Stock) resulting from the transactions
contemplated by Article I or Article II
by each individual who is subject to the reporting requirements
of Section 16(a) of the Exchange Act with respect to the
Company or will become subject to such reporting requirements
with respect to Cal Dive, to be exempt under
Rule 16b-3
promulgated under the Exchange Act.
5.12 Tax Matters. Each of
Cal Dive and the Company shall use its reasonable best
efforts to deliver to Fulbright & Jaworski L.L.P. and
Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P. a Tax Representation Letter, dated as of the
Closing Date and signed by an officer of such Party, containing
representations of such Party, in each case as shall be
reasonably necessary or appropriate to enable
Fulbright & Jaworski L.L.P. to render the opinion
described in Section 6.2(c) and Jones, Walker,
Waechter, Poitevent, Carrere & Denegre, L.L.P. to
render the opinion described in Section 6.3(c). This
Agreement is intended to constitute a plan of
reorganization within the meaning of Treasury
Regulation Section 1.368-2(g).
A-34
5.13 Vessel Matters. The Parties
shall each cooperate and consult with each other in connection
with obtaining the release and discharge of the current
mortgages and other Liens on the Company Vessels and such other
matters as may be necessary or desirable in order to effectuate
the transfer of ownership and operation of the Company Vessels
to Cal Dive, and the assumption, repayment, refinancing, or
satisfaction of the Companys existing funded Indebtedness
by Cal Dive.
ARTICLE VI
CONDITIONS
PRECEDENT
6.1 Conditions to Each Partys Obligation to
Effect the Merger. The obligations of each of
Cal Dive and the Company to effect the Merger are subject
to the satisfaction or waiver in writing on or prior to the
Closing Date of the following conditions:
(a) No Injunctions or Restraints;
Illegality. No law shall have been adopted or
promulgated, and no temporary restraining order, preliminary or
permanent injunction, or other order issued by a court or other
Governmental Entity of competent jurisdiction shall be in
effect, having the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(b) HSR Act; Other
Approvals. (i) The waiting period (and any
extension thereof) applicable to the Merger under the HSR Act
shall have been terminated or shall have expired and
(ii) all other approvals required under the Antitrust Laws
to be obtained prior to Closing shall have been obtained.
(c) NYSE Listing. The shares of
Cal Dive Common Stock to be issued in the Merger and such
other shares of Cal Dive Common Stock to be reserved for
issuance in connection with the Merger shall have been approved
for listing on the NYSE, subject to official notice of issuance.
(d) Effectiveness of the
Form S-4. The
Form S-4
shall have been declared effective by the SEC under the
Securities Act and no stop order suspending the effectiveness of
the
Form S-4
shall have been issued by the SEC and no proceedings for that
purpose shall have been initiated or threatened by the SEC.
(e) Stockholder Approval. The Company
Stockholder Approval shall have been obtained.
6.2 Additional Conditions to Obligations of
Cal Dive. The obligations of
Cal Dive to effect the Merger are subject to the
satisfaction, or waiver in writing by Cal Dive, on or prior
to the Closing Date, of the following additional conditions:
(a) Representations and Warranties. The
representations and warranties of the Company set forth in this
Agreement shall be true and correct (without giving effect to
any limitation on any representation or warranty qualified as to
materiality or Material Adverse Effect) as of the date of this
Agreement and as of the Closing Date as though made on and as of
the Closing Date (except to the extent expressly made as of an
earlier date, in which case as of such earlier date), except
where the failure of such representations and warranties to be
so true and correct (without giving effect to any limitation on
any representation or warranty qualified as to materiality or
Material Adverse Effect) would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect on the Company. Cal Dive shall have received a
certificate of an executive officer of the Company that the
conditions set forth in this Section 6.2(a) have
been satisfied.
(b) Performance of Obligations of the
Company. The Company shall have performed or
complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing
Date that are qualified as to materiality or Material Adverse
Effect and shall have performed or complied in all material
respects with all other agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing
Date that are not so qualified; and Cal Dive shall have
received a certificate of an executive officer of the Company to
such effect.
(c) Tax Opinion. Cal Dive shall have
received from Fulbright & Jaworski L.L.P., counsel to
Cal Dive, a written opinion dated the Closing Date to the
effect that for U.S. federal income tax purposes
A-35
the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code. In rendering
such opinion, counsel to Cal Dive shall be entitled to rely
upon assumptions, representations, warranties, and covenants,
including those contained in this Agreement and in the Tax
Representation Letters described in Section 5.12 of
this Agreement.
6.3 Additional Conditions to Obligations of the
Company. The obligations of the Company to
effect the Merger are subject to the satisfaction, or waiver in
writing by the Company, on or prior to the Closing Date, of the
following additional conditions:
(a) Representations and Warranties. The
representations and warranties of Cal Dive set forth in
this Agreement shall be true and correct (without giving effect
to any limitation on any representation or warranty qualified as
to materiality or Material Adverse Effect) as of the date of
this Agreement and as of the Closing Date as though made on and
as of the Closing Date (except to the extent expressly made as
of an earlier date, in which case as of such earlier date),
except where the failure of such representations and warranties
to be so true and correct (without giving effect to any
limitation on any representation or warranty qualified as to
materiality or Material Adverse Effect) would not, individually
or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Cal Dive. The Company shall have received
a certificate of an executive officer of Cal Dive that the
conditions set forth in this Section 6.3(a) have
been satisfied.
(b) Performance of Obligations of
Cal Dive. Cal Dive shall have performed
or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing
Date that are qualified as to materiality or Material Adverse
Effect and shall have performed or complied in all material
respects with all other agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing
Date that are not so qualified; and the Company shall have
received a certificate of an executive officer of Cal Dive
to such effect.
(c) Tax Opinion. The Company shall have
received from Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P., counsel to the Company, a
written opinion dated the Closing Date to the effect that for
U.S. federal income tax purposes the Merger will constitute
a reorganization within the meaning of
Section 368(a) of the Code. In rendering such opinion,
counsel to the Company shall be entitled to rely upon
assumptions, representations, warranties and covenants,
including those contained in this Agreement and in the Tax
Representation Letters described in Section 5.12 of
this Agreement.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement
may be terminated at any time prior to the Effective Time and,
except as specifically provided below, whether before or after
the Company Stockholders Meeting:
(a) by mutual written consent of Cal Dive and the
Company;
(b) by either Cal Dive or the Company, if the
Effective Time shall not have occurred on or before the
Termination Date; provided, however, that the right to terminate
this Agreement under this Section 7.1(b) shall not
be available to a Party whose failure to fulfill any obligation
under this Agreement (including such Partys obligations
set forth in Section 5.3) has been the primary cause
of, or resulted in, the failure of the Effective Time to occur
on or before the Termination Date;
(c) by either Cal Dive or the Company, if any
Governmental Entity (i) shall have issued an order, decree,
or ruling or have taken any other action permanently
restraining, enjoining, or otherwise prohibiting the
transactions contemplated by this Agreement, and such order,
decree, ruling, or other action shall have become final and
nonappealable, or (ii) shall have failed to issue an order,
decree, or ruling, or to take any other action that is necessary
to fulfill the conditions set forth in
Sections 6.1(b), 6.1(c) or 6.1(d), as
applicable, and such denial of a request to issue such order,
decree, ruling, or the failure to take such other action shall
have become final and nonappealable; provided, however, that the
A-36
right to terminate this Agreement under this
Section 7.1(c) shall not be available to a Party
whose failure to comply with Section 5.3 has been
the primary cause of, or resulted in, such action or inaction;
(d) by either Cal Dive or the Company, if the Company
Stockholder Approval has not been obtained by reason of the
failure to obtain the required vote at the Company Stockholders
Meeting;
(e) by Cal Dive, if the Company shall have
(i) failed to make the Company Board Recommendation or
effected a Change in the Company Board Recommendation, whether
or not permitted by the terms hereof, (ii) breached its
obligations under this Agreement by reason of a failure to call
the Company Stockholders Meeting or a failure to comply in any
material respect with requirements of the Information
Statement/Proxy Statement/Prospectus in accordance with
Section 5.1, (iii) subject to the
Companys right to terminate under
Section 7.1(h), entered into a definitive agreement
providing for any Acquisition Proposal or Superior Proposal, or
(iv) materially breached its obligations under
Section 5.4;
(f) by Cal Dive, if the Company shall have breached or
failed to perform any of its representations, warranties,
covenants or other agreements contained in this Agreement, such
that the conditions set forth in Section 6.2(a) or
6.2(b) are not capable of being satisfied and which shall
not have been cured prior to the earlier of (i) twenty days
following notice of such breach and (ii) the Termination
Date; provided, that Cal Dive shall not have the right to
terminate this Agreement pursuant to this clause (f) if
Cal Dive or Merger Sub is then in material breach of its
representations, warranties, covenants, or other agreements
contained in this Agreement;
(g) by the Company, if Cal Dive shall have breached or
failed to perform any of its representations, warranties,
covenants, or other agreements contained in this Agreement, such
that the conditions set forth in Section 6.3(a) or
6.3(b) are not capable of being satisfied and which shall
not have been cured prior to the earlier of (i) twenty days
following notice of such breach and (ii) the Termination
Date; provided, that the Company shall not have the right to
terminate this Agreement pursuant to this clause (g) if the
Company is then in material breach of its representations,
warranties, covenants, or other agreements contained in this
Agreement; or
(h) by the Company, prior to the Company Stockholder
Approval being obtained, in accordance with and subject to the
terms and conditions of Section 5.4(d).
7.2 Effect of Termination.
(a) In the event of termination of this Agreement by either
the Company or Cal Dive as provided in
Section 7.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part
of any Party hereto or their respective officers or directors,
except with respect to the third sentence of Section 5.2,
Section 5.5, this Section 7.2 and
Article IX, which provisions shall survive such
termination; provided that, notwithstanding anything to the
contrary contained in this Agreement, neither Cal Dive nor
the Company shall be relieved or released from any liabilities
or damages arising out of its breach of this Agreement; provided
further, that if Cal Dive receives a Termination Fee under
Section 7.2(b)(i), (ii), or (iii)
below, then the receipt of such Termination Fee shall be
Cal Dives sole and exclusive remedy under this
Agreement.
(b) (i) If the Company terminates this Agreement
pursuant to Section 7.1(h), then the Company shall
pay Cal Dive an amount equal to the Termination Fee, by
wire transfer of immediately available funds, prior to or
concurrently with such termination; provided, however, that if
such termination is the result of an Excluded Party Superior
Proposal, then the Termination Fee payable pursuant to this
Section 7.2(b)(i) shall be $9,441,448.
(ii) If Cal Dive terminates this Agreement pursuant to
Section 7.1(e), then the Company shall pay
Cal Dive an amount equal to the Termination Fee, by wire
transfer of immediately available funds, on or before one
Business Day after such termination; provided, however, that if
such termination is the result of an Excluded Party Superior
Proposal, then the Termination Fee payable pursuant to this
Section 7.2(b)(i) shall be $9,441,448.
(iii) If (A)(I) the Company or Cal Dive terminates
this Agreement pursuant to Section 7.1(d) and at any
time prior to such termination an Acquisition Proposal with
respect to the Company shall have been
A-37
publicly announced and not withdrawn prior to the Company
Stockholders Meeting, or (II) Cal Dive terminates this
Agreement pursuant to Section 7.1(f), and at any
time prior to such termination an Acquisition Proposal with
respect to the Company shall have been publicly announced or
otherwise communicated to the senior management or Board of
Directors of the Company and not withdrawn prior to the breach
giving rise to Cal Dives right to terminate under
Section 7.1(f), and (B) within twelve months of
the termination of this Agreement, the Company or any of its
Subsidiaries enters into a definitive agreement with respect to,
or consummates, an Acquisition Proposal with any Person, then
the Company shall promptly, but in no event later than one
Business Day after the earlier of the date the Company or its
Subsidiary enters into such agreement with respect to, or
consummates, such Acquisition Proposal, pay Cal Dive an
amount equal to the Termination Fee, by wire transfer of
immediately available funds; provided, however, that if such
Acquisition Proposal referenced in
Section 7.2(b)(iii)(A) is from an Excluded Party,
then the Termination Fee payable pursuant to this
Section 7.1(b)(iii) shall be $9,441,448.
(c) The Parties acknowledge that the agreements contained
in this Section 7.2 are an integral part of the
transactions contemplated by this Agreement, and that, without
these agreements, neither Cal Dive or the Company would
enter into this Agreement; accordingly, if any Party fails
promptly to pay any amount due pursuant to this Section
7.2, and, in order to obtain such payment, the Other Party
commences a suit that results in a judgment against such Party
for the fee set forth in this Section 7.2, such
Party shall pay to the Other Party its costs and Expenses
(including attorneys fees and Expenses) in connection with
such suit, together with interest on the amount of the fee at
the prime rate of JP Morgan Chase Bank in effect on the date
such payment was required to be made, notwithstanding the
provisions of Section 5.5. The Parties agree that
any remedy or amount payable pursuant to this
Section 7.2 shall not preclude any other remedy or
amount payable hereunder, and shall not be an exclusive remedy
for any willful and material breach of any representation,
warranty, covenant, or agreement contained in this Agreement.
ARTICLE VIII
CERTAIN
DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
Acceptable Confidentiality Agreement means a
confidentiality agreement that contains terms no less favorable
in the aggregate to the Company than those contained in the
Confidentiality Agreement (excluding standstill provisions) and
containing additional provisions that expressly permit the
Company to comply with the terms of Section 5.4 (it
being understood that such confidentiality agreement need not
prohibit the making or amendment of a Acquisition Proposal or
the disclosure of such Acquisition Proposal).
Acquisition Proposal means any proposal or
offer (whether or not in writing) with respect to, or a
transaction to effect, a merger, reorganization, share exchange,
consolidation, business combination, recapitalization,
liquidation, dissolution, or similar transaction involving the
Company, or any purchase or sale of 50% or more of the
consolidated assets (including stock of the Companys
Subsidiaries) of the Company and its Subsidiaries, taken as a
whole, or any purchase or sale of, or tender or exchange offer
for, the Companys equity securities that, if consummated,
would result in any Person (or the stockholders of such Person)
beneficially owning securities representing 50% or more of the
Companys total voting power (or of the surviving parent
entity in such transaction) (other than a proposal or offer made
by the Other Party or an Affiliate thereof), or announcement of
an intention to make any such proposal, offer, or transaction.
Affiliate of any Person means another Person
that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with,
such first Person.
Affiliate Agreement shall have the meaning
set forth in Section 5.10.
Agreement shall have the meaning set forth in
the preamble.
Antitrust Laws means any competition law,
including the HSR Act or any other antitrust, premerger
notification, or trade regulation law, regulation, or order.
A-38
Beneficial ownership or beneficially
own shall have the meaning ascribed to such terms
under Section 13(d) of the Exchange Act.
Benefit Plan means any employee benefit plan,
program, policy, practice, agreement, contract, or other
arrangement, whether formal or informal, funded or unfunded,
written or not written, and whether or not governed by ERISA,
including any employee welfare benefit plan within
the meaning of Section 3(1) of ERISA or any employee
pension benefit plan within the meaning of
Section 3(2) of ERISA (whether or not such plan is subject
to ERISA), any employment or severance agreement, and any bonus,
incentive, deferred compensation, vacation, stock purchase,
stock option, severance, change of control or fringe benefit
plan, program, policy, practice, agreement, contract, or other
arrangement.
Business Day means any day on which banks are
not required or authorized to close in the State of Texas.
Cal Dive shall have the meaning set
forth in the preamble.
Cal Dive Benefit Plan means a Benefit
Plan providing benefits to any current or former employee,
officer, or director of Cal Dive or any of its Affiliates
or any beneficiary or dependent thereof that is sponsored or
maintained by Cal Dive or any of its Affiliates or to which
Cal Dive or any of its Affiliates is party, contributes, or
is obligated to contribute.
Cal Dive Capital Stock means the
Cal Dive Common Stock together with the Cal Dive
Preferred Stock.
Cal Dive Common Stock means common
stock, par value $0.01 per share, of Cal Dive.
Cal Dive Contract shall have the meaning
set forth in Section 3.2(m)(i).
Cal Dive Current
10-Q
means Cal Dives Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007, as filed with the SEC.
Cal Dive Disclosure Schedule means the
disclosure schedule delivered by Cal Dive to the Company
concurrently herewith.
Cal Dive ERISA Affiliate means any
Person that is treated as a single employer with Cal Dive
for purposes of Section 414 of the Code.
Cal Dive Necessary Consents shall have
the meaning set forth in Section 3.2(d).
Cal Dive Preferred Stock means preferred
stock, par value $0.01 per share, of Cal Dive.
Cal Dive SEC Documents shall have the
meaning set forth in Section 3.2(e)(i).
Cal Dive Stock Plans shall mean the
Cal Dive 2006 Long Term Incentive Plan and the
Cal Dive Employee Stock Purchase Plan.
Cal Dive Vessel shall mean any and all
of the vessels set forth in Section 3.2(t)(i)(A)(I)
of the Cal Dive Disclosure Schedule and shall include, with
respect to each vessel, all her equipment and outfitting.
CERCLA means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended,
and the rules and regulations promulgated thereunder.
Certificate shall have the meaning set forth
in Section 2.1(c).
Certificate of Merger shall have the meaning
set forth in Section 1.2.
Change in the Company Board Recommendation
shall have the meaning set forth in
Section 5.1(f).
Classification Society shall mean the
American Bureau of Shipping, DNV, Lloyds Register of Shipping or
such other classification society which shall be a member of the
International Association of Classification Societies.
Closing shall have the meaning set forth in
Section 1.4.
A-39
Closing Date shall have the meaning set forth
in Section 1.4.
Code means the U.S. Internal Revenue
Code of 1986, as amended.
Company shall have the meaning set forth in
the preamble.
Company Benefit Plan means a Benefit Plan
providing benefits to any current or former employee, officer or
director of the Company or any of its Affiliates or any
beneficiary or dependent thereof that is sponsored or maintained
by the Company or any of its Affiliates or to which the Company
or any of its Affiliates is party, contributes, or is obligated
to contribute, or with respect to which the Company or any of
its Affiliates has any liability, contingent or otherwise.
Company Board Recommendation shall have the
meaning set forth in Section 5.1(f).
Company Capital Budget shall have the meaning
set forth in Section 4.1(a)(ii).
Company Capital Stock means the Company
Common Stock together with the Company Preferred Stock.
Company Common Stock means common stock, par
value $0.00001 per share, of Company.
Company Contract shall have the meaning set
forth in Section 3.1(m)(i).
Company Current
10-Q
means the Companys Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007, as filed with the SEC.
Company Disclosure Schedule means the
disclosure schedule delivered by the Company to Cal Dive
concurrently herewith.
Company Employees means the individuals who
are employed as employees by the Company or any of its
Subsidiaries immediately prior to the Effective Time who remain
employed as employees of Cal Dive or any of its
Subsidiaries after the Effective Time.
Company ERISA Affiliate means any Person that
is treated as a single employer with the Company for purposes of
Section 414 of the Code.
Company Necessary Consents shall have the
meaning set forth in Section 3.1(d).
Company Preferred Stock means preferred
stock, par value $0.00001 per share, of the Company.
Company Representatives shall have the
meaning set forth in Section 5.4(a).
Company SEC Documents shall have the meaning
set forth in Section 3.1(e)(i).
Company Stock Option shall have the meaning
set forth in Section 2.3(a).
Company Stock Plans means the Horizon
Offshore, Inc. 1998 Stock Incentive Plan, the Horizon Offshore,
Inc. 2005 Stock Incentive Plan, as amended and restated as of
May 23, 2007, and the Horizon Offshore, Inc.
2006 Director Stock Plan.
Company Stockholder Approval shall have the
meaning set forth in Section 3.1(c)(i).
Company Stockholders Meeting shall have the
meaning set forth in Section 3.1(c)(i).
Company Vessel shall mean any and all of the
vessels set forth in Section 3.1(v)(i) of the
Company Disclosure Schedule (excluding, in all cases, the
Gulf Horizon) and shall include, with respect to each
vessel, all her equipment and outfitting.
Confidentiality Agreement means that certain
Mutual Confidentiality Agreement dated May 29, 2007,
between Cal Dive and the Company.
Converted Cal Dive Option shall have the
meaning set forth in Section 2.3(a).
Country of Registry shall mean the United
States, the Republic of Vanuatu, or such other jurisdiction
under whose laws a Vessel is flagged.
A-40
DGCL means the General Corporation Law of the
State of Delaware.
DLLCA means the Delaware Limited Liability
Company Act.
Dissenting Share shall have the meaning set
forth in Section 2.2.
DOJ means the Antitrust Division of the
U.S. Department of Justice.
Effective Time shall have the meaning set
forth in Section 1.2.
Environmental Claims means, in respect of any
Person, any and all liabilities, responsibilities, claims,
suits, losses, costs (including remediation, removal, response,
abatement,
clean-up,
investigative,
and/or
monitoring costs and any other related costs and expenses),
other causes of action recognized now or at any later time,
damages, settlements, expenses, charges, assessments, liens,
penalties, fines, pre-judgment and post-judgment interest,
attorney fees and other legal fees (a) pursuant to any
agreement, order, notice, requirement, responsibility, or
directive (including directives embodied in Environmental Laws),
injunction, judgment or similar documents (including
settlements) arising out of or in connection with any
Environmental Laws, or (b) pursuant to any claim by a
Governmental Entity or other Person or entity for personal
injury, property damage, damage to natural resources,
remediation, or similar costs or expenses incurred or asserted
by such entity or Person pursuant to Environmental Laws, common
law, or statute.
Environmental Laws means all laws, rules,
regulations, statutes, ordinances, decrees or orders of any
Governmental Entity relating to (i) the control of any
potential pollutant or protection of the air, water or land,
(ii) solid, gaseous or liquid waste generation, handling,
treatment, storage, disposal or transportation, and
(iii) exposure to hazardous, toxic or other substances
alleged to be harmful, and includes without limitation,
(1) the terms and conditions of any Environmental Permits,
and (2) judicial, administrative, or other regulatory
decrees, judgments, and orders of any Governmental Entity. The
term Environmental Laws shall include, but not be
limited to the following statutes and the regulations
promulgated thereunder: the Clean Air Act, 42 U.S.C.
§ 7401 et seq., the Clean Water Act,
33 U.S.C. § 1251 et seq., the Resource
Conservation and Recovery Act (RCRA), 42 U.S.C.
§ 6901 et seq., the Superfund Amendments and
Reauthorization Act, 42 U.S.C. § 11011 et
seq., the Toxic Substances Control Act, 15 U.S.C.
§ 2601 et seq., the Water Pollution Control
Act, 33 U.S.C. § 1251 et seq., the Safe
Drinking Water Act, 42 U.S.C. § 300f et
seq., CERCLA, 42 U.S.C. § 9601 et
seq., the Occupational Safety and Health Act, 29 U.S.C.
§ 651 et seq., the Hazardous Materials
Transportation Act, 49 U.S.C. § 1801 et
seq., and any state, county, or local regulations similar
thereto.
Environmental Permits means all permits,
licenses, registrations, and other governmental authorizations
required under applicable Environmental Laws.
ERISA means the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations
promulgated thereunder.
Event of Loss shall mean any of the following
events: (a) the actual total loss of any Vessel; (b) a
constructive total loss of any Vessel under applicable insurance
policies or an agreed or a compromised total loss of any Vessel;
(c) the theft or disappearance of any Vessel for a period
of thirty (30) consecutive days or more; (d) the
requisition of use of any Vessel by any Governmental Entity or
purported governmental entity which shall have resulted in the
loss of possession of any Vessel for a period of sixty
(60) consecutive days; or (e) the condemnation,
confiscation, requisition, purchase or other taking of title of,
or capture, seizure or forfeiture of any Vessel (other than a
requisition of the use of any of the Vessels) by any
Governmental Entity or purported governmental entity.
Exception Shares means, collectively, shares
of Company Common Stock owned or held by the Company,
Cal Dive, Merger Sub,
and/or any
of their respective Subsidiaries.
Exchange Act means the Securities Exchange
Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
Exchange Agent shall have the meaning set
forth in Section 2.4(a).
A-41
Exchange Fund shall have the meaning set
forth in Section 2.4(a).
Exchange Ratio shall have the meaning set
forth in Section 2.1(a).
Excluded Party means any Person, group of
related Persons, or group that includes any Person or group of
related Persons from whom the Company has received, after the
date hereof and prior to the No-Shop Period Start Date, a
written Acquisition Proposal that the Companys Board of
Directors determines, in its good faith judgment (after
consultation with a financial advisor of nationally recognized
reputation and outside legal counsel), constitutes or is
reasonably likely to lead to a Superior Proposal.
Excluded Party Superior Proposal means any
Superior Proposal made by any Excluded Party.
Expenses means all out-of-pocket expenses
(including all fees and expenses of counsel, accountants,
investment bankers, experts, and consultants to a Party and its
Affiliates) incurred by a Party or on its behalf in connection
with or related to the authorization, preparation, negotiation,
execution, or performance of this Agreement and the transactions
contemplated hereby, including the preparation, printing,
filing, and mailing of the Information Statement/Proxy
Statement/Prospectus and the
Form S-4
and the solicitation of stockholder approval and all other
matters related to the transactions contemplated hereby and
thereby.
Form S-4
shall have the meaning set forth in
Section 3.1(d).
FTC means the U.S. Federal Trade
Commission.
GAAP means U.S. generally accepted
accounting principles.
Governmental Entity means any multi-national,
national, state, municipal, or local government, foreign or
domestic, any instrumentality, subdivision, court,
administrative agency, or commission or other authority thereof,
or any quasi-governmental or private body exercising any
regulatory, taxing, importing, or other governmental or
quasi-governmental authority, and, for purposes of this
Agreement, shall include any Vessel related registry and
Classification Society.
Hazardous Materials means any (i) toxic
or hazardous materials, or substances; (ii) solid wastes,
including asbestos, polychlorinated biphenyls, mercury,
flammable or explosive materials; (iii) radioactive
materials; (iv) petroleum or petroleum products (including
crude oil); and (v) any other chemical, pollutant,
contaminant, substance, or waste that is regulated by any
Governmental Entity under any Environmental Law.
Helix means Helix Energy Solutions Group,
Inc., a Minnesota corporation.
HSR Act means the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules
and regulations promulgated thereunder.
Indebtedness means, as to any Person at a
particular time (a) all obligations of such Person for
borrowed money and all obligations of such Person evidenced by
bonds, debentures, notes, loan agreements or other similar
instruments and (b) direct or contingent obligations of
such Person owing under letters of credit (including standby and
commercial), bankers acceptances, guarantees, surety bonds
and similar instruments.
Information Statement/Proxy Statement/Prospectus
shall have the meaning set forth in
Section 3.1(d).
Knowledge or Known means,
with respect to any entity, the actual knowledge of such
entitys executive officers (as defined in the Exchange
Act), after due inquiry consistent with their respective
responsibilities as an executive officer.
Liens means any charge, mortgage, pledge,
security interest, restriction, claim, lien, or encumbrance, and
any lease, sublease, or charter of any nature or description
against any property or asset of the Person.
Mailing Date shall have the meaning set forth
in Section 2.4(b).
Market Price means the average (rounded to
the second decimal place) of the per share closing sales prices
of Cal Dive Common Stock on the NYSE (as reported by the
Wall Street Journal, or if not so reported, by another
authoritative source) over the 20 trading days ending on the
third trading day preceding the Closing Date.
A-42
Material Adverse Effect means, with respect
to either Party, a material adverse effect on (i) the
business, operations, results of operations, or financial
condition of such Party and its Subsidiaries taken as a whole or
(ii) the ability of such Party to consummate the
transactions contemplated by this Agreement by the Termination
Date, except, in each case, for any such effect attributable to
(A) general regulatory or economic conditions (including
prevailing interest rate and stock market levels, including
changes in the Market Prices of the Company Common Stock and
Cal Dive Common Stock) in the United States or the other
countries in which such Party operates including changes in the
price of oil or natural gas, (B) changes in, or events or
conditions generally affecting the industries in which such
Party operates (including changes to commodity prices),
(C) the negotiation, announcement, execution, delivery, or
consummation of the transactions contemplated by, or in
compliance with, this Agreement, or (D) changes in
applicable laws, rules or regulations;
Merger Consideration shall have the meaning
set forth in Section 2.1(a).
Merger shall have the meaning set forth in
the recitals.
Merger Sub shall have the meaning set forth
in the preamble.
Multiemployer Plan means a
multiemployer plan, as defined in Section 3(37)
or Section 4001(a)(3) of ERISA.
Nasdaq Global Market means the National
Association of Securities Dealers, Inc. National Global Market.
New Plans shall have the meaning set forth in
Section 5.7.
No-Shop Period Start Date means July 27,
2007.
NYSE means the New York Stock Exchange, Inc.
Old Plans shall have the meaning set forth in
Section 5.7.
Other Party means, with respect to
Cal Dive, the Company, and with respect to the Company,
Cal Dive and the Merger Sub.
Party means Cal Dive, Merger Sub, or the
Company.
Pension Plan means an employee pension
benefit plan within the meaning of Section 3(2) of ERISA.
Per Share Cash Amount shall have the meaning
set forth in Section 2.1(a).
Permitted Liens shall mean (a) any Lien
expressly contemplated or permitted under this Agreement,
(b) Liens for Taxes, assessments or similar governmental
charge not yet due and payable or which are being contested in
good faith and by appropriate proceedings if adequate reserves
with respect thereto are maintained by the applicable party on
their books in accordance with GAAP; (c) mechanics,
workmens, landlords, operators,
materialmens, maritime or other similar Liens with respect
to amounts not yet due and payable or which are being contested
in good faith by appropriate proceedings; (d) purchase
money Liens incurred in connection with the acquisition of
assets not prohibited by this Agreement; (e) Liens for
crews wages and for salvage (including contract salvage);
(f) Liens for general average; (g) Liens incident to
current operations or Liens for amounts which are not delinquent
or that are due and unpaid for not more than 30 days after
such amounts shall become due that do not involve any
significant risk of a sale or forfeiture or loss of any of the
Vessels; (h) Liens covered by insurance and any deductible
applicable thereto which is standard in the industry provided
that the debt underlying such Lien shall not have become due and
payable beyond any applicable grace period; (i) Liens for
repairs or with respect to any improvement made to any of the
Vessels provided that the debt underlying such Lien shall not
have become due and payable beyond any applicable grace period;
and (j) Liens for any claims that are being contested in
good faith by appropriate proceedings and that will not affect
the continued use of any of the Vessels or create any material
risk of the sale, forfeiture or loss of any of the Vessels or
any interest therein.
Person means an individual, corporation,
limited liability company, partnership, association, trust,
unincorporated organization, other entity, or group (as defined
in the Exchange Act).
A-43
Plan of Merger shall have the meaning set forth in
the recitals.
Qualifying Amendment means an amendment or
supplement to the Information Statement/Proxy
Statement/Prospectus or
Form S-4
(including by incorporation by reference) to the extent it
contains (i) a Change in the Company Board Recommendation,
(ii) a statement of the reasons of the Board of Directors
of the Company for making such Change in the Company Board
Recommendation, and (iii) additional information reasonably
related to the foregoing.
Regulatory Law means the Antitrust Laws, and
all other U.S. federal and state and foreign, if any,
statutes, rules, regulations, orders, decrees, administrative
and judicial doctrines, and other laws that are designed or
intended to prohibit, restrict, or regulate (a) mergers,
acquisitions, or other business combinations, (b) foreign
investment, or (c) actions having the purpose or effect of
monopolization or restraint of trade or lessening of competition.
Release means any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping, or disposing into the environment of any
Hazardous Materials.
Required Approvals shall have the meaning set
forth in Section 5.3(a).
Sarbanes-Oxley Act means the Sarbanes-Oxley
Act of 2002 and the rules and regulations promulgated thereunder.
SEC means the U.S. Securities and
Exchange Commission.
Securities Act means the Securities Act of
1933, as amended, and the rules and regulations promulgated
thereunder.
Stock Award Exchange Ratio means the sum of
(i) the Exchange Ratio plus (ii) the fraction
resulting from dividing the Per Share Cash Amount by the closing
price per share of the Cal Dive Common Stock on the NYSE on
the last trading day immediately preceding the Closing Date.
Subsidiary means, with respect to any Person,
any corporation, partnership, association, joint venture,
limited liability company or other entity in which such Person
owns over 50% of the stock or other equity interests, the
holders of which are generally entitled to vote for the election
of directors or other governing body of such other legal entity.
Superior Proposal means an Acquisition
Proposal made by a Person other than a Party hereto that the
Companys Board of Directors in good faith concludes
(following receipt of the advice of its financial advisors and
outside counsel), taking into account, among other things,
legal, financial, regulatory and other aspects of the proposal,
including any conditions to consummation, as well as any
revisions to the terms of the Merger or this Agreement proposed
by Cal Dive, that (i) would, if consummated, result in
a transaction that is more favorable to the Company and its
stockholders (in their capacities as stockholders), from a
financial point of view, than the transactions contemplated by
this Agreement and (ii) is reasonably capable of being
completed on the terms so proposed.
Surviving Company shall have the meaning set
forth in the recitals.
Tax Return means any return, report, or
similar statement (including any attached schedules) required to
be filed with respect to any Tax, including any information
return, claim for refund, amended return, or declaration of
estimated Tax.
Taxes means any and all U.S. federal,
state, provincial, county, local, or foreign taxes, and any and
all other charges, fees, levies, duties, deficiencies, customs,
or other similar assessments or liabilities in the nature of a
tax, including any income, profits, gross receipts, windfall
profits, ad valorem, net worth, premium, value-added,
occupation, production, assets, sales, use, capital stock,
capital gains, documentary, recapture, transfer, transfer gains,
estimated, withholding, employment, unemployment insurance,
unemployment compensation, social security, disability, wage,
payroll, stamp, goods and services, real or personal property,
intangible property, excise, any alternative or add-on minimum,
business license, business organization, environmental, profits,
license, lease, service, service use, gains, franchise, and any
other taxes imposed by any Governmental
A-44
Entity, together with any interest, fines, penalties,
assessments, or additions resulting from, attributable to, or
incurred in connection with any of the foregoing (whether or not
disputed).
Termination Date means December 11, 2007.
Termination Fee means $18,882,896.
Vessel(s) shall mean any or all of the
vessels set forth in Section 3.1(v)(i) of the
Company Disclosure Schedule (excluding, in all cases, the
Gulf Horizon) or in Section 3.2(t)(i)(A)(I) of the
Cal Dive Disclosure Schedule and shall include, with
respect to each vessel, all her equipment and outfitting.
Voting Debt means any bonds, debentures,
notes, or other Indebtedness having the right to vote on any
matters on which holders of capital stock of the same issuer may
vote.
ARTICLE IX
GENERAL
PROVISIONS
9.1 Non-Survival of Representations, Warranties and
Agreements. None of the representations,
warranties, covenants, and other agreements in this Agreement or
in any instrument delivered pursuant to this Agreement,
including any rights arising out of any breach of such
representations, warranties, covenants, agreements, and other
provisions, shall survive the Effective Time, except for those
covenants, agreements, and other provisions contained herein
that by their terms apply or are to be performed in whole or in
part after the Effective Time and this Article IX
(including without limitation Section 5.6).
9.2 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed
duly given when received. All notices hereunder shall be
delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the Party to
receive such notice:
(a) if to Cal Dive:
Cal Dive International, Inc.
400 N. Sam Houston Parkway E., Suite 400
Houston, Texas 77060
Facsimile:
(281) 848-6502
Attention: General Counsel
with a copy to (which shall not constitute notice):
Fulbright & Jaworski L.L.P.
Fulbright Tower
1301 McKinney, Suite 5100
Houston, Texas 77010
Facsimile:
(713) 651-5246
Attention: David Peterman
(b) if to the Company to:
Horizon Offshore, Inc.
2500 City West Blvd.
Suite 2200
Houston, Texas 77042
Facsimile:
(713) 361-2693
Attention: General Counsel
A-45
with a copy to (which shall not constitute notice):
Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P.
201 St. Charles Ave., Suite 5100
New Orleans, Louisiana 70170
Facsimile:
504-582-8012
Attention: William B. Masters
9.3 Interpretation.
(a) When a reference is made in this Agreement to Articles,
Sections, Exhibits, or Schedules, such reference shall be to an
Article or Section of or Exhibit or Schedule to this Agreement
unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words include,
includes or including are used in this
Agreement, they shall be deemed to be followed by the words
without limitation. The words hereby,
herein, hereof or hereunder,
and similar terms are to be deemed to refer to this Agreement as
a whole and not to any specific section. In addition, each
Section of this Agreement is qualified by the matters set forth
in the related Section of the Cal Dive Disclosure Schedule
and the Company Disclosure Schedule, as the case may be, and by
such matters set forth any place else in this Agreement or in
the Cal Dive Disclosure Schedule or the Company Disclosure
Schedule where the applicability of such qualification to the
Section of this Agreement is reasonably apparent.
(b) The Parties have participated jointly in negotiating
and drafting this Agreement. In the event that an ambiguity or a
question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the Parties, and no
presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any
provision of this Agreement.
9.4 Counterparts. This Agreement
may be executed by facsimile and in one or more counterparts,
all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been
signed by each of the Parties and delivered to the Other Party,
it being understood that the Parties need not sign the same
counterpart.
9.5 Entire Agreement; No Third Party
Beneficiaries.
(a) This Agreement (and the Confidentiality Agreement) and
the Exhibits and disclosure schedules and the other agreements
and instruments of the Parties delivered in connection herewith
constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the
Parties with respect to the subject matter hereof. The
Confidentiality Agreement remains in full force and effect in
accordance with its terms, except for paragraph 9 thereof
which is superseded in its entirety by the provisions of this
Agreement.
(b) This Agreement shall be binding upon and inure solely
to the benefit of each Party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer
upon any other Person any right, benefit, or remedy of any
nature whatsoever under or by reason of this Agreement, other
than Section 5.6 (which is intended to be for the
benefit of the Persons covered thereby).
9.6 Governing Law. This Agreement
shall be governed and construed in accordance with the laws of
the State of Delaware (without giving effect to choice of law
principles thereof).
9.7 Severability. If any term or
other provision of this Agreement is invalid, illegal, or
incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any Party hereto.
Upon such determination that any term or other provision is
invalid, illegal, or incapable of being enforced, the Parties
shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the Parties as closely as possible
in an acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated
to the greatest extent possible.
A-46
9.8 Assignment. Neither this
Agreement nor any of the rights, interests, or obligations
hereunder shall be assigned by a Party in whole or in part
(whether by operation of law or otherwise), without the prior
written consent of the Other Party, and any attempt to make any
such assignment without such consent shall be null and void.
Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the
Parties and their respective successors and assigns.
9.9 Submission to Jurisdiction;
Waivers. Each Party irrevocably agrees that
any legal action or proceeding with respect to this Agreement or
for recognition and enforcement of any judgment in respect
hereof brought by the Other Party shall be brought and
determined exclusively in the Court of Chancery or other courts
of the State of Delaware, and each Party hereby irrevocably
submits with regard to any such action or proceeding for itself
and in respect to its property, generally and unconditionally,
to the exclusive jurisdiction of the aforesaid courts (and, to
the fullest extent permitted by law, to the Court of Chancery)
and to accept service of process in any manner permitted by such
courts. Each Party hereby irrevocably waives, and agrees not to
assert, by way of motion, as a defense, counterclaim, or
otherwise, in any action or proceeding with respect to this
Agreement, (a) any claim that it is not personally subject
to the jurisdiction of the above-named courts for any reason
other than the failure to lawfully serve process, (b) that
it or its property is exempt or immune from jurisdiction of any
such court or from any legal process commenced in such courts
(whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution
of judgment or otherwise), (c) to the fullest extent
permitted by applicable law, that (i) the suit, action or
proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is
improper and (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts and
(d) any right to a trial by jury.
9.10 Enforcement. The Parties
agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed
that the Parties shall be entitled to specific performance of
the terms hereof, this being in addition to any other remedy to
which they are entitled at law or in equity.
9.11 Amendment. This Agreement may
be amended by the mutual written agreement of the Parties at any
time before or after the Company Stockholder Approval but, after
any such approval, no amendment shall be made which by law or in
accordance with the rules of any relevant stock exchange
requires further approval by such stockholders. This Agreement
may not be amended, except by an instrument in writing signed on
behalf of each of the Parties.
9.12 Extension; Waiver. At any
time prior to the Effective Time, the Parties, by action taken
or authorized by their respective Boards of Directors, may, to
the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the Other
Party, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the
part of a Party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf
of such Party. The failure of any Party to assert any of its
rights under this Agreement or otherwise shall not constitute a
waiver of those rights.
A-47
IN WITNESS WHEREOF, Cal Dive, Merger Sub and the
Company have caused this Agreement to be signed by their
respective officers thereunto duly authorized, all as of the
date first written above.
CAL DIVE INTERNATIONAL, INC.
Quinn J. Hebert
President and Chief Executive Officer
CAL DIVE ACQUISITION, LLC
Quinn J. Hebert
Chairman and Chief Executive Officer
HORIZON OFFSHORE, INC.
David W. Sharp
President and Chief Executive Officer
Signature
Page to Agreement and Plan of Merger
A-48
Exhibit A
FORM OF
AFFILIATE AGREEMENT
,
2007
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed
to be an affiliate of Horizon Offshore, Inc., a
Delaware corporation (the Company), as
the term affiliate is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the Rules
and Regulations (the Rules and
Regulations) of the Securities and Exchange
Commission (the Commission) under the
Securities Act of 1933, as amended (together with the rules and
regulations promulgated thereunder, the Securities
Act). Pursuant to the terms of the Agreement and
Plan of Merger, dated as of June 11, 2007 (the
Merger Agreement), by and among the
Company, Cal Dive International, Inc., a Delaware
corporation (Cal Dive), and
Cal Dive Acquisition, LLC, a wholly owned subsidiary of
Cal Dive (Merger Sub), the
Company will be merged with and into Merger Sub, in
consideration of cash and shares of common stock, par value
$0.01 per share, of Cal Dive (Cal Dive
Common Stock), with Merger Sub as the surviving
limited liability company (the Merger).
I represent, warrant, and covenant to Cal Dive and Merger
Sub that in the event I receive any Cal Dive Common Stock
as a result of the Merger:
A. I shall not make any sale, transfer or other disposition
of any Cal Dive Common Stock acquired by me in the Merger
in violation of the Securities Act.
B. I have carefully read this letter and the Merger
Agreement and discussed their requirements and other applicable
limitations upon my ability to sell, transfer, or otherwise
dispose of Cal Dive Common Stock, to the extent I felt
necessary, with my counsel or counsel for Cal Dive and
Merger Sub.
C. I have been advised that the issuance of Cal Dive
Common Stock to me pursuant to the Merger has been or will be
registered with the Commission under the Securities Act on a
Registration Statement on
Form S-4.
I have also been advised, however, that, because at the time the
Merger will be submitted for a vote of the stockholders of the
Company, I may be deemed to be an affiliate of the Company
(without anything in this letter agreement being an admission of
such fact), the distribution by me of any Cal Dive Common
Stock acquired by me in the Merger will not be registered under
the Securities Act and that I may not sell, transfer, or
otherwise dispose of any Cal Dive Common Stock acquired by
me in the Merger unless (i) such sale, transfer, or other
disposition has been registered under the Securities Act,
(ii) such sale, transfer, or other disposition is made in
conformity with the volume and other limitations of
Rule 145 promulgated by the Commission under the Securities
Act, or (iii) in the opinion of counsel reasonably
acceptable to Cal Dive such sale, transfer, or other
disposition is otherwise exempt from registration under the
Securities Act.
D. I understand that Cal Dive is under no obligation
to register under the Securities Act the sale, transfer, or
other disposition by me or on my behalf of any Cal Dive
Common Stock acquired by me in the Merger or to take any other
action necessary in order to make an exemption from such
registration available.
E. I also understand that stop transfer instructions will
be given to Cal Dives transfer agent with respect to
Cal Dive Common Stock and that there will be placed on the
certificates (or in the case of shares issued in book-entry
form, an appropriate notation of the records of
Cal Dives transfer agent) for any Cal Dive
Common Stock acquired by me in the Merger, or any substitutions
therefore, a legend stating in substance:
The shares represented by this certificate were issued in
a transaction to which Rule 145 under the Securities Act of
1933 may apply. The shares represented by this certificate
may only be transferred in compliance with the requirements of
the Securities Act of 1933, including, without limitation,
Rule 145 promulgated thereunder, or pursuant to an
applicable exemption therefrom.
A-49
F. I also understand that unless the transfer by me of my
Cal Dive Common Stock has been registered under the
Securities Act or is a sale made in conformity with the
provisions of Rule 145, Cal Dive reserves the right to
put the following legend on the certificates issued to my
transferee:
The shares represented by this certificate have not been
registered under the Securities Act of 1933 and were acquired
from a person who received such shares in a transaction to which
Rule 145 promulgated under the Securities Act of 1933
applies. The shares may not be sold, pledged, or otherwise
transferred except in accordance with an exemption from the
registration requirements of the Securities Act of 1933.
G. It is understood and agreed that the legend set forth in
paragraphs E and F above shall be removed by the delivery
of substitute certificates (or change in notation on the records
of Cal Dives transfer agent) without such legend if
the undersigned shall have delivered to Cal Dive a copy of
a letter from the staff of the Commission, or an opinion of
counsel in form and substance reasonably satisfactory to
Cal Dive, to the effect that such legend is not required
for purposes of the Securities Act.
I understand that (a) Cal Dive will supply me with any
information necessary to enable me to make routine sales of any
Cal Dive Common Stock acquired by me in the Merger as may
be permitted by and in accordance with the provisions of
Rule 144 under the Securities Act or any similar rule of
the Commission hereafter applicable, and (b) Cal Dive
will comply with all requirements of the Securities Exchange Act
of 1934 and the rules and regulations promulgated thereunder
(the Exchange Act), with respect to
the filing by Cal Dive of annual, periodic and other
reports on a timely basis in a manner sufficient to allow sales
of any such Cal Dive Common Stock by me during the two year
period following the Effective Time (as defined in the Merger
Agreement) if such sales are otherwise permitted by law or
regulation. Upon my written request, Cal Dive shall furnish
me with a written statement representing that it has complied
with the reporting requirements enumerated in
Rule 144(c)(1), or if Cal Dive is not then subject to
Section 13 or 15(d) of the Exchange Act, that it has made
publicly available the information concerning Cal Dive
required by Rule 144(c)(2).
Very truly yours,
Name:
Accepted this day
of ,
2007
A-50
CAL DIVE INTERNATIONAL, INC.
Quinn J. Hebert
President and Chief Executive Officer
CAL DIVE ACQUISITION, LLC
Quinn J. Hebert
Chairman and Chief Executive Officer
HORIZON OFFSHORE, INC.
David W. Sharp
President and Chief Executive Officer
A-51
Opinion
of Lehman Brothers Inc. dated June 11, 2007
June 11,
2007
Board of
Directors
Horizon Offshore, Inc.
2500 City West Blvd.
Suite 2200
Houston, TX 77042
Members of the Board:
We understand that Horizon Offshore, Inc. (the
Company) intends to enter into a transaction (the
Proposed Transaction) with Cal Dive
International, Inc. (Cal Dive), pursuant to
which (i) the Company will merge with and into
Cal Dive Acquisition, LLC, a wholly owned subsidiary of
Cal Dive (Merger Sub), with the Merger Sub
surviving the merger and (i) upon the effectiveness of the
merger, each share of common stock of the Company then issued
and outstanding, other than shares to be cancelled pursuant to
the Agreement (as defined below), will be converted into the
right to receive (a) $9.25 in cash (the Cash
Consideration) and (b) 0.625 shares of the
common stock of Cal Dive (the Stock
Consideration and together with the Cash Consideration,
the Consideration). The terms and conditions of the
Proposed Transaction are set forth in more detail in the
Agreement and Plan of Merger dated as of June 11, 2007
among the Company, Cal Dive and Merger Sub (the
Agreement).
We have been requested by the Board of Directors of the Company
to render our opinion with respect to the fairness, from a
financial point of view, to the Companys stockholders of
the consideration to be offered to such stockholders in the
Proposed Transaction. We have not been requested to opine as to,
and our opinion does not in any manner address, (i) the
Companys underlying business decision to proceed with or
effect the Proposed Transaction or (ii) the relative merit
of the Proposed Transaction in comparison to other alternatives
for the Company.
In arriving at our opinion, we reviewed and analyzed:
(1) the Agreement and the specific terms of the Proposed
Transaction; (2) publicly available information concerning
the Company and Cal Dive that we believe to be relevant to
our analysis, including the Annual Reports on
Forms 10-K
for the fiscal year ended December 31, 2006 and Quarterly
Reports on
Forms 10-Q
for the quarter ended March 31, 2007 for each of the
Company and Cal Dive; (3) financial and operating
information with respect to the business, operations and
prospects of the Company furnished to us by the Company,
including financial projections of the Company prepared by
management of the Company; (4) financial and operating
information with respect to the business, operations and
prospects of Cal Dive furnished to us by Cal Dive,
including financial projections of Cal Dive prepared by the
management of Cal Dive; (5) the trading histories of
the Companys common stock and Cal Dives common
stock from June 9, 2006 to June 8, 2007 and a
comparison of those trading histories with each other and with
those of other companies that we deemed relevant; (6) a
comparison of the historical financial results and present
financial condition of the Company and Cal Dive with each
other and with those of other companies that we deemed relevant;
(7) a comparison of the financial terms of the Proposed
Transaction with the financial terms of certain other
transactions that we deemed relevant; (8) the potential pro
forma impact of the Proposed Transaction on the current and
future financial performance of the combined company, including
the amounts and timing of the cost savings and operating
synergies expected to result from the Proposed Transaction (the
Expected Synergies); (9) published estimates by
independent equity research analysts with respect to the future
financial performance of the Company and Cal Dive; and
(10) the relative contributions of the Company and
Cal Dive to the current and future financial performance of
the combined company on a pro forma basis. In addition, we have
had discussions with the management of the Company and
Cal Dive concerning their respective businesses,
operations, assets, liabilities, financial
B-1
condition and prospects and have undertaken such other studies,
analyses and investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the
accuracy and completeness of the financial and other information
used by us without assuming any responsibility for independent
verification of such information and have further relied upon
the assurances of the managements of the Company and
Cal Dive that they are not aware of any facts or
circumstances that would make such information inaccurate or
misleading. With respect to the financial projections of the
Company, upon advice of the Company, we have assumed that such
projections have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the
management of the Company as to the future financial performance
of the Company and that the Company will perform substantially
in accordance with such projections. With respect to the
financial projections of Cal Dive, upon advice of
Cal Dive and the Company, we have assumed that such
projections have been reasonably prepared on a basis reflecting
the best currently available estimates and judgments of the
management of Cal Dive and the Company as to the future
financial performance of Cal Dive and that Cal Dive
will perform substantially in accordance with such projections.
With respect to the Expected Synergies, we have assumed that the
amount and timing of the Expected Synergies are reasonable as
estimated by the management of Cal Dive and as discussed
with the management of the Company and we also have assumed that
the Expected Synergies will be realized substantially in
accordance with such estimates. In arriving at our opinion, we
have not conducted a physical inspection of the properties and
facilities of the Company or Cal Dive and have not made or
relied upon any evaluations or appraisals of the assets or
liabilities of the Company or Cal Dive. Our opinion
necessarily is based upon market, economic and other conditions
as they exist on, and can be evaluated as of, the date of this
letter.
Based upon and subject to the foregoing, we are of the opinion
as of the date hereof that, from a financial point of view, the
consideration to be offered to the stockholders in the Proposed
Transaction is fair to such stockholders.
We have acted as financial advisor to the Company in connection
with the Proposed Transaction and will receive a fee for our
services which is contingent upon the consummation of the
Proposed Transaction. In addition, the Company has agreed to
reimburse our expenses and indemnify us for certain liabilities
that may arise out of the rendering of this opinion. We also
have performed various investment banking services for the
Company in the past and have received customary fees for such
services. In the ordinary course of our business, we actively
trade in the debt and equity securities of the Company and
Cal Dive for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short
position in such securities.
This opinion is for the use and benefit of the Board of
Directors of the Company and is rendered to the Board of
Directors in connection with its consideration of the Proposed
Transaction. This opinion is not intended to be and does not
constitute a recommendation to any stockholder of the Company as
to how such stockholder should vote with respect to the Proposed
Transaction.
Very truly yours,
/s/ Lehman Brothers
LEHMAN BROTHERS
B-2
Opinion
of Banc of America Securities LLC dated June 11,
2007
BANC OF AMERICA SECURITIES
Banc of America Securities LLC
9 West
57th
Street
New York, NY 10019
Tel 888.583.8900
June 11, 2007
Board of Directors
Cal Dive International, Inc.
400 N. Sam Houston Parkway E., Suite 400
Houston, Texas 77060
Members of the Board of Directors:
You have requested our opinion as to the fairness, from a
financial point of view, to Cal Dive International, Inc.
(Cal Dive) of the Merger Consideration (as
defined below) to be paid pursuant to the Agreement and Plan of
Merger, dated as of June 11, 2007 (the
Agreement), by and among Cal Dive,
Cal Dive Acquisition LLC, a wholly owned subsidiary of
Cal Dive (Merger Sub), and Horizon Offshore,
Inc. (Horizon). As more fully described in the
Agreement, Horizon will merge with and into Merger Sub (the
Merger), with Merger Sub being the surviving company
in the Merger, and each outstanding share of common stock, par
value $0.00001 per share, of Horizon (Horizon Common
Stock) will be converted into the right to receive the
combination of (x) $9.25 in cash and (y) 0.625 of a
share of common stock, par value $0.01 per share
(Cal Dive Common Stock), of Cal Dive
(collectively, the Merger Consideration). The terms
and conditions of the Merger are more fully set forth in the
Agreement.
In connection with rendering our opinion, we have:
(i) reviewed certain publicly available business and
financial information of Cal Dive and Horizon, respectively;
(ii) reviewed certain internal financial statements and
other financial, business and operating information and data
concerning Cal Dive and Horizon, respectively;
(iii) reviewed certain financial forecasts relating to
Cal Dive prepared by the management of Cal Dive (the
Cal Dive Forecasts);
(iv) reviewed certain financial forecasts relating to
Horizon prepared by the management of Horizon (the Horizon
Forecasts) and an alternative version of the Horizon
Forecasts incorporating adjustments thereto made by the
management of Cal Dive (the Cal Dive-Horizon
Forecasts);
(v) reviewed and discussed with senior executives of
Cal Dive information relating to certain cost savings and
strategic and operational benefits (collectively,
Synergies) anticipated by the management of
Cal Dive to result from the Merger;
(vi) discussed the past and current operations, financial
condition and prospects of Horizon with senior executives of
Cal Dive and Horizon, and discussed the past and current
operations, financial condition and prospects of Cal Dive
with senior executives of Cal Dive;
(vii) reviewed the potential pro forma financial impact of
the Merger on the future financial performance of Cal Dive,
including the potential effect on Cal Dives estimated
earnings per share;
(viii) reviewed the relative financial contributions of
Cal Dive and Horizon to the future financial performance of
the combined company on a pro forma basis following consummation
of the Merger;
C-1
(ix) reviewed the reported prices and trading activity for
Cal Dive Common Stock and Horizon Common Stock;
(x) compared the financial performance of Cal Dive and
Horizon and the prices and trading activity of Cal Dive
Common Stock and Horizon Common Stock with each other and with
that of certain other publicly traded companies we deemed
relevant;
(xi) compared certain financial terms of the Merger to
financial terms, to the extent publicly available, of certain
other acquisition transactions we deemed relevant;
(xii) participated in discussions and negotiations among
representatives of Cal Dive, Horizon and their respective
advisors;
(xiii) reviewed the Agreement; and
(xiv) performed such other analyses and considered such
other factors as we have deemed appropriate.
In arriving at our opinion, we have assumed and relied upon,
without independent verification, the accuracy and completeness
of the financial and other information reviewed by us. With
respect to the Horizon Forecasts, we have assumed, upon the
advice of Horizon, that they have been reasonably prepared on
bases reflecting the best currently available estimates and good
faith judgment of the management of Horizon as to the future
financial performance of Horizon. With respect to the
Cal Dive-Horizon Forecasts, the Cal Dive Forecasts and
the Synergies, we have assumed, at the direction of
Cal Dive, that they have been reasonably prepared on bases
reflecting the best currently available estimates and good faith
judgment of the management of Cal Dive as to the future
financial performance of Horizon, Cal Dive and the other
matters covered thereby and, at the direction of Cal Dive,
we have relied on the Cal Dive-Horizon Forecasts for
purposes of our opinion. We have not made any independent
valuation or appraisal of Cal Dive or Horizon, nor have we
been furnished with any such valuations or appraisals. We have
assumed, at the direction of Cal Dive, that the Merger will
be consummated as provided in the Agreement, with full
satisfaction of all covenants and conditions set forth therein
and without any waivers thereof. We also have assumed, with the
consent of Cal Dive, that all third party consents,
approvals and agreements necessary for the consummation of the
Merger will be obtained without any adverse effect on
Cal Dive, Horizon or the contemplated benefits of the
Merger to Cal Dive.
We express no view or opinion as to any terms or aspects of the
Merger other than the Merger Consideration to the extent
expressly set forth herein (including, without limitation, the
form or structure of the Merger). In addition, no view or
opinion is expressed as to the relative merits of the Merger in
comparison to other transactions available to Cal Dive or
in which Cal Dive might engage or as to whether any
transaction might be more favorable to Cal Dive as an
alternative to the Merger, nor are we expressing any opinion as
to the underlying business decision of the Board of Directors of
Cal Dive to proceed with or effect the Merger. We are not
expressing any opinion as to what the value of Cal Dive
Common Stock actually will be when issued pursuant to the Merger
or the prices at which Cal Dive Common Stock or Horizon
Common Stock will trade at any time.
We have acted as financial advisor to the Board of Directors of
Cal Dive in connection with the Merger, for which services
we will receive a fee, a portion of which is payable in
connection with the delivery of this opinion and a significant
portion of which is contingent upon the consummation of the
Merger. As you are aware, we and our affiliates will be
participating in the financing to be undertaken by Cal Dive
in connection with the Merger, for which services we and our
affiliates will receive significant compensation, including
acting as administrative agent, lead arranger, book-running
manager and lender under a new credit facility for
Cal Dive. In addition, we or our affiliates have provided,
currently are providing and in the future may provide financial
advisory and financing services to Cal Dive, Helix Energy
Solutions Group, Inc., Cal Dives majority shareholder
(Helix), and certain other affiliates of
Cal Dive, and have received and in the future may receive
fees for the rendering of these services, including, among other
things, having acted or currently acting as (i) book-runner
in connection with Cal Dives initial public offering,
(ii) administrative agent, arranger, book manager and
lender for a credit facility of Cal Dive and
(iii) administrative agent, arranger, book manager
C-2
and/or
lender for certain credit facilities of Helix and certain of its
affiliates. In the ordinary course of our business, we or our
affiliates may actively trade or hold securities or loans of
Cal Dive, Helix or Horizon for our own accounts or for the
accounts of customers and, accordingly, we or our affiliates may
at any time hold long or short positions in such securities or
loans.
It is understood that this letter is for the benefit and use of
the Board of Directors of Cal Dive in connection with and
for purposes of its evaluation of the Merger. In addition, we
express no opinion or recommendation as to how any shareholder
should vote or act in connection with the Merger.
Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available
to us as of, the date hereof. It should be understood that
subsequent developments may affect this opinion, and we do not
have any obligation to update, revise or reaffirm this opinion.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, we are of the
opinion on the date hereof that the Merger Consideration to be
paid in the Merger is fair, from a financial point of view, to
Cal Dive.
Very truly yours,
/s/ Banc of America Securities LLC
BANC OF AMERICA SECURITIES LLC
C-3
Section 262
of the Delaware General Corporation Law
§262
APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to §228 of this title
shall be entitled to an appraisal by the Court of Chancery of
the fair value of the stockholders shares of stock under
the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words stock and share
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words depository receipt mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to §251
(other than a merger effected pursuant to §251(g) of this
title), §252, §254, §257, §258, §263 or
§264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of
record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of
the constituent corporation surviving a merger if the merger did
not require for its approval the vote of the stockholders of the
surviving corporation as provided in subsection (f) of
§251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§251, 252, 254, 257, 258, 263 and 264 of this title
to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or designated as
a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc.
or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under §253 of this
title is not owned by the parent corporation immediately prior
to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
D-1
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this
section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is
practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall
include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholders
shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for
appraisal of such stockholders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such stockholders
shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as
herein provided. Within 10 days after the effective date of
such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of
the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to
§228 or §253 of this title, then, either a constituent
corporation before the effective date of the merger or
consolidation, or the surviving or resulting corporation within
ten days thereafter, shall notify each of the holders of any
class or series of stock of such constituent corporation who are
entitled to appraisal rights of the approval of the merger or
consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this
section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holders shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holders shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holders shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary
or of the transfer agent of the corporation that is required to
give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than
10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of
the merger or consolidation, the record date shall be such
effective date. If no record date is fixed and the notice is
given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the
notice is given.
D-2
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw
such stockholders demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within
120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon
written request, shall be entitled to receive from the
corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and
with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days
after such stockholders written request for such a
statement is received by the surviving or resulting corporation
or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d)
hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After determining the stockholders entitled to an
appraisal, the Court shall appraise the shares, determining
their fair value exclusive of any element of value arising from
the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. In
determining such fair value, the Court shall take into account
all relevant factors. In determining the fair rate of interest,
the Court may consider all relevant factors, including the rate
of interest which the surviving or resulting corporation would
have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting
corporation or by any stockholder entitled to participate in the
appraisal proceeding, the Court may, in its discretion, permit
discovery or other pretrial proceedings and may proceed to trial
upon the appraisal prior to the final determination of the
stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and
who has submitted such stockholders certificates of stock
to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal
rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Interest may be simple or compound, as the Court may direct.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other
D-3
decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this
State or of any state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
D-4
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Capitalized terms used but not defined in Part II have the
meanings ascribed to them in the information statement/proxy
statement/prospectus contained in this Registration Statement.
|
|
ITEM 20.
|
Indemnification
of Directors and Officers
|
Section 145 of the General Corporation Law of the State of
Delaware provides as follows:
A corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason
of the fact that the person is or was a director, officer,
employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including
attorneys fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if the person acted in good
faith and in a manner the person reasonably believed to be in or
not opposed to the best interest of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person
reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal
action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
A corporation shall have the power to indemnify any person who
was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that the person is or was a director,
officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses
(including attorneys fees) actually and reasonably
incurred by him in connection with the defense or settlement of
such action or suit if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to
the best interests of the corporation and except that no
indemnification shall be made with respect to any claim, issue
or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was
brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
As permitted by the Delaware General Corporation Law, we have
included in our amended and restated certificate of
incorporation a provision to eliminate the personal liability of
our directors for monetary damages for breach of their fiduciary
duties as directors, subject to certain exceptions. In addition,
our amended and restated certificate of incorporation and bylaws
provide that we are required to indemnify our officers and
directors under certain circumstances, including those
circumstances in which indemnification would otherwise be
discretionary, and we are required to advance expenses to our
officers and directors as incurred in connection with
proceedings against them for which they may be indemnified.
We have entered into indemnity agreements with each of our
directors and executive officers, pursuant to which we agree
under certain circumstances to purchase and maintain
directors and officers liability insurance, unless
such insurance is not reasonably available or, in the reasonable
judgment of the Board of Directors, there is insufficient
benefit to us from such insurance. The agreements also provide
that we will indemnify each director and executive officer
against any costs and expenses, judgments, settlements and fines
II-1
incurred in connection with any claim involving him by reason of
his position as director or officer that are in excess of the
coverage provided by any such insurance, provided that he meets
certain standards of conduct.
The Master Agreement dated December 8, 2006, by and between
Helix Energy Solutions Group, Inc. and us, provides for
indemnification by us of Helix (a controlling person of us) and
its directors, officers and employees for certain liabilities,
including liabilities under the Securities Act.
We maintain directors and officers liability insurance for the
benefit of our directors and officers.
|
|
ITEM 21.
|
Exhibits
and Financial Statement Schedules.
|
(a) Exhibits.
|
|
|
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated as of June 11, 2007, by
and among Cal Dive International, Inc., Cal Dive Acquisition,
LLC and Horizon Offshore, Inc., incorporated by reference to
Exhibit 2.1 to the Current Report on
Form 8-K,
filed by the registrant with the Securities and Exchange
Commission on June 12, 2007.
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of Cal Dive
International, Inc., incorporated by reference to
Exhibit 3.1 to the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
3
|
.2
|
|
Amended and Restated Bylaws of Cal Dive International, Inc.,
incorporated by reference to Exhibit 3.2 to the Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by the
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
4
|
.1
|
|
Specimen Common Stock certificate of Cal Dive International,
Inc., incorporated by reference to Exhibit 4.1 to the
Registration Statement on
Form S-1
(File
No. 333-134609),
initially filed by the registrant with the Securities and
Exchange Commission on May 31, 2006, as amended.
|
|
*5
|
.1
|
|
Opinion of Fulbright & Jaworski L.L.P., counsel to the
registrant, regarding the legality of the common stock to be
offered hereby.
|
|
**8
|
.1
|
|
Opinion of Fulbright & Jaworski L.L.P. regarding tax
matters.
|
|
**8
|
.2
|
|
Opinion of Jones, Walker, Waechter, Poitevent,
Carrère & Denègre, L.L.P. regarding tax
matters.
|
|
10
|
.1
|
|
Master Agreement between Cal Dive International, Inc. and Helix
Energy Solutions Group, Inc., incorporated by reference to
Exhibit 10.1 to the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.2
|
|
Corporate Services Agreement between Cal Dive International,
Inc. and Helix Energy Solutions Group, Inc., incorporated by
reference to Exhibit 10.2 to the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.3
|
|
Registration Rights Agreement between Cal Dive International,
Inc. and Helix Energy Solutions Group, Inc., incorporated by
reference to Exhibit 10.3 to the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.4
|
|
Tax Matters Agreement between Cal Dive International, Inc. and
Helix Energy Solutions Group, Inc., incorporated by reference to
Exhibit 10.4 to the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.5
|
|
Employee Matters Agreement between Cal Dive International, Inc.
and Helix Energy Solutions Group, Inc., incorporated by
reference to Exhibit 10.5 to the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.6ˆ
|
|
Cal Dive International, Inc. Amended and Restated 2006 Long Term
Incentive Plan, incorporated by reference to Exhibit 10.1
to the Current Report on
Form 8-K,
filed by registrant with the Securities and Exchange Commission
on May 11, 2007.
|
II-2
|
|
|
|
|
|
10
|
.7ˆ
|
|
Form of Restricted Stock Agreement for 2006 Grants to Quinn J.
Hébert, Scott T. Naughton, G. Kregg Lunsford, and Lisa M.
Buchanan, incorporated by reference to Exhibit 10.7 to the
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.8ˆ
|
|
Employment Agreement dated November 1, 2005, between Cal
Dive International, Inc. (predecessor to Helix Energy Solutions
Group, Inc.) and Quinn J. Hébert, incorporated by reference
to Exhibit 10.8 to the Registration Statement on
Form S-1
(File
No. 333-134609),
initially filed by the registrant with the Securities and
Exchange Commission on May 31, 2006, as amended.
|
|
10
|
.9ˆ
|
|
Amended and Restated Employment Agreement dated
February 15, 1999, between Cal Dive International, Inc.
(predecessor to Helix Energy Solutions Group, Inc.) and Scott T.
Naughton, incorporated by reference to Exhibit 10.9 to the
Registration Statement on
Form S-1
(File
No. 333-134609),
initially filed by the registrant with the Securities and
Exchange Commission on May 31, 2006, as amended.
|
|
10
|
.10ˆ
|
|
Employment Agreement dated February 1, 2003, between Cal
Dive International, Inc. (predecessor to Helix Energy Solutions
Group, Inc.) and G. Kregg Lunsford, incorporated by reference to
Exhibit 10.10 to the Registration Statement on
Form S-1
(File
No. 333-134609),
initially filed by the registrant with the Securities and
Exchange Commission on May 31, 2006, as amended.
|
|
10
|
.11
|
|
Credit Agreement dated November 20, 2006, among CDI Vessel
Holdings LLC, Cal Dive International, Inc., Bank of America,
N.A., as Administrative Agent, Amegy Bank National Association,
as Documentation Agent, Banc of America Securities LLC and
J.P. Morgan Securities, Inc., as Joint Lead Arrangers and
Joint Book Runners, and the lenders from time to time party
thereto, incorporated by reference to Exhibit 10.11 to the
Registration Statement on
Form S-1
(File
No. 333-134609),
initially filed by the registrant with the Securities and
Exchange Commission on May 31, 2006, as amended.
|
|
10
|
.12
|
|
Amendment No. 1 to Credit Agreement dated as of
December 15, 2006, by and among CDI Vessel Holdings LLC,
Cal Dive International, Inc. and Bank of America, N.A., as
Administrative Agent, and the lenders from time to time party
thereto, incorporated by reference to Exhibit 10.12 to the
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.13ˆ
|
|
Summary of 2007 Executive Officer Cash Compensation,
incorporated by reference to Exhibit 10.13 to the Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.14
|
|
Post-Closing Employee Matters Agreement dated February 1,
2007, between Cal Dive International, Inc. and Helix Energy
Solutions Group, Inc., incorporated by reference to
Exhibit 10.1 to the Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007, filed by
registrant with the Securities and Exchange Commission on
May 4, 2007.
|
|
10
|
.15
|
|
Form of Indemnity Agreement by and between Cal Dive
International, Inc. and each of its directors and named
executive officers, incorporated by reference to
Exhibit 10.2 to the Current Report on
Form 8-K,
filed by registrant with the Securities and Exchange Commission
on May 11, 2007.
|
|
*21
|
.1
|
|
Subsidiaries of Cal Dive International, Inc.
|
|
**23
|
.1
|
|
Consent of Ernst & Young LLP.
|
|
**23
|
.2
|
|
Consent of Grant Thornton LLP.
|
|
*23
|
.3
|
|
Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit 5.1).
|
|
**23
|
.4
|
|
Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit 8.1).
|
|
**23
|
.5
|
|
Consent of Jones, Walker, Waechter, Poitevent,
Carrère & Denègre, L.L.P. (included in
Exhibit 8.2).
|
|
*23
|
.6
|
|
Consent of Spears & Associates, Inc.
|
|
*24
|
.1
|
|
Powers of Attorney.
|
|
*99
|
.1
|
|
Form of Proxy of Horizon Offshore, Inc.
|
|
*99
|
.2
|
|
Consent of Prospective Director for David W. Sharp.
|
|
*99
|
.3
|
|
Consent of Prospective Director for John T. Mills.
|
|
|
|
|
|
ˆ
|
|
|
|
Management contract or compensatory plan or arrangement.
|
II-3
|
|
|
|
|
*
|
|
|
|
Previously filed.
|
**
|
|
|
|
Filed herewith.
|
(b) Financial Statement Schedules.
All financial statement schedules are omitted because the
information is not required or because the information required
is in the financial statements or notes thereto.
(a) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrants annual report
pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plans annual report pursuant
to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(b) The undersigned registrant hereby undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement, by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the
applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(c) The undersigned registrant undertakes that every
prospectus (i) that is filed pursuant to the paragraph
immediately preceding, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act of
1933 and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used
until such amendment is effective, and that for purposes of
determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered
therein and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into
the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
Form, within one business day of receipt of such request, and to
send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the
registration statement through the date of responding to the
request.
The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration
statement when it became effective.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers or controlling persons of the registrant pursuant to
the foregoing provisions, or otherwise, the registrant has been
informed that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933
and will be governed by the final adjudication of such issue.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 3 to
Registration Statement on
Form S-4
to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Houston, State of Texas, on the
2nd day of November, 2007.
CAL DIVE INTERNATIONAL, INC.
|
|
|
|
By:
|
/s/ G.
Kregg Lunsford
|
G. Kregg Lunsford
Executive Vice President,
Chief Financial Officer and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 3 to Registration Statement on
Form S-4
has been signed by the following persons in the capacities
indicated on the 2nd day of November, 2007.
|
|
|
|
|
Signature
|
|
Title
|
|
|
|
|
*
Todd
A. Dittmann
|
|
Director
|
|
|
|
*
David
E. Preng
|
|
Director
|
|
|
|
*
William
L. Transier
|
|
Director
|
|
|
|
*
Owen
Kratz
|
|
Director
|
|
|
|
*
Martin
R. Ferron
|
|
Director
|
|
|
|
*
Quinn
J. Hébert
|
|
President, Chief Executive Officer and Director
(Principal Executive Officer)
|
|
|
|
/s/ G.
Kregg Lunsford
G.
Kregg Lunsford
|
|
Executive Vice President, Chief Financial Officer and
Treasurer
(Principal Financial and Accounting Officer)
|
|
|
|
|
|
*By:
|
|
/s/ G.
Kregg Lunsford
G.
Kregg Lunsford
As Attorney-in-Fact
|
|
|
II-5
EXHIBIT INDEX
|
|
|
|
|
|
2
|
.1
|
|
Agreement and Plan of Merger, dated as of June 11, 2007, by
and among Cal Dive International, Inc., Cal Dive Acquisition,
LLC and Horizon Offshore, Inc., incorporated by reference to
Exhibit 2.1 to the Current Report on
Form 8-K,
filed by the registrant with the Securities and Exchange
Commission on June 12, 2007.
|
|
3
|
.1
|
|
Amended and Restated Certificate of Incorporation of Cal Dive
International, Inc., incorporated by reference to
Exhibit 3.1 to the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
3
|
.2
|
|
Amended and Restated Bylaws of Cal Dive International, Inc.,
incorporated by reference to Exhibit 3.2 to the Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by the
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
4
|
.1
|
|
Specimen Common Stock certificate of Cal Dive International,
Inc., incorporated by reference to Exhibit 4.1 to the
Registration Statement on
Form S-1
(File
No. 333-134609),
initially filed by the registrant with the Securities and
Exchange Commission on May 31, 2006, as amended.
|
|
*5
|
.1
|
|
Opinion of Fulbright & Jaworski L.L.P., counsel to the
registrant, regarding the legality of the common stock to be
offered hereby.
|
|
**8
|
.1
|
|
Opinion of Fulbright & Jaworski L.L.P. regarding tax
matters.
|
|
**8
|
.2
|
|
Opinion of Jones, Walker, Waechter, Poitevent,
Carrère & Denègre, L.L.P. regarding tax
matters.
|
|
10
|
.1
|
|
Master Agreement between Cal Dive International, Inc. and Helix
Energy Solutions Group, Inc., incorporated by reference to
Exhibit 10.1 to the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.2
|
|
Corporate Services Agreement between Cal Dive International,
Inc. and Helix Energy Solutions Group, Inc., incorporated by
reference to Exhibit 10.2 to the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.3
|
|
Registration Rights Agreement between Cal Dive International,
Inc. and Helix Energy Solutions Group, Inc., incorporated by
reference to Exhibit 10.3 to the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.4
|
|
Tax Matters Agreement between Cal Dive International, Inc. and
Helix Energy Solutions Group, Inc., incorporated by reference to
Exhibit 10.4 to the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.5
|
|
Employee Matters Agreement between Cal Dive International, Inc.
and Helix Energy Solutions Group, Inc., incorporated by
reference to Exhibit 10.5 to the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.6ˆ
|
|
Cal Dive International, Inc. Amended and Restated 2006 Long Term
Incentive Plan, incorporated by reference to Exhibit 10.1
to the Current Report on
Form 8-K,
filed by registrant with the Securities and Exchange Commission
on May 11, 2007.
|
|
10
|
.7ˆ
|
|
Form of Restricted Stock Agreement for 2006 Grants to Quinn J.
Hébert, Scott T. Naughton, G. Kregg Lunsford, and Lisa
M. Buchanan, incorporated by reference to Exhibit 10.7 to
the Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.8ˆ
|
|
Employment Agreement dated November 1, 2005, between Cal
Dive International, Inc. (predecessor to Helix Energy Solutions
Group, Inc.) and Quinn J. Hébert, incorporated by reference
to Exhibit 10.8 to the Registration Statement on
Form S-1
(File
No. 333-134609),
initially filed by the registrant with the Securities and
Exchange Commission on May 31, 2006, as amended.
|
|
|
|
|
|
|
10
|
.9ˆ
|
|
Amended and Restated Employment Agreement dated
February 15, 1999, between Cal Dive International, Inc.
(predecessor to Helix Energy Solutions Group, Inc.) and Scott T.
Naughton, incorporated by reference to Exhibit 10.9 to the
Registration Statement on
Form S-1
(File
No. 333-134609),
initially filed by the registrant with the Securities and
Exchange Commission on May 31, 2006, as amended.
|
|
10
|
.10ˆ
|
|
Employment Agreement dated February 1, 2003, between Cal
Dive International, Inc. (predecessor to Helix Energy Solutions
Group, Inc.) and G. Kregg Lunsford, incorporated by reference to
Exhibit 10.10 to the Registration Statement on
Form S-1
(File
No. 333-134609),
initially filed by the registrant with the Securities and
Exchange Commission on May 31, 2006, as amended.
|
|
10
|
.11
|
|
Credit Agreement dated November 20, 2006, among CDI Vessel
Holdings LLC, Cal Dive International, Inc., Bank of America,
N.A., as Administrative Agent, Amegy Bank National Association,
as Documentation Agent, Banc of America Securities LLC and
J.P. Morgan Securities, Inc., as Joint Lead Arrangers and
Joint Book Runners, and the lenders from time to time party
thereto, incorporated by reference to Exhibit 10.11 to the
Registration Statement on
Form S-1
(File
No. 333-134609),
initially filed by the registrant with the Securities and
Exchange Commission on May 31, 2006, as amended.
|
|
10
|
.12
|
|
Amendment No. 1 to Credit Agreement dated as of
December 15, 2006, by and among CDI Vessel Holdings LLC,
Cal Dive International, Inc. and Bank of America, N.A., as
Administrative Agent, and the lenders from time to time party
thereto, incorporated by reference to Exhibit 10.12 to the
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.13ˆ
|
|
Summary of 2007 Executive Officer Cash Compensation,
incorporated by reference to Exhibit 10.13 to the Annual
Report on
Form 10-K
for the fiscal year ended December 31, 2006, filed by
registrant with the Securities and Exchange Commission on
March 1, 2007.
|
|
10
|
.14
|
|
Post-Closing Employee Matters Agreement dated February 1,
2007, between Cal Dive International, Inc. and Helix Energy
Solutions Group, Inc., incorporated by reference to
Exhibit 10.1 to the Quarterly Report on
Form 10-Q
for the fiscal quarter ended March 31, 2007, filed by
registrant with the Securities and Exchange Commission on
May 4, 2007.
|
|
10
|
.15
|
|
Form of Indemnity Agreement by and between Cal Dive
International, Inc. and each of its directors and named
executive officers, incorporated by reference to
Exhibit 10.2 to the Current Report on
Form 8-K,
filed by registrant with the Securities and Exchange Commission
on May 11, 2007.
|
|
*21
|
.1
|
|
Subsidiaries of Cal Dive International, Inc.
|
|
**23
|
.1
|
|
Consent of Ernst & Young LLP.
|
|
**23
|
.2
|
|
Consent of Grant Thornton LLP.
|
|
*23
|
.3
|
|
Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit 5.1).
|
|
**23
|
.4
|
|
Consent of Fulbright & Jaworski L.L.P. (included in
Exhibit 8.1).
|
|
**23
|
.5
|
|
Consent of Jones, Walker, Waechter, Poitevent,
Carrère & Denègre, L.L.P. (included in
Exhibit 8.2).
|
|
*23
|
.6
|
|
Consent of Spears & Associates, Inc.
|
|
*24
|
.1
|
|
Powers of Attorney.
|
|
*99
|
.1
|
|
Form of Proxy of Horizon Offshore, Inc.
|
|
*99
|
.2
|
|
Consent of Prospective Director for David W. Sharp.
|
|
*99
|
.3
|
|
Consent of Prospective Director for John T. Mills.
|
|
|
|
|
|
ˆ
|
|
|
|
Management contract or compensatory plan or arrangement.
|
*
|
|
|
|
Previously filed.
|
**
|
|
|
|
Filed herewith.
|