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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
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[ ] Soliciting Material Pursuant to Section 240.14a-12
Cal Dive International, Inc.
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(Name of Registrant as Specified In Its Charter)
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SEC 1913 (02-02)
(CAL DIVE LOGO)
CAL DIVE INTERNATIONAL, INC.
400 N. SAM HOUSTON PARKWAY E., SUITE 400
HOUSTON, TEXAS 77060
TELEPHONE: 281-618-0400
APRIL 14, 2004
Dear Shareholder:
You are cordially invited to join us for our Annual Meeting of Shareholders
to be held this year on Tuesday, May 11, 2004 at 11:00 a.m. in Salon No. 1 at
the Wyndham Hotel, 12400 Greenspoint Drive, Houston, Texas 77060. Beginning at
10:30 a.m., employees and officers will be available to provide information
about 2003 developments.
The Notice of Annual Meeting of Shareholders and the Proxy Statement that
follow describe the business to be conducted at the meeting. We will also report
on industry matters of current interest to our shareholders.
YOUR VOTE IS IMPORTANT. Whether you own a few or many shares of stock, it
is important that your shares be represented. If you cannot attend the Annual
Meeting in person, please complete and sign the enclosed Proxy Card and promptly
return it in the envelope provided.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ JAMES LEWIS CONNOR, III
James Lewis Connor, III
Corporate Secretary
VOTING METHOD
If you are a shareholder of record, or hold shares through the Cal Dive
International, Inc. Employee Stock Purchase Plan (the "Cal Dive Stock Plan"),
you may vote your shares by mail. You may also revoke your proxy any time before
the Annual Meeting. Due to the small number of our record Shareholders (non
"street-name"), we have elected to forgo the high cost of internet and telephone
voting. To vote by mail:
- Mark your selections on the Proxy Card.
- Date and sign your name exactly as it appears on your Proxy Card.
- Mail the Proxy Card in the enclosed postage-paid envelope provided.
IF YOUR SHARES ARE HELD IN "STREET NAME" THROUGH A BROKER, BANK OR OTHER
THIRD PARTY, YOU WILL RECEIVE INSTRUCTIONS FROM THAT THIRD PARTY (WHO IS THE
HOLDER OF RECORD) WHICH YOU MUST FOLLOW IN ORDER FOR YOUR SHARES TO BE VOTED.
YOUR OPINION IS IMPORTANT. THANK YOU FOR VOTING.
INTERNET AVAILABILITY OF ANNUAL MEETING MATERIALS
We are pleased to offer shareholders the ability to review the 2003 Form 10-K
and Proxy materials electronically over the internet at the Cal Dive web site
(www.caldive.com) by clicking Investor Relations then SEC Filings then Click
here to continue on to view SEC Filings. These filings may also be viewed
through the Securities and Exchange Commission website at www.sec.gov. Our 2003
Annual Report may also be viewed over the internet at the Cal Dive web site by
clicking Investor Relations then Financial Reports.
CAL DIVE INTERNATIONAL, INC.
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
TIME:.................................. 11:00 a.m. (CDT) on Tuesday, May 11,
2004
PLACE:................................. Wyndham Hotel
Salon No. 1
12400 Greenspoint Drive
Houston, Texas 77060
ITEMS OF BUSINESS:..................... 1. To elect three (3) Class I
Directors.
2. To take action on any other
business that may properly be
considered at the Annual Meeting or
any adjournment thereof.
RECORD DATE:........................... You may vote at the Annual Meeting if
you are a shareholder of record at
the close of business on March 24,
2004.
VOTING BY PROXY:....................... If you cannot attend the Annual
Meeting, you may vote your shares by
completing and promptly returning the
enclosed Proxy Card in the envelope
provided.
ANNUAL REPORTS:........................ Cal Dive's 2003 Annual Report and
Form 10-K, which are not part of the
proxy soliciting material, are
enclosed.
By Order of the Board of
Directors,
/s/ JAMES LEWIS CONNOR, III
James Lewis Connor, III
Corporate Secretary
This Notice of Annual Meeting, Proxy Statement and accompanying Proxy Card
are being distributed on or about April 14, 2004.
i
TABLE OF CONTENTS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS.................... i
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING..... 1
PROPOSAL 1. ELECTION OF DIRECTORS........................... 2
BOARD OF DIRECTORS.......................................... 6
Board of Directors Independence........................... 6
Attendance at the Annual Meeting of Shareholders.......... 6
Communications with the Board............................. 7
Sources for New Nominees.................................. 7
COMMITTEES OF THE BOARD AND MEETINGS........................ 7
Audit Committee........................................... 7
Compensation Committee.................................... 8
Executive Committee....................................... 9
Corporate Governance and Nominating Committee............. 9
DIRECTOR COMPENSATION....................................... 10
CERTAIN TRANSACTIONS........................................ 11
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 11
INDEPENDENT AUDITOR FEE INFORMATION......................... 12
REPORT OF AUDIT COMMITTEE................................... 12
SHARE OWNERSHIP INFORMATION................................. 14
Five Percent Owners....................................... 14
Management Shareholdings.................................. 16
Section 16(a) Beneficial Ownership Reporting Compliance... 16
SHAREHOLDER RETURN PERFORMANCE GRAPH........................ 17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION............................................. 18
REPORT OF THE COMPENSATION COMMITTEE ON FISCAL 2003
EXECUTIVE COMPENSATION.................................... 18
EXECUTIVE COMPENSATION...................................... 20
Summary Compensation Table................................ 20
Option Grants in Last Fiscal Year......................... 21
Aggregated Option Exercises in Last Fiscal Year and Fiscal
Year-End Option Values................................. 21
Summary of Employment Contracts........................... 21
Omnibus Budget Reconciliation Act of 1994................. 22
EQUITY COMPENSATION PLAN INFORMATION........................ 23
OTHER INFORMATION........................................... 23
YOUR VOTE IS IMPORTANT
If you are a shareholder of record, please complete, date and sign your
Proxy Card and return it as soon as possible in the enclosed envelope. If not,
please respond promptly when you receive proxy materials from your broker.
ii
(CAL DIVE SMALL LOGO)
CAL DIVE INTERNATIONAL, INC.
400 N. SAM HOUSTON PARKWAY E., SUITE 400
HOUSTON, TEXAS 77060
TELEPHONE: (281) 618-0400
---------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 11, 2004
---------------------
We are providing these proxy materials in connection with the solicitation
by the Board of Directors of Cal Dive International, Inc. of proxies to be voted
at Cal Dive's Annual Meeting of Shareholders to be held on May 11, 2004, and at
any adjournment of the Annual Meeting.
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
WHO MAY VOTE AT THE ANNUAL MEETING?
The Board has set March 24, 2004 as the record date for the Annual Meeting.
If you were the owner of Cal Dive common stock at the close of business on March
24, 2004, you may vote at the Annual Meeting. You are entitled to one vote for
each share of common stock you held on the record date, including shares:
- Held directly in your name with our transfer agent, Wells Fargo Bank
Minnesota, N.A., as "shareholder of record".
- Held for you in an account with a broker, bank or other nominee (shares
held in "street name").
- Credited to your account in the Cal Dive Stock Plan.
Each share of our common stock has one vote on each matter to be voted on.
HOW MANY SHARES MUST BE PRESENT TO HOLD THE ANNUAL MEETING?
A majority of Cal Dive's outstanding common shares as of the record date
must be present at the Annual Meeting in order to hold the meeting and conduct
business. This is called a quorum. On the record date, there were 38,027,028
shares of Cal Dive common stock outstanding held by approximately 4,750
beneficial owners. Shares are counted as present at the Annual Meeting if you:
- are present and vote in person at the Annual Meeting; or
- have properly submitted a Proxy Card.
WHAT PROPOSALS WILL BE VOTED ON AT THE ANNUAL MEETING?
The only two matter currently scheduled to be voted on at the Annual
Meeting is:
PROPOSAL 1: THE ELECTION OF THREE "CLASS I" DIRECTORS
HOW MANY VOTES ARE REQUIRED TO APPROVE EACH PROPOSAL?
The election of each Director nominee requires the affirmative "FOR" vote
of a majority of the shares present in person, or by proxy, at the Annual
Meeting and entitled to vote on the election of Directors. Any other proposal
being voted on requires the affirmative "FOR" vote of a majority of the shares
present in person or by proxy at the meeting and entitled to vote on that
proposal.
HOW ARE VOTES COUNTED?
You may either vote "FOR" or "WITHHOLD AUTHORITY" to vote for each nominee
for the Board of Directors. You may vote "FOR," "AGAINST" or "ABSTAIN" on any
other proposals. If you vote to "WITHHOLD AUTHORITY" to vote on the election of
Directors, your shares will not be considered entitled to vote on the election
of Directors. If you vote to "ABSTAIN" from voting on other proposals, it has
the same effect as a vote against those proposals. IF YOU JUST SIGN AND SUBMIT
YOUR PROXY CARD WITHOUT VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED "FOR"
EACH DIRECTOR NOMINEE AND "FOR" EACH OF THE OTHER PROPOSALS, IF ANY.
If you hold your shares in street name and do not provide voting
instructions to your broker, your shares will not be voted on any proposal on
which your broker does not have discretionary authority to vote. In this
situation, a "broker non-vote" occurs. Shares that constitute broker non-votes
are not considered as entitled to vote on the proposal in question, thus
effectively reducing the number of shares needed to approve the proposal to
elect Directors.
HOW DOES THE BOARD RECOMMEND THAT I VOTE?
Cal Dive's Board recommends that you vote your shares "FOR" each of the
Director nominees in PROPOSAL 1.
HOW DO I VOTE MY SHARES WITHOUT ATTENDING THE MEETING?
Whether you hold shares directly, in the Cal Dive Stock Plan or in street
name, you may direct your vote without attending the Annual Meeting. If you are
a shareholder of record or hold shares through the Cal Dive Stock Plan, you may
vote directly by proxy. For shares held in street name, you may vote by
submitting voting instructions to your broker or nominee.
If you are a shareholder of record or hold stock through the Cal Dive Stock
Plan, you may vote by mail by signing and dating your Proxy Card and mailing it
in the envelope provided. You should sign your name exactly as it appears on the
Proxy Card. If you are signing in a representative capacity (for example as
guardian, executor, trustee, custodian, attorney or officer of a corporation),
you should indicate your name and such title or capacity. For shares held in
street name, you should follow the voting directions provided by your broker or
nominee. You may complete and mail a voting instruction card to your broker or
nominee or, in most cases, submit voting instructions by telephone or the
internet. If you provide specific voting instructions in accordance with the
directions provided by your broker or nominee, your shares will be voted by your
broker or nominee as you have directed.
HOW DO I VOTE MY SHARES IN PERSON AT THE MEETING?
If you are a shareholder of record or hold stock through the Cal Dive Stock
Plan, to vote your shares at the meeting you should bring the enclosed Proxy
Card and proof of identification. You may vote shares held in
2
street name at the meeting only if you obtain a signed proxy from the record
holder (broker or other nominee) giving you the right to vote the shares.
Even if you plan to attend the meeting, we encourage you to vote by Proxy
Card, so your vote will be counted even if you later decide not to attend the
Annual Meeting.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
It means you hold shares registered in more than one account. To ensure
that all your shares are voted, please sign and return each Proxy Card.
MAY I CHANGE MY VOTE?
Yes, you may change your vote and revoke your proxy by:
- Sending a written statement to that effect to the Corporate Secretary of
Cal Dive;
- Submitting a properly signed Proxy Card with a later date; or
- Voting in person at the Annual Meeting.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors currently consists of nine members and is divided
into three classes of similar size. The members of each class are elected to
serve a three-year term with the term of office of each class ending in
successive years. Owen Kratz, Bernard J. Duroc-Danner and John V. Lovoi are the
Directors whose terms expire at this Annual Meeting and who have been nominated
for re-election to the Board to serve until the 2007 Annual Meeting or until
their successors are elected and qualified. All of these nominees are currently
Directors. Messrs. Kratz and Duroc-Danner were elected to the Board of Directors
by the shareholders. Mr. Lovoi was elected in 2003 by the Board of Directors as
a Class I Director to serve until the 2004 Annual Meeting or until his successor
is elected and qualified.
All of the nominees have indicated a willingness to serve if elected.
However, if any nominee becomes unable to serve before the election, the shares
represented by proxies may be voted for a substitute designated by the Board,
unless a contrary instruction is indicated on the proxy.
THE BOARD RECOMMENDS A VOTE FOR THESE THREE NOMINEES.
NOMINEES FOR DIRECTOR FOR THREE YEAR TERMS ENDING IN 2007 (CLASS I):
(OWEN KRATZ PHOTO) Owen Kratz Director since 1990
Chairman of the Board and Chief Executive Officer age 49
Cal Dive International, Inc.
Mr. Kratz is Chairman and Chief Executive Officer of Cal Dive International,
Inc. He was appointed Chairman in May 1998 and has served as the Company's
Chief Executive Officer since April 1997. Mr. Kratz served as President from
1993 until February 1999, and a Director since 1990. He served as Chief
Operating Officer from 1990 through 1997. Mr. Kratz joined the Company in 1984
and has held various offshore positions, including saturation (SAT) diving
supervisor, and has had management responsibility for client relations,
marketing and estimating. From 1982 to 1983, he was the owner of an
independent marine construction company operating in the Bay of Campeche.
Prior to 1982, he was a superintendent for Santa Fe and various international
diving companies and a saturation diver in the North Sea.
3
(BERNARD J. DUROC-DANNER Bernard J. Duroc-Danner Director since 1999
PHOTO) Chairman of the Board, Chief Executive Officer and age 50
President
Weatherford International, Ltd.
Mr. Duroc-Danner has served on the Company's Board of Directors since February
1999. He is the Chairman of the Board, Chief Executive Officer and President
of Weatherford International Ltd. Prior to its merger with Weatherford
Enterra, Inc., Mr. Duroc-Danner was President and Chief Executive Officer of
EVI, Inc., where he was directly responsible for the company's 1987 start up
in the oilfield service and equipment business. Mr. Duroc-Danner also serves
as a director of Dresser, Inc., a provider of highly engineered equipment and
services, primarily for the energy industry; Universal Compression, a provider
of rental, sales, operations, maintenance and fabrication services and
products to the domestic and international natural gas industry; and Parker
Drilling Company, a provider of contract drilling and drilling services. Mr.
Duroc-Danner holds a Ph.D. in economics from The Wharton School of the
University of Pennsylvania.
(JOHN V. LOVOI PHOTO) John V. Lovoi Director since 2003
Principal age 43
JVL Partners
Mr. Lovoi has served as a Director since February 2003. He is a founder of JVL
Partners, a private oil and gas investment partnership. Mr. Lovoi served as
head of Morgan Stanley's global oil and gas investment banking practice from
2000 to 2002, and was a leading oilfield services and equipment research
analyst for Morgan Stanley from 1995-2000. Prior to joining Morgan Stanley in
1995, he spent two years as a senior financial executive at Baker Hughes and
four years as an energy investment banker with Credit Suisse First Boston. Mr.
Lovoi also serves as a director of KFX Inc., a clean energy technology company
engaged in providing technology and service solutions to the power generation
industry. Mr. Lovoi graduated from Texas A&M University with a bachelor of
science degree in chemical engineering and received a MBA from the University
of Texas.
DIRECTORS CONTINUING IN OFFICE UNTIL 2005 (CLASS III):
(MARTIN FERRON PHOTO) Martin Ferron Director since 1998
President and Chief Operating Officer age 47
Cal Dive International, Inc.
Mr. Ferron has served on the Company's Board of Directors since September
1998. He became President in February 1999 and has served as Chief Operating
Officer since January 1998. Mr. Ferron has more than twenty-two 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 the Company.
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 MBA from the University of Aberdeen. Mr. Ferron is also a
Chartered Civil Engineer.
4
(GORDON F. AHALT PHOTO) Gordon F. Ahalt Director since 1990
Retired Consultant age 76
Mr. Ahalt has served on the Company's Board of Directors since July 1990.
Since 1982, Mr. Ahalt has been the President of GFA, Inc., a petroleum
industry management and financial consulting firm. From 1977 to 1980, he was
President of the International Energy Bank, London, England. From 1980 to
1982, he served as Senior Vice President and Chief Financial Officer of
Ashland Oil Company. Prior thereto, he spent a number of years in executive
positions with Chase Manhattan Bank. Mr. Ahalt also serves as a director of
The Houston Exploration Company, Bancroft & Elsworth Convertible Funds and
other private investment funds. Mr. Ahalt received a B.S. Degree in Petroleum
Engineering in 1951 from the University of Pittsburgh.
(ANTHONY TRIPODO PHOTO) Anthony Tripodo Director since 2003
Managing Director age 51
Arch Creek Advisors LLC
Mr. Tripodo has served on our Board of Directors since February 2003. He is a
Managing Director of Arch Creek Advisors LLC, a Houston based investment
banking firm. From 2002 to 2003, Mr. Tripodo was Executive Vice President of
Veritas DGC, Inc., an international oilfield service company specializing in
geophysical services. Prior to becoming Executive Vice President, he was
President of Veritas DGC's North and South American Group, which consists of
four operating divisions: marine acquisition, processing, exploration services
and multi-client data library. From 1997 to 2001, he was Executive Vice
President, Chief Financial Officer and Treasurer of Veritas. Previously, Mr.
Tripodo served 16 years in various executive capacities with Baker Hughes,
including serving as Chief Financial Officer of both the Baker Performance
Chemicals and the Baker Oil Tools divisions. Mr. Tripodo also serves as a
director of Petroleum Geo-Services, a Norwegian based oilfield services
company. He graduated summa cum laude with a bachelor of arts degree from St.
Thomas University.
DIRECTORS CONTINUING IN OFFICE UNTIL 2006 (CLASS II):
(S. JAMES NELSON, JR. S. James Nelson, Jr. Director since 1990
PHOTO) Vice Chairman age 61
Cal Dive International, Inc.
Mr. Nelson is Vice Chairman and has been a Director of the Company since 1990.
He was named Vice Chairman in October 2000. Prior thereto, he was Executive
Vice President and Chief Financial Officer from 1990 to 2000. From 1985 to
1988, Mr. Nelson was the Senior Vice President and Chief Financial Officer of
Diversified Energies, Inc., the former parent of Cal Dive, at which time he
had corporate responsibility for the Company. From 1980 to 1985, Mr. Nelson
served as Chief Financial Officer of Apache Corporation, an oil and gas
exploration and production company. From 1966 to 1980, Mr. Nelson was employed
with Arthur Andersen L.L.P. and from 1976 to 1980, he was a partner serving on
the firm's worldwide oil and gas industry team. He received his B.S. degree
from Holy Cross College in 1964 and an MBA from Harvard University in 1966.
5
(T. WILLIAM PORTER, III T. William Porter, III Director since 2004
PHOTO) Chairman age 62
Porter & Hedges, L.L.P.
Mr. Porter has served on our Board of Directors since March 2004. He is the
Chairman and a founding partner of Porter & Hedges, L.L.P., a Houston law firm
formed in 1981. Mr. Porter also serves as a director of Gundle/SLT
Environmental, Inc., a manufacturer and marketer of geosynthetic lining
solutions, products and installation services around the world, and as a
director of U.S. Concrete, Inc., a value-added provider of ready-mixed
concrete and related products and services to the construction industry in
several major markets in the United States. Mr. Porter graduated with a B.B.A.
in Finance from Southern Methodist University in 1963 and received his law
degree (LL.B.) from Duke University in 1966.
(WILLIAM L. TRANSIER William L. Transier Director since 2000
PHOTO) Co-Chief Executive Officer age 49
Endeavour International Corporation
Mr. Transier has served on our Board of Directors since October 2000. He is
Co-Chief Executive Officer of Endeavour International Corporation, an
international oil and gas exploration and production company focused on energy
resources in the North Sea. 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 and has an MBA from Regis University. He is also a
director of Reliant Resources, Inc.
At the February 2004 regular Board meeting, the Board elected Mr. T.
William Porter as a Class II Director, with a term expiring in 2006, effective
March 2004. In addition, Mr. Nelson has announced that he will retire from the
Company and the Board effective June 15, 2004, although he will continue to
serve as a consultant to the Company. Due to Mr. Porter's election, the Board
does not intend to fill the vacancy created by Mr. Nelson's retirement.
BOARD OF DIRECTORS
BOARD OF DIRECTORS INDEPENDENCE
The Board has affirmatively determined that the following members of the
Board are "independent directors", as that term is defined under NASDAQ Rule
4200(a)(15): Messrs. Ahalt, Duroc-Danner, Lovoi, Porter, Tripodo and Transier.
The non-independent, management directors are Messrs. Kratz, Ferron and Nelson.
Accordingly, a majority of the members of the Board of Directors are
independent, as required by NASDAQ Rule 4350(c)(1).
ATTENDANCE AT THE ANNUAL MEETING OF SHAREHOLDERS
The Company's Board of Directors holds a regular meeting immediately
preceding each year's Annual Meeting of Shareholders. Therefore, members of the
Company's Board of Directors generally attend the Company's Annual Meetings of
Shareholders. Seven members of the Board attended the 2003 Annual Meeting of
Shareholders.
6
COMMUNICATIONS WITH THE BOARD
Any stockholder or other interested party wishing to send written
communications to any one or more of the Company's Board of Directors may do so
by sending them in care of the Corporate Secretary at the Company's principal
executive offices. All such communications will be forwarded to the intended
recipient(s).
SOURCES FOR NEW NOMINEES
Messrs. Kratz, Duroc-Danner and Lovoi are directors standing for
re-election. The Company did not utilize any third party search firms to assist
in identifying potential director candidates during 2003. The Corporate
Secretary did not receive any recommendations of director candidates from any
shareholder or group of shareholders during 2003.
COMMITTEES OF THE BOARD AND MEETINGS
The following table summarizes the membership of the Board and each of its
Committees as well as the number of times each met during the year ending
December 31, 2003. Members were elected to these committees in April 2003 by a
vote of the Board of Directors.
CORPORATE
GOVERNANCE
AND
BOARD AUDIT COMPENSATION EXECUTIVE NOMINATING
------ ------ ------------ --------- ----------
Mr. Kratz............................. Chair -- -- Chair --
Mr. Ferron............................ Member -- -- -- --
Mr. Nelson............................ Member -- -- -- --
Mr. Ahalt............................. Member Member Member Member --
Mr. Duroc-Danner...................... Member -- Member Member Chair
Mr. Lovoi(1).......................... Member -- Member Member Member
Mr. Porter(2)......................... -- -- -- -- --
Mr. Transier.......................... Member Chair Chair Member Member
Mr. Tripodo(1)........................ Member Member Member Member --
Number of Meetings in 2003
Regular............................. 4 10 4 0 1
Special............................. 3 0 1 0 0
Each Director attended 75% or more of the total meetings of the Board and
Board Committees on which such Director served (held during the period he served
as a Director), other than Mr. Porter who was not a member of the Board in 2003.
---------------
(1) Messrs. Lovoi and Tripodo joined the Board in February 2003.
(2) Mr. Porter joined the Board in March 2004.
AUDIT COMMITTEE
The Audit Committee is appointed by the Board of Directors to assist the
Board in fulfilling their oversight responsibility to the shareholders,
potential shareholders, the investment community and others relating to: (1) the
integrity of the financial statements of the Company; (2) the compliance by the
Company with applicable legal and regulatory requirements related to disclosure;
(3) the performance of the Company's internal audit function and independent
auditors; and (4) the independent auditor's qualifications and
7
independence. Among the duties of the Audit Committee, all of which are more
specifically described in the Audit Committee Charter (attached hereto as Annex
A), the Audit Committee:
- Reviews and selects the independent auditor.
- Reviews the adequacy of accounting and audit principles and practices and
of compliance assurance procedures and internal controls.
- Reviews and pre-approves all non-audit services performed by auditors to
maintain auditor independence.
- Reviews scope of annual audit.
- Reviews with management and the independent auditor the Company's annual
and quarterly financial statements, including disclosures made in
management's discussion and analysis and the Company's earnings press
releases.
- Meets independently with management and independent auditors.
- Reviews corporate compliance and disclosure systems.
- Makes regular reports to the Board of Directors.
- Reviews and reassesses the adequacy of its charter annually and
recommends any proposed changes to the Board of Directors for approval.
- Reviews annually the Audit Committee's own performance.
AUDIT COMMITTEE INDEPENDENCE
The Board has affirmatively determined that all members of the Audit
Committee: (i) are considered "independent" as defined under NASDAQ Rule
4200(a)(15) and (ii) meet the criteria for independence set forth in Exchange
Act Rule 10A-3(b)(1).
DESIGNATION OF AUDIT COMMITTEE FINANCIAL EXPERT
The Board has determined that each of the members of the Audit Committee is
financially literate and that William J. Transier and Anthony Tripodo are "audit
committee financial experts," as that term is defined in the rules promulgated
by the Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of
2002.
COMPENSATION COMMITTEE
The Compensation Committee is appointed by the Board to discharge the
Board's responsibilities relating to compensation of the Company's Executive
Officers. The Compensation Committee has overall responsibility for reviewing,
evaluating and approving the Company's executive officer compensation agreements
(to the extent such agreements are considered necessary or appropriate by the
Compensation Committee), plans, policies and programs. The Compensation
Committee is also responsible for producing an annual report on executive
compensation for inclusion in the Company's Proxy and for performing such other
functions as the Board may assign to the Compensation Committee from time to
time, including:
- Review of compensation philosophy and major compensation and benefits
programs for employees.
- Oversight of the 1995 Long Term Incentive Compensation Plan, as amended;
the Employee Retirement and Savings Plan; and the Employee Stock Purchase
Plan.
- Commission and review compensation surveys with respect to executive
officer compensation as compared to the offshore oilfield services
industry and the Company's peer group.
- Review and approval of executive officer compensation and bonuses.
8
EXECUTIVE COMMITTEE
The Executive Committee assists the CEO in evaluating proposed acquisitions
by Cal Dive's subsidiary ERT when approval at a regular or special Board of
Directors meeting is not practical due to time constraints associated with the
proposed transaction. The Executive Committee evaluates and approves, on behalf
of the full Board of Directors, proposed acquisitions by the Company's wholly
owned subsidiary, Energy Resource Technology, Inc., that are: (i) in excess of
$3,000,000; or (ii) outside of the approved capital expenditures budget and
performs such other duties as may be assigned by the Board from time to time.
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
The goal of the Corporate Governance and Nominating Committee is to take
the leadership role in shaping the corporate governance and business standards
of the Company's Board of Directors and the Company. The Corporate Governance
and Nominating Committee consists of no fewer than three members, all of whom
shall meet the independence requirements of the NASD. The members of the
Corporate Governance and Nominating Committee are appointed by the Board of
Directors. The Board of Directors has adopted a written charter for the
Corporate Governance and Nominating Committee, a copy of which is available at
the Company's Website www.caldive.com by clicking Investor Relations then
Corporate Governance.
The Corporate Governance and Nominating Committee identifies individuals
qualified to become Board members, consistent with criteria approved by the
Board; oversees the organization of the Board to discharge the Board's duties
and responsibilities properly and efficiently; and identifies best practices and
recommends corporate governance principles, including giving proper attention
and making effective responses to shareholder concerns regarding corporate
governance. The responsibilities of the Corporate Governance and Nominating
Committee include:
- Identify and evaluate potential qualified director nominees and select or
recommend the director nominees to the Board.
- Monitor, and recommend the members for, each of the committees of the
Board.
- Periodically review and revise the corporate governance principles of the
Company.
- Review and reassess the adequacy of its charter annually and recommend
any proposed changes to the Board for approval.
- Perform such other duties as may be assigned by the Board from time to
time.
CONSIDERATION OF DIRECTOR NOMINEES -- SHAREOWNER NOMINEES
The policy of the Corporate Governance and Nominating Committee is to
consider properly submitted shareowner nominations for candidates for membership
on the Board as described below under "Identifying and Evaluating Nominees for
Directors." In evaluating such nominations, the Corporate Governance and
Nominating Committee seeks to achieve a balance of knowledge, experience and
capability on the Board and to address the membership criteria set forth under
"Director Qualifications." Any shareowner nominations proposed for consideration
by the Corporate Governance and Nominating Committee should include the
nominee's name and qualifications for Board membership and should be addressed
to Corporate Secretary, Cal Dive International, Inc., 400 N. Sam Houston Parkway
E., Suite 400, Houston, Texas 77060. In addition, the bylaws of Cal Dive permit
shareowners to nominate directors for consideration at an annual shareowner
meeting. Shareholders may nominate persons for election to the Board of
Directors in accordance with the procedure set forth on page 23 of this Proxy
Statement.
DIRECTOR QUALIFICATIONS
The Corporate Governance and Nominating Committee has established certain
criteria that apply to Committee-recommended nominees for a position on Cal
Dive's Board. Under these criteria, members of the Board should have the highest
professional and personal ethics and values, consistent with Cal Dive's
9
longstanding values and standards. They should have broad experience at the
policy-making level in business and possess a familiarity with one or more of
the industry segments of the Company. They should be committed to enhancing
shareowner value and should have sufficient time to carry out their duties and
to provide insight and practical wisdom based on experience. Their service on
other boards of public companies should be limited to a number that permits
them, given their individual circumstances, to perform responsibly all director
duties. Each director must represent the interests of all shareowners.
IDENTIFYING AND EVALUATING NOMINEES FOR DIRECTORS
The Corporate Governance and Nominating Committee utilizes a variety of
methods for identifying and evaluating nominees for director. The Corporate
Governance and Nominating Committee regularly assesses the appropriate size of
the Board, and whether any vacancies on the Board are expected due to retirement
or otherwise. In the event that vacancies are anticipated, or otherwise arise,
the Corporate Governance and Nominating Committee considers various potential
candidates for director. Candidates may come to the attention of the Corporate
Governance and Nominating Committee through current Board members, professional
search firms, shareowners or other persons. These candidates are evaluated at
regular or special meetings of the Corporate Governance and Nominating
Committee, and may be considered at any point during the year. As described
above, the Corporate Governance and Nominating Committee considers properly
submitted shareowner nominations for candidates for the Board. Following
verification of the shareowner status of persons proposing candidates,
recommendations are aggregated and considered by the Corporate Governance and
Nominating Committee at a regularly scheduled meeting, which is generally the
first or second meeting prior to the issuance of the proxy statement for Cal
Dive's annual meeting. If any materials are provided by a shareowner in
connection with the nomination of a director candidate, such materials are
forwarded to the Corporate Governance and Nominating Committee. The Corporate
Governance and Nominating Committee may also review materials provided by
professional search firms or other parties in connection with a nominee who is
not proposed by a shareowner. In evaluating such nominations, the Corporate
Governance and Nominating Committee seeks to achieve a balance of knowledge,
experience and capability on the Board.
DIRECTOR COMPENSATION
The Cal Dive International, Inc. non-employee Director compensation plan
has three components: Director fees, expenses and stock options. The Directors
(other than Messrs. Kratz, Nelson and Ferron, who are employed by the Company)
receive an annual Director's fee of $30,000 and $1,000 per Board Meeting for
attending each of four regularly scheduled quarterly meetings together with any
Special Board Meetings. Furthermore, each of the outside Directors receives an
annual Committee retainer fee of $5,000 for each committee on which such
Director serves and a fee of $2,000 ($3,000 for the Chair) for each committee
meeting attended. During the year ended December 31, 2003, Directors (other than
Company employees) received aggregate fees of $312,000. 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.
Pursuant to the Company's 1995 Long Term Incentive Compensation Plan, as
amended (the "1995 Plan"), each non-employee Director receives at approximately
the time he or she join the Board options to purchase 44,000 shares of the
common stock of the Company at an exercise price equal to the fair market value
of the common stock on the date of grant. In addition, after each five years of
service on the Board, non-employee Directors receive additional options to
purchase 44,000 shares of the common stock of the Company at an exercise price
equal to the fair market value of the common stock on the date of grant. As with
other Company options, these vest equally over five years and expire on their
tenth anniversary. As of March 24, 2004, options for 44,000 shares were
outstanding to each of Gordon F. Ahalt, Bernard J. Duroc-Danner, John V. Lovoi,
William L. Transier and Anthony Tripodo.
10
CERTAIN TRANSACTIONS
In April 2000, ERT acquired a 20% working interest in Gunnison, a Deepwater
Gulf of Mexico prospect operated by Kerr-McGee Oil & Gas Corporation. Consistent
with CDI's philosophy of avoiding exploratory risk, financing for the
exploratory costs (initially estimated at $15 million) was provided by an
investment partnership (OKCD Investments, Ltd.), the investors of which include
current and former CDI senior management, in exchange for an overriding royalty
interest of 25% of CDI's 20% working interest. CDI provided no guarantees to the
investment partnership.
At that time, the Board of Directors established three criteria to
determine a commercial discovery and the commitment of Cal Dive funds: 75
million barrels (gross) of reserves, total development costs of $500 million
consistent with 75 MBOE, and a CDI estimated shareholder return of no less than
12%. Kerr-McGee, the operator, drilled several exploration wells and sidetracks
in 3,200 feet of water at Garden Banks 667, 668 and 669 (the Gunnison prospect)
and encountered significant potential reserves resulting in the three criteria
being achieved during 2001. The exploratory phase was expanded to ensure field
delineation resulting in the investment partnership, which assumed the
exploratory risk, funding approximately $20 million of exploratory drilling
costs. With the sanctioning of a commercial discovery, the Company funds ongoing
development and production costs. Cal Dive's share of such project development
costs is estimated in a range of $110 million to $115 million ($104 million of
which had been incurred by December 31, 2003) with over half of that for
construction of the spar. The Company's Chief Executive Officer, as a Class A
limited partner of OKCD, personally owns approximately 57% of the partnership.
Other executive officers of the Company own approximately 6% combined of the
partnership. OKCD has also awarded Class B limited partnership interests to key
CDI employees. Production from the Gunnison field commenced in December 2003.
During 2003 and 2002, the Company was paid $2,238,000 and $200,000,
respectively, by Ocean Energy, Inc. ("Ocean"), an oil and gas industry customer
of subsea services. Mr. Transier, a member of the Company's board of directors,
was Executive Vice President and Chief Financial Officer of Ocean until April
2003.
INDEPENDENT PUBLIC ACCOUNTANTS
On June 13, 2002, the Company's Board of Directors, upon the recommendation
of its Audit Committee, dismissed Arthur Andersen LLP and appointed Ernst &
Young LLP to serve as the Company's independent auditors for fiscal year 2002.
Arthur Andersen's report on Cal Dive's consolidated financial statements
for the fiscal year ended December 31, 2001 did not contain an adverse opinion
or disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles. Additionally, during the fiscal year ended
December 31, 2001 through the date of Arthur Andersen's dismissal, there were no
disagreements with Arthur Andersen on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure which,
if not resolved to Arthur Andersen's satisfaction, would have caused Arthur
Andersen to make reference to the subject matter in connection with its reports
on the Company's consolidated financial statements for such years; and there
were no reportable events, as listed in Item 304(a)(1)(v) of Regulation S-K. The
Company provided Arthur Andersen a copy of the foregoing disclosures and Arthur
Andersen advised the Company by letter dated June 18, 2002, that it has found no
basis for disagreement with such statements.
During the fiscal year ended December 31, 2001 through the date of
engagement of Ernst & Young, the Company did not consult with Ernst & Young with
respect to the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on the Company's consolidated financial statements, or any other
matters or reportable events as set forth in Items 304(a)(2)(i) and (ii) of
Regulation S-K.
Ernst & Young LLP has served as the Company's independent public
accountants providing auditing and financial services since their engagement in
fiscal 2002, and will continue to provide such services during fiscal 2004. We
expect that representatives of Ernst & Young LLP will be present at the Annual
Meeting and will
11
have the opportunity to make a statement if they desire to do so. They will also
be available to respond to appropriate questions.
INDEPENDENT AUDITOR FEE INFORMATION
Fees for professional services (in thousands) provided by our independent
auditors in each of the last two fiscal years in each of the following
categories are:
2002 2003
---- ----
Audit Fees(1)............................................... $301 $543
Audit-Related Fees(2)....................................... 42 89
Tax Fees(3)................................................. 11 42
All Other Fees.............................................. -0- -0-
---- ----
Total....................................................... $354 $674
---------------
(1) Fees related to the audit of the Company's 2002 and 2003 consolidated
financial statements and the review of the Company's interim financial
statements included in its quarterly reports on Form 10-Q.
(2) Audit-related fees included consultations concerning financial accounting
and reporting matters not required by statute or regulation and assistance
with Section 404 internal control reporting requirements.
(3) Fees primarily related to statutory tax returns in the United Kingdom and
Singapore and tax planning, including transfer pricing strategies.
The Audit Committee concluded that the foregoing non-audit services and
non-audit-related services did not adversely affect the independence of Ernst &
Young, LLP.
AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
The Audit Committee has adopted procedures for pre-approving certain audit
and permissible non-audit services provided by the independent auditor. These
procedures include reviewing a budget for audit and permissible non-audit
services. The budget includes a description of, and a budgeted amount for,
particular categories of audit and permissible non-audit services that are
recurring in nature and therefore anticipated at the time the budget is
submitted. Audit Committee approval is required to exceed the budget amount for
a particular category of audit and permissible non-audit services and to engage
the independent auditor for any audit and permissible non-audit services not
included in the budget. For both types of pre-approval, the Audit Committee
considers whether such services are consistent with the Securities and Exchange
Commission rules on auditor independence. The Audit Committee may delegate
pre-approval authority to the Chairman of the Audit Committee. The Audit
Committee periodically monitors the services rendered and actual fees paid to
the independent auditors to ensure that such services are within the parameters
approved by the Audit Committee. Approximately 2.1% of total fees were for
services approved by the Audit Committee pursuant to the de minimis exception in
paragraph (c)(7)(i)(c) of Rule 2-01 of Regulation S-X.
REPORT OF THE AUDIT COMMITTEE
Management is responsible for the Company's internal controls, financial
reporting process and compliance with laws, regulations and ethical business
standards. The independent auditors are responsible for performing an
independent audit of the Company's financial statements in accordance with
generally accepted auditing standards and issuing a report thereon. The primary
purpose of the Audit Committee is to assist the Board in fulfilling their
oversight responsibility to the shareholders, potential shareholders, the
investment community, and others relating to: (1) the integrity of the financial
statements of the Company; (2) the compliance by the Company with legal and
regulatory requirements; (3) the performance of the Company's internal audit
function and independent auditors; and (4) the independent auditor's
qualifications and independence. Its duties are more specifically described in
the Audit Committee Charter and generally include those described on page 8
hereof.
12
The Audit Committee is the principal liaison between the Board of Directors
and the independent auditors for the Company. The functions of the Audit
Committee are not intended to duplicate or to certify the activities of
management and the independent auditors and are in no way designed to supersede
or alter the traditional responsibilities of the Company's management and
independent auditors. The Audit Committee's role does not provide any special
assurances with regard to the Company's financial statements, nor does it
involve a professional evaluation of the quality of the audits performed by the
independent auditors. The Audit Committee is composed of three non-employee
Directors: Mr. Transier (Chairman), Mr. Ahalt and Mr. Tripodo. All members of
the Company's Audit Committee are independent (as independence is defined in
Rule 4200(a)(15) of the NASD listing standards, as may be modified from time to
time). The Board of Directors has adopted an amended written charter for the
Audit Committee, a copy of which is attached as Annex A to this Proxy as well as
being made available at the Company's Website www.caldive.com by clicking
Investor Relations then Corporate Governance. During the fiscal year ended
December 31, 2003, the Audit Committee conducted ten meetings.
In connection with the December 31, 2003 financial statements, the Audit
Committee: (1) reviewed and discussed the audited financial statements with
management and the auditors; (2) discussed with the auditors the matters
required to be discussed by Statement on Auditing Standards No. 61, as may be
modified or supplemented; (3) received written disclosures and the letter from
the auditors required by Independence Standards Board Statement No. 1 and has
discussed with the auditors their independence; and (4) has discussed with the
independent auditors (in Executive session outside of the presence of
management) the audited financial statements and the independent auditor's
independence. Based upon these reviews and discussions, the Audit Committee
recommended to the Board of Directors that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2003.
AUDIT COMMITTEE
William L. Transier (Chairman)
Gordon F. Ahalt
Anthony Tripodo
13
SHARE OWNERSHIP INFORMATION
FIVE PERCENT OWNERS. The following table sets forth information as to the
only persons (or entities) known by us to have beneficial ownership, as of
December 31, 2003, of more than 5% of the outstanding shares of Company common
stock, other than Owen Kratz whose beneficial ownership is disclosed below under
"Management Shareholdings." As of March 24, 2004, we had 38,027,028 shares
outstanding. The information set forth below has been determined in accordance
with Rule 13d-3 under the Exchange Act on the basis of the most recent
information filed with the Securities and Exchange Commission and furnished to
us by the person listed. To our knowledge, except as otherwise indicated below,
all shares shown as beneficially owned are held with sole voting power and sole
dispositive power.
SHARES PERCENT OF
BENEFICIALLY COMMON
NAME AND ADDRESS OWNED SHARES
---------------- ------------ ----------
Mac-Per-Wolf Company(1)..................................... 4,245,655 11.16%
310 South Michigan Avenue, Suite 2600
Chicago, Illinois 60604
Wellington Management Company, LLP(2)....................... 3,399,050 8.94%
75 State Street
Boston, Massachusetts 02109
Neuberger Berman, LLC(3).................................... 2,643,247 6.95%
605 Third Avenue
New York, New York 10158
Janus Small Cap Value Fund.................................. 2,185,000 5.75%
100 Fillmore Street
Denver, Colorado 80206-4923
Fletcher Asset Management, Inc.(5).......................... 2,066,484 5.43%
22 East 67th Street
New York, New York 10021
---------------
(1) Based on a Schedule 13G/A filed on February 2, 2004 by Mac-Per-Wolf Company
on behalf of PWMCO, LLC, a wholly owned subsidiary of Mac-Per-Wolf Company
which is both a broker dealer registered under Section 15 of the Act and an
investment adviser registered under Section 203 of the Investment Advisers
Act of 1940, and Perkins, Wolf, McDonnell and Company, LLC, a subsidiary of
Mac-Per-Wolf Company and an investment adviser registered under Section 203
of the Investment Advisers Act of 1940. Perkins, Wolf, McDonnell and
Company, LLC furnishes investment advice to various investment companies
registered under Section 8 of the Investment Company Act of 1940 and to
individual and institutional clients (collectively referred to herein as
"Managed Portfolios"). The Managed Portfolios have the right to receive all
dividends from, and the proceeds from the sale of, the securities held in
their respective accounts.
(2) Based on a Schedule 13G filed on February 12, 2004 by Wellington Management
Company, LLP ("WMC") on behalf of Wellington Trust Company, NA, a wholly
owned subsidiary of Wellington Management Company, LLP and a bank as defined
in Section 3(a)(6) of the Securities Exchange Act of 1934. WMC does not have
sole power to vote any of these shares but instead has shared voting power
with respect to 2,777,750 of these shares and shared dispositive power with
respect to all of these shares which are held of record by clients of WMC.
WMC, in its capacity as investment advisor, may be deemed to beneficially
own these shares. Those clients have the right to receive, or the power to
direct the receipt of, dividends from, or the proceeds from the sale of,
such securities.
(3) Based on a Schedule 13G/A filed on February 13, 2004, Neuberger Berman, Inc.
has sole voting power with respect to 144,531 of these shares, shared voting
power with respect to 1,824,600 of these shares and shared dispositive power
with respect to all of these shares. The remaining balance of 674,116 shares
included in the table are for individual client accounts over which
Neuberger Berman, LLC has shared
14
dispositive power but no power to vote. Neuberger Berman, LLC, a wholly
owned subsidiary of Neuberger Berman, Inc. and an investment advisor and
broker/dealer with discretion, is deemed to be a beneficial owner for
purpose of Rule 13(d) since it has shared power to make decisions whether to
retain or dispose, and in some cases the sole power to vote, the securities
of many unrelated clients. Neuberger Berman, LLC does not, however, have any
economic interest in the securities of those clients. The clients are the
actual owners of the securities and have the sole right to receive and the
power to direct the receipt of dividends from or proceeds from the sale of
such securities. With regard to the 1,824,600 shares with respect to which
there is shared voting power, Neuberger Berman, LLC and Neuberger Berman
Management Inc., a wholly-owned subsidiary of Neuberger Berman, Inc. and an
investment advisor to a series of public mutual funds, are deemed to be
beneficial owners for purposes of Rule 13(d) since they both have shared
power to make decisions whether to retain or dispose and vote the
securities. Neuberger Berman, LLC and Neuberger Berman Management Inc. serve
as sub-adviser and investment manager, respectively, of Neuberger Berman's
various Mutual Funds which hold such shares in the ordinary course of their
business and not with the purpose nor with the effect of changing or
influencing the control of the issuer.
(4) Based on a Schedule 13G/A jointly filed on February 2, 2004 with
Mac-Per-Wolf Company. Janus Small Cap Value Fund is an investment company
registered under the Investment Company Act of 1940 and is one of the
Managed Portfolios to which Perkins, Wolf, McDonnell and Company, LLC
provides investment advice.
(5) Based on a Schedule 13G filed on February 17, 2004 by Fletcher Asset
Management, Inc. ("FAM"), which is an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940, as amended. The common
stock reported to be beneficially owned consists of 68,780 shares of common
stock and 1,997,704 shares of common stock issuable upon the exercise by
Fletcher International, Ltd. of certain convertible securities and
investment rights (the "Investment Rights") pursuant to an Agreement, dated
as of December 31, 2002, by and between the Company and Fletcher
International, Ltd. The Investment Rights are exercisable within 60 days of
December 31, 2003. The holdings reported reflect the shares of common stock
issuable within 60 days of December 31, 2003 that would have been held had
the Investment Rights been exercised on December 31, 2003. The shares of
common stock of the Company reported to be beneficially owned consist of
shares underlying Investment Rights held in one or more accounts managed by
FAM (the "Accounts"), for Fletcher International, Ltd. FAM has sole power to
vote and sole power to dispose of all shares of common stock in the
Accounts. By virtue of Mr. Fletcher's position as Chairman and Chief
Executive Officer of FAM, Mr. Fletcher may be deemed to have the shared
power to vote or direct the vote of, and the shared power to dispose or
direct the disposition of, such shares, and, therefore, Mr. Fletcher may be
deemed to be the beneficial owner of such common stock. The Accounts have
the right to receive or the power to direct the receipt of dividends from,
or the proceeds from the sale of, such common stock purchased for its
account.
15
MANAGEMENT SHAREHOLDINGS. The following table shows the number of shares
of our common stock beneficially owned as of March 24, 2004 by our Directors and
five highest paid executive officers identified in the Summary Compensation
Table below ("Named Executive Officers"), and all Directors and executive
officers as a group.
OF SHARES BENEFICIALLY
OWNED, AMOUNT THAT MAY
AMOUNT AND NATURE OF BE ACQUIRED WITHIN 60 DAYS
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) BY OPTION EXERCISE
------------------------ -------------------------- --------------------------
Owen Kratz(3)................................... 2,916,874 407,916
Martin R. Ferron(4)............................. 93,899 24,000
S. James Nelson................................. 56,609 -0-
A. Wade Pursell................................. 53,821 40,053
James Lewis Connor, III......................... 9,489 7,666
Gordon F. Ahalt................................. 46,400 26,400
Bernard Duroc-Danner............................ -0- -0-
John V. Lovoi................................... 10,550 8,800
T. William Porter............................... -0- -0-
William L. Transier............................. 28,400 26,400
Anthony Tripodo................................. 10,300 8,800
---------------
(1) Only one Director or executive officer, Owen Kratz, beneficially owns more
than 1% of the shares outstanding. Mr. Kratz owns approximately 7.59% of the
outstanding shares. Our Directors and executive officers as a group
beneficially own 3,226,342 shares (including shares that are not outstanding
but are deemed beneficially owned because of the right to acquire them
pursuant to options exercisable within 60 days), which represents
approximately 8.36% of the shares outstanding.
(2) Amounts include the shares shown in the last column, which are not currently
outstanding but are deemed beneficially owned because of the right to
acquire them pursuant to options exercisable within 60 days (i.e., on or
before June 11, 2004). With respect to employees other than Mr. Kratz,
amounts include shares held through the Company's Employee Stock Purchase
Plan.
(3) Mr. Kratz disclaims beneficial ownership of 560,000 shares included in the
above table, which are held by Joss Investments Limited Partnership, an
entity of which he is a General Partner.
(4) Mr. Ferron disclaims beneficial ownership of 56,394 shares included in the
above table, which are held by the Uncle John Limited Partnership, a family
limited partnership of which he is a General Partner.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of
the Securities Exchange Act of 1934 requires the Company's Directors and
executive officers and persons who own more than ten percent of a registered
class of the Company's equity securities to file with the SEC and the Nasdaq
National Market reports of ownership and changes in ownership of the Company's
common stock. Directors, executive officers and greater than ten percent
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. Based solely on a review of the copies of
these reports furnished to the Company, all reports required to be filed
pursuant to Section 16(a) of the Exchange Act were filed on a timely basis
except as follows: each of Messrs. Kratz, Ferron and Pursell filed a Form 5 on
February 11, 2004, to reflect an award of stock options granted in 2003, which
such individuals inadvertently failed to file on a timely basis.
16
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on our
common stock for the period since December 31, 1998 to the cumulative total
shareholder return for (i) all U.S. stocks quoted on the NASDAQ Stock Market as
measured by the NASDAQ Composite Index ("NASDAQ"), assuming the reinvestment of
dividends; (ii) the Philadelphia Oil Service Sector index ("OSX"), a
price-weighted index of leading oil service companies, assuming the reinvestment
of dividends; and (iii) a peer group selected by us (the "Peer Group")
consisting of the following companies, each of which is in the offshore
construction business or the offshore oil and gas subsea support service
business, or both businesses: Technip-Coflexip, Global Industries, Ltd., Horizon
Offshore, Inc., Oceaneering International, Inc., Stolt Offshore S.A., McDermott
International, Inc. and Torch Offshore Inc. The returns of each member of the
Peer Group have been weighted according to each individual company's equity
market capitalization as of December 31, 2003 and have been adjusted for the
reinvestment of any dividends. We believe that the members of the Peer Group
provide services and products more comparable to us than those companies
included in the OSX. The graph assumes $100 was invested on December 31, 1998 in
the Company's common stock at the closing price on that date price and on
December 31, 1998 in the three indices presented. The Company paid no dividends
during the period presented. The cumulative total percentage returns for the
period presented were as follows: Company Common Stock -- 132.5%; the NASDAQ
Composite Index, -- (7.2%); the OSX -- 96.1%; and the Peer Group -- 15.4%. These
results are not necessarily indicative of future performance.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG CAL DIVE, NASDAQ, PEER
GROUP AND OSX
(PERFORMANCE GRAPH)
--------------------------------------------------------------------------------------------------
12/31/1998 12/31/1999 12/31/2000 12/31/2001 12/31/2002 12/31/2003
--------------------------------------------------------------------------------------------------
Cal Dive $100.0 $159.6 $256.6 $237.9 $226.5 $232.5
Peer Group Index 100.0 104.3 150.5 132.6 83.3 115.4
Oil Service Index 100.0 171.7 249.2 179.9 176.5 196.1
NASDAQ 100.0 185.9 113.3 89.8 62.0 92.8
Source: Bloomberg
17
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee of the Board of Directors of the
Company was, during fiscal 2003, 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 2003, 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.
REPORT OF THE COMPENSATION COMMITTEE ON
FISCAL 2003 EXECUTIVE COMPENSATION
OVERVIEW
The Compensation Committee of the Board of Directors (the "Committee") is
composed of Messrs. Transier (Chair), Ahalt, Duroc-Danner, Lovoi and Tripodo.
The Committee is responsible for establishing the compensation policies and
administering the compensation programs for Cal Dive's executive officers and
administers the grant of stock-based awards under the Company's 1995 Long Term
Incentive Compensation Plan, as amended (the "1995 Plan"). The Committee
periodically reviews peer group compensation and engages independent
compensation consultants to assist them in this process. In carrying out its
duties, the Committee intends to make all reasonable attempts to comply with the
requirements to exempt executive compensation from the $1 million deduction
limitation under Section 162(m) of the Internal Revenue Code, unless the
Committee determines that such compliance in given circumstances would not be in
the best interests of Cal Dive and its shareholders.
COMPENSATION PHILOSOPHY
The compensation program for executive officers is designed to
(1) provide a competitive total compensation package that enables the
Company to hire, develop, reward and retain key executives, and
(2) tie executive compensation and bonuses to the Company's annual business
objectives, strategies and stockholder value.
The Company's compensation philosophy is also intended to reward individual
initiative and achievement, and to assure that the amount and nature of
executive compensation is reasonably commensurate with the Company's financial
condition, results of operations and common stock performance.
Base Salary. The Committee annually reviews and approves the base salaries
of executive officers, taking into consideration management's recommendations
regarding individual performance, retention, the level of responsibility, the
scope and complexity of the position and competitive practice.
Annual Incentive Bonus. Executive officers of the Company are eligible for
annual incentives under the Company's 2004 Compensation Plan. In order to link a
portion of executive compensation to Company performance, the Committee approved
a bonus plan under which each executive officer could earn an annual bonus
calculated on the basis of individual performance objectives together with
departmental and Company profit-sharing criteria based on the attainment of
pre-established revenue and profit goals by the Company as a whole. The exact
amount of the bonus paid to the executive officers is determined by the
Compensation Committee.
18
Long Term Incentive. Another element of the Committee's performance-based
compensation philosophy is the 1995 Plan. The purpose of the 1995 Plan is to
link the interests of management to the interests of stockholders and focus on
intermediate and long-term results. Stock option grants are generally made at
100% of the market value of the stock on the date of the award, are not
exercisable during the first year after the award and are exercisable thereafter
under a vesting schedule selected by the Committee that specifies the number of
the options becoming exercisable each year throughout the schedule. The
Committee has made a limited delegation of option award authority to the CEO for
the purpose of awarding options to newly hired officers of the Company. The size
of option grants is determined subjectively, generally in approximate proportion
to the officer's level of responsibility and experience.
Compensation of Chief Executive Officer. The CEO's compensation consists
of base salary, annual incentives and long-term incentives, all of which are
reviewed and determined annually by the Committee. Pay levels and opportunity
are established by the Committee in the same manner as for other executive
officers described above. The Company and Mr. Kratz entered into a multi-year
employment agreement (the "Kratz Employment Agreement") effective February 28,
1999. Mr. Kratz is entitled to participate in all profit sharing, incentive,
bonus and other employee benefit plans made available to the Company's executive
officers, but does not have the right to cause the Company to purchase his
shares. The Kratz Employment Agreement contains the same "Good Cause" and
"Change of Control" provisions as described under "Executive
Compensation -- Summary of Employment Contracts".
During 2000, the Board of Directors approved a "Stock Option in Lieu of
Salary Program" for Mr. Kratz. Under the terms of the program, Mr. Kratz may
annually elect to receive non-qualified stock options (with an exercise price
equal to the closing stock price on the date of grant) in lieu of cash
compensation with respect to his base salary and any bonus earned under the
annual incentive compensation program. The number of options granted is
determined utilizing the Black Scholes valuation model as of the date of grant
with a risk premium included. Mr. Kratz made such an election for 2002 resulting
in a total of 105,000 options being granted during 2002 (none of which related
to a bonus caused under the Annual Incentive Compensation program) at an option
exercise price of $21.83 per share. For 2003 and 2004, Mr. Kratz has elected to
take his salary and bonus (if any) in cash, rather than receiving non-qualified
stock options.
At the end of Mr. Kratz's employment with the Company, the Company may, in
its sole discretion under the Kratz Employment Agreement, elect to trigger a
non-competition covenant pursuant to which Mr. Kratz will be prohibited from
competing with the Company in various geographic areas for a period of up to
five years. The amount of the non-competition payment to Mr. Kratz under the
Kratz Employment Agreement will be his then base salary plus insurance benefits
for the non-competition period.
CONCLUSION
Consistent with its compensation philosophy, the Committee believes the
executive officer compensation program provides incentive to attain strong
financial performance and is strongly aligned with shareholder interests. The
Committee believes that Cal Dive's compensation program directs the efforts of
Cal Dive's executive officers toward the continued achievement of growth and
profitability for the benefit of the Company's shareholders.
COMPENSATION COMMITTEE:
William L. Transier, Chair
Gordon F. Ahalt
Bernard J. Duroc-Danner
John V. Lovoi
Anthony Tripodo
19
EXECUTIVE COMPENSATION
The following table provides a summary of the cash and non-cash
compensation for each of the last three years ended December 31, 2003 for each
of (i) the chief executive officer and (ii) each of the four most highly
compensated executive officers of the Company during 2003 other than the chief
executive officer.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
SECURITIES
ANNUAL COMPENSATION(1) UNDERLYING
--------------------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) (NUMBER) COMPENSATION(3)
--------------------------- ---- -------- -------- ------------ ---------------
Owen Kratz......................... 2003 $335,416 $123,750 39,579 $5,000
Chairman and 2002 --(4) --(4) 105,000(4) --
Chief Executive Officer 2001 --(4) --(4) 180,000(4) --
Martin R. Ferron................... 2003 239,583 63,800 14,146 5,000
President and 2002 189,583 -- -- 5,000
Chief Operating Officer 2001 168,750 186,262 -- 4,250
S. James Nelson, Jr. .............. 2003 200,000 -- -- 5,000
Vice Chairman 2002 200,000 -- -- 5,000
2001 200,000 193,519 -- 4,250
A. Wade Pursell.................... 2003 193,750 45,500 12,265 4,844
Senior Vice President 2002 161,667 -- -- 5,000
and Chief Financial Officer 2001 131,500 94,340 10,000 4,250
James Lewis Connor, III............ 2003 133,752 122,582 -- 4,601
Senior Vice President 2002 115,000 50,352 30,000 5,000
and General Counsel 2001 90,833 73,927 5,000 4,250
---------------
(1) The Bonus reflected in a fiscal year is based on that year's performance.
(2) In 2003, the Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer were eligible for annual incentives, based on achievement
of certain individual performance criteria and corporate profit-sharing
incentives, under the Compensation Committee approved Senior Management
Compensation Plan. The actual bonus payments to Messrs. Kratz, Ferron and
Pursell consisted entirely of performance pay and did not include any
profit-sharing bonus. Mr. Connor's bonus was based on his participation in
the Management Bonus Pool of the Company's wholly-owned subsidiary, Energy
Resource Technology, Inc. In 2004, the annual bonus for Named Executive
Officers is payable based on individual performance objectives together with
departmental and Company criteria based on the attainment of pre-established
revenue and profit goals by the Company as a whole. The exact amount of the
bonus paid to the Named Executive Officers is determined by the Compensation
Committee.
(3) Consists of matching contributions by the Company through its 401(k) Plan.
The Company's 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 salary (including bonus) subject to contribution limits.
(4) In 2001 and 2002, Mr. Kratz elected to receive non-qualified stock options
(with an exercise price equal to the closing stock price on the date of
grant) in lieu of his base salary and bonus earned under our "Stock Option
in Lieu of Salary Program." Mr. Kratz's election for 2001 resulted in a
total of 180,000 shares being granted during 2001 (100,000 of which related
to a bonus earned under the 2001 annual incentive compensation program). Mr.
Kratz's election for 2002, resulted in a total of 105,000 shares being
granted during 2002 (none of which related to bonus earned under the 2002
annual incentive compensation program). For 2003 and 2004, Mr. Kratz has
elected to take his salary and bonus (if any) in cash, rather than receiving
non-qualified stock options.
20
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to all stock
options granted in 2003 by the Company to each of the Named Executive Officers.
NUMBER OF % OF TOTAL
SECURITIES OPTIONS GRANT DATE
UNDERLYING GRANTED TO EXERCISE PRESENT
OPTIONS EMPLOYEES IN OR BASE EXPIRATION VALUE(2)
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE (DOLLARS)
---- ---------- ------------ --------- ---------- ----------
Owen Kratz........................... 39,579 41.23% $18.64 3/17/2013 526,005
Martin Ferron........................ 14,146 14.75% 18.64 3/17/2013 188,000
S. James Nelson, Jr.................. -0- 0% -- N/A --
A. Wade Pursell...................... 12,265 12.78% 18.64 3/17/2013 163,002
James Lewis Connor, III.............. -0- 0% -- N/A --
---------------
(1) The ten-year stock options granted in 2003 by the Company vest ratably over
five years beginning one year following the date of grant. Such stock
options will, however, become immediately exercisable in their entirety upon
the occurrence of certain events specified in the 1995 Long Term Incentive
Compensation Plan, as amended.
(2) The Black-Scholes option pricing model was used to determine the grant date
present value of the stock options granted in 2003 by the Company. Under the
Black-Scholes option pricing model, the grant date present value of the
stock option referred to in the table was calculated to be $13.29. The
following facts and assumptions were used in making such calculation: (a) an
unadjusted exercise price of $18.64; (ii) a fair market value of $18.64 for
one share of Company common stock on the date of grant; (iii) no dividend
yield; (iv) a stock option term of ten years; (v) a stock volatility of 59%,
based on an analysis of weekly closing stock prices of shares the Company
since going public in July, 1997 and of the Company's peer group common
stock for the three years preceding the date of grant; and (vi) an assumed
risk-free interest rate of 4.0%, which approximates to the yield on a
ten-year treasury note on the date of grant. No other discounts or
restrictions related to vesting or the likelihood of vesting of stock
options were applied. The resulting grant date present value was multiplied
by the total number of stock options granted to determine the total grant
date present value of such stock options granted.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
NUMBER OF SECURITIES
UNDERLYING DOLLAR VALUE OF
UNEXERCISED OPTIONS UNEXERCISED IN-THE-
NUMBER OF DOLLAR FISCAL YEAR-END MONEY OPTIONS AT FISCAL
SHARES ACQUIRED VALUE EXERCISABLE/ YEAR-END
NAME ON EXERCISE REALIZED UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- -------- --------------------- -------------------------
Owen Kratz(1)................ -- $ -- 400,000/39,579 $1,125,125/$216,893
Martin R. Ferron............. 60,000 677,100 16,000/30,146 73,920/151,440
S. James Nelson.............. -- -- --/-- --/--
A. Wade Pursell.............. 4,000 4,000 31,867/32,398 139,491/157,711
James Lewis Connor, III...... 12,000 42,840 1,667/37,666 3,742/218,060
---------------
(1) Includes exercisable options to purchase an aggregate of 60,000 shares
transferred to the Joss Investments Limited Partnership, an entity of which
he is a General Partner. Mr. Kratz disclaims beneficial ownership of such
options.
SUMMARY OF EMPLOYMENT CONTRACTS
All of our Named Executive Officers have entered into employment agreements
with the Company. Each of Messrs. Connor, Ferron, Nelson and Pursell's
employment contracts have similar terms involving salary, bonus and benefits
(with amounts that vary due to their responsibilities), but none of them have
the right to
21
cause the Company to purchase his shares. Mr. Kratz's contract is described
under "Report of the Compensation Committee for Fiscal Year 2003 Executive
Compensation".
Each of the executive employment agreements provide, among other things,
that if we pay specific amounts, then until the later of February 28, 2005 or
the first or second anniversary date of termination of the executive's
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 we continue to make payments to such executive, including his base
salary and insurance benefits received by senior executives of the Company. We
also entered into employment agreements with the remainder of our other senior
officers substantially similar to the above agreements.
If a Named Executive Officer terminates his employment for "Good Cause" or
is terminated without cause during the two year period following a "Change of
Control," we would (a) make a lump sum payment to him of two times the sum of
the annual base salary and annual bonus paid to the officer with respect to the
most recently completed fiscal year, (b) all options held by such officer under
the CDI 1995 Long Term Incentive Plan would vest, and (c) he would continue to
receive welfare plan and other benefits for a period of two years or as long as
such plan or benefits allow. For the purposes of the employment agreements,
"Good Cause" includes both that (a) the CEO or COO shall cease employment with
us and (b) one of the following: (I) a material change in the officer's
position, authority, duties or responsibilities, (ii) changes in the office or
location at which he is based without his consent (such consent not to be
unreasonably withheld), (iii) certain breaches of the agreement. Each agreement
also provides for payments to officers as part of any "Change of Control." A
"Change of Control" for purposes of the agreements would occur if a person or
group becomes the beneficial owner, directly or indirectly, of securities of the
Company representing forty-five percent (45%) or more of the combined voting
power of the Company's then outstanding securities. The agreements provided that
if any payment to one of the covered officers will be subject to any excise tax
under Code Section 4999, a "gross-up" payment would be made to place the officer
in the same net after-tax position as would have been the case if no excise tax
had been payable.
OMNIBUS BUDGET RECONCILIATION ACT OF 1993
Under Section 162(m) of the Code, as amended, no deduction by a publicly
held corporation is allowed for compensation paid by the corporation to its most
highly compensated executive officers to the extent that the amount of such
compensation for the taxable year for any such individual exceeds $1 million.
Section 162(m) provides for the exclusion of compensation that qualifies as
performance-based from the compensation that is subject to such deduction
limitation. Incentive compensation granted through the Company's Stock Option
Plan may also qualify as performance-based compensation if additional
requirements are met. The Company anticipates that the components of individual
annual compensation for each highly compensated executive officer that do not
qualify for any exclusion from the deduction limitation of Section 162(m) will
not exceed $1 million and will therefore qualify for deductibility.
22
EQUITY COMPENSATION PLAN INFORMATION
The table below provides information relating to the Company's equity
compensation plans as of December 31, 2003:
NUMBER OF SECURITIES
REMAINING AVAILABLE
NUMBER OF SECURITIES FOR FUTURE ISSUANCE
TO BE ISSUED UPON WEIGHTED-AVERAGE UNDER COMPENSATION
EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS IN THE FIRST COLUMN)
------------- -------------------- -------------------- --------------------
Equity compensation plans approved by
security holders(1).................... 1,752,437 $20.35 2,351,346
Equity compensation plans not approved by
security holders....................... -0- N/A -0-
Total.................................... 1,752,437 $20.35 2,351,346
---------------
(1) The 1995 Long Term Incentive Compensation Plan, as amended, provides that
the Company may grant up to (but not exceed) 10% of the issued and
outstanding common stock (as adjusted for any subsequent stock splits, stock
dividends, recapitalizations, or similar events) of the Company.
OTHER INFORMATION
EXPENSES OF SOLICITATION
We will bear the costs of soliciting proxies, including the reimbursement
to record holders of their expenses in forwarding proxy materials to beneficial
owners. Our Directors, officers and regular employees, without extra
compensation, may solicit proxies personally or by mail, telephone, fax, telex,
telegraph or special letter.
PROPOSALS AND DIRECTOR NOMINATIONS FOR 2005 SHAREHOLDER'S MEETING
In order for a shareholder proposal to be considered for inclusion in our
Proxy Statement for the 2005 Annual Meeting, the written proposal must be
received by the Corporate Secretary, at our offices no later than December 13,
2004. The proposal must comply with Securities and Exchange Commission
regulations regarding the inclusion of shareholder proposals in
company-sponsored proxy materials.
With respect to shareholder nominations of Directors, a shareholder may
propose director candidates for consideration by the Board's Corporate
Governance and Nominating Committee. Any such recommendations should include the
nominee's name and qualifications for Board membership and should be directed to
the Corporate Secretary at the address of our principal executive offices set
forth below. In addition, the bylaws of Cal Dive permit shareholders to nominate
directors for election at an annual shareholder meeting. To nominate a director,
the shareholder must deliver a proxy statement and form of proxy to holders of a
sufficient number of shares of Cal Dive common stock to elect such nominee and
provide the information required by the bylaws of Cal Dive, as well as a
statement by the nominee acknowledging that he or she will owe a fiduciary
obligation to Cal Dive and its shareholders. In addition, the shareholder must
give timely notice to the Corporate Secretary of Cal Dive within the time period
described above regarding shareholder proposals. A copy of the bylaws is
available from the Corporate Secretary.
All submissions to, or requests from, the Corporate Secretary should be
made to our principal offices at 400 N. Sam Houston Parkway, E., Suite 400,
Houston Texas 77060.
OTHER
Our 2003 Annual Report on Form 10-K, including financial statements, is
being sent to shareholders of record as of March 24, 2004, together with this
Proxy Statement.
23
WE WILL FURNISH TO SHAREHOLDERS WITHOUT CHARGE A COPY OF OUR ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, UPON RECEIPT OF WRITTEN REQUEST ADDRESSED
TO: CORPORATE SECRETARY, CAL DIVE INTERNATIONAL, INC., 400 N. SAM HOUSTON
PARKWAY, E. SUITE 400, HOUSTON TEXAS 77060.
The Board of Directors knows of no other matters to be presented at the
Annual Meeting. If any other business properly comes before the Annual Meeting
or any adjournment thereof, the proxies will vote on that business in accordance
with their best judgment.
By Order of the Board of Directors
/s/ JAMES LEWIS CONNOR, III
------------------------------------
James Lewis Connor, III
Corporate Secretary
Cal Dive International, Inc.
24
ANNEX A TO PROXY STATEMENT
CAL DIVE INTERNATIONAL, INC.
AUDIT COMMITTEE CHARTER
ADOPTED BY THE BOARD OF DIRECTORS ON
FEBRUARY 24, 2004
ORGANIZATION
This charter governs the operations of the Audit Committee of Cal Dive
International, Inc. (the "Company"). The committee shall review and reassess the
charter at least annually and obtain the approval of the Board of Directors. The
committee shall be members of, and appointed by, the Board of Directors and
shall comprise at least three directors, each of whom are independent of
management and the Company. Members of the committee shall be considered
independent as long as they do not accept any consulting, advisory, or other
compensatory fee from the Company and are not an affiliated person of the
Company or its subsidiaries, and meet the independence requirements of the
NASDAQ listing standards. All committee members shall be financially literate,
and at least one member shall be a "financial expert", as defined by SEC
regulations.
PURPOSE
The Audit Committee is appointed by the Board to assist the Board in
fulfilling their oversight responsibility to the shareholders, potential
shareholders, the investment community, and others relating to (1) the integrity
of the financial statements of the Company, (2) the compliance by the Company
with legal and regulatory requirements, (3) the performance of the Company's
internal audit function and independent auditors, and (4) the independent
auditor's qualifications and independence.
The Audit Committee shall prepare the report required by the rules of the
Securities and Exchange Commission (the "Commission") to be included in the
Company's annual proxy statement.
MEETINGS
The Audit Committee shall meet as often as it determines, but not less
frequently than quarterly. The Audit Committee shall meet periodically with
management, the internal auditors and the independent auditor including meetings
with the independent auditor in separate executive sessions. The Audit Committee
may request any officer or employee of the Company; or the Company's outside
counsel or independent auditor; to attend a meeting of the Committee or to meet
with any members of, or consultants to, the Committee.
COMMITTEE AUTHORITY AND RESPONSIBILITIES
The Audit Committee shall have the sole authority to appoint or replace the
independent auditor (subject, if applicable, to shareholder ratification). The
Audit Committee shall be directly responsible for the compensation and oversight
of the work of the independent auditor (including resolution of disagreements
between management and the independent auditor regarding financial reporting)
for the purpose of preparing or issuing an audit report or related work. The
independent auditor shall report directly to the Audit Committee.
The Audit Committee shall preapprove all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed for
the Company by its independent auditor. The Audit Committee may form and
delegate authority to subcommittees consisting of one or more members when
appropriate, including the authority to grant pre-approvals of audit and
permitted non-audit services, provided that decisions of such subcommittee to
grant preapprovals shall be presented to the full Audit Committee at its next
scheduled meeting. The Audit Committee shall not engage the independent auditors
to perform the specific non-audit services proscribed by law or regulation. The
Audit Committee shall have the authority, to the extent it deems necessary or
appropriate, to retain independent legal, accounting or other advisors. The
Company shall provide for appropriate funding, as determined by the Audit
Committee, for payment of
25
compensation to the independent auditor for the purpose of rendering or issuing
an audit report and to any advisors employed by the Audit Committee.
The Audit Committee shall make regular reports to the Board of Directors.
The Audit Committee shall review and reassess the adequacy of this Charter
annually and recommend any proposed changes to the Board for approval. The Audit
Committee shall annually review the Audit Committee's own performance.
The Audit Committee, to the extent it deems necessary or appropriate,
shall:
FINANCIAL STATEMENT AND DISCLOSURE MATTERS
1. Review and discuss with management and the independent auditor the
annual audited financial statements, including disclosures made in management's
discussion and analysis, and recommend to the Board whether the audited
financial statements should be included in the Company's Form 10-K.
2. Review and discuss with management and the independent auditor the
Company's quarterly financial statements, including disclosures made in
management's discussion and analysis, prior to the filing of its Form 10-Q,
including the results of the independent auditor's review of the quarterly
financial statements.
3. Discuss with management and the independent auditor significant
financial reporting issues and judgments made in connection with the preparation
of the Company's financial statements, including any significant changes in the
Company's selection or application of accounting principles, any major issues as
to the adequacy of the Company's internal controls and any special steps adopted
in light of material control deficiencies.
4. Review and discuss quarterly reports from the independent auditors on:
a. All critical accounting policies and practices to be used.
b. All alternative treatments of financial information within
generally accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the independent auditor.
c. Other material written communications between the independent
auditor and management, such as any management letter or schedule of
unadjusted differences.
d. The independent auditor's judgment about the quality, not just the
acceptability, of accounting principles, the reasonableness of significant
judgments, and the clarity of disclosures in the financial statements.
5. Review and discuss with management the Company's earnings press
releases, including, but not limited to, the use of "pro forma" or "adjusted"
non-GAAP information, as well as financial information and earnings guidance
provided to analysts and rating agencies. Such discussion may be done generally
(consisting of discussing the types of information to be disclosed and the types
of presentations to be made).
6. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives as well as off-balance sheet structures on
the Company's financial statements.
7. Discuss with management the Company's major financial risk exposures
and the steps management has taken to monitor and control such exposures,
including the Company's risk assessment and risk management policies.
8. Discuss with the independent auditor the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit, including any difficulties encountered in the course of the audit
work, any restrictions on the scope of activities or access to requested
information, and any significant disagreements with management. These
discussions shall include consideration of the quality of the Company's
accounting principles as applied in its financial reporting, including review of
estimates, reserves and accruals, review of judgmental areas, review of audit
adjustments whether or not recorded and such other inquiries as may be
appropriate.
26
9. Review disclosures made to the Audit Committee by the Company's CEO and
CFO during their certification process for the Form 10-K and Form 10-Q about any
significant deficiencies in the design or operation of internal controls or
material weaknesses therein and any fraud involving management or other
employees who have a significant role in the Company's internal controls.
OVERSIGHT OF THE COMPANY'S RELATIONSHIP WITH THE INDEPENDENT AUDITOR
10. Review and evaluate the lead partner of the independent auditor team.
11. Obtain and review a report from the independent auditor at least
annually regarding (a) the independent auditor's internal quality-control
procedures, (b) any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry or
investigation by governmental or professional authorities within the preceding
five years respecting one or more independent audits carried out by the firm,
(c) any steps taken to deal with any such issues, and (d) all relationships
between the independent auditor and the Company. Evaluate the qualifications,
performance and independence of the independent auditor, including considering
whether the auditor's quality controls are adequate and the provision of
permitted non-audit services is compatible with maintaining the auditor's
independence, and taking into account the opinions of management and internal
auditors. The Audit Committee shall present its conclusions with respect to the
independent auditor to the Board.
12. Ensure the rotation of the lead (or coordinating) audit partner having
primary responsibility for the audit and the audit partner responsible for
reviewing the audit as required by law.
13. Recommend to the Board policies for the Company's hiring of employees
or former employees of the independent auditor who participated in any capacity
in the audit of the Company.
14. Meet with the independent auditor prior to the audit to discuss the
planning and staffing of the audit.
OVERSIGHT OF THE COMPANY'S INTERNAL CONTROLS AND INTERNAL AUDIT FUNCTION
15. Review the appointment and replacement of the senior internal auditing
executive.
16. Review the significant reports to management prepared by the internal
auditing department and management's responses.
17. Discuss with the independent auditor and management of the internal
audit department responsibilities, budget and staffing and any recommended
changes in the planned scope of the internal audit.
18. Review management's assertion on its assessment of the effectiveness
of internal controls as of the end of the most recent fiscal year and the
independent auditors' report on management's assertion.
COMPLIANCE OVERSIGHT RESPONSIBILITIES
19. Obtain from the independent auditor assurance that Section 10A(b) of
the Exchange Act (which requires the independent auditor to report any evidence
which it uncovers of an illegal act to management and the Board of Directors,
and, in some instances, to the Securities and Exchange Commission) has not been
implicated.
20. Obtain reports from management and the Company's senior internal
auditing executive confirming that the Company and its subsidiary/foreign
affiliated entities are in conformity with applicable legal requirements and the
Company's Code of Business Conduct and Ethics. Review reports and disclosures of
insider and affiliated party transactions. Advise the Board with respect to the
Company's policies and procedures regarding compliance with applicable laws and
regulations and with the Company's Code of Business Conduct and Ethics.
21. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters, and the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing matters.
27
22. Discuss with management and the independent auditor any correspondence
with regulators or governmental agencies and any published reports which raise
material issues regarding the Company's financial statements or accounting
policies.
23. Discuss with the Company's General Counsel legal matters that may have
a material impact on the financial statements or the Company's compliance
policies.
24. Receive corporate attorneys' reports of evidence of a material
violation of securities laws or breaches of fiduciary duty.
25. Review with management and approve all related-party transactions.
LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with generally accepted
accounting principles and applicable rules and regulations. Management is
responsible for the preparation, presentation, and integrity of the Company's
financial statements and for the appropriateness of the accounting principles
and reporting policies that are used by the Company. The independent auditors
are responsible for auditing the Company's financial statements and for
reviewing the Company's unaudited interim financial statements.
28
(CAL DIVE LOGO)
400 N. SAM HOUSTON PARKWAY E. SUITE 400
HOUSTON, TEXAS 77060-3500
PHONE: (281) 618-0400
(HOUSTON MAP)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS
MAY 14, 2003
AND PROXY STATEMENT
(CAL DIVE SMALL LOGO)
400 N. SAM HOUSTON PARKWAY E., SUITE 400
HOUSTON, TEXAS 77060
(Recycled Symbol) Printed on recycled paper.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PROXY FOR COMMON STOCK
CAL DIVE INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, having duly received the Notice of Annual Meeting of
Shareholders and the Proxy Statement, dated April 12, 2004 hereby appoints Owen
Kratz and James Lewis Connor, III as Proxies (each with the power to act alone
and with the power of substitution and revocation) to represent the undersigned
and to vote, as designated below, all common shares of Cal Dive International,
Inc. held of record by the undersigned on March 24, 2004 at the 2004 Annual
Meeting of Shareholders to be held on May 11, 2004 at 11:00 a.m. at the Wyndham
Hotel located at 12400 Greenspoint Drive, Houston, Texas 77060, and any
adjournments thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1:
1. To elect three directors of the Company to have a term expiring in 2007 and
until his successor shall be elected and duly qualified.
Owen Kratz Bernard J. Duroc-Danner John V. Lovoi
You may vote on the Proposal by marking one of the following boxes.
FOR the three "Class I" nominees [ ] WITHHOLD AUTHORITY [ ]
(except as indicated below)
INSTRUCTION: To WITHHOLD AUTHORITY to vote for any individual nominee, write
that person's name in the space provided below.
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2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
(Please See Reverse Side)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED ON THE
PROXY BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR THE CLASS I DIRECTORS INDICATED IN PROPOSAL 1. ABSTENTIONS WILL BE
COUNTED TOWARD THE EXISTENCE OF A QUORUM.
DATED:
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SIGNATURE
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SIGNATURE (IF HELD JOINTLY)
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TITLE
PLEASE SIGN EXACTLY AT THE NAME
APPEARS ON THIS PROXY. WHEN SHARES
ARE HELD BY JOINT TENANTS, BOTH
SHOULD SIGN. IF SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE
FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL
CORPORATION NAME BY PRESIDENT OR
OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AN AUTHORIZED
PERSON.