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
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14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
TORCH OFFSHORE, INC.
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(Name of Registrant as Specified In Its Charter)
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[TORCH LOGO]
TORCH OFFSHORE, INC.
401 WHITNEY AVENUE, SUITE 400
GRETNA, LOUISIANA 70056
May 5, 2004
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders to be
held at 401 Whitney Avenue, Suite 400, Gretna, Louisiana on Thursday, May 20,
2004 at 10:00 a.m. For those of you who cannot be present at this Annual Meeting
of the Stockholders, the Company urges that you participate by indicating your
choices on the enclosed proxy and completing and returning it at your earliest
convenience.
This booklet includes the Notice of the Annual Meeting and the proxy statement,
which contains information about the Board of Directors and its committees. The
matters on which action is expected to be taken during the meeting are also
described.
It is important that your shares are represented at the meeting, whether or not
you are able to attend personally. Accordingly, please sign, date and mail
promptly the enclosed proxy in the envelope provided. This will save the Company
the additional expenses associated with soliciting proxies and ensure that your
shares are represented at the annual meeting.
On behalf of the Board of Directors, thank you for your continued support.
Sincerely,
Lyle G. Stockstill
Chairman of the Board and
Chief Executive Officer
[TORCH LOGO]
TORCH OFFSHORE, INC.
401 WHITNEY AVENUE, SUITE 400
GRETNA, LOUISIANA 70056
NOTICE OF 2004 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 2004
To the Stockholders of
Torch Offshore, Inc.:
The Annual Meeting of Stockholders of Torch Offshore, Inc. (the "Company") will
be held at 401 Whitney Avenue, Suite 400, Gretna, Louisiana on Thursday, May 20,
2004 at 10:00 a.m. for the purpose of considering and voting upon the following
matters:
1. To elect the directors of the Company to serve during the ensuing
year.
2. To approve the appointment of Ernst & Young LLP as independent
public accountants of the Company for 2004.
3. To transact such other business as may properly come before the
meeting or any reconvened meeting after an adjournment thereof.
These matters are more fully described in the proxy statement accompanying this
Notice.
The Board of Directors has fixed April 12, 2004 as the record date for
determining stockholders of the Company entitled to notice of, and to vote at,
the meeting or any postponement or adjournment thereof. Only holders of record
of common stock of the Company at the close of business on the record date will
be entitled to notice of, and to vote at, the meeting or any reconvened meeting
after an adjournment.
You are cordially invited to attend the meeting in person. Even if you plan to
attend the meeting, however, you are requested to mark, sign, date and return
the accompanying proxy as soon as possible.
By Order of the Board of Directors,
Lyle G. Stockstill
Chairman of the Board and
Chief Executive Officer
Gretna, Louisiana
May 5, 2004
TORCH OFFSHORE, INC.
401 WHITNEY AVENUE, SUITE 400
GRETNA, LOUISIANA 70056
PROXY STATEMENT FOR THE
2004 ANNUAL MEETING OF STOCKHOLDERS OF
TORCH OFFSHORE, INC.
TO BE HELD ON MAY 20, 2004
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Torch Offshore, Inc., a Delaware corporation (the
"Company"), of proxies from the holders of the Company's common stock, par value
$0.01 per share (the "Common Stock"), for use at the 2004 Annual Meeting of
Stockholders (the "Annual Meeting") to be held at the time and place and for the
purposes set forth in the accompanying notice. The approximate date on which
this Proxy Statement and the accompanying proxy will first be mailed to
stockholders is May 5, 2004. In addition to the solicitation of proxies by mail,
proxies may also be solicited by telephone, telegram or by a number of regular
employees of the Company, for which they will receive no additional
compensation. The Company will pay all costs of soliciting proxies. The Company
will also reimburse brokers or other persons holding Common Stock in their names
or in the names of their nominees for their reasonable expenses in forwarding
proxy material to the beneficial owners.
All duly executed proxies received prior to the Annual Meeting will be voted in
accordance with the choices specified thereon and, in connection with any other
business that may properly come before the meeting, in the discretion of the
persons named in the proxy. AS TO ANY MATTER FOR WHICH NO CHOICE HAS BEEN
SPECIFIED IN A DULY EXECUTED PROXY, THE SHARES REPRESENTED THEREBY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES LISTED HEREIN, FOR APPROVAL OF THE APPOINTMENT
OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANTS, AND IN THE
DISCRETION OF THE PERSONS NAMED IN THE PROXY IN CONNECTION WITH ANY OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING. A stockholder giving
a proxy may revoke it at any time before it is voted at the Annual Meeting by
filing with the Secretary at the Company's executive offices a written
instrument revoking it, by delivering a duly executed proxy bearing a later
date, or by appearing at the Annual Meeting and voting in person. The executive
offices of the Company are located at 401 Whitney Avenue, Suite 400, Gretna,
Louisiana 70056. For a period of ten days prior to the Annual Meeting, a
complete list of stockholders entitled to vote at the Annual Meeting will be
available for inspection for proper purposes by stockholders of record during
ordinary business hours at the Company's executive offices.
RECORD DATE AND VOTING SECURITIES
As of the close of business on April 12, 2004, the record date for determining
stockholders entitled to notice of and to vote at the Annual Meeting, the
Company had outstanding and entitled to vote 12,663,990 shares of Common Stock.
Each share entitles the holder to one vote on each matter submitted to a vote of
stockholders.
The requirement for a quorum at the Annual Meeting is the presence in person or
by proxy of holders of a majority of the outstanding shares of Common Stock.
Proxies indicating stockholder
abstentions and shares represented by "broker nonvotes" (i.e., shares held by
brokers or nominees for which instructions have not been received from the
beneficial owners or persons entitled to vote and for which the broker or
nominee does not have discretionary power to vote on a particular matter) will
be counted for purposes of determining whether there is a quorum at the Annual
Meeting. Votes cast by proxy or in person at the Annual Meeting will be counted
by the persons appointed as election inspectors for the Annual Meeting.
MATTERS TO BE CONSIDERED
AT THE 2004 ANNUAL MEETING OF STOCKHOLDERS
PROPOSAL ONE: ELECTION OF DIRECTORS
The Board of Directors currently consists of six members, all of whom have been
nominated by the Board of Directors to stand for re-election at the Annual
Meeting. Each nominee has been pre-selected by stockholders except for Mr. Shopf
who was appointed by the Board of Directors to fill a vacancy on October 15,
2003. Each director elected at the Annual Meeting will hold the office until the
Annual Meeting of Stockholders in 2005 or until his or her successor is elected
and qualified.
In accordance with the Company's Bylaws, the affirmative vote of a plurality of
the votes cast by holders of Common Stock entitled to vote in the election of
directors at a meeting of stockholders at which a quorum is present is required
for the election of the nominees as directors. Accordingly, although abstentions
and broker nonvotes are considered shares present at the Annual Meeting for the
purpose of determining a quorum, they will have no effect on the election of
directors.
The Board of Directors is not aware of any reason why any nominee will be unable
to stand for election as a director or serve if elected, but if any such nominee
should become unavailable, the Board of Directors may nominate, and the persons
named in the accompanying Proxy may vote for, a substitute nominee.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES
LISTED BELOW.
DIRECTOR NOMINEES
The following sets forth information concerning the nominees to become directors
of the Company, including each nominee's age as of April 12, 2004, position with
the Company, if any, and business experience during the past several years.
Lyle G. Stockstill, age 60, is one of our co-founders and has served as our
Chairman of the Board and Chief Executive Officer since 1978. Mr. Stockstill has
over 39 years of experience in all aspects of offshore pipelay and construction
operations. Mr. Stockstill has previously held positions at Brown & Root, Inc.
and Taylor Diving & Salvage Co., Inc. and has worked both domestically and
internationally. Mr. Stockstill is the husband of Lana J. Hingle Stockstill.
Lana J. Hingle Stockstill, age 60, is one of our co-founders and has served as
Senior Vice President - Administration, Secretary, and as a director since 1978.
In March 2003, her title was changed to Chief Administrative Officer. Mrs.
Stockstill has 31 years of experience handling our administrative duties and the
administrative duties of other oil service companies. Mrs. Stockstill holds a
Bachelor of Arts degree from Louisiana State University. Mrs. Stockstill is the
wife of
Lyle G. Stockstill.
Curtis Lemons, age 76, has been a director since November 1998 and is a member
of the Audit Committee and the Compensation Committee of the Board of Directors.
Mr. Lemons retired in 1985 with 31 years of experience in the offshore oil and
natural gas industry in the Gulf of Mexico and in international locations. From
1955 to 1985, Mr. Lemons was employed by Conoco Inc., an integrated energy
company, in senior management positions, including Vice President of Production
- South China Sea, General Manager - North Sea, and Production Manager - Europe.
From 1954 to 1955, Mr. Lemons was employed by The California Company (now
Chevron-Texaco Corporation) as a drilling engineer. Mr. Lemons holds a Bachelor
of Science degree in Petroleum Engineering from Texas A&M University.
Andrew L. Michel, age 61, has been a director since February 2002 and is a
member of the Compensation Committee of the Board of Directors. Mr. Michel is
also a director of the TSC Holdings Group of Companies, Inc. (TSC). TSC, through
its subsidiaries, performs marine surveys and reef restoration work and provides
management consulting and mergers and acquisition services. The Company also
publishes two industry magazines. From 1996 to 2001, Mr. Michel served as Vice
President of Deepwater Development for Global Industries, Ltd., a major offshore
contracting firm. Prior to that, he was owner and principal consultant at ROV
Technologies, Inc., a company founded in 1986 that was the first engineering
consulting firm dedicated exclusively to remote operating vehicle (ROV)
technology. From 1968 to 1986, he was employed by Taylor Diving & Salvage Co.,
Inc. As Vice President of the Technical Services Division he was responsible
for, among other things, forming and managing one of the world's first ROV
operations.
R. Jere Shopf, age 70, has been a director since October 2003 and is Chairman of
the Audit Committee and a member of the Compensation Committee of the Board of
Directors. Mr. Shopf retired in January 2004 as the Chairman, Senior Vice
President and Chief Restructuring Officer of The Babcock & Wilcox Company, a
wholly-owned subsidiary of McDermott International, Inc. Mr. Shopf currently
serves as the Chairman of RPM Management Company, Chairman of Pinnacle
Management Company and Chairman of Palomar Management Company. Mr. Shopf is also
a director of C.F. Bean Companies, Conrad Industries, Inc., and Shamrock
Holdings, Inc. Mr. Shopf has held various management positions and served as a
director of over twenty-five companies during his career. Mr. Shopf holds a
Masters of Business Administration degree from Harvard University and a Bachelor
of Science degree in Mechanical Engineering from the Massachusetts Institute of
Technology.
Ken Wallace, age 78, has been a director since May 2000 and is a member of the
Audit Committee and the Compensation Committee of the Board of Directors. Mr.
Wallace retired in 1983. From 1973 to 1983, Mr. Wallace was President and a
director of Taylor Diving & Salvage Co., Inc. From 1964 to 1973, Mr. Wallace
held numerous positions for Taylor Diving & Salvage Co., Inc., including Vice
President of Research and Development, Senior Vice President of Operations and
Executive Vice President. Mr. Wallace also spent 24 years in the United States
Navy.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors has determined that the Company is a "Controlled
Company," as defined in the rules of the NASDAQ Stock Market, Inc.(R)
("NASDAQ National Market"), since Lyle G. Stockstill and Lana J. Hingle
Stockstill are the beneficial owners of more than 50% of the voting power of the
Company. The Company therefore is exempt from certain independence requirements
of the
NASDAQ National Market rules, including the requirements related to the
nomination of directors. Of the six directors currently serving on the Board of
Directors, the Board of Directors has determined that Messrs. Lemons, Michel,
Shopf and Wallace are "independent directors" as defined in the NASDAQ National
Market rules.
The Board of Directors has established an Audit Committee and a Compensation
Committee as standing committees of the Board of Directors. The Board of
Directors does not have a standing nominating committee or other committee
performing a similar function. The members of the Audit Committee and the
Compensation Committee of the Board of Directors indicated in the above
summaries are not employees of the Company.
The Audit Committee of the Board of Directors (i) recommends the annual
selection of independent public accountants to conduct audits of the Company's
financial statements, (ii) approves the plan and scope of the annual audit of
the financial statements and any additional services provided by the independent
public accountants and the fees for the audit and any such additional services,
(iii) reviews the annual audited financial statements prior to publication and
discusses the results of the audit with management and the independent public
accountants, and (iv) discusses with management and the independent public
accountants the design, quality and adequacy of the Company's internal controls.
The Audit Committee charter, which is attached as Appendix A to this Proxy
Statement, contains a detailed description of the Audit Committee's duties and
responsibilities.
The Compensation Committee reviews and recommends to the Board of Directors the
compensation and benefits of the Company's executive officers, establishes and
reviews general policies relating to the Company's compensation and benefits,
and administers the Torch Offshore, Inc. 2001 Long-Term Incentive Plan (the
"2001 Incentive Plan").
During 2003, the Board of Directors met five times. The Audit Committee met six
times and the Compensation Committee met twice. During 2003, all directors
attended at least 75% of the aggregate of all meetings of the Board of Directors
and the committees of the Board of which they were members.
The Board of Directors does not have a standing nominating committee or
committee performing similar functions. The Board of Directors has determined
that it is appropriate not to have a nominating committee because of the
relatively small size of the Board of Directors, and the entire Board of
Directors functions in the capacity of a nominating committee.
The Board of Directors does not have a formal policy with regard to the
consideration of any director candidates recommended by stockholders. Because of
the size of the Board of Directors and the historical small turnover of its
members, the Board of Directors addresses the need to retain members and fill
vacancies after discussion among current members and the Company's management.
Accordingly, the Board of Directors has determined that it is appropriate not to
have such a policy at this time. The Board of Directors, however, will consider
director candidates recommended by stockholders. Any stockholder that wishes to
nominate a director candidate should submit complete information as to the
identity and qualifications of the director candidate pursuant to the procedures
set forth below under "Advanced Notice Required for Stockholder Nominations and
Proposals." The Board of Directors does not have any specific qualifications
that have to be met by director candidates and does not have a formal process
for identifying and evaluating director candidates.
Although the Company does not have a policy with respect to attendance by the
Directors at the Annual Meeting of Stockholders, Directors are encouraged to
attend. All members of the Board of Directors attended the 2003 Annual Meeting
of Stockholders.
COMMUNICATION WITH THE BOARD OF DIRECTORS
The Board of Directors of the Company believes that it is important for
stockholders to have a process to send communications to the Board. Accordingly,
stockholders who wish to communicate with the Board of Directors or a particular
Director may do so by sending a letter to the Secretary of the Company at 401
Whitney Avenue, Suite 400, Gretna, Louisiana 70056. The mailing envelope must
contain a clear notation indicating that the enclosed letter is a
"Stockholder-Board Communication" or "Stockholder-Director Communication." All
such letters must identify the author as a stockholder and clearly state whether
the intended recipients are all members of the Board of Directors or certain
specified individual Directors. The Secretary will make copies of all such
letters and circulate them to the appropriate Director or Directors.
DIRECTOR COMPENSATION
Directors who are employees of the Company do not receive cash compensation for
their services as directors. During 2002, our non-employee directors received an
annual fee of $12,000, which was paid in monthly cash installments of $1,000.
All non-employee directors were to be paid a fee of $1,000 for each Committee
meeting attended in person; however, in February 2003, the Board of Directors
approved the removal of the fee of $1,000 for each Committee meeting attended in
person by the non-employee directors retroactive to January 1, 2002. In
addition, the monthly installments were amended to $1,167 per month, or a total
of $14,000 per annum for Board service, and $208 per month, or a total of $2,500
per annum for service on each committee, payable in a combination of cash or
Common Stock at the discretion of the Board of Directors, beginning on January
1, 2003. All directors are reimbursed for out-of-pocket expenses incurred in
attending meetings of the Board of Directors or Committees thereof and for other
expenses incurred in their capacity as directors.
Each of our directors is eligible to participate in the Company's 2001 Incentive
Plan. The terms of the 2001 Incentive Plan provide that each non-employee
director will be awarded options to purchase 1,000 shares of Common Stock on the
first business day of the month following each annual meeting at which they are
elected. The options will become exercisable six months and one day from the
date of the grant and will expire ten years from the date of the grant. All
grants are subject to the general terms and conditions of the 2001 Incentive
Plan.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and executive
officers and persons who own more than 10% of a registered class of the
Company's equity securities to file with the SEC initial reports of ownership
and reports of changes in ownership. Officers, directors and greater than 10%
stockholders are required by SEC regulation to furnish the Company with copies
of all such forms they file. Based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required, the Company believes that all its directors and executive
officers complied on a timely basis with all applicable filing requirements
under Section 16(a) of the Exchange Act during 2003 with the exception of a late
Form 4 filing for Willie Bergeron on February 3, 2003, a late Form 4 filing for
Lyle G. Stockstill on April 7, 2003, a late Form 4 filing for Lana J. Hingle
Stockstill on April 7, 2003, a late Form 4 filing for Willie Bergeron on
December 18, 2003, and late Form 4 filings for John
Reynolds, Curtis Lemons, Ken Wallace and Andrew L. Michel on January 29, 2004.
Each late Form 4 filing was with respect to a single transaction.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth information regarding
the compensation of the Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company who were serving as
executive officers as of December 31, 2003 (together with the Chief Executive
Officer, the "named executive officers").
Long-Term
Annual Compensation Compensation
------------------- ------------
Securities
Restricted Underlying All Other
Stock Options Compen-
Name and Principal Position Year Salary Bonus Awards (1) (shares) sation (2)
--------------------------- ---- ------ ----- ---------- -------- ----------
Lyle G. Stockstill ............ 2003 $266,538 $ -- $ -- 72,000 $ 62,123
Chairman of the Board and 2002 260,800 -- -- 94,000 116,328
Chief Executive Officer 2001 253,600 -- -- -- 14,601
Willie Bergeron ............... 2003 160,344 22,585 -- -- 14,729
Chief Operating Officer 2002 142,712 -- 37,580 22,000 11,000
2001 116,539 -- -- 15,625 6,992
Robert E. Fulton (3) .......... 2003 170,400 -- -- -- 22,545
Chief Financial Officer 2002 67,662 -- 140,750 -- 28,609
2001 -- -- -- -- --
Lana J. Hingle Stockstill ..... 2003 136,131 -- -- 24,600 56,725
Chief Administrative 2002 133,200 -- -- 22,000 111,000
Officer 2001 129,500 -- -- -- 7,770
Thomas P. Budde ............... 2003 81,827 -- -- -- 3,475
Senior Vice President - 2002 -- -- -- -- --
Administration 2001 -- -- -- -- --
(1) Based on the closing price of the Common Stock on the date of the grant. On
December 31, 2003, the aggregate number of restricted shares held by Mr.
Bergeron and Mr. Fulton was zero and 25,000, respectively, and the
aggregate value of such shares based upon the $5.27 market value on
December 31, 2003, was zero and $131,750, respectively. By action of the
Board of Directors on January 15, 2003, Mr. Bergeron's 2,860 shares of
restricted stock were exchanged for cash of $20,020, of which $10,010 was
paid in January 2003 and the remaining $10,010 was paid in January 2004.
Mr. Fulton's 25,000 restricted shares vest one-third on July 30, 2005,
one-third on July 30, 2006 and one-third on July 30, 2007. Dividends are
paid on restricted stock at the same time and at the same rate as dividends
paid to all stockholders.
(2) Amounts include: (a) 401(k) contributions as follows: Mr. Stockstill,
$12,000 in 2003, $11,000 in 2002 and $10,470 in 2001; Mr. Bergeron, $12,000
in 2003, $11,000 in 2002 and $6,992 in 2001; Mr. Fulton, $12,000 in 2003;
Mrs. Stockstill, $12,000 in 2003, $11,000 in 2002 and $7,770 in 2001; and
(b) health insurance premiums as follows: Mr. Stockstill, $5,398 in 2003,
$5,328 in 2002 and $4,131 in 2001; Mr. Bergeron, $2,729 in 2003; Mr.
Fulton, $5,545 in 2003 and $2,244 in 2002; Mr. Budde, $3,475 in 2003; and
(c) signing bonuses as follows: Mr. Fulton, $5,000 in 2003 and $5,000 in
2002; and (d) relocation and living allowances as follows: Mr. Fulton,
$21,365 in 2002; and (e) life insurance premiums as follows: Mr.
Stockstill, $44,725 in 2003 and $100,000 in 2002; Mrs. Stockstill, $44,725
in 2003 and $100,000 in 2002.
(3) Mr. Fulton began his employment with the Company on July 30, 2002.
(4) Mr. Budde began his employment with the Company on April 7, 2003.
Stock Options Granted in 2003. The following table sets forth certain
information on grants of stock options during 2003 to the named executive
officers of the Company.
Individual Grants
--------------------------------------------------
Number of Potential Realizable
Securities Percentage Value at Assumed
Underlying of Total Annual Rates of Stock
Options Options Price Appreciation for
Granted in Granted to Exercise Option Term (3)
2003 Employees Price per Expiration -----------------------
Name (shares) in 2003 Share (2) Date 5% ($) 10% ($)
---- -------- ------- --------- ---- ------ -------
Lyle G. Stockstill........ 72,000 (1) 57.3% $5.10 4/1/2013 230,930 585,222
Willie Bergeron........... -- -- -- -- -- --
Robert E. Fulton.......... -- -- -- -- -- --
Lana J. Hingle Stockstill. 24,600 (1) 19.6% $5.10 4/1/2013 78,901 199,951
Thomas P. Budde........... -- -- -- -- -- --
(1) These options were granted pursuant to the 2001 Incentive Plan on April 1,
2003 and become exercisable in increments of 20% on each of the first,
second, third, fourth and fifth anniversaries of the date of grant.
(2) The exercise price of the options granted is equal to the average of the
high and low price per share of Common Stock on the NASDAQ National Market
on the date of the grant.
(3) The potential realizable value through the expiration date of options has
been determined on the basis of the per share market price at the time the
options were granted, compounded annually over 10 years, net of the
exercise price. These values have been determined based upon assumed rates
of appreciation. Actual gains, if any, on stock option exercises are
dependent on the future performance of the stock. Zero percent
appreciation in stock price will result in no gain.
Option Exercises and 2003 Year-End Option Values. The following table sets forth
certain information with respect to unexercised options to purchase Common Stock
granted to the named executive officers held by them at December 31, 2003. None
of the named executive officers exercised options in 2003.
Number of Securities Underlying
Unexercised Options Held at
December 31, 2003
-----------------
Exercisable Unexercisable
----------- -------------
Lyle G. Stockstill......... 18,800 147,200
Willie Bergeron............ 10,650 26,975
Robert E. Fulton........... -- --
Lana J. Hingle Stockstill.. 4,400 42,200
Thomas P. Budde............ -- --
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with Messrs. Bergeron and
Fulton. Mr. Bergeron's employment agreement:
- expires on December 31, 2006, and can be renewed for successive one-month
terms unless terminated by either party with thirty days written notice;
- provides a severance benefit equal to twelve months salary (unless
terminated for cause), during which period he has agreed not to compete
with the Company; and
- entitles him to participate in various employee benefit plans.
Mr. Fulton's employment agreement:
- expires on July 30, 2004, and will automatically be renewed for successive
one-year terms unless terminated at least thirty days prior to the end of
the then current term;
- provides a severance benefit equal to twelve months salary (unless
terminated for cause), during which period he has agreed not to compete
with the Company; and
- entitles him to participate in various employee benefit plans.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of Common Stock beneficially
owned directly or indirectly as of April 12, 2004 by (i) each person who is
known to the Company to own beneficially more than 5% of the Common Stock, (ii)
each of the Company's director nominees and named executive officers and (iii)
all executive officers and director nominees as a group.
Number of Percent of
Name of Beneficial Owner (1) Shares Stock
---------------------------- ------ -----
Torch, Inc. ................................... 7,505,000 59.3%
Dimensional Fund Advisors Inc. (2) (3) ........ 897,700 7.1
The Lyle G. Stockstill Trust No. 1 (4) ........ 1,876,250 14.8
The Lana Hingle Stockstill Trust No. 1 (5) .... 1,876,250 14.8
Donald J. Webre (6) ........................... 1,876,250 14.8
Geraldine Cook (6) ............................ 1,876,250 14.8
Lyle G. Stockstill (7) ........................ 7,557,000 59.7
Lana J. Hingle Stockstill (8) ................. 7,518,720 59.4
Robert E. Fulton (9) .......................... 25,000 *
Willie Bergeron (10) .......................... 20,630 *
Thomas P. Budde ............................... -- *
Patrice Chemin ................................ -- *
Curtis Lemons (11) ............................ 5,500 *
Andrew L. Michel (12) ......................... 2,000 *
R. Jere Shopf ................................. -- *
Ken Wallace (11) .............................. 4,500 *
All Executive Officers and Directors as a group
(10 persons) ................................ 7,628,350 60.2
* less than one percent
(1) Unless otherwise indicated, the address of each person is c/o Torch
Offshore, Inc., 401 Whitney Avenue, Suite 400, Gretna, Louisiana
70056-2596.
(2) The address of Dimensional Fund Advisors Inc. is 1299 Ocean Avenue,
11th Floor, Santa Monica, California 90401.
(3) Based on a Schedule 13G filed with the Securities and Exchange
Commission (the "SEC") on February 6, 2004.
(4) Represents shares owned by Torch, Inc. The Lyle G. Stockstill Trust
No. 1, which owns 25% of the outstanding capital stock of Torch, Inc.,
disclaims beneficial ownership of the shares shown in the table.
(5) Represents shares owned by Torch, Inc. The Lana Hingle Stockstill
Trust No. 1, which owns 25% of the outstanding capital stock of Torch,
Inc., disclaims beneficial ownership of the shares shown in the table.
(6) Donald J. Webre and Geraldine Cook are the members of the trustee
investment committee of The Lyle G. Stockstill Trust No. 1. Each of
Donald J. Webre and Geraldine Cook disclaims beneficial ownership of
the shares shown in the table.
(7) Represents 7,505,000 shares owned by Torch, Inc. Mr. Stockstill serves
as Chief Executive Officer and Chairman of the Board of Directors of
Torch, Inc., which is currently comprised of two members. Mrs.
Stockstill serves as Secretary, Treasurer and a Director of Torch,
Inc. Also includes 52,000 shares that may be acquired pursuant to
options that are currently exercisable or will become exercisable
within 60 days of April 12, 2004.
(8) Represents 7,505,000 shares owned by Torch, Inc. Mrs. Stockstill
serves as Secretary, Treasurer and a member of the Board of Directors
of Torch, Inc., which is currently comprised of two members. Mr.
Stockstill serves as Chief Executive Officer and Chairman of the Board
of Directors of Torch, Inc. Also includes 13,720 shares that may be
acquired pursuant to options that are currently exercisable or will
become exercisable within 60 days of April 12, 2004.
(9) Includes 25,000 shares issued pursuant to restricted stock awards that
become exercisable in increments of 33% on each of the first, second
and third anniversaries of the grant date beginning on July 30, 2005.
(10) Includes 18,175 shares that may be acquired pursuant to options that
are currently exercisable or will become exercisable within 60 days of
April 12, 2004.
(11) Includes 4,500 shares that may be acquired pursuant to options that
are currently exercisable or will become exercisable within 60 days of
April 12, 2004.
(12) Includes 2,000 shares that may be acquired pursuant to options that
are currently exercisable or will become exercisable within 60 days of
April 12, 2004.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee was established in June 2001. The Compensation
Committee has the authority to, among other things, review and recommend to the
Board of Directors the compensation and benefits of the executive officers of
the Company. In addition, the Compensation Committee has the responsibility of
establishing and reviewing general policies relating to the Company's
compensation and benefits and administers the 2001 Incentive Plan.
The Compensation Committee has structured its executive compensation policies
to:
- Offer performance-based compensation that takes into account the
Company's financial performance on both a short-term and
long-term basis;
- Provide a total compensation program that considers the
compensation policies of comparable companies with whom the
Company competes so as to attract and retain qualified
executives; and
- Align executive compensation to the financial interests of the
Company's stockholders by providing equity-based incentives.
The three major components to the compensation of the Company's executives are
(i) base salary, (ii) annual incentive compensation in the form of a cash bonus,
and (iii) long-term equity-based compensation. Factors taken into account in
determining these compensation levels include the executive's responsibilities,
experience, leadership, potential future contributions and individual
performance. Long-term equity-based compensation is provided in the form of
stock options, or restricted stock, both of which are tied directly to
stockholder return. Stock options and restricted stock align the interests of
the Company's executives with those of its stockholders by encouraging
executives to enhance the value of the Company.
The Compensation Committee establishes the base salary levels of the CEO and
other executive officers after review of salaries of other comparable companies
in the oilfield service industry. By reviewing the salaries of such other
companies from time to time, the Compensation Committee intends to ensure that
the Company's base salaries are generally competitive and within the range of
base salaries paid by other companies. The base salaries also take into account
the executives' experiences and levels of responsibility.
These base salaries are reviewed and updated annually, with adjustments made
based on current salary data, increases in the cost of living, job performance,
changes in responsibilities and duties of the executive, if any, and general
market salary levels. No weight or emphasis is placed on any one of these
factors.
Long-term equity-based compensation is provided through the 2001 Incentive Plan,
which was adopted effective April 27, 2001. The objectives of the 2001 Incentive
Plan are to retain and attract persons of appropriate training, experience and
ability to serve as employees, consultants and directors of the Company, to
encourage the sense of proprietorship of such persons, and to stimulate the
active interest of such persons in the development and financial success of the
Company. The 2001 Incentive Plan provides long-term equity-based compensation,
with certain terms, conditions and limitations determined by the Compensation
Committee, via awards to employees in the form of (i) incentive stock options,
(ii) nonqualified stock options, (iii) performance stock awards, (iv) stock
awards (including restricted stock), (v) phantom stock, (vi) stock appreciation
rights and (vii) cash awards. All awards are subject to conditions established
by the Compensation Committee which may include continuous service with the
Company, achievement of specific business objectives, increases in specified
indices, attaining specified growth rates and other specified valuations.
The Company may periodically grant options or other long-term equity-based
incentives to provide continuing incentive for future performance. In 2003, the
Company granted options to purchase an aggregate of 111,600 shares of Common
Stock to executive officers of the Company. In making the decision to grant
options or other long-term equity-based incentives, the Compensation Committee
would expect to consider factors such as the size of previous grants and the
number of options held. In addition, the Compensation Committee may consider
factors including the executive's current ownership stake in the Company, the
degree to which increasing that ownership stake would provide the executive with
additional incentives for future
performance, the likelihood that the grant of those options would encourage the
executive to remain with the Company, and the value of the executive's service
to the Company.
CEO Compensation - The CEO's compensation level is established by the
Compensation Committee in the same manner as for other executive officers
described above. During 2003, Lyle G. Stockstill was granted a base salary of
$266,538. Mr. Stockstill does not have an employment contract with the Company.
Mr. Stockstill was granted 72,000 stock options to purchase shares of Common
Stock of the Company during 2003. In addition, Mr. Stockstill owns a 59.7%
ownership in the Company mostly through his ownership of Torch, Inc.
The Compensation Committee
Curtis Lemons
Andrew L. Michel
R. Jere Shopf
Ken Wallace
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There were no Compensation Committee interlocks during fiscal 2003.
TRANSACTIONS WITH MANAGEMENT AND CERTAIN DIRECTORS
Set forth below is a description of certain transactions entered into between
the Company and certain of its officers, directors and stockholders.
The Company entered into a registration rights agreement with Riverside
Investments LLC and Friends of Lime Rock LP (collectively, "Lime Rock"). This
agreement gave Lime Rock the right, on three occasions, to demand that the
Company register all or any portion of its shares of Common Stock for sale under
the Securities Act of 1933, as amended. The registration rights agreement also
provided Lime Rock with the right, if the Company proposed to register any
shares of Common Stock under the Securities Act, to include their shares of
Common Stock in the registration, subject to certain limitations.
The agreement provided for customary registration procedures. The Company paid
all registration-related expenses, other than underwriters' discounts and
commissions. The registration rights agreement contained customary
indemnification and contribution provisions by the Company for the benefit of
any selling stockholders and any underwriters.
On September 22, 2003, the Company filed a Form S-3 Registration Statement to
register the 828,333 shares of Lime Rock for sale under the Securities Act of
1933 based upon their demand. No additional shares of Common Stock were included
in the registration. All expenses associated with the registration statement
were paid for by the Company. The effective date of the transaction was October
3, 2003.
In addition, on September 24, 2003, the Company filed a Form 8-K, reporting
under Item 5, announcing the immediate resignation of John Reynolds from the
Company's Board of Directors. Mr. Reynolds serves as a managing member of Lime
Rock.
The Company purchases catering services for the galleys of some of its vessels
from A R T Catering, Inc., a company that is 11.67% owned by Mrs. Stockstill
with the remaining 88.33%
owned by other family members. Purchases for 2003 totaled $1,695,000. The
Company also purchases fuel from Empire Fuel & Oil, a company that is 33% owned
by Mrs. Stockstill with the remaining 67% owned by other family members.
Purchases for 2003 totaled $457,000.
In December 2002, the Company entered into a five-year lease agreement for a
rental property for customer entertainment purposes from an investment holding
company wholly-owned by Mr. Stockstill. The annual lease obligation approximates
$51,000.
During 2002, the Company purchased a leisure fishing vessel for customer
entertainment purposes from an investment holding company wholly-owned by Mr.
Stockstill. The total cost of the vessel was approximately $0.1 million, of
which $41,000 was paid by the Company in cash during 2002, plus the
Company-assumed debt of $60,000. The debt will be paid by the Company in monthly
installments over a five-year period.
REPORT OF THE AUDIT COMMITTEE
The audit committee is comprised of three members of the Board of Directors,
Messrs. Lemons, Shopf and Wallace. Each of the members is independent, as
defined in Rule 4200(a)(15) of the National Association of Securities Dealers'
listing standards. Mr. Shopf has been designated the "audit committee financial
expert" as prescribed by the SEC. The duties and responsibilities of the Audit
Committee are set forth in a written charter adopted by the Board of Directors.
The Audit Committee reviews and assesses the adequacy of its charter on an
annual basis and has reviewed the relevant requirements of the Sarbanes-Oxley
Act of 2002, the rules, proposed and adopted, of the SEC and the new listing
standards of the NASDAQ National Market regarding audit committee procedures and
responsibilities. Although the Audit Committee's existing procedures and
responsibilities generally complied with the requirements of these rules and
standards, the Board of Directors has adopted amendments to the Audit
Committee's charter to implement these rules and to make explicit its adherence
to others. A copy of the Audit Committee's amended and restated charter is
attached to this Proxy Statement as Appendix A.
In accordance with the Audit Committee Charter, the Audit Committee assists the
Board of Directors in its general oversight of the quality and integrity of the
Company's financial reporting, internal controls and audit functions. Management
is responsible for the preparation, presentation and integrity of the Company's
financial statements, accounting and financial reporting principles, and
internal controls and procedures designed to ensure compliance with accounting
standards, applicable laws and regulations. Ernst & Young LLP, the Company's
independent auditing firm, is responsible for performing an independent audit of
the consolidated financial statements of the Company in accordance with
generally accepted auditing standards in the United States.
Among other matters, the Audit Committee monitors the activities and performance
of the Company's external auditors, including the audit scope, external audit
fees, auditor independence matters, and the extent to which the independent
public accountants may be retained to perform non-audit services. The Audit
Committee and the Board of Directors have ultimate authority and responsibility
to select, evaluate and, when appropriate, replace the Company's independent
public accountants. The Audit Committee also reviews the results of the external
audit work with regard to the adequacy and appropriateness of the Company's
financial, accounting, and internal controls. Management and independent public
accountants' presentations to, and discussions with, the Audit Committee cover
various topics and events that may have significant financial impact or are the
subject of discussions between management and the independent public
accountants. In addition, the Audit Committee generally oversees the Company's
internal compliance programs.
The Audit Committee has reviewed and discussed the Company's audited financial
statements for the fiscal year ended December 31, 2003 with management and has
discussed with Ernst & Young LLP, the independent public accountants for the
Company, the matters required to be discussed by Statement of Auditing Standards
No. 61, "Communications with Audit Committees," as amended, with respect to
those audited financial statements. In addition, the Audit Committee has
received the written disclosures and the letter from Ernst & Young LLP required
by Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," as amended, and has reviewed, evaluated and discussed with
Ernst & Young LLP its independence in connection with its audit of the Company's
most recent financial statements.
Based on its review of the audited financial statements and discussions with
management and the independent public accountants, 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, for filing with the SEC.
The Audit Committee
R. Jere Shopf (Chairman)
Curtis Lemons
Ken Wallace
PERFORMANCE GRAPH
The following performance graph compares the cumulative total stockholder return
on the Common Stock to the cumulative total return on the NASDAQ National Market
as measured by the Nasdaq Composite Index (NASDAQ); the Philadelphia Oil Service
Sector Index (OSX), a price-weighted index of leading oil service companies; and
our Peer Group Index over the period from June 7, 2001, the date of the
Company's initial public offering, to December 31, 2003. Our Peer Group Index
consists of Global Industries, Ltd., Horizon Offshore, Inc. and Stolt Offshore,
Inc. The graph assumes that $100 was invested on June 7, 2001 in the Common
Stock and each index at the initial point of each graph and the reinvestment of
all dividends, if any. The Peer Group Index is weighted at the beginning of each
period based upon the market capitalization of each individual company within
the group. The reported closing prices for the dates specified are utilized for
determining the cumulative total returns. The returns shown assume the
reinvestment of dividends.
[PERFORMANCE GRAPH]
6/7/01 12/31/01 12/31/02 12/31/03
------ -------- -------- --------
Torch Offshore, Inc............................... $100.00 $37.50 $34.06 $32.94
NASDAQ............................................ $100.00 $86.16 $58.99 $88.49
OSX............................................... $100.00 $72.92 $72.55 $78.62
Peer Group Index.................................. $100.00 $59.07 $21.77 $29.47
PROPOSAL TWO: APPROVAL OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee of the Board of Directors has appointed and recommends the
approval of the appointment of Ernst & Young LLP as independent public
accountants to conduct an audit of the Company's financial statements for the
year 2004. This firm has acted as independent public accountants for the Company
since June 2002.
The Company is advised that no member of Ernst & Young LLP has any direct or
material indirect financial interest in the Company or has had any connection
with the Company in the capacity of promoter, underwriter, voting trustee,
director, officer or employee since June 2002.
During 2003, the Company incurred the following aggregate fees and costs for:
(i) professional services rendered by our principal independent accountants for
the audit of our financial statements for the fiscal years ended December 31,
2003 and 2002 and the reviews of the financial statements included in our Form
10-Q reports for the fiscal years ended December 31, 2003 and 2002, (ii)
professional services rendered in connection with assurance and related services
not included in (i) above, (iii) professional services rendered for tax
compliance, tax advice, and tax planning, and (iv) other professional services
rendered by our principal independent accountants and billed during the fiscal
years ended December 31, 2003 and 2002:
Years Ended December 31,
------------------------
2003 2002
---- ----
Audit Fees(1)........................................... $180,000 $115,000
Audit-Related Fees (2).................................. 15,000 15,000
Tax Fees(3)............................................. 28,600 65,800
All Other Fees.......................................... -- --
-------- --------
TOTAL................................................... $223,600 $195,800
======== ========
(1) The 2003 Audit Fees includes $10,000 for professional services rendered by
Ernst & Young LLP in connection with the issuance of their consent with our
Form S-3 filing. The 2002 Audit Fees include $10,000 paid to Arthur
Andersen LLP for their review of our quarterly financial statements for the
three-month period ended March 31, 2002, prior to being replaced with Ernst
& Young LLP.
(2) The 2003 and 2002 Audit-Related Fees relate to the audit of our 401(k) plan
by Ernst and Young LLP for the year ended December 31, 2002 and December
31, 2001, respectively.
(3) The Tax Fees represent primarily tax compliance and tax consulting. The
2002 Tax Fees include $16,900 paid to Arthur Andersen LLP prior to being
replaced with Ernst & Young LLP.
The Audit Committee reviewed the non-audit services provided to the Company and
determined that they did not impair the independence of Ernst & Young LLP.
Representatives of Ernst & Young LLP will attend the Annual Meeting and will be
available to respond to questions that may be asked by stockholders. Such
representatives will also have an opportunity to make a statement at the meeting
if they desire to do so.
THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
APPROVAL OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS. In accordance with the Company's Bylaws, approval of the
appointment of independent public accountants will require the affirmative vote
of a majority of the shares of Common Stock voted on the proposal. Accordingly,
abstentions and broker nonvotes applicable to shares present at the meeting will
not be included in the tabulation of votes cast on this matter.
OTHER BUSINESS
Management does not intend to bring any business before the meeting other than
the matters referred to in the accompanying notice. If, however, any other
matters properly come before the meeting, it is intended that the persons named
in the accompanying proxy will vote pursuant to discretionary authority granted
in the proxy in accordance with their best judgment on such
matters. This discretionary authority includes matters that the Board of
Directors does not know are to be presented at the meeting by others.
ADDITIONAL INFORMATION
AUDITOR SERVICES
On June 28, 2002, the Company dismissed Arthur Andersen LLP and appointed Ernst
& Young LLP to serve as the Company's independent auditors for fiscal year 2002,
based upon the recommendation of the Company's Audit Committee. The appointment
of Ernst & Young LLP was effective immediately and commenced with a review of
the Company's consolidated financial statements for the three months ended June
30, 2002.
The appointment of Ernst & Young LLP was made after careful consideration by the
Board of Directors, the Audit Committee and management of the Company. The
decision to change auditors was not the result of any disagreement between the
Company and Arthur Andersen LLP on any matter of accounting principles and
practices, financial statement disclosures or auditing scope or procedure, but,
rather, was attributable to the current circumstances surrounding Arthur
Andersen LLP and its inability to service the Company.
The audit reports of Arthur Andersen LLP on the consolidated financial
statements of the Company as of and for the fiscal year ended December 31, 2001,
did not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
Additionally, during the interim period from January 1, 2002, through June 28,
2002, there were (1) no disagreements between the Company and Arthur Andersen
LLP on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure which, if not resolved to Arthur
Andersen LLP's satisfaction would have caused them to make reference to the
subject matter of the disagreement in connection with its reports on the
Company's consolidated financial statements for such periods and (2) there were
no reportable events, as listed in Item 304(a)(1)(v) of Regulation S-K.
During the interim period from January 1, 2002, through June 28, 2002, the
Company did not consult with Ernst & Young LLP 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
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.
SUBMISSION DEADLINE FOR STOCKHOLDER PROPOSALS TO BE INCLUDED IN PROXY MATERIALS
FOR 2005 MEETING
In order to be included in the Company's proxy material for its Annual Meeting
of Stockholders in 2005, eligible proposals of stockholders intended to be
presented at the annual meeting must be received by the Company on or before
December 15, 2004 (directed to the Secretary of the Company at the address
indicated on the first page of this Proxy Statement).
ADVANCE NOTICE REQUIRED FOR STOCKHOLDER NOMINATIONS AND PROPOSALS
The Bylaws of the Company require timely advance written notice of stockholder
nominations of director candidates and of any other proposals to be presented at
an Annual Meeting of Stockholders. Notice will be considered timely for the
Annual Meeting to be held in 2005 if it is received by February 15, 2005. In the
case of director nominations by stockholders, the Bylaws
require that written notice be delivered to the Company's Secretary at the
Company's executive offices not later than the 90th day prior to the first
anniversary of the preceding year's annual meeting and set forth for each person
whom the stockholder proposes to nominate for election or re-election as a
director, (a) the name, age, business address and residence address of such
person, (b) the principal occupation or employment of such person, (c) the
number of shares of each class of common stock of the Company beneficially owned
by such person, (d) the written consent of such person to having such person's
name placed in nomination at the meeting and to serve as of a director if
elected and (e) any other information relating to such person that is required
to be disclosed in solicitations of proxies for election of directors of the
Company, or that is otherwise required pursuant to Regulation 14A under the
Securities Exchange Act of 1934. The stockholder giving the notice must also
include the name and address, as they appear on the Company's books, of such
stockholder and the number of shares of each class of voting stock of the
Company that are then beneficially owned by such stockholder. The Company is not
required to include any stockholder proposed nominee in the proxy statement.
In the case of other proposals by stockholders at an annual meeting, the Bylaws
require that written notice be delivered to the Company's Secretary at the
Company's executive offices not later than the 90th day prior to the first
anniversary of the preceding year's annual meeting and set forth (a) a
description of each proposal desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Company's books, of the stockholder proposing
such business and any other stockholders known by such stockholder to be
supporting such proposal, (c) the class and number of shares of the Company's
stock that are beneficially owned by the stockholder on the date of such notice,
(d) any financial interest of the stockholder in such proposal and (e) a
representation that the stockholder intends to appear in person or by proxy at
the meeting to bring the proposed business before the annual meeting. A copy of
the Bylaws of the Company setting forth the requirements for the nomination of
director candidates by stockholders and the requirements for proposals by
stockholders may be obtained from the Company's Corporate Secretary at the
address indicated on the first page of this Proxy Statement.
In order for director nominations and stockholders proposals to have been
properly submitted for presentation at this annual meeting, notice must have
been received by the Company's Secretary on or before February 15, 2004. The
Company received no such notice and no stockholder director nominations or
proposals will be presented at the Annual Meeting.
ANNUAL REPORT
The Annual Report to Stockholders, which includes financials statements of the
Company for the year ended December 31, 2003, has been mailed to all
stockholders. The Annual Report is not part of the proxy solicitation material.
By Order of the Board of Directors
Lyle G. Stockstill
Chairman of the Board and
Chief Executive Officer
Gretna, Louisiana
May 5, 2004
APPENDIX A
TORCH OFFSHORE, INC.
AMENDED AND RESTATED AUDIT COMMITTEE CHARTER
PURPOSE
The Audit Committee of the Board of Directors (the "Committee") is appointed by
the Board of Directors (the "Board") to assist the Board in fulfilling its
oversight responsibilities. The Committee's primary duties and responsibilities
are to: (i) be responsible for the appointment, oversight, and compensation of
the firm hired to audit the Company's financial statements and internal controls
("external auditors") and preapprove and review all audit and non-audit
services, including tax services, provided by the external auditor to the
Company, consistent with all applicable laws; (ii) to monitor the quality and
integrity of the accounting, auditing and financial reporting practices of the
Company; (iii) provide an avenue of communication between management and the
external auditors; (iv) to monitor the independence and performance of the
external auditors; and (v) to establish procedures for the treatment of
complaints received by the Company regarding accounting, internal accounting
controls, or audit matters and the confidential anonymous submission by
employees of the Company of concerns regarding questionable accounting or
auditing matters.
MEMBERSHIP AND MEETINGS
The Committee shall consist of not less than three directors, each of whom shall
serve at the discretion of the Board. Each member of the Committee shall be
independent, non-executive directors free from any relationship that would
interfere with the exercise of his or her independence. The Committee members
shall meet the independence and experience requirements of the Securities and
Exchange Commission (the "SEC") and the Nasdaq National Market (as may be
modified or supplemented) or the principal exchange on which the Company's
common stock is then quoted or listed (the "Principal Exchange"). Each member is
prohibited from accepting any fees from the Company other than for services as a
member of the Board or a committee of the Board. In addition, (i) each member
shall be (or shall become within a reasonable time after appointment) able to
read and understand fundamental financial statements, and (ii) at least one
member shall have accounting or related financial management expertise and
qualify as a "financial expert" in accordance with the requirements of the SEC
and the Nasdaq National Market (as may be modified or supplemented).
The Committee shall meet at least four times annually, with special meetings
called as circumstances dictate, and shall meet periodically with management and
the external auditors in order to maintain direct lines of communication and to
ensure there is an open avenue of communication between the external auditor,
the Committee and management. The Committee may hold executive sessions with
these individuals to discuss any matters that they or the Committee believe
should be discussed privately. The Committee has the authority to conduct or
authorize investigations into any matters within the Committee's scope of
responsibilities, and is empowered to retain, at the Company's expense,
independent counsel and other professionals to assist in the conduct of any such
investigation.
ACCOUNTABILITY OF EXTERNAL AUDITORS
The external auditors are ultimately accountable to the Committee. The Committee
has the ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the external auditors.
DUTIES AND RESPONSIBILITIES
The Committee shall:
1. Annually select the external auditors, with such selection to be
submitted to the stockholders for ratification.
2. Preapprove all audit and non-audit services to be provided, consistent
with all applicable laws, to the Company by the external auditors, and
establish the fees and other compensation to be paid to the external
auditors.
3. Review and approve the plan and scope of the annual audit of the
Company's financial statements and any other services provided by the
external auditors, as well as the fees related to the audit and such
other services.
4. Discuss with management and the external auditors the design, quality
and adequacy of the Company's internal controls.
5. Review and discuss with management and the external auditors the
Company's audited annual financial statements prior to filing with the
SEC, and determine whether to recommend to the Board that the audited
financial statements be included in the Company's Annual Report on Form
10-K.
6. Review and discuss with management and the external auditors the
Company's quarterly financial statements prior to filing with the SEC
and any other SEC filing deemed by the Committee to be appropriate
7. Inquire of the independent auditors whether they are aware of any
possible illegal acts that should be reported to management and/or the
Committee/Board pursuant to Section 10A of the Securities and Exchange
Act.
8. Whenever requested, or as considered useful or appropriate meet with
the external auditors and management in separate executive sessions to
discuss any matters that the Committee or these groups believe should
be discussed privately with the Audit Committee.
9. Discuss with the external auditors the matters required to be discussed
by the Statement of Auditing Standards No. 61, as amended
(Communication with Audit Committees) and any matters brought to the
Committee's attention as a result of the application of the Statement
of Auditing Standards No. 100 (Interim Financial Information).
10. Ensure that the external auditors submit to the Committee on a periodic
basis a formal written statement delineating all relationships between
the external auditors and the Company, actively engage in a dialogue
with the external auditors with respect to any such disclosed
relationships or services that may impact the objectivity and
independence
of the external auditors, and take appropriate action in response to
the written statement to satisfy itself of the independence of the
external auditors.
11. Prepare a report to stockholders as required by the SEC to be included
in the Company's annual proxy statement.
12. Review and approve all related party transactions.
13. Provide reports of Committee activities to the Board, and perform such
other functions, as requested by the Board or required by law or the
rules of the Principal Exchange.
ANNUAL REVIEW OF CHARTER
At least annually, the Committee shall review and reassess the adequacy of this
Charter. The Committee shall report the results of the review to the Board and,
if necessary, recommend that the Board amend this Charter.
OVERSIGHT/RELIANCE
While the Committee has the responsibilities and powers set forth in this
Charter, the Committee recognizes that the Company's management is responsible
for preparing the Company's financial statements and the external auditors are
responsible for auditing those financial statements. Therefore, the Committee's
responsibility is in the nature of oversight. It is not the responsibility of
the Committee to plan or conduct audits or to determine that the Company's
financial statements are complete and accurate or are in accordance with
generally acceptable accounting principles. In carrying out its oversight
responsibilities, the Committee is not providing any expert or special
assurances as to the Company's financial statements or the work of the external
auditors. Absent actual knowledge to the contrary (which shall be promptly
reported to the Board), each member of the Committee shall be entitled to assume
and rely upon (i) the integrity of those persons and organizations within and
outside the Company from which it receives information, and (ii) the accuracy of
the financial and other information provided to the Committee by such persons
and organizations.
TORCH OFFSHORE, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE 2004 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD
MAY 20, 2004
The undersigned hereby appoints Thomas P. Budde and Bradley T. Lowe, jointly and
severally, proxies, with full power of substitution and with discretionary
authority, to vote all shares of Common Stock which the undersigned is entitled
to vote at the Annual Meeting of Stockholders of Torch Offshore, Inc. (the
"Company") to be held on Thursday, May 20, 2004, at the Torch Offshore, Inc.
corporate headquarters, 401 Whitney Avenue, Suite 400, Gretna, Louisiana, at
10:00 a.m., or at any adjournment thereof, hereby revoking any proxy heretofore
given.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSAL 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
1. ELECTION OF DIRECTORS, NOMINEES: LYLE G. STOCKSTILL, LANA J. HINGLE
STOCKSTILL, CURTIS LEMONS, ANDREW L. MICHEL, R. JERE SHOPF AND KEN WALLACE
[ ] FOR ALL NOMINEES [ ] WITHHOLD AUTHORITY FOR ALL NOMINEES
[ ] FOR ALL EXCEPT (See instructions below)
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
mark "FOR ALL EXCEPT" and write the nominee name(s) below:
_________________________________________________________________
2. APPROVAL OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31,
2004.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. With discretionary authority as to such other matters as may properly come
before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN.
IN THE ABSENCE OF SPECIFIC DIRECTIONS TO THE CONTRARY, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE DIRECTORS NAMED AND FOR THE APPROVAL OF ERNST & YOUNG
LLP AS THE COMPANY'S ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2004.
The undersigned hereby acknowledges receipt of the Notice of, and Proxy
Statement for, the aforesaid Annual Meeting.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE.
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
[ ]
Signature of Stockholder:____________________________ Date:_____________
Signature of Stockholder:____________________________ Date:_____________
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.