Note 9 — Employee Benefit Plans

Defined Contribution Plan

We sponsor a defined contribution 401(k) retirement plan covering substantially all of our employees. Our contributions are in the form of cash and are determined annually as a 50% match of each employee’s contribution up to 5% of the employee’s salary. Our costs related to the 401(k) plan totaled $1.6 million, $1.4 million and $1.6 million for the years ended December 31, 2012, 2011 and 2010, respectively.

Stock-Based Compensation Plans

We have two stock-based compensation plans: the 1995 Long-Term Incentive Plan, as amended (the “1995 Incentive Plan”) and the 2005 Long-Term Incentive Plan, as amended (the “2005 Incentive Plan”).

Upon adoption of the 1995 Incentive Plan in May 1995, a maximum of 10% of the total shares of common stock issued and outstanding were eligible to be granted to executive officers, selected management employees and non-employee members of our Board of Directors. Following the approval by shareholders of the 2005 Incentive Plan in May 2005, no further grants have been or will be made under the 1995 Incentive Plan.

In May 2012, the shareholders approved an amendment to and restatement of the 2005 Incentive Plan to: (i) authorize 4.3 million additional shares for issuance pursuant to our equity incentive compensation strategy, (ii) authorize incentive stock options, stock appreciation rights, cash awards and performance awards to be made pursuant to the amended and restated 2005 Incentive Plan, and (iii) include performance criteria for awards that may be made contingent upon the achievement of one or more performance measures, as well as limits on individual awards, in accordance with the requirements for performance-based compensation under Section 162(m) of the Internal Revenue Code. As of December 31, 2012, there were 6.6 million shares available for issuance under the amended and restated 2005 Incentive Plan, which includes a maximum of 2.0 million shares that may be granted as incentive stock options.

The 1995 and 2005 Incentive Plans are administered by the Compensation Committee of Helix’s Board of Directors. The Compensation Committee also determines the type of award to be made to each participant and, as set forth in the related award agreement, the terms, conditions and limitations applicable to each award. The Compensation Committee may grant stock options, restricted stock, restricted stock units, and cash awards. Awards granted to employees under the incentive plans have typically vested 20% per year over a five-year period. Commencing in 2012, awards granted under the 2005 Incentive Plan have a vesting period of three years or 33% per year. There have been no stock options granted since 2004. Stock options granted have a maximum exercise life of 10 years.

Compensation cost for restricted shares is the product of grant date fair value of each share and the number of shares granted and is recognized over the respective vesting periods on a straight-line basis. Forfeitures on restricted stock totaled approximately 12% based on our most recent five-year average of historical forfeiture rates. Tax deduction benefits for an award in excess of recognized compensation cost is reported as a financing cash flow rather than as an operating cash flow. Stock based compensation that is based solely on service conditions is recognized on a straight line basis over the vesting period of the related shares.

Stock Options

The following table summarizes information about our stock options during the years ended December 31, 2012, 2011 and 2010:


	2012			2011			2010
			Weighted			Weighted			Weighted
			Average			Average			Average
			Exercise			Exercise			Exercise
	Shares		Price	Shares		Price	Shares		Price

Options outstanding at beginning of year	192,800	$	10.52	432,918	$	10.78	501,318	$	10.74
Exercised	(140,000)		9.24	(181,670)		10.92	(68,400)		10.52
Terminated	-		-	(58,448)		11.20	-		-
Options outstanding at end of year	52,800	$	13.91	192,800	$	10.52	432,918	$	10.78
Options exercisable at end of year	52,800	$	13.91	192,800	$	10.52	432,918	$	10.78

There was no compensation recognized associated with stock options in 2012, 2011 or 2010 as all stock options outstanding are vested. The aggregate intrinsic value of the stock options exercised in 2012, 2011 and 2010 was approximately $1.3 million, $1.1 million and $0.1 million, respectively. The aggregate intrinsic value of options exercisable at December 31, 2012, 2011 and 2010 was approximately $0.4 million, $1.0 million and $0.6 million, respectively. The weighted average remaining contractual life of stock option awards at December 31, 2012 was 1.4 years.

Share-based Awards

We grant share-based awards (restricted stock, restricted stock units (“RSUs”) and/or performance share units (“PSUs”)) to members of our Board of Directors, executive officers and selected management employees. The following table summarizes information about our share-based awards during the years ended December 31, 2012, 2011 and 2010:


	2012			2011			2010
			Grant Date			Grant Date			Grant Date
	Shares		Fair Value ⁽¹⁾	Shares		Fair Value ⁽¹⁾	Shares		Fair Value ⁽¹⁾

Awards outstanding at beginning of year	1,263,218	$	14.80	1,463,298	$	16.93	1,443,265	$	21.55
Granted	482,340		18.33	571,163		12.77	599,996		12.01
Vested ⁽²⁾	(400,180)		18.07	(504,813)		19.87	(444,905)		25.10
Forfeited	(21,066)		15.00	(266,430)		12.55	(135,058)		17.48
Awards outstanding at end of year	1,324,312	$	15.09	1,263,218	$	14.80	1,463,298	$	16.93

(1) Represents the weighted average grant date fair value, which is based on the quoted market price of the common stock on the business day prior to the date of grant.

(2) Total fair value of share-based awards that vested during the years ended December 31, 2012, 2011 and 2010 was $6.7 million, $6.7 million and $5.6 million, respectively.

For the years ended December 31, 2012, 2011 and 2010, $7.7 million, $8.4 million, $9.0 million, respectively, was recognized as stock-based compensation expense related to share-based awards. Future compensation cost associated with unvested share-based awards at December 31, 2012, 2011, and 2010 totaled approximately $13.2 million, $12.0 million and $16.8 million, respectively. The weighted average vesting period related to unvested share-based awards at December 31, 2012 was approximately 2.2 years.

The following grants of share-based awards were made in 2012 under the amended and restated 2005 Incentive Plan:


Date of Grant	Shares		Grant Date Fair Value Per Share	Vesting Period

January 3, 2012 ⁽¹⁾	272,153	$	15.80	33% per year over three years
January 3, 2012 ⁽²⁾	132,910		23.68	100% on January 1, 2015
January 3, 2012⁽³⁾	1,958		15.80	100% on January 1, 2014
April 1, 2012⁽³⁾	1,879		17.80	100% on January 1, 2014
July 2, 2012⁽³⁾	1,885		16.41	100% on January 1, 2014
August 23, 2012⁽³⁾	3,539		18.84	20% per year over five years
October 1, 2012⁽³⁾	1,830		18.27	100% on January 1, 2014
December 6, 2012⁽³⁾	66,186		18.13	33% per year over three years

(1) Reflects the grant of 132,910 restricted shares to our executive officers and 139,243 RSUs to selected management employees that are convertible into 139,243 shares of our common stock upon vesting. These RSUs may be settled in cash or common stock at the Company’s option.

(2) Reflects the grant of PSUs to our executive officers. The estimated fair value of the PSUs on grant date was determined using a Monte Carlo simulation model. The PSUs provide for an award based on the performance of our common stock over a three-year period with the maximum award being 200% of the original awarded PSUs and the minimum amount being zero. The vested PSUs will be settled in an equivalent number of shares of our common stock unless the Compensation Committee of our Board of Directors elects to pay in cash.

(3) Reflects grants to our directors.

In January 2013, we granted our executive officers 89,329 restricted shares under the 2005 Long-Term Incentive Plan. The market value of the restricted shares was $20.64 per share or $1.8 million and the shares vest 33% per year for a three-year period. Separately, we issued our executive officers 89,329 PSUs. The PSUs provide for an award based on the performance of our common stock over a three-year period with the maximum amount of the award being 200% of the original awarded PSUs and the minimum amount being zero. The PSUs vest 100% on the three-year anniversary date of the grant. The vested PSUs will be settled in an equivalent number of shares of our common stock unless the Compensation Committee of our Board of Directors determines to pay in cash.

Stock Compensation Modifications

Under our 1995 Incentive Plan and our 2005 Long-Term Incentive Plan, upon a stock recipient’s termination of employment, which is defined as employment with us and any of our majority-owned subsidiaries, any unvested restricted stock and stock options are forfeited immediately, and all unexercised vested options are forfeited as specified under the applicable plan or agreement.

Employee Stock Purchase Plan

In May 2012, the shareholders approved the Helix Energy Solutions Group, Inc. Employee Stock Purchase Plan (the “ESPP”). The ESPP has 1.5 million shares authorized for issuance. Eligible employees who participate in the ESPP may purchase shares of our common stock through payroll deductions on an after-tax basis over a four-month period beginning on January 1, May 1, and September 1 of each year during the term of the ESPP, subject to certain restrictions and limitations established by the Compensation Committee of our Board of Directors (which administers the ESPP) and Section 423 of the Internal Revenue Code. The per share price of common stock purchased under the ESPP is equal to 85% of the lesser of (i) its fair market value on the first trading day of the purchase period or (ii) its fair market value on the last trading day of the purchase period. The first purchase period under the ESPP began on September 1, 2012. The total value of the ESPP awards is calculated using the component approach where each award is computed as the sum of 15% of a share of non-vested stock, a call option on 85% of a share of non-vested stock, and a put option on 15% of a share of non-vested stock. Share-based compensation expense with respect to the ESPP was $0.3 million for the year ended December 31, 2012.

Long-Term Incentive Cash Plan

In January 2009, we adopted the 2009 Long-Term Incentive Cash Plan (the “2009 LTI Plan”) to provide long-term cash-based compensation to eligible employees. Our executive officers and certain other members of senior management as designated from time to time by the Compensation Committee of our Board of Directors are granted cash awards. Under the terms of the 2009 LTI Plan, cash awards historically have been both fixed sum amounts payable (for non-executive management only) as well as cash awards indexed to our common stock with the payment amount at each vesting date fluctuating based on the performance of our common stock (for both executive and non-executive management). These are measured based on the performance of our stock price over the applicable award period compared to a base price determined by the Compensation Committee of our Board of Directors at the time of the award. The measurement period to determine the annual payment for the share-based cash awards is generally the last 20 trading days of the year (the last 30 trading days for the 2009 awards). Payment amounts are based on the calculated ratio of the average stock price during the applicable measurement period over the original base price as determined by the Compensation Committee of our Board of Directors. The maximum amount payable under these share-based cash awards is twice the original targeted award and if the average price during the measurement period is less than 75% (50% for 2010 grants) of the base price, no payout will be made at the applicable anniversary date. Payments under the 2009 LTI Plan are made each year on the anniversary date of the award. Awards granted prior to 2012 have a vesting period of five years and awards granted in 2012 and 2013 have a vesting period of three years. This share-based component is considered a liability plan and as such is re-measured to fair value each reporting period with corresponding changes being recorded as a charge to earnings as deemed appropriate.

The awards made under the 2009 LTI Plan totaled $4.2 million in 2012, $5.2 million in 2011, and $10.2 million in 2010. All such awards were made to our executive officers except for $4.3 million of the total award in 2010. Total compensation expense associated with the 2009 LTI Plan was $8.7 million ($7.3 million related to our executive officers), $7.9 million ($6.5 million related to our executive officers) and $8.6 million ($6.9 million related to our executive officers), respectively, for the years ended December 31, 2012, 2011 and 2010. The liability balance under the 2009 LTI Plan was $13.0 million at December 31, 2012 and $9.9 million at December 31, 2011, including $11.7 million at December 31, 2012 and $8.5 million at December 31, 2011 associated with the variable portion of the 2009 LTI plan. During 2012, 2011 and 2010, we paid $5.5 million, $5.9 million and $4.4 million of the liability associated with the 2009 LTI plan. We paid $7.1 million of this liability on January 4, 2013. In January 2013, $5.9 million was awarded under the 2009 LTI Plan to executive officers and selected management employees. No cash awards were given to non-executive employees in 2012 or 2011.