-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VVJbNLifDQ+Nv4cjdB2q8vEVDh2JdpCvOnDVuocuyKEwTg4kQZ0K/0MDxSxV+VpW 9h4qF4+3IdeK4Sg0qcNbfw== 0000073756-99-000007.txt : 19990629 0000073756-99-000007.hdr.sgml : 19990629 ACCESSION NUMBER: 0000073756-99-000007 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990628 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OCEANEERING INTERNATIONAL INC CENTRAL INDEX KEY: 0000073756 STANDARD INDUSTRIAL CLASSIFICATION: OIL, GAS FIELD SERVICES, NBC [1389] IRS NUMBER: 952628227 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-10945 FILM NUMBER: 99653250 BUSINESS ADDRESS: STREET 1: 11911 FM 529 CITY: HOUSTON STATE: TX ZIP: 77041 BUSINESS PHONE: 713-329-4500 MAIL ADDRESS: STREET 1: 11911 FM 529 CITY: HOUSTON STATE: TX ZIP: 77041 10-K405 1 FISCAL 1999 10K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-10945 OCEANEERING INTERNATIONAL, INC. Exact name of registrant as specified in its charter) Delaware 95-2628227 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 11911 FM 529 Houston, Texas 77041 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code:(713) 329-4500 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, $0.25 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ , No . Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes _X_ , No . Aggregate market value of the voting stock held by non-affiliates of the registrant at June 9,1999 based upon the closing sale price of the Common Stock on the New York Stock Exchange: $377,992,000 Number of shares of Common Stock outstanding at June 9, 1999: 22,399,535 Documents Incorporated by Reference: Portions of the proxy statement relating to the registrant's 1999 annual meeting of shareholders, to be filed on or before July 29, 1999 pursuant to Regulation 14A of the Securities and Exchange Act of 1934 to the extent set forth in Part III, Items 10-13 of this report. PART I ITEM 1. BUSINESS. General Development of Business Oceaneering International, Inc. is an advanced applied technology company that provides engineered services and hardware to customers who operate in marine, space and other harsh environments. We supply a comprehensive range of integrated technical services to a wide array of industries and are one of the world's largest underwater services contractors. We provide most of our services to the oil and gas industry. These services include drilling support, subsea construction, design, lease and operation of production systems, facilities maintenance and repair, survey and positioning and specialized onshore and offshore engineering and inspection. Oceaneering was organized in 1969 out of the combination of three diving service companies founded in the early 1960s. Since our establishment, we have concentrated on the development and marketing of underwater services requiring the use of advanced deepwater technology. We operate in the United States and 26 other countries. Our international operations, principally in the North Sea, Africa and Far East, accounted for approximately 48% of our 1999 revenues, or $194 million. Our business segments are Oilfield Marine Services, Offshore Field Development and Advanced Technologies. In each of our segments, we have been concentrating on expanding our capabilities to provide technical solutions to customers operating in harsh environments. Oilfield Marine Services. In the last few years, the focus of our Oilfield Marine Services segment has been toward increasing our asset base for servicing deepwater projects. Prior to 1996, we purchased most of our remotely operated vehicles ("ROVs"), which are submersible vehicles operated from the surface and widely used in the offshore oil and gas industry. We also designed and built specialized systems in-house. In response to increased demand for more powerful systems operating in deeper water, we expanded our capabilities and established a dedicated facility to design and build ROVs to meet the continued expansion of our ROV fleet. We have delivered over 50 ROV systems and all new ROVs entering our fleet are being produced at this facility. In addition to the ROV expansion, we also committed to the construction of two dynamically positioned multiservice vessels ("MSVs"), the first of which went into service in November 1998. These vessels can carry and install significant lengths of coiled tubing or umbilicals for tying back subsea completions. They have been designed for use in pipeline or flowline tie-ins, pipeline crossings, subsea hardware interventions and riser and jumper spool installations. Offshore Field Development. Through our Multiflex unit ("Multiflex"), we are the world's largest provider of subsea hydraulic and electrohydraulic thermoplastic umbilicals. These umbilicals are the means by which offshore operators control subsea wellhead hydrocarbon flow rates. We entered this market in March 1994 through our purchase of the operating subsidiaries of Multiflex International Inc. During the fiscal year ended March 31, 1999, we relocated, modernized and increased the capabilities of our umbilical manufacturing facility in Scotland and constructed a new umbilical plant in Brazil. In November 1995, we contracted with a major oil company for the provision of a floating production, storage and offloading system ("FPSO"). We converted a crude oil tanker and delivered the FPSO to its first operational location off West Africa in August 1996. In December 1996, the customer exercised an option to purchase the FPSO. We continue to participate as a member of the customer's integrated team to operate and enhance the FPSO's production facilities. We own two mobile offshore production systems ("MOPS"), the PB SAN JACINTO, acquired in December 1997, and the FPSO OCEAN PRODUCER, initially placed in service in December 1991. Both are currently operating under contract. Advanced Technologies. In 1992 and 1993, we purchased two businesses which formed the basis of our Advanced Technologies segment ("ADTECH"). The first business designed, developed and operated robotic systems and ROVs specializing in the non-oilfield market. This business is the basis for our expansion into telecommunications cable laying and burial and commercial theme park animation. The second business designed, developed and fabricated spacecraft hardware and high temperature insulation products. We intend to continue our strategy of acquiring, as opportunities arise, additional assets or businesses, either directly through merger, consolidation or purchase, or indirectly through joint ventures. We are also applying our skills and technology in further developing business unrelated to the oil and gas industry and performing services for government agencies and firms in the telecommunications, aerospace, and civil engineering and construction industries. We are continually seeking opportunities for business combinations to improve our market position or expand into related service and product lines. Unless the context indicates otherwise, references to years indicate fiscal years. For example, 1999 would refer to the twelve month period ended March 31, 1999. Financial Information about Industry Segments The table presenting revenues, income from operations, identifiable assets, capital expenditures, and depreciation and amortization by business segment for the years ended March 31, 1999, 1998 and 1997 is incorporated herein by reference from Note 6 of the Notes to Consolidated Financial Statements. Description of Business OILFIELD MARINE SERVICES Our Oilfield Marine Services business consists of underwater intervention, maintenance and repair as well as above-water inspection services. We provide these services to customers separately or on an integrated basis along with services or products from our Offshore Field Development segment. Underwater Intervention Services. We provide underwater support services for all phases of offshore oil and gas operations - exploration, development and production. During the exploration phase, we provide positioning, placement and monitoring of subsea exploration equipment, collect data on seafloor characteristics at proposed drilling sites and assist with the navigational positioning of drilling rigs. During the development phase, we assist with the installation of production platforms and the connection of subsea pipelines. During the production phase, we inspect, maintain and repair offshore platforms, pipelines and subsea equipment. We use ROVs or divers to perform underwater intervention services. We use ROVs at depths or in situations in which diving would be uneconomical or infeasible. We believe that we operate the largest and most technically advanced fleet of work class ROVs in the world, with a market share of over 25%. We are the industry leader in providing ROV services on deepwater wells, which are the most technically demanding. We use ROVs for a variety of underwater tasks including drilling support, installation and construction support, pipeline inspections and surveys and subsea production facility installation, operation and maintenance. An ROV may be outfitted with manipulators, sonar, television cameras, specialized tooling packages and other equipment or features to facilitate the performance of specific underwater tasks. We currently own approximately 100 work-class ROVs. When a project requires manned intervention, we use divers or atmospheric diving systems ("ADS") technology. An ADS encloses the operator in a one-atmosphere (surface pressure) diving suit and is suitable for use in water depths to 2,300 feet. We do not use divers (as distinguished from ADS operators) to perform functions in water depths greater than 1,000 feet. We also provide a range of survey and navigational positioning services for the oil and gas industry, as well as ocean search and recovery projects. Applications include surface positioning for rig moves and the installation of pipelines and platforms, subsea positioning and acoustics, geophysical surveys, deep tow surveys and pipeline surveys. We perform underwater services using all these techniques from drilling rigs, platforms, barges and vessels. Above-Water Inspection Services. Through our Solus Schall division ("Solus Schall"), we offer a wide range of inspection services to customers required to obtain third-party inspections to satisfy contractual structural specifications and requirements, internal safety standards or regulatory requirements. We focus on the inspection of pipelines and onshore fabrication of offshore facilities for the oil and gas industry. Certain of Solus Schall's pipeline inspection activities are performed through the use of specialized X-ray crawlers, which travel independently inside pipelines, stopping to perform radiographic inspection of welds. Solus Schall derives the majority of its revenues from foreign operations. OFFSHORE FIELD DEVELOPMENT Mobile Offshore Production Systems. We provide engineering, procurement, construction, installation and operation of MOPS to customers for marginal and remote field production and extended well testing. We have been awarded several contracts pertaining to MOPS activities and subsea workover and maintenance needs, including deepwater extended well testing in the Gulf of Mexico and have served as prime contractor on an extended well testing project in the North Sea. Our first FPSO, the OCEAN PRODUCER, has been operating offshore West Africa since December 1991. In December 1997, we purchased a production barge, the PB SAN JACINTO, which is under contract offshore Indonesia. The ZAFIRO PRODUCER, which we acquired in 1996 and converted to an FPSO, was delivered to its first location offshore West Africa in August 1996 to begin operations under a three-year contract with a major oil company. The customer exercised its option to purchase the FPSO in December 1996. We continue our involvement with the FPSO ZAFIRO PRODUCER as a member of the customer's integrated team to operate and enhance its production facilities. Additionally, we own four out-of-service offshore rigs and a tanker, each capable of conversion to a MOPS unit. Subsea Products. Our Oceaneering Intervention Engineering ("OIE"), Multiflex and the Pipeline Repair Systems units comprise our Subsea Products division. OIE provides subsea intervention services, designs and fabricates ROV interface tooling, including ROV replaceable and ROV operable valves, and designs and fabricates subsea control systems. Multiflex, with manufacturing facilities in the Houston, Texas, Edinburgh, Scotland and Rio de Janeiro, Brazil areas, produces subsea control umbilical cables which are used for the remote operation of subsea installations and equipment and typically incorporate both electrical and hydraulic control lines. ADVANCED TECHNOLOGIES ADTECH provides underwater intervention, topside inspection and engineering services to meet a variety of non-oilfield industrial requirements, including ship husbandry, search and recovery, subsea telecommunications cable installation, maintenance and repair, civil works projects and commercial theme park animation. This is accomplished in part by extending the use of existing assets and technology developed in oilfield operations to new applications. ADTECH performs work for customers having specialized requirements in underwater or other environments. ADTECH provides deep ocean search and recovery services for governmental bodies, including the U.S. Navy. In other services for the Navy, ADTECH provides various engineering and underwater services ranging from aircraft salvage and recovery operations to inspection and maintenance of the Navy's fleet of surface ships and submarines. ADTECH also maintains and operates deepwater cable lay and maintenance vehicles. ADTECH designs and operates ROVs that are designed for work in water depths to 25,000 feet. Our other specialized equipment includes ROV cable lay and maintenance equipment rated to 5,000 feet and deep tow, side scan sonar systems designed for use in 20,000 feet. Our deep tow systems have been used to locate aircraft in water depths to 14,700 feet. ADTECH also designs and develops specialized tools and builds ROV systems to customer specifications for use in deepwater and hazardous environments. As part of ADTECH, Oceaneering Space and Thermal Systems ("OSTS") directs our efforts towards applying undersea technology and experience in the space industry. We have worked with the National Aeronautics and Space Administration ("NASA") and NASA subcontractors on a variety of projects including portable life-support systems, decompression techniques, tools and robotic systems, and standards and guidelines to ensure robotic compatibility for space station equipment and payloads. OSTS also supports NASA by producing space shuttle crew support equipment, including the design, development and fabrication of spacecraft extravehicular and intravehicular hardware and soft goods, air crew life-support equipment, mechanical and electromechanical devices and high temperature insulation. The activities of OSTS are substantially dependent on continued government funding for space programs. MARKETING Oilfield Marine Services. We market our oilfield marine services primarily to international and foreign national oil and gas companies. We also provide services as a subcontractor to other oilfield service companies operating as prime contractors. Customers for these services typically award contracts on a competitive bid basis. These contracts are typically short-term in duration. Offshore Field Development. We market both our mobile offshore production systems and our subsea products primarily to international and foreign national oil and gas companies, and use our Oilfield Marine Services administrative structure to identify potential business opportunities. We offer an integrated service consisting of design, engineering, project management and provision of hardware. We offer MOPS for extended well testing, early production and development of marginal fields and prospects in areas lacking pipelines and processing infrastructure. MOPS contracts are typically awarded on a competitive basis, generally for periods of one or more years. We own two MOPS units and operate a third. We intend to add further equipment to these operations as profitable opportunities arise. We also own equipment which is capable of being converted to MOPS. Advanced Technologies. We market our marine services and related engineering services to government agencies, major defense contractors, NASA subcontractors and telecommunications, construction and other industrial customers outside the energy sector. We also market to insurance companies, salvage associations and other customers who have requirements for specialized operations in deep water. Major Customers. Five of our customers accounted for approximately 25%, 26% and 33% of our consolidated revenues in 1999, 1998 and 1997, respectively. No single customer accounted for more than 10% of our consolidated revenues in 1999 or 1998. One customer accounted for over 10% of our consolidated revenues in 1997, and we do not believe that the loss of any individual customer would have a material adverse effect on us. COMPETITION Our businesses are highly competitive. Oilfield Marine Services. We believe we are one of five companies that provide underwater services on a worldwide basis. We compete for contracts with the other four worldwide companies and with numerous companies operating locally in various areas. Competition for underwater services historically has been based on the type of underwater equipment available, location of or ability to deploy that equipment, quality of service and price. The relative importance of these factors can vary from year to year based on market conditions. The ability to develop improved equipment and techniques and to attract and retain skilled personnel is also an important competitive factor in our markets. The number of our competitors is inversely correlated with water depth, as less sophisticated equipment and technology is needed in shallow water. With respect to projects that require less sophisticated equipment or diving techniques, small companies have sometimes been able to bid for contracts at prices uneconomic to us. We believe that our ability to provide a wide range of underwater services, including technological applications in deeper water (greater than 1,000 feet) on a worldwide basis, should enable us to compete effectively in the oilfield exploration and development market. Oil and gas exploration and development expenditures fluctuate from year to year. In particular, budgetary approval for more expensive drilling and production in deeper water or harsh environments, areas in which we believe we have a competitive advantage, may be postponed or suspended during periods when overall exploration and production spending is reduced. In some areas, our ability to obtain contracts depends on our ability to charter vessels for use as work platforms. We occasionally bid jointly with vessel owners for service contracts. The worldwide inspection market consists of a wide range of inspection and certification requirements in many industries. Solus Schall competes in only selected portions of this market. We believe that our broad geographic sales and operational coverage, long history of operations, technical reputation, application of X-ray crawler pipeline radiography and accreditation to international quality standards enable us to compete effectively in our selected inspection services market segments. Frequently, oil and gas companies use prequalification procedures that reduce the number of prospective bidders for their projects. In certain countries, political considerations tend to favor local contractors. Offshore Field Development. We believe we are well positioned to compete in the offshore field development market through our ability to identify and offer optimum solutions, supply equipment, provide capital on a limited basis and utilize the expertise in associated subsea technology and offshore construction and operations gained through our extensive operational experience worldwide. We are one of many companies that offer leased MOPS units. Although there are many competitors offering either specialized products or operating in limited geographic areas, we believe we are one of two companies that compete on a worldwide basis for the provision of subsea control umbilical cables. Advanced Technologies. We believe that our specialized ROV assets and experience in deepwater operations give us a competitive advantage in obtaining contracts in water depths greater than 5,000 feet. The number of our competitors is inversely correlated with water depth, due to the advanced technical knowledge and sophisticated equipment required for deepwater operations. Engineering services is a very broad market with a large number of competitors. We compete in specialized areas in which we can combine our extensive program management experience, engineering services and the capability to continue the development of conceptual project designs into the manufacture of prototype equipment. We also use the administrative and operational support structures of the Oilfield Marine Services business to identify opportunities in foreign countries and to provide additional local support for services provided to non-oil and gas customers. SEASONALITY, BACKLOG AND RESEARCH AND DEVELOPMENT A material amount of our consolidated revenues is generated from contracts for marine services in the Gulf of Mexico and North Sea, which are usually more active from April through November compared to the rest of the year. However, our exit from the diving sector in the North Sea in early 1998 and the substantial number of multi-year ROV contracts we entered into since 1997 has reduced the seasonality of our Oilfield Marine Services operations. Revenues in our Offshore Field Development and Advanced Technologies segments are generally not seasonal. The amounts of backlog orders believed to be firm for Oilfield Marine Services as of March 31, 1999 and 1998 were approximately $179 million and $180 million, respectively. Of these amounts, $102 million and $59 million, respectively, were not expected to be performed within the year following those respective dates. At March 31, 1999 and 1998, we had approximately $29 million and $51 million, respectively, in backlog for Offshore Field Development. Of these amounts, less than $1 million and $10 million, respectively, were not expected to be performed within the year following those respective dates. At March 31, 1999 and 1998, we had approximately $48 million and $37 million, respectively, in backlog for Advanced Technologies. Of these amounts, $8 million and $2 million, respectively, were not expected to be performed within the year following such respective dates. No material portion of our business is subject to renegotiation of profits or termination of contracts by the United States government. Our research and development expenditures were approximately $5 million, $4 million and $4 million during 1999, 1998 and 1997, respectively. These amounts do not include, nor are we able to determine, the expenditures by others in connection with joint research activities in which we participated or expenditures we incurred in connection with research conducted during the course of performing our operations. REGULATION Our operations are affected from time to time and in varying degrees by foreign and domestic political developments and foreign, federal and local laws and regulations. In particular, oil and gas production operations and economics are affected by tax, environmental and other laws relating to the petroleum industry, by changes in such laws and by constantly changing administrative regulations. Those developments may directly or indirectly affect our operations and those of our customers. Compliance with federal, state and local provisions regulating the discharge of materials into the environment or relating to the protection of the environment has not had a material impact on our capital expenditures, earnings or competitive position. While not a formal requirement, within our Oilfield Marine Services segment we maintain a quality management system covering the full range of subsea and topside services offered in the United Kingdom and Norway. Our quality management system in the United Kingdom is certified to the British Standard BS EN ISO 9001:1994 and our Norway office is certified to the Norwegian Standard NS EN ISO 9001:1994. Both of these standards are the equivalent of ISO 9001. The quality management systems of OIE, Multiflex-US and Multiflex-UK units of our Offshore Field Development segment are each certified to ISO 9001 for their products and services. The quality systems of both the OSTS and Oceaneering Technologies units of ADTECH are also certified to ISO 9001. RISKS AND INSURANCE Our operations are subject to all the risks normally incident to offshore exploration, development and production, including claims under U.S. maritime laws. These risks could result in damage to or loss of property, suspension of operations and injury to or death of personnel. We insure our real and personal property and equipment. Our vessels are insured against damage or loss including war and pollution risks. We also carry workers' compensation, maritime employer's liability, general liability, including third-party pollution, and other insurance customary in our businesses. We carry our insurance at levels of coverage and deductibles which we consider financially prudent. On some contracts, we may have certain risks for loss or damage to the customer's facilities or for unexpected weather delays, which we may cover by special insurance when we deem it advisable. In some jurisdictions, legal pleadings in personal injury actions against us may include claims for amounts of punitive damages that may not be covered by insurance. The primary industry that we serve, oil and gas exploration and production, is a cyclical industry and remains volatile, resulting in potentially large fluctuations in demand for our primary services, which could result in significant changes in our revenues and profits. Although this industry continues to be our principal market, we also perform services for government agencies, and firms in the telecommunications, aerospace, and civil engineering and construction industries. We operate primarily as a services company under dayrate contracts. However, we also own certain specialized capital assets which, if not fully utilized, could have a negative effect on cash resources as a result of continuing fixed operating costs and reduced revenues. We conduct a significant part of our operations outside the United States. For the years ended March 31, 1999, 1998 and 1997, foreign operations accounted for 48%, 51% and 58% of our consolidated revenues, respectively. Foreign operations are subject to additional political and economic uncertainties, including the possibility of repudiation of contracts and confiscation of property, fluctuations in currency exchange rates, limitations on repatriation of earnings and foreign exchange controls. Certain of the countries in which we operate have enacted exchange controls to regulate foreign currency exchange. Exchange controls in some of the countries in which we operate provide for conversion of local currency into foreign currency for payment of debts, equipment rentals, technology transfer, technical assistance and other fees or repatriation of capital. Transfers of profits and dividends can be restricted or limited by exchange controls. Typically, we are able to limit the currency risks by arranging compensation in United States dollars or freely convertible currency and, to the extent possible, limiting acceptance of blocked currency to amounts which match our expense requirements in local currencies. EMPLOYEES As of March 31, 1999, we had approximately 2,600 employees. Our work force varies seasonally and peaks during the summer months. Approximately 3% of our employees are represented by unions. We consider our relations with our employees to be satisfactory. Foreign and Domestic Operations and Export Sales The table presenting revenues and assets attributable to each of our geographic areas for the years 1999, 1998 and 1997 is incorporated herein by reference from Note 6 of the Notes to Consolidated Financial Statements. ITEM 2. PROPERTIES. See Item 1 - "Business - Description of Business - Oilfield Marine Services, Offshore Field Development and Advanced Technologies" for a description of equipment and manufacturing facilities used in providing our services and products. We maintain office, shop and yard facilities in various parts of the world to support our operations. We consider these facilities, described below, to be suitable for their intended use. In these locations, we typically lease or own office facilities for our administrative and engineering staff, shops equipped for fabrication, testing, repair and maintenance activities and warehouses and yard areas for storage and mobilization of equipment to work sites. All sites are available to support any of our business segments as the need arises. The groupings which follow associate our significant offices with the primary business segment they serve. Oilfield Marine Services. The largest location is in Morgan City, Louisiana and consists of ROV manufacturing and training facilities, open and covered storage space and offices. The Morgan City facilities primarily support operations in the United States. The regional support offices for our North Sea and Southeast Asia operations are located in Aberdeen, Scotland and Singapore, respectively. We also have operational bases in various other locations, the most significant of which are in the United Arab Emirates, Nigeria and Norway. Offshore Field Development. We use workshop and office space in Houston, Texas in our Offshore Field Development business segment. Our manufacturing facilities are located in the Houston, Texas, Edinburgh, Scotland and Rio de Janeiro, Brazil areas. Operations of the FPSO OCEAN PRODUCER and PB SAN JACINTO are supported through our Oilfield Marine Services regional offices in Aberdeen and Singapore, respectively. Advanced Technologies. ADTECH's primary facilities are offices and workshops in Upper Marlboro, Maryland, which support our services for the U.S. Navy and our commercial theme park animation activities. We also maintain facilities in Houston, Texas which primarily support OSTS and our subsea telecommunications installation activities. ITEM 3. LEGAL PROCEEDINGS. In the ordinary course of business, we are subject to actions for damages alleging personal injury under the general maritime laws of the United States, including the Jones Act, for alleged negligence. We report actions for personal injury to our insurance carriers and believe that the settlement or disposition of such suits will not have a material effect on our financial position or results of operations. The information set forth under "Commitments and Contingencies - Litigation" in Note 5 of the Notes to Consolidated Financial Statements is incorporated herein by reference. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matter was submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the fourth quarter of the year ended March 31, 1999. ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT. Executive Officers. The following information relates to our executive officers as of June 1, 1999: NAME AGE POSITIONS OFFICER SINCE EMPLOYEE SINCE John R. Huff 53 Chairman of the Board and 1986 1986 Chief Executive Officer T. Jay Collins 52 President and Chief Operating Officer 1993 1993 Marvin J. Migura 48 Senior Vice President and 1995 1995 Chief Financial Officer Bruce L. Crager 46 Senior Vice President 1988 1988 M. Kevin McEvoy 48 Senior Vice President 1990 1979 George R. Haubenreich, Jr. 51 Senior Vice President, 1988 1988 General Counsel and Secretary John L. Zachary 45 Controller and Chief 1998 1988 Accounting Officer Each executive officer serves at the discretion of our Chief Executive Officer and our Board of Directors and is subject to reelection or reappointment each year after the annual meeting of shareholders. Oceaneering does not know of any arrangement or understanding between any of the above persons and any other person or persons pursuant to which he was selected or appointed as an officer. Family Relationships. There are no family relationships between any director or executive officer. Business Experience. John R. Huff joined Oceaneering as a director, President and Chief Executive Officer in 1986. He was elected Chairman of the Board in August 1990. He served from 1980 until 1986 as Chairman and President of Western Oceanic Inc., the offshore drilling subsidiary of The Western Company of North America. He is a director of BJ Services Company, Suncor Energy Inc. and Triton Energy Limited. T. Jay Collins, President and Chief Operating Officer, joined Oceaneering in October 1993 as Senior Vice President and Chief Financial Officer. In May 1995, he was appointed Executive Vice President - - Oilfield Marine Services and held that position until attaining his present position in November 1998. From 1986 to 1992 he was with Teleco Oilfield Services, Inc., most recently as Executive Vice President of Finance and Administration and previously as Senior Vice President of Operations. Prior to that, he spent twelve years with Sonat, Inc., serving as Senior Vice President of Finance of Sonat Offshore Drilling and President of Houston Systems Manufacturing. He is a director of Friede Goldman International Inc. Marvin J. Migura, Senior Vice President and Chief Financial Officer, joined Oceaneering in May 1995. From 1975 to 1994 he held various financial positions with Zapata Corporation, then a diversified energy services company, most recently as Senior Vice President and Chief Financial Officer from 1987 to 1994. Bruce L. Crager, Senior Vice President, joined Oceaneering in 1988 as Vice President - Offshore Production Systems. Since 1994, he also has had responsibility for various subsea product groups. He was appointed Senior Vice President - Production Systems in May 1997. From 1983 until 1988 he held various positions, including General Manager, with Hughes Offshore which merged with Vetco Gray during this period. Prior to that he spent three years with Seaflo Systems and five years with The Offshore Company. M. Kevin McEvoy, Senior Vice President, joined Oceaneering in 1984 when we acquired Solus Ocean Systems, Inc. ("SOSI"). Since 1984, he has held various senior management positions in each of our operating groups and geographic areas. He was appointed a Vice President in 1990 and Senior Vice President in November 1998. Prior to joining SOSI, he spent four years in the U.S. Navy as a salvage and diving officer. George R. Haubenreich, Jr., Senior Vice President, General Counsel and Secretary, joined Oceaneering in 1988. From 1979 until 1988, he held various legal positions with The Coastal Corporation, a diversified energy company, his last being Senior Staff Counsel. From 1974 until 1979, he was an attorney with Exxon Company, U.S.A. John L. Zachary, Controller and Chief Accounting Officer, joined Oceaneering in 1988 as Controller for the Advanced Technologies and MOPS divisions. From 1993 until 1998, he was Controller for the Americas Region and was appointed to his present position in October 1998. He has over 20 years of finance and accounting-related experience. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. Oceaneering's Common Stock, par value $0.25 per share, is listed on the New York Stock Exchange (symbol OII). The following table sets forth, for the periods indicated, the high and low sales prices for Oceaneering's Common Stock as reported on the New York Stock Exchange (consolidated transaction reporting system) (the"NYSE"): Fiscal 1999 Fiscal 1998 High Low High Low For the quarter ended: June 30 $ 24 $ 17 3/8 $ 18 7/8 $ 14 September 30 18 1/8 8 3/4 24 7/8 18 5/16 December 31 15 3/4 10 11/16 27 5/16 17 3/16 March 31 15 3/4 9 1/2 20 3/16 15 3/16 On May 28, 1999, there were 544 holders of record of our Common Stock. On that date, the closing sales price, as quoted on the NYSE, was $15 7/16. We have not made any Common Stock dividend payments since 1977 and we currently have no plans to pay cash dividends. Our credit agreements contain restrictions on the payment of dividends. See Note 3 to Notes to Consolidated Financial Statements. ITEM 6. SELECTED FINANCIAL DATA. Results of Operations: Years Ended March 31, (in thousands, except per share figures) 1999 1998 1997 1996 1995 Revenues $400,322 $358,121 $368,773 $289,506 $239,936 Cost of services (1) 314,638 282,830 290,801 234,731 190,772 Gross margin 85,684 75,291 77,972 54,775 49,164 Selling, general and administrative expenses 41,328 39,009 36,363 34,589 36,410 Income from operations $ 44,356 $ 36,282 $ 41,609 $ 20,186 $ 12,754 Net income $ 25,707 $ 22,001 $ 19,445 $ 12,357 $ 5,496 Diluted earnings per share 1.12 0.93 0.81 0.53 0.23 Depreciation and amortization (2) 29,961 23,176 32,687 20,567 16,232 Capital expenditures 102,014 94,413 79,599 57,171 32,057 Other Financial Data: As of March 31, (in thousands, except ratios) 1999 1998 1997 1996 1995 Working capital ratio 1.47 1.52 1.55 1.62 1.44 Cash and cash equivalents $ 8,367 $ 9,064 $ 23,034 $ 9,351 $ 12,865 Working capital 41,398 44,890 52,962 42,427 23,106 Total assets 387,343 316,543 268,255 256,096 187,752 Long-term debt 100,312 54,626 -- 48,000 9,472 Total debt 100,618 54,919 -- 48,183 9,590 Shareholders' equity 179,439 160,322 156,334 127,098 115,140 (1) 1997 includes a $25,047 gain on the disposition of FPSO, a $7,980 impairment adjustment and a $7,980 provision for special drydocking. (2) 1997 includes a $7,980 impairment adjustment. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. All statements in this Form 10-K, other than statements of historical facts, including, without limitation, statements regarding our business strategy, plans for future operations and industry conditions, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. We use a variety of internal and external data and management judgment in order to develop such forward-looking information. Although we believe that the expectations reflected in such forward-looking statements are reasonable, because of the inherent limitations in the forecasting process, as well as the relatively volatile nature of the industry in which we operate, we can give no assurance that those expectations will prove to have been correct. Accordingly, evaluation of our future prospects must be made with caution when relying on forward-looking information. Liquidity and Capital Resources We consider our liquidity and capital resources adequate to support our operations and internally generated growth initiatives. At March 31, 1999, we had working capital of $41 million, including $8 million of unrestricted cash. Additionally, we had all of our $80 million credit facility available and $20 million was unused under uncommitted lines of credit. We expect operating cash flow to meet our ongoing annual cash requirements, including debt service. Net income plus depreciation and amortization (commonly referred to as cash flow from operations) was $56 million for 1999 compared to $45 million and $52 million for 1998 and 1997, respectively. Working capital at the end of 1999 was $41 million, compared to $45 million at the end of 1998 and $53 million at the end of 1997. The cash flow and higher working capital in 1997 included the results of the disposition of the FPSO ZAFIRO PRODUCER. Capital expenditures for the years ended March 31, 1999, 1998 and 1997 were $102 million, $94 million and $80 million, respectively. Capital expenditures in 1999 consisted of additions to our ROV fleet, construction costs for the two dynamically positioned multiservice support vessels ("MSVs"), one of which was in progress at March 31, 1999, a new umbilical plant in Brazil and the relocation and upgrading of the umbilical plant in Scotland. Capital expenditures in 1998 consisted of additions to our ROV fleet, construction costs for the two MSVs in progress, the purchase of a production barge operating in Southeast Asia, a tanker for possible future conversion to production systems use, two out-of-service offshore rigs for potential conversion to production systems or alternative service, and expenditures on leasehold improvements related to the relocation and consolidation of some of our office and workshop facilities in the U.S. Capital expenditures in 1997 included $38 million to complete the conversion of the ZAFIRO PRODUCER. Other expenditures consisted of additions to our ROV fleet and the purchase of two support vessels. Commitments for capital expenditures at the close of 1999 totaled approximately $13 million for completion of MSV construction and subsea product manufacturing facilities expansion. In 1996, we contracted with a major oil company to provide an FPSO under a dayrate lease arrangement with an initial term of three years which commenced on delivery of the FPSO in August 1996. We purchased and converted an existing crude oil tanker into the FPSO ZAFIRO PRODUCER at a capital cost of $68 million. The contract provided the customer with the option to purchase the vessel and terminate the lease at any time during the initial three-year period and the customer exercised its purchase option in December 1996. We used part of the proceeds to repay the debt we incurred in converting the vessel. In April 1997, we approved a plan to purchase up to a maximum of 3 million shares of our Common Stock and 2.2 million shares were purchased under this plan through March 31, 1999, at a total cost of $32 million. We expect to fund any additional purchases from existing resources and operating cash flows. At March 31, 1999, we had long-term debt of $100 million which equated to a 36% debt to total capitalization ratio. In September 1998, we issued $100 million of 6.72% Senior Notes. We used the proceeds to repay the then outstanding indebtedness under our prior revolving credit facility, which had been incurred in the funding of capital expenditures and treasury stock purchases. In October 1998, we replaced that revolving credit agreement with a new five-year $80 million revolving credit facility. Our debt to total capitalization ratio will vary from time to time depending primarily upon the level of capital spending. Because of our significant foreign operations, we are exposed to currency fluctuations and exchange risks. We generally minimize these risks primarily through matching, to the extent possible, revenues and expenses in the various currencies in which we operate. However, due to the weakness in certain Asian currencies during 1998, we recognized $1.0 million of losses as Other Expense. Cumulative translation adjustments as of March 31, 1999 relate primarily to our permanent investments in and loans to our foreign subsidiaries. Inflation has not had a material effect on us in the past two years and no such effect is expected in the near future. See Item 1 - "Business - Description of Business - Risks and Insurance". Results of Operations Our revenues were $400 million for 1999 compared to $358 million for 1998 and $369 million for 1997. Our gross margins were $86 million for 1999 compared to $75 million for 1998 and $78 million for 1997. Our gross margin for 1997 included a gain on disposal of the FPSO ZAFIRO PRODUCER of $25 million, an impairment adjustment of $8 million and a provision for special drydocking of $8 million. As a percentage of revenue, gross margin for each of the three years was 21%. Our net income in 1999 was $25.7 million, an increase of 17% over our net income of $22.0 million in 1998, which was over 13% higher than the $19.4 million we reported for 1997. Information on our business segments is shown in Note 6 of the Notes to Consolidated Financial Statements. Oilfield Marine Services. Revenues for our Oilfield Marine Services segment for 1999 were $198 million compared to $182 million in 1998 and $176 million in 1997. This segment's income from operations for 1999 increased to $18.0 million compared to $16.3 million in 1998 and $1.9 million in 1997. During 1997, in response to (1) continued increasing demand to support deepwater drilling and (2) identified future construction and production maintenance work, we extended our ROV fleet expansion program by announcing plans for over 30 additional new ROVs. These new vehicles are designed for use around the world in water depths to 10,000 feet and in severe weather conditions. This expansion program was further extended in 1998 with our announcement of plans to construct an additional 25 new ROVs. We have added over 50 ROVs to our fleet during the last three years and we plan to add additional vehicles at a rate dependent on market demand. In 1997, we decided to discontinue offering diving services in the North Sea. Based on a review of actual and expected operating results, we concluded that we would generate greater returns by focusing on other business lines in the North Sea area. In March 1997 we entered into an agreement to sell our North Sea diving assets, including a diving support vessel ("DSV"). The sale closed in April 1997, and the sales proceeds approximated the net book value of the assets sold. We continue to provide diving services in other areas. The table below sets out revenues and profitability for the Oilfield Marine Services segment for 1999, 1998 and 1997. For the Years Ended March 31, (dollars in thousands) 1999 1998 1997 Revenues $197,752 $181,800 $176,395 Gross Margin 42,438 40,064 24,139 Gross Margin % 21% 22% 14% Operating Income 18,003 16,263 1,853 Operating Income % 9% 9% 1% For 1999, Oilfield Marine Services segment revenues increased 9% due to the expansion of the ROV fleet and improved demand for diving services. Margins improved in line with the volume increase as margin percentages remained flat. The increases were partially offset by decreases in revenue and gross margins from survey services. For 1998, increased revenues in the U.S. were partially offset by lower revenues in the North Sea, which was impacted by our exit from the diving business in that market, resulting in an overall 3% increase in revenues. Gross margins increased to 22% in 1998 compared to 14% in 1997. Gross margins in 1997 were reduced by an impairment adjustment of $8.0 million which was made to reduce the carrying value of the DSV we sold in March 1997. Excluding the impairment adjustment, gross margin was 18% in 1997. The increase for 1998 reflected continued strong demand for ROV services. Additionally, diving profits improved on lower revenues. We anticipate improved revenues and margins in 2000 for the Oilfield Marine Services segment from the continued expansion of the ROV fleet and an increased contribution from the MSV Ocean Intervention, which we placed in service in November 1998. Offshore Field Development. Our Offshore Field Development segment includes FPSO ownership and operations, engineering, design and project management services for other MOPS-related work, and subsea products. The table below sets out revenues and profitability for this segment for 1999, 1998 and 1997. For the Years Ended March 31 (dollars in thousands) 1999 1998 1997 Revenues $103,583 $ 90,508 $101,028 Gain on disposition of FPS -- -- 25,047 Gross Margin 25,319 15,981 36,861 Gross Margin % 24% 18% 36% Operating Income 15,610 7,595 30,242 Operating Income % 15% 8% 30% Revenues and margins for 1999 were higher as a result of increased product sales and MOPS operations, including a full fiscal year of results from a production barge we purchased in December 1997. Revenues and margins for 1998 were lower than 1997 as a result of the sale of the FPSO ZAFIRO PRODUCER, partially offset by higher project management revenues and product sales. Revenues and margins for 1997 include the results of operations for the ZAFIRO PRODUCER prior to its purchase by the customer. During 1997, we completed conversion of a crude oil tanker into an FPSO, the ZAFIRO PRODUCER, which was delivered to a customer offshore West Africa in August 1996 under a three-year contract. The customer had an option to purchase the vessel at any time during the three-year contract period and elected to do so in December 1996. We recognized a gain of $25.0 million on the disposition of this asset. We continue as a member of the customer's integrated team to operate and enhance the production facilities of the FPSO. In December 1997, we purchased a production barge which is contracted for work offshore Indonesia until October 1999. We also own a tanker and four out-of-service offshore rigs that we are marketing for production systems or other alternative uses. Our first FPSO, the OCEAN PRODUCER, continued to work offshore West Africa under a four-year contract expiring in January 2000. During 1997, we determined that substantial repairs would be necessary to maintain the unit in operating condition in compliance with regulatory requirements. These repairs required a special drydocking which was completed in 1998. We recorded an $8.0 million provision in 1997, which reduced gross margin by 8%. During 2000, we expect a slightly lower gross margin from the Offshore Field Development segment, with a decline in engineering and project management-related work being offset by higher revenues and margins from increased umbilical sales. We intend to continue to invest in other MOPS assets as profitable opportunities arise. Advanced Technologies. The table below sets out revenues and profitability for this segment for 1999, 1998 and 1997. For the Years Ended March 31, (dollars in thousands) 1999 1998 1997 Revenues $98,987 $85,813 $91,350 Gross Margin 17,927 19,246 16,972 Gross Margin % 18% 22% 19% Operating Income 10,743 12,424 9,514 Operating Income % 11% 14% 10% Revenues for this segment in 1999 increased from higher activity in subsea telecommunications cable services and the design and assembly of large, dynamic, animated figures for theme parks. Margins for this segment in 1999 declined due to lower profitability from search and recovery projects and space-related product and service activities. Revenues for this segment in 1998 declined as a result of lower telecommunications and civil projects compared to 1997, partially offset by higher engineering services activity. Gross margins for this segment improved in 1998 compared to 1997 reflecting improved profitability on search and recovery operations and higher demand for engineering services. We anticipate improved results from ADTECH in the next fiscal year based on increased subsea telecommunications cable activity, increased work for the U.S. Navy and improved profitability in OSTS. Other. Our interest income declined in 1998 compared to 1997 as a result of lower cash balances available for investment. Interest expense increased in 1999 compared to 1998 as a result of our increased borrowings to fund capital expenditures. Interest expense declined in 1998 as a result of lower average borrowings and lower interest rates. Interest expense is net of capitalized interest of $2.5 million for 1999, $800,000 for 1998 and $1.1 million for 1997. Our effective tax rate was 38%, 38% and 53% in 1999, 1998 and 1997, respectively. The rate for 1997 was higher as a result of provisions made for asset impairment and a special drydocking in our United Kingdom subsidiary, where we derive no tax benefit as we already have net operating loss carryforwards ("NOLs"). Year 2000. The Year 2000 ("Y2K") issue is the result of using computer programs which were written using two digits rather than four to define the applicable year. Programs that have date-sensitive software may recognize "00" as the year 1900 rather than the year 2000. The problem can arise in computer programs and in equipment with embedded processors. We have conducted a review of our computer systems to identify the potential areas of risk and have contacted vendors and customers with whom we have a significant business relationship to assess their progress with regard to Y2K readiness. We are continuing our review of both internal and third-party systems, but based on current information, we are not aware of any Y2K issues which would have a material impact on our business. Much of our computer hardware and software has been replaced in recent years with Y2K compliant hardware and software as part of regular system and equipment upgrades. Costs incurred have not been material and we do not expect the final cost of compliance to have a material effect on our financial position, results of operations or liquidity. We rely on the representations and public statements of key third parties and, although there is currently no indication that these parties will fail to achieve Y2K compliance, there can be no assurance that such failures will not occur or that we will not experience Y2K problems. We expect to complete our review of systems considered critical during the first quarter of fiscal 2000, will continue to monitor those systems thereafter, and will develop contingency plans as necessary. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. We are currently exposed to certain market risks arising from transactions we have entered into in the normal course of business. These risks relate to interest rate changes and fluctuations in foreign exchange rates. We do not believe these risks are material. We manage our exposure to interest rate changes through the use of a combination of fixed and floating rate debt. See Note 3 to Consolidated Financial Statements for a description of our long-term debt agreements, interest rates and maturities. We believe that significant interest rate changes will not have a material near-term impact on our future earnings or cash flows. We manage our exposure to changes in foreign exchange rates primarily through arranging compensation in U.S. dollars or freely convertible currency and, to the extent possible, by limiting compensation received in other currencies to amounts necessary to meet obligations denominated in those currencies. We believe that a significant fluctuation in the foreign exchange rates would not have a material near-term effect on our future earnings or cash flows. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. In this report, the consolidated financial statements and supplementary data of the Company appear in Part IV, Item 14 and are hereby incorporated by reference. See Index to Financial Statements and Schedules. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not Applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information with respect to the directors and nominees for election to our Board of Directors is incorporated by reference from our definitive proxy statement relating to our 1999 Annual Meeting of Shareholders to be filed on or before July 29, 1999 pursuant to Regulation 14A under the Securities Exchange Act of 1934. The information with respect to our executive officers is provided under Item 4A of Part I of this Annual Report on Form 10-K. ITEM 11. EXECUTIVE COMPENSATION. The information required by Item 11 is incorporated by reference from the proxy statement described in Item 10 above. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by Item 12 is incorporated by reference from the proxy statement described in Item 10 above. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by Item 13 is incorporated by reference from the proxy statement described in Item 10 above. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a) Documents filed as part of this report. 1. Financial Statements. (i) Report of Independent Public Accountants (ii) Consolidated Balance Sheets (iii) Consolidated Statements of Income (iv) Consolidated Statements of Cash Flows (v) Consolidated Statements of Shareholders' Equity (vi) Notes to Consolidated Financial Statements 2. Exhibits: Registration or File Form or Exhibit Exhibit Number Report Date Number 3 Articles of Incorporation and By-laws *3.01 Certificate of Incorporation, as amended 0-8418 10-K March 1988 3(a) *3.02 By-laws, as amended 0-8418 10-K March 1987 3(b) *3.03 Amendment to Certificate of Incorporation 33-36872 S-8 Sept. 1990 4(b) *3.04 Amendment to By-laws 0-8418 10-K March 1991 3(d) *3.05 Amendment to By-laws 1-10945 8-K Nov. 1992 2 4 Instruments defining the rights of security holders, including indentures *4.01 Specimen of Common Stock Certificate 1-10945 10-K March 1993 4(a) *4.02 Shareholder Rights Agreement dated November 20, 1992 1-10945 8-K Nov. 1992 1 *4.03 Note Purchase Agreement dated as of September 8,1998 relating to $100,000,000 6.72% Senior Notes due September 8, 2010 1-10945 10-Q Sept. 1998 4.01 *4.04 Loan Agreement ($80,000,000 Revolving Credit Facility) dated as of October 23, 1998 1-10945 10-Q Sept. 1998 4.02 10 Material contracts *10.01+ Oceaneering Retirement Investment Plan, as amended 1-10945 10-K March 1996 10.02 *10.02+ Employment Agreement dated August 15, 1986 between John R. Huff and Oceaneering 0-8418 10-K March 1987 10(l) *10.03+ Addendum to Employment Agreement dated February 22, 1996 between John R. Huff and Oceaneering 1-10945 10-K March 1997 10.04 *10.04+ 1987 Incentive and Non-Qualified Stock Option Plan 33-16469 S-1 Sept. 1987 10(o) *10.05+ Oceaneering International, Inc. Special Incentive Plan 33-16469 S-1 Sept. 1987 10(n) *10.06+ Senior Executive Severance Plan, as amended 0-8418 10-K March 1989 10(k) *10.07+ Supplemental Senior Executive Severance Agreements, as amended 0-8418 10-K March 1989 10(l) *10.08+ Oceaneering International, Inc. Executive Retirement Plan, as amended 1-10945 10-K March 1995 10.08 *10.09+ 1990 Long-Term Incentive Plan 33-36872 S-8 Sept. 1990 4(f) *10.10+ 1990 Nonemployee Directors Stock Option Plan 33-36872 S-8 Sept. 1990 4(g) *10.11+ Indemnification Agreement between Registrant and its Directors 0-8418 10-Q Sept. 1991 10(a) *10.12+ 1993 Restricted Stock Award Incentive Agreements 1-10945 10-K March 1994 10(q) *10.13+ 1993 Restricted Stock Award Incentive Agreement 1-10945 10-K March 1996 10.16 *10.14+ 1996 Incentive Plan of Oceaneering International, Inc. 1-10945 10-Q Sept. 1996 10.02 *10.15+ 1996 Restricted Stock Award Incentive Agreements dated August 23, 1996. 1-10945 10-Q Sept. 1996 10.03 *10.16+ 1997 Bonus Restricted Stock Award Agreements dated April 22, 1997 1-10945 10-K March 1997 10.20 *10.17+ Amendment No. 1 to the Oceaneering Retirement Investment Plan 1-10945 10-Q Sept. 1996 10.01 10.18+ 1999 Bonus Award Plan 10.19+ Amendment No. 1 to 1990 Nonemployee Director Stock Option Plan 10.20+ 1998 Bonus Restricted Stock Award Agreements 21 Subsidiaries of the Registrant 23 Consent of Independent Public Accountants 24 Powers of Attorney 27 Financial Data Schedule * Indicates exhibit previously filed with the Securities and Exchange Commission as indicated and incorporated herein by reference. + Indicates management contract or compensatory plan or arrangement required to be filed as an Exhibit pursuant to the requirements of Item 14(c) of this Annual Report on Form 10-K. (b) Reports on Form 8-K. The registrant filed no reports on Form 8-K during the last quarter of the period covered by this report. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OCEANEERING INTERNATIONAL, INC. Date: June 28, 1999 By: JOHN R. HUFF John R. Huff Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date //s// JOHN R. HUFF Principal Executive Officer, June 28, 1999 John R. Huff Director //s// MARVIN J. MIGURA Senior Vice President, June 28, 1999 Marvin J. Migura Principal Financial Officer //s// JOHN L. ZACHARY Controller, Principal June 28, 1999 John L. Zachary Accounting Officer CHARLES B. EVANS* Director DAVID S. HOOKER* Director D. MICHAEL HUGHES* Director HARRIS J. PAPPAS* Director *By: //s// GEORGE R. HAUBENREICH, JR. June 28, 1999 George R. Haubenreich, Jr. Attorney-in-Fact INDEX TO FINANCIAL STATEMENTS AND SCHEDULES Index to Financial Statements Report of Independent Public Accountants Consolidated Balance Sheets Consolidated Statements of Income Consolidated Statements of Cash Flows Consolidated Statements of Shareholders' Equity Notes to Consolidated Financial Statements Selected Quarterly Financial Data Index to Schedules All schedules for which provision is made in the applicable regulations of the Securities and Exchange Commission have been omitted because they are not required under the relevant instructions or because the required information is included in the financial statements included herein or in the related footnotes thereto. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Oceaneering International, Inc.: We have audited the accompanying consolidated balance sheets of Oceaneering International, Inc. (a Delaware corporation) and subsidiaries as of March 31, 1999 and 1998, and the related consolidated statements of income, cash flows and shareholders' equity for each of the three years in the period ended March 31, 1999. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Oceaneering International, Inc. and subsidiaries as of March 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1999, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas May 14, 1999 CONSOLIDATED BALANCE SHEETS (in thousands, except share data) March 31, 1999 March 31, 1998 ASSETS Current Assets: Cash and cash equivalents $ 8,367 $ 9,064 Accounts receivable, net of allowances for doubtful accounts of $398 and $240 103,838 114,923 Prepaid expenses and other 16,859 7,077 Total current assets 129,064 131,064 Property and Equipment, at cost: Marine services equipment 285,964 221,311 Mobile offshore production equipment 53,808 52,856 Other 72,960 44,542 412,732 318,709 Less accumulated depreciation 170,993 149,874 Net property and equipment 241,739 168,835 Investments and Other Assets: Goodwill, net of amortization of $5,478 and $4,490 9,426 10,414 Other 7,114 6,230 Total Assets $387,343 $316,543 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 23,481 $ 26,071 Accrued liabilities 54,608 51,385 Income taxes payable 9,271 8,425 Current portion of long-term debt 306 293 Total current liabilities 87,666 86,174 Long-term Debt, net of current portion 100,312 54,626 Other Long-term Liabilities 19,926 15,421 Commitments and Contingencies Shareholders' Equity: Common Stock, par value $0.25 per share; 90,000,000 shares authorized; 24,017,046 shares issued 6,004 6,004 Additional paid-in capital 82,421 81,442 Treasury stock; 1,653,922 and 1,075,303 shares at cost (22,803) (17,634) Retained earnings 123,709 98,002 Accumulated other comprehensive income (9,892) (7,492) Total shareholders' equity 179,439 160,322 Total Liabilities and Shareholders' Equity$387,343 $316,543 The accompanying Notes are an integral part of these Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF INCOME For the Years Ended March 31, (in thousands, except per share data) 1999 1998 1997 Revenues $400,322 $358,121 $368,773 Gain on Disposition of FPSO -- -- 25,047 Cost of Services 314,638 282,830 299,888 Impairment Adjustment and Provision for Special Drydocking -- -- 15,960 Selling, General and Administrative Expenses 41,328 39,009 36,363 Income from operations 44,356 36,282 41,609 Interest Income 846 877 1,358 Interest Expense, Net (3,425) (637) (2,048) Other Income (Expense), Net (447) (886) (15) Minority Interests 163 (41) 390 Income before income taxes 41,493 35,595 41,294 Provision for Income Taxes (15,786) (13,594) (21,849) Net Income $ 25,707 $ 22,001 $ 19,445 Basic Earnings per Share $ 1.13 $ 0.95 $ 0.82 Diluted Earnings per Share $ 1.12 $ 0.93 $ 0.81 Weighted average number of common shares 22,708 23,233 23,651 Incremental shares from stock options 180 313 303 Weighted average number of common shares and equivalents 22,888 23,546 23,954 The accompanying Notes are an integral part of these Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended March 31, (in thousands) 1999 1998 1997 Cash Flows from Operating Activities: Net income $ 25,707 $ 22,001 $ 19,445 Adjustments to reconcile net income to net cash provided by operating activities: Gain on dispositions of property and equipment -- -- (29,605) Depreciation and amortization 29,961 23,176 24,707 Impairment adjustment -- -- 7,980 Currency translation adjustments and other (3,067) 5,090 1,718 Decrease (increase) in accounts receivable 11,085 5,172 (23,704) Increase in prepaid expenses and other current assets (9,782) (1,399) (945) Increase in other assets (571) (85) (271) Increase (decrease) in accounts payable (2,590) (1,068) 1,825 Increase (decrease) in accrued liabilities 3,223 (6,798) 22,360 Increase (decrease) in income taxes payable 849 (792) 3,826 Increase (decrease) in other long-term liabilities 4,505 (655) 3,126 Total adjustments to net income 33,613 22,641 11,017 Net Cash Provided by Operating Activities 59,320 44,642 30,462 Cash Flows from Investing Activities: Purchases of property and equipment (102,014) (94,413) (79,599) Dispositions of property and equipment 2,207 -- 108,253 Decrease (increase) in investments 1,058 -- (926) Net Cash (Used in) Provided by Investing Activities (98,749) (94,413) 27,728 Cash Flows from Financing Activities: Proceeds from long-term borrowings, net of costs 98,537 54,626 33,000 Payments on revolving credit and other long-term debt (54,301) -- (81,000) Proceeds from issuance of common stock 3,026 4,515 3,493 Purchases of treasury stock (8,530) (23,340) -- Net Cash Provided by (Used in) Financing Activities 38,732 35,801 (44,507) Net Increase (Decrease) in Cash and Cash Equivalents (697) (13,970) 13,683 Cash and Cash Equivalents - Beginning of Year 9,064 23,034 9,351 Cash and Cash Equivalents - End of Year $ 8,367 $ 9,064 $ 23,034 The accompanying Notes are an integral part of these Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the Years Ended March 31, 1999, 1998 and 1997 Additional Cumulative Common Stock Issued Paid-in Treasury Retained Translation (in thousands) Shares Amount Capital Stock Earnings Adjustment Total Balance, March 31, 1996 24,017 $6,004 $81,921 $ (6,976) $ 56,556 $(10,407) $127,098 Comprehensive Income: Net Income -- -- -- -- 19,445 -- 19,445 Translation adjustments -- -- -- -- -- 4,569 4,569 Total Comprehensive Income -- -- -- -- 19,445 4,569 24,014 Restricted Stock issued -- -- (2,797) 2,797 -- -- -- Stock options exercised -- -- 577 2,264 -- -- 2,841 Restricted Stock plan compensation expense -- -- 1,452 -- -- -- 1,452 Treasury Stock issued to Company Benefit Plan, at average cost -- -- -- 929 -- -- 929 Balance, March 31, 1997 24,017 6,004 81,153 (986) 76,001 (5,838) 156,334 Comprehensive Income: Net Income -- -- -- -- 22,001 -- 22,001 Translation adjustments -- -- -- -- -- (1,654) (1,654) Total Comprehensive Income -- -- -- -- 22,001 (1,654) 20,347 Restricted Stock issued -- -- (641) 496 -- -- (145) Stock options exercised -- -- (587) 4,626 -- -- 4,039 Restricted Stock plan compensation expense -- -- 1,517 -- -- -- 1,517 Treasury Stock purchases -- -- -- (23,340) -- -- (23,340) Treasury Stock issued to Company Benefit Plan, at average cost -- -- -- 1,570 -- -- 1,570 Balance, March 31, 1998 24,017 6,004 81,442 (17,634) 98,002 (7,492) 160,322 Comprehensive Income: Net Income -- -- -- -- 25,707 -- 25,707 Translation adjustments -- -- -- -- -- (2,400) (2,400) Total Comprehensive Income -- -- -- -- 25,707 (2,400) 23,307 Restricted Stock issued -- -- (289) 289 -- -- -- Stock options exercised -- -- (42) 250 -- -- 208 Restricted Stock plan compensation expense -- -- 1,310 -- -- -- 1,310 Treasury Stock purchases -- -- -- (8,530) -- -- (8,530) Treasury Stock issued to Company Benefit Plan, at average cost -- -- -- 2,822 -- -- 2,822 Balance, March 31, 1999 24,017 $6,004 $82,421 $(22,803) $123,709 $ (9,892) $179,439
The accompanying Notes are an integral part of these Consolidated Financial Statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF MAJOR ACCOUNTING POLICIES Principles of Consolidation The consolidated financial statements include the accounts of Oceaneering International, Inc., and its 50% or more owned and controlled subsidiaries ("Oceaneering"). Oceaneering accounts for its investments in unconsolidated affiliated companies under the equity method. All significant intercompany accounts and transactions have been eliminated. Unless the context indicates otherwise, references to years indicate Oceaneering's fiscal years. Cash and Cash Equivalents Cash and cash equivalents include demand deposits and highly liquid investments with original maturities of three months or fewer from the date of the investment. At March 31, 1998, approximately $1.5 million of Oceaneering's cash was restricted and was deposited in interest bearing accounts as security in connection with legal proceedings. Such legal proceedings were settled in 1999 and the restriction was removed. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets include spare parts of $8.4 million and $3.1 million as of March 31, 1999 and 1998, respectively, primarily for Oceaneering's fleet of remotely operated vehicles. Depreciation and Amortization Oceaneering provides for depreciation of Property and Equipment primarily on the straight-line method over estimated useful lives of 3 to 20 years for marine services equipment, 10 years for mobile offshore production equipment and 3 to 25 years for buildings, improvements and other equipment. Goodwill arising from business acquisitions is amortized on the straight-line method over 15 years. The costs of repair and maintenance of Property and Equipment are charged to operations as incurred, while the costs of improvements are capitalized. Interest is capitalized on assets where the construction period is anticipated to be more than three months. Oceaneering does not allocate general administrative costs to capital projects. Upon the disposition of property and equipment, the related cost and accumulated depreciation accounts are relieved and the resulting gain or loss is included as an adjustment to cost of services. Management periodically, and upon the occurrence of a triggering event, reviews the realizability of goodwill and other long-term assets and makes any appropriate impairment adjustments and disclosures required by Statement of Financial Accounting Standards Board Standard Number ("SFAS") 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of." During the third quarter of 1997 it became apparent that operating results for Oceaneering's diving support vessel operating in the North Sea were below expectations. After review of the first full work season Oceaneering concluded that the manner in which the vessel was being used had changed significantly from its originally intended purpose and the recoverability of the carrying amount of the asset should be assessed. After comparing the carrying value of the vessel with the net present value of the expected cash flows from the vessel over its remaining life, Oceaneering recorded an impairment loss of $8.0 million in the Oilfield Marine Services business segment. The vessel and the other assets used in the North Sea diving operations were subsequently sold and the sales proceeds approximated net book value. Revenue Recognition Oceaneering's revenues are primarily derived from billings under contracts that provide for specific time, material and equipment charges, which are accrued daily and billed monthly. Significant lump-sum contracts are accounted for using the percentage-of-completion method. Revenues on contracts with a substantial element of research and development are recognized to the extent of cost until such time as the probable final profitability can be determined. Anticipated losses on contracts, if any, are recorded in the period that such losses are first determinable. Income Taxes Oceaneering accounts for income taxes in accordance with SFAS 109, "Accounting for Income Taxes." Foreign Currency Translation The functional currency for many of Oceaneering's foreign subsidiaries is the applicable local currency. Results of operations for foreign subsidiaries with functional currencies other than the U.S. dollar are translated into U.S. dollars using average exchange rates during the period. Assets and liabilities of these foreign subsidiaries are translated into U.S. dollars using the exchange rates in effect at the balance sheet date, and the resulting translation adjustments are accumulated as other comprehensive income, a component of Shareholders' Equity. All foreign currency transaction gains and losses are recognized currently in the Consolidated Statements of Income. Earnings Per Share Oceaneering has computed earnings per share in accordance with SFAS 128, "Earnings Per Share", which became effective in the third quarter of 1998. Prior period comparative figures have been restated. Other Long-term Liabilities At March 31, 1999 and 1998 Other Long-term Liabilities include $8.1 million and $7.2 million, respectively, for self-insurance reserves not expected to be paid out in the following year and $10.1 and $7.2 million, respectively, for deferred income taxes. Reclassifications Certain amounts from prior years have been reclassified to conform with the current year presentation. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Gain on Disposition of FPSO In 1997, a major oil company customer exercised its option to purchase the floating production, storage and offloading system ("FPSO"), ZAFIRO PRODUCER. Upon disposition, the related property and equipment cost and accumulated depreciation accounts were relieved and the resulting gain of $25 million was included in Oceaneering's Consolidated Statement of Income as Gain on Disposition of FPSO. New Accounting Pronouncements The Financial Accounting Standards Board has issued SFAS 130, "Reporting Comprehensive Income," and SFAS 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS 130 establishes standards for reporting and displaying comprehensive income and its components. The primary component of other comprehensive income for Oceaneering is the foreign currency translation adjustment accounted for under SFAS 52. SFAS 131 establishes standards for the way that public business enterprises report information about operating segments in interim and annual financial statements. Oceaneering adopted SFAS 130 and SFAS 131 in 1999. 2. INCOME TAXES Oceaneering and its domestic subsidiaries, including acquired companies from their respective dates of acquisition, file a consolidated U.S. federal income tax return. Oceaneering conducts its international operations in a number of locations which have varying codes and regulations with regard to income and other taxes, some of which are subject to interpretation. On a geographic basis, income before minority interests and income taxes attributable to the United States was $18.4 million, $14.7 million and $3.3 million for 1999, 1998 and 1987, respectively. Income taxes are provided at the appropriate tax rates in accordance with Oceaneering's interpretation of the respective tax regulations after review and consultation with its internal tax department, tax consultants and, in some cases, legal counsel in the various jurisdictions. Management believes that adequate provisions have been made for all taxes which will ultimately be payable. Deferred income taxes are provided for temporary differences in the recognition of income and expenses for financial and tax reporting purposes. Oceaneering's policy is to provide for deferred U.S. income taxes on unrepatriated foreign income only to the extent such income is not to be invested indefinitely in the related foreign entity. The provisions for income taxes for the years ended March 31, 1999, 1998 and 1997 were as follows: (in thousands) 1999 1998 1997 U.S. federal and state $12,205 $11,721 $15,886 Foreign 3,581 1,873 5,963 Total provision $15,786 $13,594 $21,849 Current $13,040 $13,548 $17,731 Deferred 2,746 46 4,118 Total provision $15,786 $13,594 $21,849 Cash taxes paid $12,191 $14,340 $14,119 As of March 31, 1999, Oceaneering's United Kingdom subsidiary had net operating loss carryforwards ("NOLs") of approximately $21 million which are available to reduce future United Kingdom Corporation Tax which would otherwise be payable. As of March 31, 1999 and 1998, Oceaneering's worldwide deferred tax assets and liabilities and related valuation reserves were as follows: March 31, (in thousands) 1999 1998 Gross deferred tax assets $13,858 $14,832 Valuation allowance (10,384) (11,441) Net deferred tax assets $ 3,474 $ 3,391 Deferred tax liabilities $10,067 $ 7,238 Oceaneering's deferred tax assets consist primarily of NOLs in its United Kingdom subsidiary, which have no expiration date, and insurance claim reserves for which a tax deduction has not yet been allowed. Deferred tax liabilities consist primarily of depreciation and amortization and provisions for income of foreign subsidiaries expected to be repatriated. Oceaneering has established a valuation allowance for deferred tax assets after taking into account factors that are likely to affect Oceaneering's ability to utilize the tax assets. In particular, Oceaneering conducts its business through several foreign subsidiaries and, although Oceaneering expects its consolidated operations to be profitable, there is no assurance that profits will be earned in entities or jurisdictions which have NOLs available. Since April 1, 1996, changes in the valuation allowance primarily relate to the expected utilization of foreign NOLs and realization of foreign tax credits. Income taxes, computed by applying the federal statutory income tax rate to income before income taxes and minority interests, are reconciled to the actual provisions for income taxes as follows: For the Years Ended March 31, (in thousands) 1999 1998 1997 Computed U.S. statutory expense $14,466 $12,473 $ 14,316 Change in valuation allowances (1,057) 1,122 136 Withholding taxes and foreign earnings taxed at rates different from U.S. statutory rates 1,172 (467) 5,696 State and local taxes and other, net 1,205 466 1,701 Total provision for income taxes $15,786 $13,594 $21,849 The provision for 1997 included the effect of provisions made for asset impairment and special drydocking in Oceaneering's United Kingdom subsidiary, where Oceaneering derived no tax benefit as it already had NOLs. 3. DEBT Long-term Debt consisted of the following: March 31, (in thousands) 1999 1998 6.72% Senior Notes $100,000 -- Revolving credit agreement -- 54,000 Capital lease 618 919 Long-term Debt 100,618 54,919 Current portion (306) (293) Long-term Debt, net of current portion $100,312 $ 54,626 In September 1998, Oceaneering issued $100 million aggregate principal amount of 6.72% Senior Notes due 2010. The net proceeds were $98.6 million after issuance costs and were used to retire existing debt. The notes have an average life of ten years and are scheduled to be paid in five equal annual installments beginning September 2006. In October 1998, Oceaneering entered into a new $80 million revolving credit facility (the "Credit Agreement") to replace its prior one. There is a commitment fee ranging from .20% to .25% per annum, depending on Oceaneering's debt to capitalization ratio, on the unused portion of the banks' commitment. Principal maturity is in October 2003. Under the Credit Agreement, Oceaneering has the option to borrow dollars at the London Interbank Offered Rate ("LIBOR") plus a margin ranging from .50% to 1.00%, depending on Oceaneering's debt to capitalization ratio, or at the agent bank's prime rate. Both debt agreements contain similar restrictive covenants as to minimum net worth, debt to capitalization ratio, fixed charge coverage, interest coverage and restricted payments. Restricted payments, which include dividends and treasury stock purchases, are limited from April 1, 1998 on a net basis, to the sum of $25 million plus 50% of Oceaneering's consolidated net income after April 1, 1998, plus cash proceeds from the sale of common stock. Oceaneering has uncommitted credit agreements with banks totaling $30 million for use for borrowings and letters of credit. As of March 31, 1999, Oceaneering had approximately $10 million in letters of credit outstanding under these agreements. Cash interest payments of $5.7 million, $1.2 million and $3.6 million were made in 1999, 1998 and 1997, respectively. Interest charges of $2.5 million in 1999, $800,000 in 1998 and $1.1 million in 1997 were capitalized as part of construction in progress. 4. EMPLOYEE BENEFIT PLANS AND STOCKHOLDER RIGHTS PLAN Retirement Investment Plans Oceaneering has three separate employee retirement investment plans which cover its full-time employees. The Oceaneering Retirement Investment Plan is a deferred compensation plan in which domestic employees may participate by deferring a portion of their gross monthly salary and directing Oceaneering to contribute the deferred amount to the plan. Oceaneering matches a portion of the deferred compensation. Oceaneering's contributions to the plan were $2,508,000, $1,960,000 and $1,780,000 for the plan years ended December 31, 1998, 1997 and 1996, respectively. The second plan is the Oceaneering International Services Pension Scheme for employees in the United Kingdom. Under this plan, employees may contribute a portion of their gross monthly salary. Oceaneering also contributes an amount equal to a portion of the participant's gross monthly salary. The plan assets exceed vested benefits and are not material to the assets of Oceaneering. Company contributions to this plan for the years ended March 31, 1999, 1998 and 1997 were $34,000, $160,000 and $202,000, respectively. The third plan was the Oceaneering International, Inc. Executive Retirement Plan, which covered selected key management employees and executives of Oceaneering. The participants in this plan contributed a portion of their gross monthly salary and Oceaneering matched 100% of that contribution. Expense related to this plan during the years ended March 31, 1998 and 1997 was $576,000 and $457,000, respectively. Effective June 30, 1997, the plan was terminated and replaced by the Supplemental Executive Retirement Plan. This plan also covers selected key management employees and executives of Oceaneering as approved by the Compensation Committee of Oceaneering's Board of Directors (the "Compensation Committee"). Oceaneering accrues a portion of the participants' gross monthly salary and the amounts accrued are treated as if they are invested in one or more investment vehicles pursuant to this plan. Expense related to this plan during the years ended March 31, 1999 and 1998 was $980,000 and $668,000, respectively. Incentive and Stock Option Plans Oceaneering has in effect shareholder-approved nonemployee director stock option and incentive plans. Under the 1990 Nonemployee Director Stock Option Plan, as amended, options to purchase up to an aggregate of 100,000 shares of Oceaneering's Common Stock could have been granted through 1998 to nonemployee directors of Oceaneering. Each director of Oceaneering was automatically granted an option to purchase 2,000 shares of Common Stock on the date the director became a nonemployee director of Oceaneering and each year thereafter at an exercise price per share equal to 50% of the fair market value of a share of Common Stock on the date the option was granted. Since 1998, each nonemployee director is instead granted an option to purchase 10,000 shares of Common Stock at an exercise price per share equal to the fair market value of a share of Common Stock on the date the option is granted. The options granted are not exercisable until the later to occur of six months from the date of grant or the date the optionee has completed two years of service as a director of Oceaneering. Expense is recorded related to options which have an exercise price less than fair market value on the date the option is granted. Expense in 1999, 1998 and 1997 was not material. In August 1996, the shareholders of Oceaneering approved the 1996 Incentive Plan under which a total of 1,165,000 shares of Common Stock of Oceaneering were made available for awards to employees and other persons (excluding nonemployee directors) having an important business relationship or affiliation with Oceaneering. The 1996 Incentive Plan and a similar shareholder-approved 1990 Incentive Plan (the "Incentive Plans") are administered by the Compensation Committee, which determines the type or types of award(s) to be made to each participant and sets forth in the related award agreement the terms, conditions and limitations applicable to each award. The Compensation Committee may grant stock options, stock appreciation rights, stock and cash awards. Options are normally granted at not less than fair market value of the optioned shares at the date of grant. Options outstanding are exercisable over a period of five or ten years after the date of grant or five years after the date of vesting at the rate of 20% per year for three years beginning one year after grant and 40% at the end of the fourth year, or 25% per year for four years beginning one year after grant. During 1997 and 1999, the Compensation Committee granted to certain key executives of Oceaneering restricted Common Stock of Oceaneering designed (i) to make a material portion of their potential future compensation contingent on performance of Oceaneering's Common Stock and (ii) to retain their employ with Oceaneering. In 1998, no such restricted stock grants were made. These grants are subject to earning requirements on the basis of a percentage change between the price of the Common Stock of Oceaneering versus the average of the common stock price of a peer group of companies over three- and one-year time periods, respectively. Up to one-third of the total grant made in 1997 may be earned each year depending upon Oceaneering's cumulative Common Stock performance, with any amount earned subject to vesting in four equal installments over a four-year period conditional upon continued employment. All of the total grant made in 1999 may be similarly earned at the end of one year, subject to vesting. At the time of each vesting, a participant receives a tax assistance payment for which the participant must reimburse Oceaneering if the vested Common Stock is sold by the participant within three years after the vesting date. As of March 31, 1999, two-thirds of the grant made in 1997 was earned, subject to vesting requirements, and none of the grant made in 1999 was earned. As of March 31, 1999, a total of 287,000 shares of restricted stock was outstanding under these and former, similar grants, of which 211,250 shares were earned, subject to vesting requirements. The numbers and weighted average grant date fair value of restricted stock granted during 1999 and 1997 were 9,000 and $16.83 and 312,000 and $17.00, respectively. In April 1997 and June 1998 certain key executives also elected to receive restricted Common Stock of Oceaneering totaling 44,968 and 35,920 shares with grant date fair values of $14.63 and $17.94 per share, respectively, subject to similar vesting requirements and tax assistance payments, in lieu of cash for all or part of their 1997 and 1998 bonus awards. Oceaneering accounts for stock options issued under plans under APB Opinion No. 25, under which no compensation cost is recognized unless options are granted at an option price below the fair market value of the stock at the date of the grant. Had compensation cost for these stock options been determined consistent with SFAS 123 "Accounting for Stock-Based Compensation," Oceaneering's pro forma net income and diluted earnings per share for 1999, 1998 and 1997 would have been $24,735,000, $21,373,000 and $19,170,000, respectively, and $1.08, $0.92 and $0.80, respectively. Information regarding these option plans for 1999, 1998 and 1997 is as follows: Shares under Weighted Average Option Exercise Price Balance at March 31, 1996 1,354,830 $10.82 Granted 304,300 15.60 Exercised (270,950) 8.84 Forfeited (40,800) 11.29 Balance at March 31, 1997 1,347,380 12.23 Granted 390,700 18.64 Exercised (367,140) 10.51 Forfeited (87,600) 14.20 Balance at March 31, 1998 1,283,340 14.56 Granted 481,900 10.43 Exercised (18,090) 12.63 Forfeited (61,980) 15.40 Balance at March 31, 1999 1,685,170 $13.37 The weighted average fair value of options granted in 1999, 1998 and 1997 was $5.86, $9.20 and $8.73, respectively. The fair value of the stock options granted was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions: 1999 1998 1997 Risk-free interest rate 5.34% 6.47% 6.67% Expected dividend yield 0% 0% 0% Expected life 6 years 6 years 6 years Expected volatility 42.27% 38.48% 47.97% Options outstanding at March 31, 1999 are composed of the following: Outstanding Exercisable Weighted Number of Average Weighted Number of Weighted Range of Shares at Remaining Average Shares at Average Exercise March 31, Contractual Exercise March 31, Exercise Prices 1999 Life (years) Price 1999 Price $4.72 - 10.22 598,000 4.23 $ 9.76 188,700 $ 8.75 $10.25 - 14.50 477,000 4.40 12.62 444,800 12.75 $14.70 - 20.34 610,170 4.85 17.50 183,000 17.25 At March 31, 1999, there were 79,282 shares under these plans available for grant, of which 77,282 could be used for awarding stock options, stock appreciation rights, stock and cash awards to employees. Stockholder Rights Plan On November 20, 1992, Oceaneering's Board of Directors adopted a Stockholder Rights Plan and, in accordance with the plan, declared a dividend of one preferred share purchase right for each outstanding share of Oceaneering's Common Stock. The plan will cause substantial dilution to a party that attempts to acquire Oceaneering in a manner or on terms not approved by the Board of Directors, except pursuant to an offer conditioned on a substantial number of rights being acquired. The rights, which do not have voting rights and are not entitled to dividends until such time as they become exercisable, expire in December 2002. 5. COMMITMENTS AND CONTINGENCIES Lease Commitments At March 31, 1999, Oceaneering occupied several facilities under noncancellable operating leases expiring at various dates through 2023. Future minimum rentals under these leases are as follows: (in thousands) 2000 $ 4,243 2001 3,878 2002 2,842 2003 2,040 2004 2,088 Thereafter 9,390 Total Lease Commitments $ 24,481 Rental expense, which includes hire of vessels, specialized equipment and real estate rental, was approximately $18 million, $19 million and $25 million for the years ended March 31, 1999, 1998 and 1997, respectively. Insurance Oceaneering self-insures for workers' compensation, maritime employer's liability and comprehensive general liability claims to levels it considers financially prudent and carries insurance after the initial claim levels, which can be by occurrence or in the aggregate, are met by the company. Oceaneering determines the level of accruals by reviewing its historical experience and current year claim activity; accruals are not recorded on a present value basis. Each claim is reviewed with insurance adjusters and specific reserves are established for all known liabilities. An additional reserve for incidents incurred but not reported to Oceaneering is established for each year using management estimates and based on prior experience. Management believes that adequate accruals have been established for expected liabilities arising from such obligations. Litigation Various actions and claims are pending against Oceaneering, most of which are covered by insurance. In the opinion of management, the ultimate liability, if any, which may result from these actions and claims will not materially affect the financial position or results of operations of Oceaneering. Letters of Credit Oceaneering had $10 million and $8 million in letters of credit outstanding as of March 31, 1999 and 1998, respectively, as guarantees in force for self insurance requirements and various performance and bid bonds which are usually for a period of one year or the duration of the contract. Financial Instruments and Risk Concentration Financial instruments which potentially subject Oceaneering to concentrations of credit risk are primarily cash and cash equivalents, long-term, bank and other borrowings and accounts receivable. The carrying value of cash and cash equivalents and bank borrowings approximates fair value due to the short maturity of those instruments or the short-term duration of the associated interest rate periods. Accounts receivable are generated from a broad and diverse group of customers primarily from within the energy industry, which is Oceaneering's major source of revenues. Oceaneering maintains an allowance for doubtful accounts based upon expected collectibility. Oceaneering estimated the fair value of its $100 million of 6.72% Senior Notes (see Note 3) to be $95 million as of March 31, 1999. 6. OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA Business Segment Information Oceaneering supplies a comprehensive range of integrated technical services to a wide array of industries and is one of the world's largest underwater services contractors. Oceaneering's Oilfield Marine Services business consists of underwater intervention and above-water inspection, maintenance and repair. Oceaneering's Offshore Field Development business includes the engineering, procurement, construction and installation of mobile offshore production systems, subsea intervention services and the production of subsea control umbilical cables. Oceaneering's Advanced Technologies business provides project management, engineering services and equipment for applications in harsh environments, primarily in non-oilfield markets. The following summarizes certain financial data by business segment: For the Years Ended March 31, (in thousands) 1999 1998 1997 Revenues Oilfield Marine Services $197,752 $181,800 $176,395 Offshore Field Development 103,583 90,508 101,028 Advanced Technologies 98,987 85,813 91,350 Total $400,322 $358,121 $368,773 Income from Operations Oilfield Marine Services $ 18,003 $ 16,263 $ 1,853 Offshore Field Development 15,610 7,595 30,242 Advanced Technologies 10,743 12,424 9,514 Total $ 44,356 $ 36,282 $ 41,609 Assets Oilfield Marine Services $192,912 $155,456 $135,375 Offshore Field Development 126,450 114,306 74,455 Advanced Technologies 47,488 30,180 28,135 Total $366,850 $299,942 $237,965 Capital Expenditures Oilfield Marine Services $ 67,311 $53,352 $ 32,951 Offshore Field Development 27,805 33,168 42,696 Advanced Technologies 6,898 7,893 3,952 Total $102,014 $ 94,413 $ 79,599 Depreciation and Amortization Expenses Oilfield Marine Services $ 17,916 $13,640 $ 20,682 Offshore Field Development 7,631 6,140 7,510 Advanced Technologies 4,414 3,396 4,495 Total $ 29,961 $ 23,176 $ 32,687 Income from operations for each business segment is determined before interest income or expense, other expense, minority interests and the provision for income taxes. An allocation of these items is not considered practical. All assets specifically identified with a particular business segment have been segregated. Cash and cash equivalents, prepaid expenses and other current assets, investments and certain other assets have not been allocated to particular business segments. Income from operations for 1997 for Oilfield Marine Services is after charging an impairment adjustment of $7,980 which is included in depreciation and amortization expense. Income from operations for Offshore Field Development for 1997 includes a $25,047 gain on disposition of an FPSO and an $7,980 provision for a special drydocking. No individual customer accounted for more than 10% of revenues in 1999 or 1998. Revenues of approximately $44 million in 1997 were from one customer, with revenue in the Oilfield Marine Services and Offshore Field Development segments. Geographic Operating Areas Financial data by geographic area is summarized as follows: For the Years Ended March 31, (in thousands) 1999 1998 1997 Revenues United States $206,703 $173,878 $154,613 Europe 71,776 57,029 74,488 Africa 50,033 60,180 62,863 Asia 52,604 39,631 50,036 Other 19,206 27,403 26,773 TOTAL $400,322 $358,121 $368,773 Long-Lived Assets United States $156,457 $117,896 $ 69,221 Europe 44,043 20,789 13,759 Africa 17,167 20,472 21,993 Asia 21,625 22,398 6,515 Other 15,547 1,743 5,443 TOTAL $254,839 $183,298 $116,931 7. ACCRUED LIABILITIES Accrued liabilities consisted of the following: March 31, (in thousands) 1999 1998 Payroll and related costs $18,629 $19,042 Accrued job costs 16,846 18,159 Other 19,133 14,184 Total Accrued Liabilities $54,608 $51,385 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (in thousands, except per share data) Year Ended March 31, 1999 Quarter Ended June 30 Sept. 30 Dec. 31 Mar. 31 Total Revenues $98,911 $110,042 $98,275 $93,094 $400,322 Gross profit 21,487 23,532 21,493 19,172 85,684 Income from operations 11,126 13,227 11,154 8,849 44,356 Net income 6,575 7,895 6,351 4,886 25,707 Diluted earnings per share $0.28 $ 0.34 $ 0.28 $ 0.22 $ 1.12 Weighted average number of common shares and equivalents 23,282 22,987 22,722 22,562 22,888 Year Ended March 31, 1998 Quarter Ended June 30 Sept. 30 Dec. 31 Mar. 31 Total Revenues $95,163 $90,578 $86,234 $86,146 $358,121 Gross profit 18,933 20,632 18,285 17,441 75,291 Income from operations 9,656 11,052 8,488 7,086 36,282 Net income 5,964 6,714 4,995 4,328 22,001 Diluted earnings per share $ 0.25 $ 0.28 $ 0.21 $ 0.19 $ 0.93 Weighted average number of common shares and equivalents 23,494 23,812 23,748 23,130 23,546 EX-21 2 EXHIBIT 21 SUBSIDIARIES OF OCEANEERING INTERNATIONAL, INC. Percentage of Ownership Jurisdiction by Oceaneering of Subsidiary International, Inc. Organization Eastport International, Inc. 100% Delaware Marine Production Systems do Brasil Ltda. 100% Brazil Marine Production Systems, Ltd. 100% Delaware Marine Production Systems Servicos Ltda. 100% Brazil Multiflex, Inc. 100% Texas Multiflex Limited 100% Scotland Norsk Subsea Cable A/S 49% Norway Ocean Systems Engineering, Inc. 100% Texas Ocean Systems Engineering Limited 100% England Oceaneering Arabia Ltd. 50% Saudi Arabia Oceaneering A/S 100% Norway Oceaneering Australia Pty. Limited 100% Australia Oceaneering FSC, Inc. 100% Barbados Oceaneering International AG 100% Switzerland Oceaneering International (M) Sdn. Bhd. 100% Malaysia Oceaneering International Pte Ltd 100% Singapore Oceaneering International, S.A. de C.V. 100% Mexico Oceaneering International Services Limited 100% England Oceaneering International (Sharjah) Limited 100% Sharjah Oceaneering Limited 100% Canada Oceaneering Technologies, Inc. 100% Delaware Oceaneering Underwater GmbH 100% Switzerland Oceanteam A/S 50% Norway Oil Industry Engineering, Inc. 100% Texas P. T. Calmarine 50% Indonesia Solus Emirates 49% U.A.E. Solus Ocean Systems, Inc. 100% Delaware Solus Oceaneering (Malaysia) Sdn. Bhd. 49% Malaysia Solus Schall Limited 100% England Solus Schall (Nigeria) Limited 50% Nigeria Specialty Wire and Cable Company, Inc. 100% Texas Steadfast Oceaneering, Inc. 100% Virginia UEC 789 Limited 100% Scotland Monocean Oceaneering Engenharia Submarina Ltda. 100% Brazil Ocean Systems do Brasil Servicos Subacquaticos, Ltda. 100% Brazil Solus Offshore, Ltd. 100% Cayman Islands Oceaneering do Brasil Servicos Submarinos, Ltda. 100% Brazil Servicos Marinos Oceaneering Chile Ltda. 100% Chile Oceaneering Space Systems, Inc. 100% Delaware Oceaneering Survey, Inc. 100% Delaware Oceaneering International (Netherlands) B.V. 100% Netherlands Oceaneering Services (Nigeria) Limited 100% Nigeria Oceaneering Geoscience Ltd. 100% England (1) The names of certain subsidiaries have been omitted since the unnamed subsidiaries considered in the aggregate would not constitute a significant subsidiary as defined by Item 601(b)(21). EX-23 3 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation our reports included in this Form 10-K, into the Company's previously filed Form S-8 Registration Statements File No. 33-36872 and No. 333-35225. ARTHUR ANDERSEN LLP Houston, Texas June 24, 1999 EX-24 4 Exhibit 24 POWER OF ATTORNEY WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("Act"), an Annual Report on Form 10-K for the fiscal year ended March 31, 1999 ("10-K"), with any and all exhibits and/or amendments to such 10-K, and other documents in connection therewith. NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint JOHN R. HUFF, MARVIN J. MIGURA and GEORGE R. HAUBENREICH, JR. and each of them severally, his true and lawful attorney or attorneys with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place and stead in his capacity as a director, officer or both, as the case may be, of the Company, said 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned in any and all capacities every act whatsoever necessary or desirable to be done in the premises as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument on this 21st day of May, 1999. //s// D. Michael Hughes POWER OF ATTORNEY WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("Act"), an Annual Report on Form 10-K for the fiscal year ended March 31, 1999 ("10-K"), with any and all exhibits and/or amendments to such 10-K, and other documents in connection therewith. NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint JOHN R. HUFF, MARVIN J. MIGURA and GEORGE R. HAUBENREICH, JR. and each of them severally, his true and lawful attorney or attorneys with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place and stead in his capacity as a director, officer or both, as the case may be, of the Company, said 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned in any and all capacities every act whatsoever necessary or desirable to be done in the premises as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument on this 21st day of May, 1999. //s// Charles B. Evans POWER OF ATTORNEY WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("Act"), an Annual Report on Form 10-K for the fiscal year ended March 31, 1999 ("10-K"), with any and all exhibits and/or amendments to such 10-K, and other documents in connection therewith. NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint JOHN R. HUFF, MARVIN J. MIGURA and GEORGE R. HAUBENREICH, JR. and each of them severally, his true and lawful attorney or attorneys with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place and stead in his capacity as a director, officer or both, as the case may be, of the Company, said 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned in any and all capacities every act whatsoever necessary or desirable to be done in the premises as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument on this 21st day of May, 1999. //s// David S. Hooker POWER OF ATTORNEY WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("Act"), an Annual Report on Form 10-K for the fiscal year ended March 31, 1999 ("10-K"), with any and all exhibits and/or amendments to such 10-K, and other documents in connection therewith. NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint JOHN R. HUFF, MARVIN J. MIGURA and GEORGE R. HAUBENREICH, JR. and each of them severally, his true and lawful attorney or attorneys with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place and stead in his capacity as a director, officer or both, as the case may be, of the Company, said 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned in any and all capacities every act whatsoever necessary or desirable to be done in the premises as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument on this 21st day of May, 1999. //s// John R. Huff POWER OF ATTORNEY WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("Act"), an Annual Report on Form 10-K for the fiscal year ended March 31, 1999 ("10-K"), with any and all exhibits and/or amendments to such 10-K, and other documents in connection therewith. NOW, THEREFORE, the undersigned in his capacity as a director or officer or both, as the case may be, of the Company, does hereby appoint JOHN R. HUFF, MARVIN J. MIGURA and GEORGE R. HAUBENREICH, JR. and each of them severally, his true and lawful attorney or attorneys with power to act with or without the other and with full power of substitution and resubstitution, to execute in his name, place and stead in his capacity as a director, officer or both, as the case may be, of the Company, said 10-K and any and all amendments thereto and all instruments necessary or incidental in connection therewith and to file the same with the Commission. Each of said attorneys shall have full power and authority to do and perform in the name and on behalf of the undersigned in any and all capacities every act whatsoever necessary or desirable to be done in the premises as fully and to all intents and purposes as the undersigned might or could do in person, the undersigned hereby ratifying and approving the acts of said attorneys and each of them. IN WITNESS WHEREOF, the undersigned has executed this instrument on this 21st day of May, 1999. //s// Harris J. Pappas EX-10 5 EXHIBIT 10.18 OCEANEERING INTERNATIONAL, INC. 1999 BONUS AWARD PLAN The 1999 Bonus Award Plan is approved by the Company's Board of Directors and administered by its Compensation Committee. Individuals who are nominated and approved for inclusion in the Plan will be reviewed after final year end results are completed. Recommendations for cash bonus awards will be based on the accomplishment of results (Individual, Profit Center and Total Company) in order to determine the amount of award, if any, to be made. People must be amongst the nominated group for eligibility, and be employed by the Company at the time of funding. Bonuses will be earned when paid. Individuals, as designated, will be subject to a maximum bonus eligibility of 10% - 100% of current base salary. The 1999 Bonus Award Plan is based on achieving specific results by the Individual, his Profit Center and the Total Company. In order to integrate each of these performances in a fashion that benefits the Shareholders and Employees, each item is interrelated. The amount of award recommendation will be based on the following methodology: Individual Coefficient The Individual Coefficient is determined by taking the individual's weighted average evaluation of objectives achieved times the individual's salary maximum. This is the beginning step in determining the final award. An individual's performance must meet certain minimum criteria or he is eliminated from bonus award consideration. Profit Center Results Contribution The Profit Center Contribution is determined by comparing the Profit Center Net Income Objective with the results achieved and determining the Contribution to the Individual Coefficient. Should the Profit Center results be below a specified amount, all the individuals in that Profit Center may be eliminated from the Award Program. The President may review the performance of areas within the region on a case-by-case basis and take appropriate action. Should the actual results be equal to or greater than such specified amount, the individual becomes eligible for an award. Oceaneering International, Inc. Results Contribution The Company Results Contribution is determined by comparing the Company's FY99 Net Income Result with the Objective planned. The results achieved determine the multiplier that will be used. Thus, an individual may, subject to the determined maximum, be recommended for an award equal to the Individual Coefficient times the Profit Center Contribution times the Company Results Contribution times current base salary. As authorized by the Compensation Committee, participants in the 1996 Restrictive Stock Incentive Program have the option to receive any bonus subsequently awarded by the Compensation Committee under the 1999 Bonus Award Plan in cash, cash and restricted stock or restricted stock. Any restricted stock would be awarded pursuant to all terms and conditions, including vesting and tax assistance payments of the 1996 Restricted Stock Incentive Program, except that one-quarter of such restricted amount would vest at the time of the bonus award and the remainder would rest in equal installments at the end of each of the following three years in accordance with agreement. The 1999 Bonus Award Plan is in effect FY99. A similar plan may or may not be approved for FY00. It is extremely important that the Company continue improved results in FY99. All participants must be committed to a reward system based on achieving results. The Company is entrepreneurially oriented and must use its maximum creativity, effort and determination in achieving individual results that collectively increases its Shareholders' Net Wealth. The 1999 Bonus Award Plan is structured to foster that position. June 18, 1998 EX-10 6 Exhibit 10.19 AMENDMENT NO. 1 TO 1990 NONEMPLOYEE DIRECTOR STOCK OPTION PLAN Effective June 19, 1998, with respect to all stock options issued from that date, the 1990 Nonemployee Director Stock Option Plan of Oceaneering International, Inc., is amended as follows: Paragraph 3 - Designation of Participants; Automatic Grant of Options: Delete third and fourth sentences (Each Optionee shall...of the Company." and substitute: "Effective the date of the Annual Shareholders Meeting (August 21, 1998), each Optionee is granted options to purchase 10,000 shares of Common Stock (subject to adjustment as provided in Paragraph 9)." Paragraph 5 - Optionee Price, subparagraph (a): Delete "fifty per cent (50%)" and substitute "one hundred per cent (100%)". Paragraph 6 - Option Period: Delete "ten years" and substitute "five years". EX-10 7 Exhibit 10.20 Award No. B-109 11,148 Shares OCEANEERING INTERNATIONAL, INC. FY98 BONUS RESTRICTED STOCK AWARD AGREEMENT THIS AGREEMENT is made as of the date set forth on the signature page hereof, between Oceaneering International, Inc., a Delaware corporation (the "Company"), and JOHN R. HUFF (the "Participant"). Except as defined herein, capitalized terms shall have the same meaning ascribed to them under the 1996 Incentive Plan of Oceaneering International, Inc., as from time to time amended, a copy of which is attached hereto and made a part hereof for all purposes (the "Plan"). To the extent that any provision of this Agreement conflicts with the express terms of the Plan, it is hereby acknowledged and agreed that the terms of the Plan shall control and, if necessary, the applicable provisions of this Agreement shall be hereby deemed amended so as to carry out the purpose and intent of the Plan. 1. Definitions. As used herein, the terms set forth below shall have the following respective meanings: (a) "Change in Control" means, with respect to the Company, if (i) a third person, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of the Company having 30 percent or more of the total number of votes that may be cast for the election of directors of the Company, or (ii) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or of any successor to the Company. Without limiting the foregoing, no "Change of Control" shall be deemed to have taken place for the purposes of this Agreement, if a person or persons is appointed or elected as a member(s) of the Board as a result of or in connection with a Transaction or other event unless item (i) or (ii) above shall also have occurred. (b) "Closing Stock Price" means, with respect to common stock on a particular date, (i) if the shares of common stock are listed on a national securities exchange, the last sale price per share of common stock on any such national securities exchange on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported and, (ii) if the shares of Common Stock are not so listed but are quoted in the NASDAQ National Market System, the last sale price per share of shares of common stock reported on the NASDAQ National Market System on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported. (c) "Disability" means a physical or mental impairment of sufficient severity that, in the opinion of a physician selected by the Company, the Participant is unable to fulfill his duties. 2. Award. As an FY98 Bonus Award and in consideration of the covenants and promises of the Participant herein contained, pursuant to action taken by the Committee on June 18, 1998 (the "Date of Grant"), the Company hereby awards to the Participant as of the Date of Grant a total of 11,148 shares of Common Stock, pursuant to the Plan, subject to the conditions and restrictions set forth below and in the Plan (the "Restricted Stock"). 3. Restrictions on Transfer. The shares of Restricted Stock granted hereunder to the Participant may not be sold, assigned, transferred, pledged or otherwise encumbered from the Date of Grant until said shares shall have become vested and not otherwise subject to forfeiture (and restrictions terminated thereon) in accordance with the provisions of this Paragraph 3. (The period of time between the Date of Grant and the vesting of shares of Restricted Stock shall be referred to herein as the "Restricted Period" as to those shares of stock.) The shares of Restricted Stock shall be treated as described below for purposes of vesting and other terms and conditions of this Agreement: (a) Vesting of Common Stock: The shares of the Restricted Stock shall vest 25% on June 26, 1998, 25% on June 25, 1999, 25% on June 23, 2000 and 25% on June 22, 2001. Upon termination of a Participant's employment (with or without cause, voluntary, involuntary or for any reason whatsoever except as provided in Sections 3(c) and 3(d)), all Restricted Stock for which the conditions of the applicable provisions of this paragraph (a) have not been satisfied as of the date of such termination of employment shall be forfeited. (b) Tax Reimbursement: Within 10 days after the expiration of the Restricted Period with respect to a particular share of Restricted Stock, the Company shall pay to the Participant an amount sufficient to provide for the payment of all United States federal income taxes imposed with respect to Participant's acquisition of such share, as well as an amount sufficient to reimburse Participant for the tax obligation on such amounts so that Participant is paid an amount as a tax assistance payment by the Company sufficient to fund all of his income taxes on both the share of Restricted Stock and the tax assistance payment. In the event the Participant is not at the time a tax assistance payment is to be made subject to United States income tax, such tax assistance payment shall be computed by reference to the income tax of the laws of the country to which the participant is subject; provided, however, that such tax assistance payment shall not exceed the amount that would have been payable if the Participant were subject solely to United States income tax. No United States state (or equivalent foreign) income taxes will be considered in determining tax assistance payments. The Committee shall have sole and complete discretion in the calculation of tax assistance payments, and the determination of the Committee shall be final and binding on the Participant except in the case of bad faith or willful misconduct. In computing the tax assistance payment, it shall be assumed that the Participant is at the maximum marginal tax rate for individual taxpayers. Subject to Section 3(c), in the event a Participant sells any share of Restricted Stock within three years after expiration of the Restricted Period with respect to such Restricted Stock, the Participant shall immediately pay to the Company the amount of the tax assistance payment previously received by the Participant from the Company with respect to such share. (c) Effect of Change in Control: In the event a Change in Control occurs prior to the time that the conditions of paragraph (b) above have been satisfied with respect to a share of Restricted Stock, and upon such Change in Control, the requirements of paragraph (b) above shall be deemed to have been satisfied on the the date of such Change of Control, and tax assistance payments shall be made with respect to such shares within 10 days thereafter. (d) Effect of Death or Disability. In the event of the death or Disability of the Participant while employed by the Company, the conditions of paragraph (b) above shall be deemed immediately satisfied and tax assistance payments shall be made by Company to the Participants with respect to such event within 30 days thereafter. (e) Dividends: Dividends (other than dividends in capital stock) with respect to shares of Restricted Stock shall be paid to the Participant without regard to the restrictions otherwise applicable to such shares. Dividends in capital stock of the Company shall accumulate and be associated with the Restricted Stock to which they relate and shall vest at the time such Restricted Stock vests. (f) Voting of Common Stock: A Participant shall have the right to exercise any voting rights appurtenant to Restricted Stock without regard to any restrictions otherwise imposed by reason of this Agreement. 4. Code Section 83(b) Election. The Participant shall not make an election, under Code Section 83(b), to include in income the fair market value of the Restricted Stock in respect of this award of Restricted Stock on the Date of Grant. 5. Sale of Restricted Stock. The Participant shall not sell Restricted Stock except pursuant to an effective registration statement under the Securities Act of 1933 (or pursuant to an exemption from registration under such act), and the Participant hereby represents that he is acquiring the Restricted Stock for his own account and not with a view to the distribution thereof. 6. Escrow of Certificates. The certificates representing shares of Restricted Stock shall be registered in the name of the Participant and deposited, together with a stock power endorsed by the Participant in blank, with the Corporate Secretary of the Company during the Restricted Period. Each such certificate shall bear a legend as provided by the Company, conspicuously referring to the terms, conditions and restrictions described in the Plan and in this Agreement. Subject to the provisions of Section 7 below, upon termination of the Restricted Period with respect to shares of Restricted Stock, a certificate representing such shares shall be delivered to the Participant as promptly as practicable following such termination. 7. Withholding of Taxes. No certificates representing the shares of Restricted Stock shall be delivered to the Participant by the Company unless the Participant (or Beneficiary, as defined in Section 8 below) remits to the Company the amount of all federal, state and other governmental withholding tax requirements imposed upon the Company with respect to the issuance of such shares or unless provisions to so pay such withholding requirements have been made to the satisfaction of the Committee. 8. Beneficiary Designations. The Participant may file with the Corporate Secretary of the Company a designation of one or more beneficiaries (each a "Beneficiary") to whom shares otherwise due the Participant shall be distributed in the event of the death of the Participant while in the employ of the Company. The Participant shall have the right to change the Beneficiary or Beneficiaries from time to time; provided, however, that any change shall not become effective until received in writing by the Corporate Secretary of the Company. If any designated Beneficiary survives the Participant but dies before receiving all of his benefits hereunder, any remaining benefits due him shall be distributed to the deceased Beneficiary's estate. If there is no effective Beneficiary designation on file at the time of the Participant's death, or if the designated Beneficiary or Beneficiaries have all predeceased such Participant, the payment of any remaining benefits shall be made to the Participant's estate. In the event of any dispute, the Company shall be fully protected and discharged of its obligations under this Agreement if it delivers the shares otherwise due a Participant to the probate court administering his estate. 9. Limitation of Rights. Nothing in this Agreement or the Plan shall be construed to: (a) give the Participant any right to be awarded any Restricted Stock other than in the sole discretion of the Committee; (b) give the Participant or any other person any interest in any fund or in any specified asset or assets of the Company or any affiliate of the Company; or (c) confer upon the Participant the right to continue in the employment or service of the Company or any affiliate of the Company, or affect the right of the Company or any affiliate of the Company to terminate the employment or service of the Participant at any time or for any reason. The Committee shall have the discretion to make determinations under this Agreement and Plan, and such determinations shall be final and binding on the Participant except in the case of bad faith and willful misconduct. 10. Nonalienation of Benefits. Except as contemplated by Section 8 above, no right or benefit under this Agreement shall be subject to transfer, anticipation, alienation, sale, assignment, pledge, encumbrance or charge, whether voluntary, involuntary, or by operation of law, and any attempt to transfer, anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to any debts, contracts, liabilities or torts of the person entitled to such benefits. If the Participant or his Beneficiary hereunder shall become bankrupt or attempt to transfer, anticipate, alienate, assign, sell, pledge, encumber or charge any right or benefit hereunder, other than as contemplated by Section 8 above, or if any creditor shall attempt to subject the same to a writ of garnishment, attachment, execution, sequestration, or any other form of process or involuntary lien or seizure, then such right or benefit shall cease and terminate. 11. Prerequisites to Benefits. Neither the Participant, nor any person claiming through the Participant, shall have any right or interest in the Restricted Stock awarded hereunder, unless and until all the terms, conditions and provisions of this Agreement and the Plan which affect the Participant or such other person shall have been complied with as specified herein. 12. Rights as a Stockholder. Subject to the limitations and restrictions contained herein, the Participant (or Beneficiary) shall have all rights as a stockholder with respect to the shares of Restricted Stock once such shares have been registered in his name hereunder. 13. Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by the Participant, the Company and their respective permitted successors and assigns (including personal representatives, heirs and legatees), except that the Participant may not assign any rights or obligations under this Agreement except to the extent and in the manner expressly permitted herein. 14. The Committee shall have sole and complete discretion in the interpretation of this Agreement and the determination of the Committee shall be final and binding on the Participant except in the case of bad faith or willful misconduct. 15. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware. 16. Gender and Number. Whenever the context requires or permits, the gender and number of words shall be interchangeable. This Agreement is executed and delivered, in duplicate, pursuant to the Plan, the provisions of which are incorporated herein by reference. Dated: June 18, 1998. OCEANEERING INTERNATIONAL, INC. By //s// George R. Haubenreich, Jr. Vice President, General Counsel and Secretary The undersigned Participant accepts the Restricted Stock subject to all the terms of this Agreement. //s// JOHN R. HUFF Award No. B-110 7,804 Shares OCEANEERING INTERNATIONAL, INC. FY98 BONUS RESTRICTED STOCK AWARD AGREEMENT THIS AGREEMENT is made as of the date set forth on the signature page hereof, between Oceaneering International, Inc., a Delaware corporation (the "Company"), and T. JAY COLLINS (the "Participant"). Except as defined herein, capitalized terms shall have the same meaning ascribed to them under the 1996 Incentive Plan of Oceaneering International, Inc., as from time to time amended, a copy of which is attached hereto and made a part hereof for all purposes (the "Plan"). To the extent that any provision of this Agreement conflicts with the express terms of the Plan, it is hereby acknowledged and agreed that the terms of the Plan shall control and, if necessary, the applicable provisions of this Agreement shall be hereby deemed amended so as to carry out the purpose and intent of the Plan. 17. Definitions. As used herein, the terms set forth below shall have the following respective meanings: (a) "Change in Control" means, with respect to the Company, if (i) a third person, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of the Company having 30 percent or more of the total number of votes that may be cast for the election of directors of the Company, or (ii) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or of any successor to the Company. Without limiting the foregoing, no "Change of Control" shall be deemed to have taken place for the purposes of this Agreement, if a person or persons is appointed or elected as a member(s) of the Board as a result of or in connection with a Transaction or other event unless item (i) or (ii) above shall also have occurred. (b) "Closing Stock Price" means, with respect to common stock on a particular date, (i) if the shares of common stock are listed on a national securities exchange, the last sale price per share of common stock on any such national securities exchange on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported and, (ii) if the shares of Common Stock are not so listed but are quoted in the NASDAQ National Market System, the last sale price per share of shares of common stock reported on the NASDAQ National Market System on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported. (c) "Disability" means a physical or mental impairment of sufficient severity that, in the opinion of a physician selected by the Company, the Participant is unable to fulfill his duties. 18. Award. As an FY98 Bonus Award and in consideration of the covenants and promises of the Participant herein contained, pursuant to action taken by the Committee on June 18, 1998 (the "Date of Grant"), the Company hereby awards to the Participant as of the Date of Grant a total of 7,804 shares of Common Stock, pursuant to the Plan, subject to the conditions and restrictions set forth below and in the Plan (the "Restricted Stock"). 19. Restrictions on Transfer. The shares of Restricted Stock granted hereunder to the Participant may not be sold, assigned, transferred, pledged or otherwise encumbered from the Date of Grant until said shares shall have become vested and not otherwise subject to forfeiture (and restrictions terminated thereon) in accordance with the provisions of this Paragraph 3. (The period of time between the Date of Grant and the vesting of shares of Restricted Stock shall be referred to herein as the "Restricted Period" as to those shares of stock.) The shares of Restricted Stock shall be treated as described below for purposes of vesting and other terms and conditions of this Agreement: (a) Vesting of Common Stock: The shares of the Restricted Stock shall vest 25% on June 26, 1998, 25% on June 25, 1999, 25% on June 23, 2000 and 25% on June 22, 2001. Upon termination of a Participant's employment (with or without cause, voluntary, involuntary or for any reason whatsoever except as provided in Sections 3(c) and 3(d)), all Restricted Stock for which the conditions of the applicable provisions of this paragraph (a) have not been satisfied as of the date of such termination of employment shall be forfeited. (b) Tax Reimbursement: Within 10 days after the expiration of the Restricted Period with respect to a particular share of Restricted Stock, the Company shall pay to the Participant an amount sufficient to provide for the payment of all United States federal income taxes imposed with respect to Participant's acquisition of such share, as well as an amount sufficient to reimburse Participant for the tax obligation on such amounts so that Participant is paid an amount as a tax assistance payment by the Company sufficient to fund all of his income taxes on both the share of Restricted Stock and the tax assistance payment. In the event the Participant is not at the time a tax assistance payment is to be made subject to United States income tax, such tax assistance payment shall be computed by reference to the income tax of the laws of the country to which the participant is subject; provided, however, that such tax assistance payment shall not exceed the amount that would have been payable if the Participant were subject solely to United States income tax. No United States state (or equivalent foreign) income taxes will be considered in determining tax assistance payments. The Committee shall have sole and complete discretion in the calculation of tax assistance payments, and the determination of the Committee shall be final and binding on the Participant except in the case of bad faith or willful misconduct. In computing the tax assistance payment, it shall be assumed that the Participant is at the maximum marginal tax rate for individual taxpayers. Subject to Section 3(c), in the event a Participant sells any share of Restricted Stock within three years after expiration of the Restricted Period with respect to such Restricted Stock, the Participant shall immediately pay to the Company the amount of the tax assistance payment previously received by the Participant from the Company with respect to such share. (c) Effect of Change in Control: In the event a Change in Control occurs prior to the time that the conditions of paragraph (b) above have been satisfied with respect to a share of Restricted Stock, and upon such Change in Control, the requirements of paragraph (b) above shall be deemed to have been satisfied on the the date of such Change of Control, and tax assistance payments shall be made with respect to such shares within 10 days thereafter. (d) Effect of Death or Disability. In the event of the death or Disability of the Participant while employed by the Company, the conditions of paragraph (b) above shall be deemed immediately satisfied and tax assistance payments shall be made by Company to the Participants with respect to such event within 30 days thereafter. (e) Dividends: Dividends (other than dividends in capital stock) with respect to shares of Restricted Stock shall be paid to the Participant without regard to the restrictions otherwise applicable to such shares. Dividends in capital stock of the Company shall accumulate and be associated with the Restricted Stock to which they relate and shall vest at the time such Restricted Stock vests. (f) Voting of Common Stock: A Participant shall have the right to exercise any voting rights appurtenant to Restricted Stock without regard to any restrictions otherwise imposed by reason of this Agreement. 20. Code Section 83(b) Election. The Participant shall not make an election, under Code Section 83(b), to include in income the fair market value of the Restricted Stock in respect of this award of Restricted Stock on the Date of Grant. 21. Sale of Restricted Stock. The Participant shall not sell Restricted Stock except pursuant to an effective registration statement under the Securities Act of 1933 (or pursuant to an exemption from registration under such act), and the Participant hereby represents that he is acquiring the Restricted Stock for his own account and not with a view to the distribution thereof. 22. Escrow of Certificates. The certificates representing shares of Restricted Stock shall be registered in the name of the Participant and deposited, together with a stock power endorsed by the Participant in blank, with the Corporate Secretary of the Company during the Restricted Period. Each such certificate shall bear a legend as provided by the Company, conspicuously referring to the terms, conditions and restrictions described in the Plan and in this Agreement. Subject to the provisions of Section 7 below, upon termination of the Restricted Period with respect to shares of Restricted Stock, a certificate representing such shares shall be delivered to the Participant as promptly as practicable following such termination. 23. Withholding of Taxes. No certificates representing the shares of Restricted Stock shall be delivered to the Participant by the Company unless the Participant (or Beneficiary, as defined in Section 8 below) remits to the Company the amount of all federal, state and other governmental withholding tax requirements imposed upon the Company with respect to the issuance of such shares or unless provisions to so pay such withholding requirements have been made to the satisfaction of the Committee. 24. Beneficiary Designations. The Participant may file with the Corporate Secretary of the Company a designation of one or more beneficiaries (each a "Beneficiary") to whom shares otherwise due the Participant shall be distributed in the event of the death of the Participant while in the employ of the Company. The Participant shall have the right to change the Beneficiary or Beneficiaries from time to time; provided, however, that any change shall not become effective until received in writing by the Corporate Secretary of the Company. If any designated Beneficiary survives the Participant but dies before receiving all of his benefits hereunder, any remaining benefits due him shall be distributed to the deceased Beneficiary's estate. If there is no effective Beneficiary designation on file at the time of the Participant's death, or if the designated Beneficiary or Beneficiaries have all predeceased such Participant, the payment of any remaining benefits shall be made to the Participant's estate. In the event of any dispute, the Company shall be fully protected and discharged of its obligations under this Agreement if it delivers the shares otherwise due a Participant to the probate court administering his estate. 25. Limitation of Rights. Nothing in this Agreement or the Plan shall be construed to: (a) give the Participant any right to be awarded any Restricted Stock other than in the sole discretion of the Committee; (b) give the Participant or any other person any interest in any fund or in any specified asset or assets of the Company or any affiliate of the Company; or (c) confer upon the Participant the right to continue in the employment or service of the Company or any affiliate of the Company, or affect the right of the Company or any affiliate of the Company to terminate the employment or service of the Participant at any time or for any reason. The Committee shall have the discretion to make determinations under this Agreement and Plan, and such determinations shall be final and binding on the Participant except in the case of bad faith and willful misconduct. 26. Nonalienation of Benefits. Except as contemplated by Section 8 above, no right or benefit under this Agreement shall be subject to transfer, anticipation, alienation, sale, assignment, pledge, encumbrance or charge, whether voluntary, involuntary, or by operation of law, and any attempt to transfer, anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to any debts, contracts, liabilities or torts of the person entitled to such benefits. If the Participant or his Beneficiary hereunder shall become bankrupt or attempt to transfer, anticipate, alienate, assign, sell, pledge, encumber or charge any right or benefit hereunder, other than as contemplated by Section 8 above, or if any creditor shall attempt to subject the same to a writ of garnishment, attachment, execution, sequestration, or any other form of process or involuntary lien or seizure, then such right or benefit shall cease and terminate. 27. Prerequisites to Benefits. Neither the Participant, nor any person claiming through the Participant, shall have any right or interest in the Restricted Stock awarded hereunder, unless and until all the terms, conditions and provisions of this Agreement and the Plan which affect the Participant or such other person shall have been complied with as specified herein. 28. Rights as a Stockholder. Subject to the limitations and restrictions contained herein, the Participant (or Beneficiary) shall have all rights as a stockholder with respect to the shares of Restricted Stock once such shares have been registered in his name hereunder. 29. Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by the Participant, the Company and their respective permitted successors and assigns (including personal representatives, heirs and legatees), except that the Participant may not assign any rights or obligations under this Agreement except to the extent and in the manner expressly permitted herein. 30. The Committee shall have sole and complete discretion in the interpretation of this Agreement and the determination of the Committee shall be final and binding on the Participant except in the case of bad faith or willful misconduct. 31. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware. 32. Gender and Number. Whenever the context requires or permits, the gender and number of words shall be interchangeable. This Agreement is executed and delivered, in duplicate, pursuant to the Plan, the provisions of which are incorporated herein by reference. Dated: June 18, 1998. OCEANEERING INTERNATIONAL, INC. By //s// George R. Haubenreich, Jr. Vice President, General Counsel and Secretary The undersigned Participant accepts the Restricted Stock subject to all the terms of this Agreement. //s// T. JAY COLLINS Award No. B-112 3,624 Shares OCEANEERING INTERNATIONAL, INC. FY98 BONUS RESTRICTED STOCK AWARD AGREEMENT THIS AGREEMENT is made as of the date set forth on the signature page hereof, between Oceaneering International, Inc., a Delaware corporation (the "Company"), and M. KEVIN McEVOY (the "Participant"). Except as defined herein, capitalized terms shall have the same meaning ascribed to them under the 1996 Incentive Plan of Oceaneering International, Inc., as from time to time amended, a copy of which is attached hereto and made a part hereof for all purposes (the "Plan"). To the extent that any provision of this Agreement conflicts with the express terms of the Plan, it is hereby acknowledged and agreed that the terms of the Plan shall control and, if necessary, the applicable provisions of this Agreement shall be hereby deemed amended so as to carry out the purpose and intent of the Plan. 33. Definitions. As used herein, the terms set forth below shall have the following respective meanings: (a) "Change in Control" means, with respect to the Company, if (i) a third person, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of the Company having 30 percent or more of the total number of votes that may be cast for the election of directors of the Company, or (ii) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or of any successor to the Company. Without limiting the foregoing, no "Change of Control" shall be deemed to have taken place for the purposes of this Agreement, if a person or persons is appointed or elected as a member(s) of the Board as a result of or in connection with a Transaction or other event unless item (i) or (ii) above shall also have occurred. (b) "Closing Stock Price" means, with respect to common stock on a particular date, (i) if the shares of common stock are listed on a national securities exchange, the last sale price per share of common stock on any such national securities exchange on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported and, (ii) if the shares of Common Stock are not so listed but are quoted in the NASDAQ National Market System, the last sale price per share of shares of common stock reported on the NASDAQ National Market System on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported. (c) "Disability" means a physical or mental impairment of sufficient severity that, in the opinion of a physician selected by the Company, the Participant is unable to fulfill his duties. 34. Award. As an FY98 Bonus Award and in consideration of the covenants and promises of the Participant herein contained, pursuant to action taken by the Committee on June 18, 1998 (the "Date of Grant"), the Company hereby awards to the Participant as of the Date of Grant a total of 3,624 shares of Common Stock, pursuant to the Plan, subject to the conditions and restrictions set forth below and in the Plan (the "Restricted Stock"). 35. Restrictions on Transfer. The shares of Restricted Stock granted hereunder to the Participant may not be sold, assigned, transferred, pledged or otherwise encumbered from the Date of Grant until said shares shall have become vested and not otherwise subject to forfeiture (and restrictions terminated thereon) in accordance with the provisions of this Paragraph 3. (The period of time between the Date of Grant and the vesting of shares of Restricted Stock shall be referred to herein as the "Restricted Period" as to those shares of stock.) The shares of Restricted Stock shall be treated as described below for purposes of vesting and other terms and conditions of this Agreement: (a) Vesting of Common Stock: The shares of the Restricted Stock shall vest 25% on June 26, 1998, 25% on June 25, 1999, 25% on June 23, 2000 and 25% on June 22, 2001. Upon termination of a Participant's employment (with or without cause, voluntary, involuntary or for any reason whatsoever except as provided in Sections 3(c) and 3(d)), all Restricted Stock for which the conditions of the applicable provisions of this paragraph (a) have not been satisfied as of the date of such termination of employment shall be forfeited. (b) Tax Reimbursement: Within 10 days after the expiration of the Restricted Period with respect to a particular share of Restricted Stock, the Company shall pay to the Participant an amount sufficient to provide for the payment of all United States federal income taxes imposed with respect to Participant's acquisition of such share, as well as an amount sufficient to reimburse Participant for the tax obligation on such amounts so that Participant is paid an amount as a tax assistance payment by the Company sufficient to fund all of his income taxes on both the share of Restricted Stock and the tax assistance payment. In the event the Participant is not at the time a tax assistance payment is to be made subject to United States income tax, such tax assistance payment shall be computed by reference to the income tax of the laws of the country to which the participant is subject; provided, however, that such tax assistance payment shall not exceed the amount that would have been payable if the Participant were subject solely to United States income tax. No United States state (or equivalent foreign) income taxes will be considered in determining tax assistance payments. The Committee shall have sole and complete discretion in the calculation of tax assistance payments, and the determination of the Committee shall be final and binding on the Participant except in the case of bad faith or willful misconduct. In computing the tax assistance payment, it shall be assumed that the Participant is at the maximum marginal tax rate for individual taxpayers. Subject to Section 3(c), in the event a Participant sells any share of Restricted Stock within three years after expiration of the Restricted Period with respect to such Restricted Stock, the Participant shall immediately pay to the Company the amount of the tax assistance payment previously received by the Participant from the Company with respect to such share. (c) Effect of Change in Control: In the event a Change in Control occurs prior to the time that the conditions of paragraph (b) above have been satisfied with respect to a share of Restricted Stock, and upon such Change in Control, the requirements of paragraph (b) above shall be deemed to have been satisfied on the the date of such Change of Control , and tax assistance payments shall be made with respect to such shares within 10 days thereafter. (d) Effect of Death or Disability. In the event of the death or Disability of the Participant while employed by the Company, the conditions of paragraph (b) above shall be deemed immediately satisfied and tax assistance payments shall be made by Company to the Participants with respect to such event within 30 days thereafter. (e) Dividends: Dividends (other than dividends in capital stock) with respect to shares of Restricted Stock shall be paid to the Participant without regard to the restrictions otherwise applicable to such shares. Dividends in capital stock of the Company shall accumulate and be associated with the Restricted Stock to which they relate and shall vest at the time such Restricted Stock vests. (f) Voting of Common Stock: A Participant shall have the right to exercise any voting rights appurtenant to Restricted Stock without regard to any restrictions otherwise imposed by reason of this Agreement. 36. Code Section 83(b) Election. The Participant shall not make an election, under Code Section 83(b), to include in income the fair market value of the Restricted Stock in respect of this award of Restricted Stock on the Date of Grant. 37. Sale of Restricted Stock. The Participant shall not sell Restricted Stock except pursuant to an effective registration statement under the Securities Act of 1933 (or pursuant to an exemption from registration under such act), and the Participant hereby represents that he is acquiring the Restricted Stock for his own account and not with a view to the distribution thereof. 38. Escrow of Certificates. The certificates representing shares of Restricted Stock shall be registered in the name of the Participant and deposited, together with a stock power endorsed by the Participant in blank, with the Corporate Secretary of the Company during the Restricted Period. Each such certificate shall bear a legend as provided by the Company, conspicuously referring to the terms, conditions and restrictions described in the Plan and in this Agreement. Subject to the provisions of Section 7 below, upon termination of the Restricted Period with respect to shares of Restricted Stock, a certificate representing such shares shall be delivered to the Participant as promptly as practicable following such termination. 39. Withholding of Taxes. No certificates representing the shares of Restricted Stock shall be delivered to the Participant by the Company unless the Participant (or Beneficiary, as defined in Section 8 below) remits to the Company the amount of all federal, state and other governmental withholding tax requirements imposed upon the Company with respect to the issuance of such shares or unless provisions to so pay such withholding requirements have been made to the satisfaction of the Committee. 40. Beneficiary Designations. The Participant may file with the Corporate Secretary of the Company a designation of one or more beneficiaries (each a "Beneficiary") to whom shares otherwise due the Participant shall be distributed in the event of the death of the Participant while in the employ of the Company. The Participant shall have the right to change the Beneficiary or Beneficiaries from time to time; provided, however, that any change shall not become effective until received in writing by the Corporate Secretary of the Company. If any designated Beneficiary survives the Participant but dies before receiving all of his benefits hereunder, any remaining benefits due him shall be distributed to the deceased Beneficiary's estate. If there is no effective Beneficiary designation on file at the time of the Participant's death, or if the designated Beneficiary or Beneficiaries have all predeceased such Participant, the payment of any remaining benefits shall be made to the Participant's estate. In the event of any dispute, the Company shall be fully protected and discharged of its obligations under this Agreement if it delivers the shares otherwise due a Participant to the probate court administering his estate. 41. Limitation of Rights. Nothing in this Agreement or the Plan shall be construed to: (a) give the Participant any right to be awarded any Restricted Stock other than in the sole discretion of the Committee; (b) give the Participant or any other person any interest in any fund or in any specified asset or assets of the Company or any affiliate of the Company; or (c) confer upon the Participant the right to continue in the employment or service of the Company or any affiliate of the Company, or affect the right of the Company or any affiliate of the Company to terminate the employment or service of the Participant at any time or for any reason. The Committee shall have the discretion to make determinations under this Agreement and Plan, and such determinations shall be final and binding on the Participant except in the case of bad faith and willful misconduct. 42. Nonalienation of Benefits. Except as contemplated by Section 8 above, no right or benefit under this Agreement shall be subject to transfer, anticipation , alienation, sale, assignment, pledge, encumbrance or charge, whether voluntary, involuntary, or by operation of law, and any attempt to transfer, anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to any debts, contracts, liabilities or torts of the person entitled to such benefits. If the Participant or his Beneficiary hereunder shall become bankrupt or attempt to transfer, anticipate, alienate, assign, sell, pledge, encumber or charge any right or benefit hereunder, other than as contemplated by Section 8 above, or if any creditor shall attempt to subject the same to a writ of garnishment, attachment, execution, sequestration, or any other form of process or involuntary lien or seizure, then such right or benefit shall cease and terminate. 43. Prerequisites to Benefits. Neither the Participant, nor any person claiming through the Participant, shall have any right or interest in the Restricted Stock awarded hereunder, unless and until all the terms, conditions and provisions of this Agreement and the Plan which affect the Participant or such other person shall have been complied with as specified herein. 44. Rights as a Stockholder. Subject to the limitations and restrictions contained herein, the Participant (or Beneficiary) shall have all rights as a stockholder with respect to the shares of Restricted Stock once such shares have been registered in his name hereunder. 45. Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by the Participant, the Company and their respective permitted successors and assigns (including personal representatives, heirs and legatees), except that the Participant may not assign any rights or obligations under this Agreement except to the extent and in the manner expressly permitted herein. 46. The Committee shall have sole and complete discretion in the interpretation of this Agreement and the determination of the Committee shall be final and binding on the Participant except in the case of bad faith or willful misconduct. 47. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware. 48. Gender and Number. Whenever the context requires or permits, the gender and number of words shall be interchangeable. This Agreement is executed and delivered, in duplicate, pursuant to the Plan, the provisions of which are incorporated herein by reference. Dated: June 18, 1998. OCEANEERING INTERNATIONAL, INC. By //s// George R. Haubenreich, Jr. Vice President, General Counsel and Secretary The undersigned Participant accepts the Restricted Stock subject to all the terms of this Agreement. //s// M. KEVIN McEVOY Award No. B-111 1,200 Shares OCEANEERING INTERNATIONAL, INC. FY98 BONUS RESTRICTED STOCK AWARD AGREEMENT THIS AGREEMENT is made as of the date set forth on the signature page hereof, between Oceaneering International, Inc., a Delaware corporation (the "Company"), and MARVIN J. MIGURA (the "Participant"). Except as defined herein, capitalized terms shall have the same meaning ascribed to them under the 1996 Incentive Plan of Oceaneering International, Inc., as from time to time amended, a copy of which is attached hereto and made a part hereof for all purposes (the "Plan"). To the extent that any provision of this Agreement conflicts with the express terms of the Plan, it is hereby acknowledged and agreed that the terms of the Plan shall control and, if necessary, the applicable provisions of this Agreement shall be hereby deemed amended so as to carry out the purpose and intent of the Plan. 49. Definitions. As used herein, the terms set forth below shall have the following respective meanings: (a) "Change in Control" means, with respect to the Company, if (i) a third person, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of the Company having 30 percent or more of the total number of votes that may be cast for the election of directors of the Company, or (ii) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or of any successor to the Company. Without limiting the foregoing, no "Change of Control" shall be deemed to have taken place for the purposes of this Agreement, if a person or persons is appointed or elected as a member(s) of the Board as a result of or in connection with a Transaction or other event unless item (i) or (ii) above shall also have occurred. (b) "Closing Stock Price" means, with respect to common stock on a particular date, (i) if the shares of common stock are listed on a national securities exchange, the last sale price per share of common stock on any such national securities exchange on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported and, (ii) if the shares of Common Stock are not so listed but are quoted in the NASDAQ National Market System, the last sale price per share of shares of common stock reported on the NASDAQ National Market System on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported. (c) "Disability" means a physical or mental impairment of sufficient severity that, in the opinion of a physician selected by the Company, the Participant is unable to fulfill his duties. 50. Award. As an FY98 Bonus Award and in consideration of the covenants and promises of the Participant herein contained, pursuant to action taken by the Committee on June 18, 1998 (the "Date of Grant"), the Company hereby awards to the Participant as of the Date of Grant a total of 1,200 shares of Common Stock, pursuant to the Plan, subject to the conditions and restrictions set forth below and in the Plan (the "Restricted Stock"). 51. Restrictions on Transfer. The shares of Restricted Stock granted hereunder to the Participant may not be sold, assigned, transferred, pledged or otherwise encumbered from the Date of Grant until said shares shall have become vested and not otherwise subject to forfeiture (and restrictions terminated thereon) in accordance with the provisions of this Paragraph 3. (The period of time between the Date of Grant and the vesting of shares of Restricted Stock shall be referred to herein as the "Restricted Period" as to those shares of stock.) The shares of Restricted Stock shall be treated as described below for purposes of vesting and other terms and conditions of this Agreement: (a) Vesting of Common Stock: The shares of the Restricted Stock shall vest 25% on June 26, 1998, 25% on June 25, 1999, 25% on June 23, 2000 and 25% on June 22, 2001. Upon termination of a Participant's employment (with or without cause, voluntary , involuntary or for any reason whatsoever except as provided in Sections 3(c) and 3(d)), all Restricted Stock for which the conditions of the applicable provisions of this paragraph (a) have not been satisfied as of the date of such termination of employment shall be forfeited. (b) Tax Reimbursement: Within 10 days after the expiration of the Restricted Period with respect to a particular share of Restricted Stock, the Company shall pay to the Participant an amount sufficient to provide for the payment of all United States federal income taxes imposed with respect to Participant's acquisition of such share, as well as an amount sufficient to reimburse Participant for the tax obligation on such amounts so that Participant is paid an amount as a tax assistance payment by the Company sufficient to fund all of his income taxes on both the share of Restricted Stock and the tax assistance payment. In the event the Participant is not at the time a tax assistance payment is to be made subject to United States income tax, such tax assistance payment shall be computed by reference to the income tax of the laws of the country to which the participant is subject; provided, however, that such tax assistance payment shall not exceed the amount that would have been payable if the Participant were subject solely to United States income tax. No United States state (or equivalent foreign) income taxes will be considered in determining tax assistance payments. The Committee shall have sole and complete discretion in the calculation of tax assistance payments, and the determination of the Committee shall be final and binding on the Participant except in the case of bad faith or willful misconduct. In computing the tax assistance payment, it shall be assumed that the Participant is at the maximum marginal tax rate for individual taxpayers. Subject to Section 3(c), in the event a Participant sells any share of Restricted Stock within three years after expiration of the Restricted Period with respect to such Restricted Stock, the Participant shall immediately pay to the Company the amount of the tax assistance payment previously received by the Participant from the Company with respect to such share. (c) Effect of Change in Control: In the event a Change in Control occurs prior to the time that the conditions of paragraph (b) above have been satisfied with respect to a share of Restricted Stock, and upon such Change in Control, the requirements of paragraph (b) above shall be deemed to have been satisfied on the the date of such Change of Control , and tax assistance payments shall be made with respect to such shares within 10 days thereafter. (d) Effect of Death or Disability. In the event of the death or Disability of the Participant while employed by the Company, the conditions of paragraph (b) above shall be deemed immediately satisfied and tax assistance payments shall be made by Company to the Participants with respect to such event within 30 days thereafter. (e) Dividends: Dividends (other than dividends in capital stock) with respect to shares of Restricted Stock shall be paid to the Participant without regard to the restrictions otherwise applicable to such shares. Dividends in capital stock of the Company shall accumulate and be associated with the Restricted Stock to which they relate and shall vest at the time such Restricted Stock vests. (f) Voting of Common Stock: A Participant shall have the right to exercise any voting rights appurtenant to Restricted Stock without regard to any restrictions otherwise imposed by reason of this Agreement. 52. Code Section 83(b) Election. The Participant shall not make an election, under Code Section 83(b), to include in income the fair market value of the Restricted Stock in respect of this award of Restricted Stock on the Date of Grant. 53. Sale of Restricted Stock. The Participant shall not sell Restricted Stock except pursuant to an effective registration statement under the Securities Act of 1933 (or pursuant to an exemption from registration under such act), and the Participant hereby represents that he is acquiring the Restricted Stock for his own account and not with a view to the distribution thereof. 54. Escrow of Certificates. The certificates representing shares of Restricted Stock shall be registered in the name of the Participant and deposited, together with a stock power endorsed by the Participant in blank, with the Corporate Secretary of the Company during the Restricted Period. Each such certificate shall bear a legend as provided by the Company, conspicuously referring to the terms, conditions and restrictions described in the Plan and in this Agreement. Subject to the provisions of Section 7 below, upon termination of the Restricted Period with respect to shares of Restricted Stock, a certificate representing such shares shall be delivered to the Participant as promptly as practicable following such termination. 55. Withholding of Taxes. No certificates representing the shares of Restricted Stock shall be delivered to the Participant by the Company unless the Participant (or Beneficiary, as defined in Section 8 below) remits to the Company the amount of all federal, state and other governmental withholding tax requirements imposed upon the Company with respect to the issuance of such shares or unless provisions to so pay such withholding requirements have been made to the satisfaction of the Committee. 56. Beneficiary Designations. The Participant may file with the Corporate Secretary of the Company a designation of one or more beneficiaries (each a "Beneficiary") to whom shares otherwise due the Participant shall be distributed in the event of the death of the Participant while in the employ of the Company. The Participant shall have the right to change the Beneficiary or Beneficiaries from time to time; provided, however, that any change shall not become effective until received in writing by the Corporate Secretary of the Company. If any designated Beneficiary survives the Participant but dies before receiving all of his benefits hereunder, any remaining benefits due him shall be distributed to the deceased Beneficiary's estate. If there is no effective Beneficiary designation on file at the time of the Participant's death, or if the designated Beneficiary or Beneficiaries have all predeceased such Participant, the payment of any remaining benefits shall be made to the Participant's estate. In the event of any dispute, the Company shall be fully protected and discharged of its obligations under this Agreement if it delivers the shares otherwise due a Participant to the probate court administering his estate. 57. Limitation of Rights. Nothing in this Agreement or the Plan shall be construed to: (a) give the Participant any right to be awarded any Restricted Stock other than in the sole discretion of the Committee; (b) give the Participant or any other person any interest in any fund or in any specified asset or assets of the Company or any affiliate of the Company; or (c) confer upon the Participant the right to continue in the employment or service of the Company or any affiliate of the Company, or affect the right of the Company or any affiliate of the Company to terminate the employment or service of the Participant at any time or for any reason. The Committee shall have the discretion to make determinations under this Agreement and Plan, and such determinations shall be final and binding on the Participant except in the case of bad faith and willful misconduct. 58. Nonalienation of Benefits. Except as contemplated by Section 8 above, no right or benefit under this Agreement shall be subject to transfer, anticipation, alienation, sale, assignment, pledge, encumbrance or charge, whether voluntary, involuntary, or by operation of law, and any attempt to transfer, anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to any debts, contracts, liabilities or torts of the person entitled to such benefits. If the Participant or his Beneficiary hereunder shall become bankrupt or attempt to transfer, anticipate, alienate, assign, sell, pledge, encumber or charge any right or benefit hereunder, other than as contemplated by Section 8 above, or if any creditor shall attempt to subject the same to a writ of garnishment, attachment, execution, sequestration, or any other form of process or involuntary lien or seizure, then such right or benefit shall cease and terminate. 59. Prerequisites to Benefits. Neither the Participant, nor any person claiming through the Participant, shall have any right or interest in the Restricted Stock awarded hereunder, unless and until all the terms, conditions and provisions of this Agreement and the Plan which affect the Participant or such other person shall have been complied with as specified herein. 60. Rights as a Stockholder. Subject to the limitations and restrictions contained herein, the Participant (or Beneficiary) shall have all rights as a stockholder with respect to the shares of Restricted Stock once such shares have been registered in his name hereunder. 61. Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by the Participant, the Company and their respective permitted successors and assigns (including personal representatives, heirs and legatees), except that the Participant may not assign any rights or obligations under this Agreement except to the extent and in the manner expressly permitted herein. 62. The Committee shall have sole and complete discretion in the interpretation of this Agreement and the determination of the Committee shall be final and binding on the Participant except in the case of bad faith or willful misconduct. 63. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware. 64. Gender and Number. Whenever the context requires or permits, the gender and number of words shall be interchangeable. This Agreement is executed and delivered, in duplicate, pursuant to the Plan, the provisions of which are incorporated herein by reference. Dated: June 18, 1998. OCEANEERING INTERNATIONAL, INC. By //s// George R. Haubenreich, Jr. Vice President, General Counsel and Secretary The undersigned Participant accepts the Restricted Stock subject to all the terms of this Agreement. //s// MARVIN J. MIGURA Award No. B-113 3,344 Shares OCEANEERING INTERNATIONAL, INC. FY98 BONUS RESTRICTED STOCK AWARD AGREEMENT THIS AGREEMENT is made as of the date set forth on the signature page hereof, between Oceaneering International, Inc., a Delaware corporation (the "Company"), and GEORGE R. HAUBENREICH, JR. (the "Participant"). Except as defined herein, capitalized terms shall have the same meaning ascribed to them under the 1996 Incentive Plan of Oceaneering International, Inc., as from time to time amended, a copy of which is attached hereto and made a part hereof for all purposes (the "Plan"). To the extent that any provision of this Agreement conflicts with the express terms of the Plan, it is hereby acknowledged and agreed that the terms of the Plan shall control and, if necessary, the applicable provisions of this Agreement shall be hereby deemed amended so as to carry out the purpose and intent of the Plan. 65. Definitions. As used herein, the terms set forth below shall have the following respective meanings: (a) "Change in Control" means, with respect to the Company, if (i) a third person, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of shares of the Company having 30 percent or more of the total number of votes that may be cast for the election of directors of the Company, or (ii) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election or any combination of the foregoing transactions (a "Transaction"), the persons who were directors of the Company before the Transaction shall cease to constitute a majority of the Board of Directors of the Company or of any successor to the Company. Without limiting the foregoing, no "Change of Control" shall be deemed to have taken place for the purposes of this Agreement, if a person or persons is appointed or elected as a member(s) of the Board as a result of or in connection with a Transaction or other event unless item (i) or (ii) above shall also have occurred. (b) "Closing Stock Price" means, with respect to common stock on a particular date, (i) if the shares of common stock are listed on a national securities exchange, the last sale price per share of common stock on any such national securities exchange on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported and, (ii) if the shares of Common Stock are not so listed but are quoted in the NASDAQ National Market System, the last sale price per share of shares of common stock reported on the NASDAQ National Market System on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported. (c) "Disability" means a physical or mental impairment of sufficient severity that, in the opinion of a physician selected by the Company, the Participant is unable to fulfill his duties. 66. Award. As an FY98 Bonus Award and in consideration of the covenants and promises of the Participant herein contained, pursuant to action taken by the Committee on June 18, 1998 (the "Date of Grant"), the Company hereby awards to the Participant as of the Date of Grant a total of 3,344 shares of Common Stock, pursuant to the Plan, subject to the conditions and restrictions set forth below and in the Plan (the "Restricted Stock"). 67. Restrictions on Transfer. The shares of Restricted Stock granted hereunder to the Participant may not be sold, assigned, transferred, pledged or otherwise encumbered from the Date of Grant until said shares shall have become vested and not otherwise subject to forfeiture (and restrictions terminated thereon) in accordance with the provisions of this Paragraph 3. (The period of time between the Date of Grant and the vesting of shares of Restricted Stock shall be referred to herein as the "Restricted Period" as to those shares of stock.) The shares of Restricted Stock shall be treated as described below for purposes of vesting and other terms and conditions of this Agreement: (a) Vesting of Common Stock: The shares of the Restricted Stock shall vest 25% on June 26, 1998, 25% on June 25, 1999, 25% on June 23, 2000 and 25% on June 22, 2001. Upon termination of a Participant's employment (with or without cause, voluntary, involuntary or for any reason whatsoever except as provided in Sections 3(c) and 3(d)), all Restricted Stock for which the conditions of the applicable provisions of this paragraph (a) have not been satisfied as of the date of such termination of employment shall be forfeited. (b) Tax Reimbursement: Within 10 days after the expiration of the Restricted Period with respect to a particular share of Restricted Stock, the Company shall pay to the Participant an amount sufficient to provide for the payment of all United States federal income taxes imposed with respect to Participant's acquisition of such share, as well as an amount sufficient to reimburse Participant for the tax obligation on such amounts so that Participant is paid an amount as a tax assistance payment by the Company sufficient to fund all of his income taxes on both the share of Restricted Stock and the tax assistance payment. In the event the Participant is not at the time a tax assistance payment is to be made subject to United States income tax, such tax assistance payment shall be computed by reference to the income tax of the laws of the country to which the participant is subject; provided, however, that such tax assistance payment shall not exceed the amount that would have been payable if the Participant were subject solely to United States income tax. No United States state (or equivalent foreign) income taxes will be considered in determining tax assistance payments. The Committee shall have sole and complete discretion in the calculation of tax assistance payments, and the determination of the Committee shall be final and binding on the Participant except in the case of bad faith or willful misconduct. In computing the tax assistance payment, it shall be assumed that the Participant is at the maximum marginal tax rate for individual taxpayers. Subject to Section 3(c), in the event a Participant sells any share of Restricted Stock within three years after expiration of the Restricted Period with respect to such Restricted Stock, the Participant shall immediately pay to the Company the amount of the tax assistance payment previously received by the Participant from the Company with respect to such share. (c) Effect of Change in Control: In the event a Change in Control occurs prior to the time that the conditions of paragraph (b) above have been satisfied with respect to a share of Restricted Stock, and upon such Change in Control, the requirements of paragraph (b) above shall be deemed to have been satisfied on the the date of such Change of Control, and tax assistance payments shall be made with respect to such shares within 10 days thereafter. (d) Effect of Death or Disability. In the event of the death or Disability of the Participant while employed by the Company, the conditions of paragraph (b) above shall be deemed immediately satisfied and tax assistance payments shall be made by Company to the Participants with respect to such event within 30 days thereafter. (e) Dividends: Dividends (other than dividends in capital stock) with respect to shares of Restricted Stock shall be paid to the Participant without regard to the restrictions otherwise applicable to such shares. Dividends in capital stock of the Company shall accumulate and be associated with the Restricted Stock to which they relate and shall vest at the time such Restricted Stock vests. (f) Voting of Common Stock: A Participant shall have the right to exercise any voting rights appurtenant to Restricted Stock without regard to any restrictions otherwise imposed by reason of this Agreement. 68. Code Section 83(b) Election. The Participant shall not make an election, under Code Section 83(b), to include in income the fair market value of the Restricted Stock in respect of this award of Restricted Stock on the Date of Grant. 69. Sale of Restricted Stock. The Participant shall not sell Restricted Stock except pursuant to an effective registration statement under the Securities Act of 1933 (or pursuant to an exemption from registration under such act), and the Participant hereby represents that he is acquiring the Restricted Stock for his own account and not with a view to the distribution thereof. 70. Escrow of Certificates. The certificates representing shares of Restricted Stock shall be registered in the name of the Participant and deposited, together with a stock power endorsed by the Participant in blank, with the Corporate Secretary of the Company during the Restricted Period. Each such certificate shall bear a legend as provided by the Company, conspicuously referring to the terms, conditions and restrictions described in the Plan and in this Agreement. Subject to the provisions of Section 7 below, upon termination of the Restricted Period with respect to shares of Restricted Stock, a certificate representing such shares shall be delivered to the Participant as promptly as practicable following such termination. 71. Withholding of Taxes. No certificates representing the shares of Restricted Stock shall be delivered to the Participant by the Company unless the Participant (or Beneficiary, as defined in Section 8 below) remits to the Company the amount of all federal, state and other governmental withholding tax requirements imposed upon the Company with respect to the issuance of such shares or unless provisions to so pay such withholding requirements have been made to the satisfaction of the Committee. 72. Beneficiary Designations. The Participant may file with the Corporate Secretary of the Company a designation of one or more beneficiaries (each a "Beneficiary") to whom shares otherwise due the Participant shall be distributed in the event of the death of the Participant while in the employ of the Company. The Participant shall have the right to change the Beneficiary or Beneficiaries from time to time; provided, however, that any change shall not become effective until received in writing by the Corporate Secretary of the Company. If any designated Beneficiary survives the Participant but dies before receiving all of his benefits hereunder, any remaining benefits due him shall be distributed to the deceased Beneficiary's estate. If there is no effective Beneficiary designation on file at the time of the Participant's death, or if the designated Beneficiary or Beneficiaries have all predeceased such Participant, the payment of any remaining benefits shall be made to the Participant's estate. In the event of any dispute, the Company shall be fully protected and discharged of its obligations under this Agreement if it delivers the shares otherwise due a Participant to the probate court administering his estate. 73. Limitation of Rights. Nothing in this Agreement or the Plan shall be construed to: (a) give the Participant any right to be awarded any Restricted Stock other than in the sole discretion of the Committee; (b) give the Participant or any other person any interest in any fund or in any specified asset or assets of the Company or any affiliate of the Company; or (c) confer upon the Participant the right to continue in the employment or service of the Company or any affiliate of the Company, or affect the right of the Company or any affiliate of the Company to terminate the employment or service of the Participant at any time or for any reason. The Committee shall have the discretion to make determinations under this Agreement and Plan, and such determinations shall be final and binding on the Participant except in the case of bad faith and willful misconduct. 74. Nonalienation of Benefits. Except as contemplated by Section 8 above, no right or benefit under this Agreement shall be subject to transfer, anticipation, alienation, sale, assignment, pledge, encumbrance or charge, whether voluntary, involuntary, or by operation of law, and any attempt to transfer, anticipate, alienate, sell, assign, pledge, encumber or charge the same shall be void. No right or benefit hereunder shall in any manner be liable for or subject to any debts, contracts, liabilities or torts of the person entitled to such benefits. If the Participant or his Beneficiary hereunder shall become bankrupt or attempt to transfer, anticipate, alienate, assign, sell, pledge, encumber or charge any right or benefit hereunder, other than as contemplated by Section 8 above, or if any creditor shall attempt to subject the same to a writ of garnishment, attachment, execution, sequestration, or any other form of process or involuntary lien or seizure, then such right or benefit shall cease and terminate. 75. Prerequisites to Benefits. Neither the Participant, nor any person claiming through the Participant, shall have any right or interest in the Restricted Stock awarded hereunder, unless and until all the terms, conditions and provisions of this Agreement and the Plan which affect the Participant or such other person shall have been complied with as specified herein. 76. Rights as a Stockholder. Subject to the limitations and restrictions contained herein, the Participant (or Beneficiary) shall have all rights as a stockholder with respect to the shares of Restricted Stock once such shares have been registered in his name hereunder. 77. Successors and Assigns. This Agreement shall bind and inure to the benefit of and be enforceable by the Participant, the Company and their respective permitted successors and assigns (including personal representatives, heirs and legatees), except that the Participant may not assign any rights or obligations under this Agreement except to the extent and in the manner expressly permitted herein. 78. The Committee shall have sole and complete discretion in the interpretation of this Agreement and the determination of the Committee shall be final and binding on the Participant except in the case of bad faith or willful misconduct. 79. Governing Law. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Delaware. 80. Gender and Number. Whenever the context requires or permits, the gender and number of words shall be interchangeable. This Agreement is executed and delivered, in duplicate, pursuant to the Plan, the provisions of which are incorporated herein by reference. Dated: June 18, 1998. OCEANEERING INTERNATIONAL, INC. By //s// John R. Huff President and Chief Executive Officer The undersigned Participant accepts the Restricted Stock subject to all the terms of this Agreement. //s// GEORGE R. HAUBENREICH, JR. EX-27 8
5 This schedule contains summary financial information extracted from the financial statements filed as part of the Company's 10-K and is qualified in its entirety by reference to such financial statements. 0000073756 R MINGOIA 1,000 YEAR MAR-31-1999 MAR-31-1999 8,367 0 104,236 398 0 129,064 412,732 170,993 387,343 87,666 100,312 0 0 6,004 173,435 387,343 400,322 400,322 314,638 314,638 0 0 3,425 41,493 15,786 25,707 0 0 0 25,707 1.13 1.12
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