-----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, DYWTFErMZAM30OnDR+satMRjrY8Zf6577ChfVqpq545/On5glcp90zeN7U+X3oR0 MmWtyWYtwxuxDA7oeqaO0Q== 0000073756-96-000008.txt : 19960624 0000073756-96-000008.hdr.sgml : 19960624 ACCESSION NUMBER: 0000073756-96-000008 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960621 SROS: NYSE 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: 1934 Act SEC FILE NUMBER: 001-10945 FILM NUMBER: 96584159 BUSINESS ADDRESS: STREET 1: 16001 PARK TEN PL STE 600 CITY: HOUSTON STATE: TX ZIP: 77084 BUSINESS PHONE: 7135788868 10-K405 1 FISCAL 1996 10K FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended March 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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.) 16001 Park Ten Place, Suite 600 Houston, Texas 77084 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (713) 578-8868 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 May 31, 1996, based upon the closing sale price of the Common Stock on the New York Stock Exchange $377,769,000 Number of shares of Common Stock outstanding at May 31, 1996 23,310,206 Documents Incorporated by Reference: Portions of the proxy statement to be filed on or before July 29, 1996, 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. OCEANEERING INTERNATIONAL, INC. Annual Report on Form 10-K INDEX PART I Item 1 Business Item 2 Properties Item 3 Legal Proceedings Item 4 Submission of Matters to a Vote of Security Holders Item 4a Executive Officers of the Registrant PART II Item 5 Market for the Registrant's Common Equity and Related Shareholder Matters Item 6 Selected Financial Data Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations * Item 8 Financial Statements and Supplementary Data Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART III Item 10 Directors and Executive Officers of the Registrant Item 11 Executive Compensation Item 12 Security Ownership of Certain Beneficial Owners and Management Item 13 Certain Relationships and Related Transactions PART IV Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K SIGNATURES INDEX TO FINANCIAL STATEMENTS AND SCHEDULES * Refers the reader to Part IV, Item 14. PART I Item 1. BUSINESS. General Development of Business Oceaneering International, Inc., (together with its subsidiaries, "Oceaneering" or the "Company") is an advanced applied technology company that provides engineered services and hardware to customers who operate in marine, space and other harsh environments. The Company 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. Principal services are provided to the oil and gas industry and include drilling support, subsea construction, 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 its establishment, the Company has concentrated on the development and marketing of underwater services requiring the use of advanced deepwater technology. The Company conducts operations in the United States and 29 other countries. The Company's international operations, principally in the North Sea, Africa, Far East and the Middle East, accounted for approximately 58% of its 1996 revenues, or $167 million. Since 1990, the Company has concentrated on expanding its capabilities to provide technical solutions to customers operating in harsh environments. It has accomplished this through acquisitions and internal growth. In January 1990, the Company acquired all of the outstanding capital stock of Sonsub Limited, a United Kingdom company, whose principal assets were ten work class Remotely Operated Vehicles ("ROVs"). ROVs are unmanned submersible vehicles operated from the surface that are used widely in the offshore oil and gas industry. In December 1990, the Company was awarded a contract by a major oil company to provide and maintain a Floating Production, Storage and Offloading system ("FPSO"). This represented the first major project for the Company's Offshore Production Systems division ("OPS") which was formed to develop economical production alternatives for offshore oil and gas fields. A 78,000 deadweight ton ("dwt") tanker was purchased and converted into an FPSO, the OCEAN PRODUCER, for this project. The unit was delivered to its first location in December 1991 and is currently operating offshore Angola. In August 1992, the Company acquired Eastport International, Inc., ("Eastport"), a designer, developer and operator of advanced robotic systems and ROVs specializing in the non-oilfield market, in a transaction accounted for as a pooling of interests. All financial information herein has been restated to include the results of Eastport from Eastport's inception (June 21, 1989). Eastport's assets included two specialized ROVs, one of which is rated for water depths to 25,000 feet, a deep tow sonar system and two other work class ROVs. In May 1993, the Company purchased the business and assets of the Space Systems Division of ILC Dover, Inc., ("ILC") which were consolidated with the Company's Oceaneering Space Systems division. This business designs, develops and fabricates spacecraft hardware and high temperature insulation products. In July 1993, the Company purchased Oil Industry Engineering, Inc., a designer and fabricator of subsea control systems, which now operates as the Oceaneering Intervention Engineering division ("OIE"). In March 1994, the Company purchased the operating subsidiaries of Multiflex International Inc., a manufacturer of subsea control umbilical cables, which now operates as the Oceaneering Multiflex division ("Multiflex"). Together with the Company's existing OPS division, these acquisitions form the basis of the Company's continuing expansion in the offshore field development business. In November 1995, the Company was awarded a contract with a major oil company for the provision of an FPSO. The Company is converting a 268,000 dwt tanker and the unit, the Company s second FPSO, the ZAFIRO PRODUCER, is targeted for delivery to its first operational location offshore West Africa in August 1996. The Company intends to continue its strategy of acquiring, as opportunities arise, additional assets or businesses, either directly through merger, consolidation or purchase, or indirectly through joint ventures. The Company is also applying its 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. The Company is continually seeking opportunities for business combinations to improve its market position or expand into related service lines. Financial Information about Industry Segments The Company's business segments are Oilfield Marine Services, Offshore Field Development and Advanced Technologies. The table containing revenues, operating income, identifiable assets, capital expenditures, and depreciation and amortization by business segment for the years ended March 31, 1996, 1995 and 1994 is incorporated herein by reference from Note 6 of the Notes to Consolidated Financial Statements. Description of Business OILFIELD MARINE SERVICES The Company's Oilfield Marine Services business consists of underwater intervention and above-water inspection, maintenance and repair. All of these services are frequently provided to customers on an integrated basis. Underwater Intervention Services. The Company provides underwater support services for all phases of offshore oil and gas operations - exploration, development and production. During the exploration phase, the Company provides positioning, placement and monitoring of subsea exploration equipment, collects data on seafloor characteristics at proposed drilling sites and assists with the navigational positioning of drilling rigs. During the development phase, the Company assists with the installation of production platforms and the connection of subsea pipelines. During the production phase, the Company inspects, maintains and repairs offshore platforms, pipelines and subsea equipment. Underwater intervention services are performed by ROVs or divers. ROVs are used at depths or in situations in which diving would be uneconomical or infeasible. The Company believes that it operates the most technically advanced fleet of work class ROVs in the world, with about a 25% market share, and is the industry leader in providing ROV services on deepwater wells which are the most technically demanding. ROVs are used for a variety of underwater tasks including drill 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. The Company currently owns more than 70 work class and inspection class ROVs. When a project requires manned intervention, the Company uses 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. The Company does not use divers (as distinguished from ADS operators) to perform functions in water depths greater than 1,000 feet. The Company also provides 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. Underwater services using all of these techniques are performed from drilling rigs, platforms, barges and vessels. Above-Water Inspection Services. Through its Solus Schall division ("Solus Schall"), the Company offers 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. Historically, the Company has focused on the inspection of pipelines and onshore fabrication of offshore facilities for the oil and gas industry. The Company also conducts inspections of other industrial equipment. 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. In connection with Solus Schall's inspection services (both onshore and offshore), the Company developed a computer-aided method of managing inspection data, which consists of a software package that provides a standardized format for the storage, retrieval and analysis of multi-year inspection data. Originally developed for platform inspections, the software has been expanded for use in the inspection of pipelines, vessels and refinery piping. OFFSHORE FIELD DEVELOPMENT Mobile Offshore Production Systems. OPS was established as a division during 1989 to provide subsea intervention services and the engineering, procurement, construction, installation and operation of mobile offshore production systems ("MOPS") to customers for marginal and remote field production and extended well testing. The Company has 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 has served as prime contractor on an extended well testing project in the North Sea. The Company's first FPSO, the OCEAN PRODUCER, has been operating offshore West Africa since December 1991. The Company's second FPSO, the ZAFIRO PRODUCER, is targeted for delivery to its first location offshore West Africa in August 1996 to begin operations under a three-year contract with a major oil company. Subsea Products. OIE, Multiflex and the Pipeline Repair Systems unit of the Company form the Subsea Products division which complements the activities of OPS. OIE provides subsea intervention services, design and fabrication of ROV interface tooling, including ROV replaceable and ROV operable valves, and design and fabrication of subsea control systems. In March 1994, the Company acquired the business of Multiflex which has facilities in Houston, Texas and Edinburgh, Scotland for the production of subsea control umbilical cables. These cables are used for the remote operation of subsea installations and equipment and typically incorporate both electrical and hydraulic control lines. ADVANCED TECHNOLOGIES The Company provides project management, engineering services and equipment to non-oilfield customers for applications in harsh environments. The Company, through its Advanced Technologies ("ADTECH") segment, serves government agencies and firms in the telecommunications, aerospace, and civil engineering and construction industries. This is accomplished by using existing assets and by extending the use of technology developed in oilfield operations to new applications. ADTECH performs work for customers having specialized requirements underwater or in other harsh environments. ADTECH provides deep ocean search and recovery services for governmental bodies, including the U.S. Navy and the National Aeronautics and Space Administration ("NASA"). In other services for the Navy, Oceaneering 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. The Company also maintains and operates deepwater cable lay and maintenance vehicles for AT&T Corp. ADTECH designs and operates ROVs that are rated for work in water depths from the surface to 25,000 feet. The more advanced ROVs owned by the Company are equipped with lighter umbilical cords containing optic fibers which allow for improved communications with the surface. Other specialized equipment owned by the Company includes ROV cable lay and maintenance equipment rated to 5,000 feet and deep tow, side scan sonar systems rated for use in 20,000 feet. The Company's deep tow systems have been used to locate downed 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 Systems ("OSS") directs the Company's efforts towards applying undersea technology and experience in the space industry. The Company has worked with 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. OSS is developing cryogenic life-support system technology for neutral buoyancy testing and future space missions. Related life-support technology has been developed for future use by environmental remediation workers and fire fighters. OSS was expanded in 1994 by the purchase of the assets of ILC. ILC had supported 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. These activities have continued. The activities of OSS are substantially dependent on continued government funding for space programs. MARKETING Oilfield Marine Services. The Company markets its services primarily to international and foreign national oil and gas companies. It also provides services as a subcontractor to companies operating as prime contractors. Contracts are typically awarded on a competitive bid basis and are for the most part short-term. Offshore Field Development. The Company markets both its mobile offshore production systems and subsea products primarily to international and foreign national oil and gas companies, utilizing the Company's existing administrative structure to identify potential business opportunities. MOPS are offered for extended well testing, early production and development of marginal fields and prospects in areas lacking pipelines and processing infrastructure. Contracts are typically awarded on a competitive basis, generally for periods of one or more years. The Company owns one MOPS unit and is currently converting a second, both of which have long-term contracts. Further equipment will be added as profitable opportunities arise. The Company believes that Multiflex enables it to identify market opportunities at an earlier stage as umbilical design is typically part of the initial planning phase in field development. The Company is able to offer an integrated service consisting of design, engineering, project management and provision of hardware. Advanced Technologies. The Company markets its marine services and related engineering services to government agencies, major defense contractors, NASA subcontractors and to telecommunications, construction and other industrial customers outside the energy sector. The Company also markets to insurance companies, salvage associations and other customers who have requirements for specialized operations in deep water. Major Customers. Five principal customers of the Company accounted for approximately 29%, 34% and 36% of the Company's consolidated revenues in 1996, 1995 and 1994, respectively. No single customer accounted for more than 10% of the Company's consolidated revenues in 1996. The Royal Dutch Shell group of companies accounted for more than 10% of the Company's consolidated revenues in 1995 and 1994. Also see Note 6 of the Notes to Consolidated Financial Statements. COMPETITION The Company's businesses are highly competitive. Oilfield Marine Services. The Company believes that it is one of five companies that provides underwater services on a worldwide basis. The Company competes 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 such equipment, quality of service and price. In recent years, price has been the most important factor in obtaining contracts; however, the ability to develop improved equipment and techniques and to attract and retain skilled personnel is also an important competitive factor in the Company's markets. The number of the Company's competitors is inversely correlated with water depth, as less sophisticated equipment and technology is required 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 the Company. The Company believes that its ability to provide a wide range of underwater services, including technological applications in deeper water on a worldwide basis, should enable it to compete effectively in the oilfield exploration and development market. As a result of uncertainty and volatility in oil and gas pricing generally, 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 the Company believes it has a competitive advantage, may be postponed or suspended. In some areas, the ability of the Company to obtain contracts depends upon its ability to charter vessels for use as work platforms. On occasion, the Company will bid jointly with vessel owners for contracts, and it endeavors to develop ongoing relations with various vessel owners. 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. The Company believes that its 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 it to compete effectively in its selected inspection services market segments. In the North Sea and, to a lesser extent, in other areas, oil and gas companies utilize 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. The Company believes that it is well positioned to compete in the offshore field development market through its 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 its extensive operational experience worldwide. The Company is one of several companies that offer leased MOPS units. Potential competitors include companies having underutilized assets such as drilling rigs and tankers, although access to the capital needed to convert units to MOPS may be a limiting factor. Although there are several competitors offering either specialized products or operating in limited geographic areas, the Company believes that it is one of two companies who compete on a worldwide basis for the provision of subsea control umbilical cables. Advanced Technologies. The Company believes that its specialized ROV assets and experience in deep water operations give it a competitive advantage in obtaining contracts in water depths greater than 5,000 feet. The number of the Company's competitors is inversely correlated with water depth, due to the advanced technical knowledge and sophisticated equipment required for deep water operations. Engineering services is a very broad market with a large number of competitors. The Company competes in specialized areas in which it can combine its extensive program management experience, engineering services and the capability to continue the development of conceptual project designs into the manufacture of prototype equipment. The Company also utilizes the administrative structure of the Oilfield Marine Services business to identify opportunities in foreign countries and to provide additional local support for non-oil and gas customers. SEASONALITY, BACKLOG AND RESEARCH AND DEVELOPMENT A material amount of the Company's revenues is generated by contracts for marine services in the Gulf of Mexico and North Sea, which are usually seasonal from April through November. Revenues in the 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, 1996 and 1995 were $100 million and $94 million, respectively. Of these amounts, $26 million and $39 million, respectively, were not expected to be performed within the year following such respective dates. At March 31, 1996 and 1995, the Company had approximately $144 million and $27 million, respectively, in backlog for Offshore Field Development. Of these amounts, $100 million and none, respectively, were not expected to be performed within the year following such respective dates. At March 31, 1996 and 1995, the Company had approximately $41 million and $39 million, respectively, in backlog for Advanced Technologies. Of these amounts, $4 million and $12 million, respectively, were not expected to be performed within the year following such respective dates. No material portion of the Company's business is subject to renegotiation of profits or termination of contracts by the United States government. The Company's research and development expenditures were approximately $5.8 million, $3.6 million and $3.7 million during 1996, 1995 and 1994, respectively. These amounts do not include, nor is the Company able to determine, the expenditures by others in connection with joint research activities in which the Company participated or expenditures by the Company in connection with research conducted during the course of performing field operations. REGULATION The Company's operations are subject to various types of governmental regulation. The Company's 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 price control, tax, environmental and other laws relating to the petroleum industry, by changes in such laws and by constantly changing administrative regulations. Such developments may directly or indirectly affect the Company's operations and those of its 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 the Company's capital expenditures, earnings or competitive position. In connection with its foreign operations, the Company is required in some countries to obtain licenses or permits in order to bid on contracts or otherwise to conduct business operations. Some foreign countries require that the Company enter into a joint venture or similar business arrangement with local individuals or businesses in order to conduct business. While not a formal requirement, Oceaneering's quality management systems covering the full range of subsea and topside services offered in the United Kingdom are certified to the British Standard BS 5750 Part 2:1987, which is the equivalent of ISO 9002. The quality management systems of both the OIE and Multiflex units of the Subsea Products Group are certified to ISO 9001 for their products and services. RISKS AND INSURANCE The Company's 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. The Company insures its real and personal property and equipment. The Company's vessels are insured against damage or loss, including war and pollution risks. The Company also carries workers' compensation, maritime employer's liability, general liability, including third party pollution, and other insurance customary in its businesses. All insurance is carried at levels of coverage and deductibles which the Company considers financially prudent. On some contracts, the Company may have certain exposures for loss or damage to the customer's facilities or for unexpected weather delays, which the Company may cover by special insurance when it deems advisable. Due to the very high costs for limited coverage and, in the Company's opinion, limited exposure, the Company does not carry professional liability insurance. In some jurisdictions, legal pleadings in personal injury actions may include a claim for an amount of punitive damages which may not be covered by insurance. The primary industry that the Company serves, oil and gas, is a cyclical industry and remains volatile, resulting in potentially large fluctuations in demand for the Company's primary services, which could result in significant changes in the Company's revenues and profits. Although the oil and gas industry continues to be the Company's principal market, the Company also performs services for government agencies, and firms in the telecommunications, aerospace, and civil engineering and construction industries. The Company operates primarily as a subcontracting services company under short-term dayrate contracts. However, the Company also owns 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. A significant part of the Company's operations is conducted outside the United States. For the years ended March 31, 1996, 1995 and 1994, foreign operations accounted for 58%, 51% and 61% of the Company's 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. Typically, the Company is 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 its expense requirements in local currencies. Certain of the countries in which the Company operates have enacted exchange controls to regulate foreign currency exchange. Exchange controls in some of the countries in which the Company operates 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. EMPLOYEES As of March 31, 1996, the Company had approximately 2,000 employees. The Company's work force varies seasonally and peaks during the summer months. Approximately 5% of the Company's employees are represented by unions. The Company considers its relations with its employees to be satisfactory. Foreign and Domestic Operations and Export Sales The table presenting revenues, profitability and assets attributable to each of Oceaneering's geographic areas for the years 1996, 1995 and 1994 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 used in providing the Company's services. Oceaneering maintains office, shop and yard facilities in various parts of the world. In these locations, the Company typically leases office facilities to house its administrative and engineering staff, shops equipped for fabrication, testing, repair and maintenance activities and warehouses and yard areas for storage and mobilization of equipment en route to work sites. The largest of such properties is located in Morgan City, Louisiana and consists of 146,500 total square feet, of which 25,300 square feet are covered office and storage space owned by the Company and the remainder is leased. The Company owns and leases property in Singapore of approximately 28,700 square feet, of which 16,200 square feet are owned. The Company leases 31,000 square feet of office space and 42,800 square feet of yard area in Aberdeen, Scotland. Other major leased properties include approximately 24,600 square feet in Dubai, United Arab Emirates, and 37,000 square feet in Port Harcourt, Nigeria. These properties are used primarily by the Oilfield Marine Services business segment of the Company. Leased properties utilized primarily by the Offshore Field Development segment consist of 53,500 square feet of workshop and office space in Houston, Texas and manufacturing facilities in Houston, Texas and Edinburgh, Scotland, of 96,000 square feet and 70,000 square feet, respectively. In addition, the Company owns manufacturing facilities in Magnolia, Texas of 65,000 square feet. The Company also leases approximately 116,000 square feet in Upper Marlboro, Maryland, which includes 86,000 square feet of offices and workshops and approximately 50,000 square feet of offices and workshops in Houston, Texas, which are utilized by the Advanced Technologies business segment. Item 3. LEGAL PROCEEDINGS. In the ordinary course of business, Oceaneering encounters actions for damages alleging personal injury under the general maritime laws of the United States, including the Jones Act, for alleged negligence. The Company reports actions for personal injury to its insurance carriers and believes that the settlement or disposition of such suits will not have a material effect on its 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, 1996. Item 4a. EXECUTIVE OFFICERS OF THE REGISTRANT. Executive Officers. The following is information with respect to the executive officers of Oceaneering International, Inc., as of June 1, 1996: OFFICER EMPLOYEE NAME AGE POSITIONS SINCE SINCE John R. Huff 50 Chairman of the Board, 1986 1986 President and Chief Executive Officer T. Jay Collins 49 Executive Vice President - 1993 1993 Oilfield Marine Services Marvin J. Migura 45 Senior Vice President and 1995 1995 Chief Financial Officer F. Richard Frisbie 53 Senior Vice President - 1981 1974 Marketing and Technology George R. 48 Vice President, General 1988 1988 Haubenreich, Jr. Counsel and Secretary Richard V. Chidlow 52 Controller and Chief 1990 1987 Accounting Officer Each executive officer serves at the discretion of the Chief Executive Officer and the 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 has been a director, President and Chief Executive Officer of the Company since 1986. He was elected Chairman of the Board in August 1990. Prior to joining the Company in 1986, 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 ("Western Oceanic"). He is a director of BJ Services Company, Triton Energy Limited and Production Operators Corp. T. Jay Collins, Executive Vice President, joined the Company in October 1993 as Senior Vice President and Chief Financial Officer. In May 1995, he was appointed Executive Vice President of the Company's Oilfield Marine Services business. 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 Teleco, he spent twelve years with Sonat, Inc., serving as Senior Vice President of Finance at Sonat Offshore Drilling and President of Houston Systems Manufacturing. His operational experience with Sonat Offshore Drilling includes international management in Venezuela, Singapore, Egypt and Ivory Coast. Marvin J. Migura, Senior Vice President and Chief Financial Officer, joined the Company in May 1995. From 1975 to 1994 he held various financial positions with Zapata Corporation, a diversified energy services company, most recently as Senior Vice President and Chief Financial Officer from 1987 to 1994. F. Richard Frisbie, Senior Vice President - Marketing and Technology, joined the Company in 1984 when Solus Ocean Systems, Inc., ("SOSI") was acquired. From 1974 to 1984, he held various engineering and management positions with SOSI and its predecessors. Over the past 20 years, he has been responsible for various technical developments in remotely operated underwater vehicle designs and the use of robotics and remotely operated devices for applications in harsh environments, including nuclear power plants. He also has previous experience in the aerospace industry. George R. Haubenreich, Jr., Vice President, General Counsel and Secretary, joined the Company in 1988. From 1979 until joining the Company, 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. Richard V. Chidlow, Controller and Chief Accounting Officer, joined the Company in 1987 as Controller for the Americas Region. From 1988 until 1990, he was Controller for the Europe, Africa and Asia group in Aberdeen, and was appointed to his present position in 1990. From 1975 until joining the Company he held various positions with Western Oceanic, his last being Manager of Accounting. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. Oceaneering's Common Stock is listed on the New York Stock Exchange (symbol OII). The following table sets forth, for the periods indicated, the high and low closing sales prices for Oceaneering's Common Stock as reported on the New York Stock Exchange (consolidated transaction reporting system): Fiscal 1996 Fiscal 1995 High Low High Low For the quarter ended: June 30 $10-5/8 $ 8-7/8 $14-1/4 $11 September 30 12-1/8 8-1/2 14-1/8 12-1/4 December 31 13 8-3/4 13-1/8 9-3/4 March 31 14-1/2 10-7/8 10-5/8 7-7/8 On May 31, 1996, Oceaneering had 701 holders of record of its Common Stock, par value $0.25. On that date, the closing sales price of the shares, as quoted on the New York Stock Exchange, was $16-1/2. Oceaneering has made no Common Stock dividend payments since 1977. Its present bank credit agreement restricts aggregate dividends to 50% of cumulative net earnings from December 31, 1994. Item 6. SELECTED FINANCIAL DATA. Results of Operations: Years Ended March 31, 1996 1995 1994 1993 1992 (in thousands, except per share figures) Revenues $289,506 $239,936 $229,760 $215,603 $193,582 Cost of services 234,731 190,772 177,199 157,048 143,117 Gross margin 54,775 49,164 52,561 58,555 50,465 Selling, general and administrative expenses 34,589 36,410 31,631 32,903 30,239 Income from operations $ 20,186 $ 12,754 $ 20,930 $ 25,652 $ 20,226 Net income applicable to common stock $ 12,357 $ 5,496 $ 14,931 $ 19,401 $ 16,115 Net income per common share equivalent 0.53 0.23 0.62 0.82 0.68 Depreciation and amortization 20,567 16,232 12,196 11,528 8,013 Capital expenditures 57,171 32,057 36,730 11,996 35,312 Other Financial Data: As of March 31, 1996 1995 1994 1993 1992 (in thousands, except ratios) Working capital ratio 1.62 1.44 1.74 1.92 1.65 Cash and cash equivalents $ 9,351 $12,865 $26,486 $33,973 $23,281 Working capital 42,427 23,106 34,425 42,492 28,556 Total assets 256,096 187,752 171,993 154,524 144,905 Short-term debt 183 118 124 96 2,065 Long-term debt 48,000 9,472 171 235 2,311 Total debt 48,183 9,590 295 331 4,376 Shareholders' equity 127,098 115,140 113,353 98,331 86,622 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. All statements in this Form 10-K, other than statements of historical facts, including, without limitation, statements regarding the Company's 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. The Company utilizes a variety of internal and external data and management judgement in order to develop such forward-looking information. Although the Company believes 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 the Company operates, it can give no assurance that such expectations will prove to have been correct. Accordingly, evaluation of future prospects of the Company must be made with caution when relying on forward-looking information. Liquidity and Capital Resources Oceaneering considers its liquidity and capital resources adequate to continue its growth initiatives. At March 31, 1996, the Company had working capital of $42 million, including $8 million of unrestricted cash. Additionally, the Company had $27 million available for borrowings under a $75 million credit facility and $13 million was unused under its $20 million uncommitted line of credit. In June 1996, an additional $45 million became available for borrowing when the credit facility was increased to $120 million. None of the $48 million of long-term bank debt is required to be repaid prior to 1999. The Company expects to meet its ongoing annual cash requirements from existing cash on hand, operating cash flow, and available credit facilities. Net income plus depreciation and amortization (commonly referred to as Cash Flow from Operations) of $33 million for 1996 represented a substantial improvement from the $22 million and the $27 million for 1995 and 1994, respectively. The Company considers its liquidity and capital resources adequate to support continuing operations and capital commitments. Working capital at the end of 1996 was approximately $19 million higher than that of the prior year. The higher working capital was primarily attributable to the receivable generated by a large MOPS conversion project completed for a customer during 1996. Subsequent to the year end, the receivable, which was not due until 1998, was paid in full by the customer and has therefore been treated as a current asset. In 1995 a higher level of capital expenditures, including business acquisitions, during a period of lower cash flows from operations contributed to a decline in working capital compared to the end of 1994. The $23 million of working capital as of March 31, 1995 compared to $34 million as of March 31, 1994. In November 1995, the Company announced that it had been awarded a contract by a major oil company to provide an FPSO system. The contract is a dayrate lease arrangement which has an initial term of three years with a targeted commencement date of August 1996. The Company purchased and is converting an existing 268,000 dwt crude oil tanker into the FPSO ZAFIRO PRODUCER at an estimated capital cost of $70 million. To facilitate the funding of the capital expenditures required for this project, the Company expanded its committed credit facility from $75 million to $120 million. The Company expects this project to contribute incremental annual earnings of approximately $0.30 per share during the contract term. This forward- looking statement is based on numerous assumptions, including the total capital cost, financing cost for the project, timely completion of the conversion of the vessel to an FPSO, and satisfactory Company performance under the contract. Accordingly, there can be no assurance that these results will be realized. In addition, the contract provides the customer with the options to either extend the contract at reduced rates or purchase the vessel and terminate the lease at any time during the initial three- year period. Exercise of the purchase option would increase the Company's expected earnings for that year and substantially increase the Company's liquidity. Capital expenditures for the years ended March 31, 1996, 1995 and 1994 were $57 million, $32 million and $37 million, respectively. Capital expenditures for 1996 included $30 million of acquisition and conversion costs of the ZAFIRO PRODUCER, completion of upgrades on two dynamically- positioned ("DP") vessels and additions to the Company's fleet of ROVs. Capital expenditures for 1995 included the purchase and upgrade of a DP offshore support vessel, acquisition of the remainder of the capital stock of a jointly owned company which owned an offshore support vessel, upgrades to ROVs and the acquisition of environmental services equipment. Capital expenditures for 1994 included the acquisition costs of the ILC, OIE and Multiflex businesses, additions and upgrades to the Company's fleet of ROVs and improvements to the FPSO OCEAN PRODUCER. Commitments for capital expenditures at the close of 1996 consisted of approximately $40 million required to complete the conversion of the ZAFIRO PRODUCER during 1997. During 1995 the Company completed the purchase of 1,000,000 shares of its stock pursuant to a plan approved in June 1994. The purchases were financed primarily by bank borrowings. After re-issue of shares to meet the Company's regular obligations to the Oceaneering Retirement Investment Plan and to satisfy share option exercises, there were 793,170 shares of treasury stock remaining at March 31, 1996. As a result of the increased level of capital expenditures and working capital, total debt increased from $9 million as of the end of 1995 to $48 million as of March 31, 1996. As a percentage of total capitalization, long-term debt during 1996 increased from 8% to 27%. The ratio of the Company's debt to total capitalization will vary from time to time depending primarily upon the level of capital spending. The debt level would be significantly reduced or eliminated if the customer exercises its option to purchase the ZAFIRO PRODUCER as previously discussed. Because of its significant foreign operations, the Company is exposed to currency fluctuations and exchange risks. The Company minimizes these risks primarily through matching, to the extent possible, revenues and expenses in the various currencies in which it operates. Cumulative translation adjustments as of March 31, 1996, relate primarily to the Company's permanent investment in and loans to its United Kingdom subsidiary. Inflation has not had a material effect on the Company 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 Revenues of $290 million for 1996 represented a substantial increase from revenues of $240 million and $230 million for 1995 and 1994, respectively. Gross margin of $54.8 million also compared favorably to $49.2 million and $52.6 million for the prior two years. As a percentage of revenue, a gross margin of 19% for 1996 represented a slight decrease from the 20% margin for 1995 and compared to a 23% margin for 1994. Gross margins as a percentage of revenues vary depending upon the mix of the type of contracts (for example, subcontractor cost components) and may not be indicative of business trends. Net income of $12.4 million in 1996 was more than double the $5.5 million reported for 1995, but lower than the $14.9 million earned during 1994. Information on the Company's business segments is shown in Note 6 of the Notes to Consolidated Financial Statements. Oilfield Marine Services. During 1996, oilfield marine services segment revenues and profitability increased which resulted in a reduction of losses to $400,000. In 1995, revenues declined compared to the prior year and the operations resulted in a loss of $2.5 million for the year. Operating cash flow (defined as operating income plus depreciation and amortization) of $10.6 million for 1996 represented a significant increase from the $5.4 million for 1995, but was less than the $16.1 million during 1994. The new ROVs represent the Company's continued commitment to its oilfield marine services segment. During 1996, in response to increasing demand to support deepwater drilling and identified future construction and production maintenance work, the Company embarked on a major ROV fleet expansion program. By the middle of 1997, the size of the Company's work class ROV fleet will have been increased by a total of ten vehicles or 20%. These new vehicles are designed for use around the world in water depths to 10,000 feet and in severe weather conditions. The table below sets out revenues and profitability for the oilfield marine services segment for 1996, 1995 and 1994. For the Years Ended March 31, 1996 1995 1994 (in thousands, except percentages) Revenues $132,064 $106,294 $122,625 Gross Margin 21,154 19,872 31,355 Gross Margin % 16% 19% 26% Operating Income (loss) (369) (2,485) 9,194 Operating Income (loss) % 0% (2)% 7% Revenues increased 24% in 1996 compared to 1995, reflecting increased activity in all operating areas. The segment benefitted from higher revenues and gross margin contribution from the ROV fleet as requirements for vehicles to support exploration and development drilling activities from floating drilling rigs increased. However, these gains were partially offset by lower demand for diving services with correspondingly lower gross margin. In addition, operating results in the North Sea and Gulf of Mexico areas were negatively impacted by delays in the commissioning of support vessels which had undergone extensive refurbishment and upgrade during the year. Revenues and gross margin benefitted by $1.1 million from the settlement of a contract dispute which had been provided for in 1995. This adjustment increased gross margin % in 1996 by 1%. Revenues and margin declined in 1995 compared to 1994 as a result of reduced demand principally in the North Sea and West Africa operating areas. In addition, gross margin was negatively impacted in 1995 by an unfavorable arbitration ruling relating to a contract executed in 1991 and difficulties experienced in collection of the amounts due under a foreign contract. The provision for the arbitration ruling decreased gross margin by $1.6 million (1%). The provision relating to the difficulty in collecting amounts due under a foreign contract decreased gross margin by $1 million (1%). Oilfield marine services gross margin was 21% before the provisions. Offshore Field Development. This 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 1996, 1995 and 1994. For the Years Ended March 31, 1996 1995 1994 (in thousands, except percentages) Revenues $80,855 $62,918 $37,121 Gross Margin 21,758 13,726 4,432 Gross Margin % 27% 22% 12% Operating Income 15,567 6,676 1,191 Operating Income % 19% 11% 3% Revenues and gross margin for 1996 were higher than for 1995 as a result of a large MOPS conversion project which was completed during the year and improved results in the subsea products business. The large MOPS project consisted of the conversion of a jackup drilling rig into production service for a customer. Results for this segment included a $2.7 million gain on the involuntary conversion of the semisubmersible rig, OCEAN DEVELOPER, which sank in August 1995 while under tow. Revenues from the FPSO OCEAN PRODUCER for 1996, 1995 and 1994 were $14.7 million, $16.7 million and $10.4 million, respectively. Gross margin contribution from the OCEAN PRODUCER'S operations for 1996, 1995 and 1994 totaled $7.6 million, $8.7 million and $2.1 million, respectively. During 1996 the OCEAN PRODUCER continued to work offshore Angola and in January 1996 commenced operations under a new four-year contract in the same location. Revenues and gross margin for the Offshore Field Development segment for 1995 were higher than for 1994 as a result of the contribution of Multiflex which was acquired in March 1994, increased activity in the OIE division and a full year of profitable FPSO operations. Revenues and gross margin for the Offshore Field Development segment for 1994 were negatively impacted by the operations of the OCEAN PRODUCER, which was contracted on a month to month basis for the first two quarters at rates which were sufficient only to cover cash expenses. From the fourth quarter of 1994, the OCEAN PRODUCER operated under a contract providing substantially higher rates than its previous contract. Segment revenues and margin for 1994 were favorably impacted by a large project which the Company completed in the North Sea. The Company is presently converting a 268,000 dwt tanker into its second FPSO, the ZAFIRO PRODUCER, which is targeted to be delivered to a customer offshore West Africa in August 1996 under a three-year contract. Construction is being financed under the Company's bank credit facilities which were increased to provide sufficient resources for this project. The multi-year contracts for the OCEAN PRODUCER and the ZAFIRO PRODUCER provide the Company with a significant level of contracted backlog. The Company expects to continue to invest in other MOPS assets as profitable opportunities arise, subject to the availability and acquisition of assets suitable for MOPS application. Advanced Technologies. The table below sets out revenues and profitability for this segment for 1996, 1995 and 1994. For the Years Ended March 31, 1996 1995 1994 (in thousands, except percentages) Revenues $76,587 $70,724 $70,014 Gross Margin 11,863 15,566 16,774 Gross Margin % 15% 22% 24% Operating Income 4,988 8,563 10,545 Operating Income % 7% 12% 15% Revenues for 1996 increased over 1995 as a result of an increase in subsea telecommunication cable burial activities, space related product sales and marine civil engineering and construction work. Gross margin declined in 1996 compared to 1995 due to reduced utilization of the Company's deep ocean search and recovery equipment, lower service requirements by the U.S. Navy and complications experienced on a cable burial project completed in the fourth quarter. Revenues for 1995 were at the same level as for 1994. Gross margin decreased as a result of lower demand for engineering services and costs associated with entry into the environmental services business. Other. Selling, general and administrative expenses were $34.6 million in 1996 compared to $36.4 million in 1995 and $31.6 million in 1994. The increase during 1995 reflected the addition of the Multiflex operations and included $0.5 million of nonrecurring cost related to the consolidation of operational bases in Scotland. Interest income increased by $1.2 million in 1996 compared to 1995 as a result of interest earned on the receivable related to the MOPS conversion project. Interest expense increased by $1.6 million in 1996 compared to 1995 as a result of increased borrowings to finance the MOPS conversion project and continuing capital expenditures in oilfield marine services. The Company's effective tax rate decreased in 1996 compared to 1995 as a result of decreased losses in areas, primarily in the United Kingdom tax jurisdiction, where the Company derives no tax benefit as it already has net operating loss carryforwards. The Company's effective tax rate increased during 1995 compared to 1994 as a result of an increase in the amount of pre-tax income subject to taxing jurisdictions with higher effective tax rates, primarily the United States, and losses in 1995 in areas where the Company derives no tax benefit as it already has net operating loss carryforwards. 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. None. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information with respect to the directors and nominees for election to the Board of Directors of Oceaneering International, Inc., is incorporated by reference from Oceaneering International, Inc.'s definitive proxy statement to be filed on or before July 29, 1996, pursuant to Regulation 14A under the Securities Exchange Act of 1934. The information with respect to the executive officers of Oceaneering International, Inc., 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 Interest Rate and Currency Exchange Agreement dated July 29, 1991 0-8418 10-Q Sept. 1991 4(a) *4.03 Shareholder Rights Agreement dated November 20, 1992 1-10945 8-K Nov. 1992 1 *4.04 Bank Credit Agreement dated April 12, 1995 1-10945 10-K March 1995 4.04 4.05 Amended and Restated Bank Credit Agreement dated June 12, 1996 10 Material contracts *10.01 1981 Incentive Stock Option Plan, as amended 2-80506 S-8 Sept. 1987 28(e) 10.02 Oceaneering Retirement Investment Plan, as amended *10.03 Employment Agreement dated August 15, 1986 between John R. Huff and Registrant 0-8418 10-K March 1987 10(l) 10.04 Addendum to Employment Agreement dated February 22, 1996 between John R. Huff and Registrant *10.05 1987 Incentive and Non- Qualified Stock Option Plan 33-16469 S-1 Sept. 1987 10(o) *10.06 Oceaneering International, Inc. Special Incentive Plan 33-16469 S-1 Sept. 1987 10(n) *10.07 Senior Executive Severance Plan, as amended 0-8418 10-K March 1989 10(k) *10.08 Supplemental Senior Executive Severance Agreements, as amended 0-8418 10-K March 1989 10(l) *10.09 Oceaneering International, Inc. Executive Retirement Plan, as amended 1-10945 10-K March 1995 10.08 *10.10 Share Purchase Agreement related to the purchase of Sonsub Limited 0-8418 8-K Jan. 1990 2 *10.11 1990 Long-Term Incentive Plan 33-36872 S-8 Sept. 1990 4(f) *10.12 1990 Nonemployee Directors Stock Option Plan 33-36872 S-8 Sept. 1990 4(g) *10.13 Indemnification Agreement between Registrant and its Directors 0-8418 10-Q Sept. 1991 10(a) *10.14 1991 Executive Incentive Agreements 0-8418 10-K March 1992 10(p) *10.15 Restricted Stock Award Incentive Agreements 1-10945 10-K March 1994 10(q) 10.16 Restricted Stock Award Incentive Agreement 10.17 Bank Uncommitted Credit Line Agreement dated March 29, 1996 10.18 1996 Bonus Award Plan 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. (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 21, 1996 By: //s//JOHN R. HUFF John R. Huff President and 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 President, Principal June 21, 1996 John R. Huff Executive Officer, Director //s// MARVIN J. MIGURA Senior Vice President, June 21, 1996 Marvin J. Migura Principal Financial Officer //s// RICHARD V. CHIDLOW Controller, Principal June 21, 1996 Richard V. Chidlow Accounting Officer CHARLES B. EVANS* Director DAVID S. HOOKER* Director D. MICHAEL HUGHES* Director *By: //s// GEORGE R. HAUBENREICH, JR. June 21, 1996 George R. Haubenreich, Jr. Attorney-in-Fact OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES 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 The schedules have been omitted because of the absence of the condition under which they are required or because the required information is included in the financial statements or 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, 1996 and 1995, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended March 31, 1996. These 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 financial statements referred to above present fairly, in all material respects, the financial position of Oceaneering International, Inc. and subsidiaries as of March 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1996 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas May 16, 1996 OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands) ASSETS March 31, 1996 March 31, 1995 CURRENT ASSETS: Cash and cash equivalents $ 9,351 $ 12,865 Accounts receivable, net of allowances for doubtful accounts of $1,201 and $1,238 96,391 58,360 Prepaid expenses and other 4,733 4,613 Total current assets 110,475 75,838 PROPERTY AND EQUIPMENT, at cost: Marine services equipment 187,337 175,528 Mobile offshore production equipment 56,607 24,694 Other 29,438 28,648 273,382 228,870 Less accumulated depreciation 145,105 134,515 Net property and equipment 128,277 94,355 INVESTMENTS AND OTHER ASSETS: Goodwill, net of amortization of $2,515 and $1,546 12,082 13,051 Other 5,262 4,508 TOTAL ASSETS $256,096 $187,752 See Notes to Consolidated Financial Statements OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data) LIABILITIES AND SHAREHOLDERS' EQUITY March 31, 1996 March 31, 1995 CURRENT LIABILITIES: Accounts payable $25,607 $15,228 Accrued liabilities 35,823 29,870 Income taxes payable 6,618 7,634 Total current liabilities 68,048 52,732 LONG-TERM DEBT 48,000 9,472 OTHER LONG-TERM LIABILITIES 11,921 9,507 MINORITY INTERESTS 1,029 901 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common Stock, par value $0.25; 90,000,000 shares authorized; 24,017,046 shares issued 6,004 6,004 Additional paid-in capital 81,921 80,800 Treasury stock; 793,170 and 977,363 shares at cost (6,976) (8,596) Retained earnings 56,556 44,199 Cumulative translation adjustments (10,407) (7,267) Total shareholders' equity 127,098 115,140 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $256,096 $187,752 See Notes to Consolidated Financial Statements OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share data) For the Years Ended March 31, 1996 1995 1994 REVENUES $289,506 $239,936 $229,760 COST OF SERVICES 234,731 190,772 177,199 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 34,589 36,410 31,631 Income from operations 20,186 12,754 20,930 INTEREST INCOME 1,774 547 831 INTEREST EXPENSE (2,286) (695) (951) OTHER INCOME (EXPENSE), NET 286 (383) 48 MINORITY INTERESTS (108) 287 (99) Income before income taxes 19,852 12,510 20,759 PROVISION FOR INCOME TAXES (7,495) (5,828) NET INCOME $ 12,357 $ 5,496 $ 14,931 NET INCOME PER COMMON SHARE EQUIVALENT $ 0.53 $ 0.23 $ 0.62 See Notes to Consolidated Financial Statements OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Years Ended March 31, 1996 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $12,357 $ 5,496 $14,931 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 20,567 16,232 12,196 Currency translation adjustments and other 1,308 1,855 210 Decrease (increase) in accounts receivable (38,031) (6,797) 2,601 Decrease (increase) in prepaid expenses and other current assets (120) (1,849) 2,433 Increase in other assets (512) (1,986) (41) Increase (decrease) in accounts payable 10,379 1,331 (4,048) Increase (decrease) in accrued liabilities 6,023 4,062 (1,840) Increase (decrease) in income taxes payable (1,125) 951 265 Increase (decrease) in other long-term liabilities 2,542 (1,673) 1,564 Total adjustments to net income 1,031 12,126 13,340 NET CASH PROVIDED BY OPERATING ACTIVITIES 13,388 17,622 28,271 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (57,171) (32,057) (14,866) Business acquisitions, net of cash acquired -- -- (21,336) NET CASH USED IN INVESTING ACTIVITIES (57,171) (32,057) (36,202) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term bank borrowings 38,600 9,400 -- Payments on long-term debt (72) (99) (96) Proceeds from issuance of common stock 1,741 109 540 Purchases of treasury stock -- (8,596) -- NET CASH PROVIDED BY FINANCING ACTIVITIES 40,269 814 444 NET DECREASE IN CASH AND CASH EQUIVALENTS (3,514) (13,621) (7,487) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 12,865 26,486 33,973 CASH AND CASH EQUIVALENTS - END OF YEAR $ 9,351 $12,865 $26,486 See Notes to Consolidated Financial Statements
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the Years Ended March 31, 1996, 1995 and 1994 (in thousands) Additional Cumulative Common Stock Issued Paid-in Treasury Retained Translation Shares Amount Capital Stock Earnings Adjustment Total Balance, March 31, 1993 23,573 $ 5,893 $78,921 $ -- $23,772 $(10,255) $98,331 Net Income -- -- -- -- 14,931 -- 14,931 Translation adjustments -- -- -- -- -- (1,156) (1,156) Stock options exercised 84 21 519 -- -- -- 540 Restricted Stock issued 339 85 299 -- -- -- 384 Tax benefit from exercise of options -- -- 323 -- -- -- 323 Balance, March 31, 1994 23,996 5,999 80,062 -- 38,703 (11,411) 113,353 Net Income -- -- -- -- 5,496 -- 5,496 Translation adjustments -- -- -- -- -- 4,144 4,144 Stock options exercised 21 5 104 -- -- -- 109 Restricted Stock plan compensation expense -- -- 634 -- -- -- 634 Treasury stock purchase of 977 shares, at cost -- -- -- (8,596) -- -- (8,596) Balance, March 31, 1995 24,017 6,004 80,800 (8,596) 44,199 (7,267) 115,140 Net Income -- -- -- -- 12,357 -- 12,357 Translation adjustments -- -- -- -- -- (3,140) (3,140) Stock options exercised -- -- 113 497 -- -- 610 Restricted Stock plan compensation expense -- -- 1,008 62 -- -- 1,070 Treasury stock issued to Company Benefit Plan, at average cost -- -- -- 1,061 -- -- 1,061 Balance, March 31, 1996 24,017 $ 6,004 $81,921 $(6,976) $56,556 $(10,407) $127,098 See Notes to Consolidated Financial Statements
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES 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., (the "Company") and its 50% or more owned and controlled subsidiaries. The Company accounts for its investments in unconsolidated affiliated companies under the equity method. All significant intercompany accounts and transactions have been eliminated. 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. Approximately $1.4 million and $1.5 million of the Company's cash at March 31, 1996 and 1995, respectively, was restricted and is deposited as security in interest bearing accounts in connection with legal proceedings. Depreciation and Amortization The Company provides for depreciation of Property and Equipment primarily on the straight-line method over estimated useful lives of 3 to 12 years for marine services equipment, 10 years for mobile offshore production equipment and 3 to 25 years for buildings, improvements and other equipment. The costs of repair and maintenance of Property and Equipment are charged to operations as incurred, while the costs of improvements are capitalized. 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 sales. Goodwill arising from business acquisitions is amortized on the straight- line method over 15 years. 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 generally accepted accounting principles. In March 1995, Statement of Financial Accounting Standards Board standard number ("SFAS") 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," was issued. SFAS 121, which becomes effective for fiscal years beginning after December 15, 1995, requires that certain long-lived assets be reviewed for impairment whenever events indicate that the carrying amount of an asset may not be recoverable and that an impairment loss be recognized under certain circumstances in the amount by which the carrying value exceeds the fair value of the asset. The Company will adopt SFAS 121 in 1997, as required, and believes the adoption will have no material effect on the Company's results of operations or financial position. Revenue Recognition The Company'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 Effective 1994, the Company adopted SFAS 109, "Accounting for Income Taxes", which supersedes SFAS 96. The cumulative impact of the adoption of this standard was not material. Foreign Currency Translation All balance sheet asset and liability accounts of foreign subsidiaries are translated into U.S. dollars at the rate of exchange in effect at the balance sheet date. All income statement accounts are translated at average exchange rates during the year. Adjustments arising from these translations are accumulated in a separate account within Shareholders' Equity. Net Income Per Common Share Equivalent Net income per common share equivalent has been computed on the basis of the weighted average number of shares of Common Stock and Common Share Equivalents outstanding in each year (23,258,000, 24,047,000 and 24,069,000 in 1996, 1995 and 1994, respectively). Other Long-Term Liabilities At March 31, 1996 and 1995, other long-term liabilities include $8.3 million and $6.6 million, respectively, for self-insurance reserves not expected to be paid out in the following year and $3.7 and $2.4 million, respectively, for deferred income taxes. Reclassifications Certain amounts from prior years have been reclassified to conform with the current year presentation. Acquisitions In May 1993, the Company purchased the business and assets of the Space Systems Division of ILC Dover, Inc. ("ILC"). ILC designs, develops and fabricates spacecraft hardware and high temperature insulation products. In July 1993, the Company purchased Oil Industry Engineering, Inc., a designer and fabricator of subsea control systems and in March 1994, the Company purchased the operating subsidiaries of Multiflex International Inc., a manufacturer of subsea control umbilical cables. Total cost of the three acquisitions was $21 million cash. The acquisitions were accounted for under the purchase method and the operating results of the businesses acquired are included in the consolidated financial statements of the Company from the respective dates of acquisition. The costs of acquisition have been allocated on the basis of the estimated fair value of the assets acquired and liabilities assumed. This allocation resulted in goodwill of approximately $14 million. Had these acquisitions taken place at the beginning of 1993, unaudited pro forma revenues, net income, and net income per common share equivalent of the Company for 1994 would have been $259 million, $15 million and $0.64. The pro forma information has been prepared for comparative purposes only and is not necessarily indicative of the operating results that would have occurred had the acquisitions taken place at the beginning of 1993, nor are they necessarily representative of operating results which may occur in the future. 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 and 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. 2. INCOME TAXES The Company and its domestic subsidiaries, including acquired companies from the respective dates of acquisition, file a consolidated federal income tax return. The Company conducts its operations in a number of foreign locations which have varying codes and regulations with regard to income and other taxes, some of which are subject to interpretation. Foreign income taxes are provided at the appropriate tax rates in accordance with the Company'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 foreign locations. 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. The Company'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 provision for income taxes for the year ended March 31, 1996 includes a provision for U.S. federal and state income taxes of $5.4 million and foreign taxes of $2.1 million. The provision for income taxes for the year ended March 31, 1995, included a provision for U.S. federal and state income taxes of $5.1 million and foreign taxes of $1.9 million. The provision for income taxes for the year ended March 31, 1994, included a provision for U.S. federal and state income taxes of $3.1 million and foreign taxes of $2.7 million. As of March 31, 1996, the Company had loss carryforwards of approximately $27 million which are available to reduce future United Kingdom Corporation Tax which would otherwise be payable. The provision for income taxes for the year ended March 31, 1996, consists of $6.5 million for current taxes and $1.0 million for net deferred taxes. The provision for income taxes for the year ended March 31, 1995, consisted of $9.0 million for current taxes less $2.0 million in net deferred taxes. The provision for the year ended March 31, 1994 consisted primarily of current taxes. Cash taxes paid were $7.5 million, $8.1 million and $5.8 million for the years ended March 31, 1996, 1995 and 1994, respectively. As of March 31, 1996 and 1995, the Company's worldwide deferred tax assets and liabilities and related valuation reserves were as follows: March 31, 1996 1995 (in thousands) Gross deferred tax assets $14,166 $12,949 Valuation allowance (10,183) (9,144) Net deferred tax assets $ 3,983 $ 3,805 Deferred tax liabilities $ 3,666 $ 2,441 The Company's deferred tax assets consist primarily of net operating loss carryforwards ("NOLs") in its United Kingdom subsidiary; these NOLs have no expiration date. Deferred tax liabilities consist of depreciation and amortization and installment sale gain recognition. The Company has established a valuation allowance for deferred tax assets after taking into account factors that are likely to affect the Company's ability to utilize the tax assets. In particular, the Company conducts its business through several foreign subsidiaries and, although the Company 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, 1994, 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, 1996 1995 1994 (in thousands) Computed U.S. statutory expense $ 6,986 $ 4,278 $ 7,300 Change in valuation allowances 1,039 2,475 (1,723) Withholding taxes and foreign earnings taxed at rates different from U.S. statutory rates and other, net (530) 261 251 Total provision for income taxes $ 7,495 $ 7,014 $ 5,828 3. DEBT Long-term debt: March 31, 1996 1995 (in thousands) Bank debt $48,000 $9,400 Capital lease obligations -- 72 Total long-term debt $48,000 $9,472 Maturity Schedule (in thousands) Year 1997 -- 1998 -- 1999 $24,000 2000 24,000 2001 -- Credit Agreement On April 12, 1995, the Company and a group of banks signed a credit agreement in the amount of $75 million (the "Credit Agreement"). At March 31, 1996 the weighted average interest rate on outstanding borrowings under the Credit Agreement was 6.1% per annum. There is a commitment fee of 0.225% per annum on the unused portion of the banks' commitment. Under the Credit Agreement, the Company has the option to borrow dollars through Euro-Dollar loans at the London Interbank Offered Rate ("LIBOR") plus 5/8%, certificate of deposit loans at the reserve adjusted certificate of deposit rate plus 3/4%, or base rate loans at the agent bank's prime rate. The agreement contains certain restrictive covenants relative to consolidated debt, tangible net worth and fixed charge coverage. Loans under the agreement are unsecured. Under the agreement, dividends may not exceed 50% of cumulative consolidated net income from December 31, 1994. The Company has an uncommitted credit agreement dated March 29, 1996 with a bank in the amount of $20 million for use for borrowings and letters of credit (the "Uncommitted Line"). As of March 31, 1996, the Company had approximately $7.2 million in letters of credit outstanding under this agreement. Effective October 1, 1991, the Company entered into an interest rate swap agreement to reduce the impact of changes in interest rates under a then- existing term loan facility. The notional amount declines by $1.5 million on the first business day of each calendar quarter and was $4.5 million at March 31, 1996. The fixed rate in the swap is 7.9% and the floating rate is the three-month LIBOR. The Company benefits under the agreement if LIBOR exceeds the fixed rate. The differential to be paid or received is recognized as interest expense or income on a current basis. Cash interest payments of $2.2 million, $900,000 and $1.1 million were made in 1996, 1995 and 1994, respectively. In 1996 interest expense of $300,000 was capitalized as part of construction in progress. Subsequent Event (unaudited) In June 1996, the Credit Agreement referred to above was amended and credit availability increased to $120 million. The interest rate for Euro-Dollar loans when the total amount borrowed is $100 million or greater is LIBOR plus 3/4%. 4. EMPLOYEE BENEFIT PLANS Retirement Investment Plans The Company currently has four 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 the Company to contribute the deferred amount to the plan. The Company matches a portion of the deferred compensation. The Company's contributions to the plan were $1,294,000, $992,000 and $807,000 for the plan years ended December 31, 1995, 1994 and 1993, respectively. The second plan is the Oceaneering International Services Pension Scheme for employees in the United Kingdom. The Company provides funding for this plan based on actuarial calculations. The plan assets exceed vested benefits and are not material to the assets of the Company. Company contributions were $57,000, $67,000 and $85,000 for the years ended March 31, 1996, 1995 and 1994, respectively. There have been no new participants in this plan since March 1990. The third plan is the Personal Pension Plan for employees in the United Kingdom. Under this plan, which became effective May 1991, employees may contribute a portion of their gross monthly salary. The Company also contributes a portion of the participants' gross monthly salary. Company contributions to this plan for the years ended March 31, 1996, 1995 and 1994, were $115,000, $108,000 and $62,000, respectively. The fourth plan, the Oceaneering International, Inc. Executive Retirement Plan, covers selected key management employees and executives of the Company as approved by the Compensation Committee of the Company's Board of Directors ("Compensation Committee"). The participants in this plan may contribute a portion of their gross monthly salary and the Company matches up to 100% of that contribution. Company expense related to this plan during the years ended March 31, 1996, 1995 and 1994, was $362,000, $287,000 and $220,000, respectively. Incentive and Stock Option Plans The Company has in effect shareholder approved nonemployee director stock option and long-term incentive plans. Under the 1990 Nonemployee Director Stock Option Plan ("Nonemployee Director Plan"), options to purchase up to an aggregate of 100,000 shares of the Company's Common Stock may be granted to nonemployee directors of the Company. Each director of the Company is automatically granted an option to purchase 2,000 shares of Common Stock on the date the director becomes a nonemployee director of the Company 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 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 the Company. Expense is recorded related to these options which have an exercise price less than fair market value on the date the option is granted. Expense in 1996, 1995 and 1994 was not material. Under the 1990 Long-Term Incentive Plan ("Incentive Plan"), a total of 1,600,000 shares of Common Stock, or cash equivalents of Common Stock, are available for awards to employees and other persons (excluding nonemployee directors) having an important business relationship with the Company and its subsidiaries. The Incentive Plan is 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 up to ten years, 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. In 1992, the Compensation Committee granted to certain key executives of the Company contingent cash incentive awards totaling a maximum aggregate amount of $2,000,000 payable over a three-year period, conditional upon the achievement of certain performance goals for the Company's Common Stock and continued employment of participants. In September 1992, the performance requirement for the Company's Common Stock was met; in September 1995 the last of four equal installments was paid to the participants. During 1994 and 1996, the Compensation Committee granted to certain key executives of the Company restricted Common Stock of the Company designed (i) to make a material portion of their potential future compensation contingent on performance of the Company's Common Stock and (ii) to retain their employ with the Company. These grants are subject to earning requirements on the basis of a percentage change between the price of the Common Stock of the Company versus the average of the Common Stock price of a peer group of companies over a three-year time period. Up to one-third of the total grant made in 1994 may be earned each year and the entire grant made in 1996 may be earned depending upon the Company's cumulative Common Stock performance, with any amount earned subject to vesting in four equal installments over three years conditional upon continued employment. At the time of each vesting, a participant receives a tax assistance payment which the participant must reimburse the Company if the vested Common Stock is sold by the participant within three years after the vesting date. In June 1995, the entire two-thirds of the total grant made in 1994 was earned, subject to vesting requirements, and none of the grant made in 1996 was earned. At March 31, 1996, a total of 84,750 shares was vested and a total of 261,250 shares of restricted stock was outstanding under these grants, of which 141,250 shares were earned, subject to vesting requirements. The Company also has in effect three other stock option plans under which options to purchase have been issued to employees and other persons affiliated with the Company. Since approval of the Incentive Plan, no further grants or awards under these three stock option plans have been made or can be made or granted. All of these stock option plans are administered by the Compensation Committee. Options were normally granted at not less than the fair market value of the optioned shares at the date of grant. Options outstanding under these three plans which were granted periodically from May 1988 to December 1992, are normally exercisable over a ten-year term with vesting at the rate of 20% per year for three years beginning one year after the date of grant and 40% at the end of the fourth year. Options issued under one of these plans, the 1987 Special Incentive Plan, are exercisable in 20% increments on each of the first five anniversaries of the date of grant. During 1996, under the Nonemployee Director and Incentive Plans, options to purchase 46,000 shares were granted at prices ranging from $4.7188 to $10.25. At March 31, 1996, options to purchase 1,354,830 shares at prices ranging from $4.00 to $16.00 were outstanding under all plans and options to purchase 893,380 shares at prices ranging from $4.00 to $16.00 were exercisable. At March 31, 1996, there were 283,100 shares under these plans available for grant, of which 225,100 could be used for awarding stock options, stock appreciation rights, stock and cash awards to employees. 5. COMMITMENTS AND CONTINGENCIES Lease Commitments At March 31, 1996, the Company occupied several facilities under noncancellable operating leases expiring at various dates through 2065. Future minimum rentals under these leases are as follows: (in thousands) 1997 $2,737 1998 2,121 1999 1,744 2000 1,616 2001 1,500 Thereafter 2,070 Total Lease Commitments $11,788 Rental expense, which includes hire of vessels, specialized equipment and real estate rental, was approximately $19 million, $13 million and $16 million for the years ended March 31, 1996, 1995 and 1994, respectively. Insurance The Company 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. The Company 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 established for all known liabilities. An additional reserve for incidents incurred but not reported to the Company 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 the Company and its subsidiaries, 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 consolidated financial position or results of operations of the Company. Letters of Credit The Company had $7.8 million and $7.6 million in letters of credit outstanding as of March 31, 1996 and 1995, respectively, as guarantees in force for 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 the Company to concentrations of credit risk are primarily cash and cash equivalents, bank 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. Accounts receivable are generated from a broad and diverse group of customers primarily from within the energy industry, which is the Company's major source of revenues. At March 31, 1996, the Company had a receivable of $20 million from an energy industry customer. Subsequent to the year end, the receivable, which was not due until 1998, was paid in full by the customer and has therefore been treated as an accounts receivable. The Company maintains an allowance for doubtful accounts based upon expected collectibility. 6. OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA Business Segment Information The Company 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. The Company's Oilfield Marine Services business consists of underwater intervention and above-water inspection, maintenance and repair. The Company'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. The Company'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, 1996 1995 1994 (in thousands) Revenues Oilfield Marine Services $132,064 $106,294 $122,625 Offshore Field Development 80,855 62,918 37,121 Advanced Technologies 76,587 70,724 70,014 Total $289,506 $239,936 $229,760 Income from Operations Oilfield Marine Services $ (369) $ (2,485) $ 9,194 Offshore Field Development 15,567 6,676 1,191 Advanced Technologies 4,988 8,563 10,545 Total $ 20,186 $ 12,754 $ 20,930 Identifiable Assets Oilfield Marine Services $102,776 $ 86,422 $ 70,259 Offshore Field Development 103,538 53,124 45,153 Advanced Technologies 32,466 28,520 24,393 Total $238,780 $168,066 $139,805 Capital Expenditures Oilfield Marine Services $ 21,868 $ 25,916 $ 9,261 Offshore Field Development 32,531 1,263 16,465 Advanced Technologies 2,772 4,878 11,004 Total $ 57,171 $ 32,057 $ 36,730 Depreciation and Amortization Expenses Oilfield Marine Services $ 10,996 $ 7,861 $ 6,950 Offshore Field Development 5,127 4,690 2,276 Advanced Technologies 4,444 3,681 2,970 Total $ 20,567 $ 16,232 $ 12,196 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. Revenues of approximately $34 million in 1995 and $26 million in 1994 were from the Royal Dutch Shell group of companies. No other individual customer accounted for more than 10% of revenues in 1996, 1995 or 1994. Geographic Operating Areas Financial data by geographic area is summarized as follows: For the Years Ended March 31, 1996 1995 1994 (in thousands) Revenues United States $122,561 $117,630 $ 89,401 North Sea 53,289 48,934 60,515 Africa 39,747 36,361 36,510 Far East 38,084 22,924 24,343 Other 35,825 14,087 18,991 TOTAL $289,506 $239,936 $229,760 Income before Income Taxes and Minority Interests United States $ 1,756 $ 2,856 $ 5,003 North Sea (164) 188 6,451 Africa 9,519 6,582 4,051 Far East 1,342 353 804 Other 7,507 2,244 4,549 TOTAL $ 19,960 $ 12,223 $ 20,858 Total Assets United States $152,859 $ 87,405 $ 91,281 North Sea 51,521 52,449 30,235 Africa 29,733 33,374 39,459 Far East 12,185 9,386 8,206 Other 9,798 5,138 2,812 TOTAL $256,096 $187,752 $171,993 7. ACCRUED LIABILITIES Accrued liabilities consisted of the following: March 31, 1996 1995 (in thousands) Payroll and related costs $14,271 $11,899 Accrued job costs 12,651 9,587 Other 8,901 8,384 TOTAL ACCRUED LIABILITIES $35,823 $29,870 SELECTED QUARTERLY FINANCIAL DATA (in thousands, except per share data) (unaudited) Year Ended March 31, 1996 Quarter Ended June 30 Sept. 30 Dec. 31 Mar. 31 Total Revenues $71,541 $77,088 $74,236 $66,641 $289,506 Gross profit 13,309 15,964 14,453 11,049 54,775 Income from operations 5,000 7,312 5,661 2,213 20,186 Net income 2,787 4,573 3,528 1,469 12,357 Earnings per common share equivalent $ 0.12 $ 0.20 $ 0.15 $ 0.06 $ 0.53 Weighted average number of shares outstanding 23,158 23,224 23,267 23,383 23,258 Year Ended March 31, 1995 Quarter Ended June 30 Sept. 30 Dec. 31 Mar. 31 Total Revenues $63,370 $66,898 $55,203 $54,465 $239,936 Gross profit 14,094 15,383 8,622 11,065 49,164 Income (loss)from operations 5,728 6,572 (1,196) 1,650 12,754 Net income (loss) 3,666 4,260 (2,850) 420 5,496 Earnings (loss) per common share equivalent $ 0.15 $ 0.18 $(0.12) $ 0.02 $ 0.23 Weighted average number of shares outstanding 24,183 24,204 24,150 23,650 24,047 EXHIBIT INDEX 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 Interest Rate and Currency Exchange Agreement dated July 29, 1991 0-8418 10-Q Sept. 1991 4(a) *4.03 Shareholder Rights Agreement dated November 20, 1992 1-10945 8-K Nov. 1992 1 *4.04 Bank Credit Agreement dated April 12, 1995 1-10945 10-K March 1995 4.04 4.05 Amended and Restated Bank Credit Agreement dated June 12, 1996 10 Material contracts *10.01 1981 Incentive Stock Option Plan, as amended 2-80506 S-8 Sept. 1987 28(e) 10.02 Oceaneering Retirement Investment Plan, as amended *10.03 Employment Agreement dated August 15, 1986 between John R. Huff and Registrant 0-8418 10-K March 1987 10(l) 10.04 Addendum to Employment Agreement dated February 22, 1996 between John R. Huff and Registrant *10.05 1987 Incentive and Non- Qualified Stock Option Plan 33-16469 S-1 Sept. 1987 10(o) *10.06 Oceaneering International, Inc. Special Incentive Plan 33-16469 S-1 Sept. 1987 10(n) *10.07 Senior Executive Severance Plan, as amended 0-8418 10-K March 1989 10(k) *10.08 Supplemental Senior Executive Severance Agreements, as amended 0-8418 10-K March 1989 10(l) *10.09 Oceaneering International, Inc. Executive Retirement Plan, as amended 1-10945 10-K March 1995 10.08 *10.10 Share Purchase Agreement related to the purchase of Sonsub Limited 0-8418 8-K Jan. 1990 2 *10.11 1990 Long-Term Incentive Plan 33-36872 S-8 Sept. 1990 4(f) *10.12 1990 Nonemployee Directors Stock Option Plan 33-36872 S-8 Sept. 1990 4(g) *10.13 Indemnification Agreement between Registrant and its Directors 0-8418 10-Q Sept. 1991 10(a) *10.14 1991 Executive Incentive Agreements 0-8418 10-K March 1992 10(p) *10.15 Restricted Stock Award Incentive Agreements 1-10945 10-K March 1994 10(q) 10.16 Restricted Stock Award Incentive Agreement 10.17 Bank Uncommitted Credit Line Agreement dated March 29, 1996 10.18 1996 Bonus Award Plan 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. EX-4.05 2 AMENDED AND RESTATED CREDIT AGREEMENT AMENDED AND RESTATED CREDIT AGREEMENT (this "Amended Agreement") dated as of June 12, 1996 among OCEANEERING INTERNATIONAL, INC. (the "Borrower"), the BANKS listed on the signature pages hereof (the "Banks") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent"). W I T N E S S E T H : WHEREAS, certain of the parties hereto have heretofore entered into a $75,000,000 Credit Agreement dated as of April 12, 1995 (the "Agreement"); and WHEREAS, the parties hereto desire to amend such Agreement to modify the fees payable thereunder and the Funded Debt Covenant contained therein, to increase the aggregate amount of the Commitments of the Banks from $75,000,000 to $120,000,000, to add the New Banks (as defined below) as parties to the Agreement as amended and restated hereby, to provide for changes in the respective Commitments of the Banks as set forth herein and to restate such Agreement in its entirety to read as set forth in the Agreement with the amendments specified below; NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Definitions; References. Unless otherwise specifically defined herein, each term used herein which is defined in the Agreement shall have the meaning assigned to such term in the Agreement. Each reference to "hereof", "hereunder", "herein" and "hereby" and each other similar reference and each reference to "this Agreement", "the Agreement" and each other similar reference contained in the Agreement shall from and after the date hereof refer to the Agreement as amended and restated hereby. The term "Notes" defined in the Agreement shall include from and after the date hereof the New Notes (as defined below). SECTION 2. Change in Fees. Section 2.06 of the Agreement is amended to read in its entirety as follows: SECTION 2.06. Fees. (a) During the Revolving Credit Period, the Borrower shall pay to the Agent for the account of each Bank a commitment fee at the rate of 0.225% per annum on the daily average amount by which the amount of the Commitment of such Bank exceeds the aggregate outstanding principal amount of the Loans of such Bank. Such commitment fee shall accrue from and including the Effective Date to but excluding the last day of the Revolving Credit Period, and shall be payable quarterly in arrears on each March 31, June 30, September 30 and December 31 during the Revolving Credit Period and on the last day of the Revolving Credit Period. (b) For each day during the Revolving Credit Period on which the aggregate outstanding principal amount of the Loans equals or exceeds $100,000,000, the Borrower shall pay to the Agent for the account of the Banks ratably in proportion to their Commitments a utilization fee at the rate of 0.125% per annum on the daily aggregate principal amount of Loans outstanding on such day. Such utilization fee shall accrue from and including the Effective Date to but excluding the last day of the Revolving Credit Period, and shall be payable quarterly in arrears on each March 31, June 30, September 30 and December 31 during the Revolving Credit Period and on the last day of the Revolving Credit Period. (c) For each day after the Revolving Credit Period on which the aggregate outstanding principal amount of the Loans equals or exceeds $75,000,000, the Borrower shall pay to the Agent for the account of the Banks ratably in proportion to their Commitments a utilization fee at the rate of 0.125% per annum on the daily aggregate principal amount of Loans outstanding on such day. Such utilization fee shall accrue from and including the Conversion Date to but excluding the Termination Date, and shall be payable quarterly in arrears on each March 31, June 30, September 30 and December 31 after the Revolving Credit Period and on the Termination Date. (d) The Borrower shall pay to the Agent for its own account fees in the amounts and at the times heretofore agreed in writing between the Borrower and the Agent. SECTION 3. Up-Front Fee. On or prior to the date this Amended Agreement becomes effective in accordance with Section 8 hereof, the Borrower shall pay to the Agent for the account of each Bank whose Commitment shall be an amount equal to or greater than $30,000,000, an up-front fee of .10% of the amount of such Bank s Commitment. SECTION 4. Amendment to Funded Debt Covenant. Section 5.07 of the Agreement is amended to read in its entirety as follows: SECTION 5.07. Funded Debt. Consolidated Funded Debt will not exceed at any time 100% of Adjusted Consolidated Tangible Net Worth. For purposes of this 2 Section, any preferred stock of a Consolidated Subsidiary held by a Person other than the Borrower or a Wholly Owned Consolidated Subsidiary shall be included, at the higher of its voluntary or involuntary liquidation value, in determining Consolidated Funded Debt. SECTION 5. New Banks; Changes in Commitments. With effect from and including the date this Amended Agreement becomes effective in accordance with Section 8 hereof, (i) each Person listed on the signature pages hereof which is not a party to the Agreement (a "New Bank") shall become a Bank party to the Agreement and (ii) the Commitment of each Bank shall be the amount set forth opposite the name of such Bank on the signature pages hereof. Any Bank whose Commitment is changed to zero shall upon such effectiveness cease to be a Bank party to the Agreement, and all accrued fees and other amounts payable under the Agreement for the account of such Bank shall be due and payable on such date; provided that the provisions of Section 9.03 of the Agreement shall continue to inure to the benefit of each such Bank. SECTION 6. Representations and Warranties. The Borrower hereby represents and warrants that as of the date hereof and after giving effect thereto: (a) no Default under the Agreement has occurred and is continuing; and (b) each representation and warranty of the Borrower set forth in the Agreement is true and correct as though made on and as of this date. SECTION 7. Governing Law. This Amended Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 8. Counterparts; Effectiveness. This Amended Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amended Agreement shall become effective as of the date hereof when (i) the Agent shall have received duly executed counterparts hereof signed by each of the parties hereto (or, in the case of any party as to which an executed counterpart shall not have been received, the Agent shall have received telegraphic, telex or other written confirmation from such party of execution of a counterpart hereof by such party); (ii) the Agent shall have received a duly executed Note for each of the New Banks (a "New Note"), dated on or before the date of effectiveness hereof and otherwise in compliance with Section 2.03 of the Agreement; (iii) the Agent shall have received payment of 3 the fees payable in accordance with Section 3 hereof; (iv) the Agent shall have received an opinion of Baker & Botts, L.L.P., special counsel for the Borrower, and of George R. Haubenreich, Jr., General Counsel of the Borrower, substantially in the respective forms of Exhibits B-1 and B- 2 to the Agreement with reference to the New Notes and the Agreement as amended hereby; and (v) the Agent shall have received all documents it may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of the Agreement as amended and restated hereby, the New Notes and any other matters relevant hereto. 4 IN WITNESS WHEREOF, the parties hereto have caused this Amended Credit Agreement to be duly executed by their respective authorized officers as of the day and year first above written. OCEANEERING INTERNATIONAL, INC. By: //s//ROBERT P. MINGOIA Robert P. Mingoia Treasurer Commitments $30,000,000 ABN AMRO BANK N.V., Houston Agency By ABN AMRO NORTH AMERICA, INC., as Agent By: //s//H. GENE SHIELS H. Gene Shiels Vice President and Director By: //s//W. BRYAN CAMPBELL W. Bryan Campbell Vice President and Director $ 30,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: //s//JAMES S. FINCH James S. Finch Vice President 5 $ 30,000,000 TEXAS COMMERCE BANK NATIONAL ASSOCIATION By: //s//MONA M. FOCH Mona M. Foch Vice President $ 30,000,000 WELLS FARGO BANK (TEXAS), N.A. By: //s//FRANK W. SCHAGEMAN Frank W. Schageman Vice President _________________ Total Commitments $120,000,000 ================= MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By: //s//JAMES S. FINCH James S. Finch Vice President 6 EX-10.02 3 OCEANEERING RETIREMENT INVESTMENT PLAN (As Amended and Restated Effective July 1, 1995) HOU01A:316781.5 008939.0157 OCEANEERING RETIREMENT INVESTMENT PLAN (As Amended and Restated Effective July 1, 1995) I N D E X Page ARTICLE I DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . 3 Section: 1.1 Definitions . . . . . . . . . . . . . . . . . . . 3 Affiliate . . . . . . . . . . . . . . . . . . . . 3 Adjustment Date . . . . . . . . . . . . . . . . . 3 Authorized Leave of Absence . . . . . . . . . . . 3 Beneficiary . . . . . . . . . . . . . . . . . . . 3 Break in Service . . . . . . . . . . . . . . . . . 3 Company . . . . . . . . . . . . . . . . . . . . . 4 Committee . . . . . . . . . . . . . . . . . . . . 4 Common Stock . . . . . . . . . . . . . . . . . . . 4 Compensation . . . . . . . . . . . . . . . . . . . 4 Disability . . . . . . . . . . . . . . . . . . . . 5 Effective Date . . . . . . . . . . . . . . . . . . 5 Employee . . . . . . . . . . . . . . . . . . . . . 5 Employer . . . . . . . . . . . . . . . . . . . . . 5 Employment Year . . . . . . . . . . . . . . . . . 5 ERISA . . . . . . . . . . . . . . . . . . . . . . 6 Fiduciaries . . . . . . . . . . . . . . . . . . . 6 Forfeiture . . . . . . . . . . . . . . . . . . . . 6 Former Participant . . . . . . . . . . . . . . . . 6 Hours(s) of Service . . . . . . . . . . . . . . . 6 Income . . . . . . . . . . . . . . . . . . . . . . 6 Participant . . . . . . . . . . . . . . . . . . . 7 Participation . . . . . . . . . . . . . . . . . . 7 Plan . . . . . . . . . . . . . . . . . . . . . . . 7 Plan Year . . . . . . . . . . . . . . . . . . . . 7 Service . . . . . . . . . . . . . . . . . . . . . 7 Trust or Trust Fund . . . . . . . . . . . . . . . 7 Trustee . . . . . . . . . . . . . . . . . . . . . 7 Year of Service . . . . . . . . . . . . . . . . . 7 1.2 Construction . . . . . . . . . . . . . . . . . . . 7 ARTICLE II PARTICIPATION AND SERVICE . . . . . . . . . . . . 8 Section: 2.1 Participation . . . . . . . . . . . . . . . . . . 8 2.2 Notification of Eligible Employees . . . . . . . . 9 2.3 Participant Applications . . . . . . . . . . . . . 9 2.4 Transfers and Authorized Leaves of Absence . . . . 9 2.5 Re-Employment; Certain Account Reinstatements . . 9 2.6 Service for Former Eastport Employees . . . . . 10 ARTICLE III CONTRIBUTIONS AND FORFEITURES . . . . . . . . . 11 Section: 3.1 Employer Contributions . . . . . . . . . . . . . 11 3.2 Deferred Contributions . . . . . . . . . . . . . 12 HOU01A:316781.5 008939.0157 Page 3.3 Withdrawals . . . . . . . . . . . . . . . . . . 14 (A) Voluntary and Mandatory Contributions . . 14 (B) Rollover Contributions . . . . . . . . . 14 (C) Pre 1985-Employer Contribution Account . 14 (D) Hardship Withdrawals . . . . . . . . . . 14 3.4 Disposition of Forfeitures . . . . . . . . . . . 16 ARTICLE IV ALLOCATIONS TO PARTICIPANTS' ACCOUNTS . . . . . 17 Section: 4.1 Individual Accounts . . . . . . . . . . . . . . 17 4.2 Employer and Deferred Contributions . . . . . . 17 4.3 Forfeitures . . . . . . . . . . . . . . . . . . 18 4.4 Valuation of Trust Fund . . . . . . . . . . . . 18 4.5 Distributions Deducted from Participant's Account 18 4.6 Income . . . . . . . . . . . . . . . . . . . . . 18 4.7 Investment Funds . . . . . . . . . . . . . . . . 18 4.8 Investment Directions by Participants; Employer Contribution Investment . . . . . . . . . . . . . . . . . . . 19 4.9 Change of Investment of Account Balances . . . . 19 4.10 Special Provisions Applicable to Eastport Plan Accounts . . . . . . . . . . . . . . . . . . . . 20 4.11 Loans . . . . . . . . . . . . . . . . . . . . . 20 ARTICLE V BENEFITS . . . . . . . . . . . . . . . . . . . . 23 Section: 5.1 Retirement . . . . . . . . . . . . . . . . . . . 23 5.2 Death or Disability . . . . . . . . . . . . . . 23 5.3 Termination for Other Reasons . . . . . . . . . 23 5.4 Payments of Benefits . . . . . . . . . . . . . . 25 5.5 Designation of Beneficiary . . . . . . . . . . . 26 ARTICLE VI TRUST FUND . . . . . . . . . . . . . . . . . . . 28 ARTICLE VII ADMINISTRATION . . . . . . . . . . . . . . . . . 29 Section: 7.1 Allocation of Responsibility among Fiduciaries for Plan and Trust Administration . . . . . . . . . . . . . . . . 29 7.2 Appointment of Committee . . . . . . . . . . . . 29 7.3 Records of Committee . . . . . . . . . . . . . . 29 7.4 Committee Action; Agent for Process . . . . . . 30 7.5 Committee Disqualification . . . . . . . . . . . 30 7.6 Committee Compensation, Expenses and Advisers . 30 7.7 Committee Liability . . . . . . . . . . . . . . 30 7.8 Committee Determinations . . . . . . . . . . . . 30 7.9 Information from Employer . . . . . . . . . . . 31 7.10 General Powers of Committee . . . . . . . . . . 31 7.11 Uniform Administration . . . . . . . . . . . . . 31 7.12 Reporting Responsibilities . . . . . . . . . . . 31 7.13 Disclosure Responsibilities . . . . . . . . . . 32 7.14 Annual Statements . . . . . . . . . . . . . . . 32 7.15 Annual Audit . . . . . . . . . . . . . . . . . . 32 HOU01A:316781.5 008939.0157 Page 7.16 Presenting Claims for Benefits . . . . . . . . . 32 7.17 Claims Review Procedure . . . . . . . . . . . . 33 7.18 Unclaimed Benefits . . . . . . . . . . . . . . . 34 ARTICLE VIII MISCELLANEOUS PROVISIONS . . . . . . . . . . . 35 Section: 8.1 Terms of Employment . . . . . . . . . . . . . . 35 8.2 Controlling Law . . . . . . . . . . . . . . . . 35 8.3 Invalidity of Particular Provisions . . . . . . 35 8.4 Non-Alienation of Benefits . . . . . . . . . . . 35 8.5 Payments in Satisfaction of Claims of Participants35 8.6 Impossibility of Diversion of Trust Fund . . . . 35 8.7 Distributions Under Domestic Relations Orders . 35 8.8 Transition Period . . . . . . . . . . . . . . . 36 ARTICLE IX TRUST AGREEMENT AND TRUST FUND . . . . . . . . . 37 Section: 9.1 Trust Agreement . . . . . . . . . . . . . . . . 37 9.2 Benefits Paid Solely from Trust Fund . . . . . . 37 9.3 Committee Directions to Trustee . . . . . . . . 37 ARTICLE X ADOPTION OF THE PLAN BY OTHER ORGANIZATIONS;SEPARATION OF THE TRUST FUND; AMENDMENTAND TERMINATION OF THE PLAN; ANDDISCONTINUANCE OF CONTRIBUTIONS TO THE TRUST FUND . . . . . . . . . . . . . . . . . . . 38 Section: 10.1 Adoptive Instrument . . . . . . . . . . . . . . 38 10.2 Effect of Adoption . . . . . . . . . . . . . . . 38 10.3 Separation of the Trust Fund . . . . . . . . . . 38 10.4 Voluntary Separation . . . . . . . . . . . . . . 38 10.5 Amendment of the Plan . . . . . . . . . . . . . 39 10.6 Effect of Amendment on Other Employers . . . . . 39 10.7 Termination of the Plan . . . . . . . . . . . . 39 10.8 Liquidation and Distribution of Trust Fund upon Termination . . . . . . . . . . . . . . . . . . 39 10.9 Effect of Termination or Discontinuance of Contributions . . . . . . . . . . . . . . . . . 40 10.10 Merger of Plan with Another Plan . . . . . . . . 40 10.11 Rollover from Qualified Plans . . . . . . . . . 41 ARTICLE XI LIMITATIONS ON BENEFITS . . . . . . . . . . . . 42 Section: I. Single Defined Contribution Plan . . . . 42 II. Two or More Defined Contribution Plans . 43 III. Defined Contribution and Defined Benefit Plan . . . . . . . . . . . . . . . . . . . . . . 44 IV. Definitions . . . . . . . . . . . . . . . . 46 ARTICLE XII TOP-HEAVY PLAN REQUIREMENTS . . . . . . . . . . 49 Section: 12.1 General Rule . . . . . . . . . . . . . . . . . . 49 12.2 Vesting Provisions . . . . . . . . . . . . . . . 49 12.3 Minimum Contribution Provisions . . . . . . . . 49 HOU01A:316781.5 008939.0157 Page 12.4 Limitation on Contributions . . . . . . . . . . 50 12.5 Coordination with Other Plans . . . . . . . . . 50 12.6 Distributions to Certain Key Employees . . . . . 51 12.7 Determination of Top-Heavy Status . . . . . . . 51 ARTICLE XIII TESTING OF CONTRIBUTIONS . . . . . . . . . . . 56 Section: 13.1 Definitions . . . . . . . . . . . . . . . . . . 56 13.2 Actual Deferral Percentage . . . . . . . . . . . 57 13.3 Actual Deferral Percentage Limits . . . . . . . 58 13.4 Reduction of Pre-Tax Contribution Rates by Leveling Method . . . . . . . . . . . . . . . . . . . . . 58 13.5 Increase in Pre-Tax Contribution Rates . . . . . 59 13.6 Excess Pre-Tax Contributions . . . . . . . . . . 59 13.7 Aggregation of Family Members in Determining the Actual Deferral Ratio . . . . . . . . . . . . . 60 13.8 Contribution Percentage . . . . . . . . . . . . 60 13.9 Contribution Percentage Limits . . . . . . . . . 61 13.10 Treatment of Excess Aggregate Contributions . . 62 13.11 Aggregation of Family Members in Determining the Actual Contribution Ratio . . . . . . . . . . . . . . . . . . . . . 63 13.12 Multiple Use of Alternative Limitation . . . . . 64 ARTICLE XIV TRANSFER OF ELIGIBLE ROLLOVER DISTRIBUTION . . . 65 Section: 14.1 Transfer . . . . . . . . . . . . . . . . . . . . 65 14.2 Definitions . . . . . . . . . . . . . . . . . . 65 HOU01A:316781.5 008939.0157 OCEANEERING RETIREMENT INVESTMENT PLAN (As Amended and Restated Effective July 1, 1995) PURPOSE Effective as of April 1, 1982, Oceaneering International, Inc. established the Oceaneering International, Inc. Employees Stock Purchase Plan and contemporaneously therewith executed a trust agreement to enable eligible employees of the Company and its participating subsidiaries to share in the Company's profits and to establish for their benefit a savings fund. Effective as of June 1, 1983, Oceaneering International, Inc. amended and restated the Oceaneering International, Inc. Employees Stock Purchase Plan (the "Plan") in order to merge the Employee Savings and Investment Plan for Employees of Oceaneering International, Inc. into the Plan which thereafter was known as the Oceaneering International, Inc. Employees Stock Purchase and Savings Plan. Effective as of June 1, 1983 the Oceaneering International, Inc. Employees Stock Purchase Plan Trust (the "Trust"), which is administered pursuant to a trust agreement and which is intended to form a part of the Plan, was amended and restated to reflect the merger of the Employee Savings and Investment Plan for Employees of Oceaneering International, Inc. into the Plan and the Trust. Effective January 1, 1984 the Plan was amended to comply with the Tax Equity and Fiscal Responsibility Act of 1982. Effective January 1, 1985 the Plan was amended and restated to comply with the provisions of the Deficit Reduction Act of 1984 and the Retirement Equity Act of 1984. The Plan was amended and restated to change the name of the Plan to the Oceaneering Retirement Investment Plan, effective July 1, 1985, and to add a cash or deferred arrangement as provided for under Section 401(k) of the Internal Revenue Code, effective October 1, 1985. The Plan was amended effective January 1, 1987 to comply with the provisions of the Tax Reform Act of 1986 and to make certain other changes therein. The Plan was amended and restated in order to incorporate all prior amendments, comply with the Tax Reform Act of 1986 and to make certain other changes therein effective January 1, 1994. Effective July 1, 1995, the Plan is hereby amended and restated in order to provide for daily valuation of participant s accounts, to incorporate new investment funds, to HOU01A:316781.5 008939.0157 include loan provisions and to make certain other changes therein. Effective July 1, 1995, the Company terminated the trustee and the trust related to the Plan, appointed CG Trust Company ( CIGNA ) as the Trustee of the Plan, and adopted the Agreement of Trust between the Company and CIGNA. The Plan and the Trust are intended to meet the requirements of Sections 401(a), 401(k) and 501(a) of the Internal Revenue Code of 1986, and the Employee Retirement Income Security Act of 1974, as either may be amended from time to time. The Plan is a profit-sharing plan for purposes of Section 401(a)(27) of the Internal Revenue Code of 1986, as amended. HOU01A:316781.5 008939.0157 ARTICLE I DEFINITIONS AND CONSTRUCTION 1.1 Definitions: The following words and phrases, when used herein, unless their context clearly indicates otherwise, shall have the following respective meanings: Affiliate: A corporation or other trade or business which, together with an Employer, is "under common control" within the meaning of Section 414(b) or (c), as modified by Section 415(h) of the Code; any organization (whether or not incorporated) which, together with an Employer, is a member of an "affiliated service group" within the meaning of Section 414(m) of the Code; and any other entity required to be aggregated with the Employer pursuant to regulations under Section 414(o) of the Code. Adjustment Date: Any date on which the New York Stock Exchange is open for trading and any date on which the value of the assets of the Trust Fund is determined by the Trustee pursuant to Section 4.4 The last business day of December of each Plan Year shall be the "Annual Adjustment Date." Authorized Leave of Absence: Any absence authorized by the Employer under the Employer's standard personnel practices provided that all persons under similar circumstances must be treated alike in the granting of such Authorized Leaves of Absence and provided further that the Participant returns within the period of authorized absence. Absence due to service in the Armed Forces of the United States shall be deemed an authorized leave of absence only to the extent required by federal law and then only if the individual complies with all prerequisites of such federal law, including return to employment with an Employer within the period provided by such applicable federal law. Beneficiary: A person or persons (natural or otherwise) designated by a Participant in accordance with the provisions of Section 5.5 to receive any death benefit which shall be payable under this Plan. If a Participant has a spouse, then unless the spouse consents as set forth in Section 5.5 hereof the spouse shall always be the Beneficiary of the Participant. Break in Service: An Employment Year within which a Participant completes less than 501 Hours of Service. Solely for purposes of determining whether a Participant has a Break in Service for eligibility or vesting purposes, an individual who is absent from work for maternity or paternity reasons shall receive credit for the hours of service which would otherwise have been credited to such individual but for such absence, or in any case in which such hours cannot be determined, eight hours of service per day of such absence. For purposes of this paragraph, an absence from work for maternity or paternity reasons means an absence (i) by reason of the pregnancy of the individual, (ii) by reason of the birth of a child of the individual, (iii) by reason HOU01A:316781.5 008939.0157 of the placement of a child with the individual in connection with the adoption of such child by such individual, or (iv) for purposes of caring for such child for a period beginning immediately following such birth or placement. The hours of service credited under this paragraph shall be credited (i) in the computation period in which the absence begins if the crediting is necessary to prevent a break in service in that period, or (ii) in all other cases, in the following computation period. No more than 501 Hours of Service shall be credited for any single such absence. Company: Oceaneering International, Inc., a Delaware corporation. Committee: The Administrative Committee appointed pursuant to Section 7.2 to administer the Plan. Common Stock: The Common Stock of Oceaneering International, Inc., par value $0.25. Compensation: The total of gross earnings, including payments for commissions, overtime, shift premiums, depth premiums, and completion, incentive and executive compensation bonuses, but excluding payments for foreign housing, consumables, schooling, overseas or hardship allowances, reimbursements of expenses, taxes, or moving allowances, income realized or deemed to be realized from the exercise of stock options or other compensation under stock bonus or thrift or other such plans, and any other payments or allowances of any kind for foreign or domestic service not a function of direct salary or pay based on service or performance; provided that, for purposes of allocating the Employer's contribution for the Plan Year in which a Participant begins or resumes Participation, Compensation paid before his Participation began or resumed shall be disregarded. Unmatched Deferred Contributions and Matched Deferred Contributions authorized by a Participant pursuant to a salary reduction agreement shall be considered Compensation for purposes of the Plan. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, the Compensation of each Employee taken into account under the Plan shall not exceed $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which Compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the Compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. If Compensation for any prior determination period is taken into account in determining an Employee's benefits accruing in the current Plan Year, the Compensation for that prior determination period is subject to the Compensation limit in effect for that prior determination period. For this purpose, HOU01A:316781.5 008939.0157 for determination periods beginning before the first day of the first Plan Year beginning on or after January 1, 1994, the Compensation limit is $150,000. For purposes of applying the $150,000 limit on Compensation, the family unit of an Employee who either is a 5% owner or is both a highly compensated employee and one of the ten most highly compensated employees will be treated as a single Employee with one Compensation, and the $150,000 limit will be allocated among the members of the family unit in proportion to the total Compensation of each member of the family unit. For this purpose, a family unit consists of the Employee who is a 5% owner or one of the ten most highly compensated employees, the Employee's spouse, and the Employee's lineal descendants who have not attained age 19 before the close of the year. Deferred Contribution: The amount contributed pursuant to the Participant s deferral election by the Employer in accordance with Section 3.2. Disability: A physical or mental condition which, in the judgment of the Committee, based upon medical reports and other evidences satisfactory to the Committee, presumably permanently prevents an Employee from satisfactorily performing the duties of any occupation or job for which such Employee is reasonably fitted or otherwise qualified by reason of his training, education or experience. Effective Date: July 1, 1995, the date on which the provisions of this amended and restated Plan first become effective. Employee: Any person who, on or after the Effective Date, is receiving remuneration for personal services rendered to the Employer or an Affiliate (or who would be receiving such remuneration except for an Authorized Leave of Absence). On and after January 1, 1987, any person who is otherwise not an Employee who pursuant to an agreement between an Employer or an Affiliate ("recipient") and any other person ("leasing organization") has performed services for the recipient (or for the recipient and related persons determined in accordance with Section 414(n)(6) of the Code) on a substantially full-time basis for a period of at least one year, and such services are of a type historically performed by employees in the business field of the recipient employer, is a "leased employee" and shall be considered an Employee, unless (i) the leased employee is covered by a money purchase pension plan of the leasing organization providing: (1) a non-integrated employer contribution rate of at least 10% of compensation, as defined in Section 415(c)(3) of the Code, but including amounts contributed by the employer pursuant to a salary reduction agreement which are excludable from the employee's gross income under Section 125, 402(a)(8), 402(h) or 403(b) of the Code, (2) immediate participation, and (3) full and immediate vesting; and (ii) leased employees do not constitute more than 20% of the recipient's non-highly compensated workforce. If a leased employee is treated as an Employee, contributions or benefits provided the leased employee by the HOU01A:316781.5 008939.0157 leasing organization which are attributable to services performed for the recipient employer shall be treated as provided by the recipient employer. Employer: Oceaneering International, Inc., a Delaware corporation, each division thereof, and its Affiliates which have adopted the Plan and become an Approved Organization in accordance with Section 10.1 and as listed on Schedule A hereto. Employer Contribution: Contributions made by the Employer on behalf of Participants pursuant to Section 3.1 of the Plan. Employment Year: The 12-month period determined from the Employee's first performance of an Hour of Service and subsequent 12-month periods beginning on the anniversary of such Employee's performance of such Hour of Service; provided, however, that in the case of any Employee who incurs a Break in Service, upon such Employee's re-employment his Employment Year shall be deemed to commence on the date he first performs an Hour of Service after such Break in Service. ERISA: Public Law No. 93-406, the Employee Retirement Income Security Act of 1974, as amended from time to time. Fiduciaries: The Employer, the Committee, the Trustee and any Investment Manager appointed pursuant to the Plan and Trust, but only with respect to the specific responsibilities of each for Plan and Trust administration, all as described in Section 7.1. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan. Forfeiture: The portion of a Participant's Employer Contribution Account which is forfeited because of termination of employment before full vesting. Former Participant: A Participant whose employment with the Employer has terminated but who has a vested account balance under the Plan which has not been paid in full. Hours(s) of Service: An Hour of Service is each hour during an applicable computation period for which an Employee is directly or indirectly paid, or entitled to payment, by an Employer or an Affiliate for the performance of duties or for any period of Authorized Leave of Absence. Moreover, an Hour of Service is each hour, not in excess of 40 hours per week, during any period of unpaid Authorized Leave of Absence with an Employer or an Affiliate. Such Hours of Service shall be credited to the Employee for the computation period in which such duties were performed or in which such Authorized Leave of Absence occurred. An Hour of Service also includes each hour, not credited above, for which back pay, irrespective of mitigation of damages, has been either awarded or agreed to by an Employer or an Affiliate. These Hours of Service shall be credited to the Employee for the computation period to which the award or agreement pertains rather than the computation period in which the award, agreement HOU01A:316781.5 008939.0157 or payment is made. In determining an Employee's total Hours of Service during a computation period, a fraction of an hour shall be deemed a full Hour of Service. Hours of Service during the period prior to April 1, 1982 shall be determined from whatever records may be reasonably accessible to the Company and, if such records are insufficient, the Company may make whatever calculations are necessary to approximate Hours of Service for the period in a manner uniformly applicable to all Employees similarly situated. Instead of counting and crediting actual hours worked, for purposes of determining the number of Hours of Service to be credited to an Employee, an Employee may be credited with 190 Hours of Service for each calendar month during which he has earned one Hour of Service. For purposes of determining the number of Hours of Service to be credited for reasons other than the performance of duties and for purposes of determining to which computation period Hours of Service earned under any provision of this Plan are to be credited, the provisions of Department of Labor Regulation para. 2520.200(b)-2(b) and (c) are hereby incorporated by reference as if fully set forth herein. Income: The net gain or loss of the Trust Fund from investments, as reflected by interest payments, dividends, realized and unrealized gains and losses on securities, other investment transactions and expenses paid from the Trust Fund. In determining the Income of the Trust Fund for any period, assets shall be valued on the basis of their fair market value. Income shall be separately determined for separate types of investments, including Common Stock and any investments effected through group annuity contracts or other products issued by insurance companies in order that the net gain or loss attributable to such investments be allocated only to the accounts of those Participants who are participating in such investments. Participant: An Employee who has qualified to participate in the Plan in accordance with the provisions of Article II. Participation: The period commencing as of the date the Employee becomes a Participant and ending on the date his employment with the Employer and Affiliates terminated. Plan: The Oceaneering Retirement Investment Plan as set forth in this document and as may be amended from time to time. Plan Year: The 12-month period commencing on January 1 and ending on December 31. Service: A Participant's period of employment or deemed employment with the Employer determined in accordance with Article II and Section 5.3. HOU01A:316781.5 008939.0157 Trust or Trust Fund: The fund known as the Oceaneering Retirement Investment Plan Trust, maintained in accordance with the terms of the trust agreement, as from time to time amended, which constitutes a part of this Plan. Trustee: The corporation or individual appointed by the Board of Directors of the Company to administer the Trust. Year of Service: An Employment Year during which the Employee had not less than 1,000 Hours of Service. 1.2 Construction: The masculine gender, where appearing in the Plan shall be deemed to include the feminine gender, and the singular shall include the plural, unless the context clearly indicates to the contrary. HOU01A:316781.5 008939.0157 ARTICLE II PARTICIPATION AND SERVICE 2.1 Participation: A. Initial Eligibility: An Employee of Oceaneering International, Inc. (or of any Affiliate which has adopted the Plan with the consent of Oceaneering International, Inc. and become an Approved Organization) shall become eligible to become a Participant as of the first day of the calendar month next following twelve months from the date he first performed an Hour of Service. B. Eligibility Upon Re-Employment: Any Employee of Oceaneering International, Inc. (or any Affiliate which has adopted the Plan with the consent of Oceaneering International, Inc.) who is re-employed shall commence participation immediately if he had been a Participant during his prior period of Service or, if he had not been a Participant during his prior period of Service, shall commence participation after the elapse of twelve months from the date he first performed an Hour of Service. C. Temporary Employees Ineligible: Notwithstanding any other provision of this Plan, no temporary employee (as herein defined) shall be eligible to participate herein while on temporary status. For purposes of this Plan, a temporary employee is an employee who is hired in a temporary position. A temporary position is (i) a position which is expected by the respective Employer or Affiliate to be of limited duration or (ii) for a particular project upon the conclusion of which the employee is expected by the respective Employer or Affiliate to be terminated. D. Leased Employees Ineligible: Notwithstanding any other provision of this Plan, no leased employee (as defined in Article I) shall be eligible to participate herein. E. Former Eastport Plan Participants: Each individual who was a participant in the Eastport International, Inc. Employee's 401(k) Profit Sharing Plan on December 31, 1992, and is employed by the Company on such date ("Eastport Plan Participant") shall immediately be eligible to become a Participant in this Plan effective December 31, 1992. F. Former ILC Employees: Each Employee, who was formerly employed by ILC Space Systems, a division of ILC Dover, Inc. ("ILC") immediately prior to the transfer of assets from ILC to the Company on May 18, 1993, shall receive service credit for such Employee's last period of continuous employment with ILC immediately prior to the transfer of assets for purposes of Service requirements with respect to eligibility to participate in and vesting under this Plan. G. Former Multiflex, Inc. Employees: Effective May 2, 1994, each Employee, who was formerly employed by Multiflex, HOU01A:316781.5 008939.0157 Inc., a Texas corporation ("Multiflex"), immediately prior to the Stock Purchase Agreement, dated March 4, 1994, among the Company, Oceaneering International Services Limited and Multiflex International, Inc. shall receive Service credit for such Employee's last period of continuous employment with Multiflex immediately prior to the transfer of assets for purposes of Service requirements with respect to eligibility to participate in and vesting under this Plan. 2.2 Notification of Eligible Employees: The Committee, which shall be the sole judge of the eligibility of an Employee to participate under the Plan, shall notify each Employee of his initial eligibility to participate in the Plan. 2.3 Participant Applications: Each Employee who shall become eligible to become a Participant under the Plan, and who shall desire so to become a Participant, shall execute and file with the Committee an application to become a Participant in such form as may be prescribed by the Committee, agreeing to be bound by the terms and conditions of the Plan, and authorizing salary reductions for Deferred Contributions as provided in Article III hereof. An Employee who does not participate in the Plan when he first becomes eligible may commence such participation, if he is then otherwise eligible, as of the first day of any calendar month thereafter by signing and returning to the Committee an application, in the prescribed form, at least ten days prior to the first day of such calendar month. Once an Employee has commenced participation in the Plan he shall remain a Participant as long as he continues as an Employee of an Employer, is in an employment status covered by the Plan and has an account in the Trust Fund. An Employee's application to become a Participant under the Plan shall include an election by the Participant concerning which of, and in what proportion, Deferred Contributions made in his behalf shall be invested in the particular Investment Fund alternatives described in Section 4.7 of this Plan. 2.4 Transfers and Authorized Leaves of Absence: If a Participant is transferred to employment with an Affiliate that is not an Employer or to an employment classification with an Employer that is not covered by this Plan, his participation under the Plan shall be suspended; provided, however, that during the period of his employment in such ineligible position or with a non-participating Affiliate: (i) he may make no further Deferred Contributions, (ii) he shall continue to vest, (iii) his Employer Contribution Account shall receive no Employer Contribution allocations under Section 4.2 for periods during which he is not eligible to participate herein, and (iv) he shall continue to participate in the allocation of the Income of the Trust Fund as provided in Section 4.6. If a Participant is on an Authorized Leave of Absence he shall discontinue participation until his return to active employment except that if regular payroll salary or wages are HOU01A:316781.5 008939.0157 continued during such absence the Participant shall continue to participate during such absence. 2.5 Re-Employment; Certain Account Reinstatements: Upon the re-employment of any individual who had previously been a Participant after five consecutive Breaks in Service, such a re-employed individual shall not be entitled to reinstatement of any Forfeiture incurred by reason of his prior termination of employment. Upon the re-employment of an individual who had previously been a Participant and prior to incurring five consecutive Breaks in Service, any prior Forfeiture incurred by reason of his termination of employment and a resulting distribution shall be reinstated as of his re-employment and thereafter held in his Employer Contribution Account. 2.6 Service for Former Eastport Employees: For purposes of calculating Service under this Plan, a Participant who is a former Eastport employee shall receive credit for his Service with Eastport as defined in the Eastport Plan. HOU01A:316781.5 008939.0157 ARTICLE III CONTRIBUTIONS AND FORFEITURES 3.1 Employer Contributions: Each Employer shall make a Contribution to the Trust Fund in cash or in Common Stock (but contributions of Common Stock may only be made to the extent Common Stock is required to fund Employer Contributions (including Deferred Contributions) to be invested in Common Stock or to the extent a restored account is to be invested in Common Stock) equal to (i) any amount required to restore benefits under Section 7.18, (ii) an amount equal to 100% of Matched Deferred Contributions that are to be invested in Common Stock, (iii) an amount equal to 50% of Matched Deferred Contributions that are to be invested among the available Investment Funds under Section 4.7 hereof (excluding Common Stock), (iv) an amount equal to the Deferred Contributions authorized by Participants, (v) any amount necessary to restore Forfeitures under Section 2.5, and (vi) such other amount as may be determined by the Employer. The Employer Contribution (except for amounts required to restore benefits under Section 2.5 or 7.18) shall be authorized by the Employer by adopting an appropriate resolution of its Board of Directors and announcing the contribution to Employees and either claiming such amount as a deduction on its federal income tax return or designating such amount in writing to the Trustee. The total of Employer and Deferred Contributions shall in no event exceed the maximum amount deductible from the Employer's income for such year under Section 404(a)(3)(A) of the Code plus any carried over credits which may have accrued under Section 404 of the Code. The amount of the Employer Contribution in the case of Employer Contributions made in respect of the Matched Deferred Contributions that are invested in Common Stock shall be equal to 100% of such Matched Deferred Contributions and, in the case of Employer Contributions made in respect of Matched Deferred Contributions that are invested among all other Investment Funds (excluding Common Stock), shall be equal to 50% of such Matched Deferred Contributions. Notwithstanding the foregoing provisions of this Section 3.2, from and after January 1, 1996, if the Employer determines prior to the end of the Plan Year that the Plan may not satisfy the actual contribution percentage test for the Plan Year pursuant to Article XIII of the Plan, the Employer may require that the amount of the Employer Contribution being allocated to the accounts of Participants who are highly compensated employees be reduced to the extent necessary to prevent excess aggregate contributions from being made to the Plan. Although the Employer may reduce the amount of Employer Contribution that may be allocated to the account of a highly compensated employee, the affected Participants shall continue to participate in the Plan. The determination of whether an Employee is a highly compensated employee shall be determined in accordance with Code Section 414(q) in the determination year which shall be the Plan Year and the look-back year shall be the HOU01A:316781.5 008939.0157 12-month period immediately preceding the determination year, or at the election of the Employer, may be the calendar year ending within the determination year. In applying the foregoing limitations to highly compensated employees, the Committee shall adopt such rules and procedures as it determines are necessary and appropriate in order to implement such limitations. Any Employer Deferred Contribution or Deferred Contribution which is made by a mistake of fact may be returned to the Employer, upon the direction of the Committee, within one year after the payment of the Employer Deferred Contribution or Deferred Contribution. All Employer Deferred Contributions and Deferred Contributions effected to this Plan are specifically conditioned upon their deductibility under Section 404 of the Code and to the extent such deduction is disallowed then, upon direction of the Committee, so much of such Employer Deferred Contribution and/or Deferred Contribution which is disallowed as a deduction shall be returned to the Employer not later than one year after the disallowance of the deduction. Employer Deferred Contributions and Deferred Contributions may be made at any time before the due date of the Company's federal income tax return (including extensions thereof) for its fiscal year within which occurs the last day of the Plan Year for which such contributions are made. 3.2 Deferred Contributions: Each Participant, so long as he remains a Participant, shall be permitted to elect a Deferred Contribution rate and have contributed to the Trust Fund an amount in 1% increments (or other incremental amounts determined by the Committee) from 1% to 16% of his Compensation for the Plan Year. Subject to the specific provisions of this Section 3.2, in the usual case Deferred Contributions not exceeding the first 6% of his Participant's Compensation shall be termed Matched Deferred Contributions and the excess of Deferred Contributions over Matched Deferred Contributions shall be termed Unmatched Deferred Contributions. All Deferred Contributions must be made by payroll deduction in accordance with rules established by the Committee. All Deferred Contributions shall be paid over to the Trustee as soon as is practicable after withholding by payroll deduction. A change in the amount of Compensation of a Participant shall not change the percentage of his Compensation previously directed to be withheld under this Section 3.2. A Participant may, by giving 10 days' advance written notice to the Committee, change the amount of his Deferred Contributions once every 30 days effective as of the first day of the next calendar month. A Participant may elect at any time to totally suspend either his Unmatched Deferred or Matched Deferred Contributions and such suspension shall become effective for the first pay HOU01A:316781.5 008939.0157 period next following receipt by the Committee of such notice of suspension if such notice is received at least ten days prior to the commencement of such pay period, otherwise the notice shall be effective for the next following pay period. In the event of a suspension, the Unmatched Deferred or Matched Deferred Contributions, or both, so suspended may not be resumed until the first day of the calendar month next following six calendar months from the date such contributions were discontinued. For any period which a Participant is suspended from participating in the Plan pursuant to the provisions of this Section 3.2, such a Participant shall nevertheless remain a Participant in the Plan and he shall participate, to the extent he is otherwise entitled, in Employer Contributions under the Plan and his Account will continue to share in Income of the Trust Fund during such period. Notwithstanding the foregoing provisions of this Section 3.2, on and after January 1, 1989 and prior to January 1, 1996, in the case of a highly compensated employee (within the meaning of Section 414(g) of the Code (i) no compensation in excess of $50,000 shall be considered for determining an amount of such Participant s Deferred Contribution rate and (ii) the maximum Deferred Contributions for such a Participant shall not exceed 6% of the Participant s Compensation (as limited by clause (i) hereof). From and after January 1, 1996, if the Employer determines prior to the end of the Plan Year that the Plan may not satisfy the actual deferral percentage test pursuant to Article XIII of the Plan for the Plan Year, the Employer may reduce the percentage rate of Compensation that a highly compensated employee has elected to defer pursuant to this Section 3.2 to the extent necessary to prevent excess contributions from being made to the Plan. Although the Employer may reduce the amount of Deferred Contribution that may be allocated to the account of a highly compensated employee, the affected Participants shall continue to participate in the Plan. When the situation that resulted in the reduction of Deferred Contributions ceases to exist, the Employer shall reinstate the amount of Deferred Contributions elected by the Participant to the fullest extent possible for all affected Participants in a nondiscriminatory manner. The determination of whether an Employee is a highly compensated employee shall be determined in accordance with Code Section 414(q) in the determination year which shall be the Plan Year and the look-back year shall be the 12-month period immediately preceding the determination year, or at the election of the Employer, may be the calendar year ending within the determination year. In applying the foregoing limitations to highly compensated employees, the Committee shall adopt such rules and procedures as it determines are necessary and appropriate in order to implement such limitations. Notwithstanding the foregoing provisions of this Section 3.2, a Participant's Deferred Contributions during any taxable year beginning after December 31, 1995, shall not exceed a maximum of $9,500 as adjusted by the Secretary of the Treasury to account for cost-of-living increases. In the event a Participant's Deferred Contributions exceed such limit, or in the event the Participant submits a written claim to the Committee, HOU01A:316781.5 008939.0157 at the time and in the manner prescribed by the Committee, specifying an amount of Deferred Contributions that will exceed the applicable limit of Section 402(g) of the Code when added to amounts deferred by the Participant in other plans or arrangements, such excess (the "Excess Deferrals"), plus any income and minus any loss attributable thereto, shall be returned to the Participant by the April 15 of the following year. Such income shall include the allocable gain or loss for (i) the Plan Year in which the Excess Deferral occurred and (ii) the period from the end of that Plan Year to the date of distribution, and distribution shall first be applied to Unmatched Deferred Contributions and, upon their exhaustion, to Matched Deferred Contributions. The amount of any Excess Deferrals to be distributed to a Participant for a taxable year shall be reduced by excess Pre-Tax Contributions distributed pursuant to Article XIII for the Plan Year beginning in such taxable year. The income or loss attributable to the Participant's Excess Deferral for the Plan Year shall be determined by multiplying the income or loss attributable to the Participant's respective Deferred Contribution Account balance for the Plan Year (or relevant portion thereof) by a fraction, the numerator of which is the Excess Deferral and the denominator of which is the Participant's total respective Deferred Account balance as of the Valuation Date next preceding the date of return of the Excess Deferral. Unless the Committee elects otherwise, the income or loss attributable to the Participant's Excess Deferral for the period between the end of the Plan Year and the date of distribution shall be determined using the safe-harbor method set forth in Treasury Regulations to Section 402(g) of the Code, and shall be equal to 10% of the allocable income or loss for the Plan Year, calculated as set forth immediately above, multiplied by the number of calendar months that have elapsed since the end of the Plan Year. For these purposes, distribution of an Excess Deferral on or before the 15th day of a calendar month shall be treated as having been made on the last day of the preceding month, and a distribution made thereafter shall be treated as having been made on the first day of the next month. Any Excess Deferrals not returned to the Participant by April 15 of the following year shall be treated as Annual Additions under Article XI of the Plan. 3.3 Withdrawals: (A) Voluntary and Mandatory Contributions: Upon written application to the Committee, a Participant may elect at any time to withdraw all or any portion of Voluntary Contributions in the Employee Contribution Account of such Participant (made pursuant to the provisions of the Plan in effect prior to October 1, 1985), as adjusted for investment income, gain or loss, determined as of the Adjustment Date next following the filing of the election to withdraw by the Participant with the Committee. A Participant may elect at any time to withdraw all or any portion of Mandatory Contributions in the Employee Contribution Account of such Participant (made pursuant to the provisions of the Plan in effect HOU01A:316781.5 008939.0157 prior to October 1, 1985), as adjusted for investment income, gain or loss, determined as of the Adjustment Date next following the filing of the election to withdraw with the Committee. (B) Rollover Contributions: Upon written application to the Committee, a Participant may elect at any time to withdraw all or any portion of Rollover Contributions in such Participant s Rollover Account, as adjusted for investment income, gain or loss, determined as of the Adjustment Date next following the filing of the election to withdraw by the Participant with the Committee. (C) Pre 1985-Employer Contribution Account: Upon written application to the Committee, a Participant may elect at any time to withdraw all or any portion of contributions in his Employer Contribution Account which are attributable to contributions made pursuant to the provisions of the Plan in effect prior to October 1, 1985. Provided, however, that no such withdrawal of Employer Contributions made prior to 1985 shall be permitted unless the Participant's Voluntary Contributions, Mandatory Contributions and/or Rollover Contributions are then or have previously been completely and fully withdrawn by the Participant. A Participant's request to withdraw any such Employer Contributions shall be subject to the consent of the Committee. Each such withdrawal from such Employer Contribution Account shall be made as of the Adjustment Date next following the date of the filing of election to withdraw with the Committee. (D) Hardship Withdrawals: A Participant may at any time file with the Committee an appropriate written request for a hardship withdrawal of an amount equal to a specified portion of his vested Employer Contribution Account and Deferred Accounts; provided, however, that no such withdrawal shall be permitted (i) unless the Participant's Employee Contribution Account(s) (attributable to Voluntary and Mandatory Contributions) and/or Rollover Account is then or has previously been completely withdrawn by the Participant or (ii) to the extent such withdrawal would include Income allocated to his Deferred Accounts on or after January 1, 1989, and that on and after January 1, 1989, no such withdrawal shall be made from his Employer Contribution Account to the extent such withdrawal would include qualified matching contributions or qualified non-elective contributions, as defined in Section 1.401(k)-1(g)(7) of the Treasury Regulations, and any Income allocated thereto. A Participant's request to withdraw any amount from Employer Contribution Account or Deferred Accounts must be made in writing and shall be subject to the consent of the Committee. The basis for the Committee consenting to or refusing to consent to the Participant's request shall be that of demonstrated severe and immediate financial hardship of the Participant and other resources HOU01A:316781.5 008939.0157 of the Participant are not reasonably available to alleviate the hardship. A Participant must have taken all distributions, other than hardship distributions, and all nontaxable loans otherwise available under this Plan and all employee plans maintained by the Company. The amount of the hardship withdrawal shall be limited to that amount which the Committee determines to be required to meet the immediate financial need created by the hardship; provided however, the amount may include any amounts necessary to pay any federal, state or local income taxes or penalties reasonably anticipated to result from the distribution. The hardship withdrawal shall be made in cash as soon as practicable after the Participant submits the hardship request, and the dollar amount withdrawn shall be determined by reference to the value of the Deferred Contribution Account and the value of the Participant s vested interest in his Employer Contributions Account as of the Adjustment Date immediately preceding the date of withdrawal, plus the net dollar amount of his or her contributions for the month in which the withdrawal occurs. The Participant shall file a written request with the Committee specifying the reasons for the withdrawal, the amount of funds requested to be withdrawn, and the Account from which the withdrawal should be made. A Participant who receives such a hardship withdrawal shall be prohibited from making a Deferred Contribution under the Plan or elective contributions and employee contributions to all other plans maintained by the Employer for the 12 consecutive months following the date of distribution, and in addition, the dollar limitation on the Deferred Contribution described in Section 3.2 shall be reduced in the year following the hardship withdrawal by the amount of the Deferred Contribution made by the Participant in the Plan Year during which the withdrawal was made. The following standards (or such other standards as may be acceptable under Treasury Regulations issued pursuant to Section 401(k) of the Code) shall be applied by the Committee on a uniform and nondiscriminatory basis in determining the existence of such a hardship: (i) expenses for medical care previously incurred by the Participant or the Participant's spouse, children or other dependents (within the meaning of Section 152 of the Code) or necessary for these persons to obtain medical care described in Section 213(d) of the Code; (ii) costs directly related to the purchase of a principal residence for the Participant (excluding mortgage payments); HOU01A:316781.5 008939.0157 (iii) payment of tuition and related educational fees for the next 12 months of post-secondary education for the Participant or the Participant's spouse, children or other dependents as defined in Section 152 of the Code; or (iv) payments necessary to prevent the eviction of the Participant from his principal residence, or foreclosure on the mortgage of the Participant's principal residence. Any withdrawal shall be from such one or more of the investments in which the Participant's Accounts are invested as determined by the Committee in its sole discretion, but the Committee may determine to permit Participants to elect from which investments a less than total withdrawal shall be made. 3.4 Disposition of Forfeitures: In the event of the termination of a Participant's employment, his Employer Contribution Account shall continue to be maintained (and receive Income allocations pursuant to Section 4.6). Upon the earlier of the terminated Participant's (i) receiving a distribution of the entire portion of the Account to which he is entitled under Section 5.3 (except, that if he is not so entitled to any such portion, he shall be deemed to have received such a distribution upon such termination of employment) or (ii) incurring five consecutive Breaks in Service, the portion of the Account to which he is not entitled shall become a Forfeiture and, as such, forfeited from the Account, valued as of the preceding Adjustment Date and available to reduce future Employer Contributions in accordance with the provisions of this Section. Upon a terminated Participant becoming re-employed by the Employer or an Affiliate prior to incurring five consecutive Breaks in Service but after incurring a Forfeiture, the amount of the Forfeiture, valued as of the Adjustment Date preceding the date forfeited and without adjustment for subsequent gains and losses, shall be reinstated in his Employer Contribution Account. In any Plan Year in which amounts are required to be credited to the Account of a previous Participant pursuant to the re-employment provisions of Section 2.5 or the unclaimed benefit provisions of Section 7.18 hereof, such amounts shall be charged against and deducted from Forfeitures otherwise available to reduce Employer Contributions for the Plan Year in which such amounts must be reinstated. To the extent that Forfeitures for any Plan Year exceed the amounts required to reinstate the Accounts of reinstated Participants, they shall be applied to reduce Employer Contributions for the Plan Year. In any Plan Year in which Forfeitures exceed the amount required as Employer Contributions, such excess shall be held in a suspense account (which shall not share in the Income of the Trust Fund) and applied until exhausted toward satisfying future Employer Contributions. HOU01A:316781.5 008939.0157 ARTICLE IV ALLOCATIONS TO PARTICIPANTS' ACCOUNTS 4.1 Individual Accounts: The Committee shall create and maintain adequate records to disclose the interest in the Trust of each Participant, Former Participant and Beneficiary. Such records shall be in the form of individual accounts, and credits and charges shall be made to such accounts in the manner herein described. Each Participant may have the following Accounts: An Employer Contribution Account, an Unmatched Deferred Contribution Account, a Matched Deferred Contribution Account and a Rollover Account. In addition, a Participant in the Plan as in effect prior to October 1, 1985, may also have a Mandatory Employee Contribution Account and a Voluntary Employee Contribution Account. The maintenance of individual accounts is only for accounting purposes, and a segregation of assets of the Trust Fund to each account shall not be required. Voluntary Employee Contribution Accounts, Mandatory Employee Contribution Accounts, Unmatched Deferred Accounts and Matched Deferred Accounts shall be non-forfeitable and fully vested at all times. 4.2 Employer and Deferred Contributions: Deferred Contributions shall be allocated to the respective Participant Deferred Contribution Accounts of those Participants who elected salary reduction in order to have such Deferred Contributions made by the Employer. Subject to the limitations of Section 3.1, the portion of the Employer Contribution effected to restore benefits as required under either Section 2.5 or 7.18 shall be allocated to the appropriate Participants entitled thereto. The remainder of the Employer Contribution (excluding Deferred Contributions) for any Plan Year shall be allocated to eligible Participants by dividing such remainder into two parts, one part each for those Employer Contributions that are made in respect of Matched Deferred Contributions invested in Common Stock and the other part consisting of those Employer Contributions that are made in respect of Matched Deferred Contributions that are invested among the available Investment Funds pursuant to Section 4.7 (excluding Common Stock). The amount of each Participant's share of the part of the Employer's Contribution that is made in respect of Matched Deferred Contributions invested in Common Stock is to be determined by multiplying the total of such Employer Contribution to be allocated times a fraction, the numerator of which is the Participant's Matched Deferred Contributions for the Plan Year that are to be invested in Common Stock and the denominator of which is the total of all eligible Participants' Matched Deferred Contributions for the Plan Year that are to be invested in Common Stock. The amount of each Participant's share in the part of the Employer's Contribution that is attributable to Matched Deferred Contributions invested among the available Investment Funds pursuant to Section 4.7 (excluding Common Stock) is to be determined by multiplying the total of such Employer Contribution HOU01A:316781.5 008939.0157 to be allocated times a fraction, the numerator of which is the Participant's Matched Deferred Contributions for the Plan Year which have been or are to be invested among the available Investment Funds pursuant to Section 4.7 (excluding Common Stock) and the denominator of which is the total of all eligible Participants' Matched Deferred Contributions which have been or are to be invested among the available Investment Funds pursuant to Section 4.7 (excluding Common Stock) for the Plan Year. Any amount of Employer Contribution allocated to a Participant shall be allocated to his Employer Contribution Account. Allocation of Employer, including Deferred, Contributions may be effected as of any Adjustment Date determined by the Committee; provided, however, that all Employer, including Deferred, Contributions shall be allocated, unless allocated earlier in the Plan Year, as of the December 31 Adjustment Date. 4.3 Forfeitures: As of the end of each Plan Year, Forfeitures, which have become available for distribution during such Plan Year, shall be credited to the obligation of the Employer to effect Employer, including Deferred, Contributions. 4.4 Valuation of Trust Fund: A valuation of the Trust Fund shall be made as of each annual Adjustment Date and such valuation shall be based upon the current market value of the Trust Fund. The Committee may in its discretion require that an Adjustment Date with a determination of asset value occur on any other date during the Plan Year that the Committee deems a valuation to be advisable. Any such interim valuation shall be exercised on a uniform and non-discriminatory basis. For the purposes of each such valuation, the assets of each Investment Fund shall be valued at their respective current market values, and the amount of any obligations for which the Investment Fund may be liable, as shown on the books of the Trustee, shall be deducted from the total value of the assets. 4.5 Distributions Deducted from Participant's Account: The amount of any benefits paid to or for the account of any Participant shall be debited to his Account as of the Adjustment Date preceding the date paid. 4.6 Income: The Income of the Trust Fund for each Adjustment Date shall be divided among the available Investment Funds pursuant to Section 4.7 in order that the Income attributable to each of these respective categories of investments is allocated only to such investments and thereafter shall be further allocated to the Accounts of Participants, Former Participants and Beneficiaries who had unpaid balances in their Accounts in the appropriate investment category on the Adjustment Date in proportion to the balances in such Accounts on the day after the next preceding Adjustment Date, but after first reducing each such Account balance by any distributions from the Account since the next preceding Adjustment Date. If, upon termination of employment of a Participant, a change of 10% or more in the value of the assets of any category of investments of HOU01A:316781.5 008939.0157 the Trust Fund has occurred since the last Adjustment Date, the Committee shall instruct the Trustee to determine the Income attributable to the particular category of investment since the last Adjustment Date in which event the Accounts of any Participant whose employment terminates prior to the next Adjustment Date shall be adjusted to reflect this determination. 4.7 Investment Funds: The Trustee shall divide the Trust Fund into separate Investment Funds for investment purposes as set forth on Schedule B hereto. Contributions shall be paid into the Investment Funds in accordance with the provisions of Sections 4.8 and 4.9, as certified to the Trustee by the Committee. Except as otherwise provided herein, interest, dividends and other income and all profits and gains produced by each such Investment Fund shall be paid into such Investment Fund, and such interest, dividends and other income or profits and gains, without distinction between principal and income, may be invested and reinvested but only in the property hereinabove specified for the particular Investment Fund. 4.8 Investment Directions by Participants; Employer Contribution Investment: Each Participant shall file a written investment election (including amendments of such investment election as contemplated by this Plan) with the Committee in the manner prescribed by it, which shall direct the amount of his Deferred Contributions and Rollover Accounts and all Income of the Trust allocable to such contributions, in such percentages (in increments of 1%) as he may designate among the Investment Funds. Once a Participant makes an election to direct his Deferred Contributions and Rollover Accounts, such an election shall remain in effect until it is changed by the Participant pursuant to the procedures in this Section 4.8. An initial direction of investments for Rollover Accounts and Deferred Contributions Accounts pursuant to an election under Section 3.2 shall be made upon at least ten days' notice to be effective as of the first day of the following calendar month. Any change of investment direction with respect to unallocated Deferred Contributions may be made once every 30 days by providing advance notice and shall be effective only with respect to those contributions that are allocated on or after the Trustee receives from the Committee such written notice of change of investment election. The Employer Contributions (excluding Deferred Contributions) made with respect to Deferred Contributions that are invested in Common Stock and any Income of the Trust Fund allocable to such contributions shall initially be invested in Common Stock. The Employer Contributions (excluding Deferred Contributions) that are invested in any Investment Fund other than Common Stock of the Employer, and all Income of the Trust Fund allocable to such contributions shall be invested in such percentages which correspond to the Participant's election of Investment Funds with respect to his Deferred Contributions. HOU01A:316781.5 008939.0157 All investment elections may be subject to such limitations, determined as either a dollar amount or as a percentage of contributions, as the Committee may determine is necessary or appropriate in order to facilitate the orderly and prudent operation of the Plan and shall be subject to such notice requirements as the Committee may determine are necessary or appropriate. 4.9 Change of Investment of Account Balances: Once each 30 days via the Plan's telephone exchange system, each Participant may elect to transfer his existing Account balances among the available Investment Funds (in 1% increments), provided that such transfer election shall be made no more than twelve times per calendar year. In addition, any such election shall be subject to such further terms and conditions as the Committee may determine to be necessary or appropriate, including dollar or percentage limitations on amounts of funds transferred, in order to facilitate the orderly and prudent operation of the Plan. In the event a Participant elects to transfer funds out of an Investment Fund, then any charge attributable to such transfer, including a withdrawal, such as a market value discount imposed under the terms of a guaranteed investment contract, shall be imposed upon and borne solely by the account of the Participant who is making the withdrawal. 4.10 Special Provisions Applicable to Eastport Plan Accounts: The Committee shall instruct the Trustee to accept a transfer of the full account balance as of December 31, 1992 of each individual who was a participant in the Eastport Plan as of December 31, 1992. Such transferred assets shall be allocated to Participant Accounts in the Plan as follows: (a) Eastport Plan assets attributable to a Participant's pre-tax employee contributions made under the Eastport Plan which amounts were not subject to a matching employer contribution shall be transferred to and held thereafter in the Participant's Unmatched Deferred Contribution Account. (b) Eastport Plan assets attributable to a Participant's pre-tax employee contributions made under the Eastport Plan which amounts were subject to a matching employer contribution shall be transferred to and held thereafter in the Participant's Matched Deferred Contribution Account. (c) Eastport Plan assets attributable to employer matching contributions made under the Eastport Plan for a Participant shall be transferred to and held thereafter in the Participant's Employer Contribution Account. (d) Eastport Plan assets attributable to employer profit-sharing or other discretionary HOU01A:316781.5 008939.0157 contributions made under the Eastport Plan for a Participant shall be transferred to and held thereafter in the Participant's Employer Contribution Account. (e) Eastport Plan assets attributable to a rollover into the Eastport Plan by a Participant shall be transferred to and held thereafter in the Participant's Rollover Account. Each Eastport Plan Participant who has an outstanding loan under the Eastport Plan shall be required to repay such loan in accordance with the terms of the Eastport Plan documents, Eastport Plan Loan Policy and the loan agreement signed by the Participant. 4.11 Loans: Effective January 1, 1996, a Participant who is an Employee and, to the extent not resulting in discrimination prohibited by Section 401(a)(4) of the Code, any other Participant or any Beneficiary (including an "alternate payee" within the meaning of Code Section 414(p)(8)) who is a "party in interest" with respect to the Plan within the meaning of ERISA Section 3(14) and who must be eligible to obtain a Plan loan in order for the exemption set forth in 29 C.F.R. Section 2550.408b-1 to apply to the Plan, (hereinafter "Borrower"), may make application to the Committee to borrow from the vested portion of his Employer Contribution Account, Unmatched Deferred Contribution Account, Matched Deferred Contribution Account, Rollover Account, Mandatory Employee Contribution Account, and Voluntary Employee Contribution Account maintained by or for the Borrower in the Trust Fund, and the Committee in its sole discretion may permit such a loan. Loans shall be granted in a uniform and nondiscriminatory manner on terms and conditions determined by the Committee which shall not result in more favorable treatment of highly compensated employees and shall be set forth in written procedures promulgated by the Committee in accordance with applicable governmental regulations. All such loans shall also be subject to the following terms and conditions: (a) The amount of the loan when added to the amount of any outstanding loan or loans to the Borrower from any other plan of the Employer or an Affiliate which is qualified under Code Section 401(a) shall not exceed the lesser of (i) $50,000, reduced by the excess, if any, of the highest outstanding balance of loans from all such plans during the one-year period ending on the day before the date on which such loan was made over the outstanding balance of loans from the Plan on the date on which such loan was made or (ii) fifty percent (50%) of the present value of the Borrower's vested Account balance under the Plan. In no event shall a loan of less than $1,000 be made to a Borrower. A Borrower may not initiate a loan more than once each calendar year; nor may a Borrower HOU01A:316781.5 008939.0157 have more than one (1) loan for the purchase of a principal residence and one (1) loan for any other purpose outstanding at a time under this Plan. (b) The loan shall be for a term not to exceed five years, unless the loan is used to acquire any dwelling unit which within a reasonable time is to be used as a principal residence of the Borrower. A loan for the purchase of a principal residence shall be for a term not to exceed 10 years. The loan shall be evidenced by a note signed by the Borrower. The loan shall be payable in periodic installments and shall bear interest at a reasonable rate which shall be determined by the Committee on a uniform and consistent basis and set forth in the procedures in accordance with applicable governmental regulations. Payments by a Borrower who is an Employee receiving compensation from the Employer will be made by means of payroll deduction from the Borrower's compensation. If the Borrower is not receiving compensation from the Employer, the loan repayment shall be made in accordance with the terms and procedures established by the Committee. A Borrower may repay an outstanding loan in full at any time. (c) In the event an installment payment is not paid within 7 days of the scheduled due date, the Committee shall give written notice to the Borrower sent to his last known address. If such installment payment is not made within the period set forth in applicable procedures, the Committee shall proceed with foreclosure in order to collect the full remaining loan balance or shall make such other arrangements with the Borrower as the Committee deems appropriate. Foreclosures need not be effected until occurrence of a distributable event under the terms of the Plan and no rights against the Borrower or the security shall be deemed waived by the Plan as a result of such delay. (d) The unpaid balance of the loan, together with interest thereon, shall become due and payable upon the date of distribution of the Account or as set forth in the applicable procedures and the Trustee shall first satisfy the indebtedness from the amount payable to the Borrower or to the Borrower's Beneficiary before making any payments to the Borrower or to the Beneficiary. (e) Any loan to a Borrower under the Plan shall be adequately secured. Such security shall include a pledge of a portion of the Borrower's right, title and interest in the Trust Fund which shall not exceed 50% of the present value of the Borrower's vested Account balance under the Plan as determined HOU01A:316781.5 008939.0157 immediately after the loan is extended. Such pledge shall be evidenced by the execution of a promissory note by the Borrower which shall grant the security interest and provide that, in the event of any default by the Borrower on a loan repayment, the Committee shall be authorized to take any and all appropriate lawful actions necessary to enforce collection of the unpaid loan. (f) A request by a Borrower for a loan shall be made via the Plan's telephone exchange system, shall be confirmed in writing to the Committee and shall specify the amount of the loan. If a Borrower's request for a loan is approved by the Committee, the Committee shall furnish the Trustee with written instructions directing the Trustee to make the loan in a lump-sum payment of cash to the Borrower. (g) A loan to a Borrower shall be considered an investment of the separate Account(s) of the Borrower from which the loan is made. A record of the principal outstanding and interest accrued on the loan from time to time shall be maintained as the Participant's Loan Account. All loan repayments shall be credited as a reduction to the balance of the Loan Account when paid and thereafter reinvested exclusively in one or more of the Investment Funds in accordance with such Participant's investment election under Section 4.8. (h) The administrative expense associated with the loan will be charged against the Participant's loan balance or to the Participant's Account from which the loan is made. HOU01A:316781.5 008939.0157 ARTICLE V BENEFITS 5.1 Retirement: If a Participant's employment with the Employers and Affiliates terminates at or after he attains the age of 55, the entire amount then in each of his Accounts shall be paid to him in accordance with Section 5.4. A Participant shall be fully vested in the amount in his Accounts upon attaining the age of 55 while in the service of an Employer or Affiliate. 5.2 Death or Disability: In the event that a Participant's termination of employment is caused by his death or Disability, the entire amount then in each of his Accounts shall be paid to his Beneficiary in the case of his death or to him in the case of his Disability in accordance with Section 5.4 after receipt by the Committee of acceptable proof of death or Disability. 5.3 Termination for Other Reasons: If a Participant's employment with the Employers and Affiliates terminates before age 55 for any reason other than Disability or death, the Participant shall be entitled to the sum of: (a) The entire amount credited to his Employee Contribution Account and Deferred Contribution Accounts; plus (b) In the case of a Participant who timely elected under Section 10.5 to be covered by (ii) after the vesting schedule amendment to the Employees Stock Purchase Plan effective March 15, 1983, the amount determined under paragraph (ii) below, and in the case of a Participant who did not elect to be covered by (ii) or who was not eligible to be covered by (ii), the amount determined under (i) below: (i) An amount equal to his "vested percentage" of his Employer Contribution Account balance determined in accordance with the following schedule: Years of Service Vested Percentage Less than 1 0% At least 1 but less than 2 10% At least 2 but less than 3 20% At least 3 but less than 4 40% At least 4 but less than 5 60% At least 5 but less than 6 80% 6 or more 100% HOU01A:316781.5 008939.0157 (ii) An amount equal to his "vested percentage" of his Employer Contribution Account balance. Such vested percentage shall be determined on the date of his termination in accordance with the following schedule: Plan Years Since the Plan Year as of Which the Employer Contribution was Allocated Vested Percentage Less than 4 0% 4 or more 100% provided, that, on and after January 1, 1989, if he is credited with at least 5 Years of Service, such vested percentage shall be 100%. For purposes of the vesting schedule above, all Contributions of the Employer shall be deemed to have been allocated as of the December 31 of the Plan Year to which they relate, regardless of when such Employer Contribution was actually made. All earnings attributable to Employer Contributions shall vest as if such earnings had been allocated in the same Plan Year as the Employer Contributions to which such earnings are attributable. Any portion of each of the Accounts of a terminated Participant in excess of the vested portion specified above shall be a Forfeiture, which shall be disposed of as provided in Section 3.4. (c) For purposes of this Section 5.3, Years of Service shall include all of a Participant's Years of Service as defined in Article I hereof. (d) In the event a Participant who is not fully vested in his Employer Contribution Account has received a withdrawal or other distribution therefrom, the Participant's vested interest in his Employer Contribution Account at any relevant time shall be the amount X determined by the formula: X = P (AB+D) - D. For purposes of applying the formula: P is the vested percentage at the relevant time; AB is the account balance at the relevant time; D is the amount of the prior distribution; and the relevant time is the time at which, under the Plan, the vested percentage in the Account cannot increase. HOU01A:316781.5 008939.0157 (e) Notwithstanding the foregoing, each Eastport Plan Participant who was 100% vested in his Employer Contribution and Regular Matching Contributions Accounts as defined in the Eastport Plan as of December 31, 1992 shall be 100% vested in his Employer Contribution Account in this Plan. An Eastport Plan Participant who had 0% vesting in his Employer Contribution and Regular Matching Contribution Accounts as defined in the Eastport Plan as of December 31, 1992, shall be vested in his Employer Contribution Account in this Plan in accordance with the schedule below which provides the greater percentage of vesting: (i) Years of Service Vested Percentage Less than 1 0% At least 1 but less than 2 10% At least 2 but less than 3 20% At least 3 but less than 4 40% At least 4 but less than 5 60% At least 5 but less than 6 80% 6 or more 100% (ii) Percent of Years of Service Non-Forfeitable Interest Less than 1 0% 1 0% 2 0% 3 0% 4 0% 5 or more 100% 5.4 Payments of Benefits: Upon a Participant's entitlement to payment of benefits under Section 5.1, 5.2 or 5.3, he shall be entitled to be paid the amount in his Accounts as soon as is practicable after the date causing the distribution to occur. If a Participant's benefit exceeds the $3,500, it will be paid prior to the earlier to occur of his Disability, death or attainment of age 55 only with his consent. Payment of a Participant's benefits must commence within 60 days after the close of the Plan Year in which the latest of the following events occurs: (a) The date the Participant attains the age of 55; (b) The tenth anniversary of the year in which the Participant commenced participation in the Plan; or (c) The Participant terminates his employment with the Employers and Affiliates; HOU01A:316781.5 008939.0157 but, on and after January 1, 1989, in no event later than April 1 following the calendar year in which the Participant attains age 70 1/2, even if his employment has not terminated. Any portion of a distribution attributable to investments in Common Stock shall be in the form of shares of Common Stock except that cash shall be paid in lieu of fractional shares and except that a Participant may elect to receive cash in lieu of any Common Stock. Payment of a Participant's benefits shall commence no later than April 1 following the calendar year in which the Participant attains age 70 1/2, and in the event of a Participant's death, shall be completed not later than one year after the date of the Participant's death and shall otherwise satisfy the minimum distribution requirements under Section 401(a)(9) of the Code and the regulations thereunder. A Participant's benefits shall be paid in the form of a lump sum; provided, however, if a Participant's benefits exceed $3,500 at the time of distribution, he may elect to receive his benefits in the form of (i) a lump sum, (ii) installment payments (annually, quarterly or monthly) over a specified period of time, not exceeding the life expectancy of the Participant or the joint life and survivor expectancy of the Participant and his Beneficiary, or (iii) a combination thereof. Installment payments shall be made from a Participant's Accounts and the Investment Funds elected thereunder on a pro rata basis. If a distribution is one to which sections 401(a)(11) and 417 of the Code do not apply, such distribution may commence less than 30 days after the notice required under section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: (1) the plan administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (2) the Participant, after receiving the notice, affirmatively elects a distribution. If a benefit is to be paid to a Participant before he attains age 59-1/2, the Participant shall be advised by the Committee that, pursuant to Section 72(t) of the Code, an additional income tax may be imposed equal to 10% of the portion of the amount paid which is included in his gross income. 5.5 Designation of Beneficiary: Each Participant from time to time may designate any person or persons (who may be designated contingently or successively and who may be an entity other than a natural person) as his Beneficiary or Beneficiaries to whom his Plan benefits are paid if he dies before receipt of all such benefits. Each Beneficiary designation shall be in the form prescribed by the Committee and will be effective only when HOU01A:316781.5 008939.0157 filed with the Committee during the Participant's lifetime. Unless it is established to the satisfaction of the Committee that the Participant's spouse cannot be located, a Participant who is married may not designate anyone other than his spouse as a beneficiary except with the written consent of such spouse to the designation of a specific beneficiary, including any class of beneficiaries or contingent beneficiaries, and the designation of a specific benefit payment form, which may not be changed without spousal consent (or such written consent expressly permits designations by the Participant without further spousal consent), which consent must acknowledge that the spouse is waiving rights to receive benefits hereunder and which written consent must be witnessed by a Plan representative or a notary public. Any such consent by a spouse (or establishment that the spouse cannot be located) shall be only effective with respect to such spouse. A consent that permits designations by the Participant without further consent by the spouse must acknowledge that the spouse has the right to limit consent to a specific beneficiary and benefit payment form and that the spouse voluntarily elects to relinquish either or both of such rights. Each Beneficiary designation filed with the Committee will cancel all Beneficiary designations previously filed with the Committee. The revocation of a Beneficiary designation, no matter how effected, shall not require the consent of any designated beneficiary. If any Participant fails to designate a Beneficiary in the manner provided above or if the Beneficiary designated by a deceased Participant dies before him or before complete distribution of the Participant's benefits and in either event there is no spouse, the Committee, in its discretion, may direct the Trustee to distribute such Participant's benefits (or the balance thereof) to either: (a) Any one or more or all of the next of kin of such Participant, and in such proportions as the Committee determines; or (b) The estate of the last to die of such Participant and his Beneficiary or Beneficiaries. HOU01A:316781.5 008939.0157 ARTICLE VI TRUST FUND All contributions under this Plan shall be paid to the Trustee and deposited in the Trust Fund. All assets of the Trust Fund, including investment income, shall be retained for the exclusive benefit of Participants, Former Participants and Beneficiaries and shall be used to pay benefits to such persons or to pay administrative expenses of the Plan and Trust Fund to the extent not paid by the Employer and shall not revert to or inure to the benefit of the Employer. Notwithstanding anything herein to the contrary, upon the Employer's request, a contribution may be returned to the Employer if permitted under Section 3.1 hereof. HOU01A:316781.5 008939.0157 ARTICLE VII ADMINISTRATION 7.1 Allocation of Responsibility among Fiduciaries for Plan and Trust Administration: The Fiduciaries shall have only those specific powers, duties, responsibilities and obligations as are specifically given them under this Plan or the Trust. In general, the Employer shall have the sole responsibility for making the contributions provided for under Section 3.1, and shall have the sole authority to appoint and remove the Trustee, members of the Committee, and any Investment Manager which may be provided for under the Trust, and to amend or terminate, in whole or in part, this Plan or the Trust. The Committee shall have the sole responsibility for the administration of this Plan which responsibility is specifically described in this Plan and the Trust Agreement. The Trustee shall have the sole responsibility for the administration of the Trust and the management of the assets held under the Trust (except to the extent an Investment Manager is acting with respect to Trust Fund and except to the extent that any portion of assets are held by an insurance company pursuant to a group annuity or other contract), all as specifically provided in the Trust Agreement. Any Investment Manager shall have the sole responsibility for investment of the portion of the Trust Fund designated in the instrument appointing such Investment Manager. Any insurance company that has issued a contract which is the investment medium for the available Investment Funds under Section 4.7 hereof shall have the sole responsibility for the investment of the portion of the Trust Fund designated under the terms of the Plan to be invested in such contract. Each Fiduciary warrants that any directions given, information furnished, or action taken by it shall be in accordance with the provisions of the Plan or the Trust, as the case may be, authorizing or providing for such direction, information or action. Furthermore, each Fiduciary may rely upon any such direction, information or action of another Fiduciary as being proper under this Plan or the Trust, and is not required under this Plan or the Trust to inquire into the propriety of any such direction, information or action except as required by ERISA. It is intended under this Plan and the Trust that each Fiduciary shall be responsible for the proper exercise of its own powers, duties, responsibilities and obligations under this Plan and the Trust and shall not be responsible for any act or failure to act of another Fiduciary. No Fiduciary guarantees the Trust Fund in any manner against investment loss or depreciation in asset value. 7.2 Appointment of Committee: The Board of Directors of the Company shall appoint the Committee which shall consist of not less than three persons, who may be employees of the Company or an Affiliate, to act as Administrator of the Plan and Named Fiduciary under ERISA and to perform the administrative duties set forth herein. Each member of the Committee shall serve for such term as the Board of Directors of the Company may designate or until his death, resignation or removal by said Board. The Board of Directors of the Company shall promptly appoint HOU01A:316781.5 008939.0157 successors to fill any vacancies in the Committee if such membership falls below three. 7.3 Records of Committee: The Committee shall keep appropriate records of its proceedings and the administration of the Plan. The Committee shall make available to Participants and their beneficiaries for examination, during business hours, such records of the Plan as pertain to the examining person and such documents relating to the Plan as are required by ERISA. 7.4 Committee Action; Agent for Process: Action may be taken by the Committee at any meeting where a majority of its members are present and at any such meeting any action may be taken which shall be approved by a majority of the members present. The Committee may also take any action without a meeting that is approved by a majority of the Committee members and is evidenced by a written document signed by a member of the Committee. The Committee may delegate any of its rights, powers and duties to any one or more of its members, or to any other person, by written action as provided herein, acknowledged in writing by the delegate or delegates. Such delegation may include, without limitation, the power to execute any document on behalf of the Committee. The Chairman of the Committee shall be agent of the Plan and the Committee for the service of legal process at the principal office of the Company in Houston, Texas. 7.5 Committee Disqualification: A member of the Committee who may be a Participant shall not vote on any question relating specifically to himself. 7.6 Committee Compensation, Expenses and Advisers: The members of the Committee shall serve without bond (unless otherwise required by law) and without compensation for their services as such. The Committee may select, and authorize the Trustee to compensate suitably, such attorneys, agents and representatives as it may deem necessary or advisable to the performance of its duties. All expenses of the Committee that shall arise in connection with the administration of the Plan shall be paid by the Company or by the Trustee out of the Trust Fund. 7.7 Committee Liability: Except to the extent that such liability is created by ERISA, no member of the Committee shall be liable for any act or omission of any other member of the Committee, nor for any act or omission on his own part except for his own gross negligence or willful misconduct, nor for the exercise of any power or discretion in the performance of any duty assumed by him hereunder. The Company shall indemnify and hold harmless each member of the Committee from any and all claims, losses, damages, expenses (including counsel fees approved by the Committee), and liabilities (including any amounts paid in settlement with the Committee's approval but excluding any excise tax assessed against any member or members of the Committee pursuant to the provisions of Section 4975 of the Code) arising from any act or omission of such member in connection with duties and responsibilities under the Plan, HOU01A:316781.5 008939.0157 except when the same is judicially determined to be due to the gross negligence or willful misconduct of such member. 7.8 Committee Determinations: The Committee, on behalf of the Participants and their beneficiaries, shall enforce this Plan in accordance with its terms and shall have all powers necessary for the accomplishment of that purpose, including, but not by way of limitation, the following powers: (a) To determine all questions relating to the eligibility of Employees to become Participants, the period of service of Participants and the annual compensation of Participants; (b) To authorize in writing all disbursements by the Trustee from the Trust Fund; (c) To interpret and construe all terms, provisions, conditions and limitations of this Plan and to reconcile any inconsistency or supply any omitted detail that may appear in this Plan in such manner and to such extent, consistent with the general terms of this Plan, as the Committee shall deem necessary and proper to effectuate the Plan for the greatest benefit of all parties interested in the Plan; and (d) To make and enforce such rules and regulations for the administration of the Plan as are not inconsistent with the terms set forth herein. The determination of any fact by the Committee, including the construction placed by the Committee upon the provisions of this Plan and whether or not arising out of a claim for benefits or review of a denied claim pursuant to Sections 7.16 and 7.17, shall be final, conclusive and binding upon all parties concerned, unless, and to the extent, found by a final judgment of a court of competent jurisdiction to have been arbitrary and capricious. In the course of making any such determination, the Committee shall be entitled to rely upon information furnished by a Participant, Employee, beneficiary, Employer, legal counsel for the Employer, Investment Manager or the Trustee. 7.9 Information from Employer: To enable the Committee to perform its functions, each Employer shall supply full and timely information to the Committee of all matters relating to the dates of employment of its Employees for purposes of determining eligibility of Employees to participate hereunder, the compensation of all Participants, their retirement, death or other cause for termination of employment, and such other pertinent facts as the Committee may require; and the Committee shall advise the Trustee of such of the foregoing facts as may be pertinent to the Trustee's administration of the Trust Fund. 7.10 General Powers of Committee: In addition to all other powers herein granted, and in general consistent with the HOU01A:316781.5 008939.0157 provisions hereof, the Committee shall have all other rights and powers reasonably necessary to supervise and control the administration of this Plan. 7.11 Uniform Administration: Whenever in the administration of the Plan, any action is required by an Employer or the Committee, including, but not by way of limitation, action with respect to eligibility of Employees, Contributions and benefits, such action shall be uniform in nature as applied to all persons similarly situated, and no action shall be taken which will discriminate in favor of Participants who are officers or shareholders of an Employer or highly compensated Employees. 7.12 Reporting Responsibilities: As Administrator of the Plan under ERISA, the Committee shall file with the appropriate office of the Internal Revenue Service or the Department of Labor all reports, returns and notices required under ERISA, including, but not limited to, the plan description and summary plan description, annual reports and amendments thereof to be filed with the Internal Revenue Service and/or the Department of Labor, requests for determination letters, annual reports and registration statement required by Section 6057(a) of the Code. 7.13 Disclosure Responsibilities: The Committee shall make available to each Participant and beneficiary such records, documents and other data as may be required under ERISA, and Participants or beneficiaries shall have the right to examine such records at reasonable times during business hours. Nothing contained in this Plan shall give any Participant or beneficiary the right to examine any data or records reflecting the compensation paid to, or relating to any account of, any other Participant or beneficiary, except as may be required under ERISA. 7.14 Annual Statements: As soon as practicable after the end of each Plan Year, the Committee shall prepare and deliver to each Participant a written statement showing as of the December 31 year-end Adjustment Date: (a) The balance in his Account in the Trust Fund as of the preceding December 31; (b) The amount of Employer, including Deferred Contributions allocated to his Account for the Plan Year ending on such Adjustment Date; (c) The adjustments to his Account to reflect his share of Income and expenses of the Trust Fund and appreciation or depreciation in Trust Fund assets during the Plan Year ending on such Adjustment Date; and (d) The new balance in his Account as of that Adjustment Date. HOU01A:316781.5 008939.0157 7.15 Annual Audit: If required by ERISA or requested by any Fiduciary, the Committee shall engage, on behalf of all Participants, an independent Certified Public Accountant who shall conduct an annual examination of any financial statements of the Plan and Trust and of other books and records of the Plan and Trust as the Certified Public Accountant may deem necessary to enable him to form and provide a written opinion as to whether the financial statements and related schedules required to be filed with the Internal Revenue Service and/or the Department of Labor or furnished to each Participant are presented fairly and in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding Plan Year. 7.16 Presenting Claims for Benefits: Any Participant or any other person claiming under a deceased Participant, such as the spouse or beneficiary, may submit written application to the Committee for the payment of any benefit asserted to be due him under the Plan. Such application shall set forth the nature of the claim and such other information as the Committee may reasonably request. Promptly upon the receipt of any application required by this Section, the Committee shall determine whether or not the Participant or spouse or beneficiary involved is entitled to a benefit hereunder and, if so, the amount thereof and shall notify the claimant of its findings. If a claim is wholly or partially denied, the Committee shall so notify the claimant within 90 days after receipt of the claim by the Committee, unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the end of the initial 90-day period. In no event shall such extension exceed a period of 90 days from the end of such initial period. The extension notice shall indicate the special circumstances requiring an extension of time and the date by which the Committee expects to render its final decision. Notice of the Committee's decision to deny a claim in whole or in part shall be set forth in a manner calculated to be understood by the claimant and shall contain the following: (i) the specific reason or reasons for the denial; (ii) specific reference to the pertinent Plan provisions on which the denial is based; (iii) a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) an explanation of the claims review procedure set forth in Section 7.17 hereof. HOU01A:316781.5 008939.0157 If notice of denial is not furnished, and if the claim is not granted within the period of time set forth above, the claim shall be deemed denied for purposes of proceeding to the review stage described in Section 7.17. 7.17 Claims Review Procedure: If an application filed by a Participant or Beneficiary under Section 7.16 above shall result in a denial by the Committee of the benefit applied for, either in whole or in part, such applicant shall have the right, to be exercised by written application filed with the Committee within 60 days after receipt of notice of the denial of his application or, if no such notice has been given, within 60 days after the application is deemed denied under Section 7.16, to request the review of his application and of his entitlement to the benefit applied for. Such request for review may contain such additional information and comments as the applicant may wish to present. Within 60 days after receipt of any such request for review, the Committee shall reconsider the application for the benefit in light of such additional information and comments as the applicant may have presented, and if the applicant shall have so requested, shall afford the applicant or his designated representative a hearing before the Committee. The Committee shall also permit the applicant or his designated representative to review pertinent documents in its possession, including copies of the Plan document and information provided by the Company relating to the applicant's entitlement to such benefit. The Committee shall make a final determination with respect to the applicant's application for review as soon as practicable and in any event not later than 60 days after receipt of the aforesaid request for review, except that under special circumstances, such as the necessity for holding a hearing, such 60-day period may be extended to the extent necessary, but in no event beyond the expiration of 120 days after receipt by the Committee of such request for review. If such an extension of time for review is required because of special circumstances, written notice of the extension shall be furnished to the applicant in writing, in a manner calculated to be understood by him, and shall set forth the specific reasons for the decision and specific references to the pertinent provisions of the Plan upon which the decision is based. If the decision on review is not furnished within the time period set forth above the claim shall be deemed denied on review. 7.18 Unclaimed Benefits: If at, after, or during the time when a benefit hereunder is payable to any Participant, Beneficiary or other distributee, the Committee, upon request of the Trustee, or at its own instance, shall mail by registered or certified mail to such Participant, Beneficiary or distributee at his last known address a written demand for his then address or for satisfactory evidence of his continued life, or both, and if such Participant, Beneficiary or distributee shall fail to furnish the same to the Committee within two years from the mailing of such demand, then the Committee may, in its sole discretion, determine that such Participant, Beneficiary or other distributee has forfeited his rights to such benefit and may declare such benefit, or any unpaid portion thereof, terminated HOU01A:316781.5 008939.0157 as if the death of the distributee (with no surviving Beneficiary) had occurred on the date of the last payment made thereon, or on the date such Participant, Beneficiary or distributee first became entitled to receive benefit payments, whichever is later; provided, however, that such forfeited benefit shall be reinstated if a claim for the same is made by the Participant, Beneficiary or other distributee at any time thereafter. Any forfeited benefits shall be reallocated as if they were an additional Company contribution made in the Plan Year of forfeiture. Any reinstatement shall be made out of funds specially contributed by the Company for such purposes. HOU01A:316781.5 008939.0157 ARTICLE VIII MISCELLANEOUS PROVISIONS 8.1 Terms of Employment: The adoption and maintenance of the provisions of this Plan shall not be deemed to constitute a contract between any Employer and Employee, or to be a consideration for, or an inducement or condition of, the employment of any person. Nothing herein contained shall be deemed to give to any Employee the right to be retained in the employ of an Employer or to interfere with the right of an Employer to discharge an Employee at any time, nor shall it be deemed to give to an Employer the right to require any Employee to remain in its employ, nor shall it interfere with any Employee's right to terminate his employment at any time. 8.2 Controlling Law: This Plan and the Trust Agreement shall be construed, regulated and administered under the laws of the State of Texas. 8.3 Invalidity of Particular Provisions: In the event any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Plan but shall be fully severable, and this Plan shall be construed and enforced as if said illegal or invalid provisions had never been inserted therein. 8.4 Non-Alienation of Benefits: Except as provided in Section 3.3 and in Section 8.7, benefits payable under this Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary; and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, charge or otherwise dispose of any right to benefits payable hereunder, shall be void. The Trust Fund shall not in any manner be liable for, or subject to, the debts, contracts, liabilities, engagements or torts of any person entitled to benefits hereunder. 8.5 Payments in Satisfaction of Claims of Participants: Any payment or distribution to any Participant or his legal representative or any beneficiary in accordance with the provisions of this Plan shall be in full satisfaction of all claims under the Plan against the Trust Fund, the Trustee and the Employer. The Trustee may require that any distributee execute and deliver to the Trustee a receipt and a full and complete release as a condition precedent to any payment or distribution under the Plan. 8.6 Impossibility of Diversion of Trust Fund: Notwithstanding any provision herein to the contrary, no part of the corpus or the income of the Trust Fund shall ever be used for or diverted to purposes other than for the exclusive benefit of the Participant or their beneficiaries or for the payment of expenses of the Plan. No part of the Trust Fund shall HOU01A:316781.5 008939.0157 ever directly or indirectly revert to the Employer, except as provided in Section 3.1 hereof. 8.7 Distributions Under Domestic Relations Orders: Notwithstanding any other provision of this Plan, the Committee may direct the Trustee to comply with the provisions of a qualified domestic relations order (as defined in Section 414(p) of the Code) pursuant to this Section 8.7. When the Committee receives a domestic relations order, the Committee shall promptly notify the Participant and any other alternate payee of the receipt of such order and the Plan's procedures for determining the qualified status of domestic relations order. Within 60 days after receipt of such order the Committee shall determine whether the order is a qualified domestic relations order and notify the Participant and each alternate payee of such determination. If the Committee is unable to determine within such 60-day period whether the order is a qualified domestic relations order, the 60-day period may be extended for a reasonable period as determined by the Committee necessary in order to determine whether the order is a qualified domestic relations order. During the period in which the issue of whether a domestic relations order is a qualified domestic relations order is being determined by the Committee, the Committee shall separate in a separate account of the Plan or in an escrow account the amounts which would have been payable to the alternate payee during such period if the order had been determined to be a qualified domestic relations order. If within 18 months of the date on which the first payment would be required to be made under such order, the Committee determines that the order is a qualified domestic relations order, the Committee shall direct the separated amounts plus any income attributable thereto be distributed to the person or persons entitled thereto. If within the 18-month period the Committee is unable to determine whether the order is a qualified domestic relations order or the Committee determines that the order is not a domestic relations order then the Committee shall pay the separated amounts plus any earnings attributable thereto to the person or persons who would have been entitled to such amounts if there had been no order. Any determination that an order is a qualified domestic relations order which is made after the close of such 18-month period shall be applied prospectively only. To the extent provided under a qualified domestic relations order, a former spouse of a Participant shall be treated as the spouse or surviving spouse for all purposes of the Plan. If the Committee receives a qualified domestic relations order with respect to a Participant, the Committee may authorize the immediate distribution of the amount assigned to the Participant's former spouse pursuant to such order, to the extent vested and permitted by law, from the Participant's accounts. 8.8 Transition Period: Notwithstanding any provision of the Plan to the contrary, during the period of transition in connection with a change in investment funds and recordkeeping HOU01A:316781.5 008939.0157 practices, commencing July 1, 1995 and ending on or about December 31, 1995 as determined by the Committee in its sole discretion, the following restrictions shall apply: (i) Participants may not change their investment directions with respect to future contributions or existing Account balances; and (ii) Participants may be limited in their ability to make changes in the amount of their Deferred Contributions, all in accordance with such administrative procedures as may be decided by the Committee and communicated to Participants during said transition period. Furthermore, withdrawals and distributions otherwise available under the Plan will be suspended during the transition period, except that hardship withdrawals under Section 3.3 of the Plan and distributions upon termination of service pursuant to Article V of the Plan shall be permitted during such transition period, all in accordance with such administrative procedures as may be decided by the Committee and communicated to Participants during said transition period. HOU01A:316781.5 008939.0157 ARTICLE IX TRUST AGREEMENT AND TRUST FUND 9.1 Trust Agreement: The Company shall enter into a Trust Agreement with a Trustee providing for the administration of the Trust Fund established in connection with this Plan by the Trustee, or by a successor trustee. The provisions of such Trust Agreement are incorporated herein by reference as fully as if set out herein. The Trustee shall be subject to direction by the Committee or an investment manager, or shall have such discretion with respect to management and control of Plan assets as specified by the Committee. 9.2 Benefits Paid Solely from Trust Fund: All of the benefits provided to be paid shall be paid by the Trustee out of the Trust Fund to be administered under such Trust Agreement. No Fiduciary shall be responsible or liable in any manner for payment of any such benefits, and all Participants hereunder shall look solely to such Trust Fund and to the adequacy thereof for the payment of any such benefits of any nature or kind which may at any time be payable hereunder. 9.3 Committee Directions to Trustee: The Trustee shall make only such distributions and payments out of the Trust Fund as may be directed by the Committee. The Trustee shall not be required to determine or make any investigation to determine the identity or mailing address of any person entitled to any distributions and payments out of the Trust Fund and shall have discharged its obligation in that respect when it shall have sent certificates and checks or other papers by ordinary mail to such persons and addresses as may be certified to it by the Committee. HOU01A:316781.5 008939.0157 ARTICLE X ADOPTION OF THE PLAN BY OTHER ORGANIZATIONS; SEPARATION OF THE TRUST FUND; AMENDMENT AND TERMINATION OF THE PLAN; AND DISCONTINUANCE OF CONTRIBUTIONS TO THE TRUST FUND 10.1 Adoptive Instrument: Any organization may, with the approval of the Company, adopt and become an Employer under this Plan by executing and delivering to the Company and the Trustee an adoptive instrument specifying the classification of its Employees who are to be eligible to participate in the Plan and by agreeing to be bound as an Employer by all the terms of the Plan with respect to its eligible Employees. The adoptive instrument may contain such changes and variations in the terms of the Plan as may be acceptable to the Company. Any such Approved Organization which shall adopt this Plan shall designate the Company as its agent to act for it in all transactions affecting the administration of the Plan and shall designate the Committee to act for such Approved Organization and its Participants in the same manner in which the Committee may act for the Company and its Participants hereunder. The adoptive instrument shall specify the effective date of such adoption of the Plan and shall become, as to such Approved Organization and its Employees, a part of this Plan. 10.2 Effect of Adoption: The following special provisions shall apply to all Employers: (a) An Employee shall be considered in service while employed simultaneously or successively by one or more Employers or Affiliates. (b) The transfer of an Employee from one Employer or Affiliate to another Employer or Affiliate shall not be deemed a termination of service. 10.3 Separation of the Trust Fund: A separation of the Trust Fund as to the interest therein of the Participants of any particular Employer may be made by the Company at any time. In such event, the Trustee shall set apart that portion of the Trust Fund which shall be allocated to such Participants pursuant to a valuation and allocation of the Trust Fund made in accordance with the procedures set forth in Section 4.4 hereof but as of the date when such separation of the Trust Fund shall be effective. Such portion may in the Trustee's discretion be set apart in cash or in kind out of the properties of the Trust Fund. That portion of the Trust Fund so set apart shall continue to be held by the Trustee as though such Employer had entered into the Trust Agreement as a separate Trust Agreement with the Trustee. Such Employer may in such event designate a new Trustee of its selection to act as Trustee under the Trust Agreement. Such Employer shall thereupon be deemed to have adopted the Plan as its own separate Plan, and shall subsequently have all such powers of amendment or modification of the Plan as are reserved herein to the Company. HOU01A:316781.5 008939.0157 10.4 Voluntary Separation: If any Employer shall desire to separate its interest in the Trust Fund, it may request such a separation in a notice in writing to the Company and the Trustee. Such separation shall then be made as of any specified date after service of such notice, and such separation shall be accomplished in the manner set forth in Section 10.3 above. 10.5 Amendment of the Plan: The Company shall have the right to amend or modify this Plan and (with the consent of the Trustee) the Trust Agreement at any time and from time to time to any extent that it may deem advisable. Any such amendment or modification shall be set out in an instrument in writing duly authorized by the Board of Directors of the Company and executed by the Company. No such amendment or modification shall, however, increase the duties or responsibilities of the Trustee without its consent thereto in writing, or have the effect of transferring to or vesting in any Employer any interest or ownership in any properties of the Trust Fund, or of permitting the same to be used for or diverted to purposes other than for the exclusive benefit of the Participants and their beneficiaries. No amendment shall decrease the account of any Participant; and no amendment shall change the vesting schedule in Section 5.3 unless each Participant having not less than five, or on and after January 1, 1989, three, years of service is permitted to elect to have the vested portion of his account computed under the provisions of Section 5.3 without regard to the amendment. Such election shall be available during an election period which shall begin on the date such amendment is adopted and shall end on the latest of (i) the date 60 days after such amendment is adopted, (ii) the date 60 days after such amendment is effective, or (iii) the date 60 days after such Participant is issued written notice of the amendment by the Committee or the Employer. Notwithstanding anything herein to the contrary, the Plan or the Trust Agreement may be amended in such manner as may be required at any time to make it conform to the requirements of the Code, or of any United States statutes with respect to employees' trusts, or of any amendment thereto, or of any regulations or rulings issued pursuant thereto, and no such amendment shall be considered prejudicial to any then existing rights of any Participant or his beneficiary under the Plan. 10.6 Effect of Amendment on Other Employers: Any amendment effected by the Company may be made without the consent of the other Employers, subject to the right of any such Employer to withdraw pursuant to Section 10.3 hereof. Any amendment effected by the Company shall be delivered within 30 days to each other Employer, and each other Employer shall be deemed to have consented to and accepted such amendment unless written notice of objection is delivered to the Company within 30 days of notice of said amendment. 10.7 Termination of the Plan: A termination of the Plan as to any particular Employer (and only as to any such particular Employer) shall occur by the delivery to the Trustee of an instrument in writing approved and authorized by the Board of HOU01A:316781.5 008939.0157 Directors of such Employer. In such event, termination of the Plan shall be effective as of any subsequent date specified in such instrument. 10.8 Liquidation and Distribution of Trust Fund upon Termination: In the event a termination of the Plan in respect of any Employer shall occur, a separation of the Trust Fund in respect of the Participants of such Employer shall be made as of the effective date of such termination of the Plan in accordance with the procedure set forth in Section 10.3 hereof. Following separation of the Trust Fund in respect of the Participants of any Employer as to whom the Plan has been terminated, the properties of the Trust Fund, exclusive of any Common Stock, so set apart shall be reduced to cash as soon as may be expeditious under the circumstances. Any administrative costs or expenses incurred incident to the final liquidation of such separate Trust Funds shall be paid by the Employer, except that in the case of bankruptcy or insolvency of such Employer any such costs shall be charged against the Trust Fund. Following such reduction of such Trust Fund to cash, the accounts of the Participants shall then be valued as provided in Section 4.4 and shall be fully vested, whereupon each such Participant shall become entitled to receive the entire amount of cash and Common Stock attributable to his Account, provided distribution is in the form of a lump sum and by reason of an event described in Section 401(k)(10) of the Code. The terminating Employer shall promptly advise the appropriate District Director of Internal Revenue of the termination and the Company may direct the Trustee to delay the final distribution to the Participants until the District Director shall advise in writing that such termination does not adversely affect the previously qualified status of the Plan or the exemption from tax of the Trust under Section 401(a) or 501(a) of the Code. 10.9 Effect of Termination or Discontinuance of Contributions: In the event of a termination or partial termination of the Plan with respect to an Employer or its Employees, then all amounts credited to the accounts of the affected Participants of such Employer shall become fully vested and non-forfeitable. If any Employer shall completely discontinue its Contributions to the Trust Fund or suspend its Contributions to the Trust Fund under such circumstances as to constitute a complete discontinuance of Contributions within the purview of the reasoning of U.S. Treasury Regulations para. 1.401-6(c), then all amounts credited to the accounts of the Participants of such Employer shall become fully vested and non-forfeitable, and throughout any such period of discontinuance of Contributions by an Employer, all other provisions of the Plan shall continue in full force and effect with respect to such Employer other than the provisions for Contributions by such Employer. 10.10 Merger of Plan with Another Plan: In the event of any merger or consolidation of the Plan with, or transfer in whole or in part of the assets and liabilities of the Trust Fund to another trust fund held under, any other plan of deferred HOU01A:316781.5 008939.0157 compensation maintained or to be established for the benefit of all or some of the Participants of this Plan, the assets of the Trust Fund applicable to such Participants shall be transferred to the other trust fund only if: (a) Each Participant would (if either this Plan or the other plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (if this Plan had then terminated); (b) Resolutions of the Board of Directors of the Employer under this Plan, or of any new or successor employer of the affected Participants, shall authorize such transfer of assets; and, in the case of the new or successor employer of the affected Participants, its resolutions shall include an assumption of liabilities with respect to such Participants' inclusion in the new employer's plan; and (c) Such other plan and trust are qualified under Sections 401(a) and 501(a) of the Code. 10.11 Rollover from Qualified Plans: With the approval of the Committee, and subject to such terms and conditions as the Committee may establish in order that the action contemplated by this Section 10.11 not have an adverse effect upon the qualified status of the Plan and its related Trust Agreement, a Participant in this Plan may make a rollover of amounts received from a qualified plan maintained by the Company, its Affiliates or any other employer if approved by the Company provided that the distribution from such other qualified plan constitutes an "eligible rollover distribution" within the meaning of Section 402 of the Code, and provided that all other requirements applicable under Section 402 of the Code be complied with in order that the acceptance by this Plan of the distribution from the other plan be treated as a rollover under Section 402 of the Code. Any such amounts rolled over into this Plan shall be allocated to the Participant's Rollover Account and the Participant shall be 100% vested in the amount in his Rollover Account. The withdrawal provisions in Section 3.3 applicable to Rollover Contributions shall be applicable to withdrawals from a Participant's Rollover Account. HOU01A:316781.5 008939.0157 ARTICLE XI LIMITATIONS ON BENEFITS Notwithstanding any provision of this Plan to the contrary, the total Annual Additions made to the Account of a Participant for any Plan Year shall be subject to the following limitations: I. Single Defined Contribution Plan 1. If an Employer does not maintain any other qualified plan, the amount of Annual Additions which may be allocated under this Plan on a Participant's behalf for a Limitation Year shall not exceed the lesser of the Maximum Permissible Amount or any other limitation contained in this Plan. 2. Prior to the determination of the Participant's actual Compensation for a Limitation Year, the Maximum Permissible Amount may be determined on the basis of the Participant's estimated annual Compensation for such Limitation Year. Such estimated annual Compensation shall be determined on a reasonable basis and shall be uniformly determined for all Participants similarly situated. Any Employer contributions (including allocation of forfeitures) based on estimated annual Compensation shall be reduced by any Excess Amounts carried over from prior years. 3. As soon as is administratively feasible after the end of the Limitation Year, the maximum Permissible Amount for such Limitation Year shall be determined on the basis of the Participant's actual Compensation for such Limitation Year. 4. If there is an Excess Amount with respect to a Participant for the Limitation Year, such Excess shall be disposed of as follows: A. There shall first be returned to the Participant (i) his after-tax contributions attributable to that Limitation Year, if any are authorized under the Plan, and then (ii) his Deferred Contributions attributable to that Limitation Year, to the extent such returned Contributions would reduce the Excess Amount pursuant to the regulations enacted under Code Section 415. B. If any such Excess Amount shall then remain, there shall then be a reduction of the Employer Contributions allocated to the Participant, and the amount of the reduction of the Employer Contributions for HOU01A:316781.5 008939.0157 such Participant shall be reallocated out of the Account of such Participant and shall be held in a suspense account which shall be applied as a part of (and to reduce to such extent what would otherwise be) the Employer Contributions for all Participants required to be made to the Plan during the next subsequent calendar month or months. No portion of such Excess Amount may be distributed to Participants or former Participants. If a suspense account is in existence at any time during the Limitation Year pursuant to this Paragraph B, such suspense account shall not participate in the allocation of investment gains or losses of the Trust Fund. C. If any such Excess Amount shall then remain, the Excess Amount of the Participant's Deferred Contributions, as defined in Section 3.2, shall be used to reduce Deferred Contributions for the next Limitation Year (and succeeding Limitation Years, as necessary) for that Participant if that Participant is eligible to participate in the Plan as of the end of the next and succeeding Limitation Years. However, if that Participant is not eligible to participate in the Plan as of the end of the Limitation Year, then the Excess Amounts must be held unallocated in a suspense account and applied in the next subsequent calendar month or months as a part of (and to reduce to such extent what would otherwise be) the Employer Contribution for all Participants required to be made to the Plan. No portion of such Excess Amount may be distributed to Participants or former Participants. If a suspense account is in existence at any time during the Limitation Year pursuant to this paragraph C, such suspense account shall not participate in the allocation of investment gains or losses of the Trust Fund. II. Two or More Defined Contribution Plans 1. If, in addition to this Plan, the Employer maintains any other qualified defined contribution plan, the amount of Annual Additions which may be allocated under this Plan on a Participant's behalf for a Limitation Year, shall not exceed the lesser of: A. the Maximum Permissible Amount, reduced by the sum of any Annual Additions allocated to the Participant's accounts for HOU01A:316781.5 008939.0157 the same Limitation Year under such other defined contribution plan or plans; or B. any other limitation contained in this Plan. 2. Prior to the determination of the Participant's actual Compensation for the Limitation Year, the amount referred to in Section 11(II)1(A) above may be determined on the basis of the Participant's estimated annual Compensation for such Limitation Year. Such estimated annual Compensation shall be determined on a reasonable basis and shall be uniformly determined for all Participants similarly situated. Any Employer contribution (including allocation of forfeitures) based on estimated annual Compensation shall be reduced by any Excess Amounts carried over from prior years. 3. As soon as is administratively feasible after the end of the Limitation Year, the amounts referred to in Section 11(II)1(A) above shall be determined on the basis of the Participant's actual Compensation for such Limitation Year. 4. If a Participant's Annual Additions under this Plan and all such other defined contribution plans result in an Excess Amount, such Excess Amount shall be deemed to consist of the amounts last allocated. 5. If an Excess Amount was allocated to a Participant on an allocation date of this Plan which coincides with an allocation date of another plan, the Excess Amount attributed to this Plan will be the product of: A. the total Excess Amount allocated as of such date (including any amount which would have been allocated but for the limitations of Section 415 of the Code); times B. the ratio of (1) the amount allocated to the Participant as of such date under this Plan, divided by (2) the total amount allocated as of such date under all qualified defined contribution plans (determined without regard to the limitations of Code Section 415). 6. Any Excess Amounts attributed to this Plan shall be disposed of as provided in Section 11(I)4. HOU01A:316781.5 008939.0157 III. Defined Contribution and Defined Benefit Plan 1. General Rule: If the Employer maintains one or more defined contribution plans and one or more defined benefit plans, the sum of the "defined contribution plan fraction" and the "defined benefit plan fraction", as defined below, cannot exceed 1.0 for any Limitation Year. For purposes of this Section, employee contributions to a qualified defined benefit plan are treated as a separate defined contribution plan. For purposes of this Section, all defined contribution plans of an Employer are to be treated as one defined contribution plan and all defined benefit plans of an Employer are to be treated as one defined benefit plan, whether or not such plans have been terminated. If the sum of the defined contribution plan fraction and defined benefit plan fraction exceeds 1.0, the Annual Benefit of the defined benefit plans will be reduced so that the sum of the fractions will not exceed 1.0. In no event will the Annual Benefit be decreased below the amount of the accrued benefit to date. If additional reductions are required for the sum of the fractions to equal 1.0, the reductions will then be made to the Annual Additions of the defined contribution plans. 2. Defined Contribution Plan Fraction A. General Rule: The defined contribution plan fraction for any year is (1) divided by (2), where: (1) is the sum of the actual Annual Additions to the Participant's account at the close of the Limitation Year; and (2) is the sum of the lesser of the following amounts determined for such year and for each prior year of service of the Employee: a. 1.25 times the dollar limitation in effect for each such year (without regard to the special dollar limitations for employee stock ownership plans); or b. 1.4 times 25% of the Participant's HOU01A:316781.5 008939.0157 Compensation for each such year. B. If the Employee was a participant, as of January 1, 1987, in one or more defined contribution plans maintained by the Employer which were in existence on May 6, 1986, the numerator of this fraction will be adjusted if the sum of this fraction and the defined benefit fraction would otherwise exceed 1.0 under the terms of this Plan. Under the adjustment, an amount equal to the product of (1) the excess of the sum of the fractions over 1.0 times (2) the denominator of this fraction, will be permanently subtracted from the numerator of this fraction. The adjustment is calculated using the fractions as they would be computed as of December 31, 1986, and disregarding any changes in the terms and conditions of the plan made after May 6, 1986, but using the Code Section 415 limitation applicable to the 1987 Limitation Year. C. The Annual Additions for any Limitation Year before 1987 shall not be recomputed to treat all employee contributions as Annual Additions. 3. Defined Benefit Plan Fraction A. General Rule: The defined benefit plan fraction for any year is (1) divided by (2), where: (1) is the projected Annual Benefit of the Participant under the Plan (determined as of the close of the Limitation Year); and (2) is the lesser of: a. 1.25 times the dollar limitation (adjusted, if necessary) for such year; or b. 1.4 times 100% of the Participant's Average Compensation for the high three years (adjusted, if necessary). B. Notwithstanding the above, if the Employee was a participant, as of January 1, 1987, in one or more defined benefit plans HOU01A:316781.5 008939.0157 maintained by the Employer which were in existence on May 6, 1986, the denominator of this fraction will not be less than 125% of the sum of the annual benefits under such plans which the Employee had accrued as of December 31, 1986, disregarding any changes in the terms and conditions of the plan(s) after May 5, 1986. The preceding sentence applies only if the defined benefit plans individually and in the aggregate satisfied the requirements of Code Section 415. IV. Definitions 1. Employer: The Company and any other Employer that adopts this Plan. In the case of a group of employers which constitutes a controlled group of corporations (as defined in Code Section 414(b) as modified by Section 415(h)) or which constitutes trades and businesses (whether or not incorporated) which are under common control (as defined in Code Section 414(c) as modified by Section 415(h)) or an affiliated service group (as defined in Code Section 414(m)), all such employers shall be considered a single Employer for purposes of applying the limitations of these sections. 2. Excess Amount: The excess of the Participant's Annual Additions for the Limitation Year over the Maximum Permissible Amount. 3. Limitation Year: A 12 consecutive month period ending on December 31. 4. Maximum Permissible Amount: For a Limitation Year, the Maximum Permissible Amount with respect to any Participant shall be the lesser of: A. $30,000 (or, if greater, 1/4 of the defined benefit dollar limitation set forth in Section 415(b)(1) of the Code as in effect for the Limitation Year); or B. 25% of the Participant's Compensation for the Limitation Year. 5. Compensation: For purposes of determining compliance with the limitations of Code Section 415, Compensation shall mean a Participant's earned income, wages, salaries, fees for professional services and other amounts received for personal services actually rendered in the course of employment with an Employer maintaining the Plan, including, but not limited to, commissions paid salesmen, compensation for services based on a percentage of profits, commissions on HOU01A:316781.5 008939.0157 insurance premiums, tips and bonuses, and excluding the following: (a) Employer contributions to a plan of a deferred compensation to the extent contributions are not included in gross income of the Employee for the taxable year in which contributed, or on behalf of an employee to a simplified employee pension plan to the extent such contributions are deductible under Code Section 219(b)(2), and any distributions from a plan of deferred compensation whether or not includable in the gross income of the Employee when distributed (however, any amounts received by an Employee pursuant to an unfunded non-qualified plan may be considered as compensation in the year such amounts are included in the gross income of the Employee); (b) amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by an employee becomes freely transferable or is no longer subject to a substantial risk of forfeiture; (c) amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option; and (d) other amounts which receive special tax benefits, or contributions made by an Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in Code Section 403(b) (whether or not the contributions are excludable from the gross income of the Employee). For purposes of applying the limitations in this Article, amounts included as compensation are those actually paid or made available to a Participant within the Limitation Year. For Limitation Years beginning after December 31, 1988, Compensation shall be limited to $200,000 (unless adjusted in the same manner as permitted under Code Section 415(d)). For Limitation Years beginning after December 31, 1993, Compensation shall be limited to $150,000 (unless adjusted in the same manner as permitted under Code Section 415(d)). Notwithstanding anything to the contrary in the definition, compensation shall include any and all items which may be includable in Compensation under Section 415(c)(3) of the Code. HOU01A:316781.5 008939.0157 6. Average Compensation: The average Compensation during a Participant's high three years of service, which period is the three consecutive calendar years (or the actual number of consecutive years of employment for those employees who are employed for less than three consecutive years with the Employer) during which the Employee had the greatest aggregate Compensation from the Employer. 7. Annual Benefit: A benefit payable annually in the form of a straight life annuity (with no ancillary benefits) under a plan to which Employees do not contribute and under which no rollover contributions are made. 8. Annual Additions: With respect to each Limitation Year, the total of the Employer Contributions, Deferred Contributions, Forfeitures and amounts described in Code Sections 415(l) and 419A(d)(2) which are allocated to a Participant's Account. HOU01A:316781.5 008939.0157 ARTICLE XII TOP-HEAVY PLAN REQUIREMENTS 12.1 General Rule: For any Plan Year for which this Plan is a Top-Heavy Plan, as defined in Section 12.7, despite any other provisions of this Plan to the contrary, this Plan shall be subject to the provisions of this Article XII. 12.2 Vesting Provisions: Each Participant who has completed an Hour of Service after the Plan becomes top heavy and while the Plan is top heavy and who has completed the Vesting Service specified in the following table shall be vested in his account under this Plan at least as rapidly as is provided in the following schedule: Vesting Service Vested Percentage Less than 2 years 0% 2 but less than 3 years 20% 3 but less than 4 years 40% 4 but less than 5 years 66 2/3% 5 years or more 100% If an account becomes vested by reason of the application of the preceding schedule, it may not thereafter be forfeited by reason of re-employment after retirement pursuant to a suspension of benefits provision, by reason of withdrawal of any mandatory employee contributions to which employer contributions were keyed, or for any other reason. If the Plan subsequently ceases to be top heavy, the preceding schedule shall continue to apply with respect to any Participant who had at least three years of service (as defined in Treasury Regulation para. 1.411(a)-8T(b)(3)) as of the close of the last year that the Plan was top heavy. For all other Participants, the vested percentage provided in the preceding schedule prior to the date the Plan ceases to be top heavy shall not be reduced. 12.3 Minimum Contribution Provisions: Each Participant who (i) is a Non-Key Employee, as defined in Section 12.7 and (ii) is employed on the last day of the Plan Year will be entitled to have contributions and forfeitures allocated to his account of not less than 3% (the "Minimum Contribution Percentage") of the Participant's Compensation. This minimum allocation shall be provided without taking pre-tax contributions into account. A Non-Key Employee may not fail to receive a Minimum Contribution Percentage because of a failure to receive a specified minimum amount of compensation or a failure to make mandatory employee or elective contributions. This Minimum Contribution Percentage will be reduced for any Plan Year to the percentage at which contributions (including Forfeitures) are made or are required to be made under the Plan for the Plan Year for the Key Employee for whom such percentage is the highest for such Plan Year. For this purpose, the percentage with respect to a Key Employee will be determined by dividing the contributions (including Forfeitures) HOU01A:316781.5 008939.0157 made for such Key Employee by his total compensation (as defined in Section 415 of the Code). Contributions considered under the first paragraph of this Section 12.3 will include Employer contributions under this Plan and under all other defined contribution plans required to be included in an Aggregation Group (as defined in Section 12.7 below), but will not include Employer contributions under any plan required to be included in such aggregation group if the plan enables a defined benefit plan required to be included in such group to meet the requirements of the Code prohibiting discrimination as to contributions in favor of employees who are officers, shareholders or the highly compensated or prescribing the minimum participation standards. If the highest rate allocated to a Key Employee for a year in which the Plan is top-heavy is less then 3%, amounts contributed as a result of a salary reduction agreement must be included in determining contributions made on behalf of Key Employees. Contributions considered under this Section will not include any contributions under the Social Security Act or any other federal or state law. 12.4 Limitation on Contributions: In the event that the Company, another Employer or an Affiliate (hereinafter in this Article collectively referred to as a "Considered Company") also maintains a defined benefit plan providing benefits on behalf of Participants in this Plan, one of the two following provisions will apply: (a) If for the Plan Year this would not be a Top-Heavy Plan if "90%" were substituted for "60%" in Section 12.7, then the percentage of 3% used in Section 12.3 is changed to 4%. (b) If for the Plan Year this Plan would continue to be a Top-Heavy Plan if "90%" were substituted for "60%," in Section 12.7, then the denominator of both the defined contribution plan fraction and the defined benefit plan fraction shall be calculated as set forth in Section 11(III) for the Limitation Year ending in such Plan Year by substituting "1.0" for "1.25" in each place such figure appears. This subsection (b) will not apply for such Plan Year with respect to any individual for whom there are no (i) employer contributions, forfeitures or voluntary non-deductible contributions allocated to such individual or (ii) accruals earned under the defined benefit plan. Furthermore, the transitional rule set forth in Section 415(e)(6)(B)(i) of the Code shall be applied by substituting "$41,500" for "$51,875" where it appears therein. 12.5 Coordination with Other Plans: If another defined benefit plan maintained by a Considered Company provides contributions or benefits on behalf of a Participant in this HOU01A:316781.5 008939.0157 Plan, such other plan shall be treated as a part of this Plan pursuant to applicable principles prescribed by U.S. Treasury Regulations or applicable IRS rulings (such as Revenue Ruling 81-202 or any successor ruling) to determine whether this Plan satisfies the requirements of Section 12.3 and to avoid inappropriate omissions or inappropriate duplication of minimum contributions. The determination shall be made by the Committee upon the advice of counsel. In the event a Participant is covered by a defined benefit plan which is top heavy pursuant to Section 416 of the Code, a comparability analysis (as prescribed by Revenue Ruling 81-202 or any successor ruling) shall be performed in order to establish that the plans are providing benefits at least equal to the defined benefit minimum. 12.6 D i s t r i b u t i o n s t o C e r t a i n K e y Employees: Notwithstanding any other provision of this Plan to the contrary, the entire interest in this Plan of each Participant who is a 5% owner (as described in Section 416(i)(1)(A) of the Code determined with respect to the Plan Year ending in the calendar year in which such individual attains age 70 1/2) shall be distributed to such Participant not later than the first day of April following the calendar year in which such individual attains age 70 1/2. 12.7 Determination of Top-Heavy Status: The Plan will be a Top-Heavy Plan for any Plan Year if, as of the Determination Date, the aggregate of the accounts under the Plan (determined as of the Valuation Date) for Participants (including former Participants) who are Key Employees exceeds 60% of the aggregate of the accounts of all Participants, excluding former Key Employees, or if this Plan is required to be in an Aggregation Group, any such Plan Year in which such Group is a Top-Heavy Group. In determining Top-Heavy status, if an individual has not performed one hour of service for any Considered Company at any time during the five-year period ending on the Determination Date, any accrued benefit for such individual and the aggregate accounts of such individual shall not be taken into account. For purposes of this Section, the capitalized words have the following meanings: (a) "Aggregation Group" means the group of plans, if any, that includes both the group of plans required to be aggregated and the group of plans permitted to be aggregated. The group of plans required to be aggregated (the "required aggregation group") includes: (i) Each plan of a Considered Company in which a Key Employee is a participant in the Plan Year containing the Determination Date, or any of the four preceding Plan Years, and (ii) Each other plan, including collectively bargained plans, of a Considered HOU01A:316781.5 008939.0157 Company which, during this period, enables a plan in which a Key Employee is a participant to meet the requirements of Sections 401(a)(4) and 410 of the Code. The group of plans that are permitted to be aggregated (the "permissive aggregation group") includes the required aggregation group plus one or more plans of a Considered Company that is not part of the required aggregation group and that the Considered Company certifies as a plan within the permissive aggregation group. Such plan or plans may be added to the permissive aggregation group only if, after the addition, the aggregation group as a whole continues to satisfy the requirements of Sections 401(a)(4) and 410 of the Code. (b) "Determination Date" means for any Plan Year the last day of the immediately preceding Plan Year. However, for the first Plan Year of this Plan, Determination Date means the last day of that Plan Year. (c) "Key Employee" means any Employee or former Employee under this Plan who, at any time during the Plan Year in question or during any of the four preceding Plan Years, is or was one of the following: (i) An officer of a Considered Company having an annual compensation greater than 50% of the amount in effect under Section 415(b)(1)(A) of the Code for any such Plan Year. Whether an individual is an officer shall be determined by the Considered Company on the basis of all the facts and circumstances, such as an individual's authority, duties, and term of office, not on the mere fact that the individual has the title of an officer. For any such Plan Year, officers considered to be Key Employees will be no more than the fewer of: (A) 50 Employees; or (B) 10% of the Employees or, if greater than 10%, three Employees. For this purpose, the highest paid officers shall be selected. (ii) One of the ten Employees owning (or considered as owning, within the meaning of the constructive ownership rules of Section 416(i)(1)(B) of the Code) the largest interests in the Considered Company. HOU01A:316781.5 008939.0157 An Employee who has some ownership interest is considered to be one of the top ten owners unless at least ten other employees own a greater interest than that Employee. However, an Employee will not be considered a top ten owner for a Plan Year if the Employee earns less than the maximum dollar limitation on annual additions to a participant's account in a defined contribution plan under the Code, as in effect for the calendar year in which the Determination Date falls. (iii) Any person who owns (or is considered as owning, within the meaning of the constructive ownership rules of Section 416(i)(1)(B) of the Code) more than 5% of the outstanding stock of a Considered Company or stock possessing more than 5% of the combined voting power of all stock of the Considered Company. (iv) Any person who has an annual compensation from the Considered Company of more than $150,000 and who owns (or is considered as owning within the meaning of the constructive ownership rules of Section 416(i)(1)(B) of the Code) more than 1% of the outstanding stock of the Considered Company or stock possessing more than 1% of the total combined voting power of all stock of the Considered Company. For purposes of this subsection, compensation means all items includable as compensation for purposes of applying the limitations on annual additions to a Participant account in a defined contribution plan and the maximum benefit payable under a defined benefit plan under the Code. For purposes of this subsection (c), a Beneficiary of a Key Employee shall be treated as a Key Employee. For purposes of parts (iii) and (iv), each Considered Company is treated separately in determining ownership percentages; but all such Considered Companies shall be considered a single employer in determining the amount of compensation. (d) "Non-Key Employee" means any employee (and any Beneficiary of an employee) who is not a Key Employee. (e) "Top-Heavy Group" means the Aggregation Group, if as of the applicable Determination Date, the sum of the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans included in the Aggregation Group plus the HOU01A:316781.5 008939.0157 aggregate of the accounts of Key Employees under all defined contribution plans included in the Aggregation Group exceeds 60% of the sum of the present value of the cumulative accrued benefits for all employees, excluding former Key Employees as provided in paragraph (i) below, under all such defined benefit plans plus the aggregate accounts for all employees, excluding former Key Employees as provided in paragraph (i) below, under all such defined contribution plans. In determining Top-Heavy status, if an individual has not performed one hour of service for any Considered Company at any time during the five-year period ending on the Determination Date, any accrued benefit for such individual and the aggregate accounts of such individual shall not be taken into account. If the Aggregation Group that is a Top-Heavy Group is a required aggregation group, each plan in the group will be a Top-Heavy Plan. If the Aggregation Group that is a Top-Heavy Group is a permissive aggregation group, only those plans that are part of the required aggregation group will be treated as Top-Heavy Plans. If the Aggregation Group is not a Top-Heavy Group, no plan within such group will be a Top-Heavy Plan. In determining whether this Plan constitutes a Top-Heavy Plan, the Committee (or its agent) will make the following adjustments: (f) When more than one plan is aggregated, the Committee shall determine separately for each plan as of each plan's Determination Date the present value of the accrued benefits (for this purpose using the actuarial assumptions set forth in the applicable plan or account balance. The results shall then be aggregated by adding the results of each plan as of the Determination Dates for such plans that fall within the same calendar year. (g) In determining the present value of the cumulative accrued benefit (for this purpose using the actuarial assumptions set forth in the applicable pension plan) or the amount of the account of any employee, such present value or account will include the amount in dollar value of the aggregate distributions made to such employee under the applicable plan during the five-year period ending on the Determination Date unless reflected in the value of the accrued benefit or account balance as of the most recent Valuation Date. The amounts will include distributions to employees representing the entire amount credited to their accounts under the applicable plan. (h) Further, in making such determination, such present value or such account shall include any rollover contribution (or similar transfer), as follows: HOU01A:316781.5 008939.0157 (1) If the rollover contribution (or similar transfer) is initiated by the employee and made to or from a plan maintained by another Considered Company, the plan providing the distribution shall include such distribution in the present value of such account; the plan accepting the distribution shall not include such distribution in the present value of such account unless the plan accepted it before December 31, 1983. (2) If the rollover contribution (or similar transfer) is not initiated by the employee or made from a plan maintained by another Considered Company, the plan accepting the distribution shall include such distribution in the present value of such account, whether the plan accepted the distribution before or after December 31, 1983; the plan making the distribution shall not include the distribution in the present value of such account. (i) In any case where an individual is a Non-Key Employee with respect to an applicable plan but was a Key Employee with respect to such plan for any prior Plan Year, any accrued benefit and any account of such employee shall be altogether disregarded. For this purpose, to the extent that a Key Employee is deemed to be a Key Employee if he or she met the definition of Key Employee within any of the four preceding Plan Years, this provision shall apply following the end of such period of time. (j) "Valuation Date" means for purposes for determining the present value of an accrued benefit as of the Determination Date the date determined as of the most recent valuation date which is within a 12-month period ending on the Determination Date. For the first plan year of a plan, the accrued benefit for a current employee shall be determined either (i) as if the individual terminated service as of the Determination Date or (ii) as if the individual terminated service as of the valuation date, but taking into account the estimated accrued benefit as of the Determination Date. The Valuation Date shall be determined in accordance with the principles set forth in Q.&A. T-25 of Treasury Regulations para. 1.416-1. (k) For purposes of this Article XII, "Compensation" shall have the meaning given to it in Section 11(IV)(5). HOU01A:316781.5 008939.0157 ARTICLE XIII TESTING OF CONTRIBUTIONS 13.1 Definitions: For purposes of this Article XIII, the capitalized words have the following meanings: (a) "Compensation" shall mean the Employee's total Compensation for services rendered to an Employer during the Plan Year and, unless the Committee elects otherwise, the Employee's Pre-Tax Contributions for the Plan Year and any amounts not currently included in the Employee's gross income by reason of the application of Section 125 of the Code. (b) "Employer Contributions" shall mean the amounts contributed to the Trust Fund by the Employer pursuant to Section 3.1. (c) "Family Member" shall mean the spouse and the lineal ascendants and descendants (and spouses of such ascendants and descendants) of any Employee or former Employee. (d) "Highly Compensated Employee" shall mean any Employee and any employee of an Affiliate who is a highly compensated employee under Section 414(q) of the Code, including any Employee and any employee of an Affiliate who, during the current Plan Year or prior Plan Year, (i) was at any time a 5% owner; or (ii) received Compensation (as defined in Section 11(IV)(5)) in excess of $75,000 (or such other amount as determined by the Secretary of the Treasury which reflects cost-of-living increases in accordance with the provisions of Code Section 414(q)(1)); or (iii) received Compensation (as defined in Section 11(IV)(5)) in excess of $50,000 (or such other amount as determined by the Secretary of the Treasury which reflects cost-of-living increases in accordance with the provisions of Code Section 414(q)(1)) and was in the "top-paid group" (the top 20% of payroll excluding Employees described in Code Section 414(q)(8) and applicable regulations) for the Plan Year; or (iv) was an officer receiving Compensation (as defined in Section 11(IV)(5)) exceeding 50% of the HOU01A:316781.5 008939.0157 dollar limit in Section 415(b)(1)(A) of the Code). The number of officers shall be limited to 50 employees (or, if lesser, the greater of three employees or 10% of the employees). If for any year no officer of the Employer is described in subparagraph (iv) above, the highest paid officer of the Employer for such year shall be treated as described in such paragraph. In determining an Employee's status as a Highly Compensated Employee within the meaning of Section 414(q), the entities set forth in Treasury Regulation Section 1.414(q)-1T Q&A-6(a)(1) through (4) must be taken into account as a single employer. For purposes of determining whether an individual is a Highly Compensated Employee for the current Plan Year, an Employee who meets the definition of Highly Compensated Employee set forth in Section 13.1(d) above by virtue of subparagraphs (i), (ii) or (iv) for the current Plan Year (but not for the prior Plan Year), shall not be treated as a Highly Compensated Employee unless such individual is a member of the group consisting of the 100 individuals who were paid the greatest Compensation (as defined in Section 11(IV)(5)) during the current Plan Year. (e) "Pre-Tax Contributions" shall mean the amounts contributed to the Trust Fund out of a Participant's Compensation pursuant to Section 3.2. 13.2 Actual Deferral Percentage: The Actual Deferral Percentage for a specified group of Employees for a Plan Year shall be the average of the ratios (calculated separately for each Employee in such group) of: (a) The amount of Pre-Tax Contributions actually paid to the Plan on behalf of each such Employee for such Plan Year, over (b) The Employee's Compensation (as defined in Section 11(IV)(5)) for such Plan Year. Notwithstanding any provision in this Plan to the contrary, an Employer may, to the extent permitted by the Code and applicable regulations, elect to include as Compensation pre-tax or after-tax contributions made under this Plan or any other plan of the Employer. The individual ratios and Actual Deferral Percentages shall be calculated to the nearest 1/100 of 1% of an Employee's Compensation. An eligible Employee for the purpose of computing the Actual Deferral Percentage is defined in Treasury Regulation HOU01A:316781.5 008939.0157 Section 1.401(k)-1(g)(4). The Actual Deferral Percentage of an eligible Employee who makes no Pre-Tax Contributions is zero. 13.3 Actual Deferral Percentage Limits: The Actual Deferral Percentage for the eligible Highly Compensated Employees for any Plan Year shall not exceed the greater of (a) or (b), as follows: (a) The Actual Deferral Percentage of Compensation for the eligible non-Highly Compensated Employees times 1.25, or (b) The lesser of (i) the Actual Deferral Percentage of Compensation for the eligible non-Highly Compensated Employees times 2.0 or (ii) the Actual Deferral Percentage of Compensation for the eligible non-Highly Compensated Employees plus two percentage points or such lesser amount as the Secretary of the Treasury shall prescribe to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee. In determining the Actual Deferral Percentage of an Employee who is a five 5% owner or one of the ten most Highly Compensated Employees and who has a Family Member who is an Employee, any remuneration paid to the Family Member for services rendered to an Employer or an Affiliate and any contributions made on behalf of or by such Family Member shall be attributed to such Highly Compensated Employee. Family Members, with respect to Highly Compensated Employees, shall be disregarded as separate Employees in determining the Actual Deferral Percentage both for Participants who are non-Highly Compensated Employees and for Participants who are Highly Compensated Employees. The Actual Deferral Percentage for any Highly Compensated Employee who is eligible to have deferred contributions allocated to his account under one or more plans described in Section 401(k) of the Code that are maintained by an Employer or an Affiliate in addition to this Plan shall be determined as if all such contributions were made to this Plan. For purposes of determining whether the Actual Deferral Percentage limits of Section 13.3 are satisfied, all Pre-Tax Contributions that are made under two or more plans that are aggregated for purposes of Code Section 401(a)(4) or 410(b) (other than Code Section 410(b)(2)(A)(ii)) are to be treated as made under a single plan and if two or more plans are permissively aggregated for purposes of Code Section 401(k) the aggregated plans must also satisfy Code Sections 401(a)(4) and 410(b) as though they were a single plan. 13.4 Reduction of Pre-Tax Contribution Rates by Leveling Method: If on the basis of the Pre-Tax Contribution rates elected by Participants for any Plan Year, the Committee determines, in its sole discretion, that neither of the tests contained in (a) or (b) of Section 13.3 will be satisfied, the Committee may reduce the Pre-Tax Contribution rate of any Participant who is among the eligible Highly Compensated HOU01A:316781.5 008939.0157 Employees to the extent necessary to reduce the overall Actual Deferral Percentage for eligible Highly Compensated Employees to a level which will satisfy either (a) or (b) of Section 13.3. The reductions in Pre-Tax Contribution rates shall be made in a manner so that the Actual Deferral Percentage of the affected Participants who elected the highest Actual Deferral Percentage shall be first lowered to the level of the affected Participants who elected the next to the highest Actual Deferral Percentage. If further overall reductions are required to achieve compliance with (a) or (b) of Section 13.3, both of the above-described groups of Participants will be lowered to the level of Participants with the next highest Actual Deferral Percentage, and so on, until sufficient total reductions in Pre-Tax Contribution rates have occurred to achieve compliance with (a) or (b) of Section 13.3. 13.5 Increase in Pre-Tax Contribution Rates: If a Participant's Pre-Tax Contribution rate is reduced below the level necessary to satisfy either (a) or (b) of Section 13.3 for the Plan Year, such Participant may be eligible to increase his Pre-Tax Contribution rate for the remainder of the Plan Year to a level not in excess of that level which will satisfy the greater of (a) or (b) of Section 13.3. Such an increase in the Pre-Tax Contribution rate shall be made by Participants on a uniform and non-discriminatory basis, pursuant to such rules and procedures as the Committee may prescribe. 13.6 Excess Pre-Tax Contributions: As soon as possible following the end of the Plan Year, the Committee shall determine whether either of the tests contained in Section 13.3 were satisfied as of the end of the Plan Year, and any excess Pre-Tax Contributions, plus any income and minus any loss attributable thereto, of those Participants who are among the Highly Compensated Employees shall be distributed to the affected Participants as of the end of such Plan Year. Such income shall include the allocable gain or loss for (i) the Plan Year and (ii) the period between the end of the Plan Year and the date of distribution. An eligible Employee for the purpose of computing the Actual Deferral Percentage is defined in Treasury Regulation Section 1.401(k)-1(g)(4). The Actual Deferral Percentage of an eligible Employee who makes no Pre-Tax Contributions is zero. The amount of any excess Pre-Tax Contributions to be distributed shall be reduced by Excess Deferrals previously distributed to a Participant pursuant to Section 3.2 for the taxable year ending in the same Plan Year. All excess Pre-Tax Contributions shall be returned to the Participants no later than the last day of the following Plan Year. The excess Pre-Tax Contributions, if any, of each Participant who is among the Highly Compensated Employees shall be determined by computing the maximum Actual Deferral Percentage which each such Participant may defer under (a) or (b) of Section 13.3 and then reducing the Actual Deferral Percentage of some or all of such Participants who elected an Actual Deferral Percentage in excess of such HOU01A:316781.5 008939.0157 maximum by an amount of sufficient size to reduce the overall Actual Deferral Percentage for eligible Participants who are among the Highly Compensated Employees to a level which satisfies either (a) or (b) of Section 13.3. The excess Pre-Tax Contributions, if any, of each Participant shall be determined in such a manner that the Actual Deferral Percentage of such Participants who elected the highest Actual Deferral Percentage shall be first lowered to the level of such Participants who elected the next to the highest Actual Deferral Percentage. If further overall reductions are required to achieve compliance with (a) or (b) of Section 13.3, both of the above-described groups of Participants will be lowered to the level of Participants with the next highest Actual Deferral Percentages, and so on, until sufficient total reductions have occurred to achieve compliance with (a) or (b) of Section 13.3. The income or loss attributable to the Participant's excess Pre-Tax Contributions for the Plan Year shall be determined by multiplying the income or loss attributable to the Participant's Pre-Tax Contribution Account balance for the Plan Year by a fraction, the numerator of which is the excess Pre-Tax Contribution and the denominator of which is the Participant's total Pre-Tax Contribution Account balance. Unless the Committee elects otherwise, the income or loss attributable to the Participant's excess Pre-Tax Contributions for the period between the end of the Plan Year and the date of distribution shall be determined using the safe harbor method set forth in Treasury Regulations to Section 401(k) of the Code, and shall be equal to 10% of the allocable income or loss for the Plan Year, calculated as set forth immediately above, multiplied by the number of calendar months that have elapsed since the end of such Plan Year. A calendar month shall be deemed to have elapsed and shall be counted as a full month for this purpose if the distribution of excess Pre-Tax Contributions is made after the 15th day of that month; otherwise such distribution shall be treated as having been made on the last day of the preceding month. Excess Pre-Tax Contributions shall be treated as Annual Additions under Article XI of the Plan. 13.7 Aggregation of Family Members in Determining the Actual Deferral Ratio: A. Calculation of Actual Deferral Ratios: If an eligible Highly Compensated Employee is subject to the family aggregation rules of Section 414(q)(6) of the Code because such Employee is either a 5% owner or one of the ten most Highly Compensated Employees, the combined actual deferral ratio for the family group (which is treated as one Highly Compensated Employee) shall be determined by combining the Pre-Tax Contributions and Compensation of all the eligible Family Members. The Pre-Tax Contributions and Compensation of all Family Members are disregarded for purposes of determining the Actual Deferral Percentage for the group of non-Highly Compensated Employees, except to the extent taken into account in paragraph (A) above. HOU01A:316781.5 008939.0157 B. Aggregation of Family Groups: If an Employee is required to be aggregated as a Family Member of more than one family group, all eligible Employees who are Family Members of those groups that include the Employee are aggregated as one family group in accordance with paragraph (A) above. C. Excess Pre-Tax Contributions of Family Members: In the event that it becomes necessary to determine and correct the excess Pre-Tax Contributions of a Highly Compensated Employee whose actual deferral ratio is determined under the rules of Section 414(q)(6) of the Code and this Section 13.7, the actual deferral ratio calculated in paragraph (A) above shall be reduced using the leveling method set forth in Section 13.4 and the excess Pre-Tax Contributions to be distributed thereby shall be allocated among the Family Members in proportion to the Pre-Tax Contribution of each Family Member that is combined to determine the actual deferral ratio. 13.8 Contribution Percentage: The Contribution Percentage for a specified group of Employees for a Plan Year shall be the average of the ratios (calculated separately for each Employee in such group) of: (a) The total of the Employer Contributions (the "Aggregate Contributions") paid under the Plan on behalf of each Employee for such Plan Year, to (b) The Employee's Compensation (as defined in Section 11(IV)(5)) for such Plan Year. In computing the Contribution Percentage, the Employer may elect to take into account after-tax and pre-tax contributions made under this Plan or any other plan of the Employer to the extent that the following requirements are satisfied: (1) the amount of non-elective contributions, including those qualified non-elective contributions treated as employer matching contributions for purposes of calculating the Contribution Percentage, satisfies the requirements of Section 401(a)(4) of the Code; (2) the amount of non-elective contributions, excluding those qualified non-elective contributions treated as employer matching contributions for purposes of calculating the Contribution Percentage and those qualified non-elective contributions treated as elective contributions under Section 1.401(k)-1(b)(5) for purposes of calculating the Actual Deferral Percentage, satisfies the requirements of Section 401(a)(4) of the Code; (3) the elective contributions, including those treated as matching contributions for purposes of calculating the Contribution Percentage, satisfy the requirements of Section 401(k)(3) of the Code; HOU01A:316781.5 008939.0157 (4) the qualified non-elective contributions are allocated to the Employee under the Plan as of a date within the Plan Year and the elective contributions satisfy Section 1.401(k)-1(b)(i) for the Plan Year; and, if applicable, the Plan and the plans to which the qualified non-elective contributions and elective contributions are made, are or could be aggregated for purposes of Section 410(b). A Participant's Contribution Percentage shall be determined after determining the Participant's Excess Deferrals, if any, pursuant to Section 3.2, and after determining the Participant's excess Pre-Tax Contributions pursuant to Section 13.6. 13.9 Contribution Percentage Limits: The Contribution Percentage for the eligible Employees for any Plan Year who are Highly Compensated Employees shall not exceed the greater of (a) or (b), as follows: (a) The Contribution Percentage for the eligible Employees who are not Highly Compensated Employees times 1.25, or (b) The lesser of (i) the Contribution Percentage for the eligible Employees who are not Highly Compensated Employees times 2.0 or (ii) the Contribution Percentage for the eligible Employees who are not Highly Compensated Employees plus two percentage points or such lesser amount as the Secretary of the Treasury shall prescribe to prevent the multiple use of this alternative limitation with respect to any Highly Compensated Employee. In determining the Contribution Percentage of an Employee who is a 5% owner or one of the ten most Highly Compensated Employees and who has a Family Member who is an Employee, any remuneration paid to the Family Member for services rendered to an Employer or to an Affiliate and any contributions made on behalf of or by such Family Member shall be attributed to such Highly Compensated Employee. Family Members, with respect to Highly Compensated Employees, shall be disregarded as separate Employees in determining the Contribution Percentage both for Participants who are non-Highly Compensated Employees and for Participants who are Highly Compensated Employees. The Contribution Percentage for any Highly Compensated Employee for any Plan Year who is eligible to have matching employer contributions made on his behalf or to make after-tax contributions under one or more plans described in Section 401(a) of the Code that are maintained by an Employer or an Affiliate in addition to this Plan shall be determined as if all such contributions were made to this Plan. In the event that this Plan must be combined with one or more other plans in order to satisfy the requirements of Code Section 410(b), then the Contribution Percentage shall be HOU01A:316781.5 008939.0157 determined as if all such plans were a single plan. If two or more plans are permissively aggregated for the purposes of Code Section 410(b) (other than the average benefit percentage test), then the Contribution Percentage shall be determined as if all such plans were a single plan. 13.10 Treatment of Excess Aggregate Contributions: If neither of the tests described in (a) or (b) of Section 13.9 are satisfied, the excess Aggregate Contributions, plus any income and minus any loss attributable thereto, shall be forfeited, or if not forfeitable, shall be distributed no later than the last day of the Plan Year following the Plan Year in which such excess Aggregate Contributions were made. Such income shall include the allocable gain or loss for (i) the Plan Year and (ii) the period between the end of the Plan Year and the date of distribution. The income or loss attributable to the Participant's excess Aggregate Contributions for the Plan Year shall be determined by multiplying the income or loss attributable to the Participant's Employer Contribution Account for the Plan Year by a fraction, the numerator of which is the excess Aggregate Contribution, and the denominator of which is the Participant's total Employer Contribution Account balance. Unless the Committee elects otherwise, the income or loss attributable to the Participant's excess Aggregate Contributions for the period between the end of the Plan Year and the date of distribution shall be determined using the safe harbor method set forth in Treasury Regulations to Code Section 401(m), and shall be equal to 10% of the allocable income or loss for the Plan Year (as calculated immediately above) multiplied by the number of calendar months that have elapsed since the end of the Plan Year. A calendar month shall be deemed to have elapsed and a full month shall be counted for this purpose if the distribution of excess Aggregate Contributions is made after the 15th day of that month; otherwise such distribution shall be treated as having been made on the last day of the preceding month. Excess Aggregate Contributions shall be treated as Annual Additions under Article XI of the Plan. The excess Aggregate Contributions, if any, of each Participant who is among the Highly Compensated Employees shall be determined by computing the maximum Contribution Percentage under (a) or (b) of Section 13.9 and then reducing the Contribution Percentage of some or all of such Participants whose Contribution Percentage exceeds the maximum by an amount of sufficient size to reduce the overall Contribution Percentage for eligible Participants who are among the Highly Compensated Employees to a level which satisfies either (a) or (b) of Section 13.9. The excess Aggregate Contributions, if any, of each Participant shall be determined in such a manner that the Contribution Percentage of such Participants who have the highest actual contribution ratio under Section 13.8 shall be first lowered to the level of such Participants with the next to the highest actual contribution ratio under Section 13.8. If further overall reductions are required to achieve compliance with (a) or (b) of Section 13.9, both of the above-described groups of Participants will be lowered to the level of Participants with HOU01A:316781.5 008939.0157 the next highest actual contribution ratio under Section 13.8, and so on, until sufficient total reductions have occurred to achieve compliance with (a) or (b) of Section 13.9. For each Participant who is a Highly Compensated Employee, the amount of excess Aggregate Contributions is equal to the total Employer Contributions on behalf of the Participant (determined prior to the application of this paragraph) minus the amount determined by multiplying the Participant's actual contribution ratio (determined after application of this paragraph) by his Compensation used in determining such ratio. The individual ratios and Contribution Percentages shall be calculated to the nearest 1/100 of 1% of the Employee's Compensation. 13.11 Aggregation of Family Members in Determining the Actual Contribution Ratio: A. Calculation of Actual Contribution Ratio: If an eligible Highly Compensated Employee is subject to the family aggregation rules of Section 414(q)(6) of the Code because such Employee is either a 5% owner or one of the ten most Highly Compensated Employees, the combined actual contribution ratio for the family group (which is treated as one Highly Compensated Employee) shall be determined by combining the Employer Contributions and Compensation of all the eligible Family Members. The Employer Contributions and Compensation of all Family Members are disregarded for purposes of determining the Contribution Percentage for the group of Highly Compensated Employees, and the group of non-Highly Compensated Employees, except to the extent taken into account in paragraph (A) of this Section. B. Aggregation of Family Groups: If an Employee is required to be aggregated as a Family Member of more than one family group, all eligible Employees or Family Members of those groups that include the Employee are aggregated as one family group in accordance with paragraph (A) above. C. Excess Aggregate Contributions of Family Members: In the event that it becomes necessary to determine and correct the excess Aggregate Contributions of a Highly Compensated Employee whose actual contribution ratio is determined under the rules of Code Section 414(q)(6) and this Section 13.11, the actual contribution ratio shall be reduced as required under Section 13.10, and the excess Aggregate Contributions to be forfeited or distributed thereby should be allocated among the Family Members in proportion to the Employer Contributions of each Family Member that are combined to determine the actual contribution ratio. 13.12 Multiple Use of Alternative Limitation: The rules set forth in Treasury Regulation Section 1.401(m)-2(b) for determination of multiple use of the alternative methods of compliance with respect to Sections 13.3 and 13.9 are hereby incorporated into the Plan. If a multiple use of the alternative HOU01A:316781.5 008939.0157 limitation occurs with respect to two or more plans or arrangements maintained by an Employer, it shall be treated as an excess Aggregate Contribution and must be corrected by reducing the actual contribution ratio of Highly Compensated Employees eligible both to make elective contributions to receive matching contributions under the 401(k) arrangement or to make contributions under the 401(m) plan. Such reduction shall be by the leveling process set forth in Section 13.10. HOU01A:316781.5 008939.0157 ARTICLE XIV TRANSFER OF ELIGIBLE ROLLOVER DISTRIBUTION 14.1 Transfer: This Article applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Article, a distributee may elect, at the time and in the manner prescribed by the plan administrator, to have any portion of an eligible rollover distribution paid directly to an eligible retirement plan specified by the distributee in a direct rollover. 14.2 Definitions: Eligible Rollover Distribution: An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). Eligible Retirement Plan: An eligible retirement plan is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. Distributee: A distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. Direct Rollover: A direct rollover is a payment by the plan to the eligible retirement plan specified by the distributee. HOU01A:316781.5 008939.0157 IN WITNESS WHEREOF, Oceaneering International, Inc. has executed these presents as evidenced by the signatures of its duly authorized officers, in a number of copies, all of which shall constitute but one and the same instrument, which may be sufficiently evidenced by any such executed copy hereof, this 18th day of June, 1996. OCEANEERING INTERNATIONAL, INC. By //S// GEORGE R. HAUBENREICH, JR. George R. Haubenreich, Jr. Vice President and General Counsel ATTEST: //S// SHEILA F. JAYNES Assistant Secretary HOU01A:316781.5 008939.0157 SCHEDULE A As of the above execution date, only the following companies have adopted this Plan and become Employers with respect thereto. 1. Oceaneering International, Inc. 2. Eastport International, Inc. 3. Steadfast Oceaneering Inc. 4. Solus Ocean Systems, Inc. 5. Ocean Systems Engineering, Inc. HOU01A:316781.5 008939.0157 SCHEDULE B Effective July 1, 1995, the following Investment Funds are available under the Plan: (a) Fixed Income Account - this fund shall be invested in longer-term fixed-income securities, such as corporate bonds and commercial mortgages. (b) Fidelity Puritan Fund - this fund shall be invested in a broadly diversified portfolio securities, including stocks, bonds and short-term instruments. (c) Fidelity Growth Opportunities Fund - this fund shall be invested primarily in common stocks and securities convertible into common stocks. (d) Fidelity Magellan Fund - this fund shall be invested primarily in equity securities of United States, multi-national and foreign countries. (e) Warburg Pincus Emerging Growth Fund - this fund shall be invested in equity securities of domestic, emerging growth companies. Ordinarily, this fund shall invest 65% of its total assets in common stock or warrants, with the remainder invested in debt securities, preferred stock and money market instruments. (f) Warburg Pincus International Equity Fund - this fund shall be invested in equity securities of companies that have their principal business activities and interests outside the United States. (g) Oceaneering International Inc. Company Stock Fund - this fund shall be solely invested in Common Stock of the Company. (h) GIC Fund - this fund is invested in a fixed investment contract or contracts issued by insurance companies. HOU01A:316781.5 008939.0157 EX-10.04 4 BENEFIT AGREEMENT THIS BENEFIT AGREEMENT, made and entered into as of the 22nd day of February, 1996 by and between Oceaneering International, Inc., a Delaware corporation with its principal office located in Houston, Texas (together with its successors and assigns permitted under this Agreement) (the"Company"), and John R. Huff, who resides at 1221 Archley, Houston, Texas 77005 (the "Executive"). W I T N E S S E T H WHEREAS, the Executive is the Chairman of the Board of Directors, President and Chief Executive Officer of the Company and an integral part of its management; and WHEREAS, effective August 15, 1986, the Executive entered into an employment agreement with the Company (the "Employment Agreement"); and WHEREAS, the Company has determined that it would be in the best interests of the Company and its shareholders to assure itself of the continued services of the Executive by entering into this Agreement as an addendum to the Employment Agreement to provide medical benefits to the Executive and his spouse and children as set forth herein; NOW, THEREFORE, in consideration of the premises contained herein, the Company and the Executive (the"Parties") agree as follows: 1. Definitions "Change in Control" shall have the same meaning as defined in the Senior Executive Severance Plan as amended effective March 17, 1989, and as thereafter may be amended. "Children" shall mean the natural children of the Executive as of the date of this Agreement, namely Christopher David Huff and Jonathan Travis Huff. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Disability" shall have the same meaning as defined in the long-term disability plan of the Company. "Spouse" shall mean the woman who is legally married to the Executive as of the date of this Agreement, namely Karen Keohane Huff. 2. Benefits During Executive's employment with the Company and thereafter, the Company shall provide the Executive, his Spouse and Children with medical benefits through a group or individual insurance plan or provide to the appropriate of the Executive, his Spouse or Children with 100% reimbursement of any expenses incurred by the Executive, his Spouse or Children that are not reimbursed by insurance or otherwise for "medical care" (as such term is defined in Section 213 of the Code) for the Executive, his Spouse, and his Children. 3. Certain Events a. In the event the Executive's employment is terminated due to death or Disability, the medical benefits described in Section 2 herein shall continue to be provided to the Executive, his Spouse and Children for each of their lives. b. In the event of a Change in Control of the Company, the medical benefits described in Section 2 herein shall continue to be provided to the Executive, his Spouse and Children for each of their lives. c. In the event the Executive's employment is terminated by the Company or the Executive terminates employment with the Company in each case after being continuously employed by the Company through August 15, 2006, the medical benefits described in Section 2 herein shall continue to be provided to the Executive, his Spouse and Children for each of their lives. d. If the Executive's employment with the Company is terminated by Executive voluntarily or if Executive's employment is terminated by the Company by reason of the Executive's commission of a felony related to his employment with the Company, in each case prior to a Change in Control and prior to August 15, 2006, the medical benefits provided herein shall cease. 4. Effect of Agreement on Other Benefits The existence of this Agreement shall not prohibit or restrict the Executive's entitlement to full participation in the executive compensation, employee benefit and other plans or programs in which senior executives of the Company are eligible to participate. 5. Assignability; Binding Nature This Agreement shall be binding upon and inure to the benefit of the Company and the Executive and their respective successors, heirs (in the case of the Executive) and assigns. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Company and such assignee or transferee assumes the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company further agrees that, in the event of a sale of assets or liquidation as described in the preceding sentence, it shall take whatever action it legally can in order to cause such assignee or transferee to expressly assume the liabilities, obligations and duties of the Company hereunder. No obligations of the Executive under this Agreement may be assigned or transferred by the Executive. 6. Representation The Company represents and warrants that it is fully authorized and empowered to enter into this Agreement and that the performance of its obligations under this Agreement will not violate any agreement between the Company and any other person, firm or organization. 7. Entire Agreement Except to the extent otherwise provided herein, this Agreement contains the entire understanding and agreement between the Parties concerning the subject matter hereof. 8. Amendment or Waiver No provision in this Agreement may be amended unless such amendment is agreed to in writing and signed by both the Executive and an authorized officer of the Company. No waiver by either Party of any breach by the other Party of any condition or provision contained in this Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar condition or provision at the same or any prior or subsequent time. Any waiver must be in writing and signed by the Executive or an authorized representative of the Company, as the case may be. 9. Severability In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law. 10. Survivorship The respective rights and obligations of the Parties hereunder shall survive any termination of the Executive's employment, except as specified in Section 3 hereof, to the extent necessary to the intended preservation of such rights and obligations. 11. Governing Law/Jurisdiction This Agreement shall be governed by and construed and interpreted in accordance with the laws of Texas without reference to principles of conflict of laws. 12. Headings The headings of the sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement. 13. Counterparts This Agreement may be executed in two or more counterparts. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. //S// JOHN R. HUFF John R. Huff OCEANEERING INTERNATIONAL, INC. By: //S// GEORGE R. HAUBENREICH, JR. Vice President, General Counsel and Secretary EX-10.16 5 K- K-113 7,000 Shares OCEANEERING INTERNATIONAL, INC. RESTRICTED STOCK AWARD INCENTIVE 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 1990 Long Term 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. (d) "Peer Group Companies" means Baroid Corporation as replaced by Dresser Industries, Inc. on June 24, 1994, Global Industries, Inc., Halliburton Company, Hornbeck Offshore Services, Inc., Offshore Pipelines, Inc. as replaced by J. Ray McDermott, Inc. on February 10, 1995, McDermott International, Inc., Nabors Industries, Inc., Stolt Comex Seaway S.A., and Tidewater, Inc. In the event any of such companies (i) shall cease to have its common stock listed on a national securities exchange or quoted in the NASDAQ National Market System, or (ii) in the sole discretion of the Committee, shall be so changed as a result of any merger, acquisition or other transaction that it no longer is appropriate to include such company as one of the Peer Group Companies, then the Peer Group Companies shall thereafter not include such company for purposes of calculating any forfeiture of Restricted Stock under this Agreement. (e) "Peer Group Companies Performance" for any 52-week period contemplated in Section 3 of this Agreement means, the arithmetic average of the changes in Closing Stock Price for each of the Peer Group Companies between the first day of such period and the last day of such period. 2. Award. In order to encourage the Participant's contribution to the successful performance of the Company, and in consideration of the covenants and promises of the Participant herein contained, pursuant to action taken by the Committee on May 22, 1995 (the "Date of Grant"), the Company hereby awards to the Participant as of the Date of Grant a total of 7,000 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 Restricted Stock awarded hereunder consists of Tranche C containing 7,000 shares. The shares of Restricted Stock shall be treated as described below for purposes of forfeiture, vesting and other terms and conditions of this Agreement: (a) Tranche C: The shares of Restricted Stock in Tranche C shall be forfeited to the extent the change of the Closing Stock Price for the Common Stock for the 156-week period referred to below fails to meet the levels of Peer Group Companies Performance indicated in the columnar presentation below for such period, with linear interpolation to be used between these designated points (rounded to the nearest whole share of Common Stock); provided, however, that if net income for the Company for its fiscal year ending immediately prior to June 21, 1996 is not positive, all of Tranche C shall be forfeited. Determination of changes shall be made by comparing the Closing Stock Prices of the Company and the Peer Group Companies on June 25, 1993 to the Closing Stock Prices on the last trading day of each calendar week for each of such companies for the period ended June 21, 1996. Percentage of Company Performance as Percentage Restricted Stock of Peer Group Companies Performance Forfeited 87-1/2% 0% 75% 34% 50% 84% Less than 50% 100% (b) Vesting of Common Stock: The shares of Tranche C Restricted Stock not forfeited by reason of failure to meet the conditions set forth in paragraph (c) above, shall vest 25% on June 21, 1996, 25% on June 20, 1997, 25% on June 19, 1998 and a final 25% on June 18, 1999. Upon termination of a Participant's employment (with or without cause, voluntary, involuntary or for any reason whatsoever except as provided in Sections 3(f) and 3(g)), all Restricted Stock for which the conditions of the applicable provisions of paragraphs (a), (b) or (c) and this paragraph (d) have not been satisfied as of the date of such termination of employment shall be forfeited. (c) 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(f), 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. (d) Effect of Change in Control: In the event a Change in Control occurs prior to the time that the conditions of the applicable of paragraphs (a), (b) or (c) and paragraph (d) above have been satisfied with respect to a share of Restricted Stock, and upon such Change in Control if a share of Restricted Stock has not theretofore been forfeited, the requirements of paragraphs (a), (b), (c) and (d) above shall be deemed to have been satisfied on the later of (i) 6 months after the Date of Grant and (ii) the date of such Change of Control, and tax assistance payments shall be made with respect to such shares within 10 days thereafter. (e) Effect of Death Disability; Discretion of Committee. In the event of the death or Disability of the Participant while employed by the Company, the conditions of the applicable of paragraphs (a), (b) or (c) and paragraph (d) with respect to any shares of Restricted Stock not previously forfeited by the Participant shall be deemed immediately satisfied and tax assistance payments shall be made by Company to Participants with respect to such event within 30 days thereafter. At any time after 6 months from the Date of Grant, the Compensation Committee may determine to deem the conditions of paragraphs (a), (b), (c) or (d) satisfied with respect to one or more shares of Restricted Stock, and may in connection therewith authorize a tax assistance payment. (f) 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. (g) 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. (h) Interpretation of Market Declines. In the event, for any 52-week period, the Peer Group Companies Performance is negative, the tables in Sections 3(a), 3(b) and 3(c) shall be interpreted such that (i) a relative performance of 87-1/2% shall mean the Company Performance (in terms of a decline in Closing Stock Price) declined 112-1/2% compared to the Peer Group Companies Performance, (ii) a relative performance of 75% shall mean the Company Performance declined 125% compared to the Peer Group Companies Performance and (iii) a relative performance of 50% shall mean the Company Performance declined 150% compared to the Peer Group Companies Performance. For example, if Peer Group Companies Performance change is a negative 10% (an average decline of 10%), and Company Performance declined 15%, 84% of Tranche C would be forfeited. 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: May 22, 1995. OCEANEERING INTERNATIONAL, INC. By //S// GEORGE R. HAUBENREICH, JR. The undersigned Participant accepts the Restricted Stock subject to all the terms of this Agreement. //S// MARVIN J. MIGURA EX-10.17 6 March 29, 1996 Oceaneering International, Inc. 16001 Park Ten Place, Suite 600 Houston, Texas 77084 Attention: Robert P. Mingoia, Treasurer Ladies and Gentlemen: Citibank, N.A. (the "Bank") is pleased to establish an uncommitted line of credit in your favor not to exceed $US20,000,000.00 (Twenty Million Dollars) at any time outstanding and available for your use from time to time through March 31, 1997, unless the Bank should advise, or be advised by you, to the contrary. This line of credit agreement (this "Agreement") is not a commitment but sets forth the terms and conditions under which the Bank may in its sole discretion make advances (the "Advances") to you and may issue (as "Issuing Bank") letters of credit for a term not to exceed two (2) years from the date of issuance (each a "Letter of Credit") for your account from time to time under such line of credit. 1. The Advances. (a) All Advances under the line of credit shall be payable on demand and shall be evidenced by your Demand Promissory Note substantially in the form of Exhibit A hereto (the "Note"). Advances under the Note may be made by the Bank at the oral or written request of persons designated pursuant to the resolution delivered to the Bank pursuant to Section 3 below and shall be disbursed by credit to your account at the office of the Citibank, N.A. located at 399 Park Avenue, New York, New York 10043 or otherwise in accordance with the written instruction of such persons. In accordance with the terms of the Note, you shall be permitted to choose as the applicable interest rate basis for each Advance one of the following (as defined in the Note): Citibank's Alternate Base Rate, LIBOR plus an additional amount mutually agreed upon by the Bank and you prior to the time of a borrowing under the Note, or the Quoted Rate; provided that LIBOR and Quoted Rate Advances (each a "Fixed Rate Advance") shall only be available for principal amounts of at least $1,000,000 or $500,000, respectively, that are whole-integer multiples of $100,000. All capitalized terms not otherwise defined herein are used with the same meanings as in the Note. (b) If due to either (i) the introduction of or any change (including without limitation, any change by way of imposition or increase of reserve requirements) in or in the interpretation of any law or regulation or (ii) the compliance of the Bank with any guideline or request from any central bank or other governmental authority (whether or not having force of law), there shall be any increase in the cost to the Bank of agreeing to make or making, funding or maintaining Advances, then you shall from time to time, upon demand by the Bank, pay to the Bank additional amounts sufficient to indemnify the Bank against such increased cost. You further agree to indemnify and save the Bank harmless from any loss, cost, damage, liability or expense which may be suffered or incurred by the Bank, resulting from the imposition of reserve requirements to transactions covered hereby under Regulation D of the Board of Governors of the Federal Reserve System or otherwise (including without limitation the loss, cost, damage, liability or expense incurred in maintaining any such reserve). A certificate as to the amount of such increased cost, submitted to you by the Bank, shall be conclusive, absent manifest error. (c) You agree to compensate the Bank on written request by the Bank (which request will set forth in reasonable detail the basis for requesting such amounts) for all reasonable losses, expenses and liabilities (including, without limitation, any interest paid by the Bank to lenders of funds borrowed by it to make or carry Fixed Rate Advances) and any loss sustained by the Bank in connection with the reemployment of such funds which Bank may sustain if for any reason (whether due to demand for payment by the Bank (except for demand by the Bank in circumstances where no default or event of default exists or where no imminent breach by Borrower of the note and/or this Agreement exists in the reasonable view of the Bank), voluntary prepayment by the Borrower or any other reason) you repay any Fixed Rate Advance on a day which is not the last day of the applicable Interest Period or as a consequence of your failure to borrow any such Advance after giving notice thereof or to pay the principal of any such Advance when due under this Agreement and the Note. 2. Letters of Credit. You may from time to time request the Bank to cause the Issuing Bank to issue a Letter of Credit for your account by executing the Issuing Bank's standard form of letter of credit application (each an "Application"). The Issuing Bank shall not be obligated to issue any Letter of Credit at any time but each Letter of Credit shall be subject to the terms and conditions contained in the related Application and shall expire no more than two (2) years after the date of issuance. You shall pay the Bank a commission payable at issuance on each standby Letter of Credit computed at the rate of .75% per annum (based on a year of 360 days and actual days elapsed) on the maximum amount available or to be available for drawing thereunder (assuming compliance with all conditions thereof), or $450.00 (which ever is greater) payable in arrears on the last day of each calendar quarter and on the expiration date thereof. In the event that the Issuing Bank notifies the Bank that you have failed to pay any obligations under any Application when due, you shall be deemed to have requested an Advance from the Bank in such amount bearing interest at the Alternate Base Rate and the Bank is hereby irrevocably authorized to make such an Advance and deliver the proceeds thereof to the Issuing Bank for application to such obligations. 3. Loan Documents. You shall provide to the Bank (i) a copy of this Agreement executed by you, (ii) your executed Note, (iii) a certificate of your secretary or assistant secretary, dated a recent date, containing a copy of the resolutions of your board of directors authorizing the execution and performance of this Agreement, the Note, the Applications, and all other documents executed or to be executed by you hereunder or thereunder (collectively, the "Loan Documents") and certifying as to the incumbency and specimen signatures of your officers authorized to execute each such Loan Document and to give or designate others to give notices hereunder and thereunder, and (iv) a copy of your articles or certificate of incorporation certified by the Secretary of State of your state of incorporation as of a recent date. 4. Representations and Covenants. Until the termination of this line of credit and payment in full of your obligations under this letter agreement, the Note and the Applications (the "Obligations") you will provide to the Bank: (i) within 90 days after the end of each fiscal year, annual financial statements certified by accountants acceptable to the Bank; (ii) within 45 days after the end of each fiscal quarter (except the fourth quarter) unaudited financial statements certified by your chief financial officer; and (iii) such other information concerning your business, operations, properties, prospects and financial or other condition as the Bank may request from time to time. In addition, you agree at all times during the term of this Letter Agreement to advise the Bank immediately upon obtaining knowledge of (but in any event not later than twenty (20) days from the date of) the occurrence of a default under the terms of or an Event of Default as defined under any credit agreement or senior credit facilities between the Borrower and any financial institution or other third party. Such notice maybe in the form of oral communication promptly confirmed in writing via letter, telex, telecopier or telefacsimile. 5. Obligations Payable on Demand. Except as otherwise required by the terms of the Demand Promissory Note, all of the Obligations shall be payable on demand, notwithstanding the duration of any Interest Period for any Advance, the expiration date of any Letter of Credit or anything else contained herein or in any of the Loan Documents. Upon such demand, you shall pay to us, in addition to all principal and interest then outstanding under the Note, an amount equal to the maximum amount (the "Maximum Available Amount") which may at any time be drawn under all Letters of Credit then outstanding (assuming compliance with all conditions thereof and whether or not any beneficiary under any Letter of Credit shall have presented, or shall be entitled at such time to present, the drafts or other documents required to draw under such Letter of Credit), which amount shall be held in a cash collateral account to be established by you with the Issuing Bank as cash collateral for your obligations under the Applications, provided that in the event of cancellation or expiration of any Letter of Credit or any reduction in the Maximum Available Amount, we shall apply the difference between the Maximum Available Amount immediately prior to such cancellation, expiration or reduction and the Maximum Available Amount immediately after such cancellation, expiration or reduction, to the payment of any outstanding Obligations and shall pay any excess to whomsoever shall be lawfully entitled to receive such funds. Amounts deposited in the cash collateral account shall be invested by the Bank at your request in approved certificates of deposit or other readily marketable instruments or securities mutually agreed upon by you and the Bank. 6. Indemnification. You agree to indemnify and hold harmless the Bank and its affiliates, officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, fees and disbursements of counsel) which may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of, or in connection with the preparation for a defense of, any investigation, litigation or proceeding arising out of, related to or in connection with this Agreement or the Obligations, including, without limitation, any transaction in which the proceeds of any borrowing are or are to be applied, whether or not an Indemnified Party is a party thereto and whether or not the transactions contemplated herein are consummated, except to the extent such claim, damage, loss, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct. 7. Amendments and Waivers. No amendment, modification or waiver of this Agreement, the Note or any term hereof or thereof shall be effective unless in writing and signed by you and the Bank. 8. Integration. This letter agreement, the Note and any other Loan Documents constitute the final agreement between you and the Bank on the subject matter hereof and supersede all prior understandings, representations and agreements. 9. Assignments and Participations. We may assign to any of our affiliates or, with your consent (which shall not be unreasonably withheld), to one or more other financial institutions, all or a portion of our rights and obligations under this letter and the Note. Upon delivery to you of written notice of such assignment signed by both parties thereto, (i) the assignee shall become a party hereto and shall assume our rights and obligations hereunder to the extent of such assignment, (ii) the assignor shall relinquish its rights and be released from its obligations under this letter to the same extent and (iii) you shall promptly execute and deliver new notes to the assignee and assignor as necessary to reflect their respective rights and obligations hereunder after giving effect to such assignment. We may also sell participations in all or a portion of our rights and obligations under this Agreement, provided that our obligations hereunder shall remain unchanged, we shall remain solely responsible to the other parties hereto for the performance thereof and you shall continue to deal solely and directly with us in connection with our rights and obligations hereunder. We may disclose to any existing or prospective transferee under this Section any information received by us from or on behalf of you pursuant to this letter, so long as the recipient has agreed to hold in confidence any such information which is confidential in nature. Notwithstanding anything else set forth herein, we may at any time create a security interest in all or any portion of our rights under this letter (including without limitation the Advances and the Note) in favor of any Federal Reserve Bank. 10. Governing Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York. The Borrower hereby consents to the personal jurisdiction of any court of the United States or the State of New York sitting in New York City, New York in any action or proceeding arising out of or relating to this agreement or the Note, agrees that all claims in respect of any such action or proceeding may be heard and determined in such court and waives the defense of inconvenient forum to the maintenance of any such action or proceeding. If the foregoing is satisfactory to you, please indicate your acceptance by signing the enclosed copy of this letter and returning it to the Bank at Citibank, N.A. c/o Citicorp Securities, Inc., 1200 Smith Street, Suite 2000, Houston, Texas 77002. Yours very truly CITIBANK, N.A. By: //s//MARJORIE FUTORNICK Marjorie Futornick Vice President Accepted and agreed to as of the date first stated above: OCEANEERING INTERNATIONAL, INC. By: //s//ROBERT P. MINGOIA Robert P. Mingoia Treasurer EXHIBIT A DEMAND PROMISSORY NOTE $20,000,000.00 March 29, 1996 FOR VALUE RECEIVED, the undersigned, Oceaneering International, Inc., a Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY ON DEMAND to the order of Citibank, N.A. (the "Bank"), at its office (the "Reference Bank") located at 399 Park Avenue, New York, New York, the principal sum of $20,000,000.00 (Twenty Million Dollars) or, if less, the aggregate principal amount of all advances (each an "Advance") made hereunder by the Bank to the Borrower outstanding at the time of such demand; together with interest on any and all principal amounts remaining unpaid hereunder from time to time outstanding from and including the date hereof until such principal amounts are finally paid in full, at such interest rates and payable at such times, as are specified below. This Demand Promissory Note is the Note referred to in, and is entitled to the benefits of, the letter agreement between the Borrower and the Bank dated as of March 31, 1995 (as amended from time to time, the "Letter Agreement"). 1. All Advances hereunder shall bear interest, payable on demand or if no demand is made then monthly on the last day of each calendar month during the term hereof, at a fluctuating interest rate per annum in effect from time to time equal at all times to the Alternate Base Rate (as defined below), with each change in the fluctuating interest rate hereunder taking effect simultaneously with the corresponding change in the Alternate Base Rate; provided that upon not less than three Business Days (as defined below) notice to the Bank, the Borrower may elect to have all or any portion (in the amount of at least $1,000,000 that are whole-integer multiples of $100,000) of the aggregate principal amount of such Advances bear interest for the Interest Period (as defined below) specified in such notice at LIBOR (as defined below), plus an additional amount mutually agreed upon by the Borrower and the Bank, payable on the last day of such Interest Period; and provided further, that upon offer by the Bank and acceptance by the Borrower on any Business Day, the Borrower may elect to have all or any portion (in the amount of at least $500,000 that are whole-integer multiples of $100,000) of the aggregate principal amount of such Advances bear interest at a rate equal to the Quoted Rate (as defined below), payable on the last day of such Interest Period. 2. As used in this Demand Promissory Note, the following terms shall have the following meanings: "Alternate Base Rate" means, at all times, a fluctuating rate per annum equal to the highest of: (i) the rate of interest announced publicly by the Reference Bank in New York, New York, for time to time, as the Reference Bank's base rate; or (ii) the sum of (A) 1/2 of one percent per annum plus (B) the rate obtained by dividing (x) the latest three-week moving average of secondary market morning offering rates in the United States for three-month certificates of deposit of major United States money market banks (such three-week moving average being determined weekly by the Reference Bank on the basis of such rates reported by certificate of deposit dealers to and published by the Federal Reserve Bank of New York, or, if such publication shall be suspended or terminated, on the basis of quotations for such rates received by the Reference Bank, in either case adjusted to the nearest 1/4 of one percent or, if there is no nearest 1/4 of one percent, to the next higher 1/4 on one percent), by (y) a percentage equal to 100% minus the average of the daily percentages specified during such three-week period by the Federal Reserve Board for determining the maximum reserve requirement (including, but not limited to, any marginal reserve requirements for the Reference Bank in respect of liabilities consisting of or including (among other liabilities) three-month non-personal time deposits of at least $100,000), plus (C) the average during such three- week period of the daily net annual assessment rates estimated by the Reference Bank for determining the current annual assessment payable by the Reference Bank to the Federal Deposit Insurance Corporation for insuring three-month time deposits in the United States; or (iii) one half of one percent per annum above the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such transactions received by the Reference Bank from three Federal funds brokers of recognized standing selected by it. "Business Day" means a day of the year on which banks are not required or authorized to close in New York City and, with respect to any Advance bearing interest by reference to LIBOR, a day of the year on which dealings are carried on in the London interbank market. "Indebtedness" means (a) all indebtedness of the Borrower for borrowed money or for the deferred purchase price of property or services under material contracts (other than current trade liabilities incurred in the ordinary course of the Borrower's business and payable in accordance with customary practices and which in any event are no more than 120 days past due or, if more than 120 days past due, are being contested in good faith and adequate reserves with respect thereof have been made on the books of the Borrower), (b) all obligations under senior credit facilities, (c) all obligations under Finance leases, (d) all obligations and liabilities secured by liens on any property owned by the Borrower whether or not the Borrower has assumed or is otherwise liable for the payment thereof. "Interest Period" means (i) in the case of a Quoted Rate Advance, the number of days mutually agreed by the Borrower and the Bank and (ii) in the case of a LIBOR Advance, one, two or three months; provided that (a) no Interest Period shall be selected which will end after the Termination Date and (b) if the last day of any Interest Period would otherwise occur on a day other than a Business Day, such Interest Period shall end on the next succeeding Business Day, except that if such extension would cause the last day of any Interest Period for a LIBOR Advance to occur in the next following calendar month, such Interest Period shall end on the next preceding Business Day. "LIBOR" means, for any Interest Period, the rate per annum at which deposits in United States dollars are offered by the principal office of the Reference Bank in London, England to prime banks in the London interbank market at 11:00 A.M. (London time) two Business Days (as defined below) before the first day of such Interest Period in an amount substantially equal to the principal amount of such Advance and for a period equal to such Interest Period, provided that if, on any date, it shall become unlawful for the Bank to continue to fund or maintain any amount hereunder at LIBOR, or LIBOR shall fail to reflect the cost to Bank of funding or maintaining such amount, such amount shall bear interest from and after such date at the Alternate Base Rate. "Quoted Rate" means, for any Interest Period, the rate per annum offered by the Bank to the Borrower and agreed to by the Borrower for such Interest Period, provided, however, that if no rate per annum shall be agreed by the Borrower and the Bank prior to 1:00 p.m. (New York time) on the first day of such Interest Period as the Quoted Rate for such Interest Period, the Quoted Rate for such Interest Period shall be equal to the Alternate Base Rate. The Bank may give the Borrower a written confirmation of the principal amount, Quoted Rate and Interest Period applicable to any Advance bearing interest at the Quoted Rate and, unless the Borrower shall object thereto within one Business Day after receiving such confirmation, such confirmation shall be conclusive and binding for all purposes. If the Borrower shall make a timely objection as to the rate or term set forth in such confirmation, such Advances shall bear interest at the Alternate Base Rate. 3. The duration of any Interest Period shall in no way affect the Bank's right to demand payment hereunder at any time; provided that, unless the Bank shall have made a demand hereunder for payment, the Borrower shall have no right to prepay or to change the interest rate basis for any unpaid principal amount bearing interest by reference to LIBOR or the Quoted Rate other than on the last day of the Interest Period therefor. To the extent that any unpaid principal amount hereof bears interest at the Alternate Base Rate, the Borrower may pay all or any part thereof on not less than three Business Days' notice to the Bank, together with accrued interest to the date of such payment on the amount paid. 4. Both principal and interest hereunder are payable prior to 1:00 P.M. (New York City time) on the day for payment thereof (whether upon demand or otherwise) in lawful money of the United States of America to the Bank at the office of the Reference Bank referred to above, in same day funds. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of payment of interest. All computations of interest shall be made by the Bank on the basis of a year of 365 or 366 days (if based on the Base Rate) or 360 days (in the case of any other rate) for the actual number of days (including the first day but excluding the last day) occurring in the period for which such interest is payable. The Borrower hereby authorizes the Reference Bank, if and to the extent payment is not made when due hereunder, to charge from time to time against any or all of the Borrower's accounts with the Reference Bank (without notice to the Borrower) and make available to the Bank any amount so due. Any amount of principal or interest which is not paid when due (whether on demand, at stated maturity, by acceleration or otherwise) shall bear interest from the date on which such amount is due until such amount is paid in full, payable on demand, at a rate per annum equal at all times to two percent (2%) per annum above the Alternate Base Rate. 5. The date and amount of each Advance, the interest rate selection, the Interest Period applicable thereto (if any) and all payments made by the Borrower on account of principal hereof shall be recorded by the Bank and, prior to any transfer of this Demand Promissory Note, entered by the Bank on the grid attached hereto, which is part of this Demand Promissory Note, provided that the Bank shall not be liable to the Borrower or to any other person for failure to record any of the foregoing matters on the grid or otherwise in the Bank's records. Such grid or such other record maintained by the Bank shall, in the absence of manifest error, be conclusive evidence of the matters so recorded. 6. Each Advance made by the Bank to the Borrower under this Demand Promissory Note shall be subject to the satisfaction of the condition precedent to funding such Advance and a representation by the Borrower to the Bank that no default or Event of Default (as defined in such agreements) exist under any senior credit facilities or credit agreements to which the Borrower is a party on the date of and at the time of the making of such Advance by the Bank hereunder. 7. In the event of an actual or deemed entry of an order for relief with respect to the Borrower under the Federal Bankruptcy Code, this Demand Promissory Note, all interest hereon and all other amounts payable hereunder shall automatically become and be due and payable, without presentment, demand, protest or any notice of any kind, all of which are hereby expressly waived by the Borrower. 8. If the Borrower shall default in any payment of principal of or interest on any Indebtedness (other than this Note) after the expiration of the applicable grace period provided for in any agreement, note or instrument under which such Indebtedness was created, upon the happening of such event, without demand by the Bank, all interest hereon and all amounts due hereunder shall automatically become due and payable, without notice, presentment or protest of any kind, all of which are expressly waived by the Borrower. 9. The Borrower hereby waives presentment for payment, demand, notice of dishonor and protest of this Demand Promissory Note and, to the full extent permitted by law the right to plead any statute of limitations as a defense to any demand hereunder. The Borrower agrees to pay on demand all losses, costs and expenses, if any (including reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Demand Promissory Note and any other instruments and documents delivered in connection herewith, including, without limitation, reasonable counsel fees and expenses in connection therewith. 10. This Demand Promissory Note shall be governed by, and construed in accordance with, the laws of the State of New York. The Borrower hereby consents to the personal jurisdiction of any court of the United States or the State of New York sitting in New York City, New York in any action or proceeding arising out of or relating to this Demand Promissory Note or the Letter Agreement, agrees that all claims in respect of any such action or proceeding may be heard and determined in such court and waives the defense of inconvenient forum to the maintenance of any such action or proceeding. IN WITNESS WHEREOF, the Borrower has caused this Demand Promissory Note to be executed and delivered by its duly authorized officer, as of the day and year and at the place first above written. OCEANEERING INTERNATIONAL, INC. By: Title: TRANSACTIONS ON DEMAND PROMISSORY NOTE OF OCEANEERING INTERNATIONAL, INC. IN FAVOR OF CITIBANK, N.A. dated March 29, 1996 Amount of Borrowing Made This Interest Interest Amount of Notation Date Date Period Rate Payment Made By EXHIBIT B FORM OF OPINION OF BORROWER'S COUNSEL [Date] Citibank, N.A. 399 Park Avenue New York, New York 10043 Ladies and Gentlemen: This opinion is furnished to you pursuant to Section 3 of the letter agreement dated as of , 19 (the "Letter Agreement"), between (the "Borrower") and you. Terms defined in the Credit Agreement are used herein as therein defined. We have acted as counsel for the Borrower in connection with the preparation, execution and delivery of the Letter Agreement. In that connection, we have examined: (1) the Letter Agreement, (2) the documents furnished by the Borrower pursuant to Section 3 of the Letter Agreement, (3) the [Articles] [Certificate] of Incorporation of the Borrower and all amendments thereto (the "Charter"), (4) the by-laws of the Borrower and all amendments thereto (the "By-laws"), (5) a certificate of the Secretary of State of , dated , 19 , attesting to the continued corporate existence and good standing of the Borrower in that State. We have also examined the originals, or copies certified to our satisfaction, of the documents listed in a certificate of the chief financial officer of the Borrower, dated the date hereof (the "Certificate"), certifying that the documents listed in such certificate are all of the indentures, loan or credit agreements, leases, guarantees, mortgages, security agreements, bonds, notes and other agreements or instruments, and all of the orders, writs, judgments, awards, injunctions and decrees, which affect or purport to affect the Borrower's right to borrow money or the Borrower's obligations under the Letter Agreement or the Note. In addition, we have examined the originals, or copies certified to our satisfaction, of such other corporate records of the Borrower, certificates of public officials and of officers of the Borrower, and agreements, instruments and other documents, as we have deemed necessary as a basis for the opinions expressed below. As to questions of fact material to such opinions, we have, when relevant facts were not independently established by us, relied upon certificates of the Borrower or its officers or of public officials. We have assumed the due execution and delivery, pursuant to due authorization, of the Letter Agreement by the Bank. Based upon the foregoing and upon such investigation as we have deemed necessary, we are of the following opinion: 1. The Borrower is a corporation duly organized, validly existing and in good standing under the laws of the State of . 2. The execution, delivery and performance by the Borrower of the Letter Agreement and the Note are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) the Charter or the By-laws or (ii) any law, rule or regulation applicable to the Borrower (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System) or (iii) any contractual or legal restriction contained in any document listed in the Certificate or, to the best of our knowledge, contained in any other similar document. The Letter Agreement and the Note have been duly executed and delivered on behalf of the Borrower. 3. No authorization, approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by the Borrower of the Letter Agreement and the Note [, except for , all of which have been duly obtained or made and are in full force and effect]. 4. The Letter Agreement and the Note are legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors' rights generally and subject to the effect of general principles of equity, including (without limitation) concepts of materiality, reasonableness, good faith and fair dealing (regardless of whether considered in a proceeding in equity or at law). 9 5. To the best of our knowledge, there are no pending or overtly threatened actions or proceedings against the Borrower or any of its subsidiaries before any court, governmental agency or arbitrator which purport to affect the legality, validity, binding effect or enforceability of the Letter Agreement or the Note or which are likely to have a materially adverse effect upon the financial condition or operations of the Borrower or any of its subsidiaries. [*6. In any action or proceeding arising out of or relating to the Letter Agreement or the Note in any court of the State of or in any federal court sitting in the State of , such court would recognize and give effect to the provisions of Section of the Letter Agreement wherein the parties thereto agree that the Letter Agreement and the Note shall be governed by, and construed in accordance with, the laws of the State of New York.] We are qualified to practice law in the State of and we do not purport to be experts on any laws other than the laws of the State of [, the General Corporation Law of the State of Delaware] and the Federal laws of the United States. [**For purposes of the opinion set forth in paragraph 4 above, we have assumed with your permission that the laws of the State of New York are identical to the laws of the State of .] Very truly yours, * Include if the Borrower is located in a state other than New York. ** Include if Borrower's counsel is not admitted in New York. 10 EX-10.18 7 OCEANEERING INTERNATIONAL, INC. 1996 BONUS AWARD PLAN The 1996 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 1996 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 FY96 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. The 1996 Bonus Award Plan is in effect FY96. A similar plan may or may not be approved for FY97. It is extremely important that the Company continue improved results in FY96. 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 1996 Bonus Award Plan is structured to foster that position. June 30, 1995 EX-21 8 SUBSIDIARIES OF OCEANEERING INTERNATIONAL, INC. Percentage of Ownership Jurisdiction by Oceaneering of Subsidiary International, Inc. Organization Eastport International, Inc. 100% Delaware Monocean Oceaneering Engenharia Submarina Ltda. 100% Brazil Multiflex, Inc. 100% Texas Multiflex Limited 100% Scotland Multiflex U.K., Inc. 100% Texas Norsk Subsea Cable A/S 49% Norway Ocean Barge Limited Partnership 75% Texas Ocean Systems Do Brasil Servicos Subaquaticos Ltda. 100% Brazil 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 50% Australia Oceaneering do Brasil Servicos Submarinos Ltda. 100% Brazil Oceaneering FSC, Inc. 100% Barbados Oceaneering International AG 100% Switzerland Oceaneering International (Ireland) Limited 100% Ireland Oceaneering International (M) Sdn. Bhd. 100% Malaysia Oceaneering International (Netherlands) B.V. 100% Netherlands 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 Space Systems, Inc. 100% Delaware Oceaneering Survey, Inc. 100% Delaware Oceaneering Technologies, Inc. 100% Delaware Oceaneering Underwater GmbH 100% Switzerland Oceanteam A/S 50% Norway Oceanteam UK Limited 100% Scotland Oil Industry Engineering, Inc. 100% Texas P. T. Calmarine 50% Indonesia QAF-Solus Offshore Sdn Bhd 50% Brunei Servicios Marinos Oceaneering Chile Limitada 100% Chile Solus Emirates 49% U.A.E. Solus Ocean Systems, Inc. 100% Delaware Solus Oceaneering (Malaysia) Sdn. Bhd. 49% Malaysia Solus Offshore Ltd. 100% Cayman Islands Solus Schall Limited 100% England Solus Schall (Nigeria) Limited 50% Nigeria Specialty Wire and Cable Company, Inc. 100% Texas Steadfast Oceaneering, Inc. 100% Virginia Stolt-Comex Seaway Tecnologia Submarina S.A. 20% Brazil EX-23 9 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our report included in this Form 10- K, into the Company's previously filed Form S-8 Registration Statements filed on May 11, 1982 (Reg. No. 2-77451), November 22, 1982 (Reg. No. 2-80506), July 13, 1988 (Reg. No. 33-23059), June 12, 1989 (Reg. No. 33-29277), and September 24, 1990 (Reg. No. 33- 36872). ARTHUR ANDERSEN LLP Houston, Texas June 19, 1996 EX-24 10 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, 1996 ("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 June, 1996. //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, 1996 ("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 June, 1996. //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, 1996 ("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 June, 1996. //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, 1996 ("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 June, 1996. //s// JOHN R. HUFF EX-27 11
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. 1,000 YEAR MAR-31-1996 MAR-31-1996 9,351 0 97,592 1,201 0 110,475 273,382 145,105 256,096 68,048 48,000 0 0 6,004 121,094 256,096 289,506 289,506 234,731 234,731 0 0 2,286 19,852 7,495 12,357 0 0 0 12,357 .53 .53
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