-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, dvJeCnYwCJkLXWwkU0vumtHzzsxN4LmKAQxkio5KQPBqwJbTauKeT4mF+UBVCtDH +619blI1h/eNu13taYVbpw== 0000073756-95-000007.txt : 19950626 0000073756-95-000007.hdr.sgml : 19950626 ACCESSION NUMBER: 0000073756-95-000007 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950623 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: 95548786 BUSINESS ADDRESS: STREET 1: 16001 PARK TEN PL STE 600 CITY: HOUSTON STATE: TX ZIP: 77084 BUSINESS PHONE: 7135788868 10-K405 1 FISCAL 1995 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, 1995 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 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. [X] 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 . Aggregate market value of the voting stock held by non-affiliates of the registrant at June 1, 1995, based upon the closing sale price of the Common Stock on the New York Stock Exchange $217,725,000 Number of shares of Common Stock outstanding at June 1, 1995 23,060,024 Documents Incorporated by Reference: Portions of the proxy statement to be filed on or before July 31, 1995, 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 which 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 28 other countries. The Company's international operations, principally in the North Sea, Far East, Africa and the Middle East, accounted for approximately 51% of its 1995 fiscal year revenues, or $122,000,000. In January 1990, the Company acquired all of the outstanding capital stock of Sonsub Limited, a United Kingdom company ("Sonsub"), whose principal assets were ten large and four small 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 ("FPSO") system offshore Gabon. 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 for this project and was delivered to its first location in December 1991. The unit is currently operating offshore Angola. See Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations." 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 ROVs, one of which is rated for water depths to 25,000 feet, a deep tow sonar system and two other work 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 Offshore Production Systems division, these acquisitions form the basis of the Company's continuing expansion in the Offshore Field Development business. The Company intends to pursue a 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 the United States and foreign governments and the telecommunications, aerospace, insurance, marine and environmental remediation industries. Financial Information About Industry Segments The table containing revenues, operating income and assets by business segment for the fiscal years ended March 31, 1995, 1994 and 1993 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 construction, underwater and above-water inspection and maintenance (including repair) and survey. All of these services are frequently provided to customers on an integrated basis. Underwater Construction, Maintenance and Inspection. 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's underwater crews assist 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. Such services include testing, monitoring and replacing cathodic protection devices and inspecting platforms and pipelines for defects and unsupported spans, which the Company may then be contracted to repair or replace. Following production, the Company's salvage crews assist with the removal of the platforms and restoration of the seabed to its original condition. The Company's underwater services require the use of a variety of techniques and equipment. Underwater services are performed by divers or through the use of advanced work systems such as manned Atmospheric Diving Systems ("ADSs") and unmanned ROVs. The Company uses ROVs to provide underwater services at depths or in situations in which diving would be uneconomical or infeasible. An ROV may be outfitted with manipulators, sonar, television cameras, specialized tooling packages and other equipment or features to facilitate the performance of underwater tasks. The Company currently owns over 70 ROVs. When a project requires manned intervention, the Company uses divers or ADS technology. An ADS encloses the operator in a one-atmosphere (surface pressure) diving suit or manipulator diving bell. The Company operates two types of ADSs. The first type, the WASP, is a one-man suit equipped with manipulators to allow the operator to perform gripping and turning actions. The WASP ADSs work in water depths from the surface to 2,000 feet. The other type of ADS is a tethered diving bell equipped with a manipulator arm. The bell carries two operators to water depths of 3,000 feet. The WASP and the tethered manipulator diving bell have onboard life-support systems and are capable of providing audiovisual transmissions to the surface. The Company does not use divers (as distinguished from ADS operators) to perform functions in water depths greater than 1,000 feet. Revenues of the Company from all business segments attributable to ADS and ROV services for the fiscal years ended March 31, 1995, 1994 and 1993 were $55,000,000, $57,000,000 and $49,000,000 respectively. 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 onsite inspections of refineries, nuclear and conventional power stations and operates laboratory facilities for the testing of aero-engine components and other manufacturing 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. Survey Services. The Company 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. OFFSHORE FIELD DEVELOPMENT Mobile Offshore Production Systems. OPS was established as a group during fiscal 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. OPS 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. In December 1990, the Company was awarded its first major MOPS contract for the provision of an FPSO involving the conversion of a 78,000 dwt tanker into an FPSO for the production, processing, storage and offloading of oil into shuttle tankers. The unit has been operating offshore West Africa since December 1991. Subsea Products. OIE, Multiflex and the Pipeline Repair Systems unit of the Company form the Subsea Products group which complements the activities of the OPS group. OIE includes the subsea intervention business previously carried out by OPS and the subsea control systems business acquired in July 1993. OIE now 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 Since fiscal 1986, the Company has provided project management, engineering services and equipment to non-oilfield customers for applications in harsh environments. The Company serves government, industrial marine, space and environmental remediation services markets by using existing assets for new customers and by extending the use of technology developed in oilfield operations to new applications. Two separate divisions of Oceaneering - Oceaneering Technologies ("OTECH") and Oceaneering Space Systems ("OSS") - perform these services. Marine. OTECH performs work for customers having specialized requirements underwater or in other harsh environments. Customers include U.S. and foreign governments and the telecommunications, aerospace, insurance and environmental remediation industries. Since 1982, the Company has provided deep ocean search and recovery services on behalf of the United States government, 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 on behalf of American Telephone & Telegraph Company. OTECH operates ROVs that are rated for work in water depths from the surface to 25,000 feet. In June 1990, the Company purchased an ROV that has worked in water depths to 14,700 feet and is capable of working in water depths to 20,000 feet. Assets acquired with Eastport include an ROV designed for use in water depths 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 and deep tow, side scan sonar systems which are rated for use in 20,000 feet. One of the Company's deep tow systems has been used to locate downed aircraft in water depths to 14,700 feet. Engineering. 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 fiscal 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, and the Company is providing advanced refrigeration equipment for use on the International Space Station. The activities of OSS are substantially dependent on continued government funding for the nation's space program. OTECH designs and develops specialized tools and builds ROV systems to customer specifications for use in deepwater and hazardous environments. It also develops ROVs for the Company including associated ROV control vans and computer-based control systems. In April 1990, the Company delivered a remotely operated cable burial and repair system to a group of international telecommunications companies, and in fiscal 1992, delivered a second remotely operated cable burial and repair system for telecommunications use and an ROV system for salvage work. 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. See Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." 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, which is currently contracted. 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. Marketing efforts in the environmental remediation business are directed towards the petrochemical industry. Major Customers. Five principal customers of the Company accounted for approximately 34%, 36% and 31% of the Company's consolidated revenues in fiscal 1995, 1994 and 1993, respectively. The Royal Dutch Shell group of companies accounted for more than 10% of the Company's consolidated revenues in fiscal 1995, 1994 and 1993. 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, 1995 and 1994 were $94,000,000 and $69,000,000, respectively. Of these amounts, $39,000,000 and $28,000,000, respectively, were not expected to be performed within the fiscal year following such respective dates. At March 31, 1995 and 1994, the Company had approximately $27,000,000 and $25,000,000, respectively, in backlog for Offshore Field Development, all of which was expected to be completed within the fiscal year following such respective dates. At March 31, 1995 and 1994, the Company had approximately $39,000,000 and $22,000,000, respectively, in backlog for Advanced Technologies. Of these amounts, $12,000,000 and none, respectively, were not expected to be performed within the fiscal year following such respective dates. At March 31, 1995 the Company had approximately $7,000,000 of additional contracted work for Advanced Technologies which is not funded and is substantially dependent upon continued government funding for the nation's space program. 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 $3,600,000, $3,700,000 and $6,500,000 during fiscal 1995, 1994 and 1993, 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 are certified to the British Standard BS 5750 Part 2:1987, which is the equivalent of ISO 9002, covering the full range of subsea and topside services offered in the United Kingdom. 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. A significant part of the Company's operations is conducted outside the United States. For the fiscal years ended March 31, 1995, 1994 and 1993, foreign operations accounted for 51%, 61% and 66% 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, 1995, the Company had approximately 1,900 employees. The Company's work force varies seasonally and peaks during the summer months. None of the Company's domestic employees is currently represented by a labor union. Approximately 6% of the Company's employees are represented by unions in foreign countries. 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 fiscal years 1995, 1994 and 1993 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. The business of Oceaneering ordinarily results in 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 fiscal year ended March 31, 1995. 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, 1995: OFFICER EMPLOYEE NAME AGE POSITIONS SINCE SINCE John R. Huff 49 Chairman of the Board, 1986 1986 President and Chief Executive Officer T. Jay Collins 48 Executive Vice President - 1993 1993 Oilfield Marine Services Stephen Helburn 48 Senior Vice President - 1984 1982 Asia F. Richard Frisbie 52 Senior Vice President - 1981 1974 Marketing and Technology Marvin J. Migura 44 Senior Vice President and 1995 1995 Chief Financial Officer George R. 47 Vice President, General 1988 1988 Haubenreich, Jr. Counsel and Secretary Richard V. Chidlow 51 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 August 1986, he served from May 1980 until January 1986 as Chairman and President of Western Oceanic Inc., the offshore drilling subsidiary of The Western Company of North America ("Western Oceanic"). From February 1986 through July 1986, he was Managing Partner of an investment banking group specializing in the energy industry. He is a director of BJ Services Company, Triton Energy Corporation 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. Stephen Helburn, Senior Vice President - Asia, joined the Company in 1982 as General Manager of the Gulf Coast Division and served as Vice President - Americas Region from 1987 to 1990 and as Senior Vice President - Worldwide Operations from 1990 to 1995. He has over 20 years of experience in the underwater services industry. From 1972 to 1978, he was an engineer with Chicago Bridge & Iron Industries, Inc., ("CBI"), where he was responsible for a variety of projects including wet welding development research, project management and construction. From 1979 to 1982, he was manager of the underwater welding division of Seacon Services, Inc., the offshore subsidiary of CBI. 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. Marvin J. Migura, Senior Vice President and Chief Financial Officer, joined the Company in 1995. From 1987 to 1994, he was employed as Senior Vice President and Chief Financial Officer with Zapata Corporation, a diversified energy services company. From 1975 to 1987 he held various financial positions with Zapata Corporation. George R. Haubenreich, Jr. joined the Company in June 1988 as Vice President, General Counsel and Secretary. 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 joined the Company in January 1987 as Controller for the Americas Region. From September 1988 until May 1990, he was Controller for the Europe, Africa and Asia group in Aberdeen, and was appointed Controller and Chief Accounting Officer in June 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 fiscal 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 1995 Fiscal 1994 High Low High Low For the quarter ended: June 30 $14-1/4 $11 $16 $12-3/4 September 30 14-1/8 12-1/4 17-1/8 13-1/2 December 31 13-1/8 9-3/4 18 12-1/8 March 31 10-5/8 7-7/8 14-1/2 12-1/8 On June 1, 1995, Oceaneering had 804 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 $9-5/8. 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: Fiscal Years Ended March 31, 1995 1994 1993 1992 1991 (in thousands, except per share figures) Revenues $239,936 $229,760 $215,603 $193,582 $168,928 Cost of services 190,772 177,199 157,048 143,117 120,775 Gross margin 49,164 52,561 58,555 50,465 48,153 Selling, general and administrative expenses 36,410 31,631 32,903 30,239 29,683 Income from operations $ 12,754 $ 20,930 $ 25,652 $ 20,226 $18,470 Net income applicable to common stock $ 5,496 $ 14,931 $ 19,401 $ 16,115 $16,870 Net income per common share equivalent 0.23 0.62 0.82 0.68 0.72 Depreciation and amortization 16,232 12,196 11,528 8,013 7,731 Capital expenditures 32,057 36,730 11,996 35,312 21,310 Other Financial Data: As of March 31, 1995 1994 1993 1992 1991 (in thousands, except ratios) Working capital ratio 1.44 1.74 1.92 1.65 2.26 Cash and cash equivalents $12,865 $ 26,486 $ 33,973 $ 23,281 $ 18,364 Working capital 23,106 34,425 42,492 28,556 42,406 Total assets 187,752 171,993 154,524 144,905 120,670 Short-term debt 118 124 96 2,065 1,243 Long-term debt 9,472 171 235 2,311 3,184 Total debt 9,590 295 331 4,376 4,427 Shareholders' equity 115,140 113,353 98,331 86,622 70,111 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Liquidity and Capital Resources At March 31, 1995, the Company had working capital of $23,100,000, including $11,400,000 of unrestricted cash. Additionally, as of April 12, 1995 the Company had $65,600,000 available for borrowings under its new $75,000,000 credit facility and $12,600,000 was unused under its uncommitted line of credit. See Note 3 of the Notes to Consolidated Financial Statements. The Company expects to meet its ongoing annual cash requirements out of operating cash flow; if significant investment opportunities arise, the Company may use external financing. Current maturities under capital lease obligations are not material and none of the $9,400,000 of long-term bank debt is required to be repaid prior to fiscal 1999. While liquidity and capital resources are considered adequate, the Company's working capital has declined over the last two years. A higher level of capital expenditures, including business acquisitions, during a period of lower cash flows from operations contributed to the decline. The $23,100,000 of working capital at March 31, 1995 compared to $34,400,000 and $42,500,000 as of March 31, 1994 and 1993, respectively. Likewise, the working capital ratio of 1.44 at March 31, 1995 was lower than the ratio of 1.74 and 1.92 at the end of fiscal years 1994 and 1993, respectively. Capital expenditures for the fiscal years ended March 31, 1995, 1994 and 1993 were $32,100,000, $36,700,000 and $12,000,000, respectively. Capital expenditures for fiscal 1995 consisted of the purchase and upgrade of a dynamically positioned 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 fiscal 1994 include 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. Capital expenditures for fiscal 1993 consisted primarily of upgrades to the Company's fleet of ROVs, including the addition of two new large ROV systems. There were no material commitments for capital expenditures at the close of fiscal 1995. During fiscal 1995 the Company completed the purchase of 1,000,000 shares of its stock pursuant to a plan approved in June 1994. 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 was a balance of 977,363 shares of treasury stock remaining at March 31, 1995. The purchases were financed primarily by bank borrowings. 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 the United States and foreign governments, and the telecommunications, aerospace, insurance and environmental remediation industries. The Company is continually seeking opportunities for business combinations to improve its market position or expand into related service lines. The Company operates primarily as a subcontracting services company under short-term day-rate contracts. However, the Company owns certain specialized capital assets, in particular the FPSO, which if not fully utilized could have a negative effect on cash resources as a result of continuing fixed operating costs and reduced revenues. The FPSO is currently operating profitably offshore Angola under a contract which has been extended for a second year expiring in January 1996. Because of its significant foreign operations, the Company is exposed to currency fluctuations and exchange risks. Oceaneering 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, 1995, relate primarily to the Company's permanent investment in and loans to its United Kingdom subsidiary. See Item 1 - "Business - Description of Business - Risks and Insurance." 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. Results of Operations Revenues for fiscal 1995 were $239,936,000 as compared to $229,760,000 and $215,603,000 for fiscal 1994 and 1993, respectively. Gross margin was 20% for fiscal 1995, compared with 23% and 27% for fiscal 1994 and 1993, respectively. Net income in fiscal 1995, 1994 and 1993 was $5,496,000, $14,931,000 and $19,401,000, respectively. Information on the Company's business segments is shown in Note 6 of the Notes to Consolidated Financial Statements. Oilfield Marine Services. Historically, a major part of the Company's revenues, operating income and cash flow had been generated by the oilfield marine services segment of its business. In fiscal 1995, however, revenues for this segment continued to decline and the operations resulted in a loss for the year. Operating cash flow for fiscal 1995 from oilfield marine services remained positive and the Company increased its capital spending during the year with the intent of enhancing future operating results. The segment's capital expenditures consisted primarily of the acquisition and upgrade of a dynamically positioned offshore support vessel. Capital expenditure requirements are related mainly to replacement and upgrade of its existing equipment and for equipment purchased to service specific contracts, although the Company does add selected assets in existing service lines as opportunities arise. The table below sets out revenues and profitability for this segment for fiscal 1995, 1994 and 1993. For the Years Ended March 31, 1995 1994 1993 (in thousands, except percentages) Revenues $106,294 $122,625 $144,790 Gross Margins 19,872 31,355 38,021 Gross Margin % 19% 26% 26% Operating Margins (2,485) 9,194 16,012 Operating Margin % (2)% 7% 11% Revenues and margins declined in fiscal 1995 compared to fiscal 1994 as a result of reduced demand principally in the North Sea and West Africa operating areas. In addition, gross margins were negatively impacted in fiscal 1995 by an unfavorable arbitration ruling relating to a contract executed in fiscal 1991 and difficulties experienced in collection of the amounts due under a foreign contract. Revenues and margins for fiscal 1994 decreased from fiscal 1993 reflecting reduced demand in all major operating areas. Lower oil prices and resulting oil company project delays contributed to this decline. Gross margin percentage in West Africa during fiscal 1994 was lower than for fiscal 1993 reflecting increased competitive pressures. This decline was offset by improved performance from ROV operations and total gross margin percentage for this segment for fiscal 1994 was maintained at the same percentage level as the prior year. Offshore Field Development. This segment includes FPSO operations, other MOPS related work for customers requiring engineering, design and project management services and subsea products. The table below sets out revenues and profitability for this segment for fiscal 1995, 1994 and 1993. For the Years Ended March 31, 1995 1994 1993 (in thousands, except percentages) Revenues $62,918 $37,121 $17,580 Gross Margins 13,726 4,432 6,326 Gross Margin % 22% 12% 36% Operating Margins 6,676 1,191 3,031 Operating Margin % 11% 3% 17% Revenue and gross margins for the Offshore Field Development segment for fiscal 1995 were higher than for fiscal 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. The FPSO contract was extended for a second year expiring in January 1996. Revenue and gross margins for the Offshore Field Development segment for fiscal 1994 were negatively impacted by the operations of the FPSO 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 fiscal 1994 the FPSO operated under a contract providing substantially higher rates than its previous contract. MOPS revenues and margins for fiscal 1994 were favorably impacted by a large project which the Company completed in the North Sea; the Company did not have any similar contracts in fiscal 1995. Results for the FPSO for fiscal 1993 reflect the terms of the original contract up to the date of termination on December 10, 1992; the FPSO continued to operate under another contract at a substantially reduced rate that generated lower revenues, margins and profits for the remainder of the fiscal year. Revenues from the FPSO for fiscal 1995, 1994 and 1993 were $16,685,000, $10,405,000 and $11,649,000, respectively. Gross margins from the FPSO for fiscal 1995, 1994 and 1993 were $8,717,000, $2,074,000 and $5,291,000, respectively. For any period of time that the FPSO is not contracted or contracted at reduced rates, there will be a negative impact on the Company's revenues, margins and earnings. Expansion of this business will require access to additional assets suitable for MOPS applications which may be accomplished by outright purchase, leasing or other financing arrangement. The Company expects to continue to invest in other MOPS assets as profitable opportunities arise. Funds for such investments are available from cash flows from operations, existing cash or credit facilities. Advanced Technologies. The table below sets out revenues and profitability for this segment for fiscal 1995, 1994 and 1993. For the Years Ended March 31, 1995 1994 1993 (in thousands, except percentages) Revenues $70,724 $70,014 $53,233 Gross Margins 15,566 16,774 14,208 Gross Margin % 22% 24% 27% Operating Margins 8,563 10,545 6,609 Operating Margin % 12% 15% 12% Revenues for fiscal 1995 were at the same level as for fiscal 1994. Gross margins decreased as a result of lower demand for engineering services and costs associated with entry into the environmental services business. Revenues for fiscal 1994 improved over fiscal 1993 primarily as a result of the contribution from the ILC acquisition which was finalized in May 1993. Demand for ROV services from non-oilfield customers remained firm in fiscal 1994 compared to fiscal 1993; revenues in other areas were at or below the prior year. Gross margins for this segment decreased to 24% in fiscal 1994 from 27% in fiscal 1993. Increased revenues generated by the ILC acquisition were at lower margins primarily due to the higher level of subcontract work in certain contracts. This was partially offset by higher margins earned on engineering work in fiscal 1994 compared with the prior year. Other. Selling, general and administrative expenses were $36,410,000 in fiscal 1995 compared to $31,631,000 in fiscal 1994 and $32,903,000 in fiscal 1993. Fiscal 1995 reflects the addition of the Multiflex operations and includes $500,000 of nonrecurring cost related to the consolidation of operational bases in Scotland. Fiscal 1993 includes $1,200,000 of nonrecurring costs incurred in connection with the acquisition of Eastport. The Company's effective tax rate increased during fiscal 1995 compared to fiscal 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 fiscal 1995 in areas, primarily the North Sea, 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 31, 1995, 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 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 2-77451 S-8 Oct. 1985 4(f) *10.03 Employment Agreement dated August 15, 1986 between John R. Huff and Registrant 0-8418 10-K March 1987 10(l) *10.04 1987 Incentive and Non- Qualified Stock Option Plan 33-16469 S-1 Sept. 1987 10(o) *10.05 Oceaneering International, Inc. Special Incentive Plan 33-16469 S-1 Sept. 1987 10(n) *10.06 Senior Executive Severance Plan, as amended 0-8418 10-K March 1989 10(k) *10.07 Supplemental Senior Executive Severance Agreements, as amended 0-8418 10-K March 1989 10(l) 10.08 Oceaneering International, Inc. Executive Retirement Plan, as amended *10.09 Share Purchase Agreement related to the purchase of Sonsub Limited 0-8418 8-K Jan. 1990 2 *10.10 1990 Long-Term Incentive Plan 33-36872 S-8 Sept. 1990 4(f) *10.11 1990 Nonemployee Directors Stock Option Plan 33-36872 S-8 Sept. 1990 4(g) *10.12 Indemnification Agreement between Registrant and its Directors 0-8418 10-Q Sept. 1991 10(a) *10.13 1991 Executive Incentive Agreements 0-8418 10-K March 1992 10(p) 10.14 Restricted Stock Award Agreement *10.15 Restricted Stock Award 1-10945 10-K March 1994 10(q) Incentive Agreements 10.16 Bank Uncommitted Credit Line Agreement dated March 31, 1995 10.17 1995 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, 1995 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, 1995 John R. Huff Executive Officer, Director //s// MARVIN J. MIGURA Senior Vice President, June 21, 1995 Marvin J. Migura Principal Financial Officer //s// RICHARD V. CHIDLOW Controller, Principal June 21, 1995 Richard V. Chidlow Accounting Officer GORDON M. ANDERSON* Director CHARLES B. EVANS* Director DAVID S. HOOKER* Director D. MICHAEL HUGHES* Director *By: //s// GEORGE R. HAUBENREICH, JR. June 21, 1995 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 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, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended March 31, 1995. 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, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 1995 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Houston, Texas May 18, 1995 OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands) ASSETS March 31, 1995 March 31, 1994 CURRENT ASSETS: Cash and cash equivalents $ 12,865 $ 26,486 Accounts receivable, net of allowances for doubtful accounts of $1,238 and $1,023 58,360 51,563 Prepaid expenses and other 4,613 2,764 Total current assets 75,838 80,813 PROPERTY AND EQUIPMENT, at cost: Marine services equipment 175,528 136,799 Mobile offshore production equipment 24,694 24,464 Other 28,648 25,658 228,870 186,921 Less accumulated depreciation 134,515 114,153 Net property and equipment 94,355 72,768 INVESTMENTS AND OTHER ASSETS: Goodwill, net of amortization of $1,546 and $576 13,051 14,021 Other 4,508 4,391 TOTAL ASSETS $187,752 $171,993 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, 1995 March 31, 1994 CURRENT LIABILITIES: Accounts payable $ 15,110 $ 13,773 Accrued liabilities 29,870 25,808 Income taxes payable 7,634 6,683 Current portion of long-term debt 118 124 Total current liabilities 52,732 46,388 LONG-TERM DEBT 9,472 171 OTHER LONG-TERM LIABILITIES 9,507 10,912 MINORITY INTERESTS 901 1,169 COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common Stock, par value $0.25; 90,000,000 shares authorized; 24,017,046 and 23,995,796 shares issued 6,004 5,999 Additional paid-in capital 80,800 80,062 Treasury stock, 977,363 shares at cost (8,596) -- Retained Earnings 44,199 38,703 Cumulative translation adjustments (7,267) (11,411) Total shareholders' equity 115,140 113,353 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $187,752 $171,993 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, 1995 1994 1993 REVENUES $239,936 $229,760 $215,603 COST OF SERVICES 190,772 177,199 157,048 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 36,410 31,631 32,903 Income from operations 12,754 20,930 25,652 INTEREST INCOME 547 831 1,104 INTEREST EXPENSE (695) (951) (1,353) OTHER INCOME (EXPENSE), NET (383) 48 (21) MINORITY INTERESTS 287 (99) (225) Income before income taxes 12,510 20,759 25,157 PROVISION FOR INCOME TAXES (7,014) (5,828) (5,756) NET INCOME $ 5,496 $ 14,931 $ 19,401 NET INCOME PER COMMON SHARE EQUIVALEN $ 0.23 $ 0.62 $ 0.82 See Notes to Consolidated Financial Statements OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) For the Years Ended March 31, 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 5,496 $14,931 $19,401 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 16,232 12,196 11,528 Currency translation adjustments and other 1,221 (174) (2,463) Decrease (increase) in accounts receivable (6,797) 2,601 (4,696) Decrease (increase) in prepaid expenses and other current assets (1,849) 2,433 (1,034) Decrease (increase) in other assets (1,986) (41) 161 Increase (decrease) in accounts payable 1,331 (4,048) 4,176 Increase (decrease) in accrued liabilities 4,062 (1,840) (1,116) Increase in income taxes payable 951 265 1,628 Increase (decrease) in other long- term liabilities (1,673) 1,564 (2,500) Total adjustments to net income 11,492 12,956 5,684 NET CASH PROVIDED BY OPERATING ACTIVITIES 16,988 27,887 25,085 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (32,057) (15,394)(11,996) Business acquisitions, net of cash acquired -- (21,336) -- Other investing activities -- 528 244 NET CASH USED IN INVESTING ACTIVITIES (32,057) (36,202)(11,752) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term bank borrowings 9,400 -- -- Payments on revolving note payable -- -- (1,314) Payments on long-term debt (99) (96) (2,731) Proceeds from issuance of common stock 743 924 1,404 Purchases of treasury stock (8,596) -- -- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 1,448 828 (2,641) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (13,621) (7,487) 10,692 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 26,486 33,973 23,281 CASH AND CASH EQUIVALENTS - END OF YEAR $12,865 $26,486 $33,973 See Notes to Consolidated Financial Statements
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the Years Ended March 31, 1995, 1994 and 1993 (in thousands) Additional Cumulative Common Stock Issued Paid-in Treasury Retained Translation Shares Amount Capital Stock Earnings Adjustment Total Balance, March 31, 1992 23,335 $ 5,834 $77,343 -- $ 4,237 $ (792) $86,622 Net Income -- -- -- -- 19,401 -- 19,401 Pooling adjustment -- -- -- -- 134 -- 134 Translation adjustments -- -- -- -- -- (9,463) (9,463) Stock options and warrants exercised 238 59 1,345 -- -- -- 1,404 Tax benefit from exercise of options -- -- 233 -- -- -- 233 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 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. In August 1992, the Company exchanged 807,501 shares of its Common Stock for all of the outstanding shares of Eastport International, Inc., ("Eastport") in a transaction accounted for as a pooling of interests. Eastport was a designer, developer and operator of advanced robotic systems and Remotely Operated Vehicles ("ROVs") specializing in the non-oilfield market. 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 $21,336,000 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 $14,000,000. Had these acquisitions taken place at the beginning of fiscal 1993, unaudited pro forma revenues, net income, and net income per common share equivalent of the Company for fiscal 1994 and 1993 would have been $259,282,000, $15,400,000 and $0.64, and $256,465,000, $19,626,000 and $0.83, respectively. 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 fiscal 1993 nor are they necessarily representative of operating results which may occur in the future. 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 $1,500,000 and $1,300,000 of the Company's cash at March 31, 1995 and 1994, 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 in other income (expense). Goodwill arising from business acquisitions is amortized on the straight- line method over 15 years. Revenue Recognition Substantially all of the Company's revenue is 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 fiscal 1994, the Company adopted Financial Accounting Standards Board standard number ("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 fiscal year (24,047,000, 24,069,000 and 23,788,000 in 1995, 1994 and 1993, respectively). Other Long-Term Liabilities Other long-term liabilities include $6,566,000 and $7,289,000 at March 31, 1995 and 1994, respectively, for self-insurance reserves not expected to be paid out in the following fiscal year and $2,441,000 and $2,623,000, respectively, for deferred income taxes. Reclassifications Certain amounts from prior years have been reclassified to conform with the current year presentation. 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, 1995, includes a provision for U.S. federal and state income taxes of $5,080,000 and foreign taxes of $1,934,000. The provision for income taxes for the year ended March 31, 1994, included a provision for U.S. federal and state income taxes of $3,120,000 and foreign taxes of $2,708,000. The provision for income taxes for the year ended March 31, 1993, included a provision for U.S. federal and state income taxes of $2,248,000 and foreign taxes of $3,508,000. As of March 31, 1995, the Company had loss carryforwards of approximately $18,000,000 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, 1995, consists of $9,021,000 for current taxes less a $2,007,000 change in net deferred taxes. The provisions for the years ended March 31, 1994 and 1993 consisted primarily of current taxes. Cash taxes paid were $8,070,000, $5,785,000 and $4,949,000 for the fiscal years ended March 31, 1995, 1994 and 1993, respectively. As of March 31, 1995, the Company's worldwide deferred tax assets and liabilities and related valuation reserves were as follows: March 31, 1995 1994 (in thousands) Gross deferred tax assets $10,807 $10,774 Valuation allowance (7,002) (8,794) Net deferred tax assets $3,805 $1,980 Deferred tax liabilities $2,441 $2,623 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 primarily of depreciation and amortization. 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, 1995 1994 1993 (in thousands) Computed U.S. statutory expense $ 4,278 $ 7,300 $ 8,630 Utilization of foreign NOL carryforwards -- -- (3,166) Change in valuation allowances 333 (1,723) -- Withholding taxes and foreign earnings taxed at rates different from U.S. statutory rates and other, net 2,403 251 292 Total provision for income taxes $ 7,014 $ 5,828 $ 5,756 3. DEBT Long-term debt: March 31, 1995 1994 (in thousands) Bank debt $9,400 $ -- Capital lease obligations 190 295 Less: Current portion (118) (124) Total long-term debt $9,472 $ 171 Maturity Schedule (in thousands) Fiscal Year 1996 $ 118 1997 72 1998 -- 1999 4,700 2000 4,700 Credit Agreement On April 12, 1995 the Company and a group of banks signed a new credit agreement in the amount of $75,000,000 (the "Credit Agreement"). Existing short-term bank borrowings of $9,400,000 were subsequently refinanced under the Credit Agreement at an interest rate of 6.75% per annum. Consequently, $65,600,000 of the $75,000,000 was available at that date. There is a commitment fee of .225% per annum on the unused portion of the Credit Agreement. 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 31, 1995 with a bank in the amount of $20,000,000 for use for borrowings and letters of credit (the "Uncommitted Line"). As of March 31, 1995, the Company had approximately $7,400,000 in letters of credit outstanding issued through credit lines available under a prior loan agreement. These were included within the Uncommitted Line on April 12, 1995, and the prior agreement was terminated. Effective October 1, 1991, the Company entered into an interest rate swap agreement to reduce the impact of changes in interest rates under a previous term loan facility. The notional amount declines by $1,500,000 on the first business day of each calendar quarter and was $10,500,000 at March 31, 1995. The fixed rate in the swap is 7.9% and the floating rate is the three-month LIBOR. The differential to be paid or received is recognized as interest expense or income on a current basis. Cash interest payments of $889,000, $1,136,000 and $1,247,000 were made in fiscal 1995, 1994 and 1993, respectively. 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 $992,000, $807,000 and $409,000 for the plan years ended December 31, 1994, 1993 and 1992, respectively. When acquired, Eastport had a defined contribution plan covering substantially all its employees. Eastport's contributions to its plan were $17,000 for the six- month period ended December 31, 1992, and $285,000 for the plan year ended June 30, 1992. The Eastport plan was merged with the Oceaneering Retirement Investment Plan on December 31, 1992. 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 $67,000, $85,000 and $105,000 for the years ended March 31, 1995, 1994 and 1993, 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, 1995, 1994 and 1993, were $108,000, $62,000 and $57,000, 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 the plan during the years ended March 31, 1995, 1994 and 1993, was $287,000, $220,000 and $221,000, 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 recorded in fiscal 1995, 1994 and 1993 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 fiscal 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 1993 and September 1994, respectively, the second and third of four equal installments were paid to the participants. After taking into account amounts paid and forfeitures, the maximum amount of the awards remaining to be paid is $412,500, conditional upon continued employment of participants. During fiscal 1994, 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 may be earned each year depending upon the cumulative Company's 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 1994, the entire one-third of the total grant was earned, subject to vesting requirements. At March 31, 1995, a total of 28,250 shares was vested and a total of 310,750 shares of restricted stock was outstanding under these grants, of which 84,750 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 five-year or 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 fiscal 1995, under the Incentive Plan, options to purchase 408,500 shares were granted at prices ranging from $6.5625 to $12.0625. At March 31, 1995, options to purchase 1,422,080 shares at prices ranging from $4.00 to $16.00 were outstanding and options to purchase 671,130 shares at prices ranging from $4.00 to $16.00 were exercisable. At March 31, 1995, there were 294,150 shares under the plans available for grant, of which 232,150 could be used for awarding stock options, stock appreciation rights, stock and cash awards. 5. COMMITMENTS AND CONTINGENCIES Lease Commitments At March 31, 1995, the Company occupied several facilities under noncancellable operating leases expiring at various dates through 2065. Future minimum rentals under these leases are as follows: 1996 $2,259,000 1997 1,689,000 1998 1,573,000 1999 1,429,000 2000 728,000 Thereafter 1,574,000 TOTAL LEASE COMMITMENTS $9,252,000 Rental expense, which includes hire of vessels, specialized equipment and real estate rental, was approximately $12,680,000, $15,976,000 and $18,531,000 for the years ended March 31, 1995, 1994 and 1993, 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. 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 $7,600,000 and $6,600,000 in letters of credit outstanding as of March 31, 1995 and 1994, 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. 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 construction, underwater and above-water inspection and maintenance (including repair), survey and engineering. 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, 1995 1994 1993 (in thousands) Revenues Oilfield Marine Services $106,294 $122,625 $144,790 Offshore Field Development 62,918 37,121 17,580 Advanced Technologies 70,724 70,014 53,233 Total $239,936 $229,760 $215,603 Income from Operations Oilfield Marine Services $ (2,485) $ 9,194 $ 16,012 Offshore Field Development 6,676 1,191 3,031 Advanced Technologies 8,563 10,545 6,609 Total $ 12,754 $ 20,930 $ 25,652 Identifiable Assets Oilfield Marine Services $ 86,422 $ 70,259 $ 78,985 Offshore Field Development 53,124 45,153 24,192 Advanced Technologies 28,520 24,393 10,050 Total $168,066 $139,805 $113,227 Capital Expenditures Oilfield Marine Services $ 25,916 $ 9,261 $ 9,819 Offshore Field Development 1,263 16,465 -- Advanced Technologies 4,878 11,004 2,177 Total $ 32,057 $ 36,730 $ 11,996 Depreciation and Amortization Expenses Oilfield Marine Services $ 7,861 $ 6,950 $ 6,553 Offshore Field Development 4,690 2,276 2,780 Advanced Technologies 3,681 2,970 2,195 Total $ 16,232 $ 12,196 $ 11,528 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 other assets and long-term debt have not been allocated to particular business segments. Revenues of approximately $34,000,000 in fiscal 1995, $26,000,000 in fiscal 1994 and $26,000,000 in fiscal 1993 were from the Royal Dutch Shell group of companies. No other individual customer accounted for more than 10% of revenues in fiscal 1995, 1994 or 1993. Geographic Operating Areas Financial data by geographic area is summarized as follows: FOR THE YEARS ENDED MARCH 31, 1995 1994 1993 (in thousands) REVENUES United States $117,630 $ 89,401 $ 72,983 North Sea 48,934 60,515 50,587 Far East 22,924 24,343 29,753 Africa 36,361 36,510 45,802 Other 14,087 18,991 16,478 TOTAL $239,936 $229,760 $215,603 INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS United States $ 2,856 $ 5,003 $ 4,802 North Sea 188 6,451 5,114 Far East 353 804 2,352 Africa 6,582 4,051 9,112 Other 2,244 4,549 4,002 TOTAL $ 12,223 $ 20,858 $ 25,382 TOTAL ASSETS United States $ 87,405 $ 91,281 $ 68,054 North Sea 52,449 30,235 29,902 Far East 9,386 8,206 12,007 Africa 33,374 39,459 43,290 Other 5,138 2,812 1,271 TOTAL $187,752 $171,993 $154,524 7. ACCRUED LIABILITIES Accrued liabilities consisted of the following: March 31, 1995 1994 (in thousands) Payroll and related costs $11,899 $10,437 Accrued job costs 9,587 6,906 Other 8,384 8,465 TOTAL ACCRUED LIABILITIES $29,870 $25,808 SELECTED QUARTERLY FINANCIAL DATA (in thousands, except per share data) (unaudited) Fiscal 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 Fiscal Year Ended March 31, 1994 Quarter Ended June 30 Sept. 30 Dec. 31 Mar. 31 Total Revenues $59,394 $65,535 $55,492 $49,339 $229,760 Gross profit 13,531 13,878 12,982 12,170 52,561 Income from operations 6,168 6,254 5,223 3,285 20,930 Net income 4,717 4,766 3,889 1,559 14,931 Earnings per common share equivalent $ 0.20 $ 0.20 $ 0.16 $ 0.06 $ 0.62 Weighted average number of shares outstanding 23,830 24,137 24,169 24,140 24,069 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 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 2-77451 S-8 Oct. 1985 4(f) *10.03 Employment Agreement dated August 15, 1986 between John R. Huff and Registrant 0-8418 10-K March 1987 10(l) *10.04 1987 Incentive and Non- Qualified Stock Option Plan 33-16469 S-1 Sept. 1987 10(o) *10.05 Oceaneering International, Inc. Special Incentive Plan 33-16469 S-1 Sept. 1987 10(n) *10.06 Senior Executive Severance Plan, as amended 0-8418 10-K March 1989 10(k) *10.07 Supplemental Senior Executive Severance Agreements, as amended 0-8418 10-K March 1989 10(l) 10.08 Oceaneering International, Inc. Executive Retirement Plan, as amended *10.09 Share Purchase Agreement related to the purchase of Sonsub Limited 0-8418 8-K Jan. 1990 2 *10.10 1990 Long-Term Incentive Plan 33-36872 S-8 Sept. 1990 4(f) *10.11 1990 Nonemployee Directors Stock Option Plan 33-36872 S-8 Sept. 1990 4(g) *10.12 Indemnification Agreement between Registrant and its Directors 0-8418 10-Q Sept. 1991 10(a) *10.13 1991 Executive Incentive Agreements 0-8418 10-K March 1992 10(p) 10.14 Restricted Stock Award Agreement *10.15 Restricted Stock Award 1-10945 10-K March 1994 10(q) Incentive Agreements 10.16 Bank Uncommitted Credit Line Agreement dated March 31, 1995 10.17 1995 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-4.04 2 EXHIBIT 4.04 EXECUTION COPY $75,000,000 CREDIT AGREEMENT dated as of April 12, 1995 among OCEANEERING INTERNATIONAL, INC., THE BANKS PARTIES HERETO and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS AGENT 27009/039/CA/agt TABLE OF CONTENTS 1 Page ARTICLE I DEFINITIONS SECTION 1.01 Definitions.......................... 1 1.02 Accounting Terms and Determinations.. 13 ARTICLE II THE CREDIT SECTION 2.01 Commitments to Lend.................. 14 2.02 Method of Borrowing.................. 15 2.03 Notes................................ 17 2.04 Maturity of Loan..................... 17 2.05 Interest Rates....................... 17 2.06 Fees................................. 21 2.07 Optional Termination or Reduction of Commitments...................... 21 2.08 Mandatory Termination and Reduction of Commitments............ 21 2.09 Optional Prepayments................. 22 2.10 General Provisions as to Payments.... 22 2.11 Funding Losses....................... 23 2.12 Computation of Interest and Fees..... 23 2.13 Maximum Interest Rate................ 24 2.14 Regulation D Compensation............ 24 ARTICLE III CONDITIONS SECTION 3.01 Closing.............................. 25 3.02 Borrowings........................... 26 1 The Table of Contents is not a part of this Agreement. 27009/039/CA/agt i Page ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.01 Corporate Existence and Power........ 27 4.02 Corporate and Governmental Authorization; Contravention....... 27 4.03 Binding Effect....................... 27 4.04 Financial Information................ 27 4.05 Litigation........................... 28 4.06 Compliance with ERISA................ 28 4.07 Taxes................................ 29 4.08 Subsidiaries......................... 29 4.09 Environmental Matters................ 29 4.10 Regulatory Restrictions on Borrowing.......................... 30 4.11 Full Disclosure...................... 30 ARTICLE V COVENANTS SECTION 5.01 Information.......................... 30 5.02 Payment of Taxes, etc................ 33 5.03 Maintenance of Property; Insurance... 33 5.04 Compliance with Laws................. 33 5.05 Inspection of Property, Books and Records........................ 33 5.06 Fixed Charge Coverage................ 34 5.07 Funded Debt.......................... 34 5.08 Minimum Consolidated Net Worth....... 34 5.09 Negative Pledge...................... 34 5.10 Consolidations, Mergers and Sales of Assets.......................... 36 5.11 Investments.......................... 36 5.12 Use of Proceeds...................... 37 5.13 Maintenance of Existence Change of Business........................ 37 5.14 Restricted Payments.................. 37 5.15 Transactions with Affiliates.......... 37 27009/039/CA/agt ii Page ARTICLE VI DEFAULTS SECTION 6.01 Events of Default.................... 38 6.02 Notice of Default.................... 41 ARTICLE VII THE AGENT SECTION 7.01 Appointment and Authorization........ 41 7.02 Agent and Affiliates................. 41 7.03 Action by Agent...................... 41 7.04 Consultation with Experts............ 41 7.05 Liability of Agent................... 41 7.06 Indemnification...................... 42 7.07 Credit Decision...................... 42 7.08 Successor Agent...................... 42 ARTICLE VIII CHANGE IN CIRCUMSTANCES AFFECTING FIXED RATE LOANS SECTION 8.01 Basis for Determining Interest Rate Inadequate or Unfair.......... 43 8.02 Illegality........................... 43 8.03 Increased Cost and Reduced Return.... 44 8.04 Taxes................................ 46 8.05 Base Rate Loans Substituted for Affected Fixed Rate Loans.......... 48 8.06 Substitution of Bank................. 48 ARTICLE IX MISCELLANEOUS SECTION 9.01 Notices.............................. 49 9.02 No Waivers........................... 49 9.03 Expenses; Indemnification............ 49 9.04 Sharing of Set-Offs.................. 50 9.05 Amendments and Waivers............... 51 9.06 Successors and Assigns............... 51 9.07 Collateral........................... 53 27009/039/CA/agt iii Page 9.08 Governing Law; Submission to Jurisdiction....................... 53 9.09 Counterparts; Integration; Effectiveness...................... 53 9.10 WAIVER OF JURY TRIAL................. 53 Exhibit A - Note Exhibit B-1 - Opinion of Baker & Botts, L.L.P., Special Counsel for the Borrower Exhibit B-2 - Opinion of George R. Haubenreich, Jr., General Counsel of the Borrower Exhibit C - Opinion of Davis Polk & Wardwell, Special Counsel for the Agent Exhibit D - Extension Agreement Exhibit E - Assignment and Assumption Agreement 27009/039/CA/agt iv CREDIT AGREEMENT AGREEMENT dated as of April 12, 1995 among OCEANEERING INTERNATIONAL, INC., the BANKS (as defined herein) and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent. The parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.01. Definitions. The following terms, as used herein, have the following meanings: "Adjusted CD Rate" has the meaning set forth in Section 2.05(b). "Adjusted Consolidated Tangible Net Worth" means at any date (i) the consolidated shareholders' investment of the Borrower and its Consolidated Subsidiaries, excluding cumulative foreign currency translation, plus (ii) the amount (if any) by which such consolidated shareholders' investment is reduced as a result of the Stock Repurchase Program and minus (iii) all consolidated assets properly classified as intangible assets in accordance with generally accepted accounting principles. "Administrative Questionnaire" means, with respect to each Bank, an administrative questionnaire in the form prepared by the Agent and submitted to the Agent (with a copy to the Borrower) duly completed by such Bank. "Affiliate" means (i) any Person that directly, or indirectly through one or more intermediaries, controls the Borrower (a "Controlling Person") or (ii) any Person (other than the Borrower or a Subsidiary) which is controlled by or is under common control with a Controlling Person. As used herein, the term "control" means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise. 27009/039/CA/agt 1 "Agent" means Morgan Guaranty Trust Company of New York in its capacity as agent for the Banks hereunder, and its successors in such capacity. "Agreement" means this Credit Agreement, as amended, restated and modified from time to time. "Assignee" has the meaning set forth in Section 9.06(c). "Bank" means each bank listed on the signature pages hereof, each Assignee which becomes a Bank pursuant to Section 9.06, and their respective successors. "Base Rate" means, for any day, a rate per annum equal to the higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds Rate for such day. "Base Rate Loan" means a Loan to be made as a Base Rate Loan pursuant to the applicable Notice of Borrowing or pursuant to Article VIII. "Borrower" means Oceaneering International, Inc., a Delaware corporation, and its successors. "Borrower's 1994 Form 10-K" means the Borrower's annual report on Form 10-K for the fiscal year ended March 31, 1994, as filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. "Borrowing" means a borrowing hereunder consisting of Loans made to a Borrower at the same time by each Bank severally. A Borrowing is a "Domestic Borrowing" if such Loans are Domestic Loans or a "Euro-Dollar Borrowing" if such Loans are Euro-Dollar Loans. A Domestic Borrowing is a "CD Borrowing" if such Domestic Loans are CD Loans or a "Base Rate Borrowing" if such Domestic Loans are Base Rate Loans. "CD Base Rate" has the meaning set forth in Section 2.05(b). "CD Loan" means a Loan to be made as a CD Loan pursuant to the applicable Notice of Borrowing. "CD Margin" has the meaning set forth in Section 2.05(b). 27009/039/CA/agt 2 "CD Reference Banks" means Texas Commerce Bank National Association and Morgan Guaranty Trust Company of New York. "Closing Date" means the date on or after the Effective Date on which the Agent shall have received the documents specified in or pursuant to Section 3.01. "Code" means the Internal Revenue Code of 1986, as amended. "Commitment" means, with respect to each Bank listed on the signature pages hereof, the amount set forth opposite the name of such Bank on such signature pages (as such amount may change pursuant to Section 9.06) and with respect to any Bank which becomes a party to this Agreement pursuant to Section 9.06, the amount of the Commitment thereby assumed by it, in each case as such amount may be reduced from time to time pursuant to Sections 2.07 and 2.08. "Commitment Reduction Date" means each March 31, June 30, September 30 and December 31, from and including the June 30 following the Conversion Date, prior to the Termination Date, and the Termination Date. "Completion Guarantees" means completion guarantees (if any) to be provided by the Borrower in connection with the Soekor Project Debt. "Consolidated EBITDA" means, for any fiscal period, Consolidated Net Income for such period, determined before the effect of any extraordinary or other non- recurring gain (but not loss), plus, to the extent deducted in determining Consolidated Net Income for such period, the aggregate amount of (i) Consolidated Interest Expense, (ii) income tax expense and (iii) depreciation, amortization and other similar non-cash charges. "Consolidated Funded Debt" means at any date the Funded Debt of the Borrower and its Consolidated Subsidiaries, determined on a consolidated basis as of such date. "Consolidated Interest Expense" means, for any period, the interest expense of the Borrower and its Consolidated Subsidiaries determined on a consolidated basis for such period. "Consolidated Net Income" means, for any fiscal period, the net income of the Borrower and its Consolidated 27009/039/CA/agt 3 Subsidiaries, determined on a consolidated basis for such period. "Consolidated Rental Expense" means, for any period, the aggregate rental expense of the Borrower and its Consolidated Subsidiaries (excluding such expense in respect of any lease the term of which is one year or less) determined on a consolidated basis for such period. "Consolidated Subsidiary" means at any date any Subsidiary or other entity the accounts of which would be consolidated with those of the Borrower in its consolidated financial statements as of such date. "Conversion Date" means April 12, 1998, or, if the Revolving Credit Period shall have been extended pursuant to Section 2.01(c), April 12, 1999. "Debt" of any Person means at any date, without duplication, (i) all obligations of such Person for borrowed money, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments, (iii) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable arising in the ordinary course of business, (iv) all obligations of such Person as lessee under capital leases, (v) all non-contingent obligations (and, for purposes of Section 5.09 and the definitions of Material Debt and Material Financial Obligations, all contingent obligations) of such Person to reimburse any bank or other Person in respect of amounts paid under a letter of credit or similar instrument, (vi) all Debt of others secured by a Lien on any asset of such Person, whether or not such Debt is assumed by such Person, and (vii) all Debt of others Guaranteed by such Person; provided that any Debt of any Person which is Guaranteed by the Borrower or any Subsidiary pursuant to any applicable joint venture or other similar arrangement shall be deemed Debt of the Borrower or such Subsidiary only to the extent of its ratable share thereof in accordance with such joint venture arrangement. "Default" means any condition or event which constitutes an Event of Default or which with the giving of notice or lapse of time or both would, unless cured or waived, become an Event of Default. "Derivatives Obligations" of any Person means all obligations (other than Debt) of such Person in respect of any rate swap transaction, basis swap, forward rate transaction, forward purchase, commodity swap, commodity option, equity or equity index swap, equity or equity index 27009/039/CA/agt 4 option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions. "Domestic Business Day" means any day except a Saturday, Sunday or other day on which commercial banks in New York City are authorized by law to close. "Domestic Lending Office" means, as to each Bank, its office located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Domestic Lending Office) or such other office as such Bank may hereafter designate as its Domestic Lending Office by notice to the Borrower and the Agent; provided that any Bank may so designate separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case all references herein to the Domestic Lending Office of such Bank shall be deemed to refer to either or both of such offices, as the context may require. "Domestic Loans" means Base Rate Loans or CD Loans or both. "Effective Date" means the date this Agreement becomes effective in accordance with Section 9.09. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to the environment, the effect of the environment on human health or to emissions, discharges or releases of pollutants, contaminants, Hazardous Substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, Hazardous Substances or wastes or the clean-up or other remediation thereof. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute. 27009/039/CA/agt 5 "ERISA Group" means the Borrower, any Subsidiary and all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Subsidiary, are treated as a single employer under Section 414 of the Code. "Euro-Dollar Business Day" means any Domestic Business Day on which commercial banks are open for domestic and international business (including dealings in Dollar deposits) in London. "Euro-Dollar Lending Office" means, as to each Bank, its office, branch or affiliate located at its address set forth in its Administrative Questionnaire (or identified in its Administrative Questionnaire as its Euro-Dollar Lending Office) or such other office, branch or affiliate of such Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice to the Borrower and the Agent. "Euro-Dollar Loans" means any Loans to be made as Euro-Dollar Loans pursuant to the applicable Notice of Borrowing. "Euro-Dollar Margin" has the meaning set forth in Section 2.05(c). "Euro-Dollar Reference Banks" means the principal London offices of Texas Commerce Bank National Association and Morgan Guaranty Trust Company of New York. "Euro-Dollar Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents). "Event of Default" has the meaning set forth in Section 6.01. "Federal Funds Rate" means, for any day, the rate per annum (rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on 27009/039/CA/agt 6 overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Domestic Business Day next succeeding such day, provided that (i) if such day is not a Domestic Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Domestic Business Day as so published on the next succeeding Domestic Business Day, and (ii) if no such rate is so published on such next succeeding Domestic Business Day, the Federal Funds Rate for such day shall be the average rate quoted to Morgan Guaranty Trust Company of New York on such day on such transactions as determined by the Agent. "Fixed Charge Coverage Ratio" means, at any date, the ratio of (i) the sum of Consolidated EBITDA plus Consolidated Rental Expense, in each case for the four consecutive fiscal quarters of the Borrower and its Consolidated Subsidiaries ending on or most recently prior to such date to (ii) the sum of Consolidated Interest Expense and Consolidated Rental Expense for such period plus the aggregate principal amount of scheduled amortization of long term Debt of the Borrower and its Consolidated Subsidiaries during such period. "Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or both. "Funded Debt" means at any date, with respect to any Person, all Debt of such Person which is not a current liability as of such date. "Guarantee" by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt of any other Person or in any manner providing for the payment of any Debt of any other Person or otherwise protecting the holder of such Debt against loss (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise), provided that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a correlative meaning. "Hazardous Substances" means any toxic, radioactive, caustic or otherwise hazardous substance, including petroleum, its derivatives, by-products and other hydrocarbons, or any substance having any constituent elements displaying any of the foregoing characteristics. 27009/039/CA/agt 7 "Interest Period" means: (1) with respect to each Euro-Dollar Borrowing, the period commencing on the date of such Borrowing and ending one, two, three or six months thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: (a) any Interest Period which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Euro-Dollar Business Day; (b) any Interest Period which begins on the last Euro-Dollar Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall, subject to clause (c) below, end on the last Euro-Dollar Business Day of a calendar month; and (c) if any Interest period includes a date on which a payment of principal of the Loans is required to be made under Section 2.08 but does not end on such date, then (i) the principal amount (if any) of each Euro-Dollar Loan required to be repaid on such date shall have an Interest Period ending on such date and (ii) the remainder (if any) of each such Euro-Dollar Loan shall have an Interest Period determined as set forth above. (2) with respect to each CD Borrowing, the period commencing on the date of such Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower may elect in the applicable Notice of Borrowing; provided that: (a) any Interest Period (other than an Interest Period determined pursuant to clause (b)(i) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) if any Interest Period includes a date on which a payment of principal of the Loans is required to be made under Section 2.08 but does not end on such date, then (i) the principal amount (if any) of each CD Loan required to be repaid on such date shall have an Interest Period ending on such date and (ii) the remainder (if any) of each such CD Loan shall have an Interest Period determined as set forth above. 27009/039/CA/agt 8 (3) with respect to each Base Rate Borrowing, the period commencing on the date of such Borrowing and ending 30 days thereafter; provided that: (a) any Interest Period (other than an Interest Period determined pursuant to clause (b) below) which would otherwise end on a day which is not a Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar Business Day; and (b) any Interest Period which would otherwise end after the Termination Date shall end on the Termination Date. "Investment" means any investment in any Person, whether by means of share purchase, capital contribution, loan, time deposit or otherwise, excluding accounts receivable from any Person arising in the ordinary course of business from the sale of goods or services. "Lending Office" means as to any Bank its Domestic Lending Office or its Euro-Dollar Lending Office, as the context may require. "Lien" means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset. "Loan" means a Domestic Loan or a Euro-Dollar Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or both. "London Interbank Offered Rate" has the meaning set forth in Section 2.05(c). "Material Debt" means Debt (other than the Notes) of the Borrower and/or one or more of its Subsidiaries, arising in one or more related transactions, in an aggregate principal or face amount exceeding $2,000,000. "Material Financial Obligations" means a principal or face amount of Debt and/or payment or collateralization obligations in respect of Derivatives Obligations of the Borrower and/or one or more of its Subsidiaries, arising in one or more related transactions, exceeding in the aggregate $2,000,000. 27009/039/CA/agt 9 "Material Plan" means at any time a Plan or Plans having aggregate Unfunded Liabilities in excess of $5,000,000. "Material Subsidiary" means at any time a Subsidiary which as of such time meets the definition of a "significant subsidiary" contained as of the date hereof in Regulation S-X of the Securities and Exchange Commission; provided, that the term "Material Subsidiary" shall in any event include OISL, Solus, Oceaneering International A.G., a Zug, Switzerland corporation, and its successors, and Oceaneering International PTE, Ltd., a Singapore corporation, and its successors. "Morgan" means Morgan Guaranty Trust Company of New York, and its successors. "Multiemployer Plan" means at any time an employee pension benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA Group (i) is then making or accruing an obligation to make contributions or (ii) has at any time within the preceding five years made contributions, including for these purposes any Person which ceased to be a member of the ERISA Group during such five year period which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Non-Recourse Debt" means Debt (i) which is incurred or assumed by the Borrower or any Subsidiary for the purpose of financing all or any part of the cost of acquiring assets which do not (except where the maker is a Subsidiary specifically incorporated to hold the assets securing such Non-Recourse Debt) constitute all or substantially all of the assets of the Borrower or such Subsidiary, as the case may be, and which are used for the performance of a particular offshore diving (including design engineering and remote operated vehicle services) or engineering, construction or inspection project, and (ii) either (a) (1) as to which the recourse of the holder of such Debt to the Borrower or any Subsidiary in respect of such Debt is limited to the Borrower's or such Subsidiary's interest in such assets, (2) as to which such holder shall have (subject to clause (3)) waived any right to enforce such Debt as a general obligation of the Borrower or such Subsidiary, as the case may be, and agreed to enforce such Debt only against such assets and (3) as to which Debt the holder shall have subordinated in favor of the Banks, pursuant to subordination provisions reasonably satisfactory in form and substance to the Banks, its rights as the holder of a claim treated as a recourse claim under 11 U.S.C. Sec. 27009/039/CA/agt 10 1111 (b)(1)(A) or (b) such assets securing such Debt constitute substantially all of the assets of a Subsidiary specifically established to hold such assets and Debt. "Notes" means promissory notes of the Borrower, substantially in the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay the Loans, and "Note" means any one of such promissory notes issued hereunder. "Notice of Borrowing" has the meaning set forth in Section 2.02. "OISL" means Oceaneering International Services Limited, an English corporation, and its successors. "Parent" means, with respect to any Bank, any Person controlling such Bank. "Participant" has the meaning set forth in Section 9.06(b). "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. "Person" means an individual, a corporation, a partnership, an association, a trust or any other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Plan" means at any time an employee pension benefit plan (other than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code and either (i) is maintained, or contributed to, by any member of the ERISA Group for employees of any member of the ERISA Group or (ii) has at any time within the preceding five years been maintained, or contributed to, by any Person which was at such time a member of the ERISA Group for employees of any Person which was at such time a member of the ERISA Group. "Prime Rate" means the rate of interest publicly announced by Morgan in New York City from time to time as its Prime Rate. "Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference Banks, as the context may require, and "Reference Bank" means any one of such Reference Banks. 27009/039/CA/agt 11 "Refunding Borrowing" means a Borrowing which, after application of the proceeds thereof, results in no net increase in the outstanding principal amount of Loans made by any Bank. "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time. "Required Banks" means at any time Banks having at least 60% of the aggregate amount of the Commitments or, if the Commitments shall have been terminated, holding Notes evidencing at least 60% of the aggregate unpaid principal amount of the Loans. "Restricted Payment" means (i) any dividend or other distribution on any shares of the Borrower's capital stock (except dividends payable solely in shares of, or warrants or rights to subscribe for or purchase shares of, its capital stock) or (ii) any payment on account of the purchase, redemption, retirement or acquisition of (a) any shares of the Borrower's capital stock or (b) any option, warrant or other right to acquire shares of the Borrower's capital stock. "Revolving Credit Period" means the period from the date hereof to and including the Conversion Date. "Soekor Project Debt" means Debt to be incurred to finance the Soekor E-BT project in South Africa, in an aggregate amount not exceeding $75,000,000, which Debt (i) will satisfy the criteria for Non-Recourse Debt once the Completion Guarantees have been extinguished and (ii) is, in all respects, reasonably satisfactory to the Required Banks. It is understood that, depending on the final terms of such Debt, further modification of the terms of this Agreement may be necessary or appropriate. "Solus" means Solus Ocean Systems, Inc., a Delaware corporation, and its successors. "Stock Repurchase Program" means the Borrower's stock buyback program which commenced August, 1994, for not more than 2,000,000 shares of the Borrower's common stock, but only to the extent that the aggregate amount paid by the Borrower in respect of such program does not exceed $20,000,000. "Subsidiary" means any corporation or other entity of which at least 50% of the securities or other ownership interests having ordinary voting power to elect members of 27009/039/CA/agt 12 the board of directors or other persons performing similar functions (other than any such securities or ownership interests having such voting power only by reason of the happening of a contingency) are at the time directly or indirectly owned or controlled by the Borrower or one or more Subsidiaries, or by the Borrower and one or more Subsidiaries. "Substantial Asset Sale" means any sale, long term lease or other disposition (including any such transaction effected by way of merger or consolidation or through the issuance or sale of capital stock of a Subsidiary) by the Borrower or a Subsidiary, in a single transaction or a series of related transactions, of assets having an aggregate net book value at the date of disposition exceeding $10,000,000, but excluding (i) dispositions of inventory and used, surplus or worn out equipment in the ordinary course of business, (ii) dispositions to the Borrower or a Wholly Owned Consolidated Subsidiary and (iii) dispositions of cash and cash equivalents otherwise permitted under this Agreement. "Termination Date" means the second anniversary of the Conversion Date, or, if such date is not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day. "Unfunded Liabilities" means, with respect to any Plan at any time, the amount (if any) by which (i) the value of all benefit liabilities under such Plan, determined on a plan termination basis using the assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market value of all Plan assets allocable to such liabilities under Title IV of ERISA (excluding any accrued but unpaid contributions), all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the ERISA Group to the PBGC or any other Person under Title IV of ERISA. "Wholly Owned Consolidated Subsidiary" means any Consolidated Subsidiary all of the shares of capital stock or other ownership interests of which (except directors' qualifying shares) are at one time directly or indirectly owned by the Borrower. SECTION 1.02. Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted 27009/039/CA/agt 13 accounting principles as in effect from time to time, applied on a basis consistent (except for changes approved by the Borrower's independent public accountants) with the most recent audited consolidated financial statements of the Borrower and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Borrower notifies the Agent that the Borrower wishes to amend any covenant in Article V to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant (or if the Agent notifies the Borrower that the Required Banks wish to amend Article V for such purpose), then the Borrower's compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Banks. ARTICLE II THE CREDIT SECTION 2.01. Commitments to Lend. (a) During Revolving Credit Period. During the Revolving Credit Period each Bank severally agrees, on the terms and conditions set forth in this Agreement, to lend to the Borrower from time to time amounts not to exceed in the aggregate at any one time outstanding the amount of its Commitment. Each Borrowing under this subsection (a) shall be in an aggregate principal amount of $2,000,000 or any larger multiple of $1,000,000 (except that the first Borrowing shall be in the aggregate principal amount of at least $2,500,000 and except that any such Borrowing may be in the aggregate amount of the unused Commitments) and shall be made from the several Banks ratably in proportion to their respective Commitments. Within the foregoing limits, the Borrower may borrow under this subsection (a), repay, or to the extent permitted by Section 2.09, prepay Loans and reborrow at any time during the Revolving Credit Period under this subsection (a). (b) After Revolving Credit Period. After the Revolving Credit Period each Bank severally agrees, on the terms and conditions set forth in this Agreement, to make a new loan to the Borrower upon any repayment of outstanding Loans pursuant to Section 2.04 or any optional prepayment of outstanding Loans pursuant to Section 2.09 for the purpose of refunding all or a portion of such outstanding Loans; 27009/039/CA/agt 14 provided that the principal amount of such Bank's new Loan shall not exceed the principal amount of its outstanding Loan or Loans being repaid or prepaid; and provided further that the aggregate principal amount of such Bank's outstanding Loans shall at no time exceed its Commitment as reduced from time to time pursuant to Sections 2.07 and 2.08. Each Borrowing under this subsection (b) shall be made from the several Banks ratably in proportion to their respective Commitments. Amounts required to be repaid pursuant to Section 2.08(d) shall not be reborrowed, and amounts repaid pursuant to Section 8.02 shall not be reborrowed except as provided therein. (c) Extension of Revolving Credit Period. The Revolving Credit Period may be extended, in the manner set forth in this subsection (c), from April 12, 1998 to April 12, 1999. If the Borrower wishes to request such an extension of the Revolving Credit Period, the Borrower shall give notice to that effect to the Agent on a date between October 12, 1997 and February 12, 1998, whereupon the Agent shall notify each of the Banks of such notice. Each Bank will use its best efforts to respond to such request, whether affirmatively or negatively, within 30 days. If all Banks respond affirmatively, then, subject to receipt by the Agent of counterparts of an Extension Agreement in substantially the form of Exhibit D duly completed and signed by all of the parties hereto, the Revolving Credit Period shall be extended to April 12, 1999. (d) General. The failure of any Bank to make any Loan shall not in itself relieve any other Bank of its obligation to lend hereunder (it being understood, however, that no Bank shall be responsible for the failure of any other Bank to make any Loan required to be made by such other Bank). SECTION 2.02. Method of Borrowing. (a) The Borrower shall give the Agent notice (a "Notice of Borrowing") not later than 11:00 A.M. (New York City time) on (x) the date of each Base Rate Borrowing, (y) the second Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying: (i) the date of such Borrowing, which shall be a Domestic Business Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the case of a Euro-Dollar Borrowing, (ii) the aggregate amount of such Borrowing, 27009/039/CA/agt 15 (iii) whether the Loans comprising such Borrowing are to be CD Loans, Base Rate Loans or Euro-Dollar Loans, and (iv) in the case of a CD Borrowing or a Euro- Dollar Borrowing, the duration of the Interest Period applicable thereto, subject to the provisions of the definition of Interest Period. (b) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share of such Borrowing and such Notice of Borrowing shall not thereafter be revocable by the Borrower. (c) Not later than 1:00 p.m. (New York City time) on the date of each Borrowing, each Bank shall (except as provided in subsection (d) of this Section) make available its ratable share of such Borrowing, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. Unless the Agent determines that any applicable condition specified in Article III has not been satisfied, the Agent will make the funds so received from the Banks available to the Borrower at the Agent's aforesaid address. (d) If any Bank makes a new Loan hereunder on a day on which the Borrower is to repay all or any part of an outstanding Loan from such Bank, such Bank shall apply the proceeds of its new Loan to make such repayment and only an amount equal to the difference (if any) between the amount being borrowed and the amount being repaid shall be made available by such Bank to the Agent as provided in subsection (c) of this Section, or remitted by the Borrower to the Agent as provided in Section 2.10, as the case may be. (e) Unless the Agent shall have received notice from a Bank prior to the date of any Borrowing that such Bank will not make available to the Agent such Bank's share of such Borrowing, the Agent may assume that such Bank has made such share available to the Agent on the date of such Borrowing in accordance with subsections (c) and (d) of this Section 2.02 and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Bank shall not have so made such share available to the Agent, such Bank and the Borrower severally agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such 27009/039/CA/agt 16 amount is repaid to the Agent, at (i) in the case of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the interest rate applicable thereto pursuant to Section 2.05 and (ii) in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Bank's Loan included in such Borrowing for purposes of this Agreement. SECTION 2.03. Notes. (a) The Loans of each Bank shall be evidenced by a single Note payable to the order of such Bank for the account of its Applicable Lending Office in an amount equal to the aggregate unpaid principal amount of such Bank's Loans. (b) Each Bank may, by notice to the Borrower and the Agent, request that its Loans of a particular type be evidenced by a separate Note in an amount equal to the aggregate unpaid principal amount of such Loans. Each such Note shall be in substantially the form of Exhibit A hereto with appropriate modifications to reflect the fact that it evidences solely Loans of the relevant type. Each reference in this Agreement to the "Note" of such Bank shall be deemed to refer to and include any or all of such Notes, as the context may require. (c) Upon receipt of each Bank's Note pursuant to Section 3.01(a), the Agent shall forward such Note to such Bank. Each Bank shall record the date, amount, type and maturity of each Loan made by it and the date and amount of each payment of principal made by the Borrower with respect thereto, and may, if such Bank so elects in connection with any transfer or enforcement of its Note, endorse on the schedule forming a part thereof appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding; provided that the failure of any Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Notes. Each Bank is hereby irrevocably authorized by the Borrower so to endorse its Note and to attach to and make a part of its Note a continuation of any such schedule as and when required. SECTION 2.04. Maturity of Loans. Each Loan included in any Borrowing shall mature, and the principal amount thereof shall be due and payable, on the last day of the Interest Period applicable to such Borrowing. SECTION 2.05. Interest Rates. (a) Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from the date such Loan is made 27009/039/CA/agt 17 until the earlier of its repayment or due date, at a rate per annum equal to the Base Rate for such day. Such interest shall be payable for each Interest Period on the last day thereof. Any overdue principal of or interest on any Base Rate Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the Base Rate for such day. (b) Each CD Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to such Interest Period; provided that if any CD Loan or any portion thereof shall, as a result of clause (2)(b)(i) of the definition of Interest Period, have an Interest Period of less than 30 days, such portion shall bear interest during such Interest Period at the rate applicable to Base Rate Loans during such period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than 90 days, at intervals of 90 days after the first day thereof. Any overdue principal of or interest on any CD Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the sum of 2% plus the higher of (i) the sum of the CD Margin for such day plus the Adjusted CD Rate applicable to the Interest Period for such Loan and (ii) the Base Rate for such day. "CD Margin" means (i) for any day on or prior to the Conversion Date, 0.75% and (ii) for any day thereafter, 1.0%. The "Adjusted CD Rate" applicable to any Interest Period means a rate per annum determined pursuant to the following formula: [ CDBR ]* ACDR = [ ---------- ] + AR [ 1.00 - DRP ] ACDR = Adjusted CD Rate CDBR = CD Base Rate DRP = Domestic Reserve Percentage AR = Assessment Rate __________ * The amount in brackets being rounded upward, if necessary, to the next higher 1/100 of 1% 27009/039/CA/agt 18 The "CD Base Rate" applicable to any Interest Period is the rate of interest determined by the Agent to be the average (rounded upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the first day of such Interest Period by two or more New York certificate of deposit dealers of recognized standing for the purchase at face value from each CD Reference Bank of its certificates of deposit in an amount comparable to the principal amount of the CD Loan of such CD Reference Bank to which such Interest Period applies and having a maturity comparable to such Interest Period. "Domestic Reserve Percentage" means for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including without limitation any basic, supplemental or emergency reserves) for a member bank of the Federal Reserve System in New York City with deposits exceeding five billion dollars in respect of new non-personal time deposits in dollars in New York City having a maturity comparable to the related Interest Period and in an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Domestic Reserve Percentage. "Assessment Rate" means for any day the annual assessment rate in effect on such day which is payable by a member of the Bank Insurance Fund classified as adequately capitalized and within supervisory subgroup "A" (or a comparable successor assessment risk classification) within the meaning of 12 C.F.R. Sec. 327.3(e) (or any successor provision) to the Federal Deposit Insurance Corporation (or any successor) for such Corporation's (or such successor's) insuring time deposits at offices of such institution in the United States. The Adjusted CD Rate shall be adjusted automatically on and as of the effective date of any change in the Assessment Rate. (c) Each Euro-Dollar Loan shall bear interest on the outstanding principal amount thereof, for each day during the Interest Period applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to such Interest Period. Such interest shall be payable for each Interest Period on the last day thereof and, if such Interest Period is longer than three months, at intervals of three months after the first day thereof. 27009/039/CA/agt 19 "Euro-Dollar Margin" means (i) for any day on or prior to the Conversion Date, 0.625% and (ii) for any day thereafter, 0.875%. The "London Interbank Offered Rate" applicable to any Interest Period means the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which deposits in dollars are offered to each of the Euro-Dollar Reference Banks in the London interbank market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the first day of such Interest Period in an amount approximately equal to the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such Interest Period is to apply and for a period of time comparable to such Interest Period. (d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear interest, payable on demand, for each day until paid at a rate per annum equal to the higher of (i) the sum of 2% per annum plus the Euro-Dollar Margin for such day plus the London Interbank Offered Rate applicable to the Interest Period for such Loan and (ii) the sum of 2% per annum plus the Euro-Dollar Margin for such day plus the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the respective rates per annum at which one day (or, if such amount due remains unpaid more than three Euro-Dollar Business Days, then for such period of time not longer than six months as the Agent may select) deposits in dollars in an amount approximately equal to such overdue payment due to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar Reference Bank in the London interbank market for the applicable period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a rate per annum equal to the sum of 2% per annum plus the Base Rate for such day). (e) The Agent shall determine each interest rate applicable to the Loans hereunder. The Agent shall give prompt notice to the Borrower and the Banks of each rate of interest so determined, and its determination thereof shall be conclusive in the absence of manifest error. (f) Each Reference Bank agrees to use its best efforts to furnish quotations to the Agent as contemplated hereby. If any Reference Bank does not furnish a timely quotation, the Agent shall determine the relevant interest rate on the basis of the quotation or quotations furnished 27009/039/CA/agt 20 by the remaining Reference Bank or Banks or, if none of such quotations is available on a timely basis, the provisions of Section 8.01 shall apply. SECTION 2.06. Fees. (a) During the Revolving Credit Period, the Borrower shall pay to the Agent for the account of the Banks ratably in proportion to their Commitments a commitment fee at the rate of 0.225% per annum on the daily average amount by which the aggregate amount of the Commitments exceeds the aggregate outstanding principal amount of the Loans. 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) 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 2.07. Optional Termination or Reduction of Commitments. The Borrower may, upon at least three Domestic Business Days' notice to the Agent, terminate entirely at any time or proportionately reduce the unused portions of the Commitments from time to time by an aggregate amount of $5,000,000 or any larger multiple thereof. If the Commitments are terminated in their entirety, all accrued commitment fees shall be payable on the effective date of such termination. SECTION 2.08. Mandatory Termination and Reduction of Commitments. (a) The Commitments shall terminate on the Termination Date and any Loans then outstanding (together with accrued interest thereon) shall be due and payable on such date. (b) On any date on or after the last day of the Revolving Credit Period on which the Commitment of any Bank shall be greater than the aggregate principal amount of the Loans of such Bank outstanding on such date (after giving effect to any repayment, prepayment and borrowing on such date), the Commitment of such Bank shall be automatically reduced to an amount equal to such outstanding principal amount. (c) The Commitment of each Bank shall be further reduced, on each Commitment Reduction Date, by an amount equal to one-eighth (1/8) of such Bank's Commitment in effect on the last day of the Revolving Credit Period (after giving effect to any reduction pursuant to subsection (b) on 27009/039/CA/agt 21 such date). No reduction of any Commitment pursuant to subsection (b) shall reduce the amount of any subsequent mandatory reduction of such Commitment pursuant to this subsection (c). (d) On each Commitment Reduction Date, the Borrower shall repay such principal amount (together with accrued interest thereon) of each Bank's outstanding Loans, if any, as may be necessary so that after such repayment, the aggregate unpaid principal amount of such Bank's Loans does not exceed the amount of such Bank's Commitment as then reduced. SECTION 2.09. Optional Prepayments. (a) Subject in the case of any Fixed Rate Loans to Section 2.11, the Borrower may, upon at least three Domestic Business Days' notice to the Agent, prepay any Domestic Borrowing or upon at least three Euro-Dollar Business Days' notice to the Agent, prepay any Euro-Dollar Borrowing, in each case in whole at any time, or from time to time in part in amounts aggregating $1,000,000 or any larger multiple thereof, by paying the principal amount to be prepaid together with accrued interest thereon to the date of prepayment. Each such optional prepayment shall be applied to prepay ratably the Loans of the several Banks included in such Borrowing. (b) Upon receipt of a notice of prepayment pursuant to this Section, the Agent shall promptly notify each Bank of the contents thereof and of such Bank's ratable share of such prepayment and such notice shall not thereafter be revocable by the Borrower. SECTION 2.10. General Provisions as to Payments. (a) The Borrower shall make each payment of principal of, and interest on, the Loans and of commitment fees hereunder, not later than 1:00 p.m. (New York City time) on the date when due, in Federal or other funds immediately available in New York City, to the Agent at its address referred to in Section 9.01. The Agent will promptly distribute to each Bank its ratable share of each such payment received by the Agent for the account of the Banks. Whenever any payment of principal of, or interest on, the Domestic Loans or of commitment fees shall be due on a day which is not a Domestic Business Day, the date for payment thereof shall be extended to the next succeeding Domestic Business Day. Whenever any payment of principal of, or interest on, the Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day, the date for payment thereof shall be extended to the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another calendar month, in which case the date for payment thereof 27009/039/CA/agt 22 shall be the next preceding Euro-Dollar Business Day. If the date for any payment of principal is extended by operation of law or otherwise, interest thereon shall be payable for such extended time. (b) Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Banks hereunder that the Borrower will not make such payment in full, the Agent may assume that the Borrower has made such payment in full to the Agent on such date and the Agent may, in reliance upon such assumption, cause to be distributed to each Bank on such due date an amount equal to the amount then due such Bank. If and to the extent that the Borrower shall not have so made such payment, each Bank shall repay to the Agent forthwith on demand such amount distributed to such Bank together with interest thereon, for each day from the date such amount is distributed to such Bank until the date such Bank repays such amount to the Agent, at the Federal Funds Rate. SECTION 2.11. Funding Losses. If the Borrower makes any payment of principal with respect to any Fixed Rate Loan (pursuant to Article II, VI or VIII or otherwise) on any day other than the last day of the Interest Period applicable thereto, or the last day of an applicable period fixed pursuant to Section 2.05(d), or if the Borrower fails to borrow or prepay any Fixed Rate Loans after notice has been given to any Bank in accordance with Section 2.02(b) or 2.09(b), the Borrower shall reimburse each Bank within 15 days after demand for any resulting loss or expense incurred by it (or by an existing or prospective Participant in the related Loan), including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin for the period after any such payment or failure to borrow or prepay, provided that such Bank shall have delivered to the Borrower a certificate as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. SECTION 2.12. Computation of Interest and Fees. Interest based on the Prime Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days in a leap year) and paid for the actual number of days elapsed (including the first day but excluding the last day). All other interest and fees shall be computed on the basis of a year of 360 days and paid for the actual number of days elapsed (including the first day but excluding the last day). 27009/039/CA/agt 23 SECTION 2.13. Maximum Interest Rate. (a) Nothing contained in this Agreement or the Notes shall require the Borrower to pay interest at a rate exceeding the maximum rate permitted by applicable law. (b) If the amount of interest payable for the account of any Bank by the Borrower on any interest payment date in respect of the immediately preceding interest computation period, computed pursuant to Section 2.05, would exceed the maximum amount permitted by applicable law to be charged to the Borrower by such Bank, the amount of interest payable for its account on such interest payment date shall be automatically reduced to such maximum permissible amount. (c) If the amount of interest payable for the account of any Bank in respect of any interest computation period is reduced pursuant to subsection (b) of this Section 2.13 and the amount of interest payable for its account by the Borrower in respect of any subsequent interest computation period, computed pursuant to Section 2.05, would be less than the maximum amount permitted by applicable law to be charged to the Borrower by such Bank, then the amount of interest payable for its account by the Borrower in respect of such subsequent interest computation period shall be automatically increased to such maximum permissible amount; provided that at no time shall the aggregate amount by which interest paid for the account of any Bank has been increased pursuant to this subsection (c) exceed the aggregate amount by which interest paid for its account has theretofore been reduced pursuant to subsection (b) of this Section 2.13. SECTION 2.14. Regulation D Compensation. So long as Regulation D shall require reserves to be maintained against "Eurocurrency liabilities" (or against any other category of liabilities which includes deposits by reference to which the interest rate on Euro-Dollar Loans is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Bank to United States residents), each Bank may require the Borrower to pay, contemporaneously with each payment of interest on the Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of such Bank at a rate per annum equal to the excess of (i) (A) the applicable London Interbank Offered Rate divided by (B) one minus the reserve ratio prescribed by Regulation D (as such Regulation shall have been amended to the date of the notice referred to in clause (x) below) for such requirements (expressed as a decimal) over (ii) the rate specified in clause (i)(A), such rate per annum to be adjusted automatically on and as of the effective date of any change in such reserve ratio. Any 27009/039/CA/agt 24 Bank wishing to require payment of such additional interest (x) shall so notify the Borrower and the Agent, in which case such additional interest on the Euro-Dollar Loans of such Bank shall be payable with respect to each related Interest Period commencing at least five Euro-Dollar Business Days after the giving of such notice and (y) shall notify the Borrower and the Agent at least five Euro-Dollar Business Days prior to each date on which interest is payable on the Euro-Dollar Loans of the amount then due it under this Section. ARTICLE III CONDITIONS SECTION 3.01. Closing. The closing hereunder shall occur upon receipt by the Agent of the following documents, each dated the Closing Date unless otherwise indicated: (a) a duly executed Note for the account of each Bank dated on or before the Closing Date complying with the provisions of Section 2.03; (b) 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 hereto, and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (c) an opinion of Davis Polk & Wardwell, special counsel for the Agent, substantially in the form of Exhibit C hereto and covering such additional matters relating to the transactions contemplated hereby as the Required Banks may reasonably request; (d) evidence satisfactory to it that the commitments under the Credit Agreement dated as of September 1, 1988 among the Borrower, the borrowing subsidiaries listed therein, the banks party thereto and Morgan Guaranty Trust Company of New York, as agent (as amended, the "Existing Credit Agreement") have terminated, all loans thereunder have been repaid in full (all Banks hereunder which are also banks under the Existing Credit Agreement hereby agreeing that such repayment may be made, whether at the end of interest periods under the Existing Credit Agreement or not) and all accrued fees and other amounts payable thereunder 27009/039/CA/agt 25 (including, without limitation, any funding costs payable pursuant to the Existing Credit Agreement) have been paid in full; and (e) all documents the Agent may reasonably request relating to the existence of the Borrower, the corporate authority for and the validity of this Agreement and the Notes, and any other matters relevant hereto, all in form and substance satisfactory to the Agent. The Agent shall promptly notify the Borrower and the Banks of the Closing Date, and such notice shall be conclusive and binding on all parties hereto. SECTION 3.02. Borrowings. The obligation of any Bank to make a Loan on the occasion of any Borrowing is subject to the satisfaction of the following conditions: (a) the fact that the Closing Date shall have occurred on or prior to April 12, 1995; (b) receipt by the Agent of a Notice of Borrowing as required by Section 2.02; (c) the fact that, immediately after such Borrowing, the aggregate outstanding principal amount of the Loans will not exceed the aggregate amount of the Commitments; (d) the fact that, immediately before and after such Borrowing, no Default shall have occurred and be continuing; and (e) the fact that the representations and warranties of the Borrower contained in this Agreement (except, in the case of a Refunding Borrowing, the representations and warranties set forth in Sections 4.04(c) and 4.05 as to any matter which has theretofore been disclosed in writing by the Borrower to the Banks) shall be true on and as of the date of such Borrowing. Each Borrowing hereunder shall be deemed to be a representation and warranty by the Borrower on the date of such Borrowing as to the facts specified in clauses (c), (d) and (e) of this Section. 27009/039/CA/agt 26 ARTICLE IV REPRESENTATIONS AND WARRANTIES The Borrower represents and warrants that: SECTION 4.01. Corporate Existence and Power. The Borrower is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted unless the failure to have or maintain such powers, licenses, authorizations, consents and approvals could not reasonably be expected to have a material adverse effect on the financial condition or results of operations of the Borrower and its Subsidiaries, taken as a whole. SECTION 4.02. Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by the Borrower of this Agreement and the Notes are within the Borrower's corporate power, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any governmental body, agency or official and do not contravene, or constitute a default under, any provision of applicable law or regulation or of the certificate of incorporation or by-laws of the Borrower, of any agreement or other instrument binding upon the Borrower or of any judgment, injunction, order or decree binding upon the Borrower or result in the creation or imposition of any Lien on any asset of the Borrower or any of its Subsidiaries. SECTION 4.03. Binding Effect. This Agreement constitutes a valid and binding agreement of the Borrower and each Note, when executed and delivered in accordance with this Agreement, will constitute a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization or moratorium or similar laws relating to the enforcement of creditors' rights generally and by general principles of equity. SECTION 4.04. Financial Information. (a) The consolidated balance sheet of the Borrower and its Subsidiaries as of March 31, 1994 and the related consolidated statements of operations, shareholders' investment and cash flows for the fiscal year then ended, reported by Arthur Andersen & Co. and set forth in the 27009/039/CA/agt 27 Borrower's 1994 Form 10-K, a copy of which has been delivered to each of the Banks, fairly present, in all material respects, in conformity with generally accepted accounting principles, the consolidated financial position of the Borrower and its Subsidiaries as of such date and their consolidated results of operations and cash flows for such fiscal year. (b) The unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of December 31, 1994 and the related unaudited consolidated statements of operations, shareholders' investment and cash flows for the nine months then ended, set forth in the Borrower's Form 10- Q filed with the Securities and Exchange Commission for the fiscal quarter then ended, a copy of which has been delivered to each of the Banks, fairly present, in all material respects, in conformity with generally accepted accounting principles applied on a basis consistent with the financial statements referred to in subsection (a) above, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of such date and their consolidated results of operations and cash flows for such nine month period (subject to normal year-end adjustments). (c) Since December 31, 1994 there has been no material adverse change in the business, financial position or results of operations of the Borrower and its Subsidiaries, considered as a whole. SECTION 4.05. Litigation. There is no action, suit or proceeding pending, or (to the knowledge of the Borrower) threatened, against or affecting the Borrower or any of its Subsidiaries before any court or arbitrator or any governmental body, agency or official in which there is a reasonable possibility of an adverse decision which could reasonably be expected to materially adversely affect the business or consolidated results of operations of the Borrower and its Subsidiaries, taken as a whole, or which in any manner questions the validity of this Agreement or the Notes. SECTION 4.06. Compliance with ERISA. Each member of the ERISA Group has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan and is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Plan. No member of the ERISA Group has (i) sought a waiver of the minimum funding standard under Section 412 of the Code in respect of any Plan, (ii) failed to make any contribution or payment to any Plan or Multiemployer Plan, or made any amendment to any 27009/039/CA/agt 28 Plan, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security under ERISA or the Code or (iii) incurred any liability under Title IV of ERISA, which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, other than a liability to the PBGC for premiums under Section 4007 of ERISA. SECTION 4.07. Taxes. The Borrower and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any Subsidiary or are contesting such assessment in good faith. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes or other governmental charges are, in the opinion of the Borrower, adequate. SECTION 4.08. Subsidiaries. Each of the Borrower's corporate Subsidiaries is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted unless the failure to have or maintain such powers, licenses, authorizations, consents and approvals could not reasonably be expected to have a material adverse effect on the financial condition or results of operations of the Borrower and its Subsidiaries, taken as a whole. SECTION 4.09. Environmental Matters. In the ordinary course of its business, the Borrower conducts an ongoing review of the effect of Environmental Laws on the business, operations and properties of the Borrower and its Subsidiaries, in the course of which it takes all reasonable steps to identify and evaluate associated liabilities and costs (including, without limitation, any capital or operating expenditures required for clean-up or closure of properties presently or previously owned, any capital or operating expenditures required to achieve or maintain compliance with environmental protection standards imposed by law or as a condition of any license, permit or contract, any related constraints on operating activities, including any periodic or permanent shutdown of any facility or reduction in the level of or change in the nature of operations conducted thereat, any costs or liabilities in connection with off-site disposal of wastes or Hazardous Substances, and any actual or potential liabilities to third parties, including employees, and any related costs and 27009/039/CA/agt 29 expenses). On the basis of this review, the Borrower has reasonably concluded that such associated liabilities and costs, including the costs of compliance with Environmental Laws, are not reasonably expected to have a material adverse effect on the business, financial condition, results of operations or prospects of the Borrower and its Consolidated Subsidiaries, considered as a whole. SECTION 4.10. Regulatory Restrictions on Borrowing. The Borrower is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended, a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended, or otherwise subject to any regulatory scheme which restricts its ability to incur Debt. SECTION 4.11. Full Disclosure. All written information heretofore furnished by the Borrower to the Agent or any Bank for purposes of or in connection with this Agreement or any transaction contemplated hereby was, to the Borrower's knowledge, true and accurate in all material respects on the date as of which such information was stated or certified. The Borrower has disclosed to the Banks in writing any and all facts known to the Borrower which materially and adversely affect or may affect (to the extent the Borrower can now reasonably foresee), the business, operations or financial condition of the Borrower and its Consolidated Subsidiaries, taken as a whole, or the ability of the Borrower to perform its obligations under this Agreement. ARTICLE V COVENANTS The Borrower agrees that, so long as any Bank has any Commitment hereunder or any amount payable under any Note remains unpaid: SECTION 5.01. Information. The Borrower will deliver to each of the Banks: (a) as soon as available and in any event within 90 days after the end of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such fiscal year and the related consolidated statements of operations, shareholders' investment and cash flows for such fiscal year, setting forth in each case in comparative form the figures for the previous fiscal 27009/039/CA/agt 30 year, all reported on by Arthur Andersen LLP or other independent public accountants of nationally recognized standing; (b) as soon as available and in any event within 45 days after the end of each of the first three quarters of each fiscal year of the Borrower, a consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and the related consolidated statements of operations and cash flows for such quarter and for the portion of the Borrower's fiscal year ended at the end of such quarter, setting forth in each case in comparative form the figures for the corresponding quarter and the corresponding portion of the Borrower's previous fiscal year, all as included in the Borrower's Form 10-Q (or successor form) for such fiscal quarter, prepared in accordance with generally accepted accounting principles consistently applied (except any change with respect to consistent application of accounting principles concurred in by the Borrower's independent public accountants) and fairly presenting, in all material respects, the consolidated financial position of the Borrower and its Consolidated Subsidiaries as of the end of such quarter and their consolidated results of operations and cash flows for such period (subject to normal year-end adjustments); (c) simultaneously with the delivery of each set of financial statements referred to in subsections (a) and (b) above, a certificate of the President or the Treasurer or the Vice President-Finance of the Borrower (i) setting forth in reasonable detail the calculations required to establish whether the Borrower was in compliance with the requirements of Sections 5.06, 5.07, 5.08, 5.10, 5.11 and 5.14, inclusive, on the date of such financial statements and (ii) stating whether there exists on the date of such certificate any Default and, if any Default then exists, setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (d) forthwith upon the occurrence of any Default, a certificate of the President or the Treasurer or the Vice President-Finance of the Borrower setting forth the details thereof and the action which the Borrower is taking or proposes to take with respect thereto; (e) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies of all 27009/039/CA/agt 31 financial statements, reports and proxy statements so mailed; (f) promptly upon the filing thereof, copies of all registration statements (other than the exhibits thereto and any registration statements on Form S-8 or its equivalent) and annual, quarterly or monthly reports (other than, except as reasonably requested by any Bank, the exhibits thereto) which the Borrower shall have filed with the Securities and Exchange Commission; (g) if and when any member of the ERISA Group (i) gives or is required to give notice to the PBGC of any "reportable event" (as defined in Section 4043 of ERISA) with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such reportable event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of complete or partial withdrawal liability under Title IV of ERISA or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of such notice; (iv) applies for a waiver of the minimum funding standard under Section 412 of the Code, a copy of such application; (v) gives notice of intent to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and other information filed with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any payment or contribution to any Plan or Multiemployer Plan or makes any amendment to any Plan which has resulted or could result in the imposition of a Lien or the posting of a bond or other security, a certificate of the chief financial officer or the chief accounting officer of the Borrower setting forth details as to such occurrence and the action, if any, which the Borrower or applicable member of the ERISA Group is required or proposes to take; and (h) from time to time such additional information regarding the financial position or business of the Borrower or any Subsidiary as the Agent, at the request of any Bank, may reasonably request. 27009/039/CA/agt 32 SECTION 5.02. Payment of Taxes, etc. The Borrower will, and will cause each Material Subsidiary to pay and discharge promptly when due and payable all taxes, assessments and other governmental charges imposed upon it or any of its property, provided that the Borrower or any Subsidiary shall not be required to pay any such tax, assessment or other governmental charge the payment of which is being contested in good faith. SECTION 5.03. Maintenance of Property; Insurance. (a) Subject to Section 5.10, the Borrower will keep, and will cause each Subsidiary to keep, all property useful and necessary in its business in good working order and condition, ordinary wear and tear and force majeure excepted. (b) The Borrower will, and will cause each of its Subsidiaries to, maintain (either in the name of the Borrower or in such Subsidiary's own name) with financially sound and responsible insurance companies, insurance on all their respective properties in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business; and will furnish to the Banks, upon reasonable request from the Agent, information presented in reasonable detail as to the insurance so carried. SECTION 5.04. Compliance with Laws. The Borrower will comply, and cause each Subsidiary to comply, in all material respects with all applicable laws, ordinances, rules, regulations, and requirements of governmental authorities (including, without limitation, Environmental Laws and ERISA and the rules and regulations thereunder) except where (i) the necessity of compliance therewith is contested in good faith by appropriate proceedings or (ii) the failure to so comply could not reasonably be expected to have a material adverse effect on the financial condition or results of operations of the Borrower and its Subsidiaries, taken as a whole. SECTION 5.05. Inspection of Property, Books and Records. The Borrower will keep, and will cause each Subsidiary to keep, proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to its business and activities in order to allow for the preparation of financial statements in accordance with generally accepted accounting principles; and will permit, and will cause each Subsidiary to permit, representatives of any Bank at such Bank's expense to visit and inspect any of their respective 27009/039/CA/agt 33 properties, to examine and make abstracts from any of their respective books and records and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants, all at such reasonable times during normal business hours and as often as may reasonably be desired and without undue interference with the operations of the Borrower or its Subsidiaries. SECTION 5.06. Fixed Charge Coverage. The Fixed Charge Coverage Ratio will at no time be less than 2.0 to 1.0. SECTION 5.07. Funded Debt. Consolidated Funded Debt will not exceed (i) during the period from the initial incurrence by the Borrower or any Subsidiary of any Soekor Project Debt until such time as any Completion Guarantees have been extinguished, 100% of Adjusted Consolidated Tangible Net Worth and (ii) at any other time, 80% of Adjusted Consolidated Tangible Net Worth. For purposes of this 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 5.08. Minimum Consolidated Tangible Net Worth. Adjusted Consolidated Tangible Net Worth will not at any date be less than the sum of (i) $90,000,000 plus (ii) 75% of Consolidated Net Income for each fiscal quarter ended after December 31, 1994 and on or prior to such date, but only to the extent that Consolidated Net Income for any such fiscal quarter is positive plus (iii) 75% of the increase in consolidated stockholders' equity of the Borrower from any equity issuances by the Borrower after the date hereof and on or prior to such date. SECTION 5.09. Negative Pledge. Neither the Borrower nor any Subsidiary will create, assume or suffer to exist any Lien on any asset now owned or hereafter acquired by it, except: (a) Liens existing on the date of this Agreement securing Debt outstanding on the date of this Agreement in an aggregate principal amount not exceeding $1,000,000; (b) any Lien existing on any asset of any corporation at the time such corporation becomes a Subsidiary and not created in contemplation of such event; 27009/039/CA/agt 34 (c) any Lien on any asset securing Debt incurred or assumed for the purpose of financing all or any part of the cost of acquiring such asset, provided that such Lien attaches to such asset concurrently with or within 90 days after the acquisition thereof; (d) any Lien on any asset of any corporation existing at the time such corporation is merged into or consolidated with the Borrower or a Subsidiary and not created in contemplation of such event; (e) any Lien existing on any asset prior to the acquisition thereof by the Borrower or a Subsidiary and not created in contemplation of such acquisition; (f) any Lien arising out of the refinancing, extension, renewal or refunding of any Debt secured by any Lien permitted by any of the foregoing subsections of this Section, provided that such Debt is not increased and is not secured by any additional assets; (g) any Lien arising pursuant to any order of attachment, distraint or similar legal process arising in connection with court proceedings so long as (i) the portion of any judgment or order for the payment of money secured thereby which is not fully payable through insurance is less than $2,000,000 or (ii) the execution or other enforcement thereof is effectively stayed and the claims secured thereby are being contested in good faith by appropriate proceedings; (h) Liens on any asset of any corporation in favor of the United States of America or any state thereof, or any department, agency or instrumentality or political subdivision of the United States of America or any state thereof to secure partial, progress, advance or other payments pursuant to any statute or contract or to secure any Debt (including Debt of the pollution control or industrial revenue bond type) incurred for the purpose of financing all or any part of the purchase price or the cost of construction of the property subject to such Lien; (i) any Lien on any assets securing either Non-Recourse Debt or, while any Completion Guarantees remain in effect, Soekor Project Debt; (j) Liens arising in the ordinary course of its business which (i) do not secure Debt or Derivatives Obligations and (ii) do not in the aggregate materially detract from the value of its assets or materially 27009/039/CA/agt 35 impair the use thereof in the operation of its business; (k) Liens on cash and cash equivalents securing Derivatives Obligations, provided that the aggregate amount of cash and cash equivalents subject to such Liens may at no time exceed $2,000,000; and (l) Liens not otherwise permitted by the foregoing clauses of this Section securing Debt or Derivative Obligations in an aggregate principal amount not to exceed 5% of Adjusted Consolidated Tangible Net Worth at any time outstanding. SECTION 5.10. Consolidations, Mergers and Sales of Assets. The Borrower will not consolidate or merge with or into any other Person unless (i) the Borrower is the surviving entity and (ii) immediately after such merger no Default shall have occurred and be continuing. The Borrower will not, and will not permit any Subsidiary to, make a Substantial Asset Sale. SECTION 5.11. Investments. Neither the Borrower nor any Subsidiary will make or acquire any Investment in any Person other than: (a) Investments existing on the date hereof; (b) Investments in the Borrower or its Subsidiaries; (c) any Investment in any Person which, after the making of such Investment, shall be or become a Subsidiary; (d) temporary cash Investments in money market instruments; (e) Investments by the Borrower through the exchange of Borrower's capital stock for such Investments; (f) Investments consisting of undistributed earnings of a Person; and (g) any Investment not otherwise permitted by the foregoing clauses of this Section if, immediately after any such Investment is made or acquired, the aggregate net book value of all Investments permitted by this clause (g) does not exceed $10,000,000. 27009/039/CA/agt 36 SECTION 5.12. Use of Proceeds. The proceeds of the Loans made under this Agreement will be used by the Borrower for working capital and capital expenditures in the ordinary course of business or for the repayment of Debt and for the Borrower's other general corporate purposes. None of such proceeds will be used in violation of Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto, including but not limited to Regulation U of the Board of Governors of the Federal Reserve System. SECTION 5.13. Maintenance of Existence; Change of Business. The Borrower and each Material Subsidiary shall at all times, except as otherwise permitted under Section 5.10, maintain its corporate existence, and the Borrower will not, and will not permit its Subsidiaries to, substantially change the general lines of business of the Borrower and its Subsidiaries considered as a whole. Such current general lines of business are petroleum services, marine and underwater services, inspection services, government contracting services, aerospace services and survey services. SECTION 5.14. Restricted Payments. Neither the Borrower nor any Subsidiary will declare or make any Restricted Payment unless, after giving effect thereto (i) no Default shall have occurred and be continuing and (ii) the aggregate of all Restricted Payments (other than in respect of (a) the Stock Repurchase Program and (b) other repurchases by the Borrower of its capital stock in connection with employee compensation or benefit plans in an amount not to exceed $10,000,000 in a fiscal year) declared or made subsequent to December 31, 1994 does not exceed 50% of the cumulative Consolidated Net Income of the Borrower and its Subsidiaries from December 31, 1994 through the end of its then most recent fiscal quarter (treated for this purpose as a single accounting period). SECTION 5.15. Transactions with Affiliates. The Borrower will not, and will not permit any Subsidiary to, directly or indirectly, pay any funds to or for the account of, make any Investment (whether by acquisition of stock or indebtedness, by loan, advance, transfer of property, guarantee or other agreement to pay, purchase or service, directly or indirectly, any Debt, or otherwise) in, lease, sell, transfer or otherwise dispose of any assets, tangible or intangible, to, or participate in, or effect, any transaction with, any Affiliate except on an arms-length basis on terms at least as favorable to the Borrower or such Subsidiary as could have been obtained from a third party who was not an Affiliate; provided that the foregoing 27009/039/CA/agt 37 provisions of this Section shall not prohibit any such Person from declaring or paying any lawful dividend or other payment ratably in respect of all of its capital stock of the relevant class so long as, after giving effect thereto, no Default shall have occurred and be continuing. ARTICLE VI DEFAULTS SECTION 6.01. Events of Default. If one or more of the following events ("Events of Default") shall have occurred and be continuing: (a) the Borrower shall fail to pay when due any principal of any Note; (b) the Borrower shall fail to pay any interest on any Note, any fees hereunder or any other obligation hereunder for a period of five days after the same shall become due; (c) the Borrower shall fail to observe or perform any covenant contained in Sections 5.06 through 5.15, inclusive; (d) the Borrower shall fail to observe or perform any covenant or agreement contained in this Agreement (other than those covered by subsection (a), (b) or (c) above) for 30 days after notice thereof has been given to the Borrower by the Agent at the request of any Bank; (e) any representation, warranty, certification or statement made by the Borrower in this Agreement or in any certificate, financial statement or other document delivered pursuant to this Agreement shall prove to have been incorrect in any material respect when made; (f) the Borrower or any Material Subsidiary shall fail to make any payment in respect of any Material Financial Obligation (other than (i) any deferred purchase payment obligation incurred by the Borrower in connection with its acquisition of all of the stock or a material portion of the assets of a corporation and withheld by the Borrower in good faith or (ii) the Notes) when due or within any applicable grace period; 27009/039/CA/agt 38 (g) any event or condition shall occur which results in the acceleration of the maturity of any Material Debt or the acceleration of the termination of commitments to lend monies or extend credit in any other form in an aggregate amount in excess of $2,000,000 to the Borrower or any Subsidiary or enables (or, with the giving of notice or lapse of time or both, would enable) the holder of any such Debt or the maker of such commitment, as the case may be, or any Person acting on such holder's or maker's behalf to accelerate the maturity of such Debt or accelerate the termination of such commitment, as the case may be; (h) the Borrower or any Material Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (i) an involuntary case or other proceeding shall be commenced against the Borrower or any Material Subsidiary seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of 60 days; or an order for relief shall be entered against the Borrower or any Material Subsidiary under the federal bankruptcy laws as now or hereafter in effect; (j) any member of the ERISA Group shall fail to pay when due an amount or amounts aggregating in excess of $2,000,000 which it shall have become liable to pay under Title IV of ERISA; or notice of intent to terminate a Material Plan shall be filed under Title IV of ERISA by any member of the ERISA Group, any plan 27009/039/CA/agt 39 administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to impose liability (other than for premiums under Section 4007 of ERISA) in respect of, or to cause a trustee to be appointed to administer any Material Plan; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or there shall occur a complete or partial withdrawal from, or a default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which could cause one or more members of the ERISA Group to incur a current payment obligation in excess of $2,000,000; (k) a final judgment or order for the payment of money the portion of which not fully payable through insurance equals or exceeds $2,000,000 (or the equivalent amount in any other currency) shall be rendered against the Borrower or any Material Subsidiary and such judgment or order shall continue unsatisfied and in effect and unstayed for a period of 30 days after the date of entry thereof; or (l) any Person or group of Persons (within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as amended) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under said Act) of 50% or more of the outstanding shares of common stock of the Borrower; or, during any period of twelve consecutive calendar months, individuals who were directors of the Borrower on the first day of such period shall cease to constitute a majority of the board of directors of the Borrower; then, and in every such event, the Agent shall (i) if requested by the Required Banks, by notice to the Borrower terminate the Commitments (if still in existence), and they shall thereupon terminate, and (ii) if requested by the Required Banks, by notice to the Borrower declare the Notes (together with accrued interest thereon) to be, and the Notes shall thereupon become, due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower; provided that in the case of any of the Events of Default specified in clause (h) or (i) above with respect to the Borrower, without any notice to the Borrower or any other act by the Agent or the Banks, the Commitments shall thereupon terminate and the Notes (together with accrued interest thereon) shall become immediately due and payable without 27009/039/CA/agt 40 presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower. SECTION 6.02. Notice of Default. The Agent shall give notice to the Borrower under Section 6.01(d) promptly upon being requested to do so by any Bank and shall thereupon notify all the Banks thereof. ARTICLE VII THE AGENT SECTION 7.01. Appointment and Authorization. Each Bank irrevocably appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with all such powers as are reasonably incidental thereto. SECTION 7.02. Agent and Affiliates. Morgan shall have the same rights and powers under this Agreement as any other Bank and may exercise or refrain from exercising the same as though it were not the Agent, and Morgan and its affiliates may accept deposits from, lend money to, and generally engage in any kind of business with the Borrower or any Subsidiary or affiliate of the Borrower as if it were not the Agent thereunder. SECTION 7.03. Action by Agent. The obligations of the Agent under this Agreement are only those expressly set forth herein. Without limiting the generality of the foregoing, the Agent shall not be required to take any action with respect to any Default, except as expressly provided in Article VI . SECTION 7.04. Consultation with Experts. The Agent may consult with legal counsel (who may be counsel for the Borrower), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. SECTION 7.05. Liability of Agent. Neither the Agent nor any of its affiliates nor any of their respective directors, officers, agents or employees shall be liable for any action taken or not taken by it in connection herewith (i) with the consent or at the request of the Required Banks or (ii) in the absence of its own gross negligence or willful misconduct. Neither the Agent nor any of its 27009/039/CA/agt 41 affiliates nor any of their respective directors, officers, agents or employees shall be responsible for or have any duty to ascertain, inquire into or verify (w) any statement, warranty or representation made in connection herewith or any borrowing hereunder; (x) the performance or observance of any of the covenants or agreements of the Borrower hereunder; (y) the satisfaction of any condition specified in Article III, except receipt of items required to be delivered to the Agent; or (z) the validity, effectiveness or genuineness of this Agreement or any other instrument or writing furnished in connection herewith. The Agent shall not incur any liability by acting in reliance upon any notice, consent, certificate, statement, or other writing (which may be a bank wire, telex or similar writing) believed by it to be genuine or to be signed by the proper party or parties. SECTION 7.06. Indemnification. Each Bank shall, ratably in accordance with its Commitment, indemnify the Agent, its affiliates and their respective directors, officers, agents and employees (to the extent not reimbursed by the Borrower) against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the Agent's gross negligence or willful misconduct) that the Agent may suffer or incur in connection with this Agreement or any action taken or omitted by the Agent hereunder. SECTION 7.07. Credit Decision. Each Bank acknowledges that it has, independently and without reliance upon the Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Bank also acknowledges that it will, independently and without reliance upon the Agent or any other Bank, and based on such documents and other information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action hereunder. SECTION 7.08. Successor Agent. The Agent may resign at any time by giving notice thereof to the Banks and the Borrower. Upon any such resignation, the Required Banks shall have the right to appoint a successor Agent, which successor Agent shall be approved by the Borrower, which approval shall not be unreasonably withheld. If no successor Agent shall have been so appointed by the Required Banks, and shall have accepted such appointment, within 30 days after the retiring Agent's giving of notice of resignation, then the retiring Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a 27009/039/CA/agt 42 commercial bank organized or licensed under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of its appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations hereunder. After any retiring Agent's resignation hereunder as Agent, the provisions of this Article shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent. ARTICLE VIII CHANGE IN CIRCUMSTANCES AFFECTING FIXED RATE LOANS SECTION 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If on or prior to the first day of any Interest Period for any Fixed Rate Borrowing: (a) the Agent is advised by the Reference Banks that deposits in dollars (in the applicable amounts) are not being offered to the Reference Banks in the relevant market for such Interest Period, or (b) Banks having 50% or more of the aggregate amount of the Commitments advise the Agent that the Adjusted CD Rate or the London Interbank Offered Rate, as the case may be, as determined by the Agent will not adequately and fairly reflect the cost to such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may be, for such Interest Period, the Agent shall forthwith give notice thereof to the Borrower and the Banks, whereupon until the Agent notifies the Borrower that the circumstances giving rise to such suspension no longer exist, the obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may be, shall be suspended. Unless the Borrower notifies the Agent at least two Domestic Business Days before the date of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been given that it elects not to borrow on such date, such Borrowing shall instead be made as a Base Rate Borrowing. SECTION 8.02. Illegality. If, on or after the date of this Agreement, the adoption of any applicable law, rule or regulation, or any change in any applicable law, 27009/039/CA/agt 43 rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Euro-Dollar Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall so notify the Agent, the Agent shall forthwith give notice thereof to the other Banks and the Borrower, whereupon until such Bank notifies the Borrower and the Agent that the circumstances giving rise to such suspension no longer exist, the obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before giving any notice to the Agent pursuant to this Section, such Bank shall designate a different Euro-Dollar Lending Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. If such Bank shall determine that it may not lawfully continue to maintain and fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify in such notice, the Borrower shall immediately prepay in full the then outstanding principal amount of each such Euro-Dollar Loan, together with accrued interest thereon. Concurrently with prepaying each such Euro-Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount from such Bank (on which interest and principal shall be payable contemporaneously with the related Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate Loan. SECTION 8.03. Increased Cost and Reduced Return. (a) If on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Bank (or its Applicable Lending Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding (i) with respect to any CD Loan any such requirement included in an applicable Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar Loan, any such requirement with respect to which such Bank is entitled to compensation during the relevant Interest Period 27009/039/CA/agt 44 under Section 2.14), special deposit, insurance assessment (excluding, with respect to any CD Loan, any such requirement reflected in an applicable Assessment Rate) or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Bank (or its Applicable Lending Office) or shall impose on any Bank (or its Applicable Lending Office) or on the United States market for certificates of deposit or the London interbank market any other condition affecting its Fixed Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result of any of the foregoing is to increase the cost to such Bank (or its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the amount of any sum received or receivable by such Bank (or its Applicable Lending Office) under this Agreement or under its Note with respect thereto, by an amount deemed by such Bank to be material, then, within 15 days after demand by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank for such increased cost or reduction. (b) If any Bank shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change in any such law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Bank (or its Parent) as a consequence of such Bank's obligations hereunder to a level below that which such Bank (or its Parent) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Bank to be material, then from time to time, within 15 days after demand by such Bank (with a copy to the Agent), the Borrower shall pay to such Bank such additional amount or amounts as will compensate such Bank (or its Parent) for such reduction. (c) Each Bank will promptly notify the Borrower and the Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Bank to compensation pursuant to this Section and will designate a different Applicable Lending Office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Bank, be otherwise disadvantageous to such Bank. A 27009/039/CA/agt 45 certificate of any Bank claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Bank may use any reasonable averaging and attribution methods. Notwithstanding the foregoing subsections (a) and (b) of this Section 8.03, the Borrower shall only be obligated to compensate any Bank for any amount arising or accruing during (i) any time or period commencing not more than 180 days prior to the date on which such Bank notifies the Agent and the Borrower that it proposes to demand such compensation and identifies to the Agent and the Borrower the statute, regulation or other basis upon which the claimed compensation is or will be based and (ii) any time or period during which, because of the retroactive application of such statute, regulation or other such basis, such Bank did not know (and would not in the exercise of reasonable diligence have known) that such amount would arise or accrue. SECTION 8.04. Taxes. (a) For purposes of this Section 8.04, the following terms have the following meanings: "Taxes" means any and all present or future taxes, duties, levies, imposts, deductions, charges or withholdings with respect to any payment by the Borrower pursuant to this Agreement or under any Note, and all liabilities with respect thereto, excluding (i) in the case of each Bank and the Agent, taxes imposed on its income, and franchise or similar taxes imposed on it, by a jurisdiction under the laws of which such Bank or the Agent (as the case may be) is organized or in which its principal executive office is located or, in the case of each Bank, in which its Applicable Lending Office is located and (ii) in the case of each Bank, any United States withholding tax imposed on such payments but only to the extent that such Bank is subject to United States withholding tax at the time such Bank first becomes a party to this Agreement. "Other Taxes" means any present or future stamp or documentary taxes and any other excise or property taxes, or similar charges or levies, which arise from any payment made pursuant to this Agreement or under any Note or from the execution or delivery of, or otherwise with respect to, this Agreement or any Note. "United States" means the United States of America, including the States and the District of Columbia, but excluding its territories and possessions. 27009/039/CA/agt 46 (b) Any and all payments by the Borrower to or for the account of any Bank or the Agent hereunder or under any Note shall be made without deduction for any Taxes or Other Taxes; provided that, if the Borrower shall be required by law to deduct any Taxes or Other Taxes from any such payments, (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 8.04) such Bank or the Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) the Borrower shall make such deductions, (iii) the Borrower shall pay the full amount deducted to the relevant taxation authority or other authority in accordance with applicable law and (iv) the Borrower shall furnish to the Agent, at its address referred to in Section 9.01, the original or a certified copy of a receipt evidencing payment thereof. (c) The Borrower agrees to indemnify each Bank and the Agent for the full amount of Taxes or Other Taxes (including, without limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts payable under this Section 8.04) paid by such Bank or the Agent (as the case may be) and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto. This indemnification shall be paid within 15 days after such Bank or the Agent (as the case may be) makes demand therefor. (d) Each Bank organized under the laws of a jurisdiction outside the United States, on or prior to the date of its execution and delivery of this Agreement in the case of each Bank listed on the signature pages hereof and on or prior to the date on which it becomes a Bank in the case of each other Bank, and from time to time thereafter if requested in writing by the Borrower (but only so long as such Bank remains lawfully able to do so), shall provide the Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or any successor form prescribed by the Internal Revenue Service, certifying that such Bank is entitled to benefits under an income tax treaty to which the United States is a party which exempts the Bank from United States withholding tax or reduces the rate of withholding tax on payments of interest for the account of such Bank or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States. (e) For any period with respect to which a Bank has failed to provide the Borrower with the appropriate form pursuant to Section 8.04(d) (unless such failure is due to a 27009/039/CA/agt 47 change in treaty, law or regulation occurring subsequent to the date on which such form originally was required to be provided), such Bank shall not be entitled to indemnification under Section 8.04(b) or (c) with respect to Taxes imposed by the United States; provided that if a Bank, which is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the Borrower shall take such steps as such Bank shall reasonably request to assist such Bank to recover such Taxes. (f) If the Borrower is required to pay additional amounts to or for the account of any Bank pursuant to this Section 8.04, then such Bank will change the jurisdiction of its Applicable Lending Office if, in the judgment of such Bank, such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Bank. SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04 with respect to its CD Loans or Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to such Bank through the Agent, have elected that the provisions of this Section shall apply to such Bank, then, unless and until such Bank notifies the Borrower that the circumstances giving rise to such suspension or demand for compensation no longer exist: (a) all Loans which would otherwise be made by such Bank as CD Loans or Euro-Dollar Loans, as the case may be, shall be made instead as Base Rate Loans (on which interest and principal shall be payable contemporaneously with the related Fixed Rate Loans of the other Banks), and (b) after each of its CD Loans or Euro-Dollar Loans, as the case may be, has been repaid, all payments of principal which would otherwise be applied to repay such Fixed Rate Loans shall be applied to repay its Base Rate Loans instead. SECTION 8.06. Substitution of Bank. If (i) the obligation of any Bank to make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or 8.04, the Borrower shall have the right, with the assistance of the Agent, to seek a mutually satisfactory substitute bank or 27009/039/CA/agt 48 banks (which may be one or more of the Banks) to purchase the Note and assume the Commitment of such Bank. ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. All notices, requests and other communications to any party hereunder shall be in writing (including bank wire, telex, facsimile transmission or similar writing) and shall be given to such party: (x) in the case of the Borrower or the Agent, at its address, facsimile number or telex number set forth on the signature pages hereof, (y) in the case of any Bank, at its address, facsimile number or telex number set forth in its Administrative Questionnaire or (z) in the case of any party, such other address, facsimile number or telex number as such party may hereafter specify for the purpose by notice to the Agent and the Borrower. Each such notice, request or other communication shall be effective (i) if given by telex, when such telex is transmitted to the telex number specified in this Section and the appropriate answerback is received, (ii) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (iii) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iv) if given by any other means, when delivered at the address specified in this Section; provided that notices to the Agent under Article II or Article VIII shall not be effective until received. SECTION 9.02. No Waivers. No failure or delay by the Agent or any Bank in exercising any right, power or privilege hereunder or under any Note shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses of the Agent, including the reasonable fees and disbursements of special counsel for the Agent, in connection with the preparation and administration of this Agreement, any waiver or consent hereunder or any amendment hereof or any Default or alleged Default hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket 27009/039/CA/agt 49 expenses incurred by the Agent and each Bank, including (without duplication) the reasonable fees and disbursements of outside counsel and the allocated cost of inside counsel, in connection with such Event of Default and collection, bankruptcy, insolvency and other enforcement proceedings resulting therefrom. (b) The Borrower agrees to indemnify the Agent and each Bank, their respective affiliates and the respective directors, officers, agents and employees of the foregoing (each an "Indemnitee") and hold each Indemnitee harmless from and against any and all liabilities, losses, damages, costs and expenses of any kind, including, without limitation, the reasonable fees and disbursements of counsel, which may be incurred by such Indemnitee in connection with any investigative, administrative or judicial proceeding (whether or not such Indemnitee shall be designated a party thereto) brought or threatened relating to or arising out of this Agreement or any actual or proposed use of proceeds of Loans hereunder; provided that no Indemnitee shall have the right to be indemnified hereunder for such Indemnitee's own gross negligence or willful misconduct as determined by a court of competent jurisdiction. SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it shall, by exercising any right of set-off or counterclaim or otherwise, receive payment of a proportion of the aggregate amount of principal and interest due with respect to any Note held by it which is greater than the proportion received by any other Bank in respect of the aggregate amount of principal and interest due with respect to any Note held by such other Bank, the Bank receiving such proportionately greater payment shall purchase such participations in the Notes held by the other Banks, and such other adjustments shall be made, as may be required so that all such payments of principal and interest with respect to the Notes held by the Banks shall be shared by the Banks pro rata; provided that nothing in this Section shall impair the right of any Bank to exercise any right of set-off or counterclaim it may have and to apply the amount subject to such exercise to the payment of indebtedness of the Borrower other than its indebtedness hereunder. The Borrower agrees, to the fullest extent it may effectively do so under applicable law, that any holder of a participation in a Note, whether or not acquired pursuant to the foregoing arrangements, may exercise rights of set-off or counterclaim and other rights with respect to such participation as fully as if such holder of a participation were a direct creditor of the Borrower in the amount of such participation. 27009/039/CA/agt 50 SECTION 9.05. Amendments and Waivers. Any provision of this Agreement or the Notes may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by the Borrower and the Required Banks (and, if the rights or duties of the Agent are affected thereby, by the Agent); provided that no such amendment or waiver shall, unless signed by all the Banks, (i) increase or decrease the Commitment of any Bank (except for a ratable decrease in the Commitments of all Banks) or subject any Bank to any additional obligation, (ii) reduce the principal of or rate of interest on any Loan or any fees hereunder, (iii) postpone the date fixed for any payment of principal of or interest on any Loan or any fees hereunder or for any reduction or termination of any Commitment, (iv) change the aggregate amount by which or to which the Commitments are required to be reduced on or prior to any Commitment Reduction Date or (v) change the percentage of the Commitments or of the aggregate unpaid principal amount of the Notes, or the number of Banks, which shall be required for the Banks or any of them to take any action under this Section or any other provision of this Agreement. SECTION 9.06. Successors and Assigns. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Borrower may not assign or otherwise transfer any of its rights under this Agreement without the prior written consent of all Banks. (b) Any Bank may at any time grant to one or more banks or other institutions (each a "Participant") participating interests in its Commitment or any or all of its Loans. In the event of any such grant by a Bank of a participating interest to a Participant, whether or not upon notice to the Borrower and the Agent, such Bank shall remain responsible for the performance of its obligations hereunder, and the Borrower and the Agent shall continue to deal solely and directly with such Bank in connection with such Bank's rights and obligations under this Agreement. Any agreement pursuant to which any Bank may grant such a participating interest shall provide that such Bank shall retain the sole right and responsibility to enforce the obligations of the Borrower hereunder including, without limitation, the right to approve any amendment, modification or waiver of any provision of this Agreement; provided that such participation agreement may provide that such Bank will not agree to any modification, amendment or waiver of this Agreement described in clause (i), (ii), (iii) or (iv) of Section 9.05 without the consent of the Participant. The Borrower agrees that each Participant shall, to the extent provided in its participation agreement, be entitled to the 27009/039/CA/agt 51 benefits of Article VIII with respect to its participating interest. An assignment or other transfer which is not permitted by subsection (c) or (d) below shall be given effect for purposes of this Agreement only to the extent of a participating interest granted in accordance with this subsection (b). (c) Any Bank may at any time assign to one or more banks or other institutions (each an "Assignee") all, or a proportionate part (equivalent to an initial Commitment of not less than $5,000,000 or such lesser amount as may be acceptable to the Borrower and the Agent) of all, of its rights and obligations under this Agreement and the Notes, and such Assignee shall assume such rights and obligations, pursuant to an Assignment and Assumption Agreement in substantially the form of Exhibit E hereto executed by such Assignee and such transferor Bank, with (and subject to) the subscribed consent of the Borrower, which shall not be unreasonably withheld, and acknowledgement of the Agent; provided that if an Assignee is an affiliate of such transferor Bank or was a Bank immediately prior to such assignment, no such consent shall be required. Upon execution and delivery of such instrument and payment by such Assignee to such transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such Assignee, such Assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with a Commitment as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this subsection (c), the transferor Bank, the Agent and the Borrower shall make appropriate arrangements so that, if required, a new Note is issued to the Assignee. In connection with any such assignment, the transferor Bank shall pay to the Agent an administrative fee for processing such assignment in the amount of $2,500. If the Assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of any United States federal income taxes in accordance with Section 8.04. (d) Any Bank may at any time assign all or any portion of its rights under this Agreement and its Note to a Federal Reserve Bank. No such assignment shall release the transferor Bank from its obligations hereunder. (e) No Assignee, Participant or other transferee of any Bank's rights shall be entitled to receive any 27009/039/CA/agt 52 greater payment under Section 8.03 or 8.04 than such Bank would have been entitled to receive with respect to the rights transferred, unless such transfer is made with the Borrower's prior written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04 requiring such Bank to designate a different Applicable Lending Office under certain circumstances or at a time when the circumstances giving rise to such greater payment did not exist. SECTION 9.07. Collateral. Each of the Banks represents to the Agent and each of the other Banks that it in good faith is not relying upon any "margin stock" (as defined in Regulation U) as collateral in the extension or maintenance of the credit provided for in this Agreement. SECTION 9.08. Governing Law; Submission to Jurisdiction. This Agreement and each Note shall be governed by and construed in accordance with the laws of the State of New York. The Borrower hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrower irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 9.09. Counterparts; Integration; Effectiveness. This 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 Agreement constitutes the entire agreement and understanding among the parties hereto and supersedes any and all prior agreements and understandings, oral or written, relating to the subject matter hereof. This Agreement shall become effective upon receipt by the Agent of 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, receipt by the Agent in form satisfactory to it of telegraphic, telex, facsimile or other written confirmation from such party of execution of a counterpart hereof by such party). SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING 27009/039/CA/agt 53 ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 27009/039/CA/agt 54 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. OCEANEERING INTERNATIONAL, INC. By_ROBERT_P._MINGOIA_________ Title: Treasurer 16001 Park Ten Place, Suite 650 Houston, Texas 77084 Telex number: 775181 Telecopy number: (713) 578-5243 Commitments $ 30,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By_JAMES_S._FINCH____________ Title: Vice President $ 25,000,000 TEXAS COMMERCE BANK NATIONAL ASSOCIATION By_MONA_M._FOCH_____________ Title: Vice President $ 20,000,000 FIRST INTERSTATE BANK OF TEXAS, N.A. By_ANN_M._RHOADS_____________ Title: Vice President _________________ Total Commitments $75,000,000 ================= 27009/039/CA/agt 55 MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By______________________________ Title: 60 Wall Street New York, New York 10260 Telex number: 177615 Telecopy number: (212) 648-5014 27009/039/CA/agt 56 EXHIBIT A NOTE New York, New York , 19 For value received, OCEANEERING INTERNATIONAL, INC., a Delaware corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for the account of its Applicable Lending Office, the unpaid principal amount of each Loan made by the Bank to the Borrower pursuant to the Credit Agreement referred to below on the last day of the Interest Period relating to such Loan. The Borrower promises to pay interest on the unpaid principal amount of each such Loan on the dates and at the rate or rates provided for in the Credit Agreement. All such payments of principal and interest shall be made in lawful money of the United States in Federal or other immediately available funds at the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New York, New York. All Loans made by the Bank, the respective types and maturities thereof and all repayments of the principal thereof shall be recorded by the Bank and, if the Bank so elects in connection with any transfer or enforcement hereof, appropriate notations to evidence the foregoing information with respect to each such Loan then outstanding may be endorsed by the Bank on the schedule attached hereto, or on a continuation of such schedule attached to and made a part hereof; provided that the failure of the Bank to make any such recordation or endorsement shall not affect the obligations of the Borrower hereunder or under the Credit Agreement. This note is one of the Notes referred to in the Credit Agreement dated as of April 12, 1995 among the Borrower, the banks parties thereto and Morgan Guaranty Trust Company of New York, as Agent (as amended from time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are used herein with the same meanings. Reference is made to the Credit Agreement for provisions for the prepayment hereof and the acceleration of the maturity hereof. OCEANEERING INTERNATIONAL, INC. 27009/039/CA/agt By______________________________ Title: 27009/039/CA/agt 2 LOANS AND PAYMENTS OF PRINCIPAL __________________________________________________________________________ Type Amount of Amount of Principal Maturity Notation Date of Loan Loan Repaid Date Made By __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ 27009/039/CA/agt 3 EXHIBIT B-1 OPINION OF SPECIAL COUNSEL FOR THE BORROWER [Dated as provided in Section 3.01 of the Credit Agreement] To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260 Dear Sirs: We have acted as special counsel to Oceaneering International, Inc. (the "Borrower") in connection with the Credit Agreement (the "Credit Agreement") dated as of April 12, 1995 among the Borrower, the Banks (as defined therein) and Morgan Guaranty Trust Company of New York, as Agent, and are rendering this opinion pursuant to Section 3.01 of the Credit Agreement. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: [Provided separately] 27009/039/CA/agt EXHIBIT B-2 OPINION OF GENERAL COUNSEL OF THE BORROWER [Dated as provided in Section 3.01 of the Credit Agreement] To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260 Dear Sirs: I am General Counsel of Oceaneering International, Inc., a Delaware corporation (the "Borrower"), and am familiar with the Credit Agreement (the "Credit Agreement") dated as of April 12, 1995 among the Borrower, the Banks (as defined therein) and Morgan Guaranty Trust Company of New York, as Agent (the "Agent"). Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. I have examined originals or copies, certified or otherwise identified to my satisfaction, of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as I have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, I am of the opinion that: [Provided separately] 27009/039/CA/agt EXHIBIT C OPINION OF DAVIS POLK & WARDWELL, SPECIAL COUNSEL FOR THE AGENT [Dated as provided in Section 3.01 of the Credit Agreement] To the Banks and the Agent Referred to Below c/o Morgan Guaranty Trust Company of New York, as Agent 60 Wall Street New York, New York 10260 Dear Sirs: We have participated in the preparation of the Credit Agreement (the "Credit Agreement") dated as of April 12, 1995 among Oceaneering International, Inc., a Delaware corporation (the "Borrower"), the Banks (as defined therein) and Morgan Guaranty Trust Company of New York, as Agent (the "Agent"), and have acted as special counsel for the Agent for the purpose of rendering this opinion pursuant to Section 3.01(c) of the Credit Agreement. Terms defined in the Credit Agreement and not otherwise defined herein are used herein as therein defined. We have examined originals or copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates of such documents, corporate records, certificates of public officials and other instruments and have conducted such other investigations of fact and law as we have deemed necessary or advisable for purposes of this opinion. Upon the basis of the foregoing, we are of the opinion that: 1. The execution, delivery and performance by the Borrower of the Credit Agreement and the Notes are within 27009/039/CA/agt the Borrower's corporate powers and have been duly authorized by all necessary corporate action. 2. The Credit Agreement constitutes a valid and binding agreement of the Borrower and each Note constitutes a valid and binding obligation of the Borrower, in each case enforceable in accordance with its terms, except as the same may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and by general principles of equity. We are members of the Bar of the State of New York and the foregoing opinion is limited to the laws of the State of New York, the federal laws of the United States of America and the General Corporation Law of the State of Delaware. In giving the foregoing opinion, we express no opinion as to the effect (if any) of any law of any jurisdiction (except the State of New York) in which any Bank is located which limits the rate of interest that such Bank may charge or collect. This opinion is rendered solely to you in connection with the above matter. This opinion may not be relied upon by you for any other purpose or relied upon by any other person without our prior written consent. Very truly yours, 27009/039/CA/agt 2 EXHIBIT D EXTENSION AGREEMENT Oceaneering International, Inc. 16001 Park Ten Place, Suite 650 Houston, Texas 77084 Morgan Guaranty Trust Company of New York, as Agent under the Credit Agreement referred to below 60 Wall Street New York, NY 10260 Gentlemen: The undersigned hereby agree to extend, effective ___________, 1998, the Revolving Credit Period under the Credit Agreement dated as of April 12, 1995 among Oceaneering International, Inc. (the "Borrower"), the Banks parties thereto and Morgan Guaranty Trust Company of New York, as agent (the "Credit Agreement") for one year to April 12, 1999. Terms defined in the Credit Agreement are used herein as therein defined. This Extension Agreement shall be construed in accordance with and governed by the law of the State of New York. MORGAN GUARANTY TRUST COMPANY OF NEW YORK By __________________________ Title: 27009/039/CA/agt TEXAS COMMERCE BANK NATIONAL ASSOCIATION By __________________________ Title: FIRST INTERSTATE BANK OF TEXAS, N.A. By __________________________ Title: Agreed and accepted: OCEANEERING INTERNATIONAL, INC. By __________________________ Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By __________________________ Title: 27009/039/CA/agt 2 EXHIBIT E ASSIGNMENT AND ASSUMPTION AGREEMENT AGREEMENT dated as of _________, 19__ among (the "Assignor"), (the "Assignee"), OCEANEERING INTERNATIONAL, INC. (the "Borrower") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent"). WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates to the Credit Agreement dated as of April 12, 1995 among the Borrower, the Assignor and the other Banks party thereto, as Banks, and the Agent (the "Credit Agreement"); WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment to make Loans to the Borrower in an aggregate principal amount at any time outstanding not to exceed $__________; WHEREAS, Loans made to the Borrower by the Assignor under the Credit Agreement in the aggregate principal amount of $__________ are outstanding at the date hereof; and WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of the Assignor under the Credit Agreement in respect of a portion of its Commitment thereunder in an amount equal to $__________ (the "Assigned Amount"), together with a corresponding portion of its outstanding Loans, and the Assignee proposes to accept assignment of such rights and assume the corresponding obligations from the Assignor on such terms; NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein, the parties hereto agree as follows: SECTION 1. Definitions. All capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Credit Agreement. SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee all of the rights of the Assignor 27009/039/CA/agt under the Credit Agreement to the extent of the Assigned Amount, and the Assignee hereby accepts such assignment from the Assignor and assumes all of the obligations of the Assignor under the Credit Agreement to the extent of the Assigned Amount, including the purchase from the Assignor of the corresponding portion of the principal amount of the Loans made by the Assignor outstanding at the date hereof. Upon the execution and delivery hereof by the Assignor, the Assignee, the Borrower and the Agent and the payment of the amounts specified in Section 3 required to be paid on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights and be obligated to perform the obligations of a Bank under the Credit Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of the date hereof, be reduced by a like amount and the Assignor released from its obligations under the Credit Agreement to the extent such obligations have been assumed by the Assignee. The assignment provided for herein shall be without recourse to the Assignor. SECTION 3. Payments. As consideration for the assignment and sale contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the date hereof in Federal funds the amount heretofore agreed between them. It is understood that commitment and/or facility fees accrued to the date hereof are for the account of the Assignor and such fees accruing from and including the date hereof are for the account of the Assignee. Each of the Assignor and the Assignee hereby agrees that if it receives any amount under the Credit Agreement which is for the account of the other party hereto, it shall receive the same for the account of such other party to the extent of such other party's interest therein and shall promptly pay the same to such other party. SECTION 4. Consent of the Borrower and Acknowledgement of the Agent. This Agreement is conditioned upon the consent of the Borrower and the acknowledgement of the Agent pursuant to Section 9.06(c) of the Credit Agreement. The execution of this Agreement by the Borrower and the Agent is evidence of such consent and acknowledgement. Pursuant to Section 9.06(c), the Borrower agrees to execute and deliver a Note payable to the order of the Assignee to evidence the assignment and assumption provided for herein. 27009/039/CA/agt 2 SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or warranty in connection with, and shall have no responsibility with respect to, the solvency, financial condition, or statements of the Borrower, or the validity and enforceability of the obligations of the Borrower in respect of the Credit Agreement or any Note. The Assignee acknowledges that it has, independently and without reliance on the Assignor, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement and will continue to be responsible for making its own independent appraisal of the business, affairs and financial condition of the Borrower. SECTION 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. SECTION 7. Counterparts. This 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. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed and delivered by their duly authorized officers as of the date first above written. By_________________________ Name: Title: By__________________________ Name: Title: 27009/039/CA/agt 3 OCEANEERING INTERNATIONAL, INC. By__________________________ Name: Title: MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By__________________________ Name: Title: 27009/039/CA/agt 4 EX-10.08 3 EXHIBIT 10.08 OCEANEERING INTERNATIONAL, INC. EXECUTIVE RETIREMENT PLAN (As Amended and Restated Effective February 1, 1993) OCEANEERING INTERNATIONAL, INC. EXECUTIVE RETIREMENT PLAN (As Amended and Restated Effective February 1, 1993) I N D E X Page ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . 2 Section: 1.1 Account . . . . . . . . . . . . . . . . . . . 2 1.2 Affiliate . . . . . . . . . . . . . . . . . . 2 1.3 Beneficiary . . . . . . . . . . . . . . . . . 2 1.4 Code . . . . . . . . . . . . . . . . . . . . . 2 1.5 Committee . . . . . . . . . . . . . . . . . . 2 1.6 Company . . . . . . . . . . . . . . . . . . . 2 1.7 Company Matching Account . . . . . . . . . . . 2 1.8 Company Matching Contribution . . . . . . . . 2 1.9 Compensation . . . . . . . . . . . . . . . . . 2 1.10 Contribution . . . . . . . . . . . . . . . . . 2 1.11 Contribution Percentage . . . . . . . . . . . 3 1.12 Deferred Company Contribution . . . . . . . . 3 1.13 Employee Contribution Account . . . . . . . . 3 1.14 Employee Contributions . . . . . . . . . . . . 3 1.15 ERISA . . . . . . . . . . . . . . . . . . . . 3 1.16 Effective Date . . . . . . . . . . . . . . . . 3 1.17 Employee . . . . . . . . . . . . . . . . . . . 3 1.18 Employer . . . . . . . . . . . . . . . . . . . 3 1.19 Entry Date . . . . . . . . . . . . . . . . . . 3 1.20 Fiduciaries . . . . . . . . . . . . . . . . . 3 1.21 Income of the Investment Accounts . . . . . . 3 1.22 Investment Account(s) . . . . . . . . . . . . 3 1.23 Investment Fund . . . . . . . . . . . . . . . 3 1.24 Investment Manager . . . . . . . . . . . . . . 4 1.25 Participant . . . . . . . . . . . . . . . . . 4 1.26 Participation . . . . . . . . . . . . . . . . 4 1.27 Participation Year . . . . . . . . . . . . . . 4 1.28 Plan . . . . . . . . . . . . . . . . . . . . . 4 1.29 Plan Year . . . . . . . . . . . . . . . . . . 4 1.30 Retirement Date . . . . . . . . . . . . . . . 4 1.31 Service . . . . . . . . . . . . . . . . . . . 4 1.32 Valuation Date . . . . . . . . . . . . . . . . 4 ARTICLE II ADMINISTRATION OF THE PLAN . . . . . . . . . . 5 Section: 2.1 Appointment of Committee . . . . . . . . . . . 5 2.2 Records of Committee . . . . . . . . . . . . . 5 2.3 Committee Action . . . . . . . . . . . . . . . 5 2.4 Committee Disqualification . . . . . . . . . . 5 2.5 Committee Compensation, Expenses and Advisers 5 (i) Page 2.6 Committee Liability . . . . . . . . . . . . . 5 2.7 Committee Determinations . . . . . . . . . . . 6 2.8 Information from Employer . . . . . . . . . . 6 2.9 General Powers of Committee . . . . . . . . . 6 2.10 Uniform Administration . . . . . . . . . . . . 7 2.11 Reporting Responsibilities . . . . . . . . . . 7 2.12 Disclosure Responsibilities . . . . . . . . . 7 2.13 Participant Statements . . . . . . . . . . . . 7 2.14 Allocation of Responsibility Among Fiduciaries for Plan Administration . . . . . . . . . . . . . . 7 2.15 Presenting Claims for Benefits . . . . . . . . 8 2.16 Claims Review Procedure . . . . . . . . . . . 9 2.17 Disputed Benefits . . . . . . . . . . . . . . 9 ARTICLE III PARTICIPATION AND SERVICE . . . . . . . . . . 10 Section: 3.1 Participation . . . . . . . . . . . . . . . . 10 3.2 Participants to Furnish Required Information . 10 3.3 Participation Service . . . . . . . . . . . . 10 3.4 Participation Upon Re-Employment . . . . . . . 10 3.5 Transferred or Ineligible Participants . . . . 10 ARTICLE IV CONTRIBUTIONS AND FORFEITURES . . . . . . . . 11 Section: 4.1 Deferred Company Contributions . . . . . . . . 11 4.2 Company Matching Contributions . . . . . . . . 11 4.3 Employee Contributions . . . . . . . . . . . . 12 4.4 Funding Policy . . . . . . . . . . . . . . . . 13 4.5 Special One-Time Vesting . . . . . . . . . . . 13 4.6 Special One-Time Employee and Deferred Company Contributions . . . . . . . . . . . . . . . 13 ARTICLE V ACCOUNTS OF PARTICIPANTS . . . . . . . . . . . 14 Section: 5.1 Individual Accounts . . . . . . . . . . . . . 14 5.2 Account Adjustments . . . . . . . . . . . . . 14 5.3 Valuation of Investment Accounts . . . . . . . 14 5.4 Recognition of Different Investment Funds . . 14 ARTICLE VI PARTICIPANTS' BENEFITS . . . . . . . . . . . . 15 Section: 6.1 Retirement of Participant on or After Retirement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 6.2 Disability of Participant . . . . . . . . . . 15 6.3 Death of Participant . . . . . . . . . . . . . 15 6.4 Other Termination of Service . . . . . . . . . 15 6.5 Beneficiaries in the Event of Death . . . . . 16 6.6 Qualified Election . . . . . . . . . . . . . . 16 (ii) Page 6.7 Valuation Dates Determinative of Participants' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 6.8 Loans and Withdrawals . . . . . . . . . . . . 17 6.9 Tax Payments . . . . . . . . . . . . . . . . . 17 6.10 Cessation of Deferred Company Contributions and Company Matching Contributions and Tax Payment 17 ARTICLE VII PAYMENT OF BENEFITS . . . . . . . . . . . . . 18 ARTICLE VIII INVESTMENT OF ACCOUNTS . . . . . . . . . 19 Section: 8.1 Investment Accounts . . . . . . . . . . . . . 19 8.2 Investment Manager . . . . . . . . . . . . . . 19 8.3 Investment Directions of Participants . . . . 19 8.4 Change of Investment Directions . . . . . . . 19 8.5 Benefits Provided Solely From Individual Accounts . 20 ARTICLE IX ADOPTION OF PLAN BY OTHER ORGANIZATIONS; AMENDMENT AND TERMINATION OF THE PLAN; DISCONTINUANCE OF CONTRIBUTIONS TO THE INVESTMENT ACCOUNTS . . . . . . . . . . . . . 21 Section: 9.1 Procedure for Adoption . . . . . . . . . . . . 21 9.2 Effect of Adoption . . . . . . . . . . . . . . 21 9.3 Amendment . . . . . . . . . . . . . . . . . . 21 9.4 Acceptance or Rejection of Amendment by Employers . 22 9.5 Termination . . . . . . . . . . . . . . . . . 22 (iii) Page 9.6 Liquidation and Distribution of Investment Accounts Upon Termination . . . . . . . . . . . . . . . . 22 9.7 Effect of Termination or Discontinuance of Company Matching Contributions . . . . . . . . . . . . . . . 22 9.8 Merger of Plan . . . . . . . . . . . . . . . . 23 ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . 24 Section: 10.1 Terms of Employment . . . . . . . . . . . . . 24 10.2 Controlling Law . . . . . . . . . . . . . . . 24 10.3 Invalidity of Particular Provisions . . . . . 24 10.4 Non-Alienability of Rights of Participants . . 24 10.5 Payments in Satisfaction of Claims of Participants . . . . . . . . . . . . . . . . . . . . . . . . 24 10.6 Impossibility of Diversion of Investment Accounts . 24 (iv) OCEANEERING INTERNATIONAL, INC. EXECUTIVE RETIREMENT PLAN (As Amended and Restated Effective February 1, 1993) Effective as of February 1, 1989, the Board of Directors of Oceaneering International, Inc., a Delaware corporation (the "Company"), authorized the adoption of a non-qualified profit-sharing plan, in the form of the Oceaneering International, Inc. Executive Retirement Plan (the "Prior Plan") for the benefit of a select group of management or highly compensated employees to provide retirement income and to promote the best interests of the Company by attracting and retaining desirable employees. The Board of Directors of the Company also authorized the establishment of individual secular trusts effective February 1, 1989, among the Company, each of the employees eligible to participate in the Prior Plan, D. Michael Hughes and George R. Haubenreich, Jr., as Trustees (the "Trust Agreements"). The Trust Agreements were intended to constitute a part of the Prior Plan. Effective February 1, 1993, the Board of Directors has authorized the amendment, restatement and continuation of the Prior Plan in the form of this Plan (the "Plan") and the termination of the Trust Agreements. The Plan is not intended to qualify under Sections 401 and 501 of the Internal Revenue Code of 1986, as amended from time to time, but is, however, intended to meet the applicable requirements of the Employee Retirement Income Security Act of 1974, as amended from time to time. NOW, THEREFORE, the Company hereby amends, restates and continues the Oceaneering International, Inc. Executive Retirement Plan, which shall read as follows: -1- ARTICLE I DEFINITIONS As used in this Plan, the following words and phrases shall have the following meanings unless the context clearly requires a different meaning: 1.1 Account: The accounts maintained for a Participant pursuant to Section 5.1. 1.2 Affiliate: A corporation or other trade or business which is not an Employer under this Plan but which, together with an Employer, is "under common control" within the meaning of Sections 414(b) and (c) of the Code, as modified by Section 415(h) of the Code. 1.3 Beneficiary: A Participant's spouse, or such other natural person or persons, or the trustee of an inter vivos trust for the benefit of natural persons, entitled to receive a Participant's death benefits, as provided in Section 6.5 hereof. 1.4 Code: The Internal Revenue Code of 1986, as amended from time to time. 1.5 Committee: The Compensation Committee appointed by the Board of Directors of the Company to act as administrator of this Plan and to perform the duties described in Article II hereof. 1.6 Company: Oceaneering International, Inc., a Delaware corporation. 1.7 Company Matching Account: The separate account maintained for a Participant to record his share of Company Matching Contributions, and the investment thereof. 1.8 Company Matching Contribution: The amount of cash contributed by the Employer to the Investment Accounts as a Company Matching Contribution, pursuant to Section 4.2. 1.9 Compensation: The base salary paid to a Participant by an Employer for personal services rendered, not including incentive compensation, bonuses, any other item of special compensation, any Company Matching Contributions to this Plan or any Employer or Affiliate contributions to any other pension, profit-sharing or welfare plan. For the purpose of determining the amount of such Compensation, the books and records of the Employer shall be conclusive. 1.10 Contribution: Any amount contributed to the Investment Accounts pursuant to the provisions of this Plan, whether incident to the original adoption of this Plan, or at any time -2- subsequent thereto, by the Employer to the extent of profits or by a Participant out of his Compensation. 1.11 Contribution Percentage: The percentage applied to Deferred Company Contributions pursuant to Section 4.2. 1.12 Deferred Company Contribution: The contingent amount accrued on the books of the Company or an Employer for purposes of this Plan, but subject to all the terms and restrictions hereof, pursuant to Section 4.1. 1.13 Employee Contribution Account: The separate account maintained for a Participant to record his Contributions to the Plan and the investment thereof. 1.14 Employee Contributions: The amount contributed by a Participant out of his Compensation pursuant to Section 4.3. 1.15 ERISA: Public Law No. 93-406, the Employee Retirement Income Security Act of 1974, as amended from time to time. 1.16 Effective Date: February 1, 1993. 1.17 Employee: Any person employed by the Employer, including all directors and officers of the Employer except any such person who is not regularly and principally employed by such Employer. 1.18 Employer: The Company and any eligible organization that shall adopt this Plan pursuant to the provisions of Article IX, and the successors, if any, to such organization. 1.19 Entry Date: The first day of each calendar month during the Plan Year. 1.20 Fiduciaries: The Employer, the Committee and the Investment Manager, but only with respect to the specific responsibilities of each for Plan administration, all as described in Section 2.14 hereof. Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan. 1.21 Income of the Investment Accounts: The net gain or loss of the Investment Accounts from investments, as reflected by interest payments, dividends, realized and unrealized gains and losses on securities and other investment transactions and expenses paid from the Investment Accounts. 1.22 Investment Account(s): All Contributions of Employers and Participants, together with all income, profits or increments thereon which are deposited in separate investment accounts for -3- each Participant with the Investment Manager in the name of each Participant as described in Section 8.1 hereof. 1.23 Investment Fund: The mutual funds offered by the Investment Manager as described in Section 8.1 hereof. 1.24 Investment Manager: The investment manager or managers authorized to manage the assets of the Investment Funds in accordance with the terms of the Plan pursuant to Section 8.2 hereof. 1.25 Participant: An eligible Employee who, pursuant to the provisions of Article III hereof, is participating in the Plan. 1.26 Participation: The period commencing as of the date the Employee becomes a Participant and ending on the last day of the pay period during which his termination of Service occurs. 1.27 Participation Year: A twelve (12) consecutive month period commencing on the Participant's Entry Date or on any anniversary of such Entry Date. 1.28 Plan: The Oceaneering International, Inc. Executive Retirement Plan set forth herein, a non-qualified profit-sharing plan, as amended from time to time. 1.29 Plan Year: The calendar year commencing January 1 and ending December 31. 1.30 Retirement Date: The first day of the calendar month coincident with or next following the sixty-fifth (65th) birthday of a Participant. 1.31 Service: A Participant's employment with Employers and Affiliates. 1.32 Valuation Date: The last business day of each calendar quarter during the Plan Year or any other date on which a special valuation is made pursuant to Section 5.3. Words used in this Plan in the singular shall include the plural and in the plural the singular, and the gender of words used shall be construed to include whichever may be appropriate under any particular circumstances. -4- ARTICLE II ADMINISTRATION OF THE PLAN 2.1 Appointment of Committee: The Board of Directors of the Company (the "Board of Directors") shall appoint a Compensation Committee (the "Committee") of not less than three (3) persons, who may be Employees of the Company or an Affiliate, to perform the administrative duties set forth herein. The Committee shall be the administrator of the Plan. Each member of the Committee shall serve for such term as the Board of Directors may designate or until his death, resignation or removal by the Board of Directors. The Board of Directors shall promptly appoint successors to fill any vacancies in the Committee. 2.2 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 may be required by ERISA. 2.3 Committee Action: The Committee may act through the concurrence of a majority of its members expressed either at a meeting of the Committee, or in writing without a meeting. Concurrence of a member of the Committee may be by telegram or letter. Any member of the Committee, or the Secretary of the Committee (who need not be a member of the Committee), may execute on behalf of the Committee any certificate or other written instrument evidencing or carrying out any action approved by the Committee. The Committee may delegate any of its rights, powers and duties to any one or more of its members. 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. 2.4 Committee Disqualification: A member of the Committee who may be a Participant shall not vote on any question relating specifically to himself. 2.5 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 Investment Manager 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. 2.6 Committee Liability: Except to the extent that such liability is created by ERISA, no member of the Committee shall -5- 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 arising from any act or omission of such member in connection with duties and responsibilities under the Plan, except when the same is judicially determined to be due to the gross negligence or willful misconduct of such member or as prohibited by law. 2.7 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 Compensation of Participants; (b) To notify the Investment Manager of a Participant's termination of Service; (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. 2.8 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 or other cause for termination of employment, and such other pertinent facts as the Committee may require; and the Committee shall advise the Investment Manager of such of the foregoing facts as may be -6- pertinent to the Investment Manger's administration of the Investment Accounts. 2.9 General Powers of Committee: In addition to all other powers herein granted, and in general consistent with the provisions hereof, the Committee shall have all other rights and powers reasonably necessary to supervise and control the administration of this Plan. The determination of any fact by the Committee and the construction placed by the Committee upon the provisions of this Plan shall be binding upon all of the Participants under this Plan, their Beneficiaries and the Employers. 2.10 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. 2.11 Reporting Responsibilities: As Administrator of the Plan, 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 or the Code, including, but not limited to, annual reports and amendments thereof to be filed with the Department of Labor. 2.12 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. 2.13 Participant Statements: As soon as practicable after each Valuation Date, the Investment Manager shall cause a written statement to be prepared and delivered to each Participant reflecting as of that Valuation Date: (a) The balance in his Account as of the preceding Valuation Date; (b) The amount of any Company Matching Contributions and Employee Contributions allocated to his Account for the period ending on such Valuation Date; -7- (c) The adjustments to his Account to reflect Income of the Investment Accounts, expenses of the Investment Accounts and withdrawals from the Investment Accounts, if any, during the period ending on such Valuation Date; and (d) The new balance in his Account as of that Valuation Date. 2.14 Allocation of Responsibility Among Fiduciaries for Plan Administration: The Fiduciaries shall have only those specific powers, duties, responsibilities and obligations as are specifically given them under this Plan. In general, the Employer shall have the sole responsibility for making the Contributions provided for under Sections 4.1, 4.2 and 4.3. The Company shall have the sole authority to appoint and remove the Investment Manager. The Company may amend or terminate this Plan in whole or in part, and each other Employer may amend or terminate this Plan with respect to its Employees to the extent provided in Article IX. The Committee shall have the sole responsibility for the administration of the Plan, and the Board of Directors shall have sole authority to appoint and remove members of the Committee. Each Fiduciary warrants that any directions given, information furnished, or action taken by it shall be in accordance with the provisions of the Plan, 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, and is not required under this Plan to inquire into the propriety of any such direction, information or action. It is intended under this Plan that each Fiduciary shall be responsible for the proper exercise of its own powers, duties, responsibilities and obligations under this Plan and shall not be responsible for any act or failure to act of another Fiduciary. No Fiduciary guarantees the Investment Accounts in any manner against investment loss or depreciation in asset value. 2.15 Presenting Claims for Benefits: Any Participant or the Beneficiary of any deceased Participant may submit written application to the Committee regarding 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 Beneficiary involved is entitled to a benefit hereunder and, if so, the nature thereof and shall notify the applicant of its findings. If a claim is wholly or partially denied, the Committee shall so notify the applicant within ninety (90) days after receipt of the application by the Committee, unless special -8- circumstances require an extension of time for processing the application. If such an extension of time for processing is required, written notice of the extension shall be furnished to the applicant prior to the end of the initial ninety (90) day period. In no event shall such extension exceed a period of ninety (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 applicant 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 applicant 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 2.16 hereof. 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 2.16. 2.16 Claims Review Procedure: If an application filed by a Participant or Beneficiary under Section 2.15 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 request filed with the Committee within sixty (60) days after receipt of notice of the denial of his application or, if no such notice has been given, within sixty (60) days after the application is deemed denied under Section 2.15, for the review of his application and of his entitlement to the benefit for which he applied. Such request for review may contain such additional information and comments as the applicant may wish to present. Within sixty (60) days after receipt of any such request for review, the Committee shall reconsider the application 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 -9- 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 sixty (60) days after receipt of the aforesaid request for review, except that under special circumstances, such as the necessity for holding a hearing, such sixty (60) day period may be extended to the extent necessary, but in no event beyond the expiration of one hundred twenty (120) days after receipt by the Committee of such request. 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 prior to the commencement of the extension. Notice of such final determination of the Committee 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. 2.17 Disputed Benefits: If any dispute still exists between a Participant or a Beneficiary and the Committee after a review of the claim or in the event any uncertainty shall develop as to the person to whom payment of any benefit hereunder shall be made, the Investment Manager may withhold the payment of all or any part of the benefits payable hereunder to the Participant or Beneficiary until such dispute has been resolved by a court of competent jurisdiction or settled by the parties involved. -10- ARTICLE III PARTICIPATION AND SERVICE 3.1 Participation: Certain key management Employees and executives of the Company, who shall be nominated by the Chief Executive Officer of the Company and approved by the Committee, shall be eligible to commence participation in the Plan as of the Effective Date or the next following Entry Date, if their eligibility to participate is approved by the Committee after the Effective Date. An Employee who chooses not to participate in the Plan when he first becomes eligible, by failing to authorize Employee Contributions and to complete such other enrollment actions as the Committee shall require, may commence participation only if he is subsequently offered another opportunity to participate by the Committee. The Committee may declare a Participant to be ineligible for further participation in the Plan at any time. In no event shall eligibility to participate in the Plan be determined with reference to any minimum or maximum age or upon completion of any minimum period of Service. Notwithstanding any provision of this Plan to the contrary, for purposes of eligibility to participate in this Plan, the term "Employee" shall not include any individuals who are "leased employees" as defined in Section 414(n) of the Code or who are compensated on an hourly basis. 3.2 Participants to Furnish Required Information: Each Participant shall furnish the Committee such information as the Committee may consider to be necessary or desirable in administering the Plan in such form as may be prescribed by the Committee. 3.3 Participation Service: For purposes of determining the Contribution Percentage applicable to a Participant under Article IV, such Participant shall be credited with one (1) year of Participation Service for each Participation Year throughout which such Participant is continuously employed by Employers and Affiliates and during which such Participant has not been declared ineligible for further participation in the Plan. 3.4 Participation Upon Re-Employment: Upon the employment by an Employer of any person who had previously been employed by an Employer on or after the Effective Date, whether or not such person was previously a Participant, such person shall be treated as a new Employee and, as such, only eligible to participate pursuant to Section 3.1. 3.5 Transferred or Ineligible Participants: If a Participant is transferred from an Employer to an Affiliate, or if the Committee declares him ineligible for further -11- participation in the Plan, his participation shall be suspended until he again becomes eligible to participate pursuant to Section 3.1. During such suspension or ineligibility, the Participant shall not be entitled to make Employee Contributions and no Company Matching Contributions shall be made to his Company Matching Account. -12- ARTICLE IV CONTRIBUTIONS AND FORFEITURES 4.1 Deferred Company Contributions: The Committee shall determine, with respect to each Participant, the appropriate rate, not to exceed one hundred percent (100%), at which Deferred Company Contributions are to match Employee Contributions made by such Participant in accordance with Section 4.3. As the Participant makes Employee Contributions for a Participation Year, the Employer shall accrue on its books Deferred Company Contributions in the name of the Participant for that Participation Year at such appropriate rate. No Participant has any interest in or claim to a Deferred Company Contribution. Deferred Company Contributions accrued in the name of a Participant for a Participation Year shall be adjusted to reflect the investment performance that would have resulted if such contributions had been invested in an Investment Fund selected by the Participant under Section 8.3 and shall be reduced to reflect any Company Matching Contributions made with respect to such Deferred Company Contributions. 4.2 Company Matching Contributions: Until the applicable Contribution Percentage becomes one hundred percent (100%), the Employer shall contribute Company Matching Contributions for a Participation Year to a Participant's Company Matching Account, unless participation is suspended pursuant to Section 3.5, as of the last day of the Participation Year. The amount of Company Matching Contributions to be contributed for the Participation Year then ended shall be determined as follows: Step 1. Separately for the Participation Year then ended and each previous Participation Year - to the amount of adjusted Deferred Company Contributions accrued in the name of the Participant for the particular Participation Year, add all Company Matching Contributions previously made with respect to the Deferred Company Contributions accrued in the name of the Participant for the particular Participation Year. Step 2. Multiply each sum obtained in Step 1 by the Contribution Percentage determined in accordance with the following schedule based on the Participant's then full Years of Participation Service: -13- Contribution Years of Participation Service Percentage Less than 1 year 0% At least 1 year but less than 2 25% At least 2 years but less than 3 50% At least 3 years but less than 4 75% 4 years or more 100% Step 3. Determine the amount, if any, by which each product obtained in Step 2 exceeds the sum of all Company Matching Contributions previously made with respect to the Deferred Company Contributions accrued in the name of the Participant for the particular Participation Year. Step 4. The amount of Company Matching Contributions to be contributed for the Participation Year then ended shall be equal to the sum of the excess amounts determined in Step 3. Once the applicable Contribution Percentage becomes one hundred percent (100%), Company Matching Contributions shall be made at the time Deferred Company Contributions accrue. Each Participant's Company Matching Account shall be fully vested and non-forfeitable at all times. Company Matching Contributions may, at the Participant's election, be contributed "net of taxes," by directing the Employer on the form specified by the Committee to contribute the specified amount after reduction for applicable tax withholding, or "gross of taxes," by directing the Employer on said form to contribute the specified amount without such reduction and to apply the applicable tax withholding against other amounts paid by the Employer to the Participant. In either event, however, the Participant shall be subject to any liability for taxes (including federal income taxes) arising with respect to Company Matching Contributions made to his Company Matching Account. 4.3 Employee Contributions: Each Participant may elect to make an Employee Contribution in any whole percentage of Compensation up to his individual maximum percentage, such percentage to be determined annually by the Committee. No Employee Contribution shall be made with respect to any period during which participation in the Plan is suspended pursuant to Section 3.5. Each Participant's Employee Contribution shall be effected by payroll deduction and shall be contributed to the Investment Accounts by the Employer at periods of time determined by the Employer beginning on or after the Effective Date, except that (a) Employees who become Participants as of the Effective Date may make a single Employee Contribution by check for the -14- amount that would have been contributed by payroll deduction for the period from the Effective Date to the date the Participant's election is received by the Committee and (b) Employees who become Participants after the Effective Date may, at the discretion of the Committee, make a one-time only Employee Contribution by check in an amount permitted by the Committee. Each Participant's Employee Contribution Account shall be fully vested and non-forfeitable at all times. A Participant may change the amount of his Employee Contribution (not to exceed his individual maximum percentage) as of March 1 of any Plan Year by directing the Committee in writing at least fifteen (15) days prior to such date to change the rate of the Contribution. In the event of a voluntary suspension of Employee Contributions by the Participant at any time during the Plan Year, the Participant may not resume making Employee Contributions until the March 1 following the expiration of one (1) year from the date of suspension. 4.4 Funding Policy: The provisions of this Article IV shall be deemed the procedure for establishing and carrying out the funding policy and method of the Plan. Such funding policy and method shall be administered by the Employer and other Fiduciaries consistent with the objectives of the Plan and with the applicable requirements of Title I of ERISA. 4.5 Special One-Time Vesting: All Participants shall be one hundred percent (100%) vested in their existing Deferred Company Contributions on January 31, 1993. All future Company contributions shall be subject to the provisions in Sections 4.1 and 4.2. 4.6 Special One-Time Employee and Deferred Company Contributions: An Employee who first becomes a Participant in this Plan in February 1993 shall be eligible to make a one-time lump-sum Employee Contribution in an amount equal to ten percent (10%) of his Compensation. The contributions in this Section 4.6 shall be subject to the other provisions of this Article IV. -15- ARTICLE V ACCOUNTS OF PARTICIPANTS 5.1 Individual Accounts: The Committee shall create and maintain adequate records to disclose the interest in the Plan of each Participant, former Participant and Beneficiary. Such records shall be in the form of individual accounts maintained by the Investment Manager and credits and charges shall be made to such accounts in the manner herein described. Each Participant shall have two separate accounts, a Company Matching Account and an Employee Contribution Account (collectively an "Account"). Distributions and withdrawals made from an Account shall be charged to the Account as of the date paid. 5.2 Account Adjustments: The Accounts of Participants, former Participants and Beneficiaries may be adjusted as of any Valuation Date to reflect Income of the Investment Accounts, Company Matching Contributions and Employee Contributions for each Account. 5.3 Valuation of Investment Accounts: A valuation of the Investment Accounts shall be made as of each Valuation Date and as of such other special Valuation Dates as may be specified by the Committee. Each valuation shall be based on the fair market value of assets in the Investment Accounts at the end of the day on the Valuation Date. For the purposes of each such valuation, the assets of the Investment Accounts shall be valued at their respective current market values. 5.4 Recognition of Different Investment Funds: As provided in Article VIII, specific Investment Funds shall be established and each Participant shall direct, within the limitations set forth in Section 8.3, the proportion of the balance in his Company Matching Account and Employee Contribution Account that shall be deposited in each specific Investment Fund. Consequently, when appropriate, a Participant shall have a Company Matching Account and an Employee Contribution Account in each such Investment Fund and the allocations described in Section 5.2 shall be adjusted in such manner as is appropriate to recognize the existence of Investment Funds. Because Participants have a choice of Investment Funds, any reference in this Plan to an Account shall be deemed to mean and include all accounts of a like nature which are maintained for the Participant under each Investment Fund. -16- ARTICLE VI PARTICIPANTS' BENEFITS 6.1 Retirement of Participant on or After Retirement Date: In the event a Participant's Service terminates on or after his Retirement Date, the Employer shall promptly make a special Company Matching Contribution to the Participant's Company Matching Account in an amount equal to any adjusted Deferred Company Contributions which are then shown as accrued on the Employer's books with respect to the Participant. Thereafter, the Participant shall be entitled to a distribution of his Account in accordance with Article VII. 6.2 Disability of Participant: If the Committee shall find and advise the Investment Manager that the Service of a Participant has been terminated because of total and permanent physical or mental disability, which in the judgment of the Committee, based upon advice of competent physicians of their selection, will permanently prevent such Participant from resuming his Service with an Employer, the Employer shall promptly make a special Company Matching Contribution to the Participant's Company Matching Account in an amount equal to any adjusted Deferred Company Contributions which are then shown as accrued on the Employer's books with respect to the Participant. Thereafter, the Participant shall be entitled to a distribution of his Account in accordance with Article VII. 6.3 Death of Participant: In the event of the Participant's death, and after receipt by the Committee of acceptable proof of death, the Employer shall promptly make a special Company Matching Contribution to the Participant's Company Matching Account in an amount equal to any adjusted Deferred Company Contributions which are then shown as accrued on the Employer's books with respect to the Participant. Thereafter, the Participant's Beneficiary (which, except as provided in Sections 6.5 and 6.6, shall be the Participant's surviving spouse) shall be entitled to a distribution of the Participant's Account in accordance with Article VII. 6.4 Other Termination of Service: (a) Standard Termination: Except as otherwise provided in Section 6.4(b), in the event a Participant's Service terminates under circumstances not described in Section 6.1, 6.2 or 6.3, the Employer shall promptly make a special Company Matching Contribution to the Participant's Company Matching Account in an amount determined in accordance with the first paragraph of Section 4.2, but with the phrase "Participation Year during which the Participant's Service terminates" substituted for the phrase -17- "Participation Year then ended" wherever the latter phrase appears in said paragraph. After such special Company Matching Contribution has been made, all adjusted Deferred Company Contributions which are then shown as accrued in the name of the Participant on the Employer's books shall be cancelled. Thereafter, the Participant shall be entitled to a distribution of his Account in accordance with Article VII. (b) Change in Control: Notwithstanding the foregoing, in the event of the insolvency or bankruptcy of the Company or in the event of a change in control of the Company, each Employer shall promptly make a special Company Matching Contribution to the Company Matching Account of each Participant for whom it is the Employer in an amount equal to any Deferred Company Contributions which are then shown as accrued on the Employer's books with respect to the Participant. A change of control shall only be deemed to have taken place if: (i) a third person, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, becomes the beneficial owner of shares of the Company having thirty percent (30%) 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, 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 or any successor to the Company. Without limiting the foregoing, no change of control shall be deemed to have taken place if a person or persons are appointed or elected as a member or members of the Board of Directors as a result of or in connection with a Transaction or other event unless items (i) or (ii) above shall also have occurred. 6.5 Beneficiaries in the Event of Death: Upon the death of a Participant, his Account shall be distributed to the Participant's surviving spouse, but if there is no surviving spouse, or if the surviving spouse has already consented by a qualified election pursuant to Section 6.6, to the Beneficiary or Beneficiaries designated by the Participant in a written designation filed with his Employer, or if no such designation shall have been so filed, to his estate. No designation of any Beneficiary other than the Participant's surviving spouse shall be effective unless in writing and received by the Participant's -18- Employer, and in no event shall it be effective as of the date prior to such receipt. 6.6 Qualified Election: The Participant's spouse may waive the right to the Participant's Account. The waiver must be in writing and the Participant's spouse must acknowledge the effect of the waiver. The spouse's consent to a waiver must be witnessed by a Plan representative or a notary public. The Participant may file a waiver without the spouse's consent if it is established to the satisfaction of the Committee that such written consent may not be obtained because there is no spouse or the spouse may not be located. Any consent under this Section 6.6 will be valid only with respect to the spouse who signs the consent. Additionally, a revocation of a prior waiver may be made by a Participant without the consent of the spouse at any time before the distribution of the Account. The number of revocations shall not be limited. 6.7 Valuation Dates Determinative of Participants' Rights: If it should be necessary to value a Participant's Account upon his termination of Service, such value shall be determined as of the Valuation Date coinciding with or next following the termination of his Service. The distribution of such Participant's Account shall be determined in the manner set forth in Article VII. 6.8 Loans and Withdrawals: No loans or withdrawals are permitted under the Plan. 6.9 Tax Payments: As of the end of each Plan Year during the period of Participation, the Company or an Employer will make a cash payment to each Participant in an amount determined by the Committee, which amount will be sufficient to pay such Participant's federal income tax liability (assuming the highest rates of federal income tax applicable to any individual taxpayer in the year in which such payment is due) with respect to (i) earnings, if any, on the Participant's Employee Contributions and Company Matching Contributions (other than earnings constituting capital gains occasioned by distributions at termination of Service under Article VII) and (ii) such cash payment. 6.10 Cessation of Deferred Company Contributions and Company Matching Contributions and Tax Payment: No tax payment will be paid and all Deferred Company Contributions and Company Matching Contributions shall cease if a Participant makes a deposit, withdrawal or an investment direction from his Investment Accounts with the Investment Manager inconsistent with the terms of this Plan; provided, however, that the Committee, at its sole discretion, may subsequently reinstate or make tax payments and/or Deferred Company Contributions and Company Matching Contributions to such a Participant. -19- -20- ARTICLE VII PAYMENT OF BENEFITS At the time that a Participant becomes entitled to a single-sum distribution of benefits under the terms of Section 6.1, 6.2 or 6.4, the Participant shall be given full authority as to the disposition of his Investment Account and the assets of the Investment Account shall henceforth be subject to the control and direction of such Participant. Notwithstanding the foregoing, the Committee shall direct the Investment Manager that upon a Participant's death, his Investment Account shall be paid within one year after the Participant's death to the Participant's Beneficiary in a single-sum distribution, subject to Sections 6.5 and 6.6 hereof. -21- ARTICLE VIII INVESTMENT OF ACCOUNTS 8.1 Investment Accounts: All contributions of Employers and Participants, together with all income, profits or increments thereon shall be deposited in separate investment accounts ("Investment Accounts") for each Participant with the Investment Manager in the name of each Participant. Contributions to a Participant's Investment Account shall be invested among the Investment Funds pursuant to the Participant's directions given in accordance with the provisions of Sections 8.3 and 8.4. Except as otherwise provided herein, interest, dividends and other income or profits and gains, without distinction between principle and income arising from an Investment Fund, shall be invested and reinvested in the Investment Fund in which they arise. A Participant may only invest his Investment Accounts in the Investment Funds designated by the Employer and offered by the Investment Manager to Participants in this Plan. Pending investment acquisitions in an Investment Fund, the Investment Manager may hold funds thereof uninvested, or in bank deposits, money-market investments, Treasury Bills, commercial paper or like holdings. 8.2 Investment Manager: The Committee shall appoint an Investment Manager or Managers to manage (including the power to acquire and dispose of) the assets of the Investment Funds in accordance with the terms of this Plan. 8.3 Investment Directions of Participants: Effective as of the Effective Date or any following Entry Date, each Participant may by written notice to the Investment Manager, in the form and manner prescribed by it or the Committee, direct that the total of the Contributions allocable to his Company Matching Account and Employee Contribution Account be invested in accordance with such percentages as he may designate among the Investment Funds. 8.4 Change of Investment Directions: Subject to any restrictions or conditions which may be established by the Investment Manager, a Participant may direct that the investment of the total, or any part thereof, of the existing account balances in his Company Matching Account and Employee Contribution Account be changed from one authorized Investment Fund to another authorized Investment Fund at any time by contacting the Investment Manager. During February of each Plan Year or within thirty (30) days after a new investment fund is offered by the Investment Manager to Participants in this Plan, each Participant may, by written notice to the Committee in the manner prescribed by it and subject to any restrictions or -22- conditions which may be established by the Committee, direct that the investment of all future contributions by and on behalf of the Participant be changed from one authorized Investment Fund to another authorized Investment Fund(s), effective as of the next following March 1 or on the first day of the month next following thirty (30) days after a new investment fund is offered by the Investment Manager to Participants in this Plan. 8.5 Benefits Provided Solely From Individual Accounts: All the benefits provided under Article VI hereof shall be paid or distributed by the Investment Manager out of the Participant's Investment Account with the Investment Manager. 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 Investment Account and to the adequacy thereof for the payment of benefits of any nature or kind which may at any time be payable hereunder. The Investment Manager is to look solely to the Participant for instructions as to prompt disbursement of his Account in accordance with Participant's instructions. -23- ARTICLE IX ADOPTION OF PLAN BY OTHER ORGANIZATIONS; AMENDMENT AND TERMINATION OF THE PLAN; DISCONTINUANCE OF CONTRIBUTIONS TO THE INVESTMENT ACCOUNTS 9.1 Procedure for Adoption: Any corporation or other organization which is or may become an Affiliate and which is not already an Employer under this Plan may, with the consent and approval of the Company, adopt the Plan by formal resolution or decision of its own board of directors or other governing authority, for all or any classification of persons in its employment, and thereby, from and after the specified effective date become an "Employer" as defined in this Plan. Such adoption shall be effected and evidenced by an adoptive instrument executed by the adopting Affiliate and consented to by the Company. The adoptive instrument may contain such specific changes and variations in Plan terms and provisions as may be acceptable to the Company. The adoptive instrument shall become, as to such adopting Affiliate and its employees, a part of this Plan as then amended. The effective date of the Plan for any such adopting Affiliate shall be that stated in the adoptive instrument, and from and after such effective date such adopting Affiliate shall assume all the rights, obligations and liabilities of an Employer hereunder. The administrative powers and control of the Company, as provided in the Plan, including the sole right of amendment, of appointment and removal of the Committee and the Investment Manager and their successors, shall not be diminished by reason of the participation of any Employer in the Plan. Any Employer may withdraw from the Plan at any time without affecting other Employers by complying with the provisions of the Plan. The Company may, in its absolute discretion, terminate an Employer's participation at any time when in its sole judgment such adopting Employer fails or refuses to discharge its obligations under the Plan. 9.2 Effect of Adoption: The following special provisions shall apply to all Employers: (a) An Employee shall be considered in continuous Service while regularly employed simultaneously or successively by one or more Employers. (b) The transfer of a Participant from one Employer to another or to an Affiliate shall not be deemed a termination of Service. 9.3 Amendment: The Company shall have the right to amend or modify this Plan 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 -24- authorized by the Board of Directors and executed by the Company. No such amendment or modification shall, however, increase the duties or responsibilities of the Investment Manager 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 Investment Accounts, 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 and the payment of expenses of the Plan. No amendment shall decrease the Account of any Participant. Notwithstanding anything herein to the contrary, the Plan may be amended in such manner as may be required at any time to make it conform to the requirements of any United States statutes with respect to the Investment Accounts, 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. 9.4 Acceptance or Rejection of Amendment by Employers: The Company shall promptly deliver to each other Employer any amendment to this Plan. Each such Employer will be deemed to have consented to such amendment unless it notifies the Company in writing within thirty (30) days after receipt of the amendment that it does not consent thereto. 9.5 Termination: The Company shall have the right to terminate this Plan at any time and from time to time to any extent that it may deem advisable. A termination of the Plan as to any particular Employer (and only as to any such particular Employer) shall occur under the following circumstances: (a) The Plan may be terminated by the delivery to the Investment Manager of an instrument in writing approved and authorized by the board of directors of such Employer. In such event, termination of the Plan shall be effective as of any subsequent day specified in such instrument. (b) The Plan shall terminate effective at the expiration of sixty (60) days following the merger or dissolution of any Employer, unless within such time a successor organization approved by the Company shall deliver to the Investment Manager a written instrument certifying that such organization (i) has become the Employer of more than fifty percent (50%) of those Employees of such Employer who are then Participants under this Plan and (ii) has adopted the Plan as to its Employees. 9.6 Liquidation and Distribution of Investment Accounts Upon Termination: In the event a termination of the Plan in respect of any Employer shall occur, a separation of and -25- withdrawal from the Investment Accounts in respect of the Participants of such Employer shall be made as of the effective date of such termination of the Plan. 9.7 Effect of Termination or Discontinuance of Company Matching Contributions: If any Employer shall completely discontinue its Company Matching Contributions to the Investment Accounts or suspend its Company Matching Contributions to the Investment Accounts under such circumstances as to constitute a complete discontinuance of Contributions within the purview of the reasoning of U.S. Treasury Regulations Sec. 1.401-6(c), then throughout any such period of discontinuance of Company Matching Contributions 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. 9.8 Merger of 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 Investment Accounts to a trust fund held under any other non-qualified plan of deferred compensation maintained or to be established for the benefit of all or some of the Participants of this Plan, the assets of the Investment Accounts applicable to such Participants shall be transferred to the 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); and (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. -26- ARTICLE X MISCELLANEOUS 10.1 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 any 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. 10.2 Controlling Law: Subject to the applicable provisions of ERISA, as the same may be amended from time to time, which may be applicable and provide to the contrary, this Plan shall be construed, regulated and administered under the laws of the State of Texas. 10.3 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. 10.4 Non-Alienability of Rights of Participants: No interest, right or claim in or to any part of an Investment Account or any payment therefrom shall be assignable, transferable, voluntary or involuntary by operation of law or otherwise, or subject to sale, mortgage, pledge, hypothecation, commutation, anticipation, garnishment, attachment, execution or levy of any kind, and the Investment Manager shall not recognize any attempt to assign, transfer, sell, mortgage, pledge, hypothecate, commute or anticipate the same, except to the extent required by law. 10.5 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 Employer. The Investment Manager may require that any distributee execute and deliver to the Investment Manager a receipt and a full and complete release as a condition precedent to any payment or distribution under the Plan. 10.6 Impossibility of Diversion of Investment Accounts: Notwithstanding any provision herein to the contrary, -27- no part of the corpus or the income of the Investment Accounts shall ever be used for or diverted to purposes other than for the exclusive benefit of the Participants or their Beneficiaries. No part of the Investment Accounts shall ever directly or indirectly revert to the Employer. -28- IN WITNESS WHEREOF, the Company 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 16th day of June, 1995, but effective as of February 1, 1993. OCEANEERING INTERNATIONAL, INC. By//s// George R. Haubenreich, Jr. ATTEST: //s// Sheila F. Jaynes THE STATE OF TEXAS COUNTY OF HARRIS BEFORE ME, the undersigned authority, on this day personally appeared George R. Haubenreich, Jr., Sheila F. Jaynes of OCEANEERING INTERNATIONAL, INC., known to me to be the persons and officers whose names are subscribed to the foregoing instrument, and acknowledged to me that they executed the same as the act of the said OCEANEERING INTERNATIONAL, INC., a corporation, and that they are duly authorized to perform the same and that they executed the same as the act and deed of said corporation for the purposes and consideration therein expressed and in the capacity therein stated. GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 6th day of June, 1995. //s// June M. Templet Notary Public, State of Texas -29- EX-10.16 4 EXHIBIT 10.16 March 31, 1995 Oceaneering International, Inc. 16001 Park Ten Place, Suite 600 Houston, Texas 77084 Attention: T. Jay Collins, Executive Vice President & Chief Financial Officer 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, 1996, 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. rew:atc oceaneering - 3/30/95 (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. rew:atc oceaneering - 3/30/95 2 (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 rew:atc oceaneering - 3/30/95 3 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 rew:atc oceaneering - 3/30/95 4 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 rew:atc oceaneering - 3/30/95 5 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 North America, Inc., Two Allen Center, 1200 Smith Street, Houston, Texas 77002. Yours very truly CITIBANK, N.A. By_MARK_J._LYONS____________________ Title_Vice President________________ Accepted and agreed to as of the date first stated above: OCEANEERING INTERNATIONAL, INC. By: ROBERT P. MINGOIA Title: Treasurer rew:atc oceaneering - 3/30/95 6 EXHIBIT A DEMAND PROMISSORY NOTE $20,000,000.00 March 31, 1995 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: rew:atc oceaneering - 3/30/95 "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 rew:atc oceaneering - 3/30/95 2 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. rew:atc oceaneering - 3/30/95 3 3. 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. 4. 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. 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 rew:atc oceaneering - 3/30/95 4 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. rew:atc oceaneering - 3/30/95 5 By: Title: rew:atc oceaneering - 3/30/95 6 TRANSACTIONS ON DEMAND PROMISSORY NOTE OF IN FAVOR OF CITIBANK, N.A. dated March 31, 1995 Amount of Borrowing Made This Interest Interest Amount of Notation Date Date Period Rate Payment Made By rew:atc oceaneering - 3/30/95 7 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. rew:atc oceaneering - 3/30/95 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). 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 rew:atc oceaneering - 3/30/95 2 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. rew:atc oceaneering - 3/30/95 3 EX-10.17 5 EXHIBIT 10.17 OCEANEERING INTERNATIONAL, INC. 1995 BONUS AWARD PLAN The 1995 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 1995 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 FY95 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 1995 Bonus Award Plan is in effect FY95. A similar plan may or may not be approved for FY96. It is extremely important that the Company continue improved results in FY95. 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 1995 Bonus Award Plan is structured to foster that position. June 16, 1994 EX-21 6 EXHIBIT 21 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 AS 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 EX-23 7 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 21, 1995 EX-24 8 EXHIBIT 24 POWER OF ATTORNEY WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("Act"), an Annual Report on Form 10-K for the fiscal year ended March 31, 1995 ("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, T. JAY COLLINS 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 17th day of February, 1995. //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, 1995 ("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, T. JAY COLLINS 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 17th day of February, 1995. //S// Gordon M. Anderson 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, 1995 ("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, T. JAY COLLINS 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 17th day of February, 1995. //S// John R. Huff POWER OF ATTORNEY WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware corporation ("Company"), intends to file with the Securities and Exchange Commission ("Commission") under the Securities Exchange Act of 1934, as amended ("Act"), an Annual Report on Form 10-K for the fiscal year ended March 31, 1995 ("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, T. JAY COLLINS 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 17th day of February, 1995. //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, 1995 ("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, T. JAY COLLINS 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 17th day of February, 1995. //S// Charles B. Evans EX-27 9
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 12-MOS MAR-31-1995 MAR-31-1995 12,865 0 59,598 1,238 0 75,838 228,870 134,515 187,752 52,732 9,472 6,004 0 0 99,136 187,752 239,936 239,936 190,772 190,772 0 0 695 12,510 7,014 5,496 0 0 0 5,496 .23 .23
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