FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number 1-10945
OCEANEERING INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2628227
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
16001 Park Ten Place, Suite 600
Houston, Texas 77084
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 578-8868
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $0.25 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X, No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes X, No .
Aggregate market value of the voting stock held by non-affiliates of the
registrant at May 31, 1996, based upon the closing sale price of the Common
Stock on the New York Stock Exchange $377,769,000
Number of shares of Common Stock outstanding at May 31, 1996 23,310,206
Documents Incorporated by Reference:
Portions of the proxy statement to be filed on or before July 29, 1996,
pursuant to Regulation 14A of the Securities and Exchange Act of 1934 to
the extent set forth in Part III, Items 10-13 of this report.
OCEANEERING INTERNATIONAL, INC.
Annual Report on Form 10-K
INDEX
PART I
Item 1 Business
Item 2 Properties
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of
Security Holders
Item 4a Executive Officers of the Registrant
PART II
Item 5 Market for the Registrant's Common Equity
and Related Shareholder Matters
Item 6 Selected Financial Data
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of Operations
* Item 8 Financial Statements and Supplementary Data
Item 9 Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure
PART III
Item 10 Directors and Executive Officers of the
Registrant
Item 11 Executive Compensation
Item 12 Security Ownership of Certain Beneficial
Owners and Management
Item 13 Certain Relationships and Related Transactions
PART IV
Item 14 Exhibits, Financial Statement Schedules
and Reports on Form 8-K
SIGNATURES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
* Refers the reader to Part IV, Item 14.
PART I
Item 1. BUSINESS.
General Development of Business
Oceaneering International, Inc., (together with its subsidiaries,
"Oceaneering" or the "Company") is an advanced applied technology company
that provides engineered services and hardware to customers who operate in
marine, space and other harsh environments. The Company supplies a
comprehensive range of integrated technical services to a wide array of
industries and is one of the world's largest underwater services
contractors. Principal services are provided to the oil and gas industry
and include drilling support, subsea construction, production systems,
facilities maintenance and repair, survey and positioning and specialized
onshore and offshore engineering and inspection. Oceaneering was organized
in 1969 out of the combination of three diving service companies founded in
the early 1960s. Since its establishment, the Company has concentrated on
the development and marketing of underwater services requiring the use of
advanced deepwater technology. The Company conducts operations in the
United States and 29 other countries. The Company's international
operations, principally in the North Sea, Africa, Far East and the Middle
East, accounted for approximately 58% of its 1996 revenues, or $167
million.
Since 1990, the Company has concentrated on expanding its capabilities to
provide technical solutions to customers operating in harsh environments.
It has accomplished this through acquisitions and internal growth.
In January 1990, the Company acquired all of the outstanding capital stock
of Sonsub Limited, a United Kingdom company, whose principal assets were
ten work class Remotely Operated Vehicles ("ROVs"). ROVs are unmanned
submersible vehicles operated from the surface that are used widely in the
offshore oil and gas industry.
In December 1990, the Company was awarded a contract by a major oil company
to provide and maintain a Floating Production, Storage and Offloading
system ("FPSO"). This represented the first major project for the
Company's Offshore Production Systems division ("OPS") which was formed to
develop economical production alternatives for offshore oil and gas fields.
A 78,000 deadweight ton ("dwt") tanker was purchased and converted into an
FPSO, the OCEAN PRODUCER, for this project. The unit was delivered to its
first location in December 1991 and is currently operating offshore Angola.
In August 1992, the Company acquired Eastport International, Inc.,
("Eastport"), a designer, developer and operator of advanced robotic
systems and ROVs specializing in the non-oilfield market, in a transaction
accounted for as a pooling of interests. All financial information herein
has been restated to include the results of Eastport from Eastport's
inception (June 21, 1989). Eastport's assets included two specialized
ROVs, one of which is rated for water depths to 25,000 feet, a deep tow
sonar system and two other work class ROVs.
In May 1993, the Company purchased the business and assets of the Space
Systems Division of ILC Dover, Inc., ("ILC") which were consolidated with
the Company's Oceaneering Space Systems division. This business designs,
develops and fabricates spacecraft hardware and high temperature insulation
products.
In July 1993, the Company purchased Oil Industry Engineering, Inc., a
designer and fabricator of subsea control systems, which now operates as
the Oceaneering Intervention Engineering division ("OIE"). In March 1994,
the Company purchased the operating subsidiaries of Multiflex International
Inc., a manufacturer of subsea control umbilical cables, which now operates
as the Oceaneering Multiflex division ("Multiflex"). Together with the
Company's existing OPS division, these acquisitions form the basis of the
Company's continuing expansion in the offshore field development business.
In November 1995, the Company was awarded a contract with a major oil
company for the provision of an FPSO. The Company is converting a 268,000
dwt tanker and the unit, the Company s second FPSO, the ZAFIRO PRODUCER, is
targeted for delivery to its first operational location offshore West
Africa in August 1996.
The Company intends to continue its strategy of acquiring, as opportunities
arise, additional assets or businesses, either directly through merger,
consolidation or purchase, or indirectly through joint ventures. The
Company is also applying its skills and technology in further developing
business unrelated to the oil and gas industry and performing services for
government agencies and firms in the telecommunications, aerospace, and
civil engineering and construction industries. The Company is continually
seeking opportunities for business combinations to improve its market
position or expand into related service lines.
Financial Information about Industry Segments
The Company's business segments are Oilfield Marine Services, Offshore
Field Development and Advanced Technologies. The table containing
revenues, operating income, identifiable assets, capital expenditures, and
depreciation and amortization by business segment for the years ended March
31, 1996, 1995 and 1994 is incorporated herein by reference from Note 6 of
the Notes to Consolidated Financial Statements.
Description of Business
OILFIELD MARINE SERVICES
The Company's Oilfield Marine Services business consists of underwater
intervention and above-water inspection, maintenance and repair. All of
these services are frequently provided to customers on an integrated basis.
Underwater Intervention Services. The Company provides underwater support
services for all phases of offshore oil and gas operations - exploration,
development and production. During the exploration phase, the Company
provides positioning, placement and monitoring of subsea exploration
equipment, collects data on seafloor characteristics at proposed drilling
sites and assists with the navigational positioning of drilling rigs.
During the development phase, the Company assists with the installation of
production platforms and the connection of subsea pipelines. During the
production phase, the Company inspects, maintains and repairs offshore
platforms, pipelines and subsea equipment.
Underwater intervention services are performed by ROVs or divers. ROVs are
used at depths or in situations in which diving would be uneconomical or
infeasible. The Company believes that it operates the most technically
advanced fleet of work class ROVs in the world, with about a 25% market
share, and is the industry leader in providing ROV services on deepwater
wells which are the most technically demanding. ROVs are used for a
variety of underwater tasks including drill support, installation and
construction support, pipeline inspections and surveys, and subsea
production facility installation, operation and maintenance. An ROV may be
outfitted with manipulators, sonar, television cameras, specialized tooling
packages and other equipment or features to facilitate the performance of
specific underwater tasks. The Company currently owns more than 70 work
class and inspection class ROVs.
When a project requires manned intervention, the Company uses divers or
Atmospheric Diving Systems ("ADS") technology. An ADS encloses the
operator in a one-atmosphere (surface pressure) diving suit and is suitable
for use in water depths to 2,300 feet. The Company does not use divers (as
distinguished from ADS operators) to perform functions in water depths
greater than 1,000 feet.
The Company also provides a range of survey and navigational positioning
services for the oil and gas industry, as well as ocean search and recovery
projects. Applications include surface positioning for rig moves and the
installation of pipelines and platforms, subsea positioning and acoustics,
geophysical surveys, deep tow surveys and pipeline surveys.
Underwater services using all of these techniques are performed from
drilling rigs, platforms, barges and vessels.
Above-Water Inspection Services. Through its Solus Schall division ("Solus
Schall"), the Company offers a wide range of inspection services to
customers required to obtain third party inspections to satisfy contractual
structural specifications and requirements, internal safety standards or
regulatory requirements. Historically, the Company has focused on the
inspection of pipelines and onshore fabrication of offshore facilities for
the oil and gas industry. The Company also conducts inspections of other
industrial equipment. Certain of Solus Schall's pipeline inspection
activities are performed through the use of specialized X-ray crawlers,
which travel independently inside pipelines, stopping to perform
radiographic inspection of welds. Solus Schall derives the majority of its
revenues from foreign operations.
In connection with Solus Schall's inspection services (both onshore and
offshore), the Company developed a computer-aided method of managing
inspection data, which consists of a software package that provides a
standardized format for the storage, retrieval and analysis of multi-year
inspection data. Originally developed for platform inspections, the
software has been expanded for use in the inspection of pipelines, vessels
and refinery piping.
OFFSHORE FIELD DEVELOPMENT
Mobile Offshore Production Systems. OPS was established as a division
during 1989 to provide subsea intervention services and the engineering,
procurement, construction, installation and operation of mobile offshore
production systems ("MOPS") to customers for marginal and remote field
production and extended well testing. The Company has been awarded several
contracts pertaining to MOPS activities and subsea workover and maintenance
needs, including deepwater extended well testing in the Gulf of Mexico and
has served as prime contractor on an extended well testing project in the
North Sea. The Company's first FPSO, the OCEAN PRODUCER, has been
operating offshore West Africa since December 1991. The Company's second
FPSO, the ZAFIRO PRODUCER, is targeted for delivery to its first location
offshore West Africa in August 1996 to begin operations under a three-year
contract with a major oil company.
Subsea Products. OIE, Multiflex and the Pipeline Repair Systems unit of
the Company form the Subsea Products division which complements the
activities of OPS. OIE provides subsea intervention services, design and
fabrication of ROV interface tooling, including ROV replaceable and ROV
operable valves, and design and fabrication of subsea control systems.
In March 1994, the Company acquired the business of Multiflex which has
facilities in Houston, Texas and Edinburgh, Scotland for the production of
subsea control umbilical cables. These cables are used for the remote
operation of subsea installations and equipment and typically incorporate
both electrical and hydraulic control lines.
ADVANCED TECHNOLOGIES
The Company provides project management, engineering services and equipment
to non-oilfield customers for applications in harsh environments. The
Company, through its Advanced Technologies ("ADTECH") segment, serves
government agencies and firms in the telecommunications, aerospace, and
civil engineering and construction industries. This is accomplished by
using existing assets and by extending the use of technology developed in
oilfield operations to new applications.
ADTECH performs work for customers having specialized requirements
underwater or in other harsh environments. ADTECH provides deep ocean
search and recovery services for governmental bodies, including the U.S.
Navy and the National Aeronautics and Space Administration ("NASA"). In
other services for the Navy, Oceaneering provides various engineering and
underwater services ranging from aircraft salvage and recovery operations
to inspection and maintenance of the Navy's fleet of surface ships and
submarines. The Company also maintains and operates deepwater cable lay
and maintenance vehicles for AT&T Corp.
ADTECH designs and operates ROVs that are rated for work in water depths
from the surface to 25,000 feet. The more advanced ROVs owned by the
Company are equipped with lighter umbilical cords containing optic fibers
which allow for improved communications with the surface. Other
specialized equipment owned by the Company includes ROV cable lay and
maintenance equipment rated to 5,000 feet and deep tow, side scan sonar
systems rated for use in 20,000 feet. The Company's deep tow systems have
been used to locate downed aircraft in water depths to 14,700 feet.
ADTECH also designs and develops specialized tools and builds ROV systems
to customer specifications for use in deepwater and hazardous environments.
As part of ADTECH, Oceaneering Space Systems ("OSS") directs the Company's
efforts towards applying undersea technology and experience in the space
industry. The Company has worked with NASA and NASA subcontractors on a
variety of projects including portable life-support systems, decompression
techniques, tools and robotic systems, and standards and guidelines to
ensure robotic compatibility for space station equipment and payloads. OSS
is developing cryogenic life-support system technology for neutral buoyancy
testing and future space missions. Related life-support technology has been
developed for future use by environmental remediation workers and fire
fighters. OSS was expanded in 1994 by the purchase of the assets of ILC.
ILC had supported NASA by producing space shuttle crew support equipment,
including the design, development and fabrication of spacecraft
extravehicular and intravehicular hardware and soft goods, air crew
life-support equipment, mechanical and electromechanical devices and high
temperature insulation. These activities have continued. The activities
of OSS are substantially dependent on continued government funding for
space programs.
MARKETING
Oilfield Marine Services. The Company markets its services primarily to
international and foreign national oil and gas companies. It also provides
services as a subcontractor to companies operating as prime contractors.
Contracts are typically awarded on a competitive bid basis and are for the
most part short-term.
Offshore Field Development. The Company markets both its mobile offshore
production systems and subsea products primarily to international and
foreign national oil and gas companies, utilizing the Company's existing
administrative structure to identify potential business opportunities.
MOPS are offered for extended well testing, early production and
development of marginal fields and prospects in areas lacking pipelines and
processing infrastructure. Contracts are typically awarded on a
competitive basis, generally for periods of one or more years. The Company
owns one MOPS unit and is currently converting a second, both of which have
long-term contracts. Further equipment will be added as profitable
opportunities arise. The Company believes that Multiflex enables it to
identify market opportunities at an earlier stage as umbilical design is
typically part of the initial planning phase in field development. The
Company is able to offer an integrated service consisting of design,
engineering, project management and provision of hardware.
Advanced Technologies. The Company markets its marine services and related
engineering services to government agencies, major defense contractors,
NASA subcontractors and to telecommunications, construction and other
industrial customers outside the energy sector. The Company also markets
to insurance companies, salvage associations and other customers who have
requirements for specialized operations in deep water.
Major Customers. Five principal customers of the Company accounted for
approximately 29%, 34% and 36% of the Company's consolidated revenues in
1996, 1995 and 1994, respectively. No single customer accounted for more
than 10% of the Company's consolidated revenues in 1996. The Royal Dutch
Shell group of companies accounted for more than 10% of the Company's
consolidated revenues in 1995 and 1994. Also see Note 6 of the Notes to
Consolidated Financial Statements.
COMPETITION
The Company's businesses are highly competitive.
Oilfield Marine Services. The Company believes that it is one of five
companies that provides underwater services on a worldwide basis. The
Company competes for contracts with the other four worldwide companies and
with numerous companies operating locally in various areas. Competition
for underwater services historically has been based on the type of
underwater equipment available, location of or ability to deploy such
equipment, quality of service and price. In recent years, price has been
the most important factor in obtaining contracts; however, the ability to
develop improved equipment and techniques and to attract and retain skilled
personnel is also an important competitive factor in the Company's markets.
The number of the Company's competitors is inversely correlated with water
depth, as less sophisticated equipment and technology is required in
shallow water. With respect to projects that require less sophisticated
equipment or diving techniques, small companies have sometimes been able to
bid for contracts at prices uneconomic to the Company.
The Company believes that its ability to provide a wide range of underwater
services, including technological applications in deeper water on a
worldwide basis, should enable it to compete effectively in the oilfield
exploration and development market. As a result of uncertainty and
volatility in oil and gas pricing generally, oil and gas exploration and
development expenditures fluctuate from year to year. In particular,
budgetary approval for more expensive drilling and production in deeper
water or harsh environments, areas in which the Company believes it has a
competitive advantage, may be postponed or suspended. In some areas, the
ability of the Company to obtain contracts depends upon its ability to
charter vessels for use as work platforms. On occasion, the Company will
bid jointly with vessel owners for contracts, and it endeavors to develop
ongoing relations with various vessel owners.
The worldwide inspection market consists of a wide range of inspection and
certification requirements in many industries. Solus Schall competes in
only selected portions of this market. The Company believes that its broad
geographic sales and operational coverage, long history of operations,
technical reputation, application of X-ray crawler pipeline radiography and
accreditation to international quality standards enable it to compete
effectively in its selected inspection services market segments.
In the North Sea and, to a lesser extent, in other areas, oil and gas
companies utilize prequalification procedures that reduce the number of
prospective bidders for their projects. In certain countries political
considerations tend to favor local contractors.
Offshore Field Development. The Company believes that it is well
positioned to compete in the offshore field development market through its
ability to identify and offer optimum solutions, supply equipment, provide
capital on a limited basis and utilize the expertise in associated subsea
technology and offshore construction and operations gained through its
extensive operational experience worldwide. The Company is one of several
companies that offer leased MOPS units. Potential competitors include
companies having underutilized assets such as drilling rigs and tankers,
although access to the capital needed to convert units to MOPS may be a
limiting factor.
Although there are several competitors offering either specialized products
or operating in limited geographic areas, the Company believes that it is
one of two companies who compete on a worldwide basis for the provision of
subsea control umbilical cables.
Advanced Technologies. The Company believes that its specialized ROV
assets and experience in deep water operations give it a competitive
advantage in obtaining contracts in water depths greater than 5,000 feet.
The number of the Company's competitors is inversely correlated with water
depth, due to the advanced technical knowledge and sophisticated equipment
required for deep water operations.
Engineering services is a very broad market with a large number of
competitors. The Company competes in specialized areas in which it can
combine its extensive program management experience, engineering services
and the capability to continue the development of conceptual project
designs into the manufacture of prototype equipment.
The Company also utilizes the administrative structure of the Oilfield
Marine Services business to identify opportunities in foreign countries and
to provide additional local support for non-oil and gas customers.
SEASONALITY, BACKLOG AND RESEARCH AND DEVELOPMENT
A material amount of the Company's revenues is generated by contracts for
marine services in the Gulf of Mexico and North Sea, which are usually
seasonal from April through November. Revenues in the Offshore Field
Development and Advanced Technologies segments are generally not seasonal.
The amounts of backlog orders believed to be firm for Oilfield Marine
Services as of March 31, 1996 and 1995 were $100 million and $94 million,
respectively. Of these amounts, $26 million and $39 million, respectively,
were not expected to be performed within the year following such respective
dates. At March 31, 1996 and 1995, the Company had approximately $144
million and $27 million, respectively, in backlog for Offshore Field
Development. Of these amounts, $100 million and none, respectively, were
not expected to be performed within the year following such respective
dates. At March 31, 1996 and 1995, the Company had approximately $41
million and $39 million, respectively, in backlog for Advanced
Technologies. Of these amounts, $4 million and $12 million, respectively,
were not expected to be performed within the year following such respective
dates.
No material portion of the Company's business is subject to renegotiation
of profits or termination of contracts by the United States government.
The Company's research and development expenditures were approximately $5.8
million, $3.6 million and $3.7 million during 1996, 1995 and 1994,
respectively. These amounts do not include, nor is the Company able to
determine, the expenditures by others in connection with joint research
activities in which the Company participated or expenditures by the Company
in connection with research conducted during the course of performing field
operations.
REGULATION
The Company's operations are subject to various types of governmental
regulation. The Company's operations are affected from time to time and in
varying degrees by foreign and domestic political developments and foreign,
federal and local laws and regulations. In particular, oil and gas
production operations and economics are affected by price control, tax,
environmental and other laws relating to the petroleum industry, by changes
in such laws and by constantly changing administrative regulations. Such
developments may directly or indirectly affect the Company's operations and
those of its customers.
Compliance with federal, state and local provisions regulating the
discharge of materials into the environment or relating to the protection
of the environment has not had a material impact on the Company's capital
expenditures, earnings or competitive position.
In connection with its foreign operations, the Company is required in some
countries to obtain licenses or permits in order to bid on contracts or
otherwise to conduct business operations. Some foreign countries require
that the Company enter into a joint venture or similar business arrangement
with local individuals or businesses in order to conduct business. While
not a formal requirement, Oceaneering's quality management systems covering
the full range of subsea and topside services offered in the United Kingdom
are certified to the British Standard BS 5750 Part 2:1987, which is the
equivalent of ISO 9002. The quality management systems of both the OIE and
Multiflex units of the Subsea Products Group are certified to ISO 9001 for
their products and services.
RISKS AND INSURANCE
The Company's operations are subject to all the risks normally incident to
offshore exploration, development and production, including claims under
U.S. maritime laws. These risks could result in damage to or loss of
property, suspension of operations and injury to or death of personnel.
The Company insures its real and personal property and equipment. The
Company's vessels are insured against damage or loss, including war and
pollution risks. The Company also carries workers' compensation, maritime
employer's liability, general liability, including third party pollution,
and other insurance customary in its businesses. All insurance is carried
at levels of coverage and deductibles which the Company considers
financially prudent. On some contracts, the Company may have certain
exposures for loss or damage to the customer's facilities or for unexpected
weather delays, which the Company may cover by special insurance when it
deems advisable. Due to the very high costs for limited coverage and, in
the Company's opinion, limited exposure, the Company does not carry
professional liability insurance. In some jurisdictions, legal pleadings
in personal injury actions may include a claim for an amount of punitive
damages which may not be covered by insurance.
The primary industry that the Company serves, oil and gas, is a cyclical
industry and remains volatile, resulting in potentially large fluctuations
in demand for the Company's primary services, which could result in
significant changes in the Company's revenues and profits. Although the
oil and gas industry continues to be the Company's principal market, the
Company also performs services for government agencies, and firms in the
telecommunications, aerospace, and civil engineering and construction
industries.
The Company operates primarily as a subcontracting services company under
short-term dayrate contracts. However, the Company also owns certain
specialized capital assets, which if not fully utilized could have a
negative effect on cash resources as a result of continuing fixed operating
costs and reduced revenues.
A significant part of the Company's operations is conducted outside the
United States. For the years ended March 31, 1996, 1995 and 1994, foreign
operations accounted for 58%, 51% and 61% of the Company's revenues,
respectively.
Foreign operations are subject to additional political and economic
uncertainties, including the possibility of repudiation of contracts and
confiscation of property, fluctuations in currency exchange rates,
limitations on repatriation of earnings and foreign exchange controls.
Typically, the Company is able to limit the currency risks by arranging
compensation in United States dollars or freely convertible currency and,
to the extent possible, limiting acceptance of blocked currency to amounts
which match its expense requirements in local currencies.
Certain of the countries in which the Company operates have enacted
exchange controls to regulate foreign currency exchange. Exchange controls
in some of the countries in which the Company operates provide for
conversion of local currency into foreign currency for payment of debts,
equipment rentals, technology transfer, technical assistance and other fees
or repatriation of capital. Transfers of profits and dividends can be
restricted or limited by exchange controls.
EMPLOYEES
As of March 31, 1996, the Company had approximately 2,000 employees. The
Company's work force varies seasonally and peaks during the summer months.
Approximately 5% of the Company's employees are represented by unions. The
Company considers its relations with its employees to be satisfactory.
Foreign and Domestic Operations and Export Sales
The table presenting revenues, profitability and assets attributable to
each of Oceaneering's geographic areas for the years 1996, 1995 and 1994 is
incorporated herein by reference from Note 6 of the Notes to Consolidated
Financial Statements.
Item 2. PROPERTIES.
See Item 1 - "Business - Description of Business - Oilfield Marine
Services, Offshore Field Development and Advanced Technologies" for a
description of equipment used in providing the Company's services.
Oceaneering maintains office, shop and yard facilities in various parts of
the world. In these locations, the Company typically leases office
facilities to house its administrative and engineering staff, shops
equipped for fabrication, testing, repair and maintenance activities and
warehouses and yard areas for storage and mobilization of equipment en
route to work sites. The largest of such properties is located in Morgan
City, Louisiana and consists of 146,500 total square feet, of which 25,300
square feet are covered office and storage space owned by the Company and
the remainder is leased. The Company owns and leases property in Singapore
of approximately 28,700 square feet, of which 16,200 square feet are owned.
The Company leases 31,000 square feet of office space and 42,800 square
feet of yard area in Aberdeen, Scotland. Other major leased properties
include approximately 24,600 square feet in Dubai, United Arab Emirates,
and 37,000 square feet in Port Harcourt, Nigeria. These properties are
used primarily by the Oilfield Marine Services business segment of the
Company. Leased properties utilized primarily by the Offshore Field
Development segment consist of 53,500 square feet of workshop and office
space in Houston, Texas and manufacturing facilities in Houston, Texas and
Edinburgh, Scotland, of 96,000 square feet and 70,000 square feet,
respectively. In addition, the Company owns manufacturing facilities in
Magnolia, Texas of 65,000 square feet. The Company also leases
approximately 116,000 square feet in Upper Marlboro, Maryland, which
includes 86,000 square feet of offices and workshops and approximately
50,000 square feet of offices and workshops in Houston, Texas, which are
utilized by the Advanced Technologies business segment.
Item 3. LEGAL PROCEEDINGS.
In the ordinary course of business, Oceaneering encounters actions for
damages alleging personal injury under the general maritime laws of the
United States, including the Jones Act, for alleged negligence. The
Company reports actions for personal injury to its insurance carriers and
believes that the settlement or disposition of such suits will not have a
material effect on its financial position or results of operations. The
information set forth under "Commitments and Contingencies - Litigation" in
Note 5 of the Notes to Consolidated Financial Statements is incorporated
herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of the
year ended March 31, 1996.
Item 4a. EXECUTIVE OFFICERS OF THE REGISTRANT.
Executive Officers. The following is information with respect to the
executive officers of Oceaneering International, Inc., as of June 1, 1996:
OFFICER EMPLOYEE
NAME AGE POSITIONS SINCE SINCE
John R. Huff 50 Chairman of the Board, 1986 1986
President and Chief Executive
Officer
T. Jay Collins 49 Executive Vice President - 1993 1993
Oilfield Marine Services
Marvin J. Migura 45 Senior Vice President and 1995 1995
Chief Financial Officer
F. Richard Frisbie 53 Senior Vice President - 1981 1974
Marketing and Technology
George R. 48 Vice President, General 1988 1988
Haubenreich, Jr. Counsel and Secretary
Richard V. Chidlow 52 Controller and Chief 1990 1987
Accounting Officer
Each executive officer serves at the discretion of the Chief Executive
Officer and the Board of Directors and is subject to reelection or
reappointment each year after the annual meeting of shareholders.
Oceaneering does not know of any arrangement or understanding between any
of the above persons and any other person or persons pursuant to which he
was selected or appointed as an officer.
Family Relationships. There are no family relationships between any
director or executive officer.
Business Experience. John R. Huff has been a director, President and Chief
Executive Officer of the Company since 1986. He was elected Chairman of
the Board in August 1990. Prior to joining the Company in 1986, he served
from 1980 until 1986 as Chairman and President of Western Oceanic Inc., the
offshore drilling subsidiary of The Western Company of North America
("Western Oceanic"). He is a director of BJ Services Company, Triton
Energy Limited and Production Operators Corp.
T. Jay Collins, Executive Vice President, joined the Company in October
1993 as Senior Vice President and Chief Financial Officer. In May 1995, he
was appointed Executive Vice President of the Company's Oilfield Marine
Services business. From 1986 to 1992 he was with Teleco Oilfield Services,
Inc., most recently as Executive Vice President of Finance and
Administration and previously as Senior Vice President of Operations. Prior
to Teleco, he spent twelve years with Sonat, Inc., serving as Senior Vice
President of Finance at Sonat Offshore Drilling and President of Houston
Systems Manufacturing. His operational experience with Sonat Offshore
Drilling includes international management in Venezuela, Singapore, Egypt
and Ivory Coast.
Marvin J. Migura, Senior Vice President and Chief Financial Officer, joined
the Company in May 1995. From 1975 to 1994 he held various financial
positions with Zapata Corporation, a diversified energy services company,
most recently as Senior Vice President and Chief Financial Officer from
1987 to 1994.
F. Richard Frisbie, Senior Vice President - Marketing and Technology,
joined the Company in 1984 when Solus Ocean Systems, Inc., ("SOSI") was
acquired. From 1974 to 1984, he held various engineering and management
positions with SOSI and its predecessors. Over the past 20 years, he has
been responsible for various technical developments in remotely operated
underwater vehicle designs and the use of robotics and remotely operated
devices for applications in harsh environments, including nuclear power
plants. He also has previous experience in the aerospace industry.
George R. Haubenreich, Jr., Vice President, General Counsel and Secretary,
joined the Company in 1988. From 1979 until joining the Company, he held
various legal positions with The Coastal Corporation, a diversified energy
company, his last being Senior Staff Counsel. From 1974 until 1979, he was
an attorney with Exxon Company, U.S.A.
Richard V. Chidlow, Controller and Chief Accounting Officer, joined the
Company in 1987 as Controller for the Americas Region. From 1988 until
1990, he was Controller for the Europe, Africa and Asia group in Aberdeen,
and was appointed to his present position in 1990. From 1975 until joining
the Company he held various positions with Western Oceanic, his last being
Manager of Accounting.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
Oceaneering's Common Stock is listed on the New York Stock Exchange (symbol
OII). The following table sets forth, for the periods indicated, the high
and low closing sales prices for Oceaneering's Common Stock as reported on
the New York Stock Exchange (consolidated transaction reporting system):
Fiscal 1996 Fiscal 1995
High Low High Low
For the quarter ended:
June 30 $10-5/8 $ 8-7/8 $14-1/4 $11
September 30 12-1/8 8-1/2 14-1/8 12-1/4
December 31 13 8-3/4 13-1/8 9-3/4
March 31 14-1/2 10-7/8 10-5/8 7-7/8
On May 31, 1996, Oceaneering had 701 holders of record of its Common Stock,
par value $0.25. On that date, the closing sales price of the shares, as
quoted on the New York Stock Exchange, was $16-1/2.
Oceaneering has made no Common Stock dividend payments since 1977. Its
present bank credit agreement restricts aggregate dividends to 50% of
cumulative net earnings from December 31, 1994.
Item 6. SELECTED FINANCIAL DATA.
Results of Operations:
Years Ended March 31,
1996 1995 1994 1993 1992
(in thousands, except per share figures)
Revenues $289,506 $239,936 $229,760 $215,603 $193,582
Cost of services 234,731 190,772 177,199 157,048 143,117
Gross margin 54,775 49,164 52,561 58,555 50,465
Selling, general and
administrative
expenses 34,589 36,410 31,631 32,903 30,239
Income from
operations $ 20,186 $ 12,754 $ 20,930 $ 25,652 $ 20,226
Net income
applicable to
common stock $ 12,357 $ 5,496 $ 14,931 $ 19,401 $ 16,115
Net income per
common share
equivalent 0.53 0.23 0.62 0.82 0.68
Depreciation and
amortization 20,567 16,232 12,196 11,528 8,013
Capital expenditures 57,171 32,057 36,730 11,996 35,312
Other Financial Data:
As of March 31,
1996 1995 1994 1993 1992
(in thousands, except ratios)
Working capital
ratio 1.62 1.44 1.74 1.92 1.65
Cash and cash
equivalents $ 9,351 $12,865 $26,486 $33,973 $23,281
Working capital 42,427 23,106 34,425 42,492 28,556
Total assets 256,096 187,752 171,993 154,524 144,905
Short-term debt 183 118 124 96 2,065
Long-term debt 48,000 9,472 171 235 2,311
Total debt 48,183 9,590 295 331 4,376
Shareholders' equity 127,098 115,140 113,353 98,331 86,622
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
All statements in this Form 10-K, other than statements of historical
facts, including, without limitation, statements regarding the Company's
business strategy, plans for future operations, and industry conditions,
are forward-looking statements made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. The Company
utilizes a variety of internal and external data and management judgement
in order to develop such forward-looking information. Although the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, because of the inherent limitations in the
forecasting process, as well as the relatively volatile nature of the
industry in which the Company operates, it can give no assurance that such
expectations will prove to have been correct. Accordingly, evaluation of
future prospects of the Company must be made with caution when relying on
forward-looking information.
Liquidity and Capital Resources
Oceaneering considers its liquidity and capital resources adequate to
continue its growth initiatives. At March 31, 1996, the Company had
working capital of $42 million, including $8 million of unrestricted cash.
Additionally, the Company had $27 million available for borrowings under a
$75 million credit facility and $13 million was unused under its $20
million uncommitted line of credit. In June 1996, an additional $45
million became available for borrowing when the credit facility was
increased to $120 million. None of the $48 million of long-term bank debt
is required to be repaid prior to 1999.
The Company expects to meet its ongoing annual cash requirements from
existing cash on hand, operating cash flow, and available credit
facilities. Net income plus depreciation and amortization (commonly
referred to as Cash Flow from Operations) of $33 million for 1996
represented a substantial improvement from the $22 million and the $27
million for 1995 and 1994, respectively.
The Company considers its liquidity and capital resources adequate to
support continuing operations and capital commitments. Working capital at
the end of 1996 was approximately $19 million higher than that of the prior
year. The higher working capital was primarily attributable to the
receivable generated by a large MOPS conversion project completed for a
customer during 1996. Subsequent to the year end, the receivable, which
was not due until 1998, was paid in full by the customer and has therefore
been treated as a current asset. In 1995 a higher level of capital
expenditures, including business acquisitions, during a period of lower
cash flows from operations contributed to a decline in working capital
compared to the end of 1994. The $23 million of working capital as of
March 31, 1995 compared to $34 million as of March 31, 1994.
In November 1995, the Company announced that it had been awarded a contract
by a major oil company to provide an FPSO system. The contract is a
dayrate lease arrangement which has an initial term of three years with a
targeted commencement date of August 1996. The Company purchased and is
converting an existing 268,000 dwt crude oil tanker into the FPSO ZAFIRO
PRODUCER at an estimated capital cost of $70 million. To facilitate the
funding of the capital expenditures required for this project, the Company
expanded its committed credit facility from $75 million to $120 million.
The Company expects this project to contribute incremental annual earnings
of approximately $0.30 per share during the contract term. This forward-
looking statement is based on numerous assumptions, including the total
capital cost, financing cost for the project, timely completion of the
conversion of the vessel to an FPSO, and satisfactory Company performance
under the contract. Accordingly, there can be no assurance that these
results will be realized. In addition, the contract provides the customer
with the options to either extend the contract at reduced rates or purchase
the vessel and terminate the lease at any time during the initial three-
year period. Exercise of the purchase option would increase the Company's
expected earnings for that year and substantially increase the Company's
liquidity.
Capital expenditures for the years ended March 31, 1996, 1995 and 1994 were
$57 million, $32 million and $37 million, respectively. Capital
expenditures for 1996 included $30 million of acquisition and conversion
costs of the ZAFIRO PRODUCER, completion of upgrades on two dynamically-
positioned ("DP") vessels and additions to the Company's fleet of ROVs.
Capital expenditures for 1995 included the purchase and upgrade of a DP
offshore support vessel, acquisition of the remainder of the capital stock
of a jointly owned company which owned an offshore support vessel, upgrades
to ROVs and the acquisition of environmental services equipment. Capital
expenditures for 1994 included the acquisition costs of the ILC, OIE and
Multiflex businesses, additions and upgrades to the Company's fleet of ROVs
and improvements to the FPSO OCEAN PRODUCER. Commitments for capital
expenditures at the close of 1996 consisted of approximately $40 million
required to complete the conversion of the ZAFIRO PRODUCER during 1997.
During 1995 the Company completed the purchase of 1,000,000 shares of its
stock pursuant to a plan approved in June 1994. The purchases were
financed primarily by bank borrowings. After re-issue of shares to meet
the Company's regular obligations to the Oceaneering Retirement Investment
Plan and to satisfy share option exercises, there were 793,170 shares of
treasury stock remaining at March 31, 1996.
As a result of the increased level of capital expenditures and working
capital, total debt increased from $9 million as of the end of 1995 to $48
million as of March 31, 1996. As a percentage of total capitalization,
long-term debt during 1996 increased from 8% to 27%. The ratio of the
Company's debt to total capitalization will vary from time to time
depending primarily upon the level of capital spending. The debt level
would be significantly reduced or eliminated if the customer exercises its
option to purchase the ZAFIRO PRODUCER as previously discussed.
Because of its significant foreign operations, the Company is exposed to
currency fluctuations and exchange risks. The Company minimizes these
risks primarily through matching, to the extent possible, revenues and
expenses in the various currencies in which it operates. Cumulative
translation adjustments as of March 31, 1996, relate primarily to the
Company's permanent investment in and loans to its United Kingdom
subsidiary. Inflation has not had a material effect on the Company in the
past two years and no such effect is expected in the near future.
See Item 1 - "Business - Description of Business - Risks and Insurance."
Results of Operations
Revenues of $290 million for 1996 represented a substantial increase from
revenues of $240 million and $230 million for 1995 and 1994, respectively.
Gross margin of $54.8 million also compared favorably to $49.2 million and
$52.6 million for the prior two years. As a percentage of revenue, a
gross margin of 19% for 1996 represented a slight decrease from the 20%
margin for 1995 and compared to a 23% margin for 1994. Gross margins as a
percentage of revenues vary depending upon the mix of the type of contracts
(for example, subcontractor cost components) and may not be indicative of
business trends. Net income of $12.4 million in 1996 was more than double
the $5.5 million reported for 1995, but lower than the $14.9 million earned
during 1994.
Information on the Company's business segments is shown in Note 6 of the
Notes to Consolidated Financial Statements.
Oilfield Marine Services.
During 1996, oilfield marine services segment revenues and profitability
increased which resulted in a reduction of losses to $400,000. In 1995,
revenues declined compared to the prior year and the operations resulted in
a loss of $2.5 million for the year. Operating cash flow (defined as
operating income plus depreciation and amortization) of $10.6 million for
1996 represented a significant increase from the $5.4 million for 1995, but
was less than the $16.1 million during 1994.
The new ROVs represent the Company's continued commitment to its oilfield
marine services segment. During 1996, in response to increasing demand to
support deepwater drilling and identified future construction and
production maintenance work, the Company embarked on a major ROV fleet
expansion program. By the middle of 1997, the size of the Company's work
class ROV fleet will have been increased by a total of ten vehicles or 20%.
These new vehicles are designed for use around the world in water depths to
10,000 feet and in severe weather conditions.
The table below sets out revenues and profitability for the oilfield marine
services segment for 1996, 1995 and 1994.
For the Years Ended March 31,
1996 1995 1994
(in thousands, except percentages)
Revenues $132,064 $106,294 $122,625
Gross Margin 21,154 19,872 31,355
Gross Margin % 16% 19% 26%
Operating Income (loss) (369) (2,485) 9,194
Operating Income (loss) % 0% (2)% 7%
Revenues increased 24% in 1996 compared to 1995, reflecting increased
activity in all operating areas. The segment benefitted from higher
revenues and gross margin contribution from the ROV fleet as requirements
for vehicles to support exploration and development drilling activities
from floating drilling rigs increased. However, these gains were partially
offset by lower demand for diving services with correspondingly lower gross
margin. In addition, operating results in the North Sea and Gulf of Mexico
areas were negatively impacted by delays in the commissioning of support
vessels which had undergone extensive refurbishment and upgrade during the
year. Revenues and gross margin benefitted by $1.1 million from the
settlement of a contract dispute which had been provided for in 1995. This
adjustment increased gross margin % in 1996 by 1%.
Revenues and margin declined in 1995 compared to 1994 as a result of
reduced demand principally in the North Sea and West Africa operating
areas. In addition, gross margin was negatively impacted in 1995 by an
unfavorable arbitration ruling relating to a contract executed in 1991 and
difficulties experienced in collection of the amounts due under a foreign
contract. The provision for the arbitration ruling decreased gross margin
by $1.6 million (1%). The provision relating to the difficulty in
collecting amounts due under a foreign contract decreased gross margin by
$1 million (1%). Oilfield marine services gross margin was 21% before the
provisions.
Offshore Field Development.
This segment includes FPSO ownership and operations, engineering, design
and project management services for other MOPS-related work, and subsea
products.
The table below sets out revenues and profitability for this segment for
1996, 1995 and 1994.
For the Years Ended March 31,
1996 1995 1994
(in thousands, except percentages)
Revenues $80,855 $62,918 $37,121
Gross Margin 21,758 13,726 4,432
Gross Margin % 27% 22% 12%
Operating Income 15,567 6,676 1,191
Operating Income % 19% 11% 3%
Revenues and gross margin for 1996 were higher than for 1995 as a result of
a large MOPS conversion project which was completed during the year and
improved results in the subsea products business. The large MOPS project
consisted of the conversion of a jackup drilling rig into production
service for a customer. Results for this segment included a $2.7 million
gain on the involuntary conversion of the semisubmersible rig, OCEAN
DEVELOPER, which sank in August 1995 while under tow.
Revenues from the FPSO OCEAN PRODUCER for 1996, 1995 and 1994 were $14.7
million, $16.7 million and $10.4 million, respectively. Gross margin
contribution from the OCEAN PRODUCER'S operations for 1996, 1995 and 1994
totaled $7.6 million, $8.7 million and $2.1 million, respectively. During
1996 the OCEAN PRODUCER continued to work offshore Angola and in January
1996 commenced operations under a new four-year contract in the same
location.
Revenues and gross margin for the Offshore Field Development segment for
1995 were higher than for 1994 as a result of the contribution of Multiflex
which was acquired in March 1994, increased activity in the OIE division
and a full year of profitable FPSO operations.
Revenues and gross margin for the Offshore Field Development segment for
1994 were negatively impacted by the operations of the OCEAN PRODUCER,
which was contracted on a month to month basis for the first two quarters
at rates which were sufficient only to cover cash expenses. From the
fourth quarter of 1994, the OCEAN PRODUCER operated under a contract
providing substantially higher rates than its previous contract. Segment
revenues and margin for 1994 were favorably impacted by a large project
which the Company completed in the North Sea.
The Company is presently converting a 268,000 dwt tanker into its second
FPSO, the ZAFIRO PRODUCER, which is targeted to be delivered to a customer
offshore West Africa in August 1996 under a three-year contract.
Construction is being financed under the Company's bank credit facilities
which were increased to provide sufficient resources for this project. The
multi-year contracts for the OCEAN PRODUCER and the ZAFIRO PRODUCER provide
the Company with a significant level of contracted backlog.
The Company expects to continue to invest in other MOPS assets as
profitable opportunities arise, subject to the availability and acquisition
of assets suitable for MOPS application.
Advanced Technologies.
The table below sets out revenues and profitability for this segment for
1996, 1995 and 1994.
For the Years Ended March 31,
1996 1995 1994
(in thousands, except percentages)
Revenues $76,587 $70,724 $70,014
Gross Margin 11,863 15,566 16,774
Gross Margin % 15% 22% 24%
Operating Income 4,988 8,563 10,545
Operating Income % 7% 12% 15%
Revenues for 1996 increased over 1995 as a result of an increase in subsea
telecommunication cable burial activities, space related product sales and
marine civil engineering and construction work. Gross margin declined in
1996 compared to 1995 due to reduced utilization of the Company's deep
ocean search and recovery equipment, lower service requirements by the U.S.
Navy and complications experienced on a cable burial project completed in
the fourth quarter.
Revenues for 1995 were at the same level as for 1994. Gross margin
decreased as a result of lower demand for engineering services and costs
associated with entry into the environmental services business.
Other.
Selling, general and administrative expenses were $34.6 million in 1996
compared to $36.4 million in 1995 and $31.6 million in 1994. The increase
during 1995 reflected the addition of the Multiflex operations and included
$0.5 million of nonrecurring cost related to the consolidation of
operational bases in Scotland.
Interest income increased by $1.2 million in 1996 compared to 1995 as a
result of interest earned on the receivable related to the MOPS conversion
project. Interest expense increased by $1.6 million in 1996 compared to
1995 as a result of increased borrowings to finance the MOPS conversion
project and continuing capital expenditures in oilfield marine services.
The Company's effective tax rate decreased in 1996 compared to 1995 as a
result of decreased losses in areas, primarily in the United Kingdom tax
jurisdiction, where the Company derives no tax benefit as it already has
net operating loss carryforwards. The Company's effective tax rate
increased during 1995 compared to 1994 as a result of an increase in the
amount of pre-tax income subject to taxing jurisdictions with higher
effective tax rates, primarily the United States, and losses in 1995 in
areas where the Company derives no tax benefit as it already has net
operating loss carryforwards.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
In this report, the consolidated financial statements and supplementary
data of the Company appear in Part IV, Item 14 and are hereby incorporated
by reference. See Index to Financial Statements and Schedules.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information with respect to the directors and nominees for election to
the Board of Directors of Oceaneering International, Inc., is incorporated
by reference from Oceaneering International, Inc.'s definitive proxy
statement to be filed on or before July 29, 1996, pursuant to Regulation
14A under the Securities Exchange Act of 1934. The information with
respect to the executive officers of Oceaneering International, Inc., is
provided under Item 4a of Part I of this Annual Report on Form 10-K.
Item 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is incorporated by reference from the
proxy statement described in Item 10 above.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 12 is incorporated by reference from the
proxy statement described in Item 10 above.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 is incorporated by reference from the
proxy statement described in Item 10 above.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) Documents filed as part of this report.
1. Financial Statements.
(i) Report of Independent Public Accountants
(ii) Consolidated Balance Sheets
(iii) Consolidated Statements of Income
(iv) Consolidated Statements of Cash Flows
(v) Consolidated Statements of Shareholders' Equity
(vi) Notes to Consolidated Financial Statements
2. Exhibits:
Registration
or File Form or Exhibit
Exhibit Number Report Date Number
3 Articles of Incorporation
and By-laws
*3.01 Certificate of Incorporation,
as amended 0-8418 10-K March 1988 3(a)
*3.02 By-laws, as amended 0-8418 10-K March 1987 3(b)
*3.03 Amendment to Certificate
of Incorporation 33-36872 S-8 Sept. 1990 4(b)
*3.04 Amendment to By-laws 0-8418 10-K March 1991 3(d)
*3.05 Amendment to By-laws 1-10945 8-K Nov. 1992 2
4 Instruments defining the rights
of security holders, including
indentures
*4.01 Specimen of Common Stock
Certificate 1-10945 10-K March 1993 4(a)
*4.02 Interest Rate and Currency
Exchange Agreement dated
July 29, 1991 0-8418 10-Q Sept. 1991 4(a)
*4.03 Shareholder Rights Agreement
dated November 20, 1992 1-10945 8-K Nov. 1992 1
*4.04 Bank Credit Agreement dated
April 12, 1995 1-10945 10-K March 1995 4.04
4.05 Amended and Restated Bank Credit
Agreement dated June 12, 1996
10 Material contracts
*10.01 1981 Incentive Stock Option
Plan, as amended 2-80506 S-8 Sept. 1987 28(e)
10.02 Oceaneering Retirement
Investment Plan, as amended
*10.03 Employment Agreement dated
August 15, 1986 between
John R. Huff and Registrant 0-8418 10-K March 1987 10(l)
10.04 Addendum to Employment Agreement
dated February 22, 1996 between
John R. Huff and Registrant
*10.05 1987 Incentive and Non-
Qualified Stock Option Plan 33-16469 S-1 Sept. 1987 10(o)
*10.06 Oceaneering International, Inc.
Special Incentive Plan 33-16469 S-1 Sept. 1987 10(n)
*10.07 Senior Executive Severance
Plan, as amended 0-8418 10-K March 1989 10(k)
*10.08 Supplemental Senior Executive
Severance Agreements, as
amended 0-8418 10-K March 1989 10(l)
*10.09 Oceaneering International, Inc.
Executive Retirement Plan,
as amended 1-10945 10-K March 1995 10.08
*10.10 Share Purchase Agreement
related to the purchase of
Sonsub Limited 0-8418 8-K Jan. 1990 2
*10.11 1990 Long-Term Incentive Plan 33-36872 S-8 Sept. 1990 4(f)
*10.12 1990 Nonemployee Directors
Stock Option Plan 33-36872 S-8 Sept. 1990 4(g)
*10.13 Indemnification Agreement
between Registrant and its
Directors 0-8418 10-Q Sept. 1991 10(a)
*10.14 1991 Executive Incentive
Agreements 0-8418 10-K March 1992 10(p)
*10.15 Restricted Stock Award
Incentive Agreements 1-10945 10-K March 1994 10(q)
10.16 Restricted Stock Award
Incentive Agreement
10.17 Bank Uncommitted Credit Line
Agreement dated March 29, 1996
10.18 1996 Bonus Award Plan
21 Subsidiaries of the Registrant
23 Consent of Independent Public
Accountants
24 Powers of Attorney
27 Financial Data Schedule
* Indicates exhibit previously filed with the Securities and Exchange
Commission as indicated and incorporated herein by reference.
(b) Reports on Form 8-K.
The registrant filed no reports on Form 8-K during the last quarter of
the period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
OCEANEERING INTERNATIONAL, INC.
Date: June 21, 1996 By: //s//JOHN R. HUFF
John R. Huff
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
//s// JOHN R. HUFF President, Principal June 21, 1996
John R. Huff Executive Officer, Director
//s// MARVIN J. MIGURA Senior Vice President, June 21, 1996
Marvin J. Migura Principal Financial Officer
//s// RICHARD V. CHIDLOW Controller, Principal June 21, 1996
Richard V. Chidlow Accounting Officer
CHARLES B. EVANS* Director
DAVID S. HOOKER* Director
D. MICHAEL HUGHES* Director
*By: //s// GEORGE R. HAUBENREICH, JR. June 21, 1996
George R. Haubenreich, Jr.
Attorney-in-Fact
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Index to Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders' Equity
Notes to Consolidated Financial Statements
Selected Quarterly Financial Data
Index to Schedules
The schedules have been omitted because of the absence of the condition
under which they are required or because the required information is
included in the financial statements or related footnotes thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Oceaneering International, Inc.:
We have audited the accompanying consolidated balance sheets of Oceaneering
International, Inc. (a Delaware corporation) and subsidiaries as of March
31, 1996 and 1995, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the
period ended March 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Oceaneering
International, Inc. and subsidiaries as of March 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three
years in the period ended March 31, 1996 in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
May 16, 1996
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
ASSETS
March 31, 1996 March 31, 1995
CURRENT ASSETS:
Cash and cash equivalents $ 9,351 $ 12,865
Accounts receivable, net of
allowances for doubtful accounts
of $1,201 and $1,238 96,391 58,360
Prepaid expenses and other 4,733 4,613
Total current assets 110,475 75,838
PROPERTY AND EQUIPMENT, at cost:
Marine services equipment 187,337 175,528
Mobile offshore production
equipment 56,607 24,694
Other 29,438 28,648
273,382 228,870
Less accumulated depreciation 145,105 134,515
Net property and equipment 128,277 94,355
INVESTMENTS AND OTHER ASSETS:
Goodwill, net of amortization of
$2,515 and $1,546 12,082 13,051
Other 5,262 4,508
TOTAL ASSETS $256,096 $187,752
See Notes to Consolidated Financial Statements
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, 1996 March 31, 1995
CURRENT LIABILITIES:
Accounts payable $25,607 $15,228
Accrued liabilities 35,823 29,870
Income taxes payable 6,618 7,634
Total current liabilities 68,048 52,732
LONG-TERM DEBT 48,000 9,472
OTHER LONG-TERM LIABILITIES 11,921 9,507
MINORITY INTERESTS 1,029 901
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common Stock, par value $0.25;
90,000,000 shares
authorized; 24,017,046
shares issued 6,004 6,004
Additional paid-in capital 81,921 80,800
Treasury stock; 793,170 and
977,363 shares at cost (6,976) (8,596)
Retained earnings 56,556 44,199
Cumulative translation
adjustments (10,407) (7,267)
Total shareholders' equity 127,098 115,140
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $256,096 $187,752
See Notes to Consolidated Financial Statements
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
For the Years Ended March 31,
1996 1995 1994
REVENUES $289,506 $239,936 $229,760
COST OF SERVICES 234,731 190,772 177,199
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 34,589 36,410 31,631
Income from operations 20,186 12,754 20,930
INTEREST INCOME 1,774 547 831
INTEREST EXPENSE (2,286) (695) (951)
OTHER INCOME (EXPENSE), NET 286 (383) 48
MINORITY INTERESTS (108) 287 (99)
Income before income taxes 19,852 12,510 20,759
PROVISION FOR INCOME TAXES (7,495) (5,828)
NET INCOME $ 12,357 $ 5,496 $ 14,931
NET INCOME PER COMMON SHARE
EQUIVALENT $ 0.53 $ 0.23 $ 0.62
See Notes to Consolidated Financial Statements
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Years Ended
March 31,
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $12,357 $ 5,496 $14,931
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 20,567 16,232 12,196
Currency translation adjustments and other 1,308 1,855 210
Decrease (increase) in accounts receivable (38,031) (6,797) 2,601
Decrease (increase) in prepaid expenses
and other current assets (120) (1,849) 2,433
Increase in other assets (512) (1,986) (41)
Increase (decrease) in accounts payable 10,379 1,331 (4,048)
Increase (decrease) in accrued liabilities 6,023 4,062 (1,840)
Increase (decrease) in income taxes
payable (1,125) 951 265
Increase (decrease) in other long-term
liabilities 2,542 (1,673) 1,564
Total adjustments to net income 1,031 12,126 13,340
NET CASH PROVIDED BY OPERATING ACTIVITIES 13,388 17,622 28,271
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (57,171) (32,057) (14,866)
Business acquisitions, net of cash acquired -- -- (21,336)
NET CASH USED IN INVESTING ACTIVITIES (57,171) (32,057) (36,202)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term bank borrowings 38,600 9,400 --
Payments on long-term debt (72) (99) (96)
Proceeds from issuance of common stock 1,741 109 540
Purchases of treasury stock -- (8,596) --
NET CASH PROVIDED BY FINANCING ACTIVITIES 40,269 814 444
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,514) (13,621) (7,487)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 12,865 26,486 33,973
CASH AND CASH EQUIVALENTS - END OF YEAR $ 9,351 $12,865 $26,486
See Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the Years Ended March 31, 1996, 1995 and 1994
(in thousands)
Additional Cumulative
Common Stock Issued Paid-in Treasury Retained Translation
Shares Amount Capital Stock Earnings Adjustment Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1993 23,573 $ 5,893 $78,921 $ -- $23,772 $(10,255) $98,331
Net Income -- -- -- -- 14,931 -- 14,931
Translation adjustments -- -- -- -- -- (1,156) (1,156)
Stock options exercised 84 21 519 -- -- -- 540
Restricted Stock issued 339 85 299 -- -- -- 384
Tax benefit from exercise of
options -- -- 323 -- -- -- 323
Balance, March 31, 1994 23,996 5,999 80,062 -- 38,703 (11,411) 113,353
Net Income -- -- -- -- 5,496 -- 5,496
Translation adjustments -- -- -- -- -- 4,144 4,144
Stock options exercised 21 5 104 -- -- -- 109
Restricted Stock plan compensation
expense -- -- 634 -- -- -- 634
Treasury stock purchase of 977
shares, at cost -- -- -- (8,596) -- -- (8,596)
Balance, March 31, 1995 24,017 6,004 80,800 (8,596) 44,199 (7,267) 115,140
Net Income -- -- -- -- 12,357 -- 12,357
Translation adjustments -- -- -- -- -- (3,140) (3,140)
Stock options exercised -- -- 113 497 -- -- 610
Restricted Stock plan compensation
expense -- -- 1,008 62 -- -- 1,070
Treasury stock issued to Company
Benefit Plan, at average cost -- -- -- 1,061 -- -- 1,061
Balance, March 31, 1996 24,017 $ 6,004 $81,921 $(6,976) $56,556 $(10,407) $127,098
See Notes to Consolidated Financial Statements
</TABLE>
OCEANEERING INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF MAJOR ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Oceaneering
International, Inc., (the "Company") and its 50% or more owned and
controlled subsidiaries. The Company accounts for its investments in
unconsolidated affiliated companies under the equity method. All
significant intercompany accounts and transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents include demand deposits and highly liquid
investments with original maturities of three months or fewer from the date
of the investment. Approximately $1.4 million and $1.5 million of the
Company's cash at March 31, 1996 and 1995, respectively, was restricted and
is deposited as security in interest bearing accounts in connection with
legal proceedings.
Depreciation and Amortization
The Company provides for depreciation of Property and Equipment primarily
on the straight-line method over estimated useful lives of 3 to 12 years
for marine services equipment, 10 years for mobile offshore production
equipment and 3 to 25 years for buildings, improvements and other
equipment.
The costs of repair and maintenance of Property and Equipment are charged
to operations as incurred, while the costs of improvements are capitalized.
Upon the disposition of property and equipment, the related cost and
accumulated depreciation accounts are relieved and the resulting gain or
loss is included as an adjustment to cost of sales.
Goodwill arising from business acquisitions is amortized on the straight-
line method over 15 years.
Management periodically and upon the occurrence of a triggering event,
reviews the realizability of goodwill and other long-term assets and makes
any appropriate impairment adjustments and disclosures required by
generally accepted accounting principles.
In March 1995, Statement of Financial Accounting Standards Board standard
number ("SFAS") 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of," was issued. SFAS 121, which
becomes effective for fiscal years beginning after December 15, 1995,
requires that certain long-lived assets be reviewed for impairment whenever
events indicate that the carrying amount of an asset may not be recoverable
and that an impairment loss be recognized under certain circumstances in
the amount by which the carrying value exceeds the fair value of the asset.
The Company will adopt SFAS 121 in 1997, as required, and believes the
adoption will have no material effect on the Company's results of
operations or financial position.
Revenue Recognition
The Company's revenues are primarily derived from billings under contracts
that provide for specific time, material and equipment charges, which are
accrued daily and billed monthly. Significant lump-sum contracts are
accounted for using the percentage-of-completion method. Revenues on
contracts with a substantial element of research and development are
recognized to the extent of cost until such time as the probable final
profitability can be determined. Anticipated losses on contracts, if any,
are recorded in the period that such losses are first determinable.
Income Taxes
Effective 1994, the Company adopted SFAS 109, "Accounting for Income
Taxes", which supersedes SFAS 96. The cumulative impact of the adoption of
this standard was not material.
Foreign Currency Translation
All balance sheet asset and liability accounts of foreign subsidiaries are
translated into U.S. dollars at the rate of exchange in effect at the
balance sheet date. All income statement accounts are translated at
average exchange rates during the year. Adjustments arising from these
translations are accumulated in a separate account within Shareholders'
Equity.
Net Income Per Common Share Equivalent
Net income per common share equivalent has been computed on the basis of
the weighted average number of shares of Common Stock and Common Share
Equivalents outstanding in each year (23,258,000, 24,047,000 and 24,069,000
in 1996, 1995 and 1994, respectively).
Other Long-Term Liabilities
At March 31, 1996 and 1995, other long-term liabilities include $8.3
million and $6.6 million, respectively, for self-insurance reserves not
expected to be paid out in the following year and $3.7 and $2.4 million,
respectively, for deferred income taxes.
Reclassifications
Certain amounts from prior years have been reclassified to conform with the
current year presentation.
Acquisitions
In May 1993, the Company purchased the business and assets of the Space
Systems Division of ILC Dover, Inc. ("ILC"). ILC designs, develops and
fabricates spacecraft hardware and high temperature insulation products.
In July 1993, the Company purchased Oil Industry Engineering, Inc., a
designer and fabricator of subsea control systems and in March 1994, the
Company purchased the operating subsidiaries of Multiflex International
Inc., a manufacturer of subsea control umbilical cables. Total cost of the
three acquisitions was $21 million cash. The acquisitions were accounted
for under the purchase method and the operating results of the businesses
acquired are included in the consolidated financial statements of the
Company from the respective dates of acquisition. The costs of acquisition
have been allocated on the basis of the estimated fair value of the assets
acquired and liabilities assumed. This allocation resulted in goodwill of
approximately $14 million. Had these acquisitions taken place at the
beginning of 1993, unaudited pro forma revenues, net income, and net income
per common share equivalent of the Company for 1994 would have been $259
million, $15 million and $0.64. The pro forma information has been
prepared for comparative purposes only and is not necessarily indicative of
the operating results that would have occurred had the acquisitions taken
place at the beginning of 1993, nor are they necessarily representative of
operating results which may occur in the future.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
2. INCOME TAXES
The Company and its domestic subsidiaries, including acquired companies
from the respective dates of acquisition, file a consolidated federal
income tax return. The Company conducts its operations in a number of
foreign locations which have varying codes and regulations with regard to
income and other taxes, some of which are subject to interpretation.
Foreign income taxes are provided at the appropriate tax rates in
accordance with the Company's interpretation of the respective tax
regulations after review and consultation with its internal tax department,
tax consultants and, in some cases, legal counsel in the various foreign
locations. Management believes that adequate provisions have been made for
all taxes which will ultimately be payable.
Deferred income taxes are provided for temporary differences in the
recognition of income and expenses for financial and tax reporting
purposes. The Company's policy is to provide for deferred U.S. income
taxes on unrepatriated foreign income only to the extent such income is not
to be invested indefinitely in the related foreign entity.
The provision for income taxes for the year ended March 31, 1996 includes a
provision for U.S. federal and state income taxes of $5.4 million and
foreign taxes of $2.1 million. The provision for income taxes for the year
ended March 31, 1995, included a provision for U.S. federal and state
income taxes of $5.1 million and foreign taxes of $1.9 million. The
provision for income taxes for the year ended March 31, 1994, included a
provision for U.S. federal and state income taxes of $3.1 million and
foreign taxes of $2.7 million. As of March 31, 1996, the Company had loss
carryforwards of approximately $27 million which are available to reduce
future United Kingdom Corporation Tax which would otherwise be payable.
The provision for income taxes for the year ended March 31, 1996, consists
of $6.5 million for current taxes and $1.0 million for net deferred taxes.
The provision for income taxes for the year ended March 31, 1995, consisted
of $9.0 million for current taxes less $2.0 million in net deferred taxes.
The provision for the year ended March 31, 1994 consisted primarily of
current taxes.
Cash taxes paid were $7.5 million, $8.1 million and $5.8 million for the
years ended March 31, 1996, 1995 and 1994, respectively.
As of March 31, 1996 and 1995, the Company's worldwide deferred tax assets
and liabilities and related valuation reserves were as follows:
March 31,
1996 1995
(in thousands)
Gross deferred tax assets $14,166 $12,949
Valuation allowance (10,183) (9,144)
Net deferred tax assets $ 3,983 $ 3,805
Deferred tax liabilities $ 3,666 $ 2,441
The Company's deferred tax assets consist primarily of net operating loss
carryforwards ("NOLs") in its United Kingdom subsidiary; these NOLs have no
expiration date. Deferred tax liabilities consist of depreciation and
amortization and installment sale gain recognition.
The Company has established a valuation allowance for deferred tax assets
after taking into account factors that are likely to affect the Company's
ability to utilize the tax assets. In particular, the Company conducts its
business through several foreign subsidiaries and, although the Company
expects its consolidated operations to be profitable, there is no assurance
that profits will be earned in entities or jurisdictions which have NOLs
available. Since April 1, 1994, changes in the valuation allowance
primarily relate to the expected utilization of foreign NOLs and
realization of foreign tax credits.
Income taxes, computed by applying the federal statutory income tax rate to
income before income taxes and minority interests, are reconciled to the
actual provisions for income taxes as follows:
For the Years Ended
March 31,
1996 1995 1994
(in thousands)
Computed U.S. statutory expense $ 6,986 $ 4,278 $ 7,300
Change in valuation allowances 1,039 2,475 (1,723)
Withholding taxes and foreign
earnings taxed at rates different
from U.S. statutory rates and
other, net (530) 261 251
Total provision for income taxes $ 7,495 $ 7,014 $ 5,828
3. DEBT
Long-term debt: March 31,
1996 1995
(in thousands)
Bank debt $48,000 $9,400
Capital lease obligations -- 72
Total long-term debt $48,000 $9,472
Maturity Schedule
(in thousands)
Year
1997 --
1998 --
1999 $24,000
2000 24,000
2001 --
Credit Agreement
On April 12, 1995, the Company and a group of banks signed a credit
agreement in the amount of $75 million (the "Credit Agreement"). At March
31, 1996 the weighted average interest rate on outstanding borrowings under
the Credit Agreement was 6.1% per annum. There is a commitment fee of
0.225% per annum on the unused portion of the banks' commitment.
Under the Credit Agreement, the Company has the option to borrow dollars
through Euro-Dollar loans at the London Interbank Offered Rate ("LIBOR")
plus 5/8%, certificate of deposit loans at the reserve adjusted certificate
of deposit rate plus 3/4%, or base rate loans at the agent bank's prime
rate. The agreement contains certain restrictive covenants relative to
consolidated debt, tangible net worth and fixed charge coverage. Loans
under the agreement are unsecured. Under the agreement, dividends may not
exceed 50% of cumulative consolidated net income from December 31, 1994.
The Company has an uncommitted credit agreement dated March 29, 1996 with a
bank in the amount of $20 million for use for borrowings and letters of
credit (the "Uncommitted Line"). As of March 31, 1996, the Company had
approximately $7.2 million in letters of credit outstanding under this
agreement.
Effective October 1, 1991, the Company entered into an interest rate swap
agreement to reduce the impact of changes in interest rates under a then-
existing term loan facility. The notional amount declines by $1.5 million
on the first business day of each calendar quarter and was $4.5 million at
March 31, 1996. The fixed rate in the swap is 7.9% and the floating rate
is the three-month LIBOR. The Company benefits under the agreement if
LIBOR exceeds the fixed rate. The differential to be paid or received is
recognized as interest expense or income on a current basis.
Cash interest payments of $2.2 million, $900,000 and $1.1 million were made
in 1996, 1995 and 1994, respectively. In 1996 interest expense of $300,000
was capitalized as part of construction in progress.
Subsequent Event (unaudited)
In June 1996, the Credit Agreement referred to above was amended and credit
availability increased to $120 million. The interest rate for Euro-Dollar
loans when the total amount borrowed is $100 million or greater is LIBOR
plus 3/4%.
4. EMPLOYEE BENEFIT PLANS
Retirement Investment Plans
The Company currently has four separate employee retirement investment
plans which cover its full-time employees. The Oceaneering Retirement
Investment Plan is a deferred compensation plan in which domestic employees
may participate by deferring a portion of their gross monthly salary and
directing the Company to contribute the deferred amount to the plan. The
Company matches a portion of the deferred compensation. The Company's
contributions to the plan were $1,294,000, $992,000 and $807,000 for the
plan years ended December 31, 1995, 1994 and 1993, respectively. The
second plan is the Oceaneering International Services Pension Scheme for
employees in the United Kingdom. The Company provides funding for this
plan based on actuarial calculations. The plan assets exceed vested
benefits and are not material to the assets of the Company. Company
contributions were $57,000, $67,000 and $85,000 for the years ended March
31, 1996, 1995 and 1994, respectively. There have been no new participants
in this plan since March 1990. The third plan is the Personal Pension Plan
for employees in the United Kingdom. Under this plan, which became
effective May 1991, employees may contribute a portion of their gross
monthly salary. The Company also contributes a portion of the
participants' gross monthly salary. Company contributions to this plan for
the years ended March 31, 1996, 1995 and 1994, were $115,000, $108,000 and
$62,000, respectively. The fourth plan, the Oceaneering International,
Inc. Executive Retirement Plan, covers selected key management employees
and executives of the Company as approved by the Compensation Committee of
the Company's Board of Directors ("Compensation Committee"). The
participants in this plan may contribute a portion of their gross monthly
salary and the Company matches up to 100% of that contribution. Company
expense related to this plan during the years ended March 31, 1996, 1995
and 1994, was $362,000, $287,000 and $220,000, respectively.
Incentive and Stock Option Plans
The Company has in effect shareholder approved nonemployee director stock
option and long-term incentive plans. Under the 1990 Nonemployee Director
Stock Option Plan ("Nonemployee Director Plan"), options to purchase up to
an aggregate of 100,000 shares of the Company's Common Stock may be granted
to nonemployee directors of the Company. Each director of the Company is
automatically granted an option to purchase 2,000 shares of Common Stock on
the date the director becomes a nonemployee director of the Company and
each year thereafter at an exercise price per share equal to 50% of the
fair market value of a share of Common Stock on the date the option is
granted. The options granted are not exercisable until the later to occur
of six months from the date of grant or the date the optionee has completed
two years of service as a director of the Company. Expense is recorded
related to these options which have an exercise price less than fair market
value on the date the option is granted. Expense in 1996, 1995 and 1994
was not material.
Under the 1990 Long-Term Incentive Plan ("Incentive Plan"), a total of
1,600,000 shares of Common Stock, or cash equivalents of Common Stock, are
available for awards to employees and other persons (excluding nonemployee
directors) having an important business relationship with the Company and
its subsidiaries. The Incentive Plan is administered by the Compensation
Committee, which determines the type or types of award(s) to be made to
each participant and sets forth in the related award agreement the terms,
conditions and limitations applicable to each award. The Compensation
Committee may grant stock options, stock appreciation rights, stock and
cash awards. Options are normally granted at not less than fair market
value of the optioned shares at the date of grant. Options outstanding are
exercisable over a period up to ten years, vesting at the rate of 20% per
year for three years beginning one year after grant and 40% at the end of
the fourth year. In 1992, the Compensation Committee granted to certain
key executives of the Company contingent cash incentive awards totaling a
maximum aggregate amount of $2,000,000 payable over a three-year period,
conditional upon the achievement of certain performance goals for the
Company's Common Stock and continued employment of participants. In
September 1992, the performance requirement for the Company's Common Stock
was met; in September 1995 the last of four equal installments was paid to
the participants. During 1994 and 1996, the Compensation Committee granted
to certain key executives of the Company restricted Common Stock of the
Company designed (i) to make a material portion of their potential future
compensation contingent on performance of the Company's Common Stock and
(ii) to retain their employ with the Company. These grants are subject to
earning requirements on the basis of a percentage change between the price
of the Common Stock of the Company versus the average of the Common Stock
price of a peer group of companies over a three-year time period. Up to
one-third of the total grant made in 1994 may be earned each year and the
entire grant made in 1996 may be earned depending upon the Company's
cumulative Common Stock performance, with any amount earned subject to
vesting in four equal installments over three years conditional upon
continued employment. At the time of each vesting, a participant receives
a tax assistance payment which the participant must reimburse the Company
if the vested Common Stock is sold by the participant within three years
after the vesting date. In June 1995, the entire two-thirds of the total
grant made in 1994 was earned, subject to vesting requirements, and none of
the grant made in 1996 was earned. At March 31, 1996, a total of 84,750
shares was vested and a total of 261,250 shares of restricted stock was
outstanding under these grants, of which 141,250 shares were earned,
subject to vesting requirements.
The Company also has in effect three other stock option plans under which
options to purchase have been issued to employees and other persons
affiliated with the Company. Since approval of the Incentive Plan, no
further grants or awards under these three stock option plans have been
made or can be made or granted. All of these stock option plans are
administered by the Compensation Committee. Options were normally granted
at not less than the fair market value of the optioned shares at the date
of grant.
Options outstanding under these three plans which were granted periodically
from May 1988 to December 1992, are normally exercisable over a ten-year
term with vesting at the rate of 20% per year for three years beginning one
year after the date of grant and 40% at the end of the fourth year.
Options issued under one of these plans, the 1987 Special Incentive Plan,
are exercisable in 20% increments on each of the first five anniversaries
of the date of grant.
During 1996, under the Nonemployee Director and Incentive Plans, options to
purchase 46,000 shares were granted at prices ranging from $4.7188 to
$10.25. At March 31, 1996, options to purchase 1,354,830 shares at prices
ranging from $4.00 to $16.00 were outstanding under all plans and options
to purchase 893,380 shares at prices ranging from $4.00 to $16.00 were
exercisable. At March 31, 1996, there were 283,100 shares under these
plans available for grant, of which 225,100 could be used for awarding
stock options, stock appreciation rights, stock and cash awards to
employees.
5. COMMITMENTS AND CONTINGENCIES
Lease Commitments
At March 31, 1996, the Company occupied several facilities under
noncancellable operating leases expiring at various dates through 2065.
Future minimum rentals under these leases are as follows:
(in thousands)
1997 $2,737
1998 2,121
1999 1,744
2000 1,616
2001 1,500
Thereafter 2,070
Total Lease Commitments $11,788
Rental expense, which includes hire of vessels, specialized equipment and
real estate rental, was approximately $19 million, $13 million and $16
million for the years ended March 31, 1996, 1995 and 1994, respectively.
Insurance
The Company self-insures for workers' compensation, maritime employer's
liability and comprehensive general liability claims to levels it considers
financially prudent and carries insurance after the initial claim levels,
which can be by occurrence or in the aggregate, are met by the Company.
The Company determines the level of accruals by reviewing its historical
experience and current year claim activity; accruals are not recorded on a
present value basis. Each claim is reviewed with insurance adjusters and
specific reserves established for all known liabilities. An additional
reserve for incidents incurred but not reported to the Company
is established for each year using management estimates and based on prior
experience. Management believes that adequate accruals have been
established for expected liabilities arising from such obligations.
Litigation
Various actions and claims are pending against the Company and its
subsidiaries, most of which are covered by insurance. In the opinion of
management, the ultimate liability, if any, which may result from these
actions and claims will not materially affect the consolidated financial
position or results of operations of the Company.
Letters of Credit
The Company had $7.8 million and $7.6 million in letters of credit
outstanding as of March 31, 1996 and 1995, respectively, as guarantees in
force for various performance and bid bonds which are usually for a period
of one year or the duration of the contract.
Financial Instruments and Risk Concentration
Financial instruments which potentially subject the Company to
concentrations of credit risk are primarily cash and cash equivalents, bank
borrowings and accounts receivable. The carrying value of cash and cash
equivalents and bank borrowings approximates fair value due to the short
maturity of those instruments. Accounts receivable are generated from a
broad and diverse group of customers primarily from within the energy
industry, which is the Company's major source of revenues. At March 31,
1996, the Company had a receivable of $20 million from an energy industry
customer. Subsequent to the year end, the receivable, which was not due
until 1998, was paid in full by the customer and has therefore been treated
as an accounts receivable. The Company maintains an allowance for doubtful
accounts based upon expected collectibility.
6. OPERATIONS BY BUSINESS SEGMENT AND GEOGRAPHIC AREA
Business Segment Information
The Company supplies a comprehensive range of integrated technical services
to a wide array of industries and is one of the world's largest underwater
services contractors. The Company's Oilfield Marine Services business
consists of underwater intervention and above-water inspection, maintenance
and repair. The Company's Offshore Field Development business includes the
engineering, procurement, construction and installation of mobile offshore
production systems, subsea intervention services and the production of
subsea control umbilical cables. The Company's Advanced Technologies
business provides project management, engineering services and equipment
for applications in harsh environments, primarily in non-oilfield markets.
The following summarizes certain financial data by business segment:
For the Years Ended March 31,
1996 1995 1994
(in thousands)
Revenues
Oilfield Marine Services $132,064 $106,294 $122,625
Offshore Field Development 80,855 62,918 37,121
Advanced Technologies 76,587 70,724 70,014
Total $289,506 $239,936 $229,760
Income from Operations
Oilfield Marine Services $ (369) $ (2,485) $ 9,194
Offshore Field Development 15,567 6,676 1,191
Advanced Technologies 4,988 8,563 10,545
Total $ 20,186 $ 12,754 $ 20,930
Identifiable Assets
Oilfield Marine Services $102,776 $ 86,422 $ 70,259
Offshore Field Development 103,538 53,124 45,153
Advanced Technologies 32,466 28,520 24,393
Total $238,780 $168,066 $139,805
Capital Expenditures
Oilfield Marine Services $ 21,868 $ 25,916 $ 9,261
Offshore Field Development 32,531 1,263 16,465
Advanced Technologies 2,772 4,878 11,004
Total $ 57,171 $ 32,057 $ 36,730
Depreciation and Amortization Expenses
Oilfield Marine Services $ 10,996 $ 7,861 $ 6,950
Offshore Field Development 5,127 4,690 2,276
Advanced Technologies 4,444 3,681 2,970
Total $ 20,567 $ 16,232 $ 12,196
Income from operations for each business segment is determined before
interest income or expense, other expense, minority interests and the
provision for income taxes. An allocation of these items is not considered
practical. All assets specifically identified with a particular business
segment have been segregated. Cash and cash equivalents, prepaid expenses
and other current assets, investments and certain other assets have not
been allocated to particular business segments.
Revenues of approximately $34 million in 1995 and $26 million in 1994 were
from the Royal Dutch Shell group of companies. No other individual
customer accounted for more than 10% of revenues in 1996, 1995 or 1994.
Geographic Operating Areas
Financial data by geographic area is summarized as follows:
For the Years Ended March 31,
1996 1995 1994
(in thousands)
Revenues
United States $122,561 $117,630 $ 89,401
North Sea 53,289 48,934 60,515
Africa 39,747 36,361 36,510
Far East 38,084 22,924 24,343
Other 35,825 14,087 18,991
TOTAL $289,506 $239,936 $229,760
Income before Income Taxes and Minority Interests
United States $ 1,756 $ 2,856 $ 5,003
North Sea (164) 188 6,451
Africa 9,519 6,582 4,051
Far East 1,342 353 804
Other 7,507 2,244 4,549
TOTAL $ 19,960 $ 12,223 $ 20,858
Total Assets
United States $152,859 $ 87,405 $ 91,281
North Sea 51,521 52,449 30,235
Africa 29,733 33,374 39,459
Far East 12,185 9,386 8,206
Other 9,798 5,138 2,812
TOTAL $256,096 $187,752 $171,993
7. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
March 31,
1996 1995
(in thousands)
Payroll and related costs $14,271 $11,899
Accrued job costs 12,651 9,587
Other 8,901 8,384
TOTAL ACCRUED LIABILITIES $35,823 $29,870
SELECTED QUARTERLY FINANCIAL DATA
(in thousands, except per share data)
(unaudited)
Year Ended March 31, 1996
Quarter Ended
June 30 Sept. 30 Dec. 31 Mar. 31 Total
Revenues $71,541 $77,088 $74,236 $66,641 $289,506
Gross profit 13,309 15,964 14,453 11,049 54,775
Income from operations 5,000 7,312 5,661 2,213 20,186
Net income 2,787 4,573 3,528 1,469 12,357
Earnings per common
share equivalent $ 0.12 $ 0.20 $ 0.15 $ 0.06 $ 0.53
Weighted average number
of shares outstanding 23,158 23,224 23,267 23,383 23,258
Year Ended March 31, 1995
Quarter Ended
June 30 Sept. 30 Dec. 31 Mar. 31 Total
Revenues $63,370 $66,898 $55,203 $54,465 $239,936
Gross profit 14,094 15,383 8,622 11,065 49,164
Income (loss)from
operations 5,728 6,572 (1,196) 1,650 12,754
Net income (loss) 3,666 4,260 (2,850) 420 5,496
Earnings (loss) per
common share equivalent $ 0.15 $ 0.18 $(0.12) $ 0.02 $ 0.23
Weighted average number
of shares outstanding 24,183 24,204 24,150 23,650 24,047
EXHIBIT INDEX
Registration
or File Form or Exhibit
Exhibit Number Report Date Number
3 Articles of Incorporation
and By-laws
*3.01 Certificate of Incorporation,
as amended 0-8418 10-K March 1988 3(a)
*3.02 By-laws, as amended 0-8418 10-K March 1987 3(b)
*3.03 Amendment to Certificate
of Incorporation 33-36872 S-8 Sept. 1990 4(b)
*3.04 Amendment to By-laws 0-8418 10-K March 1991 3(d)
*3.05 Amendment to By-laws 1-10945 8-K Nov. 1992 2
4 Instruments defining the rights
of security holders, including
indentures
*4.01 Specimen of Common Stock
Certificate 1-10945 10-K March 1993 4(a)
*4.02 Interest Rate and Currency
Exchange Agreement dated
July 29, 1991 0-8418 10-Q Sept. 1991 4(a)
*4.03 Shareholder Rights Agreement
dated November 20, 1992 1-10945 8-K Nov. 1992 1
*4.04 Bank Credit Agreement dated
April 12, 1995 1-10945 10-K March 1995 4.04
4.05 Amended and Restated Bank Credit
Agreement dated June 12, 1996
10 Material contracts
*10.01 1981 Incentive Stock Option
Plan, as amended 2-80506 S-8 Sept. 1987 28(e)
10.02 Oceaneering Retirement
Investment Plan, as amended
*10.03 Employment Agreement dated
August 15, 1986 between
John R. Huff and Registrant 0-8418 10-K March 1987 10(l)
10.04 Addendum to Employment Agreement
dated February 22, 1996 between
John R. Huff and Registrant
*10.05 1987 Incentive and Non-
Qualified Stock Option Plan 33-16469 S-1 Sept. 1987 10(o)
*10.06 Oceaneering International, Inc.
Special Incentive Plan 33-16469 S-1 Sept. 1987 10(n)
*10.07 Senior Executive Severance
Plan, as amended 0-8418 10-K March 1989 10(k)
*10.08 Supplemental Senior Executive
Severance Agreements, as
amended 0-8418 10-K March 1989 10(l)
*10.09 Oceaneering International, Inc.
Executive Retirement Plan,
as amended 1-10945 10-K March 1995 10.08
*10.10 Share Purchase Agreement
related to the purchase of
Sonsub Limited 0-8418 8-K Jan. 1990 2
*10.11 1990 Long-Term Incentive Plan 33-36872 S-8 Sept. 1990 4(f)
*10.12 1990 Nonemployee Directors
Stock Option Plan 33-36872 S-8 Sept. 1990 4(g)
*10.13 Indemnification Agreement
between Registrant and its
Directors 0-8418 10-Q Sept. 1991 10(a)
*10.14 1991 Executive Incentive
Agreements 0-8418 10-K March 1992 10(p)
*10.15 Restricted Stock Award
Incentive Agreements 1-10945 10-K March 1994 10(q)
10.16 Restricted Stock Award
Incentive Agreement
10.17 Bank Uncommitted Credit Line
Agreement dated March 29, 1996
10.18 1996 Bonus Award Plan
21 Subsidiaries of the Registrant
23 Consent of Independent Public
Accountants
24 Powers of Attorney
27 Financial Data Schedule
* Indicates exhibit previously filed with the Securities and Exchange
Commission as indicated and incorporated herein by reference.
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT (this
"Amended Agreement") dated as of June 12, 1996 among
OCEANEERING INTERNATIONAL, INC. (the "Borrower"), the BANKS
listed on the signature pages hereof (the "Banks") and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"Agent").
W I T N E S S E T H :
WHEREAS, certain of the parties hereto have
heretofore entered into a $75,000,000 Credit Agreement dated
as of April 12, 1995 (the "Agreement"); and
WHEREAS, the parties hereto desire to amend such
Agreement to modify the fees payable thereunder and the
Funded Debt Covenant contained therein, to increase the
aggregate amount of the Commitments of the Banks from
$75,000,000 to $120,000,000, to add the New Banks (as
defined below) as parties to the Agreement as amended and
restated hereby, to provide for changes in the respective
Commitments of the Banks as set forth herein and to restate
such Agreement in its entirety to read as set forth in the
Agreement with the amendments specified below;
NOW, THEREFORE, the parties hereto agree as
follows:
SECTION 1. Definitions; References. Unless
otherwise specifically defined herein, each term used herein
which is defined in the Agreement shall have the meaning
assigned to such term in the Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other
similar reference and each reference to "this Agreement",
"the Agreement" and each other similar reference contained
in the Agreement shall from and after the date hereof refer
to the Agreement as amended and restated hereby. The term
"Notes" defined in the Agreement shall include from and
after the date hereof the New Notes (as defined below).
SECTION 2. Change in Fees. Section 2.06 of the
Agreement is amended to read in its entirety as follows:
SECTION 2.06. Fees. (a) During the Revolving
Credit Period, the Borrower shall pay to the Agent for the
account of each Bank a commitment fee at the rate of 0.225%
per annum on the daily average amount by which the amount of
the Commitment of such Bank exceeds the aggregate
outstanding principal amount of the Loans of such Bank.
Such commitment fee shall accrue from and including the
Effective Date to but excluding the last day of the
Revolving Credit Period, and shall be payable quarterly in
arrears on each March 31, June 30, September 30 and December
31 during the Revolving Credit Period and on the last day of
the Revolving Credit Period.
(b) For each day during the Revolving Credit
Period on which the aggregate outstanding principal amount
of the Loans equals or exceeds $100,000,000, the Borrower
shall pay to the Agent for the account of the Banks ratably
in proportion to their Commitments a utilization fee at the
rate of 0.125% per annum on the daily aggregate principal
amount of Loans outstanding on such day. Such utilization
fee shall accrue from and including the Effective Date to
but excluding the last day of the Revolving Credit Period,
and shall be payable quarterly in arrears on each March 31,
June 30, September 30 and December 31 during the Revolving
Credit Period and on the last day of the Revolving Credit
Period.
(c) For each day after the Revolving Credit
Period on which the aggregate outstanding principal amount
of the Loans equals or exceeds $75,000,000, the Borrower
shall pay to the Agent for the account of the Banks ratably
in proportion to their Commitments a utilization fee at the
rate of 0.125% per annum on the daily aggregate principal
amount of Loans outstanding on such day. Such utilization
fee shall accrue from and including the Conversion Date to
but excluding the Termination Date, and shall be payable
quarterly in arrears on each March 31, June 30, September 30
and December 31 after the Revolving Credit Period and on the
Termination Date.
(d) The Borrower shall pay to the Agent for its
own account fees in the amounts and at the times heretofore
agreed in writing between the Borrower and the Agent.
SECTION 3. Up-Front Fee. On or prior to the date
this Amended Agreement becomes effective in accordance with
Section 8 hereof, the Borrower shall pay to the Agent for
the account of each Bank whose Commitment shall be an amount
equal to or greater than $30,000,000, an up-front fee of
.10% of the amount of such Bank s Commitment.
SECTION 4. Amendment to Funded Debt Covenant.
Section 5.07 of the Agreement is amended to read in its
entirety as follows:
SECTION 5.07. Funded Debt. Consolidated Funded
Debt will not exceed at any time 100% of Adjusted
Consolidated Tangible Net Worth. For purposes of this
2
Section, any preferred stock of a Consolidated Subsidiary
held by a Person other than the Borrower or a Wholly Owned
Consolidated Subsidiary shall be included, at the higher of
its voluntary or involuntary liquidation value, in
determining Consolidated Funded Debt.
SECTION 5. New Banks; Changes in Commitments.
With effect from and including the date this Amended
Agreement becomes effective in accordance with Section 8
hereof, (i) each Person listed on the signature pages hereof
which is not a party to the Agreement (a "New Bank") shall
become a Bank party to the Agreement and (ii) the Commitment
of each Bank shall be the amount set forth opposite the name
of such Bank on the signature pages hereof. Any Bank whose
Commitment is changed to zero shall upon such effectiveness
cease to be a Bank party to the Agreement, and all accrued
fees and other amounts payable under the Agreement for the
account of such Bank shall be due and payable on such date;
provided that the provisions of Section 9.03 of the
Agreement shall continue to inure to the benefit of each
such Bank.
SECTION 6. Representations and Warranties. The
Borrower hereby represents and warrants that as of the date
hereof and after giving effect thereto:
(a) no Default under the Agreement has occurred
and is continuing; and
(b) each representation and warranty of the
Borrower set forth in the Agreement is true and correct as
though made on and as of this date.
SECTION 7. Governing Law. This Amended Agreement
shall be governed by and construed in accordance with the
laws of the State of New York.
SECTION 8. Counterparts; Effectiveness. This
Amended Agreement may be signed in any number of
counterparts, each of which shall be an original, with the
same effect as if the signatures thereto and hereto were
upon the same instrument. This Amended Agreement shall
become effective as of the date hereof when (i) the Agent
shall have received duly executed counterparts hereof signed
by each of the parties hereto (or, in the case of any party
as to which an executed counterpart shall not have been
received, the Agent shall have received telegraphic, telex
or other written confirmation from such party of execution
of a counterpart hereof by such party); (ii) the Agent shall
have received a duly executed Note for each of the New Banks
(a "New Note"), dated on or before the date of effectiveness
hereof and otherwise in compliance with Section 2.03 of the
Agreement; (iii) the Agent shall have received payment of
3
the fees payable in accordance with Section 3 hereof; (iv)
the Agent shall have received an opinion of Baker & Botts,
L.L.P., special counsel for the Borrower, and of George R.
Haubenreich, Jr., General Counsel of the Borrower,
substantially in the respective forms of Exhibits B-1 and B-
2 to the Agreement with reference to the New Notes and the
Agreement as amended hereby; and (v) the Agent shall have
received all documents it may reasonably request relating to
the existence of the Borrower, the corporate authority for
and the validity of the Agreement as amended and restated
hereby, the New Notes and any other matters relevant hereto.
4
IN WITNESS WHEREOF, the parties hereto have caused this
Amended Credit Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
OCEANEERING INTERNATIONAL, INC.
By: //s//ROBERT P. MINGOIA
Robert P. Mingoia
Treasurer
Commitments
$30,000,000
ABN AMRO BANK N.V., Houston Agency
By ABN AMRO NORTH AMERICA, INC.,
as Agent
By: //s//H. GENE SHIELS
H. Gene Shiels
Vice President and Director
By: //s//W. BRYAN CAMPBELL
W. Bryan Campbell
Vice President and Director
$ 30,000,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: //s//JAMES S. FINCH
James S. Finch
Vice President
5
$ 30,000,000 TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: //s//MONA M. FOCH
Mona M. Foch
Vice President
$ 30,000,000 WELLS FARGO BANK (TEXAS),
N.A.
By: //s//FRANK W. SCHAGEMAN
Frank W. Schageman
Vice President
_________________
Total Commitments
$120,000,000
=================
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By: //s//JAMES S. FINCH
James S. Finch
Vice President
6
OCEANEERING RETIREMENT INVESTMENT PLAN
(As Amended and Restated Effective July 1, 1995)
HOU01A:316781.5
008939.0157
OCEANEERING RETIREMENT INVESTMENT PLAN
(As Amended and Restated Effective July 1, 1995)
I N D E X
Page
ARTICLE I DEFINITIONS AND CONSTRUCTION . . . . . . . . . . . 3
Section:
1.1 Definitions . . . . . . . . . . . . . . . . . . . 3
Affiliate . . . . . . . . . . . . . . . . . . . . 3
Adjustment Date . . . . . . . . . . . . . . . . . 3
Authorized Leave of Absence . . . . . . . . . . . 3
Beneficiary . . . . . . . . . . . . . . . . . . . 3
Break in Service . . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . . . . . 4
Committee . . . . . . . . . . . . . . . . . . . . 4
Common Stock . . . . . . . . . . . . . . . . . . . 4
Compensation . . . . . . . . . . . . . . . . . . . 4
Disability . . . . . . . . . . . . . . . . . . . . 5
Effective Date . . . . . . . . . . . . . . . . . . 5
Employee . . . . . . . . . . . . . . . . . . . . . 5
Employer . . . . . . . . . . . . . . . . . . . . . 5
Employment Year . . . . . . . . . . . . . . . . . 5
ERISA . . . . . . . . . . . . . . . . . . . . . . 6
Fiduciaries . . . . . . . . . . . . . . . . . . . 6
Forfeiture . . . . . . . . . . . . . . . . . . . . 6
Former Participant . . . . . . . . . . . . . . . . 6
Hours(s) of Service . . . . . . . . . . . . . . . 6
Income . . . . . . . . . . . . . . . . . . . . . . 6
Participant . . . . . . . . . . . . . . . . . . . 7
Participation . . . . . . . . . . . . . . . . . . 7
Plan . . . . . . . . . . . . . . . . . . . . . . . 7
Plan Year . . . . . . . . . . . . . . . . . . . . 7
Service . . . . . . . . . . . . . . . . . . . . . 7
Trust or Trust Fund . . . . . . . . . . . . . . . 7
Trustee . . . . . . . . . . . . . . . . . . . . . 7
Year of Service . . . . . . . . . . . . . . . . . 7
1.2 Construction . . . . . . . . . . . . . . . . . . . 7
ARTICLE II PARTICIPATION AND SERVICE . . . . . . . . . . . . 8
Section:
2.1 Participation . . . . . . . . . . . . . . . . . . 8
2.2 Notification of Eligible Employees . . . . . . . . 9
2.3 Participant Applications . . . . . . . . . . . . . 9
2.4 Transfers and Authorized Leaves of Absence . . . . 9
2.5 Re-Employment; Certain Account Reinstatements . . 9
2.6 Service for Former Eastport Employees . . . . . 10
ARTICLE III CONTRIBUTIONS AND FORFEITURES . . . . . . . . . 11
Section:
3.1 Employer Contributions . . . . . . . . . . . . . 11
3.2 Deferred Contributions . . . . . . . . . . . . . 12
HOU01A:316781.5
008939.0157
Page
3.3 Withdrawals . . . . . . . . . . . . . . . . . . 14
(A) Voluntary and Mandatory Contributions . . 14
(B) Rollover Contributions . . . . . . . . . 14
(C) Pre 1985-Employer Contribution Account . 14
(D) Hardship Withdrawals . . . . . . . . . . 14
3.4 Disposition of Forfeitures . . . . . . . . . . . 16
ARTICLE IV ALLOCATIONS TO PARTICIPANTS' ACCOUNTS . . . . . 17
Section:
4.1 Individual Accounts . . . . . . . . . . . . . . 17
4.2 Employer and Deferred Contributions . . . . . . 17
4.3 Forfeitures . . . . . . . . . . . . . . . . . . 18
4.4 Valuation of Trust Fund . . . . . . . . . . . . 18
4.5 Distributions Deducted from Participant's Account 18
4.6 Income . . . . . . . . . . . . . . . . . . . . . 18
4.7 Investment Funds . . . . . . . . . . . . . . . . 18
4.8 Investment Directions by Participants; Employer
Contribution
Investment . . . . . . . . . . . . . . . . . . . 19
4.9 Change of Investment of Account Balances . . . . 19
4.10 Special Provisions Applicable to Eastport Plan
Accounts . . . . . . . . . . . . . . . . . . . . 20
4.11 Loans . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE V BENEFITS . . . . . . . . . . . . . . . . . . . . 23
Section:
5.1 Retirement . . . . . . . . . . . . . . . . . . . 23
5.2 Death or Disability . . . . . . . . . . . . . . 23
5.3 Termination for Other Reasons . . . . . . . . . 23
5.4 Payments of Benefits . . . . . . . . . . . . . . 25
5.5 Designation of Beneficiary . . . . . . . . . . . 26
ARTICLE VI TRUST FUND . . . . . . . . . . . . . . . . . . . 28
ARTICLE VII ADMINISTRATION . . . . . . . . . . . . . . . . . 29
Section:
7.1 Allocation of Responsibility among Fiduciaries for
Plan and Trust
Administration . . . . . . . . . . . . . . . . 29
7.2 Appointment of Committee . . . . . . . . . . . . 29
7.3 Records of Committee . . . . . . . . . . . . . . 29
7.4 Committee Action; Agent for Process . . . . . . 30
7.5 Committee Disqualification . . . . . . . . . . . 30
7.6 Committee Compensation, Expenses and Advisers . 30
7.7 Committee Liability . . . . . . . . . . . . . . 30
7.8 Committee Determinations . . . . . . . . . . . . 30
7.9 Information from Employer . . . . . . . . . . . 31
7.10 General Powers of Committee . . . . . . . . . . 31
7.11 Uniform Administration . . . . . . . . . . . . . 31
7.12 Reporting Responsibilities . . . . . . . . . . . 31
7.13 Disclosure Responsibilities . . . . . . . . . . 32
7.14 Annual Statements . . . . . . . . . . . . . . . 32
7.15 Annual Audit . . . . . . . . . . . . . . . . . . 32
HOU01A:316781.5
008939.0157
Page
7.16 Presenting Claims for Benefits . . . . . . . . . 32
7.17 Claims Review Procedure . . . . . . . . . . . . 33
7.18 Unclaimed Benefits . . . . . . . . . . . . . . . 34
ARTICLE VIII MISCELLANEOUS PROVISIONS . . . . . . . . . . . 35
Section:
8.1 Terms of Employment . . . . . . . . . . . . . . 35
8.2 Controlling Law . . . . . . . . . . . . . . . . 35
8.3 Invalidity of Particular Provisions . . . . . . 35
8.4 Non-Alienation of Benefits . . . . . . . . . . . 35
8.5 Payments in Satisfaction of Claims of Participants35
8.6 Impossibility of Diversion of Trust Fund . . . . 35
8.7 Distributions Under Domestic Relations Orders . 35
8.8 Transition Period . . . . . . . . . . . . . . . 36
ARTICLE IX TRUST AGREEMENT AND TRUST FUND . . . . . . . . . 37
Section:
9.1 Trust Agreement . . . . . . . . . . . . . . . . 37
9.2 Benefits Paid Solely from Trust Fund . . . . . . 37
9.3 Committee Directions to Trustee . . . . . . . . 37
ARTICLE X ADOPTION OF THE PLAN BY OTHER
ORGANIZATIONS;SEPARATION OF THE TRUST FUND;
AMENDMENTAND TERMINATION OF THE PLAN;
ANDDISCONTINUANCE OF CONTRIBUTIONS TO THE
TRUST FUND . . . . . . . . . . . . . . . . . . . 38
Section:
10.1 Adoptive Instrument . . . . . . . . . . . . . . 38
10.2 Effect of Adoption . . . . . . . . . . . . . . . 38
10.3 Separation of the Trust Fund . . . . . . . . . . 38
10.4 Voluntary Separation . . . . . . . . . . . . . . 38
10.5 Amendment of the Plan . . . . . . . . . . . . . 39
10.6 Effect of Amendment on Other Employers . . . . . 39
10.7 Termination of the Plan . . . . . . . . . . . . 39
10.8 Liquidation and Distribution of Trust Fund upon
Termination . . . . . . . . . . . . . . . . . . 39
10.9 Effect of Termination or Discontinuance of
Contributions . . . . . . . . . . . . . . . . . 40
10.10 Merger of Plan with Another Plan . . . . . . . . 40
10.11 Rollover from Qualified Plans . . . . . . . . . 41
ARTICLE XI LIMITATIONS ON BENEFITS . . . . . . . . . . . . 42
Section:
I. Single Defined Contribution Plan . . . . 42
II. Two or More Defined Contribution Plans . 43
III. Defined Contribution and Defined Benefit
Plan . . . . . . . . . . . . . . . . . . . . . . 44
IV. Definitions . . . . . . . . . . . . . . . . 46
ARTICLE XII TOP-HEAVY PLAN REQUIREMENTS . . . . . . . . . . 49
Section:
12.1 General Rule . . . . . . . . . . . . . . . . . . 49
12.2 Vesting Provisions . . . . . . . . . . . . . . . 49
12.3 Minimum Contribution Provisions . . . . . . . . 49
HOU01A:316781.5
008939.0157
Page
12.4 Limitation on Contributions . . . . . . . . . . 50
12.5 Coordination with Other Plans . . . . . . . . . 50
12.6 Distributions to Certain Key Employees . . . . . 51
12.7 Determination of Top-Heavy Status . . . . . . . 51
ARTICLE XIII TESTING OF CONTRIBUTIONS . . . . . . . . . . . 56
Section:
13.1 Definitions . . . . . . . . . . . . . . . . . . 56
13.2 Actual Deferral Percentage . . . . . . . . . . . 57
13.3 Actual Deferral Percentage Limits . . . . . . . 58
13.4 Reduction of Pre-Tax Contribution Rates by Leveling
Method . . . . . . . . . . . . . . . . . . . . . 58
13.5 Increase in Pre-Tax Contribution Rates . . . . . 59
13.6 Excess Pre-Tax Contributions . . . . . . . . . . 59
13.7 Aggregation of Family Members in Determining the
Actual Deferral Ratio . . . . . . . . . . . . . 60
13.8 Contribution Percentage . . . . . . . . . . . . 60
13.9 Contribution Percentage Limits . . . . . . . . . 61
13.10 Treatment of Excess Aggregate Contributions . . 62
13.11 Aggregation of Family Members in Determining the
Actual Contribution
Ratio . . . . . . . . . . . . . . . . . . . . . 63
13.12 Multiple Use of Alternative Limitation . . . . . 64
ARTICLE XIV TRANSFER OF ELIGIBLE ROLLOVER DISTRIBUTION . . . 65
Section:
14.1 Transfer . . . . . . . . . . . . . . . . . . . . 65
14.2 Definitions . . . . . . . . . . . . . . . . . . 65
HOU01A:316781.5
008939.0157
OCEANEERING RETIREMENT INVESTMENT PLAN
(As Amended and Restated Effective July 1, 1995)
PURPOSE
Effective as of April 1, 1982, Oceaneering
International, Inc. established the Oceaneering International,
Inc. Employees Stock Purchase Plan and contemporaneously
therewith executed a trust agreement to enable eligible employees
of the Company and its participating subsidiaries to share in the
Company's profits and to establish for their benefit a savings
fund.
Effective as of June 1, 1983, Oceaneering
International, Inc. amended and restated the Oceaneering
International, Inc. Employees Stock Purchase Plan (the "Plan") in
order to merge the Employee Savings and Investment Plan for
Employees of Oceaneering International, Inc. into the Plan which
thereafter was known as the Oceaneering International, Inc.
Employees Stock Purchase and Savings Plan.
Effective as of June 1, 1983 the Oceaneering
International, Inc. Employees Stock Purchase Plan Trust
(the "Trust"), which is administered pursuant to a trust
agreement and which is intended to form a part of the Plan, was
amended and restated to reflect the merger of the Employee
Savings and Investment Plan for Employees of Oceaneering
International, Inc. into the Plan and the Trust.
Effective January 1, 1984 the Plan was amended to
comply with the Tax Equity and Fiscal Responsibility Act of 1982.
Effective January 1, 1985 the Plan was amended and
restated to comply with the provisions of the Deficit Reduction
Act of 1984 and the Retirement Equity Act of 1984.
The Plan was amended and restated to change the name
of the Plan to the Oceaneering Retirement Investment Plan,
effective July 1, 1985, and to add a cash or deferred arrangement
as provided for under Section 401(k) of the Internal Revenue
Code, effective October 1, 1985.
The Plan was amended effective January 1, 1987 to
comply with the provisions of the Tax Reform Act of 1986 and to
make certain other changes therein.
The Plan was amended and restated in order to
incorporate all prior amendments, comply with the Tax Reform Act
of 1986 and to make certain other changes therein effective
January 1, 1994.
Effective July 1, 1995, the Plan is hereby amended
and restated in order to provide for daily valuation of
participant s accounts, to incorporate new investment funds, to
HOU01A:316781.5
008939.0157
include loan provisions and to make certain other changes
therein.
Effective July 1, 1995, the Company terminated the
trustee and the trust related to the Plan, appointed CG Trust
Company ( CIGNA ) as the Trustee of the Plan, and adopted the
Agreement of Trust between the Company and CIGNA.
The Plan and the Trust are intended to meet the
requirements of Sections 401(a), 401(k) and 501(a) of the
Internal Revenue Code of 1986, and the Employee Retirement Income
Security Act of 1974, as either may be amended from time to time.
The Plan is a profit-sharing plan for purposes of
Section 401(a)(27) of the Internal Revenue Code of 1986, as
amended.
HOU01A:316781.5
008939.0157
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Definitions: The following words and phrases, when
used herein, unless their context clearly indicates otherwise,
shall have the following respective meanings:
Affiliate: A corporation or other trade or business
which, together with an Employer, is "under common control"
within the meaning of Section 414(b) or (c), as modified by
Section 415(h) of the Code; any organization (whether or not
incorporated) which, together with an Employer, is a member of an
"affiliated service group" within the meaning of Section 414(m)
of the Code; and any other entity required to be aggregated with
the Employer pursuant to regulations under Section 414(o) of the
Code.
Adjustment Date: Any date on which the New York Stock
Exchange is open for trading and any date on which the value of
the assets of the Trust Fund is determined by the Trustee
pursuant to Section 4.4 The last business day of December of each
Plan Year shall be the "Annual Adjustment Date."
Authorized Leave of Absence: Any absence authorized by
the Employer under the Employer's standard personnel practices
provided that all persons under similar circumstances must be
treated alike in the granting of such Authorized Leaves of
Absence and provided further that the Participant returns within
the period of authorized absence. Absence due to service in the
Armed Forces of the United States shall be deemed an authorized
leave of absence only to the extent required by federal law and
then only if the individual complies with all prerequisites of
such federal law, including return to employment with an Employer
within the period provided by such applicable federal law.
Beneficiary: A person or persons (natural or
otherwise) designated by a Participant in accordance with the
provisions of Section 5.5 to receive any death benefit which
shall be payable under this Plan. If a Participant has a spouse,
then unless the spouse consents as set forth in Section 5.5
hereof the spouse shall always be the Beneficiary of the
Participant.
Break in Service: An Employment Year within which a
Participant completes less than 501 Hours of Service. Solely for
purposes of determining whether a Participant has a Break in
Service for eligibility or vesting purposes, an individual who is
absent from work for maternity or paternity reasons shall receive
credit for the hours of service which would otherwise have been
credited to such individual but for such absence, or in any case
in which such hours cannot be determined, eight hours of service
per day of such absence. For purposes of this paragraph, an
absence from work for maternity or paternity reasons means an
absence (i) by reason of the pregnancy of the individual, (ii) by
reason of the birth of a child of the individual, (iii) by reason
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of the placement of a child with the individual in connection
with the adoption of such child by such individual, or (iv) for
purposes of caring for such child for a period beginning
immediately following such birth or placement. The hours of
service credited under this paragraph shall be credited (i) in
the computation period in which the absence begins if the
crediting is necessary to prevent a break in service in that
period, or (ii) in all other cases, in the following computation
period. No more than 501 Hours of Service shall be credited for
any single such absence.
Company: Oceaneering International, Inc., a Delaware
corporation.
Committee: The Administrative Committee appointed
pursuant to Section 7.2 to administer the Plan.
Common Stock: The Common Stock of Oceaneering
International, Inc., par value $0.25.
Compensation: The total of gross earnings, including
payments for commissions, overtime, shift premiums, depth
premiums, and completion, incentive and executive compensation
bonuses, but excluding payments for foreign housing, consumables,
schooling, overseas or hardship allowances, reimbursements of
expenses, taxes, or moving allowances, income realized or deemed
to be realized from the exercise of stock options or other
compensation under stock bonus or thrift or other such plans, and
any other payments or allowances of any kind for foreign or
domestic service not a function of direct salary or pay based on
service or performance; provided that, for purposes of allocating
the Employer's contribution for the Plan Year in which a
Participant begins or resumes Participation, Compensation paid
before his Participation began or resumed shall be disregarded.
Unmatched Deferred Contributions and Matched Deferred
Contributions authorized by a Participant pursuant to a salary
reduction agreement shall be considered Compensation for purposes
of the Plan. In addition to other applicable limitations set
forth in the Plan, and notwithstanding any other provision of the
Plan to the contrary, the Compensation of each Employee taken
into account under the Plan shall not exceed $150,000, as
adjusted by the Commissioner for increases in the cost of living
in accordance with Section 401(a)(17)(B) of the Code. The
cost-of-living adjustment in effect for a calendar year applies
to any period, not exceeding 12 months, over which Compensation
is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12
months, the Compensation limit will be multiplied by a fraction,
the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
If Compensation for any prior determination period is
taken into account in determining an Employee's benefits accruing
in the current Plan Year, the Compensation for that prior
determination period is subject to the Compensation limit in
effect for that prior determination period. For this purpose,
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for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the
Compensation limit is $150,000. For purposes of applying the
$150,000 limit on Compensation, the family unit of an Employee
who either is a 5% owner or is both a highly compensated employee
and one of the ten most highly compensated employees will be
treated as a single Employee with one Compensation, and the
$150,000 limit will be allocated among the members of the family
unit in proportion to the total Compensation of each member of
the family unit. For this purpose, a family unit consists of the
Employee who is a 5% owner or one of the ten most highly
compensated employees, the Employee's spouse, and the Employee's
lineal descendants who have not attained age 19 before the close
of the year.
Deferred Contribution: The amount contributed pursuant
to the Participant s deferral election by the Employer in
accordance with Section 3.2.
Disability: A physical or mental condition which, in
the judgment of the Committee, based upon medical reports and
other evidences satisfactory to the Committee, presumably
permanently prevents an Employee from satisfactorily performing
the duties of any occupation or job for which such Employee is
reasonably fitted or otherwise qualified by reason of his
training, education or experience.
Effective Date: July 1, 1995, the date on which the
provisions of this amended and restated Plan first become
effective.
Employee: Any person who, on or after the Effective
Date, is receiving remuneration for personal services rendered to
the Employer or an Affiliate (or who would be receiving such
remuneration except for an Authorized Leave of Absence). On and
after January 1, 1987, any person who is otherwise not an
Employee who pursuant to an agreement between an Employer or an
Affiliate ("recipient") and any other person ("leasing
organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with
Section 414(n)(6) of the Code) on a substantially full-time basis
for a period of at least one year, and such services are of a
type historically performed by employees in the business field of
the recipient employer, is a "leased employee" and shall be
considered an Employee, unless (i) the leased employee is covered
by a money purchase pension plan of the leasing organization
providing: (1) a non-integrated employer contribution rate of at
least 10% of compensation, as defined in Section 415(c)(3) of the
Code, but including amounts contributed by the employer pursuant
to a salary reduction agreement which are excludable from the
employee's gross income under Section 125, 402(a)(8), 402(h) or
403(b) of the Code, (2) immediate participation, and (3) full and
immediate vesting; and (ii) leased employees do not constitute
more than 20% of the recipient's non-highly compensated
workforce. If a leased employee is treated as an Employee,
contributions or benefits provided the leased employee by the
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leasing organization which are attributable to services performed
for the recipient employer shall be treated as provided by the
recipient employer.
Employer: Oceaneering International, Inc., a Delaware
corporation, each division thereof, and its Affiliates which have
adopted the Plan and become an Approved Organization in
accordance with Section 10.1 and as listed on Schedule A hereto.
Employer Contribution: Contributions made by the
Employer on behalf of Participants pursuant to Section 3.1 of the
Plan.
Employment Year: The 12-month period determined from
the Employee's first performance of an Hour of Service and
subsequent 12-month periods beginning on the anniversary of such
Employee's performance of such Hour of Service; provided,
however, that in the case of any Employee who incurs a Break in
Service, upon such Employee's re-employment his Employment Year
shall be deemed to commence on the date he first performs an Hour
of Service after such Break in Service.
ERISA: Public Law No. 93-406, the Employee Retirement
Income Security Act of 1974, as amended from time to time.
Fiduciaries: The Employer, the Committee, the Trustee
and any Investment Manager appointed pursuant to the Plan and
Trust, but only with respect to the specific responsibilities of
each for Plan and Trust administration, all as described in
Section 7.1. Any person or group of persons may serve in more
than one fiduciary capacity with respect to the Plan.
Forfeiture: The portion of a Participant's Employer
Contribution Account which is forfeited because of termination of
employment before full vesting.
Former Participant: A Participant whose employment
with the Employer has terminated but who has a vested account
balance under the Plan which has not been paid in full.
Hours(s) of Service: An Hour of Service is each hour
during an applicable computation period for which an Employee is
directly or indirectly paid, or entitled to payment, by an
Employer or an Affiliate for the performance of duties or for any
period of Authorized Leave of Absence. Moreover, an Hour of
Service is each hour, not in excess of 40 hours per week, during
any period of unpaid Authorized Leave of Absence with an Employer
or an Affiliate. Such Hours of Service shall be credited to the
Employee for the computation period in which such duties were
performed or in which such Authorized Leave of Absence occurred.
An Hour of Service also includes each hour, not credited above,
for which back pay, irrespective of mitigation of damages, has
been either awarded or agreed to by an Employer or an Affiliate.
These Hours of Service shall be credited to the Employee for the
computation period to which the award or agreement pertains
rather than the computation period in which the award, agreement
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or payment is made. In determining an Employee's total Hours of
Service during a computation period, a fraction of an hour shall
be deemed a full Hour of Service.
Hours of Service during the period prior to April 1,
1982 shall be determined from whatever records may be reasonably
accessible to the Company and, if such records are insufficient,
the Company may make whatever calculations are necessary to
approximate Hours of Service for the period in a manner uniformly
applicable to all Employees similarly situated.
Instead of counting and crediting actual hours worked,
for purposes of determining the number of Hours of Service to be
credited to an Employee, an Employee may be credited with 190
Hours of Service for each calendar month during which he has
earned one Hour of Service. For purposes of determining the
number of Hours of Service to be credited for reasons other than
the performance of duties and for purposes of determining to
which computation period Hours of Service earned under any
provision of this Plan are to be credited, the provisions of
Department of Labor Regulation para. 2520.200(b)-2(b) and (c) are
hereby incorporated by reference as if fully set forth herein.
Income: The net gain or loss of the Trust Fund from
investments, as reflected by interest payments, dividends,
realized and unrealized gains and losses on securities, other
investment transactions and expenses paid from the Trust Fund.
In determining the Income of the Trust Fund for any period,
assets shall be valued on the basis of their fair market value.
Income shall be separately determined for separate types of
investments, including Common Stock and any investments effected
through group annuity contracts or other products issued by
insurance companies in order that the net gain or loss
attributable to such investments be allocated only to the
accounts of those Participants who are participating in such
investments.
Participant: An Employee who has qualified to
participate in the Plan in accordance with the provisions of
Article II.
Participation: The period commencing as of the date
the Employee becomes a Participant and ending on the date his
employment with the Employer and Affiliates terminated.
Plan: The Oceaneering Retirement Investment Plan as
set forth in this document and as may be amended from time to
time.
Plan Year: The 12-month period commencing on January 1
and ending on December 31.
Service: A Participant's period of employment or
deemed employment with the Employer determined in accordance with
Article II and Section 5.3.
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Trust or Trust Fund: The fund known as the Oceaneering
Retirement Investment Plan Trust, maintained in accordance with
the terms of the trust agreement, as from time to time amended,
which constitutes a part of this Plan.
Trustee: The corporation or individual appointed by
the Board of Directors of the Company to administer the Trust.
Year of Service: An Employment Year during which the
Employee had not less than 1,000 Hours of Service.
1.2 Construction: The masculine gender, where appearing in
the Plan shall be deemed to include the feminine gender, and the
singular shall include the plural, unless the context clearly
indicates to the contrary.
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ARTICLE II
PARTICIPATION AND SERVICE
2.1 Participation:
A. Initial Eligibility: An Employee of Oceaneering
International, Inc. (or of any Affiliate which has adopted the
Plan with the consent of Oceaneering International, Inc. and
become an Approved Organization) shall become eligible to become
a Participant as of the first day of the calendar month next
following twelve months from the date he first performed an Hour
of Service.
B. Eligibility Upon Re-Employment: Any Employee of
Oceaneering International, Inc. (or any Affiliate which has
adopted the Plan with the consent of Oceaneering International,
Inc.) who is re-employed shall commence participation immediately
if he had been a Participant during his prior period of Service
or, if he had not been a Participant during his prior period of
Service, shall commence participation after the elapse of twelve
months from the date he first performed an Hour of Service.
C. Temporary Employees Ineligible: Notwithstanding any
other provision of this Plan, no temporary employee (as herein
defined) shall be eligible to participate herein while on
temporary status. For purposes of this Plan, a temporary
employee is an employee who is hired in a temporary position. A
temporary position is (i) a position which is expected by the
respective Employer or Affiliate to be of limited duration or
(ii) for a particular project upon the conclusion of which the
employee is expected by the respective Employer or Affiliate to
be terminated.
D. Leased Employees Ineligible: Notwithstanding any other
provision of this Plan, no leased employee (as defined in
Article I) shall be eligible to participate herein.
E. Former Eastport Plan Participants: Each individual who
was a participant in the Eastport International, Inc. Employee's
401(k) Profit Sharing Plan on December 31, 1992, and is employed
by the Company on such date ("Eastport Plan Participant") shall
immediately be eligible to become a Participant in this Plan
effective December 31, 1992.
F. Former ILC Employees: Each Employee, who was formerly
employed by ILC Space Systems, a division of ILC Dover, Inc.
("ILC") immediately prior to the transfer of assets from ILC to
the Company on May 18, 1993, shall receive service credit for
such Employee's last period of continuous employment with ILC
immediately prior to the transfer of assets for purposes of
Service requirements with respect to eligibility to participate
in and vesting under this Plan.
G. Former Multiflex, Inc. Employees: Effective May 2,
1994, each Employee, who was formerly employed by Multiflex,
HOU01A:316781.5
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Inc., a Texas corporation ("Multiflex"), immediately prior to the
Stock Purchase Agreement, dated March 4, 1994, among the Company,
Oceaneering International Services Limited and Multiflex
International, Inc. shall receive Service credit for such
Employee's last period of continuous employment with Multiflex
immediately prior to the transfer of assets for purposes of
Service requirements with respect to eligibility to participate
in and vesting under this Plan.
2.2 Notification of Eligible Employees: The Committee,
which shall be the sole judge of the eligibility of an Employee
to participate under the Plan, shall notify each Employee of his
initial eligibility to participate in the Plan.
2.3 Participant Applications: Each Employee who shall
become eligible to become a Participant under the Plan, and who
shall desire so to become a Participant, shall execute and file
with the Committee an application to become a Participant in such
form as may be prescribed by the Committee, agreeing to be bound
by the terms and conditions of the Plan, and authorizing salary
reductions for Deferred Contributions as provided in Article III
hereof. An Employee who does not participate in the Plan when he
first becomes eligible may commence such participation, if he is
then otherwise eligible, as of the first day of any calendar
month thereafter by signing and returning to the Committee an
application, in the prescribed form, at least ten days prior to
the first day of such calendar month. Once an Employee has
commenced participation in the Plan he shall remain a Participant
as long as he continues as an Employee of an Employer, is in an
employment status covered by the Plan and has an account in the
Trust Fund.
An Employee's application to become a Participant under
the Plan shall include an election by the Participant concerning
which of, and in what proportion, Deferred Contributions made in
his behalf shall be invested in the particular Investment Fund
alternatives described in Section 4.7 of this Plan.
2.4 Transfers and Authorized Leaves of Absence: If a
Participant is transferred to employment with an Affiliate that
is not an Employer or to an employment classification with an
Employer that is not covered by this Plan, his participation
under the Plan shall be suspended; provided, however, that during
the period of his employment in such ineligible position or with
a non-participating Affiliate: (i) he may make no further
Deferred Contributions, (ii) he shall continue to vest, (iii) his
Employer Contribution Account shall receive no Employer
Contribution allocations under Section 4.2 for periods during
which he is not eligible to participate herein, and (iv) he shall
continue to participate in the allocation of the Income of the
Trust Fund as provided in Section 4.6.
If a Participant is on an Authorized Leave of Absence
he shall discontinue participation until his return to active
employment except that if regular payroll salary or wages are
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continued during such absence the Participant shall continue to
participate during such absence.
2.5 Re-Employment; Certain Account Reinstatements: Upon
the re-employment of any individual who had previously been a
Participant after five consecutive Breaks in Service, such a
re-employed individual shall not be entitled to reinstatement of
any Forfeiture incurred by reason of his prior termination of
employment. Upon the re-employment of an individual who had
previously been a Participant and prior to incurring five
consecutive Breaks in Service, any prior Forfeiture incurred by
reason of his termination of employment and a resulting
distribution shall be reinstated as of his re-employment and
thereafter held in his Employer Contribution Account.
2.6 Service for Former Eastport Employees: For purposes of
calculating Service under this Plan, a Participant who is a
former Eastport employee shall receive credit for his Service
with Eastport as defined in the Eastport Plan.
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ARTICLE III
CONTRIBUTIONS AND FORFEITURES
3.1 Employer Contributions: Each Employer shall make a
Contribution to the Trust Fund in cash or in Common Stock (but
contributions of Common Stock may only be made to the extent
Common Stock is required to fund Employer Contributions
(including Deferred Contributions) to be invested in Common Stock
or to the extent a restored account is to be invested in Common
Stock) equal to (i) any amount required to restore benefits under
Section 7.18, (ii) an amount equal to 100% of Matched Deferred
Contributions that are to be invested in Common Stock, (iii) an
amount equal to 50% of Matched Deferred Contributions that are to
be invested among the available Investment Funds under
Section 4.7 hereof (excluding Common Stock), (iv) an amount equal
to the Deferred Contributions authorized by Participants, (v) any
amount necessary to restore Forfeitures under Section 2.5, and
(vi) such other amount as may be determined by the Employer. The
Employer Contribution (except for amounts required to restore
benefits under Section 2.5 or 7.18) shall be authorized by the
Employer by adopting an appropriate resolution of its Board of
Directors and announcing the contribution to Employees and either
claiming such amount as a deduction on its federal income tax
return or designating such amount in writing to the Trustee. The
total of Employer and Deferred Contributions shall in no event
exceed the maximum amount deductible from the Employer's income
for such year under Section 404(a)(3)(A) of the Code plus any
carried over credits which may have accrued under Section 404 of
the Code.
The amount of the Employer Contribution in the case of
Employer Contributions made in respect of the Matched Deferred
Contributions that are invested in Common Stock shall be equal to
100% of such Matched Deferred Contributions and, in the case of
Employer Contributions made in respect of Matched Deferred
Contributions that are invested among all other Investment Funds
(excluding Common Stock), shall be equal to 50% of such Matched
Deferred Contributions.
Notwithstanding the foregoing provisions of this
Section 3.2, from and after January 1, 1996, if the Employer
determines prior to the end of the Plan Year that the Plan may
not satisfy the actual contribution percentage test for the Plan
Year pursuant to Article XIII of the Plan, the Employer may
require that the amount of the Employer Contribution being
allocated to the accounts of Participants who are highly
compensated employees be reduced to the extent necessary to
prevent excess aggregate contributions from being made to the
Plan. Although the Employer may reduce the amount of Employer
Contribution that may be allocated to the account of a highly
compensated employee, the affected Participants shall continue to
participate in the Plan. The determination of whether an
Employee is a highly compensated employee shall be determined in
accordance with Code Section 414(q) in the determination year
which shall be the Plan Year and the look-back year shall be the
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12-month period immediately preceding the determination year, or
at the election of the Employer, may be the calendar year ending
within the determination year. In applying the foregoing
limitations to highly compensated employees, the Committee shall
adopt such rules and procedures as it determines are necessary
and appropriate in order to implement such limitations.
Any Employer Deferred Contribution or Deferred
Contribution which is made by a mistake of fact may be returned
to the Employer, upon the direction of the Committee, within one
year after the payment of the Employer Deferred Contribution or
Deferred Contribution.
All Employer Deferred Contributions and Deferred
Contributions effected to this Plan are specifically conditioned
upon their deductibility under Section 404 of the Code and to the
extent such deduction is disallowed then, upon direction of the
Committee, so much of such Employer Deferred Contribution and/or
Deferred Contribution which is disallowed as a deduction shall be
returned to the Employer not later than one year after the
disallowance of the deduction.
Employer Deferred Contributions and Deferred
Contributions may be made at any time before the due date of the
Company's federal income tax return (including extensions
thereof) for its fiscal year within which occurs the last day of
the Plan Year for which such contributions are made.
3.2 Deferred Contributions: Each Participant, so long as
he remains a Participant, shall be permitted to elect a Deferred
Contribution rate and have contributed to the Trust Fund an
amount in 1% increments (or other incremental amounts determined
by the Committee) from 1% to 16% of his Compensation for the Plan
Year. Subject to the specific provisions of this Section 3.2, in
the usual case Deferred Contributions not exceeding the first 6%
of his Participant's Compensation shall be termed Matched
Deferred Contributions and the excess of Deferred Contributions
over Matched Deferred Contributions shall be termed Unmatched
Deferred Contributions.
All Deferred Contributions must be made by
payroll deduction in accordance with rules established by the
Committee. All Deferred Contributions shall be paid over to the
Trustee as soon as is practicable after withholding by payroll
deduction. A change in the amount of Compensation of a
Participant shall not change the percentage of his Compensation
previously directed to be withheld under this Section 3.2.
A Participant may, by giving 10 days' advance written
notice to the Committee, change the amount of his Deferred
Contributions once every 30 days effective as of the first day of
the next calendar month.
A Participant may elect at any time to totally suspend
either his Unmatched Deferred or Matched Deferred Contributions
and such suspension shall become effective for the first pay
HOU01A:316781.5
008939.0157
period next following receipt by the Committee of such notice of
suspension if such notice is received at least ten days prior to
the commencement of such pay period, otherwise the notice shall
be effective for the next following pay period. In the event of
a suspension, the Unmatched Deferred or Matched Deferred
Contributions, or both, so suspended may not be resumed until the
first day of the calendar month next following six calendar
months from the date such contributions were discontinued. For
any period which a Participant is suspended from participating in
the Plan pursuant to the provisions of this Section 3.2, such a
Participant shall nevertheless remain a Participant in the Plan
and he shall participate, to the extent he is otherwise entitled,
in Employer Contributions under the Plan and his Account will
continue to share in Income of the Trust Fund during such period.
Notwithstanding the foregoing provisions of this
Section 3.2, on and after January 1, 1989 and prior to January 1,
1996, in the case of a highly compensated employee (within the
meaning of Section 414(g) of the Code (i) no compensation in
excess of $50,000 shall be considered for determining an amount
of such Participant s Deferred Contribution rate and (ii) the
maximum Deferred Contributions for such a Participant shall not
exceed 6% of the Participant s Compensation (as limited by clause
(i) hereof). From and after January 1, 1996, if the Employer
determines prior to the end of the Plan Year that the Plan may
not satisfy the actual deferral percentage test pursuant to
Article XIII of the Plan for the Plan Year, the Employer may
reduce the percentage rate of Compensation that a highly
compensated employee has elected to defer pursuant to this
Section 3.2 to the extent necessary to prevent excess
contributions from being made to the Plan. Although the Employer
may reduce the amount of Deferred Contribution that may be
allocated to the account of a highly compensated employee, the
affected Participants shall continue to participate in the Plan.
When the situation that resulted in the reduction of Deferred
Contributions ceases to exist, the Employer shall reinstate the
amount of Deferred Contributions elected by the Participant to
the fullest extent possible for all affected Participants in a
nondiscriminatory manner. The determination of whether an
Employee is a highly compensated employee shall be determined in
accordance with Code Section 414(q) in the determination year
which shall be the Plan Year and the look-back year shall be the
12-month period immediately preceding the determination year, or
at the election of the Employer, may be the calendar year ending
within the determination year. In applying the foregoing
limitations to highly compensated employees, the Committee shall
adopt such rules and procedures as it determines are necessary
and appropriate in order to implement such limitations.
Notwithstanding the foregoing provisions of this
Section 3.2, a Participant's Deferred Contributions during any
taxable year beginning after December 31, 1995, shall not exceed
a maximum of $9,500 as adjusted by the Secretary of the Treasury
to account for cost-of-living increases. In the event a
Participant's Deferred Contributions exceed such limit, or in the
event the Participant submits a written claim to the Committee,
HOU01A:316781.5
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at the time and in the manner prescribed by the Committee,
specifying an amount of Deferred Contributions that will exceed
the applicable limit of Section 402(g) of the Code when added to
amounts deferred by the Participant in other plans or
arrangements, such excess (the "Excess Deferrals"), plus any
income and minus any loss attributable thereto, shall be returned
to the Participant by the April 15 of the following year. Such
income shall include the allocable gain or loss for (i) the Plan
Year in which the Excess Deferral occurred and (ii) the period
from the end of that Plan Year to the date of distribution, and
distribution shall first be applied to Unmatched Deferred
Contributions and, upon their exhaustion, to Matched Deferred
Contributions. The amount of any Excess Deferrals to be
distributed to a Participant for a taxable year shall be reduced
by excess Pre-Tax Contributions distributed pursuant to
Article XIII for the Plan Year beginning in such taxable year.
The income or loss attributable to the Participant's Excess
Deferral for the Plan Year shall be determined by multiplying the
income or loss attributable to the Participant's respective
Deferred Contribution Account balance for the Plan Year (or
relevant portion thereof) by a fraction, the numerator of which
is the Excess Deferral and the denominator of which is the
Participant's total respective Deferred Account balance as of the
Valuation Date next preceding the date of return of the Excess
Deferral. Unless the Committee elects otherwise, the income or
loss attributable to the Participant's Excess Deferral for the
period between the end of the Plan Year and the date of
distribution shall be determined using the safe-harbor method set
forth in Treasury Regulations to Section 402(g) of the Code, and
shall be equal to 10% of the allocable income or loss for the
Plan Year, calculated as set forth immediately above, multiplied
by the number of calendar months that have elapsed since the end
of the Plan Year. For these purposes, distribution of an Excess
Deferral on or before the 15th day of a calendar month shall be
treated as having been made on the last day of the preceding
month, and a distribution made thereafter shall be treated as
having been made on the first day of the next month. Any Excess
Deferrals not returned to the Participant by April 15 of the
following year shall be treated as Annual Additions under
Article XI of the Plan.
3.3 Withdrawals:
(A) Voluntary and Mandatory Contributions: Upon
written application to the Committee, a Participant may
elect at any time to withdraw all or any portion of
Voluntary Contributions in the Employee Contribution
Account of such Participant (made pursuant to the
provisions of the Plan in effect prior to October 1,
1985), as adjusted for investment income, gain or loss,
determined as of the Adjustment Date next following the
filing of the election to withdraw by the Participant with
the Committee. A Participant may elect at any time to
withdraw all or any portion of Mandatory Contributions in
the Employee Contribution Account of such Participant
(made pursuant to the provisions of the Plan in effect
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prior to October 1, 1985), as adjusted for investment
income, gain or loss, determined as of the Adjustment Date
next following the filing of the election to withdraw with
the Committee.
(B) Rollover Contributions: Upon written application
to the Committee, a Participant may elect at any time to
withdraw all or any portion of Rollover Contributions in
such Participant s Rollover Account, as adjusted for
investment income, gain or loss, determined as of the
Adjustment Date next following the filing of the election
to withdraw by the Participant with the Committee.
(C) Pre 1985-Employer Contribution Account: Upon
written application to the Committee, a Participant may
elect at any time to withdraw all or any portion of
contributions in his Employer Contribution Account which
are attributable to contributions made pursuant to the
provisions of the Plan in effect prior to October 1, 1985.
Provided, however, that no such withdrawal of Employer
Contributions made prior to 1985 shall be permitted unless
the Participant's Voluntary Contributions, Mandatory
Contributions and/or Rollover Contributions are then or
have previously been completely and fully withdrawn by the
Participant. A Participant's request to withdraw any such
Employer Contributions shall be subject to the consent of
the Committee. Each such withdrawal from such Employer
Contribution Account shall be made as of the Adjustment
Date next following the date of the filing of election to
withdraw with the Committee.
(D) Hardship Withdrawals: A Participant may at any
time file with the Committee an appropriate written
request for a hardship withdrawal of an amount equal to a
specified portion of his vested Employer Contribution
Account and Deferred Accounts; provided, however, that no
such withdrawal shall be permitted (i) unless the
Participant's Employee Contribution Account(s)
(attributable to Voluntary and Mandatory Contributions)
and/or Rollover Account is then or has previously been
completely withdrawn by the Participant or (ii) to the
extent such withdrawal would include Income allocated to
his Deferred Accounts on or after January 1, 1989, and
that on and after January 1, 1989, no such withdrawal
shall be made from his Employer Contribution Account to
the extent such withdrawal would include qualified
matching contributions or qualified non-elective
contributions, as defined in Section 1.401(k)-1(g)(7) of
the Treasury Regulations, and any Income allocated
thereto. A Participant's request to withdraw any amount
from Employer Contribution Account or Deferred Accounts
must be made in writing and shall be subject to the
consent of the Committee. The basis for the Committee
consenting to or refusing to consent to the Participant's
request shall be that of demonstrated severe and immediate
financial hardship of the Participant and other resources
HOU01A:316781.5
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of the Participant are not reasonably available to
alleviate the hardship.
A Participant must have taken all distributions, other
than hardship distributions, and all nontaxable loans
otherwise available under this Plan and all employee plans
maintained by the Company. The amount of the hardship
withdrawal shall be limited to that amount which the
Committee determines to be required to meet the immediate
financial need created by the hardship; provided however,
the amount may include any amounts necessary to pay any
federal, state or local income taxes or penalties
reasonably anticipated to result from the distribution.
The hardship withdrawal shall be made in cash as soon
as practicable after the Participant submits the hardship
request, and the dollar amount withdrawn shall be
determined by reference to the value of the Deferred
Contribution Account and the value of the Participant s
vested interest in his Employer Contributions Account as
of the Adjustment Date immediately preceding the date of
withdrawal, plus the net dollar amount of his or her
contributions for the month in which the withdrawal
occurs. The Participant shall file a written request with
the Committee specifying the reasons for the withdrawal,
the amount of funds requested to be withdrawn, and the
Account from which the withdrawal should be made. A
Participant who receives such a hardship withdrawal shall
be prohibited from making a Deferred Contribution under
the Plan or elective contributions and employee
contributions to all other plans maintained by the
Employer for the 12 consecutive months following the date
of distribution, and in addition, the dollar limitation on
the Deferred Contribution described in Section 3.2 shall
be reduced in the year following the hardship withdrawal
by the amount of the Deferred Contribution made by the
Participant in the Plan Year during which the withdrawal
was made.
The following standards (or such other standards as may
be acceptable under Treasury Regulations issued pursuant
to Section 401(k) of the Code) shall be applied by the
Committee on a uniform and nondiscriminatory basis in
determining the existence of such a hardship:
(i) expenses for medical care previously
incurred by the Participant or the Participant's
spouse, children or other dependents (within the
meaning of Section 152 of the Code) or necessary
for these persons to obtain medical care described
in Section 213(d) of the Code;
(ii) costs directly related to the purchase of
a principal residence for the Participant
(excluding mortgage payments);
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(iii) payment of tuition and related
educational fees for the next 12 months of
post-secondary education for the Participant or the
Participant's spouse, children or other dependents
as defined in Section 152 of the Code; or
(iv) payments necessary to prevent the
eviction of the Participant from his principal
residence, or foreclosure on the mortgage of the
Participant's principal residence.
Any withdrawal shall be from such one or more of the
investments in which the Participant's Accounts are invested as
determined by the Committee in its sole discretion, but the
Committee may determine to permit Participants to elect from
which investments a less than total withdrawal shall be made.
3.4 Disposition of Forfeitures: In the event of the
termination of a Participant's employment, his Employer
Contribution Account shall continue to be maintained (and receive
Income allocations pursuant to Section 4.6). Upon the earlier of
the terminated Participant's (i) receiving a distribution of the
entire portion of the Account to which he is entitled under
Section 5.3 (except, that if he is not so entitled to any such
portion, he shall be deemed to have received such a distribution
upon such termination of employment) or (ii) incurring five
consecutive Breaks in Service, the portion of the Account to
which he is not entitled shall become a Forfeiture and, as such,
forfeited from the Account, valued as of the preceding Adjustment
Date and available to reduce future Employer Contributions in
accordance with the provisions of this Section. Upon a
terminated Participant becoming re-employed by the Employer or an
Affiliate prior to incurring five consecutive Breaks in Service
but after incurring a Forfeiture, the amount of the Forfeiture,
valued as of the Adjustment Date preceding the date forfeited and
without adjustment for subsequent gains and losses, shall be
reinstated in his Employer Contribution Account. In any Plan
Year in which amounts are required to be credited to the Account
of a previous Participant pursuant to the re-employment
provisions of Section 2.5 or the unclaimed benefit provisions of
Section 7.18 hereof, such amounts shall be charged against and
deducted from Forfeitures otherwise available to reduce Employer
Contributions for the Plan Year in which such amounts must be
reinstated. To the extent that Forfeitures for any Plan Year
exceed the amounts required to reinstate the Accounts of
reinstated Participants, they shall be applied to reduce Employer
Contributions for the Plan Year. In any Plan Year in which
Forfeitures exceed the amount required as Employer Contributions,
such excess shall be held in a suspense account (which shall not
share in the Income of the Trust Fund) and applied until
exhausted toward satisfying future Employer Contributions.
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ARTICLE IV
ALLOCATIONS TO PARTICIPANTS' ACCOUNTS
4.1 Individual Accounts: The Committee shall create and
maintain adequate records to disclose the interest in the Trust
of each Participant, Former Participant and Beneficiary. Such
records shall be in the form of individual accounts, and credits
and charges shall be made to such accounts in the manner herein
described.
Each Participant may have the following Accounts: An
Employer Contribution Account, an Unmatched Deferred Contribution
Account, a Matched Deferred Contribution Account and a Rollover
Account. In addition, a Participant in the Plan as in effect
prior to October 1, 1985, may also have a Mandatory Employee
Contribution Account and a Voluntary Employee Contribution
Account. The maintenance of individual accounts is only for
accounting purposes, and a segregation of assets of the Trust
Fund to each account shall not be required. Voluntary Employee
Contribution Accounts, Mandatory Employee Contribution Accounts,
Unmatched Deferred Accounts and Matched Deferred Accounts shall
be non-forfeitable and fully vested at all times.
4.2 Employer and Deferred Contributions: Deferred
Contributions shall be allocated to the respective Participant
Deferred Contribution Accounts of those Participants who elected
salary reduction in order to have such Deferred Contributions
made by the Employer.
Subject to the limitations of Section 3.1, the portion
of the Employer Contribution effected to restore benefits as
required under either Section 2.5 or 7.18 shall be allocated to
the appropriate Participants entitled thereto. The remainder of
the Employer Contribution (excluding Deferred Contributions) for
any Plan Year shall be allocated to eligible Participants by
dividing such remainder into two parts, one part each for those
Employer Contributions that are made in respect of Matched
Deferred Contributions invested in Common Stock and the other
part consisting of those Employer Contributions that are made in
respect of Matched Deferred Contributions that are invested among
the available Investment Funds pursuant to Section 4.7 (excluding
Common Stock). The amount of each Participant's share of the
part of the Employer's Contribution that is made in respect of
Matched Deferred Contributions invested in Common Stock is to be
determined by multiplying the total of such Employer Contribution
to be allocated times a fraction, the numerator of which is the
Participant's Matched Deferred Contributions for the Plan Year
that are to be invested in Common Stock and the denominator of
which is the total of all eligible Participants' Matched Deferred
Contributions for the Plan Year that are to be invested in Common
Stock. The amount of each Participant's share in the part of the
Employer's Contribution that is attributable to Matched Deferred
Contributions invested among the available Investment Funds
pursuant to Section 4.7 (excluding Common Stock) is to be
determined by multiplying the total of such Employer Contribution
HOU01A:316781.5
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to be allocated times a fraction, the numerator of which is the
Participant's Matched Deferred Contributions for the Plan Year
which have been or are to be invested among the available
Investment Funds pursuant to Section 4.7 (excluding Common Stock)
and the denominator of which is the total of all eligible
Participants' Matched Deferred Contributions which have been or
are to be invested among the available Investment Funds pursuant
to Section 4.7 (excluding Common Stock) for the Plan Year. Any
amount of Employer Contribution allocated to a Participant shall
be allocated to his Employer Contribution Account.
Allocation of Employer, including Deferred,
Contributions may be effected as of any Adjustment Date
determined by the Committee; provided, however, that all
Employer, including Deferred, Contributions shall be allocated,
unless allocated earlier in the Plan Year, as of the December 31
Adjustment Date.
4.3 Forfeitures: As of the end of each Plan Year,
Forfeitures, which have become available for distribution during
such Plan Year, shall be credited to the obligation of the
Employer to effect Employer, including Deferred, Contributions.
4.4 Valuation of Trust Fund: A valuation of the Trust Fund
shall be made as of each annual Adjustment Date and such
valuation shall be based upon the current market value of the
Trust Fund. The Committee may in its discretion require that an
Adjustment Date with a determination of asset value occur on any
other date during the Plan Year that the Committee deems a
valuation to be advisable. Any such interim valuation shall be
exercised on a uniform and non-discriminatory basis. For the
purposes of each such valuation, the assets of each Investment
Fund shall be valued at their respective current market values,
and the amount of any obligations for which the Investment Fund
may be liable, as shown on the books of the Trustee, shall be
deducted from the total value of the assets.
4.5 Distributions Deducted from Participant's Account: The
amount of any benefits paid to or for the account of any
Participant shall be debited to his Account as of the Adjustment
Date preceding the date paid.
4.6 Income: The Income of the Trust Fund for each
Adjustment Date shall be divided among the available Investment
Funds pursuant to Section 4.7 in order that the Income
attributable to each of these respective categories of
investments is allocated only to such investments and thereafter
shall be further allocated to the Accounts of Participants,
Former Participants and Beneficiaries who had unpaid balances in
their Accounts in the appropriate investment category on the
Adjustment Date in proportion to the balances in such Accounts on
the day after the next preceding Adjustment Date, but after first
reducing each such Account balance by any distributions from the
Account since the next preceding Adjustment Date. If, upon
termination of employment of a Participant, a change of 10% or
more in the value of the assets of any category of investments of
HOU01A:316781.5
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the Trust Fund has occurred since the last Adjustment Date, the
Committee shall instruct the Trustee to determine the Income
attributable to the particular category of investment since the
last Adjustment Date in which event the Accounts of any
Participant whose employment terminates prior to the next
Adjustment Date shall be adjusted to reflect this determination.
4.7 Investment Funds: The Trustee shall divide the Trust
Fund into separate Investment Funds for investment purposes as
set forth on Schedule B hereto. Contributions shall be paid into
the Investment Funds in accordance with the provisions of
Sections 4.8 and 4.9, as certified to the Trustee by the
Committee. Except as otherwise provided herein, interest,
dividends and other income and all profits and gains produced by
each such Investment Fund shall be paid into such Investment
Fund, and such interest, dividends and other income or profits
and gains, without distinction between principal and income, may
be invested and reinvested but only in the property hereinabove
specified for the particular Investment Fund.
4.8 Investment Directions by Participants; Employer
Contribution Investment: Each Participant shall file a written
investment election (including amendments of such investment
election as contemplated by this Plan) with the Committee in the
manner prescribed by it, which shall direct the amount of his
Deferred Contributions and Rollover Accounts and all Income of
the Trust allocable to such contributions, in such percentages
(in increments of 1%) as he may designate among the Investment
Funds.
Once a Participant makes an election to direct his
Deferred Contributions and Rollover Accounts, such an election
shall remain in effect until it is changed by the Participant
pursuant to the procedures in this Section 4.8.
An initial direction of investments for Rollover
Accounts and Deferred Contributions Accounts pursuant to an
election under Section 3.2 shall be made upon at least ten days'
notice to be effective as of the first day of the following
calendar month. Any change of investment direction with respect
to unallocated Deferred Contributions may be made once every 30
days by providing advance notice and shall be effective only with
respect to those contributions that are allocated on or after the
Trustee receives from the Committee such written notice of change
of investment election.
The Employer Contributions (excluding Deferred
Contributions) made with respect to Deferred Contributions that
are invested in Common Stock and any Income of the Trust Fund
allocable to such contributions shall initially be invested in
Common Stock. The Employer Contributions (excluding Deferred
Contributions) that are invested in any Investment Fund other
than Common Stock of the Employer, and all Income of the Trust
Fund allocable to such contributions shall be invested in such
percentages which correspond to the Participant's election of
Investment Funds with respect to his Deferred Contributions.
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All investment elections may be subject to such
limitations, determined as either a dollar amount or as a
percentage of contributions, as the Committee may determine is
necessary or appropriate in order to facilitate the orderly and
prudent operation of the Plan and shall be subject to such notice
requirements as the Committee may determine are necessary or
appropriate.
4.9 Change of Investment of Account Balances: Once each 30
days via the Plan's telephone exchange system, each Participant
may elect to transfer his existing Account balances among the
available Investment Funds (in 1% increments), provided that such
transfer election shall be made no more than twelve times per
calendar year. In addition, any such election shall be subject
to such further terms and conditions as the Committee may
determine to be necessary or appropriate, including dollar or
percentage limitations on amounts of funds transferred, in order
to facilitate the orderly and prudent operation of the Plan.
In the event a Participant elects to transfer funds out
of an Investment Fund, then any charge attributable to such
transfer, including a withdrawal, such as a market value discount
imposed under the terms of a guaranteed investment contract,
shall be imposed upon and borne solely by the account of the
Participant who is making the withdrawal.
4.10 Special Provisions Applicable to Eastport Plan
Accounts: The Committee shall instruct the Trustee to accept a
transfer of the full account balance as of December 31, 1992 of
each individual who was a participant in the Eastport Plan as of
December 31, 1992. Such transferred assets shall be allocated to
Participant Accounts in the Plan as follows:
(a) Eastport Plan assets attributable to a
Participant's pre-tax employee contributions made
under the Eastport Plan which amounts were not
subject to a matching employer contribution shall be
transferred to and held thereafter in the
Participant's Unmatched Deferred Contribution
Account.
(b) Eastport Plan assets attributable to a
Participant's pre-tax employee contributions made
under the Eastport Plan which amounts were subject
to a matching employer contribution shall be
transferred to and held thereafter in the
Participant's Matched Deferred Contribution Account.
(c) Eastport Plan assets attributable to
employer matching contributions made under the
Eastport Plan for a Participant shall be transferred
to and held thereafter in the Participant's Employer
Contribution Account.
(d) Eastport Plan assets attributable to
employer profit-sharing or other discretionary
HOU01A:316781.5
008939.0157
contributions made under the Eastport Plan for a
Participant shall be transferred to and held
thereafter in the Participant's Employer
Contribution Account.
(e) Eastport Plan assets attributable to a
rollover into the Eastport Plan by a Participant
shall be transferred to and held thereafter in the
Participant's Rollover Account.
Each Eastport Plan Participant who has an outstanding loan under
the Eastport Plan shall be required to repay such loan in
accordance with the terms of the Eastport Plan documents,
Eastport Plan Loan Policy and the loan agreement signed by the
Participant.
4.11 Loans: Effective January 1, 1996, a Participant
who is an Employee and, to the extent not resulting in
discrimination prohibited by Section 401(a)(4) of the Code, any
other Participant or any Beneficiary (including an "alternate
payee" within the meaning of Code Section 414(p)(8)) who is a
"party in interest" with respect to the Plan within the meaning
of ERISA Section 3(14) and who must be eligible to obtain a Plan
loan in order for the exemption set forth in 29 C.F.R. Section
2550.408b-1 to apply to the Plan, (hereinafter "Borrower"), may
make application to the Committee to borrow from the vested
portion of his Employer Contribution Account, Unmatched Deferred
Contribution Account, Matched Deferred Contribution Account,
Rollover Account, Mandatory Employee Contribution Account, and
Voluntary Employee Contribution Account maintained by or for the
Borrower in the Trust Fund, and the Committee in its sole
discretion may permit such a loan. Loans shall be granted in a
uniform and nondiscriminatory manner on terms and conditions
determined by the Committee which shall not result in more
favorable treatment of highly compensated employees and shall be
set forth in written procedures promulgated by the Committee in
accordance with applicable governmental regulations. All such
loans shall also be subject to the following terms and
conditions:
(a) The amount of the loan when added to the
amount of any outstanding loan or loans to the
Borrower from any other plan of the Employer or an
Affiliate which is qualified under Code
Section 401(a) shall not exceed the lesser of
(i) $50,000, reduced by the excess, if any, of the
highest outstanding balance of loans from all such
plans during the one-year period ending on the day
before the date on which such loan was made over the
outstanding balance of loans from the Plan on the
date on which such loan was made or (ii) fifty
percent (50%) of the present value of the Borrower's
vested Account balance under the Plan. In no event
shall a loan of less than $1,000 be made to a
Borrower. A Borrower may not initiate a loan more
than once each calendar year; nor may a Borrower
HOU01A:316781.5
008939.0157
have more than one (1) loan for the purchase of a
principal residence and one (1) loan for any other
purpose outstanding at a time under this Plan.
(b) The loan shall be for a term not to exceed
five years, unless the loan is used to acquire any
dwelling unit which within a reasonable time is to
be used as a principal residence of the Borrower. A
loan for the purchase of a principal residence shall
be for a term not to exceed 10 years. The loan
shall be evidenced by a note signed by the Borrower.
The loan shall be payable in periodic installments
and shall bear interest at a reasonable rate which
shall be determined by the Committee on a uniform
and consistent basis and set forth in the procedures
in accordance with applicable governmental
regulations. Payments by a Borrower who is an
Employee receiving compensation from the Employer
will be made by means of payroll deduction from the
Borrower's compensation. If the Borrower is not
receiving compensation from the Employer, the loan
repayment shall be made in accordance with the terms
and procedures established by the Committee. A
Borrower may repay an outstanding loan in full at
any time.
(c) In the event an installment payment is not
paid within 7 days of the scheduled due date, the
Committee shall give written notice to the Borrower
sent to his last known address. If such installment
payment is not made within the period set forth in
applicable procedures, the Committee shall proceed
with foreclosure in order to collect the full
remaining loan balance or shall make such other
arrangements with the Borrower as the Committee
deems appropriate. Foreclosures need not be
effected until occurrence of a distributable event
under the terms of the Plan and no rights against
the Borrower or the security shall be deemed waived
by the Plan as a result of such delay.
(d) The unpaid balance of the loan, together
with interest thereon, shall become due and payable
upon the date of distribution of the Account or as
set forth in the applicable procedures and the
Trustee shall first satisfy the indebtedness from
the amount payable to the Borrower or to the
Borrower's Beneficiary before making any payments to
the Borrower or to the Beneficiary.
(e) Any loan to a Borrower under the Plan shall
be adequately secured. Such security shall include
a pledge of a portion of the Borrower's right, title
and interest in the Trust Fund which shall not
exceed 50% of the present value of the Borrower's
vested Account balance under the Plan as determined
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008939.0157
immediately after the loan is extended. Such pledge
shall be evidenced by the execution of a promissory
note by the Borrower which shall grant the security
interest and provide that, in the event of any
default by the Borrower on a loan repayment, the
Committee shall be authorized to take any and all
appropriate lawful actions necessary to enforce
collection of the unpaid loan.
(f) A request by a Borrower for a loan shall be
made via the Plan's telephone exchange system, shall
be confirmed in writing to the Committee and shall
specify the amount of the loan. If a Borrower's
request for a loan is approved by the Committee, the
Committee shall furnish the Trustee with written
instructions directing the Trustee to make the loan
in a lump-sum payment of cash to the Borrower.
(g) A loan to a Borrower shall be considered an
investment of the separate Account(s) of the
Borrower from which the loan is made. A record of
the principal outstanding and interest accrued on
the loan from time to time shall be maintained as
the Participant's Loan Account. All loan repayments
shall be credited as a reduction to the balance of
the Loan Account when paid and thereafter reinvested
exclusively in one or more of the Investment Funds
in accordance with such Participant's investment
election under Section 4.8.
(h) The administrative expense associated with
the loan will be charged against the Participant's
loan balance or to the Participant's Account from
which the loan is made.
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ARTICLE V
BENEFITS
5.1 Retirement: If a Participant's employment with the
Employers and Affiliates terminates at or after he attains the
age of 55, the entire amount then in each of his Accounts shall
be paid to him in accordance with Section 5.4. A Participant
shall be fully vested in the amount in his Accounts upon
attaining the age of 55 while in the service of an Employer or
Affiliate.
5.2 Death or Disability: In the event that a Participant's
termination of employment is caused by his death or Disability,
the entire amount then in each of his Accounts shall be paid to
his Beneficiary in the case of his death or to him in the case of
his Disability in accordance with Section 5.4 after receipt by
the Committee of acceptable proof of death or Disability.
5.3 Termination for Other Reasons: If a Participant's
employment with the Employers and Affiliates terminates before
age 55 for any reason other than Disability or death, the
Participant shall be entitled to the sum of:
(a) The entire amount credited to his Employee
Contribution Account and Deferred Contribution
Accounts; plus
(b) In the case of a Participant who timely
elected under Section 10.5 to be covered by
(ii) after the vesting schedule amendment to the
Employees Stock Purchase Plan effective March 15,
1983, the amount determined under paragraph (ii)
below, and in the case of a Participant who did not
elect to be covered by (ii) or who was not eligible
to be covered by (ii), the amount determined under
(i) below:
(i) An amount equal to his "vested
percentage" of his Employer Contribution
Account balance determined in accordance with
the following schedule:
Years of Service Vested Percentage
Less than 1 0%
At least 1 but less than 2 10%
At least 2 but less than 3 20%
At least 3 but less than 4 40%
At least 4 but less than 5 60%
At least 5 but less than 6 80%
6 or more 100%
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(ii) An amount equal to his "vested
percentage" of his Employer Contribution
Account balance. Such vested percentage
shall be determined on the date of his
termination in accordance with the following
schedule:
Plan Years Since
the Plan Year as of
Which the Employer
Contribution was Allocated Vested Percentage
Less than 4 0%
4 or more 100%
provided, that, on and after January 1,
1989, if he is credited with at least 5
Years of Service, such vested percentage
shall be 100%.
For purposes of the vesting schedule above,
all Contributions of the Employer shall be
deemed to have been allocated as of the
December 31 of the Plan Year to which they
relate, regardless of when such Employer
Contribution was actually made. All
earnings attributable to Employer
Contributions shall vest as if such earnings
had been allocated in the same Plan Year as
the Employer Contributions to which such
earnings are attributable. Any portion of
each of the Accounts of a terminated
Participant in excess of the vested portion
specified above shall be a Forfeiture, which
shall be disposed of as provided in
Section 3.4.
(c) For purposes of this Section 5.3, Years of
Service shall include all of a Participant's Years of
Service as defined in Article I hereof.
(d) In the event a Participant who is not fully
vested in his Employer Contribution Account has
received a withdrawal or other distribution therefrom,
the Participant's vested interest in his Employer
Contribution Account at any relevant time shall be the
amount X determined by the formula: X = P (AB+D) - D.
For purposes of applying the formula: P is the vested
percentage at the relevant time; AB is the account
balance at the relevant time; D is the amount of the
prior distribution; and the relevant time is the time
at which, under the Plan, the vested percentage in the
Account cannot increase.
HOU01A:316781.5
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(e) Notwithstanding the foregoing, each Eastport
Plan Participant who was 100% vested in his Employer
Contribution and Regular Matching Contributions
Accounts as defined in the Eastport Plan as of
December 31, 1992 shall be 100% vested in his Employer
Contribution Account in this Plan. An Eastport Plan
Participant who had 0% vesting in his Employer
Contribution and Regular Matching Contribution Accounts
as defined in the Eastport Plan as of December 31,
1992, shall be vested in his Employer Contribution
Account in this Plan in accordance with the schedule
below which provides the greater percentage of vesting:
(i) Years of Service Vested Percentage
Less than 1 0%
At least 1 but less than 2 10%
At least 2 but less than 3 20%
At least 3 but less than 4 40%
At least 4 but less than 5 60%
At least 5 but less than 6 80%
6 or more 100%
(ii) Percent of
Years of Service Non-Forfeitable Interest
Less than 1 0%
1 0%
2 0%
3 0%
4 0%
5 or more 100%
5.4 Payments of Benefits: Upon a Participant's entitlement
to payment of benefits under Section 5.1, 5.2 or 5.3, he shall be
entitled to be paid the amount in his Accounts as soon as is
practicable after the date causing the distribution to occur. If
a Participant's benefit exceeds the $3,500, it will be paid prior
to the earlier to occur of his Disability, death or attainment of
age 55 only with his consent.
Payment of a Participant's benefits must commence
within 60 days after the close of the Plan Year in which the
latest of the following events occurs:
(a) The date the Participant attains the age of
55;
(b) The tenth anniversary of the year in which
the Participant commenced participation in the Plan;
or
(c) The Participant terminates his employment
with the Employers and Affiliates;
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008939.0157
but, on and after January 1, 1989, in no event later than April 1
following the calendar year in which the Participant attains age
70 1/2, even if his employment has not terminated.
Any portion of a distribution attributable to
investments in Common Stock shall be in the form of shares of
Common Stock except that cash shall be paid in lieu of fractional
shares and except that a Participant may elect to receive cash in
lieu of any Common Stock.
Payment of a Participant's benefits shall commence no
later than April 1 following the calendar year in which the
Participant attains age 70 1/2, and in the event of a
Participant's death, shall be completed not later than one year
after the date of the Participant's death and shall otherwise
satisfy the minimum distribution requirements under
Section 401(a)(9) of the Code and the regulations thereunder. A
Participant's benefits shall be paid in the form of a lump sum;
provided, however, if a Participant's benefits exceed $3,500 at
the time of distribution, he may elect to receive his benefits in
the form of (i) a lump sum, (ii) installment payments (annually,
quarterly or monthly) over a specified period of time, not
exceeding the life expectancy of the Participant or the joint
life and survivor expectancy of the Participant and his
Beneficiary, or (iii) a combination thereof. Installment
payments shall be made from a Participant's Accounts and the
Investment Funds elected thereunder on a pro rata basis.
If a distribution is one to which sections 401(a)(11)
and 417 of the Code do not apply, such distribution may commence
less than 30 days after the notice required under section
1.411(a)-11(c) of the Income Tax Regulations is given, provided
that:
(1) the plan administrator clearly informs the
Participant that the Participant has a right to a period of
at least 30 days after receiving the notice to consider the
decision of whether or not to elect a distribution (and, if
applicable, a particular distribution option), and
(2) the Participant, after receiving the notice,
affirmatively elects a distribution.
If a benefit is to be paid to a Participant before he
attains age 59-1/2, the Participant shall be advised by the
Committee that, pursuant to Section 72(t) of the Code, an
additional income tax may be imposed equal to 10% of the portion
of the amount paid which is included in his gross income.
5.5 Designation of Beneficiary: Each Participant from time
to time may designate any person or persons (who may be
designated contingently or successively and who may be an entity
other than a natural person) as his Beneficiary or Beneficiaries
to whom his Plan benefits are paid if he dies before receipt of
all such benefits. Each Beneficiary designation shall be in the
form prescribed by the Committee and will be effective only when
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filed with the Committee during the Participant's lifetime.
Unless it is established to the satisfaction of the Committee
that the Participant's spouse cannot be located, a Participant
who is married may not designate anyone other than his spouse as
a beneficiary except with the written consent of such spouse to
the designation of a specific beneficiary, including any class of
beneficiaries or contingent beneficiaries, and the designation of
a specific benefit payment form, which may not be changed without
spousal consent (or such written consent expressly permits
designations by the Participant without further spousal consent),
which consent must acknowledge that the spouse is waiving rights
to receive benefits hereunder and which written consent must be
witnessed by a Plan representative or a notary public. Any such
consent by a spouse (or establishment that the spouse cannot be
located) shall be only effective with respect to such spouse. A
consent that permits designations by the Participant without
further consent by the spouse must acknowledge that the spouse
has the right to limit consent to a specific beneficiary and
benefit payment form and that the spouse voluntarily elects to
relinquish either or both of such rights. Each Beneficiary
designation filed with the Committee will cancel all Beneficiary
designations previously filed with the Committee. The revocation
of a Beneficiary designation, no matter how effected, shall not
require the consent of any designated beneficiary.
If any Participant fails to designate a Beneficiary in
the manner provided above or if the Beneficiary designated by a
deceased Participant dies before him or before complete
distribution of the Participant's benefits and in either event
there is no spouse, the Committee, in its discretion, may direct
the Trustee to distribute such Participant's benefits (or the
balance thereof) to either:
(a) Any one or more or all of the next of kin of
such Participant, and in such proportions as the
Committee determines; or
(b) The estate of the last to die of such
Participant and his Beneficiary or Beneficiaries.
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ARTICLE VI
TRUST FUND
All contributions under this Plan shall be paid to the
Trustee and deposited in the Trust Fund. All assets of the Trust
Fund, including investment income, shall be retained for the
exclusive benefit of Participants, Former Participants and
Beneficiaries and shall be used to pay benefits to such persons
or to pay administrative expenses of the Plan and Trust Fund to
the extent not paid by the Employer and shall not revert to or
inure to the benefit of the Employer.
Notwithstanding anything herein to the contrary, upon
the Employer's request, a contribution may be returned to the
Employer if permitted under Section 3.1 hereof.
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ARTICLE VII
ADMINISTRATION
7.1 Allocation of Responsibility among Fiduciaries for Plan
and Trust Administration: The Fiduciaries shall have only those
specific powers, duties, responsibilities and obligations as are
specifically given them under this Plan or the Trust. In
general, the Employer shall have the sole responsibility for
making the contributions provided for under Section 3.1, and
shall have the sole authority to appoint and remove the Trustee,
members of the Committee, and any Investment Manager which may be
provided for under the Trust, and to amend or terminate, in whole
or in part, this Plan or the Trust. The Committee shall have the
sole responsibility for the administration of this Plan which
responsibility is specifically described in this Plan and the
Trust Agreement. The Trustee shall have the sole responsibility
for the administration of the Trust and the management of the
assets held under the Trust (except to the extent an Investment
Manager is acting with respect to Trust Fund and except to the
extent that any portion of assets are held by an insurance
company pursuant to a group annuity or other contract), all as
specifically provided in the Trust Agreement. Any Investment
Manager shall have the sole responsibility for investment of the
portion of the Trust Fund designated in the instrument appointing
such Investment Manager. Any insurance company that has issued a
contract which is the investment medium for the available
Investment Funds under Section 4.7 hereof shall have the sole
responsibility for the investment of the portion of the Trust
Fund designated under the terms of the Plan to be invested in
such contract. Each Fiduciary warrants that any directions
given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan or the Trust, as the
case may be, authorizing or providing for such direction,
information or action. Furthermore, each Fiduciary may rely upon
any such direction, information or action of another Fiduciary as
being proper under this Plan or the Trust, and is not required
under this Plan or the Trust to inquire into the propriety of any
such direction, information or action except as required by
ERISA. It is intended under this Plan and the Trust that each
Fiduciary shall be responsible for the proper exercise of its own
powers, duties, responsibilities and obligations under this Plan
and the Trust and shall not be responsible for any act or failure
to act of another Fiduciary. No Fiduciary guarantees the Trust
Fund in any manner against investment loss or depreciation in
asset value.
7.2 Appointment of Committee: The Board of Directors of
the Company shall appoint the Committee which shall consist of
not less than three persons, who may be employees of the Company
or an Affiliate, to act as Administrator of the Plan and Named
Fiduciary under ERISA and to perform the administrative duties
set forth herein. Each member of the Committee shall serve for
such term as the Board of Directors of the Company may designate
or until his death, resignation or removal by said Board. The
Board of Directors of the Company shall promptly appoint
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successors to fill any vacancies in the Committee if such
membership falls below three.
7.3 Records of Committee: The Committee shall keep
appropriate records of its proceedings and the administration of
the Plan. The Committee shall make available to Participants and
their beneficiaries for examination, during business hours, such
records of the Plan as pertain to the examining person and such
documents relating to the Plan as are required by ERISA.
7.4 Committee Action; Agent for Process: Action may be
taken by the Committee at any meeting where a majority of its
members are present and at any such meeting any action may be
taken which shall be approved by a majority of the members
present. The Committee may also take any action without a
meeting that is approved by a majority of the Committee members
and is evidenced by a written document signed by a member of the
Committee. The Committee may delegate any of its rights, powers
and duties to any one or more of its members, or to any other
person, by written action as provided herein, acknowledged in
writing by the delegate or delegates. Such delegation may
include, without limitation, the power to execute any document on
behalf of the Committee. The Chairman of the Committee shall be
agent of the Plan and the Committee for the service of legal
process at the principal office of the Company in Houston, Texas.
7.5 Committee Disqualification: A member of the Committee
who may be a Participant shall not vote on any question relating
specifically to himself.
7.6 Committee Compensation, Expenses and Advisers: The
members of the Committee shall serve without bond (unless
otherwise required by law) and without compensation for their
services as such. The Committee may select, and authorize the
Trustee to compensate suitably, such attorneys, agents and
representatives as it may deem necessary or advisable to the
performance of its duties. All expenses of the Committee that
shall arise in connection with the administration of the Plan
shall be paid by the Company or by the Trustee out of the Trust
Fund.
7.7 Committee Liability: Except to the extent that such
liability is created by ERISA, no member of the Committee shall
be liable for any act or omission of any other member of the
Committee, nor for any act or omission on his own part except for
his own gross negligence or willful misconduct, nor for the
exercise of any power or discretion in the performance of any
duty assumed by him hereunder. The Company shall indemnify and
hold harmless each member of the Committee from any and all
claims, losses, damages, expenses (including counsel fees
approved by the Committee), and liabilities (including any
amounts paid in settlement with the Committee's approval but
excluding any excise tax assessed against any member or members
of the Committee pursuant to the provisions of Section 4975 of
the Code) arising from any act or omission of such member in
connection with duties and responsibilities under the Plan,
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except when the same is judicially determined to be due to the
gross negligence or willful misconduct of such member.
7.8 Committee Determinations: The Committee, on behalf of
the Participants and their beneficiaries, shall enforce this Plan
in accordance with its terms and shall have all powers necessary
for the accomplishment of that purpose, including, but not by way
of limitation, the following powers:
(a) To determine all questions relating to the
eligibility of Employees to become Participants, the
period of service of Participants and the annual
compensation of Participants;
(b) To authorize in writing all disbursements by
the Trustee from the Trust Fund;
(c) To interpret and construe all terms,
provisions, conditions and limitations of this Plan
and to reconcile any inconsistency or supply any
omitted detail that may appear in this Plan in such
manner and to such extent, consistent with the general
terms of this Plan, as the Committee shall deem
necessary and proper to effectuate the Plan for the
greatest benefit of all parties interested in the
Plan; and
(d) To make and enforce such rules and
regulations for the administration of the Plan as are
not inconsistent with the terms set forth herein.
The determination of any fact by the Committee, including the
construction placed by the Committee upon the provisions of this
Plan and whether or not arising out of a claim for benefits or
review of a denied claim pursuant to Sections 7.16 and 7.17,
shall be final, conclusive and binding upon all parties
concerned, unless, and to the extent, found by a final judgment
of a court of competent jurisdiction to have been arbitrary and
capricious. In the course of making any such determination, the
Committee shall be entitled to rely upon information furnished by
a Participant, Employee, beneficiary, Employer, legal counsel for
the Employer, Investment Manager or the Trustee.
7.9 Information from Employer: To enable the Committee to
perform its functions, each Employer shall supply full and timely
information to the Committee of all matters relating to the dates
of employment of its Employees for purposes of determining
eligibility of Employees to participate hereunder, the
compensation of all Participants, their retirement, death or
other cause for termination of employment, and such other
pertinent facts as the Committee may require; and the Committee
shall advise the Trustee of such of the foregoing facts as may be
pertinent to the Trustee's administration of the Trust Fund.
7.10 General Powers of Committee: In addition to all other
powers herein granted, and in general consistent with the
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provisions hereof, the Committee shall have all other rights and
powers reasonably necessary to supervise and control the
administration of this Plan.
7.11 Uniform Administration: Whenever in the administration
of the Plan, any action is required by an Employer or the
Committee, including, but not by way of limitation, action with
respect to eligibility of Employees, Contributions and benefits,
such action shall be uniform in nature as applied to all persons
similarly situated, and no action shall be taken which will
discriminate in favor of Participants who are officers or
shareholders of an Employer or highly compensated Employees.
7.12 Reporting Responsibilities: As Administrator of the
Plan under ERISA, the Committee shall file with the appropriate
office of the Internal Revenue Service or the Department of Labor
all reports, returns and notices required under ERISA, including,
but not limited to, the plan description and summary plan
description, annual reports and amendments thereof to be filed
with the Internal Revenue Service and/or the Department of Labor,
requests for determination letters, annual reports and
registration statement required by Section 6057(a) of the Code.
7.13 Disclosure Responsibilities: The Committee shall make
available to each Participant and beneficiary such records,
documents and other data as may be required under ERISA, and
Participants or beneficiaries shall have the right to examine
such records at reasonable times during business hours. Nothing
contained in this Plan shall give any Participant or beneficiary
the right to examine any data or records reflecting the
compensation paid to, or relating to any account of, any other
Participant or beneficiary, except as may be required under
ERISA.
7.14 Annual Statements: As soon as practicable after the
end of each Plan Year, the Committee shall prepare and deliver to
each Participant a written statement showing as of the December
31 year-end Adjustment Date:
(a) The balance in his Account in the Trust Fund
as of the preceding December 31;
(b) The amount of Employer, including Deferred
Contributions allocated to his Account for the Plan
Year ending on such Adjustment Date;
(c) The adjustments to his Account to reflect
his share of Income and expenses of the Trust Fund and
appreciation or depreciation in Trust Fund assets
during the Plan Year ending on such Adjustment Date;
and
(d) The new balance in his Account as of that
Adjustment Date.
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7.15 Annual Audit: If required by ERISA or requested by any
Fiduciary, the Committee shall engage, on behalf of all
Participants, an independent Certified Public Accountant who
shall conduct an annual examination of any financial statements
of the Plan and Trust and of other books and records of the Plan
and Trust as the Certified Public Accountant may deem necessary
to enable him to form and provide a written opinion as to whether
the financial statements and related schedules required to be
filed with the Internal Revenue Service and/or the Department of
Labor or furnished to each Participant are presented fairly and
in conformity with generally accepted accounting principles
applied on a basis consistent with that of the preceding Plan
Year.
7.16 Presenting Claims for Benefits: Any Participant or any
other person claiming under a deceased Participant, such as the
spouse or beneficiary, may submit written application to the
Committee for the payment of any benefit asserted to be due him
under the Plan. Such application shall set forth the nature of
the claim and such other information as the Committee may
reasonably request. Promptly upon the receipt of any application
required by this Section, the Committee shall determine whether
or not the Participant or spouse or beneficiary involved is
entitled to a benefit hereunder and, if so, the amount thereof
and shall notify the claimant of its findings.
If a claim is wholly or partially denied, the Committee
shall so notify the claimant within 90 days after receipt of the
claim by the Committee, unless special circumstances require an
extension of time for processing the claim. If such an extension
of time for processing is required, written notice of the
extension shall be furnished to the claimant prior to the end of
the initial 90-day period. In no event shall such extension
exceed a period of 90 days from the end of such initial period.
The extension notice shall indicate the special circumstances
requiring an extension of time and the date by which the
Committee expects to render its final decision. Notice of the
Committee's decision to deny a claim in whole or in part shall be
set forth in a manner calculated to be understood by the claimant
and shall contain the following:
(i) the specific reason or reasons for the
denial;
(ii) specific reference to the pertinent Plan
provisions on which the denial is based;
(iii) a description of any additional
material or information necessary for the claimant to
perfect the claim and an explanation of why such
material or information is necessary; and
(iv) an explanation of the claims review
procedure set forth in Section 7.17 hereof.
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If notice of denial is not furnished, and if the claim is not
granted within the period of time set forth above, the claim
shall be deemed denied for purposes of proceeding to the review
stage described in Section 7.17.
7.17 Claims Review Procedure: If an application filed by a
Participant or Beneficiary under Section 7.16 above shall result
in a denial by the Committee of the benefit applied for, either
in whole or in part, such applicant shall have the right, to be
exercised by written application filed with the Committee within
60 days after receipt of notice of the denial of his application
or, if no such notice has been given, within 60 days after the
application is deemed denied under Section 7.16, to request the
review of his application and of his entitlement to the benefit
applied for. Such request for review may contain such additional
information and comments as the applicant may wish to present.
Within 60 days after receipt of any such request for review, the
Committee shall reconsider the application for the benefit in
light of such additional information and comments as the
applicant may have presented, and if the applicant shall have so
requested, shall afford the applicant or his designated
representative a hearing before the Committee. The Committee
shall also permit the applicant or his designated representative
to review pertinent documents in its possession, including copies
of the Plan document and information provided by the Company
relating to the applicant's entitlement to such benefit. The
Committee shall make a final determination with respect to the
applicant's application for review as soon as practicable and in
any event not later than 60 days after receipt of the aforesaid
request for review, except that under special circumstances, such
as the necessity for holding a hearing, such 60-day period may be
extended to the extent necessary, but in no event beyond the
expiration of 120 days after receipt by the Committee of such
request for review. If such an extension of time for review is
required because of special circumstances, written notice of the
extension shall be furnished to the applicant in writing, in a
manner calculated to be understood by him, and shall set forth
the specific reasons for the decision and specific references to
the pertinent provisions of the Plan upon which the decision is
based. If the decision on review is not furnished within the
time period set forth above the claim shall be deemed denied on
review.
7.18 Unclaimed Benefits: If at, after, or during the time
when a benefit hereunder is payable to any Participant,
Beneficiary or other distributee, the Committee, upon request of
the Trustee, or at its own instance, shall mail by registered or
certified mail to such Participant, Beneficiary or distributee at
his last known address a written demand for his then address or
for satisfactory evidence of his continued life, or both, and if
such Participant, Beneficiary or distributee shall fail to
furnish the same to the Committee within two years from the
mailing of such demand, then the Committee may, in its sole
discretion, determine that such Participant, Beneficiary or other
distributee has forfeited his rights to such benefit and may
declare such benefit, or any unpaid portion thereof, terminated
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as if the death of the distributee (with no surviving
Beneficiary) had occurred on the date of the last payment made
thereon, or on the date such Participant, Beneficiary or
distributee first became entitled to receive benefit payments,
whichever is later; provided, however, that such forfeited
benefit shall be reinstated if a claim for the same is made by
the Participant, Beneficiary or other distributee at any time
thereafter. Any forfeited benefits shall be reallocated as if
they were an additional Company contribution made in the Plan
Year of forfeiture. Any reinstatement shall be made out of funds
specially contributed by the Company for such purposes.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 Terms of Employment: The adoption and maintenance of
the provisions of this Plan shall not be deemed to constitute a
contract between any Employer and Employee, or to be a
consideration for, or an inducement or condition of, the
employment of any person. Nothing herein contained shall be
deemed to give to any Employee the right to be retained in the
employ of an Employer or to interfere with the right of an
Employer to discharge an Employee at any time, nor shall it be
deemed to give to an Employer the right to require any Employee
to remain in its employ, nor shall it interfere with any
Employee's right to terminate his employment at any time.
8.2 Controlling Law: This Plan and the Trust Agreement
shall be construed, regulated and administered under the laws of
the State of Texas.
8.3 Invalidity of Particular Provisions: In the event any
provision of this Plan shall be held illegal or invalid for any
reason, said illegality or invalidity shall not affect the
remaining provisions of this Plan but shall be fully severable,
and this Plan shall be construed and enforced as if said illegal
or invalid provisions had never been inserted therein.
8.4 Non-Alienation of Benefits: Except as provided in
Section 3.3 and in Section 8.7, benefits payable under this Plan
shall not be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, charge,
garnishment, execution, or levy of any kind, either voluntary or
involuntary; and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose
of any right to benefits payable hereunder, shall be void. The
Trust Fund shall not in any manner be liable for, or subject to,
the debts, contracts, liabilities, engagements or torts of any
person entitled to benefits hereunder.
8.5 Payments in Satisfaction of Claims of
Participants: Any payment or distribution to any Participant or
his legal representative or any beneficiary in accordance with
the provisions of this Plan shall be in full satisfaction of all
claims under the Plan against the Trust Fund, the Trustee and the
Employer. The Trustee may require that any distributee execute
and deliver to the Trustee a receipt and a full and complete
release as a condition precedent to any payment or distribution
under the Plan.
8.6 Impossibility of Diversion of Trust
Fund: Notwithstanding any provision herein to the contrary, no
part of the corpus or the income of the Trust Fund shall ever be
used for or diverted to purposes other than for the exclusive
benefit of the Participant or their beneficiaries or for the
payment of expenses of the Plan. No part of the Trust Fund shall
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ever directly or indirectly revert to the Employer, except as
provided in Section 3.1 hereof.
8.7 Distributions Under Domestic Relations
Orders: Notwithstanding any other provision of this Plan, the
Committee may direct the Trustee to comply with the provisions of
a qualified domestic relations order (as defined in
Section 414(p) of the Code) pursuant to this Section 8.7. When
the Committee receives a domestic relations order, the Committee
shall promptly notify the Participant and any other alternate
payee of the receipt of such order and the Plan's procedures for
determining the qualified status of domestic relations order.
Within 60 days after receipt of such order the Committee shall
determine whether the order is a qualified domestic relations
order and notify the Participant and each alternate payee of such
determination. If the Committee is unable to determine within
such 60-day period whether the order is a qualified domestic
relations order, the 60-day period may be extended for a
reasonable period as determined by the Committee necessary in
order to determine whether the order is a qualified domestic
relations order.
During the period in which the issue of whether a
domestic relations order is a qualified domestic relations order
is being determined by the Committee, the Committee shall
separate in a separate account of the Plan or in an escrow
account the amounts which would have been payable to the
alternate payee during such period if the order had been
determined to be a qualified domestic relations order. If within
18 months of the date on which the first payment would be
required to be made under such order, the Committee determines
that the order is a qualified domestic relations order, the
Committee shall direct the separated amounts plus any income
attributable thereto be distributed to the person or persons
entitled thereto. If within the 18-month period the Committee is
unable to determine whether the order is a qualified domestic
relations order or the Committee determines that the order is not
a domestic relations order then the Committee shall pay the
separated amounts plus any earnings attributable thereto to the
person or persons who would have been entitled to such amounts if
there had been no order. Any determination that an order is a
qualified domestic relations order which is made after the close
of such 18-month period shall be applied prospectively only.
To the extent provided under a qualified domestic
relations order, a former spouse of a Participant shall be
treated as the spouse or surviving spouse for all purposes of the
Plan. If the Committee receives a qualified domestic relations
order with respect to a Participant, the Committee may authorize
the immediate distribution of the amount assigned to the
Participant's former spouse pursuant to such order, to the extent
vested and permitted by law, from the Participant's accounts.
8.8 Transition Period: Notwithstanding any provision of
the Plan to the contrary, during the period of transition in
connection with a change in investment funds and recordkeeping
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practices, commencing July 1, 1995 and ending on or about
December 31, 1995 as determined by the Committee in its sole
discretion, the following restrictions shall
apply: (i) Participants may not change their investment
directions with respect to future contributions or existing
Account balances; and (ii) Participants may be limited in their
ability to make changes in the amount of their Deferred
Contributions, all in accordance with such administrative
procedures as may be decided by the Committee and communicated to
Participants during said transition period. Furthermore,
withdrawals and distributions otherwise available under the Plan
will be suspended during the transition period, except that
hardship withdrawals under Section 3.3 of the Plan and
distributions upon termination of service pursuant to Article V
of the Plan shall be permitted during such transition period, all
in accordance with such administrative procedures as may be
decided by the Committee and communicated to Participants during
said transition period.
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ARTICLE IX
TRUST AGREEMENT AND TRUST FUND
9.1 Trust Agreement: The Company shall enter into a Trust
Agreement with a Trustee providing for the administration of the
Trust Fund established in connection with this Plan by the
Trustee, or by a successor trustee. The provisions of such Trust
Agreement are incorporated herein by reference as fully as if set
out herein. The Trustee shall be subject to direction by the
Committee or an investment manager, or shall have such discretion
with respect to management and control of Plan assets as
specified by the Committee.
9.2 Benefits Paid Solely from Trust Fund: All of the
benefits provided to be paid shall be paid by the Trustee out of
the Trust Fund to be administered under such Trust Agreement. No
Fiduciary shall be responsible or liable in any manner for
payment of any such benefits, and all Participants hereunder
shall look solely to such Trust Fund and to the adequacy thereof
for the payment of any such benefits of any nature or kind which
may at any time be payable hereunder.
9.3 Committee Directions to Trustee: The Trustee shall
make only such distributions and payments out of the Trust Fund
as may be directed by the Committee. The Trustee shall not be
required to determine or make any investigation to determine the
identity or mailing address of any person entitled to any
distributions and payments out of the Trust Fund and shall have
discharged its obligation in that respect when it shall have sent
certificates and checks or other papers by ordinary mail to such
persons and addresses as may be certified to it by the Committee.
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ARTICLE X
ADOPTION OF THE PLAN BY OTHER ORGANIZATIONS;
SEPARATION OF THE TRUST FUND; AMENDMENT
AND TERMINATION OF THE PLAN; AND
DISCONTINUANCE OF CONTRIBUTIONS TO THE TRUST FUND
10.1 Adoptive Instrument: Any organization may, with the
approval of the Company, adopt and become an Employer under this
Plan by executing and delivering to the Company and the Trustee
an adoptive instrument specifying the classification of its
Employees who are to be eligible to participate in the Plan and
by agreeing to be bound as an Employer by all the terms of the
Plan with respect to its eligible Employees. The adoptive
instrument may contain such changes and variations in the terms
of the Plan as may be acceptable to the Company. Any such
Approved Organization which shall adopt this Plan shall designate
the Company as its agent to act for it in all transactions
affecting the administration of the Plan and shall designate the
Committee to act for such Approved Organization and its
Participants in the same manner in which the Committee may act
for the Company and its Participants hereunder. The adoptive
instrument shall specify the effective date of such adoption of
the Plan and shall become, as to such Approved Organization and
its Employees, a part of this Plan.
10.2 Effect of Adoption: The following special provisions
shall apply to all Employers:
(a) An Employee shall be considered in service
while employed simultaneously or successively by one
or more Employers or Affiliates.
(b) The transfer of an Employee from one
Employer or Affiliate to another Employer or Affiliate
shall not be deemed a termination of service.
10.3 Separation of the Trust Fund: A separation of the
Trust Fund as to the interest therein of the Participants of any
particular Employer may be made by the Company at any time. In
such event, the Trustee shall set apart that portion of the Trust
Fund which shall be allocated to such Participants pursuant to a
valuation and allocation of the Trust Fund made in accordance
with the procedures set forth in Section 4.4 hereof but as of the
date when such separation of the Trust Fund shall be effective.
Such portion may in the Trustee's discretion be set apart in cash
or in kind out of the properties of the Trust Fund. That portion
of the Trust Fund so set apart shall continue to be held by the
Trustee as though such Employer had entered into the Trust
Agreement as a separate Trust Agreement with the Trustee. Such
Employer may in such event designate a new Trustee of its
selection to act as Trustee under the Trust Agreement. Such
Employer shall thereupon be deemed to have adopted the Plan as
its own separate Plan, and shall subsequently have all such
powers of amendment or modification of the Plan as are reserved
herein to the Company.
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10.4 Voluntary Separation: If any Employer shall desire to
separate its interest in the Trust Fund, it may request such a
separation in a notice in writing to the Company and the Trustee.
Such separation shall then be made as of any specified date after
service of such notice, and such separation shall be accomplished
in the manner set forth in Section 10.3 above.
10.5 Amendment of the Plan: The Company shall have the
right to amend or modify this Plan and (with the consent of the
Trustee) the Trust Agreement at any time and from time to time to
any extent that it may deem advisable. Any such amendment or
modification shall be set out in an instrument in writing duly
authorized by the Board of Directors of the Company and executed
by the Company. No such amendment or modification shall,
however, increase the duties or responsibilities of the Trustee
without its consent thereto in writing, or have the effect of
transferring to or vesting in any Employer any interest or
ownership in any properties of the Trust Fund, or of permitting
the same to be used for or diverted to purposes other than for
the exclusive benefit of the Participants and their
beneficiaries. No amendment shall decrease the account of any
Participant; and no amendment shall change the vesting schedule
in Section 5.3 unless each Participant having not less than five,
or on and after January 1, 1989, three, years of service is
permitted to elect to have the vested portion of his account
computed under the provisions of Section 5.3 without regard to
the amendment. Such election shall be available during an
election period which shall begin on the date such amendment is
adopted and shall end on the latest of (i) the date 60 days after
such amendment is adopted, (ii) the date 60 days after such
amendment is effective, or (iii) the date 60 days after such
Participant is issued written notice of the amendment by the
Committee or the Employer. Notwithstanding anything herein to
the contrary, the Plan or the Trust Agreement may be amended in
such manner as may be required at any time to make it conform to
the requirements of the Code, or of any United States statutes
with respect to employees' trusts, or of any amendment thereto,
or of any regulations or rulings issued pursuant thereto, and no
such amendment shall be considered prejudicial to any then
existing rights of any Participant or his beneficiary under the
Plan.
10.6 Effect of Amendment on Other Employers: Any amendment
effected by the Company may be made without the consent of the
other Employers, subject to the right of any such Employer to
withdraw pursuant to Section 10.3 hereof. Any amendment effected
by the Company shall be delivered within 30 days to each other
Employer, and each other Employer shall be deemed to have
consented to and accepted such amendment unless written notice of
objection is delivered to the Company within 30 days of notice of
said amendment.
10.7 Termination of the Plan: A termination of the Plan as
to any particular Employer (and only as to any such particular
Employer) shall occur by the delivery to the Trustee of an
instrument in writing approved and authorized by the Board of
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Directors of such Employer. In such event, termination of the
Plan shall be effective as of any subsequent date specified in
such instrument.
10.8 Liquidation and Distribution of Trust Fund upon
Termination: In the event a termination of the Plan in respect
of any Employer shall occur, a separation of the Trust Fund in
respect of the Participants of such Employer shall be made as of
the effective date of such termination of the Plan in accordance
with the procedure set forth in Section 10.3 hereof. Following
separation of the Trust Fund in respect of the Participants of
any Employer as to whom the Plan has been terminated, the
properties of the Trust Fund, exclusive of any Common Stock, so
set apart shall be reduced to cash as soon as may be expeditious
under the circumstances. Any administrative costs or expenses
incurred incident to the final liquidation of such separate Trust
Funds shall be paid by the Employer, except that in the case of
bankruptcy or insolvency of such Employer any such costs shall be
charged against the Trust Fund. Following such reduction of such
Trust Fund to cash, the accounts of the Participants shall then
be valued as provided in Section 4.4 and shall be fully vested,
whereupon each such Participant shall become entitled to receive
the entire amount of cash and Common Stock attributable to his
Account, provided distribution is in the form of a lump sum and
by reason of an event described in Section 401(k)(10) of the
Code. The terminating Employer shall promptly advise the
appropriate District Director of Internal Revenue of the
termination and the Company may direct the Trustee to delay the
final distribution to the Participants until the District
Director shall advise in writing that such termination does not
adversely affect the previously qualified status of the Plan or
the exemption from tax of the Trust under Section 401(a) or
501(a) of the Code.
10.9 Effect of Termination or Discontinuance of
Contributions: In the event of a termination or partial
termination of the Plan with respect to an Employer or its
Employees, then all amounts credited to the accounts of the
affected Participants of such Employer shall become fully vested
and non-forfeitable. If any Employer shall completely
discontinue its Contributions to the Trust Fund or suspend its
Contributions to the Trust Fund under such circumstances as to
constitute a complete discontinuance of Contributions within the
purview of the reasoning of U.S. Treasury Regulations para.
1.401-6(c), then all amounts credited to the accounts of the
Participants of such Employer shall become fully vested and
non-forfeitable, and throughout any such period of discontinuance
of Contributions by an Employer, all other provisions of the Plan
shall continue in full force and effect with respect to such
Employer other than the provisions for Contributions by such
Employer.
10.10 Merger of Plan with Another Plan: In the event of any
merger or consolidation of the Plan with, or transfer in whole or
in part of the assets and liabilities of the Trust Fund to
another trust fund held under, any other plan of deferred
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compensation maintained or to be established for the benefit of
all or some of the Participants of this Plan, the assets of the
Trust Fund applicable to such Participants shall be transferred
to the other trust fund only if:
(a) Each Participant would (if either this Plan
or the other plan then terminated) receive a benefit
immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit
he would have been entitled to receive immediately
before the merger, consolidation or transfer (if this
Plan had then terminated);
(b) Resolutions of the Board of Directors of the
Employer under this Plan, or of any new or successor
employer of the affected Participants, shall authorize
such transfer of assets; and, in the case of the new
or successor employer of the affected Participants,
its resolutions shall include an assumption of
liabilities with respect to such Participants'
inclusion in the new employer's plan; and
(c) Such other plan and trust are qualified
under Sections 401(a) and 501(a) of the Code.
10.11 Rollover from Qualified Plans: With the approval of
the Committee, and subject to such terms and conditions as the
Committee may establish in order that the action contemplated by
this Section 10.11 not have an adverse effect upon the qualified
status of the Plan and its related Trust Agreement, a Participant
in this Plan may make a rollover of amounts received from a
qualified plan maintained by the Company, its Affiliates or any
other employer if approved by the Company provided that the
distribution from such other qualified plan constitutes an
"eligible rollover distribution" within the meaning of
Section 402 of the Code, and provided that all other requirements
applicable under Section 402 of the Code be complied with in
order that the acceptance by this Plan of the distribution from
the other plan be treated as a rollover under Section 402 of the
Code. Any such amounts rolled over into this Plan shall be
allocated to the Participant's Rollover Account and the
Participant shall be 100% vested in the amount in his Rollover
Account. The withdrawal provisions in Section 3.3 applicable to
Rollover Contributions shall be applicable to withdrawals from a
Participant's Rollover Account.
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ARTICLE XI
LIMITATIONS ON BENEFITS
Notwithstanding any provision of this Plan to the
contrary, the total Annual Additions made to the Account of a
Participant for any Plan Year shall be subject to the following
limitations:
I. Single Defined Contribution Plan
1. If an Employer does not maintain any other
qualified plan, the amount of Annual Additions which
may be allocated under this Plan on a Participant's
behalf for a Limitation Year shall not exceed the
lesser of the Maximum Permissible Amount or any other
limitation contained in this Plan.
2. Prior to the determination of the
Participant's actual Compensation for a Limitation
Year, the Maximum Permissible Amount may be determined
on the basis of the Participant's estimated annual
Compensation for such Limitation Year. Such estimated
annual Compensation shall be determined on a
reasonable basis and shall be uniformly determined for
all Participants similarly situated. Any Employer
contributions (including allocation of forfeitures)
based on estimated annual Compensation shall be
reduced by any Excess Amounts carried over from prior
years.
3. As soon as is administratively feasible
after the end of the Limitation Year, the maximum
Permissible Amount for such Limitation Year shall be
determined on the basis of the Participant's actual
Compensation for such Limitation Year.
4. If there is an Excess Amount with respect to
a Participant for the Limitation Year, such Excess
shall be disposed of as follows:
A. There shall first be returned to
the Participant (i) his after-tax
contributions attributable to that Limitation
Year, if any are authorized under the Plan,
and then (ii) his Deferred Contributions
attributable to that Limitation Year, to the
extent such returned Contributions would
reduce the Excess Amount pursuant to the
regulations enacted under Code Section 415.
B. If any such Excess Amount shall
then remain, there shall then be a reduction
of the Employer Contributions allocated to
the Participant, and the amount of the
reduction of the Employer Contributions for
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such Participant shall be reallocated out of
the Account of such Participant and shall be
held in a suspense account which shall be
applied as a part of (and to reduce to such
extent what would otherwise be) the Employer
Contributions for all Participants required
to be made to the Plan during the next
subsequent calendar month or months. No
portion of such Excess Amount may be
distributed to Participants or former
Participants. If a suspense account is in
existence at any time during the Limitation
Year pursuant to this Paragraph B, such
suspense account shall not participate in the
allocation of investment gains or losses of
the Trust Fund.
C. If any such Excess Amount shall
then remain, the Excess Amount of the
Participant's Deferred Contributions, as
defined in Section 3.2, shall be used to
reduce Deferred Contributions for the next
Limitation Year (and succeeding Limitation
Years, as necessary) for that Participant if
that Participant is eligible to participate
in the Plan as of the end of the next and
succeeding Limitation Years. However, if
that Participant is not eligible to
participate in the Plan as of the end of the
Limitation Year, then the Excess Amounts must
be held unallocated in a suspense account and
applied in the next subsequent calendar month
or months as a part of (and to reduce to such
extent what would otherwise be) the Employer
Contribution for all Participants required to
be made to the Plan. No portion of such
Excess Amount may be distributed to
Participants or former Participants. If a
suspense account is in existence at any time
during the Limitation Year pursuant to this
paragraph C, such suspense account shall not
participate in the allocation of investment
gains or losses of the Trust Fund.
II. Two or More Defined Contribution Plans
1. If, in addition to this Plan, the Employer
maintains any other qualified defined contribution
plan, the amount of Annual Additions which may be
allocated under this Plan on a Participant's behalf
for a Limitation Year, shall not exceed the lesser of:
A. the Maximum Permissible Amount,
reduced by the sum of any Annual Additions
allocated to the Participant's accounts for
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the same Limitation Year under such other
defined contribution plan or plans; or
B. any other limitation contained in
this Plan.
2. Prior to the determination of the
Participant's actual Compensation for the Limitation
Year, the amount referred to in Section 11(II)1(A)
above may be determined on the basis of the
Participant's estimated annual Compensation for such
Limitation Year. Such estimated annual Compensation
shall be determined on a reasonable basis and shall be
uniformly determined for all Participants similarly
situated. Any Employer contribution (including
allocation of forfeitures) based on estimated annual
Compensation shall be reduced by any Excess Amounts
carried over from prior years.
3. As soon as is administratively feasible
after the end of the Limitation Year, the amounts
referred to in Section 11(II)1(A) above shall be
determined on the basis of the Participant's actual
Compensation for such Limitation Year.
4. If a Participant's Annual Additions under
this Plan and all such other defined contribution
plans result in an Excess Amount, such Excess Amount
shall be deemed to consist of the amounts last
allocated.
5. If an Excess Amount was allocated to a
Participant on an allocation date of this Plan which
coincides with an allocation date of another plan, the
Excess Amount attributed to this Plan will be the
product of:
A. the total Excess Amount allocated
as of such date (including any amount which
would have been allocated but for the
limitations of Section 415 of the Code);
times
B. the ratio of (1) the amount
allocated to the Participant as of such date
under this Plan, divided by (2) the total
amount allocated as of such date under all
qualified defined contribution plans
(determined without regard to the limitations
of Code Section 415).
6. Any Excess Amounts attributed to this Plan
shall be disposed of as provided in Section 11(I)4.
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III. Defined Contribution and Defined Benefit Plan
1. General Rule: If the Employer maintains one
or more defined contribution plans and one or more
defined benefit plans, the sum of the "defined
contribution plan fraction" and the "defined benefit
plan fraction", as defined below, cannot exceed 1.0
for any Limitation Year. For purposes of this
Section, employee contributions to a qualified defined
benefit plan are treated as a separate defined
contribution plan. For purposes of this Section, all
defined contribution plans of an Employer are to be
treated as one defined contribution plan and all
defined benefit plans of an Employer are to be treated
as one defined benefit plan, whether or not such plans
have been terminated.
If the sum of the defined contribution plan
fraction and defined benefit plan fraction exceeds
1.0, the Annual Benefit of the defined benefit plans
will be reduced so that the sum of the fractions will
not exceed 1.0. In no event will the Annual Benefit
be decreased below the amount of the accrued benefit
to date. If additional reductions are required for
the sum of the fractions to equal 1.0, the reductions
will then be made to the Annual Additions of the
defined contribution plans.
2. Defined Contribution Plan Fraction
A. General Rule: The defined
contribution plan fraction for any year is
(1) divided by (2), where:
(1) is the sum of the actual
Annual Additions to the
Participant's account at the close
of the Limitation Year; and
(2) is the sum of the lesser
of the following amounts determined
for such year and for each prior
year of service of the Employee:
a. 1.25 times the
dollar limitation in
effect for each such year
(without regard to the
special dollar
limitations for employee
stock ownership plans);
or
b. 1.4 times 25%
of the Participant's
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Compensation for each
such year.
B. If the Employee was a participant,
as of January 1, 1987, in one or more defined
contribution plans maintained by the Employer
which were in existence on May 6, 1986, the
numerator of this fraction will be adjusted
if the sum of this fraction and the defined
benefit fraction would otherwise exceed 1.0
under the terms of this Plan. Under the
adjustment, an amount equal to the product of
(1) the excess of the sum of the fractions
over 1.0 times (2) the denominator of this
fraction, will be permanently subtracted from
the numerator of this fraction. The
adjustment is calculated using the fractions
as they would be computed as of December 31,
1986, and disregarding any changes in the
terms and conditions of the plan made after
May 6, 1986, but using the Code Section 415
limitation applicable to the 1987 Limitation
Year.
C. The Annual Additions for any
Limitation Year before 1987 shall not be
recomputed to treat all employee
contributions as Annual Additions.
3. Defined Benefit Plan Fraction
A. General Rule: The defined benefit
plan fraction for any year is (1) divided by
(2), where:
(1) is the projected Annual
Benefit of the Participant under
the Plan (determined as of the
close of the Limitation Year); and
(2) is the lesser of:
a. 1.25 times the
dollar limitation
(adjusted, if necessary)
for such year; or
b. 1.4 times 100%
of the Participant's
Average Compensation for
the high three years
(adjusted, if necessary).
B. Notwithstanding the above, if the
Employee was a participant, as of January 1,
1987, in one or more defined benefit plans
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maintained by the Employer which were in
existence on May 6, 1986, the denominator of
this fraction will not be less than 125% of
the sum of the annual benefits under such
plans which the Employee had accrued as of
December 31, 1986, disregarding any changes
in the terms and conditions of the plan(s)
after May 5, 1986. The preceding sentence
applies only if the defined benefit plans
individually and in the aggregate satisfied
the requirements of Code Section 415.
IV. Definitions
1. Employer: The Company and any other
Employer that adopts this Plan. In the case of a
group of employers which constitutes a controlled
group of corporations (as defined in Code
Section 414(b) as modified by Section 415(h)) or which
constitutes trades and businesses (whether or not
incorporated) which are under common control (as
defined in Code Section 414(c) as modified by
Section 415(h)) or an affiliated service group (as
defined in Code Section 414(m)), all such employers
shall be considered a single Employer for purposes of
applying the limitations of these sections.
2. Excess Amount: The excess of the
Participant's Annual Additions for the Limitation Year
over the Maximum Permissible Amount.
3. Limitation Year: A 12 consecutive month
period ending on December 31.
4. Maximum Permissible Amount: For a
Limitation Year, the Maximum Permissible Amount with
respect to any Participant shall be the lesser of:
A. $30,000 (or, if greater, 1/4 of the
defined benefit dollar limitation set forth
in Section 415(b)(1) of the Code as in effect
for the Limitation Year); or
B. 25% of the Participant's
Compensation for the Limitation Year.
5. Compensation: For purposes of determining
compliance with the limitations of Code Section 415,
Compensation shall mean a Participant's earned income,
wages, salaries, fees for professional services and
other amounts received for personal services actually
rendered in the course of employment with an Employer
maintaining the Plan, including, but not limited to,
commissions paid salesmen, compensation for services
based on a percentage of profits, commissions on
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insurance premiums, tips and bonuses, and excluding
the following:
(a) Employer contributions to a plan of
a deferred compensation to the extent
contributions are not included in gross
income of the Employee for the taxable year
in which contributed, or on behalf of an
employee to a simplified employee pension
plan to the extent such contributions are
deductible under Code Section 219(b)(2), and
any distributions from a plan of deferred
compensation whether or not includable in the
gross income of the Employee when distributed
(however, any amounts received by an Employee
pursuant to an unfunded non-qualified plan
may be considered as compensation in the year
such amounts are included in the gross income
of the Employee);
(b) amounts realized from the exercise
of a non-qualified stock option, or when
restricted stock (or property) held by an
employee becomes freely transferable or is no
longer subject to a substantial risk of
forfeiture;
(c) amounts realized from the sale,
exchange or other disposition of stock
acquired under a qualified stock option; and
(d) other amounts which receive special
tax benefits, or contributions made by an
Employer (whether or not under a salary
reduction agreement) towards the purchase of
an annuity contract described in Code
Section 403(b) (whether or not the
contributions are excludable from the gross
income of the Employee).
For purposes of applying the limitations in
this Article, amounts included as compensation are
those actually paid or made available to a Participant
within the Limitation Year. For Limitation Years
beginning after December 31, 1988, Compensation shall
be limited to $200,000 (unless adjusted in the same
manner as permitted under Code Section 415(d)). For
Limitation Years beginning after December 31, 1993,
Compensation shall be limited to $150,000 (unless
adjusted in the same manner as permitted under Code
Section 415(d)). Notwithstanding anything to the
contrary in the definition, compensation shall include
any and all items which may be includable in
Compensation under Section 415(c)(3) of the Code.
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6. Average Compensation: The average
Compensation during a Participant's high three years
of service, which period is the three consecutive
calendar years (or the actual number of consecutive
years of employment for those employees who are
employed for less than three consecutive years with
the Employer) during which the Employee had the
greatest aggregate Compensation from the Employer.
7. Annual Benefit: A benefit payable annually
in the form of a straight life annuity (with no
ancillary benefits) under a plan to which Employees do
not contribute and under which no rollover
contributions are made.
8. Annual Additions: With respect to each
Limitation Year, the total of the Employer
Contributions, Deferred Contributions, Forfeitures and
amounts described in Code Sections 415(l) and
419A(d)(2) which are allocated to a Participant's
Account.
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ARTICLE XII
TOP-HEAVY PLAN REQUIREMENTS
12.1 General Rule: For any Plan Year for which this Plan is
a Top-Heavy Plan, as defined in Section 12.7, despite any other
provisions of this Plan to the contrary, this Plan shall be
subject to the provisions of this Article XII.
12.2 Vesting Provisions: Each Participant who has completed
an Hour of Service after the Plan becomes top heavy and while the
Plan is top heavy and who has completed the Vesting Service
specified in the following table shall be vested in his account
under this Plan at least as rapidly as is provided in the
following schedule:
Vesting Service Vested Percentage
Less than 2 years 0%
2 but less than 3 years 20%
3 but less than 4 years 40%
4 but less than 5 years 66 2/3%
5 years or more 100%
If an account becomes vested by reason of the application of the
preceding schedule, it may not thereafter be forfeited by reason
of re-employment after retirement pursuant to a suspension of
benefits provision, by reason of withdrawal of any mandatory
employee contributions to which employer contributions were
keyed, or for any other reason. If the Plan subsequently ceases
to be top heavy, the preceding schedule shall continue to apply
with respect to any Participant who had at least three years of
service (as defined in Treasury Regulation para. 1.411(a)-8T(b)(3))
as of the close of the last year that the Plan was top heavy.
For all other Participants, the vested percentage provided in the
preceding schedule prior to the date the Plan ceases to be top
heavy shall not be reduced.
12.3 Minimum Contribution Provisions: Each Participant who
(i) is a Non-Key Employee, as defined in Section 12.7 and (ii) is
employed on the last day of the Plan Year will be entitled to
have contributions and forfeitures allocated to his account of
not less than 3% (the "Minimum Contribution Percentage") of the
Participant's Compensation. This minimum allocation shall be
provided without taking pre-tax contributions into account. A
Non-Key Employee may not fail to receive a Minimum Contribution
Percentage because of a failure to receive a specified minimum
amount of compensation or a failure to make mandatory employee or
elective contributions. This Minimum Contribution Percentage
will be reduced for any Plan Year to the percentage at which
contributions (including Forfeitures) are made or are required to
be made under the Plan for the Plan Year for the Key Employee for
whom such percentage is the highest for such Plan Year. For this
purpose, the percentage with respect to a Key Employee will be
determined by dividing the contributions (including Forfeitures)
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made for such Key Employee by his total compensation (as defined
in Section 415 of the Code).
Contributions considered under the first paragraph of
this Section 12.3 will include Employer contributions under this
Plan and under all other defined contribution plans required to
be included in an Aggregation Group (as defined in Section 12.7
below), but will not include Employer contributions under any
plan required to be included in such aggregation group if the
plan enables a defined benefit plan required to be included in
such group to meet the requirements of the Code prohibiting
discrimination as to contributions in favor of employees who are
officers, shareholders or the highly compensated or prescribing
the minimum participation standards. If the highest rate
allocated to a Key Employee for a year in which the Plan is
top-heavy is less then 3%, amounts contributed as a result of a
salary reduction agreement must be included in determining
contributions made on behalf of Key Employees.
Contributions considered under this Section will not
include any contributions under the Social Security Act or any
other federal or state law.
12.4 Limitation on Contributions: In the event that the
Company, another Employer or an Affiliate (hereinafter in this
Article collectively referred to as a "Considered Company") also
maintains a defined benefit plan providing benefits on behalf of
Participants in this Plan, one of the two following provisions
will apply:
(a) If for the Plan Year this would not be a
Top-Heavy Plan if "90%" were substituted for "60%" in
Section 12.7, then the percentage of 3% used in
Section 12.3 is changed to 4%.
(b) If for the Plan Year this Plan would
continue to be a Top-Heavy Plan if "90%" were
substituted for "60%," in Section 12.7, then the
denominator of both the defined contribution plan
fraction and the defined benefit plan fraction shall
be calculated as set forth in Section 11(III) for the
Limitation Year ending in such Plan Year by
substituting "1.0" for "1.25" in each place such
figure appears. This subsection (b) will not apply
for such Plan Year with respect to any individual for
whom there are no (i) employer contributions,
forfeitures or voluntary non-deductible contributions
allocated to such individual or (ii) accruals earned
under the defined benefit plan. Furthermore, the
transitional rule set forth in Section 415(e)(6)(B)(i)
of the Code shall be applied by substituting "$41,500"
for "$51,875" where it appears therein.
12.5 Coordination with Other Plans: If another defined
benefit plan maintained by a Considered Company provides
contributions or benefits on behalf of a Participant in this
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Plan, such other plan shall be treated as a part of this Plan
pursuant to applicable principles prescribed by U.S. Treasury
Regulations or applicable IRS rulings (such as Revenue
Ruling 81-202 or any successor ruling) to determine whether this
Plan satisfies the requirements of Section 12.3 and to avoid
inappropriate omissions or inappropriate duplication of minimum
contributions. The determination shall be made by the Committee
upon the advice of counsel. In the event a Participant is
covered by a defined benefit plan which is top heavy pursuant to
Section 416 of the Code, a comparability analysis (as prescribed
by Revenue Ruling 81-202 or any successor ruling) shall be
performed in order to establish that the plans are providing
benefits at least equal to the defined benefit minimum.
12.6 D i s t r i b u t i o n s t o C e r t a i n K e y
Employees: Notwithstanding any other provision of this Plan to
the contrary, the entire interest in this Plan of each
Participant who is a 5% owner (as described in
Section 416(i)(1)(A) of the Code determined with respect to the
Plan Year ending in the calendar year in which such individual
attains age 70 1/2) shall be distributed to such Participant not
later than the first day of April following the calendar year in
which such individual attains age 70 1/2.
12.7 Determination of Top-Heavy Status: The Plan will be a
Top-Heavy Plan for any Plan Year if, as of the Determination
Date, the aggregate of the accounts under the Plan (determined as
of the Valuation Date) for Participants (including former
Participants) who are Key Employees exceeds 60% of the aggregate
of the accounts of all Participants, excluding former Key
Employees, or if this Plan is required to be in an Aggregation
Group, any such Plan Year in which such Group is a Top-Heavy
Group. In determining Top-Heavy status, if an individual has not
performed one hour of service for any Considered Company at any
time during the five-year period ending on the Determination
Date, any accrued benefit for such individual and the aggregate
accounts of such individual shall not be taken into account.
For purposes of this Section, the capitalized words
have the following meanings:
(a) "Aggregation Group" means the group of
plans, if any, that includes both the group of plans
required to be aggregated and the group of plans
permitted to be aggregated. The group of plans
required to be aggregated (the "required aggregation
group") includes:
(i) Each plan of a Considered Company
in which a Key Employee is a participant in
the Plan Year containing the Determination
Date, or any of the four preceding Plan
Years, and
(ii) Each other plan, including
collectively bargained plans, of a Considered
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Company which, during this period, enables a
plan in which a Key Employee is a participant
to meet the requirements of Sections
401(a)(4) and 410 of the Code.
The group of plans that are permitted to be
aggregated (the "permissive aggregation group")
includes the required aggregation group plus one or
more plans of a Considered Company that is not part of
the required aggregation group and that the Considered
Company certifies as a plan within the permissive
aggregation group. Such plan or plans may be added to
the permissive aggregation group only if, after the
addition, the aggregation group as a whole continues
to satisfy the requirements of Sections 401(a)(4) and
410 of the Code.
(b) "Determination Date" means for any Plan
Year the last day of the immediately preceding Plan
Year. However, for the first Plan Year of this Plan,
Determination Date means the last day of that Plan
Year.
(c) "Key Employee" means any Employee or former
Employee under this Plan who, at any time during the
Plan Year in question or during any of the four
preceding Plan Years, is or was one of the following:
(i) An officer of a Considered Company
having an annual compensation greater than
50% of the amount in effect under
Section 415(b)(1)(A) of the Code for any such
Plan Year. Whether an individual is an
officer shall be determined by the Considered
Company on the basis of all the facts and
circumstances, such as an individual's
authority, duties, and term of office, not on
the mere fact that the individual has the
title of an officer. For any such Plan Year,
officers considered to be Key Employees will
be no more than the fewer of:
(A) 50 Employees; or
(B) 10% of the Employees or,
if greater than 10%, three
Employees.
For this purpose, the highest paid officers
shall be selected.
(ii) One of the ten Employees
owning (or considered as owning, within the
meaning of the constructive ownership rules
of Section 416(i)(1)(B) of the Code) the
largest interests in the Considered Company.
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An Employee who has some ownership interest
is considered to be one of the top ten owners
unless at least ten other employees own a
greater interest than that Employee.
However, an Employee will not be considered a
top ten owner for a Plan Year if the Employee
earns less than the maximum dollar limitation
on annual additions to a participant's
account in a defined contribution plan under
the Code, as in effect for the calendar year
in which the Determination Date falls.
(iii) Any person who owns (or is
considered as owning, within the meaning of
the constructive ownership rules of
Section 416(i)(1)(B) of the Code) more than
5% of the outstanding stock of a Considered
Company or stock possessing more than 5% of
the combined voting power of all stock of the
Considered Company.
(iv) Any person who has an annual
compensation from the Considered Company of
more than $150,000 and who owns (or is
considered as owning within the meaning of
the constructive ownership rules of
Section 416(i)(1)(B) of the Code) more than
1% of the outstanding stock of the Considered
Company or stock possessing more than 1% of
the total combined voting power of all stock
of the Considered Company. For purposes of
this subsection, compensation means all items
includable as compensation for purposes of
applying the limitations on annual additions
to a Participant account in a defined
contribution plan and the maximum benefit
payable under a defined benefit plan under
the Code.
For purposes of this subsection (c), a Beneficiary of
a Key Employee shall be treated as a Key Employee.
For purposes of parts (iii) and (iv), each Considered
Company is treated separately in determining ownership
percentages; but all such Considered Companies shall
be considered a single employer in determining the
amount of compensation.
(d) "Non-Key Employee" means any employee (and
any Beneficiary of an employee) who is not a Key
Employee.
(e) "Top-Heavy Group" means the Aggregation
Group, if as of the applicable Determination Date, the
sum of the present value of the cumulative accrued
benefits for Key Employees under all defined benefit
plans included in the Aggregation Group plus the
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aggregate of the accounts of Key Employees under all
defined contribution plans included in the Aggregation
Group exceeds 60% of the sum of the present value of
the cumulative accrued benefits for all employees,
excluding former Key Employees as provided in
paragraph (i) below, under all such defined benefit
plans plus the aggregate accounts for all employees,
excluding former Key Employees as provided in
paragraph (i) below, under all such defined
contribution plans. In determining Top-Heavy status,
if an individual has not performed one hour of service
for any Considered Company at any time during the
five-year period ending on the Determination Date, any
accrued benefit for such individual and the aggregate
accounts of such individual shall not be taken into
account. If the Aggregation Group that is a Top-Heavy
Group is a required aggregation group, each plan in
the group will be a Top-Heavy Plan. If the
Aggregation Group that is a Top-Heavy Group is a
permissive aggregation group, only those plans that
are part of the required aggregation group will be
treated as Top-Heavy Plans. If the Aggregation Group
is not a Top-Heavy Group, no plan within such group
will be a Top-Heavy Plan. In determining whether this
Plan constitutes a Top-Heavy Plan, the Committee (or
its agent) will make the following adjustments:
(f) When more than one plan is aggregated, the
Committee shall determine separately for each plan as
of each plan's Determination Date the present value of
the accrued benefits (for this purpose using the
actuarial assumptions set forth in the applicable plan
or account balance. The results shall then be
aggregated by adding the results of each plan as of
the Determination Dates for such plans that fall
within the same calendar year.
(g) In determining the present value of the
cumulative accrued benefit (for this purpose using the
actuarial assumptions set forth in the applicable
pension plan) or the amount of the account of any
employee, such present value or account will include
the amount in dollar value of the aggregate
distributions made to such employee under the
applicable plan during the five-year period ending on
the Determination Date unless reflected in the value
of the accrued benefit or account balance as of the
most recent Valuation Date. The amounts will include
distributions to employees representing the entire
amount credited to their accounts under the applicable
plan.
(h) Further, in making such determination, such
present value or such account shall include any
rollover contribution (or similar transfer), as
follows:
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(1) If the rollover contribution (or
similar transfer) is initiated by the
employee and made to or from a plan
maintained by another Considered Company, the
plan providing the distribution shall include
such distribution in the present value of
such account; the plan accepting the
distribution shall not include such
distribution in the present value of such
account unless the plan accepted it before
December 31, 1983.
(2) If the rollover contribution (or
similar transfer) is not initiated by the
employee or made from a plan maintained by
another Considered Company, the plan
accepting the distribution shall include such
distribution in the present value of such
account, whether the plan accepted the
distribution before or after December 31,
1983; the plan making the distribution shall
not include the distribution in the present
value of such account.
(i) In any case where an individual is a
Non-Key Employee with respect to an applicable plan
but was a Key Employee with respect to such plan for
any prior Plan Year, any accrued benefit and any
account of such employee shall be altogether
disregarded. For this purpose, to the extent that a
Key Employee is deemed to be a Key Employee if he or
she met the definition of Key Employee within any of
the four preceding Plan Years, this provision shall
apply following the end of such period of time.
(j) "Valuation Date" means for purposes for
determining the present value of an accrued benefit as
of the Determination Date the date determined as of
the most recent valuation date which is within a
12-month period ending on the Determination Date. For
the first plan year of a plan, the accrued benefit for
a current employee shall be determined either (i) as
if the individual terminated service as of the
Determination Date or (ii) as if the individual
terminated service as of the valuation date, but
taking into account the estimated accrued benefit as
of the Determination Date. The Valuation Date shall
be determined in accordance with the principles set
forth in Q.&A. T-25 of Treasury Regulations para. 1.416-1.
(k) For purposes of this Article XII,
"Compensation" shall have the meaning given to it in
Section 11(IV)(5).
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ARTICLE XIII
TESTING OF CONTRIBUTIONS
13.1 Definitions: For purposes of this Article XIII, the
capitalized words have the following meanings:
(a) "Compensation" shall mean the Employee's
total Compensation for services rendered to an
Employer during the Plan Year and, unless the
Committee elects otherwise, the Employee's Pre-Tax
Contributions for the Plan Year and any amounts not
currently included in the Employee's gross income by
reason of the application of Section 125 of the Code.
(b) "Employer Contributions" shall mean the
amounts contributed to the Trust Fund by the Employer
pursuant to Section 3.1.
(c) "Family Member" shall mean the spouse and
the lineal ascendants and descendants (and spouses of
such ascendants and descendants) of any Employee or
former Employee.
(d) "Highly Compensated Employee" shall mean
any Employee and any employee of an Affiliate who is a
highly compensated employee under Section 414(q) of
the Code, including any Employee and any employee of
an Affiliate who, during the current Plan Year or
prior Plan Year,
(i) was at any time a 5% owner; or
(ii) received Compensation (as
defined in Section 11(IV)(5)) in excess of
$75,000 (or such other amount as determined
by the Secretary of the Treasury which
reflects cost-of-living increases in
accordance with the provisions of Code
Section 414(q)(1)); or
(iii) received Compensation (as
defined in Section 11(IV)(5)) in excess of
$50,000 (or such other amount as determined
by the Secretary of the Treasury which
reflects cost-of-living increases in
accordance with the provisions of Code
Section 414(q)(1)) and was in the "top-paid
group" (the top 20% of payroll excluding
Employees described in Code Section 414(q)(8)
and applicable regulations) for the Plan
Year; or
(iv) was an officer receiving
Compensation (as defined in
Section 11(IV)(5)) exceeding 50% of the
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dollar limit in Section 415(b)(1)(A) of the
Code). The number of officers shall be
limited to 50 employees (or, if lesser, the
greater of three employees or 10% of the
employees).
If for any year no officer of the Employer
is described in subparagraph (iv) above, the highest
paid officer of the Employer for such year shall be
treated as described in such paragraph.
In determining an Employee's status as a
Highly Compensated Employee within the meaning of
Section 414(q), the entities set forth in Treasury
Regulation Section 1.414(q)-1T Q&A-6(a)(1) through (4)
must be taken into account as a single employer.
For purposes of determining whether an
individual is a Highly Compensated Employee for the
current Plan Year, an Employee who meets the definition
of Highly Compensated Employee set forth in
Section 13.1(d) above by virtue of subparagraphs (i),
(ii) or (iv) for the current Plan Year (but not for the
prior Plan Year), shall not be treated as a Highly
Compensated Employee unless such individual is a member
of the group consisting of the 100 individuals who were
paid the greatest Compensation (as defined in
Section 11(IV)(5)) during the current Plan Year.
(e) "Pre-Tax Contributions" shall mean the
amounts contributed to the Trust Fund out of a
Participant's Compensation pursuant to Section 3.2.
13.2 Actual Deferral Percentage: The Actual Deferral
Percentage for a specified group of Employees for a Plan Year
shall be the average of the ratios (calculated separately for
each Employee in such group) of:
(a) The amount of Pre-Tax Contributions actually
paid to the Plan on behalf of each such Employee for
such Plan Year, over
(b) The Employee's Compensation (as defined in
Section 11(IV)(5)) for such Plan Year. Notwithstanding
any provision in this Plan to the contrary, an Employer
may, to the extent permitted by the Code and applicable
regulations, elect to include as Compensation pre-tax
or after-tax contributions made under this Plan or any
other plan of the Employer.
The individual ratios and Actual Deferral Percentages shall be
calculated to the nearest 1/100 of 1% of an Employee's
Compensation.
An eligible Employee for the purpose of computing the
Actual Deferral Percentage is defined in Treasury Regulation
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Section 1.401(k)-1(g)(4). The Actual Deferral Percentage of an
eligible Employee who makes no Pre-Tax Contributions is zero.
13.3 Actual Deferral Percentage Limits: The Actual Deferral
Percentage for the eligible Highly Compensated Employees for any
Plan Year shall not exceed the greater of (a) or (b), as follows:
(a) The Actual Deferral Percentage of
Compensation for the eligible non-Highly Compensated
Employees times 1.25, or
(b) The lesser of (i) the Actual Deferral
Percentage of Compensation for the eligible non-Highly
Compensated Employees times 2.0 or (ii) the Actual
Deferral Percentage of Compensation for the eligible
non-Highly Compensated Employees plus two percentage
points or such lesser amount as the Secretary of the
Treasury shall prescribe to prevent the multiple use of
this alternative limitation with respect to any Highly
Compensated Employee.
In determining the Actual Deferral Percentage of an
Employee who is a five 5% owner or one of the ten most Highly
Compensated Employees and who has a Family Member who is an
Employee, any remuneration paid to the Family Member for services
rendered to an Employer or an Affiliate and any contributions
made on behalf of or by such Family Member shall be attributed to
such Highly Compensated Employee. Family Members, with respect
to Highly Compensated Employees, shall be disregarded as separate
Employees in determining the Actual Deferral Percentage both for
Participants who are non-Highly Compensated Employees and for
Participants who are Highly Compensated Employees.
The Actual Deferral Percentage for any Highly
Compensated Employee who is eligible to have deferred
contributions allocated to his account under one or more plans
described in Section 401(k) of the Code that are maintained by an
Employer or an Affiliate in addition to this Plan shall be
determined as if all such contributions were made to this Plan.
For purposes of determining whether the Actual Deferral
Percentage limits of Section 13.3 are satisfied, all Pre-Tax
Contributions that are made under two or more plans that are
aggregated for purposes of Code Section 401(a)(4) or 410(b)
(other than Code Section 410(b)(2)(A)(ii)) are to be treated as
made under a single plan and if two or more plans are
permissively aggregated for purposes of Code Section 401(k) the
aggregated plans must also satisfy Code Sections 401(a)(4) and
410(b) as though they were a single plan.
13.4 Reduction of Pre-Tax Contribution Rates by Leveling
Method: If on the basis of the Pre-Tax Contribution rates
elected by Participants for any Plan Year, the Committee
determines, in its sole discretion, that neither of the tests
contained in (a) or (b) of Section 13.3 will be satisfied, the
Committee may reduce the Pre-Tax Contribution rate of any
Participant who is among the eligible Highly Compensated
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Employees to the extent necessary to reduce the overall Actual
Deferral Percentage for eligible Highly Compensated Employees to
a level which will satisfy either (a) or (b) of Section 13.3.
The reductions in Pre-Tax Contribution rates shall be made in a
manner so that the Actual Deferral Percentage of the affected
Participants who elected the highest Actual Deferral Percentage
shall be first lowered to the level of the affected Participants
who elected the next to the highest Actual Deferral Percentage.
If further overall reductions are required to achieve compliance
with (a) or (b) of Section 13.3, both of the above-described
groups of Participants will be lowered to the level of
Participants with the next highest Actual Deferral Percentage,
and so on, until sufficient total reductions in Pre-Tax
Contribution rates have occurred to achieve compliance with (a)
or (b) of Section 13.3.
13.5 Increase in Pre-Tax Contribution Rates: If a
Participant's Pre-Tax Contribution rate is reduced below the
level necessary to satisfy either (a) or (b) of Section 13.3 for
the Plan Year, such Participant may be eligible to increase his
Pre-Tax Contribution rate for the remainder of the Plan Year to a
level not in excess of that level which will satisfy the greater
of (a) or (b) of Section 13.3. Such an increase in the Pre-Tax
Contribution rate shall be made by Participants on a uniform and
non-discriminatory basis, pursuant to such rules and procedures
as the Committee may prescribe.
13.6 Excess Pre-Tax Contributions: As soon as possible
following the end of the Plan Year, the Committee shall determine
whether either of the tests contained in Section 13.3 were
satisfied as of the end of the Plan Year, and any excess Pre-Tax
Contributions, plus any income and minus any loss attributable
thereto, of those Participants who are among the Highly
Compensated Employees shall be distributed to the affected
Participants as of the end of such Plan Year. Such income shall
include the allocable gain or loss for (i) the Plan Year and
(ii) the period between the end of the Plan Year and the date of
distribution.
An eligible Employee for the purpose of computing the
Actual Deferral Percentage is defined in Treasury Regulation
Section 1.401(k)-1(g)(4). The Actual Deferral Percentage of an
eligible Employee who makes no Pre-Tax Contributions is zero.
The amount of any excess Pre-Tax Contributions to be
distributed shall be reduced by Excess Deferrals previously
distributed to a Participant pursuant to Section 3.2 for the
taxable year ending in the same Plan Year. All excess Pre-Tax
Contributions shall be returned to the Participants no later than
the last day of the following Plan Year. The excess Pre-Tax
Contributions, if any, of each Participant who is among the
Highly Compensated Employees shall be determined by computing the
maximum Actual Deferral Percentage which each such Participant
may defer under (a) or (b) of Section 13.3 and then reducing the
Actual Deferral Percentage of some or all of such Participants
who elected an Actual Deferral Percentage in excess of such
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maximum by an amount of sufficient size to reduce the overall
Actual Deferral Percentage for eligible Participants who are
among the Highly Compensated Employees to a level which satisfies
either (a) or (b) of Section 13.3. The excess Pre-Tax
Contributions, if any, of each Participant shall be determined in
such a manner that the Actual Deferral Percentage of such
Participants who elected the highest Actual Deferral Percentage
shall be first lowered to the level of such Participants who
elected the next to the highest Actual Deferral Percentage. If
further overall reductions are required to achieve compliance
with (a) or (b) of Section 13.3, both of the above-described
groups of Participants will be lowered to the level of
Participants with the next highest Actual Deferral Percentages,
and so on, until sufficient total reductions have occurred to
achieve compliance with (a) or (b) of Section 13.3.
The income or loss attributable to the Participant's
excess Pre-Tax Contributions for the Plan Year shall be
determined by multiplying the income or loss attributable to the
Participant's Pre-Tax Contribution Account balance for the Plan
Year by a fraction, the numerator of which is the excess Pre-Tax
Contribution and the denominator of which is the Participant's
total Pre-Tax Contribution Account balance. Unless the Committee
elects otherwise, the income or loss attributable to the
Participant's excess Pre-Tax Contributions for the period between
the end of the Plan Year and the date of distribution shall be
determined using the safe harbor method set forth in Treasury
Regulations to Section 401(k) of the Code, and shall be equal to
10% of the allocable income or loss for the Plan Year, calculated
as set forth immediately above, multiplied by the number of
calendar months that have elapsed since the end of such Plan
Year. A calendar month shall be deemed to have elapsed and shall
be counted as a full month for this purpose if the distribution
of excess Pre-Tax Contributions is made after the 15th day of
that month; otherwise such distribution shall be treated as
having been made on the last day of the preceding month. Excess
Pre-Tax Contributions shall be treated as Annual Additions under
Article XI of the Plan.
13.7 Aggregation of Family Members in Determining the Actual
Deferral Ratio:
A. Calculation of Actual Deferral Ratios: If an eligible
Highly Compensated Employee is subject to the family aggregation
rules of Section 414(q)(6) of the Code because such Employee is
either a 5% owner or one of the ten most Highly Compensated
Employees, the combined actual deferral ratio for the family
group (which is treated as one Highly Compensated Employee) shall
be determined by combining the Pre-Tax Contributions and
Compensation of all the eligible Family Members.
The Pre-Tax Contributions and Compensation of all
Family Members are disregarded for purposes of determining the
Actual Deferral Percentage for the group of non-Highly
Compensated Employees, except to the extent taken into account in
paragraph (A) above.
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B. Aggregation of Family Groups: If an Employee is
required to be aggregated as a Family Member of more than one
family group, all eligible Employees who are Family Members of
those groups that include the Employee are aggregated as one
family group in accordance with paragraph (A) above.
C. Excess Pre-Tax Contributions of Family Members: In the
event that it becomes necessary to determine and correct the
excess Pre-Tax Contributions of a Highly Compensated Employee
whose actual deferral ratio is determined under the rules of
Section 414(q)(6) of the Code and this Section 13.7, the actual
deferral ratio calculated in paragraph (A) above shall be reduced
using the leveling method set forth in Section 13.4 and the
excess Pre-Tax Contributions to be distributed thereby shall be
allocated among the Family Members in proportion to the Pre-Tax
Contribution of each Family Member that is combined to determine
the actual deferral ratio.
13.8 Contribution Percentage: The Contribution Percentage
for a specified group of Employees for a Plan Year shall be the
average of the ratios (calculated separately for each Employee in
such group) of:
(a) The total of the Employer Contributions (the
"Aggregate Contributions") paid under the Plan on
behalf of each Employee for such Plan Year, to
(b) The Employee's Compensation (as defined in
Section 11(IV)(5)) for such Plan Year.
In computing the Contribution Percentage, the Employer
may elect to take into account after-tax and pre-tax
contributions made under this Plan or any other plan of the
Employer to the extent that the following requirements are
satisfied:
(1) the amount of non-elective contributions,
including those qualified non-elective contributions
treated as employer matching contributions for purposes
of calculating the Contribution Percentage, satisfies
the requirements of Section 401(a)(4) of the Code;
(2) the amount of non-elective contributions,
excluding those qualified non-elective contributions
treated as employer matching contributions for purposes
of calculating the Contribution Percentage and those
qualified non-elective contributions treated as
elective contributions under Section 1.401(k)-1(b)(5)
for purposes of calculating the Actual Deferral
Percentage, satisfies the requirements of
Section 401(a)(4) of the Code;
(3) the elective contributions, including those
treated as matching contributions for purposes of
calculating the Contribution Percentage, satisfy the
requirements of Section 401(k)(3) of the Code;
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(4) the qualified non-elective contributions are
allocated to the Employee under the Plan as of a date
within the Plan Year and the elective contributions
satisfy Section 1.401(k)-1(b)(i) for the Plan Year;
and, if applicable, the Plan and the plans to which the
qualified non-elective contributions and elective
contributions are made, are or could be aggregated for
purposes of Section 410(b).
A Participant's Contribution Percentage shall be determined after
determining the Participant's Excess Deferrals, if any, pursuant
to Section 3.2, and after determining the Participant's excess
Pre-Tax Contributions pursuant to Section 13.6.
13.9 Contribution Percentage Limits: The Contribution
Percentage for the eligible Employees for any Plan Year who are
Highly Compensated Employees shall not exceed the greater of (a)
or (b), as follows:
(a) The Contribution Percentage for the eligible
Employees who are not Highly Compensated Employees
times 1.25, or
(b) The lesser of (i) the Contribution Percentage
for the eligible Employees who are not Highly
Compensated Employees times 2.0 or (ii) the
Contribution Percentage for the eligible Employees who
are not Highly Compensated Employees plus two
percentage points or such lesser amount as the
Secretary of the Treasury shall prescribe to prevent
the multiple use of this alternative limitation with
respect to any Highly Compensated Employee.
In determining the Contribution Percentage of an Employee who is
a 5% owner or one of the ten most Highly Compensated Employees
and who has a Family Member who is an Employee, any remuneration
paid to the Family Member for services rendered to an Employer or
to an Affiliate and any contributions made on behalf of or by
such Family Member shall be attributed to such Highly Compensated
Employee. Family Members, with respect to Highly Compensated
Employees, shall be disregarded as separate Employees in
determining the Contribution Percentage both for Participants who
are non-Highly Compensated Employees and for Participants who are
Highly Compensated Employees.
The Contribution Percentage for any Highly Compensated
Employee for any Plan Year who is eligible to have matching
employer contributions made on his behalf or to make after-tax
contributions under one or more plans described in Section 401(a)
of the Code that are maintained by an Employer or an Affiliate in
addition to this Plan shall be determined as if all such
contributions were made to this Plan.
In the event that this Plan must be combined with one
or more other plans in order to satisfy the requirements of Code
Section 410(b), then the Contribution Percentage shall be
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determined as if all such plans were a single plan. If two or
more plans are permissively aggregated for the purposes of Code
Section 410(b) (other than the average benefit percentage test),
then the Contribution Percentage shall be determined as if all
such plans were a single plan.
13.10 Treatment of Excess Aggregate Contributions: If
neither of the tests described in (a) or (b) of Section 13.9 are
satisfied, the excess Aggregate Contributions, plus any income
and minus any loss attributable thereto, shall be forfeited, or
if not forfeitable, shall be distributed no later than the last
day of the Plan Year following the Plan Year in which such excess
Aggregate Contributions were made. Such income shall include the
allocable gain or loss for (i) the Plan Year and (ii) the period
between the end of the Plan Year and the date of distribution.
The income or loss attributable to the Participant's excess
Aggregate Contributions for the Plan Year shall be determined by
multiplying the income or loss attributable to the Participant's
Employer Contribution Account for the Plan Year by a fraction,
the numerator of which is the excess Aggregate Contribution, and
the denominator of which is the Participant's total Employer
Contribution Account balance. Unless the Committee elects
otherwise, the income or loss attributable to the Participant's
excess Aggregate Contributions for the period between the end of
the Plan Year and the date of distribution shall be determined
using the safe harbor method set forth in Treasury Regulations to
Code Section 401(m), and shall be equal to 10% of the allocable
income or loss for the Plan Year (as calculated immediately
above) multiplied by the number of calendar months that have
elapsed since the end of the Plan Year. A calendar month shall
be deemed to have elapsed and a full month shall be counted for
this purpose if the distribution of excess Aggregate
Contributions is made after the 15th day of that month; otherwise
such distribution shall be treated as having been made on the
last day of the preceding month. Excess Aggregate Contributions
shall be treated as Annual Additions under Article XI of the
Plan.
The excess Aggregate Contributions, if any, of each
Participant who is among the Highly Compensated Employees shall
be determined by computing the maximum Contribution Percentage
under (a) or (b) of Section 13.9 and then reducing the
Contribution Percentage of some or all of such Participants whose
Contribution Percentage exceeds the maximum by an amount of
sufficient size to reduce the overall Contribution Percentage for
eligible Participants who are among the Highly Compensated
Employees to a level which satisfies either (a) or (b) of
Section 13.9. The excess Aggregate Contributions, if any, of
each Participant shall be determined in such a manner that the
Contribution Percentage of such Participants who have the highest
actual contribution ratio under Section 13.8 shall be first
lowered to the level of such Participants with the next to the
highest actual contribution ratio under Section 13.8. If further
overall reductions are required to achieve compliance with (a) or
(b) of Section 13.9, both of the above-described groups of
Participants will be lowered to the level of Participants with
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the next highest actual contribution ratio under Section 13.8,
and so on, until sufficient total reductions have occurred to
achieve compliance with (a) or (b) of Section 13.9. For each
Participant who is a Highly Compensated Employee, the amount of
excess Aggregate Contributions is equal to the total Employer
Contributions on behalf of the Participant (determined prior to
the application of this paragraph) minus the amount determined by
multiplying the Participant's actual contribution ratio
(determined after application of this paragraph) by his
Compensation used in determining such ratio. The individual
ratios and Contribution Percentages shall be calculated to the
nearest 1/100 of 1% of the Employee's Compensation.
13.11 Aggregation of Family Members in Determining the Actual
Contribution Ratio:
A. Calculation of Actual Contribution Ratio: If an
eligible Highly Compensated Employee is subject to the family
aggregation rules of Section 414(q)(6) of the Code because such
Employee is either a 5% owner or one of the ten most Highly
Compensated Employees, the combined actual contribution ratio for
the family group (which is treated as one Highly Compensated
Employee) shall be determined by combining the Employer
Contributions and Compensation of all the eligible Family
Members.
The Employer Contributions and Compensation of all
Family Members are disregarded for purposes of determining the
Contribution Percentage for the group of Highly Compensated
Employees, and the group of non-Highly Compensated Employees,
except to the extent taken into account in paragraph (A) of this
Section.
B. Aggregation of Family Groups: If an Employee is
required to be aggregated as a Family Member of more than one
family group, all eligible Employees or Family Members of those
groups that include the Employee are aggregated as one family
group in accordance with paragraph (A) above.
C. Excess Aggregate Contributions of Family Members: In
the event that it becomes necessary to determine and correct the
excess Aggregate Contributions of a Highly Compensated Employee
whose actual contribution ratio is determined under the rules of
Code Section 414(q)(6) and this Section 13.11, the actual
contribution ratio shall be reduced as required under
Section 13.10, and the excess Aggregate Contributions to be
forfeited or distributed thereby should be allocated among the
Family Members in proportion to the Employer Contributions of
each Family Member that are combined to determine the actual
contribution ratio.
13.12 Multiple Use of Alternative Limitation: The rules set
forth in Treasury Regulation Section 1.401(m)-2(b) for
determination of multiple use of the alternative methods of
compliance with respect to Sections 13.3 and 13.9 are hereby
incorporated into the Plan. If a multiple use of the alternative
HOU01A:316781.5
008939.0157
limitation occurs with respect to two or more plans or
arrangements maintained by an Employer, it shall be treated as an
excess Aggregate Contribution and must be corrected by reducing
the actual contribution ratio of Highly Compensated Employees
eligible both to make elective contributions to receive matching
contributions under the 401(k) arrangement or to make
contributions under the 401(m) plan. Such reduction shall be by
the leveling process set forth in Section 13.10.
HOU01A:316781.5
008939.0157
ARTICLE XIV
TRANSFER OF ELIGIBLE ROLLOVER DISTRIBUTION
14.1 Transfer: This Article applies to distributions made
on or after January 1, 1993. Notwithstanding any provision of
the Plan to the contrary that would otherwise limit a
distributee's election under this Article, a distributee may
elect, at the time and in the manner prescribed by the plan
administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
14.2 Definitions:
Eligible Rollover Distribution: An eligible rollover
distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an eligible
rollover distribution does not include: any distribution that is
one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under
Section 401(a)(9) of the Code; and the portion of any
distribution that is not includable in gross income (determined
without regard to the exclusion for net unrealized appreciation
with respect to employer securities).
Eligible Retirement Plan: An eligible retirement plan
is an individual retirement account described in Section 408(a)
of the Code, an individual retirement annuity described in
Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in
Section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, in the case of an
eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or
individual retirement annuity.
Distributee: A distributee includes an Employee or
former Employee. In addition, the Employee's or former
Employee's surviving spouse and the Employee's or former
Employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in
Section 414(p) of the Code, are distributees with regard to the
interest of the spouse or former spouse.
Direct Rollover: A direct rollover is a payment by the
plan to the eligible retirement plan specified by the
distributee.
HOU01A:316781.5
008939.0157
IN WITNESS WHEREOF, Oceaneering International, Inc. has
executed these presents as evidenced by the signatures of its
duly authorized officers, in a number of copies, all of which
shall constitute but one and the same instrument, which may be
sufficiently evidenced by any such executed copy hereof, this
18th day of June, 1996.
OCEANEERING INTERNATIONAL, INC.
By //S// GEORGE R. HAUBENREICH, JR.
George R. Haubenreich, Jr.
Vice President and General Counsel
ATTEST:
//S// SHEILA F. JAYNES
Assistant Secretary
HOU01A:316781.5
008939.0157
SCHEDULE A
As of the above execution date, only the following
companies have adopted this Plan and become Employers with
respect thereto.
1. Oceaneering International, Inc.
2. Eastport International, Inc.
3. Steadfast Oceaneering Inc.
4. Solus Ocean Systems, Inc.
5. Ocean Systems Engineering, Inc.
HOU01A:316781.5
008939.0157
SCHEDULE B
Effective July 1, 1995, the following Investment Funds
are available under the Plan:
(a) Fixed Income Account - this fund shall be
invested in longer-term fixed-income securities, such
as corporate bonds and commercial mortgages.
(b) Fidelity Puritan Fund - this fund shall be
invested in a broadly diversified portfolio securities,
including stocks, bonds and short-term instruments.
(c) Fidelity Growth Opportunities Fund - this
fund shall be invested primarily in common stocks and
securities convertible into common stocks.
(d) Fidelity Magellan Fund - this fund shall be
invested primarily in equity securities of United
States, multi-national and foreign countries.
(e) Warburg Pincus Emerging Growth Fund - this
fund shall be invested in equity securities of
domestic, emerging growth companies. Ordinarily, this
fund shall invest 65% of its total assets in common
stock or warrants, with the remainder invested in debt
securities, preferred stock and money market
instruments.
(f) Warburg Pincus International Equity Fund -
this fund shall be invested in equity securities of
companies that have their principal business activities
and interests outside the United States.
(g) Oceaneering International Inc. Company Stock
Fund - this fund shall be solely invested in Common
Stock of the Company.
(h) GIC Fund - this fund is invested in a fixed
investment contract or contracts issued by insurance
companies.
HOU01A:316781.5
008939.0157
BENEFIT AGREEMENT
THIS BENEFIT AGREEMENT, made and entered into as of the 22nd
day of February, 1996 by and between Oceaneering International,
Inc., a Delaware corporation with its principal office located in
Houston, Texas (together with its successors and assigns
permitted under this Agreement) (the"Company"), and John R.
Huff, who resides at 1221 Archley, Houston, Texas 77005 (the
"Executive").
W I T N E S S E T H
WHEREAS, the Executive is the Chairman of the Board of
Directors, President and Chief Executive Officer of the Company
and an integral part of its management; and
WHEREAS, effective August 15, 1986, the Executive entered
into an employment agreement with the Company (the "Employment
Agreement"); and
WHEREAS, the Company has determined that it would be in the
best interests of the Company and its shareholders to assure
itself of the continued services of the Executive by entering
into this Agreement as an addendum to the Employment Agreement to
provide medical benefits to the Executive and his spouse and
children as set forth herein;
NOW, THEREFORE, in consideration of the premises contained
herein, the Company and the Executive (the"Parties") agree as
follows:
1. Definitions
"Change in Control" shall have the same meaning as defined
in the Senior Executive Severance Plan as amended effective March
17, 1989, and as thereafter may be amended.
"Children" shall mean the natural children of the Executive
as of the date of this Agreement, namely Christopher David Huff
and Jonathan Travis Huff.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Disability" shall have the same meaning as defined in the
long-term disability plan of the Company.
"Spouse" shall mean the woman who is legally married to the
Executive as of the date of this Agreement, namely Karen Keohane
Huff.
2. Benefits
During Executive's employment with the Company and
thereafter, the Company shall provide the Executive, his Spouse
and Children with medical benefits through a group or individual
insurance plan or provide to the appropriate of the Executive,
his Spouse or Children with 100% reimbursement of any expenses
incurred by the Executive, his Spouse or Children that are not
reimbursed by insurance or otherwise for "medical care" (as such
term is defined in Section 213 of the Code) for the Executive,
his Spouse, and his Children.
3. Certain Events
a. In the event the Executive's employment is terminated
due to death or Disability, the medical benefits
described in Section 2 herein shall continue to be
provided to the Executive, his Spouse and Children for
each of their lives.
b. In the event of a Change in Control of the Company, the
medical benefits described in Section 2 herein shall
continue to be provided to the Executive, his Spouse
and Children for each of their lives.
c. In the event the Executive's employment is terminated
by the Company or the Executive terminates employment
with the Company in each case after being continuously
employed by the Company through August 15, 2006, the
medical benefits described in Section 2 herein shall
continue to be provided to the Executive, his Spouse
and Children for each of their lives.
d. If the Executive's employment with the Company is
terminated by Executive voluntarily or if Executive's
employment is terminated by the Company by reason of
the Executive's commission of a felony related to his
employment with the Company, in each case prior to a
Change in Control and prior to August 15, 2006, the
medical benefits provided herein shall cease.
4. Effect of Agreement on Other Benefits
The existence of this Agreement shall not prohibit or
restrict the Executive's entitlement to full participation in the
executive compensation, employee benefit and other plans or
programs in which senior executives of the Company are eligible
to participate.
5. Assignability; Binding Nature
This Agreement shall be binding upon and inure to the
benefit of the Company and the Executive and their respective
successors, heirs (in the case of the Executive) and assigns. No
rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or
obligations may be assigned or transferred pursuant to a merger
or consolidation in which the Company is not the continuing
entity, or the sale or liquidation of all or substantially all of
the assets of the Company, provided that the assignee or
transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the
liabilities, obligations and duties of the Company, as contained
in this Agreement, either contractually or as a matter of law.
The Company further agrees that, in the event of a sale of assets
or liquidation as described in the preceding sentence, it shall
take whatever action it legally can in order to cause such
assignee or transferee to expressly assume the liabilities,
obligations and duties of the Company hereunder. No obligations
of the Executive under this Agreement may be assigned or
transferred by the Executive.
6. Representation
The Company represents and warrants that it is fully
authorized and empowered to enter into this Agreement and that
the performance of its obligations under this Agreement will not
violate any agreement between the Company and any other person,
firm or organization.
7. Entire Agreement
Except to the extent otherwise provided herein, this
Agreement contains the entire understanding and agreement between
the Parties concerning the subject matter hereof.
8. Amendment or Waiver
No provision in this Agreement may be amended unless such
amendment is agreed to in writing and signed by both the
Executive and an authorized officer of the Company. No waiver by
either Party of any breach by the other Party of any condition or
provision contained in this Agreement to be performed by such
other Party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same or any prior or subsequent
time. Any waiver must be in writing and signed by the Executive
or an authorized representative of the Company, as the case may
be.
9. Severability
In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full
force and effect to the fullest extent permitted by law.
10. Survivorship
The respective rights and obligations of the Parties
hereunder shall survive any termination of the Executive's
employment, except as specified in Section 3 hereof, to the
extent necessary to the intended preservation of such rights and
obligations.
11. Governing Law/Jurisdiction
This Agreement shall be governed by and construed and
interpreted in accordance with the laws of Texas without
reference to principles of conflict of laws.
12. Headings
The headings of the sections contained in this Agreement are
for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
13. Counterparts
This Agreement may be executed in two or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
//S// JOHN R. HUFF
John R. Huff
OCEANEERING INTERNATIONAL, INC.
By: //S// GEORGE R. HAUBENREICH, JR.
Vice President,
General Counsel and Secretary
K- K-113 7,000 Shares
OCEANEERING INTERNATIONAL, INC.
RESTRICTED STOCK AWARD INCENTIVE AGREEMENT
THIS AGREEMENT is made as of the date set forth on the
signature page hereof, between Oceaneering International, Inc., a
Delaware corporation (the "Company"), and Marvin J.
Migura (the "Participant"). Except as defined herein,
capitalized terms shall have the same meaning ascribed to them
under the 1990 Long Term Incentive Plan of Oceaneering
International, Inc., as from time to time amended, a copy of
which is attached hereto and made a part hereof for all purposes
(the "Plan"). To the extent that any provision of this Agreement
conflicts with the express terms of the Plan, it is hereby
acknowledged and agreed that the terms of the Plan shall control
and, if necessary, the applicable provisions of this Agreement
shall be hereby deemed amended so as to carry out the purpose and
intent of the Plan.
1. Definitions. As used herein, the terms set forth
below shall have the following respective meanings:
(a) "Change in Control" means, with respect to the
Company, if (i) a third person, including a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, becomes
the beneficial owner of shares of the Company having 30 percent
or more of the total number of votes that may be cast for the
election of directors of the Company, or (ii) as the result of,
or in connection with, any cash tender or exchange offer, merger
or other business combination, sale of assets or contested
election or any combination of the foregoing transactions (a
"Transaction"), the persons who were directors of the Company
before the Transaction shall cease to constitute a majority of
the Board of Directors of the Company or of any successor to the
Company. Without limiting the foregoing, no "Change of Control"
shall be deemed to have taken place for the purposes of this
Agreement, if a person or persons is appointed or elected as a
member(s) of the Board as a result of or in connection with a
Transaction or other event unless item (i) or (ii) above shall
also have occurred.
(b) "Closing Stock Price" means, with respect to
common stock on a particular date, (i) if the shares of common
stock are listed on a national securities exchange, the last sale
price per share of common stock on any such national securities
exchange on that date, or, if there shall have been no such sale
so reported on that date, on the last preceding date on which
such a sale was so reported and, (ii) if the shares of Common
Stock are not so listed but are quoted in the NASDAQ National
Market System, the last sale price per share of shares of common
stock reported on the NASDAQ National Market System on that date,
or, if there shall have been no such sale so reported on that
date, on the last preceding date on which such a sale was so
reported.
(c) "Disability" means a physical or mental impairment
of sufficient severity that, in the opinion of a physician
selected by the Company, the Participant is unable to fulfill his
duties.
(d) "Peer Group Companies" means Baroid Corporation as
replaced by Dresser Industries, Inc. on June 24, 1994, Global
Industries, Inc., Halliburton Company, Hornbeck Offshore
Services, Inc., Offshore Pipelines, Inc. as replaced by J. Ray
McDermott, Inc. on February 10, 1995, McDermott International,
Inc., Nabors Industries, Inc., Stolt Comex Seaway S.A., and
Tidewater, Inc. In the event any of such companies (i) shall
cease to have its common stock listed on a national securities
exchange or quoted in the NASDAQ National Market System, or (ii)
in the sole discretion of the Committee, shall be so changed as a
result of any merger, acquisition or other transaction that it no
longer is appropriate to include such company as one of the Peer
Group Companies, then the Peer Group Companies shall thereafter
not include such company for purposes of calculating any
forfeiture of Restricted Stock under this Agreement.
(e) "Peer Group Companies Performance" for any 52-week
period contemplated in Section 3 of this Agreement means, the
arithmetic average of the changes in Closing Stock Price for each
of the Peer Group Companies between the first day of such period
and the last day of such period.
2. Award. In order to encourage the Participant's
contribution to the successful performance of the Company, and in
consideration of the covenants and promises of the Participant
herein contained, pursuant to action taken by the Committee on
May 22, 1995 (the "Date of Grant"), the Company hereby awards to
the Participant as of the Date of Grant a total of 7,000 shares
of Common Stock, pursuant to the Plan, subject to the conditions
and restrictions set forth below and in the Plan (the "Restricted
Stock").
3. Restrictions on Transfer. The shares of
Restricted Stock granted hereunder to the Participant may not be
sold, assigned, transferred, pledged or otherwise encumbered from
the Date of Grant until said shares shall have become vested and
not otherwise subject to forfeiture (and restrictions terminated
thereon) in accordance with the provisions of this Paragraph 3.
(The period of time between the Date of Grant and the vesting of
shares of Restricted Stock shall be referred to herein as the
"Restricted Period" as to those shares of stock.) The Restricted
Stock awarded hereunder consists of Tranche C containing 7,000
shares. The shares of Restricted Stock shall be treated as
described below for purposes of forfeiture, vesting and other
terms and conditions of this Agreement:
(a) Tranche C: The shares of Restricted Stock in
Tranche C shall be forfeited to the extent the change of the
Closing Stock Price for the Common Stock for the 156-week period
referred to below fails to meet the levels of Peer Group
Companies Performance indicated in the columnar presentation
below for such period, with linear interpolation to be used
between these designated points (rounded to the nearest whole
share of Common Stock); provided, however, that if net income for
the Company for its fiscal year ending immediately prior to
June 21, 1996 is not positive, all of Tranche C shall be
forfeited. Determination of changes shall be made by comparing
the Closing Stock Prices of the Company and the Peer Group
Companies on June 25, 1993 to the Closing Stock Prices on the
last trading day of each calendar week for each of such companies
for the period ended June 21, 1996.
Percentage of
Company Performance as Percentage Restricted Stock
of Peer Group Companies Performance Forfeited
87-1/2% 0%
75% 34%
50% 84%
Less than 50% 100%
(b) Vesting of Common Stock: The shares of Tranche C
Restricted Stock not forfeited by reason of failure to meet the
conditions set forth in paragraph (c) above, shall vest 25% on
June 21, 1996, 25% on June 20, 1997, 25% on June 19, 1998 and a
final 25% on June 18, 1999. Upon termination of a Participant's
employment (with or without cause, voluntary, involuntary or for
any reason whatsoever except as provided in Sections 3(f) and
3(g)), all Restricted Stock for which the conditions of the
applicable provisions of paragraphs (a), (b) or (c) and this
paragraph (d) have not been satisfied as of the date of such
termination of employment shall be forfeited.
(c) Tax Reimbursement: Within 10 days after the
expiration of the Restricted Period with respect to a particular
share of Restricted Stock, the Company shall pay to the
Participant an amount sufficient to provide for the payment of
all United States federal income taxes imposed with respect to
Participant's acquisition of such share, as well as an amount
sufficient to reimburse Participant for the tax obligation on
such amounts so that Participant is paid an amount as a tax
assistance payment by the Company sufficient to fund all of his
income taxes on both the share of Restricted Stock and the tax
assistance payment. In the event the Participant is not at the
time a tax assistance payment is to be made subject to United
States income tax, such tax assistance payment shall be computed
by reference to the income tax of the laws of the country to
which the participant is subject; provided, however, that such
tax assistance payment shall not exceed the amount that would
have been payable if the Participant were subject solely to
United States income tax. No United States state (or equivalent
foreign) income taxes will be considered in determining tax
assistance payments. The Committee shall have sole and complete
discretion in the calculation of tax assistance payments, and the
determination of the Committee shall be final and binding on the
Participant except in the case of bad faith or willful
misconduct. In computing the tax assistance payment, it shall be
assumed that the Participant is at the maximum marginal tax rate
for individual taxpayers. Subject to Section 3(f), in the event
a Participant sells any share of Restricted Stock within three
years after expiration of the Restricted Period with respect to
such Restricted Stock, the Participant shall immediately pay to
the Company the amount of the tax assistance payment previously
received by the Participant from the Company with respect to such
share.
(d) Effect of Change in Control: In the event a
Change in Control occurs prior to the time that the conditions of
the applicable of paragraphs (a), (b) or (c) and paragraph (d)
above have been satisfied with respect to a share of Restricted
Stock, and upon such Change in Control if a share of Restricted
Stock has not theretofore been forfeited, the requirements of
paragraphs (a), (b), (c) and (d) above shall be deemed to have
been satisfied on the later of (i) 6 months after the Date of
Grant and (ii) the date of such Change of Control, and tax
assistance payments shall be made with respect to such shares
within 10 days thereafter.
(e) Effect of Death Disability; Discretion of
Committee. In the event of the death or Disability of the
Participant while employed by the Company, the conditions of the
applicable of paragraphs (a), (b) or (c) and paragraph (d) with
respect to any shares of Restricted Stock not previously
forfeited by the Participant shall be deemed immediately
satisfied and tax assistance payments shall be made by Company to
Participants with respect to such event within 30 days
thereafter. At any time after 6 months from the Date of Grant,
the Compensation Committee may determine to deem the conditions
of paragraphs (a), (b), (c) or (d) satisfied with respect to one
or more shares of Restricted Stock, and may in connection
therewith authorize a tax assistance payment.
(f) Dividends: Dividends (other than dividends in
capital stock) with respect to shares of Restricted Stock shall
be paid to the Participant without regard to the restrictions
otherwise applicable to such shares. Dividends in capital stock
of the Company shall accumulate and be associated with the
Restricted Stock to which they relate and shall vest at the time
such Restricted Stock vests.
(g) Voting of Common Stock: A Participant shall have
the right to exercise any voting rights appurtenant to Restricted
Stock without regard to any restrictions otherwise imposed by
reason of this Agreement.
(h) Interpretation of Market Declines. In the event,
for any 52-week period, the Peer Group Companies Performance is
negative, the tables in Sections 3(a), 3(b) and 3(c) shall be
interpreted such that (i) a relative performance of 87-1/2% shall
mean the Company Performance (in terms of a decline in Closing
Stock Price) declined 112-1/2% compared to the Peer Group Companies
Performance, (ii) a relative performance of 75% shall mean the
Company Performance declined 125% compared to the Peer Group
Companies Performance and (iii) a relative performance of 50%
shall mean the Company Performance declined 150% compared to the
Peer Group Companies Performance. For example, if Peer Group
Companies Performance change is a negative 10% (an average
decline of 10%), and Company Performance declined 15%, 84% of
Tranche C would be forfeited.
4. Code Section 83(b) Election. The Participant
shall not make an election, under Code Section 83(b), to include
in income the fair market value of the Restricted Stock in
respect of this award of Restricted Stock on the Date of Grant.
5. Sale of Restricted Stock. The Participant shall
not sell Restricted Stock except pursuant to an effective
registration statement under the Securities Act of 1933 (or
pursuant to an exemption from registration under such act), and
the Participant hereby represents that he is acquiring the
Restricted Stock for his own account and not with a view to the
distribution thereof.
6. Escrow of Certificates. The certificates
representing shares of Restricted Stock shall be registered in
the name of the Participant and deposited, together with a stock
power endorsed by the Participant in blank, with the Corporate
Secretary of the Company during the Restricted Period. Each such
certificate shall bear a legend as provided by the Company,
conspicuously referring to the terms, conditions and restrictions
described in the Plan and in this Agreement. Subject to the
provisions of Section 7 below, upon termination of the Restricted
Period with respect to shares of Restricted Stock, a certificate
representing such shares shall be delivered to the Participant as
promptly as practicable following such termination.
7. Withholding of Taxes. No certificates
representing the shares of Restricted Stock shall be delivered to
the Participant by the Company unless the Participant (or
Beneficiary, as defined in Section 8 below) remits to the Company
the amount of all federal, state and other governmental
withholding tax requirements imposed upon the Company with
respect to the issuance of such shares or unless provisions to so
pay such withholding requirements have been made to the
satisfaction of the Committee.
8. Beneficiary Designations. The Participant may
file with the Corporate Secretary of the Company a designation of
one or more beneficiaries (each a "Beneficiary") to whom shares
otherwise due the Participant shall be distributed in the event
of the death of the Participant while in the employ of the
Company. The Participant shall have the right to change the
Beneficiary or Beneficiaries from time to time; provided,
however, that any change shall not become effective until
received in writing by the Corporate Secretary of the Company.
If any designated Beneficiary survives the Participant but dies
before receiving all of his benefits hereunder, any remaining
benefits due him shall be distributed to the deceased
Beneficiary's estate. If there is no effective Beneficiary
designation on file at the time of the Participant's death, or if
the designated Beneficiary or Beneficiaries have all predeceased
such Participant, the payment of any remaining benefits shall be
made to the Participant's estate. In the event of any dispute,
the Company shall be fully protected and discharged of its
obligations under this Agreement if it delivers the shares
otherwise due a Participant to the probate court administering
his estate.
9. Limitation of Rights. Nothing in this Agreement
or the Plan shall be construed to:
(a) give the Participant any right to be awarded any
Restricted Stock other than in the sole discretion of the
Committee;
(b) give the Participant or any other person any
interest in any fund or in any specified asset or assets of the
Company or any affiliate of the Company; or
(c) confer upon the Participant the right to continue
in the employment or service of the Company or any affiliate of
the Company, or affect the right of the Company or any affiliate
of the Company to terminate the employment or service of the
Participant at any time or for any reason.
The Committee shall have the discretion to make
determinations under this Agreement and Plan, and such
determinations shall be final and binding on the Participant
except in the case of bad faith and willful misconduct.
10. Nonalienation of Benefits. Except as contemplated
by Section 8 above, no right or benefit under this Agreement
shall be subject to transfer, anticipation, alienation, sale,
assignment, pledge, encumbrance or charge, whether voluntary,
involuntary, or by operation of law, and any attempt to transfer,
anticipate, alienate, sell, assign, pledge, encumber or charge
the same shall be void. No right or benefit hereunder shall in
any manner be liable for or subject to any debts, contracts,
liabilities or torts of the person entitled to such benefits. If
the Participant or his Beneficiary hereunder shall become
bankrupt or attempt to transfer, anticipate, alienate, assign,
sell, pledge, encumber or charge any right or benefit hereunder,
other than as contemplated by Section 8 above, or if any creditor
shall attempt to subject the same to a writ of garnishment,
attachment, execution, sequestration, or any other form of
process or involuntary lien or seizure, then such right or
benefit shall cease and terminate.
11. Prerequisites to Benefits. Neither the
Participant, nor any person claiming through the Participant,
shall have any right or interest in the Restricted Stock awarded
hereunder, unless and until all the terms, conditions and
provisions of this Agreement and the Plan which affect the
Participant or such other person shall have been complied with as
specified herein.
12. Rights as a Stockholder. Subject to the
limitations and restrictions contained herein, the Participant
(or Beneficiary) shall have all rights as a stockholder with
respect to the shares of Restricted Stock once such shares have
been registered in his name hereunder.
13. Successors and Assigns. This Agreement shall bind
and inure to the benefit of and be enforceable by the
Participant, the Company and their respective permitted
successors and assigns (including personal representatives, heirs
and legatees), except that the Participant may not assign any
rights or obligations under this Agreement except to the extent
and in the manner expressly permitted herein.
14. The Committee shall have sole and complete
discretion in the interpretation of this Agreement and the
determination of the Committee shall be final and binding on the
Participant except in the case of bad faith or willful
misconduct.
15. Governing Law. This Agreement shall be governed
by, construed and enforced in accordance with the laws of the
State of Delaware.
16. Gender and Number. Whenever the context requires
or permits, the gender and number of words shall be
interchangeable.
This Agreement is executed and delivered, in duplicate,
pursuant to the Plan, the provisions of which are incorporated
herein by reference.
Dated: May 22, 1995.
OCEANEERING INTERNATIONAL, INC.
By //S// GEORGE R. HAUBENREICH, JR.
The undersigned Participant accepts
the Restricted Stock subject to all
the terms of this Agreement.
//S// MARVIN J. MIGURA
March 29, 1996
Oceaneering International, Inc.
16001 Park Ten Place, Suite 600
Houston, Texas 77084
Attention: Robert P. Mingoia, Treasurer
Ladies and Gentlemen:
Citibank, N.A. (the "Bank") is pleased to establish an
uncommitted line of credit in your favor not to exceed
$US20,000,000.00 (Twenty Million Dollars) at any time outstanding
and available for your use from time to time through March 31,
1997, unless the Bank should advise, or be advised by you, to the
contrary. This line of credit agreement (this "Agreement") is
not a commitment but sets forth the terms and conditions under
which the Bank may in its sole discretion make advances (the
"Advances") to you and may issue (as "Issuing Bank") letters of
credit for a term not to exceed two (2) years from the date of
issuance (each a "Letter of Credit") for your account from time
to time under such line of credit.
1. The Advances. (a) All Advances under the line of
credit shall be payable on demand and shall be evidenced by your
Demand Promissory Note substantially in the form of Exhibit A
hereto (the "Note"). Advances under the Note may be made by the
Bank at the oral or written request of persons designated
pursuant to the resolution delivered to the Bank pursuant to
Section 3 below and shall be disbursed by credit to your account
at the office of the Citibank, N.A. located at 399 Park Avenue,
New York, New York 10043 or otherwise in accordance with the
written instruction of such persons. In accordance with the
terms of the Note, you shall be permitted to choose as the
applicable interest rate basis for each Advance one of the
following (as defined in the Note): Citibank's Alternate Base
Rate, LIBOR plus an additional amount mutually agreed upon by the
Bank and you prior to the time of a borrowing under the Note, or
the Quoted Rate; provided that LIBOR and Quoted Rate Advances
(each a "Fixed Rate Advance") shall only be available for
principal amounts of at least $1,000,000 or $500,000,
respectively, that are whole-integer multiples of $100,000. All
capitalized terms not otherwise defined herein are used with the
same meanings as in the Note.
(b) If due to either (i) the introduction of or any change
(including without limitation, any change by way of imposition or
increase of reserve requirements) in or in the interpretation of
any law or regulation or (ii) the compliance of the Bank with any
guideline or request from any central bank or other governmental
authority (whether or not having force of law), there shall be
any increase in the cost to the Bank of agreeing to make or
making, funding or maintaining Advances, then you shall from time
to time, upon demand by the Bank, pay to the Bank additional
amounts sufficient to indemnify the Bank against such increased
cost. You further agree to indemnify and save the Bank harmless
from any loss, cost, damage, liability or expense which may be
suffered or incurred by the Bank, resulting from the imposition
of reserve requirements to transactions covered hereby under
Regulation D of the Board of Governors of the Federal Reserve
System or otherwise (including without limitation the loss, cost,
damage, liability or expense incurred in maintaining any such
reserve). A certificate as to the amount of such increased cost,
submitted to you by the Bank, shall be conclusive, absent
manifest error.
(c) You agree to compensate the Bank on written request by
the Bank (which request will set forth in reasonable detail the
basis for requesting such amounts) for all reasonable losses,
expenses and liabilities (including, without limitation, any
interest paid by the Bank to lenders of funds borrowed by it to
make or carry Fixed Rate Advances) and any loss sustained by the
Bank in connection with the reemployment of such funds which Bank
may sustain if for any reason (whether due to demand for payment
by the Bank (except for demand by the Bank in circumstances where
no default or event of default exists or where no imminent breach
by Borrower of the note and/or this Agreement exists in the
reasonable view of the Bank), voluntary prepayment by the
Borrower or any other reason) you repay any Fixed Rate Advance on
a day which is not the last day of the applicable Interest Period
or as a consequence of your failure to borrow any such Advance
after giving notice thereof or to pay the principal of any such
Advance when due under this Agreement and the Note.
2. Letters of Credit. You may from time to time request
the Bank to cause the Issuing Bank to issue a Letter of Credit
for your account by executing the Issuing Bank's standard form of
letter of credit application (each an "Application"). The
Issuing Bank shall not be obligated to issue any Letter of Credit
at any time but each Letter of Credit shall be subject to the
terms and conditions contained in the related Application and
shall expire no more than two (2) years after the date of
issuance. You shall pay the Bank a commission payable at
issuance on each standby Letter of Credit computed at the rate of
.75% per annum (based on a year of 360 days and actual days
elapsed) on the maximum amount available or to be available for
drawing thereunder (assuming compliance with all conditions
thereof), or $450.00 (which ever is greater) payable in arrears
on the last day of each calendar quarter and on the expiration
date thereof. In the event that the Issuing Bank notifies the
Bank that you have failed to pay any obligations under any
Application when due, you shall be deemed to have requested an
Advance from the Bank in such amount bearing interest at the
Alternate Base Rate and the Bank is hereby irrevocably authorized
to make such an Advance and deliver the proceeds thereof to the
Issuing Bank for application to such obligations.
3. Loan Documents. You shall provide to the Bank (i) a
copy of this Agreement executed by you, (ii) your executed Note,
(iii) a certificate of your secretary or assistant secretary,
dated a recent date, containing a copy of the resolutions of your
board of directors authorizing the execution and performance of
this Agreement, the Note, the Applications, and all other
documents executed or to be executed by you hereunder or
thereunder (collectively, the "Loan Documents") and certifying as
to the incumbency and specimen signatures of your officers
authorized to execute each such Loan Document and to give or
designate others to give notices hereunder and thereunder, and
(iv) a copy of your articles or certificate of incorporation
certified by the Secretary of State of your state of
incorporation as of a recent date.
4. Representations and Covenants. Until the termination
of this line of credit and payment in full of your obligations
under this letter agreement, the Note and the Applications (the
"Obligations") you will provide to the Bank: (i) within 90 days
after the end of each fiscal year, annual financial statements
certified by accountants acceptable to the Bank; (ii) within 45
days after the end of each fiscal quarter (except the fourth
quarter) unaudited financial statements certified by your chief
financial officer; and (iii) such other information concerning
your business, operations, properties, prospects and financial or
other condition as the Bank may request from time to time. In
addition, you agree at all times during the term of this Letter
Agreement to advise the Bank immediately upon obtaining knowledge
of (but in any event not later than twenty (20) days from the
date of) the occurrence of a default under the terms of or an
Event of Default as defined under any credit agreement or senior
credit facilities between the Borrower and any financial
institution or other third party. Such notice maybe in the form
of oral communication promptly confirmed in writing via letter,
telex, telecopier or telefacsimile.
5. Obligations Payable on Demand. Except as otherwise
required by the terms of the Demand Promissory Note, all of the
Obligations shall be payable on demand, notwithstanding the
duration of any Interest Period for any Advance, the expiration
date of any Letter of Credit or anything else contained herein or
in any of the Loan Documents. Upon such demand, you shall pay
to us, in addition to all principal and interest then outstanding
under the Note, an amount equal to the maximum amount (the
"Maximum Available Amount") which may at any time be drawn under
all Letters of Credit then outstanding (assuming compliance with
all conditions thereof and whether or not any beneficiary under
any Letter of Credit shall have presented, or shall be entitled
at such time to present, the drafts or other documents required
to draw under such Letter of Credit), which amount shall be held
in a cash collateral account to be established by you with the
Issuing Bank as cash collateral for your obligations under the
Applications, provided that in the event of cancellation or
expiration of any Letter of Credit or any reduction in the
Maximum Available Amount, we shall apply the difference between
the Maximum Available Amount immediately prior to such
cancellation, expiration or reduction and the Maximum Available
Amount immediately after such cancellation, expiration or
reduction, to the payment of any outstanding Obligations and
shall pay any excess to whomsoever shall be lawfully entitled to
receive such funds. Amounts deposited in the cash collateral
account shall be invested by the Bank at your request in approved
certificates of deposit or other readily marketable instruments
or securities mutually agreed upon by you and the Bank.
6. Indemnification. You agree to indemnify and hold
harmless the Bank and its affiliates, officers, directors,
employees, agents and advisors (each, an "Indemnified Party")
from and against any and all claims, damages, losses, liabilities
and expenses (including, without limitation, fees and
disbursements of counsel) which may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out
of or in connection with or by reason of, or in connection with
the preparation for a defense of, any investigation, litigation
or proceeding arising out of, related to or in connection with
this Agreement or the Obligations, including, without limitation,
any transaction in which the proceeds of any borrowing are or are
to be applied, whether or not an Indemnified Party is a party
thereto and whether or not the transactions contemplated herein
are consummated, except to the extent such claim, damage, loss,
liability or expense is found in a final, non-appealable judgment
by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct.
7. Amendments and Waivers. No amendment, modification or
waiver of this Agreement, the Note or any term hereof or thereof
shall be effective unless in writing and signed by you and the
Bank.
8. Integration. This letter agreement, the Note and any
other Loan Documents constitute the final agreement between you
and the Bank on the subject matter hereof and supersede all prior
understandings, representations and agreements.
9. Assignments and Participations. We may assign to any
of our affiliates or, with your consent (which shall not be
unreasonably withheld), to one or more other financial
institutions, all or a portion of our rights and obligations
under this letter and the Note. Upon delivery to you of written
notice of such assignment signed by both parties thereto, (i) the
assignee shall become a party hereto and shall assume our rights
and obligations hereunder to the extent of such assignment, (ii)
the assignor shall relinquish its rights and be released from its
obligations under this letter to the same extent and (iii) you
shall promptly execute and deliver new notes to the assignee and
assignor as necessary to reflect their respective rights and
obligations hereunder after giving effect to such assignment. We
may also sell participations in all or a portion of our rights
and obligations under this Agreement, provided that our
obligations hereunder shall remain unchanged, we shall remain
solely responsible to the other parties hereto for the
performance thereof and you shall continue to deal solely and
directly with us in connection with our rights and obligations
hereunder. We may disclose to any existing or prospective
transferee under this Section any information received by us from
or on behalf of you pursuant to this letter, so long as the
recipient has agreed to hold in confidence any such information
which is confidential in nature. Notwithstanding anything else
set forth herein, we may at any time create a security interest
in all or any portion of our rights under this letter (including
without limitation the Advances and the Note) in favor of any
Federal Reserve Bank.
10. Governing Law and Jurisdiction. This Agreement shall
be governed by and construed in accordance with the internal laws
of the State of New York. The Borrower hereby consents to the
personal jurisdiction of any court of the United States or the
State of New York sitting in New York City, New York in any
action or proceeding arising out of or relating to this agreement
or the Note, agrees that all claims in respect of any such action
or proceeding may be heard and determined in such court and
waives the defense of inconvenient forum to the maintenance of
any such action or proceeding.
If the foregoing is satisfactory to you, please indicate
your acceptance by signing the enclosed copy of this letter and
returning it to the Bank at Citibank, N.A. c/o Citicorp
Securities, Inc., 1200 Smith Street, Suite 2000, Houston, Texas
77002.
Yours very truly
CITIBANK, N.A.
By: //s//MARJORIE FUTORNICK
Marjorie Futornick
Vice President
Accepted and agreed to as of
the date first stated above:
OCEANEERING INTERNATIONAL, INC.
By: //s//ROBERT P. MINGOIA
Robert P. Mingoia
Treasurer
EXHIBIT A
DEMAND PROMISSORY NOTE
$20,000,000.00
March 29, 1996
FOR VALUE RECEIVED, the undersigned, Oceaneering
International, Inc., a Delaware corporation (the "Borrower"),
HEREBY PROMISES TO PAY ON DEMAND to the order of Citibank, N.A.
(the "Bank"), at its office (the "Reference Bank") located at 399
Park Avenue, New York, New York, the principal sum of
$20,000,000.00 (Twenty Million Dollars) or, if less, the
aggregate principal amount of all advances (each an "Advance")
made hereunder by the Bank to the Borrower outstanding at the
time of such demand; together with interest on any and all
principal amounts remaining unpaid hereunder from time to time
outstanding from and including the date hereof until such
principal amounts are finally paid in full, at such interest
rates and payable at such times, as are specified below. This
Demand Promissory Note is the Note referred to in, and is
entitled to the benefits of, the letter agreement between the
Borrower and the Bank dated as of March 31, 1995 (as amended
from time to time, the "Letter Agreement").
1. All Advances hereunder shall bear interest, payable on
demand or if no demand is made then monthly on the last day of
each calendar month during the term hereof, at a fluctuating
interest rate per annum in effect from time to time equal at all
times to the Alternate Base Rate (as defined below), with each
change in the fluctuating interest rate hereunder taking effect
simultaneously with the corresponding change in the Alternate
Base Rate; provided that upon not less than three Business Days
(as defined below) notice to the Bank, the Borrower may elect to
have all or any portion (in the amount of at least $1,000,000
that are whole-integer multiples of $100,000) of the aggregate
principal amount of such Advances bear interest for the Interest
Period (as defined below) specified in such notice at LIBOR (as
defined below), plus an additional amount mutually agreed upon by
the Borrower and the Bank, payable on the last day of such
Interest Period; and provided further, that upon offer by the
Bank and acceptance by the Borrower on any Business Day, the
Borrower may elect to have all or any portion (in the amount of
at least $500,000 that are whole-integer multiples of $100,000)
of the aggregate principal amount of such Advances bear interest
at a rate equal to the Quoted Rate (as defined below), payable on
the last day of such Interest Period.
2. As used in this Demand Promissory Note, the following
terms shall have the following meanings:
"Alternate Base Rate" means, at all times, a fluctuating
rate per annum equal to the highest of:
(i) the rate of interest announced publicly by the
Reference Bank in New York, New York, for time to time, as
the Reference Bank's base rate; or
(ii) the sum of (A) 1/2 of one percent per annum
plus (B) the rate obtained by dividing (x) the latest
three-week moving average of secondary market morning
offering rates in the United States for three-month
certificates of deposit of major United States money
market banks (such three-week moving average being
determined weekly by the Reference Bank on the basis of
such rates reported by certificate of deposit dealers to
and published by the Federal Reserve Bank of New York, or,
if such publication shall be suspended or terminated, on
the basis of quotations for such rates received by the
Reference Bank, in either case adjusted to the nearest 1/4
of one percent or, if there is no nearest 1/4 of one
percent, to the next higher 1/4 on one percent), by (y) a
percentage equal to 100% minus the average of the daily
percentages specified during such three-week period by the
Federal Reserve Board for determining the maximum reserve
requirement (including, but not limited to, any marginal
reserve requirements for the Reference Bank in respect of
liabilities consisting of or including (among other
liabilities) three-month non-personal time deposits of at
least $100,000), plus (C) the average during such three-
week period of the daily net annual assessment rates
estimated by the Reference Bank for determining the
current annual assessment payable by the Reference Bank to
the Federal Deposit Insurance Corporation for insuring
three-month time deposits in the United States; or
(iii) one half of one percent per annum above the
weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for
such transactions received by the Reference Bank from
three Federal funds brokers of recognized standing
selected by it.
"Business Day" means a day of the year on which banks are
not required or authorized to close in New York City and, with
respect to any Advance bearing interest by reference to LIBOR, a
day of the year on which dealings are carried on in the London
interbank market.
"Indebtedness" means (a) all indebtedness of the Borrower
for borrowed money or for the deferred purchase price of property
or services under material contracts (other than current trade
liabilities incurred in the ordinary course of the Borrower's
business and payable in accordance with customary practices and
which in any event are no more than 120 days past due or, if more
than 120 days past due, are being contested in good faith and
adequate reserves with respect thereof have been made on the
books of the Borrower), (b) all obligations under senior credit
facilities, (c) all obligations under Finance leases, (d) all
obligations and liabilities secured by liens on any property
owned by the Borrower whether or not the Borrower has assumed or
is otherwise liable for the payment thereof.
"Interest Period" means (i) in the case of a Quoted Rate
Advance, the number of days mutually agreed by the Borrower and
the Bank and (ii) in the case of a LIBOR Advance, one, two or
three months; provided that (a) no Interest Period shall be
selected which will end after the Termination Date and (b) if the
last day of any Interest Period would otherwise occur on a day
other than a Business Day, such Interest Period shall end on the
next succeeding Business Day, except that if such extension would
cause the last day of any Interest Period for a LIBOR Advance to
occur in the next following calendar month, such Interest Period
shall end on the next preceding Business Day.
"LIBOR" means, for any Interest Period, the rate per annum
at which deposits in United States dollars are offered by the
principal office of the Reference Bank in London, England to
prime banks in the London interbank market at 11:00 A.M. (London
time) two Business Days (as defined below) before the first day
of such Interest Period in an amount substantially equal to the
principal amount of such Advance and for a period equal to such
Interest Period, provided that if, on any date, it shall become
unlawful for the Bank to continue to fund or maintain any amount
hereunder at LIBOR, or LIBOR shall fail to reflect the cost to
Bank of funding or maintaining such amount, such amount shall
bear interest from and after such date at the Alternate Base
Rate.
"Quoted Rate" means, for any Interest Period, the rate per
annum offered by the Bank to the Borrower and agreed to by the
Borrower for such Interest Period, provided, however, that if no
rate per annum shall be agreed by the Borrower and the Bank prior
to 1:00 p.m. (New York time) on the first day of such Interest
Period as the Quoted Rate for such Interest Period, the Quoted
Rate for such Interest Period shall be equal to the Alternate
Base Rate. The Bank may give the Borrower a written confirmation
of the principal amount, Quoted Rate and Interest Period
applicable to any Advance bearing interest at the Quoted Rate
and, unless the Borrower shall object thereto within one Business
Day after receiving such confirmation, such confirmation shall be
conclusive and binding for all purposes. If the Borrower shall
make a timely objection as to the rate or term set forth in such
confirmation, such Advances shall bear interest at the Alternate
Base Rate.
3. The duration of any Interest Period shall in no way
affect the Bank's right to demand payment hereunder at any time;
provided that, unless the Bank shall have made a demand hereunder
for payment, the Borrower shall have no right to prepay or to
change the interest rate basis for any unpaid principal amount
bearing interest by reference to LIBOR or the Quoted Rate other
than on the last day of the Interest Period therefor. To the
extent that any unpaid principal amount hereof bears interest at
the Alternate Base Rate, the Borrower may pay all or any part
thereof on not less than three Business Days' notice to the Bank,
together with accrued interest to the date of such payment on the
amount paid.
4. Both principal and interest hereunder are payable prior
to 1:00 P.M. (New York City time) on the day for payment thereof
(whether upon demand or otherwise) in lawful money of the United
States of America to the Bank at the office of the Reference Bank
referred to above, in same day funds. Whenever any payment
hereunder shall be stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall in such case be
included in the computation of payment of interest. All
computations of interest shall be made by the Bank on the basis
of a year of 365 or 366 days (if based on the Base Rate) or 360
days (in the case of any other rate) for the actual number of
days (including the first day but excluding the last day)
occurring in the period for which such interest is payable. The
Borrower hereby authorizes the Reference Bank, if and to the
extent payment is not made when due hereunder, to charge from
time to time against any or all of the Borrower's accounts with
the Reference Bank (without notice to the Borrower) and make
available to the Bank any amount so due. Any amount of principal
or interest which is not paid when due (whether on demand, at
stated maturity, by acceleration or otherwise) shall bear
interest from the date on which such amount is due until such
amount is paid in full, payable on demand, at a rate per annum
equal at all times to two percent (2%) per annum above the
Alternate Base Rate.
5. The date and amount of each Advance, the interest rate
selection, the Interest Period applicable thereto (if any) and
all payments made by the Borrower on account of principal hereof
shall be recorded by the Bank and, prior to any transfer of this
Demand Promissory Note, entered by the Bank on the grid attached
hereto, which is part of this Demand Promissory Note, provided
that the Bank shall not be liable to the Borrower or to any other
person for failure to record any of the foregoing matters on the
grid or otherwise in the Bank's records. Such grid or such other
record maintained by the Bank shall, in the absence of manifest
error, be conclusive evidence of the matters so recorded.
6. Each Advance made by the Bank to the Borrower under
this Demand Promissory Note shall be subject to the satisfaction
of the condition precedent to funding such Advance and a
representation by the Borrower to the Bank that no default or
Event of Default (as defined in such agreements) exist under any
senior credit facilities or credit agreements to which the
Borrower is a party on the date of and at the time of the making
of such Advance by the Bank hereunder.
7. In the event of an actual or deemed entry of an order
for relief with respect to the Borrower under the Federal
Bankruptcy Code, this Demand Promissory Note, all interest hereon
and all other amounts payable hereunder shall automatically
become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
8. If the Borrower shall default in any payment of
principal of or interest on any Indebtedness (other than this
Note) after the expiration of the applicable grace period
provided for in any agreement, note or instrument under which
such Indebtedness was created, upon the happening of such event,
without demand by the Bank, all interest hereon and all amounts
due hereunder shall automatically become due and payable, without
notice, presentment or protest of any kind, all of which are
expressly waived by the Borrower.
9. The Borrower hereby waives presentment for payment,
demand, notice of dishonor and protest of this Demand Promissory
Note and, to the full extent permitted by law the right to plead
any statute of limitations as a defense to any demand hereunder.
The Borrower agrees to pay on demand all losses, costs and
expenses, if any (including reasonable counsel fees and
expenses), in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Demand
Promissory Note and any other instruments and documents delivered
in connection herewith, including, without limitation, reasonable
counsel fees and expenses in connection therewith.
10. This Demand Promissory Note shall be governed by, and
construed in accordance with, the laws of the State of New York.
The Borrower hereby consents to the personal jurisdiction of any
court of the United States or the State of New York sitting in
New York City, New York in any action or proceeding arising out
of or relating to this Demand Promissory Note or the Letter
Agreement, agrees that all claims in respect of any such action
or proceeding may be heard and determined in such court and
waives the defense of inconvenient forum to the maintenance of
any such action or proceeding.
IN WITNESS WHEREOF, the Borrower has caused this Demand
Promissory Note to be executed and delivered by its duly
authorized officer, as of the day and year and at the place first
above written.
OCEANEERING INTERNATIONAL, INC.
By:
Title:
TRANSACTIONS ON DEMAND PROMISSORY NOTE OF OCEANEERING INTERNATIONAL, INC.
IN FAVOR OF CITIBANK, N.A. dated March 29, 1996
Amount of
Borrowing
Made This Interest Interest Amount of Notation
Date Date Period Rate Payment Made By
EXHIBIT B
FORM OF OPINION OF BORROWER'S COUNSEL
[Date]
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 3 of the
letter agreement dated as of , 19 (the "Letter
Agreement"), between (the
"Borrower") and you. Terms defined in the Credit Agreement are
used herein as therein defined.
We have acted as counsel for the Borrower in connection with the
preparation, execution and delivery of the Letter Agreement. In
that connection, we have examined: (1) the Letter Agreement, (2)
the documents furnished by the Borrower pursuant to Section 3 of
the Letter Agreement, (3) the [Articles] [Certificate] of
Incorporation of the Borrower and all amendments thereto (the
"Charter"), (4) the by-laws of the Borrower and all amendments
thereto (the "By-laws"), (5) a certificate of the Secretary of
State of , dated , 19 , attesting
to the continued corporate existence and good standing of the
Borrower in that State. We have also examined the originals, or
copies certified to our satisfaction, of the documents listed in
a certificate of the chief financial officer of the Borrower,
dated the date hereof (the "Certificate"), certifying that the
documents listed in such certificate are all of the indentures,
loan or credit agreements, leases, guarantees, mortgages,
security agreements, bonds, notes and other agreements or
instruments, and all of the orders, writs, judgments, awards,
injunctions and decrees, which affect or purport to affect the
Borrower's right to borrow money or the Borrower's obligations
under the Letter Agreement or the Note. In addition, we have
examined the originals, or copies certified to our satisfaction,
of such other corporate records of the Borrower, certificates of
public officials and of officers of the Borrower, and agreements,
instruments and other documents, as we have deemed necessary as a
basis for the opinions expressed below. As to questions of fact
material to such opinions, we have, when relevant facts were not
independently established by us, relied upon certificates of the
Borrower or its officers or of public officials. We have assumed
the due execution and delivery, pursuant to due authorization, of
the Letter Agreement by the Bank.
Based upon the foregoing and upon such investigation as we have
deemed necessary, we are of the following opinion:
1. The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of .
2. The execution, delivery and performance by the Borrower
of the Letter Agreement and the Note are within the
Borrower's corporate powers, have been duly authorized by
all necessary corporate action, and do not contravene (i)
the Charter or the By-laws or (ii) any law, rule or
regulation applicable to the Borrower (including, without
limitation, Regulation X of the Board of Governors of the
Federal Reserve System) or (iii) any contractual or legal
restriction contained in any document listed in the
Certificate or, to the best of our knowledge, contained in
any other similar document. The Letter Agreement and the
Note have been duly executed and delivered on behalf of the
Borrower.
3. No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery
and performance by the Borrower of the Letter Agreement and
the Note [, except for , all of which have been
duly obtained or made and are in full force and effect].
4. The Letter Agreement and the Note are legal, valid and
binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms, subject
to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting
creditors' rights generally and subject to the effect of
general principles of equity, including (without limitation)
concepts of materiality, reasonableness, good faith and fair
dealing (regardless of whether considered in a proceeding in
equity or at law).
9
5. To the best of our knowledge, there are no pending or
overtly threatened actions or proceedings against the
Borrower or any of its subsidiaries before any court,
governmental agency or arbitrator which purport to affect
the legality, validity, binding effect or enforceability of
the Letter Agreement or the Note or which are likely to have
a materially adverse effect upon the financial condition or
operations of the Borrower or any of its subsidiaries.
[*6. In any action or proceeding arising out of or
relating to the Letter Agreement or the Note in any court of
the State of or in any federal court sitting in
the State of , such court would recognize and
give effect to the provisions of Section of the Letter
Agreement wherein the parties thereto agree that the Letter
Agreement and the Note shall be governed by, and construed
in accordance with, the laws of the State of New York.]
We are qualified to practice law in the State of
and we do not purport to be experts on any laws other than the
laws of the State of [, the General Corporation Law
of the State of Delaware] and the Federal laws of the United
States. [**For purposes of the opinion set forth in paragraph 4
above, we have assumed with your permission that the laws of the
State of New York are identical to the laws of the State of
.]
Very truly yours,
* Include if the Borrower is located in a state other than
New York.
** Include if Borrower's counsel is not admitted in New
York.
10
OCEANEERING INTERNATIONAL, INC.
1996 BONUS AWARD PLAN
The 1996 Bonus Award Plan is approved by the Company's Board of
Directors and administered by its Compensation Committee.
Individuals who are nominated and approved for inclusion in the
Plan will be reviewed after final year end results are completed.
Recommendations for cash bonus awards will be based on the
accomplishment of results (Individual, Profit Center and Total
Company) in order to determine the amount of award, if any, to be
made. People must be amongst the nominated group for
eligibility, and be employed by the Company at the time of
funding. Bonuses will be earned when paid. Individuals, as
designated, will be subject to a maximum bonus eligibility of 10%
- 100% of current base salary.
The 1996 Bonus Award Plan is based on achieving specific results
by the Individual, his Profit Center and the Total Company. In
order to integrate each of these performances in a fashion that
benefits the Shareholders and Employees, each item is
interrelated. The amount of award recommendation will be based
on the following methodology:
Individual Coefficient
The Individual Coefficient is determined by taking the
individual's weighted average evaluation of objectives
achieved times the individual's salary maximum. This is the
beginning step in determining the final award. An
individual's performance must meet certain minimum criteria
or he is eliminated from bonus award consideration.
Profit Center Results Contribution
The Profit Center Contribution is determined by comparing
the Profit Center Net Income Objective with the results
achieved and determining the Contribution to the Individual
Coefficient.
Should the Profit Center results be below a specified
amount, all the individuals in that Profit Center may be
eliminated from the Award Program. The President may review
the performance of areas within the region on a case-by-case
basis and take appropriate action. Should the actual
results be equal to or greater than such specified amount,
the individual becomes eligible for an award.
Oceaneering International, Inc. Results Contribution
The Company Results Contribution is determined by comparing
the Company's FY96 Net Income Result with the Objective
planned. The results achieved determine the multiplier that
will be used. Thus, an individual may, subject to the
determined maximum, be recommended for an award equal to the
Individual Coefficient times the Profit Center Contribution
times the Company Results Contribution times current base
salary.
The 1996 Bonus Award Plan is in effect FY96. A similar plan may
or may not be approved for FY97. It is extremely important that
the Company continue improved results in FY96. All participants
must be committed to a reward system based on achieving results.
The Company is entrepreneurially oriented and must use its
maximum creativity, effort and determination in achieving
individual results that collectively increases its Shareholders'
Net Wealth. The 1996 Bonus Award Plan is structured to foster
that position.
June 30, 1995
SUBSIDIARIES OF
OCEANEERING INTERNATIONAL, INC.
Percentage of Ownership Jurisdiction
by Oceaneering of
Subsidiary International, Inc. Organization
Eastport International, Inc. 100% Delaware
Monocean Oceaneering Engenharia
Submarina Ltda. 100% Brazil
Multiflex, Inc. 100% Texas
Multiflex Limited 100% Scotland
Multiflex U.K., Inc. 100% Texas
Norsk Subsea Cable A/S 49% Norway
Ocean Barge Limited Partnership 75% Texas
Ocean Systems Do Brasil Servicos
Subaquaticos Ltda. 100% Brazil
Ocean Systems Engineering, Inc. 100% Texas
Ocean Systems Engineering Limited 100% England
Oceaneering Arabia Ltd. 50% Saudi Arabia
Oceaneering A/S 100% Norway
Oceaneering Australia Pty. Limited 50% Australia
Oceaneering do Brasil Servicos
Submarinos Ltda. 100% Brazil
Oceaneering FSC, Inc. 100% Barbados
Oceaneering International AG 100% Switzerland
Oceaneering International (Ireland) Limited 100% Ireland
Oceaneering International (M) Sdn. Bhd. 100% Malaysia
Oceaneering International (Netherlands) B.V. 100% Netherlands
Oceaneering International Pte Ltd 100% Singapore
Oceaneering International, S.A. de C.V. 100% Mexico
Oceaneering International Services Limited 100% England
Oceaneering International (Sharjah) Limited 100% Sharjah
Oceaneering Limited 100% Canada
Oceaneering Space Systems, Inc. 100% Delaware
Oceaneering Survey, Inc. 100% Delaware
Oceaneering Technologies, Inc. 100% Delaware
Oceaneering Underwater GmbH 100% Switzerland
Oceanteam A/S 50% Norway
Oceanteam UK Limited 100% Scotland
Oil Industry Engineering, Inc. 100% Texas
P. T. Calmarine 50% Indonesia
QAF-Solus Offshore Sdn Bhd 50% Brunei
Servicios Marinos Oceaneering Chile Limitada 100% Chile
Solus Emirates 49% U.A.E.
Solus Ocean Systems, Inc. 100% Delaware
Solus Oceaneering (Malaysia) Sdn. Bhd. 49% Malaysia
Solus Offshore Ltd. 100% Cayman Islands
Solus Schall Limited 100% England
Solus Schall (Nigeria) Limited 50% Nigeria
Specialty Wire and Cable Company, Inc. 100% Texas
Steadfast Oceaneering, Inc. 100% Virginia
Stolt-Comex Seaway Tecnologia Submarina S.A. 20% Brazil
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report included in this Form 10-
K, into the Company's previously filed Form S-8 Registration
Statements filed on May 11, 1982 (Reg. No. 2-77451), November 22,
1982 (Reg. No. 2-80506), July 13, 1988 (Reg. No. 33-23059), June
12, 1989 (Reg. No. 33-29277), and September 24, 1990 (Reg. No. 33-
36872).
ARTHUR ANDERSEN LLP
Houston, Texas
June 19, 1996
POWER OF ATTORNEY
WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware
corporation ("Company"), intends to file with the Securities and
Exchange Commission ("Commission") under the Securities Exchange
Act of 1934, as amended ("Act"), an Annual Report on Form 10-K
for the fiscal year ended March 31, 1996 ("10-K"), with any and
all exhibits and/or amendments to such 10-K, and other documents
in connection therewith.
NOW, THEREFORE, the undersigned in his capacity as a
director or officer or both, as the case may be, of the Company,
does hereby appoint JOHN R. HUFF, MARVIN J. MIGURA and GEORGE R.
HAUBENREICH, JR. and each of them severally, his true and lawful
attorney or attorneys with power to act with or without the other
and with full power of substitution and resubstitution, to
execute in his name, place and stead in his capacity as a
director, officer or both, as the case may be, of the Company,
said 10-K and any and all amendments thereto and all instruments
necessary or incidental in connection therewith and to file the
same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities every act whatsoever
necessary or desirable to be done in the premises as fully and to
all intents and purposes as the undersigned might or could do in
person, the undersigned hereby ratifying and approving the acts
of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 21st day of June, 1996.
//s// D. MICHAEL HUGHES
POWER OF ATTORNEY
WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware
corporation ("Company"), intends to file with the Securities and
Exchange Commission ("Commission") under the Securities Exchange
Act of 1934, as amended ("Act"), an Annual Report on Form 10-K
for the fiscal year ended March 31, 1996 ("10-K"), with any and
all exhibits and/or amendments to such 10-K, and other documents
in connection therewith.
NOW, THEREFORE, the undersigned in his capacity as a
director or officer or both, as the case may be, of the Company,
does hereby appoint JOHN R. HUFF, MARVIN J. MIGURA and GEORGE R.
HAUBENREICH, JR. and each of them severally, his true and lawful
attorney or attorneys with power to act with or without the other
and with full power of substitution and resubstitution, to
execute in his name, place and stead in his capacity as a
director, officer or both, as the case may be, of the Company,
said 10-K and any and all amendments thereto and all instruments
necessary or incidental in connection therewith and to file the
same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities every act whatsoever
necessary or desirable to be done in the premises as fully and to
all intents and purposes as the undersigned might or could do in
person, the undersigned hereby ratifying and approving the acts
of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 21st day of June, 1996.
//s// CHARLES B. EVANS
POWER OF ATTORNEY
WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware
corporation ("Company"), intends to file with the Securities and
Exchange Commission ("Commission") under the Securities Exchange
Act of 1934, as amended ("Act"), an Annual Report on Form 10-K
for the fiscal year ended March 31, 1996 ("10-K"), with any and
all exhibits and/or amendments to such 10-K, and other documents
in connection therewith.
NOW, THEREFORE, the undersigned in his capacity as a
director or officer or both, as the case may be, of the Company,
does hereby appoint JOHN R. HUFF, MARVIN J. MIGURA and GEORGE R.
HAUBENREICH, JR. and each of them severally, his true and lawful
attorney or attorneys with power to act with or without the other
and with full power of substitution and resubstitution, to
execute in his name, place and stead in his capacity as a
director, officer or both, as the case may be, of the Company,
said 10-K and any and all amendments thereto and all instruments
necessary or incidental in connection therewith and to file the
same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities every act whatsoever
necessary or desirable to be done in the premises as fully and to
all intents and purposes as the undersigned might or could do in
person, the undersigned hereby ratifying and approving the acts
of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 21st day of June, 1996.
//s// DAVID S. HOOKER
POWER OF ATTORNEY
WHEREAS, OCEANEERING INTERNATIONAL, INC., a Delaware
corporation ("Company"), intends to file with the Securities and
Exchange Commission ("Commission") under the Securities Exchange
Act of 1934, as amended ("Act"), an Annual Report on Form 10-K
for the fiscal year ended March 31, 1996 ("10-K"), with any and
all exhibits and/or amendments to such 10-K, and other documents
in connection therewith.
NOW, THEREFORE, the undersigned in his capacity as a
director or officer or both, as the case may be, of the Company,
does hereby appoint JOHN R. HUFF, MARVIN J. MIGURA and GEORGE R.
HAUBENREICH, JR. and each of them severally, his true and lawful
attorney or attorneys with power to act with or without the other
and with full power of substitution and resubstitution, to
execute in his name, place and stead in his capacity as a
director, officer or both, as the case may be, of the Company,
said 10-K and any and all amendments thereto and all instruments
necessary or incidental in connection therewith and to file the
same with the Commission. Each of said attorneys shall have full
power and authority to do and perform in the name and on behalf
of the undersigned in any and all capacities every act whatsoever
necessary or desirable to be done in the premises as fully and to
all intents and purposes as the undersigned might or could do in
person, the undersigned hereby ratifying and approving the acts
of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned has executed this
instrument on this 21st day of June, 1996.
//s// JOHN R. HUFF
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,351
<SECURITIES> 0
<RECEIVABLES> 97,592
<ALLOWANCES> 1,201
<INVENTORY> 0
<CURRENT-ASSETS> 110,475
<PP&E> 273,382
<DEPRECIATION> 145,105
<TOTAL-ASSETS> 256,096
<CURRENT-LIABILITIES> 68,048
<BONDS> 48,000
0
0
<COMMON> 6,004
<OTHER-SE> 121,094
<TOTAL-LIABILITY-AND-EQUITY> 256,096
<SALES> 289,506
<TOTAL-REVENUES> 289,506
<CGS> 234,731
<TOTAL-COSTS> 234,731
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,286
<INCOME-PRETAX> 19,852
<INCOME-TAX> 7,495
<INCOME-CONTINUING> 12,357
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,357
<EPS-PRIMARY> .53
<EPS-DILUTED> .53
</TABLE>
