Exhibit 10.5
2010 PERFORMANCE AWARD: GOALS AND MEASURES
ARTICLE 1
ESTABLISHMENT AND PURPOSE
     1.1 Establishment of the 2010-2012 Performance Goals. Oceaneering
International, Inc. (the “Company”), has previously established the 2005
Incentive Plan of Oceaneering International, Inc. (the “Plan”). The Plan permits
the establishment of Performance Goals and the award of Performance Awards to
Participants. The Committee has established Performance Goals (as detailed
herein) for the first performance period under the Plan which shall run from
January 1, 2010 through December 31, 2012 (the “2010-2012 Performance Period”).
This 2010-2012 Performance Period is subject to all the provisions of the Plan.
     1.2 Establishment of 2010-2012 Performance Goal Targets. The 2010-2012
Performance Goal targets are as follows:

         
ROIC/Kc:
          %1  
Cumulative Three Year Cash Flow:
  $       1

     1.3 Purpose. The establishment of Performance Goals for the 2010-2012
Performance Period is to provide Participants with a long-term incentive
opportunity in respect of the 2010-2012 Performance Period. Performance Awards
granted in February 2010 (the “2010 Performance Awards”) are subject to the
attainment of these Performance Goals.
ARTICLE 2
DEFINITIONS
     2.1 Definitions. Whenever used in this document, capitalized terms shall
have the meanings assigned in the Plan, unless defined otherwise or specifically
provided herein. The following terms shall have the meanings set forth below:
     (a) “Average Cost of Capital” means the average (the arithmetic mean) of
the Cost of Capital for each of the three calendar years within the 2010-2012
Performance Period.
     (b) “Average Invested Capital” means the sum of Average Total Debt and
Average Shareholders’ Equity for each of the three calendar years within the
2010-2012 Performance Period.
 

1   In accordance with Instruction 4 to Item 402(k) of Regulation S-K,
Oceaneering is not disclosing these and the other amounts or items left blank
herein, as they reflect confidential commercial or business information.

Page 1 of 5

--------------------------------------------------------------------------------

 

     (c) “Average Return on Invested Capital” or “ROIC” means a percentage
derived by dividing (i) the cumulative NOPAT (the sum of NOPAT for each of the
three calendar years within the 2010-2012 Performance Period) by (ii) Average
Invested Capital.
     (d) “Average Total Debt” means (i) the sum of the Total Debt as of the end
of the prior year and the Total Debt as of the end of the current year
(ii) divided by two. For example, the Average Total Debt for calendar year 2010
will be the Total Debt as of December 31, 2009, plus the Total Debt as of
December 31, 2010, divided by two.
     (e) “Average Shareholders’ Equity” means (i) the sum of Shareholders’
Equity as of the end of the prior year and Shareholders’ Equity as of the end of
the current year (ii) divided by two.
     (f) “Cost of Capital” or “Kc” means a percentage determined by dividing
(i) the sum of the Cost of Debt and the Cost of Equity for each of the three
calendar years within the 2010-2012 Performance Period by (ii) the sum of
Average Total Debt and Average Shareholders’ Equity for each of the three
calendar years within the 2010-2012 Performance Period. All components of Cost
of Capital shall be obtained directly from the audited financial statements of
the Company for the applicable year.
     (g) “Cost of Debt” means the product of annual Interest Expense and 65%
(100% less a deemed income tax rate of 35%).
     (h) “Cost of Equity” means the product of Average Shareholders’ Equity and
9.35%, which is the sum of the 3.85% yield on the 10-year Treasury Notes as of
December 31, 2009, as published by the U.S. Federal Reserve, plus an equity
return premium of 5.5%.
     (i) “Cumulative Three Year Cash Flow” means the sum of the earnings before
interest, taxes, depreciation and amortization (“EBITDA”) amounts for each of
the three calendar years in the 2010-2012 Performance Period. EBITDA shall be
calculated as Net Income (Loss) plus (or Minus) Net Interest Expense (Income),
plus provisions for income taxes (or minus benefit from income taxes), plus
depreciation and amortization. Each component of EBITDA shall be obtained
directly from the audited financials statements of the Company for the
applicable year.
     (j) “Income Before Income Taxes” means income before income taxes as
reflected in the audited financial statements of the Company for the applicable
calendar year.
     (k) “Interest Expense” means interest expense, net of amounts capitalized,
as reflected in the audited financial statements of the Company for the
applicable calendar year.

2 of 5

--------------------------------------------------------------------------------

 

     (l) “Interest Income” means interest income as reflected in the audited
financial statements of the Company for the applicable calendar year.
     (m) “Net Income (Loss)” means net income (loss) as reflected in the audited
financial statements of the Company for the applicable calendar year.
     (n) “Net Interest Expense (Income)” means the difference between
(i) Interest Expense and (ii) Interest Income for the applicable calendar year.
     (o) “Net Operating Profit After Taxes” or “NOPAT” means Net Income (Loss)
plus (or minus) the product of (i) Net Interest Expense (Income) and (ii) 100%
minus the effective income tax rate for the applicable year. The effective
income tax rate will be determined by dividing the annual income tax provision
(or benefit) by Income Before Income Taxes. All components of NOPAT shall be
obtained directly from the audited financial statements of the Company for the
applicable calendar year.
     (p) “Performance Unit” means the unit of measure underlying a Performance
Award, with an initial notional value of $100.
     (q) “ROIC/Kc” means a percentage derived by dividing (i) Average Return on
Invested Capital for the 2010-2012 Performance Period by (ii) Average Cost of
Capital for the 2010-2012 Performance Period. A percentage greater than 100%
indicates the Company earned a rate of return on its Average Invested Capital in
excess of its Average Cost of Capital.
     (r) “Shareholders’ Equity” means the shareholders’ equity as reflected in
the audited financial statements of the Company for the applicable year.
     (s) “Total Debt” means the difference between (i) the sum of the debt
components (in both current and long-term liabilities), as reflected in the
audited financial statements of the Company for the applicable calendar year,
and (ii) construction-in-progress as disclosed in the footnotes to the audited
financial statements of the Company to the extent such amount is greater than
$20,000,000.
ARTICLE 3
AWARD DETERMINATION
     3.1 Award Opportunities. The Committee has determined the Participants for
the 2010-2012 Performance Period and each Participant’s 2010 Performance Award;
such Participants and their individual Performance Awards are reflected in the
Committee records. A Participant’s 2010 Performance Award is keyed to the
Company’s performance with respect to the 2010-2012 Performance Goals, and may
result in a payment to the Participant having a value from zero percent to one
hundred fifty percent of the initial notional value of the 2010 Performance
Award.

3 of 5

--------------------------------------------------------------------------------

 

     3.2 Performance Award Determination. As soon as is practicable after the
close of the 2010-2012 Performance Period, the Committee shall calculate the
value of 2010 Performance Awards for each Participant as follows:
     (a) Determine ROIC/Kc for the 2010-2012 Performance Period.
     (b) Determine the Cumulative Three Year Cash Flow for the 2010-2012
Performance Period.
     (c) Determine the ROIC/Kc Performance Goal level based on the following:

         
Threshold Level:
          %  
Target Level:
          %  
Maximum Level:
          %

     (d) Determine the Cumulative Three Year Cash Flow Performance Goal level
based on the following:

         
Threshold Level:
  $          
Target Level:
  $          
Maximum Level:
  $        

     (e) If the Company does not reach the Threshold level on both the ROIC/Kc
and the Cumulative Three Year Cash Flow Performance Goal, no amounts will be
paid with respect to the 2010 Performance Awards. If the Company reaches the
Threshold level on at least one Performance Goal, an amount will be payable with
respect to the 2010 Performance Awards.
     (f) The 2010 Performance Award for any Participant shall not be in an
amount greater than $5,000,000.
     (g) Satisfaction of each Performance Goal at the Target level will result
in a final value of each Performance Unit of $100. The determination of the
final value of each Performance Unit shall be based on application of the
following grid (with interpolation between the specified levels):

4 of 5

--------------------------------------------------------------------------------

 

UNIT VALUES

                                  Cumulative                                
Three Year Cash Flow                                
Maximum
  $ 75.00     $ 112.50     $ 125.00     $ 150.00  
Target
  $ 50.00     $ 87.50     $ 100.00     $ 125.00  
Threshold
  $ 37.50     $ 75.00     $ 87.50     $ 112.50  
Below
Threshold   $ 0.00     $ 37.50     $ 50.00     $ 75.00  

                                 
 
  Below                        
 
  Threshold   Threshold   Target   Maximum ROIC/Kc

     (h) The Committee shall certify the determination of the final value of
each Performance Unit. If such value exceeds $100, the Committee retains the
discretion to reduce such value to any amount above or equal to $100.
ARTICLE 4
PAYMENT OF 2010 PERFORMANCE AWARDS
     4.1 Determination of Amount. 2010 Performance Awards will be determined as
soon as practicable after (a) the Company’s financial statements for each of the
three calendar years in the 2010-2012 Performance Period have been certified,
(b) the Committee has certified in writing that the various Performance Goals
and conditions set forth herein and in the Plan have all been met or satisfied,
and (c) the Committee has specifically authorized in writing the payment of any
2010 Performance Awards based on attainment of either Performance Goal at a
level greater than Target.
     4.2 Vesting. The 2010 Performance Awards will vest as set forth in the
Participant’s Performance Unit Agreement.
     4.3 Form of Payment. Each 2010 Performance Award will be paid in cash.
     4.4 Time of Payment. 2010 Performance Awards shall be paid as set forth in
the Participant’s Performance Unit Agreement.

5 of 5