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(7) STOCK-BASED COMPENSATION AND INCENTIVE PLANS 

## General 

## TIDEWATER INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

Years ended March 31, 2010, 2009, and 2008 

The company’s employee stock option, restricted stock, and phantom stock plans are long-term retention plans that are intended to attract, retain and provide incentives for talented employees, including officers and non-employee directors, and to align stockholder and employee interests. The company believes its employee stock option plans are critical to its operations and productivity. The employee stock option plans allow the company to grant, on a discretionary basis, both incentive and non-qualified stock options as well as restricted stock. 

Under the company's stock option and restricted stock plans, the Compensation Committee of the Board of Directors has the authority to grant stock options and restricted shares of the company's stock to officers and other key employees. At March 31, 2010, 3,775,801 shares of common stock are reserved for issuance under the plans of which 1,583,534 shares are available for future grants. Under the terms of the plans, stock options are granted with an exercise price equal to the stock's closing fair market value on the date of grant. 

## Stock Option Plans 

The company has granted stock options to its directors and employees, including officers, over the last several years under several different stock incentive plans. Generally, options granted vest annually over a one to three-year vesting period measured from the date of grant. Options not previously exercised expire at the earlier of either three months after termination of the grantee’s employment or ten years after the date of grant. All of the stock options are classified as equity awards. 

The company uses the Black-Scholes option-pricing model to determine the fair value of options granted and to calculate the share-based compensation expense. The fair value and assumptions used during fiscal 2010, 2009 and 2008 are as follows: 

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The following table sets forth a summary of stock option activity of the company for fiscal years 2010, 2009 and 2008: 

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