Exhibit 10.44
PERFORMANCE GOALS
FOR PERFORMANCE UNIT AWARDS GRANTED IN _____ UNDER
THE BAKER HUGHES INCORPORATED 2002 DIRECTOR & OFFICER
LONG-TERM INCENTIVE PLAN AND
THE BAKER HUGHES INCORPORATED 2002 EMPLOYEE
LONG-TERM INCENTIVE PLAN
          1. Baker Value Added.
          For Performance Unit Award Agreements issued by Baker Hughes
Incorporated (“BHI”) in ___ under the Baker Hughes Incorporated 2002 Director &
Officer Long-Term Incentive Plan and the Baker Hughes Incorporated 2002 Employee
Long-Term Incentive Plan, the terms “Baker Value Added” and “BVA” shall mean the
amount calculated for a calendar year period under the following formula:
[[(a) + (b) + (c)] x (1 – (d))] – (e)
where (a) is the Profit Before Tax of the Company for the applicable calendar
year, (b) is the interest expense of the Company for the applicable calendar
year, (c) is the goodwill and non-compete amortization of the Company for the
applicable calendar year, (d) is the Tax Rate for the applicable calendar year
and (e) is the Capital Charge determined for the Company for the applicable
calendar year. Notwithstanding the foregoing, to the extent that the inclusion
of such items would increase the amount payable under a Performance Unit Award
Agreement, the Committee shall include all gains, income and revenues for the
applicable calendar year determined to be extraordinary, unusual in nature,
infrequent in occurrence, related to the disposal or acquisition of a business,
or related to a change in accounting principle, in each case, based on Opinion
No. 30 of the Accounting Principles Board (APB Opinion No. 30) or other
applicable accounting rules, or consistent with BHI policies and practices for
calculating BVA in effect on the date hereof (“Unplanned Items”); provided,
however, that the Committee shall have the discretion to reduce the amount
payable under the Performance Unit Award Agreement by not taking into account
such items. Notwithstanding the foregoing, Unplanned Items resulting in losses
or expenses for the applicable calendar year shall be excluded by the Committee;
provided, however, that the Committee shall have the discretion to reduce the
amount payable under the Performance Unit Award Agreement by taking into account
such items.
          “Average Adjusted Net Capital Employed” means the sum of the Monthly
Adjusted Net Capital Employed during the applicable calendar year divided by 12.
          “Capital Charge” means Average Adjusted Net Capital Employed
multiplied by the Cost of Capital.
          “Committee” means the Compensation Committee of the Board of Directors
of the Company.
          “Company” means BHI and all of its Affiliates in which BHI directly or
indirectly has a capital investment.
          “Cost of Capital” means ___%.
          “Cost of Sales” means the cost of products sold and the cost of
providing services, including personnel costs, repair and maintenance costs,
freight/custom, depreciation, and other costs (e.g., commission and royalty)
directly relating to the service provided.

 

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          “Monthly Adjusted Net Capital Employed” means the capital employed by
the Company at the end of a month of the applicable calendar year plus
accumulated goodwill amortization plus the value of significant operating
leases, adjusted to reflect the effect of an Unplanned Item consistent with BHI
policies and practices for calculating Monthly Adjusted Net Capital Employed in
effect on the date hereof if such adjustment would increase the amount payable
under a Performance Unit Award Agreement; provided, however, that the Committee
shall have the discretion to reduce the amount payable under the Performance
Unit Award Agreement by not making such an adjustment to reflect the effect of
an Unplanned Item.
          “Operating Expenses” means costs incurred in non-manufacturing areas
to provide products and services to customers (e.g., finance and administrative
support) during the applicable calendar year.
          “Profit Before Tax” means the revenue of the Company for the
applicable calendar year minus the Cost of Sales of the Company for the
applicable calendar year minus the Operating Expenses of the Company for the
applicable calendar year plus interest income minus interest expense of the
Company for the applicable calendar year.
          “Performance Period” means the three-year period beginning January 1,
___, and ending December 31, ___.
          “Tax Rate” means the effective tax rate for the Company determined in
a manner consistent with BHI tax policies and practices in effect on the date
hereof.
          2. Performance Goals for the Performance Period.
          For Performance Unit Award Agreements issued by BHI in ___under the
Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan and
the Baker Hughes Incorporated 2002 Employee Long-Term Incentive Plan, the
Threshold BVA, Expected BVA and Overachievement BVA shall be $___million,
$___million and $___million, respectively.
          3. General Performance Unit Formula.
          For Performance Units granted by BHI under the Baker Hughes
Incorporated 2002 Director & Officer Long-Term Incentive Plan and the Baker
Hughes Incorporated 2002 Employee Long-Term Incentive Plan during ___, the
aggregate amount payable to an award recipient for the Performance Period shall
be equal to the number of Performance Units granted to the award recipient
multiplied by the Final Performance Unit Award Value.
If (a) the sum of the Baker Value Added achieved by the Company for each of the
three years included in the Performance Period (the “Aggregate Realized BVA”)
equals or exceeds the Expected BVA (but does not exceed the Overachievement
BVA), (b) a Change in Control of the Company has not occurred on or before the
last day of the Performance Period, and (c) the award recipient remains in the
active employ of the Company and/or an Affiliate through the last day of the
Performance Period, then the Final Performance Unit Award Value shall be equal
to:
$100 + ($100/(Overachievement BVA – Expected BVA)) x (Aggregate Realized BVA –
Expected BVA)

 

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If (a) the Aggregate Realized BVA exceeds the Overachievement BVA, (b) a Change
in Control of the Company has not occurred on or before the last day of the
Performance Period, and (c) the award recipient remains in the active employ of
the Company and/or an Affiliate through the last day of the Performance Period,
then the Final Performance Unit Award Value shall be equal to $200.00.
If (a) the Aggregate Realized BVA is less than the Expected BVA (but is not less
than the Threshold BVA, (b) a Change in Control of the Company has not occurred
on or before the last day of the Performance Period, and (c) the award recipient
remains in the active employ of the Company and/or an Affiliate through the last
day of the Performance Period, then the Final Performance Unit Award Value shall
be equal to:
$25 + ($75/(Expected BVA – Threshold BVA)) x (Aggregate Realized BVA – Threshold
BVA)
          The Committee may not increase the Final Performance Unit Award Value
for, or otherwise increase the aggregate amount payable to an award recipient
for the Performance Period under, a Performance Unit Award Agreement issued by
BHI in ___under the Baker Hughes Incorporated 2002 Director & Officer Long-Term
Incentive Plan or the Baker Hughes Incorporated 2002 Employee Long-Term
Incentive Plan.
          Capitalized terms that are not defined herein shall have the meaning
ascribed to such terms in the applicable plan or the applicable Terms and
Conditions of Award Agreements.