Document:

2012 10-K Exhibit 10.34

BAKER HUGHES INCORPORATED 
RESTRICTED STOCK UNIT AWARD AGREEMENT 

Awardee 

Date of Award: 

Number of Restricted Stock Units: 

AWARD OF RESTRICTED STOCK UNITS

        The Board of Directors (the “Board”) of Baker Hughes Incorporated, a Delaware corporation (the “Company”), pursuant to the Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan (the “Plan”), hereby awards to you, the above-named awardee, effective as of the Date of Award set forth above (the “Date of Award”), that number of restricted stock units (the “Restricted Stock Units”) set forth above, on the following terms and conditions:  

The Restricted Stock Units that are awarded hereby to you shall be subject to the prohibitions and restrictions set forth herein with respect to the sale or other disposition of such Restricted Stock Units and the obligation to forfeit and surrender such Restricted Stock Units to the Company (the “Forfeiture Restrictions”). The Forfeiture Restrictions shall lapse as to the Restricted Stock Units that are hereby awarded on the earlier to occur of:

		
	(a)
	the first anniversary of the Date of Award (the “General Lapse Date”) provided that your service on the Board has not terminated prior to such date; and

		
	(b)
	the date of the annual meeting of the stockholders of the Company next following the date of your 72nd birthday, provided that your service on the Board has not terminated prior to such date of annual meeting of the stockholders of the Company. 

If a Change in Control of the Company occurs or you cease to be a member of the Board before the General Lapse Date, your rights to the Restricted Stock Units under this Agreement will be determined as provided in the attached Terms and Conditions of Award Agreements dated January 24, 2013 (the “Terms and Conditions”). 

Upon the lapse of the Forfeiture Restrictions applicable to a Restricted Stock Unit that is awarded hereby, the Company shall issue to you one share of the Company’s Common Stock, $1.00 par value per share (the “Common Stock”), in exchange for such Restricted Stock Unit and thereafter you shall have no further rights with respect to such Restricted Stock Unit. On the date of the lapse of the Forfeiture Restrictions the Company shall cause to be delivered to you stock representing those shares of the Common Stock issued in exchange for Restricted Stock Units awarded hereby, and such shares of the Common Stock shall be transferable by you (except to the extent that any proposed transfer would, in the opinion of counsel satisfactory to the Company, constitute a violation of applicable federal or state securities law). 

        If during the period you hold any Restricted Stock Units awarded hereby and the Company pays a dividend in cash with respect to the outstanding shares of the Common Stock (a “Cash Dividend”), then the Company will credit to an account established for you by the Company under the Plan (the “Account”) an amount equal to the product of (a) the Restricted Stock Units awarded hereby that have not been forfeited to the Company or exchanged by the Company for shares of the Common Stock and (b) the amount of the Cash Dividend paid per share of the Common Stock (the “Dividend Equivalent Credit”). The Company shall pay to you, in cash, an amount equal to the Dividend Equivalent Credits credited to the Account with respect to a Restricted Stock Unit on the date the Forfeiture Restrictions applicable to that Restricted Stock Unit lapse (and in no case later than the end of the calendar year in which the Forfeiture Restrictions applicable to that Restricted Stock Unit lapse or, if later, the 15th day of the third month following the date the Forfeiture Restrictions applicable to that Restricted Stock Unit lapse). 

       If during the period you hold any Restricted Stock Units awarded hereby and the Company pays a dividend in shares of the Common Stock with respect to the outstanding shares of the Common Stock, then the Company will increase the Restricted Stock Units awarded hereby that have not then been exchanged by the Company for shares of the Common Stock by an amount equal to the product of (a) the Restricted Stock Units awarded hereby that have not been forfeited to the Company or exchanged by the Company for shares of the Common Stock and (b) the number of shares of the Common Stock paid by the Company per share of the Common Stock (collectively, the “Stock Dividend Restricted Stock Units”). Each Stock Dividend Restricted Stock Unit will be subject to same Forfeiture Restrictions and other restrictions, limitations and conditions applicable to the Restricted Stock Unit for which such Stock Dividend Restricted Stock Unit was awarded and will be exchanged for shares of the Common Stock at the same time and on the same basis as such Restricted Stock Unit.
 
        The Restricted Stock Units may not be sold, assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered or disposed of (other than by will or the applicable laws of descent and distribution). Any such attempted sale, assignment, pledge, exchange, hypothecation, transfer, encumbrance or disposition in violation of this Agreement shall be void and the Company shall not be bound thereby. 

        Any shares of the Common Stock issued to you in exchange for Restricted Stock Units awarded hereby may not be sold or otherwise disposed of in any manner that would constitute a violation of any applicable federal or state securities laws. You also agree that (a) the Company may refuse to cause the transfer of any such shares of the Common Stock to be registered on the stock register of the Company if such proposed transfer would in the opinion of counsel satisfactory to the Company constitute a violation of any applicable federal or state securities law and (b) the Company may give related instructions to the transfer agent, if any, to stop registration of the transfer of such shares of the Common Stock. 

The shares of Common Stock that may be issued under the Plan are registered with the Securities and Exchange Commission under a Registration Statement on Form S-8. A Prospectus describing the Plan and the shares of Common Stock and the Terms and Conditions can be found on the Baker Hughes Direct website at www.bakerhughesdirect.com. You may obtain a copy of the Plan Prospectus by requesting it from the Company. 

Capitalized terms that are not defined herein shall have the meaning ascribed to such terms in the Plan or the Terms and Conditions. 

In accepting the award of Restricted Stock Units set forth in this Agreement you accept and agree to be bound by all the terms and conditions of the Plan, this Agreement and the Terms and Conditions. 
	
			
	 
	 
	 

	 
	 
	BAKER HUGHES INCORPORATED

	 
	 
	/s/ Martin S. Craighead

	 
	 
	 

	 
	 
	Martin S. Craighead
President and Chief Executive Officer

  

BAKER HUGHES INCORPORATED 
TERMS AND CONDITIONS 
OF 
AWARD AGREEMENTS
 

	
			
	1.
	 
	TERMINATION OF SERVICE. The following provisions will apply in the event your service on the Board terminates before the General Lapse Date set forth under the terms of the Restricted Stock Unit Award Agreement awarded to you (the “Agreement”):

		
	1.1
	Termination Generally. Subject to Section 2, if your service on the Board terminates on or before the General Lapse Date for any reason other than one of the reasons described in Sections 1.2 through 1.5, the Forfeiture Restrictions then applicable to the Restricted Stock Units shall not lapse and the number of Restricted Stock Units then subject to the Forfeiture Restrictions shall be forfeited to the Company on the date your service on the Board terminates. 

		
	1.2
	Disability. Notwithstanding any other provision of the Agreement or these Terms and Conditions to the contrary, if you become permanently disabled before the General Lapse Date and before your service on the Board terminates, all remaining Forfeiture Restrictions shall immediately lapse on the date your service on the Board terminates due to your becoming permanently disabled. For purposes of this Section 1.2, you will be “permanently disabled” if you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months. 

		
	1.3
	Death. Notwithstanding any other provision of the Agreement or these Terms and Conditions to the contrary, if you die before the General Lapse Date and before your service on the Board terminates, all remaining Forfeiture Restrictions shall immediately lapse on the date your service on the Board terminates due to death. 

		
	1.4
	Completion of Term. Notwithstanding any other provision of the Agreement or these Terms and Conditions to the contrary, if you complete before the General Lapse Date the term for which you were elected to the Board (the “Term”) and as a result thereof your service on the Board terminates, all remaining Forfeiture Restrictions shall immediately lapse on the last day of the Term. 

		
	1.5
	Attainment of Retirement Age. Notwithstanding any other provision of the Agreement or these Terms and Conditions to the contrary, if you attain the age of 72 and  your service on the Board has not terminated prior to the date of the annual meeting of the stockholders of the Company that next follows your 72nd birthday, all remaining forfeiture restrictions shall immediately lapse on such date of annual meeting of the stockholders of the Company.

	
			
	2.
	

 
	CHANGE IN CONTROL. Notwithstanding any other provision of the Agreement or these Terms and Conditions to the contrary, if a Change in Control of the Company occurs before the General Lapse Date and before you cease to be a member of the Board, then all remaining Forfeiture Restrictions shall immediately lapse on the effective date of the Change in Control of the Company provided that the transaction qualifies as a change in the ownership or effective control of the Company, or in the sale of a substantial portion of the assets of the Company, within the meaning of section 409A of the Internal Revenue Code of 1986, as amended and Department of Treasury regulations issued thereunder. 

	 
	 
	 

	3.
	 
	NONTRANSFERABILITY. The Agreement is not transferable by you otherwise than by will or by the laws of descent and distribution.

	 

	4.
	 
	CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The existence of the Restricted Stock Units shall not affect in any way the right or power of the Company or any company the stock of which is awarded pursuant to the Agreement to make or authorize any adjustment, recapitalization, reorganization or other change in its capital structure or its business, engage in any merger or consolidation, issue any debt or equity securities, dissolve or liquidate, or sell, lease, exchange or otherwise dispose of all or any part of its assets or business, or engage in any other corporate act or proceeding.

	 
	 
	 

	5.
	 
	RESTRICTED STOCK UNITS DO NOT AWARD ANY RIGHTS OF A SHAREHOLDER. You shall not have the voting rights or any of the other rights, powers or privileges of a holder of the Common Stock with respect to the Restricted Stock Units that are awarded hereby. Only after a share of the Common Stock is issued in exchange for a Restricted Stock Unit will you have all of the rights of a shareholder with respect to such share of Common Stock issued in exchange for a Restricted Stock Unit.

	 
	 
	 

	6.
	 
	SECURITIES ACT LEGEND. You consent to the placing on any certificate for the shares of Common Stock issued under the Agreement an appropriate legend restricting resale or other transfer of the Shares except in accordance with the Securities Act of 1933, as amended and all applicable rules thereunder.

	 
	 
	 

	7.
	 
	LIMIT OF LIABILITY. Under no circumstances will the Company be liable for any indirect, incidental, consequential or special damages (including lost profits) of any form incurred by any person, whether or not foreseeable and regardless of the form of the act in which such a claim may be brought, with respect to the Plan or the Company’s role as Plan sponsor.

	 
	 
	 

	8.

	 
	MISCELLANEOUS. The Agreement is awarded pursuant to and is subject to all of the provisions of the Plan, including amendments to the Plan, if any. In the event of a conflict between these Terms and Conditions and the Plan provisions, the Plan provisions will control. The term “you” and “your” refer to the Awardee named in the Agreement. Capitalized terms that are not defined herein shall have the meanings ascribed to such terms in the Plan or the Agreement.2012 10-K Exhibit 10.39

PERFORMANCE GOALS 
FOR PERFORMANCE UNIT AWARDS GRANTED IN 2012 UNDER 
THE BAKER HUGHES INCORPORATED 2002 DIRECTOR & OFFICER 
LONG-TERM INCENTIVE PLAN AND 
THE BAKER HUGHES INCORPORATED 2002 EMPLOYEE 
LONG-TERM INCENTIVE PLAN
		
	1.
	2012 Performance Unit Program.

The Performance Unit Program, a component compensation program established under each of the Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan and the Baker Hughes Incorporated 2002 Employee Long-Term Incentive Plan (the “PUP”),  provides for cash awards for participants if performance goals are met during the term of the PUP.   The performance goals are related to the Company’s achievement as compared to a peer group of companies.   Achievement is measured over multiple performance periods from the beginning of 2012 to the end of 2014.   Twenty-five percent of the Total Unit Value is determined based upon one year performance relative to certain specified performance criteria during each of 2012, 2013, and 2014.  The final twenty-five percent of the Total Unit Value is calculated at the end of 2014 based upon the cumulative performance of the Company over the three-year performance period 2012 through 2014.

		
	2.
	Performance Goals for the Performance Period.

For Performance Unit Awards granted by BHI in 2012 under the Plan, the performance goals are based upon the Company’s (1) change in Revenue as compared to the Peer Group, (2) Pre-Tax Operating Margin for the applicable performance periods as compared to that of the Peer Group, and (3) Return on Capital Employed or ROCE as compared to the Peer Group.  For each performance goal, if the Company’s performance as compared to the Peer Group is the highest, the Company’s performance rank shall be first.

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(a)One Year Performance Periods.
Revenue Growth.  For each of the 2012 Performance Period, the 2013 Performance Period and the 2014 Performance Period the Company’s One Year Interval Percentage Increase in Revenue for its 2012, 2013 and 2014 fiscal years, respectively, shall be compared against the One Year Interval Percentage Increase in Revenue for all members of the Peer Group.
Pre-Tax Operating Margin.  For each of the 2012 Performance Period, the 2013 Performance Period and the 2014 Performance Period, the Company’s Pre-Tax Operating Margin for its 2012, 2013 and 2014 fiscal years, respectively, shall be compared against the Pre-Tax Operating Margin for all members of the Peer Group during the applicable Current Period.
Return on Capital Employed.  For each of the 2012 Performance Period, the 2013 Performance Period and the 2014 Performance Period, the Company’s ROCE for its 2012, 2013 and 2014 fiscal years, respectively, shall be compared against the ROCE for all members of the Peer Group during the applicable Current Period.
(b)    Three-Year Performance Period.
Revenue Growth.  For the Three-Year Performance Period, the Three-Year Percentage Increase in Revenue of the Company shall be compared against the Three‐Year Percentage Increase in Revenue for all members of the Peer Group as of December 31, 2014.
Pre-Tax Operating Margin.  For the Three-Year Performance Period, the sum of the Pre-Tax Operating Margin of the Company for the 2012 Performance Period, the 2013 Performance Period and the 2014 Performance Period shall be compared against the sum of the Pre-Tax Operating Margin of the Company for each member of the Peer Group for the 2012 Performance Period, the 2013 Performance Period and the 2014 Performance Period.
Return on Capital Employed.  For the Three‐Year Performance Period, the sum of the ROCE of the Company for the 2012 Performance Period, the 2013 Performance Period and the 2014 

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Performance Period shall be compared against the sum of the ROCE for each member of the Peer Group for the 2012 Performance Period, the 2013 Performance Period and the 2014 Performance Period.
		
	3.
	 Unit Value Based on Peer Group Ranking.

The Unit Value earned during an applicable performance period (the 2012 Performance Period, the 2013 Performance Period, the 2014 Performance Period or the Three-Year Performance Period) for each of the three performance goals is 25 percent the Unit Value Amount listed below.  The averages of 25 percent Unit Value Amounts earned during a performance period is used to determine the Period Unit Value for the performance period.  The payout under each Performance Unit will be based on 12 measures (three Peer Group Ranking results achieved during four discrete performance periods.)
	
						
	2012, 2013, 2014, and Three-Year Performance Period

	Peer Group Rank
	5th
	4th
	3rd
	2nd
	1st

	Unit Value Amount
	$0
	$45
	$90
	$135
	$200

In the example below, for illustrative purposes, Year 1 Revenue growth rank was 5th and 25 percent of $0 is $0.  Pre-Tax Operating Margin rank was 2nd and 25 percent of $135 is $33.75.  ROCE rank was 1st and 25 percent of $200 is $50.  The average Unit Value based upon the performance in Year 1 is $27.92.  For each Performance Unit awarded, the sum of the Period Unit Values for each of the performance periods equals the Total Unit Value.

Note that levels of achievement contained in the foregoing example are not forecasts by the Company of its expected levels of achievement. Rather, the levels of achievement for purposes of the illustrative example were selected at random.
If the Peer Group is reduced by merger(s) or otherwise during the term of the Three-Year Performance Period the Committee shall make such adjustments to the Unit Value Amount chart as it deems appropriate in its sole discretion. Such adjustments shall not increase the amounts that would have been payable under the Unit Value Amount chart absent such adjustments. 

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4.    Peer Group.
The Peer Group is as follows for the performance periods ending in 2012, 2013, and 2014, and for the Three-Year Performance Period.
	
	
	Peer Group 
(5 Companies)

	Baker Hughes Incorporated

	Halliburton Company

	National Oilwell Varco Incorporated

	Schlumberger Limited

	Weatherford International Ltd.

5.    General Performance Unit Formula.
Except as otherwise specified in the Terms and Conditions, the aggregate amount payable to a Participant for a Performance Unit Award granted in 2012 under the Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan and the Baker Hughes Incorporated 2002 Employee Long-Term Incentive Plan shall be equal to the number of Performance Units granted to the Participant multiplied by the Final Performance Unit Award Value.
The Compensation Committee shall determine in writing the extent to which the Performance Goals applicable to the Performance Unit Awards have been satisfied before the Company makes any payments under the Performance Unit Awards.
Subject to the terms of the Plan, the Performance Unit Award and the Terms and Conditions, unless prior to the Scheduled Payment Date a Change in Control (as defined in the Terms and Conditions) occurs or the Participant forfeits his Performance Unit Award, on the Scheduled Payment Date the Company shall pay the Participant an amount equal to the Final Performance Agreement Award Value (prorated in accordance with the Terms and Conditions in the event of the Retirement, death or permanent disability of the Participant within the meaning of the Terms and Conditions).  
The Compensation Committee may not increase the Final Performance Unit Award Value for, or otherwise increase the aggregate amount payable to a Participant for the performance period under, a Performance Unit Award Agreement issued by BHI in 2012 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 Plan or the Terms and Conditions.
6.    Adjustments.
Revenue Growth, Pre‐Tax Operating Margin and Return on Capital Employed may be determined by including or excluding, in the Compensation Committee’s discretion, items that are determined to be extraordinary, unusual in nature, infrequent in occurrence, related to the disposal or acquisition of a segment of a business, or related to a change in accounting principal, in each case, based on Financial Accounting 

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Standards Board (FASB) Accounting Standards Codification (ASC) 225-20, Income Statement, Extraordinary and Unusual Items, and FASB ASC 830-10, Foreign Currency Matters, Overall, or other applicable accounting rules, or consistent with Company accounting policies and practices in effect on the date these Performance Goal are established.
7.    Definitions.
For Performance Unit Award Agreements issued by Baker Hughes Incorporated (“BHI”) in 2012 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 set forth below shall have the following meanings:
 “Capital Employed” means an amount equal to the Relevant Company’s total shareholders’ equity at the close of the Current Period plus the Relevant Company’s long-term debt, short-term borrowing and the current portion of long-term debt at the close of the Current Period.
 “Company” means BHI and all of its Affiliates in which BHI directly or indirectly has a capital investment.
“Compensation Committee” means the Compensation Committee of the Board of Directors of the Company.
 “Current Period” means the fiscal year of the Relevant Company that coincides with or ends within the fiscal year of the Company to which the applicable Performance Goal applies.
“EBIT” means earnings before deduction of interest and taxes.
 “Final Performance Unit Award Value” or “Total Unit Value” means the sum of the Unit Values for the 2012 Performance Period, the 2013 Performance Period, the 2014 Performance Period and the Three-Year Performance Period.
 “One Year Interval Percentage Increase in Revenue” means the result of (a) minus (b), divided by (c), where (a) is the Revenue of the Relevant Company for the Current Period, (b) is the Revenue of the Relevant Company for the Prior Period, and (c) is the Revenue of the Relevant Company  for the Prior Period.
“Participant” means the person to whom a Performance Unit Award is granted.
“Peer Group” means the group identified in Section 4.
“Performance Units” means the number of performance units listed in the Participant’s agreement evidencing his or her Performance Unit Award.
“Performance Unit Award” means a Performance Unit Award granted under the Plan in 2012.
“Plan” means the Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan or the Baker Hughes Incorporated 2002 Employee Long-Term Incentive Plan, as applicable.
“Pre-Tax Operating Margin” means the quotient of the Relevant Company’s EBIT for the Current Period divided by the Relevant Company’s total revenue for the Current Period.

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“Prior Period” means the fiscal year of the Relevant Company that coincides with or ends within the fiscal year of the Company immediately preceding the fiscal year of the Company to which the applicable Performance Goal applies.
 “Relevant Company” means the Company or a member of the Peer Group.
“Return on Capital Employed” or “ROCE” means the Relevant Company’s EBIT for the Current Period, divided by the Relevant Company’s Capital Employed.
“Revenue” means the revenue of the Company or the revenue of a particular member of the Peer Group, as applicable.
“Scheduled Payment Date” means March 13, 2015.
“Three-Year Interval Percentage Increase in Revenue” means the result of (a) minus (b), divided by (c), where (a) is the Revenue for the Relevant Company for the Current Period corresponding to the final fiscal year of the Company ending during the Three‐Year Performance Period, (b) is the Revenue of the Relevant Company for the Prior Period corresponding to the fiscal year of the Company immediately prior to the first fiscal year of the Company beginning during the Three‐Year Performance Period and (c) is the Revenue of the Relevant Company for the Prior Period corresponding to the fiscal year of the Company immediately prior to the first fiscal year of the Company beginning during the Three‐Year Performance Period.
“Three-Year Performance Period” means the three-year period beginning January 1, 2012, and ending December 31, 2014.
 “2012 Performance Period” means the one-year period beginning January 1, 2012, and ending December 31, 2012.
“2013 Performance Period” means the one-year period beginning January 1, 2013, and ending December 31, 2013.
 “2014 Performance Period” means the one-year period beginning January 1, 2014, and ending December 31, 2014.
“Terms and Conditions” means the Terms and Conditions of Performance Unit Award Agreements adopted by the Compensation Committee with respect to Performance Unit Awards. 
“Unit Value” or “Period Unit Value” means the averages of the Unit Value Amounts per Performance Unit earned with respect to a performance period as specified in Section 3.
“Unit Value Amount” means the applicable dollar amount specified in the first chart in Section 3.

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