Document:

exv10w41

 

Exhibit 10.41

BAKER HUGHES INCORPORATED

AMENDED AND RESTATED

NONQUALIFIED STOCK OPTION AGREEMENT

	 	 	 
	Anthony G. Fernandes	 	878
	Grantee

	 	Shares

This Amended and Restated Nonqualified Stock Option Agreement (the “Amended and Restated
Agreement”) is issued by Baker Hughes Incorporated (the “Company”) to Anthony G. Fernandes
(“Grantee”) on February 24, 2006, pursuant to the Baker Hughes Incorporated Director Compensation
Deferral Plan (the “Plan”).

WHEREAS, the Company granted to Grantee on December 31, 2004 (the “Grant Date”), a nonqualified
stock option to purchase 878 shares of the common stock of the Company, $1.00 par value per share
(the “Common Stock”), at a price of $21.335 per share and issued to Grantee a nonqualified stock
option agreement effective on the Grant Date setting forth the terms and conditions of the grant to
Grantee (the “Original Agreement”); and

WHEREAS, Grantee’s rights under the Original Agreement are subject to the provisions of section
409A of the Internal Revenue Code of 1986, as amended (the “Code”), because the exercise price for
the option in the Original Agreement was less than the fair market value of the Common Stock on the
Grant Date;

WHEREAS, the Company desires to amend and restate the terms of the Original Agreement by this
Amended and Restated Agreement to comply with the requirements of section 409A of the Code and the
guidance issued by the Internal Revenue Service with respect thereto;

NOW, THEREFORE, pursuant to action by the Board of Directors of the Company, the Company hereby
amends and restates the Original Agreement to provide as follows:

Grantee is hereby granted a nonqualified stock option to purchase the number of shares set forth
above of the Company’s $1.00 par value common stock at the exercise price of $21.335 for each share
subject to this option, payable at the time of exercise. Subject to the terms of the Plan
regarding exercise, this option will be exercisable only on February 24, 2006.

Cashless exercise, in accordance with the terms of the Plan, shall be available to Grantee for the
shares subject to the option.

This option is granted under the Plan and is subject to all of the provisions of the Plan. This
option is not transferable by Grantee otherwise than by will or by the laws of descent and
distribution, and is exercisable during Grantee’s lifetime only by Grantee.

The Original Agreement is amended and restated in its entirety by the terms of this Amended and
Restated Agreement and the Original Agreement is no longer effective.

IN WITNESS WHEREOF, this Amended and Restated Agreement has been duly executed and delivered on
this 24th day of February, 2006.

	 	 	 
	 

	 	BAKER HUGHES INCORPORATED
	 
	 	 
	 
	 	 
	 

	 	/s/Chad C. Deaton
	 

	 	 
	 

	 	Chad C. Deaton — Chairman & CEOexv10w44

 

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.

 

 

          “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)

 

 

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.

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