EXHIBIT 10.14
BAKER HUGHES INCORPORATED
1993 STOCK OPTION PLAN
ARTICLE I
INTRODUCTION
1. PURPOSE. This 1993 Stock Option Plan, which shall be known as the "1993 STOCK
OPTION PLAN" and which is hereinafter referred to as the "PLAN," is intended to
promote the interests of Baker Hughes Incorporated ("COMPANY") and its
stockholders by encouraging employees of the Company and its subsidiaries and
non-employee directors of the Company to acquire or increase their equity
interest in the Company, thereby giving them an added incentive to work toward
the continued growth and success of the Company. The Board of Directors also
contemplates that through the adoption of the Plan, the Company, its
subsidiaries and affiliated entities will be better able to compete for the
services of personnel needed for the continued growth and success of the
Company.
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided in Article I,
Section 4, Article II, Paragraph 3(e), Article III, Paragraph 3(e), and Article
IV, Paragraph 5(e), the aggregate number of shares of Common Stock, $1 par value
per share, of the Company ("COMMON STOCK") to be delivered upon exercise of all
options granted under the Plan shall not exceed 6,500,000 shares. In the event
the number of shares to be delivered upon the exercise in full of any option
granted under the Plan is reduced for any reason whatsoever or in the event any
option granted under the Plan can no longer under any circumstances be
exercised, the number of shares no longer subject to such option shall thereupon
be released from such option and shall thereafter be available to be re-optioned
under the Plan. Shares issued pursuant to the exercise of options granted under
the Plan shall be fully paid and nonassessable.
3. ADMINISTRATION OF THE PLAN. Subject to the provisions of the Plan, the
Compensation Committee of the Board of Directors of the Company (the
"COMMITTEE") shall interpret the Plan and all options granted under the Plan,
shall make such rules as it deems necessary for the proper administration of the
Plan, shall make all other determinations necessary or advisable for the
administration of the Plan and shall correct any defect or supply any omission
or reconcile any inconsistency in the Plan or in any option granted under the
Plan in the manner and to the extent that the Committee deems desirable to carry
the Plan or any option into effect. Any action taken or determination made by
the Committee pursuant to this and the other paragraphs of the Plan shall be
conclusive on all parties. The act or determination of a majority of the
Committee shall be deemed to be the act or determination of the Committee.
The Committee shall consist of at least three members of the Board of Directors
of the Company appointed by and holding office during the pleasure of the Board
of Directors of the Company. Other than options granted to Non-Employee
Directors (as hereinafter defined) pursuant to Article IV, no options may be
granted under the Plan to any member of the Committee during the term of his
membership on the Committee. No person shall be eligible to serve on the
Committee unless he is then a "disinterested person" within the meaning of
Paragraph (d)(3) of Rule 16b-3 ("RULE 16B-3") promulgated under the Securities
Exchange Act of 1934, as amended (the "ACT"), if and as the Rule is then in
effect. The members of the Committee shall be solely "outside directors," within
the meaning of section 162(m) of the Internal Revenue Code of 1986, as amended
(the "CODE") and applicable interpretive authority thereunder.
4. AMENDMENT AND DISCONTINUANCE OF THE PLAN. The Board of Directors of the
Company may amend, suspend or terminate the Plan; provided, however, that each
such amendment of the Plan (a) extending the period within which options may be
granted under the Plan, (b) increasing the aggregate number of shares of Common
Stock to be optioned under the Plan except as provided in Article II, Paragraph
3(e), Article III, Paragraph 3(e), Article IV, Paragraph 5(e) and the next
succeeding sentence, (c) changing the class of employees to whom options may be
granted under Article II or III, (d) materially increasing the benefits to
optionees under the Plan, (e) modifying the provisions of Article IV, or (f)
granting options to Non-Employee Directors other than pursuant to Article IV,
shall, in each case, be subject to approval by the stockholders of the Company;
provided, further, however, that no amendment, suspension or termination of the
Plan may cause the Plan to fail to meet the requirements of Rule 16b-3 or may,
without the consent of the holder of an option granted under Article II, III, or
IV, terminate such option or adversely affect such person's rights in any
material respect (unless such change is required in order to cause the benefits
under the Plan to qualify as "performance based compensation" within the meaning
of section 162(m) of the Code and applicable interpretive authority thereunder).
The Board of Directors of the Company may increase the aggregate number of
shares of Common Stock that may be issued under the Plan provided that the full
amount of such increase shall be reserved solely for issuance as provided in
Article I, Paragraph 5(a), and provided that the number of shares issuable to
persons subject to Section 16(a) of the Act in connection with such increases
shall not, in the aggregate, exceed 650,000 shares.
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5. GRANTING OF OPTIONS TO EMPLOYEES. The Committee shall have authority to
grant, prior to the expiration date of the Plan, to employees of the Company and
its subsidiaries (as defined in section 424 of the Code) ("EMPLOYEE OPTIONEES"),
options to purchase, on the terms and conditions hereinafter set forth in
Articles II and III, authorized but unissued, or reacquired, shares of Common
Stock as follows:
(a) to a broad-based group of Employee Optionees, including those
described in Paragraph 5(b) below, options granted pursuant to Article II,
provided such grants under this Paragraph 5(a) shall, unless increased by the
Board of Directors, be limited to options to purchase 1,500,000 shares of Common
Stock and shall be made only to those Employee Optionees, in such amounts and at
such times as determined in the discretion of the Committee; and
(b) to Employee Optionees who are key employees (including officers and
directors who are also key employees), options granted pursuant to Article II
and/or Article III, provided such grants shall be made only to those Employee
Optionees, in such amounts and at such times as determined in the discretion of
the Committee, and, for this purpose, the Committee may consider the Employee
Optionee's office or position, degree of responsibility for and contribution to
the growth and success of the Company, length of service, age, promotions,
potential and any other factors which it may deem relevant.
Options granted to Employee Optionees under Article III shall be "incentive
stock options," within the meaning of section 422(b) of the Code, and are
hereinafter referred to as "incentive stock options." All other options granted
to Employee Optionees under the Plan shall be granted pursuant to Article II,
and are hereinafter referred to as "nonqualified options." Notwithstanding the
foregoing, grants of options to any one Employee Optionee under the Plan shall
be limited to options to purchase no more than 400,000 shares of Common Stock
per calendar year.
6. GRANTING OF OPTIONS TO NON-EMPLOYEE DIRECTORS. All options granted to
Non-Employee Directors shall be options to purchase, on the terms and conditions
hereinafter set forth in Article IV, authorized but unissued, or reacquired,
shares of Common Stock and shall be nonqualified options.
7. OPTION AGREEMENTS. Each option under the Plan shall be evidenced by a written
agreement between the Company and the Eligible Optionee which shall contain such
terms and conditions, and may be exercisable for such periods, as may be
approved by the Committee, which terms and conditions need not be identical.
8. EFFECTIVE DATE. The Plan shall become effective as of October 27,
1993,provided the Plan is approved by the Board of Directors of the Company and
approved by the shareholders of the Company within twelve months thereafter.
Notwithstanding any other provisions of the Plan, no option under the Plan shall
be exercisable prior to such shareholder approval. Except with respect to
options then outstanding, if not sooner terminated under the provisions of
Article I, Paragraph 4, the Plan shall terminate upon and no further options
shall be granted after the expiration of ten years from October 27, 1993.
9. MISCELLANEOUS. All references in the Plan to "Articles," "Paragraphs," and
other subdivisions refer to the corresponding Articles, Paragraphs, and
subdivisions of the Plan.
10. RULE 16B-3 COMPLIANCE. The Company intends:
(a) that the Plan meet the requirements of Rule 16b-3;
(b) that participation by Non-Employee Directors under Article IV of
the Plan will not prohibit them from being "disinterested persons" within the
meaning of Rule 16b-3(d)(3) with respect to administration of the Plan or with
respect to administration of any other plan of the Company;
(c) that transactions of the type specified in the first paragraph of
Rule 16b-3 by Non-Employee Directors pursuant to Article IV of the Plan will be
exempt from the operation of section 16(b) of the Act; and
(d) that transactions of the type specified in the first paragraph of
Rule 16b-3 by officers of the Company (whether or not they are directors)
pursuant to the Plan will be exempt from the operation of section 16(b) of the
Act. In all cases, the terms, provisions, conditions and limitations of the Plan
shall be construed and interpreted consistent with the Company's intent as
stated in this Article I, Paragraph 10.
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11. RECAPITALIZATION OR REORGANIZATION. If (i) the Company shall not be the
surviving entity in any merger, consolidation or other reorganization (or
survives only as a subsidiary of an entity other than a previously wholly-owned
subsidiary of the Company), (ii) the Company sells, leases or exchanges all or
substantially all of its assets to any other person or entity (other than a
wholly-owned subsidiary of the Company), (iii) the Company is to be dissolved
and liquidated, (iv) any person or entity, including a "group" as contemplated
by section 13(d)(3) of the Act, acquires or gains ownership or control
(including, without limitation, power to vote) of more than 50% of the
outstanding shares of the Company's voting stock (based upon voting power), or
(v) as a result of or in connection with a contested election of directors, the
persons who were directors of the Company before such election shall cease to
constitute a majority of the Board of Directors of the Company (each such event
is referred to herein as a "CORPORATE CHANGE"), no later than (a) ten days after
the approval by the shareholders of the Company of such merger, consolidation,
reorganization, sale, lease or exchange of assets or dissolution or such
election of directors or (b) thirty days after a change of control of the type
described in Clause (iv), the Committee, acting in its sole discretion without
the consent or approval of any optionee, shall act to effect one or more of the
following alternatives, which may vary among individual optionees and which may
vary among options held by any individual optionee: (1) accelerate the time at
which options then outstanding may be exercised so that such options may be
exercised in full for a limited period of time on or before a specified date
(before or after such Corporate Change) fixed by the Committee, after which
specified date all unexercised options and all rights of optionees thereunder
shall terminate, (2) require the mandatory surrender to the Company by selected
optionees of some or all of the outstanding options held by such optionees
(irrespective of whether such options are then exercisable under the provisions
of the Plan) as of a date, before or after such Corporate Change, specified by
the Committee, in which event the Committee shall thereupon cancel such options
and the Company shall pay to each optionee an amount of cash per share equal to
the excess, if any, of the amount calculated below (the "CHANGE OF CONTROL
VALUE") of the shares subject to such option over the exercise price(s) under
such options for such shares, (3) make such equitable adjustments to options
then outstanding as the Committee deems appropriate to reflect such Corporate
Change (provided, however, that the Committee may determine in its sole
discretion that no adjustment is necessary to options then outstanding) or (4)
provide that thereafter upon any exercise of an option theretofore granted the
optionee shall be entitled to purchase under such option, in lieu of the number
of shares of Common Stock then covered by such option the number and class of
shares of stock or other securities or property (including, without limitation,
cash) to which the optionee would have been entitled pursuant to the terms of
the agreement of merger, consolidation or sale of assets and dissolution if,
immediately prior to such merger, consolidation or sale of assets and
dissolution the optionee had been the holder of record of the number of shares
of Common Stock then covered by such option. For the purposes of clause (2)
above, the "CHANGE OF CONTROL VALUE" shall equal the amount determined in clause
(i), (ii) or (iii), whichever is applicable, as follows: (i) the per share price
offered to shareholders of the Company in any such merger, consolidation,
reorganization, sale of assets or dissolution transaction, (ii) the price per
share offered to shareholders of the Company in any tender offer or exchange
offer whereby a Corporate Change takes place, or (iii) if such Corporate Change
occurs other than pursuant to a tender or exchange offer, the fair market value
per share of the shares into which such options being surrendered are
exercisable, as determined by the Committee as of the date determined by the
Committee to be the date of cancellation and surrender of such options. In the
event that the consideration offered to shareholders of the Company in any
transaction described herein consists of anything other than cash, the Committee
shall determine the fair cash equivalent of the portion of the consideration
offered which is other than cash. Any adjustment provided for herein shall be
subject to any required shareholder action.
ARTICLE II
NONQUALIFIED STOCK OPTIONS
1. ELIGIBLE EMPLOYEES. All Employee Optionees shall be eligible to receive
nonqualified options under this Article II.
2. CALCULATION OF EXERCISE PRICE. The exercise price to be paid for each share
of Common Stock deliverable upon exercise of each nonqualified option granted
under Article II shall be equal to the fair market value per share of Common
Stock at the time of grant as determined by the Committee, based on the
composite transactions in the Common Stock as reported by The Wall Street
Journal, and shall be equal to the per share price of the last sale of Common
Stock on the trading day prior to the grant of such option. The exercise price
for each nonqualified option granted under Article II shall be subject to
adjustment as provided in Article II, Paragraph 3(e).
3. TERMS AND CONDITIONS OF OPTIONS. Nonqualified options granted under Article
II shall be in such form as the Committee may from time to time approve. Options
granted under Article II shall be subject to the following terms
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and conditions and may contain such additional terms and conditions, not
inconsistent with Article II, as the Committee shall deem desirable:
(a) OPTION PERIOD AND CONDITIONS AND LIMITATIONS ON EXERCISE. Subject
to Article II, Paragraph 4, no nonqualified option granted under Article II
shall be exercisable with respect to any of the shares subject to the option
later than the date which is ten years after the date of grant (the
"NONQUALIFIED OPTION EXPIRATION DATE"). To the extent not prohibited by other
provisions of the Plan, each nonqualified option granted under Article II shall
be exercisable at such time or times as the Committee in its discretion may
determine at or prior to the time such option is granted (unless otherwise
extended by the Committee pursuant to Article II, Paragraph 3 (b)(2)(iii));
provided, however, that unless the Committee determines otherwise, each
nonqualified option granted under Article II shall be exercisable from time to
time, in whole or in part, at any time prior to the Nonqualified Option
Expiration Date.
(b) TERMINATION OF EMPLOYMENT AND DEATH. For purposes of Article II and
each nonqualified option granted under Article II, an Employee Optionee's
employment shall be deemed to have terminated at the close of business on the
day preceding the first date on which he is no longer for any reason whatsoever
(including his death) employed by the Company or a subsidiary of the Company. An
Employee Optionee shall be considered to be in the employment of the Company or
a subsidiary of the Company as long as he remains an employee of the Company or
a subsidiary of the Company, whether active or on an authorized leave of
absence. Any question as to whether and when there has been a termination of
such employment, and the cause of such termination, shall be determined by the
Committee and its determination shall be final. If an Employee Optionee's
employment is terminated for any reason whatsoever (including his death), each
nonqualified option granted to him under Article II and all of his rights
thereunder shall wholly and completely terminate:
(1) With respect to options not then exercisable, at the time
the Employee Optionee's employment is terminated; and
(2) With respect to options then exercisable:
(i) At the time the Employee Optionee's employment is
terminated if his employment is terminated because he is
discharged for fraud, theft or embezzlement committed against
the Company or a subsidiary, affiliated entity or customer of
the Company, or for conflict of interest (other than
legitimate competition); or
(ii) At the expiration of a period of one year after
the Employee Optionee's death (but in no event later than the
Nonqualified Option Expiration Date) if the Employee
Optionee's employment is terminated by reason of his death. A
nonqualified option granted under Article II may be exercised
by the Employee Optionee's estate or by the person or persons
who acquire the right to exercise his option by bequest or
inheritance with respect to any or all of the shares remaining
subject to his option at the time of his death; or
(iii) Unless it is otherwise provided in the option
agreement or otherwise extended in the discretion of the
Committee in the event of the Employee Optionee's retirement,
at the expiration of a period of three years after the
Employee Optionee's employment is terminated because of
retirement (such that the Employee Optionee's age plus years
of service with the Company and its subsidiaries equals or
exceeds sixty-five) or disability (but in no event later than
the Nonqualified Option Expiration Date); or
(iv) At the expiration of a period of three months
after the Employee Optionee's employment is terminated (but in
no event later than the Nonqualified Option Expiration Date)
if the Employee Optionee's employment is terminated for any
reason other than his death, retirement, disability or the
reasons specified in Article II, Paragraph 3 (b)(2)(i).
(c) MANNER OF EXERCISE. In order to exercise a nonqualified option
granted under Article II, the person or persons entitled to exercise it shall
deliver to the Company payment in full for the shares being purchased, together
with any required withholding tax. The payment of the exercise price for each
option granted under Article II and any required withholding tax shall either be
in cash or through delivery to the Company of shares of Common Stock, or by any
combination of cash or shares; the value of each share of Common Stock delivered
shall be deemed to be equal to the per
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share price of the last sale of Common Stock on the trading day prior to the
date the option is exercised, based on the composite transactions in the Common
Stock as reported in The Wall Street Journal. If the Committee so requires, such
person or persons shall also deliver a written representation that all shares
being purchased are being acquired for investment and not with a view to, or for
resale in connection with, any distribution of such shares. An option agreement
may, in the discretion of the Committee, provide for a "cashless exercise" of a
nonqualified option by establishing procedures whereby the Employee Optionee, by
a properly executed written notice, directs (1) an immediate market sale or
margin loan respecting all or a part of the shares of Common Stock to which he
is entitled upon exercise pursuant to an extension of credit by the Company to
the Employee Optionee of the option price, (2) the delivery of the shares of
Common Stock from the Company directly to a brokerage firm and (3) the delivery
of the option price from sale or margin loan proceeds from the brokerage firm
directly to the Company. An option agreement may also, in the discretion of the
Committee, provide for the withholding of Federal, state or local income tax
upon exercise of a nonqualified option from any cash or stock remuneration (from
the Plan or otherwise) then or thereafter payable by the Company to the Employee
Optionee.
(d) OPTIONS NOT TRANSFERABLE. No nonqualified option granted under
Article II shall be transferable otherwise than by will or by the laws of
descent and distribution and, during the lifetime of the Employee Optionee to
whom any such option is granted, it shall be exercisable only by the Employee
Optionee. Any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of, or to subject to execution, attachment or similar process, any
nonqualified option granted under Article II, or any right thereunder, contrary
to the provisions hereof, shall be void and ineffective, shall give no right to
the purported transferee, and shall, at the sole discretion of the Committee,
result in forfeiture of the option with respect to the shares involved in such
attempt.
(e) ADJUSTMENT OF SHARES. In the event that at any time after the
effective date of the Plan the outstanding shares of Common Stock are changed
into or exchanged for a different number or kind of shares of the Company or
other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, or combination
of shares, the Committee shall make an appropriate and equitable adjustment in
the number and kind of shares subject to Article II (including shares as to
which all outstanding nonqualified options granted under Article II, or portions
thereof then unexercised, shall be exercisable), to the end that after such
event the shares subject to Article II of the Plan and each Employee Optionee's
proportionate interest shall be maintained as before the occurrence of such
event. Such adjustment in an outstanding nonqualified option granted under
Article II shall be made without change in the total price applicable to the
option or the unexercised portion of the option (except for any change in the
aggregate price resulting from rounding-off of share quantities or prices) and
with any necessary corresponding adjustment in exercise price per share. Any
such adjustment made by the Committee shall be final and binding upon all
Employee Optionees, the Company, and all other interested persons.
(f) LISTING AND REGISTRATION OF SHARES. Each nonqualified option
granted under Article II shall be subject to the requirement that if at any time
the Committee determines, in its discretion, that the listing, registration, or
qualification of the shares subject to such option under any securities exchange
or under any state or Federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the issue or purchase of shares thereunder, such option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained and the
same shall have been free of any conditions not acceptable to the Committee.
4. AMENDMENT. The Committee may, with the consent of the person or persons
entitled to exercise any outstanding nonqualified option granted under Article
II, amend such nonqualified option; provided, however, that any such amendment
shall be subject to shareholder approval when required in Article I, Paragraph
4. The Committee may at any time or from time to time, in its discretion, in the
case of any nonqualified option previously granted under Article II which is not
then immediately exercisable in full, accelerate the time or times at which such
option may be exercised to any earlier time or times. The Committee, in its
absolute discretion, may grant to holders of outstanding nonqualified options
granted under Article II, in exchange for the surrender and cancellation of such
options, new options having exercise prices lower (or higher) than the exercise
price provided in the options so surrendered and cancelled and containing such
other terms and conditions, in accordance with the terms of the Plan, as the
Committee may deem appropriate.
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5. OTHER PROVISIONS.
(a) The person or persons entitled to exercise, or who have exercised,
a nonqualified option granted under Article II shall not be entitled to any
rights as a stockholder of the Company with respect to any shares subject to
such option until he shall have become the holder of record of such shares.
(b) No nonqualified option granted under Article II shall be construed
as limiting any right which the Company or any subsidiary of the Company may
have to terminate at any time, with or without cause, the employment of any
person to whom such option has been granted.
(c) Notwithstanding any provision of the Plan or the terms of any
nonqualified option granted under Article II, the Company shall not be required
to issue any shares hereunder if such issuance would, in the judgment of the
Committee, constitute a violation of any state or Federal law or of the rules or
regulations of any governmental regulatory body.
ARTICLE III
INCENTIVE STOCK OPTIONS
1. ELIGIBLE EMPLOYEES. Key employees (including officers and directors who are
also key employees) of the Company and its subsidiaries (as defined in section
424 of the Code) shall be eligible to receive incentive stock options, within
the meaning of section 422(b) of the Code, under this Article III.
2. CALCULATION OF EXERCISE PRICE. The exercise price to be paid for each share
of Common Stock deliverable upon exercise of each incentive stock option granted
under Article III shall be equal to the fair market value per share of Common
Stock at the time of grant as determined by the Committee, based on the
composite transactions in the Common Stock as reported by The Wall Street
Journal, and shall be equal to the per share price of the last sale of Common
Stock on the trading day prior to the grant of such option; provided, however,
that in the case of an Employee Optionee who, at the time such option is
granted, owns more than 10% of the total combined voting power of all classes of
stock of the Company or any subsidiary corporation, within the meaning of
section 422(b)(6) of the Code, then the exercise price per share shall be at
least 110% of the fair market value per share of Common Stock at the time of
grant. The exercise price for each incentive stock option shall be subject to
adjustment as provided in Article III, Paragraph 3(e).
3. TERMS AND CONDITIONS OF OPTIONS. Incentive stock options granted under
Article III shall be in such form as the Committee may from time to time
approve. Options granted under Article III shall be subject to the following
terms and conditions and may contain such additional terms and conditions, not
inconsistent with Article III, as the Committee shall deem desirable:
(a) OPTION PERIOD AND CONDITIONS AND LIMITATIONS ON EXERCISE. Subject
to Article III, Paragraph 4, no incentive stock option granted under Article III
shall be exercisable with respect to any of the shares subject to such option
later than the date which is ten years after the date of grant; provided,
however, that in the case of an Employee Optionee who, at the time such option
is granted, owns more than 10% of the total combined voting power of all classes
of stock of the Company or any subsidiary corporation, within the meaning of
section 422(b)(6) of the Code, then such option shall not be exercisable with
respect to any of the shares subject to such option later than five years after
the date of grant. The date on which an incentive stock option ultimately
becomes unexercisable under the previous sentence is hereinafter referred to as
the "ISO EXPIRATION DATE. To the extent not prohibited by other provisions of
the Plan, each incentive stock option granted under Article III shall be
exercisable at such time or times as the Committee in its discretion may
determine at or prior to the time such option is granted (unless otherwise
extended by the Committee pursuant to Article III, Paragraph 3 (b)(2)(iii));
provided, however, that unless the Committee determines otherwise, each
incentive stock option granted under Article III shall be exercisable from time
to time, in whole or in part, subject to the dollar limitations set forth in
Article III, Paragraph 3(g), at any time prior to the ISO Expiration Date.
(b) TERMINATION OF EMPLOYMENT AND DEATH. For purposes of Article III
and each incentive stock option granted under Article III, an Employee
Optionee's employment shall be deemed to have terminated at the close of
business on the day preceding the first date on which he is no longer for any
reason whatsoever (including his death) employed by the Company or a subsidiary
of the Company. An Employee Optionee shall be considered to be in the employment
of the Company or a subsidiary of the Company as long as he remains an employee
of the Company or a subsidiary of the Company, whether active or on an
authorized leave of absence. Any question as to whether and when there has been
a termination of such employment, and the cause of such termination, shall be
determined by the Committee and its determination shall be final. If an Employee
Optionee's employment is terminated by any reason whatsoever
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(including his death), each incentive stock option granted to him and all of his
rights thereunder shall wholly and completely terminate:
(1) With respect to options not then exercisable, at the time
the Employee Optionee's employment is terminated; and
(2) With respect to options then exercisable:
(i) At the time the Employee Optionee's employment is
terminated if his employment is terminated because he is
discharged for fraud, theft or embezzlement committed against
the Company or a subsidiary, affiliated entity or customer of
the Company, or for conflict of interest (other than
legitimate competition); or
(ii) At the expiration of a period of one year after
the Employee Optionee's death (but in no event later than the
ISO Expiration Date) if the Employee Optionee's employment is
terminated by reason of his death. An incentive stock option
granted under Article III of the Plan may be exercised by the
Employee Optionee's estate or by the person or persons who
acquire the right to exercise his option by bequest or
inheritance with respect to any or all of the shares remaining
subject to his option at the time of his death; or
(iii) Unless it is otherwise provided in the option
agreement or otherwise extended in the discretion of the
Committee after the date which is three months after the
Employee Optionee's retirement, at the expiration of a period
of three years after the Employee Optionee's employment is
terminated because of retirement (such that the Employee
Optionee's age plus years of service with the Company and its
subsidiaries equals or exceeds sixty-five) or disability (but
in no event later than the ISO Expiration Date); or
(iv) At the expiration of a period of three months
after the Employee Optionee's employment is terminated (but in
no event later than the ISO Expiration Date) if the Employee
Optionee's employment is terminated for any other reason than
his death, retirement, disability or the reasons specified in
Article III, Paragraph 3 (b)(2)(i). In the event and to the
extent that an incentive stock option granted under Article
III is not exercised (i) within three months after the
Employee Optionee's employment is terminated because of
retirement or disability not within the meaning of section
22(e)(3) of the Code or (ii) within one year after the
Employee Optionee's employment is terminated because of
disability within the meaning of section 22(e)(3) of the Code,
such option shall be taxed as a nonqualified option and shall
be subject to the manner of exercise provisions described in
Article II, Paragraph 3(c).
(c) MANNER OF EXERCISE. In order to exercise an incentive stock option
granted under Article III, the person or persons entitled to exercise it shall
deliver to the Company payment in full for the shares being purchased. The
payment of the exercise price for each option granted under Article III shall
either be in cash or through delivery to the Company of shares of Common Stock,
or by any combination of cash or shares; the value of each share of Common Stock
delivered shall be deemed to be equal to the per share price of the last sale of
Common Stock on the trading day prior to the date the option is exercised, based
on the composite transactions in the Common Stock as reported in The Wall Street
Journal. If the Committee so requires, such person or persons shall also deliver
a written representation that all shares being purchased are being acquired for
investment and not with a view to, or for resale in connection with, any
distribution of such shares. An option agreement may, in the discretion of the
Committee, provide for a "cashless exercise" of an incentive stock option by
establishing procedures whereby the Employee Optionee, by a properly executed
written notice, directs (1) an immediate market sale or margin loan respecting
all or a part of the shares of Common Stock to which he is entitled upon
exercise pursuant to an extension of credit by the Company to the Employee
Optionee of the option price, (2) the delivery of the shares of Common Stock
from the Company directly to a brokerage firm and (3) the delivery of the option
price from sale or margin loan proceeds from the brokerage firm directly to the
Company. An option agreement may also, in the discretion of the Committee,
provide for the withholding of Federal, state or local income tax upon exercise
of an incentive stock option from any cash or stock remuneration (from the Plan
or otherwise) then or thereafter payable by the Company to the Employee
Optionee.
(d) OPTIONS NOT TRANSFERABLE. No incentive stock option granted under
Article III shall be transferable otherwise than by will or by the laws of
descent and distribution and, during the lifetime of the Employee
7
Optionee to whom any option is granted, it shall be exercisable only by such
Employee Optionee. Any attempt to transfer, assign, pledge, hypothecate or
otherwise dispose of, or to subject to execution, attachment or similar process,
any incentive stock option granted under Article III, or any right thereunder,
contrary to the provisions hereof, shall be void and ineffective, shall give no
right to the purported transferee, and shall, at the sole discretion of the
Committee, result in forfeiture of the option with respect to the shares
involved in such attempt.
(e) ADJUSTMENT OF SHARES. In the event that at any time after the
effective date of the Plan the outstanding shares of Common Stock are changed
into or exchanged for a different number or kind of shares of the Company or
other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, or combination
of shares, the Committee shall make an appropriate and equitable adjustment in
the number and kind of shares subject to Article III (including shares as to
which all outstanding incentive stock options granted under Article III, or
portions thereof then unexercised, shall be exercisable), to the end that after
such event the shares subject to Article III of the Plan and each Employee
Optionee's proportionate interest shall be maintained as before the occurrence
of such event. Such adjustment in an outstanding incentive stock option shall be
made without change in the total price applicable to the option or the
unexercised portion of the option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in exercise price per share. Any such
adjustment made by the Committee shall be final and binding upon all Employee
Optionees, the Company, and all other interested persons. Any adjustment of an
incentive stock option under this paragraph shall be made in such manner as not
to constitute a "modification" within the meaning of section 424(h)(3) of the
Code.
(f) LISTING AND REGISTRATION OF SHARES. Each incentive stock option
granted under Article III shall be subject to the requirement that if at any
time the Committee determines, in its discretion, that the listing,
registration, or qualification of the shares subject to such option upon any
securities exchange or under any state or Federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with, the issue or purchase of shares thereunder,
such option may not be exercised in whole or in part unless such listing,
registration qualification, consent or approval shall have been effected or
obtained and the same shall have been free of any conditions not acceptable to
the Committee.
(g) LIMITATION ON AMOUNT. Notwithstanding any other provision of the
Plan, the aggregate fair market value (determined as of the time the incentive
stock option is granted) of the Common Stock with respect to which incentive
stock options are exercisable for the first time by an Employee Optionee, under
all incentive stock option plans of the Company and its subsidiaries, during any
calendar year cannot exceed $100,000 as provided under section 422(d) of the
Code.
4. AMENDMENT. The Committee may, with the consent of the person or persons
entitled to exercise any outstanding incentive stock option granted under
Article III, amend such incentive stock option; provided, however, that any such
amendment shall be subject to shareholder approval when required in Article I,
Paragraph 4. Subject to Article III, Paragraph 3(g), the Committee may at any
time or from time to time, in its discretion, in the case of any incentive stock
option previously granted under Article III which is not then immediately
exercisable in full, accelerate the time or times at which such option may be
exercised to any earlier time or times.
5. OTHER PROVISIONS.
(a) The person or persons entitled to exercise, or who have exercised,
an incentive stock option granted under Article III shall not be entitled to any
rights as a stockholder of the Company with respect to any shares subject to
such option until he shall have become the holder of record of such shares.
(b) No incentive stock option granted under Article III shall be
construed as limiting any right which the Company or any subsidiary of the
Company may have to terminate at any time, with or without cause, the employment
of any person to whom such option has been granted.
(c) Notwithstanding any provision of the Plan or the terms of any
incentive stock option granted under Article III, the Company shall not be
required to issue any shares hereunder if such issuance would, in the judgment
of the Committee, constitute a violation of any state or Federal law or of the
rules or regulations of any governmental regulatory body.
8
(d) The Committee may require any person who exercises an incentive
stock option to give prompt notice to the Company of any disposition of shares
of Common Stock acquired upon exercise of an incentive stock option within one
year after the transfer of shares to such person.
ARTICLE IV
NON-EMPLOYEE DIRECTOR STOCK OPTIONS
1. ELIGIBLE PERSONS. Persons who are members of the Board of Directors of the
Company but are not employees of the Company or of its subsidiaries
("NON-EMPLOYEE DIRECTORS") shall be eligible to receive options under, and
solely under, this Article IV.
2. INITIAL AND ANNUAL GRANTING OF OPTIONS TO NON-EMPLOYEE DIRECTORS. Subject to
the limitation of the number of shares of Common Stock set forth in Article I,
Paragraph 2, (a) a nonqualified option to purchase 2,000 shares of Common Stock
is hereby granted to each Non-Employee Director who is elected or appointed to
the Board of Directors of the Company after the effective date of the Plan and
prior to the expiration of the Plan, effective on the date of his initial
election or appointment, if applicable (which date shall be the date of grant
for purposes hereof), and (b) a nonqualified option to purchase 1,000 shares of
Common Stock is hereby granted, effective the fourth Wednesday of October of
each year from and after the effective date of the Plan until the expiration of
the Plan, to each person who is a Non-Employee Director on each such date (which
date shall be the date of grant for purposes hereof). The Non-Employee Director
grants set forth in this Article IV, Paragraph 2 are provided to replace and
supersede, and not to supplement, the Non-Employee Director grants provided in
Article IV, Paragraph 2 and Paragraph 3 of the Company's 1987 Stock Option Plan.
3. ADDITIONAL GRANTING OF OPTIONS TO NON-EMPLOYEE DIRECTORS. Subject to the
limitation of the number of shares of Common Stock set forth in Article I,
Paragraph 2, Non-Employee Directors shall, in the discretion of the Committee,
be eligible to receive additional nonqualified options under this Article IV in
lieu of directors fees and/or retainers, in accordance with such terms as may be
approved by the Committee.
4. CALCULATION OF EXERCISE PRICE. The exercise price to be paid for each share
of Common Stock deliverable upon exercise of each option granted under Article
IV shall be equal to the fair market value per share of Common Stock at the time
of grant as determined by the Committee, based on the composite transactions in
the Common Stock as reported by The Wall Street Journal, and shall be equal to
the per share price of the last sale of Common Stock on the trading day prior to
the grant of such option, provided, that the exercise price of each option
granted under Article IV, Paragraph 3 may, in the discretion of the Committee,
be discounted from fair market value. The exercise price for each option granted
under Article IV shall be subject to adjustment as provided in Article IV,
Paragraph 5(e).
5. TERMS AND CONDITIONS OF OPTIONS. Subject to the provisions of this Article
IV, Paragraph 5, options granted under Article IV shall be in such form as the
Committee may from time to time approve. Options granted under Article IV shall
be subject to the following terms and conditions:
(a) OPTION PERIOD AND CONDITIONS AND LIMITATIONS ON EXERCISE. Each
option granted under Article IV shall be exercisable from time to time, in whole
or in part, at any time after one year from the date of grant and prior to the
date which is seven years after the date of grant (the "OPTION EXPIRATION
DATE").
(b) TERMINATION OF DIRECTORSHIP AND DEATH. For purposes of Article IV
and each option granted under Article IV, a Non-Employee Director's directorship
shall be deemed to have terminated at the close of business on the day preceding
the first date on which he ceases to be a member of the Board of Directors of
the Company for any reason whatsoever (including his death). If a Non-Employee
Director's directorship is terminated for any reason whatsoever (including his
death), each option granted to him under Article IV and all of his rights
thereunder shall wholly and completely terminate:
(1) With respect to each option granted within the one-year
period preceding such termination, at the time the Non-Employee
Director's directorship is terminated; and
(2) With respect to each option granted prior to the one-year
period preceding such termination:
9
(i) At the time the Non-Employee Director's
directorship is terminated if his directorship is terminated
as a result of his removal from the Board of Directors for
cause (other than disability or in accordance with the
provision of the Company's Bylaws regarding automatic
termination of directors' terms of office); or
(ii) At the expiration of a period of one year after
the Non-Employee Director's death (but in no event later than
the Option Expiration Date) if the Non-Employee Director's
directorship is terminated by reason of his death. An option
granted under Article IV may be exercised by the Non-Employee
Director's estate or by the person or persons who acquire the
right to exercise his option by bequest or inheritance with
respect to any or all of the shares remaining subject to his
option at the time of his death; or
(iii) At the expiration of a period of three years
after the Non-Employee Director's directorship is terminated
as a result of such person's resignation or removal from the
Board of Directors of the Company because of disability or in
accordance with the provisions of the Company's Bylaws
regarding automatic termination of directors' terms of office
(but in no event later than the Option Expiration Date); or
(iv) At the expiration of a period of three months
after the Non-Employee Director's directorship is terminated
(but in no event later than the Option Expiration Date) if the
Non-Employee Director's directorship is terminated for any
reason other than the reasons specified in Article IV,
Paragraphs 5 (b)(2)(i) through 5 (b)(2)(iii).
(c) MANNER OF EXERCISE. In order to exercise an option granted under
Article IV, the person or persons entitled to exercise it shall deliver to the
Company payment in full for the shares being purchased, together with any
required withholding tax. The payment of the exercise price for each option
granted under Article IV and any required withholding tax shall either be in
cash or through delivery to the Company of shares of Common Stock, or by any
combination of cash or shares; the value of each share of Common Stock delivered
shall be deemed to be equal to the per share price of the last sale of Common
Stock on the trading day prior to the date the option is exercised, based on the
composite transactions in the Common Stock as reported in The Wall Street
Journal. If the Committee so requires, such person or persons shall also deliver
a written representation that all shares being purchased are being acquired for
investment and not with a view to, or for resale in connection with, any
distribution of such shares. An option agreement may, in the discretion of the
Committee, provide for a "cashless exercise" of a nonqualified option by
establishing procedures whereby the Non-Employee Director, by a properly
executed written notice, directs (1) an immediate market sale or margin loan
respecting all or a part of the shares of Common Stock to which he is entitled
upon exercise pursuant to an extension of credit by the Company to the
Non-Employee Director of the option price, (2) the delivery of the shares of
Common Stock from the Company directly to a brokerage firm and (3) the delivery
of the option price from sale or margin loan proceeds from the brokerage firm
directly to the Company. An option agreement may also, in the discretion of the
Committee, provide for the withholding of Federal, state or local income tax
upon exercise of a nonqualified option from any cash or stock remuneration (from
the Plan or otherwise) then or thereafter payable by the Company to the
Non-Employee Director.
(d) OPTIONS NOT TRANSFERABLE. No option granted under Article IV shall
be transferable otherwise than by will or by the laws of descent and
distribution and, during the lifetime of the Non-Employee Director to whom any
such option is granted, it shall be exercisable only by such Non-Employee
Director. Any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of, or to subject to execution, attachment or similar process, any
option granted under Article IV, or any right thereunder, contrary to the
provisions hereof, shall be void and ineffective, shall give no right to the
purported transferee, and shall, at the sole discretion of the Committee, result
in forfeiture of the option with respect to the shares involved in such attempt.
(e) ADJUSTMENT OF SHARES. In the event that at any time after the
effective date of the Plan the outstanding shares of Common Stock are changed
into or exchanged for a different number or kind of shares of the Company or
other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split, stock dividend, or combination
of shares, the Committee shall make an appropriate and equitable adjustment in
the number and kind of shares subject to Article IV (including shares as to
which all outstanding options granted under Article IV, or portions thereof then
unexercised, shall be exercisable), to the end that after such event the shares
subject to Article IV of the Plan and each Non-Employee Director's proportionate
interest shall be maintained as before the occurrence of
10
such event. Such adjustment in an outstanding option granted under Article IV
shall be made without change in the total price applicable to the option or the
unexercised portion of the option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in exercise price per share. Any such
adjustment made by the Committee shall be final and binding upon all
Non-Employee Directors, the Company, and all other interested persons.
(f) LISTING AND REGISTRATION OF SHARES. Each option granted under
Article IV shall be subject to the requirement that if at any time the Committee
determines, in its discretion, that the listing, registration, or qualification
of the shares subject to such option under any securities exchange or under any
state or Federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
issue or purchase of shares thereunder, such option may not be exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained and the same shall have been free
of any conditions not acceptable to the Committee.
6. AMENDMENT. The Committee may, with the consent of the person or persons
entitled to exercise any outstanding nonqualified option granted under Article
IV, amend such nonqualified option; provided, however, that any such amendment
shall be subject to shareholder approval when required in Article I, Paragraph
4.
7. OTHER PROVISIONS.
(a) The person or persons entitled to exercise, or who have exercised,
an option granted under Article IV shall not be entitled to any rights as a
stockholder of the Company with respect to any shares subject to such option
until he shall have become the holder of record of such shares.
(b) No option granted under Article IV shall be construed as limiting
any right which either the stockholders of the Company or the Board of Directors
of the Company may have to remove at any time, with or without cause, any person
to whom such option has been granted from the Board of Directors of the Company.
(c) Notwithstanding any provision of the Plan or the terms of any
option granted under Article IV, the Company shall not be required to issue any
shares hereunder if such issuance would, in the judgment of the Committee,
constitute a violation of any state or Federal law or of the rules or
regulations of any governmental regulatory body.
(d) Notwithstanding any provision of the Plan, the Committee may not
exercise any discretion with respect to this Article IV which would be
inconsistent with the intent that (i) the Plan meet the requirements of Rule
16b-3 promulgated by the Securities Exchange Commission under the Act and (ii)
any Non-Employee Director who is eligible to receive a grant or to whom a grant
is made pursuant this Article IV will not for such reason cease to be a
"disinterested person" within the meaning of such Rule 16b-3 with respect to the
Plan and other stock related plans of the Company or any of its affiliates.
Specifically, in the event of a Corporate Change, as defined in Article I,
Paragraph 11, the Committee may, with respect to options under this Article IV,
only exercise the alternative in clause (2) of Article I, Paragraph 11, or such
other alternatives specified in Article I, Paragraph 11 as would not, in the
opinion of legal counsel of the Company, violate the limitations contained in
the immediately preceding sentence.
11
AMENDMENT NO. 1997-1 TO THE
1993 STOCK OPTION PLAN
This Amendment No. 1997-1 is made to the Baker Hughes Incorporated 1993
Stock Option Plan ("the Plan"). Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Plan.
WHEREAS, Baker Hughes Incorporated (the "Company") has determined that
it is in its best interest and that of its stockholders to amend the Plan as set
forth herein;
NOW, THEREFORE, the Plan is amended as follows:
1. Article I, Paragraph 11 of the Plan is amended in its entirety to read as
follows:
11. Change in Control.
(a) Notwithstanding any provision of the Plan to the contrary, in the event of
an occurrence of a Change in Control, all options granted pursuant to this Plan
shall become fully vested and exercisable.
(b) Notwithstanding any provision of the Plan to the contrary, all outstanding
options held by an Employee Optionee shall become fully vested and exercisable
as of the effective date of termination of such Employee Optionee's employment
if (i) such Employee Optionee's employment is terminated by the Company without
Cause prior to a Change in Control (whether or not a Change in Control ever
occurs) and such termination was at the request or direction of a Person who has
entered into an agreement with the Company the consummation of which would
constitute a Change in Control, (ii) such Employee Optionee terminates his or
her employment for Good Reason prior to a Change in Control (whether or not a
Change in Control ever occurs) and the circumstance or event which constitutes
Good Reason occurs at the request or direction of the Person described in clause
(i), or (iii) such Employee Optionee's employment is terminated by the Company
without Cause or by the Employee Optionee for Good Reason and such termination
or the circumstance or event which constitutes Good Reason is otherwise in
connection with or in anticipation of a Change in Control (whether or not a
Change in Control ever occurs).
(c) "Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated under
Section 12 of the Act."
(d) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
promulgated under the Act."
(e) "Cause" for termination by the Company of the eligible employee's employment
shall mean (i) the willful and continued failure by the eligible employee to
substantially perform the eligible employee's duties with the Company (other
than any such failure resulting from the eligible employee's incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance of a notice of termination for Good Reason by the eligible employee)
after a written demand for substantial performance is delivered to the eligible
employee by the CIC Committee, which demand specifically identifies the manner
in which the CIC Committee believes that the eligible employee has not
substantially performed the eligible employee's duties, or (ii) the willful
engaging by the eligible employee in conduct which is demonstrably and
materially injurious to the Company or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no act,
or failure to act, on the eligible employee's part shall be deemed "willful"
unless done, or omitted to be done, by the eligible employee not in good faith
and without reasonable belief that the eligible employee's act, or failure to
act, was in the best interest of the Company and (y) in the event of a dispute
concerning the application of this provision, no claim by the Company that Cause
exists shall be given effect unless the Company establishes to the CIC Committee
by clear and convincing evidence that Cause exists.
(f) A "Change in Control" shall be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have occurred:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its affiliates) representing 20% or more of the combined voting power
of the Company's then outstanding securities, excluding any Person who becomes
such a Beneficial Owner in connection with a transaction described in clause (a)
of paragraph (iii) below; or
12
(ii) the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, on the date
hereof, constitute the Board of Directors of the Company and any new director
(other than a director whose initial assumption of office is in connection with
an actual or threatened election contest relating to the election of directors
of the Company) whose appointment or election by the Board of Directors of the
Company or nomination for election by the Company's stockholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or recommended;
or
(iii) there is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other corporation,
other than (a) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any
subsidiary of the Company, at least 65% of the combined voting power of the
securities of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (b) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities acquired directly
from the Company or its Affiliates other than in connection with the acquisition
by the Company or its Affiliates of a business) representing 20% or more of the
combined voting power of the Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated an agreement
for the sale or disposition by the Company of all or substantially all of the
Company's assets, other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at least 65% of the
combined voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as their
ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred by virtue of the consummation of any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
(f) "CIC Committee" shall mean (i) the individuals (not fewer than three in
number) who, on the date six months before a Change in Control, constitute the
Compensation Committee of the Board of Directors of the Company, plus (ii) in
the event that fewer than three individuals are available from the group
specified in clause (i) above for any reason, such individuals as may be
appointed by the individual or individuals so available (including for this
purpose any individual or individuals previously so appointed under this clause
(ii)); provided, however, that the maximum number of individuals constituting
the CIC Committee shall not exceed six (6).
(g) "Good Reason" for termination by the eligible employee of the eligible
employee's employment shall mean the occurrence (without the eligible employee's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clauses (iii)(b) and (c) of the
first sentence of this Paragraph 5 (treating all references in paragraphs (i)
through (vii) below to a "Change in Control" as references to a "Potential
Change in Control"), of any one of the following acts by the Company, or
failures by the Company to act, unless, in the case of any act or failure to act
described in paragraph (i), (v), (vi) or (vii) below, such act or failure to act
is corrected prior to the effective date of the eligible employee's termination
for Good Reason:
(1) the assignment to the eligible employee of any duties inconsistent
with the status of the eligible employee's position with the Company or a
substantial adverse alteration in the nature or status of the eligible
employee's responsibilities from those in effect immediately prior to the Change
in Control;
(2) a reduction by the Company in the eligible employee's annual base
salary as in effect on the date hereof or as
13
the same may be increased from time to time except for across-the-board salary
reductions similarly affecting all individuals having a similar level of
authority and responsibility with the Company and all individuals having a
similar level of authority and responsibility with any Person in control of the
Company;
(3) the relocation of the eligible employee's principal place of
employment to a location more than 50 miles from the eligible employee's
principal place of employment immediately prior to the Change in Control or the
Company's requiring the eligible employee to be based anywhere other than such
principal place of employment (or permitted relocation thereof) except for
required travel on the Company's business to an extent substantially consistent
with the eligible employee's present business travel obligations;
(4) the failure by the Company to pay to the eligible employee any
portion of the eligible employee's current compensation except pursuant to an
across-the-board compensation deferral similarly affecting all individuals
having a similar level of authority and responsibility with the Company and all
individuals having a similar level of authority and responsibility with any
Person in control of the Company, or to pay to the eligible employee any portion
of an installment of deferred compensation under any deferred compensation
program of the Company, within seven (7) days of the date such compensation is
due;
(5) the failure by the Company to continue in effect any compensation
plan in which the eligible employee participates immediately prior to the Change
in Control which is material to the eligible employee's total compensation,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the failure by the
Company to continue the eligible employee's participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable, both
in terms of the amount or timing of payment of benefits provided and the level
of the eligible employee's participation relative to other participants, as
existed immediately prior to the Change in Control;
(6) the failure by the Company to continue to provide the eligible
employee with benefits substantially similar to those enjoyed by the eligible
employee under any of the Company's pension, savings, life insurance, medical,
health and accident, or disability plans in which the eligible employee was
participating immediately prior to the Change in Control (except for across the
board changes similarly affecting all individuals having a similar level of
authority and responsibility with the Company and all individuals having a
similar level of authority and responsibility with any Person in control of the
Company), the taking of any other action by the Company which would directly or
indirectly materially reduce any of such benefits or deprive the eligible
employee of any material fringe benefit or perquisite enjoyed by the eligible
employee at the time of the Change in Control, or the failure by the Company to
provide the eligible employee with the number of paid vacation days to which the
eligible employee is entitled on the basis of years of service with the Company
in accordance with the Company's normal vacation policy in effect at the time of
the Change in Control; or
(7) if the eligible employee is party to an individual employment,
severance or other similar agreement with the Company, any purported termination
of the eligible employee's employment which is not effected pursuant to the
notice of termination and other procedures specified therein.
The eligible employee's right to terminate the eligible employee's employment
for Good Reason shall not be affected by the eligible employee's incapacity due
to physical or mental illness. The eligible employee's continued employment
shall not constitute consent to, or a waiver of rights with respect to, any act
or failure to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of Good Reason, any
claim by the eligible employee that Good Reason exists shall be presumed to be
correct unless the Company establishes to the CIC Committee by clear and
convincing evidence that Good Reason does not exist.
(h) "Person" shall have the meaning given in Section 3(a)(9) of the Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such term
shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or any of its Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company.
(i) A "Potential Change in Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have occurred:
14
(1) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(2) the Company or any Person publicly announces an intention to take
or to consider taking actions which, if consummated, would constitute a Change
in Control;
(3) any Person becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 15% or more of either the then
outstanding shares of common stock of the Company or the combined voting power
of the Company's then outstanding securities (not including in the securities
Beneficially Owned by such Person any securities acquired directly from the
Company or its affiliates); or
(4) the Board adopts a resolution to the effect that, for purposes of
this Plan, a Potential Change in Control has occurred.
2. Article II, Paragraph 3(b)(2)(i) of the Plan is amended by inserting,
immediately following the phrase "(other than legitimate competition)", the
following:
, if such termination of employment occurs prior to a Change in Control or after
the second anniversary of a Change in Control, and thirty days following such
termination of employment if such termination occurs within two years following
a Change in Control (in each case, as such term is defined in Article I,
Paragraph 11 hereof)
3. Article III, Paragraph 3(b)(2)(i) of the Plan is amended by inserting,
immediately following the phrase "(other than legitimate competition)", the
following:
, if such termination of employment occurs prior to a Change in Control or after
the second anniversary of a Change in Control, and thirty days following such
termination of employment if such termination occurs within two years following
a Change in Control (in each case, as such term is defined in Article I,
Paragraph 11 hereof)
4. Article IV, Paragraph 2 of the Plan is amended by adding the following new
sentence at the end thereof:
Notwithstanding any provision of this Plan to the contrary, no options shall be
granted under this Article IV, Paragraph 2 after October 22, 1997.
5. Article IV, Paragraph 5(b)(1) of the Plan is amended in its entirety to read
as follows:
(1) With respect to each option granted within the one-year period preceding
such termination of service:
(i) At the time the Non-Employee Director's directorship is terminated, if such
termination of service occurs prior to a Change in Control; or
(ii) At the time determined under Section 5(b)(2), if such termination of
service occurs following or in connection with a Change in Control.
6. Article IV, Paragraph 5(b)(2)(i) of the Plan is amended by deleting the ":"
therein and inserting in lieu thereof the following:
, if such termination of service occurs prior to a Change in Control or after
the second anniversary of a Change in Control, and thirty days following such
termination of service if such termination occurs within two years following a
Change in Control (in each case, as such term is defined in Article I, Paragraph
11 hereof);
The effective date of this Amendment No. 1997-1 shall be July
23, 1997; provided, however, that, in the event that (A) the Company is party to
a transaction which is otherwise intended to qualify for "pooling of interests"
15
accounting treatment, (B) such transaction constitutes a Change in Control
within the meaning of the Plan and (C) individuals who satisfy the requirements
in clauses (i) and (ii) below constitute at least two-thirds (2/3) of the number
of directors of the entity surviving such transaction or any parent thereof:
individuals who (i) immediately prior to such transaction constitute the Board
of Directors of the Company and (ii) on the date hereof constitute the Board of
Directors of the Company and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of the Company) whose
appointment or election by the Board of Directors of the Company or nomination
for election by the Company's stockholders was approved or recommended, by a
vote of at least two-thirds (2/3) of the directors then still in office who
either were directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or recommended then (a) this
Amendment No. 1997-1 shall, to the extent practicable, be interpreted so as to
permit such accounting treatment, and (b) to the extent that the application of
clause (a) of this sentence does not preserve the availability of such
accounting treatment, then, to the extent that any provision or combination of
provisions of this Amendment No. 1997-1 disqualifies the transaction as a
"pooling" transaction (including, if applicable, this entire Amendment No.
1997-1), the Board of Directors of the Company shall amend such provision or
provisions if and to the extent necessary (including declaring such provision or
provisions to be null and void as of the date hereof) so that such transaction
may be accounted for as a "pooling of interests." All determinations with
respect to this paragraph shall be made by the Company, based upon the advice of
the accounting firm whose opinion with respect to "pooling of interests" is
required as a condition to the consummation of such transaction. Except as
herein modified, the Plan shall remain in full force and effect.
BAKER HUGHES INCORPORATED
By:
--------------------------------
Title:
16
AMENDMENT NO. 1999-1 TO THE
1993 STOCK OPTION PLAN
This Amendment No. 1999-1 is made to the Baker Hughes Incorporated 1993
Stock Option Plan ("the Plan"). Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Plan.
WHEREAS, Baker Hughes Incorporated (the "Company") has determined that
it is in its best interest and that of its stockholders to amend the Plan as set
forth herein;
NOW, THEREFORE, the Plan is amended as follows:
1. Article I, Paragraphs 11(a), (b) and (f) of the Plan are amended in their
entirety to read as follows:
"11. Change in Control.
(a) Notwithstanding any provision of the Plan to the contrary,
in the event of an occurrence of a Change in Control other than an
event described only in clause (3) of Paragraph 11(f) of the Plan, all
options granted pursuant to this Plan shall become fully vested and
exercisable.
(b) Notwithstanding any provision of the Plan to the contrary,
all outstanding options held by an Employee Optionee shall become fully
vested and exercisable as of the effective date of termination of such
Employee Optionee's employment if (i) such Employee Optionee's
employment is terminated by the Company without Cause prior to a Change
in Control (whether or not a Change in Control ever occurs) and such
termination was at the request or direction of a Person who has entered
into an agreement with the Company the consummation of which would
constitute a Change in Control, (ii) such Employee Optionee terminates
his or her employment for Good Reason prior to a Change in Control
(whether or not a Change in Control ever occurs) and the circumstance
or event which constitutes Good Reason occurs at the request or
direction of the Person described in clause (i), (iii) such Employee
Optionee's employment is terminated by the Company without Cause or by
the Employee Optionee for Good Reason and such termination or the
circumstance or event which constitutes Good Reason is otherwise in
connection with or in anticipation of a Change in Control (whether or
not a Change in Control ever occurs) or (iv) such Employee Optionee's
employment is terminated by the Company without Cause or by the
Employee Optionee for Good Reason, in either case within 2 years
following the occurrence of a Change in Control described in clause (3)
of Paragraph 11(f) of the Plan.
(f) A "Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall have
occurred:
(1) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not
including in the securities beneficially owned by such Person
any securities acquired directly from the Company or its
affiliates) representing 20% or more of the combined voting
power of the Company's then outstanding securities, excluding
any Person who becomes such a Beneficial Owner in connection
with a transaction described in clause (i) of paragraph (3)
below; or
(2) the following individuals cease for any reason to
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board of
Directors of the Company and any new director (other than a
director whose initial assumption of office is in connection
with an actual or threatened election contest relating to the
election of directors of the Company) whose appointment or
election by the Board of Directors of the Company or
nomination for election by the Company's stockholders was
approved or recommended by a vote of at least two-thirds (2/3)
of the directors then still in office who either were
directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or
recommended; or
(3) there is consummated a merger or consolidation of
the Company or any direct or indirect subsidiary of the
Company with any other corporation, other than (i) a merger or
consolidation which would result in the voting securities of
the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity or any parent thereof), in combination
with the ownership of any trustee
17
or other fiduciary holding securities under an employee
benefit plan of the Company or any subsidiary of the Company,
at least 65% of the combined voting power of the securities of
the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including in
the securities Beneficially Owned by such Person any
securities acquired directly from the Company or its
Affiliates other than in connection with the acquisition by
the Company or its Affiliates of a business) representing 20%
or more of the combined voting power of the Company's then
outstanding securities; or
(4) there is consummated a merger or consolidation of
the Company or any direct or indirect subsidiary of the
Company with any other corporation, other than a merger or
consolidation immediately following which the individuals who
comprise the Board immediately prior thereto constitute at
least a majority of the board of directors of the Company, the
entity surviving such merger or any parent thereof (or a
majority plus one member where such board comprises an odd
number of members); or
(5) the stockholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or
substantially all of the Company's assets to an entity, at
least 65% of the combined voting power of the voting
securities of which are owned by stockholders of the Company
in substantially the same proportions as their ownership of
the Company immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not
be deemed to have occurred by virtue of the consummation of any
transaction or series of integrated transactions immediately following
which the record holders of the common stock of the Company immediately
prior to such transaction or series of transactions continue to have
substantially the same proportionate ownership in an entity which owns
all or substantially all of the assets of the Company immediately
following such transaction or series of transactions."
2. Article II, Paragraph 3(b)(2)(i) of the Plan is amended by inserting the
phrase "(but in no event later than the Nonqualified Option Expiration Date)"
after the second appearance of the phrase "termination of employment" therein.
3. Article II, Paragraph 3(b)(2)(iv) of the Plan is amended in its entirety to
read as follows:
"At the expiration of a period of three months after the
Employee Optionee's employment is terminated (but in no event later
than the Nonqualified Option Expiration Date) if the Employee
Optionee's employment is terminated for any reason other than his
death, retirement, disability or the reasons specified in this Article
II, Paragraph 3(b)(2)(i), if such termination of employment occurs
prior to a Change in Control or after the second anniversary of a
Change in Control, and two years following such termination of
employment (but in no event later than the Nonqualified Option
Expiration Date) if such termination is either by the Company without
Cause or by the Employee Optionee for Good Reason and, in either case,
occurs within two years following a Change in Control (in each case, as
such term is defined in Article I, Paragraph 11(f) hereof)."
4. Article III, Paragraph 3(b)(2)(i) of the Plan is amended by inserting the
phrase "(but in no event later than the ISO Expiration Date)" after the second
appearance of the phrase "termination of employment" therein".
5. Article III, Paragraph 3(b)(2)(iv) of the Plan is amended in its entirety to
read as follows:
"At the expiration of a period of three months after the
Employee Optionee's employment is terminated (but in no event later
than the ISO Expiration Date) if the Employee Optionee's employment is
terminated for any reason other than his death, retirement, disability
or the reasons specified in this Article III, Paragraph 3(b)(2)(i), if
such termination of employment occurs prior to a Change in Control or
after the second anniversary of a Change in Control, and two years
following such termination of employment (but in no event later than
the ISO Expiration Date) if such termination is either by the Company
without Cause or by the Employee Optionee for Good Reason and, in
either case, occurs within two years following a Change in Control (in
each case, as such term is defined in Article I, Paragraph 11(f)
hereof)."
18
6. Article IV, Paragraph 5(b)(2)(i) of the Plan is amended by inserting the
phrase "(but in no event later than the Option Expiration Date)" after the
second appearance of the phrase "termination of service" therein.
7. Article IV, Paragraph 5(b)(2)(iv) of the Plan is amended in its entirety to
read as follows:
"At the expiration of a period of three months after the
Non-Employee Director's directorship is terminated (but in no event
later than the Option Expiration Date) if the Non-Employee Director's
directorship is terminated for any reason other than the reasons
specified in Article IV, Paragraphs 5(b)(2)(i) through 5(b)(2)(iii), if
such termination of directorship occurs prior to a Change in Control or
after the second anniversary of a Change in Control, and two years
following such termination of directorship (but in no event later than
the Option Expiration Date) if such termination occurs within two years
following a Change in Control (in each case, as such term is defined in
Article I, Paragraph 11(f) hereof)."
The effective date of this Amendment No. 1999-1 shall be January 27,
1999; provided, however, that, in the event that (A) the Company is party to a
transaction which is otherwise intended to qualify for "pooling of interests"
accounting treatment, (B) such transaction constitutes a Change in Control
within the meaning of the Plan and (C) individuals who satisfy the requirements
in clauses (i) and (ii) below constitute at least two-thirds (2/3) of the number
of directors of the entity surviving such transaction or any parent thereof:
individuals who (i) immediately prior to such transaction constitute the Board
of Directors of the Company and (ii) on the date hereof constitute the Board of
Directors of the Company and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened
election contest relating to the election of directors of the Company) whose
appointment or election by the Board of Directors of the Company or nomination
for election by the Company's stockholders was approved or recommended, by a
vote of at least two-thirds (2/3) of the directors then still in office who
either were directors on the date hereof or whose appointment, election or
nomination for election was previously so approved or recommended then (a) this
Amendment No. 1999-1 shall, to the extent practicable, be interpreted so as to
permit such accounting treatment, and (b) to the extent that the application of
clause (a) of this sentence does not preserve the availability of such
accounting treatment, then, to the extent that any provision or combination of
provisions of this Amendment No. 1999-1 disqualifies the transaction as a
"pooling" transaction (including, if applicable, this entire Amendment No.
1999-1), the Board of Directors of the Company shall amend such provision or
provisions if and to the extent necessary (including declaring such provision or
provisions to be null and void as of the date hereof) so that such transaction
may be accounted for as a "pooling of interests." All determinations with
respect to this paragraph shall be made by the Company, based upon the advice of
the accounting firm whose opinion with respect to "pooling of interests" is
required as a condition to the consummation of such transaction. Except as
herein modified, the Plan shall remain in full force and effect.
BAKER HUGHES INCORPORATED
By:
--------------------------------
Name: G.S. Finley
Title: Senior Vice President
and Chief Administrative Officer
19