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<SEC-DOCUMENT>0000950129-97-005146.txt : 19971209
<SEC-HEADER>0000950129-97-005146.hdr.sgml : 19971209
ACCESSION NUMBER: 0000950129-97-005146
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 30
CONFORMED PERIOD OF REPORT: 19970930
FILED AS OF DATE: 19971208
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: BAKER HUGHES INC
CENTRAL INDEX KEY: 0000808362
STANDARD INDUSTRIAL CLASSIFICATION: OIL & GAS FILED MACHINERY & EQUIPMENT [3533]
IRS NUMBER: 760207995
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0930
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 001-09397
FILM NUMBER: 97734154
BUSINESS ADDRESS:
STREET 1: 3900 ESSEX LANE
CITY: HOUSTON
STATE: TX
ZIP: 77027
BUSINESS PHONE: 7134398600
MAIL ADDRESS:
STREET 1: P O BOX 4740
CITY: HOUSTON
STATE: TX
ZIP: 77210-4740
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<DESCRIPTION>BAKER HUGHES - DATED 09/30/97
<TEXT>
<PAGE> 1
================================================================================
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------
COMMISSION FILE NUMBER 1-9397
------------------
BAKER HUGHES INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-0207995
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
3900 ESSEX LANE, HOUSTON, TEXAS 77027-5177
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713)439-8600
------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
PACIFIC EXCHANGE
SWISS EXCHANGE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceeding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
------------------
At December 3, 1997, the registrant had outstanding 169,318,406 shares of
Common Stock, $1 par value. The aggregate market value of the Common Stock on
such date (based on the closing price on the New York Stock Exchange) held by
nonaffiliates was approximately $7,362,257,083.
------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Stockholders for 1997 are
incorporated by reference into Parts I and II.
Portions of Registrant's 1997 Proxy Statement for the Annual Meeting of
Stockholders to be held January 28, 1998 are incorporated by reference into
Part III.
================================================================================
<PAGE> 2
PART I
ITEM 1. BUSINESS
The Company operates in three industry segments, oilfield, chemicals
and process equipment. In addition to these industry segments, the Company
manufactures and sells other products and provides services to industries not
related to either the petroleum, specialty chemical or continuous process
industries. Certain of the Company's operations are conducted through joint
ventures, partnerships or alliances.
The Company is a Delaware corporation that was formed in connection
with the combination of Baker International Corporation ("Baker") and Hughes
Tool Company ("Hughes") consummated on April 3, 1987 (the "Combination"). The
shares of each of Baker and Hughes were publicly traded and registered with the
Securities and Exchange Commission for more than five years. As used herein,
the "Company" refers to Baker Hughes Incorporated and its subsidiaries, unless
the context clearly indicates otherwise.
For additional industry segment information for each of the three
years in the three-year period ended September 30, 1997, see Note 10 of Notes
to Consolidated Financial Statements which Notes are incorporated herein by
reference in Part II, Item 8 ("Notes to Consolidated Financial Statements").
OILFIELD
The Company is a leading provider of downhole tool technologies,
products and services for the worldwide oilfield service industry, which are
critical to drilling, completing and producing oil and gas wells.
The Company manufactures and markets a broad range of roller cutter
bits and fixed cutter diamond bits, ranging upward from 3-3/4 inches in
diameter, which are designed for drilling in specific types of rock formations.
The Company believes that it is the leading worldwide manufacturer of bits and
that its principal competitors in this area are Smith International, Inc.
("Smith"), the Security Division of Dresser Industries, Inc. ("Dresser") and
Reed Tool Company and Hycalog, each operating units of Camco International Inc.
("Camco").
The Company also produces and markets drilling fluids (muds) for oil
and gas well drilling, as well as chemical additives and specialty chemicals,
and provides technical services in connection with their formulation and use.
Drilling fluids, which are usually barite and bentonite combined with other
chemicals in a water, chemical or oil base, are used to clean the bottom of a
hole by removing cuttings and transporting them to the surface, to cool the bit
and drill string, to control formation pressures and to seal porous well
formations. The Company also furnishes on-site, around-the-clock laboratory
analysis and examination of circulated and recovered drilling fluids and
recovered drill cuttings to detect the presence of hydrocarbons and identify
the formations penetrated by the drill bit. The Company's principal competitors
with regard to these products and services are M-I Drilling Fluids, which is
jointly owned by Halliburton Company ("Halliburton") and Smith, and Baroid
Corporation, a subsidiary of Dresser.
<PAGE> 3
The Company believes that it is a leading supplier of directional and
horizontal drilling services, downhole motors, coring services, subsurface
surveying and measurement-while-drilling services to the oil and gas industry.
The Company's specialized positive displacement downhole motors help operators
to steer wells into pay zones for conventional directional drilling and short,
medium and long-radius horizontal drilling. A full range of
measurement-while-drilling systems provided by the Company use mud-pulse
telemetry to deliver real-time downhole information on the drilling process and
the reservoir. The systems are available for every application, from
directional-only service through wireline-replacement and real-time logging.
With regard to these products and services, the Company competes principally
with Halliburton Energy Services, an operating unit of Halliburton, Sperry-Sun
Drilling Services, a subsidiary of Dresser, and Anadrill, a subsidiary of
Schlumberger Ltd. ("Schlumberger").
After oil and gas wells are drilled, they must be completed and
equipped using production tools, serviced to achieve safety and long-term
productivity, protected against pressure and corrosion damage and stimulated or
repaired during their productive lives. The Company provides a broad range of
production tools and oilfield services to meet many of these needs.
Packers, a major product of the Company, are used to seal the space
between the production tubing and the casing to protect the casing from
reservoir pressures and corrosive formation fluids and also to maintain the
separation of productive zones. The Company believes that it is a leading
worldwide producer of packers and that its principal competitors for sale of
packers are Dresser Oil Tools, an operating unit of Dresser, Halliburton Energy
Services, and Camco Products and Services, a division of Camco.
Liner hanger tools and equipment used to suspend and set springs of
casing pipe in wells are manufactured by the Company. The Company believes that
it is a leading worldwide producer of liner hangers and its primary competitor
is the Nodeco division of Weatherford Enterra, Inc. ("Weatherford").
The Company provides fishing tool services using specialized tools to
locate, dislodge and retrieve twisted off, dropped or damaged pipe, tools or
other objects from the well bore. Major fishing tool competitors are
Weatherford and Smith. The Company also provides inflatable and mechanical
packers that are used in testing the potential of a well during the drilling
phase prior to installation of casing, and under-reamers, which enlarge the
well bore at any point below the surface to form a production cavity.
The Company offers gravel packing, a specialized service that prevents
sand from entering the well bore and reducing productivity, as well as other
sand control services. It also provides tubing conveyed perforating services to
provide paths through the casing and cement sheath in wells so that oil and gas
can enter the well bore from the formation. Major gravel packing competitors
include Dowell, a division of Schlumberger, and Halliburton Energy
Services. Tubing conveyed perforating competitors include the Wireline & Testing
division of Schlumberger, Halliburton Energy Services, Dresser Oil Tools and
Western Atlas Inc. The Company's gravel packing products and services also
compete with frac-pack services provided by pressure pumping companies
including BJ Services Company, Dowell and Halliburton Energy Services.
-2-
<PAGE> 4
Other completion, remedial and production products and services
provided by the Company include control systems for surface and subsurface
safety valves and surface flow lines; and flow regulators and packers used in
secondary recovery waterflood projects. The Company's primary competitors are
Halliburton Energy Services and Camco.
The Company is a leader in oilfield electric submersible pumping
systems ("ESPs"), which help raise oil to the surface. It also provides
variable speed motor controllers and specialty armored power cables. Its major
competition in ESPs is Reda, a division of Camco.
Beginning with reservoir and field evaluation, the Company can help
customers plan and manage individual wells and fields. This approach can
encompass virtually all of the Company's oilfield products and services.
Halliburton, Dresser and Schumberger are the principal competitors with this
capability.
Recent new technology offered by the Company includes downhole
hydrocyclone oil/water separation systems, multi-lateral drilling and
completion systems, coiled tubing drilling systems, remote actuated, downhole
completion tools and rotary closed loop drilling systems.
CHEMICALS
The Company manufactures specialty chemicals for inclusion in the sale
of integrated chemical technology solutions for petroleum production,
transportation and refining. These chemicals include specialty chemicals used
by the production segments of the petroleum industry, as well as industrial
chemicals used in refining, waste water treatment, mineral handling and cooling
and boiler water processes. The principle geographic markets for this segment
include all major oil and gas producing regions of the world. This segment also
provides chemical technology solutions to other industrial markets throughout
the world including petrochemicals, fuel additives, plastics, imaging and
adhesives. The Company believes it is a leader in worldwide specialty oilfield
chemicals and that its primary competitor is the Nalco- Exxon joint venture.
The Company designs and manufactures systems for the treatment of produced
water and its reinjection.
PROCESS EQUIPMENT
The Company provides a broad range of solid/liquid separation
equipment and systems to concentrate product or separate and remove waste
material in the mineral, industrial, pulp and paper and municipal industries.
The Company's product lines include vacuum filters (drum, disc and horizontal
belt), filter presses, belt presses, granular media filters, thickeners,
clarifiers, flotation cells and aeration equipment. The Company's principal
competitors for sales for mineral and industrial applications are Dorr-Oliver,
Outokumpu and Svedala; the Company's principal competitors for sales for
municipal applications are Envirex, a business unit of United States Filter
Corporation ("U.S. Filter"), Walker Process and General Filter; and the
Company's principal competitor for sales for pulp and paper applications is
Ahlstrom.
The Company designs and manufactures process solutions for the
oilfield and refinery markets. These solutions include equipment for the
processing and conditioning of seawater for injection as desalting and primary
and oily-water separation in oil production streams. The Company's products
include fine filters, coarse filters, nutshell filters, flotation units,
hydrocyclones, coalescers, dearation towers, electrochlorinators and
electrostatic desalters. The primary competition in this area is Kvaerner,
Serck Baker and U.S. Filter.
-3-
<PAGE> 5
The Company manufactures a broad range of continuous and batch
centrifuges and specialty filters which are widely used in the environmental,
chemical, minerals and pharmaceutical markets to dewater or classify process
and waste streams. The Company's principal competitors in its continuous
centrifuge product line are Alfa-Laval/Sharples, Tomoe and Flottweg. There are
numerous small and large companies which compete in the batch centrifuge and
filter product lines.
The Company provides parts and service for all of its product lines
through a global network of personnel and facilities strategically located to
serve the customer community.
MARKETING, COMPETITION AND ECONOMIC CONDITIONS
The products of each of the Company's principal industry segments are
marketed primarily through its own sales organizations on a product line basis,
although certain products and services are marketed through supply stores,
independent distributors or sales representatives. Technical and advisory
services are ordinarily provided to assist in the customer's use of the
Company's products and services. Stockpoints and service centers for oilfield
products and services are located in areas of drilling and production activity
throughout the world. The Company markets its oilfield products and services in
nearly all of the oil producing countries. Stockpoints and service centers for
process products and services are located near the Company's customers'
operations, and the Company markets process products and services throughout
the world. In certain foreign areas where direct product sales efforts are not
practicable, the Company utilizes licensees, sales representatives and
distributors.
The products of each of the Company's principal industry segments are
sold in highly competitive markets, and its revenues and earnings can be
affected by changes in competitive prices, fluctuations in the level of
activity in major markets, general economic conditions and governmental
regulation. The Company competes with a large number of companies, a few of
which have greater resources and more extensive and diversified operations than
the Company. The Company believes that the principal competitive factors in the
industries that it serves are product and service quality and availability,
technical proficiency and price.
Further information concerning Marketing, Competition and Economic
Conditions is contained under the caption "Business Environment" in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the 1997 Annual Report to Stockholders and is incorporated
herein by reference.
INTERNATIONAL OPERATIONS
The Company's operations are subject to the risks inherent in doing
business in multiple countries with various legal and political policies. These
risks include war, boycotts, political changes, expropriation, currency
restrictions, taxes and changes in currency exchange rates. Although it is
impossible to predict the likelihood of such occurrences or their effect on the
Company, management believes these risks to be acceptable. However, there can
be no assurance that an occurrence of any one of these events would not have a
material adverse effect on its operations.
RESEARCH AND DEVELOPMENT; PATENTS
At September 30, 1997, the equivalent of approximately 412 full-time
employees were engaged in research and development activities directed
primarily toward improvement of existing products and services, design of
specialized products to meet specific customer needs and development of new
products and processes. For information regarding the amounts of research and
development
-4-
<PAGE> 6
expense for each of the three years in the period ended September 30, 1997, see
Note 12 of Notes to Consolidated Financial Statements.
The Company has followed a policy of seeking patent protection both
inside and outside the United States for products and methods that appear to
have commercial significance. The Company believes its patents and trademarks
to be adequate for the conduct of its business, and while it regards patent and
trademark protection important to its business and future prospects, it
considers its established reputation, the reliability of its products and the
technical skills of its personnel to be more important. The Company
aggressively pursues protection of its patents against patent infringement
worldwide.
BUSINESS DEVELOPMENTS
OILFIELD
Baker Hughes Oilfield Operations consists of five operating divisions:
Baker Hughes INTEQ, Baker Hughes Solutions, Baker Oil Tools, Centrilift and
Hughes Christensen. Business developments over the past five years have
positioned these divisions as leaders in providing products, services and
technologies in the drilling, completion and production processes.
In April 1992, the Company purchased Teleco Oilfield Services
Incorporated, a leading provider of directional measurement-while-drilling
technology. Also, during 1992, the Company combined Baker Service Tools with
Baker Oil Tools, to streamline the Company's ability to market its completion,
remedial and workover products and services.
In 1993, in an effort to create a more efficient operating structure
and to meet the needs of its customers, Baker Hughes INTEQ was formed by
combining five of the Company's oilfield divisions. The formation of Baker
Hughes INTEQ continued the Company's ongoing goal to pursue the directional and
horizontal drilling, measurement-while-drilling, drilling fluids and sand
control completions markets and to combine a full range of technologies into
optimum integrated solutions.
In September 1996, due in part to the growth of its integrated
services business, the Company formed a new division, Baker Hughes Solutions,
specifically devoted to integrated solutions and project management. The
Company also moved the sand control completions business operated by Baker
Hughes INTEQ to Baker Oil Tools to unify the Company's approach within the
completions sector.
In May 1997, the Company and Schlumberger signed agreements covering
the joint development and marketing of the initial phase of Intelligent
Completion Systems ("ICS") to the oilfield service industry. ICS is expected to
provide remote reservoir monitoring and control to improve operation and
enhance hydrocarbon recovery from deepwater and extended-reach horizontal
wells. ICS is one of the major alliances outlined in the Letter of Intent
signed by the Company and Schlumberger in September 1996. In another agreement
between the Company and Schlumberger, Baker Oil Tools became the preferred
supplier of completion technology and services to certain Schlumberger
divisions. Schlumberger is the preferred supplier of coiled tubing services and
downhole monitoring devices to Baker Oil Tools.
-5-
<PAGE> 7
In July 1997, the Company completed the acquisition of Drilex
International Inc. to enhance the ability of the Company to meet the
directional and horizontal drilling and workover needs of U.S. independent
producers.
CHEMICALS
Baker Petrolite Corporation (formerly Baker Performance Chemicals
Incorporated) ("BPC") is the Company's chemicals business unit. In July 1997,
the Company purchased Petrolite Corporation ("Petrolite") to combine it with
BPC. BPC will continue to be a leading provider to the oilfield chemical
market.
In September 1996, BPC purchased BASF AG's oilfield chemical business
to increase BPC's international presence and to provide BPC with access to
BASF's oilfield chemical technology, manufacturing and research capabilities.
PROCESS EQUIPMENT
Baker Hughes Process Equipment Company consists of three operating
divisions: Baker Hughes Process Systems, Bird Machine Company ("Bird") and
EIMCO Process Equipment. These three divisions provide separation technologies
for the petroleum, municipal, continuous process and mining industries.
In March and September of 1994, the operations of EnviroTech
Measurements and Controls and EnviroTech Pumpsystems were sold. In 1996, the
Company purchased Vortoil Separation Systems and Ketema Process Equipment
Company to expand its product lines of liquid/solid and liquid/liquid
separation equipment and increase the size of its process equipment operations.
In July 1997, when the Company acquired Petrolite, it merged the
PETRECO division of Petrolite with Baker Hughes Process Systems, to enhance the
Company's ability to provide its customers complete process solutions. Also in
July 1997, the Company acquired the Environmental Technology Division of Deutz
AG and added that business to Bird. This provides Bird customers increased
options and service, and provides Bird with a strategic presence in Europe.
During the preceding six years, the Company acquired and disposed of
several additional businesses, none of which, individually or in the aggregate,
had a material effect on the Company's results of operations.
EMPLOYEES
At September 30, 1997, the Company had a total of approximately 21,250
employees, as compared to approximately 16,800 employees at September 30, 1996.
Approximately 2,200 employees at September 30, 1997 were represented under
collective bargaining agreements that terminate at various times through 1999.
The Company believes that its relations with its employees are satisfactory.
-6-
<PAGE> 8
EXECUTIVE OFFICERS
The following table shows as of December 3, 1997, the name of each
executive officer of the Company, together with his age and all offices
presently held with the Company.
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL AGE
- ------------------ ---
<S> <C> <C>
Max L. Lukens 49 President of the Company since October 1995; Chief Executive Officer of the
Company since October 1996; and Chairman of the Board since January 1997.
Employed 1981. Vice President and Chief Financial Officer of Baker, 1984-1987;
Senior Vice President and Chief Financial Officer of the Company, 1987-1989;
President, Baker Hughes Production Tools, 1989-1993; Senior Vice President of
the Company, 1987-1994; Executive Vice President, 1994-1995; President, Baker
Hughes Oilfield Operations, 1993-1995; and Chief Operating Officer of the
Company, 1995-1996.
David H. Barr 48 Vice President of Business Process Development since June 1997. Employed 1972.
Vice President - Production and Technology, Hughes Christensen Company, 1994-
1997; Vice President - Diamond Products, Hughes Christensen Company, 1993-
1994; Vice President - Eastern Hemisphere, Hughes Christensen Company, 1990-
1993; Vice President - North American Operations, Hughes Christensen Company,
1988-1990.
M. Glen Bassett 59 Vice President of the Company since 1995; and President, Baker Petrolite
Corporation since July 1997. Employed 1980. President of Baker Performance
Chemicals Incorporated, 1983-1997.
Joseph F. Brady 51 Vice President of the Company since 1995; and President of Centrilift since
1988. Employed 1981. President, Baker Lift Systems, 1983-1987; and President,
Baker CAC, Inc., 1987-1988.
James E. Braun 38 Vice President of the Company since December 1997; and Controller of the Company
since 1993. Employed 1993. From 1981-1993, Deloitte & Touche LLP; Partner of
Deloitte & Touche LLP from 1991.
Matthew G. Dick 54 Vice President of the Company; and President of Baker Hughes Process Equipment
Company since 1996. Employed 1975. Vice President - Western Hemisphere, Hughes
Christensen Company, 1991-1993; Vice President - Oilfield Tricones, Hughes
Christensen Company, 1993-1994; and Vice President - Eastern Hemisphere, Baker
Hughes INTEQ, 1994-1996.
</TABLE>
-7-
<PAGE> 9
<TABLE>
<S> <C> <C>
George S. Finley 46 Senior Vice President and Chief Administrative Officer of the Company since
1995. Employed 1982. Controller of the Company, 1987-1993; Vice President of
the Company, 1990-1995; and Chief Financial Officer of Baker Hughes Oilfield
Operations, 1993-1995.
Roger P. Herbert 51 Vice President of the Company since 1994; and Vice President-Technology and
Market Development of the Company since 1995. Employed 1988. President,
Baker Hughes Drilling Systems, 1988-1990; President, Baker Hughes MWD,
1990-1991; President, Develco, 1991-1993; and Vice President-Technology
and Market Development, Baker Hughes Oilfield Operations, 1993-1995.
Edwin C. Howell 50 Vice President of the Company since 1995; and President of Baker Oil Tools
since 1992. Employed 1975. President, Baker Service Tools, 1989-1992.
Eric L. Mattson 46 Senior Vice President of the Company since 1994; and Chief Financial Officer
of the Company since 1993. Employed 1980. Treasurer of the Company, 1983-1994;
and Vice President of the Company, 1988 to 1994.
Lawrence O'Donnell, III 40 Vice President and General Counsel of the Company since 1995. Employed 1991.
Deputy General Counsel of the Company, 1991-1995; Vice President and General
Counsel, Baker Hughes Oilfield Operations, 1994-1995; and Corporate Secretary
of the Company, 1992-1996.
Timothy J. Probert 46 Vice President of the Company since 1994; and President of Baker Hughes INTEQ
since 1996. Employed 1972. President, Milpark, 1989-1990; President, Eastman
Christensen, 1990-1992; President, Eastman Teleco, 1992-1993; Executive Vice
President, Baker Hughes INTEQ, 1993; Vice President, Drilling & Evaluation
Technology Unit, Baker Hughes INTEQ, 1993-1994; and President, Baker Hughes
Process Equipment Company, 1994-1996.
Andrew J. Szescila 50 Senior Vice President of the Company and President, Baker Hughes Oilfield
Operations, since July 1997; Vice President of the Company from 1995-1997; and
President of Hughes Christensen Company from 1989-1997. Employed 1973.
President, BJ Services International, 1987-1988; and President, Baker Service
Tools, 1988-1989.
Jabian P. Trahan 51 Vice President of the Company since 1995; and President of Baker Hughes
Solutions since 1996. Employed 1978. President, Baker Sand Control, 1990-1993;
and President, Baker Hughes INTEQ, 1993-1996.
</TABLE>
-8-
<PAGE> 10
<TABLE>
<S> <C> <C>
Douglas J. Wall 44 Vice President of the Company and President of Hughes Christensen Company
since December 1997. Employed 1997. President, Western Rock Bit Company
Limited, 1992-1997.
</TABLE>
There are no family relationships between the executive officers of
the Company.
The Company follows the practice of electing its officers annually in
October.
ENVIRONMENTAL MATTERS
The Company is subject to local, state and federal regulations with
regard to air and water quality and other environmental matters. The Company
believes that it is in substantial compliance with these regulations.
Regulation in this area is in the process of development, and changes in
standards of enforcement of existing regulations as well as the enactment and
enforcement of new legislation may require the Company, as well as its
customers, to modify, supplement or replace equipment or facilities, or to
change or discontinue present methods of operation.
While making projections of future costs in the environmental area can
be difficult and uncertain, based upon current information, the Company
estimates that during the fiscal year ending September 30, 1998, the Company
will spend approximately $23,220,000 to enable the Company to comply with
federal, state and local provisions which have been enacted or adopted
regulating the discharge of materials into the environment or otherwise
relating to the protection of the environment (collectively, "Environmental
Regulations"). Based upon current information, the Company believes that its
compliance with Environmental Regulations will not have a material adverse
effect upon the capital expenditures, earnings and competitive position of the
Company because the Company has adequate reserves for such compliance
expenditures or the cost to the Company for such compliance will be small when
compared to the Company's overall net worth.
In addition to the amounts described in the preceding paragraph, based
upon current information, the Company estimates that it will incur capital
expenditures of approximately $3,324,000 for environmental control equipment
during the fiscal year ending September 30, 1998. Based upon current
information, the Company believes that capital expenditures for environmental
control equipment for the 1998 and 1999 fiscal years, as well as such future
periods as the Company deems relevant, will not have a material adverse effect
upon the financial condition of the Company because the aggregate amount of
these expenditures for those periods is or will be small when compared to the
Company's overall net worth.
The Company and certain of its subsidiaries and divisions have been
identified as a potentially responsible party ("PRP") as a result of substances
which may have been released in the past at various sites more fully discussed
below. The United States Environmental Protection Agency (the "EPA") and
appropriate state agencies are supervising investigative and clean-up
activities at these sites.
(a) Baker Performance Chemicals Incorporated and
Petrolite Corporation (now known as BPC), a subsidiary of the Company,
Hughes Christensen Company ("HC"), Milpark Drilling Fluids ("Milpark")
(now known as INTEQ), and Baker Oil Tools ("BOT"), a division of Baker
Hughes Oilfield Operations, Inc. ("BHOO"), have been named as PRPs in
the Sheridan Superfund Site, located in Hempstead, Texas. The remedial
work at this site is being overseen
-9-
<PAGE> 11
by the Texas Natural Resource Conservation Commission ("TNRCC"). A
trust (the "Sheridan Site Trust") was formed to manage the site
remediation and administrative details of the project. The Company
participates as a member of the Sheridan Site Trust. Total remedial and
administrative costs are estimated by Sheridan Site Trust officials to
total approximately $30,000,000. Contribution of the Company's
subsidiaries and divisions (including Baker Hughes Tubular Services,
Inc. ("BHTS") which was sold to ICO on September 30, 1992), is
estimated to be 1.81% of those costs.
(b) Spectrace Instruments, Inc. ("Spectrace") the assets
of which were sold to Thermo- Electron Corporation on March 15, 1994,
is a named respondent to an EPA Administrative Order associated with
the MEW Study Area, an eight square mile soil and groundwater
contamination site located in Mountain View, California. A group of
PRPs estimates that the total cost of remediation will be
approximately $80,000,000. The Company's environmental consultants
have conducted extensive investigations of Spectrace's operating
facility located within the MEW Study Area and have concluded that
Spectrace's activities could not have been the source of any
contamination in the soil or groundwater at and around the MEW Study
Area. The EPA has informed the Company that no further work needs to
be performed on Spectrace's site and indicated that the EPA does not
believe there is a contaminant source on the property. However, the
Company continues to be named in the EPA's Administrative Order. The
Company continues to believe the EPA's Administrative Order for
Remedial Design and Remedial Action is not valid with respect to the
Company's subsidiary and is seeking the withdrawal of the
Administrative Order with respect to the Company's subsidiary.
(c) Baker Performance Chemicals Incorporated (now known
as BPC) was named in an administrative action brought by the EPA
pursuant to the Toxic Substances Control Act, as amended. The
complaint filed by the EPA alleges failure on the part of BPC to
properly update the EPA with the volume of Toxic Substance Control Act
listed substances manufactured. The EPA has proposed a fine against
BPC in the amount of $104,000.
(d) In May 1987, Baker Performance Chemicals Incorporated
(now known as BPC) entered into an Agreed Administrative Order with
the then Texas Water Commission, now known as the TNRCC, with respect
to soil and groundwater contamination at the Odessa - Hillmont site
located in Odessa, Texas. This site was previously used by BPC as a
chemical blending plant. The contaminated soil has been removed, and
the site continues in the groundwater recovery/treatment phase at an
annual cost to the Company of approximately $20,000.
(e) Oil Base, Inc. and Hughes Drilling Fluids (now known
as INTEQ) have been identified by the EPA as PRPs in the PAB Oil and
Chemical Superfund Site located in Abbeville, Louisiana. The Company
has estimated that the contribution to the contamination by these
entities may be from 2.0% to 5.0% of the total waste at this site. A
volumetric calculation is not possible because the disposal records
maintained at this site are incomplete and inaccurate. The Company's
ultimate percentage of liability will depend in part upon the final
allocation of volumes among the participating PRPs (members of the PAB
site Remediation Group, L.L.C. ("PAB Group")). Resolution of these
allocation issues is currently being sought through the Company's
-10-
<PAGE> 12
participation in the PAB Group formed to implement the EPA
Administrative Order. Current estimates of the total cost of
remediation at this site is approximately $7,000,000. Remediation is
underway and the Company has provided interim funding of remedial
activity through the PAB Group of up to 4% of the total estimated cost
of remediation.
(f) PA Inc., a former subsidiary of the Company, was
identified as a PRP in the Sonics International Site, a former
hazardous waste disposal facility located near Ranger, Texas. This
site is currently being administered by the TNRCC under the Texas
Superfund Statute. The Company allegedly contributed 1.64% of the
waste volume at the site. It is not possible at this time to quantify
the Company's ultimate liability. The remediation proposed by the
TNRCC is estimated to cost $700,000.
(g) Milpark (now known as INTEQ) has been identified as a
PRP at the Toups Farm Superfund Site (eligible for cleanup under the
Texas State Cleanup Fund) located two miles north of South Lake at the
intersection of Highway 105 and Highway 326 near Hallettsville, Texas.
The site consists of approximately 21 acres and was operated over the
years as a municipal landfill, fence post treating company and a hog
farm. Based on available information, the Company does not believe
that it has any liability for contamination at the site.
(h) The Company and Baker Performance Chemicals
Incorporated (now known as BPC) have been named as PRPs at the former
Fike Chemical Company site located in Nitro, West Virginia. The
Company and BPC were alleged to be responsible by virtue of business
transactions involving toll chemical processing and raw materials with
the site's operator, Fike Chemical. Contractual indemnities,
associated with the acquisition of Chemlink, that protect the Company
and BPC from liability (and associated defense costs, if any)
associated with this site, have been executed and are in place and
have been acknowledged by the EPA and the Department of Justice
(Environmental Division).
(i) Milpark (now known as INTEQ) and Baker Sand Control
(now known as BOT) have been named as PRPs at the DL Mud Superfund
Site located in Abbeville, Louisiana. This site was used for the
disposal of used drilling fluids and drilling muds. However, another
named PRP is responsible for a majority of the waste volume disposed
at this site, and such PRP is presently engaged in the remediation of
the site. To date neither the other PRP nor the EPA have produced any
substantive waste disposal or transportation documentation linking the
Company or its subsidiaries or divisions to the environmental
conditions at the site. The Company does not anticipate that it will
have any liability for this site.
(j) Milpark (now known as INTEQ) has been named as a PRP
at the Mar Services Superfund site located in Crankton, Louisiana. It
has been estimated that the contribution to this site by the Company's
subsidiary is approximately 0.08% of the total volume of solids at the
site (based upon a volumetric calculation). The site is now undergoing
investigative studies to determine the remedial action plan as well as
a total estimated cost for remediation.
-11-
<PAGE> 13
(k) Teleco Oilfield Services, Inc. (now known as INTEQ)
has been named as a PRP at the Solvent Recycling Service of New
England Superfund Site located in Southington, Connecticut.
Approximately 1,000 companies have been named as PRPs at this site.
Calculations from the PRP group verified by the Company, indicate that
Teleco contributed 0.00006% of the volume at the site. The total cost
of cleanup at the site is currently estimated to be $3,500,000. A
deminimis buyout offer from either the EPA or the PRP group is
anticipated in the future.
(l) In January 1996, Petrolite Corporation (now known as
BPC) was named as a PRP by the TNRCC at the McBay Oil and Gas State
Superfund site. The Company has disputed its involvement in the site
based on the fact that it has no knowledge of transporting waste to
the site. However, the Company has transacted product sales to McBay
Oil and Gas Company. Documentation of product sales has been sent to
the TNRCC. Based on available information, the Company does not
believe that it has any liability for contamination at this site.
(m) In July 1997, Petrolite Corporation (now known as
BPC), was named by the EPA as a PRP at the Shore Refinery Site,
Kilgore, Gregg County, Texas. The Company has completed a thorough
search of its documents and records. The Company has concluded that it
has not arranged for the disposal, treatment, or transportation of
hazardous substances or used oil at the site. To date, the EPA has not
produced any substantive, hazardous substance treatment, disposal or
transportation documentation linking the Company or any of its
subsidiaries or divisions to the environmental conditions at the site.
The Company does not believe that it has any liability for
contamination at the site.
While PRPs in Superfund actions have joint and several liability for
all costs of remediation in many of the sites described above, it is not
possible at this time to quantify the Company's ultimate exposure because the
project is either in its early investigative or remediation stage. Based upon
current information, the Company does not believe that probable and reasonably
possible expenditures in connection with any of the sites described above are
likely to have a material adverse effect on the Company's financial condition
because: (i) the Company has established adequate reserves to cover what the
Company presently believes will be its ultimate liability with respect to the
matter, (ii) the Company and its subsidiaries have only limited involvement in
the sites based upon a volumetric calculation, as described above, (iii) there
are other PRPs that have greater involvement on a volumetric calculation basis
who have substantial assets and who may reasonably be expected to pay their
share of the cost of remediation, (iv) where discussed above, the Company has
insurance coverage or contractual indemnities from third parties to cover the
ultimate liability, and (v) the Company's ultimate liability, based upon
current information, is small compared to the Company's overall net worth.
The Company is subject to various other governmental proceedings
relating to environmental matters, but the Company does not believe that any of
these matters is likely to have a material adverse effect on its financial
condition.
-12-
<PAGE> 14
ITEM 2. PROPERTIES
The Company operates 85 manufacturing plants, almost all of which are
owned, ranging in size from approximately 750 square feet to approximately
230,000 square feet of manufacturing space and totaling more than 3,395,000
square feet. Of such total, approximately 2,241,000 square feet (66%) are
located in the United States, 206,000 square feet (6%) are located in the
Western Hemisphere exclusive of the United States, 818,000 square feet (24%)
are located in Europe, and 130,000 square feet (4%) are located in the Eastern
Hemisphere exclusive of Europe. These manufacturing plants by industry segment
and geographic area appear in the table below. The Company also owns or leases
and operates various customer service centers and shops, and sales and
administrative offices throughout the geographic areas in which it operates.
<TABLE>
<CAPTION>
Other Other
United Western Eastern
States Hemisphere Europe Hemisphere Total
------ ---------- ------ ---------- -----
<S> <C> <C> <C> <C> <C>
Oilfield 24 7 8 9 48
Chemicals 11 3 3 5 22
Process equipment 7 2 6 - 15
</TABLE>
The Company believes that its manufacturing facilities are well
maintained. The Company also has a significant investment in service vehicles,
rental tools and equipment. During 1997 and 1996, the Company recognized
permanent impairments and wrote down to net realizable value certain inventory,
property, plant and equipment. For further information regarding these
write-downs, see Note 5 of Notes to Consolidated Financial Statements. Property
additions increased in 1997 as the Company added capacity to meet the increased
market demand. The Company believes that it has the capacity to meet increased
demands in each of its industry segments.
ITEM 3. LEGAL PROCEEDINGS
The Company is sometimes named as a defendant in litigation relating
to the products and services it provides. The Company insures against these
risks to the extent deemed prudent by its management, but no assurance can be
given that the nature and amount of such insurance will in every case fully
indemnify the Company against liabilities arising out of pending and future
legal proceedings relating to its ordinary business activities. However, the
Company is not a party to any litigation the probable outcome of which, in the
opinion of the Company's management, would have a material adverse effect on
the consolidated financial condition of the Company.
See also "Item 1. Business -- Environmental Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-13-
<PAGE> 15
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock, $1.00 par value per share (the "Common Stock"), of
the Company is principally traded on The New York Stock Exchange. The Common
Stock is also traded on the Pacific Exchange and the Swiss Exchange. At
December 3, 1997, there were approximately 96,663 stockholders and 17,650
stockholders of record.
For information regarding quarterly high and low sales prices on the
New York Stock Exchange for the Common Stock, during the two years ended
September 30, 1997 and information regarding dividends declared on the Common
Stock during the two years ended September 30, 1997, see Note 15 of Notes to
Consolidated Financial Statements.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Condensed Comparative
Consolidated Financial Information" in the 1997 Annual Report to Stockholders
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information set forth under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in the 1997
Annual Report to Stockholders ("MD&A") is incorporated herein by reference.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The information set forth under the sub-caption "Quantitative and
Qualitative Market Risk Disclosures" under MD&A is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company and the
independent auditors' report set forth in the 1997 Annual Report to
Stockholders are incorporated herein by reference:
Independent Auditors' Report.
Consolidated Statements of Operations for each of the three years in
the period ended September 30, 1997.
Consolidated Statements of Financial Position as of September 30,
1997 and 1996.
-14-
<PAGE> 16
Consolidated Statements of Stockholders' Equity for each of the three
years in the period ended September 30, 1997.
Consolidated Statements of Cash Flows for each of the three years in
the period ended September 30, 1997.
Notes to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-15-
<PAGE> 17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the directors of the Company is set forth in
the section entitled "Election of Directors" in the Proxy Statement of the
Company for the Annual Meeting of Stockholders to be held January 28, 1998,
which section is incorporated herein by reference. For information regarding
executive officers of the Company, see "Item 1. Business -- Executive
Officers." Additional information regarding compliance by directors and
executive officers with Section 16(a) of the Securities Exchange Act of 1934,
as amended, is set forth under the section entitled "Compliance with Section
16(a) of the Securities Exchange Act of 1934" in the Proxy Statement for the
Annual Meeting of Stockholders to be held on January 28, 1998, which section is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information for this item is set forth in the section entitled
"Executive Compensation" in the Proxy Statement of the Company for the Annual
Meeting of Stockholders to be held January 28, 1998, which section is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information concerning security ownership of certain beneficial owners
and management is set forth in the sections entitled "Voting Securities" and
"Security Ownership of Management" in the Proxy Statement of the Company for
the Annual Meeting of Stockholders to be held January 28, 1998, which sections
are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
-16-
<PAGE> 18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT
(1) Financial Statements
All financial statements of the Registrant as set forth under
Item 8 of this Annual Report on Form 10-K.
(2) Financial Statement Schedules:
Financial statement schedules are omitted because of the
absence of conditions under which they are required or because
all material information required to be reported is included
in the consolidated financial statements and notes thereto.
(3) Exhibits:
3.1 Restated Certificate of Incorporation (filed as
Exhibit 3.1 to Annual Report of Baker Hughes
Incorporated on Form 10-K for the year ended
September 30, 1993 and incorporated herein by
reference).
3.2 By-Laws
3.3 Certificate of Designation of Series L Preferred
Stock of Baker Hughes Incorporated (filed as Exhibit
3.3 to Annual Report of Baker Hughes Incorporated on
Form 10-K for the year ended September 30, 1996 and
incorporated herein by reference).
4.1 Rights of Holders of the Company's Long-Term Debt.
The Company has no long-term debt instrument with
regard to which the securities authorized thereunder
equal or exceed 10% of the total assets of the
Company and its subsidiaries on a consolidated basis.
The Company agrees to furnish a copy of its long-term
debt instruments to the SEC upon request.
4.2 Restated Certificate of Incorporation (filed as
Exhibit 3.1 to Annual Report of Baker Hughes
Incorporated on Form 10-K for the year ended
September 30, 1993 and incorporated herein by
reference).
4.3 By-Laws (filed as Exhibit 3.2 hereto).
4.4 Certificate of Designation of Series L Preferred
Stock of Baker Hughes Incorporated (filed as Exhibit
4.4 to Annual Report of Baker Hughes Incorporated on
Form 10-K for the year ended September 30, 1996 and
incorporated herein by reference).
-17-
<PAGE> 19
10.1 Employment Agreement between Baker Hughes
Incorporated and Max L. Lukens dated as of December
7, 1994 (filed as Exhibit 10.3 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1994 and incorporated herein by
reference).
10.2 Severance Agreement between Baker Hughes Incorporated
and David H. Barr dated as of July 23, 1997.
10.3 Severance Agreement between Baker Hughes Incorporated
and M. Glen Bassett dated as of July 23, 1997.
10.4 Severance Agreement between Baker Hughes Incorporated
and Joseph F. Brady dated as of July 23, 1997.
10.5 Severance Agreement between Baker Hughes Incorporated
and Matthew G. Dick dated as of July 23, 1997.
10.6 Severance Agreement between Baker Hughes Incorporated
and G. Stephen Finley dated as of July 23, 1997.
10.7 Severance Agreement between Baker Hughes Incorporated
and R. Patrick Herbert dated as of July 23, 1997.
10.8 Severance Agreement between Baker Hughes Incorporated
and Edwin C. Howell dated as of July 23, 1997.
10.9 Severance Agreement between Baker Hughes Incorporated
and Max L. Lukens dated as of July 23, 1997.
10.10 Severance Agreement between Baker Hughes Incorporated
and Eric L. Mattson dated as of July 23, 1997.
10.11 Severance Agreement between Baker Hughes Incorporated
and Lawrence O'Donnell, III dated as of July 23, 1997.
10.12 Severance Agreement between Baker Hughes Incorporated
and Timothy J. Probert dated as of July 23, 1997.
10.13 Severance Agreement between Baker Hughes Incorporated
and Andrew J. Szescila dated as of July 23, 1997.
10.14 Severance Agreement between Baker Hughes Incorporated
and Jay P. Trahan dated as of July 23, 1997.
10.15 Amended and Restated 1991 Employee Stock Bonus Plan
of Baker Hughes Incorporated.
10.16 Amendment No. 1997-1 to the Amended and Restated 1991
Employee Stock Bonus Plan.
-18-
<PAGE> 20
10.17 Restated 1987 Stock Option Plan of Baker Hughes
Incorporated (Amended as of October 24, 1990).
10.18 1987 Convertible Debenture Plan of Baker Hughes
Incorporated (Amended as of October 24, 1990).
10.19 Baker Hughes Incorporated Supplemental Retirement
Plan (filed as Exhibit 10.10 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1993 and incorporated herein by
reference).
10.20 Amendment No. 1997-1 to the Baker Hughes Incorporated
Supplemental Retirement Plan.
10.21 Executive Severance Policy (filed as Exhibit 10.11 to
Annual Report of Baker Hughes Incorporated on Form
10-K for the year ended September 30, 1993 and
incorporated herein by reference).
10.22 1993 Stock Option Plan (filed as Exhibit 10.12 to
Annual Report of Baker Hughes Incorporated on Form
10-K for the year ended September 30, 1993 and
incorporated herein by reference).
10.23 Amendment No. 1997-1 to the 1993 Stock Option Plan.
10.24 1993 Employee Stock Bonus Plan (filed as Exhibit
10.13 to Annual Report of Baker Hughes Incorporated
on Form 10-K for the year ended September 30, 1993
and incorporated herein by reference).
10.25 Amendment No. 1997-1 to the 1993 Employee Stock Bonus
Plan.
10.26 Director Compensation Deferral Plan (filed as Exhibit
10.15 to Annual Report of Baker Hughes Incorporated
on Form 10-K for the year ended September 30, 1993
and incorporated herein by reference).
10.27 1995 Employee Annual Incentive Compensation Plan
(filed as Exhibit 10.16 to Annual Report of Baker
Hughes Incorporated on Form 10-K for the year ended
September 30, 1994 and incorporated herein by
reference).
10.28 Amendment No. 1997-1 to the 1995 Employee Annual
Incentive Compensation Plan.
10.29 1995 Stock Award Plan (filed as Exhibit 10.17 to
Annual Report of Baker Hughes Incorporated on Form
10-K for the year ended September 30, 1994 and
incorporated herein by reference).
10.30 Amendment No. 1997-1 to the 1995 Stock Award Plan.
10.31 Long Term Incentive Plan.
-19-
<PAGE> 21
10.32 Form of Credit Agreement, dated as of September 1,
1994, among Baker Hughes Incorporated and eighteen
banks (filed as Exhibit 10.18 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1994 and incorporated herein by
reference).
10.33 Form of Nonqualified Stock Option Agreement for
directors (filed as Exhibit 10.16 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1996 and incorporated herein by
reference).
10.34 Form of Nonqualified Stock Option Agreement for
employees (filed as Exhibit 10.17 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1996 and incorporated herein by
reference).
10.35 Form of Incentive Stock Option Agreement for
employees (filed as Exhibit 10.18 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1996 and incorporated herein by
reference).
10.36 Agreement and Plan of Merger among Baker Hughes
Incorporated, Baker Hughes Missouri, Inc., Baker
Hughes Delaware, Inc., Petrolite Corporation and
Wm. S. Barnickel & Company, dated as of February 25,
1997 (filed as Exhibit 2.1 to Form 8-K dated March 5,
1997 and incorporated herein by reference).
11.1 Statement of Computation of Earnings per Common
Share.
13.1 Portions of 1997 Annual Report to Stockholders.
21.1 Subsidiaries of Registrant.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule (for SEC purposes only).
(b) REPORTS ON FORM 8-K:
A report on Form 8-K was filed on July 17, 1997, as amended on Form
8-K/A dated August 11, 1997, reporting that the Company had consummated the
transactions contemplated by the Agreement and Plan of Merger dated as of
February 25, 1997, providing for the acquisition of Petrolite Corporation and
Wm. S. Barnickel & Company by the Company.
-20-
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized on the
8th day of December, 1997.
BAKER HUGHES INCORPORATED
By /s/ Max L. Lukens
---------------------------------------
(Max L. Lukens, Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ MAX L. LUKENS Chairman of the Board, President December 8, 1997
- ----------------------------------- and Chief Executive Officer
(Max L. Lukens) (principal executive officer)
/s/ E. L. MATTSON Senior Vice President and December 8, 1997
- ----------------------------------- Chief Financial Officer
(E. L. Mattson) (principal financial officer)
/s/ JAMES E. BRAUN Vice President and Controller December 8, 1997
- -------------------- (principal accounting officer)
(James E. Braun)
/s/ LESTER M. ALBERTHAL, JR. Director December 8, 1997
- ---------------------------
(Lester M Alberthal, Jr.)
/s/ VICTOR G. BEGHINI Director December 8, 1997
- ---------------------------
(Victor G. Beghini)
</TABLE>
-21-
<PAGE> 23
<TABLE>
<S> <C> <C>
/s/ JACK S. BLANTON Director December 8, 1997
- ---------------------------
(Jack S. Blanton)
/s/ EUNICE M. FILTER Director December 8, 1997
- ---------------------------
(Eunice M. Filter)
/s/ JOE B. FOSTER Director December 8, 1997
- -----------------------------------
(Joe B. Foster)
/s/ RICHARD D. KINDER Director December 8, 1997
- ---------------------------
(Richard D. Kinder)
/s/ JOHN F. MAHER Director December 8, 1997
- -----------------------------------
(John F. Maher)
/s/ JAMES F. McCALL Director December 8, 1997
- ---------------------------
(James F. McCall)
/s/ H. JOHN RILEY, JR. Director December 8, 1997
- ---------------------------
(H. John Riley, Jr.)
/s/ DONALD C. TRAUSCHT Director December 8, 1997
- ---------------------------
(Donald C. Trauscht)
</TABLE>
-22-
<PAGE> 24
Index to Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<S> <C>
3.1 Restated Certificate of Incorporation (filed as Exhibit 3.1 to Annual Report of Baker Hughes
Incorporated on Form 10-K for the year ended September 30, 1993 and incorporated herein by
reference).
3.2 By-Laws
3.3 Certificate of Designation of Series L Preferred Stock of Baker Hughes Incorporated (filed as
Exhibit 3.3 to Annual Report of Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1996 and incorporated herein by reference).
4.1 Rights of Holders of the Company's Long-Term Debt. The Company has no long-term debt instrument
with regard to which the securities authorized thereunder equal or exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to
furnish a copy of its long-term debt instruments to the SEC upon request.
4.2 Restated Certificate of Incorporation (filed as Exhibit 3.1 to Annual Report of Baker Hughes
Incorporated on Form 10-K for the year ended September 30, 1993 and incorporated herein by
reference).
4.3 By-Laws (filed as Exhibit 3.2 hereto).
4.4 Certificate of Designation of Series L Preferred Stock of Baker Hughes Incorporated (filed as
Exhibit 4.4 to Annual Report of Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1996 and incorporated herein by reference).
</TABLE>
<PAGE> 25
<TABLE>
<S> <C>
10.1 Employment Agreement between Baker Hughes Incorporated and Max L. Lukens dated as of December
7, 1994 (filed as Exhibit 10.3 to Annual Report of Baker Hughes Incorporated on Form 10-K for
the year ended September 30, 1994 and incorporated herein by reference).
10.2 Severance Agreement between Baker Hughes Incorporated and David H. Barr dated as of July 23, 1997.
10.3 Severance Agreement between Baker Hughes Incorporated and M. Glen Bassett dated as of July 23, 1997.
10.4 Severance Agreement between Baker Hughes Incorporated and Joseph F. Brady dated as of July 23, 1997.
10.5 Severance Agreement between Baker Hughes Incorporated and Matthew G. Dick dated as of July 23, 1997.
10.6 Severance Agreement between Baker Hughes Incorporated and G. Stephen Finley dated as of July 23, 1997.
10.7 Severance Agreement between Baker Hughes Incorporated and R. Patrick Herbert dated as of July 23, 1997.
10.8 Severance Agreement between Baker Hughes Incorporated and Edwin C. Howell dated as of July 23, 1997.
10.9 Severance Agreement between Baker Hughes Incorporated and Max L. Lukens dated as of July 23, 1997.
10.10 Severance Agreement between Baker Hughes Incorporated and Eric L. Mattson dated as of July 23, 1997.
10.11 Severance Agreement between Baker Hughes Incorporated and Lawrence O'Donnell, III dated as of July 23,
1997.
10.12 Severance Agreement between Baker Hughes Incorporated and Timothy J. Probert dated as of July 23, 1997.
10.13 Severance Agreement between Baker Hughes Incorporated and Andrew J. Szescila dated as of July 23, 1997.
10.14 Severance Agreement between Baker Hughes Incorporated and Jay P. Trahan dated as of July 23, 1997.
10.15 Amended and Restated 1991 Employee Stock Bonus Plan of Baker Hughes Incorporated.
10.16 Amendment No. 1997-1 to the Amended and Restated 1991 Employee Stock Bonus Plan.
</TABLE>
<PAGE> 26
<TABLE>
<S> <C>
10.17 Restated 1987 Stock Option Plan of Baker Hughes Incorporated (Amended as of October 24, 1990).
10.18 1987 Convertible Debenture Plan of Baker Hughes Incorporated (Amended as of October 24, 1990).
10.19 Baker Hughes Incorporated Supplemental Retirement Plan (filed as Exhibit 10.10 to Annual Report
of Baker Hughes Incorporated on Form 10-K for the year ended September 30, 1993 and
incorporated herein by reference).
10.20 Amendment No. 1997-1 to the Baker Hughes Incorporated Supplemental Retirement Plan.
10.21 Executive Severance Policy (filed as Exhibit 10.11 to Annual Report of Baker Hughes
Incorporated on Form 10-K for the year ended September 30, 1993 and incorporated herein by
reference).
10.22 1993 Stock Option Plan (filed as Exhibit 10.12 to Annual Report of Baker Hughes Incorporated on
Form 10-K for the year ended September 30, 1993 and incorporated herein by reference).
10.23 Amendment No. 1997-1 to the 1993 Stock Option Plan.
10.24 1993 Employee Stock Bonus Plan (filed as Exhibit 10.13 to Annual Report of Baker Hughes
Incorporated on Form 10-K for the year ended September 30, 1993 and incorporated herein by
reference).
10.25 Amendment No. 1997-1 to the 1993 Employee Stock Bonus Plan.
10.26 Director Compensation Deferral Plan (filed as Exhibit 10.15 to Annual Report of Baker Hughes
Incorporated on Form 10-K for the year ended September 30, 1993 and incorporated herein by
reference).
10.27 1995 Employee Annual Incentive Compensation Plan (filed as Exhibit 10.16 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year ended September 30, 1994 and incorporated
herein by reference).
10.28 Amendment No. 1997-1 to the 1995 Employee Annual Incentive Compensation Plan.
10.29 1995 Stock Award Plan (filed as Exhibit 10.17 to Annual Report of Baker Hughes Incorporated on
Form 10-K for the year ended September 30, 1994 and incorporated herein by reference).
10.30 Amendment No. 1997-1 to the 1995 Stock Award Plan.
10.31 Long Term Incentive Plan.
</TABLE>
<PAGE> 27
<TABLE>
<S> <C>
10.32 Form of Credit Agreement, dated as of September 1, 1994, among Baker Hughes Incorporated and
eighteen banks (filed as Exhibit 10.18 to Annual Report of Baker Hughes Incorporated on Form
10-K for the year ended September 30, 1994 and incorporated herein by reference).
10.33 Form of Nonqualified Stock Option Agreement for directors (filed as Exhibit 10.16 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year ended September 30, 1996 and
incorporated herein by reference).
10.34 Form of Nonqualified Stock Option Agreement for employees (filed as Exhibit 10.17 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year ended September 30, 1996 and
incorporated herein by reference).
10.35 Form of Incentive Stock Option Agreement for employees (filed as Exhibit 10.18 to Annual Report
of Baker Hughes Incorporated on Form 10-K for the year ended September 30, 1996 and
incorporated herein by reference).
10.36 Agreement and Plan of Merger among Baker Hughes Incorporated, Baker Hughes Missouri, Inc., Baker
Hughes Delaware, Inc., Petrolite Corporation and Wm. S. Barnickel & Company, dated as of February 25,
1997 (filed as Exhibit 2.1 to Form 8-K dated March 5, 1997 and incorporated herein by reference).
11.1 Statement of Computation of Earnings per Common Share.
13.1 Portions of 1997 Annual Report to Stockholders.
21.1 Subsidiaries of Registrant.
23.1 Consent of Deloitte & Touche LLP.
27.1 Financial Data Schedule (for SEC purposes only).
</TABLE>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>2
<DESCRIPTION>BY-LAWS
<TEXT>
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
BAKER HUGHES INCORPORATED
As Amended
October 22, 1997
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
ARTICLE I - Offices 1
Section 1. Registered Office ...............................................................1
Section 2. Other Offices ...................................................................1
ARTICLE II - Meetings of Stockholders ..........................................................1
Section 1. Place of Meetings................................................................1
Section 2. Annual Meeting of Stockholders...................................................1
Section 3. Quorum; Adjourned Meetings and Notice Thereof ...................................1
Section 4. Voting ..........................................................................2
Section 5. Proxies..........................................................................2
Section 6. Special Meetings ................................................................2
Section 7. Notice of Stockholders' Meetings ................................................2
Section 8. Waiver of Notice ................................................................2
Section 9. Maintenance and Inspection of Stockholder List ..................................3
Section 10. Stockholder Action by Written Consent Without a Meeting .........................3
Section 11. Inspectors of Election ..........................................................3
Section 12. Procedure for Stockholders' Meetings.............................................4
Section 13. Order of Business ...............................................................4
Section 14. Procedures for Bringing Business before an Annual Meeting .......................4
Section 15. Procedures for Nominating Directors .............................................5
ARTICLE III - Directors ........................................................................5
Section 1. Number and Qualification of Directors ..........................................5
Section 2. Election and Term of Office ....................................................6
Section 3. Resignation and Removal of Directors ...........................................6
Section 4. Vacancies ......................................................................7
Section 5. Powers .........................................................................7
Section 6. Place of Directors' Meetings ...................................................7
Section 7. Regular Meetings ...............................................................7
Section 8. Special Meetings ...............................................................7
Section 9. Quorum .........................................................................8
Section 10. Action Without Meeting .........................................................8
Section 11. Telephonic Meetings ............................................................8
Section 12. Meetings and Action of Committees ..............................................8
Section 13. Special Meetings of Committees .................................................9
Section 14. Minutes of Committee Meetings ..................................................9
Section 15. Compensation of Directors ......................................................9
Section 16. Indemnification ................................................................9
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE IV - Officers .........................................................................11
Section 1. Officers .......................................................................11
Section 2. Election of Officers ...........................................................11
Section 3. Subordinate Officers ...........................................................11
Section 4. Removal and Resignation of Officers ............................................12
Section 5. Vacancies in Offices ...........................................................12
Section 6. Chairman of the Board ..........................................................12
Section 7. Vice Chairman of the Board .....................................................12
Section 8. President ......................................................................12
Section 9. Vice Presidents ................................................................12
Section 10. Secretary ......................................................................12
Section 11. Chief Financial Officer ........................................................13
Section 12. Treasurer and Controller ......................................................13
ARTICLE V - Certificate of Stock ..............................................................13
Section 1. Certificates ...................................................................13
Section 2. Signatures on Certificates .....................................................13
Section 3. Statement of Stock Rights, Preferences, Privileges .............................13
Section 4. Lost Certificates ..............................................................14
Section 5. Transfers of Stock .............................................................14
Section 6. Fixing Record Date .............................................................14
Section 7. Registered Stockholders ........................................................14
ARTICLE VI - General Provisions - Dividends ...................................................15
Section 1. Dividends ......................................................................15
Section 2. Payment of Dividends; Directors' Duties.........................................15
Section 3. Checks .........................................................................15
Section 4. Corporate Contracts and Instruments ............................................15
Section 5. Fiscal Year ....................................................................15
Section 6. Manner of Giving Notice ........................................................15
Section 7. Waiver of Notice ...............................................................16
Section 8. Annual Statement ...............................................................16
ARTICLE VII - Amendments ......................................................................16
Section 1. Amendment by Directors .........................................................16
Section 2. Amendment by Stockholders ......................................................16
</TABLE>
-ii-
<PAGE> 4
BYLAWS
OF
BAKER HUGHES INCORPORATED
ARTICLE I
Offices
Section 1. The registered office shall be in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may
from time to time determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
Section 1. All meetings of the stockholders shall be held at such
place either within or without the State of Delaware as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting.
Section 2. An annual meeting of stockholders shall be held on the
fourth Wednesday in January in each year, if not a legal holiday, and if a
legal holiday, then on the next business day following, at 2:00 p.m. or at such
other date and time as may be determined from time to time by resolution
adopted by the Board of Directors, for the purpose of electing, subject to
Article III, Section 17 hereof, one class of the directors of the Corporation,
and transacting such other business as may properly be brought before the
meeting.
Section 3. A majority of the stock issued and outstanding and entitled
to vote at any meeting of stockholders, the holders of which are present in
person or represented by proxy, without regard to class or series, shall
constitute a quorum for the transaction of business except as otherwise
provided by law, by the Certificate of Incorporation, or by these Bylaws. A
quorum, once established, shall not be broken by the withdrawal of enough votes
to leave less than a quorum and the votes present may continue to transact
business until adjournment provided that any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, a majority of the voting stock
represented in person or by proxy may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote thereat.
<PAGE> 5
Section 4. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or
the Certificate of Incorporation or these Bylaws, a different vote is required
in which case such express provision shall govern and control the decision of
such question.
Section 5. At each meeting of the stockholders, each stockholder
having the right to vote may vote in person or may authorize another person or
persons to act for him by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to said meeting, unless said instrument provides for a longer period. All
proxies must be filed with the Secretary of the Corporation at the beginning of
each meeting in order to be counted in any vote at the meeting. A proxy shall
be deemed signed if the stockholder's name is placed on the proxy (whether by
manual signature, telegraphic transmission or otherwise) by the stockholder or
the stockholder's attorney in fact. Each stockholder shall have one vote for
each share of stock having voting power, registered in his name on the books of
the Corporation on the record date set by the Board of Directors as provided in
Article V, Section 6 hereof.
Section 6. Special meetings of the stockholders, for any purpose, or
purposes, unless otherwise prescribed by statute or by the Certificate of
Incorporation, may be called at any time by the Board of Directors or by a
committee of the Board of Directors which has been duly designated by the Board
of Directors and whose powers and authority, as provided in a resolution of the
Board of Directors or in these Bylaws, include the power to call such meetings.
Special meetings of stockholders of the Corporation may not be called by any
other person or persons. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 7. Any notice requested to be given to stockholders by
statute, the Certificate of Incorporation or these Bylaws, including notice of
any meeting of stockholders, shall be given personally, by first-class mail or
by telegraphic communication, charges prepaid, addressed to the stockholder at
the address of such stockholder appearing on the books of the Corporation or
given by the stockholder to the Corporation for the purpose of notice. If no
such address appears on the Corporation's books or has been so given, notice
shall be deemed to have been given if sent by first-class mail or telegraphic
communication to the Corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where such
principal executive office is located. Notice shall be deemed to have been
given at the time when delivered personally or deposited in the mail or sent by
telegram.
If any notice addressed to a stockholder at the address of such
stockholder appearing on the books of a Corporation is returned to the
Corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the stockholder
at such address, all further notices shall be deemed to have been duly given
without further mailing if the same shall be available to the stockholder upon
written demand of the stockholder at the principal executive office of the
Corporation for a period of one year from the date of the giving of such
notice.
Section 8. Attendance of a person at a meeting shall constitute a
waiver of notice to such person of such meeting, except when the person objects
at the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened, or objects to the consideration of
matters not included in the notice of the meeting.
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<PAGE> 6
Section 9. The officer or agent who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where their meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept open at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine such list or
to vote at any meetings of stockholders.
Section 10. No action shall be taken by stockholders except at an
annual or special meeting of stockholders, and stockholders may not act by
written consent.
Section 11. Before any meeting of stockholders, the Board of Directors
may appoint any persons other than nominees for office to act as inspectors of
election at the meeting or its adjournment. If no inspectors of election are so
appointed, the chairman of the meeting may, and on the request of any
stockholder or a stockholder's proxy shall, appoint inspectors of election at
the meeting. The number of inspectors shall be either one or three. If
inspectors are appointed at a meeting on the request of one or more
stockholders or proxies, the holders of a majority of shares or their proxies
present at the meeting shall determine whether one or three inspectors are to
be appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may, and upon the request of any
stockholder or a stockholder's proxy shall, appoint a person to fill such
vacancy.
The duties of these inspectors shall be as follows:
(a) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of
a quorum, and the authenticity, validity and effect of proxies;
(b) Receive votes or ballots;
(c) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) Count and tabulate all votes;
(e) Determine when the polls shall close;
(f) Determine the results; and
(g) Do any other acts that may be proper to conduct the
election or vote with fairness to all stockholders.
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<PAGE> 7
Section 12. Meetings of the stockholders shall be presided over by the
Chairman of the Board of Directors, or in his absence, by the Vice Chairman,
the President or by any Vice President, or, in the absence of any of such
officers, by a chairman to be chosen by a majority of the stockholders entitled
to vote at the meeting who are present in person or by proxy. The Secretary,
or, in his absence, any person appointed by the chairman, shall act as
secretary of all meetings of the stockholders.
Section 13. The order of business at all meetings of stockholders
shall be as determined by the chairman of the meeting.
Section 14. Notwithstanding anything in these Bylaws to the contrary,
no business shall be conducted at an annual meeting of the stockholders except
in accordance with the procedures hereinafter set forth in this Section 14;
provided, however, that nothing in this Section 14 shall be deemed to preclude
discussion by any stockholder of any business properly brought before the
annual meeting in accordance with said procedures.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (1) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board, (2) otherwise properly brought before the meeting by or at the
direction of the Board, or (3) otherwise properly brought before the meeting by
a stockholder. In addition to any other applicable requirements, for business
to be properly brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice must be delivered to
or mailed and received at the principal executive offices of the Corporation
not less than one hundred twenty (120) days in advance of the first annual
anniversary of the date of the Corporation's proxy statement released to
stockholders in connection with the previous year's annual meeting of
stockholders, except that if no annual meeting was held in the previous year or
the date of the annual meeting has been changed by more than thirty (30)
calendar days from the date contemplated at the time of the previous year's
proxy statement, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth (10th) day following the day on
which such notice of the date of the annual meeting was mailed or such public
disclosure was made. Any adjournment(s) or postponement(s) of the original
meeting whereby the meeting will reconvene within 30 days from the original
date shall be deemed for purposes of notice to be a continuation of the
original meeting and no business may be brought before any such reconvened
meeting unless timely notice of such business was given to the Secretary of the
Corporation for the meeting as originally scheduled. A stockholder's notice to
the Secretary shall set forth as to each matter the stockholder proposes to
bring before the annual meeting (i) a brief description of the business desired
to be brought before the annual meeting and their reasons for conducting such
business at the annual meeting, (ii) the name and record address of the
stockholder proposing such business, (iii) the class and number of shares of
the Corporation which are beneficially owned by the stockholders, and (iv) any
material interest of the stockholder in such business.
The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 14, and if
he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
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<PAGE> 8
Section 15. Notwithstanding anything in these Bylaws to the contrary,
only persons who are nominated in accordance with the procedures hereinafter
set forth in this Section 15 shall be eligible for election as directors of the
Corporation.
Nominations of persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders only (1) by or at the
direction of the Board of Directors or (2) by any stockholder of the
Corporation entitled to vote for the election of directors at the meeting who
complies with the notice procedures set forth in this Section 15. Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation
not less than thirty (30) days nor more than sixty (60) days prior to the
meeting; provided, however, that in the event that less than forty (40) days'
notice or prior public disclosure of the date of the meeting is given or made
to stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth (10th) day following the day on
which such notice of the date of the meeting was mailed or such public
disclosure was made. Any adjournment(s) or postponement(s) of the original
meeting whereby the meeting will reconvene within thirty (30) days from the
original date shall be deemed for purposes of notice to be a continuation of
the original meeting and no nominations by a shareholder of persons to be
elected directors of the Corporation may be made at any such reconvened meeting
other than pursuant to a notice that was timely for the meeting on the date
originally scheduled. Such stockholder's notice shall set forth: (i) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director, all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is
otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, or any successor regulation
thereto (including such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); and (ii) as to
the stockholder giving notice (A) the name and address, as they appear on the
Corporation's books, of such stockholder, and (B) the class and number of
shares of the Corporation which are beneficially owned by such stockholder. At
the request of the Board of Directors, any person nominated by the Board of
Directors for election as a director shall furnish to the Secretary of the
Corporation that information required to be set forth in a stockholder's notice
of nomination which pertains to the nominee.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by this Section 15, and if he should so determine, he
shall so declare to the meeting and the defective nomination shall be
disregarded.
ARTICLE III
Directors
Section 1. The Board of Directors shall consist of a minimum of twelve
(12) and a maximum of sixteen (16) directors. The number of directors shall be
fixed from time to time within the minimum and the maximum number established
by the then elected Board of Directors. The number of directors until changed
by the Board shall be twelve (12). The maximum number of directors may not be
increased by the Board of Directors to exceed sixteen without the affirmative
vote of 75% of the members of the entire Board. The directors need not be
stockholders. No officer of the Corporation may serve on a board of directors
of any company having a present or retired employee on the
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<PAGE> 9
Corporation's Board of Directors. No person may stand for election as a
director if within the previous one (1) year he has resigned from the Board as
a result of the tenure provisions of Article III, Section 3 hereof regarding
service for more than ten (10), eleven (11) or twelve (12) consecutive years on
the Board. No person associated with an organization whose services are
contracted by the Corporation shall serve on the Corporation's Board of
Directors; provided, however, that this prohibition may be waived by a majority
of the members of the whole Board if the Board in its judgment determines that
such waiver would be in the best interest of the Corporation.
Section 2. The Board of Directors shall be divided into three classes,
Class I, Class II and Class III. The number of directors in each class shall be
the whole number contained in the quotient arrived at by dividing the
authorized number of directors by three, and if a fraction is also contained in
such quotient then if such fraction is one-third (1/3), the extra director
shall be a member of Class III, and if the fraction is two-thirds (2/3), one of
the extra directors shall be a member of Class III and the other a member of
Class II. Each director shall serve for a term ending on the date of the third
annual meeting following the annual meeting at which such director was elected;
provided, however, that the directors initially appointed to Class I shall
serve for a term ending on the date of the first annual meeting next following
September 30, 1988, the directors initially appointed to Class II shall serve
for a term ending on the date of the second annual meeting next following
September 30, 1988, and the directors initially appointed to Class III shall
serve for a term ending on the date of the third annual meeting next following
September 30, 1988. One class of the directors shall be elected at each annual
meeting of the stockholders. If any such annual meeting is not held or the
directors are not elected thereat, the directors may be elected at any special
meeting of stockholders held for that purpose. All directors shall hold office
until their respective successors are elected and qualified or until their
earlier death, resignation or removal.
Section 3. Directors who are employees of the Corporation must resign
from the Board of Directors at the time of any diminution in their duties or
responsibilities as an officer, at the time they leave the employ of the
Corporation for any reason or on their 70th birthday. A director's term of
office shall automatically terminate on the date of the annual meeting of
stockholders following: (i) his seventieth (70th) birthday; (ii) the third
anniversary of his retirement from his principal occupation; (iii) unless he is
an officer of the Corporation, the date on which he has served on the
Corporation's Board of Directors a total of ten (10) complete years; (iv) any
fiscal year in which he has failed to attend at least sixty-six percent (66%)
of the meetings of the Board of Directors and any committees of the Board of
Directors on which such director serves; or (v) the first anniversary of any
change in his employment (other than a promotion or lateral movement within the
same organization). The requirements of Section 3(i) through Section 3(v) of
Article III may be waived by a majority of the members of the whole Board
(excluding the director whose resignation would otherwise be required) if the
Board in its judgment determines that such waiver would be in the best interest
of the Corporation. Any director may be removed for cause by the holders of a
majority of the shares of the Corporation entitled to vote in the election of
directors; stockholders may not remove any director without cause. The Board of
Directors may not remove any director for or without cause, and no
recommendation by the Board of Directors that a director be removed for cause
may be made to the stockholders except by the affirmative vote of not less than
seventy-five percent (75%) of the members of the whole Board; provided that the
Board may remove any director who fails to resign as required by the provisions
of these Bylaws.
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<PAGE> 10
Section 4. Except as otherwise provided by statute or the Certificate
of Incorporation, in the case of any increase in the number of directors, such
additional director or directors shall be proposed for election to terms of
office that will most nearly result in each class of directors containing
one-third (1/3) of the entire number of members of the whole Board, and, unless
such position is to be filled by a vote of the stockholders at an annual or
special meeting, shall be elected by a majority vote of the directors in such
class or classes, voting separately by class. In the case of any vacancy in the
Board of Directors, however created, the vacancy or vacancies shall be filled
by majority vote of the directors remaining in the class in which the vacancy
occurs or, if only one such director remains, by such director. In the event
one or more directors shall resign, effective at a future date, such vacancy or
vacancies shall be filled as provided herein. Directors so chosen or elected
shall hold office for the remaining term of the directorship to which
appointed. Any director elected or chosen as provided herein shall serve for
the unexpired term of office or until his successor is elected and qualified or
until his earlier death, resignation or removal.
In the event of any decrease in the authorized number of directors,
(a) each director then serving as such shall nevertheless continue as a
director of the class of which he is a member until the expiration of this
current term, or his prior death, resignation or removal, and (b) the newly
eliminated directorships resulting from such decrease shall be apportioned by
the Board of Directors to such class or classes as shall, so far as possible,
bring the number of directors in the respective classes into conformity with
the formula in Section 2 hereof as applied to the newly authorized number of
directors.
Section 5. The property and business of the Corporation shall be
managed by or under the direction of its Board of Directors. In addition to the
powers and authorities by these Bylaws expressly conferred upon them, the Board
may exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute, by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.
Meetings of the Board of Directors
Section 6. The directors may hold their meetings and have one or more
offices, and keep the books of the Corporation outside the State of Delaware.
Section 7. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined
by the Board. Except as otherwise provided by statute, any business may be
transacted at any regular meeting of the Board of Directors.
Section 8. Special meetings of the Board of Directors may be called by
the Chairman of the Board, the Vice Chairman or the President on at least
twenty-four hours' notice, or such shorter period as the person calling deems
appropriate, to each director. Special meetings shall be called by the
President or the Secretary in like manner and on like notice on the written
request of any two directors unless the Board consists of only one director, in
which case special meetings shall be called by the President or Secretary in
like manner and on like notice on the written request of the sole director.
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<PAGE> 11
Section 9. At all meetings of the Board of Directors a majority of the
authorized number of directors shall be necessary and sufficient to constitute
a quorum for the transaction of business, and the vote of a majority of the
directors present at any meeting at which there is a quorum, shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute, by the Certificate of Incorporation or by these Bylaws. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present. If only one
director is authorized, such sole director shall constitute a quorum. A meeting
at which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action is approved by at
least a majority of the required quorum for such meeting.
Section 10. Unless otherwise restricted by statute, the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the Board or committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board or committee.
Section 11. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating in
a meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
Committees of Directors
Section 12. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each such
committee to consist of one or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. If no alternate members have been appointed, the committee
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. The Board of Directors shall, by resolution
passed by a majority of the whole Board, designate one member of each committee
as chairman of such committee. Each such chairman shall hold such office for a
period not in excess of five years, and shall upon surrender of such
chairmanship resign from membership on such committee. Any such committee, to
the extent provided in the resolution of the Board of Directors, shall have and
may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation, but no such
committee shall have the power or authority to authorize an amendment to the
Certificate of Incorporation (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of
shares of stock adopted by the Board of Directors, fix the designations and any
of the preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation, or fix the number or shares of any series of stock or authorize
the increase or decrease of the shares of any series), adopt an agreement of
merger or consolidation, recommend to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's
-8-
<PAGE> 12
property and assets, recommend to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or amend the Bylaws of the
Corporation; and, unless the resolution or the Certificate of Incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock or to adopt a
certificate of ownership and merger.
Section 13. Special meetings of committees may be called by the
Chairman of such committee, the Chairman of the Board or the President, on at
least forty-eight (48) hours notice to each member and alternate member.
Alternate members shall have the right to attend all meetings of the committee.
The Board of Directors may adopt rules of the government of any committee not
inconsistent with the provisions of these Bylaws. If a committee is comprised
of an odd number of members, a quorum shall consist of a majority of that
number. If the committee is comprised of an even number of members, a quorum
shall consist of one-half (1/2) of that number. If a committee is comprised of
two members, a quorum shall consist of both members.
Section 14. Each Committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when requested.
Compensation of Directors
Section 15. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a
stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Indemnification
Section 16. (a) The Corporation shall indemnify every person who is or
was a party or is or was threatened to be made a party to any threatened,
pending or completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation), by reason of the fact that he is or was a director, officer or
employee of the Corporation or any of its direct or indirect wholly-owned
subsidiaries or, while a director, officer or employee of the Corporation or
any of its direct or indirect wholly-owned subsidiaries, is or was serving at
the request of the Corporation or any of its direct or indirect wholly-owned
subsidiaries, as a director, officer or employee, of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including counsel fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, to the full extent permitted by applicable law;
provided that the Corporation shall not be obligated to indemnify any such
person against any such action, suit or proceeding which is brought by such
person against the Corporation or any of its direct or indirect wholly-owned
subsidiaries or the directors of the Corporation or any of its direct or
indirect wholly-owned subsidiaries, other than an action brought by such person
to enforce his rights to indemnification hereunder, unless a majority of the
Board of Directors of the Corporation shall have previously approved the
bringing of such action, suit or proceeding, and provided further that the
Corporation shall not be obligated to indemnify any such person against any
action, suit or proceeding
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<PAGE> 13
arising out of any adjudicated criminal, dishonest or fraudulent acts, errors
or omissions of such person or any adjudicated willful, intentional or
malicious acts, errors or omissions of such person.
(b) The Corporation shall indemnify every person who is or was a party
or is or was threatened to be made a party to any threatened, pending or
completed action, suit, or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was licensed to practice
law and an employee (including an employee who is or was an officer) of the
Corporation or any of its direct or indirect wholly-owned subsidiaries and,
while acting in the course of such employment committed or is alleged to have
committed any negligent acts, errors or omissions in rendering professional
legal services at the request of the Corporation or pursuant to his employment
(including, without limitation, rendering written or oral legal opinions to
third parties) against expenses (including counsel fees), judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding, to the full extent permitted
by applicable law; provided that the Corporation shall not be obligated to
indemnify any such person against any action, suit or proceeding arising out of
any adjudicated criminal, dishonest or fraudulent acts, errors or omissions of
such person or any adjudicated willful, intentional or malicious acts, errors
or omissions of such person.
(c) The Corporation shall indemnify every person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, or
employee of the Corporation, or any of its direct or indirect wholly-owned
subsidiaries or, while a director, officer, or employee of the Corporation or
any of its direct or indirect wholly-owned subsidiaries, is or was serving at
the request of the Corporation or any of its direct or indirect wholly-owned
subsidiaries, as a director, officer, or employee of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
(d) To the extent that a director, officer, or employee of the
Corporation, or any of its direct or indirect wholly-owned subsidiaries, has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subsections (a), (b) and (c) of this section, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
(e) Any indemnification under subsections (a), (b) and (c) of this
section (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, or employee is proper in the circumstances because he
has met the applicable standard of conduct set forth in subsections (a), (b)
and (c) of this section. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of
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<PAGE> 14
Directors who were not parties to such action, suit or proceeding, or (2) if
such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
(f) Expenses (including attorneys' fees) incurred by an officer or
director of the Corporation or any of its direct or indirect wholly-owned
subsidiaries in defending a civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Corporation as authorized in this Section 16. Such expenses incurred by
other employees and agents may be so paid upon such terms and conditions, if
any, as the Board of Directors deems appropriate.
(g) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 16 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any provision of law, the Corporation's Certificate of
Incorporation, the Certificate of Incorporation or Bylaws or other governing
documents of any direct or indirect wholly-owned subsidiary of the Corporation,
or any agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding any of the positions or having any of the relationships referred
to in this Section 16.
(h) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 16 shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer or employee and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE IV
Officers
Section 1. The officers of the Corporation shall be a Chairman of the
Board, a Vice Chairman of the Board, a President, a Chief Financial Officer, a
Vice President, a Secretary, a Treasurer and a Controller. The Corporation may
also have, at the discretion of the Board of Directors, one or more additional
Vice Presidents, and such other officers as may be appointed in accordance with
the provisions of Section 3 of this Article.
Section 2. The officers of the Corporation, except such officers as
may be appointed in accordance with the provisions of Section 3 or Section 5 of
this Article, shall be chosen by the Board of Directors, and each shall serve
at the pleasure of the Board, subject to the rights, if any, of any officer
under any contract of employment.
Section 3. The Board of Directors may appoint, and may empower the
President to appoint, such other officers as the business of the Corporation
may require, each of whom shall hold office for such period, have such
authority and perform such duties as are provided in the Bylaws or as the Board
of Directors may from time to time determine.
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<PAGE> 15
Section 4. Any officer may be removed, either with or without cause,
by the Board of Directors, at any regular or special meeting thereof, or except
in case of an officer chosen by the Board of Directors, by any officer upon
whom such power of removal may be conferred by the Board of Directors, provided
that such removal shall not prejudice the remedy of such officer for breach of
any contract of employment.
Any officer may resign at any time by giving written notice to the
Corporation. Any such resignation shall take effect on receipt of such notice
or at any later time specified therein. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. Any
such resignation is without prejudice to the rights, if any, of the Corporation
under any contract to which the officer is a party.
Section 5. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in the manner
prescribed in these Bylaws for regular appointments to such office.
Section 6. The Chairman of the Board shall, if present, preside at all
meetings of the Board of Directors and of the stockholders, and shall exercise
and perform such other powers and duties as may be from time to time assigned
to him by the Board of Directors or prescribed by the Bylaws.
Section 7. The Vice Chairman of the Board shall exercise and perform
such powers and duties as may be from time to time assigned to him by the Board
of Directors or prescribed in these Bylaws. In the absence of the Chairman of
the Board, the Vice Chairman of the Board shall preside at all meetings of the
stockholders and the Board of Directors.
Section 8. The President shall be the chief executive officer of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and the officers of
the Corporation. In the absence of the Chairman of the Board and the Vice
Chairman of the Board, the President shall preside at all meetings of the
stockholders and the Board of Directors. He shall have the general powers and
duties of management usually vested in the office of President of a
corporation, and shall have such other powers and duties as may be prescribed
by the Board of Directors or the Bylaws.
Section 9. In the absence or disability of the President, the Vice
Presidents, if any, in order of their rank as fixed by the Board of Directors,
or if not ranked, the Vice President designated by the President, shall perform
all the duties of the President, and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors,
these Bylaws or the President.
Section 10. The Secretary shall keep or cause to be kept, at the
principal office or such other place as the Board of Directors may order, a
book of minutes of all meetings and actions of directors, committees of
directors and stockholders, with the time and place of holding, whether regular
or special, and, if special, how authorized, the notice thereof given, the
names of those present at directors' and committee meetings, the number of
shares present or represented at stockholders' meetings, and the proceedings
thereof.
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<PAGE> 16
The Secretary shall keep, or cause to be kept, at the principal office
or at the office of the Corporation's transfer agent or registrar, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required by these Bylaws or
by law to be given, and he shall keep the seal of the Corporation, if one be
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the Bylaws.
Section 11. The Chief Financial Officer shall keep and maintain, or
cause to be kept and maintained, adequate and correct books and records of
accounts of the properties and business transactions of the Corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, retained earnings and shares. The books of account shall be
open at all times to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, shall
render to the President and Directors, whenever they request it, an account of
all of his transactions as Chief Financial Officer and of the financial
condition of the Corporation, and shall have other powers and perform such
other duties as may be prescribed by the Board of Directors or the Bylaws.
Section 12. The Treasurer and the Controller shall each have such
powers and perform such duties as from time to time may be prescribed for him
by the Board of Directors, the President or these Bylaws.
ARTICLE V
Certificate of Stock
Section 1. Every holder of stock of the Corporation shall be entitled
to have a certificate signed by, or in the name of the Corporation by, the
Chairman or Vice Chairman of the Board of Directors, or the President or a Vice
President, and by the Secretary or an Assistant Secretary, if one be appointed,
or the Treasurer or an Assistant Treasurer of the Corporation, certifying the
number of shares represented by the certificate owned by such stockholder in
the Corporation.
Section 2. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issue.
Section 3. If the Corporation shall be authorized to issue more than
one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualification,
limitations or restrictions of such preferences and/or rights shall be set
forth in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided by statute, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the
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<PAGE> 17
Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or
series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights.
Lost, Stolen or Destroyed Certificates
Section 4. The Board of Directors, the Secretary and the Treasurer
each may direct a new certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the owner of such certificate, or his legal representative. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to furnish the Corporation a bond in such form and
substance and with such surety as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost, stolen or destroyed.
Transfers of Stock
Section 5. Upon surrender to the Corporation, or the transfer agent of
the Corporation, of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall
be the duty of the Corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon
its books.
Fixing Record Date
Section 6. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than 60 nor less than 10 days before the
date of such meeting, nor more than 60 days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
Registered Stockholder
Section 7. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
the State of Delaware.
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<PAGE> 18
ARTICLE VI
General Provisions
Dividends
Section 1. Dividends upon the capital stock of the Corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property or in shares of the
Corporation's capital stock, subject to the provisions of the Certificate of
Incorporation.
Section 2. Before declaration of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or sums as
the Board of Directors from time to time, in its absolute discretion, thinks
proper as a reserve fund to meet contingencies, or for equalizing dividends, or
for repairing or maintaining any property of the Corporation, or for such other
purpose as the Board of Directors shall think conducive to the interests of the
Corporation, and the Board of Directors may thereafter abolish any such reserve
in its absolute discretion.
Checks
Section 3. All checks, drafts or other orders for payment of money,
notes or other evidences of indebtedness, issued in the name of or payable to
the Corporation shall be signed by such officer or officers as the Board of
Directors or the President or any Vice President, acting jointly, may from time
to time designate.
Section 4. The President, any Vice President, the Secretary or the
Treasurer may enter into contracts and execute instruments on behalf of the
Corporation. The Board of Directors, the President or any Vice President may
authorize any officer or officers, and any employee or employees or agent or
agents of the Corporation or any of its subsidiaries, to enter into any
contract or execute any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
Fiscal Year
Section 5. The fiscal year of the Corporation shall be October 1
through September 30, unless otherwise fixed by resolution of the Board of
Directors.
Notices
Section 6. Whenever, under the provisions of the statutes, the
Certificate of Incorporation or these Bylaws, notice is required to be given to
any director, it shall not be construed to require personal notice, but such
notice may be given in writing, by mail, addressed to such director, at his
address as it appears on the records of the Corporation (unless prior to
mailing of such notice he shall have filed with the Secretary a written request
that notices intended for him be mailed to some other address, in which case
such notice shall be mailed to the address designated in the request) with
postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be
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<PAGE> 19
deposited in the United States mail; provided, however, that, in the case of
notice of a special meeting of the Board of Directors, if such meeting is to be
held within seven calendar days after the date of such notice, notice shall be
deemed given as of the date such notice shall be accepted for delivery by a
courier service that provides "opening of business next day" delivery, so long
as at least one attempt shall have been made, on or before the date such notice
is accepted for delivery by such courier service, to provide notice by
telephone to each director at his principal place of business and at his
principal residence. Notice to directors may also be given by telegram, by
personal delivery, by telephone or by facsimile.
Section 7. Whenever any notice is required to be given under the
provisions of the statutes, the Certificate of Incorporation or these Bylaws, a
waiver thereof in writing, or by telegraph, cable or other written form of
recorded communication, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
Annual Statement
Section 8. The Board of Directors shall present at each annual
meeting, and at any special meeting of the stockholders when called for by vote
of the stockholders, a full and clear statement of the business and condition
of the Corporation.
ARTICLE VII
Amendments
Section 1. Except any amendment to this Article VII and to Article II,
Section 6, Article II, Section 10, Article III, Section 1 (as it relates to
increases in the number of directors), Article III, Section 2, the last
sentence of Article III, Section 3 (as it relates to removal of directors),
Article III, Section 4, Article III, Section 16 and Article VI, Section 6 of
these Bylaws, or any of such provisions, which shall require approval by the
affirmative vote of directors representing at least seventy-five percent (75%)
of the number of directors provided for in accordance with Article III, Section
1, and except as otherwise expressly provided in a bylaw adopted by the
stockholders as hereinafter provided, the directors, by the affirmative vote of
a majority of the whole Board and without the assent or vote of the
stockholders, may at any meeting, make, repeal, alter, amend or rescind any of
these Bylaws, provided the substance of the proposed amendment or other action
shall have been stated in a notice of the meeting.
Section 2. These Bylaws may not be altered, amended or rescinded, and
new Bylaws may not be adopted, by the stockholders of the Corporation except by
the vote of the holders of not less than seventy-five percent (75%) of the
total voting power of all shares of stock of the Corporation entitled to vote
in the election of directors, considered for such purpose as one class.
-16-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.2
<SEQUENCE>3
<DESCRIPTION>SEVERANCE AGMT - BAKER HUGHES & DAVID H. BARR
<TEXT>
<PAGE> 1
EXHIBIT 10.2
SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of July 23, 1997, is made by and
between BAKER HUGHES INCORPORATED, a Delaware corporation (the "Company"), and
DAVID H. BARR (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to foster the continued employment of key
management personnel; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive hereby agree
as follows:
1. Defined Terms. The definitions of capitalized terms used
in this Agreement are provided in the last Section hereof.
2. Term of Agreement. Subject to the provisions of Section
12.2 hereof, the Term of this Agreement shall commence on the date hereof and
shall continue in effect through December 31, 1999; provided, however, that
commencing on January 1, 1998 and each January 1 thereafter (an "Extension
Date"), the Term shall automatically be extended for one additional year (i.e.,
resulting in a two-year Term on the Extension Date) unless, not later than
September 30 of the year preceding the Extension Date, the Company or the
Executive shall have given notice not to extend the Term; and further provided,
however, that if a Change in Control shall have occurred during the Term, the
Term shall expire no earlier than twenty-four (24) months beyond the month in
which such Change in Control occurred.
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<PAGE> 2
3. Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the Severance Payments
and the other payments and benefits described herein. Except as provided in
Section 9.1 hereof, no Severance Payments shall be payable under this Agreement
unless there shall have been (or, under the terms of the second sentence of
Section 6.1 hereof, there shall be deemed to have been) a termination of the
Executive's employment with the Company following a Change in Control and
during the Term. This Agreement shall not be construed as creating an express
or implied contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have any right
to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive's employment for any
reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during
any period that the Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or mental illness,
the Company shall pay the Executive's full salary to the Executive at the rate
in effect at the commencement of any such period, together with all
compensation and benefits payable to the Executive under the terms of any
compensation or benefit plan, program or arrangement maintained by the Company
during such period, until the Executive's employment is terminated by the
Company for Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
the Executive's full salary to the Executive through the Date of Termination at
the rate in effect immediately prior to the Date of Termination or, if higher,
the rate in effect immediately prior to the first occurrence of
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<PAGE> 3
an event or circumstance constituting Good Reason, together with all
compensation and benefits payable to the Executive through the Date of
Termination under the terms of the Company's compensation and benefit plans,
programs or arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect immediately
prior to the first occurrence of an event or circumstance constituting Good
Reason.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
to the Executive the Executive's normal post-termination compensation and
benefits as such payments become due. Such post-termination compensation and
benefits shall be determined under, and paid in accordance with, the Company's
retirement, insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Date of Termination or, if
more favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good Reason.
5.4 Upon the occurrence of a Change in Control all options to
acquire shares of Company stock, all shares of restricted Company stock and all
other equity or phantom equity incentives held by the Executive under any plan
of the Company (including, but not limited to, the Company's 1995 Stock Award
Plan (and the Stock Matching Programs thereunder), 1993 Stock Option Plan, 1993
Stock Bonus Plan and 1991 Stock Bonus Plan) shall become immediately vested,
exercisable and nonforfeitable and all conditions thereof (including, but not
limited to, any required holding periods) shall be deemed to have been
satisfied.
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<PAGE> 4
6. Severance Payments.
6.1 If (i) the Executive's employment is terminated following
a Change in Control and during the Term, other than (A) by the Company for
Cause, (B) by reason of death or Disability, or (C) by the Executive without
Good Reason, or (ii) the Executive voluntarily terminates his employment for
any reason during the one-month period commencing on the first anniversary of
the Change in Control, then, the Company shall pay the Executive the amounts,
and provide the Executive the benefits, described in this Section 6.1
("Severance Payments") and Section 6.2, in addition to any payments and
benefits to which the Executive is entitled under Section 5 hereof. For
purposes of this Agreement, the Executive's employment shall be deemed to have
been terminated following a Change in Control by the Company without Cause or
by the Executive with Good Reason, if (i) the Executive'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) the Executive
terminates his 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 such Person
described in clause (i), or (iii) the Executive's employment is terminated by
the Company without Cause or by the Executive 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). For purposes of any determination
regarding the applicability of the immediately preceding sentence, any position
taken by the Executive shall be presumed to be correct unless the Company
establishes to the Committee by clear and convincing evidence that such
position is not correct.
(A) In lieu of any further salary payments
to the Executive for periods subsequent to the Date of Termination and
in lieu of any severance benefit otherwise payable to the Executive,
the Company shall pay to the Executive a lump sum severance payment,
in cash, equal to three times the sum of (i) the Executive's base
salary as in effect immediately prior to the Date of Termination or,
if higher, in effect immediately prior to the first occurrence of an
event or circumstance constituting
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<PAGE> 5
Good Reason, and (ii) the average annual bonus earned by the Executive
pursuant to any annual bonus or incentive plan maintained by the
Company in respect of the three fiscal years ending immediately prior
to the fiscal year in which occurs the Date of Termination or, if
higher, immediately prior to the fiscal year in which occurs the first
event or circumstance constituting Good Reason; provided, that if the
Executive has not participated in an annual bonus or incentive plan
maintained by the Company for the entirety of such three-year period,
the amount referred to in this clause (ii) shall be calculated using
such lesser number of bonuses as have been actually earned by the
Executive in respect of such lesser period.
(B) For the thirty-six (36) month period
immediately following the Date of Termination, the Company shall
arrange to provide the Executive and his dependents life, disability,
accident and health insurance benefits and perquisites (including, but
not limited to, executive life insurance, club memberships, financial
planning and tax preparation, annual physical examination and
charitable contributions), in each case, substantially similar to
those provided to the Executive and his dependents immediately prior
to the Date of Termination or, if more favorable to the Executive,
those provided to the Executive and his dependents immediately prior
to the first occurrence of an event or circumstance constituting Good
Reason, at no greater cost to the Executive than the cost to the
Executive immediately prior to such date or occurrence; provided,
however, that, unless the Executive consents to a different method
(after taking into account the effect of such method on the
calculation of "parachute payments" pursuant to Section 6.2 hereof),
such health insurance benefits shall be provided through a third-party
insurer. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1(B) shall be reduced to the extent benefits of the
same type are received by or made available to the Executive during
the thirty-six (36) month period following the Executive's termination
of employment (and any such benefits received by or made available to
the Executive shall be reported to the Company by the Executive);
provided, however, that the Company shall reimburse the Executive for
the excess, if any, of the cost of such benefits to the Executive over
such cost immediately prior to the Date of Termination or, if more
favorable to the Executive,
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the first occurrence of an event or circumstance constituting Good
Reason.
(C) Notwithstanding any provision of the
Baker Hughes Incorporated 1995 Employee Annual Incentive Compensation
Plan (the "Annual Incentive Plan"), the Company shall pay to the
Executive a lump sum amount, in cash, equal to the sum of (i) any
unpaid incentive compensation which has been allocated or awarded to
the Executive for a completed fiscal year or other measuring period
preceding the Date of Termination under the Annual Incentive Plan and
which, as of the Date of Termination, is contingent only upon the
continued employment of the Executive to a subsequent date, and (ii) a
pro rata portion to the Date of Termination of the aggregate value of
all contingent incentive compensation awards to the Executive for all
then uncompleted periods under the Annual Incentive Plan, calculated
as to each such award by multiplying the award that the Executive
would have earned on the last day of the performance award period,
assuming the achievement, at the expected value target level, of the
individual and corporate performance goals established with respect to
such award, by the fraction obtained by dividing the number of full
months and any fractional portion of a month during such performance
award period through the Date of Termination by the total number of
months contained in such performance award period; provided, however,
that if such termination of employment occurs during the same year in
which the Change in Control occurs, the pro-rata bonus payment
referred to in clause (ii) above shall be offset by any payments
received under the Annual Incentive Plan in connection with such
Change in Control.
(D) In addition to the retirement benefits
to which the Executive is entitled under the Company's Thrift Plan
(the "Thrift Plan") and the Company's Supplemental Retirement Plan
(the "SRP"), the Company shall pay the Executive a lump sum amount, in
cash, equal to the present value of the employer-provided
contributions, deferrals and allocations the Executive would have
received had he continued to participate, after the Date of
Termination, in the Thrift Plan and the SRP for three (3) additional
years, assuming for this purpose that (i) the Executive earned
compensation for purposes of the Thrift Plan and SRP during such
three- year period the amount used to calculate the Executive's
severance payment under subparagraph
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(A) of this Section 6.1, and (ii) the percentages of contributions,
deferrals and allocations made under the Thrift Plan and the SRP by or
on behalf of the Executive during such three-year period are the same
percentages of contributions, deferrals and allocations in effect on
the date of the Change in Control or the Date of Termination,
whichever is more favorable to the Executive.
(E) If the Executive would have become
entitled to benefits under the Company's post- retirement health care
or life insurance plans, as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, had the Executive's employment terminated at
any time during the period of thirty-six (36) months after the Date of
Termination, the Company shall provide such post-retirement health
care or life insurance benefits to the Executive and the Executive's
dependents commencing on the later of (i) the date on which such
coverage would have first become available and (ii) the date on which
benefits described in subsection (B) of this Section 6.1 terminate.
(F) The Company shall provide the Executive
with outplacement services suitable to the Executive's position for a
period of three years or, if earlier, until the first acceptance by
the Executive of an offer of employment.
6.2 (A) Whether or not the Executive becomes entitled
to the Severance Payments, if any of the payments or benefits received or to be
received by the Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or any Person affiliated
with the Company or such Person) (such payments or benefits, excluding the
Gross-Up Payment, being hereinafter referred to as the "Total Payments") will
be subject to the Excise Tax, the Company shall pay to the Executive an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Executive, after deduction of any Excise Tax on the Total Payments and any
federal, state and local income and employment taxes and Excise Tax upon the
Gross-Up Payment, shall be equal to the Total Payments.
(B) For purposes of determining whether any of
the Total
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<PAGE> 8
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) all of the Total Payments shall be treated as "parachute payments" (within
the meaning of section 280G(b)(2) of the Code) unless, in the opinion of tax
counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by
the accounting firm which was, immediately prior to the Change in Control, the
Company's independent auditor (the "Auditor"), such payments or benefits (in
whole or in part) do not constitute parachute payments, including by reason of
section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within
the meaning of section 280G(b)(l) of the Code shall be treated as subject to
the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in
excess of the Base Amount allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the Auditor
in accordance with the principles of sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay federal income tax at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence on the Date of
Termination (or if there is no Date of Termination, then the date on which the
Gross-Up Payment is calculated for purposes of this Section 6.2), net of the
maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
(C) In the event that the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Executive shall repay to the Company,
within five (5) business days following the time that the amount of such
reduction in the Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the Executive,
to the extent that such repayment results in a reduction in the Excise Tax and
a dollar-for-dollar reduction in the Executive's taxable income and wages for
purposes of federal, state and local income and employment taxes, plus interest
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on the amount of such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder in calculating the Gross-Up
Payment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with respect to such
excess) within five (5) business days following the time that the amount of
such excess is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of liability for Excise
Tax with respect to the Total Payments.
6.3 The payments provided in subsections (A), (C) and (D) of
Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the
fifth day following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or before such day,
the Company shall pay to the Executive on such day an estimate, as determined
in good faith by the Executive or, in the case of payments under Section 6.2
hereof, in accordance with Section 6.2 hereof, of the minimum amount of such
payments to which the Executive is clearly entitled and shall pay the remainder
of such payments (together with interest on the unpaid remainder (or on all
such payments to the extent the Company fails to make such payments when due)
at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with
interest at 120% of the rate provided in section 1274(b)(2)(B) of the Code),
but only to the extent such amount has not been paid by the Executive pursuant
to Section 6.2(C) above. At the time that payments are made under this
Agreement, the Company shall provide the Executive with a written statement
setting forth the manner in which such payments were calculated and the basis
for such calculations including, without limitation, any opinions or other
advice the Company has received from Tax Counsel, the Auditor or other advisors
or consultants (and any such opinions or advice which are in
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writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees
and expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executive's employment, in seeking
in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board which was called and held for the
purpose of considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive was guilty of conduct set forth in clause (i) or
(ii) of the definition of Cause herein, and specifying the particulars thereof
in detail.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if
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the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of an arbitrator or a court
of competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice
of dispute given by the Executive only if such notice is given in good faith
and the Executive pursues the resolution of such dispute with reasonable
diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation,
benefit and insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given or those plans in which the
Executive was participating immediately prior to the first occurrence of an
event or circumstance giving rise to the Notice of Termination, if more
favorable to the Executive, until the Date of Termination, as determined in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the
Executive's employment with the Company terminates during the Term, the
Executive is not required to seek other
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employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to Sections 5, 6 or 7.4 hereof. Further, the
amount of any payment or benefit provided for in this Agreement (other than
Section 6.1(B) hereof but including (but not limited to) Section 7.4 hereof)
shall not be reduced by any compensation earned by the Executive as the result
of employment by another employer, by retirement benefits, by offset against
any amount claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death
of the Executive) if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of
the Executive's estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed,
if to the Executive, to the address inserted below the
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Executive's signature on the final page hereof and, if to the Company, to the
address set forth below, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon actual receipt:
To the Company:
3900 Essex Lane
Suite 1200
Houston, Texas 77027
Attention: General Counsel
11. Miscellaneous. Except as otherwise specifically provided
in Section 12.2 below, no provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of any lack of compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement supersedes any
other agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof which have been made by either party;
provided, however, that this Agreement shall supersede any agreement setting
forth the terms and conditions of the Executive's employment with the Company
only in the event that the Executive's employment with the Company is
terminated on or following a Change in Control, by the Company other than for
Cause or by the Executive other than for Good Reason; and provided further that
all agreements otherwise superseded by this Agreement shall be automatically
reinstated with full force and effect to the extent this Agreement is
terminated or otherwise rendered inapplicable or amended in accordance with
Section 12.2 hereof. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
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required under federal, state or local law and any additional withholding to
which the Executive has agreed. The obligations of the Company and the
Executive under this Agreement which by their nature may require either partial
or total performance after the expiration of the Term (including, without
limitation, those under Sections 6 and 7 hereof) shall survive such expiration.
12. Validity; Pooling.
12.1 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
12.2 Pooling. 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 Section 15(G)(III) and (C) individuals who satisfy the
requirements in clauses (i) and (ii) below constitute more than two-thirds
(2/3) of the number of directors of the entity surviving such transaction and
the parent thereof, if any: individuals who (i) immediately prior to such
transaction constitute the Board and (ii) on the date hereof constitute the
Board 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 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 Agreement 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 Section 12.2 does not preserve the
availability of such accounting treatment, then, to the extent that any
provision or combination of provisions of the Agreement disqualifies the
transaction as a "pooling" transaction (including, if applicable, the entire
Agreement), the Board shall have the right, by sending written notice to the
Executive prior to the Change in Control, to unilaterally amend (without the
consent of the Executive) 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
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accounted for as a "pooling of interests." All determinations under this
Section 12.2 shall be made by the Board prior to the Change in Control, 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.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Committee and shall be in
writing. Any denial by the Committee of a claim for benefits under this
Agreement shall be delivered to the Executive in writing within thirty (30)
days after written notice of the claim is provided to the Company in accordance
with Section 10 and shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Committee shall afford
a reasonable opportunity to the Executive for a review of the decision denying
a claim and shall further allow the Executive to appeal to the Committee a
decision of the Committee within sixty (60) days after notification by the
Committee that the Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Houston, Texas in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the evidentiary standards
set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to
seek specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2
hereof.
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<PAGE> 16
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive'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 Executive pursuant to Section
7.1 hereof) after a written demand for substantial performance is delivered to
the Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties, or (ii) the willful engaging by the Executive 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 Executive's part shall
be deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive'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
Committee by clear and convincing evidence that Cause exists.
(G) 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 (i) of
paragraph (III) below; or
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(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 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 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 (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 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
(IV) the stockholders of the Company approve
a plan of complete liquidation or dissolution of the Company
or there is consummated
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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.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "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, 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
Committee shall not exceed six (6).
(J) "Company" shall mean Baker Hughes Incorporated and,
except in determining under Section 15(G) hereof whether or not any Change in
Control of the Company has occurred, shall include any successor to its
business and/or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(K) "Date of Termination" shall have the meaning set forth in
Section 7.2 hereof.
(L) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance
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<PAGE> 19
of the Executive's duties with the Company for a period of six (6) consecutive
months, the Company shall have given the Executive a Notice of Termination for
Disability, and, within thirty (30) days after such Notice of Termination is
given, the Executive shall not have returned to the full-time performance of
the Executive's duties.
(M) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(O) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(P) "Extension Date" shall have the meaning set forth in
Section 2 hereof.
(Q) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (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 Date of Termination specified in the Notice of
Termination given in respect thereof:
(I) the assignment to the Executive of any
duties inconsistent with the Executive's status as a senior
executive officer of the Company or a substantial adverse
alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the
Change in Control;
(II) a reduction by the Company in the
Executive's annual base salary as in effect on the date hereof
or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all
senior executives of the Company and all senior executives of
any Person in control of the Company;
(III) the relocation of the Executive's
principal place of
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<PAGE> 20
employment to a location more than 50 miles from the
Executive's principal place of employment immediately prior to
the Change in Control or the Company's requiring the Executive
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 Executive's present business
travel obligations;
(IV) the failure by the Company to pay to
the Executive any portion of the Executive's current
compensation except pursuant to an across-the-board
compensation deferral similarly affecting all senior
executives of the Company and all senior executives of any
Person in control of the Company, or to pay to the Executive
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;
(V) the failure by the Company to continue
in effect any compensation plan in which the Executive
participates immediately prior to the Change in Control which
is material to the Executive's total compensation, including
but not limited to the Company's 1993 Stock Option Plan, 1993
Employee Stock Bonus Plan, 1991 Employee Stock Bonus Plan,
1995 Stock Award Plan (and the 1995, 1996 and 1997 Stock
Matching Programs thereunder and any subsequent Stock Matching
Programs in which the Executive participates), 1987
Convertible Debenture Plan and 1995 Employee Annual Incentive
Compensation Plan or any substitute plans adopted prior to the
Change in Control, 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 Executive'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 Executive's
participation relative to other participants, as existed
immediately prior to the Change in Control;
(VI) the failure by the Company to continue
to provide the
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<PAGE> 21
Executive with benefits substantially similar to those
enjoyed by the Executive under any of the Company's pension,
savings, life insurance, medical, health and accident, or
disability plans in which the Executive was participating
immediately prior to the Change in Control (except for across
the board changes similarly affecting all senior executives of
the Company and all senior executives of 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 Executive of any material fringe
benefit or perquisite enjoyed by the Executive at the time of
the Change in Control, or the failure by the Company to
provide the Executive with the number of paid vacation days to
which the Executive 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
(VII) any purported termination of the
Executive's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
7.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive'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 Executive that Good Reason exists shall be
presumed to be correct unless the Company establishes to the Committee by clear
and convincing evidence that Good Reason does not exist.
(R) "Gross-Up Payment" shall have the meaning set forth in
Section 6.2 hereof.
(S) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(T) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange
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<PAGE> 22
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.
(U) "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:
(I) the Company enters into an agreement,
the consummation of which would result in the occurrence of a
Change in Control;
(II) 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;
(III) 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
(IV) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(V) "Retirement" shall, for purposes of Section 4 hereof, be
deemed the reason for the termination by the Executive of the Executive's
employment if such employment is terminated after completion of ten (10) years
of service with the Company and attainment of age fifty-five (55).
(W) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(X) "SRP" shall have the meaning set forth in Section 6.1
hereof.
(Y) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(Z) "Term" shall mean the period of time described in Section
2 hereof
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<PAGE> 23
(including any extension, continuation or termination described therein).
(AA) "Thrift Plan" shall have the meaning set forth in
Section 6.1 hereof.
(BB) "Total Payments" shall mean those payments so described
in Section 6.2 hereof.
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<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date above first written.
BAKER HUGHES INCORPORATED
By: /s/ JOHN F. MAHER
---------------------------------
John F. Maher
Chairman - Compensation
Committee of the Board of
Directors
EXECUTIVE:
---------
/s/ DAVID H. BARR
------------------------------------
DAVID H. BARR
Address:
------------------------------------
------------------------------------
------------------------------------
(Please print carefully)
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.3
<SEQUENCE>4
<DESCRIPTION>SEVERANCE AGMT. - BAKER HUGHES & M. GLEN BASSETT
<TEXT>
<PAGE> 1
EXHIBIT 10.3
SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of July 23, 1997, is made by and
between BAKER HUGHES INCORPORATED, a Delaware corporation (the "Company"), and
M. GLEN BASSETT (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to foster the continued employment of key
management personnel; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive hereby agree
as follows:
1. Defined Terms. The definitions of capitalized terms used
in this Agreement are provided in the last Section hereof.
2. Term of Agreement. Subject to the provisions of Section
12.2 hereof, the Term of this Agreement shall commence on the date hereof and
shall continue in effect through December 31, 1999; provided, however, that
commencing on January 1, 1998 and each January 1 thereafter (an "Extension
Date"), the Term shall automatically be extended for one additional year (i.e.,
resulting in a two-year Term on the Extension Date) unless, not later than
September 30 of the year preceding the
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<PAGE> 2
Extension Date, the Company or the Executive shall have given notice not to
extend the Term; and further provided, however, that if a Change in Control
shall have occurred during the Term, the Term shall expire no earlier than
twenty- four (24) months beyond the month in which such Change in Control
occurred.
3. Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the Severance Payments
and the other payments and benefits described herein. Except as provided in
Section 9.1 hereof, no Severance Payments shall be payable under this Agreement
unless there shall have been (or, under the terms of the second sentence of
Section 6.1 hereof, there shall be deemed to have been) a termination of the
Executive's employment with the Company following a Change in Control and
during the Term. This Agreement shall not be construed as creating an express
or implied contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have any right
to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive's employment for any
reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during
any period that the Executive fails to perform the Executive's full-time duties
with the
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<PAGE> 3
Company as a result of incapacity due to physical or mental illness, the
Company shall pay the Executive's full salary to the Executive at the rate in
effect at the commencement of any such period, together with all compensation
and benefits payable to the Executive under the terms of any compensation or
benefit plan, program or arrangement maintained by the Company during such
period, until the Executive's employment is terminated by the Company for
Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
the Executive's full salary to the Executive through the Date of Termination at
the rate in effect immediately prior to the Date of Termination or, if higher,
the rate in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, together with all compensation and
benefits payable to the Executive through the Date of Termination under the
terms of the Company's compensation and benefit plans, programs or arrangements
as in effect immediately prior to the Date of Termination or, if more favorable
to the Executive, as in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
to the Executive the Executive's normal post-termination compensation and
benefits as such payments become due. Such post-termination compensation and
benefits shall be determined under, and paid in accordance with, the Company's
retirement, insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Date of Termination or, if
more favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good Reason.
5.4 Upon the occurrence of a Change in Control all options to
acquire shares of Company stock, all shares of restricted Company stock and all
other equity or
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<PAGE> 4
phantom equity incentives held by the Executive under any plan of the Company
(including, but not limited to, the Company's 1995 Stock Award Plan (and the
Stock Matching Programs thereunder), 1993 Stock Option Plan, 1993 Stock Bonus
Plan and 1991 Stock Bonus Plan) shall become immediately vested, exercisable
and nonforfeitable and all conditions thereof (including, but not limited to,
any required holding periods) shall be deemed to have been satisfied.
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<PAGE> 5
6. Severance Payments.
6.1 If the Executive's employment is terminated following a
Change in Control and during the Term, other than (A) by the Company for Cause,
(B) by reason of death or Disability, or (C) by the Executive without Good
Reason, then, the Company shall pay the Executive the amounts, and provide the
Executive the benefits, described in this Section 6.1 ("Severance Payments")
and Section 6.2, in addition to any payments and benefits to which the
Executive is entitled under Section 5 hereof. For purposes of this Agreement,
the Executive's employment shall be deemed to have been terminated following a
Change in Control by the Company without Cause or by the Executive with Good
Reason, if (i) the Executive'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) the Executive terminates his 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 such Person described in clause
(i), or (iii) the Executive's employment is terminated by the Company without
Cause or by the Executive 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). For purposes of any determination regarding the
applicability of the immediately preceding sentence, any position taken by the
Executive shall be presumed to be correct unless the Company establishes to the
Committee by clear and convincing evidence that such position is not correct.
(A) In lieu of any further salary payments
to the Executive for periods subsequent to the Date of Termination and
in lieu of any severance benefit otherwise payable to the Executive,
the Company shall pay to the
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<PAGE> 6
Executive a lump sum severance payment, in cash, equal to three times the sum
of (i) the Executive's base salary as in effect immediately prior to the Date
of Termination or, if higher, in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, and (ii) the
average annual bonus earned by the Executive pursuant to any annual bonus or
incentive plan maintained by the Company in respect of the three fiscal years
ending immediately prior to the fiscal year in which occurs the Date of
Termination or, if higher, immediately prior to the fiscal year in which occurs
the first event or circumstance constituting Good Reason; provided, that if the
Executive has not participated in an annual bonus or incentive plan maintained
by the Company for the entirety of such three-year period, the amount referred
to in this clause (ii) shall be calculated using such lesser number of bonuses
as have been actually earned by the Executive in respect of such lesser period.
(B) For the thirty-six (36) month period immediately
following the Date of Termination, the Company shall arrange to provide the
Executive and his dependents life, disability, accident and health insurance
benefits and perquisites (including, but not limited to, executive life
insurance, club memberships, financial planning and tax preparation, annual
physical examination and charitable contributions), in each case, substantially
similar to those provided to the Executive and his dependents immediately prior
to the Date of Termination or, if more favorable to the Executive, those
provided to the Executive and his dependents immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, at no greater
cost to the Executive than the cost to the Executive immediately prior to such
date or occurrence; provided, however, that, unless the Executive consents to a
different method (after taking into account the effect of such method on the
calculation of "parachute payments" pursuant to Section 6.2 hereof), such
health
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<PAGE> 7
insurance benefits shall be provided through a third-party insurer. Benefits
otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be
reduced to the extent benefits of the same type are received by or made
available to the Executive during the thirty-six (36) month period following
the Executive's termination of employment (and any such benefits received by or
made available to the Executive shall be reported to the Company by the
Executive); provided, however, that the Company shall reimburse the Executive
for the excess, if any, of the cost of such benefits to the Executive over such
cost immediately prior to the Date of Termination or, if more favorable to the
Executive, the first occurrence of an event or circumstance constituting Good
Reason.
(C) Notwithstanding any provision of the Baker
Hughes Incorporated 1995 Employee Annual Incentive Compensation Plan (the
"Annual Incentive Plan"), the Company shall pay to the Executive a lump sum
amount, in cash, equal to the sum of (i) any unpaid incentive compensation
which has been allocated or awarded to the Executive for a completed fiscal
year or other measuring period preceding the Date of Termination under the
Annual Incentive Plan and which, as of the Date of Termination, is contingent
only upon the continued employment of the Executive to a subsequent date, and
(ii) a pro rata portion to the Date of Termination of the aggregate value of
all contingent incentive compensation awards to the Executive for all then
uncompleted periods under the Annual Incentive Plan, calculated as to each such
award by multiplying the award that the Executive would have earned on the last
day of the performance award period, assuming the achievement, at the expected
value target level, of the individual and corporate performance goals
established with respect to such award, by the fraction obtained by dividing
the number of full months and any fractional portion of a month during such
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<PAGE> 8
performance award period through the Date of Termination by the total number of
months contained in such performance award period; provided, however, that if
such termination of employment occurs during the same year in which the Change
in Control occurs, the pro-rata bonus payment referred to in clause (ii) above
shall be offset by any payments received under the Annual Incentive Plan in
connection with such Change in Control.
(D) In addition to the retirement benefits to which
the Executive is entitled under the Company's Thrift Plan (the "Thrift Plan")
and the Company's Supplemental Retirement Plan (the "SRP"), the Company shall
pay the Executive a lump sum amount, in cash, equal to the present value of the
employer-provided contributions, deferrals and allocations the Executive would
have received had he continued to participate, after the Date of Termination,
in the Thrift Plan and the SRP for three (3) additional years, assuming for
this purpose that (i) the Executive earned compensation for purposes of the
Thrift Plan and SRP during such three-year period the amount used to calculate
the Executive's severance payment under subparagraph (A) of this Section 6.1,
and (ii) the percentages of contributions, deferrals and allocations made under
the Thrift Plan and the SRP by or on behalf of the Executive during such
three-year period are the same percentages of contributions, deferrals and
allocations in effect on the date of the Change in Control or the Date of
Termination, whichever is more favorable to the Executive.
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<PAGE> 9
(E) If the Executive would have become
entitled to benefits under the Company's post-retirement health care
or life insurance plans, as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, had the Executive's employment terminated at
any time during the period of thirty-six (36) months after the Date of
Termination, the Company shall provide such post-retirement health
care or life insurance benefits to the Executive and the Executive's
dependents commencing on the later of (i) the date on which such
coverage would have first become available and (ii) the date on which
benefits described in subsection (B) of this Section 6.1 terminate.
(F) The Company shall provide the Executive
with outplacement services suitable to the Executive's position for a
period of three years or, if earlier, until the first acceptance by
the Executive of an offer of employment.
6.2 (A) Whether or not the Executive becomes entitled
to the Severance Payments, if any of the payments or benefits received or to be
received by the Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or any Person affiliated
with the Company or such Person) (such payments or benefits, excluding the
Gross-Up Payment, being hereinafter referred to as the "Total Payments") will
be subject to the Excise Tax, the Company shall pay to the Executive an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Executive, after deduction of any Excise Tax on the Total Payments and any
federal, state and local income and employment taxes and Excise Tax upon the
Gross-Up Payment, shall be equal to the Total Payments.
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<PAGE> 10
(B) For purposes of determining whether any of
the Total Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) all of the Total Payments shall be treated as "parachute
payments" (within the meaning of section 280G(b)(2) of the Code) unless, in the
opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive
and selected by the accounting firm which was, immediately prior to the Change
in Control, the Company's independent auditor (the "Auditor"), such payments or
benefits (in whole or in part) do not constitute parachute payments, including
by reason of section 280G(b)(4)(A) of the Code, (ii) all "excess parachute
payments" within the meaning of section 280G(b)(l) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section 280G(b)(4)(B) of the
Code) in excess of the Base Amount allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax, and (iii) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the
Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's residence on the
Date of Termination (or if there is no Date of Termination, then the date on
which the Gross-Up Payment is calculated for purposes of this Section 6.2), net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
(C) In the event that the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Executive shall repay to the Company,
within five (5) business days
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<PAGE> 11
following the time that the amount of such reduction in the Excise Tax is
finally determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable to the Excise
Tax and federal, state and local income and employment taxes imposed on the
Gross-Up Payment being repaid by the Executive, to the extent that such
repayment results in a reduction in the Excise Tax and a dollar-for-dollar
reduction in the Executive's taxable income and wages for purposes of federal,
state and local income and employment taxes, plus interest on the amount of
such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an additional
Gross-Up Payment in respect of such excess (plus any interest, penalties or
additions payable by the Executive with respect to such excess) within five (5)
business days following the time that the amount of such excess is finally
determined. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments.
6.3 The payments provided in subsections (A), (C) and (D) of
Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the
fifth day following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or before such day,
the Company shall pay to the Executive on such day an estimate, as determined
in good faith by the Executive or, in the case of payments under Section 6.2
hereof, in accordance with Section 6.2 hereof, of the minimum amount of such
payments to which the Executive is clearly entitled and shall pay the remainder
of such payments (together with interest on the unpaid remainder (or on all
such payments to the extent the Company fails to make such
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<PAGE> 12
payments when due) at 120% of the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later
than the thirtieth (30th) day after the Date of Termination. In the event that
the amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at 120% of the rate provided in section 1274(b)(2)(B)
of the Code), but only to the extent such amount has not been paid by the
Executive pursuant to Section 6.2(C) above. At the time that payments are made
under this Agreement, the Company shall provide the Executive with a written
statement setting forth the manner in which such payments were calculated and
the basis for such calculations including, without limitation, any opinions or
other advice the Company has received from Tax Counsel, the Auditor or other
advisors or consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal
fees and expenses incurred by the Executive in disputing in good faith any
issue hereunder relating to the termination of the Executive's employment, in
seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
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<PAGE> 13
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board which was called and held for the
purpose of considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive was guilty of conduct set forth in clause (i) or
(ii) of the definition of Cause herein, and specifying the particulars thereof
in detail.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
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<PAGE> 14
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of an arbitrator or a court
of competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice
of dispute given by the Executive only if such notice is given in good faith
and the Executive pursues the resolution of such dispute with reasonable
diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation,
benefit and insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given or those plans in which the
Executive was participating immediately prior to the first occurrence of an
event or circumstance giving rise to the Notice of Termination, if more
favorable to the Executive, until the Date of Termination, as determined in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
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<PAGE> 15
8. No Mitigation. The Company agrees that, if the
Executive's employment with the Company terminates during the Term, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Sections
5, 6 or 7.4 hereof. Further, the amount of any payment or benefit provided for
in this Agreement (other than Section 6.1(B) hereof but including (but not
limited to) Section 7.4 hereof) shall not be reduced by any compensation earned
by the Executive as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Executive to
the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death
of the Executive) if the Executive had continued to
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<PAGE> 16
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive's estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed,
if to the Executive, to the address inserted below the Executive's signature on
the final page hereof and, if to the Company, to the address set forth below,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall
be effective only upon actual receipt:
To the Company:
3900 Essex Lane
Suite 1200
Houston, Texas 77027
Attention: General Counsel
11. Miscellaneous. Except as otherwise specifically provided
in Section 12.2 below, no provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of any lack of compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement supersedes any
other agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof which have been made by
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<PAGE> 17
either party; provided, however, that this Agreement shall supersede any
agreement setting forth the terms and conditions of the Executive's employment
with the Company only in the event that the Executive's employment with the
Company is terminated on or following a Change in Control, by the Company other
than for Cause or by the Executive other than for Good Reason; and provided
further that all agreements otherwise superseded by this Agreement shall be
automatically reinstated with full force and effect to the extent this
Agreement is terminated or otherwise rendered inapplicable or amended in
accordance with Section 12.2 hereof. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Texas. All references to sections of the Exchange Act or the Code
shall be deemed also to refer to any successor provisions to such sections.
Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law and any additional
withholding to which the Executive has agreed. The obligations of the Company
and the Executive under this Agreement which by their nature may require either
partial or total performance after the expiration of the Term (including,
without limitation, those under Sections 6 and 7 hereof) shall survive such
expiration.
12. Validity; Pooling.
12.1 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
12.2 Pooling. 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 Section 15(G)(III) and (C) individuals who satisfy the
requirements in clauses (i) and (ii) below constitute more than two-thirds
(2/3) of the number of directors of the entity surviving such transaction and
the parent thereof, if any: individuals who
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<PAGE> 18
(i) immediately prior to such transaction constitute the Board and (ii) on the
date hereof constitute the Board 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 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 Agreement
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 Section 12.2 does not preserve the availability of such accounting
treatment, then, to the extent that any provision or combination of provisions
of the Agreement disqualifies the transaction as a "pooling" transaction
(including, if applicable, the entire Agreement), the Board shall have the
right, by sending written notice to the Executive prior to the Change in
Control, to unilaterally amend (without the consent of the Executive) 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 under this Section 12.2 shall be made by the Board prior to the
Change in Control, 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.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Committee and shall be in
writing.
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<PAGE> 19
Any denial by the Committee of a claim for benefits under this Agreement shall
be delivered to the Executive in writing within thirty (30) days after written
notice of the claim is provided to the Company in accordance with Section 10
and shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Committee shall afford a
reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Committee a
decision of the Committee within sixty (60) days after notification by the
Committee that the Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Houston, Texas in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the evidentiary standards
set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to
seek specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2
hereof.
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
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<PAGE> 20
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive'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 Executive pursuant to Section
7.1 hereof) after a written demand for substantial performance is delivered to
the Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties, or (ii) the willful engaging by the Executive 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 Executive's part shall
be deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive'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
Committee by clear and convincing evidence that Cause exists.
(G) 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
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<PAGE> 21
connection with a transaction described in clause (i) of
paragraph (III) below; or
(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 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 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 (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 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
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<PAGE> 22
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.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "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
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<PAGE> 23
Committee of the Board, 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 Committee shall not exceed six
(6).
(J) "Company" shall mean Baker Hughes Incorporated and,
except in determining under Section 15(G) hereof whether or not any Change in
Control of the Company has occurred, shall include any successor to its
business and/or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(K) "Date of Termination" shall have the meaning set forth
in Section 7.2 hereof.
(L) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the Executive's duties
with the Company for a period of six (6) consecutive months, the Company shall
have given the Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the Executive shall
not have returned to the full-time performance of the Executive's duties.
(M) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(O) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(P) "Extension Date" shall have the meaning set forth in
Section 2 hereof.
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<PAGE> 24
(Q) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (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 Date of Termination specified in the Notice of
Termination given in respect thereof:
(I) the assignment to the Executive of any
duties inconsistent with the Executive's status as a senior
executive officer of the Company or a substantial adverse
alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the
Change in Control;
(II) a reduction by the Company in the
Executive's annual base salary as in effect on the date hereof
or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all
senior executives of the Company and all senior executives of
any Person in control of the Company;
(III) the relocation of the Executive's
principal place of employment to a location more than 50 miles
from the Executive's principal place of employment immediately
prior to the Change in Control or the Company's requiring the
Executive 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
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<PAGE> 25
extent substantially consistent with the Executive's present
business travel obligations;
(IV) the failure by the Company to pay to
the Executive any portion of the Executive's current
compensation except pursuant to an across-the-board
compensation deferral similarly affecting all senior
executives of the Company and all senior executives of any
Person in control of the Company, or to pay to the Executive
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;
(V) the failure by the Company to continue
in effect any compensation plan in which the Executive
participates immediately prior to the Change in Control which
is material to the Executive's total compensation, including
but not limited to the Company's 1993 Stock Option Plan, 1993
Employee Stock Bonus Plan, 1991 Employee Stock Bonus Plan,
1995 Stock Award Plan (and the 1995, 1996 and 1997 Stock
Matching Programs thereunder and any subsequent Stock Matching
Programs in which the Executive participates), 1987
Convertible Debenture Plan and 1995 Employee Annual Incentive
Compensation Plan or any substitute plans adopted prior to the
Change in Control, 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 Executive'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 Executive's
participation relative to other participants, as existed
immediately prior to the Change in Control;
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<PAGE> 26
(VI) the failure by the Company to continue
to provide the Executive with benefits substantially similar
to those enjoyed by the Executive under any of the Company's
pension, savings, life insurance, medical, health and
accident, or disability plans in which the Executive was
participating immediately prior to the Change in Control
(except for across the board changes similarly affecting all
senior executives of the Company and all senior executives of
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
Executive of any material fringe benefit or perquisite enjoyed
by the Executive at the time of the Change in Control, or the
failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive 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
(VII) any purported termination of the
Executive's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
7.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive'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
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<PAGE> 27
Reason, any claim by the Executive that Good Reason exists shall be
presumed to be correct unless the Company establishes to the Committee by clear
and convincing evidence that Good Reason does not exist.
(R) "Gross-Up Payment" shall have the meaning set forth in
Section 6.2 hereof.
(S) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(T) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange 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.
(U) "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:
(I) the Company enters into an agreement,
the consummation of which would result in the occurrence of a
Change in Control;
(II) 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;
(III) 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
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<PAGE> 28
any securities acquired directly from the Company or its
affiliates); or
(IV) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(V) "Retirement" shall, for purposes of Section 4 hereof, be
deemed the reason for the termination by the Executive of the Executive's
employment if such employment is terminated after completion of ten (10) years
of service with the Company and attainment of age fifty-five (55).
(W) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(X) "SRP" shall have the meaning set forth in Section 6.1
hereof.
(Y) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(Z) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
(AA) "Thrift Plan" shall have the meaning set forth in
Section 6.1 hereof.
(BB) "Total Payments" shall mean those payments so described
in Section 6.2 hereof.
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<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date above first written.
BAKER HUGHES INCORPORATED
By: /s/ JOHN F. MAHER
------------------------------------
John F. Maher
Chairman - Compensation Committee
of the Board of Directors
EXECUTIVE:
---------
/s/ M. GLEN BASSETT
---------------------------------------
M. GLEN BASSETT
Address:
---------------------------------------
---------------------------------------
---------------------------------------
(Please print carefully)
-29-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>5
<DESCRIPTION>SEVERANCE AGMT. - BAKER HUGHES & JOSEPH F. BRADY
<TEXT>
<PAGE> 1
Exhibit 10.4
SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of July 23, 1997, is made by and
between BAKER HUGHES INCORPORATED, a Delaware corporation (the "Company"), and
JOSEPH F. BRADY (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to foster the continued employment of key
management personnel; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive hereby agree
as follows:
1. Defined Terms. The definitions of capitalized terms used
in this Agreement are provided in the last Section hereof.
2. Term of Agreement. Subject to the provisions of Section
12.2 hereof, the Term of this Agreement shall commence on the date hereof and
shall continue in effect through December 31, 1999; provided, however, that
commencing on January 1, 1998 and each January 1 thereafter (an "Extension
Date"), the Term shall automatically be extended for one additional year (i.e.,
resulting in a two-year Term on the Extension Date) unless, not later than
September 30 of the year preceding the Extension Date, the Company or the
Executive shall have given notice not to extend the Term; and further provided,
however, that if a Change in Control shall have occurred during the Term, the
Term shall expire no earlier than twenty-four (24) months beyond the month in
which such Change in Control occurred.
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<PAGE> 2
3. Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the Severance Payments
and the other payments and benefits described herein. Except as provided in
Section 9.1 hereof, no Severance Payments shall be payable under this Agreement
unless there shall have been (or, under the terms of the second sentence of
Section 6.1 hereof, there shall be deemed to have been) a termination of the
Executive's employment with the Company following a Change in Control and
during the Term. This Agreement shall not be construed as creating an express
or implied contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have any right
to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive's employment for any
reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during
any period that the Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or mental illness,
the Company shall pay the Executive's full salary to the Executive at the rate
in effect at the commencement of any such period, together with all
compensation and benefits payable to the Executive under the terms of any
compensation or benefit plan, program or arrangement maintained by the Company
during such period, until the Executive's employment is terminated by the
Company for Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
the
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<PAGE> 3
Executive's full salary to the Executive through the Date of Termination at the
rate in effect immediately prior to the Date of Termination or, if higher, the
rate in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, together with all compensation and
benefits payable to the Executive through the Date of Termination under the
terms of the Company's compensation and benefit plans, programs or arrangements
as in effect immediately prior to the Date of Termination or, if more favorable
to the Executive, as in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
to the Executive the Executive's normal post-termination compensation and
benefits as such payments become due. Such post-termination compensation and
benefits shall be determined under, and paid in accordance with, the Company's
retirement, insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Date of Termination or, if
more favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good Reason.
5.4 Upon the occurrence of a Change in Control all options to
acquire shares of Company stock, all shares of restricted Company stock and all
other equity or phantom equity incentives held by the Executive under any plan
of the Company (including, but not limited to, the Company's 1995 Stock Award
Plan (and the Stock Matching Programs thereunder), 1993 Stock Option Plan, 1993
Stock Bonus Plan and 1991 Stock Bonus Plan) shall become immediately vested,
exercisable and nonforfeitable and all conditions thereof (including, but not
limited to, any required holding periods) shall be deemed to have been
satisfied.
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<PAGE> 4
6. Severance Payments.
6.1 If the Executive's employment is terminated following a
Change in Control and during the Term, other than (A) by the Company for Cause,
(B) by reason of death or Disability, or (C) by the Executive without Good
Reason, then, the Company shall pay the Executive the amounts, and provide the
Executive the benefits, described in this Section 6.1 ("Severance Payments")
and Section 6.2, in addition to any payments and benefits to which the
Executive is entitled under Section 5 hereof. For purposes of this Agreement,
the Executive's employment shall be deemed to have been terminated following a
Change in Control by the Company without Cause or by the Executive with Good
Reason, if (i) the Executive'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) the Executive terminates his 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 such Person described in clause
(i), or (iii) the Executive's employment is terminated by the Company without
Cause or by the Executive 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). For purposes of any determination regarding the
applicability of the immediately preceding sentence, any position taken by the
Executive shall be presumed to be correct unless the Company establishes to the
Committee by clear and convincing evidence that such position is not correct.
(A) In lieu of any further salary payments
to the Executive for periods subsequent to the Date of Termination and
in lieu of any severance benefit otherwise payable to the Executive,
the Company shall pay to the Executive a lump sum severance payment,
in cash, equal to three times the sum of (i) the Executive's base
salary as in effect immediately prior to the Date of Termination or,
if higher, in effect immediately prior to the first occurrence of an
event or
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<PAGE> 5
circumstance constituting Good Reason, and (ii) the average annual
bonus earned by the Executive pursuant to any annual bonus or
incentive plan maintained by the Company in respect of the three
fiscal years ending immediately prior to the fiscal year in which
occurs the Date of Termination or, if higher, immediately prior to the
fiscal year in which occurs the first event or circumstance
constituting Good Reason; provided, that if the Executive has not
participated in an annual bonus or incentive plan maintained by the
Company for the entirety of such three-year period, the amount
referred to in this clause (ii) shall be calculated using such lesser
number of bonuses as have been actually earned by the Executive in
respect of such lesser period.
(B) For the thirty-six (36) month period
immediately following the Date of Termination, the Company shall
arrange to provide the Executive and his dependents life, disability,
accident and health insurance benefits and perquisites (including, but
not limited to, executive life insurance, club memberships, financial
planning and tax preparation, annual physical examination and
charitable contributions), in each case, substantially similar to
those provided to the Executive and his dependents immediately prior
to the Date of Termination or, if more favorable to the Executive,
those provided to the Executive and his dependents immediately prior
to the first occurrence of an event or circumstance constituting Good
Reason, at no greater cost to the Executive than the cost to the
Executive immediately prior to such date or occurrence; provided,
however, that, unless the Executive consents to a different method
(after taking into account the effect of such method on the
calculation of "parachute payments" pursuant to Section 6.2 hereof),
such health insurance benefits shall be provided through a third-party
insurer. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1(B) shall be reduced to the extent benefits of the
same type are received by or made available to the Executive during
the thirty-six (36) month period following the Executive's termination
of employment (and any such benefits received by or made available to
the Executive shall be reported to the Company by the Executive);
provided, however, that the Company shall reimburse the
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<PAGE> 6
Executive for the excess, if any, of the cost of such benefits to the
Executive over such cost immediately prior to the Date of Termination
or, if more favorable to the Executive, the first occurrence of an
event or circumstance constituting Good Reason.
(C) Notwithstanding any provision of the
Baker Hughes Incorporated 1995 Employee Annual Incentive Compensation
Plan (the "Annual Incentive Plan"), the Company shall pay to the
Executive a lump sum amount, in cash, equal to the sum of (i) any
unpaid incentive compensation which has been allocated or awarded to
the Executive for a completed fiscal year or other measuring period
preceding the Date of Termination under the Annual Incentive Plan and
which, as of the Date of Termination, is contingent only upon the
continued employment of the Executive to a subsequent date, and (ii) a
pro rata portion to the Date of Termination of the aggregate value of
all contingent incentive compensation awards to the Executive for all
then uncompleted periods under the Annual Incentive Plan, calculated
as to each such award by multiplying the award that the Executive
would have earned on the last day of the performance award period,
assuming the achievement, at the expected value target level, of the
individual and corporate performance goals established with respect to
such award, by the fraction obtained by dividing the number of full
months and any fractional portion of a month during such performance
award period through the Date of Termination by the total number of
months contained in such performance award period; provided, however,
that if such termination of employment occurs during the same year in
which the Change in Control occurs, the pro-rata bonus payment
referred to in clause (ii) above shall be offset by any payments
received under the Annual Incentive Plan in connection with such
Change in Control.
(D) In addition to the retirement benefits
to which the Executive is entitled under the Company's Thrift Plan
(the "Thrift Plan") and the Company's Supplemental Retirement Plan
(the "SRP"), the Company shall pay the Executive a lump sum amount, in
cash, equal to the present value of the employer-provided
contributions, deferrals and allocations the Executive would have re-
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<PAGE> 7
ceived had he continued to participate, after the Date of Termination,
in the Thrift Plan and the SRP for three (3) additional years,
assuming for this purpose that (i) the Executive earned compensation
for purposes of the Thrift Plan and SRP during such three-year period
the amount used to calculate the Executive's severance payment under
subparagraph (A) of this Section 6.1, and (ii) the percentages of
contributions, deferrals and allocations made under the Thrift Plan
and the SRP by or on behalf of the Executive during such three-year
period are the same percentages of contributions, deferrals and
allocations in effect on the date of the Change in Control or the Date
of Termination, whichever is more favorable to the Executive.
(E) If the Executive would have become
entitled to benefits under the Company's post-retirement health care
or life insurance plans, as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, had the Executive's employment terminated at
any time during the period of thirty-six (36) months after the Date of
Termination, the Company shall provide such post-retirement health
care or life insurance benefits to the Executive and the Executive's
dependents commencing on the later of (i) the date on which such
coverage would have first become available and (ii) the date on which
benefits described in subsection (B) of this Section 6.1 terminate.
(F) The Company shall provide the Executive
with outplacement services suitable to the Executive's position for a
period of three years or, if earlier, until the first acceptance by
the Executive of an offer of employment.
6.2 (A) Whether or not the Executive becomes entitled
to the Severance Payments, if any of the payments or benefits received or to be
received by the Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change
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<PAGE> 8
in Control or any Person affiliated with the Company or such Person) (such
payments or benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the "Total Payments") will be subject to the Excise Tax, the
Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after deduction
of any Excise Tax on the Total Payments and any federal, state and local income
and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal
to the Total Payments.
(B) For purposes of determining whether any of
the Total Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) all of the Total Payments shall be treated as "parachute
payments" (within the meaning of section 280G(b)(2) of the Code) unless, in the
opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive
and selected by the accounting firm which was, immediately prior to the Change
in Control, the Company's independent auditor (the "Auditor"), such payments or
benefits (in whole or in part) do not constitute parachute payments, including
by reason of section 280G(b)(4)(A) of the Code, (ii) all "excess parachute
payments" within the meaning of section 280G(b)(l) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section 280G(b)(4)(B) of the
Code) in excess of the Base Amount allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax, and (iii) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the
Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's residence on the
Date of Termination (or if there is no Date of Termination, then the date on
which the Gross-Up Payment is calculated for purposes of this Section 6.2), net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
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<PAGE> 9
(C) In the event that the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Executive shall repay to the Company,
within five (5) business days following the time that the amount of such
reduction in the Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the Executive,
to the extent that such repayment results in a reduction in the Excise Tax and
a dollar-for-dollar reduction in the Executive's taxable income and wages for
purposes of federal, state and local income and employment taxes, plus interest
on the amount of such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder in calculating the Gross-Up
Payment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with respect to such
excess) within five (5) business days following the time that the amount of
such excess is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of liability for Excise
Tax with respect to the Total Payments.
6.3 The payments provided in subsections (A), (C) and (D) of
Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the
fifth day following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or before such day,
the Company shall pay to the Executive on such day an estimate, as determined
in good faith by the Executive or, in the case of payments under Section 6.2
hereof, in accordance with Section 6.2 hereof, of the minimum amount of such
payments to which the Executive is clearly entitled and shall pay the remainder
of such payments (together with interest on the unpaid remainder (or on all
such payments to the extent the Company fails to make such payments when due)
at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be deter-
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<PAGE> 10
mined but in no event later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on the fifth (5th)
business day after demand by the Company (together with interest at 120% of the
rate provided in section 1274(b)(2)(B) of the Code), but only to the extent
such amount has not been paid by the Executive pursuant to Section 6.2(C)
above. At the time that payments are made under this Agreement, the Company
shall provide the Executive with a written statement setting forth the manner
in which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Company has
received from Tax Counsel, the Auditor or other advisors or consultants (and
any such opinions or advice which are in writing shall be attached to the
statement).
6.4 The Company also shall pay to the Executive all legal
fees and expenses incurred by the Executive in disputing in good faith any
issue hereunder relating to the termination of the Executive's employment, in
seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
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7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board which was called and held for the
purpose of considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive was guilty of conduct set forth in clause (i) or
(ii) of the definition of Cause herein, and specifying the particulars thereof
in detail.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies
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<PAGE> 12
the other party that a dispute exists concerning the termination, the Date of
Termination shall be extended until the earlier of (i) the date on which the
Term ends or (ii) the date on which the dispute is finally resolved, either by
mutual written agreement of the parties or by a final judgment, order or decree
of an arbitrator or a court of competent jurisdiction (which is not appealable
or with respect to which the time for appeal therefrom has expired and no
appeal has been perfected); provided, however, that the Date of Termination
shall be extended by a notice of dispute given by the Executive only if such
notice is given in good faith and the Executive pursues the resolution of such
dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation,
benefit and insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given or those plans in which the
Executive was participating immediately prior to the first occurrence of an
event or circumstance giving rise to the Notice of Termination, if more
favorable to the Executive, until the Date of Termination, as determined in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the
Executive's employment with the Company terminates during the Term, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Sections
5, 6 or 7.4 hereof. Further, the amount of any payment or benefit provided for
in this Agreement (other than Section 6.1(B) hereof but including (but not
limited to) Section 7.4 hereof) shall not be reduced by any compensation earned
by the Executive as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Executive to
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the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death
of the Executive) if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of
the Executive's estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed,
if to the Executive, to the address inserted below the Executive's signature on
the final page hereof and, if to the Company, to the address set forth below,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall
be
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effective only upon actual receipt:
To the Company:
3900 Essex Lane
Suite 1200
Houston, Texas 77027
Attention: General Counsel
11. Miscellaneous. Except as otherwise specifically provided
in Section 12.2 below, no provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of any lack of compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement supersedes any
other agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof which have been made by either party;
provided, however, that this Agreement shall supersede any agreement setting
forth the terms and conditions of the Executive's employment with the Company
only in the event that the Executive's employment with the Company is
terminated on or following a Change in Control, by the Company other than for
Cause or by the Executive other than for Good Reason; and provided further that
all agreements otherwise superseded by this Agreement shall be automatically
reinstated with full force and effect to the extent this Agreement is
terminated or otherwise rendered inapplicable or amended in accordance with
Section 12.2 hereof. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law and any additional withholding to
which the Executive has agreed. The obligations of the Company and the
Executive under this Agreement which
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<PAGE> 15
by their nature may require either partial or total performance after the
expiration of the Term (including, without limitation, those under Sections 6
and 7 hereof) shall survive such expiration.
12. Validity; Pooling.
12.1 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
12.2 Pooling. 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 Section 15(G)(III) and (C) individuals who satisfy the
requirements in clauses (i) and (ii) below constitute more than two-thirds
(2/3) of the number of directors of the entity surviving such transaction and
the parent thereof, if any: individuals who (i) immediately prior to such
transaction constitute the Board and (ii) on the date hereof constitute the
Board 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 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 Agreement 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 Section 12.2 does not preserve the
availability of such accounting treatment, then, to the extent that any
provision or combination of provisions of the Agreement disqualifies the
transaction as a "pooling" transaction (including, if applicable, the entire
Agreement), the Board shall have the right, by sending written notice to the
Executive prior to the Change in Control, to unilaterally amend (without the
consent of the Executive) 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 under this Section 12.2 shall
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be made by the Board prior to the Change in Control, 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.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Committee and shall be in
writing. Any denial by the Committee of a claim for benefits under this
Agreement shall be delivered to the Executive in writing within thirty (30)
days after written notice of the claim is provided to the Company in accordance
with Section 10 and shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Committee shall afford
a reasonable opportunity to the Executive for a review of the decision denying
a claim and shall further allow the Executive to appeal to the Committee a
decision of the Committee within sixty (60) days after notification by the
Committee that the Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Houston, Texas in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the evidentiary standards
set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to
seek specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
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(A) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2
hereof.
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3)
of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive'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 Executive pursuant to Section
7.1 hereof) after a written demand for substantial performance is delivered to
the Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties, or (ii) the willful engaging by the Executive 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 Executive's part shall
be deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive'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
Committee by clear and convincing evidence that Cause exists.
(G) 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
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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 (III) below; or
(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 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 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 (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 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 Bene-
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<PAGE> 19
ficially 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.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "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, 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
Committee
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<PAGE> 20
shall not exceed six (6).
(J) "Company" shall mean Baker Hughes Incorporated and,
except in determining under Section 15(G) hereof whether or not any Change in
Control of the Company has occurred, shall include any successor to its
business and/or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(K) "Date of Termination" shall have the meaning set forth in
Section 7.2 hereof.
(L) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the Executive's duties
with the Company for a period of six (6) consecutive months, the Company shall
have given the Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the Executive shall
not have returned to the full-time performance of the Executive's duties.
(M) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(O) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(P) "Extension Date" shall have the meaning set forth in
Section 2 hereof.
(Q) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (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 Date of Termination specified in the Notice of
Termination given in respect thereof:
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<PAGE> 21
(I) the assignment to the Executive of any
duties inconsistent with the Executive's status as a senior
executive officer of the Company or a substantial adverse
alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the
Change in Control;
(II) a reduction by the Company in the
Executive's annual base salary as in effect on the date hereof
or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all
senior executives of the Company and all senior executives of
any Person in control of the Company;
(III) the relocation of the Executive's
principal place of employment to a location more than 50 miles
from the Executive's principal place of employment immediately
prior to the Change in Control or the Company's requiring the
Executive 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 Executive's present business
travel obligations;
(IV) the failure by the Company to pay to
the Executive any portion of the Executive's current
compensation except pursuant to an across-the-board
compensation deferral similarly affecting all senior
executives of the Company and all senior executives of any
Person in control of the Company, or to pay to the Executive
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;
(V) the failure by the Company to continue
in effect any compensation plan in which the Executive
participates immediately prior to the Change in Control which
is material to the Executive's total compensation, including
but not limited to the Company's 1993 Stock Option Plan, 1993
Employee Stock Bonus Plan, 1991 Employee Stock
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<PAGE> 22
Bonus Plan, 1995 Stock Award Plan (and the 1995, 1996 and 1997
Stock Matching Programs thereunder and any subsequent Stock
Matching Programs in which the Executive participates), 1987
Convertible Debenture Plan and 1995 Employee Annual Incentive
Compensation Plan or any substitute plans adopted prior to the
Change in Control, 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 Executive'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 Executive's
participation relative to other participants, as existed
immediately prior to the Change in Control;
(VI) the failure by the Company to continue
to provide the Executive with benefits substantially similar
to those enjoyed by the Executive under any of the Company's
pension, savings, life insurance, medical, health and
accident, or disability plans in which the Executive was
participating immediately prior to the Change in Control
(except for across the board changes similarly affecting all
senior executives of the Company and all senior executives of
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
Executive of any material fringe benefit or perquisite enjoyed
by the Executive at the time of the Change in Control, or the
failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive 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
(VII) any purported termination of the
Executive's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
7.1 hereof; for purposes of this
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<PAGE> 23
Agreement, no such purported termination shall be effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive'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 Executive that Good Reason exists shall be
presumed to be correct unless the Company establishes to the Committee by clear
and convincing evidence that Good Reason does not exist.
(R) "Gross-Up Payment" shall have the meaning set forth in
Section 6.2 hereof.
(S) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(T) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange 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.
(U) "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:
(I) the Company enters into an agreement,
the consummation of which would result in the occurrence of a
Change in Control;
(II) 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;
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<PAGE> 24
(III) 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
(IV) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(V) "Retirement" shall, for purposes of Section 4 hereof, be
deemed the reason for the termination by the Executive of the Executive's
employment if such employment is terminated after completion of ten (10) years
of service with the Company and attainment of age fifty-five (55).
(W) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(X) "SRP" shall have the meaning set forth in Section 6.1
hereof.
(Y) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(Z) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
(AA) "Thrift Plan" shall have the meaning set forth in
Section 6.1 hereof.
(BB) "Total Payments" shall mean those payments so described
in Section 6.2 hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date above first written.
BAKER HUGHES INCORPORATED
By: /s/ JOHN F. MAHER
------------------------
John F. Maher
Chairman - Compensation
Committee of the Board
of Directors
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<PAGE> 25
EXECUTIVE:
---------
/s/ JOSEPH F. BRADY
---------------------------
JOSEPH F. BRADY
Address:
---------------------------
---------------------------
---------------------------
(Please print carefully)
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.5
<SEQUENCE>6
<DESCRIPTION>SEVERANCE AGMT. - BAKER HUGHES & MATTHEW G. DICK
<TEXT>
<PAGE> 1
EXHIBIT 10.5
SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of July 23, 1997, is made by and
between BAKER HUGHES INCORPORATED, a Delaware corporation (the "Company"), and
MATTHEW G. DICK (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to foster the continued employment of key
management personnel; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive hereby agree
as follows:
1. Defined Terms. The definitions of capitalized terms used
in this Agreement are provided in the last Section hereof.
2. Term of Agreement. Subject to the provisions of Section
12.2 hereof, the Term of this Agreement shall commence on the date hereof and
shall continue in effect through December 31, 1999; provided, however, that
commencing on January 1, 1998 and each January 1 thereafter (an "Extension
Date"), the Term shall automatically be extended for one additional year (i.e.,
resulting in a two-year Term on the Extension Date) unless, not later than
September 30 of the year preceding the Extension Date, the Company or the
Executive shall have given notice not to extend the Term; and further provided,
however, that if a Change in Control shall have occurred during the Term, the
Term shall expire no earlier than twenty-four (24) months beyond the month in
which such Change in Control occurred.
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<PAGE> 2
3. Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the Severance Payments
and the other payments and benefits described herein. Except as provided in
Section 9.1 hereof, no Severance Payments shall be payable under this Agreement
unless there shall have been (or, under the terms of the second sentence of
Section 6.1 hereof, there shall be deemed to have been) a termination of the
Executive's employment with the Company following a Change in Control and
during the Term. This Agreement shall not be construed as creating an express
or implied contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have any right
to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive's employment for any
reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during
any period that the Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or mental illness,
the Company shall pay the Executive's full salary to the Executive at the rate
in effect at the commencement of any such period, together with all
compensation and benefits payable to the Executive under the terms of any
compensation or benefit plan, program or arrangement maintained by the Company
during such period, until the Executive's employment is terminated by the
Company for Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
the
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<PAGE> 3
Executive's full salary to the Executive through the Date of Termination at the
rate in effect immediately prior to the Date of Termination or, if higher, the
rate in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, together with all compensation and
benefits payable to the Executive through the Date of Termination under the
terms of the Company's compensation and benefit plans, programs or arrangements
as in effect immediately prior to the Date of Termination or, if more favorable
to the Executive, as in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
to the Executive the Executive's normal post-termination compensation and
benefits as such payments become due. Such post-termination compensation and
benefits shall be determined under, and paid in accordance with, the Company's
retirement, insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Date of Termination or, if
more favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good Reason.
5.4 Upon the occurrence of a Change in Control all options to
acquire shares of Company stock, all shares of restricted Company stock and all
other equity or phantom equity incentives held by the Executive under any plan
of the Company (including, but not limited to, the Company's 1995 Stock Award
Plan (and the Stock Matching Programs thereunder), 1993 Stock Option Plan, 1993
Stock Bonus Plan and 1991 Stock Bonus Plan) shall become immediately vested,
exercisable and nonforfeitable and all conditions thereof (including, but not
limited to, any required holding periods) shall be deemed to have been
satisfied.
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<PAGE> 4
6. Severance Payments.
6.1 If the Executive's employment is terminated following a
Change in Control and during the Term, other than (A) by the Company for Cause,
(B) by reason of death or Disability, or (C) by the Executive without Good
Reason, then, the Company shall pay the Executive the amounts, and provide the
Executive the benefits, described in this Section 6.1 ("Severance Payments")
and Section 6.2, in addition to any payments and benefits to which the
Executive is entitled under Section 5 hereof. For purposes of this Agreement,
the Executive's employment shall be deemed to have been terminated following a
Change in Control by the Company without Cause or by the Executive with Good
Reason, if (i) the Executive'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) the Executive terminates his 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 such Person described in clause
(i), or (iii) the Executive's employment is terminated by the Company without
Cause or by the Executive 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). For purposes of any determination regarding the
applicability of the immediately preceding sentence, any position taken by the
Executive shall be presumed to be correct unless the Company establishes to the
Committee by clear and convincing evidence that such position is not correct.
(A) In lieu of any further salary payments
to the Executive for periods subsequent to the Date of Termination and
in lieu of any severance benefit otherwise payable to the Executive,
the Company shall pay to the Executive a lump sum severance payment,
in cash, equal to three times the sum of (i) the Executive's base
salary as in effect immediately prior to the Date of Termination or,
if higher, in effect immediately prior to the first occurrence of an
event or
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<PAGE> 5
circumstance constituting Good Reason, and (ii) the average annual
bonus earned by the Executive pursuant to any annual bonus or incentive
plan maintained by the Company in respect of the three fiscal years
ending immediately prior to the fiscal year in which occurs the Date of
Termination or, if higher, immediately prior to the fiscal year in
which occurs the first event or circumstance constituting Good Reason;
provided, that if the Executive has not participated in an annual bonus
or incentive plan maintained by the Company for the entirety of such
three-year period, the amount referred to in this clause (ii) shall be
calculated using such lesser number of bonuses as have been actually
earned by the Executive in respect of such lesser period.
(B) For the thirty-six (36) month period
immediately following the Date of Termination, the Company shall
arrange to provide the Executive and his dependents life, disability,
accident and health insurance benefits and perquisites (including, but
not limited to, executive life insurance, club memberships, financial
planning and tax preparation, annual physical examination and
charitable contributions), in each case, substantially similar to
those provided to the Executive and his dependents immediately prior
to the Date of Termination or, if more favorable to the Executive,
those provided to the Executive and his dependents immediately prior
to the first occurrence of an event or circumstance constituting Good
Reason, at no greater cost to the Executive than the cost to the
Executive immediately prior to such date or occurrence; provided,
however, that, unless the Executive consents to a different method
(after taking into account the effect of such method on the
calculation of "parachute payments" pursuant to Section 6.2 hereof),
such health insurance benefits shall be provided through a third-party
insurer. Benefits otherwise receivable by the Executive pursuant to
this Section 6.1(B) shall be reduced to the extent benefits of the
same type are received by or made available to the Executive during
the thirty-six (36) month period following the Executive's termination
of employment (and any such benefits received by or made available to
the Executive shall be reported to the Company by the Executive);
provided, however, that the Company shall reimburse the
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<PAGE> 6
Executive for the excess, if any, of the cost of such benefits to the
Executive over such cost immediately prior to the Date of Termination
or, if more favorable to the Executive, the first occurrence of an
event or circumstance constituting Good Reason.
(C) Notwithstanding any provision of the
Baker Hughes Incorporated 1995 Employee Annual Incentive Compensation
Plan (the "Annual Incentive Plan"), the Company shall pay to the
Executive a lump sum amount, in cash, equal to the sum of (i) any
unpaid incentive compensation which has been allocated or awarded to
the Executive for a completed fiscal year or other measuring period
preceding the Date of Termination under the Annual Incentive Plan and
which, as of the Date of Termination, is contingent only upon the
continued employment of the Executive to a subsequent date, and (ii) a
pro rata portion to the Date of Termination of the aggregate value of
all contingent incentive compensation awards to the Executive for all
then uncompleted periods under the Annual Incentive Plan, calculated
as to each such award by multiplying the award that the Executive
would have earned on the last day of the performance award period,
assuming the achievement, at the expected value target level, of the
individual and corporate performance goals established with respect to
such award, by the fraction obtained by dividing the number of full
months and any fractional portion of a month during such performance
award period through the Date of Termination by the total number of
months contained in such performance award period; provided, however,
that if such termination of employment occurs during the same year in
which the Change in Control occurs, the pro-rata bonus payment
referred to in clause (ii) above shall be offset by any payments
received under the Annual Incentive Plan in connection with such
Change in Control.
(D) In addition to the retirement benefits
to which the Executive is entitled under the Company's Thrift Plan
(the "Thrift Plan") and the Company's Supplemental Retirement Plan
(the "SRP"), the Company shall pay the Executive a lump sum amount, in
cash, equal to the present value of the employer-provided
contributions, deferrals and allocations the Executive would have re-
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<PAGE> 7
ceived had he continued to participate, after the Date of Termination,
in the Thrift Plan and the SRP for three (3) additional years, assuming
for this purpose that (i) the Executive earned compensation for
purposes of the Thrift Plan and SRP during such three-year period the
amount used to calculate the Executive's severance payment under
subparagraph (A) of this Section 6.1, and (ii) the percentages of
contributions, deferrals and allocations made under the Thrift Plan and
the SRP by or on behalf of the Executive during such three-year period
are the same percentages of contributions, deferrals and allocations in
effect on the date of the Change in Control or the Date of Termination,
whichever is more favorable to the Executive.
(E) If the Executive would have become
entitled to benefits under the Company's post-retirement health care
or life insurance plans, as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, had the Executive's employment terminated at
any time during the period of thirty-six (36) months after the Date of
Termination, the Company shall provide such post-retirement health
care or life insurance benefits to the Executive and the Executive's
dependents commencing on the later of (i) the date on which such
coverage would have first become available and (ii) the date on which
benefits described in subsection (B) of this Section 6.1 terminate.
(F) The Company shall provide the Executive
with outplacement services suitable to the Executive's position for a
period of three years or, if earlier, until the first acceptance by
the Executive of an offer of employment.
6.2 (A) Whether or not the Executive becomes entitled
to the Severance Payments, if any of the payments or benefits received or to be
received by the Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change
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<PAGE> 8
in Control or any Person affiliated with the Company or such Person) (such
payments or benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the "Total Payments") will be subject to the Excise Tax, the
Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after deduction
of any Excise Tax on the Total Payments and any federal, state and local income
and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal
to the Total Payments.
(B) For purposes of determining whether any of
the Total Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) all of the Total Payments shall be treated as "parachute
payments" (within the meaning of section 280G(b)(2) of the Code) unless, in the
opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive
and selected by the accounting firm which was, immediately prior to the Change
in Control, the Company's independent auditor (the "Auditor"), such payments or
benefits (in whole or in part) do not constitute parachute payments, including
by reason of section 280G(b)(4)(A) of the Code, (ii) all "excess parachute
payments" within the meaning of section 280G(b)(l) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section 280G(b)(4)(B) of the
Code) in excess of the Base Amount allocable to such reasonable compensation,
or are otherwise not subject to the Excise Tax, and (iii) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the
Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income tax at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Executive's residence on the
Date of Termination (or if there is no Date of Termination, then the date on
which the Gross-Up Payment is calculated for purposes of this Section 6.2), net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
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<PAGE> 9
(C) In the event that the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Executive shall repay to the Company,
within five (5) business days following the time that the amount of such
reduction in the Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the Executive,
to the extent that such repayment results in a reduction in the Excise Tax and
a dollar-for-dollar reduction in the Executive's taxable income and wages for
purposes of federal, state and local income and employment taxes, plus interest
on the amount of such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder in calculating the Gross-Up
Payment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with respect to such
excess) within five (5) business days following the time that the amount of
such excess is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of liability for Excise
Tax with respect to the Total Payments.
6.3 The payments provided in subsections (A), (C) and (D) of
Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the
fifth day following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or before such day,
the Company shall pay to the Executive on such day an estimate, as determined
in good faith by the Executive or, in the case of payments under Section 6.2
hereof, in accordance with Section 6.2 hereof, of the minimum amount of such
payments to which the Executive is clearly entitled and shall pay the remainder
of such payments (together with interest on the unpaid remainder (or on all
such payments to the extent the Company fails to make such payments when due)
at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be deter-
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<PAGE> 10
mined but in no event later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated payments exceeds
the amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on the fifth (5th)
business day after demand by the Company (together with interest at 120% of the
rate provided in section 1274(b)(2)(B) of the Code), but only to the extent
such amount has not been paid by the Executive pursuant to Section 6.2(C)
above. At the time that payments are made under this Agreement, the Company
shall provide the Executive with a written statement setting forth the manner
in which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Company has
received from Tax Counsel, the Auditor or other advisors or consultants (and
any such opinions or advice which are in writing shall be attached to the
statement).
6.4 The Company also shall pay to the Executive all legal
fees and expenses incurred by the Executive in disputing in good faith any
issue hereunder relating to the termination of the Executive's employment, in
seeking in good faith to obtain or enforce any benefit or right provided by
this Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5)
business days after delivery of the Executive's written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.
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<PAGE> 11
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board which was called and held for the
purpose of considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive was guilty of conduct set forth in clause (i) or
(ii) of the definition of Cause herein, and specifying the particulars thereof
in detail.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period), and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies
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<PAGE> 12
the other party that a dispute exists concerning the termination, the Date of
Termination shall be extended until the earlier of (i) the date on which the
Term ends or (ii) the date on which the dispute is finally resolved, either by
mutual written agreement of the parties or by a final judgment, order or decree
of an arbitrator or a court of competent jurisdiction (which is not appealable
or with respect to which the time for appeal therefrom has expired and no
appeal has been perfected); provided, however, that the Date of Termination
shall be extended by a notice of dispute given by the Executive only if such
notice is given in good faith and the Executive pursues the resolution of such
dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation,
benefit and insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given or those plans in which the
Executive was participating immediately prior to the first occurrence of an
event or circumstance giving rise to the Notice of Termination, if more
favorable to the Executive, until the Date of Termination, as determined in
accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in
addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the
Executive's employment with the Company terminates during the Term, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Sections
5, 6 or 7.4 hereof. Further, the amount of any payment or benefit provided for
in this Agreement (other than Section 6.1(B) hereof but including (but not
limited to) Section 7.4 hereof) shall not be reduced by any compensation earned
by the Executive as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Executive to
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<PAGE> 13
the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death
of the Executive) if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of
the Executive's estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed,
if to the Executive, to the address inserted below the Executive's signature on
the final page hereof and, if to the Company, to the address set forth below,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall
be
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<PAGE> 14
effective only upon actual receipt:
To the Company:
3900 Essex Lane
Suite 1200
Houston, Texas 77027
Attention: General Counsel
11. Miscellaneous. Except as otherwise specifically provided
in Section 12.2 below, no provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of any lack of compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement supersedes any
other agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof which have been made by either party;
provided, however, that this Agreement shall supersede any agreement setting
forth the terms and conditions of the Executive's employment with the Company
only in the event that the Executive's employment with the Company is
terminated on or following a Change in Control, by the Company other than for
Cause or by the Executive other than for Good Reason; and provided further that
all agreements otherwise superseded by this Agreement shall be automatically
reinstated with full force and effect to the extent this Agreement is
terminated or otherwise rendered inapplicable or amended in accordance with
Section 12.2 hereof. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Texas. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law and any additional withholding to
which the Executive has agreed. The obligations of the Company and the
Executive under this Agreement which
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<PAGE> 15
by their nature may require either partial or total performance after the
expiration of the Term (including, without limitation, those under Sections 6
and 7 hereof) shall survive such expiration.
12. Validity; Pooling.
12.1 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
12.2 Pooling. 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 Section 15(G)(III) and (C) individuals who satisfy the
requirements in clauses (i) and (ii) below constitute more than two-thirds
(2/3) of the number of directors of the entity surviving such transaction and
the parent thereof, if any: individuals who (i) immediately prior to such
transaction constitute the Board and (ii) on the date hereof constitute the
Board 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 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 Agreement 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 Section 12.2 does not preserve the
availability of such accounting treatment, then, to the extent that any
provision or combination of provisions of the Agreement disqualifies the
transaction as a "pooling" transaction (including, if applicable, the entire
Agreement), the Board shall have the right, by sending written notice to the
Executive prior to the Change in Control, to unilaterally amend (without the
consent of the Executive) 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 under this Section 12.2 shall
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<PAGE> 16
be made by the Board prior to the Change in Control, 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.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Committee and shall be in
writing. Any denial by the Committee of a claim for benefits under this
Agreement shall be delivered to the Executive in writing within thirty (30)
days after written notice of the claim is provided to the Company in accordance
with Section 10 and shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Committee shall afford
a reasonable opportunity to the Executive for a review of the decision denying
a claim and shall further allow the Executive to appeal to the Committee a
decision of the Committee within sixty (60) days after notification by the
Committee that the Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Houston, Texas in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the evidentiary standards
set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to
seek specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
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<PAGE> 17
(A) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section
6.2 hereof.
(C) "Base Amount" shall have the meaning set forth in
section 280G(b)(3) of the Code.
(D) Beneficial Owner" shall have the meaning set forth in Rule
13d-3 under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive'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 Executive pursuant to Section
7.1 hereof) after a written demand for substantial performance is delivered to
the Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties, or (ii) the willful engaging by the Executive 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 Executive's part shall
be deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive'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
Committee by clear and convincing evidence that Cause exists.
(G) 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
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<PAGE> 18
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 (III) below; or
(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 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 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 (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 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 Bene-
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<PAGE> 19
ficially 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.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "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, 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
Committee
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<PAGE> 20
shall not exceed six (6).
(J) "Company" shall mean Baker Hughes Incorporated and,
except in determining under Section 15(G) hereof whether or not any Change in
Control of the Company has occurred, shall include any successor to its
business and/or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(K) "Date of Termination" shall have the meaning set forth in
Section 7.2 hereof.
(L) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the Executive's duties
with the Company for a period of six (6) consecutive months, the Company shall
have given the Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the Executive shall
not have returned to the full-time performance of the Executive's duties.
(M) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(O) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(P) "Extension Date" shall have the meaning set forth in
Section 2 hereof.
(Q) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (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 Date of Termination specified in the Notice of
Termination given in respect thereof:
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<PAGE> 21
(I) the assignment to the Executive of any
duties inconsistent with the Executive's status as a senior
executive officer of the Company or a substantial adverse
alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the
Change in Control;
(II) a reduction by the Company in the
Executive's annual base salary as in effect on the date hereof
or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all
senior executives of the Company and all senior executives of
any Person in control of the Company;
(III) the relocation of the Executive's
principal place of employment to a location more than 50 miles
from the Executive's principal place of employment immediately
prior to the Change in Control or the Company's requiring the
Executive 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 Executive's present business
travel obligations;
(IV) the failure by the Company to pay to
the Executive any portion of the Executive's current
compensation except pursuant to an across-the-board
compensation deferral similarly affecting all senior
executives of the Company and all senior executives of any
Person in control of the Company, or to pay to the Executive
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;
(V) the failure by the Company to continue
in effect any compensation plan in which the Executive
participates immediately prior to the Change in Control which
is material to the Executive's total compensation, including
but not limited to the Company's 1993 Stock Option Plan, 1993
Employee Stock Bonus Plan, 1991 Employee Stock
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<PAGE> 22
Bonus Plan, 1995 Stock Award Plan (and the 1995, 1996 and 1997
Stock Matching Programs thereunder and any subsequent Stock
Matching Programs in which the Executive participates), 1987
Convertible Debenture Plan and 1995 Employee Annual Incentive
Compensation Plan or any substitute plans adopted prior to the
Change in Control, 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 Executive'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 Executive's
participation relative to other participants, as existed
immediately prior to the Change in Control;
(VI) the failure by the Company to continue
to provide the Executive with benefits substantially similar
to those enjoyed by the Executive under any of the Company's
pension, savings, life insurance, medical, health and
accident, or disability plans in which the Executive was
participating immediately prior to the Change in Control
(except for across the board changes similarly affecting all
senior executives of the Company and all senior executives of
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
Executive of any material fringe benefit or perquisite enjoyed
by the Executive at the time of the Change in Control, or the
failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive 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
(VII) any purported termination of the
Executive's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of Section
7.1 hereof; for purposes of
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<PAGE> 23
this Agreement, no such purported termination shall be
effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive'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 Executive that Good Reason exists shall be
presumed to be correct unless the Company establishes to the Committee by clear
and convincing evidence that Good Reason does not exist.
(R) "Gross-Up Payment" shall have the meaning set forth in
Section 6.2 hereof.
(S) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(T) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange 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.
(U) "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:
(I) the Company enters into an agreement,
the consummation of which would result in the occurrence of a
Change in Control;
(II) 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;
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<PAGE> 24
(III) 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
(IV) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(V) "Retirement" shall, for purposes of Section 4 hereof, be
deemed the reason for the termination by the Executive of the Executive's
employment if such employment is terminated after completion of ten (10) years
of service with the Company and attainment of age fifty-five (55).
(W) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(X) "SRP" shall have the meaning set forth in Section 6.1
hereof.
(Y) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(Z) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
(AA) "Thrift Plan" shall have the meaning set forth in
Section 6.1 hereof.
(BB) "Total Payments" shall mean those payments so described
in Section 6.2 hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date above first written.
BAKER HUGHES INCORPORATED
By: /s/ JOHN F. MAHER
---------------------------------
John F. Maher
Chairman - Compensation Committee
of the Board of Directors
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<PAGE> 25
EXECUTIVE:
---------
/s/ MATTHEW G. DICK
-----------------------------------
MATTHEW G. DICK
Address:
-----------------------------------
-----------------------------------
-----------------------------------
(Please print carefully)
-25-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>7
<DESCRIPTION>SEVERANCE AGMT. - BAKER HUGHES & STEPHEN FINLEY
<TEXT>
<PAGE> 1
EXHIBIT 10.6
SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of July 23, 1997, is made by and between BAKER
HUGHES INCORPORATED, a Delaware corporation (the "Company"), and G. STEPHEN
FINLEY (the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its stockholders to foster the continued employment of key management
personnel; and
WHEREAS the Board recognizes that, as is the case with many publicly
held corporations, the possibility of a Change in Control exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of members of
the Company's management, including the Executive, to their assigned duties
without distraction in the face of potentially disturbing circumstances arising
from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definitions of capitalized terms used in this
Agreement are provided in the last Section hereof.
2. Term of Agreement. Subject to the provisions of Section 12.2 hereof,
the Term of this Agreement shall commence on the date hereof and shall continue
in effect through December 31, 1999; provided, however, that commencing on
January 1, 1998 and each January 1 thereafter (an "Extension Date"), the
Term shall automatically be extended for one additional year (i.e., resulting
in a two-year Term on the Extension Date) unless, not later than September
30 of the year preceding the Extension Date, the Company or the Executive shall
have given notice not to extend the Term; and further provide, however, if a
Change in that Control shall have occurred during the Term, the Term shall
expire no earlier than twenty-four (24) months beyond the month in which such
Change in Control occurred.
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3. Company's Covenants Summarized. In order to induce the Executive to
remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and
the other payments and benefits described herein. Except as provided in Section
9.1 hereof, no Severance Payments shall be payable under this Agreement unless
there shall have been (or, under the terms of the second sentence of Section
6.1 hereof, there shall be deemed to have been) a termination of the
Executive's employment with the Company following a Change in Control and
during the Term. This Agreement shall not be construed as creating an express
or implied contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have any right
to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Potential Change in
Control during the Term, the Executive will remain in the employ of the Company
until the earliest of (i) a date which, is six (6) months from the date of such
Potential Change of Control, (ii) the date of a Change in Control, (iii) the
date of termination by the Executive of the Executive's employment for Good
Reason or by reason of death, Disability or Retirement, or (iv) the termination
by the Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during any
period that the Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or mental illness,
the Company shall pay the Executive's full salary to the Executive at the rate
in effect at the commencement of any such period, together with all
compensation and benefits payable to the Executive under the terms of any
compensation or benefit plan, program or arrangement maintained by the Company
during such period, until the Executive's employment is terminated by the
Company for Disability.
5.2 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay the
Executive's full salary to the Executive through the Date of Termination at the
rate in effect immediately prior to the
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Date of Termination or, if higher, the rate in effect immediately prior to the
first occurrence of an event or circumstance constituting Good Reason, together
with all compensation and benefits payable to the Executive through the Date
of Termination under the terms of the Company's compensation and benefit plans,
programs or arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect immediately
prior to the first occurrence of an event or circumstance constituting Good
Reason.
5.3 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall pay to the
Executive the Executive's normal post-termination compensation and benefits as
such payments become due. Such post-termination compensation and benefits shall
be determined under, and paid in accordance with, the Company's retirement,
insurance and other compensation or benefit plans, programs and arrangements as
in effect immediately prior to the Date of Termination or, if more favorable to
the Executive, as in effect immediately prior to the occurrence of the first
event or circumstance constituting Good Reason.
5.4 Upon the occurrence of a Change in Control all options to acquire
shares of Company stock, all shares of restricted Company stock and all other
equity or phantom equity incentives held by the Executive under any plan of the
Company (including, but not limited to, the Company's 1995 Stock Award Plan
(and the Stock Matching Programs thereunder), 1993 Stock Option Plan, 1993
Stock Bonus Plan and 1991 Stock Bonus Plan) shall become immediately vested,
exercisable and nonforfeitable and all conditions thereof (including, but not
limited to, any required holding periods) shall be deemed to have been
satisfied.
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6. Severance Payments
6.1 If (i) the Executive's employment is terminated following a Change
in Control and during the Term, other than (A) by the Company for Cause, (B) by
reason of death or Disability, or (C) by the Executive without Good Reason, or
(ii) the Executive voluntarily terminates his employment for any reason during
the one-month period commencing on the first anniversary of the Change in
Control, then, the Company shall pay the Executive the amounts, and provide the
Executive the benefits, described in this Section 6.1 ("Severance Payments")
and Section 6.2, in addition to any payments and benefits to which the
Executive is entitled under Section 5 hereof. For purposes of this Agreement,
the Executive's employment shall be deemed to have been terminated following a
Change in Control by the Company without Cause or by the Executive with Good
Reason, if (i) the Executive'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) the Executive terminates his 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 such Person described in clause
(i), or (iii) the Executive's employment is terminated by the Company without
Cause or by the Executive 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). For purposes of any determination regarding the
applicability of the immediately preceding sentence, any position taken by the
Executive shall be presumed to be correct unless the Company establishes to the
Committee by clear and convincing evidence that such position is not correct.
(A) In lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination and in lieu of any
severance benefit otherwise payable to the Executive, the Company shall
pay to the Executive a lump sum severance payment, in cash, equal to
three times the sum of (i) the Executive's base salary as in effect
immediately prior to the Date of Termination or, if higher, in
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effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, and (ii) the average annual bonus
earned by the Executive pursuant to any annual bonus or incentive plan
maintained by the Company in respect of the three fiscal years ending
immediately prior to the fiscal year in which occurs the Date of
Termination or, if higher, immediately prior to the fiscal year in which
occurs the first event or circumstance constituting Good Reason;
provided, that if the Executive has not participated in an annual bonus
or incentive plan maintained by the Company for the entirety of such
three-year period, the amount referred to in this clause (ii) shall be
calculated using such lesser number of bonuses as have been actually
earned by the Executive in respect of such lesser period.
(B) For the thirty-six (36) month period immediately following
the Date of Termination, the Company shall arrange to provide the
Executive and his dependents life, disability, accident and health
insurance benefits and perquisites (including, but not limited to,
executive life insurance, club memberships, financial planning and tax
preparation, annual physical examination and charitable contributions),
in each case, substantially similar to those provided to the Executive
and his dependents immediately prior to the Date of Termination or, if
more favorable to the Executive, those provided to the Executive and his
dependents immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, at no greater cost to the
Executive than the cost to the Executive immediately prior to such date
or occurrence; provided, however, that, unless the Executive consents to
a different method (after taking into account the effect of such method
on the calculation of "parachute payments" pursuant to Section 6.2
hereof, such health insurance benefits shall be provided through a
third-party insurer. Benefits otherwise receivable by the Executive
pursuant to this Section 6.1(B) shall be reduced to the extent benefits
of the same type are received by or made available to the Executive
during the thirty-six (36) month period following the Executive's
termination of employment (and any such benefits received by or made
available to the Executive shall be reported to the Company by the
Executive); provided, however, that the Company shall reimburse the
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Executive for the excess, if any, of the cost of such benefits to the
Executive over such cost immediately prior to the Date of Termination
or, if more favorable to the Executive, the first occurrence of an event
or circumstance constituting Good Reason.
(C) Notwithstanding any provision of the Baker Hughes
Incorporated 1995 Employee Annual Incentive Compensation Plan (the
"Annual Incentive Plan"), the Company shall pay to the Executive a lump
sum amount, in cash, equal to the sum of (i) any unpaid incentive
compensation which has been allocated or awarded to the Executive for a
completed fiscal year or other measuring period preceding the Date of
Termination under the Annual Incentive Plan and which, as of the Date of
Termination, is contingent only upon the continued employment of the
Executive to a subsequent date, and (ii) a pro rata portion to the Date
of Termination of the aggregate value of all contingent incentive
compensation awards to the Executive for all then uncompleted periods
under the Annual Incentive Plan, calculated as to each such award by
multiplying the award that the Executive would have earned on the last
day of the performance award period, assuming the achievement, at the
expected value target level, of the individual and corporate performance
goals established with respect to such award, by the fraction obtained
by dividing the number of full months and any fractional portion of a
month during such performance award period through the Date of
Termination by the total number of months contained in such performance
award period; provided, however, that if such termination of employment
occurs during the same year in which the Change in Control occurs, the
pro-rata bonus payment referred to in clause (ii) above shall be offset
by any payments received under the Annual Incentive Plan in connection
with such Change in Control.
(D) In addition to the retirement benefits to which the
Executive is entitled under the Company's Thrift Plan (the "Thrift
Plan") and the Company's Supplemental Retirement Plan ( the "SRP"), the
Company shall pay the Executive a lump sum amount, in cash, equal to the
present value of the employer-provided contributions, deferrals and
allocations the Executive would have received had he continued to
participate, after the Date of Termination, in the Thrift Plan and
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the SRP for three (3) additional years, assuming for this purpose that
(i) the Executive earned compensation for purposes of the Thrift Plan and
SRP during such three-year period the amount used to calculate the
Executive's severance payment under subparagraph (A) of this Section 6.1,
and (ii) the percentages of contributions, deferrals and allocations made
under the Thrift Plan and the SRP by or on behalf of the Executive during
such three-year period are the same percentages of contributions,
deferrals and allocations in effect on the date of the Change in Control
or the Date of Termination, whichever is more favorable to the Executive,
(E) If the Executive would have become entitled to benefits
under the Company's post-retirement health care or life insurance plans,
as in effect immediately prior to the Date of Termination or, if more
favorable to the Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, had the
Executive's employment terminated at any time during the period of
thirty-six (36) months after the Date of Termination, the Company shall
provide such post-retirement health care or life insurance benefits to
the Executive and the Executive's dependents commencing on the later of
(i) the date on which such coverage would have first become available
and (ii) the date on which benefits described in subsection (B) of this
Section 6.1 terminate.
(F) The Company shall provide the Executive with outplacement
services suitable to the Executive's position for a period of three
years or, if earlier, until the first acceptance by the Executive of an
offer of employment.
6.2 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any of the payments or benefits received or to be
received by the Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or any Person affiliated
with the Company or such Person) (such payments or benefits, excluding the
Gross-Up Payment, being hereinafter referred to as the "Total Payments") will
be subject to the Excise Tax, the Company shall pay to the Executive an
additional amount (the "Gross-Up
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Payment") such that the net amount retained by the Executive, after deduction
of any Excise Tax on the Total Payments and any federal, state and local income
and employment taxes and Excise Tax upon the Gross-Up Payment, shall be equal
to the Total Payments.
(B) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) all of the Total Payments shall be treated as "parachute payments" (within
the meaning of section 28OG(b)(2) of the Code) unless, in the opinion of tax
counsel ("Tax Counsel") reasonably acceptable to the Executive and selected by
the accounting firm which was, immediately prior to the Change in Control, the
Company's independent auditor (the "Auditor"), such payments or benefits (in
whole or in part) do not constitute parachute payments, including by reason of
section 28OG(b)(4)(A) of the Code, (ii) all "excess parachute payments" within
the meaning of section 28OG(b)(1) of the Code shall be treated as subject to
the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in
excess of the Base Amount allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the Auditor
in accordance with the principles of sections 28OG(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay federal income tax at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence on the Date of
Termination (or if there is no Date of Termination, then the date on which the
Gross-Up Payment is calculated for purposes of this Section 6.2), net of the
maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
(C) In the event that the Excise Tax is finally determined to
be less than the amount taken into account hereunder in calculating the
Gross-Up Payment, the Executive shall repay to the Company, within five (5)
business days following the time that the amount of such reduction in the
Excise Tax is finally determined, the portion of the Gross-Up
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<PAGE> 9
Payment attributable to such reduction (plus that pardon of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the Executive,
to the extent that such repayment results in a reduction in the Excise Tax and
a dollar-for-dollar reduction in the Executive's taxable income and wages for
purposes of federal, state and local income and employment taxes, plus interest
on the amount of such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder in calculating the Gross-Up
Payment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with respect to such
excess) within five (5) business days following the time that the amount of
such excess is finally determined. The Executive and the Company shall each
reasonably cooperate with the other in connection with any administrative or
judicial proceedings concerning the existence or amount of liability for Excise
Tax with respect to the Total Payments.
6.3 The payments provided in subsections (A), (C) and (D) of Section
6.1 hereof and in Section 6.2 hereof shall be made not later than the fifth day
following the Date of Termination; provided however that if the amounts of such
payments cannot be finally determined on or before such day, the Company shall
pay to the Executive on such day an estimate, as determined in good faith by
the Executive or, in the case of payments under Section 6.2 hereof, in
accordance with Section 6.2 hereof, of the minimum amount of such payments to
which the Executive is clearly entitled and shall pay the remainder of such
payments (together with interest on the unpaid remainder (or on all such
payments to the extent the Company fails to make such payments when due) at
120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the
amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with
interest at 120% of the rate provided in section
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1274(b)(2)(B) of the Code), but only to the extent such amount has not been
paid by the Executive pursuant to Section 6.2(C) above. At the time that
payments are made under this Agreement, the Company shall provide the Executive
with a written statement setting forth the manner in which such payments were
calculated and the basis for such calculations including, without limitation,
any opinions or other advice the Company has received from Tax Counsel, the
Auditor or other advisors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive in disputing in good faith any issue
hereunder relating to the termination of the Executives employment, in seeking
in good faith to obtain or enforce any benefit or right provided by this
Agreement or in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit provided hereunder. Such payments shall be made within five (5)
business days after delivery of the Executive!s written requests for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require,
7. Termination Procedures end Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and during the
Term, any purported termination of the Executive's employment (other than by
reason of death) shall be communicated by written Notice of Termination from
one party hereto to the other party hereto in accordance with Section 10 hereof.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board which was called and held for the
purpose of considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive was guilty of conduct
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set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the Particulars thereof in detail.
7.2 Date of Termination "Date of Termination," with respect to any
purported termination of the Executive's employment after a Change in Control
and during the Term, shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of the
Executive's duties during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other reason, the date specified
in the Notice of Termination (which. in the case of a termination by the
Company, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Executive,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of an arbitrator or a court
of competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however , that the Date of Termination shall be extended by a notice
of dispute given by the Executive only if such notice is given in good faith
and the Executive pursues the resolution of such dispute with reasonable
diligence.
7.4 Compensation During Dispute. If a purported termination occurs
following a Change in Control and during the Term and the Date of Termination
is extended in accordance with Section 7.3 hereof, the Company shall continue
to pay the Executive the full compensation in effect when the notice giving
rise to the dispute was given (including but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and
insurance plans in which the Executive was participating when the notice giving
rise to the
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dispute was given or those plans in which the Executive was participating
immediately prior to the first occurrence of an event or circumstance giving
rise to the Notice of Termination, if more favorable to the Executive, until
the Date of Termination, as determined in accordance with Section 7.3 hereof.
Amounts paid under this Section 7.4 are in addition to all other amounts due
under this Agreement (other than those due under Section 5.2 hereof) and shall
not be offset against or reduce any other amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment with the Company terminates during the Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any
amounts payable to the Executive by the Company pursuant to Sections 5, 6 or
7.4 hereof. Further, the amount of any payment or benefit provided for in this
Agreement (other than Section 6.1(B) hereof but including (but not limited to)
Section 7.4 hereof) shall not be reduced by any compensation earned by the
Executive as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Executive to
the, Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any successor
to the Company, the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for
Good Reason after a Change in Control, except that, for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors, administrators,
successors, heirs,
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distributees, devisees and legatees. If the Executive shall die while any
amount would still be payable to the Executive hereunder (other than amounts
which, by their terms, terminate upon the death of the Executive), if the
Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to
the Executive, to the address inserted below the Executive's signature on the
final page hereof and, if to the Company, to the address set forth below, or to
such other address as either party may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon actual receipt:
To the Company:
3900 Essex Lane
Suite 1200
Houston, Texas 77027
Attention: General Counsel
11. Miscellaneous. Except as otherwise specifically provided in
Section 12.2 below, no provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of any lack of compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. This Agreement supersedes any
other agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof which have been made by either party;
provided, however, that this Agreement shall supersede any agreement setting
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forth the terms and conditions of the Executive's employment with the Company
only in the event that the Executive's employment with the Company is
terminated on or following a Change in Control, by the Company other than for
Cause or by the Executive other than for Good Reason; and provided further that
all agreements otherwise superseded by this Agreement shall be automatically
reinstated with full force and effect to the extent this Agreement is
terminated or otherwise rendered inapplicable or amended in accordance with
Section 12.2 hereof The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of Texas. All
references to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the Executive under
this Agreement which by their nature may require either partial or total
performance after the expiration of the Term (including, without limitation,
those under Sections 6 and 7 hereof) shall survive such expiration.
12. Validity Pooling.
12.1 Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement which shall remain in full force and effect.
12.2 Pooling. 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 Section 15(G)(III) and (C) individuals who satisfy the
requirements in clauses (i) and (ii) below constitute more than two-thirds
(2/3) of the number of directors of the entity surviving such transaction and
the parent thereof, if any: individuals who (i) immediately prior to such
transaction constitute the Board and (ii) on the date hereof constitute the
Board 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 or nomination for election by the Company's stockholders was approved
or recommend-
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ed, 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 Agreement 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 Section 12.2 does not preserve the availability of such
accounting treatment then, to the extent that any provision or combination of
provisions of the Agreement disqualifies the transaction as a "pooling"
transaction (including, if applicable, the entire Agreement), the Board shall
have the right, by sending written notice to the Executive prior to the Change
in Control, to unilaterally amend (without the consent of the Executive) 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 under this Section 12.2 shall be made by the Board prior to the
Change in Control, 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.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this Agreement
shall be directed to and determined by the Committee and shall be in writing.
Any denial by the Committee of a claim for benefits under this Agreement shall
be delivered to the Executive in writing within thirty (30) days after written
notice of the claim is provided to the Company in accordance with Section 10
and shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Committee shall afford a
reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Committee a
decision of the Committee within sixty (60) days after notification by the
Committee that the Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or in connection
with
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this Agreement shall be settled exclusively by arbitration in Houston, Texas in
accordance with the rules of the American Arbitration Association then in
effect; provided, however that the evidentiary standards set forth in this
Agreement shall apply. Judgment may be entered on the arbitrator's award in any
court having jurisdiction. Notwithstanding any provision of this Agreement to
the contrary, the Executive shall be entitled to seek specific performance of
the Executive's right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
15. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2 hereof.
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive'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 Executive pursuant to Section
7.1 hereof) after a written demand for substantial performance is delivered to
the Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties, or (ii) the willful engaging by the Executive 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 Executive's part shall
be deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the
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Executive'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 Committee by clear and convincing evidence that Cause
exists.
(G) 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 (i) of paragraph
(III) below; or
(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 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 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 (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
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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 (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
(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.
(H) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(I) "Committee" shall mean (i) the individuals (not fewer than three
in number)
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who, on the date six months before a Change in Control, constitute the
Compensation Committee of the Board, 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 Committee shall not
exceed six (6).
(J) "Company" shall mean Baker Hughes Incorporated and, except in
determining under Section 15(G) hereof whether or not any Change in Control of
the Company has occurred, shall include any successor to its business and/or
assets which assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(K) "Date of Termination" shall have the meaning set forth in Section
7.2 hereof,
(L) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the
Company for a period of six (6) consecutive months, the Company shall have
given the Executive a Notice of Termination for Disability, and, within thirty
(30) days after such Notice of Termination is given, the Executive shall not
have returned to the full-time performance of the Executive's duties.
(M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under Section 4999
of the Code.
(O) "Executive" shall mean the individual named in the first paragraph
of this Agreement.
(P) "Extension Date" shall have the meaning set forth in Section 2
hereof.
(Q) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) after any Change in Control, or prior to a Change in Control under the
circumstances described in
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clauses (ii) and (iii) of the second sentence of Section 6.1 hereof (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 (VIII)
below, such act or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior executive officer
of the Company or a substantial adverse alteration in the nature or
status of the Executive's responsibilities from those in effect
immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's
annual base salary as in effect on the date hereof or as the same may
be increased from time to time except for across-the-board salary
reductions similarly affecting all senior executives of the Company
and all senior executives of any Person in control of the Company;
(III) the relocation of the Executive's principal
place of employment to a location more than 50 miles from the
Executive's principal place of employment immediately prior to the
Change in Control or the Company's requiring the Executive 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 Executive's
present business travel obligations;
(IV) the failure by the Company to pay to the
Executive any portion of the Executive's current compensation except
pursuant to an across-the-board compensation deferral similarly
affecting all senior executives of the Company and all senior
executives of any Person in control of the Company, or to pay to the
Executive 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;
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<PAGE> 21
(V) the failure by the Company to continue in effect
any compensation plan in which the Executive participates immediately
prior to the Change in Control which is material to the Executive's
total compensation, including but not limited to the Company's 1993
Stock Option Plan, 1993 Employee Stock Bonus Plan, 1991 Employee Stock
Bonus Plan, 1995 Stock Award Plan (and the 1995, 1996 and 1997 Stock
Matching Programs thereunder and any subsequent Stock Matching
Programs in which the Executive participates), 1987 Convertible
Debenture Plan and 1995 Employee Annual Incentive Compensation Plan or
any substitute plans adopted prior to the Change in Control, 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 Executives 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 Executive's
participation relative to other participants, as existed immediately
prior to the Change in Control;
(VI) the failure by the Company to continue to
provide the Executive with benefits substantially similar to those
enjoyed by the Executive under any of the Company's pension, savings,
life insurance, medical, health and accident, or disability plans in
which the Executive was participating immediately prior to the Change
in Control (except for across the board changes similarly affecting
all senior executives of the Company and all senior executives of 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 Executive of any material fringe
benefit or perquisite enjoyed by the Executive at the time of the
Change in Control, or the failure by the Company to provide the
Executive with the number of paid vacation days to which the Executive
is entitled on the basis of years of service with the Company in
accordance with the any in accordance with the Company's normal
vacation policy in
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<PAGE> 22
effect at the time of the Change in Control; or
(VII) any purported termination of the Executives
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 7.1 hereof, for purposes of
this Agreement no such purported termination shall be effective. The
Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive'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 Executive that Good Reason exists shall be presumed to
be correct unless the Company establishes to the Committee by clear and
convincing evidence that Good Reason does not exist.
(R) "Gross-Up Payment" shall have the meaning set forth in Section 6.2
hereof.
(S) "Notice of Termination" shall have the meaning set forth in
Section 7.1 hereof.
(T) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Art, 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.
(U) "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:
(I) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
(II) the Company or any Person publicly announces an
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<PAGE> 23
intention to take or to consider taking actions which, if consummated,
would constitute a Change in Control;
(III ) 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
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has
occurred.
(V) "Retirement" shall, for purposes of Section 4 hereof be deemed the
reason for the termination by the Executive of the Executive's employment if
such employment is terminated after completion of ten (10) years of service
with the Company and attainment of age fifty-five (55).
(W) "Severance Payments" shall have the meaning set forth in Section
6.1 hereof.
(X) "SRP" shall have the meaning set forth in Section 6.1 hereof.
(Y) "Tax Counsel" shall have the meaning set forth in Section 6.2
hereof.
(Z) "Term" shall mean the period of time described in Section 2 hereof
(including any extension continuation or termination described therein).
(AA) "Thrift Plan" shall have the meaning set forth in Section 6.1
hereof.
(BB) "Total Payments" shall mean those payments so described in
Section 6.2 hereof.
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<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date above first written.
BAKER HUGHES INCORPORATED
By: /s/ JOHN MAHER
-------------------------------
John Maher
Chairman-Compensation Committee
of the Board of Directors
EXECUTIVE:
----------
/s/ G. STEPHEN FINLEY
-------------------------------
G. STEPHEN FINLEY
Address:
-------------------------------
-------------------------------
-------------------------------
(Please print carefully)
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>8
<DESCRIPTION>SEVERANCE AGMT - BAKER HUGHES & R. PATRICK HERBERT
<TEXT>
<PAGE> 1
EXHIBIT 10.7
SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of July 23, 1997, is made by and
between BAKER HUGHES INCORPORATED, a Delaware corporation (the "Company"), and
R. PATRICK HERBERT (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to foster the continued employment of key
management personnel; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive hereby agree
as follows:
1. Defined Terms. The definitions of capitalized terms used
in this Agreement are provided in the last Section hereof.
2. Term of Agreement. Subject to the provisions of Section
12.2 hereof, the Term of this Agreement shall commence on the date hereof and
shall continue in effect through December 31, 1999; provided, however, that
commencing on January 1, 1998 and each January 1 thereafter (an "Extension
Date"), the Term shall automatically be extended for one additional year (i.e.,
resulting in a two-year Term on the Extension Date) unless, not later than
September 30 of the year preceding the Extension Date, the Company or the
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Executive shall have given notice not to extend the Term; and further provided,
however, that if a Change in Control shall have occurred during the Term, the
Term shall expire no earlier than twenty-four (24) months beyond the month in
which such Change in Control occurred.
3. Company's Covenants Summarized. In order to induce the
Executive to remain in the employ of the Company and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the Severance Payments
and the other payments and benefits described herein. Except as provided in
Section 9.1 hereof, no Severance Payments shall be payable under this Agreement
unless there shall have been (or, under the terms of the second sentence of
Section 6.1 hereof, there shall be deemed to have been) a termination of the
Executive's employment with the Company following a Change in Control and
during the Term. This Agreement shall not be construed as creating an express
or implied contract of employment and, except as otherwise agreed in writing
between the Executive and the Company, the Executive shall not have any right
to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event of a
Potential Change in Control during the Term, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive's employment for any
reason.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term, during
any period that the Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or mental illness,
the Company shall pay the Executive's
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<PAGE> 3
full salary to the Executive at the rate in effect at the commencement of any
such period, together with all compensation and benefits payable to the
Executive under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company during such period, until the Executive's
employment is terminated by the Company for Disability.
5.2 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
the Executive's full salary to the Executive through the Date of Termination at
the rate in effect immediately prior to the Date of Termination or, if higher,
the rate in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, together with all compensation and
benefits payable to the Executive through the Date of Termination under the
terms of the Company's compensation and benefit plans, programs or arrangements
as in effect immediately prior to the Date of Termination or, if more favorable
to the Executive, as in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason.
5.3 If the Executive's employment shall be terminated for any
reason following a Change in Control and during the Term, the Company shall pay
to the Executive the Executive's normal post-termination compensation and
benefits as such payments become due. Such post-termination compensation and
benefits shall be determined under, and paid in accordance with, the Company's
retirement, insurance and other compensation or benefit plans, programs and
arrangements as in effect immediately prior to the Date of Termination or, if
more favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good Reason.
5.4 Upon the occurrence of a Change in Control all options to
acquire shares of Company stock, all shares of restricted Company stock and all
other equity or phantom equity incentives held by the Executive under any plan
of the Company (including, but not limited to, the Company's 1995 Stock Award
Plan (and the Stock Matching Programs thereunder), 1993 Stock Option Plan, 1993
Stock Bonus Plan and 1991 Stock Bonus Plan)
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<PAGE> 4
shall become immediately vested, exercisable and nonforfeitable and all
conditions thereof (including, but not limited to, any required holding
periods) shall be deemed to have been satisfied.
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<PAGE> 5
6. Severance Payments.
6.1 If (i) the Executive's employment is terminated following
a Change in Control and during the Term, other than (A) by the Company for
Cause, (B) by reason of death or Disability, or (C) by the Executive without
Good Reason, or (ii) the Executive voluntarily terminates his employment for
any reason during the one-month period commencing on the first anniversary of
the Change in Control, then, the Company shall pay the Executive the amounts,
and provide the Executive the benefits, described in this Section 6.1
("Severance Payments") and Section 6.2, in addition to any payments and
benefits to which the Executive is entitled under Section 5 hereof. For
purposes of this Agreement, the Executive's employment shall be deemed to have
been terminated following a Change in Control by the Company without Cause or
by the Executive with Good Reason, if (i) the Executive'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) the Executive
terminates his 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 such Person
described in clause (i), or (iii) the Executive's employment is terminated by
the Company without Cause or by the Executive 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). For purposes of any determination
regarding the applicability of the immediately preceding sentence, any position
taken by the Executive shall be presumed to be correct unless the Company
establishes to the Committee by clear and convincing evidence that such
position is not correct.
(A) In lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination
and in lieu of any severance
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benefit otherwise payable to the Executive, the Company shall
pay to the Executive a lump sum severance payment, in cash,
equal to three times the sum of (i) the Executive's base
salary as in effect immediately prior to the Date of
Termination or, if higher, in effect immediately prior to the
first occurrence of an event or circumstance constituting Good
Reason, and (ii) the average annual bonus earned by the
Executive pursuant to any annual bonus or incentive plan
maintained by the Company in respect of the three fiscal years
ending immediately prior to the fiscal year in which occurs
the Date of Termination or, if higher, immediately prior to the
fiscal year in which occurs the first event or circumstance
constituting Good Reason; provided, that if the Executive has
not participated in an annual bonus or incentive plan
maintained by the Company for the entirety of such three-year
period, the amount referred to in this clause (ii) shall be
calculated using such lesser number of bonuses as have been
actually earned by the Executive in respect of such lesser
period.
(B) For the thirty-six (36) month period immediately
following the Date of Termination, the Company shall arrange
to provide the Executive and his dependents life, disability,
accident and health insurance benefits and perquisites
(including, but not limited to, executive life insurance, club
memberships, financial planning and tax preparation, annual
physical examination and charitable contributions), in each
case, substantially similar to those provided to the Executive
and his dependents immediately prior to the Date of
Termination or, if more favorable to the Executive, those
provided to the Executive and his dependents immediately prior
to the first occurrence of an event or circumstance
constituting Good Reason, at no greater cost to the Executive
than the cost to the Executive immediately prior to such date
or occurrence; provided, however, that, unless the Executive
consents to a different method (after taking into account the
effect of such method on the calculation of "parachute
payments" pursuant to Section 6.2 hereof),
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<PAGE> 7
such health insurance benefits shall be provided through a
third-party insurer. Benefits otherwise receivable by the
Executive pursuant to this Section 6.1(B) shall be reduced to
the extent benefits of the same type are received by or made
available to the Executive during the thirty-six (36) month
period following the Executive's termination of employment
(and any such benefits received by or made available to the
Executive shall be reported to the Company by the Executive);
provided, however, that the Company shall reimburse the
Executive for the excess, if any, of the cost of such benefits
to the Executive over such cost immediately prior to the Date
of Termination or, if more favorable to the Executive, the
first occurrence of an event or circumstance constituting Good
Reason.
(C) Notwithstanding any provision of the Baker
Hughes Incorporated 1995 Employee Annual Incentive
Compensation Plan (the "Annual Incentive Plan"), the Company
shall pay to the Executive a lump sum amount, in cash, equal
to the sum of (i) any unpaid incentive compensation which has
been allocated or awarded to the Executive for a completed
fiscal year or other measuring period preceding the Date of
Termination under the Annual Incentive Plan and which, as of
the Date of Termination, is contingent only upon the continued
employment of the Executive to a subsequent date, and (ii) a
pro rata portion to the Date of Termination of the aggregate
value of all contingent incentive compensation awards to the
Executive for all then uncompleted periods under the Annual
Incentive Plan, calculated as to each such award by
multiplying the award that the Executive would have earned on
the last day of the performance award period, assuming the
achievement, at the expected value target level, of the
individual and corporate performance goals established with
respect to such award, by the fraction obtained by dividing
the number of full months and any fractional portion of a
month during such performance award period through the Date of
Termination by the total number of months contained in such
performance award period; provided,
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<PAGE> 8
however, that if such termination of employment occurs during
the same year in which the Change in Control occurs, the
pro-rata bonus payment referred to in clause (ii) above shall
be offset by any payments received under the Annual Incentive
Plan in connection with such Change in Control.
(D) In addition to the retirement benefits to which
the Executive is entitled under the Company's Thrift Plan (the
"Thrift Plan") and the Company's Supplemental Retirement Plan
(the "SRP"), the Company shall pay the Executive a lump sum
amount, in cash, equal to the present value of the
employer-provided contributions, deferrals and allocations the
Executive would have received had he continued to participate,
after the Date of Termination, in the Thrift Plan and the SRP
for three (3) additional years, assuming for this purpose that
(i) the Executive earned compensation for purposes of the
Thrift Plan and SRP during such three-year period the amount
used to calculate the Executive's severance payment under
subparagraph (A) of this Section 6.1, and (ii) the percentages
of contributions, deferrals and allocations made under the
Thrift Plan and the SRP by or on behalf of the Executive
during such three-year period are the same percentages of
contributions, deferrals and allocations in effect on the date
of the Change in Control or the Date of Termination, whichever
is more favorable to the Executive.
(E) If the Executive would have become entitled to
benefits under the Company's post-retirement health care or
life insurance plans, as in effect immediately prior to the
Date of Termination or, if more favorable to the Executive, as
in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason, had the
Executive's employment terminated at any time during the
period of thirty-six (36) months after the Date of
Termination, the Company shall provide such post-retirement
health care or life insurance benefits to the Executive and
the Executive's dependents commencing on the later of (i) the
date on which such coverage would have first become available
and (ii) the date on
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which benefits described in subsection (B) of this Section 6.1
terminate.
(F) The Company shall provide the Executive
with outplacement services suitable to the Executive's
position for a period of three years or, if earlier, until the
first acceptance by the Executive of an offer of employment.
6.2 (A) Whether or not the Executive becomes entitled
to the Severance Payments, if any of the payments or benefits received or to be
received by the Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
Person whose actions result in a Change in Control or any Person affiliated
with the Company or such Person) (such payments or benefits, excluding the
Gross-Up Payment, being hereinafter referred to as the "Total Payments") will
be subject to the Excise Tax, the Company shall pay to the Executive an
additional amount (the "Gross-Up Payment") such that the net amount retained by
the Executive, after deduction of any Excise Tax on the Total Payments and any
federal, state and local income and employment taxes and Excise Tax upon the
Gross-Up Payment, shall be equal to the Total Payments.
(B) For purposes of determining whether any of
the Total Payments will be subject to the Excise Tax and the amount of such
Excise Tax, (i) all of the Total Payments shall be treated as "parachute
payments" (within the meaning of section 280G(b)(2) of the Code) unless, in the
opinion of tax counsel ("Tax Counsel") reasonably acceptable to the Executive
and selected by the accounting firm which was, immediately prior to the Change
in Control, the Company's independent auditor (the "Auditor"), such payments or
benefits (in whole or in part) do not constitute parachute payments, including
by reason of section 280G(b)(4)(A) of the Code, (ii) all "excess parachute
payments" within the meaning of section 280G(b)(l) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of
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section 280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to
such reasonable compensation, or are otherwise not subject to the Excise Tax,
and (iii) the value of any noncash benefits or any deferred payment or benefit
shall be determined by the Auditor in accordance with the principles of
sections 280G(d)(3) and (4) of the Code. For purposes of determining the
amount of the Gross-Up Payment, the Executive shall be deemed to pay federal
income tax at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state and local
income taxes at the highest marginal rate of taxation in the state and locality
of the Executive's residence on the Date of Termination (or if there is no Date
of Termination, then the date on which the Gross-Up Payment is calculated for
purposes of this Section 6.2), net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes.
(C) In the event that the Excise Tax is finally
determined to be less than the amount taken into account hereunder in
calculating the Gross-Up Payment, the Executive shall repay to the Company,
within five (5) business days following the time that the amount of such
reduction in the Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income and
employment taxes imposed on the Gross-Up Payment being repaid by the Executive,
to the extent that such repayment results in a reduction in the Excise Tax and
a dollar-for-dollar reduction in the Executive's taxable income and wages for
purposes of federal, state and local income and employment taxes, plus interest
on the amount of such repayment at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder in calculating the Gross-Up
Payment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions
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payable by the Executive with respect to such excess) within five (5) business
days following the time that the amount of such excess is finally determined.
The Executive and the Company shall each reasonably cooperate with the other in
connection with any administrative or judicial proceedings concerning the
existence or amount of liability for Excise Tax with respect to the Total
Payments.
6.3 The payments provided in subsections (A), (C) and (D) of
Section 6.1 hereof and in Section 6.2 hereof shall be made not later than the
fifth day following the Date of Termination; provided, however, that if the
amounts of such payments cannot be finally determined on or before such day,
the Company shall pay to the Executive on such day an estimate, as determined
in good faith by the Executive or, in the case of payments under Section 6.2
hereof, in accordance with Section 6.2 hereof, of the minimum amount of such
payments to which the Executive is clearly entitled and shall pay the remainder
of such payments (together with interest on the unpaid remainder (or on all
such payments to the extent the Company fails to make such payments when due)
at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have been due,
such excess shall constitute a loan by the Company to the Executive, payable on
the fifth (5th) business day after demand by the Company (together with
interest at 120% of the rate provided in section 1274(b)(2)(B) of the Code),
but only to the extent such amount has not been paid by the Executive pursuant
to Section 6.2(C) above. At the time that payments are made under this
Agreement, the Company shall provide the Executive with a written statement
setting forth the manner in which such payments were calculated and the basis
for such calculations including, without limitation, any opinions or other
advice the Company has received from Tax Counsel, the Auditor or other advisors
or consultants (and any such opinions or advice which are in writing shall be
attached to the statement).
6.4 The Company also shall pay to the Executive all legal fees
and expenses
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incurred by the Executive in disputing in good faith any issue hereunder
relating to the termination of the Executive's employment, in seeking in good
faith to obtain or enforce any benefit or right provided by this Agreement or
in connection with any tax audit or proceeding to the extent attributable to
the application of section 4999 of the Code to any payment or benefit provided
hereunder. Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board which was called and held for the
purpose of considering such termination (after reasonable notice to the
Executive and an opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Executive was guilty of conduct set forth in clause (i) or
(ii) of the definition of Cause herein, and specifying the particulars thereof
in detail.
7.2 Date of Termination. "Date of Termination," with respect
to any purported termination of the Executive's employment after a Change in
Control and during the Term, shall mean (i) if the Executive's employment is
terminated for Disability, thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have
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<PAGE> 13
returned to the full-time performance of the Executive's duties during such
thirty (30) day period), and (ii) if the Executive's employment is terminated
for any other reason, the date specified in the Notice of Termination (which,
in the case of a termination by the Company, shall not be less than thirty (30)
days (except in the case of a termination for Cause) and, in the case of a
termination by the Executive, shall not be less than fifteen (15) days nor more
than sixty (60) days, respectively, from the date such Notice of Termination is
given).
7.3 Dispute Concerning Termination. If within fifteen (15)
days after any Notice of Termination is given, or, if later, prior to the Date
of Termination (as determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be extended
until the earlier of (i) the date on which the Term ends or (ii) the date on
which the dispute is finally resolved, either by mutual written agreement of
the parties or by a final judgment, order or decree of an arbitrator or a court
of competent jurisdiction (which is not appealable or with respect to which the
time for appeal therefrom has expired and no appeal has been perfected);
provided, however, that the Date of Termination shall be extended by a notice
of dispute given by the Executive only if such notice is given in good faith
and the Executive pursues the resolution of such dispute with reasonable
diligence.
7.4 Compensation During Dispute. If a purported termination
occurs following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation,
benefit and insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given or those plans in which the
Executive was participating immediately prior to the first occurrence of an
event or circumstance giving rise to the Notice of Termination, if more
favorable to the Executive, until the Date of Termination, as determined in
accordance with Section 7.3 hereof. Amounts paid under this Section
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<PAGE> 14
7.4 are in addition to all other amounts due under this Agreement (other than
those due under Section 5.2 hereof) and shall not be offset against or reduce
any other amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the
Executive's employment with the Company terminates during the Term, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Sections
5, 6 or 7.4 hereof. Further, the amount of any payment or benefit provided for
in this Agreement (other than Section 6.1(B) hereof but including (but not
limited to) Section 7.4 hereof) shall not be reduced by any compensation earned
by the Executive as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by the Executive to
the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any
successor to the Company, the Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the Executive's
employment for Good Reason after a Change in Control, except that, for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs,
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<PAGE> 15
distributees, devisees and legatees. If the Executive shall die while any
amount would still be payable to the Executive hereunder (other than amounts
which, by their terms, terminate upon the death of the Executive) if the
Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed,
if to the Executive, to the address inserted below the Executive's signature on
the final page hereof and, if to the Company, to the address set forth below,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall
be effective only upon actual receipt:
To the Company:
3900 Essex Lane
Suite 1200
Houston, Texas 77027
Attention: General Counsel
11. Miscellaneous. Except as otherwise specifically provided
in Section 12.2 below, no provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or of any lack of compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at
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<PAGE> 16
any prior or subsequent time. This Agreement supersedes any other agreements
or representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party; provided, however,
that this Agreement shall supersede any agreement setting forth the terms and
conditions of the Executive's employment with the Company only in the event
that the Executive's employment with the Company is terminated on or following
a Change in Control, by the Company other than for Cause or by the Executive
other than for Good Reason; and provided further that all agreements otherwise
superseded by this Agreement shall be automatically reinstated with full force
and effect to the extent this Agreement is terminated or otherwise rendered
inapplicable or amended in accordance with Section 12.2 hereof. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Texas. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law
and any additional withholding to which the Executive has agreed. The
obligations of the Company and the Executive under this Agreement which by
their nature may require either partial or total performance after the
expiration of the Term (including, without limitation, those under Sections 6
and 7 hereof) shall survive such expiration.
12. Validity; Pooling.
12.1 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
12.2 Pooling. 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 Section 15(G)(III) and (C) individuals who satisfy the
requirements in clauses (i) and (ii) below constitute more than two-thirds
(2/3) of the number of directors of the entity surviving such transac-
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tion and the parent thereof, if any: individuals who (i) immediately prior to
such transaction constitute the Board and (ii) on the date hereof constitute
the Board 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 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 Agreement 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 Section 12.2 does not
preserve the availability of such accounting treatment, then, to the extent
that any provision or combination of provisions of the Agreement disqualifies
the transaction as a "pooling" transaction (including, if applicable, the
entire Agreement), the Board shall have the right, by sending written notice to
the Executive prior to the Change in Control, to unilaterally amend (without
the consent of the Executive) 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 under this Section 12.2 shall be
made by the Board prior to the Change in Control, 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.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Committee and shall be in
writing. Any denial by the
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Committee of a claim for benefits under this Agreement shall be delivered to
the Executive in writing within thirty (30) days after written notice of the
claim is provided to the Company in accordance with Section 10 and shall set
forth the specific reasons for the denial and the specific provisions of this
Agreement relied upon. The Committee shall afford a reasonable opportunity to
the Executive for a review of the decision denying a claim and shall further
allow the Executive to appeal to the Committee a decision of the Committee
within sixty (60) days after notification by the Committee that the Executive's
claim has been denied.
14.2 Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Houston, Texas in accordance with the rules of the American Arbitration
Association then in effect; provided, however, that the evidentiary standards
set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to
seek specific performance of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or
in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(B) Auditor" shall have the meaning set forth in Section
6.2 hereof.
(C) "Base Amount" shall have the meaning set forth in
section 280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in
Rule 13d-3 under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
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<PAGE> 19
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company (other than any
such failure resulting from the Executive'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 Executive pursuant to Section
7.1 hereof) after a written demand for substantial performance is delivered to
the Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties, or (ii) the willful engaging by the Executive 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 Executive's part shall
be deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the Executive'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
Committee by clear and convincing evidence that Cause exists.
(G) 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 (i) of paragraph (III)
below; or
(II) the following individuals cease for any reason
to
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<PAGE> 20
constitute a majority of the number of directors then serving:
individuals who, on the date hereof, constitute the Board 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 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 (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 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
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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.
(H) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(I) "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, 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
Committee shall not exceed six (6).
(J) "Company" shall mean Baker Hughes Incorporated and,
except in determining under Section 15(G) hereof whether or not any Change in
Control of the
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Company has occurred, shall include any successor to its business and/or assets
which assumes and agrees to perform this Agreement by operation of law, or
otherwise.
(K) "Date of Termination" shall have the meaning set forth in
Section 7.2 hereof.
(L) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the Executive's duties
with the Company for a period of six (6) consecutive months, the Company shall
have given the Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the Executive shall
not have returned to the full-time performance of the Executive's duties.
(M) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under
section 4999 of the Code.
(O) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(P) "Extension Date" shall have the meaning set forth in
Section 2 hereof.
(Q) "Good Reason" for termination by the Executive of the
Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (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 Date of Termination specified in the Notice of
Termination given in respect thereof:
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<PAGE> 23
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior executive
officer of the Company or a substantial adverse alteration in
the nature or status of the Executive's responsibilities from
those in effect immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's
annual base salary as in effect on the date hereof or as the
same may be increased from time to time except for
across-the-board salary reductions similarly affecting all
senior executives of the Company and all senior executives of
any Person in control of the Company;
(III) the relocation of the Executive's principal
place of employment to a location more than 50 miles from the
Executive's principal place of employment immediately prior to
the Change in Control or the Company's requiring the Executive
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 Executive's present business
travel obligations;
(IV) the failure by the Company to pay to the
Executive any portion of the Executive's current compensation
except pursuant to an across-the-board compensation deferral
similarly affecting all senior executives of the Company and
all senior executives of any Person in control of the Company,
or to pay to the Executive 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;
(V) the failure by the Company to continue in effect
any compensation plan in which the Executive participates
immediately prior to the Change in Control which is material
to the Executive's total
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<PAGE> 24
compensation, including but not limited to the Company's 1993
Stock Option Plan, 1993 Employee Stock Bonus Plan, 1991
Employee Stock Bonus Plan, 1995 Stock Award Plan (and the
1995, 1996 and 1997 Stock Matching Programs thereunder and any
subsequent Stock Matching Programs in which the Executive
participates), 1987 Convertible Debenture Plan and 1995
Employee Annual Incentive Compensation Plan or any substitute
plans adopted prior to the Change in Control, 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 Executive'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 Executive's participation relative to other
participants, as existed immediately prior to the Change in
Control;
(VI) the failure by the Company to continue to
provide the Executive with benefits substantially similar to
those enjoyed by the Executive under any of the Company's
pension, savings, life insurance, medical, health and
accident, or disability plans in which the Executive was
participating immediately prior to the Change in Control
(except for across the board changes similarly affecting all
senior executives of the Company and all senior executives of
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
Executive of any material fringe benefit or perquisite enjoyed
by the Executive at the time of the Change in Control, or the
failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive is
entitled on the basis of years of service with the Company in
accordance
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<PAGE> 25
with the Company's normal vacation policy in effect at the
time of the Change in Control; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Section 7.1 hereof;
for purposes of this Agreement, no such purported termination
shall be effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive'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 Executive that Good Reason exists shall be
presumed to be correct unless the Company establishes to the Committee by clear
and convincing evidence that Good Reason does not exist.
(R) "Gross-Up Payment" shall have the meaning set forth in
Section 6.2 hereof.
(S) "Notice of Termination" shall have the meaning set forth
in Section 7.1 hereof.
(T) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange 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.
(U) "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:
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<PAGE> 26
(I) the Company enters into an agreement, the
consummation of which would result in the occurrence of a
Change in Control;
(II) 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;
(III) 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
(IV) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in
Control has occurred.
(V) "Retirement" shall, for purposes of Section 4 hereof, be
deemed the reason for the termination by the Executive of the Executive's
employment if such employment is terminated after completion of ten (10) years
of service with the Company and attainment of age fifty-five (55).
(W) "Severance Payments" shall have the meaning set forth in
Section 6.1 hereof.
(X) "SRP" shall have the meaning set forth in Section 6.1
hereof.
(Y) "Tax Counsel" shall have the meaning set forth in Section
6.2 hereof.
(Z) "Term" shall mean the period of time described in Section
2 hereof (including any extension, continuation or termination described
therein).
(AA) "Thrift Plan" shall have the meaning set forth in
Section 6.1 hereof.
(BB) "Total Payments" shall mean those payments so described
in Section 6.2 hereof.
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<PAGE> 27
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date above first written.
BAKER HUGHES INCORPORATED
By: /s/ JOHN F. MAHER
------------------------------------
John F. Maher
Chairman -Compensation Committee
of the Board of Directors
EXECUTIVE
/s/ R. PATRICK HERBERT
---------------------------------------
R. PATRICK HERBERT
Address:
---------------------------------------
---------------------------------------
---------------------------------------
(Please print carefully)
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</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>9
<DESCRIPTION>SEVERANCE AGMT - BAKER HUGHES & EDWIN C. HOWELL
<TEXT>
<PAGE> 1
EXHIBIT 10.8
SEVERANCE AGREEMENT
THIS AGREEMENT, dated as of July 23, 1997, is made by and
between BAKER HUGHES INCORPORATED, a Delaware corporation (the "Company"), and
EDWIN C. HOWELL (the "Executive").
WHEREAS, the Company considers it essential to the best
interests of its stockholders to foster the continued employment of key
management personnel; and
WHEREAS, the Board recognizes that, as is the case with many
publicly held corporations, the possibility of a Change in Control exists and
that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of members of the Company's management, including the Executive, to
their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the Company and the Executive hereby agree
as follows:
1. Defined Terms. The definitions of capitalized terms used
in this Agreement are provided in the last Section hereof.
2. Term of Agreement. Subject to the provisions of Section
12.2 hereof, the Term of this Agreement shall commence on the date hereof and
shall continue in effect through December 31, 1999; provided, however, that
commencing on January 1, 1998 and each January 1 thereafter (an "Extension
Date"), the Term shall automatically be extended for one additional year (i.e.,
resulting in a two-year Term on the Extension Date) unless, not later than
September 30 of the year preceding the Extension Date, the Company or the
Executive shall have given notice not to extend the Term; and further provided,
however, that if a Change in Control shall have occurred during the Term, the
Term shall expire no earlier than twenty-four (24) months beyond the month in
which such Change in Control occurred.
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<PAGE> 2