Baker Hughes 2009 Annual Report Download - page 141

2009 Form 10-K 67
Our nonstockholder-approved plans are described below:
1998 Employee Stock Option Plan
The Baker Hughes Incorporated 1998 Employee Stock
Option Plan (the “1998 ESOP”) was adopted effective as of
October 1, 1998. The number of shares authorized for issu-
ance under the 1998 ESOP was 7.0 million shares. Nonquali-
fied stock options may be granted under the 1998 ESOP to
our employees. The exercise price of the options will be equal
to the fair market value per share of our common stock on the
date of grant, and option terms may be up to ten years. Under
the terms and conditions of the option award agreements for
options issued under the 1998 ESOP, options generally vest
and become exercisable in installments over the optionee’s
period of service, and the options vest on an accelerated basis
in the event of a change in control. As of December 31, 2009,
options covering approximately 0.1 million shares of our com-
mon stock were outstanding under the 1998 ESOP, options
covering approximately 9,000 shares were exercised during
fiscal year 2009. There are no shares available for grants of
future options as the plan expired on October 1, 2008.
2002 Employee Long-Term Incentive Plan
The Baker Hughes Incorporated 2002 Employee Long-Term
Incentive Plan (the “2002 Employee LTIP”) was adopted effec-
tive as of March 6, 2002. The 2002 Employee LTIP permits the
grant of awards as nonqualified stock options, stock apprecia-
tion rights, restricted stock, restricted stock units, performance
shares, performance units, stock awards and cash-based awards
to our corporate officers and key employees. The number of
shares authorized for issuance under the 2002 Employee LTIP
is 9.5 million, with no more than 69,000 shares available for
future grants (the number of shares is subject to adjustment
for changes in our common stock).
The 2002 Employee LTIP is the companion plan to the Baker
Hughes Incorporated 2002 Director & Officer Long-Term Incen-
tive Plan, which was approved by our stockholders in 2002.
The rationale for the two companion plans was to discontinue
the use of the remaining older option plans and to have only
two plans from which we would issue compensation awards.
Options. The exercise price of the options will not be less
than the fair market value of the shares of our common stock
on the date of grant, and options terms may be up to ten
years. The maximum number of shares of our common stock
that may be subject to options granted under the 2002
Employee LTIP to any one employee during any one fiscal year
will not exceed 3.0 million, subject to adjustment under the
antidilution provisions of the 2002 Employee LTIP. Under the
terms and conditions of the stock option awards for options
issued under the 2002 Employee LTIP, options generally vest
and become exercisable in installments over the optionee’s
period of service, and the options vest on an accelerated basis
in the event of a change in control or certain terminations
of employment. As of December 31, 2009, options covering
approximately 3.5 million shares of our common stock were
outstanding under the 2002 Employee LTIP and options cover-
ing approximately 24,000 shares were exercised during fiscal
year 2009.
Performance Shares and Units; Cash-Based Awards.
Performance shares may be granted to employees in the
amounts and upon the terms determined by the Compensation
Committee of our Board of Directors, but must be limited to
no more than 1.0 million shares to any one employee in any
one fiscal year. Performance units and cash-based awards may
be granted to employees in amounts and upon the terms
determined by the Compensation Committee, but must be
limited to no more than $10 million for any one employee in
any one fiscal year. The performance measures that may be
used to determine the extent of the actual performance payout
or vesting include, but are not limited to, net earnings; earn-
ings per share; return measures; cash flow return on invest-
ments (net cash flows divided by owner’s equity); earnings
before or after taxes, interest, depreciation and/or amortization;
share price (including growth measures and total shareholder
return) and Baker Value Added (our metric that measures
operating profit after tax less the cost of capital employed).
Restricted Stock and Restricted Stock Units. With
respect to awards of restricted stock and restricted stock units,
the Compensation Committee will determine the conditions or
restrictions on the awards, including whether the holders of the
restricted stock or restricted stock units will exercise full voting
rights (in the case of restricted stock awards only) or receive
dividends and other distributions during the restriction period.
At the time the award is made, the Compensation Committee
will determine the right to receive unvested restricted stock or
restricted units after termination of service. Awards of restricted
stock are limited to 1.0 million shares in any one year to any
one individual. Awards of restricted stock units are limited to
1.0 million units in any one year to any one individual.
Stock Appreciation Rights. Stock appreciation rights
may be granted under the 2002 Employee LTIP on the terms
and conditions determined by the Compensation Committee.
The grant price of a freestanding stock appreciation right will
not be less than the fair market value of our common stock
on the date of grant. The maximum number of shares of our
common stock that may be subject to stock appreciation rights
granted under the 2002 Employee LTIP to any one individual
during any one fiscal year will not exceed 3.0 million shares,
subject to adjustment under the antidilution provisions of the
2002 Employee LTIP.
Administration; Amendment and Termination. The
Compensation Committee shall administer the 2002 Employee
LTIP, and in the absence of the Compensation Committee, the
Board will administer the Plan. The Compensation Committee
will have full and exclusive power to interpret the provisions of
the 2002 Employee LTIP as the Committee may deem neces-
sary or proper. The Board may alter, amend, modify, suspend
or terminate the 2002 Employee LTIP, except that no amend-
ment, modification, suspension or termination that would
adversely affect in any material way the rights of a participant
under any award previously granted under the 2002 Employee
LTIP may be made without the written consent of the partici-
pant. In addition, no amendment of the 2002 Employee LTIP
shall become effective absent stockholder approval of the
amendment, to the extent stockholder approval is otherwise
required by applicable legal requirements.