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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1994
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
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COMMISSION FILE NUMBER 1-9397
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BAKER HUGHES INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
76-0207995
DELAWARE (I.R.S. EMPLOYER IDENTIFICATION NO.)
(STATE OR OTHER JURISDICTION OF 77027-5177
INCORPORATION OR ORGANIZATION) (ZIP CODE)
3900 ESSEX LANE, HOUSTON, TEXAS
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 439-8600
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
COMMON STOCK, $1 PAR VALUE NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
THE SWISS STOCK EXCHANGE
COMMON STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: WARRANTS TO
PURCHASE COMMON STOCK
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 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.[_]
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At December 7, 1994, the registrant had outstanding 141,005,606 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 $2,460,171,175.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Annual Report to Stockholders for 1994 are
incorporated by reference into Parts I and II.
Portions of Registrant's 1994 Proxy Statement for the Annual Meeting of
Stockholders to be held January 25, 1995 are incorporated by reference into
Part III.
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PART I
ITEM 1. BUSINESS
The Company operates in two industry segments, Oilfield Services and
Equipment and Process Products and Services. In addition to these industry
segments, the Company manufactures and sells other equipment and provides
services to industries not related to either the petroleum or process
industries. Certain of the Company's operations are conducted through joint
ventures or partnerships.
The Company is a Delaware corporation which was formed in connection
with the combination of Baker International Corporation ("Baker") and Hughes
Tool Company ("Hughes") consummated on April 3, 1987 (the "Combination"). Baker
and Hughes were publicly-traded companies 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 and the majority-owned
joint ventures and partnerships in which Baker Hughes Incorporated and its
subsidiaries participate, unless the context clearly indicates otherwise.
For additional industry segment information for each of the three
years in the period ended September 30, 1994, see Note 9 of Notes to
Consolidated Financial Statements which is incorporated herein by reference in
Part II, Item 8 hereof ("Notes to Consolidated Financial Statements").
OILFIELD SERVICES AND EQUIPMENT
The Company manufactures and markets a broad range of rolling cutter
and diamond drilling 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 rock bits and that its
principal competitors are Smith International, Inc. ("Smith"), the Security
Division of Dresser Industries, Inc. ("Dresser"), Reed Tool Company and Hycalog,
operating units of Camco, Incorporated.
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 in
these markets are M-I Drilling Fluids, which is jointly owned by Halliburton
Company ("Halliburton") and Smith, and Baroid Corporation, a subsidiary of
Dresser.
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The Company believes it is the industry's leading supplier of
directional and horizontal drilling services, downhole motors, coring services,
subsurface surveying and both directional and formation-evaluation measurement-
while-drilling services. 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 real-time logging.
Through the well engineering and planning process, the Company integrates its
high-performance drilling tools with downhole information systems to provide
customers with a total systems approach. In these markets, the Company competes
principally with Halliburton, Sperry-Sun, a subsidiary of Dresser, and Anadrill,
a subsidiary of Schlumberger Ltd.
Other products of the Company related to drilling include surface and
downhole instruments which collect, display and record data regarding various
aspects of the drilling process and the possible accumulation of oil and gas.
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 the leading
worldwide producer of packers, and that its principal competitors are the
Guiberson AVA Division of Dresser and the Otis Division of Halliburton.
The Company manufactures liner hanger tools and equipment used to
suspend and set strings of casing pipe in wells. It also manufactures downhole
electric submersible pumps and variable frequency drive systems for use with
such pumps, and provides related control equipment, electrical cable and repair
services for artificial lift. 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. It also provides
inflatable and mechanical packers which 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.
Other completion, remedial and production products and services
include specialty chemicals used by the production segments of the petroleum
industry (with Petrolite Corporation being the Company's principal competitor in
the market for completion, remedial and production specialty chemicals) as well
as industrial chemicals used in refining, waste water treatment, mineral
handling and cooling and boiler water processes; 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 offers
gravel packing, a specialized service which prevents sand from entering the well
bore and reducing productivity, as well as
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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.
PROCESS EQUIPMENT PRODUCTS AND SERVICES
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, municipal and industrial wastewater and pulp and paper
industries. Product lines include vacuum filters (drum, disc and horizontal
belt), filter presses, belt presses, granular media filters, thickeners,
clarifiers, flotation cells and aeration equipment. Major competitors are Dorr-
Oliver, Otokumpu and Sala in the worldwide minerals and industrial markets,
Envirex and General Filter in municipal markets, and Alstrom is the principal
competitor in the pump and paper market.
The Company manufactures and markets solid bowl, screen bowl and
pusher centrifuges, tilting pan filters and a high speed Bird Young drum filter
for the minerals, chemical and petrochemical sectors where the equipment is used
for dewatering of process flow streams. The tilting pan filter is the preferred
equipment in potash and phosphate fertilizer markets. Principal competitors in
the centrifuge product lines are Alfa-Laval and Klockner-Humbolt-Deutch.
The Company designs and manufactures systems for the treatment of
produced water and its reinjection and treatment of refinery waste streams.
Products include coarse filters, fine filters, flotation units, coalescers,
deaeration towers and electrochlorination cells. Primary competitors are
General Filter and Serck Baker.
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.
OTHER
On September 30, 1994, the Company sold the EnviroTech Puumpsystems
group of companies to The Weir Group PLC. The sale provided approximately $210
million in proceeds and resulted in a gain of $101 million.
On March 15, 1994, the Company sold the EnviroTech Measurements and
Controls group of companies to Thermo Electron Corporation. The sale provided
approximately $134 million in proceeds and resulted in a gain of $8.6 million.
ENVIRONMENTAL MATTERS
The Company's subsidiaries, divisions and customers are 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
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regulations as well as the enactment and enforcement of new legislation may
require the Company, its subsidiaries and divisions, 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, 1995, the Company
will spend approximately $13,600,000 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 and its subsidiaries 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 $3,030,000 for environmental control equipment
during the fiscal year ending September 30, 1995. Based upon current
information, the Company believes that capital expenditures for environmental
control equipment for the 1995 and 1996 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 such 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) The Company's subsidiaries, Hughes Christensen ("HC"), a division
of Baker Hughes Oilfield Operations, Inc. ("BHOO"), Milpark Drilling Fluids
("Milpark") (now known as Baker Hughes INTEQ, a division of BHOO), and a
former subsidiary of the Company, Baker Hughes Tubular Services, Inc.
("BHTS"), have been named as PRPs in the French Limited Superfund Site
which consists of a 15 acre wastepit and a seven acre lagoon located in
Crosby, Texas. The site is on the Superfund National Priorities List. This
site has been in active remediation for five (5) years and is managed by a
task force of PRPs ("FLTG, Inc. Task Force"). $64,700,000 has been spent
to date by FLTG, Inc. Task Force, with additional costs of approximately
$18,500,000 being anticipated by FLTG, Inc. Task Force. The contribution
of the Company's subsidiaries (including BHTS which was sold to ICO on
September 30, 1992) is estimated to be approximately 1.33% of those costs
(such proportion being based upon the ratio that the number of gallons of
waste estimated to be contributed to the site by the Company's subsidiaries
bears to the total number of gallons of waste estimated to have been
disposed of at the site, and being herein sometimes
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referred to as a "Volumetric Calculation"). A portion of the Company's
liability (.77%) is covered by an indemnity from ICO. The Company has
settled that portion of its liability for this site not covered by the
Indemnity Agreement (.56%) for $62,721, and the Company does not anticipate
any additional liability for this site. The Company will continue to
follow the progress of the site through completion.
(b) Baker Performance Chemicals Incorporated ("BPCI"), a subsidiary of
the Company, HC, Milpark, BHTS and Baker Oil Tools ("BOT"), a division of
BHOO, have been named as PRPs in the Sheridan Superfund Site, located in
Hempstead, Texas. The remedial work at this site is being overseen by the
Texas Natural Resource Conservation Commission. A trust formed to
remediate the site and to allocate responsibility for the costs of such
remedial work estimates that the total cost of remediation will be
approximately $30,000,000, with the contribution of the Company's
subsidiaries (including BHTS which was sold to ICO on September 30, 1992)
estimated to be approximately 0.63% of those costs (based upon a Volumetric
Calculation).
(c) BPCI and Centrilift, a division of BHOO, have been named as PRPs
in the Hardage Industrial Waste Disposal Superfund Site, located in Criner,
Oklahoma. It has been estimated that the contribution to the contamination
at this site by the Company's two subsidiaries is approximately 0.005% and
0.19%, respectively, of the total waste at such site (based upon a
Volumetric Calculation). An agreement has been reached to release the
Company and its subsidiaries from liability for a total of $325,000 to be
paid over three years. The first annual installment in the amount of
$108,333, was paid on November 1, 1994.
(d) Centrilift has also been named as a PRP in the Sand Springs
Superfund Site, a former oil refinery operation situated on approximately
200 acres located west of Tulsa, Oklahoma on the Arkansas River. Following
the shutdown of refining operations in 1948, portions of the site were
operated by third parties as a storage and treatment facility for
industrial waste. ARCO, successor in interest to Sinclair, the operator of
the former refinery, has entered into a consent decree with the EPA to
design and construct source control facilities, the total cost of which is
estimated to be approximately $15,000,000, with the contribution of the
Company's subsidiary estimated to be approximately $250,000, or 1.67% of
the total cost.
(e) BPCI, has been named as a PRP in the Odessa Drum Company Superfund
Site located in Odessa, Texas. Total cost of abatement at the site is
currently estimated to be $7,000,000. A de minimis Settlement Agreement
with the PRP group has been signed under which BPCI has agreed to pay
$55,000.
(f) Spectrace Instruments, Inc. ("Spectrace"), a subsidiary of the
Company, has been named as a PRP in 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
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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 Company has had
several meetings with the EPA and the other PRPs and their respective
counsel and consultants in an attempt to resolve this dispute. The EPA has
recently 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. 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 diligently seeking
the withdrawal of such Order with respect to the Company's subsidiary.
(g) Hughes Tool Company (now known as Hughes Christensen), Eastman
Teleco Company (now known as Baker Hughes INTEQ, a division of BHOO), and
EIMCO, a subsidiary of the Company, have been named as PRPs in the Marco of
Iota hazardous waste storage and treatment facility located in Iota, Acadia
Parish, Louisiana. In 1991, the Marco facility was abandoned by the owners
and the EPA discovered hazardous substances were being released into the
surrounding environment. EPA records, corroborated by current Company
information, suggest that the contribution to the contamination at this
site by these subsidiaries of the Company is less than .005% of the total
volume of wastes at this site. The hazardous wastes disposed of at this
site have now been removed under the EPA's emergency response authority at
a cost of approximately $6,000,000. A de minimis buyout offer from either
the EPA or the PRP group is anticipated in the future.
(h) BPCI, by virtue of its acquisition of ChemLink, was named in an
administrative action brought by the EPA pursuant to the Toxic Substances
Control Act. The complaint filed by the EPA alleges failure on the part of
ChemLink to properly notify the EPA of the manufacture of a new chemical
substance and asserts a fine against ChemLink in the amount of $280,000.
Contractual indemnities are available to BPCI as a part of the acquisition
of ChemLink which the Company believes cover any liability of BPCI in
connection with this action, including any defense costs.
(i) In May 1987, BPCI entered into an Agreed Administrative Order with
the then Texas Water Commission, now known as the Texas Natural Resource
Conservation Commission ("TNRCC"), with respect to soil and groundwater
contamination at the Odessa - Hillmont site located in Odessa, Texas. This
site was previously used by BPCI 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 of approximately
$60,000.
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(j) Oil Base, Inc. and Hughes Drilling Fluids (now known as Baker
Hughes INTEQ, a division of BHOO), have been identified as PRPs in the PAB
Superfund Site located in Abbeville, Louisiana. Due to certain issues at
this site, the Company has estimated that the contribution to the
contamination by these entities is approximately 2.0%-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. Resolution of
these issues is currently being sought through an ADR process supported by
Region VI of the EPA. The EPA currently estimates the total cost of
remediation at this site will be approximately $20,000,000. The Company is
currently participating with other PRPs to fund certain remedial design
efforts on an interim basis in order to comply with the EPA order, pending
the finalization of the ADR process anticipated to occur within the next
eighteen (18) months.
(k) PA Inc., a former subsidiary of the Company, was identified as a
PRP in the Sonics International Superfund Site, a former hazardous waste
disposal facility located near Ranger, Texas. It is not possible at this
time to quantify the Company's ultimate liability. The Company currently
believes that its former subsidiary is a de minimis PRP at this site based
upon the small amount of waste allegedly contributed to this site by the
Company's former subsidiary (approximately 1.64% based upon a Volumetric
Calculation). The remediation proposed by the PRP group is estimated to
cost $700,000, and the Company anticipates its ultimate liability to be
approximately $25,000.
(l) The Company and Envirotech Corporation (now known as EVT Holdings,
Inc.) have been sued by the Michigan Department of Natural Resources
("MDNR"). The MDNR has alleged that contamination to the residential water
wells in the township of Rock, Michigan was caused in part by a 500 gallon
diesel underground storage tank formerly located (removed in 1992) on real
property acquired by the Company as a result of the acquisition of
Envirotech in 1982. The MDNR has also brought suit against other
potentially responsible parties. The MDNR is demanding partial payment
from the Company and Envirotech (approximately $1,200,000) for a
residential drinking water system installed in response to elevated levels
of petroleum hydrocarbons in residential drinking water wells. The Company
has met with the MDNR regarding the allegations, and after review of the
state's reports and data, as well as the Company's own data, it is the
Company's position that it has no liability.
(m) Milpark (now known as Baker Hughes INTEQ, a division of BHOO) 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 it has any liability for contamination at the site.
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(n) The Company and BPCI have been named as PRPs at the former Fike
Chemical Company site located in Nitro, West Virginia. The Company and
BPCI 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 are available to BPCI as
part of the acquisition of Chemlink, which the Company believes cover any
liability of BPCI in connection with this action, including defense costs.
(o) Milpark and Baker Sand Control (now known as Baker Hughes INTEQ, a
division of BHOO) 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 over 98% of the waste volume disposed of at this site, and
such PRP has agreed to remediate this site totally. The Company does not
anticipate that it will have any liability for this site.
(p) Milpark (now known as Baker Hughes INTEQ, a division of BHOO) 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 .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.
(q) Teleco (now known as Baker Hughes INTEQ, a division of BHOO) 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 .00006% of
the volume at the site. The total cost of cleanup at the site is currently
estimated to be $3,500,000. A de minimis buyout offer from either the EPA
or the PRP group is anticipated in the future.
While PRPs in Superfund actions have joint and several liability for all
costs of remediation and 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 who 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.
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The Company, through its subsidiaries and/or divisions, 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.
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 and
independent distributors. 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 are located in areas of drilling and production
activity throughout the world. The Company markets its products and services in
nearly all of the oil producing countries. In certain foreign areas where
direct product sales efforts are not practicable, the Company utilizes
licensees, sales agents 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 which it
serves are product and service quality and availability, technical proficiency
and price.
INTERNATIONAL OPERATIONS
Revenues attributable to sales of products and provision of services for
use outside the United States (which, for 1994, consisted of revenues from non-
U.S. operations of $1,233.2 million and export sales from the United States of
$244.6 million) accounted for approximately 59%, 66%, and 66% of the Company's
total revenues for the years ended September 30, 1994, 1993 and 1992,
respectively. These revenues in 1994 were distributed approximately as follows:
Europe, 20%; other Eastern Hemisphere, 21%; and Non-U.S. Western Hemisphere,
18%. See Note 9 of Notes to Consolidated Financial Statements which is
incorporated herein by reference.
The Company's operations are subject to the risks inherent in doing
business in multiple countries with various legal and political policies. Such
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 and, in view of the
diversified nature of the Company's activities, does not consider them a factor
materially adverse to its operations as a whole.
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RESEARCH AND DEVELOPMENT; PATENTS
At September 30, 1994, the equivalent of approximately 429 full-time
employees were engaged in research and development activities directed primarily
toward improvement of existing products and services and 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
expense for each of the three years in the period ended September 30, 1994, see
Note 11 of Notes to Consolidated Financial Statements which is incorporated
herein by reference.
The Company has followed a policy of seeking patent protection both inside
and outside the U.S. for products and methods which 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.
EMPLOYEES
At September 30, 1994, the Company had a total of approximately 14,700
employees, as compared to approximately 18,400 employees at September 30, 1993.
Approximately 680 employees at September 30, 1994 were represented under
collective bargaining agreements which terminate at various times through 1996.
The Company believes that its relations with its employees are satisfactory.
EXECUTIVE OFFICERS
The following table shows as of December 7, 1994, the name of each
executive officer of the Company, together with his age and all offices
presently held with the Company.
NAME OF INDIVIDUAL AGE
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James D. Woods 63 Chairman of the Board, President, and Chief Executive
Officer since 1987. Employed 1955.
Max L. Lukens 46 Executive Vice President since 1994 and President,
Baker Hughes Oilfield Operations, since 1993. Employed
1981. Chief Financial Officer, 1984-1989; President,
Baker Hughes Production Tools, 1989-1993; Senior Vice
President from 1987 to 1994.
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Timothy J. Probert 43 Vice President and President of Baker Hughes Process
Equipment Operations since 1994. 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.
James E. Braun 35 Controller since 1993. Employed 1993. From 1981-1993,
Deloitte & Touche; Partner from 1991.
Arthur T. Downey 57 Vice President - Government Affairs since 1992.
Employed 1992. Partner, Johnson & Gibbs from 1990-
1992; Partner, Sutherland, Asbill & Brennan, 1977-1990.
George S. Finley 43 Vice President since 1990 and Chief Financial Officer
of Baker Hughes Oilfield Operations since 1993.
Employed 1982. Controller, 1987-1993.
Scott B. Gill 35 Vice President - Investor Relations since 1993.
Employed 1990. Director of Technical Services, Baker
Sand Control, 1990-1992; Integrated Engineering
Services Manager, Baker Sand Control, 1992-1993.
Roger P. Herbert 48 Vice President since 1994 and Vice President -
Technology and Market Development, Baker Hughes
Oilfield Operations, since 1993. Employed 1988.
President, Baker Hughes Drilling Systems, 1988-1990;
President, Baker Hughes MWD, 1990-1991; President,
Develco, 1991-1993.
Eric L. Mattson 43 Senior Vice President since 1994 and Chief Financial
Officer since 1993. Employed 1980. Treasurer from
1983-1994; Vice President from 1988 to 1994.
Franklin Myers 42 Senior Vice President since 1994 and General Counsel
since 1988. Employed 1988. Corporate Secretary from
1988 to 1992; Vice President from 1988 to 1994.
Phillip A. Rice 59 Vice President - Human Resources since 1985. Employed
1980.
There are no family relationships between the executive officers of the
Company.
The Company follows the practice of electing its officers annually
immediately after its Annual Meeting of Stockholders.
11
<PAGE>
ITEM 2. PROPERTIES
The Company operates 72 principal manufacturing plants, almost all of which
are owned, ranging in size from approximately 2,000 square feet to approximately
233,000 square feet of manufacturing space and totaling more than 2,967,000
square feet. Of such total, approximately 2,024,000 square feet (68%) are
located in the United States, 301,000 square feet (10%) are located in the
Western Hemisphere exclusive of the United States, 532,000 square feet (18%) are
located in Europe and 110,000 square feet (4%) are located in the Eastern
Hemisphere exclusive of Europe. Principal manufacturing plants by industry
segment and geographic area appear in the table below.
<TABLE>
<CAPTION>
Other Other
Western Eastern
U.S. Hemisphere Europe Hemisphere Total
---- ---------- ------ ---------- -----
<S> <C> <C> <C> <C> <C>
Oilfield Services and Equipment 36 8 8 9 61
Process Equipment Products 7 2 2 - 11
and Services
</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 1994 and 1992, 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 3 of Notes to Consolidated Financial Statements which is incorporated
herein by reference. The Company believes it has the capacity to meet increased
demands in each of its industry segments.
ITEM 3. LEGAL PROCEEDINGS
On September 16, 1994, the Company and its insurers settled, for $.8
million, litigation instituted June 30, 1992, by Mission Resources, Inc. - II in
the Superior Court for the State of California for the County of Kern, in
connection with product delivery or service variances on approximately 53 well
stimulation projects performed by the Company's former subsidiary, BJ-Hughes in
Kern County, California. Although the suit did not name the Company as a
defendant, the allegations may have fallen within the Company's agreement, in
connection with the initial public offering by BJ Services Company, to indemnify
it for damages, if any, and costs of litigation arising out of any such claims.
On August 5, 1994, the Company settled, for $7.5 million, a class action
instituted February 15, 1991 by Glyn Snell, et al. on behalf of royalty interest
owners in the 238th Judicial District Court in Midland County, Texas implicating
Dresser, BJ Services Company, the Company and affiliates in damages to a number
of wells in West Texas.
12
<PAGE>
On July 18, 1994, the Company settled, for $1 million, a complaint
instituted March 31, 1993 by Chevron USA Inc. in the United States District
Court for the Southern District of Texas, Houston Division alleging a conspiracy
by the Company and three other major producers of tricone rock bits, Reed Tool
Company, Smith and Dresser, in violation of federal antitrust laws regarding
pricing of such rock bits.
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 position of the Company.
See also "Business -- Environmental Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
13
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Common Stock of the Company is principally traded on The New York Stock
Exchange. At December 7, 1994, there were approximately 59,155 stockholders and
18,155 stockholders of record.
For information regarding quarterly high and low sales prices for the
Company's Common Stock, see page 48 of the 1994 Annual Report to Stockholders
which is incorporated herein by reference.
For information regarding dividends declared on the Company's Common Stock,
see Note 15 of Notes to Consolidated Financial Statements which is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information set forth under the caption "Condensed Comparative
Consolidated Financial Information" on page 17 of the 1994 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" on pages 19 through
25 of the 1994 Annual Report to Stockholders 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 on pages 26 through 48 of the 1994 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, 1994.
Consolidated Statements of Financial Position as of September 30, 1994 and
1993.
14
<PAGE>
Consolidated Statements of Stockholders' Equity for each of the three years
in the period ended September 30, 1994.
Consolidated Statements of Cash Flows for each of the three years in the
period ended September 30, 1994.
Notes to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
15
<PAGE>
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 25, 1995, which
section is incorporated herein by reference. For information regarding
executive officers of the Company, see pages 10 and 11 hereof.
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 25, 1995, 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 25, 1995, which sections are
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
16
<PAGE>
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 report on Form 10-K.
(2) Financial Statement Schedules:
Schedule Number Description Page Number
--------------- ----------- -----------
IX Short-Term Borrowings 24
(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 (filed as Exhibit 3.2 to Annual Report of Baker Hughes
Incorporated on Form 10-K for the year ended September 30, 1992
and incorporated herein by reference).
3.3 Certificate of Designation of Series One Junior Participating
Preferred Stock (filed as Exhibit 3.3 to Annual Report of Baker
Hughes Incorporated on Form 10-K for the year ended September 30,
1993 and incorporated herein by reference).
3.4 Amended Certificate of Designation of Series One Junior
Participating Preferred Stock (filed as Exhibit 3.4 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1992 and incorporated herein by reference).
3.5 Certificate of Designation of Series I Preferred Stock of Baker
Hughes Incorporated (filed as Exhibit 3.6 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1989 and incorporated herein by reference).
17
<PAGE>
3.6 Certificate of Designation of Series J Preferred Stock of Baker
Hughes Incorporated (filed as Exhibit 3.7 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1989 and incorporated herein by reference).
3.7 Certificate of Designation of Series K Preferred Stock of Baker
Hughes Incorporated (filed as Exhibit 3.8 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1989 and incorporated herein by reference).
3.8 Certificate of Designation of Series L Preferred Stock of Baker
Hughes Incorporated (filed as Exhibit 3.8 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1990 and incorporated herein by reference).
3.9 Certificate of Designation of $3.00 Convertible Preferred Stock
(filed as Exhibit A to Exhibit 2.1 to Form 8-K of Baker Hughes
Incorporated on February 11, 1992 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 Commission upon request.
4.2 Stockholder Rights Agreement dated as of March 23, 1988, between
Baker Hughes Incorporated and Morgan Shareholder Services Trust
Company, as Rights Agent (filed as Exhibit 4.2 to Annual Report
of Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1993 and incorporated herein by reference).
10.1 Employment Agreement between Baker Hughes Incorporated and James
D. Woods dated December 7, 1994.
10.2 Executive Severance Agreement between Baker Hughes Incorporated
and Eric L. Mattson dated as of May 22, 1991 (filed as Exhibit
10.2 to Annual Report of Baker Hughes Incorporated on Form 10-K
for the year ended September 30, 1993 and incorporated herein by
reference).
10.3 Employment Agreement between Baker Hughes Incorporated and Max L.
Lukens dated as of December 7, 1994.
10.4 Executive Severance Agreement between Baker Hughes Incorporated
and Franklin Myers dated as of May 22, 1991 (filed as Exhibit
10.4 to Annual Report of Baker Hughes Incorporated on Form 10-K
for the year ended September 30, 1991 and incorporated herein by
reference).
18
<PAGE>
10.5 Executive Severance Agreement between Baker Hughes Incorporated
and G.S. Finley dated as of May 22, 1991 (filed as Exhibit 10.5
to Annual Report of Baker Hughes Incorporated on Form 10-K for
the year ended September 30, 1993 and incorporated herein by
reference).
10.6 Executive Severance Agreement between Baker Hughes Incorporated
and P. A. Rice dated as of May 22, 1991 (filed as Exhibit 10.6 to
Annual Report of Baker Hughes Incorporated on Form 10-K for the
year ended September 30, 1993 and incorporated herein by
reference).
10.7 Amended and Restated 1991 Employee Stock Bonus Plan of Baker
Hughes Incorporated (filed as Exhibit 10.5 to Annual Report of
Baker Hughes Incorporated on Form 10-K for the year ended
September 30, 1991 and incorporated herein by reference).
10.8 Restated 1987 Stock Option Plan of Baker Hughes Incorporated
(Amended as of October 24, 1990) (filed as Exhibit 10.7 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1991 and incorporated herein by reference).
10.9 1987 Convertible Debenture Plan of Baker Hughes Incorporated
(Amended as of October 24, 1990) (filed as Exhibit 10.9 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year
ended September 30, 1991 and incorporated herein by reference).
10.10 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).
10.11 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).
10.12 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).
10.13 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).
10.14 1993 Employee Annual Incentive Compensation Plan (filed as
Exhibit 10.14 to Annual Report of Baker Hughes Incorporated on
Form 10-K for the year ended September 30, 1993 and incorporated
herein by reference).
19
<PAGE>
10.15 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).
10.16 1995 Employee Annual Incentive Compensation Plan (subject to
stockholder approval).
10.17 1995 Stock Award Plan (subject to stockholder approval).
10.18 Form of Credit Agreement, dated as of September 1, 1994, among
Baker Hughes Incorporated and eighteen banks.
10.19 Warrant Agreement dated as of March 15, 1990 between Baker Hughes
Incorporated and First Chicago Trust Company of New York (filed
as Exhibit 10.15 to Annual Report of Baker Hughes Incorporated on
Form 10-K for the year ended September 30, 1990 and incorporated
herein by reference).
10.20 Purchase Agreement dated as of December 31, 1991 by and between
Sonat Inc. and Baker Hughes Incorporated (filed as Exhibit 2.1 to
Form 8-K of Baker Hughes Incorporated on February 11, 1992 and
incorporated herein by reference).
13 Portions of 1994 Annual Report to Stockholders.
21 Subsidiaries of Registrant.
23 Opinion and Consent of Deloitte & Touche, which is included at
Page 23 of this Annual Report on Form 10-K.
27 Financial Data Schedule (for SEC purposes only)
(B) REPORTS ON FORM 8-K:
None.
20
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 7th day of
December, 1994.
BAKER HUGHES INCORPORATED
By JAMES D. WOODS
-------------------------------------
(James D. Woods, President and
Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, 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>
JAMES D. WOODS Chairman of the Board, December 7, 1994
------------------------ President and Chief
(James D. Woods) Executive Officer
(principal executive
officer)
E. L. MATTSON Senior Vice President and December 7, 1994
- -------------------------- Chief Financial Officer
(E. L. Mattson) (principal financial
officer)
JAMES E. BRAUN Controller (principal December 7, 1994
- -------------------------- accounting officer)
(James E. Braun)
Director December , 1994
- --------------------------
(Lester M. Alberthal, Jr.)
GORDON M. ANDERSON Director December 7, 1994
- --------------------------
(Gordon M. Anderson)
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C>
VICTOR G. BEGHINI Director December 7, 1994
- --------------------------
(Victor G. Beghini)
JACK S. BLANTON Director December 7, 1994
- --------------------------
(Jack S. Blanton)
HARRY M. CONGER Director December 7, 1994
- --------------------------
(Harry M. Conger)
EUNICE M. FILTER Director December 7, 1994
- --------------------------
(Eunice M. Filter)
JOE B. FOSTER Director December 7, 1994
- --------------------------
(Joe B. Foster)
RICHARD D. KINDER Director December 7, 1994
- --------------------------
(Richard D. Kinder)
- --------------------------
(John F. Maher) Director December , 1994
- -------------------------- Director December , 1994
(Dana G. Mead)
DONALD C. TRAUSCHT Director December 7, 1994
- --------------------------
(Donald C. Trauscht)
</TABLE>
22
<PAGE>
INDEPENDENT AUDITORS' REPORT
Baker Hughes Incorporated:
We have audited the consolidated financial statements of Baker Hughes
Incorporated and its subsidiaries as of September 30, 1994 and 1993, and for
each of the three years in the period ended September 30, 1994, and have issued
our report thereon dated November 16, 1994; such financial statements and report
are included in your 1994 Annual Report to Stockholders and are incorporated
herein by reference. Our audits also included the financial statement schedule
of Baker Hughes Incorporated and its subsidiaries, listed in Item 14. This
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Houston, Texas
November 16, 1994
INDEPENDENT AUDITORS' CONSENT
Baker Hughes Incorporated:
We consent to the incorporation by reference in Post-Effective Amendment Nos. 1,
2 and 3 on Form S-8 to Registration Statement No. 33-11074 on Form S-4, in Post-
Effective Amendment No. 1 to Registration Statement No. 33-16094 on Form S-4, in
Post-Effective Amendment Nos. 1 and 2 to Registration Statement No. 33-14803 on
Form S-8, in Registration Statement No. 33-34935 on Form S-3, in Registration
Statement No. 33-39445 on Form S-8, in Registration Statement No. 33-61304 on
Form S-3, in Amendment No. 1 to Registration Statement No. 33-61304 on Form S-3
and in Registration Statement No. 33-52195 on Form S-8 of our reports dated
November 16, 1994, appearing and incorporated by reference in the 1994 Annual
Report on Form 10-K of Baker Hughes Incorporated for the year ended September
30, 1994.
DELOITTE & TOUCHE LLP
Houston, Texas
December 15, 1994
23
<PAGE>
BAKER HUGHES INCORPORATED
SCHEDULE IX -- SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
Weighted Maximum Average Weighted
Average Amount Amount Average
Balance Interest Outstanding Outstanding Interest Rate
at End of Rate at End During the During the During the
(Dollar amounts in thousands) Period of Period Period (1) Period (2) Period (2)
- ----------------------------- ---------- ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Fiscal year ended September 30, 1994 $ 863 (4) 24.6%(4) $14,692 $ 803 14.2%
Borrowings (3)
Fiscal year ended September 30, 1993 5,381 10.8 10,361 5,877 13.7
Borrowings (3)
Fiscal year ended September 30, 1992 7,161 13.1 21,701 9,290 16.3
Borrowings (3)
</TABLE>
- ----------------------------------
(1) The maximum amount outstanding during the period is determined on the basis
of the amounts outstanding at any month end.
(2) The average amount outstanding during the period and the weighted average
interest rate during the period are computed on the basis of quarterly
balances.
(3) Represents borrowings under uncommitted credit facilities outside of the
U.S. of which a portion is denominated in currencies other than the U.S.
dollar.
(4) Represents borrowings in Chilean pesos.
24
<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
FOR
J.D. WOODS
BAKER HUGHES INCORPORATED
December 7, 1994
<PAGE>
BAKER HUGHES INCORPORATED
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement") is
made, entered into, and is effective as of this 7th day of December, 1994, by
and between Baker Hughes Incorporated, (hereinafter referred to as the
"Company"), a Delaware corporation having its principal offices at 3900 Essex
Lane, Houston, Texas and J.D. Woods (hereinafter referred to as the "Employee").
WHEREAS, Employee is presently employed by the Company in the capacity of
President and Chief Executive Officer and also serves as Chairman of the Board
of Directors of the Company (hereinafter referred to as the "Board"); and
WHEREAS, Employee possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, its policies, methods,
personnel and operations; and
WHEREAS, the Company recognizes that Employee's contribution has been
substantial and meritorious and, as such, the Employee has demonstrated unique
qualifications to act in an executive capacity for the Company; and
WHEREAS, the Company is desirous of assuring the continued employment of
the Employee in the above stated capacity, and Employee is desirous of having
such assurance; and
WHEREAS, the Company is desirous of assuring the Employee of certain
benefits of employment at the time of retirement from the Company.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
SECTION 1. TERM OF EMPLOYMENT
The Company hereby agrees to employ Employee and Employee hereby agrees to
continue to serve the Company, in accordance with the terms and conditions set
forth herein, for a term commencing as of the date hereof. The term of
employment shall be until the later of January 31, 1997 or the retirement from
employment of the Company by the Employee; provided, however Employee agrees not
to retire on the last day of any fiscal year of the Company.
The Agreement shall automatically begin again for successive one year
terms if the Employee does not enter retirement on January 31, 1997. No
additional salary or benefits shall be owed to the Employee beyond the term
except for normal retirement benefits and the payment for consulting services
set forth below. As used herein, the "term of this Agreement" shall mean the
term of employment as described above.
-1-
<PAGE>
SECTION 2. POSITION AND RESPONSIBILITIES
During the term of this Agreement, Employee agrees to be employed as
President and Chief Executive Officer of the Company and to further serve as
Chairman of the Board if so elected. In the capacity of President and Chief
Executive Officer, Employee shall be the highest ranking officer of the Company
and shall have full authority and responsibility for formulating and
administering the plans and policies of the Company. Employee shall have,
subject to the sole discretion of the Board, the same status and
responsibilities normally inherent in such capacity in U.S. publicly held
corporations of similar size and character. Employee agrees and acknowledges
that, in connection with his employment relationship with the Company, Employee
owes fiduciary duties to the Company and will act accordingly. Employee also
agrees that the Board may request that he relinquish the title of President at
any time without there being considered any diminution in stature or position in
the Company.
SECTION 3. STANDARD OF CARE
During the term of this Agreement, Employee agrees to devote substantially
his full time, attention and energies to the Company's business and agrees to
faithfully and diligently endeavor to the best of his ability to further the
best interests of the Company. Employee shall not engage in any other business
activity, whether or not such business activity is pursued for gain, profit or
other pecuniary advantage. Subject to the covenants of Section 9 herein, this
shall not be construed as preventing the Employee from investing his own assets
in such form or manner as will not require his services in the daily operations
of the affairs of the companies in which such investments are made. Further,
subject to Section 9.1 herein, Employee may serve as a director of other
companies so long as such service is not injurious to the Company and so long as
such service does not present Employee with a conflict of interest.
In keeping with Employee's fiduciary duties to the Company, and after the
term of this Agreement but during the term of the Consulting Agreement, Employee
agrees that he shall not, directly or indirectly, become involved in any
conflict of interest, or upon discovery thereof, allow such a conflict to
continue. Moreover, Employee agrees that he shall promptly disclose to the Board
any facts which might involve any reasonable possibility of a conflict of
interest.
Circumstances in which a conflict of interest on the part of Employee
would or might arise, and which should be reported immediately by Employee to
the Board, include the following: (a) ownership of a material interest in,
acting in any capacity for, or accepting directly or indirectly any payments,
services or loans from a supplier, contractor, subcontractor, customer or other
entity with which the Company does business; (b) misuse of information or
facilities to which Employee has access in a manner which will be detrimental to
Company's interest; (c) disclosure or other misuse of confidential information
of any kind obtained through the Employee's connection with the Company; (d)
acquiring or trading in, directly or indirectly, other properties or interests
connected with the design, manufacture or marketing of products designed,
manufactured or marketed by the Company; (e) the appropriation to the Employee
or the diversion to others, directly or indirectly, of any opportunity in which
it is known or could reasonably be anticipated that the Company would be
interested; and (f) the ownership, directly or indirectly, of a material
interest in an enterprise in competition with the Company or its dealers and
distributors or acting as a director, officer, partner, consultant, employee or
agent of any enterprise which is in competition with the Company or its dealers
or distributors.
-2-
<PAGE>
Further, Employee covenants, warrants and represents that he shall:
(i) Devote his full and best efforts to the fulfillment of his employment
obligations;
(ii) Exercise the highest degree of fiduciary loyalty and care and the
highest standards of conduct in the performance of his duties; and
(iii) Endeavor to prevent any harm, in any way, to the business or
reputation of the Company.
SECTION 4. COMPENSATION
As remuneration for all services to be rendered by Employee during the
term of this Agreement, and as further consideration for so contracting with the
Company, the Company shall pay Employee total compensation consisting of the
following:
4.1. Base Salary. The Company shall pay Employee a Base Salary in an
amount which shall be established from time to time by the Board or the
Compensation Committee of the Board. This Base Salary shall be paid to Employee
in 26 equal installments throughout the year, consistent with the normal payroll
practices of the Company.
The Base Salary shall be reviewed at least annually in December, the first
such review to occur in December 1995, while this Agreement is in force, to
ascertain whether, in the sole discretion and judgment of the Board or the
Compensation Committee of the Board, such Base Salary should be increased (but
not decreased), based on the performance of the Employee during the year. If so
increased, the Base Salary as stated above shall, likewise, be increased for all
purposes of this Agreement.
4.2. Annual Bonus. The Company shall provide Employee the opportunity to
earn an annual cash bonus based on the achievement of performance goals
established, and communicated to the Employee, at the beginning of each bonus
plan year, by the Board or the Compensation Committee of the Board (the "Bonus
Plan"). The annual bonus opportunity shall be at a level as determined by the
Board or the Compensation Committee of the Board in their sole discretion, which
is commensurate with the opportunity normally offered to employees having the
same duties and responsibilities (as the Employee), at public companies similar
in size and character to the Company and which may vary from year to year with
the executive salary grade schedule for the Company and for the Employee.
4.3. Long-Term Incentives. The Company shall provide as a long-term
incentive award a stock grant, pursuant to the 1995 Stock Award Plan and subject
to its approval by the stockholders of the Company, of 50,000 shares of Common
Stock, $1.00 par value, of the Company. Such stock grant shall vest and be
issued to the Employee in its entirety upon the retirement of the Employee. The
award shall also vest and be issued in its entirety upon the death or total
disability of the Employee. Pending vesting and issuance, the Company shall pay
to the Employee a cash payment equal to the dividend paid on such shares as
though they were issued and outstanding from the date hereof.
In addition to the foregoing, the Company has granted to Employee stock
options pursuant to the 1993 Stock Option Plan which shall remain in effect
subject to the vesting schedule set forth by the Compensation Committee and
remain outstanding for the term of this
-3-
<PAGE>
Agreement. Such options shall also fully vest and remain outstanding upon the
retirement of the Employee for the term of the lesser of (a) the original term
set forth in such options or (b) three years subsequent to the end of the
consulting arrangement set forth in Section 7.3.
4.4. Employee Benefits. During the term of this Agreement, the Company
shall provide to the Employee the fringe benefits to which other officers and
employees of the Company are entitled to receive, as determined by the Board or
the Compensation Committee of the Board in their sole discretion, commensurate
with the Employee's position. Such fringe benefits shall include, but not be
limited to, group term life insurance, comprehensive health and major medical
insurance, short-term and long-term disability and participation in all
retirement plans.
Employee shall be entitled each year to paid vacation in accordance with
the standard written policy of the Company with regard to vacations of
employees. In applying this policy, Employee shall be given credit for prior
service.
Employee shall likewise have the benefit of any additional fringe benefit
established during the term of this Agreement, by standard written policy of the
Company.
4.5. Perquisites. During the term of this Agreement, the Company shall
provide to Employee, at the Company's cost, the perquisites to which other
officers of the Company are entitled, as determined by the Board or the
Compensation Committee of the Board in their sole discretion, including, but not
limited to, executive life insurance, club memberships, financial planning
(including tax return preparation), and an annual physical examination. The
Company also shall provide such other perquisites which are suitable to the
character of Employee's position with the Company and adequate for the
performance of his duties hereunder, including, but not limited to, a furnished
executive office and a full-time secretary at a location mutually agreeable to
the Employee and the Company. However, by reason of Sections 4.4 and 4.5 herein,
the Company shall not be obligated to institute, maintain or refrain from
changing, amending or discontinuing any benefit plan, program or perquisite, so
long as such changes are similarly applicable to senior executive employees
generally.
SECTION 5. EXPENSES
The Company shall pay, or reimburse Employee, for all ordinary, reasonable
and necessary expenses which Employee incurs in performing his duties under this
Agreement including, but not limited to, travel, entertainment, professional
dues and subscriptions, and all dues, fees and expenses associated with
membership in various professional, business and civic associations and
societies of which Employee's participation is in the best interest of the
Company.
SECTION 6. TERMINATION OF EMPLOYMENT
6.1. Termination Due to Disability. In the event of the Disability (as
hereafter defined) of Employee during the term of this Agreement for a period of
more than 90 days in the aggregate during any period of 12 consecutive months,
or of the reasonable expectation that Employee's Disability will exist for more
than such a period of time, upon termination of Employee's employment by the
Company due to such Disability following 30 days prior written notice, the
Company shall pay to Employee, in lieu of the Base Salary provided for in
Section 4.1 hereof the Retirement Compensation (as defined in Section 7.3).
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Notwithstanding any provision to the contrary contained in such plans,
the above payments will be in lieu of any short-term or long-term disability
provided to Employee under the terms of any broad-based plans maintained by the
Company. However, Employee shall receive those benefits specified in Section 7.1
herein.
It is expressly understood that the Disability of Employee for a period of
90 days or less in the aggregate during any period of 12 consecutive months, in
the absence of any reasonable expectation that his Disability will exist for
more than such a period of time, shall not constitute a failure by him to
perform his duties hereunder and shall not be deemed a breach or default and
Employee shall receive full compensation for any such period of Disability or
for any other temporary illness or incapacity during the term of this Agreement.
The term "Disability" shall mean, for all purposes of this Agreement, the
incapacity of Employee due to injury, illness, disease, or bodily or mental
infirmity to engage in the performance of substantially all of the usual duties
of his employment with the Company, such incapacity to be determined by and in
the sole discretion of the Board upon competent medical advice.
6.2. Termination Due to Death. In the event of the death of Employee
during the term of this Agreement, or during any period of Disability during
which he is receiving compensation pursuant to Section 6.1 herein, the Company
shall pay Employee's designated beneficiary, the Retirement Compensation.
Employee's beneficiaries also shall receive those benefits specified in Section
7.1 herein.
6.3. Termination for Good Reason. Employee may terminate this Agreement
for Good Reason by giving the Board 30 days prior written notice of his intent
to terminate for Good Reason. Such written notice must set forth in reasonable
detail the facts and circumstances claimed to provide a basis for such Good
Reason termination. "Good Reason" shall mean the occurrence of any one or more
of the following without Employee's express written consent:
(i) The assignment to the Employee of any duties inconsistent with the
Employee's position (including status, offices, titles and reporting
requirements), authorities, duties or other responsibilities as contemplated by
Section 2 of this Agreement, or any other action of the Company which results in
an unreasonable or material diminishment in such position, authority, duties or
responsibilities, other than a non-material, insubstantial or inadvertent action
which is remedied by the Company after receipt of written notice thereof given
by the Employee;
(ii) The Company's requiring the Employee to be based more than 50 miles
from the location of his agreed upon principal office;
(iii) A reduction or elimination not otherwise in accordance with the
terms of this Agreement of any component of Employee's compensation as provided
for in Section 4 herein; or
(iv) A material breach by the Company of any provision of this Agreement
which is not remedied by the Company after receipt of written notice thereof
given by the Employee.
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Subject to the consulting requirements of Section 7.3 herein, upon
lapse of the 30-day period following notice of termination for Good Reason, the
Employee's obligation to serve the Company, and the Company's obligation to
employ Employee, under the terms of this Agreement, shall terminate, and the
Employee shall receive the compensation and benefits specified in Section 7.2
herein.
6.4. Termination by Notice. Either the Company or Employee may terminate
this Agreement without Cause by delivering proper written notice to the other
party.
(i) Notice by Employee. Employee may terminate this Agreement at any time
by giving the Board 90 days prior written notice of his intent to terminate or
retire. In the case of termination, the Company shall pay Employee his full Base
Salary and benefits through the effective date of termination and Employee shall
immediately thereafter forfeit all rights and benefits (other than vested
benefits under any agreement or plan) he would otherwise have been entitled to
receive under this Agreement (including the Employee's annual bonus for the then
current fiscal year). In the case of retirement, the Company shall pay the
Employee the Retirement Compensation. The Company shall have the right to offset
against the aforementioned sums any monies owed by Employee to the Company.
Subject to the consulting requirements of Section 7.2 herein, Employee
thereafter shall have no further employment obligations under this Agreement.
(ii) Notice by the Company. The Company may terminate this Agreement at
any time by the Board giving Employee 30 days prior written notice of the
Company's intent to terminate. Subject to the consulting requirements of Section
7.2 herein, upon the lapse of the 30 days, Employee's employment obligation to
the Company, and the obligation to employ Employee, under the terms of this
Agreement shall terminate, and the Employee shall receive the compensation and
benefits specified in Section 7.2 herein. The Company shall have the right to
offset against the aforementioned sums any monies owed by Employee to the
Company.
6.5. Termination for Cause. Nothing in this Agreement shall be construed
to prevent the Company from terminating Employee's employment under this
Agreement for Cause.
"Cause" shall be defined as including the commission of an act of fraud,
embezzlement, theft or other criminal act constituting a felony; the material
breach of the Company's Code of Ethical Conduct attached hereto; a material
breach of any provision of this Agreement which is not remedied by the Employee
after receipt of written notice thereof given by the Company or the failure of
Employee to perform any and all material covenants under this Agreement, for any
reason other than Employee's death, Disability or as the result of a termination
for Good Reason as defined in Section 6.3 herein.
In the event this Agreement is terminated by the Company for Cause, the
Company shall pay Employee his full Base Salary, benefits and a portion of
Employee's most recently ascertainable incentive bonus (as provided under the
provisions of the annual incentive bonus plan) up through and including the date
on which the termination becomes effective as computed in accordance with the
provisions of the Company's Bonus Plan, and Employee shall immediately
thereafter forfeit all other rights and benefits (other than vested benefits
under any agreement or plan) he would otherwise have been entitled to receive
under this Agreement (including the remainder of Employee's annual bonus for the
then current plan year). The
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Company shall have the right to offset against the aforementioned sums any
monies owed by Employee to the Company.
SECTION 7. COMPENSATION UPON TERMINATION
7.1. Disability or Death. In the event Employee's employment is terminated
by reason of Disability (as provided in Section 6.1 herein), or by reason of
Death (as provided in Section 6.2 herein), in addition to the payments specified
in Sections 6.1 and 6.2, the Company shall pay Employee, or Employee's
beneficiary, in a lump sum a portion of Employee's most recently ascertainable
incentive bonus (as provided under the provisions of the annual incentive bonus
plan), up through and including the date on which the termination becomes
effective as computed in accordance with the provisions of the Bonus Plan.
7.2. For Good Reason or by Notice by the Company. In the event Employee's
employment is terminated for Good Reason (as provided in Section 6.3 herein), or
by Notice by the Company (as provided in Section 6.4(ii) herein) in addition to
the payments specified in Sections 6.3 and 6.4(ii), the Company shall pay
Employee the following amounts upon the effective date of such termination, or
as otherwise specified subject to the Company's right to offset against any such
amounts any monies owed by Employee to the Company:
(i) Employee's annual Base Salary (as stated in Section 4.1 and as
previously adjusted by the Board from time to time) continued for the remaining
term of this Agreement, paid to Employee in equal biweekly installments
consistent with the normal payroll practices of the Company, subject to the
Company's right of offset as provided in Section 8; and
(ii) Once a year, the greater of (a) one-half of Employee's expected value
incentive bonus (as provided under the provisions of the Bonus Plan) to be
computed for the current fiscal year at the time of termination or (b)
Employee's expected value incentive bonus multiplied by the percentage amount of
expected value incentive bonus a successor chief executive officer receives for
such fiscal year, and in both (a) and (b) prorated for the months applicable.
Such amounts are to be paid to Employee in an annual installment for each
year or part thereof for the remaining term of this Agreement consistent with
the normal payroll practices of the Company. To the extent Employee is
terminated in the middle of a fiscal year, he is to receive the proportionate
incentive bonus for the completed term of the year as computed in accordance
with the Bonus Plan; and
(iii) An immediate vesting of all outstanding long-term incentive awards
held by the Employee; and
(iv) A cash lump sum payment, within thirty (30) days of termination, of
the present value of all Employee's accrued benefits, vested or otherwise, under
the Company's supplemental retirement plan; and
(v) A continuation, at the same or greater benefit level, of all Employee
Benefits and Perquisites, as provided in Sections 4.4 and 4.5 herein, for the
remaining term of this Agreement; provided, however, that to the extent that any
such Employee Benefit or Perquisite cannot be continued during a period when
Employee is not an employee of the Company or cannot be continued with similar
tax effects to Employee when Employee is not an employee of the Company, the
Company shall pay Employee an amount in cash equal to the economic value of such
Employee Benefit or Perquisite.
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As consideration for the continuation of the above stated benefits,
Employee agrees to make himself available during the remaining term of the
Agreement, at reasonable times and locations, to the Company and/or to the
successor to his position at the Company, to provide consulting advice (as
requested) including, but not limited to, strategic planning, management
development, market trend analysis, product development, acquisition planning
and industry trend analysis. The Company agrees not to require more than 10
business days a month as long as the Employee is not otherwise fully employed
nor more than four business days a month once the Employee is otherwise fully
employed.
Notwithstanding the previous provisions of this Section 4.1 the amounts in
Sections 7.2(i) and (ii) shall be adjusted automatically upward or downward (in
the nearest increment of $1,000), effective on each December 1, by the GNP price
deflator ad published by the Federal government for the previous twelve months,
as determined by the then public accounting firm of record of the Company (that
performs the annual audit). Upon such adjustment, the Base Salary as stated
above shall, likewise, be increased or decreased for all purposes of this
Agreement.
7.3. Consulting Arrangement Upon Retirement. Upon designation by Employee
of his desire to retire from the Company upon completion of the term of this
Agreement or otherwise, the Company shall pay Employee for five years subsequent
to the date of retirement an annual consulting fee of $400,000 (the "Retirement
Compensation"). The Retirement Compensation shall be paid to Employee on a bi-
weekly basis for the term of retirement. No Employment Benefits as set forth in
Section 4.4 or perquisites as set forth in Section 4.5 shall be paid to the
Employee, other than normal retirement benefits accruing to all retirees of the
Company generally; provided, however, that any club memberships will be
transferred into Employee's name upon retirement at no transfer cost to
Employee. The Company shall continue to be responsible for expenses as set forth
in Section 5 as they may be incurred on behalf of the Company. In addition, the
Company shall provide Employee with reasonable office space and secretarial
support in a location away from any principal office of the Company, but at a
site reasonably convenient to Employee. The Company shall no longer be
responsible for any incentive bonus pursuant to the Bonus Plan during the term
of retirement and subsequent to the term of this Agreement.
Notwithstanding the foregoing, in addition to the compensation provided
pursuant to Section 7.2 in the event of termination of employment of Good Reason
or by Notice by the Company, Employee shall be entitled to the Retirement
Compensation set forth in this Section 7.3 subsequent to the payments made
pursuant to Section 7.2.
SECTION 8. OFFSET FOR COMPENSATION EARNED SUBSEQUENT TO TERMINATION
8.1. Right of Offset. In the event the Employee's employment is terminated
for Good Reason (as provided in Section 6.3 herein), or by Notice by the Company
(as provided in Section 6.4(ii) herein), the continuation of the Employee's Base
Salary (as provided in Section 7.2(i) herein) and incentive bonus (as provided
in Section 7.2(ii) herein), shall be offset by "Compensation" earned from a
subsequent employer during the remaining term of this Agreement. The percentage
of the offset shall be limited to 65% of the unpaid Base Salary and incentive
bonus provided under Sections 7.2(i) and 7.2(ii) herein. However, there shall be
no right of offset with respect to the Retirement Compensation.
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8.2. Definition of Compensation. For purposes of the offset provided
in Section 8.1 herein, "Compensation" shall be defined as all sums constituting
income, as that term is defined for federal income tax purposes, received by
Employee for his services as an employee, officer, partner, consultant or
otherwise, subsequent to the effective date of termination under this Agreement.
8.3. Duty of Disclosure. For purposes of enforcing this Section 8,
Employee has a duty to keep the Company informed of the terms and conditions of
any subsequent employment and the corresponding "Compensation" earned from such
employment, and shall provide or cause to be provided to the Company in writing
true, correct, timely and complete information concerning the same on a
quarterly basis.
SECTION 9. COVENANTS
9.1. Noncompetition. Employee and Company agree and acknowledge that the
Company has developed and owns valuable Confidential Information (as defined in
Section 9.2 of this Agreement) and that the Company has developed substantial
goodwill. Employee and Company further agree and acknowledge that the Company
has a substantial and legitimate interest in protecting the Company's
Confidential Information and goodwill. Employee and Company further agree and
acknowledge that the provisions of this Section 9 are reasonably necessary to
protect the Company's legitimate business interests and are designed to protect
the Company's Confidential Information and goodwill. During the term of this
Agreement, or any other period in which amounts are paid hereunder, the Employee
shall not, as a shareholder, employee, officer, partner, consultant or
otherwise, engage directly or indirectly in any business or enterprise which is
"in competition" with the Company or its successors or assigns. A business or
enterprise "in competition" with the Company includes only a business or
enterprise that is engaged in any business activity of the Company within a one
hundred (100) mile radius of any facility operated by the Company.
However, the Employee shall be allowed to purchase and hold for investment
less than two percent (2%) of the shares of any corporation whose shares are
regularly traded on a national securities exchange or in the over-the-counter
market.
Employee further agrees that, (a) during the two (2) years following his
termination if such termination occurs pursuant to Section 6.4(i), or 6.5 or (b)
during the term of the Agreement if termination is pursuant to Section 6.1, 6.3
or 6.4(ii) or (c) during the term the Employee is receiving Retirement
Compensation, Employee will not solicit, contact, canvass, or attempt to
solicit, contact or canvass any of the customers of Company with whom Employee
had direct or indirect contact while Employee was performing services for the
Company.
Employee and Company further agree and acknowledge that a part of
Employee's compensation under this Agreement constitutes independent valuable
consideration for this Section 9.1. Employee further agrees that the existence
of any claim or cause of action of Employee against Company, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement by Company of any or all of this Section 9. Employee agrees that the
scope of the restrictions as to time, geographic area, and scope of activity in
this Section 9.1 are reasonably necessary for the protection of the Company's
legitimate business interests and are not oppressive or injurious to the public
interest.
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Employee agrees that in the event of a breach or threatened breach of
any of the provisions of this Section 9.1 the Company shall be entitled to
injunctive relief against Employee's activities to the extent allowed by law.
Employee further agrees that any breach or threatened breach of any of the
provisions of Section 9.1 would cause irreparable injury to the Company for
which it would have no adequate remedy at law. Nothing herein shall be construed
as prohibiting the Company from pursuing any other remedies available to it for
any breach or threatened breach, including the recovery of damages.
9.2 Confidential Information. Employee recognizes and acknowledges that he
will have access to certain information of the Company that is confidential and
proprietary and constitutes valuable and unique property of the Company.
Employee agrees that he will not at any time, either during or subsequent to the
employment, disclose to others, use, copy or permit to be copied, except in
pursuance of his duties on behalf of the Company, its successors, assigns or
nominees, any secret or confidential information or know-how of the Company
(whether or not developed by the Employee) without the Company's prior written
consent. The term "secret or confidential information or know-how of the
Company" (referred to collectively as "Confidential Information") shall include,
without limitation, the Company's plans, strategies, costs, prices, uses,
applications of products and services, results of investigations or experiments,
and all apparatus, products, processes, compositions, samples, formulas,
computer programs, pricing policy, financial information, methods of doing
business, policy and/or procedure manuals, training and recruiting procedures,
accounting procedures, the status and content of the Company's contracts with
its customers, the Company's business philosophy, and servicing methods and
techniques at any time used, developed, or investigated by the Company, before
or during the Employee's tenure of employment which are not generally available
to the public or which are maintained as confidential information of third
parties received as a result of his employment with Company.
Employee further agrees to deliver to the Company at the termination of
his employment all correspondence, memoranda, notes, records, drawings,
sketches, plans, customer lists, product compositions, or other documents and
all copies thereof (all of which are hereafter referred to as the "Documents"),
made, composed or received by Employee, solely or jointly with others, and which
are in Employee's possession, custody, or control at such date and which are
related in any manner to the past, present, or anticipated business of the
Company. In this regard, Employee hereby grants and conveys to Company all
right, title and interest in and to, including without limitation, the right to
possess, print, copy, and sell or otherwise dispose of, any reports, records,
papers, summaries, photographs, drawings or other documents, and writings,
copies, abstracts or summaries thereof, which may be prepared by Employee or
under his direction or which may come into his possession in any way during his
employment with the Company which relate in any manner to the past, present or
anticipated business of the Company.
In the event of a breach or threatened breach of any of the provisions of
this Section 9.2, the Company shall be entitled to an injunction ordering the
return of such Documents and any and all copies thereof and restraining Employee
from using or disclosing, for his benefit or the benefit of others, in whole or
in part, any Confidential Information, including but not limited to the
Confidential Information which such Documents contain, constitute, or embody.
Employee further agrees that any breach or threatened breach of any of the
provisions of Section 9.2 would cause irreparable injury to the Company for
which it would have no adequate remedy at law. Nothing herein shall be construed
as prohibiting the Company from
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pursuing any other remedies available to it for any such beach or threatened
breach, including the recovery of damages.
9.3 Publicity. Employee agrees that Company may use, and hereby grants the
Company the nonexclusive and worldwide right to use, Employee's name, picture,
likeness, photograph, signature or any other attribute of Employee's persona
(all of such attributes are hereafter collectively referred to as "Persona") in
any media for any advertising, publicity or other purpose at any time, either
during or subsequent to his employment by the Company. Employee agrees that such
use of his Persona will not result in any invasion or violation of any privacy
or property rights Employee may have; and Employee agrees that he will receive
no additional compensation for the use of his Persona. Employee further agrees
that any negatives, prints or other material for printing or reproduction
purposes prepared in connection with the use of his Persona by the Company shall
be and are the sole property of the Company.
9.4. Covenants Regarding Other Employees. During the term of this
Agreement if termination is pursuant to Section 6.1, 6.3 or 6.4(ii), or during
the 24 months following termination if termination occurs pursuant to Section
6.4(i), or 6.5 or during the term Employee is receiving Retirement Compensation,
Employee agrees not to solicit or induce any employee of the Company to
terminate their employment, accept employment with anyone else, or to interfere
in a similar manner with the business of the Company.
SECTION 10. INDEMNIFICATION AND RELEASE
10.1. Indemnification. The Company hereby covenants and agrees to
indemnify and hold harmless Employee fully, completely and absolutely against
and in respect to any and all actions, suits, proceedings, claims, demands,
judgments, costs, expenses (including attorney's fees), losses and damages
resulting from Employee's good faith performance of his duties and obligations
under the terms of this Agreement to the extent provided in the Bylaws of the
Company and the Indemnification Agreements for the benefit of the officers of
the Company.
10.2. Release. In consideration of the benefits and compensation which may
be awarded to Employee under Sections 6 and 7 of this Agreement, Employee agrees
to execute and be bound by, as a condition precedent to receiving said benefits
and compensation, the Release attached hereto as Exhibit"A", said Release being
incorporated herein by this reference.
SECTION 11. ASSIGNMENT
11.1. Assignment by Company. This Agreement may and shall be assigned or
transferred to, and shall be binding upon and shall inure to the benefit of, any
successor of the Company, and any such successor shall be deemed substituted for
all purposes for the "Company" under the terms of this Agreement. As used in
this Agreement, the term "successor" shall mean any person, firm, corporation or
business entity which at any time, whether by merger, purchase or otherwise,
acquires all or essentially all of the assets or business of the Company.
Notwithstanding such assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Failure of the Company's successor to agree to the assignment of this
Agreement shall be a material breach of this Agreement. Except as herein
provided, this Agreement may not otherwise be assigned by the Company.
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11.2. Assignment by Employee. This Agreement shall inure to the
benefit of and be enforceable by Employee's personal or legal representatives,
executors and administrators, successors, heirs, distributees, devisees and
legatees. If Employee should die while any amounts payable to Employee hereunder
remain outstanding, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Employee's devisee,
legatee or other designee or, in the absence of such designee, to Employee's
estate.
Other than a transfer by reason of death or incapacity, the rights and
duties of Employee hereunder are personal and may not be assigned or
transferred.
SECTION 12. INCOME AND EXCISE TAX
12.1. Tax Withholding. The Company may withhold from any sums or benefits
payable under this Agreement all federal, state, city or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
12.2. Excise Tax Reimbursement. In addition to the compensation and
benefits to which Employee shall become entitled under the terms of this
Agreement, the Company shall reimburse the Employee in the amount of any excise
or other similar tax or any interest or penalties with respect to such tax that
is assessed against and paid by Employee and that is attributable to and
calculated with reference to the compensation and benefits to which Employee is
entitled under the Agreement. Any such reimbursement shall be payable to
Employee immediately following the date that Employee provides evidence
reasonably satisfactory to the Company that Employee has made any payment in
satisfaction of any such tax liability. The reimbursement provided for herein
shall not pertain to any tax liability attributable to such compensation and
benefits that are determined and calculated in the manner that pertains to other
income earned for personal services, but shall rather pertain only to liability
arising under excise and other similar tax provisions of federal and state tax
laws that specifically address employment termination or severance compensation
and benefits as contemplated by Section 280(g) of the Internal Revenue Code or
similar provisions. The reimbursements provided for in this Section 12.2 shall
be "grossed up." For this purpose, "grossed up" shall mean that Employee shall
be paid an amount which, after payment of taxes on such amount, shall insulate
Employee from the effect of taxes on such reimbursements (including the effects
of income tax assessed on the gross-up).
12.3. Procedural Aspects. The Employee shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the grossed up payment. Such notification shall be
given as soon as practicable but no later than 10 business days after the
Employee knows of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Employee
shall not pay such claim prior to the expiration of the 30-day period following
the date on which the Employee gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Employee in writing prior to the expiration
of such period that it desires to contest such claim, the Employee shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim;
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(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time-to-time, including,
without limitation, accepting legal representation with respect to such claim by
any attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim;
(iv) permit the Company to participate in any proceedings relating to such
claim; provided, however, that the Company shall bear and pay directly all costs
and expenses (including attorneys fees and any additional interest and
penalties) incurred in connection with such contest and shall indemnify and hold
the Employee harmless, on an after-tax basis, for any excise tax or income tax,
including interest and penalties with respect thereto, imposed as a result of
such representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 12.3, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Employee to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, the Employee agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company directs the
Employee to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Employee, on an interest-free basis and shall
indemnify and hold the Employee harmless, on an after-tax basis, from any excise
tax or income tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with respect
to such advance.
If, after the receipt by the Employee of an amount advanced by the Company
pursuant to Section 12.3, the Employee becomes entitled to receive any refund
with respect to such claim, the Employee shall (subject to the Company's
complying with the requirements of Section 12.3) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 12.3, a determination is made that
the Employee shall not be entitled to any refund with respect to such claims and
the Company does not notify the Employee in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of grossed up payment required to be paid.
SECTION 13. ARBITRATION AND NOTICE
13.1. Arbitration. Any claim, controversy or dispute arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The arbitration shall be conducted in Houston, Harris
County, Texas. Federal law other than state law shall govern the interpretation
of this Section 13.1. The decision of the arbitrator(s) shall be final and
binding and judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
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The arbitrator(s) shall award the prevailing party in the arbitration
its costs and expenses, including attorney's fees, incurred in enforcing the
provisions of this Agreement, in arbitration.
13.2. Notice. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to Employee at the last address he has filed in
writing with the Company or, in the case of the Company, at its principal
executive offices.
SECTION 14. MISCELLANEOUS
14.1. Entire Agreement. This document contains the entire agreement of
the parties relating to the subject matter hereof. This Agreement supersedes,
replaces and merges any and all prior and contemporaneous understandings,
representations, agreements and discussions relating to the same or similar
subject matter as that of this Agreement between Employee and Company (including
the Employment Agreement dated December 6, 1989) and constitutes the sole and
entire agreement between the Employee and Company with respect to the subject
matter of this Agreement.
14.2. Modifications. This Agreement shall not be varied, altered,
modified, cancelled, changed or in any way amended except by mutual agreement of
the parties in a written instrument executed by the parties hereto or their
legal representatives.
14.3. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
portions held to be invalid or unenforceable shall be revised and reduced in
scope so as to be valid and enforceable, or, if such is not possible, then such
portions shall be deemed to have been wholly excluded with the same force and
effect as if it had never been included herein. The remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full force and effect.
Should any one or more of the provisions of this Agreement be held to be
excessive or unreasonable as to duration, geographical scope or activity, then
that provision shall be construed by limiting and reducing it so as to be
reasonable and enforceable to the extent compatible with the applicable law. If
such reformation is not possible, then such portions shall be deemed to have
been wholly excluded with the same force and effect as if they had never been
included herein.
14.4. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same agreement.
SECTION 15. GOVERNING LAW
The laws of the State of Texas, excluding any conflicts of law rule or
principle that might otherwise refer to the substantive law of another
jurisdiction, will govern the interpretation, validity and effect of this
Agreement without regard to the place of execution or the place for performance
thereof, and Company and Employee agree that the state and federal courts in
Harris County, Texas, shall have personal jurisdiction and venue over the
Company and Employee to hear all disputes arising under this Agreement. This
Agreement is to be at least partially performed in Harris County, Texas.
-14-
<PAGE>
IN WITNESS WHEREOF, Employee has executed and the Company (pursuant to
a resolution adopted at a duly constituted meeting of its Board of Directors)
has executed this Agreement, as of the day and year first above written.
ATTEST: BAKER HUGHES INCORPORATED
By: [Signature of Lawrence O'Donnell, III By: [Signature of J.F. Maher
Appears Here] Appears Here]
------------------------------ ------------------------------
Corporate Secretary Chairman, Compensation
Committee of the Board
of Directors
EMPLOYEE
[Signature of James D. Woods Appears Here]
----------------------------------------
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<PAGE>
EXHIBIT "A"
RELEASE
As a material inducement for Company to enter into this Agreement Employee
hereby irrevocably and unconditionally releases, acquits and forever discharges
Company and its affiliated companies and their directors, officers, employees
and representatives, (collectively "Releasees"), from any and all claims,
liabilities, obligations, damages, causes of action, demands, costs, losses
and/or expenses (including attorneys fees) of any nature whatsoever, whether
known or unknown, including, but not limited to, rights arising out of alleged
violations of any contracts, express or implied, any covenant of good faith and
fair dealing, express or implied, or any tort, or any legal restrictions on the
Company's right to terminate employees, or any federal, state or other
governmental statute, regulation, or ordinance, including, without limitation,
Title VII of the Civil Rights Act of 1964, and the Federal Age Discrimination in
Employment Act, which Employee claims to have against any of the Releasees. In
addition, Employee waives all rights and benefits afforded by any state laws
which provide in substance that a general release does not extend to claims
which a person does not know or suspect to exist in his favor at the time of
executing the release which, if known by him, must have materially affected
Employee's settlement with the other person. The only exception to the foregoing
are claims and rights that may arise after the date of execution of this
Agreement.
The Employee represents and acknowledges that in executing this Release he
does not rely and has not relied upon any representation or statement, oral or
written, not set forth herein or in the Agreement made by any of the Releasees
or by any of the Releasees' agents, representatives or attorneys with regard to
the subject matter, basis or effect of this Release, the Agreement or otherwise.
The Employee represents and agrees that he fully understands his right to
discuss all aspects of this Release with his private attorney, that to the
extent, if any, that he desires, he has availed himself of this right, that he
has carefully read and fully understands all of the provisions of this Release
and that he is voluntarily entering into this Release.
AGREED AND ACCEPTED, on this day of , 19 .
EMPLOYEE
By:
---------------------------------
J.D. Woods
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
FOR
M.L. LUKENS
BAKER HUGHES INCORPORATED
December 7,1994
<PAGE>
BAKER HUGHES INCORPORATED
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement") is
made, entered into, and is effective as of this 7th day of December, 1994, by
and between Baker Hughes Incorporated, (hereinafter referred to as the
"Company"), a Delaware corporation having its principal offices at 3900 Essex
Lane, Houston, Texas and M.L. Lukens (hereinafter referred to as the
"Employee").
WHEREAS, Employee is presently employed by the Company in the capacity of
Senior Vice President and is employed by Baker Hughes Oilfield Operations, Inc.
in the capacity of President; and
WHEREAS, Employee possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, its policies, methods,
personnel and operations; and
WHEREAS, the Company recognizes that Employee's contribution has been
substantial and meritorious and, as such, the Employee has demonstrated unique
qualifications to act in an executive capacity for the Company; and
WHEREAS, the Company is desirous of assuring the continued employment of
the Employee in the above stated capacity, and Employee is desirous of having
such assurance; and
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
SECTION 1. TERM OF EMPLOYMENT
The Company hereby agrees to employ Employee and Employee hereby agrees to
continue to serve the Company, in accordance with the terms and conditions set
forth herein, for a term of five (5) years commencing as of the date hereof and
ending December 6, 1999, unless terminated earlier as hereinafter provided. At
the end of such five (5) year term, Employee's status will be "at will" and
Employee or the Company may terminate the employment relationship at any time.
The Employee and the Company each agree not to terminate the employment
relationship on the last day of any fiscal year of the Company.
No additional salary or benefits shall be owed to the Employee beyond the
term of this Agreement except for the standard benefits that would otherwise be
payable to Employee for his position. As used herein, the "term of this
Agreement" shall mean the term of employment as described above.
SECTION 2. POSITION AND RESPONSIBILITIES
During the term of this Agreement, Employee agrees to be employed as
Executive Vice President and to further serve in any higher ranking capacities
if so elected. Employee shall have, subject to the sole discretion of the Board,
the same status and responsibilities normally inherent in such capacity in U.S.
publicly held corporations of similar size and character.
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Employee agrees and acknowledges that, in connection with his employment
relationship with the Company, Employee owes fiduciary duties to the Company and
will act accordingly. Employee also agrees that the Board of Directors of the
Company (hereinafter referred to as the "Board") may request that he relinquish
the title of Executive Vice President at any time without there being considered
any diminution in stature or position in the Company.
SECTION 3. STANDARD OF CARE
During the term of this Agreement, Employee agrees to devote substantially
his full time, attention and energies to the Company's business and agrees to
faithfully and diligently endeavor to the best of his ability to further the
best interests of the Company. Employee shall not engage in any other business
activity, whether or not such business activity is pursued for gain, profit or
other pecuniary advantage. Subject to the covenants of Section 9 herein, this
shall not be construed as preventing the Employee from investing his own assets
in such form or manner as will not require his services in the daily operations
of the affairs of the companies in which such investments are made. Further,
subject to Section 9.1 herein, Employee may serve as a director of other
companies so long as such service is not injurious to the Company and so long as
such service does not present Employee with a conflict of interest.
In keeping with Employee's fiduciary duties to the Company, Employee
agrees that he shall not, directly or indirectly, become involved in any
conflict of interest, or upon discovery thereof, allow such a conflict to
continue. Moreover, Employee agrees that he shall promptly disclose to the Board
any facts which might involve any reasonable possibility of a conflict of
interest.
Circumstances in which a conflict of interest on the part of Employee
would or might arise, and which should be reported immediately by Employee to
the Board, include the following (a) ownership of a material interest in, acting
in any capacity for, or accepting directly or indirectly any payments, services
or loans from a supplier, contractor, subcontractor, customer or other entity
with which the Company does business; (b) misuse of information or facilities to
which Employee has access in a manner which will be detrimental to the Company's
interest; (c) disclosure or other misuse of confidential information of any kind
obtained through the Employee's connection with the Company; (d) acquiring or
trading in, directly or indirectly, other properties or interests connected with
the design, manufacture or marketing of products designed, manufactured or
marketed by the Company; (e) the appropriation to the Employee or the diversion
to others, directly or indirectly, of any opportunity in which it is known or
could reasonably be anticipated that the Company would be interested; and (f)
the ownership, directly or indirectly, of a material interest in an enterprise
in competition with the Company or its dealers and distributors or acting as a
director, officer, partner, consultant, employee or agent of any enterprise
which is in competition with the Company or its dealers or distributors.
Further, Employee covenants, warrants and represents that he shall:
(i) Devote his full and best efforts to the fulfillment of his
employment obligations;
(ii) Exercise the highest degree of fiduciary loyalty and care and the
highest standards of conduct in the performance of his duties; and
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(iii) Endeavor to prevent any harm, in any way, to the business or
reputation of the Company.
SECTION 4. COMPENSATION
As remuneration for all services to be rendered by Employee during the
term of this Agreement, and as further consideration for so contracting with the
Company, the Company shall pay Employee total compensation consisting of the
following:
4.1. Base Salary. The Company shall pay Employee a Base Salary in an
amount which shall be established from time to time by the Board or the
Compensation Committee of the Board. This Base Salary shall be paid to Employee
in 26 equal installments throughout the year, consistent with the normal payroll
practices of the Company.
The Base Salary shall be reviewed at least annually in December, the first
such review to occur in December 1995, while this Agreement is in force, to
ascertain whether, in the sole discretion and judgment of the Board or the
Compensation Committee of the Board, such Base Salary should be increased (but
not decreased), based on the performance of the Employee during the year. If so
increased, the Base Salary as stated above shall, likewise, be increased for all
purposes of this Agreement.
4.2. Annual Bonus. The Company shall provide Employee the opportunity to
earn an annual cash bonus based on the achievement of performance goals
established, and communicated to the Employee, at the beginning of each bonus
plan year, by the Board or the Compensation Committee of the Board (the "Bonus
Plan"). The annual bonus opportunity shall be at a level as determined by the
Board or the Compensation Committee of the Board in their sole discretion, which
is commensurate with the opportunity normally offered to employees having the
same duties and responsibilities (as the Employee), at public companies similar
in size and character to the Company and which may vary from year to year with
the executive salary grade schedule for the Company and for the Employee.
4.3. Long-Term Incentives. The Company shall provide as a long-term
incentive award a stock grant, pursuant to the 1995 Stock Award Plan and subject
to its approval by the stockholders of the Company, of 15,000 shares of Common
Stock, $1.00 par value, of the Company. Such stock grant shall vest October 26,
1999 if Employee is employed by the Company at such time. The award shall also
vest and be issued in its entirety upon the death or total disability of the
Employee. Pending vesting and issuance, the Company shall pay to the Employee a
cash payment equal to the dividend paid on such shares as though they were
issued and outstanding from the date hereof.
The Company may also provide the Employee the opportunity to earn other
long-term incentive awards to the extent any long-term incentive awards are
provided to any employees or group of employees by the Board, at a level as
determined by the Board or the Compensation Committee of the Board in their sole
discretion, which is commensurate with the opportunity normally offered to
employees, having the same duties and responsibilities (as the Employee), at
public companies similar in size and character to the Company. Currently, the
Company has, as long-term incentive awards, stock options and convertible
debentures.
4.4. Employee Benefits. During the term of this Agreement, the Company
shall provide to the Employee the fringe benefits to which other officers and
employees of the
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Company are entitled to receive, as determined by the Board or the Compensation
Committee of the Board in their sole discretion, commensurate with the
Employee's position. Such fringe benefits shall include, but not be limited to,
group term life insurance, comprehensive health and major medical insurance,
short-term and long-term disability and participation in all retirement plans.
Employee shall be entitled each year to paid vacation in accordance with
the standard written policy of the Company with regard to vacations of
employees. In applying this policy, Employee shall be given credit for prior
service.
Employee shall likewise have the benefit of any additional fringe benefit
established during the term of this Agreement, by standard written policy of the
Company; provided, however, the Employee shall not be eligible for benefits
under the Baker Hughes Incorporated Severance Policy except as provided in
Section 7.2 hereunder.
4.5. Perquisites. During the term of this Agreement, the Company shall
provide to Employee, at the Company's cost, the perquisites to which other
officers of the Company are entitled, as determined by the Board or the
Compensation Committee of the Board in their sole discretion, including, but not
limited to, executive life insurance, club memberships, financial planning
(including tax return preparation), and an annual physical examination. The
Company also shall provide such other perquisites which are suitable to the
character of Employee's position with the Company and adequate for the
performance of his duties hereunder, including, but not limited to, a furnished
executive office and a full-time secretary at a location mutually agreeable to
the Employee and the Company. However, by reason of Sections 4.4 and 4.5 herein,
the Company shall not be obligated to institute, maintain or refrain from
changing, amending or discontinuing any benefit plan, program or perquisite, so
long as such changes are similarly applicable to senior executive employees
generally.
SECTION 5. EXPENSES
The Company shall pay, or reimburse Employee, for all ordinary, reasonable
and necessary expenses which Employee incurs in performing his duties under this
Agreement including, but not limited to, travel, entertainment, professional
dues and subscriptions, and all dues, fees and expenses associated with
membership in various professional, business and civic associations and
societies of which Employee's participation is in the best interest of the
Company.
SECTION 6. TERMINATION OF EMPLOYMENT
6.1. Termination Due to Disability. In the event of the Disability (as
hereafter defined) of Employee during the term of this Agreement for a period of
more than 90 days in the aggregate during any period of 12 consecutive months,
or of the reasonable expectation that Employee's Disability will exist for more
than such a period of time, upon termination of Employee's employment by the
Company due to such Disability following 30 days prior written notice, the
Company shall pay to Employee, in lieu of the Base Salary provided for in
Section 4.1 hereof, one-half of the Base Salary provided for in Section 4.1,
until the last day of the month in which Employee is no longer deemed disabled
pursuant to this Agreement or until the end of the term of this Agreement,
whichever shall occur first.
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<PAGE>
Notwithstanding any provision to the contrary contained in such plans,
the above payments will be in addition to any short-term or long-term disability
provided to Employee under the terms of any broad-based plans maintained by the
Company. Employee shall also receive those benefits specified in Section 7.1
herein.
It is expressly understood that the Disability of Employee for a period of
90 days or less in the aggregate during any period of 12 consecutive months, in
the absence of any reasonable expectation that his Disability will exist for
more than such a period of time, shall not constitute a failure by him to
perform his duties hereunder and shall not be deemed a breach or default and
Employee shall receive full compensation for any such period of Disability or
for any other temporary illness or incapacity during the term of this Agreement.
The term "Disability" shall mean, for all purposes of this Agreement, the
incapacity of Employee due to injury, illness, disease, or bodily or mental
infirmity to engage in the performance of substantially all of the usual duties
of his employment with the Company, such incapacity to be determined by and in
the sole discretion of the Board upon competent medical advice.
6.2. Termination Due to Death. In the event of the death of Employee
during the term of this Agreement, or during any period of Disability during
which he is receiving compensation pursuant to Section 6.1 herein, the Company
shall pay Employee's designated beneficiary, an amount equal to one-half of the
annual Base Salary provided for in Section 4.1 herein, payable as set forth in
Section 4.1 or in a lump sum, at the sole discretion of the Board. Employee's
beneficiaries also shall receive those benefits specified in Section 7.1 herein.
6.3. Termination for Good Reason. Employee may terminate this Agreement
for Good Reason by giving the Board 30 days prior written notice of his intent
to terminate for Good Reason. Such written notice must set forth in reasonable
detail the facts and circumstances claimed to provide a basis for such Good
Reason termination. "Good Reason" shall mean the occurrence of any one or more
of the following without Employee's express written consent:
(i) The assignment to the Employee of any duties inconsistent with the
Employee's position (including status, office, titles and reporting
requirements), authorities, duties or other responsibilities as contemplated by
Section 2 of this Agreement, or any other action of the Company which results in
an unreasonable or material diminishment in such position, authority, duties or
responsibilities, other than a non-material, insubstantial or inadvertent action
which is remedied by the Company after receipt of written notice thereof given
by the Employee;
(ii) The Company's requiring the Employee to be based more than 50 miles
from the location of his agreed upon principal office;
(iii) A reduction or elimination not otherwise in accordance with the
terms of this Agreement of any component of Employee's compensation as provided
for in Section 4 herein; or
(iv) A material breach by the Company of any provision of this Agreement
which is not remedied by the Company after receipt of written notice thereof
given by the Employee.
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If the circumstances claimed to provide a basis for such Good Reason
termination are not remedied by the Company (as may be provided for above), upon
lapse of the 30-day period following notice of termination for Good Reason, the
Employee's obligation to serve the Company, and the Company's obligation to
employ Employee, under the terms of this Agreement, shall terminate, and the
Employee shall receive the compensation and benefits specified in Section 7.2
herein.
6.4. Termination by Notice. Either the Company or Employee may terminate
this Agreement without Cause (as hereinafter defined) by delivering proper
written notice to the other party.
(i) Notice by Employee. Employee may terminate this Agreement at any time
by giving the Board 90 days prior written notice of his intent to terminate. In
such case, the Company shall pay Employee his full Base Salary and benefits
through the effective date of termination and Employee shall immediately
thereafter forfeit all rights and benefits (other than vested benefits under any
agreement or plan) he would otherwise have been entitled to receive under this
Agreement (including the Employee's annual bonus for the then current fiscal
year). The Company shall have the right to offset against the aforementioned
sums any monies owed by Employee to the Company. Employee thereafter shall have
no further employment obligations under this Agreement.
(ii) Notice by the Company. The Company may terminate this Agreement at
any time by the Board giving Employee 30 days prior written notice of the
Company's intent to terminate. Upon the lapse of the 30 days, Employee's
employment obligation to the Company, and the obligation to employ Employee,
under the terms of this Agreement shall terminate, and the Employee shall
receive the compensation and benefits specified in Section 7.2 herein. The
Company shall have the right to offset against the aforementioned sums any
monies owed by Employee to the Company.
6.5. Termination for Cause. Nothing in this Agreement shall be construed
to prevent the Company from terminating Employee's employment under this
Agreement for Cause.
"Cause" shall be defined as including the commission of an act of fraud,
embezzlement, theft or other criminal act constituting a felony; the material
breach of the Company's Code of Ethical Conduct attached hereto; a material
breach of any provision of this Agreement which is not remedied by the Employee
after receipt of written notice thereof given by the Company or the failure of
Employee to perform any and all material covenants under this Agreement, for any
reason other than Employee's death, Disability or as the result of a termination
for Good Reason as defined in Section 6.3 herein.
In the event this Agreement is terminated by the Company for Cause, the
Company shall pay Employee his full Base Salary, benefits and a portion of
Employees most recently ascertainable incentive bonus (as provided under the
provisions of the annual incentive bonus plan) up through and including the date
on which the termination becomes effective as computed in accordance with the
provisions of the Company's Bonus Plan, and Employee shall immediately
thereafter forfeit all other rights and benefits (other than vested benefits
under any agreement or plan) he would otherwise have been entitled to receive
under this Agreement (including the remainder of Employee's annual bonus for the
then current plan year). The Company shall have the right to offset against the
aforementioned sums any monies owed by Employee to the Company.
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SECTION 7. COMPENSATION UPON TERMINATION
7.1. Disability or Death. In the event Employee's employment is terminated
by reason of Disability (as provided in Section 6.1 herein), or by reason of
Death (as provided in Section 6.2 herein), in addition to the payments specified
in Sections 6.1 and 6.2, the Company shall pay Employee, or Employee's
beneficiary, in a lump sum a portion of Employee's most recently ascertainable
incentive bonus (as provided under the provisions of the annual incentive bonus
plan), up through and including the date on which the termination becomes
effective as computed in accordance with the provisions of the Bonus Plan.
7.2. For Good Reason or by Notice by the Company. (a) In the event
Employee's employment is terminated for Good Reason (as provided in Section 6.3
herein), or by Notice by the Company (as provided in Section 6.4(ii) herein), in
addition to any payments specified in Sections 6.3 and 6.4(ii), the Company
shall pay Employee the following amounts upon the effective date of such
termination, or as otherwise specified subject to the Company's right to offset
against any such amounts any monies owed by Employee to the Company:
(i) Employee's annual Base Salary (as stated in Section 4.1 and as
previously adjusted by the Board from time to time) continued for the remaining
term of this Agreement, paid to Employee in equal biweekly installments
consistent with the normal payroll practices of the Company, subject to the
Company's right of offset as provided in Section 8; and
(ii) Once a year, the greater of (a) one-half of Employee's expected value
incentive bonus (as provided under the provisions of the Bonus Plan) to be
computed for the current fiscal year at the time of termination or (b)
Employee's expected value incentive bonus multiplied by the percentage amount of
expected value incentive bonus an executive officer in a comparable position
receives for such fiscal year, and in both (a) and (b) prorated for the months
applicable. Such amounts are to be paid to Employee in an annual installment for
each year or part thereof for the remaining term of this Agreement consistent
with the normal payroll practices of the Company. To the extent Employee is
terminated in the middle of a fiscal year, he is to receive the proportionate
incentive bonus for the completed term of the year as computed in accordance
with the Bonus Plan; and
(iii) An immediate vesting of all outstanding long-term incentive awards
held by the Employee; and
(iv) A cash lump sum payment, within thirty (30) days of termination, of
the present value of all Employee's accrued benefits, vested or otherwise, under
the Company's supplemental retirement plan; and
(v) A continuation, at the same or greater benefit level, of all Employee
Benefits and Perquisites, as provided in Sections 4.4 and 4.5 herein, for the
remaining term of this Agreement; provided, however, that to the extent that any
such Employee Benefit or Perquisite cannot be continued during a period when
Employee is not an employee of the Company or cannot be continued with similar
tax effects to Employee when Employee is not an employee of the Company, the
Company shall pay Employee an amount in cash equal to the economic value of such
Employee Benefit or Perquisite.
As consideration for the continuation of the above stated benefits,
Employee agrees to make himself available during the remaining term of the
Agreement, at reasonable times and
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locations, to the Company and/or to the successor to his position at the
Company, to provide consulting advice (as requested) including, but not limited
to, strategic planning, management development, market trend analysis, product
development, acquisition planning and industry trend analysis. The Company
agrees not to require more than 10 business days a month as long as the Employee
is not otherwise fully employed nor more than four business days a month once
the Employee is otherwise fully employed.
Notwithstanding the previous provisions of Section 4.1, the amounts in
Sections 7.2(i) and (ii) shall be adjusted automatically upward or downward (in
the nearest increment of $1,000), effective on each December 1, by the GNP price
deflator ad published by the Federal government for the previous twelve months,
as determined by the then public accounting firm of record of the Company (that
performs the annual audit). Upon such adjustment, the Base Salary as stated
above shall, likewise, be increased or decreased for all purposes of this
Agreement.
(b) Notwithstanding the provisions of Section 7.2(a) above, in the event
that Employee's employment is terminated during the last eighteen (18) months of
the term of this Agreement, either for Good Reason (as provided in Section 6.3
herein), or by Notice by the Company (as provided in Section 6.4(ii) herein),
the Company shall then pay Employee the greater of (x) the benefits set forth in
Section 7.2 above, or (y) the benefits under the terms of the Baker Hughes
Incorporated Severance Policy, effective April 1, 1994, irrespective of whether
Employee would otherwise be deemed eligible for the benefits under such policy.
SECTION 8. OFFSET FOR COMPENSATION EARNED SUBSEQUENT TO TERMINATION
8.1. Right of Offset. In the event the Employee's employment is
terminated for Good Reason (as provided in Section 6.3 herein), or by Notice by
the Company (as provided in Section 6.4(ii) herein), the continuation of the
Employee's Base Salary (as provided in Section 7.2(i) herein) and incentive
bonus (as provided in Section 7.2(ii) herein), shall be offset by "Compensation"
earned from a subsequent employer during the remaining term of this Agreement.
The percentage of the offset shall be limited to 65% of the unpaid Base Salary
and incentive bonus provided under Sections 7.2(i) and 7.2(ii) herein.
8.2. Definition of Compensation. For purposes of the offset provided in
Section 8.1 herein, "Compensation" shall be defined as all sums constituting
income, as that term is defined for federal income tax purposes, received by
Employee for his services as an employee, officer, partner, consultant or
otherwise, subsequent to the effective date of termination under this Agreement.
8.3. Duty of Disclosure. For purposes of enforcing this Section 8,
Employee has a duty to keep the Company informed of the terms and conditions of
any subsequent employment and the corresponding "Compensation" earned from such
employment, and shall provide or cause to be provided to the Company in writing
true, correct, timely and complete information concerning the same on a
quarterly basis.
SECTION 9. COVENANTS
9.1. Noncompetition. Employee and Company agree and acknowledge that the
Company has developed and owns valuable Confidential Information (as defined in
Section 9.2 of this Agreement) and that the Company has developed substantial
goodwill. Employee and
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Company further agree and acknowledge that the Company has a substantial and
legitimate interest in protecting the Company's Confidential Information and
goodwill. Employee and Company further agree and acknowledge that the provisions
of this Section 9 are reasonably necessary to protect the Company's legitimate
business interests and are designed to protect the Company's Confidential
Information and goodwill. During the term of this Agreement, or any other period
in which amounts are paid hereunder, the Employee shall not, as a shareholder,
employee, officer, partner, consultant or otherwise, engage directly or
indirectly in any business or enterprise which is "in competition" with the
Company or its successors or assigns. A business or enterprise "in competition"
with the Company includes only a business or enterprise that is engaged in any
business activity of the Company within a one hundred (100) mile radius of any
facility operated by the Company.
However, the Employee shall be allowed to purchase and hold for investment
less than two percent (2%) of the shares of any corporation whose shares are
regularly traded on a national securities exchange or in the over-the-counter
market.
Employee further agrees that, (a) during the two (2) years following his
termination if such termination occurs pursuant to Section 6.4(i) or 6.5, or (b)
during the term of the Agreement if termination is pursuant to Section 6.1, 6.3
or 6.4(ii), Employee will not solicit, contact, canvass, or attempt to solicit,
contact or canvass any of the customers of Company with whom Employee had direct
or indirect contact while Employee was performing services for the Company.
Employee and Company further agree and acknowledge that a part of
Employee's compensation under this Agreement constitutes independent valuable
consideration for this Section 9.1. Employee further agrees that the existence
of any claim or cause of action of Employee against Company, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement by Company of any or all of this Section 9. Employee agrees that the
scope of the restrictions as to time, geographic area, and scope of activity in
this Section 9.1 are reasonably necessary for the protection of the Company's
legitimate business interests and are not oppressive or injurious to the public
interest.
Employee agrees that in the event of a breach or threatened breach of any
of the provisions of this Section 9.1 the Company shall be entitled to
injunctive relief against Employee's activities to the extent allowed by law.
Employee further agrees that any breach or threatened breach of any of the
provisions of Section 9.1 would cause irreparable injury to the Company for
which it would have no adequate remedy at law. Nothing herein shall be construed
as prohibiting the Company from pursuing any other remedies available to it for
any breach or threatened breach, including the recovery of damages.
9.2 Confidential Information. Employee recognizes and acknowledges that he
will have access to certain information of the Company that is confidential and
proprietary and constitutes valuable and unique property of the Company.
Employee agrees that he will not at any time, either during or subsequent to the
employment, disclose to others, use, copy or permit to be copied, except in
pursuance of his duties on behalf of the Company, its successors, assigns or
nominees, any secret or confidential information or know-how of the Company
(whether or not developed by the Employee) without the Company's prior written
consent. The term "secret or confidential information or know-how of the
Company" (referred to collectively as "Confidential Information") shall include,
without limitation, the Company's plans, strategies, costs, prices, uses,
applications of products and services, results of
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investigations or experiments, and all apparatus, products, processes,
compositions, samples, formulas, computer programs, pricing policy, financial
information, methods of doing business, policy and/or procedure manuals,
training and recruiting procedures, accounting procedures, the status and
content of the Company's contracts with its customers, the Company's business
philosophy, and servicing methods and techniques at any time used, developed, or
investigated by the Company, before or during the Employee's tenure of
employment which are not generally available to the public or which are
maintained as confidential information of third parties received as a result of
his employment with Company.
Employee further agrees to deliver to the Company at the termination of
his employment all correspondence, memoranda, notes, records, drawings,
sketches, plans, customer lists, product compositions, or other documents and
all copies thereof (all of which are hereafter referred to as the "Documents"),
made, composed or received by Employee, solely or jointly with others, and which
are in Employee's possession, custody, or control at such date and which are
related in any manner to the past, present, or anticipated business of the
Company. In this regard, Employee hereby grants and conveys to Company all
right, title and interest in and to, including without limitation, the right to
possess, print, copy, and sell or otherwise dispose of, any reports, records,
papers, summaries, photographs, drawings or other documents, and writings,
copies, abstracts or summaries thereof, which may be prepared by Employee or
under his direction or which may come into his possession in any way during his
employment with the Company which relate in any manner to the past, present or
anticipated business of the Company.
In the event of a breach or threatened breach of any of the provisions of
this Section 9.2, the Company shall be entitled to an injunction ordering the
return of such Documents and any and all copies thereof and restraining Employee
from using or disclosing, for his benefit or the benefit of others, in whole or
in part, any Confidential Information, including but not limited to the
Confidential Information which such Documents contain, constitute, or embody.
Employee further agrees that any breach or threatened breach of any of the
provisions of Section 9.2 would cause irreparable injury to the Company for
which it would have no adequate remedy at law. Nothing herein shall be construed
as prohibiting the Company from pursuing any other remedies available to it for
any such breach or threatened breach, including the recovery of damages.
9.3 Publicity. Employee agrees that Company may use, and hereby grants the
Company the nonexclusive and worldwide right to use, Employee's name, picture,
likeness, photograph, signature or any other attribute of Employee's persona
(all of such attributes are hereafter collectively referred to as "Persona") in
any media for any advertising, publicity or other purpose at any time, either
during or subsequent to his employment by the Company. Employee agrees that such
use of his Persona will not result in any invasion or violation of any privacy
or property rights Employee may have; and Employee agrees that he will receive
no additional compensation for the use of his Persona. Employee further agrees
that any negatives, prints or other material for printing or reproduction
purposes prepared in connection with the use of his Persona by the Company shall
be and are the sole property of the Company.
9.4. Covenants Regarding Other Employees. During the term of this
Agreement if termination is pursuant to Section 6.1, 6.3 or 6.4(ii), or during
the 24 months following termination if termination occurs pursuant to Section
6.4(i) or 6.5, Employee agrees not to solicit or induce any employee of the
Company to terminate their employment, accept
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employment with anyone else, or to interfere in a similar manner with the
business of the Company.
SECTION 10. INDEMNIFICATION AND RELEASE
10.1. Indemnification. The Company hereby covenants and agrees to
indemnify and hold harmless Employee fully, completely and absolutely against
and in respect to any and all actions, suits, proceedings, claims, demands,
judgments, costs, expenses (including attorney's fees), losses and damages
resulting from Employee's good faith performance of his duties and obligations
under the terms of this Agreement to the extent provided in the Bylaws of the
Company and the Indemnification Agreements for the benefit of the officers of
the Company.
10.2. Release. In consideration of the benefits and compensation which may
be awarded to Employee under Sections 6 and 7 of this Agreement, Employee agrees
to execute and be bound by, as a condition precedent to receiving said benefits
and compensation, the Release attached hereto as Exhibit "A", said Release being
incorporated herein by this reference.
SECTION 11. ASSIGNMENT
11.1. Assignment by Company. This Agreement may and shall be assigned or
transferred to, and shall be binding upon and shall inure to the benefit of, any
successor of the Company, and any such successor shall be deemed substituted for
all purposes for the "Company" under the terms of this Agreement. As used in
this Agreement, the term "successor" shall mean any person, firm, corporation or
business entity which at any time, whether by merger, purchase or otherwise,
acquires all or essentially all of the assets or business of the Company.
Notwithstanding such assignment, the Company shall remain, with such successor,
jointly and severally liable for all its obligations hereunder.
Failure of the Company's successor to agree to the assignment of this
Agreement shall be a material breach of this Agreement. Except as herein
provided, this Agreement may not otherwise be assigned by the Company.
11.2. Assignment by Employee. This Agreement shall inure to the benefit of
and be enforceable by Employee's personal or legal representatives, executors
and administrators, successors, heirs, distributees, devisees and legatees. If
Employee should die while any amounts payable to Employee hereunder remain
outstanding, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to Employee's devisee, legatee or
other designee or, in the absence of such designee, to Employee's estate.
Other than a transfer by reason of death or incapacity, the rights and
duties of Employee hereunder are personal and may not be assigned or
transferred.
SECTION 12. INCOME AND EXCISE TAX
12.1. Tax Withholding. The Company may withhold from any sums or benefits
payable under this Agreement all federal, state, city or other taxes as may be
required pursuant to any law or governmental regulation or ruling.
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12.2. Excise Tax Reimbursement. In addition to the compensation and
benefits to which Employee shall become entitled under the terms of this
Agreement, the Company shall reimburse the Employee in the amount of any excise
or other similar tax or any interest or penalties with respect to such tax that
is assessed against and paid by Employee and that is attributable to and
calculated with reference to the compensation and benefits to which Employee is
entitled under the Agreement. Any such reimbursement shall be payable to
Employee immediately following the date that Employee provides evidence
reasonably satisfactory to the Company that Employee has made any payment in
satisfaction of any such tax liability. The reimbursement provided for herein
shall not pertain to any tax liability attributable to such compensation and
benefits that are determined and calculated in the manner that pertains to other
income earned for personal services, but shall rather pertain only to liability
arising under excise and other similar tax provisions of federal and state tax
laws that specifically address employment termination or severance compensation
and benefits as contemplated by Section 280(g) of the Internal Revenue Code or
similar provisions. The reimbursements provided for in this Section 12.2 shall
be "grossed up." For this purpose, "grossed up" shall mean that Employee shall
be paid an amount which, after payment of taxes on such amount, shall insulate
Employee from the effect of taxes on such reimbursements (including the effects
of income tax assessed on the gross-up).
12.3. Procedural Aspects. The Employee shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful, would require
the payment by the Company of the grossed up payment. Such notification shall be
given as soon as practicable but no later than 10 business days after the
Employee knows of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Employee
shall not pay such claim prior to the expiration of the 30-day period following
the date on which the Employee gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Employee in writing prior to the expiration
of such period that it desires to contest such claim, the Employee shall:
(i) give the Company any information reasonably requested by the Company
relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time-to-time, including,
without limitation, accepting legal representation with respect to such claim by
any attorney reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order effectively to
contest such claim;
(iv) permit the Company to participate in any proceedings relating to such
claim; provided, however, that the Company shall bear and pay directly all costs
and expenses (including attorneys fees and any additional interest and
penalties) incurred in connection with such contest and shall indemnify and hold
the Employee harmless, on an after-tax basis, for any excise tax or income tax,
including interest and penalties with respect thereto, imposed as a result of
such representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 12.3, the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Employee to pay the tax
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claimed and sue for a refund or contest the claim in any permissible manner, the
Employee agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Employee to pay such claim and sue for a refund, the Company
shall advance the amount of such payment to the Employee, on an interest-free
basis and shall indemnify and hold the Employee harmless, on an after-tax basis,
from any excise tax or income tax, including interest or penalties with respect
thereto, imposed with respect to such advance or with respect to any imputed
income with respect to such advance.
If, after the receipt by the Employee of an amount advanced by the Company
pursuant to Section 12.3, the Employee becomes entitled to receive any refund
with respect to such claim, the Employee shall (subject to the Company's
complying with the requirements of Section 12.3) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 12.3, a determination is made that
the Employee shall not be entitled to any refund with respect to such claims and
the Company does not notify the Employee in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of grossed up payment required to be paid.
SECTION 13. ARBITRATION AND NOTICE
13.1. Arbitration. Any claim, controversy or dispute arising out of or
relating to this Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The arbitration shall be conducted in Houston, Harris
County, Texas. Federal law other than state law shall govern the interpretation
of this Section 13.1. The decision of the arbitrator(s) shall be final and
binding and judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
The arbitrator(s) shall award the prevailing party in the arbitration its
costs and expenses, including attorney's fees, incurred in enforcing the
provisions of this Agreement, in arbitration.
13.2. Notice. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to Employee at the last address he has filed in
writing with the Company or, in the case of the Company, at its principal
executive offices.
SECTION 14. MISCELLANEOUS
14.1. Entire Agreement. This document contains the entire agreement of the
parties relating to the subject matter hereof. This Agreement supersedes,
replaces and merges any and all prior and contemporaneous understandings,
representations, agreements and discussions relating to the same or similar
subject matter as that of this Agreement between Employee and Company,
including, but not limited to, (i) the Executive Severance Agreement dated as of
May 22, 1991, and (ii) any benefits that would be payable to Employee under the
Baker Hughes Incorporated Executive Severance Policy effective April 1, 1994
(except that the
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provisions of such policy may apply under Section 7.2(b) herein or following the
term of this Agreement.) This Agreement constitutes the sole and entire
agreement between the Employee and Company with respect to the subject matter of
this Agreement.
14.2. Modifications. This Agreement shall not be varied, altered,
modified, cancelled, changed or in any way amended except by mutual agreement
of the parties in a written instrument executed by the parties hereto or their
legal representatives.
14.3. SeverabilitY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
portions held to be invalid or unenforceable shall be revised and reduced in
scope so as to be valid and enforceable, or, if such is not possible, then such
portions shall be deemed to have been wholly excluded with the same force and
effect as if it had never been included herein. The remaining provisions of this
Agreement shall be unaffected thereby and shall remain in full force and effect.
Should any one or more of the provisions of this Agreement be held to be
excessive or unreasonable as to duration, geographical scope or activity, then
that provision shall be construed by limiting and reducing it so as to be
reasonable and enforceable to the extent compatible with the applicable law. If
such reformation is not possible, then such portions shall be deemed to have
been wholly excluded with the same force and effect as if they had never been
included herein.
14.4. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same agreement.
SECTION 15. GOVERNING LAW
The laws of the State of Texas, excluding any conflicts of law rule or
principle that might otherwise refer to the substantive law of another
jurisdiction, will govern the interpretation, validity and effect of this
Agreement without regard to the place of execution or the place for performance
thereof, and Company and Employee agree that the state and federal courts in
Harris County, Texas, shall have personal jurisdiction and venue over the
Company and Employee to hear all disputes arising under this Agreement. This
Agreement is to be at least partially performed in Harris County, Texas.
IN WITNESS WHEREOF, Employee has executed and the Company (pursuant to a
resolution adopted at a duly constituted meeting of its Board of Directors) has
executed this Agreement, as of the day and year first above written.
ATTEST: BAKER HUGHES INCORPORATED
By: [Signature of Lawrence O'Donnell, III [Signature of J. F. Maher
appears here] appears here]
------------------------------------ ------------------------------
Corporate Secretary Chairman, Compensation
Committee of the Board
of Directors
EMPLOYEE
[Signature of Max L. Lukens appears here]
-----------------------------------------
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EXHIBIT "A"
RELEASE
As a material inducement for Company to enter into this Agreement Employee
hereby irrevocably and unconditionally releases, acquits and forever discharges
Company and its affiliated companies and their directors, officers, employees
and representatives, (collectively "Releasees"), from any and all claims,
liabilities, obligations, damages, causes of action, demands, costs, losses
and/or expenses (including attorneys fees) of any nature whatsoever, whether
known or unknown, including, but not limited to, rights arising out of alleged
violations of any contracts, express or implied, any covenant of good faith and
fair dealing, express or implied, or any tort, or any legal restrictions on the
Company's right to terminate employees, or any federal, state or other
governmental statute, regulation, or ordinance, including, without limitation,
Title VII of the Civil Rights Act of 1964, and the Federal Age Discrimination in
Employment Act, which Employee claims to have against any of the Releasees. In
addition, Employee waives all rights and benefits afforded by any state laws
which provide in substance that a general release does not extend to claims
which a person does not know or suspect to exist in his favor at the time of
executing the release which, if known by him, must have materially affected
Employee's settlement with the other person. The only exception to the foregoing
are claims and rights that may arise after the date of execution of this
Agreement.
The Employee represents and acknowledges that in executing this Release he
does not rely and has not relied upon any representation or statement, oral or
written, not set forth herein or in the Agreement made by any of the Releasees
or by any of the Releasees' agents, representatives or attorneys with regard to
the subject matter, basis or effect of this Release, the Agreement or otherwise.
The Employee represents and agrees that he fully understands his right to
discuss all aspects of this Release with his private attorney, that to the
extent, if any, that he desires, he has availed himself of this right, that he
has carefully read and fully understands all of the provisions of this Release
and that he is voluntarily entering into this Release.
AGREED AND ACCEPTED, on this day of , 19 .
EMPLOYEE
By
---------------------------------
Max L. Lukens
<PAGE>
EXHIBIT 10.16
BAKER HUGHES INCORPORATED
1995 EMPLOYEE ANNUAL INCENTIVE COMPENSATION PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT OF THE PLAN. Baker Hughes Incorporated (hereinafter referred
to as the "COMPANY"), a Delaware corporation, hereby establishes an annual
incentive compensation plan to be known as the "BAKER HUGHES INCORPORATED 1995
EMPLOYEE ANNUAL INCENTIVE COMPENSATION PLAN" (hereinafter referred to as the
"PLAN") as set forth in this document. The Plan permits the awarding of annual
cash bonuses to key employees of the Company and its subsidiaries, based on the
achievement of preestablished performance goals. The Plan shall become effective
as of October 1, 1994, and shall remain in effect until terminated by the Board
of Directors of the Company. Notwithstanding any provision herein to the
contrary, no amount shall be paid under the Plan unless and until the
stockholders of the Company approve the Plan prior to September 30, l995.
1.2 PURPOSE. The purpose of the Plan is to provide Key Employees with a
meaningful annual incentive opportunity geared toward the achievement of
specific corporate and/or individual goals.
ARTICLE 2
DEFINITIONS
2.1 DEFINITIONS. Whenever used in the Plan, the following terms shall have the
meanings set forth below and, when the defined meaning is intended, the term is
capitalized:
(a) "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
(b) "CAUSE" means the occurrence of any one of the following:
(i) The willfull and continued failure by a Participant to substantially
perform his/her duties (other than any such failure resulting from the
Participant's disability), after a written demand for substantial
performance is delivered to the Participant that specifically identifies the
manner in which the Company believes that the Participant has not
substantially performed his/her duties, and the Participant has failed to
remedy the situation within ten (10) business days of receiving such notice;
or
(ii) The Participant's conviction for an act of fraud, embezzlement,
theft, or other criminal act constituting a felony; or
(iii) The willful engaging by the Participant in gross misconduct or
malfeasance. However, no act, or failure to act, on the Participant's part
shall be considered "willful" unless done, or omitted to be done, by the
Participant not in good faith and without reasonable belief that
his/her action or omission was in the best interest of the Company; or
(iv) The violation of the Company's Standards of Conduct, which violation
is determined to be material by the Committee.
(c) "COMMITTEE" means the Compensation Committee of the Board or any other
committee appointed by the Board to administer the Plan. The membership of the
Committee shall in all cases be comprised solely of two or more outside
directors (within the meaning of Section 162(m)).
(d) "COMPANY" means Baker Hughes Incorporated, a Delaware corporation, and
any successor thereto.
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(e) "FINAL AWARD" means the actual award earned for a Plan Year by a
Participant as determined by the Committee (see Article 5.4 herein).
(f) "KEY EMPLOYEE" means an employee of the Company, or any of its
subsidiaries, who, in the opinion of the Chief Executive Officer of the
Company, is in a position to significantly contribute to the growth and
profitability of the Company (see Article 4 herein).
(g) "PARTICIPANT" means a Key Employee who is nominated for participation by
the Chief Executive Officer of the Company and then is selected by the
Committee to participate in the Plan (see Article 4 herein).
(h) "PLAN YEAR" means the Company's fiscal year commencing October 1 and
ending September 30.
(i) "SECTION 162(M)" means section 162(m) (or any successor provision) of
the Internal Revenue Code of 1986, as amended, and applicable interpretive
authority thereunder.
2.2 GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
2.3 SEVERABILITY. In the event any provision of the Plan shall be held to be
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid Provision had not been included.
ARTICLE 3
ADMINISTRATION
3.1 THE COMMITTEE. This Plan shall be administered by the Committee in
accordance with the rules that it may establish from time to time that are not
inconsistent with the provisions of the Plan.
The determination of the Committee as to any disputed question arising under
this Plan, including questions of construction and interpretation, shall be
final, binding, and conclusive upon persons.
3.2 INDEMNIFICATION. Each person who is or shall have been a member of the
Committee, or of the Board, shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit, or proceeding to which he may be a party or in which he
may be involved by reason of any action taken or failure to act under the Plan
and against and from any and all amounts paid by him in settlement thereof, with
the Company's approval, or paid by him in satisfaction of any judgment in any
such action, suit, or proceeding against him, provided he shall give the Company
an opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Restated Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.
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ARTICLE 4
ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBILITY. Eligibility for participation in the Plan shall be limited to
those Key Employees who, by the nature and scope of their position, contribute
to the overall results or success of the Company and its subsidiaries.
4.2 PARTICIPATION. Participation in the Plan shall be determined annually
based upon the recommendation of the Chief Executive Officer of the Company and
the approval of the Committee. Employees approved for participation shall be
notified in writing of their selection, and of their performance goals and
related Award Opportunities (as defined in Article 5.1), as soon after approval
as is practicable.
4.3 PARTIAL PLAN YEAR PARTICIPATION. The Committee may, upon recommendation of
the Chief Executive Officer of the Company, allow an individual who becomes
eligible after the beginning of a Plan Year to participate in the Plan for that
year. In such case, the Participant's Final Award normally shall be prorated
based on the number of full months of participation. However, the Committee may,
based upon the recommendation of the Chief Executive Officer of the Company,
authorize an unreduced Final Award.
4.4 TERMINATION OF APPROVAL. The Committee may withdraw its approval for
participation in the Plan for a Participant at any time. In the event of such
withdrawal, the employee concerned shall cease to be a Participant as of the
date designated by the Committee and the employee shall be notified of such
withdrawal as soon as practicable following such action. Further, such employee
shall cease to have any right to a Final Award for the Plan Year in which such
withdrawal is effective; provided, however, that the Committee may, in its sole
discretion, authorize a prorated award based on the number of full months of
participation prior to the effective date of such withdrawal.
ARTICLE 5
AWARD DETERMINATION
5.1 AWARD OPPORTUNITIES. As soon as practicable (but in no event later than
ninety (90) days) after the beginning of each Plan Year, the Committee shall
establish, in writing, maximum, target, and minimum incentive award levels (the
"AWARD OPPORTUNITIES") for each Participant. The established Award Opportunities
may vary in relation to the responsibility level of the Participant. In the
event a Participant changes job levels or salary grades during the Plan Year,
the Award Opportunities may be adjusted by the Committee, in its sole
discretion, to reflect the amount of time at each job level and/or in each
salary grade.
5.2 PERFORMANCE GOALS. As soon as practicable (but in no event later than
ninety (90) days) after the beginning of each Plan Year, the Committee shall
establish, in writing, performance goals for each Participant for that Plan
Year. The goals will be based on one or more financial objectives of the Company
determined by and defined by the Committee, which objectives may include profits
before-tax, profits after-tax, earnings per share, and/or the ratio of after-tax
profits to net capital employed; provided, however, that as an alternative to
other goals, and in addition thereto, an Award Opportunity shall provide an
element based on a goal tied to total shareholder return ("TSR"), as defined by
the Committee and discussed in Article 5.4. Nonfinancial objectives may also be
included in a Participant's performance goals, and will not represent more than
20 percent of target Award Opportunities, as discussed in Article 5.1.
Notwithstanding the foregoing, no covered employee (as such term is defined in
Section 162(m)) may have any portion of his Final Award based on nonfinancial,
subjective performance goals.
5.3 ADJUSTMENT OF PERFORMANCE GOALS. The Committee shall have the right to
adjust the performance goals (either up or down) during the Plan Year if it
determines that external changes or other unanticipated business conditions have
materially affected the fairness of the goals and unduly influenced the
Company's
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ability to meet them. Further, in the event of a Plan Year of less than twelve
(12) months, the Committee shall have the right to adjust the performance goals,
at its discretion, to protect the purpose and intent of the Plan.
Notwithstanding the foregoing, no such adjustment shall be made with respect to
an individual who is a covered employee (within the meaning of Section 162(m))
to the extent the same is considered an upward discretionary increase in the
amount of the Final Award for such individual (within the meaning of Section
162(m)).
5.4 FINAL AWARD DETERMINATIONS. As soon as practicable after the end of each
Plan Year, Final Awards shall be computed for each Participant as determined by
the Committee. The Committee shall certify to what extent the performance goals
established pursuant to Article 5.2 and any other material terms of an award
were in fact satisfied. Then, two (2) independent computations will be made, as
follows:
(a) Achievement of financial goals (other than TSR goals), as discussed in
Article 5.2, shall be assessed via a quantitative formula established by the
Committee. Individuals' award calculations will be based on varying Award
Opportunities, as discussed in Article 5.1. Adjustment will be made to reflect
nonfinancial objectives for eligible Participants, as described in
Article 5.2.
(b) Achievement of TSR goals, as discussed in Article 5.2, shall be assessed
via a quantitative formula established by the Committee. Individuals' award
calculations will be based on one-half of the target Award Opportunity, as
discussed in Article 5.1.
The greater of the resulting two calculations will be used to determine the
Final Award paid for the Plan Year. In determining the Final Award, the
Committee, in its sole discretion, may increase or decrease calculated amounts
to reflect factors regarding performance during the Plan Year which were not, in
the sole opinion of the Committee, appropriately reflected in the Final Award
calculation. Notwithstanding the foregoing, the Final Award to an individual who
is a covered employee (within the meaning of Section 162(m)) will not be subject
to upward discretionary adjustment by the Committee. Downward discretionary
adjustment for these individuals will be permitted to the extent that such
downward adjustments do not prevent the Final Awards to those individuals from
being deductible by the Company for federal income tax purposes under Section
162(m).
5.5 INDIVIDUAL AWARD CAP. The maximum annual Final Award any individual may
receive in connection with the Plan is $1,000,000.
ARTICLE 6
PAYMENT OF FINAL AWARDS
As soon as practicable following the end of each Plan Year, Final Award
payments shall be paid in cash.
ARTICLE 7
TERMINATION OF EMPLOYMENT
7.1 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT. In the
event a Participant's employment is terminated by reason of death, total and
permanent disability (as determined by the Committee), or retirement, the Final
Award, determined in accordance with Article 5.4 herein, shall be reduced so
that it reflects only participation prior to termination. This reduction shall
be determined by multiplying said Final Award by a fraction, the numerator of
which is the months of participation through the date of termination rounded up
to whole months, and the denominator of which is twelve (12). The Final Award
thus determined plus all unpaid amounts, if any, from previous years shall be
paid as soon as practicable following the Committee's determinations under
Article 5.4 hereof for that Plan Year.
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7.2 EMPLOYMENT TRANSFERS. If a Participant transfers from one division to
another division within the Company, the Final Award for the Participant's time
at the Participant's former division will be prorated for the number of whole
months rounded to the nearest whole month of the Plan Year the Participant was
at that division. The Final Award will be determined as soon as practicable
after the end of the Plan Year and will be based on the financial results at the
close of the Plan Year. The Final Award will be paid at the same time the other
Final Awards for that division are paid. If a Participant is eligible for a
Final Award in his new position, the Final Award will be based on the months
left in the Plan Year, on his new base salary level and Award Opportunities, as
determined by the Committee based upon the recommendation of the Chief Executive
Officer of the Company.
7.3 DISPOSITION OF BUSINESS. If the Participant's division is disposed of
during the Plan Year, payment of the Participant's Final Award shall be
determined in accordance with the following alternatives:
(a) If the acquiring party of the division offers employment to the
Participant and assumes the obligations under the Plan, either directly or
indirectly, and the Participant accepts such offer of employment, the Company
shall not be obligated to pay the Final Award and such obligation shall be
that of the acquiring party in accordance with the Final Award parameters; or
(b) If the acquiring party does not assume the obligations under the Plan,
whether or not the Participant is offered and accepts employment, then the
Participant will receive a prorated Final Award for the portion of the Plan
Year that the Participant was employed by the Company prior to the date of the
consummation of the sale of the division, to be paid at the same time other
Final Awards are paid under the Plan. The computation shall be made on the
basis of the number of whole months rounded to the nearest whole month of the
Plan Year that the Participant was in active service with the Company; or
(c) If the acquiring party of the division offers employment to the
Participant and assumes the obligations under the Plan, either directly or
indirectly, and the Participant rejects such employment, the Participant shall
be deemed to have voluntarily resigned as provided under Article 7.4 below.
7.4 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event a Participant's
employment is terminated voluntarily by the employee or by the Company for
Cause, all of the Participant's rights to a Final Award for the Plan Year then
in progress shall be forfeited. If a Participant's termination is for any reason
other than as described in Article 7.3, death, disability, retirement, voluntary
resignation, or Cause, the Participant will receive a prorated bonus award for
the portion of the Plan Year that the Participant was employed by the Company,
computed as determined by the Committee, to be paid at the same time other Final
Awards are paid under the Plan.
ARTICLE 8
RIGHTS OF PARTICIPANTS
8.1 EMPLOYMENT. Nothing in this Plan shall interfere with or limit in any way
the right of the Company to terminate any Participant's employment at any time
for any reason, nor confer upon any Participant any right to continue in the
employ of the Company. For all purposes of the Plan, a Participant shall be
considered to be in the employment of the Company as long as he or she remains
employed on a full-time basis by the Company or any of its subsidiaries or is on
an authorized leave of absence approved by the Committee. Any question as to
whether and when there has been a termination of a Participant's employment, and
the reason for such termination, shall be determined solely by the Committee,
and its determination shall be final and conclusive.
8.2 PARTICIPATION. No Participant or other employee shall at any time have a
right to be selected for participation in the Plan for any Plan Year, despite
having been selected for participation in a previous Plan Year.
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8.3 NONTRANSFERABILITY. No right or interest of any Participant in this Plan
shall be assigned or transferable, or subject to any lien, directly, by
operation of law, or otherwise, including execution, levy, garnishment,
attachment, pledge, and bankruptcy.
ARTICLE 9
BENEFICIARY DESIGNATION
Each Participant under the Plan may, from time to time, name any beneficiary
or beneficiaries (who may be named contingently or successively) to whom any
benefit under the Plan is to be paid in case of his death before he receives any
or all of such benefit. Each designation will revoke all prior designations by
the same Participant, shall be in a form prescribed by the Committee, and will
be effective only when filed by the Participant in writing with the Committee
during his lifetime. In the absence of any such designation, benefits remaining
unpaid at the Participant's death shall be paid to the Participant's estate.
ARTICLE 10
AMENDMENT AND TERMINATION
The Board may modify or amend, in whole or in part, any or all of the
provisions of this Plan, or suspend or terminate it entirely; provided, that no
such modification, amendment, suspension, or termination may, without the
consent of a Participant (or his beneficiary in the case of the death of the
Participant), reduce the right of a Participant (or his beneficiary as the case
may be) to a payment or distribution hereunder to which he is entitled with
respect to a Plan Year that has ended prior to such modification, amendment,
suspension, or termination.
ARTICLE 11
GOVERNING LAW AND WITHHOLDING
11.1 GOVERNING LAW. THE PLAN, AND ALL AWARDS HEREUNDER, SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
11.2 WITHHOLDING TAXES. The Company shall have the right to deduct from all
payments under this Plan any Federal, state, or local taxes required by law to
be withheld with respect to such payments.
6
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EXHIBIT 10.17
BAKER HUGHES INCORPORATED
1995 STOCK AWARD PLAN
I. PURPOSE
The purpose of the BAKER HUGHES INCORPORATED 1995 STOCK AWARD PLAN (the
"PLAN") is to provide a means through which BAKER HUGHES INCORPORATED, a
DELAWARE CORPORATION (the "COMPANY"), and its subsidiaries may attract able
persons to enter the employ of the Company and to provide a means whereby those
upon whom the responsibilities of the successful administration and
management of the Company rest, and whose present and potential contributions to
the welfare of the Company are of importance, can acquire and maintain stock
ownership, thereby strengthening their concern for the welfare of the Company
and their desire to remain in its employ. A further purpose of the Plan is to
provide such persons with additional incentive and reward opportunities designed
to enhance the profitable growth of the Company. Accordingly, the Plan provides
for granting stock Awards to Employees as provided herein.
II. DEFINITIONS
The following definitions shall be applicable throughout the Plan unless
specifically modified by any paragraph:
(a) "AWARD" means, individually or collectively, any stock award granted
under the Plan.
(b) "AWARD AGREEMENT" means a written agreement between the Company and a
Holder with respect to an Award.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended. Reference in
the Plan to any section of the Code shall be deemed to include any amendments
or successor provisions to any section and any regulations under such section.
(e) "COMMITTEE" means the committee charged with the administration of the
Plan in accordance with Article IV.
(f) "COMMON STOCK" means the common stock, par value $1 per share, of the
Company.
(g) "COMPANY" means Baker Hughes Incorporated.
(h) "EMPLOYEE" means any person in an employment relationship with the
Company or with one of its subsidiaries.
(i) "1934 ACT" means the Securities Exchange Act of 1934, as amended.
(j) "HOLDER" means an Employee who has been granted an Award.
(k) "PLAN" means Baker Hughes Incorporated 1995 Stock Award Plan, as amended
from time to time.
(1) "RULE 16b-3" means SEC Rule 16b-3 promulgated under the 1934 Act, as
such may be amended from time to time, and any successor rule, regulation or
statute fulfilling the same or a similar function.
III. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective as of October 26, 1994, the date of its adoption
by the Board, provided the Plan is approved by the stockholders of the Company
within twelve months thereafter and on or prior to the date of the first annual
meeting of stockholders of the Company held subsequent to the acquisition of an
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equity security by a Holder hereunder for which exemption is claimed under Rule
16b-3. No further Awards may be granted under the Plan after October 26, 2004.
The Plan shall remain in effect until all Awards granted under the Plan have
been satisfied or expired.
IV. ADMINISTRATION
(a) COMPOSITION OF COMMITTEE. The Plan shall be administered by the
Compensation Committee of the Board which shall be (i) appointed by the Board,
(ii) consist of at least three members of the Board and (iii) constituted so as
to permit the Plan to comply with Rule 16b-3. No member of the Committee shall
be eligible to receive an Award under the Plan and no person who has received an
Award in the preceding year shall be eligible to serve on the Committee.
(b) POWERS. Subject to the provisions of the Plan, the Committee shall have
sole authority, in its discretion, to determine which Employees shall receive an
Award, the time or times when such Award shall be made, the number of shares of
Common Stock which may be issued under each such Award, and the vesting
requirements which apply to each such Award. In making such determinations the
Committee may take into account the nature of the services rendered by the
respective individuals, their present and potential contribution to the
Company's success and such other factors as the Committee in its discretion
shall deem relevant.
(c) ADDITIONAL POWERS. The Committee shall have such additional powers as are
delegated to it by the other provisions of the Plan. Subject to the express
provisions of the Plan, the Committee is authorized to construe the Plan and the
respective Award Agreements executed thereunder, to prescribe such rules and
regulations relating to the Plan as it may deem advisable to carry out the Plan,
and to determine the terms, restrictions and provisions of each Award, and to
make all other determinations necessary or advisable for administering the Plan.
The Committee may correct any defect or supply any omission or reconcile any
inconsistency in any Award Agreement in the manner and to the extent it shall
deem expedient to carry it into effect. The determinations of the Committee on
the matters referred to in this Article IV shall be conclusive.
V. AWARD LIMITS AND SHARES SUBJECT TO THE PLAN
(a) AWARD LIMITS. The Committee may, from time to time, grant Awards to one or
more individuals determined by it to be eligible for participation in the Plan
in accordance with the provisions of paragraph VI. Subject to paragraph VIII,
the aggregate number of shares of Common Stock that may be issued under the Plan
shall not exceed 350,000 shares. Shares shall be deemed to have been issued
under the Plan only to the extent actually issued and delivered pursuant to an
Award. To the extent that an Award lapses or the rights of its Holder terminate,
any shares of Common Stock subject to such Award shall again be available for
the grant of an Award.
(b) STOCK OFFERED. The stock to be offered pursuant to the grant of an Award
may be authorized but unissued Common Stock or Common Stock previously issued
and outstanding and reacquired by the Company.
VI. ELIGIBILITY
Awards may be granted only to key Employees (including officers and directors
who are also key Employees) as determined by the Committee. An Award may be
granted on more than one occasion to the same Person.
2
<PAGE>
VII. STOCK AWARDS
(a) AWARD GRANTS. Awards which may be granted by the Committee pursuant to the
Plan are rights to receive shares of Common Stock which vest over a period of
time or upon the occurrence of an event as established by the Committee, without
payment of any amounts by the holder thereof to the Company (except to the
extent otherwise required by law, such as income or transfer taxes) or
satisfaction of any performance criteria or objectives.
(b) AWARD PERIOD. The Committee shall establish, with respect to and at the
time of each award, a period over which or the event upon which the Award shall
vest with respect to the Holder.
(c) AWARDS CRITERIA. In determining the grant of an Award, the Committee may
take into account an individual's responsibility level, performance, potential,
length of service, age, other Awards, compensation, other Common Stock ownership
and such other considerations as it deems appropriate.
(d) PAYMENT. Following the end of the vesting period for an Award, the Holder
of an Award shall be entitled to receive the underlying shares of Common Stock
represented by the Award as soon as administratively practicable following such
vesting. Cash dividend equivalents may be paid during or after the vesting
period with respect to an Award, as determined by the Committee.
(e) TERMINATION OF EMPLOYMENT. An Award shall terminate if the Holder does not
remain continuously in the employ of the Company at all times during the
applicable vesting period, except as may be otherwise determined by the
Committee or as set forth in the Award at the time of grant.
(f) AGREEMENTS. At the time any Award is made under this paragraph VII, the
Company and the Holder shall enter into an Award Agreement setting forth each of
the matters contemplated hereby as the Committee may determine to be
appropriate. The terms and provisions of the respective Award Agreements need
not be identical.
VIII. RECAPITALIZATION OR REORGANIZATION
(a) The shares with respect to which Awards may be granted are shares of
Common Stock as presently constituted, but if, and whenever, prior to the
expiration of an Award theretofore granted, the Company shall effect a
subdivision or consolidation of shares of Common Stock or the payment of a stock
dividend on Common Stock without receipt of consideration by the Company, the
number of shares of Common Stock with respect to which such Award may thereafter
be exercised or satisfied, as applicable, (i) in the event of an increase in the
number of outstanding shares shall be proportionately increased, and (ii) in the
event of a reduction in the number of outstanding shares shall be
proportionately reduced.
(b) If the Company recapitalizes or otherwise changes its capital structure,
thereafter upon any exercise or satisfaction, as applicable, of an Award
theretofore granted, the Holder shall be entitled to receive under such Award,
in lieu of the number of shares of Common Stock then covered by such Award, the
number and class of shares of stock and securities to which the Holder would
have been entitled to receive pursuant to the terms of the recapitalization if,
immediately prior to such recapitalization, the Holder had been the holder of
record of the number of shares of Common Stock then covered by such Award.
(c) In the event of changes in the outstanding Common Stock by reason of
recapitalizations, reorganizations, mergers, consolidations, combinations,
exchanges or other relevant changes in capitalization occurring after the date
of the grant of any Award and not otherwise provided for by this paragraph VIII,
any outstanding Awards and any agreements evidencing such Awards shall be
subject to adjustment by the Committee at its discretion as to the number of
shares of Common Stock subject to such Awards. In the event of any such change
in the outstanding Common Stock, the aggregate number of shares available under
the Plan may be appropriately adjusted by the Committee, whose determination
shall be conclusive.
3
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(d) The existence of the Plan and the Awards granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of the
Company to make or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business, any merger or
consolidation of the Company, any issue of debt or equity securities ahead of or
affecting Common Stock or the rights thereof, the dissolution or liquidation of
the Company or any sale, lease, exchange or other disposition of all or any part
of its assets or business or any other corporate act of proceeding.
(e) Any adjustment provided for in Subparagraphs (a), (b) or (c) above shall
be subject to any required stockholder action.
(f) Except as hereinbefore expressly provided, the issuance by the Company of
shares of stock of any class or securities convertible into shares of stock of
any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor, or upon conversion of
shares of obligations of the Company convertible into such shares or other
securities, and in any case whether or not for fair value, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of
shares of Common Stock subject to Awards theretofore granted.
IX. AMENDMENT AND TERMINATION OF THE PLAN
The Board in its discretion may terminate the Plan at any time with respect to
any shares for which Awards have not theretofore been granted. The Board shall
have the right to alter or amend the Plan or any part thereof from time to time;
provided that no change in any Award theretofore granted may be made which would
impair the rights of the holder without the consent of the Holder, and provided,
further, that the Board may not, without approval of the stockholders, amend the
Plan;
(a) to increase the maximum number of shares which may be issued pursuant to
Awards, except as provided in paragraph VIII;
(b) to change the class of individuals eligible to receive Awards under the
Plan;
(c) to extend the maximum period during which Awards may be granted under
the Plan;
(d) to modify materially the requirements as to eligibility for
participation in the Plan;
(e) to materially increase the benefits accruing to participants under the
Plan; or
(f) to decrease any authority granted to the Committee hereunder in
contravention of Rule 16b-3.
X. MISCELLANEOUS
(a) NO RIGHT TO AN AWARD. Neither the adoption of the Plan by the Company nor
any action of the Board or the Committee shall be deemed to give an employee any
right to be granted an Award or any of the rights hereunder except as may be
evidenced by an Award or by an Award Agreement duly executed on behalf of the
Company, and then only to the extent and on the terms and conditions expressly
set forth therein. The Plan shall be unfunded. The Company shall not be required
to establish any special or separate fund or to make any other segregation of
Common Stock or other assets to assure the payment of any Award.
(b) NO EMPLOYMENT RIGHTS CONFERRED. Nothing contained in the Plan shall (i)
confer upon any Employee any right with respect to continuation of employment
with the Company or any subsidiary or (ii) interfere in any way with the right
of the Company or any subsidiary to terminate his or her employment at any time.
(c) OTHER LAWS; WITHHOLDING. The Company shall not be obligated to issue any
Common Stock pursuant to any Award granted under the Plan at any time when the
shares covered by such Award have not been registered under the Securities Act
of 1933 and such other state and federal laws, rules or regulations as
4
<PAGE>
the Company or the Committee deems applicable and, in the opinion of legal
counsel for the Company, there is no exemption from the registration
requirements of such laws, rules or regulations available for the issuance of
such shares. No fractional shares of Common Stock shall be delivered, nor shall
any cash in lieu of fractional shares be paid. The Company shall have the right
to deduct in connection with all Awards any taxes required by law to be withheld
and to require any payments required to enable it to satisfy its withholding
obligations.
(d) NO RESTRICTION ON CORPORATE ACTION. Nothing contained in the Plan shall be
construed to prevent the Company or any subsidiary from taking any corporate
action which is deemed by the Company or such subsidiary to be appropriate or in
its best interest, whether or not such action would have an adverse effect on
the Plan or any Award made under the Plan. No Employee, beneficiary or other
person shall have any claim against the Company or any subsidiary as a result of
any such action.
(e) RESTRICTIONS ON TRANSFER. An Award shall not be transferable otherwise
than by will or the laws of descent and distribution.
(f) RULE 16b-3. It is intended that the Plan and any grant of an Award made to
a person subject to Section 16 of the 1934 Act meet all of the requirements of
Rule 16b-3. If any provision of the Plan or any such Award would disqualify the
Plan or such Award under, or would otherwise not comply with, Rule 16b-3, such
provision or Award shall be construed or deemed amended to conform to Rule
16b-3.
(g) GOVERNING LAW. This Plan shall be construed in accordance with the laws of
the State of Texas, except to the extent that it implicates matters which are
the subject of the General Corporation Law of the State of Delaware which
matters shall be governed by the latter law.
5
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Exhibit 10.18
CREDIT AGREEMENT
By and Between
Baker Hughes Incorporated
and
----------------------
Dated as of September 1, 1994
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
<C> <S> <S>
ARTICLE I. DEFINITIONS .............................................. -1-
1.01 "Advance(s)" ............................................. -1-
1.02 "Agreement" .............................................. -1-
1.03 "Business Day" ........................................... -1-
1.04 "Commitment" ............................................. -1-
1.05 "Commitment Limit" ....................................... -1-
1.06 "Consolidated Net Worth" ................................. -1-
1.07 "Control Group" .......................................... -1-
1.08 "Default Rate" ........................................... -2-
1.09 "Dollars" and "$" ........................................ -2-
1.10 "Effective Date" ......................................... -2-
1.11 "Encumbrance" ............................................ -2-
1.12 "ERISA" .................................................. -2-
1.13 "Eurodollar Advance(s)" .................................. -2-
1.14 "Eurodollar Rate" ........................................ -2-
1.15 "Eurodollar Reserve Percentage"........................... -2-
1.16 "Event of Default"........................................ -3-
1.17 "Facility Fee"............................................ -3-
1.18 "Facility Fee Rate"....................................... -3-
1.19 "GAAP".................................................... -3-
1.20 "Governmental Requirement"................................ -3-
1.21 "Interest Period"......................................... -3-
1.22 "Lending Office".......................................... -4-
1.23 "LIBOR"................................................... -4-
1.24 "LIBOR Margin"............................................ -4-
1.25 "Mortgage"................................................ -4-
1.26 "Net Worth"............................................... -4-
1.27 "Note".................................................... -5-
1.28 "Other Bank(s)"........................................... -5-
1.29 "Other Bank Agreement(s)"................................. -5-
1.30 "PBGC" ................................................... -5-
1.31 "Permitted Encumbrance" .................................. -5-
1.32 "Person" ................................................. -5-
1.33 "Plan" ................................................... -5-
1.34 "Reference Rate" ......................................... -5-
1.35 "Reference Rate Advance(s)" .............................. -5-
1.36 "Reportable Event" ....................................... -5-
1.37 "Stockholders' Equity" ................................... -5-
1.38 "Subsidiary" ............................................. -6-
1.39 "Taxes" .................................................. -6-
1.40 "Termination Date" ....................................... -6-
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<C> <S> <S>
ARTICLE II. LOAN COMMITMENT........................................... -6-
2.01 Commitment to Lend........................................ -6-
2.02 Change of Law............................................. -6-
2.03 Termination and Reduction of Commitment................... -7-
2.04 Facility and Origination Fees............................. -7-
2.05 Withholding Taxes......................................... -7-
2.06 Increased Costs........................................... -8-
2.07 Bank as Foreign Person.................................... -8-
2.08 Bank's Obligation for Taxes............................... -10-
2.09 Change of Lending Office.................................. -11-
ARTICLE III. REVOLVING CREDIT LOANS TO THE COMPANY..................... -11-
3.01 Advances to the Company................................... -11-
3.02 Disposition of Funds and Amount Payable in the Event of
Refinancing.............................................. -13-
3.03 Funding Losses............................................ -14-
3.04 Conditions to the Initial Borrowing....................... -14-
3.05 Conditions To All Advances................................ -15-
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............. -l5-
4.01 Existence and Rights...................................... -15-
4.02 Agreement and Note........................................ -15-
4.03 No Conflict............................................... -16-
4.04 Litigation................................................ -16-
4.05 Financial Condition....................................... -16-
4.06 Title to Assets........................................... -16-
4.07 Trademarks, Patents....................................... -16-
4.08 Margin Securities......................................... -17-
4.09 ERISA..................................................... -17-
4.10 Investment Company Act.................................... -17-
4.11 Labor Matters............................................. -17-
4.12 Environmental Laws........................................ -17-
4.13 Other Bank Agreements..................................... -17-
ARTICLE V. AFFIRMATIVE COVENANTS..................................... -17-
5.01 Corporate Rights and Franchises........................... -18-
5.02 Insurance................................................. -18-
5.03 Taxes and other Liabilities............................... -18-
5.04 Records................................................... -18-
5.05 Reports by the Company.................................... -19-
ARTICLE VI. NEGATIVE COVENANTS ....................................... -21-
6.01 Liens and Encumbrances. .................................. -21-
6.02 Sales of Assets or Business............................... -22-
</TABLE>
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<TABLE>
<CAPTION>
<C> <S> <S>
6.03 Liquidation, Dissolution, Consolidation or Merger......... -23-
6.04 Minimum Consolidated Net Worth ........................... -23-
ARTICLE VII. EVENTS OF DEFAULT AND REMEDIES ........................... -23-
7.01 Failure to Pay Note; Breach of Certain Covenants.......... -23-
7.02 Breach of Remaining Covenants ............................ -23-
7.03 Breach of Warranty........................................ -24-
7.04 Other Obligations......................................... -24-
7.05 Insolvency; Receiver...................................... -24-
7.06 Judgments; Attachments.................................... -25-
7.07 ERISA..................................................... -25-
7.08 Remedies ................................................. -25-
ARTICLE VIII. MISCELLANEOUS............................................. -26-
8.01 Survival of Warranties.................................... -26-
8.02 Failure or Indulgence Not Waiver.......................... -26-
8.03 Notices................................................... -26-
8.04 Applicable Law............................................ -26-
8.05 Interest Limitation....................................... -26-
8.06 Assignability............................................. -27-
8.07 Computation of Interest Rates and Fees; Time of Payment... -27-
8.08 Expenses; Indemnity by the Company........................ -27-
8.09 Modifications and Amendments.............................. -27-
8.10 Restriction on Transfers.................................. -27-
8.11 Table of Contents; Headings............................... -28-
8.12 Articles; Sections........................................ -28-
8.13 Counterparts.............................................. -28-
8.14 Survival of Agreements.................................... -28-
8.15 Severability.............................................. -28-
8.16 Confidentiality........................................... -29-
8.17 Consequential Damages..................................... -29-
8.18 Replacement of Prior Agreements........................... -29-
8.19 Final Agreement........................................... -29-
</TABLE>
iii
<PAGE>
EXHIBITS
Exhibit A Form of Note
Exhibit B Banks
Exhibit C Form of Company Request For Advance
Exhibit D Form of Opinion of Counsel of the Company
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<PAGE>
BAKER HUGHES INCORPORATED
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of September 1, 1994, is hereby made and
entered into by and between BAKER HUGHES INCORPORATED, a Delaware corporation
(the "Company"), and (the "Bank"), on the following terms and
conditions.
ARTICLE I. DEFINITIONS
For the purposes hereof, unless the context otherwise requires:
1.01 "Advance(s)" means any or all of the Eurodollar Advances and Reference
Rate Advances made to the Company by the Bank pursuant to Section 3.01.
1.02 "Agreement" means this Credit Agreement as originally executed or, if
later amended or supplemented, then as so amended or supplemented.
1.03 "Business Day" means any day (other than a day which is Saturday, Sunday,
or a legal holiday in London, England, the State of Texas, the State of New
York, or the State within the U.S., if any, where the Bank maintains its
corporate headquarters) on which commercial banks are open for domestic and
international business in London, England, Houston, Texas, New York, New York,
and the city within the U.S., if any, where the Bank maintains its corporate
headquarters; provided, however, that when used in connection with a Eurodollar
Advance, the term "Business Day" shall also exclude any day on which banks are
not open for dealings in dollar deposits in the London interbank market.
1.04 "Commitment" means the Bank's commitment to lend an aggregate amount not
to exceed the Commitment Limit at any time outstanding pursuant to Section 2.01,
as such Commitment may be reduced or terminated pursuant to Section 2.02,
Section 2.03 or Article VII.
1.05 "Commitment Limit" means MILLION DOLLARS ($ ).
1.06 "Consolidated Net Worth" of any Person means the Net Worth of such Person
and its Subsidiaries determined on a consolidated basis in accordance with GAAP.
1.07 "Control Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common CONTROL
WHICH, together with the Company, are treated as a single employer under Section
414(b) or 414(c) of the Internal Revenue Code of 1986, as from time to time
amended.
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1.08 "Default Rate" means a rate per annum equal to the sum of 1% plus
the Reference Rate (changing when and as such Reference Rate changes).
1.09 "Dollars" and "$" mean the lawful currency of the United States of
America and in respect of all payments to be made in Dollars under this
Agreement mean funds which are for same day settlement in immediately available
funds through the Federal Reserve wire transfer system (or such other United
States dollar funds as may at the relevant time be customary for the settlement
of international banking transactions denominated in United States dollars).
1.10 "Effective Date" means the date of this Agreement first written above.
1.11 "Encumbrance" means any mortgage, deed of trust, pledge, lien, security
interest, conditional sale or other title retention agreement or other similar
encumbrance, but excluding any right of offset or set-off which arises by
operation of law or which may be granted to a lender in connection with credit
facilities for the Company or any of its Subsidiaries, and further excluding any
encumbrance which arises by reason of any restraining order, injunction, or
similar impediment or restriction that affects the transfer of any assets.
1.12 "ERISA" means the Employee Retirement Income Security Act of 1974, as
from time to time amended.
1.13 "Eurodollar Advance(s)" means loans made by the Bank to the Company under
Section 3.01 that bear interest at the Eurodollar Rate.
1.14 "Eurodollar Rate" means, in respect of each Interest Period of each
Eurodollar Advance, a rate per annum equal to LIBOR plus the LIBOR Margin;
provided, however, that if the Bank incurs a reserve requirement (as set forth
below in the definition of "Eurodollar Reserve Percentage") on any day of any
Interest Period and the Bank notifies the Company, within thirty (30) days after
incurring such reserve requirement that it has incurred same, then "Eurodollar
Rate" means, in respect of the portion of the Interest Period of such Eurodollar
Advance in which such reserve requirement is in effect, a rate per annum equal
to the sum of LIBOR Margin plus the quotient obtained (rounded upwards, if
necessary, to the next higher 1/16 of 1%) by dividing (i) LIBOR by (ii) 1.00
minus the Eurodollar Reserve Percentage in effect during such portion of such
Interest Period.
1.15 "Eurodollar Reserve Percentage" means for any day that a Eurodollar
Advance is outstanding, that percentage (expressed as a decimal) which is in
effect on such day of the applicable Interest Period, as prescribed by the Board
of Governors of the Federal Reserve System (or any successor) for determining
the reserve requirement for the Bank in respect of "Eurocurrency liabilities"
(or in respect of any other category of liabilities which includes deposits by
reference to which the interest rate on Eurodollar Advances is determined or any
category of extensions of credit or other assets which includes loans by a non-
United States office of the Bank to United States residents).
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1.16 "Event of Default" shall have the meaning attributed thereto in Article
VII.
1.17 "Facility Fee" means the fee payable to the Bank pursuant to Section
2.04.
1.18 "Facility Fee Rate" means the rate per annum which shall be used to
calculate the Facility Fee and is equal to (i) 1/10 of 1% if the Company has a
senior unsecured credit rating by Standard and Poors of better than BBB+ or a
senior unsecured credit rating by Moody's Investor Services of better than Baal;
(ii) 1/8 of 1% if the Company has a senior unsecured credit rating by Standard
and Poors between BBB+ and BBB-, inclusive or a senior unsecured credit rating
by Moody's Investor Services between Baal and Baa3, inclusive; or (iii) 1/4 of
1% if the Company has a senior unsecured credit rating by Standard and Poors
of less than BBB- or a senior unsecured credit rating by Moody's Investor
Services of less than Baa3; provided, however, that the greater senior unsecured
credit rating (Standard and Poors or Moody's Investor Services) shall always be
applied to determine the Facility Fee Rate, and if Standard and Poors (or
Moody's Investor Services) changes its rating designations, then the new
equivalent Standard and Poors (or Moody's Investor Services) credit ratings
shall be applied.
1.19 "GAAP" means those generally accepted accounting principles which are in
effect on the date of determination and which are recognized as such by the
Financial Accounting Standards Board (or any generally recognized successor).
1.20 "Governmental Requirement" means any law, statute, code, ordinance,
order, rule, regulation, guideline, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other direction or requirement
(including, without limitation, any of the foregoing which relate to
environmental standards or controls, energy regulations and occupational, safety
and health standards or controls) of any (domestic or foreign) federal, state,
county, municipal, parish, provincial or other government or any department,
commission, board, court, agency or any other instrumentality of any of them.
1.21 "Interest Period" means (a) in respect of each Eurodollar Advance made to
the Company, the period commencing on the date of such Eurodollar Advance and
ending one, three or six months thereafter (as designated by the Company
pursuant to Section 3.01(a)) or such other time period as may be mutually agreed
upon by the Bank and the Company, and (b) in respect of each Reference Rate
Advance made to the Company, the period commencing on the date of such Reference
Rate Advance and ending one, three or six months thereafter (as designated by
the Company pursuant to Section 3.01(a)) or such other time period as may be
mutually agreed upon by the Bank and the Company; provided, however, that in
each case:
(i) any Interest Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day unless by
such extension it would fall in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day;
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(ii) any Interest Period which begins on a day for which there is no
numerically corresponding day in the calendar month during which such
Interest Period is to end shall, subject to the provisions of clause (i)
hereof, end on the last day of such calendar month;
(iii) no Interest Period shall extend beyond the Termination Date; and
(iv) no more than ten different Interest Periods may be outstanding at any
one time.
1.22 "Lending Office" means the office or offices of the Bank specified as its
"Domestic Lending Office" or "Eurodollar Lending Office", as the case may be,
below its name on the signature page hereof or such other office or offices of
the Bank as the Bank may from time to time specify in writing to the Company,
or, if the Bank fails to so notify the Company, the Bank's Domestic Lending
Office listed below its name on the signature page hereof
1.23 "LIBOR" means, in respect of each Interest Period of each Eurodollar
Advance, the rate per annum quoted by the Bank at which deposits in Dollars, in
amounts comparable to the amount of the subject Eurodollar Advance and with
maturities comparable to such Interest Period, are offered to the principal
office of the Bank in London, England (or if the Bank does not have an office in
London, England, the rate at which such deposits are offered to the principal
offices of major banks in London, England) by major banks in the interbank
market at 11:00 A.M. London time two (2) Business Days prior to the first day of
such Interest Period (rounded upward, if necessary, to the next higher 1/16 of
1%).
1.24 "LIBOR Margin" means the rate per annum which shall be added to LIBOR to
determine the Eurodollar Rate and is equal to (i) .275% if the Company has a
senior unsecured credit rating by Standard and Poors of better than BBB+ or a
senior unsecured credit rating by Moody's Investor Services of better than Baal;
(ii) .375% if the Company has a senior unsecured credit rating by Standard and
Poors between BBB+ and BBB-, inclusive, or a senior unsecured credit rating by
Moody's Investor Services between Baal and Baa3, inclusive; or (iii) .5% if the
Company has a senior unsecured credit rating by Standard and Poors of less than
BBB- or a senior unsecured credit rating by Moody's Investor Services of less
than Baa3; provided, however, that the greater senior unsecured credit rating
(Standard and Poors or Moody's Investor Services) shall always be applied to
determine the LIBOR Margin, and if Standard and Poors (or Moody's Investor
Services) changes its rating designations, then the new equivalent Standard and
Poors (or Moody's Investor Services) credit ratings shall be applied.
1.25 "Mortgage" means any Encumbrance, excluding Permitted Encumbrances.
1.26 "Net Worth" of a Person shall mean the sum of the par value or stated
value of its issued and outstanding capital stock (common and preferred),
capital in excess of par
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or stated value of shares of its capital stock, retained earnings, and any other
account which, in accordance with GAAP, constitutes Stockholders' Equity.
1.27 "Note" means the note substantially in the form of Exhibit A hereto
issued by the Company pursuant to Section 3.01.
1.28 "Other Bank(s)" means, collectively, the banks set forth on Exhibit B,
other than the Bank.
1.29 "Other Bank Agreement(s)" shall have the meaning attributed thereto in
Section 4.13.
1.30 "PBGC" means the Pension Benefit Guaranty Corporation or any successor
established under ERISA.
1.31 "Permitted Encumbrance" shall have the meaning attributed thereto in
Section 6.01.
1.32 "Person" means an individual, corporation, partnership, joint venture,
trust, unincorporated organization, association, joint stock company, government
or any agency or political subdivision thereof or any other entity.
1.33 "Plan" means each employee benefit plan or other plan maintained by the
Company or any member of the Control Group for employees of the Company or any
member of the Control Group and covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code of
1986, as from time to time amended.
1.34 "Reference Rate" means the varying rate of interest per annum equal to
the rate of interest per annum publicly announced from time to time by Citibank,
N.A., New York, New York, or its successor, as its "Base Rate" of interest,
changing as and when a change in such rate occurs; provided, however, that in
the event that such rate ceases or fails to be published, the Reference Rate
shall be equal to the "Prime Rate" published in the Wall Street Journal in the
Money Rates Column, as it may change from time to time.
1.35 "Reference Rate Advance(s)" means loans made by the Bank to the Company
under Section 3.01 that bear interest at the Reference Rate.
1.36 "Reportable Event" means any event described in Section 4043 of ERISA,
but excluding Sections 4043(b)(2) and 4043(b)(3) thereof.
1.37 "Stockholders' Equity" means the excess of assets over liabilities, in
each case of the Company and its Subsidiaries on a consolidated basis, as
determined and computed in accordance with GAAP.
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1.38 "Subsidiary" means a corporation of which the Company and/or one or more
of its other subsidiaries of any tier own, directly or indirectly, such number
of outstanding shares as have the power (disregarding any voting power, solely
by reason of the happening of any default, of shares of any class) to elect a
majority of the Board of Directors of such corporation.
1.39 "Taxes" means all present and future taxes, levies, imposts, duties,
fees, assessments, or charges of whatever nature (excluding income and similar
taxes) now or hereafter imposed by any governmental authority, or any political
subdivision or taxing authority thereof, together with interest thereon and
penalties in respect thereof
1.40 "Termination Date" means the date on which the Commitment expires, which
shall be five (5) years after the Effective Date (August 31, 1999), or such
earlier date as the Bank's obligation to honor its Commitment shall have
terminated under Section 2.02, Section 2.03 or Article VII of this Agreement.
ARTICLE II. LOAN COMMITMENT
2.01 Commitment to Lend. The Bank agrees, on the terms and conditions of this
Agreement and in reliance upon the representations and warranties set forth in
Article IV, to make Eurodollar Advances and Reference Rate Advances to the
Company, from time to time, from the Effective Date to but excluding the
Termination Date, at such times and in such amounts as the Company shall request
in accordance with Section 3.01, in an aggregate principal amount not to exceed
at any one time outstanding the Commitment Limit.
2.02 Change of Law. Notwithstanding any other provision herein, in the event
that any change in any applicable Governmental Requirement or in the
interpretation or administration thereof shall make it unlawful or impossible
for the Bank to (i) honor its Commitment under Section 2.01, then the obligation
of the Bank to make Advances to the Company under Section 2.01 and the
obligation of the Company to pay the Facility Fee for the period of time
subsequent thereto shall terminate, or (ii) maintain its Advances, then the
aggregate principal amount of the Bank's Advances which are then outstanding and
which cannot be lawfully maintained, together with interest accrued and unpaid
thereon and all other amounts payable hereunder to the Bank in respect thereof,
shall be paid, all as provided below in this Section 2.02. Upon the occurrence
of any change making it unlawful for the Bank to honor its Commitment under
Section 2.01 or maintain its Advances as aforesaid, the Bank shall immediately
notify an officer of the Company thereof by telephone (which shall be confirmed
by written notice in accordance with Section 8.03), and shall furnish to the
Company written evidence of such change. Any payment of the principal amount of
the Bank's Advances which is required under this Section 2.02 shall be made,
together with accrued and unpaid interest and all other amounts payable
hereunder to the Bank in respect thereof, on the earlier of (i) the last day of
the respective Interest Periods applicable to such Advances, or (ii) such
earlier date or dates required by any such
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Governmental Requirement or any such interpretation or administration thereof,
provided the Company has been notified of such earlier date or dates.
2.03 Termination and Reduction of Commitment. The Company may, upon at least
five (5) Business Days' prior written notice given by the Company to the Bank,
and upon payment of the Facility Fee accrued through the date of such
termination or reduction, at any time wholly terminate or from time to time
permanently reduce the unused portion of the Commitment; provided that any such
partial reduction of the commitment must be in the amount of $1,000,000 or an
integral multiple thereof.
2.04 Facility and Origination Fees.
(a) Facility Fee. The Company agrees to pay the Bank a Facility Fee, in
Dollars, equal to the Facility Fee Rate multiplied by the daily average
amount of the Commitment Limit, used and unused, as it may exist for the
period from and including the Effective Date, to but not including the
Termination Date (or such earlier date as the Bank's obligation to honor its
Commitment shall have terminated pursuant to Sections 2.02. 2.03 or 7.08).
The applicable Facility Fee Rate shall be determined as of, and the accrued
Facility Fee shall be paid to the Bank on, (i) the last Business Day of each
March, June, September and December, commencing with the first of such dates
which follows the Effective Date, and (ii) the date of any early termination
of the Commitment pursuant to Sections 2.02. 2.03 or 7.08.
(b) Origination Fee. The Company agrees to pay the Bank a one-time
origination fee, in Dollars, equal to .03% of the Commitment Limit, payable
within fifteen (15) days of the Effective Date of this Agreement.
2.05 Withholding Taxes. Subject to Sections 2.07 and 2.08, if at any time any
applicable law, regulation or regulatory requirement or any governmental
authority, monetary agency or central bank enacted after the Effective Date
requires the Company to make any deduction or withholding in respect of Taxes
from any payment due under this Agreement for the account of the Bank, the sum
due from the Company in respect of such payment shall be increased to the extent
necessary to ensure that, after the making of such deduction or withholding, the
Bank receives on the due date for such payment a net sum equal to the sum which
it would have received had no such deduction or withholding been required to be
made, and the Company shall indemnify the Bank against any losses or costs
incurred by the Bank by reason of any failure of the Company to make any such
deduction or withholding or by reason of any increased payment not being made on
the due date for such payment, except to the extent the same arise by reason of
a transfer, sale, or assignment of the Note. The Company shall promptly deliver
to the Bank any receipts, certificates or other proof evidencing the amounts (if
any) paid or payable in respect of any deduction or withholding as aforesaid. If
the Bank should, in connection with any payment made by the Company pursuant to
this Section 2.05, receive any offsetting tax credit or obtain any similar tax
benefit which may reasonably be applied to the benefit of the Company, the Bank
will in a timely manner reimburse the Company an amount equal to the
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amount of such credit or benefit after deducting any expenses reasonably and
properly attributable thereto. The Bank agrees to use its reasonable efforts to
obtain any such tax credit or similar tax benefit. If any such tax credit or
benefit, the amount of which has been reimbursed to the Company, is subsequently
disallowed in whole or in part by the appropriate taxation authorities, the
Company agrees to repay on demand to the Bank the amount of credit or benefit so
reimbursed to the Company and subsequently disallowed.
2.06 Increased Costs. Without duplication of any amounts otherwise payable
under this Agreement the Company agrees to reimburse the Bank, within ten (10)
days after receipt of written notice from the Bank, for any increase in its cost
or decrease in its effective rate of return incurred after the Effective Date
hereof (which shall include, but not be limited to, taxes (other than income or
similar taxes), fees, charges and/or reserves) directly or indirectly resulting
from the making of any Advances to the Company or maintaining of its Commitment,
and arising as a result of:
(a) any change after the Effective Date in any Governmental Requirement or
the interpretation thereof by any governmental authority, court, bureau or
agency charged with the administration or interpretation thereof (whether or
not having the force of law); or
(b) any capital or similar requirements imposed on the Bank or any
corporation controlling the Bank against assets or liabilities (or against
any class thereof or any required change in the amount thereof) of, or
commitments or extensions of credit by, the Bank (including, without
limitation, the Bank's obligation to make Advances hereunder);
except to the extent the same arise by reason of a transfer, sale or assignment
of the Note. Such reimbursement shall be made to the Bank within ten (10) days
after the receipt by the Company of notice from the Bank setting forth the
nature and amount of such loss, decrease in its effective rate of return, or
expense and an explanation as to how such amounts were calculated by the Bank,
said notice to be conclusive and binding in the absence of manifest error. The
Company will pay all amounts required pursuant to this Section 2.06 to the Bank
in immediately available funds.
2.07 Bank as Foreign Person. If the Bank is a foreign Person (i.e., a Person
other than a United States Person for United States Federal income tax
purposes), then Bank hereby agrees that:
(i) it shall on or prior to the Effective Date deliver to the Company one
original of the following:
(A) if any Lending Office is located in the United States of America,
accurate and complete signed copies of IRS Form 4224 or any successor
thereto ("Form 4224") and IRS Form W-9 or any successor thereto
("Form W-9"); and/or
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(B) if any Lending Office is located outside the United States of
America, accurate and complete signed copies of IRS Form 1001 or any
successor thereto ("Form 1001") and IRS Form W-8 or any successor thereto
("Form W-8");
in each case indicating that the Bank is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the account
of such Lending Office or Lending Offices under this Agreement free from
withholding of United States Federal income tax;
(ii) if at any time the Bank changes its Lending Office or Lending Offices
or selects an additional Lending Office, it shall, at the same time, but only
to the extent the forms previously delivered by it hereunder are no longer
effective, deliver to the Company one original, in replacement for the forms
previously delivered by it hereunder:
(A) if such changed or additional Lending Office is located in the
United States of America, accurate and complete signed originals of Form
4224 and Form W-9; or
(B) otherwise, accurate and complete signed originals of Form 1001 and
Form W-8;
in each case indicating that the Bank is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the account
of such changed or additional Lending Office under this Agreement free from
withholding of United States Federal income tax;
(iii) it shall, upon the occurrence of any event (including the passing of
time, but excluding any event mentioned in clause (ii) above) requiring a
change in the most recent Form 4224, Form W-9, Form 1001 or Form W-8
previously delivered by such Bank, deliver to the Company one original
accurate and complete signed copies of Form 4224, Form W-9, Form 1001 or Form
W-8 in replacement for the forms previously delivered by the Bank;
(iv) it shall, promptly upon the request of the Company, deliver to the
Company such other forms or similar documentation as may be required from
time to time by any applicable law, treaty, rule or regulation in order to
establish the Bank's tax status for withholding purposes;
(v) if the Company claims exemption from withholding tax under a United
States tax treaty by providing a Form 1001 and the Bank sells or grants a
participation of all or part of its rights under this Agreement, it shall
notify the Company of the percentage amount in which it is no longer the
beneficial owner under this Agreement. To the extent of this percentage
amount, the Company shall
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treat the Bank's Form 1001 as no longer applicable for purposes of this
Section 2.07. In the event the Bank is claiming exemption from United States
withholding tax by filing Form 4224 with the Company, and sells or grants a
participation in its rights under this Agreement, the Bank agrees to
undertake sole responsibility for complying with the withholding tax
requirements imposed by Sections 1441 and 1442 of the Code; and
(vi) if the IRS or any authority of the United States of America or other
jurisdiction asserts a claim that the Company did not properly withhold tax
from amounts paid to or for the account of the Bank (because the appropriate
form was not delivered, was not properly executed, or because the Bank
failed to notify the Company of a change in circumstances which rendered the
exemption from withholding tax ineffective), the Bank shall indemnify the
Company fully for all amounts paid, directly or indirectly, by the Company,
as tax or otherwise, including penalties and interest, and including any
taxes imposed by any jurisdiction on the amounts payable by the Company under
Sections 2.05 and 2.06 together with all costs, expenses and reasonable
attorneys' fees (including the allocated cost of in-house counsel).
Without limiting or restricting the Bank's right to increased amounts under
Sections 2.05 and 2.06 from the Company upon satisfaction of such Bank's
obligations under the provisions of this Section 2.07, if the Bank is a foreign
Person and is entitled to a reduction in the applicable withholding tax, the
Company may withhold from any interest to the Bank an amount equivalent to the
applicable withholding tax after taking into account such reduction. If the
forms or other documentation required by clause (i) above are not delivered to
the Company, then the Company may withhold from any interest payment to the Bank
an amount equivalent to the applicable withholding tax. In addition, the Company
may also withhold against periodic payments other than interest payments to the
extent United States withholding tax is not eliminated by obtaining Form 4224 or
Form 1001.
2.08 Bank's Obligation for Taxes. Notwithstanding anything to the contrary
contained herein, the Company shall not be required to pay any additional
amounts in respect of United States Federal income tax pursuant to Sections 2.05
or 2.06 to the Bank for the account of any Lending Office of the Bank:
(i) if the obligation to pay such additional amounts would not have arisen
but for a failure by the Bank to comply with its obligations under Section
2.07 in respect of such Lending Office;
(ii) if the Bank shall have delivered to the Company a Form 4224 and a
Form W-9 in respect of such Lending Office pursuant to Sections 2.07(i)(A),
2.07(ii)(A) or 2.07(iii) and the Bank shall not at any time be entitled to
exemption from deduction or withholding of United States Federal income tax
in respect of payments by the Company hereunder for the account of such
Lending Office for any reason other than a change in United States law or
regulations or in the official
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interpretation of such law or regulations by any governmental authority
charged with the interpretation or administration thereof (whether or not
having the force of law) after the date of delivery of such Form 4224 and
Form W-9; or
(iii) if the Bank shall have delivered to the Company a Form 1001 and a
Form W-8 in respect of such Lending Office pursuant to Sections 2.07(i)(B),
2.07(ii)(B), or 2.07(iii) and the Bank shall not at any time be entitled to
exemption from deduction or withholding of United States Federal income tax
in respect of payments by the Company hereunder for the account of such
Lending Office for any reason other than a change in United States law or
regulations or any applicable tax treaty or regulations or in the official
interpretation of any such law, treaty or regulations by any governmental
authority charged with the interpretation or administration thereof (whether
or not having the force of law) after the date of delivery of such Form 1001
and Form W-8.
Any and all present or future Taxes and related liabilities (including
penalties, interest, additions to tax and expenses) which are not required to be
paid by the Company pursuant to Sections 2.05 and 2.06 shall be paid by the Bank
and Bank agrees to indemnify and hold the Company harmless from the same.
2.09 Change of Lending Office. Bank agrees that upon the occurrence of any
event giving rise to the payment of taxes or withholding pursuant to Sections
2.05 or 2.06, it will if so requested by the Company, use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
designate a different Lending Office for any Advances affected by such event
with the object of avoiding the consequence of the event giving rise to the
payment of taxes or withholding pursuant to such Sections; provided, however,
that such designation would not, in the judgment of Bank, be otherwise
disadvantageous to Bank. Nothing in this Section 2.09 shall affect or postpone
any of the obligations of the Company or the right of the Bank provided in
Sections 2.05 or 2.06.
ARTICLE III. REVOLVING CREDIT LOANS TO THE COMPANY
3.01 Advances to the Company. Subject to the terms and conditions of this
Agreement, the Company may from time to time borrow under this Section 3.01, pay
pursuant to this Section 3.01, and reborrow under this Section 3.01. Each
Advance made to the Company and payment thereof shall be in Dollars in an
aggregate principal amount of not less than $1,000,000. All Advances to the
Company shall be subject to the provisions of Section 3.01(a) through 3.01(g).
(a) Manner of Borrowing. The Company shall give the Bank, not later than
10:00 A.M. (Houston time) (i) three (3) Business Days prior to the drawdown
date in the case of a Eurodollar Advance; and (ii) on the drawdown date in
the case of a Reference Rate Advance, irrevocable notice (effective upon
receipt), substantially in the form of Exhibit C attached hereto, of each
requested Advance to be made to the Company specifying (A) the amount of the
requested Advance,
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(B) the drawdown date of the requested Advance (which shall be a Business
Day), (C) whether the Advance is to be comprised of Eurodollar Advances or
Reference Rate Advances, and (D) the term of the Interest Period for such
Advance, provided that if the Company fails to specify the duration of such
term, the Interest Period for such Advance shall be three (3) months. If such
Advance will be a Eurodollar Advance, the Bank shall notify the Company of
the Eurodollar Rate by no later than 1l:OO A.M. (Houston time) one (1)
Business Day prior to the drawdown date specified for such Advance. If such
Advance will be a Reference Rate Advance, the Bank shall notify the Company
of the Reference Rate by no later than 11:30 A.M. (Houston time) on the
drawdown date specified for such Advance.
(b) Manner of Making Funds Available. The Bank, not later than 12:00 Noon
Houston time, on the drawdown date specified for such Advance, shall make the
Advance available to the Company by transferring in immediately available
funds the amount of such Advance to The Northern Trust Company, 50 South
LaSalle Street, Chicago, Illinois, U.S.A., 60675 for credit to the Company's
account #93343 or to such other bank and/or account as the Company shall
designate to the Bank in writing.
(c) Payment of Principal. The Company hereby promises to pay to the Bank
the principal of each Advance made to the Company on the last day of the
Interest Period applicable to such Advance. The Company shall have the right,
at any time and from time to time, to prepay, in whole or in part, any
Advance by giving Bank not less than (i) three (3) Business Days prior
written notice in the case of a prepayment of a Eurodollar Advance; and (ii)
one (1) Business Day prior written notice in the case of a Reference Rate
Advance; together with accrued interest to the date of such prepayment on the
principal amount prepaid; provided, however, that each partial prepayment of
principal shall be in an integral multiple of $1,000,000 and further provided
that the Company shall be required to pay reasonable costs and losses
incurred by the Bank as a result of the Company prepaying any Eurodollar
Advance, pursuant to Section 3.03.
(d) Payment of Interest. The Company hereby promises to pay to the Bank
accrued but unpaid interest on the principal amount of each Advance made to
the Company, from the date of such Advance until the principal amount of such
Advance shall be paid in full (i) at the Eurodollar Rate for Eurodollar
Advances; and (ii) at the Reference Rate for Reference Rate Advances; payable
on the last day of the Interest Period applicable to such Advance and, if
such Interest Period is longer than six months, also on each six-month
anniversary of the making of such Advance; provided. however, that any amount
of such principal and, to the extent permitted by law, any interest thereon
which is not paid when due (whether at stated maturity, by acceleration or
otherwise) shall bear interest from the date on which such amount is due
until such amount is paid in full, payable on demand, at the Default Rate.
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(e) Currency of Payment. All payments of principal and interest on
Advances shall be made in Dollars.
(f) Note. The Advances made by the Bank to the Company shall be evidenced
by the Note substantially in the form attached hereto as Exhibit A with
appropriate insertions, payable to the order of the Bank, dated the Effective
Date, maturing on the Termination Date and bearing interest from the
Effective Date on the unpaid principal amount thereof from time to time
outstanding at the rates provided for in this Agreement. The Bank shall
record and endorse on the Note all transactions in the space provided
thereon, which recordation and endorsement, absent manifest error, shall be
prima facie evidence of Advances made to the Company and payments thereon;
provided, however, that the failure by the Bank to make such recordation and
endorsement shall not limit or otherwise affect the obligations of the
Company hereunder or under the Note and payments of principal and interest on
the Note by the Company shall not be affected by the failure to make any such
recordation and endorsement thereof on the Note. Although the Note shall be
dated the Effective Date, interest in respect thereof shall be payable only
for the periods during which the Advances evidenced thereby are outstanding
and then only with respect to such Advances.
(g) Available London Interbank Rate. Anything herein to the contrary
notwithstanding, if, with respect to any proposed Eurodollar Advance to the
Company, the Bank determines (i) that for any reason whatsoever the rates for
the offering of Dollars for deposit in the London interbank market in
immediately available funds in an amount and for a period comparable to the
scheduled maturity of such Eurodollar Advance are not being offered to the
Bank in the London interbank market or (ii) that the rates offered for
purposes of computing the rate of interest on the requested Eurodollar
Advance do not accurately reflect the cost to the Bank of making such
Eurodollar Advance, then the Bank shall notify an officer of the Company
immediately by telephone (which shall be promptly confirmed by written notice
in accordance with Section 8.03) and so long as such failure to offer such
rates continue and/or such rates fail to accurately reflect costs to the Bank
as aforesaid, the Bank shall be under no obligation to make such Eurodollar
Advance under this Agreement; provided, however, that the Company shall have
the option to elect to have such Advance changed to a Reference Rate Advance
by giving the Bank notice at any time prior to 11:00 a.m. (Houston time) on
the date of the proposed Advance.
3.02 Disposition of Funds and Amount Payable in the Event of Refinancing. If
the Bank makes a new Advance to the Company hereunder on a day on which the
Company is to pay all or any part of an outstanding Advance made to the Company,
the Bank shall apply the proceeds of such new Advance to make such payment and
(i) only an amount equal to the excess, if any, of the amount being borrowed by
the Company over the amount applied by the Bank to make such payment shall be
made available by the Bank to the Company as provided in Section 3.01(b) and
(ii) only an amount equal to the excess, if any,
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of the amount payable by the Company to the Bank on such day over the amount
applied by the Bank to make such payment shall be payable by the Company to the
Bank on such day.
3.03 Funding Losses. The Company shall pay to the Bank upon written request
(which request shall set forth in reasonable detail the basis for such request),
such amount or amounts as shall be sufficient (in the reasonable opinion of the
Bank) to reasonably compensate the Bank for any loss or expense (other than the
loss of margin) incurred by the Bank as a result of (i) any prepayment by the
Company of any Eurodollar Advance made to the Company on a date other than the
last day of the Interest Period applicable thereto (but specifically excluding
Section 2.02), or (ii) any failure by the Company to borrow an Advance on the
date scheduled for such borrowing pursuant to Section 3.01, except Section
3.01(g), whether because of any Event of Default by the Company or otherwise.
3.04 Conditions to the Initial Borrowing. The obligation of the Bank to make
its initial Advance to the Company is subject to the conditions precedent that
the Bank shall have received:
(a) Note. In the case of the initial Advance to the Company, the Note
drawn to the order of the Bank complying with the provisions of Section 3.01
hereof.
(b) Authorized Signatories of the Company. A certificate of the Secretary
or an Assistant Secretary of the Company which shall certify the names of the
officers of the Company authorized to sign this Agreement, the Note, and any
other document related to this Agreement, together with the true specimen
signatures of such officers. The Bank may conclusively rely upon such
certificate unless it received evidence to the contrary.
(c) Evidence of Corporate Action of the Company. Certified copies of all
corporate action taken by the Company to authorize this Agreement, the Note,
and the borrowings by the Company hereunder, and such other papers as the
Bank shall reasonably require.
(d) Opinion of Company Counsel. An opinion of the General Counsel or
Deputy General Counsel of the Company in substantially the form set forth in
Exhibit D hereto.
(e) Certificate of the Company. A certificate dated the date of such
Advance to the Company and signed by an authorized executive or financial
officer of the Company stating that the representations and warranties of the
Company contained in Article IV are true and correct as of the date thereof,
and that no Event of Default, or event which with the giving of notice or
lapse of time or both would constitute an Event of Default, has occurred and
is continuing.
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3.05 Conditions To All Advances. The obligation of the Bank to make each
Advance to the Company is subject to the conditions precedent that on the date
of such Advance:
(a) Notice. The Bank shall have received the applicable notice required by
Section 3.01.
(b) Compliance with Agreement. The Company shall have complied and shall
then be in compliance with all the terms, covenants and conditions of this
Agreement which are binding upon it.
(c) No Default. There shall exist or result from such Advance no Event of
Default as defined in Article VII and no event which, with the giving of
notice or the lapse of time, or both, would constitute such an Event of
Default.
(d) Accuracy of Representations and Warranties. The representations and
warranties of the Company contained in Article IV shall be true with the same
effect as though such representations and warranties had been made at the
time of such Advance. In the case of each Advance to the Company hereunder,
each notice or request by the Company to the Bank to make each borrowing
shall be deemed to be a representation and warranty to the foregoing effects.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.01 Existence and Rights. The Company (i) is duly organized, validly
existing, and in good standing under the laws of the State of Delaware, (ii) has
all necessary corporate power to own its properties and to carry on its
businesses as now conducted, and (iii) is duly qualified and in good standing
(to the extent such concepts are applicable) in each United States jurisdiction
which requires qualification and in which the character of the properties owned
by it or the conduct of its business therein makes such qualification necessary,
except where the failure to so qualify would not have a material adverse effect
on the Company and its Subsidiaries on a consolidated basis. The Company has all
necessary corporate power and authority to make and carry out this Agreement and
to issue and deliver and perform the Note as herein provided.
4.02 Agreement and Note. The execution, delivery and performance of this
Agreement and the Note by the Company have been duly authorized by all necessary
corporate action and do not require the consent or approval of any governmental
body or other regulatory authority, are not in contravention of or in conflict
with any law or regulation applicable to the Company or any term or provision of
the charter or bylaws of the Company, and this Agreement is, and the Note when
delivered for value received, will be, the valid and legally binding
obligations of the Company, enforceable in accordance with their terms, except
as such enforceability may be (i) limited by the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws from time to time in effect and judicial decisions relating to or
affecting the enforceability
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of creditors' rights and debtor's obligations generally, and (ii) subject to the
effect of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
4.03 No Conflict. The execution, delivery and performance of this Agreement
and the Note are not in contravention of or in conflict with any material
agreement, indenture, undertaking or Governmental Requirement to which the
Company or any of its Subsidiaries is a party or by which any of them or any of
their property is subject, and do not cause any Mortgage to be created or
imposed upon any such property, except pursuant to the terms of this Agreement.
4.04 Litigation. There are no proceedings pending or, so far as the officers
of the Company know, threatened before any court, administrative agency or
arbitration panel which, in the opinion of the officers of the Company, are
expected to materially adversely affect the financial condition or operations of
the Company and its Subsidiaries on a consolidated basis. Neither the Company
nor any of its Subsidiaries is in material default with respect to any order,
writ, injunction or decree of any court or other governmental or regulatory
authority which, in the opinion of the officers of the Company, is expected to
materially adversely affect the financial condition or operations of the Company
and its Subsidiaries on a consolidated basis.
4.05 Financial Condition. The consolidated balance sheet of the Company and
its Subsidiaries as of September 30, 1993 and the related consolidated statement
of income for the fiscal year then ended, covered by the opinion of Deloitte &
Touche and heretofore delivered to the Bank, present fairly the financial
position of the Company and its consolidated Subsidiaries as of such date and
the results of their operations for the period then ended and have been prepared
in accordance with GAAP. There were no material liabilities, direct or indirect,
fixed or contingent, of the Company or any of its consolidated Subsidiaries as
of the date of such balance sheet which are not reflected therein or in the
notes thereto. Other than as has been previously disclosed to the Bank in
writing through the date hereof (including through the delivery of filings made
with the U.S. Securities and Exchange Commission), there has been since
September 30, 1993 no material adverse change in the financial condition and
operations of the Company and its Subsidiaries on a consolidated basis.
4.06 Title to Assets. The Company and its Subsidiaries have sufficient title
to their respective assets to enable them to conduct their business, and such
assets are subject to no Mortgage not permitted by Section 6.01, except where
the failure to have such title would not have a material adverse effect on the
Company and its Subsidiaries on a consolidated basis.
4.07 Trademarks, Patents. The Company and each of its Subsidiaries as of the
date hereof possess all necessary trademarks, copyrights, patents, patent rights
and licenses to conduct their respective businesses as now operated, without any
known material infringement of valid trademarks, trade names, copyrights,
patents or license rights of others,
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except to the extent that the failure of the foregoing would not have a material
adverse effect on the Company and its Subsidiaries on a consolidated basis.
4.08 Margin Securities. The Company is not incurring the indebtedness
evidenced by the Note hereunder for the purpose, directly or indirectly, of
purchasing or carrying any "margin stock" as that term is defined in Regulations
U and X of the Board of Governors of the Federal Reserve System, as amended from
time to time. Neither the Company nor any of its Subsidiaries is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock.
4.09 ERISA. Neither the Company nor any member of the control group has
incurred any material accumulated funding deficiency within the meaning of
Section 412 of the Internal Revenue Code of 1986, as from time to time amended,
or has incurred any material liability to the PBGC under Title IV of ERISA in
connection with any Plan or other class of benefit which PBGC has elected to
insure, and no Reportable Event that is materially adverse to the Company and
its Subsidiaries taken in the aggregate has occurred with respect to any Plan.
4.10 Investment Company Act. The Company is not an "investment company" or a
company "controlled" by an "investment company," within the meaning of the
Investment Company Act of 1940, as amended.
4.11 Labor Matters. There are no strikes or other labor disputes pending, or
to the knowledge of Company threatened, against the Company or any of its
Subsidiaries which have any reasonable likelihood of having a material adverse
effect on the Company and its Subsidiaries on a consolidated basis.
4.12 Environmental Laws. Except as may have been previously disclosed to the
Bank or may be disclosed in any information furnished by the Company to the Bank
pursuant to Section 5.05, the Company and its Subsidiaries are in compliance
with all environmental, health, and safety laws having applicability to the
Company and its Subsidiaries, and their respective operations and properties,
except to the extent that such non-compliance would not, in the aggregate, have
a material adverse effect on the Company and its Subsidiaries on a consolidated
basis.
4.13 Other Bank Agreements. Substantially concurrently with the execution of
this Agreement by the Company and the Bank, the Company is executing with each
of the Other Banks a substantively identical (other than with respect to the
amount of the Commitment) form of this Agreement (collectively, the "Other Bank
Agreements," and individually an "Other Bank Agreement").
ARTICLE V. AFFIRMATIVE COVENANTS
Unless the Bank shall otherwise consent in writing, it is agreed that, so long
as any credit hereunder shall be available and until payment in full of the
Note:
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5.01 Corporate Rights and Franchises. The Company will, and will cause each of
its Subsidiaries to, except as may be otherwise permitted by the provisions of
Sections 6.02 and 6.03, (i) maintain and preserve its corporate or partnership
existence and all rights, franchises and other authority necessary for the
conduct of its business unless, in the judgment of management of the Company,
the preservation thereof is no longer desirable to the conduct of the business
of the Company and its Subsidiaries taken as a whole and the loss thereof is not
disadvantageous in any material respect to the Bank; and (ii) maintain its
properties, equipment and facilities in good working order and repair and
conduct its business in an orderly manner without voluntary interruption unless,
in the judgment of management of the Company, such activities are no longer
desirable to the conduct of the Company's business and the discontinuance
thereof is not disadvantageous in any material respect to the Bank.
5.02 Insurance. The Company will, and will cause each of its Subsidiaries to,
maintain with responsible insurance carriers liability, property damage and
worker's compensation insurance coverage in such amounts and with such
deductibles and retentions as the management of the Company considers
reasonable.
5.03 Taxes and other Liabilities. The Company will, and will cause each of its
Subsidiaries to, pay and discharge, before the same become delinquent and before
penalties accrue thereon, all taxes, assessments and governmental charges upon
or against it or any of its properties, and all its other liabilities at any
time existing which, if unpaid, might by law become a Mortgage on a material
portion of its property, except to the extent that and so long as:
(a) the same are being contested in good faith and by appropriate
proceedings in such manner as not to cause any materially adverse effect upon
the financial condition of the Company and its Subsidiaries taken as a whole
or the loss of any material right of redemption from any sale thereunder; and
(b) it shall have set aside on its books reserves (segregated in
accordance with GAAP) deemed by it adequate with respect thereto.
5.04 Records. The Company will maintain, and cause each of its Subsidiaries to
maintain, a system of accounting in accordance with GAAP and permit
representatives of the Bank to have reasonable access to and to examine the
properties and publicly available information of the Company and its
Subsidiaries at all reasonable times, provided that the Bank shall keep
confidential any proprietary information of the Company or any Subsidiary
identified in writing by such entity or entities as being proprietary and
confidential; provided, however, that the Bank may disclose any such information
(i) to enable it to comply with the requirements of governmental bodies or legal
process, if the Company, after written notice to it (except in cases where
notice would be prohibited by law or by court order), has failed to obtain a
protective or similar order to prevent such disclosure or to preserve the
confidentiality of such information prior to the time that the Bank is advised
by its legal counsel that immediate disclosure is necessary to avoid liability
for failure to
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disclose, (ii) in connection with the defense of any litigation or other
proceeding brought against it arising out of the transactions contemplated by
this Agreement and related documents when such disclosure is necessary for such
defense, (iii) in connection with the enforcement of the rights and remedies of
the Bank under this Agreement when such disclosure is necessary for such
enforcement, (iv) to its auditors, legal advisors and bank examiners (provided
they agree to be bound by the provisions of this Section), (v) to its
subsidiaries and affiliates (provided they agree to be bound by the provisions
of this Section), and (vi) to assignees and participants, including prospective
assignees and participants, eligible as such under Section 8.10 hereof (provided
they agree to be bound by the provisions of this Section).
5.05 Reports by the Company. The Company will furnish the Bank:
(a) As soon as available, and in any event within forty-five (45) days
after the close of each of the first three quarters of each fiscal year of
the Company, commencing with the quarter next ending following the Effective
Date, a copy of its Quarterly Report on Form 10-Q for such quarter as filed
with the U.S. Securities and Exchange Commission.
(b) As soon as available, and in any event within one hundred twenty
(120) days after the close of each fiscal year of the Company ending
following the Effective Date (i) a balance sheet of the Company and its
consolidated Subsidiaries as of the end of such fiscal year and the related
income statement and statement of changes in cash flows of the Company and
its consolidated Subsidiaries for the fiscal year then ended, in reasonable
detail in accordance with GAAP and stating, when appropriate, in comparative
form the corresponding figures for the previous fiscal year, together with a
signed opinion of Deloitte & Touche (or other independent certified public
accountants reasonably satisfactory to the Bank) based on an audit using
generally accepted auditing standards, certifying that such financial
statements present fairly the financial position of the Company and its
consolidated Subsidiaries as of the end of such fiscal year and the results
of their consolidated operations for the fiscal year then ended, which
opinion shall not contain any material qualification or exception not
reasonably satisfactory to the Bank, and (ii) a certificate of such
accountants stating that in the course of their examination they became aware
of nothing of an accounting nature which would indicate the occurrence of an
Event of Default under this Agreement or the occurrence of any event which,
upon the lapse of time or the giving of notice, or both, would constitute an
Event of Default hereunder, or, if such is not the case, stating the facts
with respect thereto.
(c) As soon as possible, and in any event within forty-five (45) days
after the close of each of the first three quarters of each fiscal year of
the Company, and ninety (90) days after the close of each fiscal year of the
Company, commencing with the quarter next ending following the Effective
Date, a certificate of the Chief Financial Officer, Vice President-Finance,
Treasurer or Assistant Treasurer of the Company, any one acting alone,
stating that the Company has performed and
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observed each and every covenant contained in this Agreement to be performed
by it and that no event has occurred and no condition then exists which
constitutes an Event of Default hereunder or would constitute such an Event
of Default upon the lapse of time or upon the giving of notice or both, or,
if any such event has occurred or any such condition exists, specifying the
nature thereof and the action which the Company proposes to take with respect
thereto.
(d) Such other publicly available information of the Company as the Bank
may from time to time reasonably request, within a reasonable period of time
following such request.
(e) Within ten (10) Business Days after the same are known, written notice
of the following:
(1) Each Event of Default or event which, with the giving of notice or
lapse of time or both, would constitute an Event of Default under the
terms of this Agreement.
(2) Any other matter which has resulted or might result in a materially
adverse change in the financial condition or operations of the Company and
its Subsidiaries taken in the aggregate, including, without limitation,
copies of any detailed report or "management letter" submitted by
independent certified public accountants relating thereto.
(3) All events of default under any notes, debentures, other evidences
of indebtedness or preferred stock, or under any indenture, mortgage, deed
of trust or other agreement relating to any evidence of indebtedness
including, without limitation, any Other Bank Agreement, for which the
Company or any Subsidiary is liable, including the occurrence of any event
which upon the lapse of time or giving of notice or both would constitute
such a default, if such events or the exercise of any remedies arising
therefrom would have a material adverse effect upon the financial
condition or operations of the Company and its Subsidiaries taken as a
whole.
(4) The occurrence of any Reportable Event with respect to any Plan,
together with the statement of the Chief Financial Officer, Vice
President-Finance, Treasurer, or Assistant Treasurer of the Company
setting forth the details as to such Reportable Event and the action which
the Company proposes to take, if any, with respect thereto.
(5) Any material modification or amendment to or termination of any of
the Other Bank Agreements.
(6) If at any time the value of all "margin stock" (as defined in
Regulation U of the Board of Governors of the Federal Reserve System, as
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amended from time to time) owned by the Company and its subsidiaries
exceeds 25% of the value of the assets of the Company and its
subsidiaries, on a consolidated basis, as reasonably determined by the
Company.
ARTICLE VI. NEGATIVE COVENANTS
Unless the Bank otherwise consents in writing, the company agrees that so long
as any credit hereunder shall be available and until payment in full of the
Note, the Company will not do or permit any of its Subsidiaries to do any of the
following:
6.01 Liens and Encumbrances. Create, incur, assume or permit to exist any
mortgage affecting the assets of the Company or any Subsidiary except the
following (herein being collectively called "permitted encumbrance"):
(a) Encumbrances simultaneously created in favor of the Bank and the other
Banks, on a pari passu basis, to secure the indebtedness (up to a maximum
aggregate of $300,000,000) under this Agreement and the Other Bank
Agreements;
(b) Encumbrances existing as of the date hereof, and any and all
extensions, renewals or refinancings of any of the foregoing (provided that
such extensions, renewals or refinancings do not increase the outstanding
aggregate principal amount of indebtedness secured by such Encumbrances);
(c) Encumbrances upon any materials, supplies, tools, articles or other
things acquired or manufactured in connection with the performance of
contracts with the United States of America or any department or agency
thereof to secure partial progress or other payments or performance under
such contracts;
(d) Encumbrances against assets which (1) existed when such assets were
acquired by the Company or such Subsidiary or (2) owned by an entity which,
subsequent to the date hereof, becomes a Subsidiary, and such Encumbrance is
in existence at the time such entity becomes a Subsidiary (and which, in the
case of each of (1) and (2), (A) do not attach to assets other than those
encumbered at the time of such acquisition or transaction resulting in such
entity becoming a Subsidiary, and (B) were not created in contemplation of
such acquisition or transaction resulting in such entity becoming a
Subsidiary);
(e) Mechanic's, workmen's, materialmen's, landlord's, carrier's,
repairmen's, construction and other similar Encumbrances arising in the
ordinary course of business in respect of obligations not delinquent or which
are being contested in good faith;
(f) Encumbrances in connection with worker's compensation, unemployment
insurance or other social security obligations;
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(g) Encumbrances securing bids, tenders, contracts (other than contracts
for the payment of money), leases, statutory obligations, surety, appeal and
customs bonds and other obligations of like nature, and other Encumbrances
arising by operation of law in respect of the providing of goods or services,
arising in the ordinary course of business;
(h) Encumbrances on any property hereafter acquired by the Company or such
Subsidiary which are created contemporaneously with such acquisition to
secure or provide for the payment or financing of any part of the purchase
price thereof, provided:
(1) The obligation thereby secured consists primarily of the unpaid
balance of the purchase price of the property (including improvements
existing or to be constructed) being acquired by the Company or such
Subsidiary;
(2) The unpaid purchase price so secured does not exceed 90% of the
total purchase price of the property being acquired; and
(3) Any such encumbrance does not extend to, or otherwise affect or
apply to, property other than that being so acquired;
(i) Encumbrances on any property of a Subsidiary in favor of the Company
or any other Subsidiary which is wholly-owned (except for directors' or other
qualifying shares);
(j) Encumbrances for taxes, assessments or other governmental charges or
levies (i) which are not yet due, or (ii) which are due so long as the
Company or such Subsidiary is contesting the validity thereof in good faith
and by appropriate proceedings so as not to cause any materially adverse
effect upon the financial condition of the Company and its Subsidiaries taken
as a whole and has set aside on its books reserves (segregated in accordance
with GAAP) deemed by it adequate with respect thereto;
(k) Any right of set-off granted to any lending institution in connection
with that lending institution providing cash management services and/or other
financing to the Company and any of its Subsidiaries; and
(l) Any other Encumbrances; provided, however, that the aggregate claims
secured by such other Encumbrances (excluding those Encumbrances otherwise
permitted pursuant to this Section 6.01) shall not exceed 10% of
Stockholder's Equity.
6.02 Sales of Assets or Business. Other than sales or dispositions by a
Subsidiary to the Company or another Subsidiary or by the Company to a
Subsidiary, or sales in the
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ordinary course of business, the Company shall not sell, lease or otherwise
dispose of its assets, business or stock or other investment in any Subsidiary
having a value, in each case, in excess of $20,000,000 unless the Board of
Directors of the Company determines that the sale, lease or other disposition
thereof (a) is in the best interest of the Company and its Subsidiaries taken as
a whole, and (b) will not significantly adversely affect the Company's ability
to meet its financial obligations as they become due.
6.03 Liquidation, Dissolution, Consolidation or Merger. Liquidate, dissolve or
enter into any consolidation or merger unless:
(a) In the case of a consolidation or merger (1) involving the Company,
the Company will be the surviving corporation, and (2) involving a
Subsidiary, (i) a Subsidiary will be the surviving entity, or (ii) the fair
market value of the Company's investment in such Subsidiary is less than
$20,000,000, or (iii) the fair market value of the Company's investment in
such Subsidiary is $20,000,000 or greater and the Board of Directors of the
Company determines that the preservation thereof is no longer desirable to
the business of the Company and its Subsidiaries taken as a whole and that
the absence thereof will not significantly adversely affect the Company's
ability to meet its financial obligations as they become due; and
(b) After giving effect to any such merger or consolidation, there will
exist neither an Event of Default under this Agreement nor any event which,
upon the giving of notice of lapse of time or both would constitute such an
Event of Default.
6.04 Minimum Consolidated Net Worth. The Company will not permit its
consolidated net worth to be less than $1 billion at any time.
ARTICLE VII. EVENTS OF DEFAULT AND REMEDIES
The occurrence of any one or more of the following events described in
Sections 7.01 through 7.07 shall be deemed an Event of Default under this
Agreement (an "Event of Default"):
7.01 Failure to Pay Note; Breach of Certain Covenants. Failure to make any
payment of principal or interest on the Note, or any payment of any Facility
Fee or any other amount due under this Agreement, when due and payable as
required under this Agreement, whether at the end of the applicable interest
period, at maturity, or otherwise, and such failure shall have continued
unremedied for a period of three (3) days after written notice by Bank to the
Company, or the failure to observe or perform any term, covenant or agreement
of the Company contained in Sections 5.05(e)(1). 6.02. or 6.03; or
7.02 Breach of Remaining Covenants. The failure to observe or perform any
term, covenant or agreement of the Company contained in this Agreement (other
than those described in Section 7.01), and such failure shall have continued
unremedied for a period of thirty (30) days after written notice by the Bank to
the Company or beyond a reasonable
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period of time thereafter, if such Event of Default is not reasonably capable of
being cured within such thirty (30) day period and the Company is diligently
pursuing the cure thereof; or
7.03 Breach of Warranty. Any representation or warranty made by the Company
herein, or any statement or representation made in any certificate, report or
opinion delivered pursuant hereto, shall prove to have been incorrect in any
material respect when made; or
7.04 Other Obligations. The Company or any Subsidiary shall default (as
principal, guarantor or surety):
(a) in the payment of any principal of or premium, if any, or interest on
any indebtedness (other than its indebtedness hereunder and indebtedness
between the Company and any Subsidiary or between Subsidiaries) beyond the
applicable grace period, if any, (i) for borrowed money in an amount in
excess of an aggregate of $20,000,000 and/or (ii) representing the deferred
purchase price of property with an outstanding deferred aggregate liability
in excess of $20,000,000; or
(b) with respect to the performance or observance of any term of any
instrument pursuant to which any indebtedness described in Section 7.04(a)
was created or any mortgage, indenture or other agreement relating thereto if
the effect of such default (after giving effect to any applicable grace
period) is to cause or permit such indebtedness exceeding an aggregate of
$20,000,000 to become due and payable prior to its stated maturity; or
7.05 Insolvency; Receiver.
(a) if the Company makes an assignment for the benefit of creditors, files
a petition in bankruptcy, is adjudicated or held to be insolvent or bankrupt,
petitions or applies to any tribunal for any receiver or any trustee for the
Company or any substantial part of the Company's property, commences any
proceeding relating to the Company under any reorganization, arrangement,
readjustment of debt or similar law or statute of any jurisdiction, whether
now or hereafter in effect, or if there is commenced against the Company any
such proceeding which remains undismissed, unstayed (or, if stayed, such stay
shall have been set aside) or unvacated for a period of 60 days, or the
Company by any act indicates its consent to, approval of or acquiescence in
any such proceeding or the appointment of any receiver or of any trustee for
the Company or any substantial part of the Company's property, or suffers any
such receivership or trusteeship to continue undischarged, unstayed (or, if
stayed, such stay shall have been set aside) or unvacated for a period of 60
days; or
(b) if any of the foregoing events described in this Section 7.05(a)
occurs with respect to a Subsidiary instead of the Company and such event
will have a
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material adverse effect on the ability of the Company to meet its financial
obligations as they become due; or
7.06 Judgments; Attachments.
(a) The Company or any Subsidiary shall suffer the entry against it of a
final judgment or decree for any amount in excess of $20,000,000 (not
adequately covered by insurance or reserves as determined by the Bank in its
reasonable discretion) unless, within 30 days after the entry thereof, the
same is satisfied or discharged or an appeal or appropriate proceeding for
review thereof is taken and a stay of execution pending such appeal is
obtained; or
(b) The Company or any Subsidiary shall suffer one or more writs or
warrants of attachment to be issued by any court against any of its property
exceeding in the aggregate $20,000,000 in value, and such writs or warrants
of attachment are not satisfied, stayed or released within thirty (30) days
after the entry or levy thereof or after any stay is vacated or set aside; or
7.07 ERISA. Any Reportable Event which the Bank shall determine in good faith
constitutes grounds for the termination of any Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer any Plan shall have occurred and be continuing for 30 days after
written notice shall have been given by the Bank to the Company; or any Plan
shall be terminated without another Plan being available to replace or
substitute for the terminated Plan; or a trustee shall be appointed by an
appropriate United States District Court to administer any Plan; or the PBGC
shall institute proceedings to terminate any Plan or to appoint a trustee to
administer any Plan; and in any situation described above the aggregate amount
of the excess of the current value of the Plan's benefits guaranteed under Title
IV of ERISA over the current value of the Plan's assets allocable to such
benefits under Section 4044 of ERISA shall exceed $20,000,000.
7.08 Remedies. If any one or more of the Events of Default described in
Sections 7.01 through 7.07 above shall occur and be continuing, then the Bank,
by notice to the Company, may take either or both of the following actions: (i)
declare the obligation of the Bank to make Advances to the Company hereunder to
be terminated whereupon the same shall forthwith terminate, and/or (ii) declare
the entire unpaid principal amount of the Note, all interest accrued and unpaid
thereon, all accrued Facility Fees and all other amounts due and payable by the
Company under this Agreement to be forthwith due and payable, whereupon the
Note, all such accrued and unpaid interest, accrued Facility Fees and all such
other amounts due and payable by the Company shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Company; provided, however, that
if an Event of Default described in Section 7.05(a) shall occur, then the
actions described in this Section 7.08(i) and (ii) shall occur automatically,
without any notice to the Company or declaration by the Bank.
25
<PAGE>
ARTICLE VIII. MISCELLANEOUS
8.01 Survival of Warranties. All agreements, representations and warranties
made herein or made in writing in connection herewith shall survive the
execution and delivery of this Agreement, the making of the Advances hereunder
and the execution and delivery of the Note.
8.02 Failure or Indulgence Not Waiver. No failure or delay on the part of the
Bank, or any holder of the Note in the exercise of any power, right or privilege
hereunder or under the Note shall operate as a waiver thereof, and no single or
partial exercise of any such power, right or privilege shall preclude other or
further exercise thereof or of any other right, power or privilege. All rights
and remedies existing under this Agreement and the Note are cumulative to, and
not exclusive of, any rights or remedies otherwise available.
8.03 Notices. Any notice herein required or permitted to be given shall be in
writing, and may be sent by telex, facsimile, personal delivery or mail and, in
each case, shall be deemed to have been given when received by the party to
which such notice was addressed. Notices shall be sent to the addresses which
are set out in the signature pages hereof (until notice of change thereof is
served in the manner provided in this Section 8.03).
8.04 Applicable Law. This Agreement, the Note, all documents provided for
herein and the rights and obligations of the parties hereto shall be governed by
and construed in accordance with the laws of the State of Texas, United States
of America. The foregoing provision is not intended to limit the rate of
interest payable with respect to the Bank to the maximum rate permitted by the
laws of the State of Texas, United States of America if a higher rate is
permitted with respect to the Bank by supervening provisions of United States
federal law.
8.05 Interest Limitation. It is the intention of the Company and the Bank to
conform strictly to the usury laws as set forth in Section 8.04 hereof.
Accordingly, if the transactions contemplated hereby would be usurious under
such laws or any other applicable laws, then, in that event, notwithstanding
anything to the contrary in the Note, or this Agreement, it is agreed as
follows: (i) the aggregate of all consideration which constitutes interest that
is contracted for, taken, reserved, charged or received under the Note, or this
Agreement, or otherwise in connection with any Advance, shall under no
circumstances exceed the maximum amount allowed by such laws, and any excess
shall be credited by the Bank on the principal amount of such Advance (or, if
the principal amount of such Advance shall have been paid in full, refunded to
the Company); and (ii) in the event that the maturity of any Advance is
accelerated or in the event of any required or permitted prepayment, then such
consideration that constitutes interest may never include more than the maximum
amount allowed by such laws, and excess interest, if any, provided for in this
Agreement or otherwise shall be canceled automatically as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited by the
Bank on the principal amount of such Advance (or, if the principal amount of
such Advance shall have been paid in full, refunded by the Bank to the Company).
26
<PAGE>
8.06 Assignability. Subject to Section 8.10 hereof, this Agreement shall
be binding upon and inure to the benefit of the Company and the Bank and their
respective successors and permitted assigns, except that the Company may not
assign or transfer its rights hereunder without the prior written consent of the
Bank, which will not be unreasonably withheld.
8.07 Computation of Interest Rates and Fees; Time of Payment. All computations
of interest and fees shall be made on the basis of a year of 360 days for the
actual number of days elapsed (including the first day but excluding the last
day) (which results in greater interest than if a year of 365 days is used). The
Company shall make each payment of principal of, and interest on, the Advances
made to it and of the fees due hereunder by it not later than 11:00 a m. (in the
time of the city in which the Bank has its principal office) on the date when
due.
8.08 Expenses; Indemnity by the Company. The Company agrees to pay and hold
the Bank harmless against liability for the payment of all reasonable
attorneys' fees (including, without limitation, the allocated costs of in-house
counsel) and court costs incurred by the Bank arising in connection with the
enforcement against the Company of this Agreement, the Note, and the other
instruments and documents to be delivered by the Company hereunder.
8.09 Modifications and Amendments. This Agreement and the Note may only be
modified or amended by a written agreement duly executed by the Company and the
Bank.
8.10 Restriction on Transfers.
(a) The Bank may, without the consent of the Company, sell participations
to one or more Banks or other entities (including, without limitation, the
Other Banks) in all or a portion of its rights and obligations under this
Agreement (including, without limitation, the Bank's commitment), the advances
then owing to the Bank and the Note; provided, however, that (1) such sales
are made in compliance with all applicable United States federal and state
securities laws, (2) the Bank's obligations under this Agreement shall remain
unchanged, (3) the Bank shall remain solely responsible and liable to the
Company for the performance of such obligations, (4) the participating Banks
or other entities shall be entitled to the cost protection provisions
contained in Sections 2.05. 2.06. and 3.03 hereof, but only to the extent that
such protection would have been available to the Bank, calculated as if no
such participation had been sold, (5) the Company shall continue to deal
solely and directly with the Bank in connection with the Bank's rights and
obligations under this Agreement, and (6) the Bank shall retain the sole right
and responsibility to enforce the obligations of the Company relating to this
Agreement, the Advances and the Note, including, without limitation, the right
to approve any Amendment, Modification or Waiver of any provision hereof or
thereof.
27
<PAGE>
(b) The Bank may, with the prior written consent of the Company (which
consent shall not be unreasonably withheld in the case of a proposed
assignment by the Bank to one of its subsidiaries or affiliates) (which
consent may be withheld in the sole discretion of the Company in the case of
any other proposed assignment by the Bank), assign to one or more banks or
other institutions (including, without limitation, the Other Banks and
subsidiaries and/or affiliates of the Bank) all or a portion of the Bank's
Commitment and its other rights and obligations under this Agreement and the
same portion of the then outstanding Advances and Note; provided, however,
that (1) each such assignment shall be of a constant, and not a varying,
percentage of the Bank's Commitment and its other rights and obligations under
this Agreement, and the then outstanding Advances and the Note, and (2) the
parties to each such assignment shall execute and deliver to the Company an
assignment and assumption agreement in form and substance satisfactory to the
Company. Upon such execution and delivery, from and after the effective date
specified in such assignment and assumption agreement, the assignee shall be a
party hereto and, to the extent provided in such assignment and assumption
agreement, shall have the rights and obligations of the Bank under this
Agreement and the Bank shall, to the extent provided in such assignment and
assumption agreement, be released from its obligations under this Agreement.
(c) The Bank may, without the consent of the Company, assign to a Federal
Reserve Bank all or a portion of the Bank's rights and obligations under this
Agreement, the then outstanding Advances and the Note; provided, however, that
the Bank's obligations under this Agreement shall remain unchanged and the
Bank shall remain solely responsible to the Company for performance of such
obligations.
8.11 Table of Contents; Headings. The Table of Contents and the section
headings used in this Agreement are for convenience only and shall not affect
the construction of this Agreement.
8.12 Articles; Sections. References herein to "Article(s)" and "Section(s)"
mean the respective Article(s) and Section(s) of this Agreement.
8.13 Counterparts. This Agreement may be separately executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to constitute one and the same Agreement.
8.14 Survival of Agreements. All of the agreements of the Company in this
Agreement shall survive the Company's repayment of all Advances made by the Bank
pursuant hereto.
8.15 Severability. If any term or provision of this Agreement and the Note
shall be determined to be illegal or unenforceable, all other terms and
provisions of such documents shall nevertheless remain effective and shall be
enforced to the fullest extent permitted by applicable law.
28
<PAGE>
8.16 Confidentiality. The Bank agrees to take normal and reasonable
precautions and exercise due care to maintain the confidentiality of all non-
public information provided to it by the Company in connection with this
Agreement and agrees and undertakes that neither the Bank nor any of its
affiliates shall use any such information for any purpose or in any manner other
than pursuant to the terms contemplated by this Agreement. The Bank may disclose
such information (a) at the request of any bank regulatory authority or in
connection with an examination of the Bank by any such authority; (b) to Bank's
independent auditors, counsel and other professional advisors; or (c) pursuant
to subpoena or other court process or when required to do so in accordance with
the provisions of any applicable law or at the express direction of any agency
of any State of the United States of America or of any other jurisdiction in
which the Bank conducts its business, if the Company, after written notice to it
(except in cases where notice would be prohibited by law or court order), has
failed to obtain a protective or similar order to prevent such disclosure or to
preserve the confidentiality of such information prior to the time that the
Bank is advised by its legal counsel that immediate disclosure is necessary to
avoid liability for failure to disclose. Notwithstanding the foregoing, the
Company authorizes the Bank to disclose to any participant, assignee,
prospective participant, prospective assignee or the Bank's U.S. investment
banking affiliates, such financial and other information in Bank's possession
concerning the Company or its Subsidiaries which has been delivered to the
Bank; provided, however, that such participant, assignee, prospective
participant, prospective assignee or the Bank's U.S. investment banking
affiliates, as the case may be, agrees in writing to the Bank to keep such
information confidential to the same extent required of the Bank hereunder.
8.17 Consequential Damages. Notwithstanding anything herein to the contrary,
neither party shall have any liability for any consequential, indirect,
punitive, exemplary or special damages, including without limitation, loss of
business, opportunities, revenue, profit or anticipated profit.
8.18 Replacement of Prior Agreements. This Agreement and the Note hereby
replace (i) that certain Credit Agreement (the "Prior Credit Agreement") dated
on or about September 1, 1993 by and between the Bank and the Company, and (ii)
the Note described in and executed in connection with the Prior Credit Agreement
(all of such documents with the Prior Credit Agreement being collectively
referred to as the "Prior Credit Documents"); and the Prior Credit Documents are
hereby canceled, terminated, and of no further force or effect. The Bank and the
Company shall have no further obligations or liabilities under the Prior Credit
Documents.
8.19 Final Agreement.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS,
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
29
<PAGE>
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the Company and the Bank have caused this Agreement to be
duly executed as of the day and year first above written.
COMPANY:
BAKER HUGHES INCORPORATED,
a Delaware corporation
By:
Eric L. Mattson
Vice President and Chief
Financial Officer
Address for Notices:
BAKER HUGHES INCORPORATED
3900 Essex Lane, Suite 1200
Houston, Texas 77027
Attention: Treasurer and
Assistant Treasurer
Telex: 857656 (BHI HOU)
Facsimile: 713/439-8699
Telephone: 713/439-8600
30
<PAGE>
BANK:
By:
Name:
Title:
Addresses for Notices:
Telex:
Facsimile:
Telephone:
Bank's Domestic Lending Office:
Bank's Eurodollar Lending Office:
31
<PAGE>
EXHIBIT A
FORM OF COMPANY NOTE
September 1, 1994
For value received, BAKER HUGHES INCORPORATED, a Delaware corporation (the
"Company") promises to pay to the order of
(the "Bank"), for the account of its applicable lending office, at the principal
office of the Bank at , the principal amount of each Advance
made by the Bank to the Company pursuant to Section 3.01 of the Credit Agreement
hereinafter referred to on the last day of the Interest Period for such Advance.
In any event, the aggregate unpaid principal amount of each Advance shall be due
and payable on the Termination Date.
The Company also promises to pay interest on the unpaid principal amount of
each such Advance from the date of such Advance until such principal amount is
paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement; provided, however, that any amount of such
principal and, to the extent permitted by law, any interest thereon which is not
paid when due (whether at stated maturity, by acceleration or otherwise) shall
bear interest from the date on which such amount is due until such amount is
paid in full, payable on demand, at the Default Rate.
Loans and payments under this note shall be recorded and endorsed hereon by
the holder hereof, provided, however, that the failure by the holder hereof to
make such recordation and endorsement shall not limit or otherwise affect the
obligation of the Company hereunder and payments of principal and interest
hereof by the Company shall not be affected by the failure to make any such
recordation and endorsement thereof hereon.
Principal and interest shall be payable in Dollars in immediately available
funds.
This note is the Note referred to in, is issued in connection with, and is
entitled to the benefits of, that certain Credit Agreement dated as of September
1, 1994, between the Company and the Bank, to which Credit Agreement reference
is hereby made for a statement of the terms and provisions under which this note
is issued. Capitalized terms used herein shall have the respective meanings set
forth in the Credit Agreement. This note shall be governed by and construed in
accordance with the laws of the State of Texas, United States of America. Except
for notice required to be given to the Company under the Credit Agreement, the
Company hereby waives presentment, demand, protest, or notice in connection with
this Note.
THIS WRITTEN LOAN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
BAKER HUGHES INCORPORATED
By:
Name:
Title:
A-1
<PAGE>
TRANSACTIONS ON WITHIN NOTE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Amount Amount Unpaid Notation
of Maturity Interest of Principal Made
Date Advance Date Rate Payment Balance By
- ---- ------- ---- ---- ------- ------- --
</TABLE>
A-2
<PAGE>
EXHIBIT B
ABN AMRO Bank N.V.
Bank of America National Trust and Savings Association
Bank of Scotland
Banque Nationale de Paris, Houston Agency
Bayerische Vereinsbank AG, Los Angeles Agency
Chase Manhattan Bank, N.A.
Citibank, N.A.
Dresdner Bank AG, New York Branch
Morgan Guaranty Trust Company of New York
NationsBank of Texas, N.A.
Northern Trust Company
PNC Bank, National Association
Royal Bank of Canada
Texas Commerce Bank National Association
The Mitsubishi Bank, Ltd.
The Sumitomo Bank, Ltd.
Toronto Dominion (Texas), Inc.
Union Bank of Switzerland
B-1
<PAGE>
EXHIBIT C
COMPANY REQUEST FOR ADVANCE
[Date]
[Name and address of Bank]
Gentlemen:
Baker Hughes Incorporated (the "Company") refers to the Credit Agreement,
dated September 1, 1994 (the "Credit Agreement") (the terms defined therein
being used herein as therein defined), by and between the Company and you. The
Company hereby gives you notice pursuant to Section 3.01 of the Credit Agreement
that the Company hereby requests an Advance under the Credit Agreement, and in
that connection sets forth the terms on which such proposed Advance is
requested to be made.
The principal amount of the proposed Advance is $ ; the drawdown date of the
proposed Advance is , 19 ; the proposed Advance is to be a [Eurodollar Advance]
or [Reference Rate Advance]; the term of the Interest Period for such proposed
Advance is months; the maturity date for payment of the principal amount of the
proposed Advance is , 19 ; the interest payment date[s] of the proposed Advance
is/are ; and the other terms applicable to the
proposed Advance are .
In accordance with Section 3.01 of the Credit Agreement, please advise the
Company of the [Eurodollar Rate] or [Reference Rate].
Sincerely,
BAKER HUGHES INCORPORATED
By:
Name:
Title:
C-1
<PAGE>
EXHIBIT D
FORM OF OPINION OF COMPANY COUNSEL
, 1994
Dear Sirs:
I am the duly elected of Baker Hughes Incorporated,
a Delaware corporation (the "Company"), and have acted as counsel to the Company
in connection with the preparation and execution of that certain Credit
Agreement (the "Credit Agreement") dated as of September 1, 1994, by and between
the Company and ("Bank"). Terms used herein which are
defined in the Credit Agreement have the respective meanings ascribed to such
terms in the Credit Agreement, unless the context otherwise indicates.
In that connection, I have examined the Note and the Credit Agreement which
have been executed by the Company, but not by the Bank (herein being
collectively referred to as the "Examined Documents"). I have also examined the
originals or photostatic copies, certified or otherwise identified to my
satisfaction, of the Certificate of Incorporation and Bylaws of the Company,
each as amended to date, corporate records of the Company, certificates of
public officials, and certificates of representatives of the Company, and such
other documents as I have deemed necessary or appropriate for the purposes of
this opinion.
Based upon the foregoing, subject to the qualifications, limitations,
exceptions and assumptions hereinafter set forth, and having due regard for such
legal considerations as I deem relevant, I am of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware and has all necessary
corporate power and authority to own its properties and carry on its business
as now conducted and is duly qualified and in good standing in each United
States jurisdiction which requires qualification, except those jurisdictions,
if any, in which the failure to so qualify would not have a material adverse
affect on the business, properties or financial condition of the Company and
its Subsidiaries taken as a whole.
D-1
<PAGE>
, 1994
Page 2
2. The Company has all necessary corporate power and authority to enter
into and perform the Credit Agreement and to issue and deliver the Note, as
provided in the Credit Agreement. The execution, delivery and performance of
the Credit Agreement and the Note have been authorized by all necessary
corporate action on the part of the Company.
3. The Credit Agreement is, and the Note when duly executed and delivered
for value received will be, the valid and legally binding obligations of the
Company enforceable in accordance with their terms, except as such
enforceability may be (i) limited by the effect of any applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other
similar laws from time to time in effect and judicial decisions relating to
or affecting the enforcement of creditors' rights and debtor's obligations
generally, or (ii) subject to the effect of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
4. The execution, delivery and performance of the Credit Agreement and the
Note by the Company do not require the consent or approval of any United
States governmental body or other regulatory authority and are not in
contravention of or in conflict with any law or regulation applicable to the
Company or any term or provision of the Certificate of Incorporation or
Bylaws of the Company.
5. The execution, delivery and performance of the Credit Agreement and the
Note, to the best of my knowledge, are not in contravention of or in conflict
with any agreement or indenture which is material to the Company and its
Subsidiaries, taken as a whole, and to which the Company is a party or by
which any of its property is bound, and do not cause any Mortgage upon any
such property to be created or imposed or to mature except as may be
permitted by the terms of the Credit Agreement.
6. To my knowledge, there is no pending or threatened litigation before
any court, administrative agency or arbitration panel to which the Company
is a party, which, in view of the facts currently available to me, is
expected to have a material adverse effect on the financial condition or
operations of the Company and its Subsidiaries, taken as a whole. To my
knowledge, the Company is not in default with respect to any material order,
writ, injunction or decree of any court or other governmental or regulatory
authority which is expected to have a material adverse effect on the
financial condition or operations of the Company and its Subsidiaries, taken
as a whole.
The opinions expressed herein are subject to the following qualifications,
limitations, exceptions and assumptions:
D-2
<PAGE>
, 1994
Page 3
(A) In rendering the opinions expressed in Paragraph 1, above, I have
relied in part on certificates or telegrams of recent date of public
officials of the State of Delaware. Such opinions are limited to the date of
the relevant certificates or telegrams.
(B) The opinions expressed in Paragraph 5 hereof are limited to the
agreements, indentures and instruments filed by the Company with the U.S.
Securities and Exchange Commission ("SEC') as material agreements pursuant to
the rules and regulations of the SEC as a part of its annual report on Form
10-K for the year ending September 30, 1993, and those filed by the Company
with the SEC subsequent to September 30, 1993.
(C) I have assumed, without independent investigation, that the Bank will
duly execute and deliver to the Company each of the Examined Documents to
which it is a party, with all necessary power and authority (corporate and
otherwise) and that (i) if the Company or the Bank exercise any rights or
enforce any remedies, it will do so in good faith and in a commercially
reasonable manner and will abide by any implied covenant of good faith and
fair dealing which may be imposed by law, and (ii) the Bank will comply with
any applicable state or federal securities laws.
(D) As to matters of fact relevant to this opinion, I have, to the extent
I have deemed appropriate, relied upon (i) certificates and other
representations of officers and representatives of the Company and its
Subsidiaries who have made investigations outside of my personal control, and
(ii) certificates and telegrams of governmental officials.
(E) In my examination of the documents referred to above, I have assumed
(i) all documents submitted to me as originals are authentic and complete,
(ii) all documents submitted to me as certified or photostatic copies conform
to the original document, and such original document is authentic and
complete, (iii) that signatures on all documents are genuine, (iv) all
statements of fact contained in the Examined Documents and all other
documents, certificates, and records that I have examined are true, accurate,
and correct, and all statements of fact made to me by officers and
representatives of the Company and its Subsidiaries are true and correct, and
(v) there has been no material change in the facts set forth in the Examined
Documents, or such other documents, certificates, and records that I have
examined or representations made to me, prior to the date hereof. I have no
knowledge that any such documents, certificates, and records were not
authentic and complete, or that any of such statements are not true and
correct as of the date hereof.
(F) I have assumed there has been no cancellation or withdrawal of any of
the organizational documents of the Company, and that no act or event has
occurred which would, pursuant to the terms of such organizational documents
or other applicable law, permit or require the dissolution of the Company,
and I have no
D-3
<PAGE>
, 1994
Page 4
knowledge of any such cancellation, withdrawal, act or event. I have further
assumed due authorization for execution, delivery, and performance of such
organizational documents by each party by whom such authorization is
required, and that none of the signatories to such organizational documents
was operating under any legal disability under the laws of the state of
residence or incorporation of such party.
(G) I express no opinion as to the availability or enforceability of the
following provisions and remedies set forth in the Examined Documents: (i)
equitable remedies, including specific performance, or any other remedy set
forth in the Examined Documents; (ii) provisions relating to waivers by any
of the parties or precluding any of the parties from asserting certain claims
or defenses or from obtaining certain rights and remedies, or which purport
to waive any applicable statute of limitations, or rights to any stay or
extension laws, or which purport to establish evidentiary standards; (iii)
provisions expressly or by implication waiving broadly or vaguely stated
rights, unknown future rights, or defenses to obligations or rights granted
by law; (iv) provisions relating to subrogation rights, delay or omission or
enforcement of rights or remedies, severability, injunctions, appointment of
receivers, waivers or ratifications of future acts, the rights of third
parties, prohibitions against the sale, transfer, or assignment of any
property or interest, marshalling of assets, set-offs, or sale in the inverse
order of alienation; (v) provisions at variance with public laws which do not
affect the practical benefits of the Examined Documents; (vi) provisions
covenanting to take actions, the taking of which are discretionary with or
subject to the approval of a third party or which are otherwise subject to a
contingency, the fulfillment of which is not within the control of the
parties so covenanting; (vii) provisions purporting to apply subsequently
enacted laws; (viii) provisions to the effect that rights or remedies may be
exercised without notice, that rights or remedies are not exclusive, that
every right or remedy is cumulative and may be exercised in addition to or
with any other right or remedy, or that the election of a particular remedy
or remedies does not preclude recourse to one or more other remedies, or that
the failure to exercise or delay in exercising rights or remedies will not
operate as a waiver of such right or remedy; and (ix) limitations on
enforceability posed by public policy consideration or court decisions which
may limit the right to obtain indemnification under certain circumstances.
Enforcement of obligations under the Examined Documents may also be limited
by constitutional limitations (including notice and due process
requirements), by the redemption rights of the United States under the
Federal Tax Lien Act of 1966, as amended, and requirements that the Bank
exercise rights under the Examined Documents in a commercially reasonable
manner.
(H) The opinions expressed herein relate solely to, are based solely upon,
and are limited exclusively to the laws of the State of Texas, the General
Corporation Law of the State of Delaware, and the laws of the United States
of America, to the extent applicable and as currently in effect. I assume no,
and hereby specifically disclaim any, obligation to supplement this opinion
if any applicable laws change
D-4
<PAGE>
, 1994
Page 5
after the date of this opinion, of if I become aware of any facts that might
change the opinions expressed above after the date of this opinion.
(I) The opinions set forth herein are limited to the specific matters
addressed hereby, and no opinion is to be implied or may be inferred beyond
the matters specifically addressed.
(J) This letter is provided to you as a legal opinion only and not as a
guaranty or warranty of the matters discussed herein, nor does this letter
constitute a guarantee of any of the obligations set forth in the Examined
Documents. By rendering this opinion, I am not guaranteeing or insuring the
obligations set forth in the Examined Documents, or other matters referred to
herein or opined upon herein.
This opinion is furnished to you solely for your benefit pursuant to the
Credit Agreement. This letter and the opinions expressed herein may not be used
or relied upon by you for any other purpose and may not be relied upon for any
purpose by any other person or entity without my prior written consent. Except
for the use permitted herein, this letter is not to be quoted or reproduced in
whole or in part or otherwise referred to in any manner, nor is it to be filed
with any governmental agency or delivered to any other person or entity without
my prior written consent.
Very truly yours,
D-5
<PAGE>
Exhibit 13
Condensed Comparative Consolidated Financial Information
Baker Hughes Incorporated
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Total revenues $2,504,758 $2,701,697 $2,538,515 $2,828,357 $2,614,257
-------------------------------------------------------------------
Costs and expenses:
Costs and expenses applicable to revenues 2,082,745 2,262,545 2,132,928 2,283,064 2,138,481
General and administrative 214,788 238,238 232,407 249,833 232,303
Unusual charges - net 31,829 42,000 79,190 62,946 66,846
Operating income of business sold (10,488)
-------------------------------------------------------------------
Total 2,318,874 2,542,783 2,444,525 2,595,843 2,437,630
-------------------------------------------------------------------
Operating income 185,884 158,914 93,990 232,514 176,627
Gain on sale of Pumpsystems 101,000
Gain on sale of subsidiary stock 56,103 65,721
Interest expense (63,835) (64,703) (68,112) (83,561) (77,465)
Interest income 3,067 5,840 6,078 7,295 15,132
-------------------------------------------------------------------
Income before income taxes, extraordinary
loss and cumulative effect of accounting changes 226,116 100,051 31,956 212,351 180,015
Income taxes (94,974) (41,195) (26,925) (38,893) (37,838)
-------------------------------------------------------------------
Income before extraordinary loss and
cumulative effect of accounting changes 131,142 58,856 5,031 173,458 142,177
Extraordinary loss (44,320)
Cumulative effect of accounting changes (44,165)
-------------------------------------------------------------------
Net income $ 42,657 $ 58,856 $ 5,031 $ 173,458 $ 142,177
===================================================================
Per share of common stock:
Income before extraordinary loss
and cumulative effect of accounting changes $.85 $.34 $.00 $1.26 $ 1.06
-------------------------------------------------------------------
Net income .22 .34 .00 1.26 1.06
-------------------------------------------------------------------
Dividends .46 .46 .46 .46 .46
-------------------------------------------------------------------
Financial position:
Cash and cash equivalents $ 69,179 $ 6,992 $ 6,692 $ 51,709 $ 124,585
Working capital 855,421 920,969 715,472 652,404 676,383
Total assets 2,999,682 3,143,340 3,212,938 2,905,602 2,783,944
Long-term debt 637,972 935,846 812,465 545,242 611,501
Stockholders' equity 1,638,472 1,610,648 1,645,522 1,545,361 1,424,285
</TABLE>
See Note 1 of Notes to Consolidated Financial Statements for a discussion of
the adoption of new accounting standards in 1994.
In addition to the significant acquisitions and dispositions discussed in
Note 2 of Notes to Consolidated Financial Statements, the Company acquired
ChemLink Group, Inc. in 1991, Eastman Christensen Company and the Instrument
Group in 1990. The Company also sold 71% of BJ Services Company ("BJ") in 1990
and the TOTCO division of Exlog, Inc. and the remaining 29% of BJ in 1991.
See Note 3 of Notes to Consolidated Financial Statements for a description of
the unusual charges - net in 1994, 1993 and 1992. The unusual charges-net in
1991 consisted primarily of the restructuring of Hughes Christensen Company and
litigation and insurance claims offset by the gain on the disposition of TOTCO.
The unusual charges-net in 1990 consisted primarily of litigation and product
liability claims and geographic and product line restructurings.
See Note 4 of Notes to Consolidated Financial Statements for a description of
the extraordinary loss in 1994.
1
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Baker Hughes Incorporated
Business Environment
Oilfield Operations companies manufacture, sell and provide services used in
the drilling, completion and maintenance of oil and gas wells. The business
environment of the Company is significantly affected by worldwide expenditures
of the petroleum industry. Important factors establishing the levels of these
expenditures include world economic conditions, crude oil and natural gas supply
and demand balances, the legislative environment in the United States and other
major countries and developments in the Middle East and other major petroleum
producing regions.
Activity Indicators
Crude oil and natural gas prices are a major determinant of exploration and
development expenditures. (The amounts in the table below are annual averages.)
<TABLE>
<CAPTION>
Fiscal Year 1994 1993 1992
- ----------------------------------------------------
<S> <C> <C> <C>
WTI ($/Bbl) 16.87 19.49 20.88
U.S. Spot Natural Gas ($/mcf) 1.88 2.04 1.53
</TABLE>
Oil prices weakened in 1994 and 1993 falling $2.62/Bbl or 13.4% and $1.39/Bbl
or 6.7%, respectively. The Company expects prices to trend upwards in 1995 and
1996 while remaining susceptable to short-term price fluctuations. U.S. natural
gas prices weakened in 1994, decreasing 7.8%. Prices in 1993 were up 33.3% from
1992 prices. Prices are expected to be soft in 1995 and strengthen in 1996 with
demand for natural gas expected to grow 2% to 3% per year. The Company believes
that higher natural gas prices and a tightening market would stimulate
exploration and development drilling directed towards natural gas.
A more direct indicator of expenditures and drilling activity is the Baker
Hughes rotary rig count. Workover activity, as measured by the U.S. workover rig
count, is also an indicator of expenditure activity. (The amounts in the
following table are annual averages.)
<TABLE>
<CAPTION>
Fiscal Year 1994 1993 1992
- ----------------------------------------------
<S> <C> <C> <C>
North American 1,030 918 788
Non-North American 747 781 885
-------------------
Total Rig Count 1,777 1,699 1,673
===================
U.S. Workover Rig Count 1,336 1,379 1,260
===================
</TABLE>
North American Activity
The North American rig count was up 12.2% from 1993 and 1993 was up 16.5% from
1992. Activity increases in the Gulf of Mexico drove an increase in the average
offshore rig count from 71 to 101 rigs - up 42.3% from 1993 and from 51 to 71
rigs - up 39.2% from 1992. The Company benefits from offshore drilling, more so
than land drilling, as this type of activity requires the premium products and
services offered by the Company. The Canadian operations were also favorably
impacted by the increase in natural gas drilling as Canadian rig activity was up
53.5% and 82.8% in 1994 and 1993, respectively. U.S. workover activity was down
3.1% from 1993 levels and 1993 activity was up 9.4% from 1992.
The Company is cautiously optimistic that drilling activity will remain strong
in North America in 1995. The Company anticipates that reduced gas prices and
high pipeline utilization will take the edge off Canada's drilling boom. In the
U.S., the Company is expecting a modest decrease in gas-directed drilling to be
offset by a modest increase in oil-directed drilling. The average U.S. workover
rig count is expected to remain flat over the next year.
Non-North American Activity
Outside North America, activity continued to fall. The average rig count was
down 4.4% from 1993 and 1993 was 11.8% lower than 1992. The fall was widespread
throughout the Eastern Hemisphere as most regions showed a decrease in activity.
The 1994 decline was offset somewhat by Latin America activity which was up
9.0%. Two areas of particular importance to the Company that were down
significantly were Italy and Nigeria where political and social issues affected
drilling activity. The Company expects little change in activity in the Eastern
Hemisphere over the near term as political issues and volatility in crude oil
prices will continue to create uncertainty. In Latin America, the Company
expects to see continued growth in drilling activity in 1995 led by Venezuela,
Argentina and Colombia.
2
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Baker Hughes Incorporated
Acquisitions and Dispositions
1994
The Company sold the EnviroTech Pumpsystems ("Pumpsystems") group of companies
and the EnviroTech Measurements & Controls ("EM&C") group of companies in
September and March 1994, respectively. The decision to divest Pumpsystems and
EM&C was part of a continuing review of the Company's core product and service
competencies. The Pumpsystems sale provided approximately $210.0 million in
proceeds and resulted in a gain of $101.0 million while the EM&C sale provided
$134.0 million in proceeds and resulted in a gain of $8.6 million.
1992
In October 1991, the Company sold the Eastern Hemisphere operations of its
Baker Hughes Tubular Services ("BHTS") subsidiary to Tuboscope Corporation, now
known as Tuboscope Vetco International Corporation, for total consideration of
$75.7 million. In September 1992, the Company sold the Western Hemisphere
operations of BHTS to ICO, Inc. for total consideration of $11.3 million.
In April 1992, the Company acquired Teleco Oilfield Services Inc. ("Teleco")
from Sonat Inc. for $349.4 million. Teleco is a leading provider of both
directional and formation evaluation measurement-while-drilling services.
In August 1992, the Company purchased from Borg-Warner Corporation ("B-W") a
subsidiary of B-W, whose only asset was 8.3 million shares of the Company's
common stock. Total consideration paid to B-W was $168.8 million. All of the
funds for the purchase were raised through a public offering by the Company of
7.6 million shares of its common stock at a price of $22.25 per share. Net
proceeds from the offering were $168.9 million. The Company does not intend to
reissue any of the shares purchased in this transaction and accordingly, the 8.3
million shares have been treated as having been constructively retired for
financial reporting purposes.
Results of Operations
The following table summarizes the impact of the 1994 dispositions mentioned
above on consolidated revenues.
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated Revenues:
Sales $1,727.7 $1,945.8 $1,839.8
Services and rentals 777.0 755.9 698.7
---------------------------------------------
Total 2,504.7 2,701.7 2,538.5
---------------------------------------------
Less Pumpsystems and EM&C
Operations:
Sales 96.5 334.5 347.3
Services and rentals 15.7 21.3
---------------------------------------------
Total 96.5 350.2 368.6
---------------------------------------------
Revenues from Ongoing
Operations:
Sales 1,631.2 1,611.3 1,492.5
Services and rentals 777.0 740.2 677.4
---------------------------------------------
Total $2,408.2 $2,351.5 $2,169.9
=============================================
</TABLE>
Consolidated revenues for 1994 decreased 7.3% from 1993. Consolidated revenues
for 1993 increased 6.4% from 1992. Consolidated revenues were impacted in 1994
and 1993 by the revenues of disposed businesses. EM&C was sold in March 1994 and
Pumpsystems was sold in September 1994. The results of Pumpsystems and EM&C have
been reported in a manner similar to discontinued operations since March 1994
and June 1993, respectively, which represents the date at which the decisions to
divest the businesses were made. As such, consolidated results of operations for
1994 include six months of Pumpsystems' revenues and expenses. The last six
months of Pumpsystems' net operating results are reflected as a separate line in
the Company's consolidated statement of operations. Nine months of EM&C revenues
and expenses are included in the consolidated results for 1993. There are no
EM&C revenues and expenses included in the consolidated results for 1994. EM&C
operated near break even levels from July 1993 to March 1994 with a small net
operating loss offsetting the gain on the sale.
Revenues from ongoing operations were up 2.4% from 1993 and 8.4% from 1992.
Oilfield Operations currently
3
<PAGE>
represent approximately 88% of consolidated revenues ($2.1 billion) with the
remaining 12% represented by the Process Equipment Operations (formerly
EnviroTech Process Equipment).
Oilfield Operations' sales revenue was up 2.6% and services and rentals
revenue was up 4.7% in 1994. Much of the improvement in Oilfield Operations
sales, services and rentals revenue is attributable to increased drilling
activity in the Western Hemisphere, fueled in large part by natural gas
drilling. Offsetting this trend was a decline in the average number of workover
rigs running in the U.S. However, much of the improvement in the Western
Hemisphere was offset by declines in the European and West Africa markets, most
notably in geographic areas where Oilfield Operations enjoys significant revenue
on a per rig basis.
Oilfield Operations reported revenues of $2.0 billion in 1993, up 8.1% from
1992. Sales revenue was up 7.6% and services and rentals revenue was up 9.1%.
The acquisition of Teleco in April 1992 provided approximately $75.0 million of
additional revenue for 1993 when compared to the prior year. A significant
increase in gas related drilling in the Gulf of Mexico, fueled by increased
natural gas prices, increases in Canadian activity and export sales to the
former Soviet Union also contributed to the sales, services and rentals revenue
improvement. The improvement in the North American market was offset by a
decline in drilling rig activity outside of North America, most notably, the
North Sea and West Africa regions.
Process Equipment Operations sales, services and rentals revenue reported a
decline of 3.4% from 1993. General weakness in the worldwide economy and project
deferrals due to financing delays resulted in the revenue decline. In 1993,
sales, services and rentals revenue increased 10.3% from 1992. Improved order
bookings resulting from improved economic activity drove the revenue
favorability.
Operating Income
The following table summarizes the effect of the dispositions and the net
unusual charges on consolidated operating income.
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
- -------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated Operating Income $185.9 $158.9 $ 94.0
Plus Unusual Charges-net 31.8 42.0 79.2
Less Operating Income of
Pumpsystems and EM&C (17.9) (23.1) (25.2)
------------------------
Operating Income from Ongoing
Operations $199.8 $177.8 $148.0
========================
</TABLE>
Consolidated operating income in 1994 increased 17.0% from 1993 levels and in
1993 increased 69.0% from 1992 levels. Operating income from ongoing operations,
which excludes the net unusual charges and operating income of Pumpsystems and
EM&C, increased 12.4% in 1994 and 20.1% in 1993 from the respective prior year.
The increases year over year result from improved revenues and cost containment
measures, including the benefits from the consolidation of several divisions.
Costs and Expenses
Operating expenses, excluding unusual charges, typically fluctuate within a
narrow band as a percentage of consolidated revenues as the Company manages
expenses both in absolute terms and as a function of revenues.
Cost of sales, cost of services and rentals, research and engineering expenses
and marketing and field service expenses decreased in 1994 in line with the
revenue decreases associated with the dispositions of EM&C and Pumpsystems in
1994, and increased in 1993 in line with the increase in revenues associated
with the acquisition of Teleco in 1992. General and administrative expenses,
which are less sensitive to changes in revenue, decreased $17.3 million or 8.6%
in 1994 and remained virtually unchanged when comparing 1993 to 1992. The
decrease in 1994 is reflective of the impact of the disposed businesses.
Amortization of goodwill and other intangibles has decreased in 1994 because of
the sale of EM&C and Pumpsystems. In 1993, amortization increased over 1992
because of the Teleco acquisition in April 1992.
4
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Baker Hughes Incorporated
Unusual Charges-net
1994
During the fourth quarter of 1994, the Company recorded a $32.4 million
unusual charge related to the restructuring and reorganization of certain
divisions, primarily Baker Hughes INTEQ, in Oilfield Operations as part of a
continuing effort to maintain a cost structure appropriate for current and
future market conditions. Noncash provisions of the charge totalled $16.3
million and consist primarily of the write-down of excess facilities to net
realizable value. The remaining $16.1 million of the charge represents future
cash expenditures related to severance under existing benefit arrangements, the
relocation of people, equipment and inventory and abandoned leases. The Company
spent $3.1 million of the cash in 1994 and expects to spend substantially all of
the remaining $13.0 million in 1995. Such expenditures relate to specific plans
with clearly defined actions and will be funded from operations and available
credit facilities. The actions taken will favorably impact future operating
results and liquidity as the reduction of headcount and the consolidation of
facilities will reduce future operating costs without significantly impacting
the pricing of products and services and market share. Annual cost savings are
expected to be between $10.0 million and $15.0 million. In addition, an MWD
(measurement-while-drilling) product line was discontinued when it was decided
to market and support more viable MWD products resulting in the write-off of
property and inventory of $15.0 million. Offsetting these charges was an unusual
gain of $19.3 million related to the May 1994 cash settlement of a suit against
certain insurance carriers in the Parker & Parsley litigation discussed below.
1993
During the first quarter of 1993, the Company recognized a charge of $17.5
million relating to an agreement for the settlement of the civil antitrust
litigation involving the marketing of tricone rockbits. During the second
quarter of 1993, the Company, along with Dresser Industries and Parker & Parsley
Petroleum Development Incorporated, entered into a Memorandum of Understanding
covering the settlement of all outstanding litigation among the parties. In
recognition of the settlement, the Company recorded an unusual charge of $24.5
million. Cash payments totalling $75.0 million were made during the third
quarter of 1993.
1992
During the first quarter of 1992, the Company sold the Eastern Hemisphere
operations of BHTS and recognized a gain of $31.9 million. In addition, noncash
unusual charges totalling $31.8 million for the restructuring of the Western
Hemisphere operations of BHTS and the discontinuance of the Hughes Christensen
Company Argentina operations were recorded. During the third quarter of 1992, in
response to the structural changes in the U.S. oilfield and as a result of the
Teleco acquisition, the Company recognized an unusual charge totalling $79.3
million. Costs associated with the integration of the Teleco operations account
for $25.3 million of the charge. This charge included future cash outlays of
$7.3 million of which approximately one-third was spent in 1992 and the
remaining amount in 1993. Changes in market conditions led the Company to
implement several operational restructurings and combinations representing $30.1
million of the charge. This charge included future cash outlays of $12.3
million, the majority of such amounts were spent in 1993. In addition, the
Company accrued charges for the TRW Inc. litigation and certain other asset
impairments.
5
<PAGE>
Interest Expense
Offsetting interest expense in 1993 and 1992 is $3.6 million and $8.8 million,
respectively, of the reversal of accrued interest expense on certain Internal
Revenue Service issues. Excluding these reversals, interest expense decreased
$4.5 million in 1994 and $8.6 million in 1993. The decrease in 1994 is
attributable to lower total debt outstanding offset by a slightly higher overall
effective interest rate. The decrease in 1993 is attributable to significantly
lower effective interest rates offset by increases in total debt outstanding.
Interest Income
Interest income decreased $2.8 million in 1994 and $0.2 million in 1993. The
decreases are due to the repayment of notes receivables and a decrease in short-
term investments.
Income Taxes
The effective income tax rate for 1994 was 42.0% as compared to 41.2% in 1993
and 84.3% in 1992. The effective rates differ from the federal statutory rates
due primarily to the utilization of loss and credit carryforwards (1994, 1993
and 1992), increases in taxes on foreign operations (1994, 1993 and 1992),
nondeductible goodwill amortization (1994, 1993 and 1992), the impact of unusual
charges in jurisdictions where virtually no tax benefit was available (1992) and
the settlement with the IRS to resolve all pending tax issues for the 1978
through 1986 tax years (1992).
Extraordinary Loss
During 1994, the Company recorded an extraordinary loss of $44.3 million, net
of a tax benefit of $23.9 million, in connection with the repurchase or
defeasance of $225.0 million face amount of its outstanding 6% debentures due
March 2002. At September 30, 1994, $43.7 million of the debentures have been
considered extinguished through defeasance.
Net Income Per Share of Common Stock
Net income is adjusted for dividends on preferred stock of $12.0 million in
1994 and 1993 and $5.3 million in 1992.
Capital Resources and Liquidity
Financing Activities
Net cash outflows from financing activities were $429.8 million in 1994
compared to cash inflows of $56.0 million and $127.0 million in 1993 and 1992,
respectively.
Total debt outstanding at September 30, 1994 was $653.3 million, compared to
$944.3 million at September 30, 1993 and $838.9 million at September 30, 1992.
The debt to equity ratio was .399 at September 30, 1994, compared to .586 at
September 30, 1993 and .510 at September 30, 1992.
In 1994 the Company used cash to reduce overall debt levels. A total of $368.1
million was used to reduce borrowings under short-term facilities and repurchase
or defease all of the outstanding 6% discount debentures which had an effective
interest rate of 14.66%. During 1994, the Company also issued debenture purchase
warrants under favorable terms for $7.0 million which entitle the holders to
purchase $93.0 million of the Company's debentures. Subsequent to September 30,
1994, certain holders exercised warrants and purchased $78.0 million of
debentures. The Company expects the remaining warrants to be exercised prior to
their expiration in January 1995.
In 1993 and 1992, the Company had increased total debt to fund acquisitions
and other operating needs, while at the same time taking advantage of lower
interest rates. During 1993, the Company sold $385.3 million principal amount at
maturity of Liquid Yield Option Notes ("LYONS") due May 2008. The net proceeds
of $223.9 million were used to repay borrowings from short-term facilities
incurred to fund the 1992 Teleco acquisition, retire debentures and fund
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Baker Hughes Incorporated
working capital needs. During 1992, the Company raised $168.9 million through
the sale of 7.6 million shares of common stock. The proceeds were used to
effectively retire 8.3 million shares of common stock held by Borg-Warner
Corporation. Also in 1992, the Company issued fixed rate notes due in 1999 and
2004 with net proceeds of $246.6 million which were used to retire debt maturing
in 1992 and redeem convertible subordinated debentures. Borrowings under short-
term facilities increased to fund the Teleco acquisition.
Cash dividends increased in 1993 due primarily to the $12.0 million annual
dividend requirement associated with the preferred stock issued as part of the
Teleco acquisition in April 1992.
At September 30, 1994, the Company had $800.8 million of credit facilities
with commercial banks, of which $511.6 million is committed. These facilities
are subject to normal banking terms and conditions and do not materially
restrict the Company's activities.
During 1994, the U.S. dollar weakened against most European currencies where
the Company has a significant net asset position. As a result of this and the
sale of EM&C and Pumpsystems, the cumulative foreign currency translation
adjustment account decreased $34.7 million. During 1993, the U.S. dollar
strengthened against most European currencies resulting in an increase of $45.1
million in the cumulative foreign currency translation adjustment account.
Investing Activities
Net cash inflows from investing activities were $258.4 million in 1994
compared to cash outflows of $76.7 million in 1993 and $251.9 million in 1992.
Proceeds from the disposal of noncore businesses generated $328.4 million in
1994, $9.3 million in 1993 and $50.7 million in 1992. The acquisition of Teleco
in 1992 required the use of $197.0 million. Property additions have decreased
from $137.9 million in 1992 to $126.9 million in 1993 and to $108.6 million in
1994. Part of the decrease in 1994 is due to the sale of EM&C and Pumpsystems.
Likewise, the ratio of capital expenditures to depreciation has decreased over
the same period from 110.8% to 89.6% and to 88.5%. The majority of the capital
expenditures have been in Oilfield Operations where the largest single item is
the expenditure for rental tools and equipment to supplement the rental fleet.
Funds provided from operations and outstanding lines of credit are expected to
be more than adequate to meet future capital expenditure requirements. The
Company expects 1995 capital expenditures to be between $120.0 million and
$140.0 million as it focuses on replacing capital in amounts comparable to
annual depreciation.
Operating Activities
Net cash inflows from operating activities were $230.8 million, $23.0 million
and $85.6 million in 1994, 1993 and 1992, respectively.
The increase of $207.8 million in 1994 was due primarily to an increase in net
income adjusted for noncash items, litigation settlements totalling $75.0
million that were paid in 1993 and a decrease in the buildup of working capital.
The decrease of $62.6 million in 1993 was due primarily to the buildup of
working capital in Oilfield Operations due to increased domestic activity in the
fourth quarter of 1993 compared to the same period in 1992 and the litigation
settlements mentioned above. These uses of cash were offset by an increase in
net income adjusted for noncash items.
7
<PAGE>
Accounting Standards
Postretirement Benefits Other Than Pensions
The Company adopted Statement of Financial Accounting Standard ("SFAS") No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
effective October 1, 1993. The Company elected to immediately recognize the
cumulative effect of the change in accounting and recorded a charge of $69.6
million, net of a tax benefit of $37.5, in the first quarter of 1994. Expense
under SFAS No. 106 for 1994 was not significantly different from the prior
method of cash basis accounting.
Accounting for Income Taxes
The Company adopted SFAS No. 109, "Accounting for Income Taxes," effective
October 1, 1993, without restatement of prior years and recorded a credit to
income of $25.5 million in the first quarter of 1994. An additional benefit of
$21.9 million was allocated to capital in excess of par value, which reflects
the cumulative tax effect of exercised employee stock options for which the
Company has taken tax deductions in its federal tax return.
The Company establishes valuation reserves for certain of its deferred tax
assets which management deems the realization is not likely to occur. In the
U.S. jurisdiction, the Company has fully reserved the credit portion of all its
foreign tax credit carryforwards based on a recent historical pattern of
expiring foreign tax credits and the lack of taxable income in amounts
sufficient to utilize the foreign tax credit carryforwards. The Company has also
reserved the operating loss carryforwards in certain non-U.S. jurisdictions
where its operations have decreased, currently ceased or the Company has
withdrawn entirely.
The Company has not established valuation reserves on its remaining deferred
tax assets, primarily temporary differences between the book and tax basis of
assets and liabilities. Management believes that sufficient sources of taxable
income will occur in future periods so that these tax assets will be realized.
This judgement is based on recent profitable operations in the appropriate
jurisdictions.
The adoption of SFAS No. 109 had the practical effect of allowing the Company
to report its tax assets, net of valuation reserves, on the consolidated
statement of financial position. Additionally, the statement allows the netting
of the noncurrent deferred tax assets and liabilities within the same taxing
jurisdiction. The Company has used this approach in reporting its tax accounts
in the consolidated statement of financial position at September 30, 1994. Such
an approach was not allowed under the prior accounting method.
Investments in Debt and Equity Securities
The Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," effective September 30, 1994, and recorded a charge to a
separate component of stockholders' equity for unrealized losses on securities
available for sale of $2.8 million, net of a tax benefit of $1.5 million. A gain
or loss will be recognized in the consolidated statement of operations when a
security is sold.
Postemployment Benefits
In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits." The statement requires accrual basis accounting for
such benefits as opposed to cash basis accounting. The Company will adopt this
statement effective October 1, 1994. The Company will recognize a charge to
income of $14.6 million, net of a $7.9 million tax benefit, in the first quarter
of 1995 as the cumulative effect of the change in accounting. Expense under SFAS
No. 112 for 1995 related to these benefits is not expected to be significantly
different from actual cash payments.
8
<PAGE>
INDEPENDENT AUDITORS' REPORT
Baker Hughes Incorporated
STOCKHOLDERS OF BAKER HUGHES INCORPORATED:
We have audited the consolidated statements of financial position of Baker
Hughes Incorporated and its subsidiaries as of September 30, 1994 and 1993, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended September 30, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Baker Hughes Incorporated and its
subsidiaries at September 30, 1994 and 1993, and the results of its operations
and its cash flows for each of the three years in the period ended September 30,
1994 in conformity with generally accepted accounting principles.
As discussed in Note 1, the Company changed its method of accounting for
postretirement benefits other than pensions and for income taxes effective
October 1, 1993 to conform with Statement of Financial Accounting Standards No.
106 and Statement of Financial Accounting Standards No. 109, respectively. Also
as discussed in Note 1, the Company changed its method of accounting for certain
investments in debt and equity securities effective September 30, 1994 to
conform with Statement of Financial Accounting Standards No. 115.
Deloitte & Touche LLP
November 16, 1994
Houston, Texas
9
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Baker Hughes Incorporated
<TABLE>
<CAPTION>
Years ended September 30,
(In thousands, except per share amounts) 1994 1993 1992
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Sales $1,727,734 $1,945,793 $1,839,771
Services and rentals 777,024 755,904 698,744
------------------------------------
Total 2,504,758 2,701,697 2,538,515
------------------------------------
Costs and Expenses:
Cost of sales 1,015,458 1,154,865 1,076,378
Cost of services and rentals 389,605 395,286 347,020
Research and engineering 91,011 102,057 107,188
Marketing and field service 586,671 610,337 602,342
General and administrative 184,013 201,322 200,758
Amortization of goodwill and other intangibles 30,775 36,916 31,649
Unusual charges - net 31,829 42,000 79,190
Operating income of business sold (10,488)
------------------------------------
Total 2,318,874 2,542,783 2,444,525
------------------------------------
Operating income 185,884 158,914 93,990
Gain on sale of Pumpsystems 101,000
Interest expense (63,835) (64,703) (68,112)
Interest income 3,067 5,840 6,078
------------------------------------
Income before income taxes, extraordinary loss
and cumulative effect of accounting changes 226,116 100,051 31,956
Income taxes (94,974) (41,195) (26,925)
------------------------------------
Income before extraordinary loss
and cumulative effect of accounting changes 131,142 58,856 5,031
----------
Extraordinary loss (net of $23,865 income tax benefit) (44,320)
----------
Cumulative effect of accounting changes:
Income taxes 25,455
Postretirement benefits other
than pensions (net of $37,488 income tax benefit) (69,620)
----------
Accounting changes - net (44,165)
------------------------------------
Net income $ 42,657 $ 58,856 $ 5,031
====================================
Per share of Common Stock:
Income before extraordinary loss
and cumulative effect of accounting changes $ .85 $ .34 $ .00
Extraordinary loss (.31)
Cumulative effect of accounting changes (.32)
------------------------------------
Net income $ .22 $ .34 $ .00
====================================
</TABLE>
See Notes to Consolidated Financial Statements
10
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Baker Hughes Incorporated
<TABLE>
<CAPTION>
September 30,
(In thousands) 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 69,179 $ 6,992
-----------------------
Receivables-less allowance for doubtful accounts:
1994, $21,405; 1993, $21,607 612,414 619,953
-----------------------
Inventories:
Finished goods 508,198 467,806
Work in process 53,644 68,408
Raw materials 81,204 102,926
-----------------------
Total inventories 643,046 639,140
-----------------------
Net assets of business held for sale 126,430
-------
Deferred income taxes 45,959 2,990
-----------------------
Other current assets 29,394 21,301
-----------------------
Total current assets 1,399,992 1,416,806
-----------------------
Property:
Land 35,174 40,902
Buildings 294,104 305,952
Machinery and equipment 586,863 662,078
Rental tools and equipment 530,814 521,958
-----------------------
Total property 1,446,955 1,530,890
Accumulated depreciation (886,871) (869,427)
-----------------------
Property-net 560,084 661,463
-----------------------
Other assets:
Investments 89,601 98,864
Property held for disposal 73,496 72,717
Other assets 80,054 79,420
Excess costs arising from acquisitions-less accumulated amortization:
1994, $112,008; 1993, $90,001 796,455 814,070
-----------------------
Total other assets 1,039,606 1,065,071
-----------------------
Total $2,999,682 $3,143,340
=======================
</TABLE>
See Notes to Consolidated Financial Statements
11
<PAGE>
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Baker Hughes Incorporated
<TABLE>
<CAPTION>
(In thousands) 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts payable-trade $ 253,616 $ 249,781
Short-term borrowings 863 5,381
Current portion of long-term debt 14,436 3,067
Accrued employee compensation and benefits 113,304 95,303
Income taxes payable 29,729 15,322
Taxes other than income 20,608 22,552
Accrued insurance 26,492 20,554
Accrued interest 10,676 11,529
Other accrued liabilities 74,847 72,348
-----------------------
Total current liabilities 544,571 495,837
-----------------------
Long-term debt 637,972 935,846
-----------------------
Deferred income taxes 53,841 78,306
-----------------------
Postretirement benefits other than pensions 95,951
----------
Other long-term liabilities 25,494 19,021
-----------------------
Minority interest 3,381 3,682
-----------------------
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $1 par value (authorized and outstanding
4,000,000 shares of $3.00 convertible preferred stock;
$50 liquidation preference per share) 4,000 4,000
Common stock, $1 par value (authorized 400,000,000 shares;
outstanding 140,889,000 shares in 1994 and 140,437,000
shares in 1993) 140,889 140,437
Capital in excess of par value 1,474,013 1,444,549
Retained earnings 125,276 159,277
Cumulative foreign currency translation adjustment (102,915) (137,615)
Unrealized loss on securities available for sale (2,791)
-----------------------
Total stockholders' equity 1,638,472 1,610,648
-----------------------
Total $2,999,682 $3,143,340
=======================
</TABLE>
See Notes to Consolidated Financial Statements
12
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
Baker Hughes Incorporated
<TABLE>
<CAPTION>
Cumulative Unrealized
Common Capital Foreign Loss on
For the three years ended Preferred Stock In Excess Currency Securities
September 30, 1994 Stock ($1 Par of Retained Translation Available
(In thousands) ($1 Par Value) Value) Par Value Earnings Adjustment For Sale Total
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1991 $138,396 $1,256,325 $ 239,610 $ (88,970) $1,545,361
Net income 5,031 5,031
Issuance of $3.00 convertible
preferred stock $ 4,000 145,400 149,400
Cash and accrued dividends
on $3.00 convertible pre-
ferred stock ($3.00 per share) (5,267) (5,267)
Cash dividends on common
stock ($.46 per share) (62,857) (62,857)
Foreign currency translation
adjustment (3,506) (3,506)
Stock issued pursuant to
employee stock plans 705 11,203 11,908
Issuance of common stock 7,600 161,313 168,913
Purchase of shares (8,300) (160,525) (168,825)
Other 223 5,141 5,364
----------------------------------------------------------------------------------------------
Balance, September 30, 1992 4,000 138,624 1,418,857 176,517 (92,476) 1,645,522
Net income 58,856 58,856
Cash and accrued dividends
on $3.00 convertible pre-
ferred stock ($3.00 per share) (12,000) (12,000)
Cash dividends on common
stock ($.46 per share) (64,096) (64,096)
Foreign currency translation
adjustment (45,139) (45,139)
Stock issued pursuant to
employee stock plans 1,813 25,692 27,505
----------------------------------------------------------------------------------------------
Balance, September 30, 1993 4,000 140,437 1,444,549 159,277 (137,615) 1,610,648
Net income 42,657 42,657
Cash and accrued dividends
on $3.00 convertible pre-
ferred stock ($3.00 per share) (12,000) (12,000)
Cash dividends on common
stock ($.46 per share) (64,658) (64,658)
Foreign currency translation
adjustment 17,825 17,825
Disposition of businesses 16,875 16,875
Income tax accounting change 21,896 21,896
Investment accounting change $ (2,791) (2,791)
Stock issued pursuant to
employee stock plans 452 7,568 8,020
----------------------------------------------------------------------------------------------
Balance, September 30, 1994 $ 4,000 $ 140,889 $1,474,013 $ 125,276 $(102,915) $ (2,791) $1,638,472
==============================================================================================
</TABLE>
See Notes to Consolidated Financial
Statements
13
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Baker Hughes Incorporated
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Years ended September 30,
(In thousands) 1994 1993 1992
- ------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $ 42,657 $ 58,856 $ 5,031
Adjustments to reconcile net income
to net cash flows from
operating activities:
Depreciation and amortization of:
Property 122,812 141,699 124,394
Other assets and debt discount 46,526 47,371 41,608
Deferred tax provision (credit) 47,366 19,349 (5,497)
Noncash portion of unusual charges-net 47,988 79,190
Gain on disposal of assets (18,034) (14,594) (15,670)
Gain on disposition of businesses (109,550)
Foreign currency translation loss-net 1,892 441 960
Cumulative effect of accounting
changes 44,165
Extraordinary loss 44,320
Change in receivables (22,740) (74,828) 6,359
Change in inventories (58,035) (50,506) (26,296)
Change in accounts payable-trade 24,890 (2,962) 12,968
Changes in other assets
and liabilities 16,520 (101,859) (137,423)
----------------------------------
Net cash flows from operating
activities 230,777 22,967 85,624
----------------------------------
Cash flows from investing activities:
Property additions (108,639) (126,901) (137,875)
Proceeds from disposal of assets 38,664 40,928 32,240
Proceeds from disposition of
businesses 328,389 9,299 50,722
Acquisitions of businesses, net of
cash acquired (197,006)
----------------------------------
Net cash flows from investing
activities 258,414 (76,674) (251,919)
----------------------------------
Cash flows from financing activities:
Net borrowings (payments) from
commercial paper and revolving
credit facilities (162,590) (95,010) 112,166
Retirement of debentures (205,497) (18,197) (98,842)
Net proceeds from issuance of
debenture purchase warrants 7,026
Net proceeds from issuance of notes 223,911 246,595
Net proceeds from issuance of common
stock 168,913
Purchase of common stock (168,825)
Repayment of matured indebtedness (77,835)
Proceeds from exercise of stock
options and stock purchase grants 7,900 21,358 11,908
Dividends (76,658) (76,096) (67,124)
----------------------------------
Net cash flows from financing
activities (429,819) 55,966 126,956
----------------------------------
Effect of exchange rate changes on
cash 2,815 (1,959) (5,678)
----------------------------------
Increase (decrease) in cash
and cash equivalents 62,187 300 (45,017)
Cash and cash equivalents,
beginning of year 6,992 6,692 51,709
----------------------------------
Cash and cash equivalents, end of year $ 69,179 $ 6,992 $ 6,692
==================================
</TABLE>
See Notes to Consolidated Financial Statements
14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Baker Hughes Incorporated
Note 1
Summary of Significant Accounting Policies
Principles of consolidation: The consolidated financial statements include the
accounts of Baker Hughes Incorporated and all majority-owned subsidiaries (the
"Company"). Investments in which ownership interest ranges from 20 to 50 percent
and the Company exercises significant influence over operating and financial
policies are accounted for on the equity method. Prior to 1994, other
investments were accounted for under the cost method. In 1994 the Company
changed its accounting for other investments as explained below. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain minor reclassifications have been made to the 1993 balances to conform
to the 1994 presentation.
Revenue recognition: Revenue from product sales are recognized upon delivery of
products to the customer. Revenues from services and rentals are recorded when
such services are rendered.
Inventories: Inventories are stated primarily at the lower of average cost or
market.
Property: Property is stated principally at cost less accumulated depreciation,
which is generally provided by using the straight-line method over the estimated
useful lives of individual items. The Company manufactures a substantial portion
of its rental tools and equipment, and the cost of these items includes direct
and indirect manufacturing costs.
Property held for disposal: Property held for disposal is stated at the lower of
cost or estimated net realizable value.
Investments: The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," effective September 30, 1994. Investments in debt and equity
securities, other than those accounted for by the equity method, are reported at
fair value with unrealized gains or losses, net of tax, recorded as a separate
component of stockholders' equity.
Excess costs arising from acquisitions: Excess costs arising from acquisitions
of businesses ("Goodwill") are amortized on the straight-line method over the
lesser of expected useful life or forty years. Management of the Company
periodically reviews the carrying value of Goodwill in relation to the current
and expected operating results of the segments of business which benefit
therefrom in order to assess whether there has been a permanent impairment of
Goodwill.
Income taxes: The Company adopted SFAS No. 109, "Accounting for Income Taxes,"
effective October 1, 1993. Previously, the Company used SFAS No. 96, "Accounting
for Income Taxes." The cumulative effect of adopting SFAS No. 109 was a credit
to income of $25.5 million ($.18 per share). An additional benefit of $21.9
million was allocated to capital in excess of par value, which reflects the
cumulative tax effect of exercised employee stock options for which the Company
has taken tax deductions in its federal tax return.
Deferred income taxes are determined utilizing an asset and liability
approach. This method gives consideration to the future tax consequences
associated with differences between the financial accounting and tax basis of
assets and liabilities.
Environmental matters: Remediation costs are accrued based on estimates of known
environmental remediation exposure. Such accruals are recorded even if
significant uncertainties exist over the ultimate cost of the remediation.
Ongoing environmental compliance costs, including maintenance and monitoring
costs, are expensed as incurred.
Postretirement benefits other than pensions: The Company adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions,"
effective October 1, 1993. The statement requires that the estimated cost of
postretirement benefits other than pensions be accrued over the period earned
rather than expensed as incurred. The cumulative effect of adopting SFAS No. 106
on the immediate recognition basis was a charge to income of $69.6 million ($.50
per share), net of a tax benefit of $37.5 million.
Foreign currency translation: Gains and losses resulting from balance sheet
translation of foreign operations where a foreign currency is the functional
currency are included as a separate component of stockholders' equity. Gains and
losses resulting from balance sheet translation of foreign operations where the
U.S. dollar is the functional currency are included in the consolidated
statements of operations.
15
<PAGE>
Income per share: Income per share amounts are based on the weighted average
number of shares outstanding during the respective years (140,532,000 in 1994,
139,321,000 in 1993 and 138,599,000 in 1992) and exclude the negligible dilutive
effect of shares issuable in connection with employee stock plans. Net income is
adjusted for dividends on preferred stock.
Statements of cash flows: The Company considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents.
Note 2
Acquisitions and Dispositions
1994
In September 1994, the Company sold the EnviroTech Pumpsystems ("Pumpsystems")
group of companies. The decision to divest Pumpsystems was part of a continuing
review of the Company's core product and service competencies. The sale provided
approximately $210.0 million in proceeds and resulted in a gain of $101.0
million. Pumpsystems' operating revenues and expenses have been reported in a
manner similar to discontinued operations since March 1994. As such, the first
six months of Pumpsystems' revenues and expenses are included in the
consolidated results for 1994 and the last six months net operating results are
reflected as a separate line in the Company's consolidated statement of
operations.
In July 1993, the Company announced that the EnviroTech Measurements &
Controls ("EM&C") group of companies would no longer be considered part of its
core business. Accordingly, the net assets of the EM&C operations were
classified as a current asset at September 30, 1993. EM&C operating revenues and
expenses have been reported in a manner similar to discontinued operations since
June 1993. As such, there are no EM&C revenues and expenses included in the
consolidated results for 1994 and nine months of EM&C revenues and expenses are
included in the consolidated results for 1993. EM&C operated near break even
levels from July 1993 to March 1994 with a small net operating loss offsetting
the gain on the sale. In March 1994, the Company completed the sale of EM&C
which provided $134.0 million in proceeds and resulted in a gain of $8.6
million.
1992
In October 1991, the Company sold the Eastern Hemisphere operations of Baker
Hughes Tubular Services ("BHTS") to Tuboscope Corporation, now known as
Tuboscope Vetco International Corporation ("Tuboscope"), for total consideration
of $75.7 million. The consideration consisted of $50.7 million in cash, 1.7
million shares of Tuboscope common stock and $10.0 million of Tuboscope
convertible preferred stock. The Company recognized a gain on the sale of $31.9
million.
In April 1992, the Company acquired Teleco Oilfield Services Inc. ("Teleco")
from Sonat, Inc. for $349.4 million. The purchase price was funded with $17.7
million in available cash, $182.3 million of proceeds from commercial paper
borrowings, four million shares of 6.0% convertible preferred stock with a face
value of $200.0 million (estimated fair market value at date of acquisition of
approximately $149.4 million) and a five percent royalty payment for five years
on certain technology revenues. The acquisition has been accounted for using the
purchase method of accounting and accordingly, the cost of the acquisition has
been allocated to assets acquired and liabilities assumed based on their
estimated fair market values at the date of acquisition. The operating results
of Teleco are included in the consolidated statements of operations from the
acquisition date.
In August 1992, the Company purchased from Borg-Warner Corporation ("B-W") a
subsidiary of B-W, whose only asset was 8.3 million shares of the Company's
common stock. Total consideration paid to B-W was $168.8 million. All of the
funds for the purchase were raised through a public offering by the Company of
7.6 million shares of its common stock at a price of $22.25 per share. Net
proceeds from the offering were $168.9 million. The Company does not intend to
reissue any of the shares purchased in this transaction and accordingly, the 8.3
million shares have been treated as having been constructively retired for
financial reporting purposes.
16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Baker Hughes Incorporated
In September 1992, the Company sold the Western Hemisphere operations of
BHTS to ICO, Inc. ("ICO") for $11.3 million in promissory notes varying in
maturities from one to seven years and a warrant entitling the Company to
purchase 800,000 shares of ICO common stock at $3.75 per share (reflects a one-
for-five reverse stock split). The net proceeds from the sale approximated the
carrying value of the Western Hemisphere operations after recognition of a 1992
unusual charge related to these operations.
- --------------------------------------------------------------------------------
Note 3
Unusual Charges-Net
1994
During 1994, the Company recognized $31.8 million of net unusual charges
consisting of the following items:
<TABLE>
<CAPTION>
(In thousands)
- --------------------------------------------------------------------------------
<S> <C>
Insurance recovery in the Parker & Parsley litigation $(19,281)
Discontinued product line 15,005
Oilfield restructurings:
Severance under existing benefit arrangements 5,869
Relocation of property, inventory and people 5,773
Writedown of assets to net realizable value 18,650
Abandoned leases 2,082
Other 3,731
--------
Unusual charges-net $ 31,829
========
</TABLE>
In May 1994, the Company realized a gain of $19.3 million from the cash
settlement of a suit against certain insurance carriers in the Parker & Parsley
litigation. See Note 12.
During the fourth quarter of 1994, the Company discontinued an MWD
(measurement-while-drilling) product line when it decided to market and support
other more viable MWD products resulting in the write-off of property and
inventory of $15.0 million. In addition, the Company recorded a $32.4 million
charge related to the restructuring and reorganization of certain divisions,
primarily Baker Hughes INTEQ, in Oilfield Operations.
1993
During the first quarter of 1993, the Company recognized an unusual charge of
$17.5 million in connection with reaching an agreement with representatives of
the class plaintiffs for the settlement of a class action civil antitrust
lawsuit concerning the marketing of tricone rock bits. A cash payment of $17.5
million was made in April 1993. See Note 12.
During the second quarter of 1993, the Company, along with Dresser Industries
and Parker & Parsley Petroleum Development Incorporated ("Parker & Parsley"),
settled all outstanding litigation among the parties over alleged intentional
product delivery or service variance on a number of well stimulation projects.
In recognition of settlement, the Company recorded an unusual charge of $24.5
million. A cash payment of $57.5 million was made for the Company's portion in
May 1993. See Note 12.
1992
During 1992, the Company recognized $79.2 million of net unusual charges
consisting of the following items:
<TABLE>
<CAPTION>
(In thousands)
- --------------------------------------------------------------------------------
<S> <C>
Gain on sale of the Eastern Hemisphere
operations of BHTS $(31,882)
Restructuring costs and impairment of
value of the Western Hemisphere
operations of BHTS 16,272
Loss on discontinuance of Hughes Christensen
Company Argentina operations 22,500
Costs related to the integration of Teleco 25,300
Operational restructurings 30,100
Litigation 8,700
Other 8,200
--------
Unusual charges-net $ 79,190
========
</TABLE>
17
<PAGE>
As discussed in Note 2, in October 1991, the Company recognized a gain on the
sale of the Eastern Hemisphere operations of BHTS. The Company recognized
charges to operations for the estimated costs and losses to be incurred in
connection with the restructuring of the Western Hemisphere operations of BHTS
and the discontinuance of the Hughes Christensen Company ("HCC") Argentina
operations, in the first quarter of 1992. In response to further structural
changes in the U.S. oilfield, the Company recognized a $7.0 million impairment
of value of the BHTS Western Hemisphere operations in the third quarter of 1992.
During the third quarter of 1992, the Company recognized unusual charges
totalling $79.3 million in response to the structural changes in the U.S.
oilfield and as a result of the Teleco acquisition. The costs associated with
the integration of the Teleco operations accounted for $25.3 million of these
charges.
Changes in market conditions, as evidenced by the decline in the worldwide
active rig count which reported record lows in drilling activity, caused the
Company to implement several operational restructurings and combinations. Of the
$30.1 million recognized for these restructurings, the most significant charge
relates to the merger of the Baker Oil Tools and Baker Service Tools divisions.
As a result of a lawsuit filed by TRW Inc. against the Company, a charge was
recorded to accrue the Company's estimate of the total costs of disposing of
this suit through appeal or settlement. In addition, the Company accrued charges
related to a Department of Justice investigation and imposed fine concerning the
marketing of tricone rock bits by HCC. See Note 12.
- --------------------------------------------------------------------------------
Note 4
Indebtedness
Long-term debt at September 30, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial Paper $127,060
Revolving Credit Facilities due through 1999 with an
average interest rate of 5.92% at September 30, 1994 $ 47,693 77,192
4.125% Swiss Franc 200 million Bonds due June 1996
with an effective interest rate of 7.82% 107,222 106,547
7.625% Notes due February 1999 with an effective interest rate of 7.73%,
net of unamortized discount of $1,198 ($1,449 in 1993) 148,802 148,551
6% Debentures with an effective interest rate of 14.66% due March 2002,
net of unamortized discount of $93,236 in 1993 131,764
8% Notes due May 2004 with an effective interest rate of 8.08%,
net of unamortized discount of $1,292 ($1,406 in 1993) 98,708 98,594
Liquid Yield Option Notes due May 2008 with a yield to maturity of 3.5% per annum,
net of unamortized discount of $149,329 ($157,884 in 1993) 235,921 227,366
Convertible Subordinated Debentures due through October 2000 with
an average interest rate of 6.30% at September 30, 1994 10,197 10,197
Other indebtedness with an average interest rate of 5.99% at September 30, 1994 3,865 11,642
-------------------------
Total debt 652,408 938,913
Less current maturities 14,436 3,067
-------------------------
Long-term debt $637,972 $935,846
=========================
</TABLE>
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Baker Hughes Incorporated
At September 30, 1994, the Company had $800.8 million of credit facilities
with commercial banks, of which $511.6 million is committed. The majority of
these facilities expire in 1999. The Company's policy is to classify commercial
paper and borrowings under revolving credit facilities as long-term debt since
the Company has the ability under certain credit agreements, and the intent, to
maintain these obligations for longer than one year. These facilities are
subject to normal banking terms and conditions and do not materially restrict
the Company's activities.
In May through September 1994, the Company repurchased or defeased all of its
outstanding 6% discount debentures for $205.5 million and generated an
extraordinary loss of $44.3 million ($.31 per share), net of a tax benefit of
$23.9 million. At September 30, 1994, $43.7 million of the debentures have been
considered extinguished through defeasance.
In April 1994, the Company issued debenture purchase warrants for $7.0 million
which entitled the holders to purchase $93.0 million of the Company's
debentures. Subsequent to September 30, 1994, certain holders exercised warrants
and purchased $78.0 million of debentures. The option to exercise the remaining
$15.0 million of debentures will expire in January 1995.
Maturities of long-term debt for the next five years are as follows: 1995-
$14.4 million; 1996-$110.6 million; 1997-$3.4 million; 1998-$0.1 million and
1999-$184.6 million.
- --------------------------------------------------------------------------------
Note 5
Financial Instruments
The Company has entered into arrangements to manage its exposure to interest
rate and foreign currency fluctuations. The market value gains or losses arising
from interest rate or foreign exchange hedging contracts offset gains or losses
on the underlying hedged assets and liabilities. The differential paid or
received on interest rate swap agreements is recognized as an adjustment to
interest expense.
In the unlikely event that the counterparties fail to meet the terms of an
interest rate swap agreement, the Company's exposure is limited to the interest
rate differential.
At September 30, 1994, the Company had a $204.5 million aggregate notional
amount interest rate swap agreement outstanding maturing in 1998. This swap
effectively exchanges fixed interest rates for variable interest rates on the
notional amount. Additionally, the Company has an interest rate swap agreement
in conjunction with the $93.0 million debentures described in Note 4. The swap
expires in January 2000 and effectively exchanges fixed interest rates for
variable interest rates on a notional principal amount of $93.0 million.
The 4.125% Swiss Franc 200.0 million Bonds ("SFrBonds") are hedged through a
foreign currency swap agreement and a foreign currency option. These instruments
convert the Company's Swiss Franc denominated principal and interest obligations
under the SFrBonds into U.S. dollar denominated obligations. In the unlikely
event of nonperformance by the counterparty, the Company's economic exposure is
limited to the difference, in U.S. dollar terms, of its obligations under the
foreign currency hedging instruments described above and its Swiss Franc
denominated obligations pursuant to the terms of the SFrBonds.
Except as described below, the estimated fair values of the Company's
financial instruments at September 30, 1994 and 1993, approximate their carrying
value as reflected in
19
<PAGE>
the consolidated statements of financial position. The Company's financial
instruments include cash and short-term investments, receivables, investments,
payables, debt and interest rate and foreign currency contracts. The fair value
of such financial instruments has been estimated based on quoted market prices
and the Black-Scholes pricing model.
The estimated fair value of the Company's debt, including the related interest
rate and foreign currency contracts at September 30, 1994 and 1993 were $645.6
million and $1,075.1 million, respectively, which differs from the carrying
amounts of $653.3 million and $944.3 million, respectively, included in the
consolidated statements of financial position.
- --------------------------------------------------------------------------------
Note 6
Preferred Stock
In April 1992, the Company issued four million shares of $3.00 convertible
preferred stock ($1 par value per share and $50 liquidation preference per
share) to Sonat, Inc. in connection with the Teleco acquisition. The preferred
stock is convertible at the option of the holder at any time into the Company's
common stock at a conversion price of $32.50 per share.
The preferred stock is redeemable at any time, in whole or in part, at the
option of the Company on at least thirty and not more than sixty days notice at
$50 per share, plus accrued dividends. Dividends on the preferred stock are
cumulative at the rate of $3.00 per share per annum. Such dividends are payable
quarterly as declared by the Board of Directors.
- --------------------------------------------------------------------------------
Note 7
Employee Stock Plans
The Company has stock option plans which provide for granting of options for
the purchase of common stock to directors, officers and other key employees.
Such stock options may be granted subject to terms ranging from one to ten years
at a price equal to the fair market value of the stock at the date of grant.
Stock option activity for the Company during 1994, 1993 and 1992 was as
follows:
<TABLE>
<CAPTION>
Number of Shares (In thousands) 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Stock options outstanding, beginning of year 2,890 2,726 2,121
Granted (per share):
1994 $20.13 to $21.88 2,291
1993 $23.00 1,001
1992 $19.17 to $25.00 1,022
Exercised (per share):
1994 $10.25 to $15.38 (31)
1993 $10.25 to $28.50 (721)
1992 $10.25 to $21.95 (264)
Expired (271) (116) (153)
---------------------------
Stock options outstanding, end of year (per share: $13.38 to $28.50 at September 30, 1994) 4,879 2,890 2,726
===========================
</TABLE>
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Baker Hughes Incorporated
At September 30, 1994, options were exercisable for 1.9 million shares, and
6.2 million shares were available for future option grants.
The Company has a plan which provides for the sale of convertible debentures
to certain officers and key employees. An aggregate of $30.0 million principal
amount of debentures may be issued under the plan, which are convertible into
shares of common stock after one year. At September 30, 1994, a total of $10.2
million principal amount of debentures are outstanding and convertible into
472,000 shares of common stock at $13.38 to $28.50 per share.
The Company has an Employee Stock Purchase Plan (the "Plan") under which there
remain authorized and available for sale to employees an aggregate of 482,000
shares of the Company's common stock. Based on the market price of common stock
on the date of grant, the Company estimates that approximately 476,000 shares
will be purchased in July 1995. Under the Plan, 421,000, 521,000 and 439,000
shares were issued at $17.96, $19.02 and $19.34 per share during 1994, 1993 and
1992, respectively.
- --------------------------------------------------------------------------------
Note 8
Income Taxes
The geographical sources of income before income taxes, extraordinary loss and
cumulative effect of accounting changes for the three years ended September 30,
1994 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $139,940 $ 41,024 $(49,185)
Foreign 86,176 59,027 81,141
------------------------------
Income before income taxes, extraordinary loss and cumulative effect of accounting changes $226,116 $100,051 $ 31,956
==============================
</TABLE>
The provision (credit) for income taxes for the three years ended September
30, 1994 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable:
United States $ 10,875 $ 2,552 $ 3,124
Foreign 36,733 19,294 29,298
------------------------------
Total currently payable 47,608 21,846 32,422
==============================
Deferred:
United States 46,433 (1,053) (8,248)
Foreign 933 20,402 2,751
------------------------------
Total deferred 47,366 19,349 (5,497)
------------------------------
Total provision for income taxes $ 94,974 $ 41,195 $ 26,925
==============================
</TABLE>
21
<PAGE>
The provision for income taxes differs from the amount computed by applying
the U. S. statutory income tax rates to income before taxes, extraordinary loss
and cumulative effect of accounting changes for the reasons set forth below:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory income tax $ 79,141 $ 34,818 $ 10,865
Goodwill amortization 5,653 6,903 5,976
Foreign operations 11,984 22,812 3,132
State income taxes - net of U. S. tax benefit 2,940 1,701 2,045
Utilization of loss and credit carryforwards (12,662) (26,714) (3,707)
Internal Revenue Service settlement (8,245)
Unusual charges for which benefit is not currently recognizable 14,828
Other-net 7,918 1,675 2,031
-------------------------------
Provision for income taxes $ 94,974 $ 41,195 $ 26,925
===============================
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, and operating loss and
tax credit carryforwards. The tax effects of the Company's temporary differences
and carryforwards at September 30, 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Deferred tax liabilities:
Property $ 56,100
Investments 33,900
Excess costs arising from acquisitions 44,400
Undistributed earnings of foreign subsidiaries 29,600
Other 15,700
--------
Total $179,700
--------
Deferred tax assets:
Receivables $ 4,900
Inventory 48,600
Postretirement benefits other than pensions 36,750
Other accrued expenses 28,300
Operating loss carryforwards 27,400
Tax credit carryforwards 46,960
Other 7,750
--------
Subtotal 200,660
Valuation allowance (28,840)
--------
Total $171,820
--------
</TABLE>
A valuation allowance is recorded when it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate
realization of the deferred tax assets depends on the ability to generate
sufficient taxable income of the appropriate character in the future. The
valuation allowance relates to the realization of operating loss carryforwards
in certain non-U.S. jurisdictions and foreign tax credit carryforwards in the
U.S.
Deferred income tax assets and liabilities at September 30, 1993 relate
primarily to basis differences in property, inventory, accruals for unusual
charges and accrued liabilities.
Provision has been made for U.S. and additional foreign taxes for the
anticipated repatriation of certain earnings of foreign subsidiaries of the
Company. The Company considers the undistributed earnings of its foreign
subsidiaries above the amount already provided to be permanently reinvested.
These additional foreign earnings could become subject to additional tax if
remitted as a dividend, lent by the foreign subsidiary to the Company or if the
Company should sell its stock in the subsidiary. The additional amount of taxes
payable are not practicable to estimate but the Company believes they would not
be material due to offsetting foreign tax credits generated by the repatriation
of such earnings.
22
<PAGE>
During 1992, the Company reached a settlement with the IRS to resolve all
pending federal income tax issues for the 1978 through 1986 tax years. As a
result of the settlement, the Company revised its estimates of deferred income
taxes and related interest expense. Accordingly, the reversal of deferred income
taxes had the effect of increasing net income by $8.2 million, while the
reversal of the related interest reduced interest expense by $8.8 million. The
Company has reached agreement with the IRS on all federal income tax issues
through and including the 1991 tax year.
At September 30, 1994, the Company had approximately $46.9 million of general
business, alternative minimum tax and foreign tax credit carryforwards available
to offset future payments of federal income taxes expiring in varying amounts
between 1995 and 2009.
- --------------------------------------------------------------------------------
Note 9
Industry Segment and Geographic Information
The Company operates principally in two industry segments - oilfield and
process.
Oilfield Industry: Manufacture and sale of equipment and provision of services
used during and subsequent to the drilling of oil and gas wells to achieve
safety and long-term productivity, to provide structural integrity to protect
against pressure and corrosion damage and to stimulate or rework wells during
their productive lives by chemical, mechanical or other stimulation means.
Process Industry: Manufacture and sale of process equipment for separating and
treating liquids, solids and slurries for environmental and other process
industries.
Disposed Businesses: The disposed businesses segment information includes the
results of significant operations that were sold during the three years
presented as discussed in Note 2. Prior years segment information has been
restated to reflect the 1994 dispositions.
Other: The Company maintains worldwide manufacturing plants and service
locations to serve these industry segments.
Intersegment sales and transfers between geographic areas are priced at the
estimated fair value of the products or services negotiated between the selling
and receiving units. Operating profit is total revenues less costs and expenses
(including unusual charges-net) but before deduction of general corporate
expenses totalling $32.8 million, $35.6 million and $25.7 million in 1994, 1993
and 1992, respectively. Identifiable assets are those assets that are used by
the Company's operations in each industry segment or are identified with the
Company's operations in each geographic area. Corporate assets consist
principally of cash, assets held for disposal, investments and notes receivable
which amount to $281.3 million, $231.2 million and $199.4 million at September
30, 1994, 1993 and 1992, respectively.
Summarized financial information concerning the industry segments and
geographic areas in which the Company operated at September 30, 1994, 1993 and
1992 and for each of the years then ended is shown in the following tables:
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Baker Hughes Incorporated
<TABLE>
<CAPTION>
Disposed
(In thousands) Oilfield Process Businesses Eliminations Total
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operations by Industry Segment:
1994
Revenues from unaffiliated customers:
Sales $1,366,555 $264,725 $ 96,454 $1,727,734
Services and rentals 744,086 32,938 777,024
Intersegment sales 297 589 4,678 $ (5,564)
--------------------------------------------------------------------------
Total revenues 2,110,938 298,252 101,132 (5,564) 2,504,758
Operating profit 157,906 21,628 39,116 218,650
Identifiable assets 2,504,512 188,265 30,594 (4,939) 2,718,432
Capital expenditures 100,514 4,188 2,713 1,224 108,639
Depreciation and amortization 141,369 7,260 4,053 1,513 154,195
1993
Revenues from unaffiliated customers:
Sales $1,332,407 $278,849 $334,537 $1,945,793
Services and rentals 710,725 29,479 15,700 755,904
Intersegment sales 359 522 5,154 $ (6,035)
--------------------------------------------------------------------------
Total revenues 2,043,491 308,850 355,391 (6,035) 2,701,697
Operating profit (loss) 178,776 21,820 (6,130) 194,466
Identifiable assets 2,461,070 167,891 285,465 (2,330) 2,912,096
Capital expenditures 106,562 6,059 13,548 732 126,901
Depreciation and amortization 154,304 7,786 15,071 1,457 178,618
1992
Revenues from unaffiliated customers:
Sales $1,238,743 $253,719 $347,309 $1,839,771
Services and rentals 651,157 26,272 21,315 698,744
Intersegment sales 931 44 4,576 $ (5,551)
--------------------------------------------------------------------------
Total revenues 1,890,831 280,035 373,200 (5,551) 2,538,515
Operating profit 100,321 5,471 13,882 119,674
Identifiable assets 2,519,863 171,809 325,911 (4,031) 3,013,552
Capital expenditures 121,321 3,594 12,511 449 137,875
Depreciation and amortization 131,139 7,270 16,615 1,019 156,043
</TABLE>
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Baker Hughes Incorporated
<TABLE>
<CAPTION>
Western Hemisphere Eastern Hemisphere
------------------------- -------------------------
(In thousands) United States Other Europe Other Eliminations Total
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operations by Geographic Area:
1994
Revenues from unaffiliated
customers:
Sales $ 963,413 $253,834 $269,604 $240,883 $1,727,734
Services and rental s 308,106 108,282 209,875 150,761 777,024
Transfers between geographic
areas 180,345 23,177 36,588 23,433 $(263,543)
-------------------------------------------------------------------------------------------------
Total revenues 1,451,864 385,293 516,067 415,077 (263,543) 2,504,758
Operating profit 60,391 59,688 38,125 60,446 218,650
Identifiable assets 1,631,374 278,109 552,104 411,317 (154,472) 2,718,432
Export sales of U.S. companies 77,219 24,837 142,524 244,580
1993
Revenues from unaffiliated
customers:
Sales $ 929,943 $254,678 $371,346 $389,826 $1,945,793
Services and rentals 281,844 95,325 195,224 183,511 755,904
Transfers between geographic
areas 175,411 23,039 48,252 28,183 $(274,885)
-----------------------------------------------------------------------------------------------
Total revenues 1,387,198 373,042 614,822 601,520 (274,885) 2,701,697
Operating profit (loss) (20,640) 43,077 65,606 106,423 194,466
Identifiable assets 1,689,377 298,381 663,132 402,428 (141,222) 2,912,096
Export sales of U.S. companies 79,236 14,503 197,607 291,346
1992
Revenues from unaffiliated
customers:
Sales $ 893,953 $210,119 $418,041 $317,658 $1,839,771
Services and rentals 231,327 75,764 276,546 115,107 698,744
Transfers between geographic
areas 194,531 13,388 42,496 9,250 $(259,665)
-----------------------------------------------------------------------------------------------
Total revenues 1,319,811 299,271 737,083 442,015 (259,665) 2,538,515
Operating profit (loss) (87,312) 13,476 139,749 53,761 119,674
Identifiable assets 1,795,343 269,994 793,440 326,990 (172,215) 3,013,552
Export sales of U.S. companies 79,320 24,431 146,036 249,787
</TABLE>
25
<PAGE>
- -------------------------------------------------------------------------------
Note 10
Employee Benefit Plans
Postretirement Benefits Other Than Pensions
The Company provides postretirement health care and life insurance benefits for
substantially all U.S. employees. In 1993 and 1992, the Company recognized $9.5
million and $8.4 million, respectively, as expense for postretirement health
care and life insurance benefits. Expense recognized in 1994 under SFAS No. 106
was $8.8 million. The Company's postretirement plan is not funded.
The following table sets forth the funded status at September 30, 1994:
<TABLE>
<CAPTION>
(In thousands)
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation ("APBO"):
<S> <C>
Retirees $ (83,449)
Fully eligible active plan participants (9,856)
Other active plan participants (19,920)
---------
Total (113,225)
Unrecognized net loss 7,595
---------
Accrued postretirement benefit cost $(105,630)
=========
</TABLE>
Net periodic postretirement benefit cost for 1994 consists of the following:
<TABLE>
<CAPTION>
(In thousands)
- --------------------------------------------------------------------------------
<S> <C>
Service cost of benefits earned $1,300
Interest cost on APBO 7,500
------
Net periodic postretirement benefit cost $8,800
======
</TABLE>
The assumed health care cost trend rate used in measuring the APBO as of
September 30, 1994 was 9.0% for 1995 declining gradually each successive year
until it reaches 5% in 2002, after which it remains constant. A 1% increase in
the trend rate for health care costs would have increased the APBO by
approximately 9% and the aggregate of the service and interest cost components
of the net periodic postretirement benefit cost by approximately 11%. The
assumed discount rate used in determining the APBO was 7.5%.
Defined Benefit Pension Plans
The Company has several noncontributory defined benefit pension plans covering
various domestic and foreign employees. Pension expense for these plans was $1.4
million, $1.3 million and $3.0 million in 1994, 1993 and 1992, respectively.
Generally, the Company makes annual contributions to the plans in amounts
necessary to meet minimum governmental funding requirements.
Net pension expense includes the following components:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 954 $ 1,413 $ 4,345
Interest cost on projected benefit obligation 2,329 3,348 6,582
Actual return on assets (1,710) (3,545) (3,019)
Net amortization and deferral (216) 126 (4,954)
---------------------------
Net pension expense $ 1,357 $ 1,342 $ 2,954
===========================
</TABLE>
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Baker Hughes Incorporated
The weighted average assumptions used in the accounting for the defined
benefit plans were:
<TABLE>
<CAPTION>
1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.7% 7.3% 9.5%
Rates of increase in compensation levels 3.5% 4.5% 5.5%
Expected long-term rate of return on assets 8.6% 8.8% 9.5%
</TABLE>
The following table sets forth the funded status and amounts recognized in the
Company's consolidated statements of financial position at September 30, 1994
and 1993:
<TABLE>
<CAPTION>
1994 1993
Overfunded Underfunded Overfunded Underfunded
(In thousands) Plans Plans Plans Plans
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $(15,309) $(12,922) $(16,800) $(12,654)
=================================================
Accumulated benefit obligation $(15,518) $(13,848) $(17,013) $(13,509)
=================================================
Projected benefit obligation $(16,812) $(16,185) $(17,509) $(15,631)
Plan assets at fair value 22,159 7,387 20,368 6,178
-------------------------------------------------
Projected benefit obligation (in excess of) less than plan assets 5,347 (8,798) 2,859 (9,453)
Unrecognized prior service cost 259 98 351 942
Unrecognized net (gain) loss (2,024) 239 79 760
Unrecognized net liability at transition 320 97 314 822
-------------------------------------------------
Prepaid pension cost (pension liability) $ 3,902 $ (8,364) $ 3,603 $ (6,929)
=================================================
</TABLE>
During 1993, the Company terminated certain defined benefit pension plans. A
net gain of $3.3 million was recorded in connection with the terminations.
Pension plan assets are primarily mortgages, private placements, bonds and
common stocks.
Thrift Plan
Virtually all employees not covered under one of the Company's pension plans are
eligible to participate in the Company sponsored Thrift Plan. The Thrift Plan
allows eligible employees to elect to contribute from 2% to 15% of their
salaries to an investment trust. Employee contributions are matched by the
Company at the rate of $.50 per $1.00 up to 6% of the employee's salary.
Beginning January 1, 1995, the Company matching will change to $1.00 per $1.00
employee contribution for the first 2% and $.50 per $1.00 employee contribution
for the next 4% of the employee's salary. In addition, the Company contributes
for all eligible employees between 2% and 5% of their salary depending on the
employee's age as of January 1 each year. Company contributions become fully
vested to the
27
<PAGE>
employee after five years of employment. The Company's contributions to the
Thrift Plan and other defined contribution plans amounted to $26.3 million,
$23.6 million and $21.0 million in 1994, 1993 and 1992, respectively.
SFAS No. 112 "Employers' Accounting for Postemployment Benefits," was issued
by the Financial Accounting Standards Board in November 1992. The statement
requires accrual basis accounting for such benefits as opposed to the Company's
current method of cash basis accounting. The Company will adopt this statement
effective October 1, 1994. The cumulative effect due to the change in accounting
will be a charge to income of $14.6 million, net of a $7.9 million tax benefit.
Expense under SFAS No. 112 for 1995 related to these benefits is not expected to
be significantly different from actual cash payments.
- --------------------------------------------------------------------------------
Note 11
Stockholder Rights Agreement and Other Matters
The Company has a Stockholder Rights Agreement to protect against coercive
takeover tactics. Pursuant to the agreement, the Company distributed to its
stockholders one Right for each outstanding share of common stock. Each Right
entitles the holder to purchase from the Company .01 of a share of the Series
One Junior Participating Preferred Stock and, under certain circumstances,
securities of the Company or an acquiring entity at 1/2 market value. The Rights
are exercisable only if a person or group either acquires 20% or more of the
Company's outstanding common stock or makes a tender offer for 30% or more of
the Company's common stock. The Rights may be redeemed by the Company at a price
of $.03 per Right at any time prior to a person or group acquiring 20% or more
of the Company's common stock. The Rights will expire on March 23, 1998.
Supplemental consolidated statement of operations information is as follows:
<TABLE>
<CAPTION>
(In thousands) 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maintenance and repairs $89,734 $92,801 $100,481
Operating leases (generally transportation equipment and warehouse facilities) 30,089 36,500 39,218
Research and development 37,393 41,067 44,615
Taxes other than payroll and income tax 24,755 25,094 21,906
Income taxes paid 39,397 43,112 27,976
Interest paid 55,488 65,673 66,794
Net foreign exchange translation losses 1,892 441 960
</TABLE>
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Baker Hughes Incorporated
- -------------------------------------------------------------------------------
Note 12
Litigation
Parker & Parsley
In May 1994, a settlement of litigation against its insurance carriers
provided the Company a recovery of $19.3 million, net of expenses, which was
recognized as an unusual credit in the third quarter of 1994. The Company had
previously recorded a charge to earnings of $24.5 million in the second quarter
of 1993 as a result of a litigation settlement for $57.5 million in May 1993
paid on behalf of a former affiliate, BJ Services Company USA, Inc. ("BJ") to
Parker & Parsley over alleged intentional product delivery or service variance
on a number of well stimulation projects. In connection with the initial public
offering by BJ in 1990, the Company had previously agreed to indemnify BJ for
damages and costs of litigation arising out of said allegations or similar
claims from any other customers prior to the date of the initial public
offering.
Glyn Snell
In August 1994, the Company made a payment of $7.5 million to settle a class
action suit on behalf of Glyn Snell and other royalty interest owners
implicating Dresser Industries, BJ, the Company and affiliates in damages to the
same wells included in the Parker & Parsley litigation.
Mission Resources
In September 1994, the Company and its insurers settled litigation requiring the
Company to pay $.8 million to Mission Resources, Inc.- II in connection with
product delivery or service variances on approximately 53 well stimulation
projects performed by its former subsidiary, BJ-Hughes in Kern County,
California. Although the suit did not name the Company as a defendant, the
allegations may have fallen within the Company's agreement, in connection with
the initial public offering by BJ, to indemnify it for damages, if any, and
costs of litigation arising out of any such claims.
Department of Justice Investigation
In July 1992, pursuant to an agreement with the Justice Department, HCC
pleaded guilty to a one count criminal information alleging that it had
conspired to fix the price of tricone rock bits for a period of nine weeks in
1989 in violation of Section 1 of the Sherman Act. A fine of $1.0 million was
imposed by the Court upon acceptance of the plea.
As a consequence of the Justice Department action, the Company and three other
major producers of tricone rock bits were sued civilly in a class action by
several litigants alleging damages as a consequence of the Sherman Act
violation. In April 1993, a $17.5 million settlement was approved by the Court
and a judgement dismissing claims against the Company on behalf of the class was
entered. A charge to earnings of $17.5 million was recorded in the first quarter
of 1993. In September 1993, the Court notified the Class that an Additional
Settlement Agreement had been entered into on behalf of the Class with two other
defendants. Because the prior settlement with the Company contained a most
favored nations clause requiring a refund to the Company if a later settlement
with any other defendants was more favorable, the Company received a refund of
$2.1 million in the first quarter of 1994. One antitrust action by a customer
who opted out of the class was settled for $1.0 million for which payment was
made by the Company in July 1994.
TRW Inc.
In January 1994, the Company paid $10.4 million to TRW Inc. ("TRW") to satisfy
a judgement TRW had obtained in connection with a damage suit filed against the
Company and affiliates in connection with the sale of certain disc and decanter
machines by the affiliates prior to the Company's acquisition of the affiliates
in 1989.
29
<PAGE>
Other
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.
- --------------------------------------------------------------------------------
Note 13
Environmental Matters
The Company's past and present operations include activities which are subject
to extensive federal and state environmental regulations.
The Company has been identified as a potentially responsible party ("PRP") in
remedial activities related to various "Superfund" sites. Applicable federal law
imposes joint and several liability on each PRP for the cleanup of these sites
leaving the Company with the uncertainty that it may be responsible for the
remediation cost attributable to other PRPs who are unable to pay their share of
the remediation costs. Generally, the Company has determined its share of such
total cost based on the ratio that the number of gallons of waste estimated to
be contributed to the site by the Company bears to the total number of gallons
of waste estimated to have been disposed at the site. The Company has accrued
what it believes to be its share of the total cost of remediation of these
Superfund sites. No accrual has been made under the joint and several liability
concept since the Company believes that the probability that it will have to pay
material costs above its share is remote due to the fact that the other PRPs
have substantial assets available to satisfy their obligation.
At September 30, 1994 and 1993, the Company had accrued approximately $18.8
million and $18.2 million, respectively, for remediation costs, including the
Superfund sites referred to above. The measurement of the accruals for
remediation costs is subject to uncertainties, including the evolving nature of
environmental regulations and the difficulty in estimating the extent and remedy
of environmental contamination. While recoveries from insurance coverage or
indemnification agreements may be available to the Company to mitigate the
remediation costs, such amounts have not been considered in measuring the
remediation accrual. The Company believes that the likelihood of material losses
in excess of those amounts recorded is remote.
- --------------------------------------------------------------------------------
Note 14
Commitments and Contingencies
At September 30, 1994, the Company had long-term operating leases covering
certain facilities and equipment on which minimum annual rental commitments for
each of the five years in the period ending September 30, 1999 are $24.9
million, $17.6 million, $12.9 million, $8.5 million and $6.8 million,
respectively, and $32.9 million in the aggregate thereafter. The Company has not
entered into any significant capital leases.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Baker Hughes Incorporated
- --------------------------------------------------------------------------------
Note 15
Quarterly Data (Unaudited):
Summarized quarterly financial data for the years ended September 30, 1994 and
1993 are shown in the table below:
<TABLE>
<CAPTION>
First Second Third Fourth Fiscal Year
(In thousands, except per share amounts) Quarter Quarter Quarter Quarter Total
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fiscal Year 1994:*
Revenues $624,562 $650,016 $590,532 $639,648 $2,504,758
Gross Profit** 104,882 114,747 100,293 102,091 422,013
Income before extraordinary loss and
cumulative effect of accounting changes 16,879 23,288 34,439 56,536 131,142
Net income (loss) (27,286) 23,288 22,651 24,004 42,657
Per share of common stock:
Income before extraordinary loss and
cumulative effect of accounting changes .10 .14 .22 .39 .85
Net income (loss) (.22) .14 .14 .16 .22
Dividends per share .115 .115 .115 .115 .46
Fiscal Year 1993:*
Revenues $684,073 $692,449 $670,416 $654,759 $2,701,697
Gross Profit** 107,942 116,107 104,130 110,973 439,152
Net income 4,210 2,799 23,831 28,016 58,856
Net income per share .01 .00 .15 .18 .34
Dividends per share .115 .115 .115 .115 .46
</TABLE>
- --------------
* See Notes 1, 2, 3 and 4 for information regarding accounting changes,
dispositions, unusual charges-net and the extraordinary loss, respectively.
** Represents revenues less (i) cost of sales, (ii) cost of services and
rentals (iii) research and engineering expense and (iv) marketing and field
service expense
Stock Prices by Quarter. The following graph sets forth the quarterly high and
low sales price per share of the Company's common stock on the New York Stock
Exchange Composite Tape:
[GRAPH OF BAKER HUGHES APPEARS HERE]
Quarter High Low
----------- ------ ------
1993 1st Quarter $24.50 $17.88
2nd Quarter 24.25 18.50
3rd Quarter 29.63 22.13
4th Quarter 28.25 21.25
1994 1st Quarter $24.75 $18.88
2nd Quarter 22.13 17.00
3rd Quarter 22.00 17.25
4th Quarter 22.13 18.38
31
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Azimuth Sales Ltd. Cayman Islands 100%
Baker Canada Holding, Inc. Delaware (6)
ACC Diamond Products de Venezuela C.A. Venezuela 100%
Baker Hughes Canada Inc. Canada 100%
Baker Hughes INTEQ Operating Division ---
Baker Hughes Mining Tools Operating Division ---
Baker Hughes Wyoming LLC Wyoming (20)
Baker Oil Tools Canada Operating Division ---
Baker Performance Chemicals Operating Division ---
Baker Supply Products Operating Division ---
Bird Machine of Canada Operating Division ---
Canada Intermediates/CHEM-LINK Trade Name ---
Centrilift Operating Division ---
Christensen Diamond Products del Peru S.A. Peru 100%
Econolift Systems Canada Operating Division ---
Eimco Fluid Process International Operating Division ---
Eimco Process Equipment Operating Division ---
Envirotech Chile Ltda. Chile (19)
Ramsey Comercio Industria Ltd. Brazil (8)
Baker Holdings (U.S.), Inc. Nevada 100%
Baker Hughes Limited England (2)
Baker Hughes (BJ) Ltd. Scotland 100%
Baker Hughes France S.A. France (1)
Baker Hughes Angola S.A.R.L. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Milpark Operating Division ---
Baker Hughes INTEQ S.A. Gabon (27)
Baker Hughes INTEQ Administrative Services S.A.R.L. France 100%
Baker Hughes INTEQ-France S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
</TABLE>
Page 1
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
CECA, U.A.E. Abu Dhabi 100%
CKS Cameroon S.A.R.L. Cameroon 100%
CKS Congo S.A.R.L. Congo 100%
CKS Drilling Fluids Services, Inc. Delaware 100%
CKS Espanola S.A. Spain 80%
CKS Norge A/S Norway 100%
Drilling Fluids Services (Far East) Sdn. Bhd. Malaysia 70%
Malaysia Mud and Chemicals Sdn. Bhd. Malaysia 50%
EXLOG Samega S.N.C. France 100%
Milpark Operating Division ---
Milpark- CKS de Angola Angola 100%
Milpark Nigeria Ltd. Nigeria 60%
Baker International S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Wemco Eimco S.A. France 100%
Baker Hughes INTEQ Operating Division ---
Baker Hughes INTEQ (M) Sdn. Bhd. Malaysia 49%
Baker Hughes Process Systems Operating Division ---
Baker Oil Tools U.K. Operating Division ---
Baker Oil Tools India (Private) Limited India (3)
Baker Oil Tools (UK) Limited England 100%
Baker Hughes France S.A. France (1)
Baker Hughes Angola S.A.R.L. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Milpark Operating Division ---
Baker Hughes INTEQ S.A. Gabon (27)
Baker Hughes INTEQ Administrative Services S.A.R.L. France 100%
Baker Hughes INTEQ-France S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
CECA, U.A.E Abu Dhabi 100%
</TABLE>
Page 2
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
CKS Cameroon S.A.R.L. Cameroon 100%
CKS Congo S.A.R.L. Congo 100%
CKS Drilling Fluids Services, Inc. Delaware 100%
CKS Espanola S.A. Spain 80%
CKS Norge A/S Norway 100%
Drilling Fluids Services (Far East) Sdn. Bhd. Malaysia 70%
Malaysia Mud and Chemicals Sdn. Bhd. Malaysia 50%
EXLOG Samega S.N.C. France 100%
Milpark Operating Division ---
Milpark - CKS de Angola Angola 100%
Milpark Nigeria Ltd. Nigeria 60%
Baker International S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Wemco Eimco S.A. France 100%
Baker Performance Chemicals Operating Division ---
Aquaness Assumed Name ---
Baker Production Services (UK) Limited England 100%
Baker Oil Treating India (Private) Ltd. India (25)
Baker Service Tools Limited England 100%
Centrilift U.K. Operating Division ---
Eastman Christensen de Espana, S.A. Spain 100%
Eden Engineering Limited England 100%
Eimco Process Equipment Limited England 100%
EnviroTech Pumpsystems Operating Division ---
Hughes Christensen Operating Division ---
Hughes Tool Company of Australia Limited Delaware 100%
Hughes Tool Company Limited England 100%
Baker Hughes France S.A. France (1)
Baker Hughes Angola S.A.R.L. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
</TABLE>
Page 3
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Milpark Operating Division ---
Baker Hughes INTEQ S.A. Gabon (27)
Baker Hughes INTEQ Administrative Services S.A.R.L. France 100%
Baker Hughes INTEQ-France S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
CECA, U.A.E. Abu Dhabi 100%
CKS Cameroon S.A.R.L. Cameroon 100%
CKS Congo S.A.R.L. Congo 100%
CKS Drilling Fluids Services, Inc. Delaware 100%
CKS Espanola S.A. Spain 80%
CKS Norge A/S Norway 100%
Drilling Fluids Services (Far East) Sdn. Bhd. Malaysia 70%
Malaysia Mud and Chemicals Sdn. Bhd. Malaysia 50%
EXLOG Samega S.N.C. France 100%
Milpark Operating Division ---
Milpark - CKS de Angola Angola 100%
Milpark Nigeria Ltd. Nigeria 60%
Baker International S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Wemco Eimco S.A. France 100%
Baker Service Tools B.V. The Netherlands 100%
Centrilift Netherlands Operating Division ---
Lombard Baker Leasing Co. England Partnership 49%
P.T. Eastman Christensen Indonesia Indonesia (26)
Teleco Oilfield Services (Europe) Limited Scotland 100%
Tri-State Oil Tool (U.K.) Limited England 100%
Wemco G.B. Operating Division ---
Baker Quimica de Colombia S.A. Colombia (13)
Eimco-Wemco de Colombia S.A. Colombia (21)
Baker Hughes Australia Holding, Inc. Delaware (4)
</TABLE>
Page 4
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Baker Hughes Australia Pty. Limited Australia (30)
BHA Superannuation (Nominees) Pty. Limited Australia 100%
Baker Hughes INTEQ Operating Division ---
Baker Hughes Mining Tools of Australia Operating Division ---
Baker Oil Tools Operating Division ---
Centrilift-Australia Operating Division ---
Eastman Christensen (Australia) Pty. Limited Australia 100%
Eastman Teleco Operating Division ---
EXLOG Australia Operating Division ---
Hughes Christensen Operating Division ---
Milpark Drilling Fluids Operating Division ---
Teleco Oilfield Services Pty. Limited Western Australia 100%
Baker Hughes Equipamentos Ltda. Brazil (5)
Baker Hughes Equipamentos Ltda. Operating Division ---
Centrilift Brazil Operating Division ---
Exploration Logging Brazil Operating Division ---
Hughes Tool do Brazil Operating Division ---
Baker Hughes Finance, Inc. Delaware 100%
Baker Hughes Environmental Services, Inc. Delaware 100%
Baker Hughes Treatment Services D/B/A ---
Baker Hughes France S.A. France (1)
Baker Hughes Angola S.A.R.L. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Milpark Operating Division ---
Baker Hughes INTEQ S.A. Gabon (27)
Baker Hughes INTEQ Administrative Services S.A.R.L. France 100%
Baker Hughes INTEQ-France S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
CECA, U.A.E. Abu Dhabi 100%
CKS Cameroon S.A.R.L. Cameroon 100%
</TABLE>
Page 5
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
CKS Congo S.A.R.L. Congo 100%
CKS Drilling Fluids Services, Inc. Delaware 100%
CKS Espanola S.A. Spain 80%
CKS Norge A/S Norway 100%
Drilling Fluids Services (Far East) Sdn. Bhd. Malaysia 70%
Malaysia Mud and Chemicals Sdn. Bhd. Malaysia 50%
EXLOG Samega S.N.C. France 100%
Milpark Operating Division ---
Milpark - CKS de Angola Angola 100%
Milpark Nigeria Ltd. Nigeria 60%
Baker International S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Wemco Eimco S.A. France 100%
Baker Hughes FSC Inc. Barbados 100%
Baker Hughes Holding Company Delaware 100%
American Tricones, Inc. Delaware 100%
Herramientas y Triconos, S.A. de C.V. Mexico (7)
Proveedores Para Operaciones Energeticas S.A. de C.V. Mexico (12)
Baker Hughes Argentina, S.A. Argentina 100%
Hughes Tool Company Chile Ltda. Chile 95%
Kobe Argentina S.A. Operating Division ---
Baker Hughes Oilfield Operations, Inc. California 100%
Baker Canada Holding, Inc. Delaware (6)
ACC Diamond Products de Venezuela C.A. Venezuela 100%
Baker Hughes Canada Inc. Canada 100%
Baker Hughes INTEQ Operating Division ---
Baker Hughes Mining Tools Operating Division ---
Baker Hughes Wyoming LLC Wyoming (20)
Baker Oil Tools Canada Operating Division ---
Baker Performance Chemicals Operating Division ---
</TABLE>
Page 6
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Baker Supply Products Operating Division ---
Bird Machine of Canada Operating Division ---
Canada Intermediates/CHEM-LINK Trade Name ---
Centrilift Operating Division ---
Christensen Diamond Products del Peru S.A. Peru 100%
Econolift Systems Canada Operating Division ---
Eimco Fluid Process International Operating Division ---
Eimco Process Equipment Operating Division ---
Envirotech Chile Ltda. Chile (19)
Ramsey Comercio Industria Ltd. Brazil (8)
Baker Eastern S.A. Panama 100%
Baker Eastern S.A. Venezuela (9)
Baker Sand Control Venezuela Operating Division ---
Baker Eastern S.A. (Libya) Operating Division ---
Baker Nigeria Ltd. Nigeria (11)
Herramientas Interamericanas S.A. de C.V. Mexico (16)
Baker Hughes Services de Mexico S.A. de C.V. Mexico (31)
Baker Far East Ltd. Bermuda 100%
Baker Hughes Australia Holding, Inc. Delaware (4)
Baker Hughes Australia Pty. Limited Australia (30)
BHA Superannuation (Nominees) Pty. Limited Australia 100%
Baker Hughes INTEQ Operating Division ---
Baker Hughes Mining Tools of Australia Operating Division ---
Baker Oil Tools Operating Division ---
Centrilift-Australia Operating Division ---
Eastman Christensen (Australia) Pty. Limited Australia 100%
Eastman Teleco Operating Division ---
EXLOG Australia Operating Division ---
Hughes Christensen Operating Division ---
Milpark Drilling Fluids Operating Division ---
</TABLE>
Page 7
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Teleco Oilfield Services Pty. Limited Western Australia 100%
Baker Hughes (C.I.) Ltd. Cayman Islands 100%
Baker Hughes Singapore Pte. Singapore (33)
Baker Hughes INTEQ Operating Division ---
Baker Hughes Process Systems Operating Division ---
Eimco Process Equipment Operating Division ---
Baker Oil Tools Asia Pacific Operating Division ---
Hughes Christensen/Singapore Operating Division ---
Tri-State Oil Tools Singapore Operating Division ---
Bird Machine Operating Division ---
Centrilift Congo Operating Division ---
Baker Hughes INTEQ Operating Division ---
Baker Hughes INTEQ Cameroon Cameroon 100%
Baker Hughes INTEQ Gabon Gabon 100%
Baker Hughes INTEQ S.A. Gabon (27)
Baker Hughes INTEQ de Venezuela S.A. Venezuela 100%
Baker Hughes INTEQ International Branches, Inc. Delaware 100%
Baker Hughes Australia Holding, Inc. Delaware (4)
Baker Hughes Australia Pty. Limited Australia (30)
BHA Superannuation (Nominees) Pty. Limited Australia 100%
Baker Hughes INTEQ Operating Division ---
Baker Hughes Mining Tools of Australia Operating Division ---
Baker Oil Tools Operating Division ---
Centrilift-Australia Operating Division ---
Eastman Christensen (Australia) Pty. Limited Australia 100%
Eastman Teleco Operating Division ---
EXLOG Australia Operating Division ---
Hughes Christensen Operating Division ---
Milpark Drilling Fluids Operating Division ---
Teleco Oilfield Services Pty. Limited Western Australia 100%
</TABLE>
Page 8
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Baker Hughes Mining Tools Peru, S.A. Peru 99%
Baker Hughes Norge A/S Norway 100%
Baker Oil Tools Denmark Operating Division ---
Baker Hughes Services de Mexico S.A. de C.V. Mexico (31)
Baker Hughes Services International, Inc. Delaware 100%
Baker Hughes S.P.A. Italy (14)
Baker Oil Tools (Italia) Operating Division ---
Eastman Teleco Operating Division ---
Eimco Operating Division ---
Wemco Operating Division ---
Hughes Christensen Operating Division ---
Baker Hughes Systems (Bolivia) Ltda. Bolivia 100%
Baker Hughes Thailand Co., Ltd. Thailand 100%
Baker Hughes Ventures, Inc. Delaware 100%
Baker Hughes World Trade, Inc. Delaware 100%
Baker International Cote D'Ivoire S.A.R.L. Ivory Coast (10)
Baker (Malaysia) Sdn. Bhd. Malaysia 100%
Baker Oil Tools Malaysia Operating Division ---
Baker Nigeria Ltd. Nigeria (11)
Baker Oil Tools Operating Division ---
Baker Oil Tools Surface Safety Systems Company D/B/A ---
Elder Oil Tools Operating Division ---
Tri-State Oil Tools Operating Unit ---
Baker Oil Tools (Brunei) Sdn. Bhd. Brunei 50%
Baker Oil Tools de France S.A.R.L. France 19%
Baker Performance Chemicals Incorporated California 100%
Aquaness Chemicals Operating Division ---
Aquaness Industrias de Venezuela, S.A. Venezuela 100%
Aquaness Quimica de Venezuela S.A. Venezuela 55%
Baker Quimica de Venezuela S.A. Venezuela 55%
</TABLE>
Page 9
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Eimco-Wemco Equipos de Venezuela S.A. Venezuela (22)
Venezolana de Resinas, C.A. Venezuela 55%
Baker Canada Holding, Inc. Delaware (6)
ACC Diamond Products de Venezuela C.A. Venezuela 100%
Baker Hughes Canada Inc. Canada 100%
Baker Hughes INTEQ Operating Division ---
Baker Hughes Mining Tools Operating Division ---
Baker Hughes Wyoming LLC Wyoming (20)
Baker Oil Tools Canada Operating Division ---
Baker Performance Chemicals Operating Division ---
Baker Supply Products Operating Division ---
Bird Machine of Canada Operating Division ---
Canada Intermediates/CHEM-LINK Trade Name ---
Centrilift Operating Division ---
Christensen Diamond Products del Peru S.A. Peru 100%
Econolift Systems Canada Operating Division ---
Eimco Fluid Process International Operating Division ---
Eimco Process Equipment Operating Division ---
Envirotech Chile Ltda. Chile (19)
Ramsey Comercio Industria Ltd. Brazil (8)
Baker Performance Chemicals Incorporated Delaware 100%
Alamex, Inc. Delaware 100%
Camcor-Chem, Inc. Delaware 100%
ChemLink Petroleum Chemicals, Inc. Delaware 100%
P.T. Elnusa Chemlink Indonesia 49%
Baker Pipeline Products Operating Division ---
Baker Quimica de Colombia S.A. Colombia (13)
Eimco-Wemco de Colombia S.A. Colombia (21)
ChemLink Operating Division ---
Magna Herbicide D/B/A ---
</TABLE>
Page 10
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Magna International Limited Bermuda 100%
Oreprep D/B/A ---
Baker Production Services, Inc. Texas 100%
Baker Production Services (Bermuda) Ltd. Bermuda 100%
Baker Eastern S.A. Venezuela (9)
Baker Sand Control Venezuela Operating Division ---
Baker Mira Saudi Arabia Limited Saudi Arabia (32)
Baker Production Technology International Inc. Nevada 100%
Baker Hughes Australia Holding, Inc. Delaware (4)
Baker Hughes Australia Pty. Limited Australia (30)
BHA Superannuation (Nominees) Pty. Limited Australia 100%
Baker Hughes INTEQ Operating Division ---
Baker Hughes Mining Tools of Australia Operating Division ---
Baker Oil Tools Operating Division ---
Centrilift-Australia Operating Division ---
Eastman Christensen (Australia) Pty. Limited Australia 100%
Eastman Teleco Operating Division ---
EXLOG Australia Operating Division ---
Hughes Christensen Operating Division ---
Milpark Drilling Fluids Operating Division ---
Teleco Oilfield Services Pty. Limited Western Australia 100%
Baker Hughes (Deutschland) GmbH Germany 100%
Baker Hughes INTEQ GmbH Germany 100%
Baker Oil Tools Germany Operating Division ---
Centrilift Germany Operating Division ---
Eastman Whipstock GmbH Germany 100%
Eimco Operating Division ---
Gummiwerk Christensen-Netzsch GmbH Germany 50%
Hughes Christensen Operating Division ---
Corband Bandstahlbearbeitungs-Gesellschaft mbH Germany 100%
</TABLE>
Page 11
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Lynes Caribbean, Inc. Nevada 100%
Lynes International Services Inc. Panama 100%
Baker Quimica de Colombia S.A. Colombia (13)
Eimco-Wemco de Colombia S.A. Colombia (21)
Baker Real Estate Operating Division --
Baker RTC (Delaware), Inc. Delaware 100%
Baker Canada Holding, Inc. Delaware (6)
ACC Diamond Products de Venezuela C.A. Venezuela 100%
Baker Hughes Canada Inc. Canada 100%
Baker Hughes INTEQ Operating Division --
Baker Hughes Mining Tools Operating Division --
Baker Hughes Wyoming LLC Wyoming (20)
Baker Oil Tools Canada Operating Division --
Baker Performance Chemicals Operating Division --
Baker Supply Products Operating Division --
Bird Machine of Canada Operating Division --
Canada Intermediates/CHEM-LINK Trade Name --
Centrilift Operating Division --
Christensen Diamond Products del Peru S.A. Peru 100%
Econolift Systems Canada Operating Division --
Eimco Fluid Process International Operating Division --
Eimco Process Equipment Operating Division --
Envirotech Chile Ltda. Chile (19)
Ramsey Comercio Industria Ltd. Brazil (8)
Baker Hughes Australia Holding, Inc. Delaware (4)
Baker Hughes Australia Pty. Limited Australia (30)
BHA Superannuation (Nominees) Pty. Limited Australia 100%
Baker Hughes INTEQ Operating Division --
Baker Hughes Mining Tools of Australia Operating Division --
Baker Oil Tools Operating Division --
</TABLE>
Page 12
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Centrilift-Australia Operating Division ---
Eastman Christensen (Australia) Pty. Limited Australia 100%
Eastman Teleco Operating Division ---
EXLOG Australia Operating Division ---
Hughes Christensen Operating Division ---
Milpark Drilling Fluids Operating Division ---
Teleco Oilfield Services Pty. Limited Western Australia 100%
Baker RTC, Inc. Texas 100%
Baker Canada Holding, Inc. Delaware (6)
ACC Diamond Products de Venezuela C.A. Venezuela 100%
Baker Hughes Canada Inc. Canada 100%
Baker Hughes INTEQ Operating Division ---
Baker Hughes Mining Tools Operating Division ---
Baker Hughes Wyoming LLC Wyoming (20)
Baker Oil Tools Canada Operating Division ---
Baker Performance Chemicals Operating Division ---
Baker Supply Products Operating Division ---
Bird Machine of Canada Operating Division ---
Canada Intermediates/CHEM-LINK Trade Name ---
Centrilift Operating Division ---
Christensen Diamond Products del Peru S.A. Peru 100%
Econolift Systems Canada Operating Division ---
Eimco Fluid Process International Operating Division ---
Eimco Process Equipment Operating Division ---
Envirotech Chile Ltda. Chile (19)
Ramsey Comercio Industria Ltd. Brazil (8)
Baker RTC International Limited Bermuda 100%
Baker Hughes Services de Venezuela C.A. Venezuela 100%
Centrilift Colombia/Ecuador Operating Division ---
Reed Rock do Brazil Industrial Ltda. Brazil 99%
</TABLE>
Page 13
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Baker Sand Control Limited Bermuda 100%
Baker Eastern S.A. Venezuela (9)
Baker Sand Control Venezuela Operating Division ---
Centrilift-Congo Operating Division ---
Baker Sand Control Services Pte. Ltd. Singapore 100%
Baker Sand Control Servicios Tecnicos, Ltda. Brazil (15)
Baker Transworld, Inc. California 100%
Baker Canada Holding, Inc. Delaware (6)
ACC Diamond Products de Venezuela C.A. Venezuela 100%
Baker Hughes Canada Inc. Canada 100%
Baker Hughes INTEQ Operating Division ---
Baker Hughes Mining Tools Operating Division ---
Baker Hughes Wyoming LLC Wyoming (20)
Baker Oil Tools Canada Operating Division ---
Baker Performance Chemicals Operating Division ---
Baker Supply Products Operating Division ---
Bird Machine of Canada Operating Division ---
Canada Intermediates/CHEM-LINK Trade Name ---
Centrilift Operating Division ---
Christensen Diamond Products del Peru S.A. Peru 100%
Econolift Systems Canada Operating Division ---
Eimco Fluid Process International Operating Division ---
Eimco Process Equipment Operating Division ---
Envirotech Chile Ltda. Chile (19)
Ramsey Comercio Industria Ltd. Brazil (8)
Baker Hughes de Venezuela S.A. Venezuela 100%
Eimco-Wemco de Colombia S.A. Colombia (21)
Baker Transworld, Inc. y Compania Limitada Chile 100%
Bakerline Far East, Inc. Delaware 100%
Bakerline Services Ltd. Cayman Islands 100%
</TABLE>
Page 14
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Centrilift-U.S. Operating Division ---
Allen Service Operating Division ---
Clays Pump Service Operating Division ---
Centrilift-Peru Operating Division ---
Christensen-Netzsch Rubber, Inc. Oklahoma 50%
ChuanShi Christensen Diamond Bit Company, Ltd. China 50%
DC Oil Tools Operating Division ---
Eastman Christensen Marketing, Inc. Utah 100%
Eastman Whipstock (Cameroon) S.A.R.L. Cameroon 100%
Eisenman Chemical Company Delaware 100%
EXLOG Arabian Gulf Limited Jersey 49%
EXLOG A.G. Limited Jersey 100%
EXLOG International, Inc. Panama 100%
EXLOG Egypt Operating Division ---
EXLOG International-Asia Pacific Operating Division ---
EXLOG International-Papua New Guinea Operating Division ---
PT Sarana Indonesia Operating Division ---
EXLOG (Malaysia) Sdn. Bhd. Malaysia 100%
EXLOG Overseas, Inc. Panama 100%
EXLOG S.A. Nevada 100%
Baker Hughes Equipamentos Ltda. Brazil (5)
Baker Hughes Equipamentos Ltda. Operating Division ---
Centrilift Brazil Operating Division ---
Exploration Logging Brazil Operating Division ---
Hughes Tool do Brazil Operating Division ---
Baker Hughes INTEQ S.A. Argentina 100%
EXLOG de Venezuela S.A. Venezuela 100%
Exploration Logging Espanola S.A. Spain 100%
Exploration Logging (Ireland) Limited Ireland 100%
Exploration Logging Netherland B.V. The Netherlands 100%
</TABLE>
Page 15
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Fluidos de Perforacion Milchem Guatemala S.A. Guatemala 100%
Holtex, Inc. Delaware 100%
Proveedores Para Operaciones Energeticas S.A. de C.V. Mexico (12)
Precision Mecanica, S.A. de C.V. Mexico 100%
Herramientas y Triconos, S.A. de C.V. Mexico (7)
Proveedores Para Operaciones
Energeticas S.A. de C.V. Mexico (12)
Hughes Christensen Company Operating Division ---
Baker Hughes Mining Tools Operating Division ---
Hughes MPD Operating Division ---
Hughes Services Middle East Company Delaware 100%
Mid-East Drill Bit Manufacturing Co. Ltd. Saudi Arabia 50%
Hughes Tool (C.I.) Ltd. Cayman Islands 100%
Abunayyan-Hughes Tool S.A. Ltd. Co. Saudi Arabia 50%
Baker Hughes Singapore Pte. Singapore (33)
Baker Hughes INTEQ Operating Division ---
Eimco Process Equipment Operating Division ---
Baker Hughes Process Systems Operating Division ---
Baker Oil Tools Asia Pacific Operating Division ---
Hughes Christensen/Singapore Operating Division ---
Tri-State Oil Tools Singapore Operating Division ---
Bird Machine Operating Division ---
Centrilift Congo Operating Division ---
Hughes Tool Co. S.A. Delaware 100%
International Mud Services Inc. Panama 100%
Kobe WHTC California 100%
Lufkin Argentina S.A. Argentina 50%
Lynes, Inc. Texas 100%
Baker Canada Holding, Inc. Delaware (6)
ACC Diamond Products de Venezuela C.A. Venezuela 100%
Baker Hughes Canada Inc. Canada 100%
</TABLE>
Page 16
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Baker Hughes INTEQ Operating Division --
Baker Hughes Mining Tools Operating Division --
Baker Hughes Wyoming LLC Wyoming (20)
Baker Oil Tools Canada Operating Division --
Baker Performance Chemicals Operating Division --
Baker Supply Products Operating Division --
Bird Machine of Canada Operating Division --
Canada Intermediates/CHEM-LINK Trade Name --
Centrilift Operating Division --
Christensen Diamond Products del Peru S.A. Peru 100%
Econolift Systems Canada Operating Division --
Eimco Fluid Process International Operating Division --
Eimco Process Equipment Operating Division --
Envirotech Chile Ltda. Chile (19)
Ramsey Comercio Industria Ltd. Brazil (8)
Milpark de Venezuela, S.A. Venezuela 100%
Milpark International Limited Bahamas 100%
Milchem International (Nigeria) Ltd. Nigeria 100%
Milpark Kuwait for Drilling Fluids Company Kuwait 49%
Milchem Libya Co., Ltd. Libya 49%
P. T. Milchem Indonesia Indonesia 75%
Milpark Western Hemisphere Incorporated Delaware 100%
Plumayen Holdings Inc. Panama 100%
Plumayen do Brazil Ltda. Brazil 100%
Productos Industriales Mineros S.A. (Prima) Colombia 100%
E.P.E.C.-Colombia Prima Operating Division --
R.F. Smith Corporation California 100%
Servicios Y Herramientas Petroleras S.A. de C.V. Mexico 100%
Baker Hughes Immobiliaria Mexico 100%
Herramientas Interamericanas S.A. de C.V. Mexico (16)
</TABLE>
Page 17
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Baker Hughes Services de Mexico S.A. de C.V. Mexico (31)
Supply Products Operating Division --
Teleco Administrative Services S.A.R.L. France 100%
Teleco Inc. Delaware 100%
Teleco Oilfield Services International Ltd. Cayman 100%
Teleco Oilfield Services Offshore Ltd. Cayman 100%
Teleco Oilfield Services Sdn. Bhd. Malaysia 49%
TOTCO de Venezuela C.A. Venezuela 100%
Tri-State Oil Tool (Egypt) S.A. Panama 100%
Tri-State Oil Tool (H.K.) Limited Hong Kong 100%
Tri-State Oil Tool (M) Sdn. Bhd. Malaysia 100%
Tri-State Oil Tool de Mexico, S.A. de C.V. Mexico 100%
Tri-State Oil Tool S.A. Panama 100%
Tri-State Oil Tool (Thailand) Ltd. Cayman Islands 100%
EVT Holdings, Inc. Delaware 100%
Baker Hughes Australia Holding, Inc. Delaware (4)
Baker Hughes Australia Pty. Limited Australia (30)
BHA Superannuation (Nominees) Pty. Limited Australia 100%
Baker Hughes INTEQ Operating Division --
Baker Hughes Mining Tools of Australia Operating Division --
Baker Oil Tools Operating Division --
Centrilift-Australia Operating Division --
Eastman Christensen (Australia) Pty. Limited Australia 100%
Eastman Teleco Operating Division --
EXLOG Australia Operating Division --
Hughes Christensen Operating Division --
Milpark Drilling Fluids Operating Division --
Teleco Oilfield Services Pty. Limited Western Australia 100%
Baker Canada Holding, Inc. Delaware (6)
ACC Diamond Products de Venezuela C.A. Venezuela 100%
</TABLE>
Page 18
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Baker Hughes Canada Inc. Canada 100%
Baker Hughes INTEQ Operating Division --
Baker Hughes Mining Tools Operating Division --
Baker Hughes Wyorning LLC Wyoming (20)
Baker Oil Tools Canada Operating Division --
Baker Performance Chemicals Operating Division --
Baker Supply Products Operating Division --
Bird Machine of Canada Operating Division --
Canada Intermediates/CHEM-LlNK Trade Name --
Centrilift Operating Division --
Christensen Diamond Products del Peru S.A. Peru 100%
Econolift Systems Canada Operating Division --
Eimco Fluid Process International Operating Division --
Eimco Process Equipment Operating Division --
Envirotech Chile Ltda. Chile (19)
Ramsey Comercio Industria Ltd. Brazil (8)
Baker Hughes Limited England (2)
Baker Hughes (BJ) Ltd. Scotland 100%
Baker Hughes France S.A. France (1)
Baker Hughes Angola S.A.R.L. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Milpark Operating Division --
Baker Hughes INTEQ S.A. Gabon (27)
Baker Hughes INTEQ Administrative Services S.A.R.L. France 100%
Baker Hughes INTEQ-France S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
CECA, U.A.E. Abu Dhabi 100%
CKS Cameroon S.A.R.L. Cameroon 100%
CKS Congo S.A.R.L. Congo 100%
CKS Drilling Fluids Services, Inc. Delaware 100%
</TABLE>
Page l9
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
CKS Espanola S.A. Spain 80%
CKS Norge A/S Norway 100%
Drilling Fluids Services (Far East) Sdn. Bhd. Malaysia 70%
Malaysia Mud and Chemicals Sdn. Bhd. Malaysia 50%
EXLOG Samega S.N.C. France 100%
Milpark Operating Division --
Milpark - CKS de Angola Angola 100%
Milpark Nigeria Ltd. Nigeria 60%
Baker International S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Wemco Eimco S.A. France 100%
Baker Hughes INTEQ Operating Division --
Baker Hughes INTEQ (M) Sdn. Bhd. Malaysia 49%
Baker Hughes Process Systems Operating Division --
Baker Oil Tools U.K. Operating Division --
Baker Oil Tools India (Private) Limited India (3)
Baker Oil Tools (UK) Limited England 100%
Baker Hughes France S.A. France (1)
Baker Hughes Angola S.A.R.L. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Milpark Operating Division --
Baker Hughes INTEQ S.A. Gabon (27)
Baker Hughes INTEQ Administrative Services S.A.R.L. France 100%
Baker Hughes INTEQ-France S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
CECA, U.A.E. Abu Dhabi 100%
CKS Cameroon S.A.R.L. Cameroon 100%
CKS Congo S.A.R.L. Congo 100%
CKS Drilling Fluids Services, Inc. Delaware 100%
CKS Espanola S.A. Spain 80%
</TABLE>
Page 20
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
CKS Norge A/S Norway 100%
Drilling Fluids Services (Far East) Sdn. Bhd. Malaysia 70%
Malaysia Mud and Chemicals Sdn. Bhd. Malaysia 50%
EXLOG Samega S.N.C. France 100%
Milpark Operating Division --
Milpark - CKS de Angola Angola 100%
Milpark Nigeria Ltd. Nigeria 60%
Baker International S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Wemco Eimco S.A. France 100%
Baker Performance Chemicals Operating Division --
Aquaness Assumed Name --
Baker Production Services (UK) Limited England 100%
Baker Oil Treating India (Private) Ltd. India (25)
Baker Service Tools Limited England 100%
Centrilift U.K. Operating Division --
Eastman Christensen de Espana, S.A. Spain 100%
Eden Engineering Limited England 100%
Eimco Process Equipment Limited England 100%
EnviroTech Pumpsystems Operating Division --
Hughes Christensen Operating Division --
Hughes Tool Company of Australia Limited Delaware 100%
Hughes Tool Company Limited England 100%
Baker Hughes France S.A. France (1)
Baker Hughes Angola S.A.R.L. France l00%
Baker Hughes INTEQ S.A. Gabon (27)
Milpark Operating Division --
Baker Hughes INTEQ S.A. Gabon (27)
Baker Hughes INTEQ Administrative Services S.A.R.L. France 100%
Baker Hughes INTEQ-France S.A. France 100%
</TABLE>
Page 21
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Baker Hughes INTEQ S.A. Gabon (27)
CECA, U.A.E. Abu Dhabi 100%
CKS Cameroon S.A.R.L. Cameroon 100%
CKS Congo S.A.R.L. Congo 100%
CKS Drilling Fluids Services, Inc. Delaware 100%
CKS Espanola S.A. Spain 80%
CKS Norge A/S Norway 100%
Drilling Fluids Services (Far East) Sdn. Bhd. Malaysia 70%
Malaysia Mud and Chemicals Sdn. Bhd. Malaysia 50%
EXLOG Samega S.N.C. France 100%
Milpark Operating Division --
Milpark - CKS de Angola Angola 100%
Milpark Nigeria Ltd. Nigeria 60%
Baker International S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Wemco Eimco S.A. France 100%
Baker Service Tools B.V. The Netherlands 100%
Centrilift Netherlands Operating Division --
Lombard Baker Leasing Co. England Partnership 49%
P.T. Eastman Christensen Indonesia Indonesia (26)
Teleco Oilfield Services (Europe) Limited Scotland 100%
Tri-State Oil Tool (U.K.) Limited England 100%
Wemco G.B. Operating Division --
Baker International Limited England 100%
Baker Process Technology de Mexico S.A. de C.V. Mexico 100%
Baker Hughes Mining Tools Mexico Operating Division --
Filtracion Technica Especializada S.A. de C.V. Mexico (18)
BGA International Operating Division --
Eimco (Central Africa) (Pvt) Limited Zimbabwe 99%
Eimco Process Equipment Company Operating Division --
</TABLE>
Page 22
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Eimco S.A. Chile 100%
Eimco-Wemco de Colombia S.A. Colombia (21)
Eimco-Wemco de Venezuela S.A. Venezuela (22)
Envirotech Chile Ltda. Chile (19)
Envirotech Participatoes Limitada Brazil 100%
Filtracion Technica Especializada S.A. de C.V. Mexico (18)
Galigher Ash Company Assumed Name ---
KRABE V Pty. Ltd. Australia 100%
Wemco Operating Division ---
Wemco Products Assumed Name ---
WVA Mining Equipment Assumed Name ---
EnviroTech Measurements and Controls Company Delaware 100%
Baker Hughes Instruments, Inc. California 100%
DII, Inc. Delaware 100%
EnviroTech Controls Incorporated Delaware 100%
NOR Instruments Inc. Texas 100%
TREMETRICS Inc. Texas 100%
Westron Inc. Texas 100%
Hughes Tool Company, C.A. Venezuela 100%
Hughes Tool Company (Far East) Pte. Ltd. Singapore 100%
Oilfield Finance International N.V. Netherland Antilles 100%
Milchem Venezuela Corporation Delaware 100%
Milafon Venezolana C.A. Venezuela 20%
Milchem Venezuela Corporation, C.A. Venezuela 100%
Baker Hughes INTEQ International, Ltd. Bermuda 100%
Eastman Whipstock (China) Ltd. Hong Kong 100%
Baker Hughes INTEQ Sdn. Bhd. Brunei 51%
Baker Hughes Limited England (2)
Baker Hughes (BJ) Ltd. Scotland 100%
Baker Hughes France S.A. France (1)
</TABLE>
Page 23
<PAGE>
BAKER HUGHES INCORPORATED--EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Baker Hughes Angola S.A.R.L. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Milpark Operating Division ---
Baker Hughes INTEQ S.A. Gabon (27)
Baker Hughes INTEQ Administrative Services S.A.R.L. France 100%
Baker Hughes INTEQ-France S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
CECA, U.A.E. Abu Dhabi 100%
CKS Cameroon S.A.R.L. Cameroon 100%
CKS Congo S.A.R.L. Congo 100%
CKS Drilling Fluids Services, Inc. Delaware 100%
CKS Espanola S.A. Spain 80%
CKS Norge A/S Norway 100%
Drilling Fluids Services (Far East) Sdn. Bhd. Malaysia 70%
Malaysia Mud and Chemicals Sdn. Bhd. Malaysia 50%
EXLOG Samega S.N.C. France 100%
Milpark Operating Division ---
Milpark-CKS de Angola Angola 100%
Mikpark Nigeria Ltd. Nigeria 60%
Baker International S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Wemco Eimco S.A. France 100%
Baker Hughes INTEQ Operating Division ---
Baker Hughes INTEQ (M) Sdn. Bhd. Malaysia 49%
Baker Hughes Process Systems Operating Division ---
Baker Oil Tools U.K. Operating Division ---
Baker Oil Tools India (Private) Limited India (3)
Baker Oil Tools (UK) Limited England 100%
Baker Hughes France S.A. France (1)
Baker Hughes Angola S.A.R.L. France 100%
</TABLE>
Page 24
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Baker Hughes INTEQ S.A. Gabon (27)
Milpark Operating Division --
Baker Hughes INTEQ S.A. Gabon (27)
Baker Hughes INTEQ Administrative Services S.A.R.L. France 100%
Baker Hughes INTEQ-France S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
CECA, U.A.E. Abu Dhabi 100%
CKS Cameroon S.A.R.L. Cameroon 100%
CKS Congo S.A.R.L. Congo 100%
CKS Drilling Fluids Services, Inc. Delaware 100%
CKS Espanola S.A. Spain 80%
CKS Norge A/S Norway 100%
Drilling Fluids Services (Far East) Sdn. Bhd. Malaysia 70%
Malaysia Mud and Chemicals Sdn. Bhd. Malaysia 50%
EXLOG Samega S.N.C. France 100%
Milpark Operating Division --
Milpark - CKS de Angola Angola 100%
Milpark Nigeria Ltd. Nigeria 60%
Baker International S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Wemco Eimco S.A. France 100%
Baker Performance Chemicals Operating Division --
Aquaness Assumed Name --
Baker Production Services (UK) Limited England 100%
Baker Oil Treating India (Private) Ltd. India (25)
Baker Service Tools Limited England 100%
Centrilift U.K. Operating Division --
Eastman Christensen de Espana, S.A. Spain 100%
Eden Engineering Limited England 100%
Eimco Process Equipment Limited England 100%
</TABLE>
Page 25
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
EnviroTech Pumpsystems Operating Division ---
Hughes Christensen Operating Division ---
Hughes Tool Company of Australia Limited Delaware 100%
Hughes Tool Company Limited England 100%
Baker Hughes France S.A. France (1)
Baker Hughes Angola S.A.R.L. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Milpark Operating Division ---
Baker Hughes INTEQ S.A. Gabon (27)
Baker Hughes INTEQ Administrative Services S.A.R.L. France 100%
Baker Hughes INTEQ-France S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
CECA, U.A.E. Abu Dhabi 100%
CKS Cameroon S.A.R.L. Cameroon 100%
CKS Congo S.A.R.L. Congo 100%
CKS Drilling Fluids Services, Inc. Delaware 100%
CKS Espanola S.A. Spain 80%
CKS Norge A/S Norway 100%
Drilling Fluids Services (Far East) Sdn. Bhd. Malaysia 70%
Malaysia Mud and Chemicals Sdn. Bhd. Malaysia 50%
EXLOG Samega S.N.C. France 100%
Milpark Operating Division ---
Milpark - CKS de Angola Angola 100%
Milpark Nigeria Ltd. Nigeria 60%
Baker International S.A. France 100%
Baker Hughes INTEQ S.A. Gabon (27)
Wemco Eimco S.A. France 100%
Baker Service Tools B.V. The Netherlands 100%
Centrilift Netherlands Operating Division ---
Lombard Baker Leasing Co. England Partnership 49%
</TABLE>
Page 26
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
P.T. Eastman Christensen Indonesia Indonesia (26)
Teleco Oilfield Services (Europe) Limited Scotland 100%
Tri-State Oil Tool (U.K.) Limited England 100%
Wemco G.B. Operating Division ---
Baker Hughes Mining Equipment Company California 100%
Baker Hughes Nederland B.V. The Netherlands 100%
Baker Hughes Denmark A/S Denmark 100%
Baker Hughes INTEQ Operating Division ---
Baker Hughes INTEQ (China) Limited Guernsey 100%
Baker Oil Tools Nederland Operating Division ---
Baker Performance Chemicals Operating Division ---
Ferranti Eastman Survey GmbH Switzerland 49%
Hughes Christensen Co. Holland Operating Division ---
Milchem Nederland B.V. The Netherlands 100%
Societe Camerounaise de Broyage Minerai Petroliers Cameroon 65%
Tekchem B.V. The Netherlands 100%
Tracor Europa B.V. The Netherlands 100%
Tracor France S.A.R.L. France 100%
Baker Hughes Russia, Inc. Delaware 100%
Baker Hughes (Cyprus) Limited Cyprus 100%
Baker Hughes JSC Russia 100%
Baker Hughes Kazakhstan Ltd. Republic of Kazakhstan 100%
Baker Hughes S.P.A. Italy (14)
Eastman Teleco Operating Division ---
Eimco Operating Division ---
Wemco Operating Division ---
Hughes Christensen Operating Division ---
Baker Hughes Technology, Inc. California 100%
Baker Canada Holding, Inc. Delaware (6)
ACC Diamond Products de Venezuela C.A. Venezuela 100%
</TABLE>
Page 27
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Baker Hughes Canada Inc. Canada 100%
Baker Hughes INTEQ Operating Division --
Baker Hughes Mining Tools Operating Division --
Baker Hughes Wyoming LLC Wyoming (20)
Baker Oil Tools Canada Operating Division --
Baker Performance Chemicals Operating Division --
Baker Supply Products Operating Division --
Bird Machine of Canada Operating Division --
Canada Intermediates/CHEM-LINK Trade Name --
Centrilift Operating Division --
Christensen Diamond Products del Peru S.A. Peru 100%
Econolift Systems Canada Operating Division --
Eimco Fluid Process International Operating Division --
Eimco Process Equipment Operating Division --
Envirotech Chile Ltda. Chile (19)
Ramsey Comercio Industria Ltd. Brazil (8)
Baker Hughes Australia Holding, Inc. Delaware (4)
Baker Hughes Australia Pty. Limited Australia (30)
BHA Superannuation (Nominees) Pty. Limited Australia 100%
Baker Hughes INTEQ Operating Division --
Baker Hughes Mining Tools of Australia Operating Division --
Baker Oil Tools Operating Division --
Centrilift-Australia Operating Division --
Eastman Christensen (Australia) Pty. Limited Australia 100%
Eastman Teleco Operating Division --
EXLOG Australia Operating Division --
Hughes Christensen Operating Division --
Milpark Drilling Fluids Operating Division --
Teleco Oilfield Services Pty. Limited Western Australia 100%
Baker Hughes South Africa (Proprietary) Ltd. South Africa 100%
</TABLE>
Page 28
<PAGE>
BAKER HUGHES INCORPORATED - EXHIBIT 21
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
JURISDICTION OR OWNED BY OWNED BY
NAME OF SUBSIDIARIES AND SUB-SUBSIDIARIES ORGANIZATION REGISTRANT SUBSIDIARY
<S> <C> <C> <C>
Baker Hughes Mining Tools (Proprietary) Limited South Africa 100%
Reminto (Proprietary) Limited South Africa 100%
GAW, Inc. Texas 100%
Hughes Christensen South Africa (Proprietary) Limited South Africa 100%
Mangueras Industriales Schiaffino S.A. Chile 99.9%
Ramsey Comercio Industria Ltd. Brazil (8)
Baker Middle East Development Company S.A.R.L. Lebanon 51%
Baker Oil Tools (Espana) S.A. Spain 100%
Baker Oil Tools (H.K.) Ltd. Hong Kong 100%
Baker Quimica de Colombia S.A. Colombia (13)
Eimco-Wemco de Colombia S.A. Colombia (21)
Baker Sand Control Servicios Tecnicos, Ltda. Brazil (15)
Bird Machine Company Operating Division ---
Bird Machine Company, Inc. Delaware 100%
Bird Machine International, Inc. Massachusetts 100%
BJ-Hughes Holding Company Delaware 100%
BW-Hughes Tool Stock Corporation Delaware 100%
Chas. S. Lewis and Co., Inc. Missouri 100%
Christensen Gulf Services (Private) Ltd. Dubai 40%
Christensen Saudi Arabia Limited Saudi Arabia 40%
Galigher West Utah 100%
Herramientas Interamericanas S.A. de C.V. Mexico (16)
Baker Hughes Services de Mexico S.A. de C.V. Mexico (31)
Hughes Tool J.V. Inc. Delaware 100%
Oil Base de Venezuela, C.A. Venezuela 100%
STH, Inc. West Virginia 100%
Coppinger Machinery Service, Inc. Assumed Name ---
The Galigher Co. Utah 100%
Varco International, Inc. Delaware 20%
</TABLE>
Page 29
<PAGE>
BAKER HUGHES INCORPORATED - FOOTNOTES TO EXHIBIT 21
<TABLE>
<CAPTION>
FOOTNOTES ENTITY ENTITY OWNERSHIP
<C> <S> <C>
(1) Baker Hughes France S.A. Baker Hughes Finance, Inc. - 44%
Baker Hughes Limited - 55%
Baker Oil Tools (UK) Limited*
Hughes Tool Company Limited*
George Reekie*
Jean Paul E. Pradal*
---------------------
* Total of 1%
(2) Baker Hughes Limited Baker Holdings (U.S.), Inc. - 48%
Baker Hughes Incorporated - 38%
Envirotech Corporation - 14%
(3) Baker Oil Tools India (Private) Limited Baker Oil Tools Division of Baker Hughes Limited - 40%
Khushalani Group - 60%
(4) Baker Hughes Australia Holding, Inc. Baker Hughes Incorporated - 5.07%
Baker Hughes INTEQ International Branches - 6.73%
Baker Hughes Oilfield Operations, Inc. - 56.99%
Baker Hughes Technology, Inc. - 6.84%
Baker Production Technology International, Inc. - 11.59%
Baker RTC (Delaware), Inc. - 4.69%
EVT Holdings, Inc. - 8.10%
(5) Baker Hughes Equipamentos Ltda. Baker Hughes Incorporated - 99%
EXLOG, S.A. - 1%
</TABLE>
Page 30
<PAGE>
BAKER HUGHES INCORPORATED - FOOTNOTES TO EXHIBIT 21
<TABLE>
<CAPTION>
FOOTNOTES ENTITY ENTITY OWNERSHIP
<C> <S> <C>
(6) Baker Canada Holding, Inc. Baker Hughes Incorporated - 18%
Baker Hughes Oilfield Operations, Inc. - 13%
Baker Hughes Technology, Inc. - 3%
Baker Performance Chemicals Incorporated (Ca. Company) - 7%
Baker RTC (Delaware), Inc. - 12%
Baker RTC, Inc. - **
Baker Transworld, Inc. - 12%
EVT Holdings, Inc. - 7%
Lynes, Inc. - 28%
----------------
*Less than 1%
(7) Herramientas y Triconos, S.A. de C.V. American Tricones, Inc. - 49%
Precision Mecanica, S.A. de C.V. - 2%
TAMBA - 48%
Giuseppe Castiglioni*
Alfredo Freyssinier*
Emilio Paulon Gasparini*
Eugenio Perez Gil*
Manuel Garcia Ramos*
-----------------
* Total of 1%
(8) Ramsey Comercio Industria Ltd. Baker Hughes Canada, Inc. - 50%
Baker Hughes Technology, Inc. - 50%
</TABLE>
Page 31
<PAGE>
BAKER HUGHES INCORPORATED - FOOTNOTES TO EXHIBIT 21
<TABLE>
<CAPTION>
FOOTNOTES ENTITY ENTITY OWNERSHIP
<C> <S> <C>
(9) Baker Eastern S.A. (Venezuela Company) Baker Eastern S.A. (Panama Company) - 50%
Baker Production Services (Bermuda) Ltd. - 25%
Baker Sand Control Ltd. - 25%
(10) Baker International Cote D' Ivoire S.a.r.l. Baker Hughes Oilfield Operations, Inc. - 99.5%
Baker Transworld, Inc. - .5%
(11) Baker Nigeria Ltd. Baker Eastern S.A. (Panama Company) - 1%
Baker Hughes Oilfield Operations, Inc. - 59%
Others - 40%
(12) Proveedores Para Operaciones Energeticas S.A. de C.V. Herramientas y Triconos, S.A. de C.V. - 31%
Holtex, Inc. - 49%
Ing. Alejandro Herce Caro - .50%
Ing. Pedro Herce Berassin - 19%
Lic. Relipe Septien Flores - .50%
(13) Baker Quimica de Colombia S.A. Baker Holdings (U.S.), Inc. - .1%
Baker Hughes Incorporated - .1%
Baker Hughes Oilfield Operations, Inc. - .1%
Baker Performance Chemicals Incorporated (Ca. Company)- 99.7%
(14) Baker Hughes S.P.A. Baker Hughes Oilfield Operations, Inc. - 99.9%
Baker Hughes Incorporated - .1%
</TABLE>
Page 32
<PAGE>
BAKER HUGHES INCORPORATED - FOOTNOTES TO EXHIBIT 21
<TABLE>
<CAPTION>
FOOTNOTES ENTITY ENTITY OWNERSHIP
<C> <S> <C>
(15) Baker Sand Control Servicios Tecnicos, Ltda. Baker Hughes Incorporated - 1%
Baker Hughes Oilfield Operations, Inc. - 99%
(16) Herramientas Interamericanas S.A. de C.V. Baker Eastern S.A. (Panama Company) - 40%
Baker Hughes Incorporated - 7%
Servicios Y Herramientas Petroleras S.A. de C.V. - 53%
(17) left blank
(18) Filtracion Technica Especializada S.A. de C.V. Baker Process Technology de Mexico S.A. de C.V. - 99.9%
EVT Holdings, Inc. - .1%
(19) Envirotech Chile Ltda. Baker Hughes Canada, Inc. - .5%
EVT Holdings, Inc. - 99.5%
(20) Baker Hughes Wyoming LLC Baker Hughes Canada, Inc. - 99%
Baker Hughes Oilfield Operations, Inc. - 1%
(21) Eimco-Wemco de Colombia S.A. EVT Holdings, Inc. - 97%
Exploration Logging de Colombia (Branch) - .81%
Baker Transworld, Inc. - .81%
Baker Quimica de Colombia S.A. - .81%
Milpark de Colombia (Branch) - .81%
(22) Eimco Wemco Equipos de Venezuela S.A. EVT Holdings, Inc. - 99%
Baker Quimica de Venezuela S.A. - 1%
</TABLE>
Page 33
<PAGE>
BAKER HUGHES INCORPORATED - FOOTNOTES TO EXHIBIT 21
<TABLE>
<CAPTION>
FOOTNOTES ENTITY ENTITY OWNERSHIP
<C> <S> <C>
(23) Baker Sand Control Cameroon S.a.r.l. Baker Hughes Incorporated - 99%
Baker Hughes Oilfield Operations, Inc. - 1%
(24) (left blank)
(25) Baker Oil Treating (India) Private Ltd. Baker Production Services U.K. Ltd. - 40%
Dai-Ihci Karkaria Limited - 60%
(26) P.T. Eastman Christensen Indonesia Baker Hughes Limited owns rights in agreement with R. Widjaya
75% owner and B. Sastromulyono 25% owner, local agents
(27) Baker Hughes Gabon S.A. Baker Hughes INTEQ-France S.A. 1%
Baker International S.A. - 87%
Baker Hughes Oilfield Operations, Inc. - 2%
Gabonese Government - 10%
(28) (left blank)
(29) (left blank)
(30) Baker Hughes Australia Pty. Limited Baker Hughes Australia Holding, Inc. - 99%
Peter Boesenberg - 1%
(31) Baker Hughes Services de Mexico S.A. de C.V. Baker Hughes Oilfield Operations, Inc. - 99%
Herramientas Interamericanas S.A. de C.V. - 1%
</TABLE>
Page 34
<PAGE>
BAKER HUGHES INCORPORATED - FOOTNOTES TO EXHIBIT 21
<TABLE>
<CAPTION>
FOOTNOTES ENTITY ENTITY OWNERSHIP
<C> <S> <C>
(32) Baker Mira Saudi Arabia Limited Percentage of ownership not available. Owned by Baker
Production Services (Bermuda) Ltd. and Mira Brothers
(33) Baker Hughes Singapore Pte. Hughes Tool (C.I.) Ltd. - 99%
Baker Hughes (C.I.) Ltd. - 1%
(34) (left blank)
</TABLE>
Page 35
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION AND CONSOLIDATED STATEMENTS OF OPERATIONS, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<CASH> 69,179
<SECURITIES> 0
<RECEIVABLES> 612,414
<ALLOWANCES> 21,405
<INVENTORY> 643,046
<CURRENT-ASSETS> 1,399,992
<PP&E> 560,084
<DEPRECIATION> 886,871
<TOTAL-ASSETS> 2,999,682
<CURRENT-LIABILITIES> 544,571
<BONDS> 637,972
<COMMON> 140,889
0
4,000
<OTHER-SE> 1,493,583
<TOTAL-LIABILITY-AND-EQUITY> 2,999,682
<SALES> 1,727,734
<TOTAL-REVENUES> 2,504,758
<CGS> 1,015,458
<TOTAL-COSTS> 2,082,745
<OTHER-EXPENSES> 236,129
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,835
<INCOME-PRETAX> 226,116
<INCOME-TAX> 94,974
<INCOME-CONTINUING> 131,142
<DISCONTINUED> 0
<EXTRAORDINARY> (44,320)
<CHANGES> (44,165)
<NET-INCOME> 42,657
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
