Baker Hughes 2004 Annual Report Download - page 32

following,฀or฀in฀connection฀with,฀a฀Change฀in฀Control฀of฀the฀
Company.฀The฀initial฀term฀of฀the฀2004฀Change฀in฀Control฀
Agreement฀for฀Mr.฀Deaton฀expires฀on฀October฀25,฀2007.฀
The฀2004฀Change฀in฀Control฀Agreements฀for฀the฀remaining฀
Named฀Officers฀are฀effective฀as฀of฀January฀1,฀2006,฀and฀the฀
initial฀term฀will฀expire฀December฀31,฀2007฀and฀are฀intended฀
to฀replace฀the฀Prior฀Severance฀Agreements฀described฀below,฀
which฀will฀expire฀on฀December฀31,฀2005.฀After฀the฀expiration฀
of฀the฀initial฀term,฀the฀2004฀Change฀in฀Control฀Agreements฀
will฀be฀automatically฀extended฀for฀successive฀two-year฀periods฀
beginning฀on฀the฀day฀immediately฀following฀the฀expiration฀
date,฀unless,฀not฀later฀than฀18฀months฀prior฀to฀the฀expiration฀
date฀or฀applicable฀renewal฀date,฀the฀Company฀shall฀give฀notice฀
to฀the฀Named฀Officer฀that฀the฀term฀of฀the฀2004฀Change฀in฀
Control฀Agreements฀will฀not฀be฀extended.
Pursuant฀to฀the฀2004฀Change฀in฀Control฀Agreements,฀the฀
Company฀pays฀severance฀benefits฀to฀an฀officer฀if฀the฀officer’s฀
employment฀is฀terminated฀following,฀or฀in฀connection฀with,฀
a฀Change฀in฀Control฀and฀during฀the฀term฀unless:
(i)฀ the฀Named฀Officer฀resigns฀without฀Good฀Reason฀(as฀defined฀
in฀the฀2004฀Change฀in฀Control฀Agreements);
(ii)฀ the฀Company฀terminates฀the฀employment฀of฀the฀Named฀
Officer฀for฀Cause฀(as฀defined฀in฀the฀2004฀Change฀in฀Con-
trol฀Agreements);฀or
(iii)฀ the฀employment฀of฀the฀Named฀Officer฀is฀terminated฀by฀
reason฀of฀death฀or฀Disability฀(as฀defined฀in฀the฀2004฀
Change฀in฀Control฀Agreements).
If฀the฀Named฀Officer฀meets฀the฀criteria฀for฀payment฀of฀
severance฀benefits฀due฀to฀termination฀of฀employment฀follow-
ing฀a฀Change฀in฀Control฀during฀the฀term฀as฀described฀above,฀
in฀addition฀to฀any฀benefits฀he฀is฀due฀under฀the฀Company’s฀
employee฀benefit฀plans฀and฀equity฀and฀incentive฀compensa-
tion฀plans,฀he฀will฀receive฀the฀following฀benefits:
(a)฀ a฀lump฀sum฀payment฀equal฀to฀three฀(3)฀times฀the฀
Named฀Officer’s฀annual฀base฀salary฀in฀effect฀imme-
diately฀prior฀to฀(i)฀the฀first฀event฀or฀circumstance฀฀
constituting฀Good฀Reason฀for฀his฀resignation,฀(ii)฀the฀
Change฀of฀Control,฀or฀(iii)฀the฀Named฀Officer’s฀termi-
nation฀of฀employment,฀whichever฀is฀greatest฀(his฀
“Highest฀Base฀Salary”);
(b)฀ a฀lump฀sum฀payment฀equal฀to฀the฀Named฀Officer’s฀
expected฀value฀target฀percentage฀for฀his฀incentive฀
bonus฀under฀the฀Company’s฀1995฀Employee฀Annual฀
Incentive฀Plan,฀as฀amended,฀for฀the฀year฀in฀which฀he฀
terminates฀employment฀multiplied฀by฀his฀Highest฀Base฀
Salary,฀prorated฀based฀upon฀the฀number฀of฀days฀of฀his฀
service฀during฀the฀performance฀period฀(reduced฀by฀any฀
payments฀received฀by฀the฀Named฀Officer฀under฀the฀
Company’s฀1995฀Employee฀Annual฀Incentive฀Compen-
sation฀Plan,฀as฀amended฀in฀connection฀with฀the฀
Change฀in฀Control฀if฀the฀Named฀Officer’s฀termination฀
of฀employment฀occurs฀during฀the฀same฀calendar฀year฀
in฀which฀the฀Change฀in฀Control฀occurs);
(c)฀ a฀lump฀sum฀payment฀equal฀to฀Named฀Officer’s฀
expected฀value฀target฀percentage฀under฀his฀bonus฀for฀
the฀year฀in฀which฀he฀terminates฀employment฀multiplied฀
by฀his฀Highest฀Base฀Salary฀and฀multiplied฀by฀three฀(3);฀
(d)฀ continuation฀of฀accident฀and฀health฀insurance฀benefits฀
for฀an฀additional฀three฀(3)฀years;
(e)฀ a฀lump฀sum฀payment฀equal฀to฀the฀sum฀of฀(i)฀the฀cost฀
of฀the฀Named฀Officer’s฀perquisites฀in฀effect฀prior฀to฀his฀
termination฀of฀employment฀for฀the฀remainder฀of฀the฀
calendar฀year฀and฀(ii)฀the฀cost฀of฀the฀Named฀Officer’s฀
perquisites฀in฀effect฀prior฀to฀his฀termination฀of฀employ-
ment฀for฀an฀additional฀three฀(3)฀years;
(f)฀ a฀lump฀sum฀payment฀equal฀to฀the฀undiscounted฀฀
value฀of฀the฀benefits฀the฀Named฀Officer฀would฀have฀
received฀had฀he฀continued฀to฀participate฀in฀the฀Com-
pany’s฀thrift฀and฀supplemental฀retirement฀and฀pension฀
plans฀for฀an฀additional฀three฀(3)฀years,฀assuming฀for฀
this฀purpose฀that:
(1)฀ the฀Named฀Officer’s฀compensation฀during฀that฀
three-year฀period฀remained฀at฀the฀levels฀used฀for฀
calculating฀the฀severance฀payment฀described฀in฀
paragraphs฀(a)฀and฀(c)฀above,฀and
(2)฀ the฀Named฀Officer’s฀contributions฀to฀and฀accruals฀
under฀those฀plans฀remained฀at฀the฀levels฀in฀effect฀
as฀of฀the฀date฀of฀the฀Change฀in฀Control฀or฀the฀
date฀of฀termination,฀whichever฀is฀greater;
(g)฀ eligibility฀for฀the฀Company’s฀retiree฀medical฀program฀
if฀the฀Named฀Officer฀would฀have฀become฀entitled฀
to฀participate฀in฀that฀program฀had฀he฀remained฀
employed฀for฀an฀additional฀three฀(3)฀years;
(h)฀ a฀lump฀sum฀payment฀equivalent฀to฀thirty-six฀(36)฀mul-
tiplied฀by฀the฀monthly฀basic฀life฀insurance฀premium฀
applicable฀to฀the฀Named฀Officer’s฀basic฀life฀insurance฀
coverage฀on฀the฀date฀of฀termination;฀
(i)฀ outplacement฀services฀for฀a฀period฀of฀three฀(3)฀years฀
or,฀if฀earlier,฀until฀the฀Named฀Officer’s฀acceptance฀of฀
an฀offer฀of฀employment฀or฀in฀lieu฀of฀outplacement฀
services,฀the฀Named฀Officer฀may฀elect฀to฀receive฀a฀
cash฀payment฀of฀$30,000;฀and
(j)฀ an฀additional฀amount฀(a฀“gross-up”฀payment)฀in฀
respect฀of฀excise฀taxes฀that฀may฀be฀imposed฀under฀the฀
“golden฀parachute”฀rules฀on฀payments฀and฀benefits฀
received฀in฀connection฀with฀the฀Change฀in฀Control.฀
The฀gross-up฀payment฀would฀make฀the฀officer฀whole฀
for฀excise฀taxes฀(and฀for฀all฀taxes฀on฀the฀gross-up฀pay-
ment)฀in฀respect฀of฀payments฀and฀benefits฀received฀
pursuant฀to฀all฀the฀Company’s฀plans,฀agreements฀and฀
arrangements฀(including฀for฀example,฀acceleration฀of฀
vesting฀of฀equity฀awards).
In฀addition฀to฀the฀above,฀the฀2004฀Change฀in฀Control฀
Agreements฀provide฀for฀full฀vesting฀of฀all฀stock฀options฀and฀
other฀equity฀incentive฀awards฀upon฀the฀occurrence฀of฀a฀
Change฀in฀Control.
Pursuant฀to฀the฀2004฀Change฀in฀Control฀Agreements,฀
a฀“Change฀in฀Control”฀is฀deemed฀to฀occur฀if:
(i)฀ the฀individuals฀who฀are฀Incumbent฀Directors฀(as฀defined฀in฀
the฀2004฀Change฀in฀Control฀Agreements)฀cease฀for฀any฀rea-
son฀to฀constitute฀a฀majority฀of฀the฀members฀of฀the฀Board;฀
(ii)฀ the฀consummation฀of฀a฀merger฀of฀the฀Company฀or฀an฀
affiliate฀of฀the฀Company฀with฀another฀entity,฀unless฀the฀
individuals฀and฀entities฀who฀were฀the฀beneficial฀owners฀of฀
16฀฀฀฀Baker฀Hughes฀Incorporated