Baker Hughes 2009 Annual Report Download - page 33

2009 Proxy Statement 23
Employment Agreements
The Company’s philosophy is not to enter into employ-
ment agreements with Senior Executives; however, we do have
an employment agreement with our PEO, dated as of October
25, 2004 and amended and restated on December 16, 2008,
effective January 1, 2009. The term of the employment agree-
ment is until October 25, 2011, with automatic one-year
renewals unless either party provides a notice not to extend
the employment agreement at least thirteen months prior to
the then current expiration date. During the term of the
employment agreement, Mr. Deaton is entitled to receive the
following, all as established from time to time by the Board of
Directors or the Compensation Committee:
• a base salary;
• the opportunity to earn annual cash bonuses in amounts
that may vary from year to year and that are based upon
achievement of performance goals;
• long-term incentives in the form of equity-based compensa-
tion no less favorable than awards made to other Senior
Executives and that are commensurate with awards granted
to PEOs of other public companies of a similar size to the
Company; and
• benefits and perquisites that other officers and employees
of the Company are entitled to receive.
Mr. Deaton’s base salary is to be reviewed at least annually
during the term of the employment agreement and may be
increased (but not decreased) based upon his performance
during the year.
Upon the termination of Mr. Deaton’s employment, due to
his disability or his death, he or his beneficiary is to be paid a
lump sum in cash equal to one-half his then base salary for
each year (prorated for partial years) during the remaining
term of the employment agreement and a lump sum in cash
equal to his expected value incentive bonus for the year of ter-
mination. For purposes of Mr. Deaton’s employment agree-
ment, disability is defined as any incapacity due to physical or
mental illness resulting in an absence from full-time perfor-
mance of his duties for ninety (90) days in the aggregate dur-
ing any period of twelve (12) consecutive months or a
reasonable expectation that such disability will exist for more
than such period of time. Upon termination of Mr. Deaton’s
employment by him for “good reason” or by us without
“cause” (please refer to the section “Potential Payments Upon
Termination or Change in Control – Termination of Employ-
ment by Mr. Deaton for Good Reason or by Us Without
Cause” located elsewhere in this proxy statement for a defini-
tion of “good reason” and “cause”), he is entitled to:
• a lump sum cash payment in an amount equal to two times
his then base salary;
• a lump sum cash payment equal to his Highest Bonus
Amount (as defined below under the heading “Change in
Control Agreements”), prorated to the date of termination;
• a continuation of certain perquisites and medical insurance
benefits for the remainder of the term of the employment
agreement;
• a lump sum payment equivalent to the monthly basic life
insurance premium applicable to Mr. Deaton’s basic life
insurance coverage on the date of termination multiplied by
the number of months remaining in the term of the employ-
ment agreement;
• an amount equal to a continuation of employer contribu-
tions to the Company’s SRP for the remainder of the term of
the employment agreement; and
• a lump sum payment equal to the amount of interest that
would be earned on any of the foregoing payments subject
to a six-month payment delay under section 409A of the
Internal Revenue Code of 1986, as amended (“Section
409A”) using the six-month London Interbank Offered
Rate plus two percentage points.
However, the foregoing benefits are not payable if
Mr. Deaton is entitled to benefits under his Change in
Control Agreement discussed below.
If Mr. Deaton’s employment is terminated by him for
any reason other than a good reason or by the Company for
cause, he is to receive only those vested benefits to which he
is entitled under the terms of the employee benefit plans in
which he is a participant as of the date of termination and a
lump sum amount in cash equal to the sum of (i) his base sal-
ary through the date of termination and (ii) any accrued vaca-
tion pay, in each case to the extent not already paid.
During the term of the employment agreement and for a
period of two years following termination of the employment
agreement, Mr. Deaton is prohibited from (i) engaging in
competition with the Company and (ii) soliciting customers,
employees and consultants of the Company. To the extent
any provision is covered by both the employment agreement
and the Change in Control Agreement, described and defined
below, the Change in Control Agreement provision so covered
will supersede the employment agreement provision.
Change in Control Agreements
In addition to the employment agreement described
above, we have entered into change in control agreements
(“Change in Control Agreements”) with the Senior Executives,
as well as certain other Executives. The Change in Control
Agreements provide for payment of certain benefits to these
officers as a result of termination of employment following,
or in connection with, a Change in Control (as defined below)
of the Company. The terms of the Change in Control Agree-
ments for Messrs. Deaton, Ragauss, Crain and O’Donnell will
be automatically extended until October 24, 2011; April 25,
2011; December 31, 2011; and July 27, 2011, respectively.
The term of Mr. Craighead’s Change in Control Agreement will
expire on February 24, 2011 unless it is automatically renewed
for an additional two years. Mr. Barr retired from employment
with us on April 30, 2009.
After the expiration of the initial term or the extended
term, each of the Change in Control Agreements will be auto-
matically extended for successive two-year periods beginning
on the day immediately following the expiration date, unless,