Baker Hughes 2009 Annual Report Download - page 35

2009 Proxy Statement 25
According to the Change in Control Agreements, a
“Change in Control” occurs if:
• the individuals who are incumbent directors cease for any
reason to constitute a majority of the members of our Board
of Directors;
• the consummation of a merger of us or our affiliate with
another entity, unless the individuals and entities who were
the beneficial owners of our voting securities outstanding
immediately prior to such merger own, directly or indirectly,
at least 50% of the combined voting power of our voting
securities, the surviving entity or the parent of the surviving
entity outstanding immediately after such merger;
• any person, other than us, our affiliate or another specified
owner (as defined in the Change in Control Agreements),
becomes a beneficial owner, directly or indirectly, of our
securities representing 30% or more of the combined voting
power of our then outstanding voting securities;
• a sale, transfer, lease or other disposition of all or substan-
tially all of our assets (as defined in the Change in Control
Agreements) is consummated (an “asset sale”), unless (i) the
individuals and entities who were the beneficial owners of
our voting securities immediately prior to such asset sale
own, directly or indirectly, 50% or more of the combined
voting power of the voting securities of the entity that
acquires such assets in such asset sale or its parent immedi-
ately after such asset sale in substantially the same propor-
tions as their ownership of our voting securities immediately
prior to such asset sale or (ii) the individuals who comprise
our Board of Directors immediately prior to such asset sale
constitute a majority of the board of directors or other gov-
erning body of either the entity that acquired such assets in
such asset sale or its parent (or a majority plus one member
where such board or other governing body is comprised of
an odd number of directors); or
• our stockholders approve a plan of complete liquidation or
dissolution of us.
Section 280G of the Code disallows deductions for certain
executive compensation that is contingent upon a change in
ownership or effective control of the Company or a significant
portion of the assets of the Company. Assuming such a con-
trol change had occurred on December 31, but no NEO had
incurred a termination of employment, no amount paid by
us would have been non-deductible executive compensation
under Section 280G of the Code. If Messrs. Deaton, Ragauss,
Crain, Craighead and O’Donnell had incurred terminations
of employment in connection with such control change,
$7,001,901, $2,693,092, $0, $2,286,917, and $0 would have
been non-deductible executive compensation, respectively.
Mr. Barr retired from employment with us on April 30, 2009.
Indemnification Agreements
We have entered into an indemnification agreement with
each of our independent, non-management directors and
Senior Executives, which form of agreement has been filed
with the SEC. These agreements provide for us to, among
other things, indemnify such persons against certain liabilities
that may arise by reason of their status or service as directors
or officers, to advance their expenses incurred as a result of a
proceeding as to which they may be indemnified and to cover
such person under any directors’ and officers’ liability insur-
ance policy we choose, in our discretion, to maintain. These
indemnification agreements are intended to provide indemnifi-
cation rights to the fullest extent permitted under applicable
indemnification rights statutes in the State of Delaware and
shall be in addition to any other rights the indemnitee may
have under the Company’s Restated Certificate of Incorpora-
tion, Bylaws and applicable law. We believe these indemnifica-
tion agreements enhance our ability to attract and retain
knowledgeable and experienced Senior Executives and inde-
pendent, non-management directors.
Stock Ownership Policy
The Board of Directors, upon the Compensation Commit-
tee’s recommendation, adopted a Stock Ownership Policy for
our Senior Executives to ensure that they have a meaningful
economic stake in the Company. The Policy is designed to sat-
isfy an individual Senior Executive’s need for portfolio diversifi-
cation, while maintaining management stock ownership at
levels high enough to assure our stockholders of manage-
ment’s commitment to value creation.
The Compensation Committee annually reviews each
Senior Executive’s compensation and stock ownership levels
to determine whether they are appropriate or if adjustments
need to be made. In 2009, each of the Senior Executives
(other than four persons who became Senior Executives in late
2008 and early 2009) was in compliance with the Compensa-
tion Committee’s required levels of stock ownership, which
currently requires each Senior Executive to have direct owner-
ship of our Common Stock in at least the following amounts:
Stock Ownership Level
Officer Positions (Multiple of Salary)
Chief Executive Officer 5x
President/Chief Operating Officer/Chief
Financial Officer/Senior Vice Presidents 3x
Corporate Vice Presidents reporting
to CEO or COO 2x
Hemisphere Presidents 2x
A Senior Executive has five years to comply with the own-
ership requirement starting from the date appointed to a posi-
tion noted above. If a Senior Executive is promoted to a
position with a higher Ownership Salary Multiple, the Senior
Executive will have five years from the date of the change in
position to reach the higher expected Stock Ownership Level
but still must meet the prior expected Stock Ownership Level
within the original five years of the date first appointed to
such prior position. For those Senior Executives with the own-
ership requirements reflected in hiring letters, the date of hire
marks the start of the five-year period.
Until a Senior Executive achieves the applicable Stock
Ownership Level, the following applies: