Baker Hughes 2004 Annual Report Download - page 34

(2)฀ a฀pro฀rata฀portion฀to฀the฀date฀of฀termination฀of฀
the฀aggregate฀value฀of฀all฀contingent฀incentive฀
compensation฀awards฀to฀the฀Named฀Officer฀for฀
all฀then฀uncompleted฀periods฀under฀the฀Compa-
ny’s฀1995฀Employee฀Annual฀Incentive฀Compensa-
tion฀Plan,฀as฀amended,฀assuming฀the฀achievement฀
of฀the฀expected฀value฀target฀level฀of฀the฀perfor-
mance฀goals฀established฀for฀the฀awards,฀pro-
vided,฀that฀if฀the฀termination฀of฀employment฀
occurs฀during฀the฀same฀year฀in฀which฀the฀Change฀
in฀Control฀occurs,฀the฀pro฀rata฀bonus฀payment฀
shall฀be฀offset฀by฀any฀payments฀received฀under฀
the฀Company’s฀1995฀Employee฀Annual฀Incentive฀
Compensation฀Plan,฀as฀amended,฀in฀connection฀
with฀the฀Change฀in฀Control;
(e)฀ a฀lump฀sum฀payment฀equal฀to฀the฀present฀value฀of฀the฀
benefits฀the฀Named฀Officer฀would฀have฀received฀had฀
he฀continued฀to฀participate฀in฀the฀Company’s฀thrift฀
and฀supplemental฀retirement฀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฀(b)฀above,฀and
(2)฀ the฀Named฀Officer’s฀contributions฀to฀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;
(f)฀ 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;
(g)฀ outplacement฀services฀for฀a฀period฀of฀three฀(3)฀years฀
or,฀if฀earlier,฀until฀the฀Named฀Officer’s฀acceptance฀of฀
an฀offer฀of฀employment;฀and
(h)฀ 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฀Named฀Officer฀
whole฀for฀excise฀taxes฀(and฀for฀all฀taxes฀on฀the฀gross-
up฀payment)฀in฀respect฀of฀payments฀and฀benefits฀
received฀pursuant฀to฀all฀the฀Company’s฀plans,฀agree-
ments฀and฀arrangements฀(including฀for฀example,฀
acceleration฀of฀vesting฀of฀equity฀awards).
In฀addition฀to฀the฀above,฀the฀Prior฀Severance฀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฀Prior฀Severance฀Agreements,฀a฀“Change฀
in฀Control”฀is฀deemed฀to฀occur฀if:
(i)฀ any฀person฀becomes฀the฀beneficial฀owner฀of฀20%฀or฀more฀
of฀the฀Company’s฀voting฀securities฀(excluding฀securities฀
acquired฀directly฀from฀the฀Company฀or฀its฀affiliates)฀other฀
than฀a฀person฀described฀in฀(iii)(A)฀below;
(ii)฀ a฀change฀in฀the฀majority฀of฀the฀membership฀of฀the฀Board฀
occurs฀without฀approval฀of฀two-thirds฀of฀the฀directors฀who฀
either฀were฀directors฀at฀the฀beginning฀of฀the฀period,฀or฀
whose฀election฀was฀previously฀so฀approved;
(iii)฀ there฀is฀consummated฀a฀merger฀or฀consolidation฀of฀the฀
Company฀or฀a฀subsidiary฀thereof฀with฀any฀other฀corporation฀
other฀than฀(A)฀a฀merger฀or฀consolidation฀with฀a฀person฀in฀
which฀the฀Company’s฀stockholders฀continue฀to฀hold฀at฀least฀
65%฀of฀the฀voting฀securities฀of฀the฀surviving฀entity฀or฀(B)฀a฀
merger฀or฀consolidation฀effected฀to฀implement฀a฀recapitaliza-
tion฀of฀the฀Company฀and฀in฀which฀no฀person฀becomes฀the฀
owner฀of฀20%฀of฀the฀Company’s฀voting฀securities฀(excluding฀
securities฀acquired฀directly฀from฀the฀Company฀or฀its฀affiliates,฀
except฀securities฀acquired฀in฀connection฀with฀the฀acquisition฀
of฀a฀business฀by฀the฀Company฀or฀its฀affiliates);฀or
(iv)฀ the฀Company’s฀stockholders฀approve฀a฀plan฀of฀complete฀liq-
uidation฀or฀dissolution฀of฀the฀Company฀or฀there฀is฀consum-
mated฀an฀agreement฀for฀the฀sale฀or฀disposition฀of฀all฀or฀
substantially฀all฀of฀the฀Company’s฀assets฀other฀than฀a฀sale฀or฀
disposition฀to฀an฀entity฀in฀which฀the฀Company’s฀stockholders฀
continue฀to฀hold฀at฀least฀65%฀of฀the฀voting฀securities.
In฀addition,฀the฀Company฀has฀an฀Executive฀Severance฀Plan฀
that฀provides฀salary฀continuation฀between฀9฀and฀18฀months฀for฀
the฀executive฀officers฀and฀other฀benefits,฀based฀upon฀salary฀grade,฀
if฀the฀executive’s฀employment฀is฀terminated฀for฀certain฀specific฀
reasons,฀other฀than฀a฀Change฀in฀Control฀of฀the฀Company฀cov-
ered฀by฀the฀Prior฀Severance฀Agreements฀described฀above.
Indemnification฀Agreements
The฀Company฀has฀entered฀into฀an฀indemnification฀agree-
ment฀with฀each฀of฀its฀directors฀and฀executive฀officers.฀These฀
agreements฀provide฀for฀the฀Company฀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฀insurance฀policy฀the฀
Company฀chooses,฀in฀its฀discretion,฀to฀maintain.฀These฀indem-
nification฀agreements฀are฀intended฀to฀provide฀indemnification฀
rights฀to฀the฀fullest฀extent฀permitted฀under฀applicable฀indemni-
fication฀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฀Incorporation,฀Bylaws฀
and฀applicable฀law.฀
COMPENSATION฀COMMITTEE฀REPORT
To฀Our฀Stockholders
This฀report฀is฀provided฀in฀accordance฀with฀SEC฀rules฀to฀
inform฀the฀Company’s฀stockholders฀of฀the฀Compensation฀
Committee’s฀compensation฀policies฀for฀executive฀officers฀and฀
the฀rationale฀for฀compensation฀paid฀to฀the฀Chief฀Executive฀
Officer฀of฀the฀Company.
18฀฀฀฀Baker฀Hughes฀Incorporated