Baker Hughes 2007 Annual Report Download - page 152

2007 Form 10-K 69
one fiscal year. The performance measures that may be used
to determine the extent of the actual performance payout or
vesting include, but are not limited to, net earnings; earnings
per share; return measures; cash flow return on investments
(net cash flows divided by owner’s equity); earnings before or
after taxes, interest, depreciation and/or amortization; share
price (including growth measures and total shareholder return)
and Baker Value Added (our metric that measures operating
profit after tax less the cost of capital employed).
Restricted Stock and Restricted Stock Units. With
respect to awards of restricted stock and restricted stock units,
the Compensation Committee will determine the conditions or
restrictions on the awards, including whether the holders of
the restricted stock or restricted stock units will exercise full
voting rights (in the case of restricted stock awards only) or
receive dividends and other distributions during the restriction
period. At the time the award is made, the Compensation Com-
mittee will determine the right to receive unvested restricted
stock or restricted units after termination of service. Awards of
restricted stock are limited to 1.0 million shares in any one year
to any one individual. Awards of restricted stock units are lim-
ited to 1.0 million units in any one year to any one individual.
Stock Appreciation Rights. Stock appreciation rights
may be granted under the 2002 Employee LTIP on the terms
and conditions determined by the Compensation Committee.
The grant price of a freestanding stock appreciation right will
not be less than the fair market value of our common stock on
the date of grant. The maximum number of shares of our com-
mon stock that may be subject to stock appreciation rights
granted under the 2002 Employee LTIP to any one individual
during any one fiscal year will not exceed 3.0 million shares,
subject to adjustment under the antidilution provisions of the
2002 Employee LTIP.
Administration; Amendment and Termination. The
Compensation Committee shall administer the 2002 Employee
LTIP, and in the absence of the Compensation Committee, the
Board will administer the Plan. The Compensation Committee
will have full and exclusive power to interpret the provisions
of the 2002 Employee LTIP as the Committee may deem nec-
essary or proper. The Board may alter, amend, modify, suspend
or terminate the 2002 Employee LTIP, except that no amend-
ment, modification, suspension or termination that would
adversely affect in any material way the rights of a participant
under any award previously granted under the 2002 Employee
LTIP may be made without the written consent of the partici-
pant. In addition, no amendment of the 2002 Employee LTIP
shall become effective absent stockholder approval of the
amendment, to the extent stockholder approval is otherwise
required by applicable legal requirements.
Director Compensation Deferral Plan
The Baker Hughes Incorporated Director Compensation
Deferral Plan, as amended and restated effective July 24,
2002 (the “Deferral Plan”), is intended to provide a means
for members of our Board of Directors to defer compensation
otherwise payable and provide flexibility with respect to our
compensation policies. Under the provisions of the Deferral
Plan, directors may elect to defer income with respect to
each calendar year. The compensation deferrals may be stock
option-related deferrals or cash-based deferrals. If a director
elects a stock option-related deferral, on the last day of each
calendar quarter he or she will be granted a nonqualified stock
option. The number of shares subject to the stock option is
calculated by multiplying the amount of the deferred compen-
sation that otherwise would have been paid to the director
during the quarter by 4.4 and then dividing by the fair market
value of our common stock on the last day of the quarter. The
per share exercise price of the option will be the fair market
value of a share of our common stock on the date the option
is granted. Stock options granted under the Deferral Plan vest
on the first anniversary of the date of grant and must be exer-
cised within ten years of the date of grant. If a director’s direc-
torship terminates for any reason, any options outstanding
will expire three years after the termination of the directorship.
The maximum aggregate number of shares of our common
stock that may be issued under the Deferral Plan is 0.5 million.
As of December 31, 2007, options covering 3,313 shares of
our common stock were outstanding under the Deferral Plan,
there were no shares exercised during fiscal 2007 and approxi-
mately 0.5 million shares remained available for future options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS AND DIRECTOR INDEPENDENCE
Information for this item is set forth in the sections entitled
“Corporate Governance-Director Independence” and “Certain
Relationships and Related Transactions” in our Proxy State-
ment, which sections are incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information concerning principal accounting fees and ser-
vices is set forth in the section entitled “Fees Paid to Deloitte &
Touche LLP” in our Proxy Statement, which section is incorpo-
rated herein by reference.