Baker Hughes 2007 Annual Report Download - page 37

2007 Proxy Statement 19
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. The term of the employment agreement
is until October 25, 2008, with automatic one-year renewals
unless either party provides a notice not to extend the employ-
ment 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
termination. 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
during 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 Employment
by Mr. Deaton for Good Reason or by Us Without Cause”
located elsewhere in this proxy statement for a definition
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฀the฀expected฀value฀of฀
his incentive bonus for the year of termination, 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; and
•฀ a฀continuation฀of฀employer฀contributions฀to฀the฀Company’s฀
SRP for the remainder of the term of the employment
agreement.
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
salary through the date of termination; (ii) any compensation
previously deferred by him (together with any accrued interest
or earnings) and any accrued vacation pay; and (iii) any other
amounts due him as of the date of termination, 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 employ-
ment 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 NEOs, as well
as the other Senior Executives. The Change in Control Agree-
ments provide for payment of certain benefits to these officers
as a result of termination of employment following, or in con-
nection with, a Change in Control (as defined below) of the
Company. The initial term of the Change in Control Agree-
ment for Mr. Deaton expired on October 24, 2007, and was
automatically extended until October 24, 2009. The initial
term of the Change in Control Agreement for Mr. Crain will
expire December 31, 2008. The initial term of the Change in
Control Agreement for Mr. Ragauss expires on April 25, 2009.
The initial term of the Change in Control Agreement for
Mr. Barr expired on July 27, 2007, and was automatically
extended until July 27, 2009.
After the expiration of the initial term, each of the Change
in Control Agreements will be automatically extended for suc-
cessive 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, we
shall give notice to the NEO that the term of the Change in
Control Agreements will not be extended. The initial terms
of the Change in Control Agreements for Messrs. Deaton
and Barr were automatically extended since, not later than
18 months prior to the end of the initial terms, we did not
give notice that the terms would not be extended.