Baker Hughes 2007 Annual Report Download - page 38

20 Baker Hughes Incorporated
According to the Change in Control Agreements, we pay
severance benefits to a NEO if the NEO’s employment is termi-
nated following, or in connection with, a Change in Control
during the term unless:
•฀ the฀NEO฀resigns฀without฀“good฀reason”;
•฀ the฀Company฀terminates฀the฀employment฀of฀the฀NEO฀for฀
“cause”; or
•฀ the฀employment฀of฀the฀NEO฀is฀terminated฀by฀reason฀of฀
death or “disability”.
Please refer to “Potential Payments Upon Termination or
Change in Control – Payments in the Event of a Change in Con-
trol and Termination of Employment by the Executive for Good
Reason or by the Company or its Successor Without Cause”
for the definitions of “good reason”, “cause” and “disability”
in the context of the Change in Control Agreements.
If the NEO meets the criteria for payment of severance
benefits due to termination of employment following or in
connection with a Change in Control during the term as
described above, in addition to any benefits he is due under
our employee benefit plans and equity and incentive compen-
sation plans, he will receive the following benefits:
(a) a lump sum payment equal to three times the NEO’s annual
base salary in effect immediately prior to (i) the first event
or circumstance constituting Good Reason for his resigna-
tion, (ii) the Change of Control or (iii) the NEO’s termina-
tion of employment, whichever is greatest (his “Highest
Base Salary”);
(b) a lump sum payment equal to the NEO’s expected value
bonus based on the incentive bonus under our Annual
Incentive Plan for the year in which he terminates employ-
ment based on his Highest Base Salary, prorated based
upon the number of days of his service during the perfor-
mance period (reduced by any payments received by the
NEO under our Annual Incentive Compensation Plan, as
amended, in connection with the Change in Control if the
NEO’s termination of employment occurs during the same
calendar year in which the Change in Control occurs);
(c) a lump sum payment equal to the NEO’s expected value
bonus based on his Highest Base Salary for the year in
which he terminates employment multiplied by his Highest
Base Salary and multiplied by three;
(d) continuation of accident and health insurance benefits
for an additional three years;
(e) a lump sum payment equal to the sum of (i) the cost of
the NEO’s perquisites in effect prior to his termination of
employment for the remainder of the calendar year and
(ii) the cost of the NEO’s perquisites in effect prior to his
termination of employment for an additional three years;
(f) a lump sum payment equal to the undiscounted value of
the benefits the NEO would have received had he contin-
ued to participate in our Thrift Plan and SRP for an addi-
tional three years, assuming for this purpose that:
(1) the NEO’s compensation during that three-year period
remained at the levels used for calculating the sever-
ance payment described in paragraphs (a) and (c)
above, and
(2) the NEO’s contributions to and accruals under 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;
(g) eligibility for our retiree medical program if the NEO would
have become entitled to participate in that program had he
remained employed for an additional three years;
(h) a lump sum payment equivalent to thirty-six multiplied
by the monthly basic life insurance premium applicable
to the NEO’s basic life insurance coverage on the date
of termination;
(i) outplacement services for a period of three years or, if ear-
lier, until the NEO’s acceptance of an offer of employment
or in lieu of outplacement services, the NEO may elect to
receive a cash payment of $30,000; and
(j) an additional amount (a gross-up payment) in respect of
excise taxes that may be imposed under the golden para-
chute rules on payments and benefits received in connec-
tion with the Change in Control. The gross-up payment
would make the 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,
agreements and arrangements (including for example,
acceleration of vesting of equity awards).
In addition to the above, the Change in Control Agree-
ments provide for full vesting of all stock options and other
equity incentive awards upon the occurrence of a Change
in Control.
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;