Baker Hughes 2009 Annual Report Download - page 34

24 Baker Hughes Incorporated
not later than 18 months prior to the expiration date or appli-
cable renewal date, we shall give notice to the Senior Execu-
tive that the term of the Change in Control Agreements will
not be extended. The terms of the Change in Control Agree-
ments for Messrs. Deaton, Ragauss, Crain and O’Donnell will
be automatically extended since we did not give notice that
the terms would not be extended more than 18 months prior
to the applicable renewal dates.
According to the Change in Control Agreements, we pay
severance benefits to a Senior Executive if the Senior Execu-
tive’s employment is terminated following, or in connection
with, a Change in Control during the term unless:
• the Senior Executive resigns without “good reason”;
• the Company terminates the employment of the Senior
Executive for “cause”; or
• the employment of the Senior Executive 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
Control and Termination of Employment by the Senior Executive
for Good Reason or by the Company or its Successor Without
Cause” for the definitions of “good reason”, “cause” and “dis-
ability” in the context of the Change in Control Agreements.
If the Senior Executive meets the criteria for payment of
severance benefits due to termination of employment follow-
ing 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 Senior
Executive’s annual base salary in effect immediately prior to
(i) the first event or circumstance constituting Good Reason
for his resignation, (ii) the Change of Control or (iii) the
Senior Executive’s termination of employment, whichever
is greatest (his “Highest Base Salary”);
(b) a lump sum payment equal to the Senior Executive’s High-
est Bonus Amount (as defined below), prorated based upon
the number of days of his service during the performance
period (reduced by any payments received by the Senior
Executive under our Annual Incentive Compensation Plan,
as amended, in connection with the Change in Control if
the Senior Executive’s termination of employment occurs
during the same calendar year in which the Change in
Control occurs);
(c) a lump sum payment equal to three times the greater of
(i) the Senior Executive’s Highest Bonus Amount or (ii) the
Senior Executive’s Highest Base Salary multiplied by the
Senior Executive’s applicable multiple, which is 1.20; 0.80;
0.75; 0.70; and 0.70 for Messrs. Deaton, Ragauss, Crain,
Craighead and O’Donnell, respectively;
(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
Senior Executive’s perquisites in effect prior to his termina-
tion of employment for the remainder of the calendar year
and (ii) the cost of the Senior Executive’s perquisites in
effect prior to his termination of employment for an addi-
tional three years;
(f) a lump sum payment equal to the undiscounted value of
the benefits the Senior Executive would have received had
he continued to participate in our Thrift Plan, the Pension
Plan and SRP for an additional three years, assuming for
this purpose that:
(1) the Senior Executive continues to be paid his Highest
Base Salary and Highest Bonus Amount during that
three-year period, and
(2) the Senior Executive’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 Senior
Executive 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
Senior Executive’s basic life insurance coverage on the date
of termination;
(i) a lump sum payment of $30,000 for outplacement services;
(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); and
(k) a lump-sum payment equal to the amount of interest that
would be earned on any of the foregoing payments subject
to a six-month payment delay under Section 409A using
the six-month London Interbank Offered Rate plus two per-
centage points.
In addition to the above, the Change in Control Agree-
ments provide for full vesting of all stock options, RSAs and
certain other equity incentive awards upon the occurrence of a
Change in Control.
A Senior Executive’s “Highest Bonus Amount” is the aver-
age of the Senior Executive’s three highest bonus amounts
received by the Senior Executive for each of our five fiscal
years immediately preceding the Senior Executive’s employ-
ment termination date. “Bonus amount” means the sum of (a)
the amount of the annual incentive bonus, if any, paid in cash
by us under the Annual Incentive Plan to or for the benefit of
the Senior Executive for services rendered during one of our
fiscal years and (b) the amount of the discretionary bonus or
other bonus, if any, paid in cash by us outside of the Annual
Incentive Plan, to or for the benefit of the Senior Executive for
services rendered during the same fiscal year. The Senior Exec-
utive’s bonus amount is determined by including any portion
thereof that the Senior Executive could have received in cash
in lieu of any elective deferrals under the Supplemental Retire-
ment Plan, our Thrift Plan or our section 125 cafeteria plan.