EXHIBIT 10-7

HALLIBURTON MANAGEMENT PERFORMANCE PAY PLAN
AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2007

 
 

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INDEX

ARTICLE I PURPOSE
 1
ARTICLE II DEFINITIONS
 1
2.1              Definitions
 1
2.2              Number
 4
2.3              Headings
 4
ARTICLE III PARTICIPATION
 4
3.1              Participants
 4
3.2              Partial Plan Year Participation
 4
3.3              No Right to Participate
 5
3.4              Plan Exclusive
 5
3.5              Consent to Dispute Resolution
 5
ARTICLE IV ADMINISTRATION
 5
ARTICLE V REWARD DETERMINATIONS
 6
5.1              Performance Measures
 6
5.2              Performance Requirements
 6
5.3              Reward Determinations
 6
5.4              Reward Opportunities
 6
5.5              Discretionary Adjustments
 6
5.6              Discretionary Bonuses
 6
ARTICLE VI DISTRIBUTION OF REWARDS
 7
6.1              Form and Timing of Payment
 7
6.2              Elective Deferral
 7
6.3              Tax Withholding
 7
ARTICLE VII TERMINATION OF EMPLOYMENT
 7
7.1              Termination of Service During Plan Year
 7
7.2              Termination of Service After End of Plan Year But Prior to the
Payment Date
 7
ARTICLE VIII RIGHTS OF PARTICIPANTS AND BENEFICIARIES
 8
8.1              Status as a Participant or Beneficiary
 8
8.2              Employment
 8
8.3              Nontransferability
 8
8.4              Nature of Plan
 9
ARTICLE IX CORPORATE CHANGE
 9
ARTICLE X AMENDMENT AND TERMINATION
 9
ARTICLE XI MISCELLANEOUS
 9
11.1                Governing Law
 9
11.2                Severability
10
11.3                Successor
10
11.4                Section 409A of the Code
10
11.5                Effective Date
10

 
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HALLIBURTON
MANAGEMENT PERFORMANCE PAY PLAN
 
The Company, having heretofore established the Halliburton Management
Performance Pay Plan, pursuant to the provisions of Article X of said Plan,
hereby amends and restates said Plan to be effective in accordance with the
provisions of Section 11.4 hereof.
 
ARTICLE I

 
PURPOSE
 
The purpose of the Halliburton Management Performance Pay Plan (the “Plan”) is
to reward management and other key employees of the Company and its Affiliates
for improving financial results which drive the creation of value for
shareholders of the Company and thereby, serve to attract, motivate, reward and
retain high caliber employees required for the success of the Company.  The Plan
provides a means to link total and individual cash compensation to Company
performance, as measured by Cash Value Added (“CVA”), a demonstrated driver of
shareholder value, and, where appropriate, additional performance measures which
drive CVA.
 
ARTICLE II

 
DEFINITIONS
 
           2.1           Definitions.  Where the following words and phrases
appear in the Plan, they shall have the respective meanings set forth below,
unless their context clearly indicates to the contrary.
 
“Affiliate” shall mean a Subsidiary of the Company or a division or designated
group of the Company or a Subsidiary.
 
“Base Salary” shall mean the annualized rate of pay of a Participant as in
effect on January 1 of a Plan Year, including base pay a Participant could have
received in cash in lieu of (i) contributions made on such Participant’s behalf
to a qualified Plan maintained by the Company or to any cafeteria plan under
Section 125 of the Code maintained by the Company and (ii) deferrals of
compensation made at the Participant’s election pursuant to a plan or
arrangement of the Company or an Affiliate, but excluding any Rewards under this
Plan and any other bonuses, incentive pay or special awards.
 
“Beneficiary” shall mean the person, persons, trust or trusts entitled by Will
or the laws of descent and distribution to receive the benefits specified under
the Plan in the event of the Participant’s death prior to full payment of a
Reward.
 
“Board of Directors” shall mean the Board of Directors of the Company.
 
“Business Unit CVA” shall mean the respective CVA of designated business units,
each calculated on an aggregate basis for their respective operations.
 

 
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“Cause” shall mean (i) the conviction of the Participant of a felony under
Federal law or the law of the state in which such action occurred, (ii)
dishonesty in course of fulfilling the Participant’s employment duties or (iii)
the disclosure by the Participant to any unauthorized person or competitor of
any confidential information or confidential knowledge as to the business or
affairs of the Company and its Affiliates.
 
“CEO” shall mean the Chief Executive Officer of the Company.
 
“Code” shall mean the Internal Revenue Code of 1986, as amended.
 
“Common Stock” shall mean the common stock, par value $2.50 per share, of
Halliburton Company.
 
“Compensation Committee” shall mean the Compensation Committee of Directors of
the Company, appointed by the Board of Directors from among its members, no
member of which shall be an employee of the Company or a Subsidiary.
 
“Company” shall mean Halliburton Company and its successors.
 
“Company CVA” shall mean CVA calculated on a consolidated basis.
 
“Corporate Change” shall mean one of the following events: (i) the merger,
consolidation or other reorganization of the Company in which the outstanding
Common Stock is converted into or exchanged for a different class of securities
of the Company, a class of securities of any other issuer (except a direct or
indirect wholly owned Subsidiary), cash or property; (ii) the sale, lease or
exchange of all or substantially all of the assets of the Company to another
corporation or entity (except a direct or indirect wholly owned Subsidiary);
(iii) the adoption by the stockholders of the Company of a plan of liquidation
and dissolution; (iv) the acquisition (other than any acquisition pursuant to
any other clause of this definition) by any person or entity, including, without
limitation, a “group” as contemplated by Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended, of beneficial ownership, as contemplated by
such Section, of more than twenty percent (based on voting power) of the
Company’s outstanding capital stock; or (v) as a result of or in connection with
a contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board.
 
“CVA” shall mean the difference between operating cash flow and a capital
charge, calculated in accordance with the criteria and guidelines set forth in
the Corporate Policy entitled “Cash Value Added (CVA),” as in effect at the time
any such calculation is made.
 
“CVA Drivers” shall mean such additional performance measures (either objective
or subjective) as may be approved by the CEO from time to time to reinforce key
operating and strategic goals important to the Company and its business
units.  Particular CVA Drivers may vary from business unit to business unit and
from Participant to Participant within a particular business unit as deemed
appropriate according to the needs of the applicable business unit.
 

 
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“Dispute Resolution Program” shall mean the Halliburton Dispute Resolution Plan.
 
“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.
 
“Group CVA” shall mean the respective CVA of the Halliburton Energy Services
Group and the Engineering and Construction Group, each calculated on an
aggregate basis for their respective operations.
 
“Key Employees” shall mean regular, full-time employees of the Company or an
Affiliate below the Officer level.
 
“Officer” shall mean a full officer of the Company or an Affiliate.
 
“Participant” shall mean any active employee of the Company or an Affiliate who
participates in the Plan pursuant to the provisions of Article III hereof.  An
employee shall not be eligible to participate in the Plan while on a leave of
absence.
 
“Participant Category” shall mean a grouping of Participants determined in
accordance with the applicable provisions of Article III.
 
“Payment Date” shall mean, with respect to a particular Plan Year, the date
payment is actually made following the end of the applicable Plan Year, but no
later than the last business day of February of the year next following the end
of such Plan Year, or as soon as administratively practicable thereafter if it
is administratively impracticable to make payment by that date and such
impracticability was not reasonably foreseeable at the end of the applicable
Plan Year.
 
“Performance Goals” shall mean, for a particular Plan Year, established levels
of applicable Performance Measures.
 
“Performance Measures” shall mean the criteria used in determining Performance
Goals for particular Participant Categories, which may include one or more of
the following:  Company CVA, Group CVA, Business Unit CVA and CVA Drivers.
 
“Plan” shall mean the Halliburton Management Performance Pay Plan as amended and
restated effective January 1, 2007, and as the same may thereafter be amended
from time to time.
 
“Plan Year” shall mean the calendar year ending each December 31.
 
“Reward” shall mean the dollar amount of incentive compensation payable to a
Participant under the Plan for a Plan Year determined in accordance with Section
5.3.
 

 
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“Reward Opportunity” shall mean, with respect to each Participant Category,
incentive reward payment amounts, expressed as a percentage of Base Salary,
which corresponds to various levels of pre-established Performance Goals,
determined pursuant to the Reward Schedule.
 
“Reward Schedule” shall mean the schedule which aligns the level of achievement
of applicable Performance Goals with Reward Opportunities for a particular Plan
Year, such that the level of achievement of the pre-established Performance
Goals at the end of such Plan Year will determine the actual Reward.
 
“Subsidiary” shall mean any corporation 50 percent or more of whose voting power
is owned, directly or indirectly, by the Company.
 
           2.2           Number.  Wherever appropriate herein, words used in the
singular shall be considered to include the plural and words used in the plural
shall be considered to include the singular.
 
           2.3           Headings.  The headings of Articles and Sections herein
are included solely for convenience, and if there is any conflict between
headings and the text of the Plan, the text shall control.
 
ARTICLE III

 
PARTICIPATION
 
           3.1           Participants.  Active employees as designated annually
as Participants by the CEO, or his delegate, prior to the last day of March each
Plan Year shall be Participants for such Plan Year.
 
           3.2           Partial Plan Year Participation.  If, after the
beginning of the Plan Year, (i) a person is newly hired, promoted or transferred
into a position in which he or she is a Key Employee, or (ii) an employee who
was not previously a Participant for such Plan Year returns to active employment
following a leave of absence, the CEO, or his delegate, may designate in writing
such person as a Participant for the pro rata portion of such Plan Year
beginning on the first day of the month following such designation.
 
If an employee who has previously been designated as a Participant for a
particular Plan Year takes a leave of absence during such Plan Year, all of such
Participant’s rights to a Reward for such Plan Year shall be forfeited, unless
the CEO, or his delegate, shall determine that such Participant’s Reward for
such Plan Year shall be prorated based upon that portion of the Plan Year during
which he or she was an active Participant, in which case the prorated portion of
the Reward shall be paid in accordance with the provisions of Section 6.1.
 

 
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Each Participant shall be assigned to a Participant Category at the time he or
she becomes a Participant for a particular Plan Year.  If a Participant
thereafter incurs a change in status due to promotion, demotion, reassignment or
transfer, the CEO, or his delegate, may approve such adjustment in such
Participant’s Reward Opportunity as deemed appropriate under the circumstances
(including termination of participation in the Plan for the remainder of the
Plan Year), such adjustment to be made on a pro rata basis for the balance of
the Plan Year effective with the first day of the month following such approval,
unless some other effective date is specified.  All such adjustments shall be
documented in writing and filed with the Plan records for the applicable Plan
Year.
 
           3.3           No Right to Participate.  No Participant or other
employee of the Company or an Affiliate shall, at any time, have a right to
participate in the Plan for any Plan Year, notwithstanding having previously
participated in the Plan.
 
           3.4           Plan Exclusive.  No employee shall simultaneously
participate in this Plan and in any other short-term incentive plan of the
Company or an Affiliate unless such employee’s participation in such other plan
is approved by the CEO, or his delegate.
 
           3.5           Consent to Dispute Resolution.  Participation in the
Plan constitutes consent by the Participant to be bound by the terms and
conditions of the Dispute Resolution Program which in substance requires that
all disputes arising out of or in any way related to employment with the Company
or its Affiliates, including any disputes concerning the Plan, be resolved
exclusively through such program, which includes binding arbitration as its last
step.
 
ARTICLE IV

 
ADMINISTRATION
 
Each Plan Year, the basis for payments under the Plan in relation to given
Performance Goals shall be established, as more fully described in Article V
hereof, and, following the end of each Plan Year, the actual Reward payable to
each Participant shall be determined.  The CEO is authorized to construe and
interpret the Plan, to prescribe, amend and rescind rules, regulations and
procedures relating to its administration and to make all other determinations
necessary or advisable for administration of the Plan.  The CEO shall have such
other authority as is expressly provided in the Plan.  In addition, as permitted
by law, the Compensation Committee and the CEO may delegate such of their
respective authority granted under the Plan as deemed appropriate; provided,
however, that the Compensation Committee and the CEO may not delegate their
respective authority under Article V hereof.  Decisions of the Compensation
Committee and the CEO, or their respective delegates, in accordance with the
authority granted hereby or delegated pursuant hereto shall be conclusive and
binding.  Subject only to compliance with the express provisions hereof, the
Compensation Committee, the CEO and their respective delegates may act in their
sole and absolute discretion with respect to matters within their authority
under the Plan.
 

 
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ARTICLE V

 
REWARD DETERMINATIONS
 
           5.1           Performance Measures.  CVA shall be the primary
Performance Measure in determining Performance Goals for any Plan Year.  In
addition, appropriate CVA Drivers applicable to particular Participants may also
be used as Performance Measures.
 
           5.2           Performance Requirements.  Prior to the last day of
February of each Plan Year, (i) the Compensation Committee shall determine the
Company CVA, applicable Group CVA and applicable Business Unit CVA Performance
Goals, and the CEO shall approve appropriate CVA Drivers applicable to certain
Participants and (ii) the CEO shall establish a Reward Schedule which aligns the
level of achievement of applicable Performance Goals with Reward Opportunities,
such that the level of achievement of the pre-established Performance Goals at
the end of the Plan Year will determine the actual Reward.
 
           5.3           Reward Determinations.  After the end of each Plan
Year, (i) the Compensation Committee shall determine the extent to which the
Performance Goals (other than CVA Drivers) have been achieved and (ii) the CEO
shall determine the extent to which the applicable CVA Drivers have been
achieved, and the amount of the Reward shall be computed for each Participant in
accordance with the Reward Schedule.
 
           5.4           Reward Opportunities.  The established Reward
Opportunities may vary in relation to the Participant Categories and within the
Participant Categories.  In the event a Participant changes Participant
Categories during a Plan Year, the Participant’s Reward Opportunities shall be
adjusted in accordance with the applicable provisions of Section 3.2.
 
           5.5           Discretionary Adjustments.  Once established,
Performance Goals will not be changed during the Plan Year.  However, if the
Compensation Committee, in its sole and absolute discretion, determines that
there has been (i) a change in the business, operations, corporate or capital
structure, (ii) a change in the manner in which business is conducted or (iii)
any other material change or event which will impact one or more Performance
Goals in a manner the Compensation Committee did not intend, then the
Compensation Committee may, reasonably contemporaneously with such change or
event, make such adjustments as it shall deem appropriate and equitable in the
manner of computing the relevant Performance Measures applicable to such
Performance Goal or Goals for the Plan Year; provided, however, that the CEO
shall be authorized, subject to the review and oversight of the Compensation
Committee, to make adjustments in the manner of computing one or more CVA
Drivers if, when evaluated in accordance with the standards set forth in the
preceding sentence, he shall deem such adjustments to be appropriate and
equitable.
 
           5.6           Discretionary Bonuses.  Notwithstanding any other
provision contained herein to the contrary, the CEO may, in its sole discretion,
make such other or additional bonus payments to a Participant as it shall deem
appropriate.
 

 
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ARTICLE VI

 
DISTRIBUTION OF REWARDS
 
           6.1           Form and Timing of Payment.  Rewards shall be paid in a
lump sum on the Payment Date.  In the event of termination of a Participant’s
employment prior to the Payment Date for any reason other than death (in which
case payment shall be made in accordance with the applicable provisions of
Article VII), the amount of any Reward (or prorated portion thereof) payable
pursuant to the provisions of Sections 7.1 or 7.2 shall be paid in cash on the
Payment Date.
 
           6.2           Elective Deferral.  Nothing herein shall be deemed to
preclude a Participant’s election to defer receipt of a percentage of his or her
Reward beyond the time such amount would have been payable hereunder pursuant to
the Halliburton Elective Deferral Plan or other similar plan.
 
           6.3           Tax Withholding.  The Company or employing entity
through which payment of a Reward is to be made shall have the right to deduct
from any payment hereunder any amounts that Federal, state, local or foreign tax
laws require with respect to such payments.
 
ARTICLE VII

 
TERMINATION OF EMPLOYMENT
 
           7.1           Termination of Service During Plan Year.  In the event
a Participant’s employment is terminated prior to the last business day of a
Plan Year for any reason other than death, normal retirement at or after age 65
or disability (as determined by the CEO or his delegate), all of such
Participant’s rights to a Reward for such Plan Year shall be forfeited, unless
the CEO, or his delegate, shall determine that such Participant’s Reward for
such Plan Year shall be prorated based upon that portion of the Plan Year during
which he or she was a Participant, in which case the prorated portion of the
Reward shall be paid in accordance with the provisions of Section 6.1.  In the
case of death during the Plan Year, the prorated amount of such Participant’s
Reward shall be paid to the Participant’s estate, or if there is no
administration of the estate, to the heirs at law, on the Payment Date.  In the
case of disability or normal retirement at or after age 65, the prorated amount
of a Participant’s Reward shall be paid in accordance with the provisions of
Section 6.1.
 
           7.2           Termination of Service After End of Plan Year But Prior
to the Payment Date.  If a Participant’s employment is terminated after the end
of the applicable Plan Year, but prior to the Payment Date, for any reason other
than termination for Cause, the amount of any Reward applicable to such Plan
Year shall be paid to the Participant in accordance with the provisions of
Section 6.1, except in the case of death, in which case the amount of such
Reward shall be paid to such Participant’s estate, or if there is no
administration of the estate, to the heirs at law, as soon as practicable.
 
If a Participant’s employment is terminated for Cause, all of such Participant’s
rights to a Reward applicable to such Plan Year shall be forfeited.
 

 
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ARTICLE VIII

 
RIGHTS OF PARTICIPANTS AND BENEFICIARIES
 
           8.1           Status as a Participant or Beneficiary.  Neither status
as a Participant or Beneficiary shall be construed as a commitment that any
Reward will be paid or payable under the Plan.
 
           8.2           Employment.  Nothing contained in the Plan or in any
document related to the Plan or to any Reward shall confer upon any Participant
any right to continue as an employee or in the employ of the Company or an
Affiliate or constitute any contract or agreement of employment for a specific
term or interfere in any way with the right of the Company or an Affiliate to
reduce such person’s compensation, to change the position held by such person or
to terminate the employment of such person, with or without cause.
 
           8.3           Nontransferability.  No benefit payable under, or
interest in, this Plan shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or charge and any
such attempted action shall be void and no such benefit or interest shall be, in
any manner, liable for, or subject to, debts, contracts, liabilities or torts of
any Participant or Beneficiary; provided, however, that, nothing in this Section
8.3 shall prevent transfer (i) by Will, (ii) by applicable laws of descent and
distribution or (iii) pursuant to an order that satisfies the requirements for a
“qualified domestic relations order” as such term is defined in section
206(d)(3)(B) of ERISA and section 414(p)(1)(A) of the Code, including an order
that requires distributions to an alternate payee prior to a Participant’s
“earliest retirement age” as such term is defined in section 206(d)(3)(E)(ii) of
ERISA and section 414(p)(4)(B) of the Code.  Any attempt at transfer, assignment
or other alienation prohibited by the preceding sentence shall be disregarded
and all amounts payable hereunder shall be paid only in accordance with the
provisions of the Plan.
 

 
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           8.4           Nature of Plan.  No Participant, Beneficiary or other
person shall have any right, title or interest in any fund or in any specific
asset of the Company or any Affiliate by reason of any Reward hereunder.  There
shall be no funding of any benefits which may become payable hereunder.  Nothing
contained in the Plan (or in any document related thereto), nor the creation or
adoption of the Plan, nor any action taken pursuant to the provisions of the
Plan shall create, or be construed to create, a trust of any kind or a fiduciary
relationship between the Company or an Affiliate and any Participant,
Beneficiary or other person.  To the extent that a Participant, Beneficiary or
other person acquires a right to receive payment with respect to a Reward
hereunder, such right shall be no greater than the right of any unsecured
general creditor of the Company or other employing entity, as applicable.  All
amounts payable under the Plan shall be paid from the general assets of the
Company or employing entity, as applicable, and no special or separate fund or
deposit shall be established and no segregation of assets shall be made to
assure payment of such amounts.  Nothing in the Plan shall be deemed to give any
employee any right to participate in the Plan except in accordance herewith.
 
ARTICLE IX

 
CORPORATE CHANGE
 
In the event of a Corporate Change, (i) with respect to a Participant’s Reward
Opportunity for the Plan Year in which the Corporate Change occurred, such
Participant shall be entitled to an immediate cash payment equal to the maximum
amount of Reward he or she would have been entitled to receive for the Plan
Year, prorated to the date of the Corporate Change; and (ii) with respect to a
Reward earned for the previous Plan Year which has not been paid, such amount
shall be paid in cash immediately.
 
ARTICLE X

 
AMENDMENT AND TERMINATION
 
Notwithstanding anything herein to the contrary, the Company may, at any time,
terminate or, from time to time amend, modify or suspend the Plan; provided,
however, that, without the prior consent of the Participants affected, no such
action may adversely affect any rights or obligations with respect to any
Rewards theretofore earned for a particular Plan Year, whether or not the
amounts of such Rewards have been computed and whether or not such Rewards are
then payable.
 
ARTICLE XI

 
MISCELLANEOUS
 
           11.1           Governing Law.  The Plan and all related documents
shall be governed by, and construed in accordance with, the laws of the State of
Texas, without giving effect to the principles of conflicts of law thereof,
except to the extent preempted by federal law.
 

 
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           11.2           Severability.  If any provision of the Plan shall be
held illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining provisions hereof; instead, each provision shall be fully
severable and the Plan shall be construed and enforced as if said illegal or
invalid provision had never been included herein.
 
           11.3           Successor.  All obligations of the Company under the
Plan shall be binding upon and inure to the benefit of any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all of the business and/or assets of the Company.
 
           11.4           Section 409A of the Code.  It is intended that the
provisions of this Plan satisfy the requirements of Section 409A of the Code and
that the Plan be operated in a manner consistent with such requirements to the
extent applicable.  Therefore, the Compensation Committee may make adjustments
to the Plan and may construe the provisions of the Plan in accordance with the
requirements of Section 409A of the Code.
 
           11.5           Effective Date.  This amendment and restatement of the
Plan shall be effective from and after January 1, 2007, and shall remain in
effect until such time as it may be terminated or amended pursuant to Article X.
 

 

 
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