BP (BP)

Service contracts

Service contracts are expressed to expire at a normal retirement age of 60 (subject to age discrimination). The contracts have a notice period of one year.
     The service contracts of UK directors may be terminated by the company at any time with immediate effect on payment in lieu of notice equivalent to one year’s salary or the amount of salary that would have been paid if the contract had terminated on the expiry of the remainder of the notice period.
     Dr Grote’s contract is with BP Exploration (Alaska) Inc. He is seconded to BP p.l.c. under a secondment agreement of 7 August 2000, which expires on 31 March 2010. The secondment can be terminated by one month’s notice by either party and terminates automatically on the termination of Dr Grote’s service contract.
     There are no other provisions for compensation payable on early termination of the above contracts. In the event of the early termination of any of the contracts by the company, other than for cause (or under a specific termination payment provision), the relevant director’s then-current salary and benefits would be taken into account in calculating any liability of the company.
     Since January 2003, new service contracts include a provision to allow for severance payments to be phased, when appropriate. The committee will also consider mitigation to reduce compensation to a departing director, when appropriate to do so.

Directors leaving the board
2007
Both Lord Browne and Mr Manzoni, who were employed by the company under service contracts dated 11 November 1993 and 29 January 2003 respectively, left the company during the year. Lord Browne, who left on 1 May 2007, was eligible for an ex gratia lump sum superannuation payment equal to one year’s salary (£1,575,000) but, in light of his resignation, did not receive the compensation for loss of office previously notified to shareholders. Mr Manzoni, who left on 31 August 2007, was entitled to one year’s salary (£485,000) as compensation on termination in accordance with his contractual entitlement. Both individuals were eligible for a pro-rata bonus for 2007, reflecting achievement of bonus targets and their period of employment during the year. As regards long-term incentives, both individuals retain their performance awards under the EDIP in respect of 2005-2007 and 2006-2008 share element and these will vest at the normal time to the extent the performance targets are met. Both individuals forfeited their participation in the 2007-2009 share element. Further details of these awards are set out in the table on page 68. Both individuals retained their outstanding share options, as set out in the table on page 69.
     In connection with the shareholder derivative actions brought in the US against the directors of the company, the company has agreed with the plaintiffs in the Alaska action, with the consent of Lord Browne and Mr Manzoni, to defer the release of certain amounts and preserved share awards to those individuals (other than Lord Browne’s ex gratia superannuation payment) pending resolution of the action. The company has agreed to pay the individuals simple interest at the rate of 6.5% in respect of the period of deferral.