Exhibit 10.3
BAKER HUGHES INCORPORATED
CHANGE IN CONTROL SEVERANCE PLAN
(Amendment and Restatement Effective January 1, 2009)

 

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BAKER HUGHES INCORPORATED
CHANGE IN CONTROL SEVERANCE PLAN
(Amendment and Restatement Effective January 1, 2009)
     WHEREAS, Baker Hughes Incorporated, a corporation organized and existing
under the laws of the State of Delaware (the “Company”), recognizes that one of
its most valuable assets is its key management executives;
     WHEREAS, the Company would like to provide severance benefits in the event
that the employment of a key management executive is involuntarily terminated in
conjunction with a change in control;
     WHEREAS, the Company previously established the Baker Hughes Incorporated
Change in Control Severance Plan (the “Plan”); and
     WHEREAS, the Company desires to amend the Plan to comply with section 409A
of the Internal Revenue Code of 1986, as amended.
     NOW, THEREFORE, the Company adopts the amendment and restatement of the
Plan, effective January 1, 2009.

 

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TABLE OF CONTENTS

              Page  
1. ESTABLISHMENT AND OBJECTIVE
    1  
1.1 Establishment
    1  
1.2 Objective
    1  
2. DEFINITIONS
    1  
2.1 Capitalized Terms
    1  
2.2 Number and Gender
    9  
2.3 Headings
    10  
3. ELIGIBILITY
    10  
4. BENEFITS
    10  
4.1 Equity Based Compensation
    10  
4.2 Compensation and Benefits During Incapacity and Prior to Termination of
Employment
    10  
4.3 Benefits Following Termination of Employment
    11  
4.4 Tax Gross-Up Payments
    14  
4.5 Legal Fees
    15  
5. TIME OF BENEFITS PAYMENTS
    16  
6. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE
    16  
6.1 Notice of Termination
    16  
6.2 Employment Termination Date
    17  
6.3 Dispute Concerning Termination
    17  
6.4 Compensation During Dispute
    17  
7. WITHHOLDING
    18  
8. DEATH OF PARTICIPANT
    18  
9. AMENDMENT AND TERMINATION
    18  
10. ADOPTION OF PLAN BY OTHER EMPLOYERS
    18  
11. DISPUTED PAYMENTS AND FAILURES TO PAY
    18  
12. FUNDING
    19  
13. MISCELLANEOUS
    20  
13.1 Plan Not an Employment Contract
    20  
13.2 Alienation Prohibited
    20  

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TABLE OF CONTENTS
(continued)

              Page  
13.3 Severability
    20  
13.4 Binding Effect
    20  
13.5 Settlement of Disputes Concerning Benefits Under the Plan; Arbitration
    20  
13.6 Guaranty of Payment, Performance, and Observance by Baker Hughes
    21  
13.7 No Mitigation
    21  
13.8 Other Amounts Due
    21  
13.9 Notices
    22  
13.10 Governing Law
    22  
13.11 Compliance With Section 409A
    22  

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BAKER HUGHES INCORPORATED
CHANGE IN CONTROL SEVERANCE PLAN
1. ESTABLISHMENT AND OBJECTIVE
     1.1 Establishment. Baker Hughes Incorporated, a Delaware corporation,
hereby establishes a plan for certain designated employees to be known as the
“Baker Hughes Incorporated Change in Control Severance Plan” (the “Plan”).
     1.2 Objective. The Plan is designed to attract and retain certain
designated employees of the Company (defined below) and to reward such employees
of the Company by providing replacement income and certain benefits in
conjunction with a Change in Control (defined below).
2. DEFINITIONS
     2.1 Capitalized Terms. Whenever used in the Plan, the following capitalized
terms in this Section 2.1 shall have the meanings set forth below:
     “Affiliate” means any entity which is a member of (i) the same controlled
group of corporations within the meaning of section 414(b) of the Code with
Baker Hughes, (ii) a trade or business (whether or not incorporated) which is
under common control (within the meaning of section 414(c) of the Code) with
Baker Hughes or (iii) an affiliated service group (within the meaning of section
414(m) of the Code) with Baker Hughes.
     “Annual Incentive Plan” means the Baker Hughes Incorporated Annual
Incentive Compensation Plan, as amended from time to time, any guidelines issued
pursuant to such plan, and any other annual incentive bonus plans adopted by the
Company from time to time which are in replacement of such plan.
     “Applicable Multiple” means, with respect to any Participant, the
applicable multiple specified in Exhibit A.
     “Assets” means assets of any kind owned by Baker Hughes, including but not
limited to securities of Baker Hughes’ direct and indirect subsidiaries and
Affiliates.
     “Baker Hughes” means Baker Hughes Incorporated, a Delaware corporation, and
any successor by merger or otherwise.
     “Base Compensation” means a Participant’s base salary or wages (as defined
in section 3401(a) of the Code for purposes of federal income tax withholding)
from the Company, modified by including any portion thereof that such
Participant could have received in cash in lieu of any elective deferrals made
by the Participant pursuant to the Supplemental Retirement Plan (other than
deferrals of bonuses) or pursuant to a qualified cash or deferred arrangement
described in section 401(k) of the Code and any elective contributions under a
cafeteria plan described in section 125, and modified further by excluding any
bonus, incentive compensation (including but not limited to equity-based
compensation), commissions, expense reimbursements or other expense allowances,

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fringe benefits (cash and noncash), moving expenses, deferred compensation
(other than elective deferrals by the Participant under a qualified cash or
deferred arrangement described in section 401(k) of the Code or the Supplemental
Retirement Plan that are expressly included in “Base Compensation” under the
foregoing provisions of this definition), welfare benefits as defined in ERISA,
overtime pay, special performance compensation amounts and severance
compensation.
     “Beneficial Owner” or “Beneficial Ownership” shall have the meaning
ascribed to those terms in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
     “Board” means the Board of Directors of Baker Hughes or other governing
body of Baker Hughes or its direct or indirect parent.
     “Bonus” means the sum of (a) the amount of the annual incentive bonus, if
any, paid in cash by the Company under the Annual Incentive Plan to or for the
benefit of an Employee for services rendered or labor performed during a fiscal
year of the Company and (b) the amount of the discretionary cash bonus or other
cash bonus paid outside the Annual Incentive Plan, if any, paid in cash by the
Company to or for the benefit of an Employee for services rendered or labor
performed during the same fiscal year of the Company. An Employee’s Bonus shall
be determined by including any portion thereof that such Participant could have
received in cash in lieu of (i) any elective deferrals made by such Participant
pursuant to the Supplemental Retirement Plan or (ii) elective contributions made
on such Participant’s behalf by the Company pursuant to a qualified cash or
deferred arrangement (as defined in section 401(k) of the Code) or pursuant to a
plan maintained under section 125 of the Code.
     “Cause” means (i) the willful and continued failure by the Employee to
substantially perform the Employee’s duties with the Company (other than any
such failure resulting from the Employee’s incapacity due to physical or mental
illness) after a written demand for substantial performance is delivered to the
Employee by the Board (or by a delegate appointed by the Board), which demand
specifically identifies the manner in which the Board believes that the Employee
has not substantially performed the Employee’s duties, or (ii) the willful
engaging by the Employee in conduct which is demonstrably and materially
injurious to the Company or any of its Affiliates, monetarily or otherwise. For
purposes of Sections (i) and (ii) of this definition, (A) no act, or failure to
act, on the Employee’s part shall be deemed “willful” if done, or omitted to be
done, by the Employee in good faith and with reasonable belief that the act, or
failure to act, was in the best interest of the Company and (B) in the event of
a dispute concerning the application of this provision, no claim by the Company
that Cause exists shall be given effect unless the Company establishes to the
Board by clear and convincing evidence that Cause exists.
     “Change in Control” means the occurrence of any of the following events:
     (a) the individuals who are Incumbent Directors cease for any reason to
constitute a majority of the members of the Board;

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     (b) the consummation of a Merger of Baker Hughes or an Affiliate of Baker
Hughes with another Entity, unless the individuals and Entities who were the
Beneficial Owners of the Voting Securities of Baker Hughes outstanding
immediately prior to such Merger own, directly or indirectly, at least
50 percent of the combined voting power of the Voting Securities of any of Baker
Hughes, the surviving Entity or the parent of the surviving Entity outstanding
immediately after such Merger;
     (c) any Person, other than a Specified Owner, becomes a Beneficial Owner,
directly or indirectly, of securities of Baker Hughes representing 30 percent or
more of the combined voting power of Baker Hughes’ then outstanding Voting
Securities;
     (d) a sale, transfer, lease or other disposition of all or substantially
all of Baker Hughes’ Assets is consummated (an “Asset Sale”), unless:
     (1) the individuals and Entities who were the Beneficial Owners of the
Voting Securities of Baker Hughes immediately prior to such Asset Sale own,
directly or indirectly, 50 percent or more of the combined voting power of the
Voting Securities of the Entity that acquires such Assets in such Asset Sale or
its parent immediately after such Asset Sale in substantially the same
proportions as their ownership of Baker Hughes’ Voting Securities immediately
prior to such Asset Sale; or
     (2) the individuals who comprise the Board immediately prior to such Asset
Sale constitute a majority of the board of directors or other governing body of
either the Entity that acquired such Assets in such Asset Sale or its parent (or
a majority plus one member where such board or other governing body is comprised
of an odd number of directors); or
     (e) The stockholders of Baker Hughes approve a plan of complete liquidation
or dissolution of Baker Hughes.
     “Code” means the Internal Revenue Code of 1986, as amended, or any
successor act.
     “Committee” means, prior to a Change in Control or a Potential Change in
Control, the Compensation Committee of the Board. After a Change in Control or a
Potential Change in Control, “Committee” means (i) the individuals (not fewer
than three (3) in number) who, on the date six months prior to the Change in
Control constitute the Compensation Committee of the Board, plus, (ii) in the
event that fewer than three (3) individuals are available from the group
specified in clause (i) above for any reason, such individuals as may be
appointed by the individual or individuals so available (including for this
purpose any individual or individuals previously so appointed under this clause
(ii)); provided, however, that the maximum number of individuals constituting
the Committee after a Change in Control or Potential Change in Control shall not
exceed six (6).
     “Company” means Baker Hughes or an Employer.

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     “Disability” means the Participant’s incapacity due to physical or mental
illness that has caused the Participant to be absent from full-time performance
of his duties with the Company for a period of six (6) consecutive months.
     “Effective Date” means December 3, 2003, the date on which the Plan was
adopted.
     “Employee” means an individual (i) who is employed in the services of the
Company on the Company’s active payroll, and (ii) who is also a United
States-based executive salary grade system employee (under the Company’s then
current payroll system categories), or any comparable executive designations in
any system that replaces the United States-based salary grade system.
Notwithstanding the foregoing, the Committee may from time to time designate
other individuals who may be selected for participation in the Plan.
     “Employer” means any Affiliate that adopts the Plan pursuant to the
provisions of Section 10.
     “Employment Termination Date” means the date as of which a Participant
incurs a Termination of Employment determined in accordance with the provisions
of Section 6.2.
     “Entity” means any corporation, partnership, association, joint-stock
company, limited liability company, trust, unincorporated organization or other
business entity.
     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended, or any successor act.
     “Exchange Act” means the Securities Exchange Act of 1934, as amended, or
any successor act.
     “Excise Tax” means the excise tax imposed by section 4999 of the Code or
any similar tax payable under any United States federal, state, or local
statute.
     “Expiration Date” shall have the meaning specified in the definition of the
“Term of the Plan”.
     “Good Reason” for termination by the Employee of his employment means the
occurrence (without the Employee’s express written consent) after any Change in
Control, or prior to a Change in Control under the circumstances described in
clauses (ii) and (iii) of the second paragraph of the definition of Termination
of Employment (treating all references to “Change in Control” in paragraphs
(a) through (f) below as references to a “Potential Change in Control”), of any
one of the following acts by the Company, or failures by the Company to act,
unless, in the case of any act or failure to act described in paragraph (a),
(e), (f) or (g) below, such act or failure to act is corrected prior to the
effective date of the Employee’s termination for Good Reason:

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the assignment to the Employee of any duties or responsibilities which are
substantially diminished as compared to the Employee’s duties and
responsibilities immediately prior to a Change in Control or a material change
in the Employee’s reporting responsibilities, titles or offices as an Employee
and as in effect immediately prior to the Change in Control.
     (a) a reduction by the Company in the Employee’s annual Base Compensation
as in effect on the date hereof or as the same may be increased from time to
time, except for across-the-board salary reductions similarly affecting all
individuals having a similar level of authority and responsibility with the
Company and all individuals having a similar level of authority and
responsibility with any Person in control of the Company;
     (b) the relocation of the Employee’s principal place of employment to a
location outside of a 50-mile radius from the Employee’s principal place of
employment immediately prior to the Change in Control or the Company’s requiring
the Employee to be based anywhere other than such principal place of employment
(or permitted relocation thereof) except for required travel on the Company’s
business to an extent substantially consistent with the Employee’s business
travel obligations immediately prior to a Change in Control;
     (c) the failure by the Company to pay to the Employee any portion of the
Employee’s current compensation except pursuant to an across-the-board
compensation deferral similarly affecting all individuals having a similar level
of authority and responsibility with the Company and all individuals having a
similar level of authority and responsibility with any Person in control of the
Company, or to pay to the Employee any portion of an installment of deferred
compensation under any deferred compensation program of the Company, within
seven (7) days of the date such compensation is due;
     (d) the failure by the Company to continue in effect any compensation plan
in which the Employee participates immediately prior to the Change in Control
which is material to the Employee’s total compensation, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to continue the
Employee’s participation therein (or in such substitute or alternative plan) on
a basis not materially less favorable, both in terms of the amount or timing of
payment of benefits provided and the level of the Employee’s participation
relative to other participants, as existed immediately prior to the Change in
Control;
     (e) the failure by the Company to continue to provide the Employee with
benefits substantially similar to those enjoyed by the Employee under any of the
Company’s pension, savings, life insurance, medical, health and accident, or
disability plans in which the Employee was participating immediately prior to
the Change in Control (except for across the board changes similarly affecting
all individuals having a similar level of authority and responsibility with the
Company and all individuals having a similar level of authority and
responsibility with any Person in control of the Company), the taking of any
other action by the Company which would directly or indirectly materially reduce
any of such benefits or deprive the Employee of any material fringe benefit or
Perquisite enjoyed by the Employee at the time of the Change in

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Control, or the failure by the Company to provide the Employee with the number
of paid vacation days to which the Employee is entitled on the basis of years of
service with the Company in accordance with the Company’s normal vacation policy
in effect immediately prior to the time of the Change in Control; or
     (f) any purported termination of the Employee’s employment which is not
effected pursuant to a notice of termination satisfying the requirements of
Section 6.1 hereof.
     The Employee’s right to terminate his employment for Good Reason shall not
be affected by the Employee’s incapacity due to physical or mental illness. The
Employee’s continued employment shall not constitute consent to, or a waiver of
any rights with respect to, any act or failure to act constituting Good Reason
hereunder.
     For purposes of any determination regarding the existence of Good Reason,
any claim by the Employee that Good Reason exists shall be presumed to be
correct unless the Company establishes to the Committee by clear and convincing
evidence that Good Reason does not exist. The Committee’s determination
regarding the existence of Good Reason shall be conclusive and binding upon all
parties unless the Committee’s determination is arbitrary and capricious.
     “Gross-Up Payment” means the additional amount paid to a Participant
pursuant to Section 4.4.
     “Highest Base Compensation” means the Participant’s annualized Base
Compensation in effect immediately prior to (1) a Change in Control, (2) the
first event or circumstance constituting Good Reason, or (3) the Participant’s
Termination of Employment, whichever is greatest.
     “Incumbent Director” means –
          (a) a member of the Board on the Effective Date; or
          (b) an individual-
     (1) who becomes a member of the Board after the Effective Date;
     (2) whose appointment or election by the Board or nomination for election
by Baker Hughes’ stockholders is approved or recommended by a vote of at least
two-thirds of the then serving Incumbent Directors (as defined herein); and
     (3) whose initial assumption of service on the Board is not in connection
with an actual or threatened election contest.
     “Interest Amount” has the meaning specified in Section 4.3(i).
     “Merger” means a merger, consolidation or similar transaction.

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     “Participant” means an individual who is eligible to participate in the
Plan under the provisions of Section 3.
     “Pension Plan” means the Baker Hughes Incorporated Pension Plan, as amended
from time to time.
     “Perquisites” means benefits such as any airline VIP club memberships;
country club and/ or health club membership dues and expenses related to the use
of the country club and/ or health club; supplemental life insurance; financial
consulting; and office equipment for use in the home (e.g., cellular telephones,
personal digital assistance, home computers and office accessories similar to
the office accessories available to the Employee in his employment office and
monthly Internet connection fees) that may be provided by the Company from time
to time.
     “Person” shall have the meaning ascribed to the term in Section 3(a)(9) of
the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a
“group” as defined in Section 13(d) thereof, except that the term shall not
include (a) the Company or any of its Affiliates, (b) a trustee or other
fiduciary holding Company securities under an employee benefit plan of the
Company or any of its Affiliates, (c) an underwriter temporarily holding
securities pursuant to an offering of those securities or (d) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
     “Plan” means the Baker Hughes Incorporated Change in Control Severance
Plan, as it may be amended from time to time.
     “Potential Change in Control” shall be deemed to have occurred if the event
set forth in any one of the following paragraphs shall have occurred:
     (a) the Company enters into an agreement, the consummation of which would
result in the occurrence of a Change in Control;
     (b) the Company or any Person publicly announces an intention to take or to
consider taking actions which, if consummated, would constitute a Change in
Control;
     (c) any Person becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 15 percent or more of either the then
outstanding shares of common stock of the Company or the combined voting power
of the Company’s then outstanding securities (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its Affiliates); or
     (d) the Board adopts a resolution to the effect that, for purposes of the
Plan, a Potential Change in Control has occurred.
     “Renewal Date” shall have the meaning specified in the definition of the
“Term of the Plan.”

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     “Section 409A” means section 409A of the Code and the Department of
Treasury rules and regulations issued thereunder.
     “Separation From Service” has the meaning ascribed to that term in
Section 409A.
     “Specified Employee” means a person who is, as of the date of the person’s
Separation From Service, a “specified employee” within the meaning of
Section 409A, taking into account the elections made and procedures established
in resolutions adopted by the Administrative Committee of Baker Hughes.
     “Specified Owner” means any of the following:
Baker Hughes;
     (a) an Affiliate of Baker Hughes;
     (b) an employee benefit plan (or related trust) sponsored or maintained by
Baker Hughes or any Affiliate of Baker Hughes;
     (c) a Person that becomes a Beneficial Owner of Baker Hughes’ outstanding
Voting Securities representing 30 percent or more of the combined voting power
of Baker Hughes’ then outstanding Voting Securities as a result of the
acquisition of securities directly from Baker Hughes and/or its Affiliates; or
     (d) a Person that becomes a Beneficial Owner of Baker Hughes’ outstanding
Voting Securities representing 30 percent or more of the combined voting power
of Baker Hughes’ then outstanding Voting Securities as a result of a Merger if
the individuals and Entities who were the Beneficial Owners of the Voting
Securities of Baker Hughes outstanding immediately prior to such Merger own,
directly or indirectly, at least 50 percent of the combined voting power of the
Voting Securities of any of Baker Hughes, the surviving Entity or the parent of
the surviving Entity outstanding immediately after such Merger in substantially
the same proportions as their ownership of the Voting Securities of Baker Hughes
outstanding immediately prior to such Merger.
     “Supplemental Retirement Plan” means the Baker Hughes Incorporated
Supplemental Retirement Plan, as amended from time to time.
     “Term of the Plan” means the period commencing on the Effective Date and
ending on:
     (a) the last day of the three-year period beginning on the Effective Date
if no Change in Control shall have occurred during that three-year period (such
last day being the “Expiration Date”); or
     (b) if a Change in Control shall have occurred during (i) the three-year
period beginning on the Effective Date or (ii) any period for which the Term of
the Plan shall

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have been automatically extended pursuant to the second sentence of this
definition, the two-year period beginning on the date on which the Change in
Control occurred.
     After the expiration of the time period described in subsection (a) of this
definition and in the absence of a Change in Control (as described in subsection
(b) of this definition) the Term of the Plan shall be automatically extended for
successive two-year periods beginning on the day immediately following the
Expiration Date (the beginning date of each successive two-year period being a
“Renewal Date”), unless, not later than 18 months prior to the Expiration Date
or applicable Renewal Date, the Company shall give notice to Participants that
the Term of the Plan will not be extended.
     “Termination of Employment” means the termination of an individual’s
employment relationship with the Company (i) by the Company without Cause after
a Change in Control occurs, or (ii) by the individual for Good Reason after a
Change in Control occurs.
     For purposes of this definition, an individual’s employment shall be deemed
to have been terminated after a Change in Control, if (i) the individual’s
employment is terminated by the Company without Cause prior to a Change in
Control (whether or not a Change in Control ever occurs) and such termination
was at the request or direction of a Person who has entered into an agreement
with the Company, the consummation of which would constitute a Change in
Control; (ii) the individual terminates his employment for Good Reason prior to
a Change in Control (whether or not a Change in Control ever occurs) and the
circumstance or event which constitutes Good Reason occurs at the request or
direction of a Person who has entered into an agreement with the Company, the
consummation of which would constitute a Change in Control; or (iii) the
individual’s employment is terminated by the Company without Cause or by the
individual for Good Reason and such termination or the circumstance or event
which constitutes Good Reason is otherwise in connection with or in anticipation
of a Change in Control (whether or not a Change in Control ever occurs). For
purposes of any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Participant shall be presumed to
be correct unless the Company establishes to the Committee by clear and
convincing evidence that such position is not correct.
     Termination of Employment does not include (i) a termination of employment
due to the individual’s death or Disability, or (ii) a termination of employment
by the individual without Good Reason.
     “Thrift Plan” means the Baker Hughes Incorporated Thrift Plan, as amended
from time to time.
     “Voting Securities” means the outstanding securities entitled to vote
generally in the election of directors or other governing body.
     2.2 Number and Gender. As used in the Plan, unless the context otherwise
expressly requires to the contrary, references to the singular include the
plural, and vice versa;

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references to the masculine include the feminine and neuter; references to
“including” mean “including (without limitation)”; and references to Sections
and clauses mean the sections and clauses of the Plan.
     2.3 Headings. The headings of Sections herein are included solely for
convenience, and if there is any conflict between such headings and the text of
the Plan, the text shall control.
3. ELIGIBILITY
     The individuals who shall be eligible to participate in the Plan shall be
those Employees who are selected by the Committee. The Committee shall notify an
Employee who has been selected for participation of his eligibility to
participate in the Plan by furnishing him a written notification of
participation that specifies whether he is a Level 1 or Level 2 executive for
purposes of the Plan.
     Notwithstanding any other provision of the Plan, an Employee shall not be
eligible to participate in the Plan if there is in effect an individual
severance agreement (including an employment agreement that provides for
severance benefits) or change in control agreement between the Employee and the
Company.
     Notwithstanding any other provision of the Plan, the Board may discontinue
an individual’s eligibility to participate in the Plan by providing him written
advance notice (the “Notice”), no later than 18 months prior to the Expiration
Date or a Renewal Date (as defined in the definition of “Term of the Plan” in
Section 2.1), that he shall no longer participate in the Plan; provided,
however, that should a Change in Control occur during such 18-month advance
notification period, the Notice shall be void and of no effect, and the
Participant shall be eligible to participate in the Plan as if the Notice were
never given.
4. BENEFITS
     4.1 Equity Based Compensation. Upon the occurrence of a Change in Control,
all options to acquire Baker Hughes stock, all shares of restricted Baker Hughes
stock, and all stock appreciation rights, the value of which is determined by
reference to or based upon the value of Baker Hughes stock, held by the
Participant under any plan of the Company shall become immediately vested,
exercisable and nonforfeitable and all conditions thereof (including, but not
limited to, any required holding periods) shall be deemed to have been
satisfied. This effect, if any, of a Change in Control on any other equity
incentives and other awards the value of which is determined by reference to or
based upon the value of Baker Hughes stock shall be determined in accordance
with the terms of the applicable award agreement and any terms and conditions
issued by the Compensation Committee of the Board are applicable to the award.
     4.2 Compensation and Benefits During Incapacity and Prior to Termination of
Employment. Following a Change in Control and during the Term of the Plan,
during any period in which the Participant fails to perform the Participant’s
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Company shall pay the Participant’s full salary to the
Participant at the rate in effect at the commencement of any such period,
together with all compensation and benefits payable to the Participant under the
terms of

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any compensation or benefit plan, program or arrangement maintained by the
Company during such period, until the Participant’s employment is terminated by
the Company for Disability.
     4.3 Benefits Following Termination of Employment. If a Participant incurs a
Termination of Employment during the Term of the Plan, the Company shall provide
the Participant the benefits described below. Further details of the benefits
described in this Section 4.3 are provided in Exhibit A.
     (a) Severance Payment Based Upon Base Compensation. The Company will pay
the Participant a cash severance benefit in an amount equal to the Participant’s
Applicable Multiple multiplied by the Employee’s Highest Base Compensation. A
Participant’s severance payment under this paragraph (a) will be paid in
accordance with the provisions of Section 5.
     (b) Severance Payment Based Upon Bonuses. The Company will pay the
Participant a cash severance benefit in an amount equal to the sum of (1) and
(2) where (1) is an amount equal to the product of (A) the expected value target
percentage under the Participant’s Bonus for Baker Hughes’ fiscal year in which
the Participant’s Termination of Employment occurs, (B) the Participant’s
Highest Base Compensation and (C) a fraction, the numerator of which is the
number of days in the Company’s fiscal year in which occurs the Participant’s
Employment Termination Date through the Participant’s Employment Termination
Date and the denominator of which is 365 and (2) is an amount equal to the
product of (A) the Participant’s expected value target percentage under the
Participant’s Bonus for Baker Hughes’ fiscal year in which the Participant’s
Termination of Employment occurs, and (B) the Participant’s Applicable Multiple.
However, if the Participant’s Employment Termination Date occurs during the same
calendar year in which a Change in Control occurs, the pro-rata bonus payment
described in clause (1) of the preceding sentence shall be offset by any
payments received by the Participant under the Annual Incentive Compensation
Plan in connection with the Change in Control. A Participant’s severance payment
under this paragraph (b) will be paid in accordance with the provisions of
Section 5.
     (c) Outplacement Payment. The Company will provide the Participant a cash
payment in the amount specified in the relevant provisions of Exhibit A. Any
such cash payment will be paid in accordance with the provisions of Section 5.
     (d) Pension, Thrift and Supplemental Retirement Plans. In addition to the
retirement benefits to which the Participant is entitled under the Thrift Plan,
the Pension Plan and the Supplemental Retirement Plan, the Company shall pay the
Participant a single sum cash payment in an amount equal to the undiscounted
value of (A) the employer-provided accruals under the Pension Plan that the
Participant would have earned and (B) the employer contributions the Company
would have made to the Thrift Plan and the Supplemental Retirement Plan
(including but not limited to matching and base contributions) on behalf of the

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Participant had the Participant continued in the employ of the Company for a
period of time determined in accordance with the relevant provisions of Exhibit
A, assuming for this purpose that (i) the Participant’s earned compensation per
year during the relevant period of time provided in Exhibit A is the sum of
(1) the Participant’s Highest Base Compensation and (2) the product of (A) the
expected value target percentage under the Participant’s Bonus for the Baker
Hughes’ fiscal year in which the Participant’s Termination of Employment occurs,
(B) the Participant’s Highest Base Compensation, and (C) the Applicable
Multiple; and (ii) contribution, deferral, credit and accrual percentages made
under the Pension Plan, the Thrift Plan and the Supplemental Retirement Plan, by
and on behalf of the Participant during the relevant period of time provided in
Exhibit A, are the same percentages in effect on the date of the Change in
Control or the Participant’s Employment Termination Date, whichever is more
favorable for the Participant. The payment required under this paragraph (d)
will be made in accordance with the provisions of Section 5.
     (e) Accident and Health Insurance Benefits. For the period of time
following the Participant’s Employment Termination Date specified in Exhibit A
(the “Continuation Period”), the Company shall arrange to provide the
Participant and his dependents accident and health insurance benefits, in each
case, substantially similar to those provided to the Participant and his
dependents immediately prior to the Employment Termination Date or, if more
favorable to the Participant, those provided to the Participant and his
dependents immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, at no greater cost to the Participant than the cost to
the Participant immediately prior to such date or occurrence. Benefits otherwise
receivable by the Participant pursuant to this Section 4.3(e) shall be reduced
to the extent benefits of the same type are received by the Participant during
the Continuation Period (and any such benefits received by the Participant shall
be reported to the Company by the Participant).
     Except for any reimbursements under the applicable group health plan that
are subject to a limitation on reimbursements during a specified period, the
amount of expenses eligible for reimbursement under this Section 4.3(e), or
in-kind benefits provided, during the Participant’s taxable year shall not
affect the expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other taxable year of the Participant. Any reimbursement of an
expense described in this Section 4.3(e) shall be made on or before the last day
of the Participant’s taxable year following the Participants’ taxable year in
which the expense was incurred. The Participant’s right to reimbursement or
in-kind benefits pursuant to this Section 4.3(e) shall not be subject to
liquidation or exchange for another benefit. To the extent that the benefits
provided to the Participant pursuant to this Section 4.3(e) are taxable to the
Participant and are not otherwise exempt from Section 409A, any amounts to which
the Participant would otherwise be entitled under this Section 4.3(e) during the
first six months following the date of the Participant’s Separation From Service
shall be accumulated and paid to the

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Participant on the date that is six months following the date of his Separation
From Service.
     (f) Life Insurance. A Participant shall be entitled to a single sum cash
payment in an amount equivalent to the product of (1) the monthly basic life
insurance premium applicable to the Participant’s basic life insurance coverage
on his Employment Termination Date and (2) the period of time determined in
accordance with the relevant provisions of Exhibit A. The single sum cash
payment will be made in accordance with the provisions of Section 5. A
Participant may, at his option, convert his basic life insurance coverage to an
individual policy after his Employment Termination Date by completing the forms
required by the Company.
     (g) Perquisites. A Participant shall be entitled to a single sum cash
payment which shall be an amount equal to the sum of (1) the cost of the
Participant’s Perquisites in effect prior to his Termination of Employment for
the remainder of the calendar year in which the Employment Termination Date
occurs; plus (2) the cost of the Participant’s Perquisites in effect prior to
his Termination of Employment for an additional period of time determined in
accordance with the relevant provisions of Exhibit A. The payment required under
this paragraph (g) will be made in accordance with the provisions of Section 5.
If the aggregate fair market value of the club memberships to be purchased does
not exceed the amount of the dollar limitation under section 402(g)(1) of the
Code in effect when the Participant incurs a Separation From Service, a
Participant may, at his option, purchase any of his club memberships held in the
Company’s name on the terms mutually agreed by the Participant and the
Committee.
     (h) Retiree Medical. If the Participant would have become entitled to
benefits under the Company’s post-retirement health care insurance plans, as in
effect immediately prior to the Employment Termination Date or, if more
favorable to the Participant as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason, had the
Participant’s employment terminated at any time during the period of thirty-six
(36) months after the Employment Termination Date, the Company shall provide
such post-retirement health care insurance benefits to the Participant and the
Participant’s dependents commencing on the later of (i)  the date on which such
coverage would have first become available and (ii) the date on which the
applicable benefits described in paragraph  (e) of this Section 4.3 terminate.
     Except for any reimbursements under the applicable group health plan that
are subject to a limitation on reimbursements during a specified period, the
amount of expenses eligible for reimbursement under this Section 4.3(h), or
in-kind benefits provided, during the Participant’s taxable year shall not
affect the expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other taxable year of the Participant. Any reimbursement of an
expense described in this Section 4.3(h) shall be made on or before the last day
of the Participant’s

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taxable year following the Participants’ taxable year in which the expense was
incurred. The Participant’s right to reimbursement or in-kind benefits pursuant
to this Section 4.3(h) shall not be subject to liquidation or exchange for
another benefit. To the extent that the benefits provided to the Participant
pursuant to this Section 4.3(h) are taxable to the Participant and are not
otherwise exempt from Section 409A, any amounts to which the Participant would
otherwise be entitled under this Section 4.3(h) during the first six months
following the date of the Participant’s Separation From Service shall be
accumulated and paid to the Participant on the date that is six months following
the date of his Separation From Service.
     (i) Interest Amount. If the Participant is a Specified Employee, the
Company shall pay to the Participant, on the date that is six months following
the Participant’s Separation From Service, an amount equal to the amount of
interest that would be earned on the amounts specified in Sections 4.3(a),
4.3(b), 4.3(c), 4.3(d), 4.3(f), and 4.3(g) and, to the extent subject to a
mandatory six-month delay in payment, the amounts specified in Sections 4.3(e),
4.3(h), 4.4 and 4.5, for the period commencing on the date of the Participant’s
Separation From Service until the date of payment of such amounts, calculated
using an interest rate equal to the six month London Interbank Offered Rate in
effect on the date of the Participant’s Separation From Service plus two
percentage points (the “Interest Amount”).
     4.4 Tax Gross-Up Payments. If any payments or benefits received or to be
received by the Participant (whether pursuant to the terms of the Plan, or any
other plan or agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or such Person)
(such payments or benefits, excluding the Gross-Up Payment, being hereinafter
referred to as the “Total Payments”) will be subject to the Excise Tax, the
Company shall pay the Participant an additional amount (the “Gross-Up Payment”)
such that the net amount retained by the Participant after the deduction of any
Excise Tax on the Total Payments and any federal, state and local income and
employment taxes and Excise Tax upon the Gross-Up Payment shall be equal to the
Total Payments. The purpose of this Section is to place the Participant in the
same economic position such Participant would have been in had no Excise Tax
been imposed with respect to the Total Payments.
     For purposes of determining whether any of the Total Payments will be
subject to the Excise Tax and the amount of such Excise Tax,
     (i) all of the Total Payments shall be treated as “parachute payments”
(within the meaning of section 280G(b)(2) of the Code) unless, in the opinion of
tax counsel (the “Tax Counsel”) reasonably acceptable to the Participant and
selected by the accounting firm which was, immediately prior to the Change in
Control, the Company’s independent auditor (the “Auditor”), such payments or
benefits (in whole or in part) do not constitute parachute payments, including
by reason of section 280G(b)(4)(A) of the Code,
     (ii) all “excess parachute payments” within the meaning of section
280G(b)(l) of the Code shall be treated as subject to the Excise Tax unless, in
the

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opinion of the Tax Counsel, such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered (within the
meaning of section 280G(b)(4)(B) of the Code) in excess of the “base amount”
(within the meaning of section 280G(b)(3) of the Code) allocable to such
reasonable compensation, or are otherwise not subject to the Excise Tax, and
     (iii) the value of any noncash benefits or any deferred payment or benefit
shall be determined by the Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
     For purposes of determining the amount of the Gross-Up Payment, the
Participant shall be deemed to pay federal income tax at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of the Participant’s residence on the
Employment Termination Date (or if there is no Employment Termination Date, then
the date on which the Gross-Up Payment is calculated for purposes of this
Section 4.4), net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes.
     In the event that the Excise Tax is determined to exceed the amount taken
into account hereunder in calculating the Gross-Up Payment (including by reason
of any payment the existence or amount of which cannot be determined at the time
of the payment of the Gross-Up Payment), the Company shall make an additional
Gross-Up Payment in respect of such excess (plus any interest, penalties or
additions payable by the Participant with respect to such excess) within five
(5) business days following the time that the amount of such excess is finally
determined. The Participant and the Company shall each reasonably cooperate with
the other relative to any administrative or judicial proceedings concerning the
existence or amount of liability for the Excise Tax. The parties intend and
agree that the five (5) business day deadline specified above in this
Section 4.4 is not to be extended as a result of the following sentence which is
included solely for the purpose of complying with Section 409A. The Company
shall make a payment to reimburse the Participant in an amount equal to all
federal, state and local taxes imposed upon the Participant that are described
in this Section 4.4, including the amount of additional taxes imposed upon the
Participant due to the Company’s payment of the initial taxes on such amounts,
by the end of the Participant’s taxable year next following the Participant’s
taxable year in which the Participant remits the related taxes to the taxing
authority. Notwithstanding any provision of this Agreement to the contrary, if
the Participant is a Specified Employee, any amounts to which the Participant
would otherwise be entitled under this Section 4.4 during the first six months
following the date of the Participant’s Separation From Service shall be
accumulated and paid to the Participant on the date that is six months following
the date of his Separation From Service.
     4.5 Legal Fees. The Company shall pay, on a fully grossed up, after tax
basis, all legal fees and expenses incurred by the Participant (i) in disputing
in good faith any issue relating to the Participant’s termination of employment,
or (ii) in seeking in good faith to obtain or enforce any benefit or right
provided under the Plan in accordance with Section 13.5. Such payments shall be
made within ten (10) business days after the delivery of the Participant’s
written request for the payment accompanied by such evidence of fees and
expenses incurred as

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the Company may reasonably require. In any event the Company shall pay the
Participant such legal fees and expenses by the last day of the Participant’s
taxable year following the taxable year in which the Participant incurred such
legal fees and expenses. The Company shall pay the Participant, on a fully
grossed up, after tax basis, all legal fees and expenses incurred by the
Participant in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to any payment or
benefit under the Plan. Such payments shall be made within ten (10) business
days after delivery of the Participant’s written request for payment accompanied
with such evidence of fees and expenses incurred as the Company may reasonably
require. The parties intend and agree that the foregoing ten (10) business day
deadline is not to be extended as a result of the following sentence which is
included solely for the purpose of complying with Section 409A. The Company
shall make a payment to reimburse the Participant in an amount equal to all
legal fees and expenses incurred due to a tax audit or litigation relating to
the application of section 4999 of the Code to any payment or benefit under this
Agreement by the end of the Participant’s taxable year following the
Participant’s taxable year in which the taxes that are the subject of the audit
or litigation are remitted to the taxing authority, or where as a result of such
audit or litigation no taxes are remitted, by the end of the Participant’s
taxable year following the Participant’s taxable year in which the audit is
completed or there is a final and nonappealable settlement or other resolution
of the litigation. The legal fees or expenses that are subject to reimbursement
pursuant to this Section 4.5 shall not be limited as a result of when the fees
or expenses are incurred. The amount of legal fees or expenses that is eligible
for reimbursement pursuant to this Section 4.5 during a given taxable year of
the Participant shall not affect the amount of expenses eligible for
reimbursement in any other taxable year of the Participant. The right to
reimbursement pursuant to this Section 4.5 is not subject to liquidation or
exchange for another benefit. Notwithstanding any provision of this Agreement to
the contrary, if the Participant is a Specified Employee, any amount to which
the Participant would otherwise be entitled under this Section 4.5 during the
first six months following the date of the Participant’s Separation From Service
shall be accumulated and paid to the Participant on the date that is six months
following the date of his Separation From Service.
5. TIME OF BENEFITS PAYMENTS
     The Company shall pay the Participant any cash benefits described in
paragraphs (a), (b), (c), (d), (e) and (f) of Section 4.3 in a single sum cash
payment within thirty (30) days after the Participant’s Separation From Service
if the Participant is not a Specified Employee or on the date that is six months
following the Participant’s Separation From Service if the Participant is a
Specified Employee.
6. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE
     6.1 Notice of Termination. After a Change in Control and during the Term of
the Plan, any purported termination of the Participant’s employment by the
Company shall be communicated by the Company by a written Notice of Termination
to the Participant in accordance with Section 13.9 hereof. For purposes of the
Plan, a “Notice of Termination” shall mean a notice which shall indicate the
specific termination provision in the Plan relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Participant’s employment under the provision so indicated.
Further, a Notice

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of Termination for Cause is required to include a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which was called and
held for the purpose of considering such termination (after reasonable notice to
the Participant and an opportunity for the Participant, together with the
Participant’s counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, the Participant was guilty of conduct set forth in
clause (i) or (ii) of the definition of Cause herein, and specifying the
particulars thereof in detail. No purported termination of the Participant’s
employment by the Company after a Change in Control and during the Term of the
Plan shall be effective unless the Company complies with the procedures set
forth in this Section 6.1.
     6.2 Employment Termination Date. “Employment Termination Date,” with
respect to any purported termination of the Participant’s employment after a
Change in Control and during the Term of the Plan, shall mean (i) if the
Participant’s employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that the Participant shall not have
returned to the full-time performance of the Participant’s duties during such
thirty (30) day period), and (ii) if the Participant’s employment is terminated
for any other reason, the date specified in the Notice of Termination (which, in
the case of a termination by the Company, shall not be less than thirty
(30) days (except in the case of a termination for Cause) and, in the case of a
termination by the Participant, shall not be less than fifteen (15) days nor
more than sixty (60) days, respectively, from the date such Notice of
Termination is given).
     6.3 Dispute Concerning Termination. If within fifteen (15) days after any
Notice of Termination is given, or, if later, prior to the Employment
Termination Date (as determined without regard to this Section 6.3), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Employment Termination Date shall be
extended until the earlier of (i) the date on which the Term of the Plan ends or
(ii) the date on which the dispute is finally resolved, either by mutual written
agreement of the parties or by a final judgment, order or decree of an
arbitrator or a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected); provided, however, that the Employment Termination Date shall
be extended by a notice of dispute given by the Participant only if such notice
is given in good faith and the Participant pursues the resolution of such
dispute with reasonable diligence.
     6.4 Compensation During Dispute. If a purported termination of employment
occurs following a Change in Control and during the Term of the Plan and the
Employment Termination Date is extended in accordance with Section 6.3 hereof,
the Company shall continue to owe the Participant the full compensation in
effect when the notice giving rise to the dispute was given (including, but not
limited to, salary) and continue the Participant as a participant in all
compensation, benefit and insurance plans in which the Participant was
participating when the notice giving rise to the dispute was given or those
plans in which the Participant was participating immediately prior to the first
occurrence of an event or circumstance giving rise to the Notice of Termination,
if more favorable to the Participant, until the Employment Termination Date, as
determined in accordance with Section 6.3 hereof. Amounts paid under this
Section 6.4 are in addition to all other amounts due under the Plan (other than
those due under Section 4.2 hereof) and shall not be offset against or reduce
any other amounts due under the Plan.

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7. WITHHOLDING
     Subject to the provisions of Section 4.4, Company may withhold from any
benefits paid under the Plan all income, employment, and other taxes required to
be withheld under applicable law.
8. DEATH OF PARTICIPANT
     If a Participant dies after his Employment Termination Date but before the
Participant receives full payment of the benefits to which he is entitled, any
unpaid benefits will be paid to the Participant’s surviving spouse, or if the
Participant does not have a surviving spouse, to the Participant’s estate.
9. AMENDMENT AND TERMINATION
     During the Term of the Plan, the Plan may not be terminated or amended in
any manner that would negatively affect a Participant’s rights under the Plan.
Further, no amendment or termination of the Plan after a Participant’s
Employment Termination Date shall affect the benefits payable to such
Participant. Subject to the foregoing restrictions, Baker Hughes may amend or
terminate the Plan by a written instrument that is authorized by the Committee.
10. ADOPTION OF PLAN BY OTHER EMPLOYERS
     (a) With the written approval of the Committee, any entity that is an
Affiliate may adopt the Plan by appropriate action of its board of directors or
noncorporate counterpart, as evidenced by a written instrument executed by an
authorized officer of such entity or an executed adoption agreement (approved by
the board of directors or noncorporate counterpart of the Affiliate), agreeing
to be bound by all the terms, conditions and limitations of the Plan and
providing all information required by the Committee.
     (b) The provisions of the Plan shall apply separately and equally to each
adopting Affiliate and its employees in the same manner as is expressly provided
for the Company and its employees, except that the power to appoint the
Committee and the power to amend or terminate the Plan shall be exercised by
Baker Hughes.
     (c) For purposes of the Code and ERISA, the Plan as adopted by the
Affiliates shall constitute a single plan rather than a separate plan of each
Affiliate.
11. DISPUTED PAYMENTS AND FAILURES TO PAY
     If the Company fails to make a payment in whole or in part as of the
payment deadline specified in the Plan, either intentionally or unintentionally,
other than with the consent of the Participant, the Participant shall make
prompt and reasonable good faith efforts to collect the remaining portion of the
payment. The Company shall pay any such unpaid benefits due to the Participant,
together with interest on the unpaid benefits from the date of the payment
deadline specified in the Plan at the annual rate of 120 percent of the rate
specified in section

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1274(b)(2)(8) of the Code within ten (10) business days of discovering that the
additional monies are due and payable.
     The Company shall hold harmless and indemnify the Participant on a fully
grossed-up after tax basis from and against (i) any and all taxes imposed under
Section 409A by any taxing authority as a result of the Company’s failure to
comply with this Section 11, and (ii) all expenses (including reasonable
attorneys’, accountants’, and experts’ fees and expenses) incurred by the
Participant due to a tax audit or litigation addressing the existence or amount
of a tax liability described in clause (i); and (iii) the amount of additional
taxes imposed upon the Participant due to the Company’s payment of the initial
taxes and expenses described in clauses (i) and (ii).
     The Company shall make a payment to reimburse the Participant in an amount
equal to all federal, state and local taxes imposed upon the Employee that are
described in clauses (i) and (iii) of the foregoing paragraph of this
Section 11, including the amount of additional taxes imposed upon the
Participant due to the Company’s payment of the initial taxes on such amounts,
by the end of the Participant’s taxable year next following the Participant’s
taxable year in which the Participant remits the related taxes to the taxing
authority. The Company shall make a payment to reimburse the Participant in an
amount equal to all expenses and other amounts incurred due to a tax audit or
litigation addressing the existence or amount of a tax liability pursuant to
clause (ii) of the foregoing paragraph of this Section 11, by the end of
Participant’s taxable year following the Participant’s taxable year in which the
taxes that are the subject of the audit or litigation are remitted to the taxing
authority, or where as a result of such audit or litigation no taxes are
remitted, the end of the Participant’s taxable year following the Participant’s
taxable year in which the audit is completed or there is a final and
nonappealable settlement or other resolution of the litigation.
12. FUNDING
     The Participant shall have no right, title, or interest whatsoever in or to
any assets of the Company or any investments which the Company may make to aid
it in meeting its obligations under the Plan. The Participant’s right to receive
payments under the Plan shall be no greater than the right of an unsecured
general creditor of the Company. Immediately prior to a Change in Control, the
Company shall create an irrevocable grantor trust (the “Rabbi Trust”) which
shall be subject to the claims of creditors of the Company. In the event that
the Participant is a Specified Employee at the time he incurs a Separation From
Service or at the time the Company determines that it is reasonably likely that
the Participant will incur a Separation From Service in connection with a Change
in Control, then immediately upon the Participant’s Separation From Service or,
if earlier, the date on which the Company makes a determination that the
Participant is reasonably likely to incur a Separation From Services in
connection with a Change in Control, the Company shall transfer to the Rabbi
Trust cash sufficient (on an undiscounted basis) to pay the cash amounts
specified in Section 4.3, the estimated amount of the Gross-Up Payment to be
made under Section 4.4 and the Interest Amount. The cash amounts specified in
Section 4.3, the Gross-Up Payment and the Interest Amount shall be paid from the
Rabbi Trust on the dates specified in Sections 4.4 and 5 herein, provided that
the Company shall remain liable to pay any such amounts which for any reason are
not paid from the Rabbi Trust. The trustee of the Rabbi Trust shall be a bank or
trust company selected by the Company prior to the Change in Control.

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13. MISCELLANEOUS
     13.1 Plan Not an Employment Contract. The adoption and maintenance of the
Plan is not a contract between the Company and its employees that gives any
employee the right to be retained in its employment. Likewise, it is not
intended to interfere with the rights of the Company to terminate an employee’s
employment at any time with or without notice and with or without cause or to
interfere with an employee’s right to terminate his employment at any time.
     13.2 Alienation Prohibited. No benefits hereunder shall be subject to
anticipation or assignment by a Participant, to attachment by, interference
with, or control of any creditor of a Participant, or to being taken or reached
by any legal or equitable process in satisfaction of any debt or liability of a
Participant prior to its actual receipt by the Participant. Any attempted
conveyance, transfer, assignment, mortgage, pledge, or encumbrance of the
benefits hereunder prior to payment thereof shall be void.
     13.3 Severability. Each provision of the Plan may be severed. If any
provision is determined to be invalid or unenforceable, that determination shall
not affect the validity or enforceability of any other provision.
     13.4 Binding Effect. The Plan shall be binding upon any successor of the
Company. Further, the Board shall not authorize a Change in Control that is a
merger or a sale transaction unless the purchaser or the Company’s successor
agrees to take such actions as are necessary to cause all Participants to be
paid or provided all benefits due under the terms of the Plan as in effect
immediately prior to the Change in Control.
     13.5 Settlement of Disputes Concerning Benefits Under the Plan;
Arbitration. All claims by a Participant for benefits under the Plan shall be
directed to and determined by the Committee and shall be in writing. Any denial
by the Committee of a claim for benefits under the Plan shall be delivered to
the Participant in writing within thirty (30) days after written notice of the
claim is provided to the Company in accordance with Section 13.9 and shall set
forth the specific reasons for the denial and the specific provisions of the
Plan relied upon. The Committee shall afford a reasonable opportunity to the
Participant for a review of the decision denying a claim and shall further allow
the Participant to appeal to the Committee a decision of the Committee within
sixty (60) days after notification by the Committee that the Participant’s claim
has been denied. Any further dispute or controversy arising out of or relating
to the Plan, including without limitation, any and all disputes, claims (whether
in tort, contract, statutory or otherwise) or disagreements concerning the
interpretation or application of the provisions of the Plan shall be resolved by
arbitration in accordance with the rules of the American Arbitration Association
(the “AAA”) then in effect. No arbitration proceeding relating to the Plan may
be initiated by either the Company or the Participant unless the claims review
and appeals procedures specified in this Section 13.5 have been exhausted.
Within ten (10) business days of the initiation of an arbitration hereunder, the
Company and the Participant will each separately designate an arbitrator, and
within twenty (20) business days of selection, the appointed arbitrators will
appoint a neutral arbitrator from the AAA Panel of Commercial Arbitrators. The
arbitrators shall issue their written decision (including a statement of finding
of facts) within thirty (30) days from the date of the close of the arbitration
hearing. The decision of the arbitrators selected hereunder will be final and
binding on both parties. This arbitration

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provision is expressly made pursuant to and shall be governed by the Federal
Arbitration Act, 9 U.S.C. Sections 1-16 (or replacement or successor statute).
Pursuant to Section 9 of the Federal Arbitration Act, the Company and any
Participant agree that a judgment of the United States District Court for the
District in which the headquarters of Baker Hughes is located at the time of
initiation of an arbitration hereunder may be entered upon the award made
pursuant to the arbitration.
     13.6 Guaranty of Payment, Performance, and Observance by Baker Hughes.
Baker Hughes hereby unconditionally guarantees to Participant the due, prompt
and punctual payment, performance and observance by the Company, and its
successors and assigns (collectively, the “Obligor”), of the Obligor’s
obligations under the Plan (collectively, the “Guaranteed Obligations”),
including, but not limited to, (i) the due, prompt and punctual payment of each
and all amounts that the Company shall become obligated to pay under the Plan,
as and when the same shall become due and payable hereunder, and (ii) the due,
prompt and punctual performance and observance by the Company of each term,
provision and condition the Company is required to perform or observe under the
Plan, as and when the same shall be required to be performed or observed
hereunder. In any case of the failure of the Obligor to punctually pay, perform
or observe any of the Guaranteed Obligations, Baker Hughes agrees to promptly
cause to be promptly paid, performed or observed such Guaranteed Obligation as
and when such Guaranteed Obligation is required to be paid, performed or
observed. Baker Hughes agrees that its obligations hereunder shall be as if it
were the principal obligor and not merely a surety, and shall be absolute and
unconditional, irrespective of, and shall be unaffected by, any invalidity,
irregularity or unenforceability of any provision of the Plan, or any waiver,
modification or indulgence granted to the Obligor with respect thereto, by the
Participant, or any other circumstance that may otherwise constitute a legal or
equitable discharge of a surety or guarantor. Baker Hughes hereby waives
diligence, presentment, demand, any right to require a proceeding first against
the Obligor, and all demands whatsoever, and covenants that its obligations
under the Plan will not be discharged except by payment, performance and
observance in full of all of the Guaranteed Obligations. The agreements of Baker
Hughes hereunder shall inure to the benefit of and be enforceable by
Participant’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
     13.7 No Mitigation. The Company agrees that if the Participant’s employment
with the Company terminates during the Term of the Plan, the Participant is not
required to seek other employment or to attempt in any way to reduce any amounts
payable to the Participant by the Company pursuant to the Plan. Further, except
as expressly provided otherwise herein, the amount of any payment or benefit
provided for in the Plan (other than Section 4.3(f)) shall not be reduced by any
compensation earned by the Participant as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Participant to the Company, or otherwise.
     13.8 Other Amounts Due. Except as expressly provided otherwise herein, the
payments and benefits provided for in the Plan are in addition to and not in
lieu of amounts and benefits that are earned by a Participant prior to his
Termination of Employment. The Company shall pay a Participant any compensation
earned through the Employment Termination Date but not previously paid the
Participant. Further the Participant shall be entitled to any other amounts or
benefits due the Participant in accordance with any contract, plan, program or
policy of the

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Company or any of its Affiliates. Amounts that the Participant is entitled to
receive under any plan, program, contract or policy of the Company or any of its
Affiliates at or subsequent to the Participant’s Termination of Employment shall
be payable or otherwise provided in accordance with such plan, program, contract
or policy, except as expressly modified herein.
     13.9 Notices. For the purpose of the Plan, notices and all other
communications provided for in the Plan shall be in writing and shall be deemed
to have been duly given when delivered or mailed by United States registered
mail, return receipt requested, postage prepaid, addressed, if to the
Participant, to the residential address listed on the Participant’s notification
of participation and, if to the Company, to 2929 Allen Parkway, Suite 2100;
Houston, Texas 77019; Attention: General Counsel, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon actual
receipt.
     13.10 Governing Law. All provisions of the Plan shall be construed in
accordance with the laws of Texas, except to the extent preempted by federal law
and except to the extent that the conflicts of laws provisions of the State of
Texas would require the application of the relevant law of another jurisdiction,
in which event the relevant law of the State of Texas will nonetheless apply,
with venue for litigation being in Houston, Texas.
     13.11 Compliance With Section 409A. It is intended that the Plan shall
comply with Section 409A. The provisions of the Plan shall be interpreted and
administered in a manner that complies with Section 409A. The provisions of the
Plan dealing with Section 409A reflect the manner in which the Plan has been
operated in good faith compliance with Section 409A since January 1, 2005.
               IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer this 18th day of December, 2008,
effective as of January 1, 2009.

            BAKER HUGHES INCORPORATED
      By:   /s/ Didier Charreton       Title:  Vice President, Human Resources 
           

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INTERNATIONAL SUPPLEMENT

1.   General. The provisions of this Supplement apply to individuals who are
Non-US Employees (as defined below). The provisions of the Plan apply to Non-US
Employees, except to the extent this Supplement modifies the provisions of the
Plan.       The purpose of this Supplement is to provide for severance benefits
for Non-US Employees in the event of a Termination of Employment.      
Capitalized terms used in this Supplement which are defined in the Plan have the
same meaning in this Supplement unless such terms are defined differently for
purposes of this Supplement. The definition of terms defined in this Supplement
apply only to this Supplement and not to other parts of the Plan.   2.  
Definitions. Section 2.1 of the Plan is modified to add the following
definitions to read as follows:

      “Non-US Employee” means an individual (i) employed in the services of the
Company on the active payroll where the operations or principal place of
business of the individual’s employment is located outside of the United States
and (ii) who is also an executive salary grade system employee (under the
Company’s then current payroll system categories), or any comparable executive
designations in any system that replaces such salary grade system.
Notwithstanding the foregoing, the Committee may from time to time designate
other individuals who may be eligible to participate in the Plan.        
“Non-US Participant” means a Non-US Employee who is eligible to participate in
the Plan.

3.   References. References in the Plan to “Employees” and “Participants” are
deemed to be references to “Non-US Employees” and “Non-US Participants,”
respectively.   4.   Benefits.       Section 4.3 shall be modified in the first
paragraph to read as follows:       “Upon the occurrence of a Change in Control,
the Company shall provide a Non-US Participant who has satisfied the eligibility
requirements of Section 3 such severance benefits under the Plan as the
Committee determines in accordance with the provisions of Exhibit A, taking into
consideration any prohibitions or restrictions and any statutorily mandated
severance benefits applicable to the Non-US Participant, with the intent of
providing the Non-US Participant benefits that are generally comparable to the
benefits provided to Participants under the Plan. It is the express intent of
the Company that any benefits paid to a Non-US Participant under this Supplement
and the Plan will be in lieu of any statutorily-mandated severance benefits (or
other employment termination related benefits), including, but not limited to,
gratuity and similar benefits.

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Exhibit A
BAKER HUGHES INCORPORATED
CHANGE IN CONTROL SEVERANCE PLAN
SCHEDULE OF POST-TERMINATION OF EMPLOYMENT BENEFITS
     The benefits described in this Schedule are summaries only. Each benefit is
fully described in the Plan. In the event of a conflict between the provisions
of the Plan and this Exhibit A, the terms of the Plan shall govern.

      Benefit   Details of Benefit
1. Severance Payment Based Upon Base Compensation

Level 1
Level 2
 

 3 years (equivalent of 36 months) of Highest Base Compensation
2 years (equivalent of 24 months) of Highest Base Compensation
 
   
2. Severance Payment Based Upon Bonuses
  Based on the “Expected Value” (EV) target percentage under the Participant’s
Bonus for the Termination of Employment year prorated to the Participant’s
Employment Termination Date, plus an additional sum which is the product of:
 
   
 
 
   (A) EV target percentage under the Participant’s Bonus for the Termination of
Employment year, multiplied by
 
   
 
     (B) Participant’s Highest Base Compensa- tion, and multiplied by either
 
   
     Level 1
     (C) 3
     Level 2
            2
 
   
3. Outplacement
   $30,000
     Level 1
   $20,000
     Level 2
   

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      Benefit   Details of Benefit
4. Performance Awards
  Equity based performance awards are immediately vested and exercisable and all
conditions thereof are deemed satisfied.
 
   
5. Lost Benefits Under Pension, Thrift and Supplemental Retirement Plans
  An amount equal to the undiscounted value of the employer-provided accruals
and credits the Participant would have earned under the Pension Plan, the Thrift
Plan and the Supplemental Retirement Plan for the following period after the
Participant’s Employment Termination Date had he continued to participate
thereunder:
 
   
     Level 1
   3 years
     Level 2
   2 years
 
   
6. Accident and Health Insurance
  Coverage for the following time period:
 
   
     Level 1
   36 months
     Level 2
   24 months
 
   
7. Life Insurance
  An amount equal to the monthly premium amount for the basic life insurance
coverage the Participant had at his Employment Termination Date multiplied by
the following:
 
   
     Level 1
   36 months
     Level 2
   24 months
 
   
8. Perquisites
  An amount equal to (i) the cost of the Participant’s Perquisites for the
remainder of the calendar year in which the Employment Termination Date occurs
and (ii) the cost of the Participant’s Perquisites for the following additional
time period:
 
   
     Level 1
   36 months
     Level 2
   24 months

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      Benefit   Details of Benefit
9. Tax Gross-up Payment
  An amount such that after the payment of (i) any Excise Taxes due on the
Benefits and other benefits or payments, (ii) any federal, state and local
income and employment taxes on the Benefits, and (iii) any Excise Tax on the
Gross-Up Payment benefit, the net amount retained by the Participant shall be
equal to the gross amount of the Benefits prior to such deductions.
 
   
10. Legal Fees
  Legal fees and expenses incurred by the Participant (i) in disputing in good
faith any issue relating to the Participant’s termination of employment, (ii) in
seeking in good faith to obtain or enforce any Benefit or right provided under
the Plan, or (iii) in connection with any tax audit or proceeding to the extent
attributable to the application of section 4999 of the Code to the payment of
the Benefits or other benefits or payments.

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