Document:

exv10w2

Exhibit 10.2

AMENDED AND RESTATED

CHANGE IN CONTROL AGREEMENT

     THIS AMENDED AND RESTATED AGREEMENT (this “Agreement”) is entered into by and between BAKER
HUGHES INCORPORATED, a Delaware corporation (the “Company”), and                      (the “Executive”)
effective as of January 1, 2009.

     WHEREAS, the Company considers it essential to the best interests of its stockholders to
foster the continued employment of key management personnel; and

     WHEREAS, the Company recognizes that, as is the case with many publicly-held corporations, the
possibility of a change in control exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its stockholders; and

     WHEREAS, the Company has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company’s management, including
the Executive, to their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a change in control;

     WHEREAS, effective                      (the “Effective Date”) the Company and the Executive
previously entered into a Change in Control Agreement (the “Original Change in Control Agreement”);
and

     WHEREAS, the Company and the Executive desire to amend and restate the Original Change in
Control Agreement to comply with section 409A of the Internal Revenue Code of 1986, as amended;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
the Company and the Executive hereby agree as follows:

     1. Definitions and Interpretation Rules.

     1.1 Defined Terms. For purposes of this Agreement, the following terms shall have the
meanings indicated 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 and/or restated 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.

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     “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 the Executive’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 Executive could have received in cash in lieu of any elective
deferrals made by the Executive 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 of the
Code, and modified further by excluding any bonus, incentive compensation (including but not
limited to equity-based compensation), commissions, expense reimbursements or other expense
allowances, fringe benefits (cash and noncash), moving expenses, deferred compensation (other than
elective deferrals by the Executive 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 Amount” 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 the Executive for
services rendered or labor performed during a fiscal year of the Company and (b) the amount of the
discretionary bonus or other bonus paid outside of the Annual Incentive Plan, if any, paid in cash
by the Company to or for the benefit of the Executive for services rendered or labor performed
during the same fiscal year of the Company. The Executive’s Bonus Amount shall be determined by
including any portion thereof that such Executive could have received in cash in lieu of (i) any
elective deferrals made by such Executive pursuant to the Supplemental Retirement Plan or (ii)
elective contributions made on such Executive’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 Executive to substantially perform
the Executive’s duties with the Company (other than any such failure resulting from the Executive’s
incapacity due to physical or mental illness) after a written demand for substantial performance is
delivered to the Executive by the Board (or by a delegate appointed by the Board), which demand
specifically identifies the manner in which the Board believes that the Executive has not
substantially performed the Executive’s duties, or (ii) the willful engaging by the Executive 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

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to act, on the Executive’s part shall be deemed “willful” if done, or omitted to be done, by
the Executive 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;

     (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
fifty percent (50%) 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 thirty percent (30%) 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 (6)
months prior to the Change in Control constitute the Compensation Committee of the Board, plus,

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(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. In the event that the Executive’s employer is a subsidiary of
Baker Hughes, the term “Company” shall include the Executive’s employer where appropriate and Baker
Hughes will cause the Executive’s employer to take any actions necessary to satisfy the obligations
of the Company under this Agreement.

     “Disability” means the Executive’s incapacity due to physical or mental illness that has
caused the Executive to be absent from full-time performance of his duties with the Company for a
period of six (6) consecutive months.

     “Effective Date” means the date identified in the introduction of this Agreement.

     “Employment Termination Date” means the date as of which the Executive incurs a Termination of
Employment determined in accordance with the provisions of Section 5.2.

     “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.

     “Executive” means the employee identified in the introduction of this Agreement.

     “Expiration Date” shall have the meaning specified in Section 2.

     “Good Reason” for termination by the Executive of his employment means the occurrence (without
the Executive’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 Executive’s termination for Good Reason:

     (a) the assignment to the Executive of any duties or responsibilities which are substantially
diminished as compared to the Executive’s duties and responsibilities immediately

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prior to a Change in Control or a material change in the Executive’s reporting
responsibilities, titles or offices as an executive and as in effect immediately prior to the
Change in Control;

     (b) a reduction by the Company in the Executive’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;

     (c) the relocation of the Executive’s principal place of employment to a location outside of a
50-mile radius from the Executive’s principal place of employment immediately prior to the Change
in Control or the Company’s requiring the Executive 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 Executive’s business travel obligations
immediately prior to a Change in Control;

     (d) the failure by the Company to pay to the Executive any portion of the Executive’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 Executive 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;

     (e) the failure by the Company to continue in effect any compensation plan in which the
Executive participates immediately prior to the Change in Control which is material to the
Executive’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 Executive’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 Executive’s participation relative to other Baker Hughes executives,
as existed immediately prior to the Change in Control;

     (f) the failure by the Company to continue to provide the Executive with benefits
substantially similar to those enjoyed by the Executive under any of the Company’s pension,
savings, life insurance, medical, health and accident, or disability plans in which the Executive
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 Executive of any material fringe
benefit or Perquisite enjoyed by the Executive at the time of the Change in Control, or the failure
by the Company to provide the Executive with the number of paid vacation days to which the
Executive 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

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     (g) any purported termination of the Executive’s employment which is not effected pursuant to
a notice of termination satisfying the requirements of Section 5.1.

     The Executive shall have the right to terminate his employment for Good Reason even if he
becomes incapacitated due to physical or mental illness. The Executive’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
Executive 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 the Executive pursuant to Section 3.4.

     “Highest Base Compensation” means the Executive’s annualized Base Compensation in effect
immediately prior to (a) a Change in Control, (b) the first event or circumstance constituting Good
Reason, or (c) the Executive’s Termination of Employment, whichever is greatest.

     “Highest Bonus Amount” means the average of the three highest Bonus Amounts received by the
Executive with respect to the five fiscal years of the Company immediately preceding the
Executive’s Employment Termination Date.

     “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 3.3(i).

     “Merger” means a merger, consolidation or similar transaction.

     “Pension Plan” means the Baker Hughes Incorporated Pension Plan, as amended from time to time.

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     “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 Executive 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.

     “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 this Agreement, a
Potential Change in Control has occurred.

     “Renewal Date” shall have the meaning specified in Section 2.

     “Section 409A” means section 409A of the Code and the regulations issued by the IRS and the
Department of Treasury thereunder.

     “Separation From Service” shall have the meaning specified 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:

     (a) Baker Hughes;

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     (b) an Affiliate of Baker Hughes;

     (c) an employee benefit plan (or related trust) sponsored or maintained by Baker Hughes or any
Affiliate of Baker Hughes;

     (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 the acquisition of securities directly from Baker Hughes and/or
its Affiliates; or

     (e) 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.

     “Termination of Employment” means the termination of the Executive’s employment relationship
with the Company (a) by the Company without Cause after a Change in Control occurs, or (b) by the
Executive for Good Reason after a Change in Control occurs.

     For purposes of this definition, the Executive’s employment shall be deemed to have been
terminated after a Change in Control, if (a) the Executive’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; (b) the Executive
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 (c) the Executive’s employment is
terminated by the Company without Cause or by the Executive 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 Executive 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 (a) a termination of employment due to the
Executive’s death or Disability, or (b) a termination of employment by the Executive without Good
Reason.

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     “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.

     1.2 Number and Gender. As used in this Agreement, unless the context otherwise
expressly requires to the contrary, references to the singular include the plural, and vice versa;
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 this Agreement.

     2. Term of Agreement.

     2.1 The “Term” of this Agreement shall commence on the Effective Date and end 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 this Agreement shall have been automatically extended
pursuant Section 2.2, the last day of the two-year period beginning on the date on which the Change
in Control occurred.

     2.2 After the expiration of the time period described in subsection (a) of Section 2.1, and in
the absence of a Change in Control (as described in subsection (b) of Section 2.1) the “Term” of
this Agreement 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 Executive that the Term of this Agreement
will not be extended.

     3. Compensation Other Than Severance Payments.

     3.1 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 Executive 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. The 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 that are applicable to the award.

     3.2 Compensation and Benefits During Incapacity and Prior to Termination of
Employment. Following a Change in Control and during the Term of this Agreement, for any
period during which the Executive fails to perform the Executive’s full-time duties with the
Company as a result of incapacity due to physical or mental illness, the Company shall pay to the
Executive, at the time specified in Section 4, the Executive’s full salary at the rate in effect at
the

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commencement of any such period, together with all compensation and benefits payable to the
Executive under the terms of any compensation or benefit plan, program or arrangement maintained by
the Company during such period, until the Executive’s employment is terminated by the Company for
Disability.

     3.3 Benefits Following Termination of Employment. If the Executive incurs a
Termination of Employment during the Term of this Agreement, the Company shall provide the
Executive the benefits described below.

          (a) Severance Payment. The Company will pay the Executive a cash severance benefit in
an amount equal to the product of three times the sum of (i) an amount equal to the Executive’s
Highest Base Compensation plus (ii) the greater of (A) the Executive’s Highest Bonus Amount or (B)
an amount equal to one hundred and twenty percent (120%) of the Executive’s Highest Base
Compensation. The Executive’s severance payment under this paragraph (a) will be paid in
accordance with the provisions of Section 4.

          (b) Prorated Bonus. The Company will pay the Executive a cash severance benefit in an
amount equal to the product of (A) the Executive’s Highest Bonus Amount and (B) a fraction, the
numerator of which is the number of days in the Company’s fiscal year in which occurs the
Executive’s Employment Termination Date through the Executive’s Employment Termination Date and the
denominator of which is three hundred sixty-five (365). However, if the Executive’s Employment
Termination Date occurs during the same calendar year in which a Change in Control occurs, the
pro-rata bonus payment described in the preceding sentence shall be offset by any payments received
by the Executive under the Baker Hughes Incorporated Annual Incentive Compensation Plan (as amended
and/or restated) in connection with the Change in Control. The Executive’s severance payment under
this paragraph (b) will be paid in accordance with the provisions of Section 4.

          (c) Outplacement. The Company will pay the Executive a cash payment in the amount of
$30,000.00. Such cash payment will be paid in accordance with the provisions of Section 4.

          (d) Pension, Thrift and Supplemental Retirement Plans. In addition to the retirement
benefits to which the Executive is entitled under the Thrift Plan, the Pension Plan and the
Supplemental Retirement Plan, the Company shall pay the Executive 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 Executive 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 Executive had the Executive continued in the employ of the
Company for a period of three years after the Employment Termination Date, assuming for this
purpose that (i) the Executive’s earned compensation per year during that three year period of time
is the sum of (1) the Executive’s Highest Base Compensation and (2) the Executive’s Highest Bonus
Amount; 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 Executive
during the three year period, are the same percentages in effect on the date of the Change in
Control or the Executive’s Employment Termination Date, whichever is more favorable for the
Executive. The

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payment required under this paragraph (d) will be made in accordance with the provisions of
Section 4.

          (e) Accident and Health Insurance Benefits. For three years following the Executive’s
Employment Termination Date (the “Continuation Period”), the Company shall arrange to provide the
Executive and his dependents accident and health insurance benefits, in each case, substantially
similar to those provided to the Executive and his dependents immediately prior to the Employment
Termination Date or, if more favorable to the Executive, those provided to the Executive and his
dependents immediately prior to the first occurrence of an event or circumstance constituting Good
Reason, at no greater cost to the Executive than the cost to the Executive immediately prior to
such date or occurrence. Benefits otherwise receivable by the Executive pursuant to this
Section 3.3(e) shall be reduced to the extent benefits of the same type are received by the
Executive during the Continuation Period (and any such benefits received by the Executive shall be
reported to the Company by the Executive). To the extent that the accident or health insurance
benefits specified in this Section 3.3(e) are not provided through an arrangement that is fully
insured by a third party the following provisions shall apply to the reimbursement of such
benefits. The amount of accident and health insurance expenses eligible for reimbursement during
Executive’s taxable year will not affect the expenses eligible for reimbursement in any other
taxable year (with the exception of applicable lifetime maximums specified in the plans). The
Executive’s right to reimbursement is not subject to liquidation or exchange for another benefit.
To the extent that the benefits provided to the Executive pursuant to this Section 3.3(e) are
taxable to the Executive and not otherwise exempt from Section 409A, any amounts to which the
Executive would otherwise be entitled under this Section 3.3(e) during the first six months
following the date of the Executive’s Separation From Service shall be accumulated and paid to the
Executive on the date that is six months following the date of his Separation From Service.

          (f) Life Insurance. The Executive shall be entitled to a single sum cash payment in
an amount equivalent to thirty-six (36) monthly basic life insurance premiums applicable to the
Executive’s basic life insurance coverage on his Employment Termination Date. The single sum cash
payment will be made in accordance with the provisions of Section 4. The Executive 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. The Executive shall be entitled to a single sum cash payment which
shall be an amount equal to the sum of (1) the cost of the Executive’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 Executive’s Perquisites in effect prior to his
Termination of Employment for an additional three years. The payment required under this paragraph
(g) will be made in accordance with the provisions of Section 4. If the aggregate fair market
value of the club memberships to be purchased does not exceed the dollar limitation under section
402(g)(1) of the Code in effect when the Executive incurs a Separation From Service, the Executive
may, at his option, purchase any of his club memberships held in the Company’s name for fair market
value and on the terms mutually agreed by the Executive and the Committee.

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          (h) Retiree Medical. If the Executive 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 Executive as in effect immediately prior
to the first occurrence of an event or circumstance constituting Good Reason, had the Executive’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 Executive and the Executive’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 3.3 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 3.3(h), or in-kind
benefits provided, during the Executive’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 Executive. The
Executive’s right to reimbursement or in-kind benefits pursuant to this Section 3.3(h) shall not be
subject to liquidation or exchange for another benefit. To the extent that the benefits provided
to the Executive pursuant to this Section 3.3(h) are taxable to the Executive and are not otherwise
exempt from Section 409A, any amounts to which the Executive would otherwise be entitled under this
Section 3.3(h) during the first six months following the date of the Executive’s Separation From
Service shall be accumulated and paid to the Executive on the date that is six months following the
date of his Separation From Service.

          (i) Interest Amount. If the Executive is a Specified Employee, the Company shall pay
to the Executive, on the date that is six (6) months following the Executive’s Separation From
Service, an amount equal to the amount of interest that would be earned on the amounts specified in
Sections 3.3(a), 3.3(b), 3.3(c), 3.3(d), 3.3(f) and 3.3(g) and, to the extent subject to a
mandatory six-month delay in payment, the amounts specified in Sections 3(e), 3(h), 3.4(c) and 3.5,
for the period commencing on the date of the Executive’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 Executive’s Separation From Service plus two percentage
points (the “Interest Amount”).

     3.4 Gross-Up Payments. If any payments or benefits received or to be received by the
Executive (whether pursuant to the terms of this Agreement, 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 Executive an additional amount (the “Gross-Up Payment”) such that the net amount
retained by the Executive 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 3.4 is to place the Executive in the
same economic position such Executive would have been in had no Excise Tax been imposed with
respect to the Total Payments.

          (a) 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)

12

 

unless, in the opinion of tax counsel (the “Tax Counsel”) reasonably acceptable to the
Executive 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 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.

          (b) For purposes of determining the amount of the Gross-Up Payment, the Executive 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 Executive’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), net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and local taxes.

          (c) 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 Executive with respect to such excess) within five (5)
business days following the time that the amount of such excess is finally determined. The
Executive 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 3.4(c) 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 Executive in an amount equal to all federal, state and local taxes imposed upon
the Executive that are described in this Section 3.4, including the amount of additional taxes
imposed upon the Executive due to the Company’s payment of the initial taxes on such amounts, by
the end of the Executive’s taxable year next following the Executive’s taxable year in which the
Executive remits the related taxes to the taxing authority. Notwithstanding any provision of this
Agreement to the contrary, if the Executive is a Specified Employee, any amounts to which the
Executive would otherwise be entitled under this Section 3.4 during the first six months following
the date of the Executive’s Separation From Service shall be accumulated and paid to the Executive
on the date that is six months following the date of his Separation From Service.

     3.5 Legal Fees. The Company shall pay, on a fully grossed up, after tax basis, all
legal fees and expenses incurred by the Executive (i) in disputing in good faith any issue relating
to the Executive’s termination of employment, or (ii) in seeking in good faith to obtain or

13

 

enforce any benefit or right provided under this Agreement in accordance with Section 11.5.
Such payments shall be made within ten (10) business days after the delivery of the Executive’s
written request for the payment accompanied by such evidence of fees and expenses incurred as the
Company may reasonably require. The Company shall pay the Executive, on a fully grossed up, after
tax basis, all legal fees and expenses incurred by the Executive 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 this Agreement. Such payments shall be made within ten (10) business days
after delivery of the Executive’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 Executive 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 Executive’s taxable year
following the Executive’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 Executive’s taxable year following the Executive’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 3.5 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 3.5 during a given taxable year of the Executive shall not affect the amount of expenses
eligible for reimbursement in any other taxable year of the Executive. The right to reimbursement
pursuant to this Section 3.5 is not subject to liquidation or exchange for another benefit.
Notwithstanding any provision of this Agreement to the contrary, if the Executive is a Specified
Employee, any amount to which the Executive would otherwise be entitled under this Section 3.5
during the first six months following the date of the Executive’s Separation From Service shall be
accumulated and paid to the Executive on the date that is six months following the date of his
Separation From Service.

     4. Time of Benefits Payments. The Company shall pay the Executive any cash benefits
described in paragraphs (a), (b), (c), (d), (f) and (g) of Section 3.3 in a single sum cash payment
on the date that is six (6) months following the date of  the Executive’s Separation From Service
if he is a Specified Employee or ten (10) days following his Separation From Service if he is not a
Specified Employee. Any salary or compensation described in Section 3.2 or 5.4 for periods prior
to the Executive’s Separation From Service shall be paid to the Executive by the Company on the
regularly scheduled payroll dates or on the dates specified in the applicable benefit programs.
Any unpaid salary described in Section 3.2 or Section 5.4 for periods following the Executive’s
Separation From Service shall be paid to the Executive by the Company in a single sum cash payment
on the date that is six (6) months following the date of the Executive’s Separation From Service if
he is a Specified Employee or ten (10) days following his Separation From Service if he is not a
Specified Employee.

     5. Termination Procedures And Compensation During Dispute.

     5.1 Notice of Termination. After a Change in Control and during the Term of this
Agreement, any purported termination of the Executive’s employment by the Company shall be

14

 

communicated by the Company by a written Notice of Termination to the Executive in accordance
with Section 11.8. For purposes of this Agreement, a “Notice of Termination” shall mean a notice
which shall indicate the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a basis for termination
of the Executive’s employment under the provision so indicated. Further, a Notice 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 Executive and an opportunity for the Executive, together with the Executive’s counsel, to be
heard before the Board) finding that, in the good faith opinion of the Board, the Executive 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 Executive’s employment by the
Company after a Change in Control and during the Term of this Agreement shall be effective unless
the Company complies with the procedures set forth in this Section.

     5.2 Employment Termination Date. “Employment Termination Date,” with respect to any
purported termination of the Executive’s employment after a Change in Control and during the Term
of this Agreement, shall mean (i) if the Executive’s employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided that the Executive shall not have
returned to the full-time performance of the Executive’s duties during such thirty (30) day
period), and (ii) if the Executive’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 Executive, shall not be less than fifteen (15) days nor more than sixty
(60) days, respectively, from the date such Notice of Termination is given).

     5.3 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), 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 this Agreement 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 Executive only if such notice is given in good faith and the
Executive pursues the resolution of such dispute with reasonable diligence.

     5.4 Compensation During Dispute. If a purported termination of employment occurs
following a Change in Control and during the Term of this Agreement and the Employment Termination
Date is extended in accordance with Section 5.3, the Company shall pay the Executive, at the time
specified in Section 4, the full compensation in effect when the notice giving rise to the dispute
was given (including, but not limited to, salary) and continue the Executive as a participant in
all compensation, benefit and insurance plans in which the Executive was participating when the
notice giving rise to the dispute was given or those plans in which the Executive was participating
immediately prior to the first occurrence of an event or

15

 

circumstance giving rise to the Notice of Termination, if more favorable to the Executive,
until the Employment Termination Date, as determined in accordance with Section 5.3. Amounts paid
under this Section are in addition to all other amounts due under this Agreement (other than those
due under Section 3.2) and shall not be offset against or reduce any other amounts due under this
Agreement.

     6. Withholding. Subject to the provisions of Section 3.4, the Company may withhold
from any benefits paid under this Agreement all income, employment, and other taxes required to be
withheld under applicable law.

     7. Death of the Executive. If the Executive dies after his Employment Termination
Date but before the Executive receives full payment of the benefits to which he is entitled, any
unpaid benefits will be paid to the Executive’s surviving spouse, or if the Executive does not have
a surviving spouse, to the Executive’s estate.

     8. Amendment. This Agreement may not be amended except pursuant to a written
instrument that is authorized by the Committee and agreed to in writing and signed by the
Executive.

     9. 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 this Agreement, either intentionally or
unintentionally, other than with the consent of the Executive, the Executive 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 Executive, together with interest on the unpaid benefits
from the date of the payment deadline specified in this Agreement at the annual rate of 120 percent
of the rate specified in section 1274(b)(2)(B) 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 Executive 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 timely pay payments and benefits under this Agreement when
due, and (ii) all expenses (including reasonable attorneys’, accountants’, and experts’ fees and
expenses) incurred by the Executive 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 Executive 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 Executive in an amount equal to all federal,
state and local taxes imposed upon the Executive that are described in clauses (i) and (iii) of the
foregoing paragraph of this Section 9, including the amount of additional taxes imposed upon the
Executive due to the Company’s payment of the initial taxes on such amounts, within ten (10)
business days after the delivery of the Executive’s written request for the payment. The parties
intend and agree that such 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 Executive in an amount equal to all federal, state
and local taxes imposed upon the Executive that are described in clauses (i) and (iii) of the
foregoing paragraph of this Section 9, including the amount of additional taxes imposed

16

 

upon the Executive due to the Company’s payment of the initial taxes on such amounts, by the
end of the Executive’s taxable year next following the Executive’s taxable year in which the
Executive remits the related taxes to the taxing authority. The Company shall make a payment to
reimburse the Executive 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 9, within ten (10) business days after the delivery of
the Executive’s written request for the payment. The parties intend and agree that such 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 Executive 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 9, by the end of Executive’s taxable year following the
Executive’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 Executive’s taxable year following the Executive’s taxable year in which
the audit is completed or there is a final and nonappealable settlement or other resolution of the
litigation.

     10. Funding. The Executive 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 this Agreement. The Executive’s right to receive payments under this Agreement
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
Executive 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 Executive will incur a Separation From
Service in connection with a Change in Control, then immediately upon the Executive’s Separation
From Service or, if earlier, the date on which the Company makes a determination that the Executive
is reasonably likely to incur a Separation From Service 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 3.3, the estimated amount of the Gross-Up Payment to be made
under Section 3.4 and the Interest Amount. The cash amounts specified in Section 3.3, the Gross-Up
Payment and the Interest Amount shall be paid from the Rabbi Trust on the dates specified in
Sections 3.3(i), 3.4 and 4 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.

     11. Miscellaneous.

     11.1 Agreement Not an Employment Contract. This Agreement is not an employment
contract between the Company and Executive and gives Executive no right to retain his employment.
This Agreement is not intended to interfere with the rights of the Company to terminate the
Executive’s employment at any time with or without notice and with or without cause or to interfere
with the Executive’s right to terminate his employment at any time.

17

 

     11.2 Alienation Prohibited. No benefits hereunder shall be subject to anticipation or
assignment by the Executive, to attachment by, interference with, or control of any creditor of the
Executive, or to being taken or reached by any legal or equitable process in satisfaction of any
debt or liability of the Executive prior to its actual receipt by the Executive. Any attempted
conveyance, transfer, assignment, mortgage, pledge, or encumbrance of the benefits hereunder prior
to payment thereof shall be void.

     11.3 Severability. Each provision of this Agreement 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.

     11.4 Binding Effect. This Agreement 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 the Executive to be paid or provided all benefits due under the terms of this
Agreement as in effect immediately prior to the Change in Control.

     11.5 Settlement of Disputes Concerning Benefits Under this Agreement; Arbitration.
All claims by Executive for benefits under this Agreement 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
this Agreement shall be delivered to the Executive in writing within thirty (30) days after written
notice of the claim is provided to the Company in accordance with Section 11.8 and shall set forth
the specific reasons for the denial and the specific provisions of this Agreement relied upon. The
Committee shall afford a reasonable opportunity to the Executive for a review of the decision
denying a claim and shall further allow the Executive to appeal to the Committee a decision of the
Committee within sixty (60) days after notification by the Committee that the Executive’s claim has
been denied. Any further dispute or controversy arising out of or relating to this Agreement,
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 this
Agreement shall be resolved by arbitration in accordance with the rules of the American Arbitration
Association (the “AAA”) then in effect. Within ten (10) business days of the initiation of an
arbitration hereunder, the Company and the Executive 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 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 the
Executive 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.

     11.6 No Mitigation. The Company agrees that if the Executive’s employment with the
Company terminates during the Term of this Agreement, the Executive is not required to seek other
employment or to attempt in any way to reduce any amounts payable to the Executive by

18

 

the Company pursuant to this Agreement. Further, except as expressly provided otherwise
herein, the amount of any payment or benefit provided for in this Agreement (other than
Section 3.3(e)) shall not be reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.

     11.7 Other Amounts Due. Except as expressly provided otherwise herein, the payments
and benefits provided for in this Agreement are in addition to and not in lieu of amounts and
benefits that are earned by the Executive prior to his Termination of Employment. The Company
shall pay the Executive any compensation earned through the Employment Termination Date but not
previously paid the Executive. Further the Executive shall be entitled to any other amounts or
benefits due the Executive in accordance with any contract, plan, program or policy of the Company
or any of its Affiliates. Amounts that the Executive is entitled to receive under any plan,
program, contract or policy of the Company or any of its Affiliates at or subsequent to the
Executive’s Termination of Employment shall be payable or otherwise provided in accordance with
such plan, program, contract or policy, except as expressly modified herein. For the avoidance of
doubt, the Executive’s benefits under the Baker Hughes Incorporated Pension Plan and the Baker
Hughes Incorporated Thrift Plan shall not be subject to a mandatory six-month delay in payment
pursuant to Section 409A as such plans are exempt from Section 409A.

     11.8 Notices. For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be given in person or by United States
registered mail, return receipt requested (with evidence of receipt by the party to whom the notice
is given), postage prepaid, addressed, if to the Executive, to the address listed on the signature
page of this Agreement 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. For purposes of this agreement notice to a party
shall be effective only upon actual receipt of the notice by the party with written evidence of
receipt by the party to whom the notice is given.

     11.9 Governing Law. All provisions of this Agreement 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.

     11.10 Entire Agreement. Effective January 1, 2009, this Agreement supersedes the
Original Change in Control Agreement.

     11.11 Compliance With Section 409A. It is intended that this Agreement shall comply
with Section 409A. The provisions of this Agreement shall be interpreted and administered in a
manner that complies with Section 409A. The provisions of this Agreement dealing with Section 409A
reflect the manner in which this Agreement has been operated in good faith compliance with Section
409A since January 1, 2005.

19

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date
above first written.

	 	 	 	 	 	 	 
	 	 	BAKER HUGHES INCORPORATED	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 

	 	 
	 	 	EXECUTIVE	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	Address:	 	 	 	 
	 

	 	 	 	 

	 	 
	 

	 	 	 	                                        , ___
	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 

	 	 

20exv10w3

Exhibit 10.3

BAKER HUGHES INCORPORATED

CHANGE IN CONTROL SEVERANCE PLAN

(Amendment and Restatement Effective January 1, 2009)

 

 

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.

 

 

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	 

-i- 

 

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	 

-ii- 

 

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:

4

 

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

5

 

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.

6

 

     “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

8

 

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;

9

 

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

10

 

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

11

 

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

12

 

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

13

 

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

14

 

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

15

 

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

16

 

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.

17

 

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

18

 

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.

19

 

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

20

 

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

21

 

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 	 
	 	 	 	 
	 

22

 

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.

23

 

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
	 	 

24

 

	 	 	 
	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

25

 

	 	 	 
	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.

26

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