Document:

exv10w2

 

Exhibit 10.2

HCC INSURANCE HOLDINGS, INC.

NONQUALIFIED DEFERRED COMPENSATION PLAN

FOR JOHN N. MOLBECK, JR.

 

HCC INSURANCE HOLDINGS, INC.

NONQUALIFIED DEFERRED COMPENSATION PLAN

FOR JOHN N. MOLBECK, JR.

Table of Contents

	 	 	 	 	 
	 	 	Page
	ARTICLE 1 - DEFINITIONS
	 	 	1	 
	 
	 	 	 	 
	ARTICLE 2 - ELIGIBILITY
	 	 	3	 
	 
	 	 	 	 
	ARTICLE 3 - CONTRIBUTIONS
	 	 	3	 
	 
	 	 	 	 
	ARTICLE 4 - ADJUSTMENT OF ACCOUNT
	 	 	4	 
	 
	 	 	 	 
	ARTICLE 5 - PAYMENT OF BENEFITS
	 	 	5	 
	 
	 	 	 	 
	ARTICLE 6 - ADMINISTRATION OF THE PLAN
	 	 	7	 
	 
	 	 	 	 
	ARTICLE 7 - CLAIM REVIEW PROCEDURE
	 	 	8	 
	 
	 	 	 	 
	ARTICLE 8 - LIMITATION OF RIGHTS
	 	 	9	 
	 
	 	 	 	 
	ARTICLE 9 - FUNDING AND ASSIGNMENT
	 	 	9	 
	 
	 	 	 	 
	ARTICLE 10 - AMENDMENT OR TERMINATION OF THE PLAN
	 	 	10	 
	 
	 	 	 	 
	ARTICLE 11 - GENERAL AND MISCELLANEOUS
	 	 	10	 
	 
	 	 	 	 
	ARTICLE 12 - COMPLIANCE WITH CODE SECTION 409A
	 	 	13	 

 

HCC INSURANCE HOLDINGS, INC.

NONQUALIFIED DEFERRED COMPENSATION PLAN

FOR JOHN N. MOLBECK, JR.

PREAMBLE

     WHEREAS, the Company desires to establish a nonqualified deferred compensation plan for the
exclusive benefit of John N. Molbeck, Jr., who, as of the Effective Date, is the Chief Operating
Officer of the Company (the “Participant”), to allow the Company to pay a portion of the
Participant’s compensation on a deferred basis by making Contributions to the Plan on his behalf as
provided by section 3(b) of that certain Employment Agreement entered into on August 10, 2007 but
effective as of March 1, 2007, between the Company and the Participant (the “Employment
Agreement”); and

     WHEREAS, the Company intends that the Participant and his Beneficiary under the Plan shall
have the status of unsecured general creditors of the Company with respect to the Plan and that the
Plan shall constitute an unfunded plan maintained primarily for the purpose of providing deferred
compensation for a select key management and highly compensated employee within the meaning of
section 201(2) and similar provisions of ERISA;

     NOW, THEREFORE, the Company hereby establishes the HCC Insurance Holdings, Inc. Nonqualified
Deferred Compensation Plan for John N. Molbeck, Jr., effective as of the Effective Date.

ARTICLE 1

DEFINITIONS

     1.1 “Account” shall mean the record maintained by the Committee showing the monetary
value of the individual interest in the Plan of the Participant. The term “Account” shall refer
only to a bookkeeping entry and shall not be construed to require the segregation of assets on
behalf of the Participant.

     1.2 “Accrual Date” shall mean the Valuation Date on which a Contribution is deemed to
be made to the Participant’s Account as specified by Section 3.1 or Section 3.2 or, with respect to
Contributions credited under Section 3.3, as specified by the Committee action approving such
Contribution. The Accrual Date is relevant for purposes of adjusting the Account for deemed
investment experience hereunder.

     1.3 “Affiliate” shall mean a member of the controlled group of corporations (as
defined in section 1563 of the Code) of which the Company is a member. For purposes of Section
1.19, such term shall mean all persons with whom the Company would be considered a single employer
under Code section 414(b) and/or under Code section 414(c), as modified by the first sentence of
Treasury Regulation section 1.409A-1(h)(3).

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     1.4 “Beneficiary” shall mean the beneficiary or beneficiaries (including any
contingent beneficiary or beneficiaries, if applicable) designated by the Participant to receive
death benefits, if any, hereunder.

     1.5 “Board” shall mean the Board of Directors of the Company, as constituted from time
to time.

     1.6 “Code” shall mean the Internal Revenue Code of 1986, as it may be amended from
time to time, and the rules and regulations promulgated thereunder.

     1.7 “Committee” shall mean the Compensation Committee of the Board or, if none, the
Board. An individual who ceases to be a member of such Compensation Committee (or Board, if
applicable) shall automatically cease to be a member of the Committee hereunder, and an individual
who becomes a member of such Compensation Committee (or Board, if applicable) shall automatically
become a member of the Committee hereunder.

     1.8 “Company” shall mean HCC Insurance Holdings, Inc., a Delaware corporation, or its
successor.

     1.9 “Contribution” shall mean a bookkeeping entry which reflects the periodic accrual
to the Participant’s Account, if any, as provided in Article 3 hereof.

     1.10 “Effective Date” shall mean August 31, 2007.

     1.11 “Employment Agreement” is defined in the above Preamble.

     1.12 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may
be amended from time to time, and the rules and regulations promulgated thereunder.

     1.13 “HCC Stock Rate” for a Valuation Date shall mean the one-month total return,
dividend reinvested, for the common stock of the Company (or any successor security) for the month
containing such Valuation Date, as determined in the sole discretion of the Committee; provided
that if the common stock of the Company (or the successor security) ceases to be publicly traded
prior to a Valuation Date, the HCC Stock Rate shall be equal to the S&P Rate for such Valuation
Date.

     1.14 “Investment Election” shall mean a written instrument in a form acceptable to the
Committee that is executed by the Participant and delivered to the Committee specifying the
Participant’s instructions regarding the matters addressed by Section 4.3.

     1.15 “Participant” is defined in the above Preamble.

     1.16 “Plan” shall mean this HCC Insurance Holdings, Inc. Nonqualified Deferred
Compensation Plan for John N. Molbeck, Jr., as amended from time to time.

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     1.17 “Plan Year” shall mean the annual period beginning January 1 and ending December
31, both dates inclusive of each year.

     1.18 “Prime Rate” for a Valuation Date shall mean the latest United States prime
lending rate announced by Wells Fargo Bank, N.A. (or its successor) on the business day that is
coincident with or immediately precedes such Valuation Date, as adjusted to reflect monthly
compounding.

     1.19 “Separation from Service” shall mean the Participant’s “separation from service”
with the Company and its Affiliates as such term is defined for purposes of Code sections
409A(a)(2)(A)(i) and 409A(a)(2)(B)(i). To the extent permitted by Treasury Regulation section
1.409A-1(h)(5), the Participant may be considered to have such a separation from service even if he
continues to provide services as a non-employee director of the Company or any of its Affiliates.

     1.20 “Specified Employee” shall mean “specified employee” as defined by Code section
409A(a)(2)(B)(i), determined by applying the default rules applicable under such Code section
except to the extent such rules are modified by a written resolution that is adopted by the
Committee and that applies for purposes of all deferred compensation plans of the Company and its
Affiliates.

     1.21 “S&P Rate” for a Valuation Date shall mean the one-month total return, cash
dividend reinvested, for the S&P 500 Index for the month containing such Valuation Date, as
published by Standard & Poor’s (or any successor).

     1.22 “Valuation Date” shall mean the last calendar day of each month during the Plan
Year.

ARTICLE 2

ELIGIBILITY

     The only individual eligible to participate under the Plan is the Participant. He shall be
eligible to participate only while he is an employee of the Company and/or its Affiliates. No
Contributions shall be credited to the Participant’s Account with respect to periods after his
Separation from Service.

ARTICLE 3

CONTRIBUTIONS

     3.1 Initial Contribution. As of the Effective Date, the Company shall credit the
Participant’s Account with an amount equal to $178,035.53.

     3.2 Required Monthly Contributions. The Company shall credit the Participant’s
Account with an amount equal to $29,166.67 as of the Valuation Date for each month during the

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period beginning on September 1, 2007 and ending on the earliest to occur of (a) the
Participant’s Separation from Service; (b) the termination of the Employment Agreement; and (c)
December 31, 2010; provided that such accrual for the month containing the last day of such period
shall be prorated by multiplying $29,166.67 by a fraction equal to the number of calendar days in
such month prior to and including such last day divided by the total number of calendar days in
such month.

     3.3 Discretionary Contributions. The Committee may approve additional, discretionary
Company Contribution to the Participant’s Account for a Plan Year or portion of a Plan Year. Any
such discretionary Contributions shall be effective only upon approval by the Committee, which
approval shall specify the Accrual Date for each such discretionary Contribution. Discretionary
Contributions shall be accrued by the Company or an Affiliate as directed by the Committee.

ARTICLE 4

ADJUSTMENT OF ACCOUNT

     4.1 Contributions and Distributions. Contributions by the Company under Article 3
hereof shall be credited to the Account of the Participant as of the Accrual Date. All
distributions from the Account pursuant to Article 5 shall be charged against the Account as of the
date of such distribution.

     4.2 Deemed Investment Return.

     (a) The Participant’s Account shall be adjusted each Valuation Date to reflect earnings
(or losses) at the Prime Rate, the HCC Stock Rate, and/or the S&P Rate as applicable under
Section 4.3.

     (i) The portion of the Participant’s Account (if any) deemed invested at the
Prime Rate shall be credited with an amount equal to the balance of such portion (if
any) as of the close of the immediately preceding Valuation Date multiplied by the
Prime Rate for the current Valuation Date.

     (ii) The portion of the Participant’s Account (if any) deemed invested at the
HCC Stock Rate shall be credited with an amount equal to the balance of such portion
(if any) as of the close of the immediately preceding Valuation Date multiplied by
the HCC Stock Rate for the current Valuation Date.

     (iii) The portion of the Participant’s Account (if any) deemed invested at the
S&P Rate shall be credited (or debited) with an amount equal to the balance of such
portion (if any) as of the close of the immediately preceding Valuation Date
multiplied by the S&P Rate for the current Valuation Date.

     (b) Contributions to a Participant’s Account shall not be adjusted for deemed
investment experience for periods prior to the Accrual Date on which the Contributions

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are
credited to the Account (even if the Contribution amount is known prior to such date). No
amount shall be adjusted for deemed investment experience after the Valuation Date
coincident with or immediately preceding the date on which the amount is distributed from
the Participant’s Account.

     (c) The crediting of earnings and losses under the Plan does not mean and shall not be
construed to mean that the Participant’s Account is actually invested in any security, fund
or other investment, and neither the Participant nor any Beneficiary shall have any security
or other interest in any security, fund or investment, even if the Company maintains actual
investments that mirror or are substantially similar to liabilities under the Plan.

     4.3 Investment Election. The Participant (or his Beneficiary in the event of the
Participant’s death) shall be permitted to determine the manner in which his Account is deemed
invested in the Prime Rate option, the HCC Stock Rate option, and the S&P Rate option by delivering
an Investment Election to the Committee. The Investment Election shall specify the portion of the
Account (in a whole percentage of the total Account balance) to which each such option applies.
The Participant’s initial Investment Election shall be effective as of September 1, 2007, provided
the election is received by the Committee on or before August 31, 2007. A subsequent Investment
Election shall be effective as of the first day of the calendar quarter next following the date on
which the election is received by the Committee (so that the election shall apply in determining
earnings for the calendar quarter following the calendar quarter in which the election is
received). An Investment Election shall remain in effect with respect to the Participant’s Account
(including subsequent Contributions and earnings credited to the Account) until the effective date
of a subsequent Investment Election (which may be filed by the Participant (or his Beneficiary in
the event of the Participant’s death) at any time). In the absence of an effective Investment
Election with respect to all or a portion of the Participant’s Account, the Account (or such
portion, as applicable) shall be deemed invested in the Prime Rate option.

ARTICLE 5

PAYMENT OF BENEFITS

     5.1 Benefit Payment Events.

     (a) Payment of the Participant’s Account balance shall commence after the first to
occur of the following events:

     (i) the Participant’s Separation from Service due to death; and

     (ii) the Participant’s Separation from Service for any reason other than death.

     (b) If the Participant dies after Separation from Service for any reason other than
death and before the distribution of the Participant’s entire Account balance under Section
5.3 (for example, if the Participant is a Specified Employee and dies during the

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six-month period described in Section 12.2), any remaining payments under such Section shall cease,
and payment shall occur instead under Section 5.2. Such payment shall not be subject to
Section 12.2.

     (c) For purposes of this Article 5, a payment made as soon as administratively
practicable after the specified Valuation Date for payment shall in any event be made within
90 days after such Valuation Date, and neither the Participant nor any Beneficiary shall
have a right to designate the taxable year of the administratively delayed payment.

     5.2 Death. In the event of the Participant’s death, his Beneficiary shall be entitled
to the entire value of all amounts credited to the Participant’s Account. Payment of such death
benefit shall be made in a single lump sum cash payment to the Beneficiary on or as soon as
administratively practicable after the first Valuation Date that is at least 30 days after the date
of the Participant’s death. The Beneficiary may not elect to defer the date of distribution or
change the form of payment of the distribution.

     (a) The Participant may designate one or more Beneficiaries to receive any benefits
payable under the Plan after the death of the Participant. The Participant may revoke or
change a prior Beneficiary designation at any time prior to his death by filing a new
Beneficiary designation with the Committee. To be effective, any Beneficiary designation or
revocation of a Beneficiary designation must be in writing on a form acceptable to the
Committee, must be signed by the Participant, and must be received by the Committee prior to
the death of the Participant.

     (b) Any designation of a person as a Beneficiary shall be deemed to be contingent upon
the person’s surviving the Participant. Any designation of a class or group of
Beneficiaries shall be deemed to be a designation of only those members of the class or
group who are living at the time of the Participant’s death. Any designation of a trust as
a Beneficiary shall be invalid if the trust is not in existence at the time of the
Participant’s death. The Participant may designate (in the manner provided in subsection
(a), above) one or more persons as a contingent Beneficiary or Beneficiaries to receive,
upon the Participant’s death, the benefit that the primary Beneficiary would have received
had the primary Beneficiary survived the Participant.

     (c) If the Participant does not make an effective Beneficiary designation prior to
death, or if all Beneficiaries (primary and contingent) designated by the Participant
predecease him, the entire death benefit under this Section shall be paid to the
Participant’s estate. If a Beneficiary dies after the Participant and after becoming
entitled to a benefit hereunder, but before the designated payment date for such benefit,
such benefit shall be paid to the Beneficiary’s estate.

     (d) References hereunder to a benefit payable to or with respect to the Participant
include any benefit payable to the Participant’s Beneficiary or estate, as applicable.

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     5.3 Separation from Service. Upon the Participant’s Separation from Service for any
reason other than death, the Participant shall be entitled to the entire value of all amounts
credited to his Account. Subject to Section 12.2, payment of the Participant’s benefit pursuant to
this Section shall be made in a single lump sum cash payment to the Participant on or as soon as
administratively practicable after the first Valuation Date that is at least 30 days after his
Separation from Service. The Participant may not elect to defer the date of distribution or change
the form of payment of the distribution.

ARTICLE 6

ADMINISTRATION OF THE PLAN

     6.1 The Plan shall be administered by the Committee. The members of the Committee shall not
receive compensation with respect to their services for the Plan. The members of the Committee
shall serve without bond or security for the performance of their duties hereunder unless
applicable law makes the furnishing of such bond or security mandatory or unless required by the
Company.

     6.2 The Committee shall perform any act which the Plan authorizes expressed by a vote at a
meeting or in a writing signed by a majority of its members without a meeting. The Committee may,
by a writing signed by a majority of its members, appoint any member of the Committee to act on
behalf of the Committee.

     6.3 The Committee may designate in writing other persons to carry out its responsibilities
under the Plan, and may remove any person designated to carry out its responsibilities under the
Plan by notice in writing to that person. The Committee may employ persons to render advice with
regard to any of its responsibilities. All usual and reasonable expenses of the Committee shall be
paid by the Company. The Company shall indemnify and hold harmless each member of the Committee
from and against any and all claims and expenses (including, without limitation, attorney’s fees
and related costs), in connection with the performance by such member of his duties in that
capacity, other than any of the foregoing arising in connection with the willful neglect or willful
misconduct of the person so acting.

     6.4 The Committee shall establish rules, not contrary to the provisions of the Plan, for the
administration of the Plan and the transaction of its business. The Committee shall interpret the
Plan in its sole and absolute discretion, and shall determine all questions arising in the
administration, interpretation, and application of the Plan. All determinations of the Committee
shall be conclusive and binding on all concerned.

     6.5 Any action to be taken hereunder by the Company shall be taken by resolution adopted by
the Board or an executive committee thereof; provided, however, that by resolution,
the Board or an executive committee thereof may delegate to any officer of the Company the
authority to take any actions hereunder, other than the power to amend or terminate the Plan.

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ARTICLE 7

CLAIM REVIEW PROCEDURE

     7.1 The Committee shall automatically direct the distribution of all benefits to which the
Participant or his Beneficiary is entitled hereunder. In the event that the Participant or his
Beneficiary (the “Claimant”) believes that he (or she) has been denied benefits to which he (or
she) is entitled under the provisions of the Plan, the Committee shall, within 90 days after
receiving a written request from the Claimant, provide to the Claimant written notice of the denial
which shall set forth:

     (a) the specific reason or reasons for the denial;

     (b) specific references to pertinent Plan provisions on which the Committee based its
denial;

     (c) a description of any additional material or information needed for the Claimant to
perfect the claim and an explanation of why the material or information is needed;

     (d) a statement that the Claimant or his authorized representative may:

	 	(i)	 	Request a review upon written application to the Committee;
	 
	 	(ii)	 	Review pertinent Plan documents; and
	 
	 	(iii)	 	Submit issues and comments in writing;

     (e) a statement that any appeal the Claimant wishes to make of the adverse
determination must be made in writing to the Committee within 60 days after receipt of the
Committee’s notice of denial of benefits and that failure to appeal the initial
determination to the Committee in writing within such 60-day period will render the
Committee’s determination final, binding, and conclusive; and

     (f) the address to which the Claimant must forward any request for review.

     7.2 If the Claimant should appeal to the Committee, he, or his duly authorized representative,
may submit, in writing, whatever issues and comments he, or his duly authorized representative,
feels are pertinent. The Committee shall re-examine all facts related to the appeal and make a
final determination as to whether the denial of the claim is justified under the circumstances.
The Committee shall advise the Claimant in writing of its decision on appeal, the specific reasons
for the decision, and the specific Plan provisions on which the decision is based.
The notice of the decision shall be given within 60 days after the Claimant’s written request
for review, unless special circumstances (such as a hearing) would make the rendering of a decision
within such 60-day period impracticable. In such case, notice of an extension shall be provided to
the Claimant within the original 60-day period, and notice of a final decision regarding the

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denial of a claim for benefits will be provided within 120 days after its receipt of a request for review.
If an extension of time for review is required because of special circumstances, written notice of
the extension shall be furnished to the Claimant prior to the date the extension period commences.

     7.3 A Claimant’s compliance with the foregoing provisions of this Article is a mandatory
prerequisite to a Claimant’s right to commence any legal action with respect to any claim for
benefits under this Plan, including submission to mandatory arbitration in accordance with Section
11.7.

ARTICLE 8

LIMITATION OF RIGHTS

     The establishment of this Plan shall not be construed as giving the Participant or any person
claiming by, through, or on behalf of the Participant, any legal, equitable or other rights against
the Company, any Affiliate, or the respective officers, directors, employees, agents or
shareholders of the Company or any Affiliate except as expressly provided herein, or as giving to
the Participant or his Beneficiary, or any person claiming by, through, or on behalf of the
Participant or his Beneficiary, any equity or other interest in the assets or business of the
Company or any Affiliate or shares of stock of the Company or any Affiliate, or as giving the
Participant the right to be retained in the employment of the Company or any of its Affiliates.

ARTICLE 9

FUNDING AND ASSIGNMENT

     9.1 No Assignment or Alienation of Benefits. Except as provided in Section 12.3(a),
no benefits which shall be payable under the Plan to the Participant or his Beneficiary shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance
or charge, and any attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber,
charge or otherwise dispose of the same shall be void. No benefits shall in any manner be subject
to the debts, contracts, liabilities, engagements or torts of the Participant or his Beneficiary,
nor shall they be subject to attachment or legal process for or against any person, except to the
extent required by law.

     9.2 No Trust or Fund Created. All benefits under the Plan shall be paid from the
general assets of the Company or, to the extent applicable, an Affiliate which has accrued a
Contribution in accordance with Article 3. Title to and beneficial ownership of any funds
represented by a Participant’s Account will at all times remain in the Company, and such funds will
continue for all purposes to be a part of the general funds of the Company and may be used
for any corporate purpose. No assets will be placed in trust or otherwise segregated from the
general assets of the Company or any Affiliate for the payment of obligations hereunder. Nothing
herein and no action taken hereunder requires or shall be construed to require the Company, any
Affiliate, or the Committee to establish or maintain any fund or trust or to segregate any amount
for the benefit of any Participant or Beneficiary; creates a trust or fiduciary relationship of any

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kind between the Company and any Participant, Beneficiary, or other person; or shall create any
right to, title or interest whatsoever in or to any assets of the Company or any Affiliate or any
investment reserves, accounts, or funds that the Company or any Affiliate may purchase, establish,
or accumulate to aid in providing benefits under the Plan.

     9.3 Unsecured Creditor Status. To the extent that any person acquires a right to
receive payments hereunder, such right shall be no greater than the right of any unsecured general
creditor of the Company and, to the extent applicable, of any Affiliate which has accrued a
Contribution in accordance with Article 3.

ARTICLE 10

AMENDMENT OR TERMINATION OF THE PLAN

     10.1 Amendment. The Company reserves the right at any time to amend the Plan
in whole or in part by resolution of the Board. No amendment shall have the effect of
retroactively decreasing the Participant’s Account or depriving the Participant or his Beneficiary
of rights already accrued under the Plan unless the Participant (or his Beneficiary in the event of
the Participant’s death prior to the adoption of the amendment) consents to the amendment. In the
event that the Company shall change its name, the Plan shall be deemed to be amended to reflect the
name change without further action of the Company, and the language of the Plan shall be changed
accordingly. No amendment may be made to the Plan except in accordance with this Section.

     10.2 Termination. The Company reserves the right at any time to terminate the Plan by
resolution of the Board. No Contributions shall be credited to the Participant’s Account with
respect to periods after the termination of the Plan, but the Account shall continue to be
adjusted for deemed investment experience under Section 4.2. Except as provided in Section
12.3(d), the termination of the Plan shall not accelerate the payment of benefits under the Plan.

ARTICLE 11

GENERAL AND MISCELLANEOUS

     11.1 Severability. In the event that any provision of this Plan shall be declared
illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining
provisions of this Plan but shall be fully severable and this Plan shall be construed and enforced
as if said illegal or invalid provision had never been inserted herein.

     11.2 Construction. The section headings and numbers are included only for convenience
of reference and are not to be taken as limiting or extending the meaning of any of the terms and
provisions of this Plan. Whenever appropriate, words used in the singular shall include the plural
or the plural may be read as the singular. The words “hereof,” “herein,” “hereunder” and other
similar compounds of the word “here” shall, unless otherwise specifically stated, mean and refer to
the entire Plan, not to any particular provision or Section. The word “including” and words of
similar import when used in this Plan shall mean “including, without

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limitation,” unless the
context otherwise requires or unless otherwise specified. The word “or” shall not be exclusive.

     11.3 Governing Law. Except to the extent superseded by applicable Federal law, the
validity and effect of this Plan and the rights and obligations of all persons affected hereby
shall be construed and determined in accordance with the laws of the State of Texas, without giving
effect to conflict of laws principles thereof.

     11.4 Taxes.

     (a) All amounts payable hereunder shall be reduced by any and all federal, state, and
local taxes imposed upon the Participant or his Beneficiary which are required to be paid or
withheld by the Plan, the Company, an Affiliate, or any fund from which such amounts are
paid. The Participant or Beneficiary, as applicable, shall be responsible for the payment
of all taxes relating to benefits accrued under or payable from the Plan, including (without
limitation) income, excise, self-employment, payroll, Social Security, and Medicare taxes.
To the extent taxes of the Participant must be withheld or paid by the Company or an
Affiliate with respect to amounts not distributable from the Plan, the Participant shall pay
such amount to the Company or Affiliate or shall permit the Company or Affiliate pay to
withhold such amount from other compensation payable to the Participant.

     (b) Deemed investment earnings credited at the Prime Rate shall be subject to Social
Security and Medicare (FICA) taxes when credited and vested to the extent such earnings
exceed earnings determined at an interest rate equivalent to the latest, monthly adjusted
average corporate bond yield as announced by Moody’s Investors Service.

     (c) If any action or omission by the Company or any Affiliate causes any benefit or
payment under the Plan to be subject to an additional tax (including any additional
interest) under Code section 409A(a)(1)(B), the Company shall pay a “tax gross-up” payment
to the Participant in the amount necessary to pay such additional tax (including any
additional interest) and to pay all Federal, state, and local income, excise, employment,
and other taxes (including any additional taxes and interest under Code section
409A(a)(1)(B)) on such gross-up payment, such that the Participant retains, after the
payment of all applicable taxes, the amount necessary to pay such additional tax (including
interest) under Code section 409A(a)(1)(B). Such tax gross-up payment shall be paid to the
Participant on or as soon as administratively practicable after the Valuation Date next
following the date of such action or omission by the Company or any Affiliate and, in any
event, shall be paid by the end of the taxable year of the Participant next
following the taxable year in which the Participant remits such additional tax
(including any additional interest).

     11.5 Waiver. Neither the failure nor any delay on the part of the Company, any
Affiliate, or the Committee to exercise any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise or waiver of any such right, power or
privilege preclude any other or further exercise thereof, or the exercise of any other right, power
or privilege available to the Company, its Affiliates, or the Committee at law or in equity.

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     11.6 Benefit Payments to Minors and Incompetents. Notwithstanding Section 9.1,
whenever any benefit which shall be payable under the Plan is to be paid to or for the benefit of
any person who is then a minor or is determined by the Committee, on the basis of qualified medical
advice, to be incompetent, the Committee need not require the appointment of a guardian or
custodian, but shall be authorized to cause the same to be paid over to the person having custody
of the minor or incompetent, or to cause the same to be paid to the minor or incompetent without
the intervention of a guardian or custodian, or to cause the same to be paid to a legal guardian or
custodian of the minor or incompetent, if one has been appointed, or to cause the same to be used
for the benefit of the minor or incompetent.

     11.7 Arbitration. Subject to exhaustion of the administrative claim process under
Article 7, any dispute controversy or claim arising out of or relating to this Plan or the breach
thereof, which cannot be resolved by the Company, the Committee, and the Participant, shall be
submitted to final and binding arbitration.

     (a) The arbitration shall be conducted in accordance with the National Rules for the
resolution of Employment Disputes of the American Arbitration Association (“AAA”). If the
parties cannot agree on an arbitrator, a list of seven arbitrators will be requested from
AAA, and the arbitrator will be selected using alternate strikes with Participant striking
first. The cost of the arbitration will be shared equally by the Participant and the
Company. Arbitration of such disputes is mandatory and in lieu of any and all civil causes
of action and lawsuits either party may have against the other arising out of Participant’s
participation in or benefits under the Plan. Such arbitration shall be held in Houston,
Texas.

     (b) Judgment on the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof by the filing of a petition to enforce the award. Costs of filing may
be recovered by the party that initiates such action to have the award enforced.

     (c) The Company shall promptly reimburse the Participant for all eligible, reasonable
costs and expenses incurred in connection with any dispute, controversy, or claim submitted
to binding arbitration in accordance with this Section in an amount up to, but not exceeding
$200,000 per taxable year of the Participant, unless the Participant’s Separation from
Service was for “cause,” as such term is defined by the Employment Agreement, in which event
the Participant shall not be entitled to reimbursement unless and until it is determined he
was terminated other than for “cause” (as defined by the Employment Agreement). To be
eligible for reimbursement under this subsection (c), (i) the expenses must be incurred
during the period beginning on the Effective Date and
ending on the date that is ten years after the Participant’s Separation from Service
and (ii) the expenses must be submitted to the Committee for reimbursement within 90 days
after the end of the taxable year of the Participant in which the expenses were incurred.
Amounts eligible for reimbursement shall be paid to the Participant before the last day of
the taxable year of the Participant following the taxable
year in which the expenses were
incurred. The amount of expenses eligible for reimbursement during the Participant’s
taxable year may not affect the expenses eligible for reimbursement in any other taxable

12

 

year of the Participant. The Participant’s right to reimbursement under this subsection (c)
may not be assigned, alienated, or exchanged for any other benefit.

     11.8 Notices. All notices or elections required by or made in accordance with this
Plan shall be in writing and sent certified mail, return receipt requested, addressed as set forth
below (or to any successor address for which notice is provided), or by delivering the same in
person, or by transmission by facsimile to the number set forth below (or to any successor number
for which notice is provided). Notice deposited in the United States Mail, mailed in the manner
described herein above, shall be effective upon deposit. Notice given in any other manner shall be
effective only if and when received.

	 	 	 
	     If to Participant:

	 	John N. Molbeck, Jr.
	 

	 	11111 Claymore Road
	 

	 	Houston, Texas 77024
	 

	 	Fax: (832) 358-9529
	 
	 	 
	     If to the Committee:

	 	HCC Insurance Holdings, Inc.
	 

	 	13403 Northwest Freeway
	 

	 	Houston, Texas 77040
	 

	 	Fax: (713) 462-2401
	 

	 	Attention: Compensation Committee

     11.9 Relationship to Employment Agreement. The Plan is intended to implement the
commitments of the Company under section 3(b) of the Employment Agreement, but shall not otherwise
be affected by the terms or requirements of the Employment Agreement. Benefits are payable
hereunder solely pursuant to the terms of this Plan without regard to the terms of the Employment
Agreement or any amendments to the Employment Agreement. To the extent the terms of this Plan are
inconsistent with or otherwise conflict with the terms of the Employment Agreement, the terms of
this Plan shall prevail and be controlling with respect to all matters relating to the Plan or
section 3(b) of the Employment Agreement.

ARTICLE 12

COMPLIANCE WITH CODE SECTION 409A

     12.1 Interpretation. The Plan and the provisions of this Article 12 are intended to
constitute good faith compliance with the requirements of Code section 409A and shall be construed
and applied in accordance with such requirements. In the event of any conflict or
inconsistency between the provisions of this Article 12 and any other provisions of the Plan,
the provisions of this Article 12 shall be controlling.

     12.2 Delayed Payment to a Specified Employee. Payment to the Participant pursuant to
Section 5.3 shall be delayed to the extent required by Code section 409A(a)(2)(B)(i).
Accordingly, if the Participant is a Specified Employee, any payments which the Participant is
otherwise entitled to receive under Section 5.3 during the six-month period beginning on the date
of the Participant’s Separation from Service shall be accumulated and paid effective as of the
earlier to occur of (a) the first Valuation Date that occurs on or after the date that is six
months

13

 

after the date the Participant’s Separation from Service or (b) the first Valuation Date
that is at least 30 days after the date of the Participant’s death. The Participant’s Account,
including such delayed payments, shall be adjusted for investment experience in accordance with
Section 4.2 while payment is delayed pursuant to his Section. Reimbursements under Sections
11.4(c) and 11.7(c) shall be subject to the provisions of this Section to the extent required by
Code section 409A(a)(2)(B)(i).

     12.3 No Acceleration of Benefit Payments. Except as provided in this Section and
notwithstanding anything herein to the contrary, the payment of benefits under the Plan shall not
be accelerated in a manner that would cause such benefits to be includable in income under Code
section 409A.

     (a) The Committee may establish a procedure for the Plan to administer qualified
domestic relations orders. Such procedure shall comply with the applicable requirements of
ERISA Sections 206(d)(3) and 514(b)(7). The Committee may approve immediate payment to an
alternative payee (who is not the Participant) pursuant to the terms of a qualified domestic
relations order, as defined under ERISA sections 206(d)(3) and 514(b)(7). Any such payment
shall not be prohibited by Section 9.1 and shall not be subject to the limitation of Section
12.2.

     (b) If a benefit hereunder is required to be included in the income of the Participant
under Code section 409A as a result of the failure to comply with the requirements of Code
section 409A, the benefit amount so includable shall be paid to the Participant as of the
Valuation Date next following such compliance failure. This subsection shall not accelerate
the payment of a benefit that is subject to the six-month delay under Section 12.2.

     (c) The Committee may accelerate the payment of amounts credited to the Participant’s
Account (i) to the extent necessary for any Federal officer or employee in the executive
branch to comply with an ethics agreement with the Federal government and (ii) to the extent
reasonably necessary to avoid the violation of an applicable Federal, state, local, or
foreign ethics law or conflicts of interest law. Any such payment shall be made in a single
lump sum cash payment to the Participant on or as soon as administratively practicable after
the first Valuation Date that occurs on or after the Committee’s determination. Any such
payment shall not be subject to the limitation of Section 12.2.

     (d) The entire amount credited to the Participant’s Account shall be paid to the
Participant if the Plan is terminated in accordance with Section 10.2 and the Committee
determines that the requirements of Treasury Regulation 1.409A-3(j)(4)(ix) have been and
will be satisfied in connection with such termination. Any such payment shall be made in a
single lump sum cash payment to the Participant on or as soon as administratively
practicable after the first Valuation Date that occurs on or after the Plan termination and
the Committee’s determination. This subsection shall not accelerate the payment of a
benefit that is subject to the six-month delay under Section 12.2.

14

 

     12.4 Overall Compliance. To the extent any provision of this Plan or any omission
from the Plan would (absent this Section 12.4) cause amounts to be includable in income under Code
section 409A(a)(1), the Plan shall be deemed amended to the extent necessary to comply with the
requirements of Code section 409A; provided, however, that this Section 12.4 shall not apply and
shall not be construed to amend any provision of the Plan to the extent this Section 12.4 or any
amendment required thereby would itself cause any amounts to be includable in income under Code
section 409A(a)(1).

[Signature page follows]

15

 

     IN WITNESS WHEREOF, the Company has caused its corporate seal to be affixed hereto and these
presents to be duly executed in its name and behalf by a duly authorized officer on this 30th day
of August, 2007.

	 	 	 	 	 
	 	COMPANY

HCC INSURANCE HOLDINGS, INC.

 	 
	 	By:  	/s/ Frank J. Bramanti
 	 
	 	Title: CEO 	 
	 	 	 	 
	 

ATTEST:

	 	 	 
	/s/ James L. Simmons

	 	 
	 	 	 
	 (Title)
	 	 

Corporate Secretary

[CORPORATE SEAL]

16exv10w1

 

Exhibit 10.1

	 	 	 
	Baker Hughes Incorporated

	 	2929 Allen Parkway, Suite 2100
	 

	 	Houston, Texas 77019-2118
	 

	 	P.O. Box 4740
	 

	 	Houston, Texas 77210-4740
	August 30, 2007

	 	Tel 713 439-8600
	 

	 	Fax 713 439-8699

Mr. James R. Clark

10893 Lake Forest Drive

Conroe, TX 77384

Dear Rod:

As we have agreed, your employment with Baker Hughes Incorporated (hereinafter referred to as the
“Company”) will terminate upon your retirement from the Company on January 31, 2008. The purpose
of this letter (the “Agreement”) is to set forth certain agreements and understandings regarding,
among other things:

	 	•	 	The termination of your employment;
	 
	 	•	 	Certain benefits the Company has agreed to provide to you upon termination of
your employment;
	 
	 	•	 	Your agreement to certain obligations of confidentiality and cooperation; and
	 
	 	•	 	Your release of any and all claims against the Company.

When you and I have signed this Agreement, it will constitute a complete agreement on all of these
issues.

	1.	 	TERMINATION OF EMPLOYMENT:
	 
	 	 	You have decided to retire and resign your position as an officer of the Company on
January 31, 2008 (the “Effective Date”). Your employment terminates as of the Effective
Date.
	 
	2.	 	SEPARATION BENEFITS:
	 
	 	 	The Company will provide you with two kinds of separation benefits at the time of your
termination. First, you will receive regular separation benefits as defined below. Second,
in recognition of your specialized knowledge, and of your position as an officer of the
Company, the Company is offering you enhanced separation benefits. You will receive the
regular separation benefits even if you decline to sign this Agreement and execute the
release of claims.

Initials: CCD     JRC

1

 

(a) Regular Separation Benefits

Health and Welfare Benefits — If you are participating in medical, dental, and/or
vision coverage for yourself and any eligible dependent(s), all active coverage will end as
of the Effective Date. The Benefits Center will send you a packet regarding continuation of
benefits under COBRA (Consolidated Omnibus Benefits Reconciliation Act), and you and/or your
eligible dependent(s) may elect to continue coverage for an additional 18 months, provided
you timely enroll for coverage and make the required premium payments. You can also contact
the Benefits Center directly at 1-866-244-3539 for more information and to answer any
questions.

As an alternative to COBRA continuation of benefits, you have the option of enrolling in the
Retiree Medical Program based on your age and years of service. If you select this option,
the Benefits Center will send you a packet regarding continuation of benefits, and you
and/or your eligible dependent(s) may elect to continue coverage. Your retiree medical
premiums are subsidized by the Company and will be billed to you by the Benefits Center.
You will be solely responsible for payment of the retiree premiums for both yourself and
your covered dependents, if any. You can also contact the Benefits Center directly at
1-866-244-3539 for more information and to answer any questions.

All other health and welfare benefits end as of the Effective Date.

Thrift Plan — You have the option of leaving your money in the Baker Hughes
Incorporated Thrift Plan, or you may request a distribution of your account balance at any
time after the Effective Date.

Pension Plan — You have the option of leaving your money in the Baker Hughes
Incorporated Pension Plan, or you may request a distribution of your Pension Plan benefit at
any time after the Effective Date.

Supplemental Retirement Plan — Your vested account balance will be paid out
according to your elections previously submitted and the terms of the Baker Hughes
Incorporated Supplemental Retirement Plan (“SRP”).

ICP Bonuses — Your banked unpaid bonuses under the Baker Hughes Incorporated Annual
Incentive Compensation Plan (“ICP”) will be paid in accordance with the provisions of the
ICP and your applicable elections (if any) under the SRP. Your 2007 ICP bonus will be paid
in accordance with the provisions of the ICP and your applicable election (if any) under the
SRP. You will be eligible to receive a prorated ICP bonus for the 2008 fiscal year based
upon your length of service (1/12th) during the 2008 fiscal year.

2005 Total Shareholder Return Long-Term Incentive Award — Should the performance
goals set forth under the terms of the performance award granted to you in 2005 under the
Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan (the “2002 D&O
Plan”) be met, you will receive a distribution consistent with the terms of the award.

Initials: CCD     JRC

2

 

Performance Unit Long-Term Incentive Awards — You will receive a pro rated portion
of the Performance Units awarded to you under the 2002 D&O Plan in 2006, but you will
forfeit 3,333 Performance Units awarded in 2006. You will receive a prorated portion of the
Performance Units awarded to you under the 2002 D&O Plan in 2007, but you will forfeit 7,585
Performance Units awarded in 2007. Depending on results achieved, you will be eligible to
receive a prorated award based on actual results as defined in the terms and conditions of
the Performance Unit Award Agreements provided with each grant of Performance Units in 2006
and in 2007. Payments for the 2006 awards are scheduled for March 13, 2009, and payments
for the 2007 awards are scheduled for March 12, 2010. You will not receive any further
awards under the 2002 D&O Plan.

Stock Options — All of your previously granted options will become fully vested
upon the Effective Date (to the extent they are not already fully vested) and may be
exercised in accordance with the terms of the grants. As of August 1, 2007, you had the
following unexercised options to purchase shares of the Company’s Common Stock (“Stock”):

an incentive stock option (“ISO”) to purchase 3,076 shares of Stock
granted on January 30, 2002;

a nonqualified stock option (“NSO”) to purchase 7,924 shares of Stock
granted on January 30, 2002;

an NSO to purchase 11,000 shares of Stock granted on July 24, 2002;

an ISO to purchase 3,418 shares of Stock granted on January 29, 2003;

an NSO to purchase 8,582 shares of Stock granted on January 29, 2003;

an NSO to purchase 14,000 shares of Stock granted on July 22, 2003;

an ISO to purchase 2,792 shares of Stock granted on January 28, 2004;

an NSO to purchase 23,542 shares of Stock granted on January 28, 2004;

an NSO to purchase 39,334 shares of Stock granted on July 28, 2004;

an ISO to purchase 2,347 shares of Stock granted on January 26, 2005;

an NSO to purchase 33,653 shares of Stock granted on January 26, 2005;

an NSO to purchase 36,000 shares of Stock granted on July 27, 2005;

an ISO to purchase 1,332 shares of Stock granted on January 25, 2006;

an NSO to purchase 18,668 shares of Stock granted on January 25, 2006;

an NSO to purchase 20,000 shares of Stock granted on July 27, 2006;

Initials: CCD     JRC

3

 

an ISO to purchase 1,459 shares of Stock granted on January 24, 2007;

an NSO to purchase 15,771 shares of Stock granted on January 24, 2007; and

an NSO to purchase 11,200 shares of Stock granted on July 25, 2007.

You are not eligible for any future equity awards.

Final Expenses — The Company agrees to reimburse you for all outstanding business
expenses in accordance with Company policy. You will prepare and submit a final expense
account reimbursement request for expenses incurred prior to the Effective Date. Such an
expense account reimbursement request will be reviewed and paid in accordance with Company
policy. You agree and consent to allow the Company to deduct from any payments you would
otherwise be entitled to receive any amounts not in excess of $5,000 that you owe to the
Company as of the Effective Date.

Perquisites — All perquisites terminate as of the Effective Date and you will
receive no perquisite payments for any period after the Effective Date. You will receive
your first quarterly perquisite payment for 2008 in January. You may make arrangements to
transfer your country club membership from a corporate membership to a personal membership.

Vacation — You will be paid for any accrued but unused 2007 vacation. You will not
accrue further vacation.

(b) Enhanced Separation Benefits

These enhanced separation benefits are benefits to which you are not entitled pursuant to
any agreement, or under any policy or practice of the Company. You acknowledge that the
Company has no obligation to provide you with these benefits and that these benefits
constitute a valuable consideration justifying your agreement to provide the releases set
forth in Section 4 of this Agreement.

Restricted Stock — You have been awarded 40,797 shares of restricted stock under
the 2002 D&O Plan that are scheduled to vest after the Effective Date. As an enhanced
separation benefit, the Company agrees that a total of 17,232 restricted shares that would
otherwise vest after the Effective Date, will vest as of the Effective Date. Unless you
elect otherwise by remitting to the Company cash in an amount necessary to satisfy the
Company’s tax withholding obligation arising with respect to the vesting of your restricted
stock, the Company shall satisfy its tax withholding obligation by withholding shares with a
fair market value equal to the withholding obligation.

Performance Units — As an enhanced severance benefits, the Company will vest 3,333
Performance Units awarded under the 2002 D&O Plan in 2006 and the 7,585 Performance Units
awarded in 2007 that would otherwise be forfeited.

Initials: CCD     JRC

4

 

	 	 	Consulting Agreement — You agree that beginning February 1, 2008, and until January
31, 2009, you will provide the Company with consulting services and that in exchange for
those consulting services the Company will pay you $57,916.66 per month. Your consulting
fees earned during the six-month period commencing on the date of your separation from
service will be accumulated and paid to you on the date that is six months following the
date of your separation from service. Thereafter, your consulting fees earned during the
remainder of the 12-month consulting period will be paid on a monthly basis. You will
perform your consulting services pursuant to an agreement establishing that you will be
providing services to the Company as an independent contractor, and not as an employee.
During the period of the Consulting Agreement, the Company will continue to provide you with
confidential information, and in order to protect the confidentiality of that information
you agree that during the 12-month period of the Consulting Agreement you will not, without
the written consent of the Company, at any time, directly or indirectly serve as an
employee, director, consultant, or otherwise provide services, advice or assistance to any
person, association, or entity that is a competitor of the Company, in any capacity
including on the board of directors or in management, operations, research, marketing,
engineering, process, finance or administration. Any requests for a waiver will be made to
the CEO and issued in his discretion.
	 
	 	 	It is intended that the consulting services you will perform under this Agreement will not
be at a level that exceeds 20 percent of the average level of services you performed for the
Company over the 36-month period immediately preceding the Effective Date.
	 
	3.	 	COVENANTS:

(a) Non-Solicitation

Following the Effective Date, and for a period of one (1) year thereafter, you shall not,
directly or indirectly:

     (1) interfere with the relationship of the Company or any affiliate with, or endeavor
to entice away from the Company or any affiliate, any individual or entity who was or is a
material customer or material supplier of, or who has maintained a material business
relationship with, the Company or its affiliates;

     (2) establish (or take preliminary steps to establish) a business with, or cause or
attempt to cause others to establish (or take preliminary steps to establish) a business
with, any employee or agent of the Company or any of its affiliates, if such business is or
will compete with the Company or any of its affiliates; or;

     (3) employ, engage as a consultant or adviser, or solicit the employment, engagement as
a consultant or adviser, of any employee or agent of the Company or any of its affiliates,
or cause or attempt to cause any individual or entity to do any of the foregoing.

Initials: CCD     JRC

5

 

(b) Cooperation and Assistance

Definition of Cooperation — As used in this Agreement, “cooperate” and
“cooperation” includes making yourself available in response to all reasonable requests by
the Company or the Securities and Exchange Commission (“SEC”) or Department of Justice
(“DOJ”) for information, whether the request is informal or formal (e.g., in response to a
subpoena in a legal proceeding), and includes fully, completely, and truthfully answering
questions or providing testimony in any related proceeding, civil or criminal.

Agreement to Cooperate — You agree, acknowledge, represent and warrant that:

     (1) you are aware that the Company has been under investigation by the SEC and the DOJ;

     (2) you have (i) not engaged in, nor encouraged any individual, in any way, to engage
in the destruction or secretion of any information, in any form, including but not limited
to documents and emails (“documentation”), that might be relevant to any investigation
referenced in subsection 3(a)(1) above; (ii) turned over all documentation in response to
prior requests; and (iii) responded, fully and truthfully, to all questions related to or
arising from the subject matter of any such investigation that have been posed to you by
employees, representatives of the Company, or any government agency;

     (3) for a period of two (2) years after the Effective Date, upon reasonable request,
you will cooperate fully with the Company and its affiliates, past or present, in connection
with any internal investigation initiated by the Company, its affiliates, and any successors
in interest, as well as with any external investigation initiated by any government or
agency or instrumentality thereof in accordance with the Company’s Internal Investigations
Policy and Cooperation with Government Investigations Policy;

     (4) for a period of two (2) years after the Effective Date, upon reasonable request of
the Company, any subsidiary of the Company, or any successor-in-interest, you will provide
all documentation and information in your possession, custody, or control that is related to
any internal or external investigation of the Company and its affiliates;

     (5) after two (2) years after the Effective Date, you agree upon request to provide
continuing reasonable cooperation with the Company or any of its affiliates in responding to
internal or governmental investigations.

All reasonable expenses you incur in rendering cooperation under this subsection 3(b) will
be reimbursed by the Company.

Initials: CCD     JRC

6

 

(c) Confidentiality

Confidential Information — During the course of your employment with the Company,
you have had access and received confidential information. You are obligated to keep
confidential all such confidential information for a period of not less than one (1) year
following the Effective Date of this Agreement. Moreover, you understand and acknowledge
that your obligation to maintain the confidentiality of trade secrets and other intellectual
property is unending. As an exception to this confidentiality obligation you may disclose
the confidential information (i) in connection with enforcing your rights under any plan
relevant to the terms of this Agreement, or if compelled by law, and in either case, you
shall provide written notice to the Company prior to the disclosure or (ii) if the Company
provides written consent prior to the disclosure.

(d) Property

Agreement to Return Company Property — Immediately prior to the Effective Date, or
such earlier date as the Company may reasonably determine appropriate, you will return to
the Company all Company property in your possession, including but not limited to,
computers, credit cards and all files, documents and records of the Company, in whatever
medium and of whatever kind or type. You agree and hereby certify that you have returned, or
will return prior to the Effective Date, all proprietary or confidential information or
documents relating to the business and affairs of the Company and its affiliates. You
further agree that should it subsequently be determined by the Company that, notwithstanding
the foregoing certification, you have inadvertently failed to return all proprietary or
confidential information and documents in your possession or control relating to the
business and affairs of the Company and its affiliates, you will be obligated to promptly
return to the Company such proprietary or confidential information and documents in your
possession or control relating to the business and affairs of the Company and its
affiliates.

	4.	 	RELEASE OF CLAIMS:
	 
	 	 	You hereby acknowledge that your relationship with the Company is an “at-will employment
relationship,” meaning that either you or the Company could terminate the relationship with
or without notice and or without cause, at any time. Nevertheless, in consideration for the
separation benefits described in Section 2 of this Agreement, you hereby provide the Company
with an irrevocable and unconditional release and discharge of claims.
	 
	 	 	This release and discharge of claims applies to (i) Baker Hughes Incorporated, (ii) to each
and all of its subsidiaries and affiliated companies, (collectively, “the Company”), (iii)
to the Company’s officers, agents, directors, supervisors, employees, representatives, and
their successors and assigns, whether or not acting in the course and scope of employment,
and (iv) to all persons acting by, through, under, or in concert with any of the foregoing
persons or entities.

Initials: CCD     JRC

7

 

	 	 	The claims subject to this release include, without limitation, any and all claims related
or in any manner incidental to your employment with the Company or the termination of that
employment relationship. The parties understand the word “claims” to include all actions,
claims, and grievances, whether actual or potential, known or unknown, and specifically but
not exclusively all claims arising out of your employment with the Company and the
termination of your employment. All such claims (including related attorneys’ fees and
costs) are forever barred by this Agreement and without regard to whether those claims are
based on any alleged breach of a duty arising in a statute, contract, or tort; any alleged
unlawful act, including, without limitation, age discrimination; any other claim or cause or
cause of action; and regardless of the forum in which it might be brought. This release
applies to any claims brought by any person or agency on behalf of you or any class action
pursuant to which you may have any right or benefit.
	 
	 	 	You promise never to file a lawsuit asserting any claims that are released by you and
further promise not to accept any recoveries or benefits which may be obtained on your
behalf by any other person or agency or in any class action and do hereby assign any such
recovery or benefit to the Company. If you sue the Company in violation of this Agreement,
you shall be liable to the Company for its reasonable attorneys’ fees and other litigation
costs incurred in defending against such a suit. Additionally, if you sue the Company in
violation of this Agreement, the Company can require you to return all monies and other
benefits paid to you pursuant to this Agreement.
	 
	 	 	Notwithstanding the foregoing, the release contained herein shall not apply to (i) any
rights that you may have under the Company’s retirement plans including the Baker Hughes
Incorporated Pension Plan and the Baker Hughes Incorporated Thrift Plan, (ii) any rights you
may have under this Agreement, (iii) your right under applicable law (i.e., the COBRA law)
to continued medical insurance coverage at your expense, and (iv) your statutory right to
file a charge with the Equal Employment Opportunity Commission (“EEOC”) or the Texas
Commission on Human Rights (“TCHR”), to participate in an EEOC or TCHR investigation or
proceeding, or to challenge the validity of the release, consistent with the requirements of
29 U.S.C. § 626(f)(4).
	 
	 	 	In connection with this release, you understand and agree that:

     (1) You have a period of 21 days within which to consider whether you execute this
Agreement, that no one hurried you into executing this Agreement during that 21 day period,
and that no one coerced you into executing this Agreement;

     (2) You have carefully read and fully understand all the provisions of the release set
forth in Section 4 of this Agreement, and declare that the Agreement is written in a manner
that you understand;

     (3) You are, through this Agreement, releasing the Company from any and all claims you
may have against the Company and the other parties specified above, and that this Agreement
constitutes a release and discharge of claims arising under the Age

Initials: CCD     JRC

8

 

Discrimination in Employment Act (ADEA), 29 U.S.C. § 621-634, including the Older Workers’
Benefit Protection Act, 29 U.S.C. § 626(f);

     (4) You declare that your agreement to all of the terms set forth in this Agreement is
knowing and voluntary;

     (5) You knowingly and voluntarily intend to be legally bound by the terms of this
Agreement;

     (6) You acknowledge that the Company is hereby advising you in writing to consult with
an attorney of your choice prior to executing this Agreement; and

     (7) You understand that rights or claims that may arise after the date this Agreement
is executed are not waived. You understand that you have a period of seven days to revoke
your agreement to give the Company a complete release in exchange for separation benefits,
and that you may deliver notification of revocation by letter or facsimile addressed to the
Company’s Senior Labor and Employment Counsel. You understand that this will not become
effective and binding, and that none of the separation benefits described above in Section 2
of this Agreement will be provided to you until after the expiration of the revocation
period. The revocation period commences when you execute this Agreement and ends at 11:59
p.m. on the seventh calendar day after execution, not counting the date on which you execute
this Agreement. You understand that if you do not deliver a written notice of revocation to
the Company’s Senior Labor and Employment Counsel before the end of the seven-day period
described above, this Agreement will become final, binding and enforceable.

The Company’s decision to offer separation benefits in exchange for a release of claims
shall not be construed as an admission by the Company of (i) any liability whatsoever, (ii)
any violation of any of your rights or those of any person, or (iii) any violation of any
order, law, statute, duty, or contract. The Company specifically disclaims any liability to
you or to any other person for any alleged violation of any rights possessed by you or any
other person, or for any alleged violation of any order, law, statute, duty, or contract on
the part of the Company, its employees or agents or related companies or their employees or
agents.

You represent and acknowledge that in executing this Agreement you do not rely and have not
relied upon any representation or statement made by the Company, or by any of the Company’s
agents, attorneys, or representatives with regard to the subject matter, basis, or effect of
the release set forth in this Agreement, other than those specifically stated in this
Agreement.

The release set forth in this Section 4 of this Agreement shall be binding upon you, and
your heirs, administrators, representatives, executors, successors, and assigns, and shall
inure to the benefit of the Company as defined above. You expressly warrant that you have
not assigned, transferred or sold to any person or entity any rights, causes of action, or
claims released in this Agreement.

Initials: CCD     JRC

9

 

	5.	 	MISCELLANEOUS:
	 
	 	 	Exclusive Rights and Benefits — Except as otherwise provided in this Agreement, the
benefits described in this Agreement supersede, negate and replace any other benefits owed
to or offered by the Company to you. This Agreement will be administered by the Company’s
Senior Labor and Employment Counsel, who will also resolve any issues regarding the
interpretation, implementation, or administration of the benefits described above. However,
this provision shall not be construed to limit your legal rights if a disagreement exists to
contest the decision of the Company’s Senior Labor and Employment Counsel.
	 
	 	 	Entire Agreement — This Agreement sets forth the entire agreement between you and
the Company with respect to each and every issue addressed in this Agreement, and, except
for any of the Company’s benefit plans in which you have participated as an employee and
officer of the Company and the letter dated October 26, 2005 from me to you pertaining to an
award of service credit for certain benefit plan purposes, this entire, integrated Agreement
fully supersedes any and all prior agreements or understandings, oral or written, between
you and the Company pertaining to the subject matter of this Agreement.
	 
	 	 	Exclusive Choice of Law and Arbitration Agreement — This Agreement constitutes an
agreement that has been executed and delivered in the State of Texas, and the validity,
interpretation, performance, and enforcement of that agreement shall be governed by the laws
of that State.
	 
	 	 	In the event of any dispute or controversy arising out of or under this Agreement, or
concerning the substance, interpretation, performance, or enforcement of this Agreement, or
in any way relating to this Agreement (including issues relating to the formation of the
agreement and the validity of this arbitration clause), you agree to resolve that dispute or
controversy, fully and completely, through the use of final, binding arbitration. This
arbitration agreement applies to any disputes arising under (i) the common law, (ii) federal
or state statutes, laws or regulations, and also to (iii) any dispute about the
arbitrability of any claim or controversy. You further agree to hold knowledge of the
existence of any dispute or controversy subject to this Agreement to arbitrate, completely
confidential. You understand and agree that this confidentiality obligation extends to
information concerning the fact of any request for arbitration, any ongoing arbitration, as
well as all matters discussed, discovered, or divulged, (whether voluntarily or by
compulsion) during the course of such arbitration proceeding. Any arbitration conducted
pursuant to this arbitration provision will be conducted in accordance with the rules of the
American Arbitration Association in accordance with its rules governing employment disputes
and the arbitrator shall have full authority to award or grant all remedies provided by law.
The arbitrator will have the discretion to permit discovery that the arbitrator deems
appropriate for a full and fair hearing. The arbitrator will issue a reasoned award, and the
award of the arbitrator shall be final and binding. A judgment upon the award may be
entered and enforced by any court having jurisdiction. Any arbitration proceeding resulting
hereunder will be conducted in Houston, Texas before an arbitrator selected by you and the
Company by mutual agreement, or through the

Initials: CCD     JRC

10

 

	 	 	American Arbitration Association. This arbitration agreement does not limit or affect the
right of the Company to seek an injunction to maintain the status quo in the event that the
Company believes that you have violated any provision of Section 3 of this Agreement. This
arbitration agreement does not limit your right to file an administrative charge concerning
the validity of the release set forth in Section 4 of this Agreement, with any appropriate
state or federal agency.
	 
	 	 	Meaning of Separation From Service — For the purposes of this Agreement,
“separation from service” has the meaning ascribed to that term in section 409A of the
Internal Revenue Code of 1986, as amended and the rules and regulations issued thereunder by
the Department of Treasury and the Internal Revenue Service. It is intended that the date
of your separation from service will be the Effective Date.
	 
	 	 	Severability and Headings — The invalidity or unenforceability of a term or
provision of this Agreement shall not affect the validity or enforceability of any other
term or provision of this Agreement, which shall remain in full force and effect. Any titles
or headings in this Agreement are for convenience only and shall have no bearing on any
interpretation of this Agreement.

Please initial each page and sign below.

ENTERED INTO in Houston, Texas as of the 30th day of August, 2007.

BAKER HUGHES INCORPORATED

	 	 	 	 	 
	 	 	 
	By:  	          /s/ Chad C. Deaton
 	 	 
	 	Chad C. Deaton 	 	 
	 	Chairman and Chief Executive Officer 	 	 
	 

ENTERED INTO in Houston, Texas as of the 30th day of August, 2007.

	 	 	 	 	 
	 	 	 
	By:  	  /s/ James R. Clark
 	 	 
	 	James R. Clark 	 	 
	 	 	 	 
	 

Initials: CCD     JRC

11

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