BAKER HUGHES INCORPORATED

 

                2002 DIRECTOR & OFFICER LONG-TERM INCENTIVE PLAN

                         (EFFECTIVE AS OF MARCH 6, 2002)

 

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                                TABLE OF CONTENTS

 

<TABLE>

<S>                                                                                          <C>

Article 1.  Establishment, Objectives and Duration.........................................   1

Article 2.  Definitions and Construction...................................................   1

Article 3.  Administration.................................................................   8

Article 4.  Shares Subject to Plan and Maximum Awards......................................   9

Article 5.  Eligibility and Participation..................................................  12

Article 6.  Stock Options..................................................................  12

Article 7.  Stock Appreciation Rights......................................................  15

Article 8.  Restricted Stock and Restricted Stock Units....................................  17

Article 9.  Performance Units, Performance Shares and Cash-Based Awards; Stock Awards......  18

Article 10. Performance Measures...........................................................  20

Article 11. Beneficiary Designation........................................................  21

Article 12. Deferrals......................................................................  21

Article 13. Rights of Employees/Directors..................................................  21

Article 14. Acceleration...................................................................  22

Article 15. Amendment, Modification, Suspension and Termination............................  22

Article 16. Withholding....................................................................  23

Article 17. Successors.....................................................................  23

Article 18. General Provisions.............................................................  23

</TABLE>

 

Baker Hughes Incorporated

March 6, 2002

 

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                            BAKER HUGHES INCORPORATED

 

                2002 DIRECTOR & OFFICER LONG-TERM INCENTIVE PLAN

 

ARTICLE 1.        ESTABLISHMENT, OBJECTIVES AND DURATION.

 

                  1.1      ESTABLISHMENT. Baker Hughes Incorporated, a Delaware

         corporation (the "Company"), hereby establishes an incentive

         compensation plan to be known as the "Baker Hughes Incorporated 2002

         Long-Term Incentive Plan" (this "Plan"), to reward certain directors,

         corporate officers and key employees of the Company by enabling them to

         acquire shares of common stock of the Company and to receive other

         compensation based on common stock of the Company or certain

         performance measures. This Plan permits the grant of Nonqualified Stock

         Options, Incentive Stock Options, Stock Appreciation Rights, Restricted

         Stock, Restricted Stock Units, Performance Shares, Performance Units,

         Stock Awards and Cash-Based Awards (as this Plan defines each of those

         terms below).

 

                           Subject to approval by the Company's stockholders,

         this Plan shall become effective as of March 6, 2002 (the "Effective

         Date") and shall remain in effect as provided in Section 1.3.

 

                  1.2      OBJECTIVES. This Plan is designed to attract and

         retain key employees of the Company and its Affiliates (defined below),

         to attract and retain qualified directors of the Company, to encourage

         the sense of proprietorship of those employees and directors and to

         stimulate the active interest of these persons in the development and

         financial success of the Company and its Affiliates. These objectives

         are to be accomplished by making Awards (defined below) under this Plan

         and thereby providing Participants (defined below) with a proprietary

         interest in the growth and performance of the Company and its

         Affiliates.

 

                  1.3      DURATION. This Plan shall commence as of the

         Effective Date and shall remain in effect, subject to the right of the

         Board of Directors to amend or terminate this Plan at any time pursuant

         to Article 15, until all Shares subject to it shall have been purchased

         or acquired according to this Plan's provisions. However, in no event

         may an Award be granted under this Plan on or after the tenth

         anniversary of the Effective Date.

 

ARTICLE 2.        DEFINITIONS AND CONSTRUCTION.

 

                  2.1      Whenever used in this Plan, the following capitalized

         terms in this Section 2.1 shall have the meanings set forth below, and

         when the meaning is intended, the initial letter of the word shall be

         capitalized:

 

                           "AFFILIATE" shall have the meaning ascribed to such

                  term in Rule 12b-2 of the General Rules and Regulations of the

                  Exchange Act.

 

                           "AWARD" means, individually or collectively, a grant

                  under this Plan to Employees of Nonqualified Stock Options,

                  Incentive Stock Options, Stock

 

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March 6, 2002

 

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                  Appreciation Rights, Restricted Stock, Restricted Stock Units,

                  Performance Shares, Performance Units, Cash-Based Awards or

                  Stock Awards and to Directors of Nonqualified Stock Options,

                  Restricted Stock, Restricted Stock Units or Stock Awards.

 

                           "AWARD AGREEMENT" means either (a) an agreement that

                  the Company and a Participant enters into that sets forth the

                  terms and provisions applicable to an Award granted under this

                  Plan or (b) a statement that the Company issues to a

                  Participant describing the terms and provisions of the Award.

 

                           "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall

                  have the meaning ascribed to the term in Rule 13d-3 of the

                  General Rules and Regulations under the Exchange Act.

 

                           "BOARD" or "BOARD OF DIRECTORS" means the Board of

                  Directors of the Company.

 

                           "CASH-BASED AWARD" means an Award granted to a

                  Participant as described in Article 9.

 

                           "CAUSE" for termination by the Company of the

                  Employee's employment means (a) 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 or any such actual or anticipated

                  failure after the issuance of a notice of termination for Good

                  Reason by the Employee) after a written demand for substantial

                  performance is delivered to the Employee by the Committee,

                  which demand specifically identifies the manner in which the

                  Committee believes that the Employee has not substantially

                  performed the Employee's duties, or (b) the willful engaging

                  by the Employee in conduct which is demonstrably and

                  materially injurious to the Company or its subsidiaries,

                  monetarily or otherwise. For purposes of Sections (a) and (b)

                  of this definition, (i) no act, or failure to act, on the

                  Employee's part shall be deemed "willful" unless done, or

                  omitted to be done, by the Employee not in good faith and

                  without reasonable belief that the Employee's act, or failure

                  to act, was in the best interest of the Company and (ii) 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 Committee

                  by clear and convincing evidence that Cause exists.

 

                           A "CHANGE IN CONTROL" of the Company shall be deemed

                  to have occurred as of the first day that any one or more of

                  the following conditions shall have been satisfied:

 

                                    (a)      Any Person is or becomes a

                           Beneficial Owner, directly or indirectly, of

                           securities of the Company (not including in the

                           securities beneficially owned by this Person any

                           securities acquired directly from the Company or its

                           Affiliates) representing 30% or more of the combined

 

Baker Hughes Incorporated

March 6, 2002

 

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                           voting power of the Company's then outstanding

                           securities, excluding any Person who becomes, as

                           described in this Section (a), a Beneficial Owner in

                           connection with a transaction described in Section

                           (c)(i) of this definition below; or

 

                                    (b)      The following individuals cease for

                           any reason to constitute a majority of the number of

                           Directors then serving: individuals who, on the

                           Effective Date, constitute the Board of Directors of

                           the Company and any new Director (other than a

                           Director whose initial assumption of office is in

                           connection with an actual or threatened election

                           contest relating to the election of Directors of the

                           Company) whose appointment or election by the Board

                           of Directors of the Company or nomination for

                           election by the Company's stockholders was approved

                           or recommended by a vote of at least 2/3 of the

                           Directors then still in office who either were

                           Directors on the date hereof or whose appointment,

                           election or nomination for election was previously so

                           approved or recommended; or

 

                                    (c)      There is consummated a merger or

                           consolidation of the Company or any direct or

                           indirect subsidiary of the Company with any other

                           corporation, other than (i) a merger or consolidation

                           that would result in the voting securities of the

                           Company outstanding immediately prior to such merger

                           or consolidation continuing to represent (either by

                           remaining outstanding or by being converted into

                           voting securities of the surviving entity or any

                           parent thereof), in combination with the ownership of

                           any trustee or other fiduciary holding securities

                           under an employee benefit plan of the Company or any

                           Affiliate, at least 55% of the combined voting power

                           of the securities of the Company or such surviving

                           entity or any parent thereof outstanding immediately

                           after such merger or consolidation or (ii) a merger

                           or consolidation effected to implement a

                           recapitalization of the Company (or similar

                           transaction) in which no Person is or becomes the

                           Beneficial Owner, directly or indirectly, of

                           securities of the Company (not including in the

                           securities Beneficially Owned by this Person any

                           securities acquired directly from the Company or its

                           Affiliates other than in connection with the

                           acquisition by the Company or its Affiliates of a

                           business) representing 30% or more of the combined

                           voting power of the Company's then outstanding

                           securities; or

 

                                    (d)      There is consummated a merger or

                           consolidation of the Company or any direct or

                           indirect subsidiary of the Company with any other

                           corporation, other than a merger or consolidation

                           immediately following which the individuals who

                           comprise the Board immediately prior thereto

                           constitute at least a majority of the board of

                           directors of the entity surviving such merger or any

                           parent thereof (or a majority plus one member where

                           such board is comprised of an odd number of members);

                           or

 

                                    (e)      The stockholders of the Company

                           approve a plan of complete liquidation or dissolution

                           of the Company or there is

 

Baker Hughes Incorporated

March 6, 2002

 

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                           consummated an agreement for the sale or disposition

                           by the Company of all or substantially all of the

                           Company's assets, other than (i) a sale or

                           disposition by the Company of all or substantially

                           all of the Company's assets to an entity, at least

                           55% of the combined voting power of the voting

                           securities of which are owned by stockholders of the

                           Company in substantially the same proportions as

                           their ownership of the Company immediately prior to

                           such sale, or (ii) where the individuals who comprise

                           the Board immediately prior thereto constitute at

                           least a majority of the board of directors of such

                           entity or any parent thereof (or a majority plus one

                           member where such board is comprised of an odd number

                           of members).

 

                                    Notwithstanding the foregoing, a "Change in

                  Control" shall not be deemed to have occurred by virtue of the

                  consummation of any transaction or series of integrated

                  transactions immediately following which the record holders of

                  the common stock of the Company immediately prior to such

                  transaction or series of transactions continue to have

                  substantially the same proportionate ownership in an entity

                  that owns all or substantially all of the assets of the

                  Company immediately following such transaction or series of

                  transactions.

 

                           "CODE" means the Internal Revenue Code of 1986, as

                  amended from time to time.

 

                           "COMMITTEE" means the Compensation Committee of the

                  Board or such other committee of the Board or the entire Board

                  as the Board designates to administer Awards to Employees, as

                  specified in Article 3.

 

                           "COMPANY" shall have the meaning ascribed to that

                  term in Section 1.1.

 

                           "DIRECTOR" means any individual who is a member of

                  the Board of Directors of the Company; provided that any

                  Director the Company employs shall be considered an Employee

                  under this Plan.

 

                           "EFFECTIVE DATE" shall have the meaning ascribed to

                  that term in Section 1.1.

 

                           "EMPLOYEE" means (i) any employee of the Company or

                  any of its Affiliates or (ii) an individual who has agreed to

                  become an Employee of the Company or any of its Affiliates and

                  is expected to become an Employee within the following 6

                  months.

 

                           "ERISA" means the Employee Retirement Income Security

                  Act of 1974, as amended from time to time.

 

                           "EXCHANGE ACT" means the Securities Exchange Act of

                  1934, as amended from time to time, or any successor act.

 

Baker Hughes Incorporated

March 6, 2002

 

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                           "FAIR MARKET VALUE" means the value per Share as

                  determined by the Committee, based on the composite

                  transactions in Shares as reported by The Wall Street Journal,

                  and shall be equal to the per share price of the last sale of

                  Shares on the trading day prior to the date on which value is

                  being determined.

 

                           "FISCAL YEAR" means the year commencing January 1 and

                  ending December 31.

 

                           "FREESTANDING SAR" means an SAR that is granted

                  independently of any Option, as described in Article 7.

 

                           "GOOD REASON" for termination by the Employee of the

                  Employee's 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 (b) and (c) of Section 14.2

                  hereof, 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;

 

                           (a)      the assignment to the Employee of any duties

                  inconsistent with the status of the Employee's position with

                  the Company or a substantial adverse alteration in the nature

                  or status of the Employee's responsibilities from those in

                  effect immediately prior to the Change in Control;

 

                           (b)      a reduction by the Company in the Employee's

                  annual base salary 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 Employee's principal

                  place of employment to a location more than 50 miles 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 present business

                  travel obligations;

 

                           (d)      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

 

Baker Hughes Incorporated

March 6, 2002

 

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                  under any deferred compensation program of the Company, within

                  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 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;

 

                           (f)      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 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 at the time of the

                  Change in Control; or

 

                           (g)      if the Employee is party to an individual

                  employment, severance, or similar agreement with the Company,

                  any purported termination of the Employee's employment which

                  is not effected pursuant to the notice of termination or other

                  procedures specified therein satisfying the requirements

                  thereof; for purposes of this Plan, no such purported

                  termination shall be effective.

 

                           The Employee's right to terminate the Employee's

                  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 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

 

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March 6, 2002

 

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                  be correct unless the Company establishes to the Committee by

                  clear and convincing evidence that Good Reason does not exist.

 

                           "INCENTIVE STOCK OPTION" or "ISO" means an option to

                  purchase Shares granted under Article 6 and that is designated

                  as an incentive stock option and that is intended to meet the

                  requirements of Code Section 422, or any successor provision.

                  Incentive Stock Options may only be granted to Participants

                  who are officers and key employees of the Company.

 

                           "NONQUALIFIED STOCK OPTION" or "NQSO" means an Option

                  that is not intended to meet the requirements of Code Section

                  422, or that otherwise does not meet such requirements.

 

                           "OPTION" means an Incentive Stock Option or a

                  Nonqualified Stock Option, as described in Article 6.

 

                           "OPTION PRICE" means the price at which a Participant

                  may purchase a Share pursuant to an Option.

 

                           "PARTICIPANT" means an Employee or Director who has

                  been selected to receive an Award or who has an outstanding

                  Award granted under this Plan.

 

                           "PERFORMANCE-BASED AWARD" means a Performance Share,

                  a Performance Unit, a Cash-Based Award or a Stock Award

                  granted to a Participant, as described in Article 9, of which

                  the fulfillment of performance goals determines the degree of

                  payout or vesting.

 

                           "PERFORMANCE PERIOD" means the period of time during

                  which the performance goals must be met to determine the

                  degree of payout or vesting with respect to certain

                  Performance-Based Awards.

 

                           "PERFORMANCE SHARE" means an Award granted to a

                  Participant, as described in Article 9.

 

                           "PERFORMANCE UNIT" means an Award granted to a

                  Participant, as described in Article 9.

 

                           "PERIOD OF RESTRICTION" means the period during which

                  the transfer of Shares of Restricted Stock is limited in some

                  way (based on the passage of time, the achievement of

                  performance goals or upon the occurrence of other events as

                  determined by the Committee (or the Board with respect to

                  Awards granted to Directors), at its discretion) and the

                  Shares are subject to a substantial risk of forfeiture, as

                  provided in Article 8.

 

                           "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

 

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March 6, 2002

 

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                  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.

 

                           "RESTRICTED STOCK" means an Award granted to a

                  Participant pursuant to Article 8.

 

                           "RESTRICTED STOCK UNIT" means an Award granted to a

                  Participant, as described in Article 8.

 

                           "SHARES" means the common stock of the Company, $1.00

                  par value per share.

 

                           "STOCK APPRECIATION RIGHT" or "SAR" means an Award,

                  granted alone or in connection with a related Option,

                  designated as an SAR, pursuant to the terms of Article 7.

 

                           "STOCK AWARD" means an Award granted pursuant to the

                  terms of Section 9.6.

 

                           "TANDEM SAR" means an SAR that is granted in

                  connection with a related Option pursuant to Article 7, the

                  exercise of which shall require forfeiture of the right to

                  purchase a Share under the related Option (and when a Share is

                  purchased under the Option, the Tandem SAR shall similarly be

                  canceled).

 

                  2.2      As used in this Plan, 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 Articles mean the sections

         and articles of this Plan.

 

ARTICLE 3.        ADMINISTRATION.

 

                  3.1      GENERAL. Subject to the terms and conditions of this

         Plan, the Committee shall administer this Plan or, in the absence of

         the Committee, the Board shall administer this Plan. The Board shall

         appoint the members of the Committee, from time to time, who shall

         serve at the discretion of the Board. The Committee shall have full and

         exclusive power and authority to administer this Plan and to take all

         actions that this Plan specifically contemplates or are necessary or

         appropriate in connection with the administration of this Plan;

         provided that the Board shall administer this Plan with respect to

         Awards granted to Directors.

 

                  3.2      AUTHORITY OF THE COMMITTEE. Insofar as this Plan

         relates to Awards to Employees, the Committee shall also have full and

         exclusive power to interpret this Plan and to adopt such rules,

         regulations and guidelines for carrying out this Plan as it may deem

         necessary or proper, all of which powers shall be exercised in the best

         interests of

 

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March 6, 2002

 

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         the Company and in keeping with the objectives of this Plan. The

         Committee shall have full power to select Employees who shall

         participate in this Plan, determine the sizes and types of Awards to

         Employees and determine the terms and conditions of Awards to Employees

         in a manner consistent with this Plan. The Committee may, in its

         discretion, provide for the extension of the exercisability of an Award

         to an Employee, accelerate the vesting or exercisability of an Award to

         an Employee, eliminate or make less restrictive any restrictions

         contained in an Award to an Employee, waive any restriction or other

         provision of this Plan (insofar as such provision relates to Awards to

         Employees) or an Award to an Employee or otherwise amend or modify an

         Award to an Employee in any manner that is either (i) not adverse to

         the Participant to whom the Award to an Employee was granted or (ii) to

         which the Participant consents. The Committee may make an Award to an

         individual who it expects to become an Employee of the Company or any

         of its Affiliates within the next 6 months, with the Award being

         subject to the individual's actually becoming an Employee within that

         time period and subject to other terms and conditions as the Committee

         may establish. The Committee may correct any defect or supply any

         omission or reconcile any inconsistency in this Plan or in any Award to

         an Employee in the manner and to the extent the Committee deems

         necessary or desirable to further this Plan's objectives. Further, the

         Committee shall make all other determinations that may be necessary or

         advisable for the administration of this Plan. As permitted by law and

         the terms of this Plan, the Committee may delegate its authority as

         identified in Section 3.3.

 

                  3.3      DELEGATION OF AUTHORITY. The Committee may delegate

         to the Chief Executive Officer and to other senior officers of the

         Company its duties under this Plan pursuant to such conditions or

         limitations as the Committee may establish. The Committee may engage or

         authorize the engagement of a third-party administrator to carry out

         administrative functions under this Plan.

 

                  3.4      DECISIONS BINDING. All determinations and decisions

         made by the Committee and the Board pursuant to the provisions of this

         Plan and all related orders and resolutions of the Committee and the

         Board shall be final, conclusive and binding on all persons, including

         the Company, its stockholders, Directors, Employees, Participants and

         the estates and beneficiaries of Directors, Employees and Participants.

 

                           Under no circumstances shall the Company incur

         liability for any indirect, incidental, consequential or special

         damages (including lost profits) of any form incurred by any person,

         whether or not foreseeable and regardless of the form of the act in

         which such a claim may be brought, with respect to this Plan or the

         Company's role as Plan sponsor.

 

ARTICLE 4.        SHARES SUBJECT TO PLAN AND MAXIMUM AWARDS.

 

                  4.1      NUMBER OF SHARES AVAILABLE FOR AWARDS. Subject to

         adjustment as provided in Section 4.2, the number of Shares hereby

         reserved for issuance to Participants under this Plan shall be 7

         million, no more than 3 million of which may be granted in the form of

         Awards other than in the form of Options. These Shares may consist of

         authorized but unissued Shares or previously issued Shares reacquired

         by the

 

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March 6, 2002

 

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         Company. The number of Shares that are the subject of Awards under this

         Plan that are forfeited or terminated, expire unexercised, are settled

         in cash in lieu of Shares or in a manner such that all or some of the

         Shares covered by an Award are not issued to a Participant or are

         exchanged for Awards that do not involve Shares shall again immediately

         become available to be issued pursuant to Awards granted under this

         Plan. Shares approved pursuant to the Long Term Incentive Plan of Baker

         Hughes Incorporated, as amended, the Baker Hughes Incorporated 1993

         Stock Option Plan, as amended, and the Baker Hughes Incorporated 1998

         Employee Stock Option Plan, as amended, that, upon shareholder approval

         of this Plan, have not been awarded under such plans, including Shares

         that are canceled, terminated, expired unexercised, settled in cash in

         lieu of Shares or in a manner such that all or some of the Shares

         covered thereby are not issued to a participant or are exchanged for a

         consideration that does not involve Shares, and Shares that are so

         canceled, terminated, expired unexercised, settled in cash in lieu of

         Shares or in a manner such that all or some of the Shares covered

         thereby are not issued to a participant or are exchanged for a

         consideration that does not involve Shares, will immediately become

         available for Awards under this Plan. The Shares described in the

         foregoing sentence shall be included in the 7 million Shares reserved

         for issuance under this Plan. The Committee shall determine the

         appropriate methodology for calculating the number of Shares issued

         pursuant to this Plan. The following rules ("Award Limitations") shall

         apply to grants of such Awards under this Plan:

 

                           (a)      OPTIONS. The maximum aggregate number of

                  Shares that may be granted in the form of Options pursuant to

                  any Award granted in any one Fiscal Year to any one Employee

                  shall be 3,000,000.

 

                           (b)      SARS. The maximum aggregate number of Shares

                  that may be granted in the form of Stock Appreciation Rights

                  pursuant to any Award granted in any one Fiscal Year to any

                  one Employee shall be 3,000,000.

 

                           (c)      RESTRICTED STOCK/UNITS. The maximum

                  aggregate grant with respect to Awards of Restricted

                  Stock/Units granted in any one Fiscal Year to any one Employee

                  shall be 1,000,000.

 

                           (d)      PERFORMANCE SHARES/PERFORMANCE UNITS AND

                  CASH-BASED AWARDS. The maximum aggregate grant with respect to

                  Awards of Performance Shares made in any one Fiscal Year to

                  any one Employee shall be equal to the value of 1,000,000

                  Shares, determined as of the date of grant. The maximum

                  aggregate amount awarded or credited with respect to

                  Cash-Based Awards or Performance Units to any one Employee in

                  any one Fiscal Year may not exceed in value $10,000,000,

                  determined as of the date of grant.

 

                           (e)      DIRECTOR AWARDS. The maximum aggregate grant

                  with respect to Awards of Options, Stock Awards or Restricted

                  Stock/Units granted in any one Fiscal Year to any one Director

                  shall be 10,000 Shares/Units.

 

                  4.2      ADJUSTMENTS IN AUTHORIZED SHARES. The existence of

         outstanding Awards shall not affect in any manner the right or power of

         the Company or its

 

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March 6, 2002

 

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         stockholders to make or authorize any or all adjustments,

         recapitalizations, reorganizations or other changes in the capital

         stock of the Company or its business or any merger or consolidation of

         the Company, or any issue of bonds, debentures, preferred or prior

         preference stock (whether or not such issue is prior to, on a parity

         with or junior to the Shares) or the dissolution or liquidation of the

         Company, or any sale or transfer of all or any part of its assets or

         business or any other corporate act or proceeding of any kind, whether

         or not of a character similar to that of the acts or proceedings

         enumerated above.

 

                           If there shall be any change in the Shares of the

         Company or the capitalization of the Company through merger,

         consolidation, reorganization, recapitalization, stock dividend, stock

         split, reverse stock split, split up, spin-off, combination of shares,

         exchange of shares, dividend in kind or other like change in capital

         structure or distribution (other than normal cash dividends) to

         stockholders of the Company, the Board, in its sole discretion, to

         prevent dilution or enlargement of Participants' rights under this

         Plan, shall adjust, in an equitable manner, as applicable, the number

         and kind of Shares that may be issued under this Plan, the number and

         kind of Shares subject to outstanding Awards, the exercise price

         applicable to outstanding Awards, the Awards Limitations, the Fair

         Market Value of the Shares and other value determinations applicable to

         outstanding Awards. In the event of a corporate merger, consolidation,

         acquisition of property or stock, separation, reorganization or

         liquidation, the Board shall be authorized to issue or assume Awards by

         means of substitution of new Awards, as appropriate, for previously

         issued Awards or to assume previously issued Awards as part of such

         adjustment. In the event of a corporate merger, consolidation,

         acquisition of property or stock, separation, reorganization or

         liquidation, the Board shall be authorized (a) to assume under the Plan

         previously issued compensatory awards, or to substitute new Awards for

         previously issued compensatory awards, including Awards, as part of

         such adjustment or (b) to cancel Awards that are Options or SARs and

         give the Participants who are the holders of such Awards notice and

         opportunity to exercise for 30 days prior to such cancellation.

 

                           Appropriate adjustments may also be made by the Board

         in the terms of any Awards under this Plan to reflect such changes or

         distributions and to modify any other terms of outstanding Awards on an

         equitable basis, including modifications of performance goals and

         changes in the length of Performance Periods.

 

                           In addition, other than with respect to Options,

         Stock Appreciation Rights and other Awards intended to constitute

         Performance-Based Awards, the Board is authorized to make adjustments

         to the terms and conditions of, and the criteria included in, Awards in

         recognition of unusual or nonrecurring events affecting the Company or

         the financial statements of the Company, or in response to changes in

         applicable laws, regulations or accounting principles. The

         determination of the Board as to the foregoing adjustments, if any,

         shall be conclusive and binding on Participants under this Plan.

 

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March 6, 2002

 

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ARTICLE 5.        ELIGIBILITY AND PARTICIPATION.

 

                  5.1      ELIGIBILITY. Persons eligible to participate in this

         Plan include all Employees and Directors.

 

                  5.2      ACTUAL PARTICIPATION. Subject to the provisions of

         this Plan, the Committee may, from time to time, select from all

         eligible Employees those to whom Awards shall be granted and shall

         determine the nature and amount of each Award, subject to the

         provisions of this Plan. The Board may, from time to time, select from

         all eligible Directors those to whom Awards shall be granted and shall

         determine the nature and amount of each Award, subject to the

         provisions of this Plan.

 

ARTICLE 6.        STOCK OPTIONS.

 

                  6.1      GRANT OF OPTIONS. Subject to the terms and provisions

         of this Plan, Options may be granted to Participants in such number,

         upon the terms and at any time, and from time to time, as the Committee

         (or the Board with respect to Awards granted to Directors) shall

         determine.

 

                  6.2      AWARD AGREEMENT. Each Option grant shall be evidenced

         by an Award Agreement that shall specify the Option Price, the duration

         of the Option, the number of Shares to which the Option pertains, and

         other provisions as the Committee (or the Board with respect to Awards

         granted to Directors) shall determine that are not inconsistent with

         the terms of this Plan. The Award Agreement also shall specify whether

         the Option is intended to be an ISO or a NQSO. Notwithstanding its

         designation as an ISO in the Award Agreement, to the extent the

         limitations of Code Section 422 are exceeded, with respect to such

         excess portion, the Option shall become a NQSO. Employees may be

         awarded ISOs (except those who have not yet commenced employment with

         the Company or any of its Affiliates may not receive ISOs) and NQSOs,

         whereas Directors may only be awarded NQSOs.

 

                  6.3      OPTION PRICE. The Committee (or the Board with

         respect to Awards granted to Directors) shall determine the Option

         Price for each grant of an Option under this Plan. The Option Price

         shall not be less than the Fair Market Value of the Shares on the date

         of grant.

 

                  6.4      DURATION OF OPTIONS. Each Option granted to a

         Participant shall expire at the time the Committee (or the Board with

         respect to Awards granted to Directors) shall determine at the time of

         grant; provided that no Option shall be exercisable later than the

         tenth anniversary date of its grant.

 

                  6.5      EXERCISE OF OPTIONS. Options granted under this

         Article 6 shall be exercisable at the times and be subject to the

         restrictions and conditions as the Committee (or the Board with respect

         to Awards granted to Directors) shall in each instance approve, which

         need not be the same for each grant or for each Participant.

 

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March 6, 2002

 

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                  6.6      PAYMENT. Options granted under this Article 6 shall

         be exercised in the form and manner as the Committee (or the Board with

         respect to Awards to Directors) shall determine from time to time.

 

                           The Option Price upon exercise of any Option shall be

         payable to the Company in full either (a) in cash or its equivalent;

         (b) by tendering previously acquired Shares having an aggregate Fair

         Market Value at the time of exercise equal to the total Option Price

         (provided that the Shares that are tendered must have been held by the

         Participant for at least 6 months prior to their tender to satisfy the

         Option Price); (c) by a combination of (a) and (b); or (d) any other

         method approved by the Committee (or the Board with respect to Awards

         granted to Directors) in its sole discretion at the time of grant and

         as set forth in the Award Agreement. An Award Agreement evidencing an

         Option may, in the discretion of the Committee (or the Board with

         respect to Awards granted to Directors), provide for a "cashless

         exercise" of an Option by establishing procedures whereby the

         Participant, by a properly executed written notice, directs (1) an

         immediate sale or margin loan respecting all or a part of the Shares to

         which he is entitled upon exercise pursuant to an extension of credit

         by the Company to the Participant of the Option Price, (2) the delivery

         of the Shares from the Company directly to a brokerage firm and (3) the

         delivery of the Option Price from sale or margin loan proceeds from the

         brokerage firm directly to the Company.

 

                           Subject to any governing rules or regulations and

         Section 18.10, after the exercise of the Option and full payment of the

         Option Price in the form and manner as the Committee (or Board with

         respect to Awards granted to Directors) shall determine, the

         Participant may pay the required fee and request a Share certificate

         based upon the number of Shares purchased under the Option through the

         third-party administrator designated by the Committee (or the Board

         with respect to Awards granted to Directors) to have this

         administrative duty. In addition, the Company may, at its option, issue

         or cause to be issued Share certificates.

 

                           Unless otherwise determined by the Committee (or the

         Board with respect to Awards granted to Directors), all payments under

         all of the methods indicated above shall be paid in United States

         dollars.

 

                  6.7      RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee

         (or the Board with respect to Awards granted to Directors) may impose

         such restrictions on any Shares acquired pursuant to the exercise of an

         Option granted under this Article 6 as it may deem advisable, including

         restrictions under applicable federal securities laws, under the

         requirements of any stock exchange or market upon which such Shares are

         then listed or traded and under any blue sky or state securities laws

         applicable to such Shares.

 

                  6.8      TERMINATION OF EMPLOYMENT/DIRECTORSHIP.

 

                           (a)      Each Participant's Award Agreement shall set

                  forth the extent to which the Participant shall have the right

                  to exercise the Option following termination of the

                  Participant's employment or directorship with the Company or

                  its Affiliates. Such provisions shall be determined in the

                  sole discretion of the

 

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March 6, 2002

 

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                  Committee (or the Board with respect to Awards granted to

                  Directors), shall be included in the Award Agreement entered

                  into with each Participant, need not be uniform among all

                  Options issued pursuant to this Article 6 and may reflect

                  distinctions based on the reasons for termination.

 

                           (b)      TERMS FOR DIRECTOR OPTIONS.

 

                                    (i)      Each Option granted to a Director

                           (a "Director Option") shall have a term of 10 years

                           from the date of grant, notwithstanding any earlier

                           termination of the status of the holder as a Director

                           (the "Option Expiration Date").

 

                                    (ii)     The purchase price of each Share

                           subject to a Director Option shall be equal to the

                           Fair Market Value of a Share on the date of grant.

 

                                    (iii)    All Director Options shall vest and

                           become exercisable on the first anniversary of the

                           date of grant.

 

                                    (iv)     a Director's directorship shall

                           terminate at the close of business on the day

                           preceding the day he ceases to be a member of the

                           Board for any reason whatsoever. When a Director's

                           directorship is terminated, each of his Director

                           Options and all rights thereunder shall expire in

                           accordance with the following (but in no event later

                           than the Option Expiration Date):

 

                                             (A)     Director Options granted

                           within 1 year preceding termination:

 

                                                     (1) At the time the

                                             Director's directorship is

                                             terminated, unless

 

                                                     (2) Such termination occurs

                                             in connection with, or within 2

                                             years following, a Change in

                                             Control, in which case, 30 days

                                             following his termination.

 

                                            (B)      Director Options granted

                           prior to 1-year preceding termination:

 

                                                     (1) 1 year after

                                             termination if due to the

                                             Director's death (a Director's

                                             Option may be exercised by the

                                             Director's estate or by the person

                                             or persons who acquire the right to

                                             exercise his option by bequest or

                                             inheritance with respect to any or

                                             all of the Shares remaining subject

                                             to his Director Option at the time

                                             of his death); or

 

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March 6, 2002

 

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                                                     (2) 3 years after

                                             termination if as a result of

                                             resignation or removal from the

                                             Board because of disability or in

                                             accordance with the provisions of

                                             the Company's Bylaws regarding

                                             termination of director's terms of

                                             office; or

 

                                                     (3) 3 months after

                                             termination if, for any reason

                                             other than specified above.

 

                           (c)      AGREEMENTS. Any Award of Director Options

                  shall be embodied in an Award Agreement, which shall contain

                  the terms, conditions and limitations set forth above and

                  shall be signed by an authorized officer for and on behalf of

                  the Company.

 

                  6.9      TRANSFERABILITY OF OPTIONS.

 

                           (a)      INCENTIVE STOCK OPTIONS. No ISO granted

                  under this Plan may be sold, transferred, pledged, assigned or

                  otherwise alienated or hypothecated, other than by will or by

                  the laws of descent and distribution. Further, all ISOs

                  granted to a Participant under this Plan shall be exercisable

                  during his or her lifetime only by the Participant, and after

                  that time, by the Participant's heirs or estate.

 

                           (b)      NONQUALIFIED STOCK OPTIONS. Except as

                  otherwise provided in a Participant's Award Agreement, no NQSO

                  granted under this Article 6 may be sold, transferred,

                  pledged, assigned, or otherwise alienated or hypothecated,

                  other than by will or by the laws of descent and distribution.

                  Further, except as otherwise provided in a Participant's Award

                  Agreement, all NQSOs granted to a Participant under this

                  Article 6 shall be exercisable during his or her lifetime only

                  by such Participant.

 

                           Any attempted assignment of an Option in violation of

         this Section 6.9 shall be null and void.

 

                  6.10     NOTIFICATION OF DISQUALIFYING DISPOSITION. If any

         Participant shall make any disposition of Shares issued pursuant to the

         exercise of an ISO under the circumstances described in Code Section

         421(b) (relating to certain disqualifying dispositions), such

         Participant shall notify the Company of such disposition within 10 days

         thereof.

 

ARTICLE 7.        STOCK APPRECIATION RIGHTS.

 

                  7.1      GRANT OF SARS. Subject to the terms and conditions of

         this Plan, SARs may be granted to an Employee at any time, and from

         time to time, as the Committee shall determine. The Committee may grant

         Freestanding SARs, Tandem SARs or any combination of these forms of

         SAR.

 

                           Subject to the terms and conditions of this Plan, the

         Committee shall have complete discretion in determining the number of

         SARs granted to each Employee and,

 

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March 6, 2002

 

                                       15

<PAGE>

 

         consistent with the provisions of this Plan, in determining the terms

         and conditions pertaining to such SARs.

 

                           The grant price of a Freestanding SAR shall not be

         less than the Fair Market Value of a Share on the date of grant of the

         SAR. The grant price of Tandem SARs shall equal the Option Price of the

         related Option.

 

                  7.2      SAR AGREEMENT. Each SAR grant shall be evidenced by

         an Award Agreement that shall specify the grant price, the term of the

         SAR and such other provisions as the Committee shall determine.

 

                  7.3      TERM OF SARS. The term of an SAR granted under this

         Plan shall be determined by the Committee, in its sole discretion;

         provided that no SAR shall be exercisable later than the tenth

         anniversary date of its grant.

 

                  7.4      EXERCISE OF FREESTANDING SARS. Freestanding SARs may

         be exercised upon whatever terms and conditions the Committee, in its

         sole discretion, imposes upon them.

 

                  7.5      EXERCISE OF TANDEM SARS. Tandem SARs may be exercised

         for all or part of the Shares subject to the related Option upon the

         surrender of the right to exercise the equivalent portion of the

         related Option. A Tandem SAR may be exercised only with respect to the

         Shares for which its related Option is then exercisable.

 

                  7.6      PAYMENT OF SAR AMOUNT. Upon the exercise of an SAR,

         an Employee shall be entitled to receive payment from the Company in an

         amount determined by multiplying:

 

                           (a)      The difference between the Fair Market Value

                  of a Share on the date of exercise over the grant price by

 

                           (b)      The number of Shares with respect to which

                  the SAR is exercised.

 

                           At the discretion of the Committee, the payment upon

         SAR exercise may be in cash, in Shares of equivalent value, in some

         combination thereof or in any other manner approved by the Committee in

         its sole discretion. The Committee's determination regarding the form

         of SAR payout may be set forth in the Award Agreement pertaining to the

         grant of the SAR.

 

                  7.7      TERMINATION OF EMPLOYMENT. Each Award Agreement shall

         set forth the extent to which the Employee shall have the right to

         exercise the SAR following termination of the Employee's employment

         with the Company or its Affiliates. Such provisions shall be determined

         in the sole discretion of the Committee, shall be included in the Award

         Agreement entered into with Employees, need not be uniform among all

         SARs issued pursuant to this Plan and may reflect distinctions based on

         the reasons for termination.

 

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March 6, 2002

 

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                  7.8      NONTRANSFERABILITY OF SARS. Except as otherwise

         provided in an Employee's Award Agreement, no SAR granted under this

         Plan may be sold, transferred, pledged, assigned or otherwise alienated

         or hypothecated, other than by will or by the laws of descent and

         distribution. Further, except as otherwise provided in an Employee's

         Award Agreement, all SARs granted to an Employee under this Plan shall

         be exercisable during his or her lifetime only by the Employee, and

         after that time, by the Employee's heirs or estate. Any attempted

         assignment of an SAR in violation of this Section 7.8 shall be null and

         void.

 

ARTICLE 8.        RESTRICTED STOCK AND RESTRICTED STOCK UNITS.

 

                  8.1      GRANT OF RESTRICTED STOCK/UNITS. Subject to the terms

         and provisions of this Plan, the Committee (or the Board with respect

         to Awards granted to Directors), at any time, and from time to time,

         may grant Shares of Restricted Stock and Restricted Stock Units to

         Participants in such amounts as the Committee (or the Board with

         respect to Awards granted to Directors) shall determine. Restricted

         Stock Units shall be similar to Restricted Stock, except that no Shares

         are actually awarded to the Participant until a later date, unless the

         payout is otherwise made in cash.

 

                  8.2      RESTRICTED STOCK AGREEMENT. Each Restricted Stock or

         Restricted Stock Unit grant shall be evidenced by an Award Agreement

         that shall specify the Period(s) of Restriction, the number of Shares

         of Restricted Stock (or the number of Restricted Stock Units) granted

         and such other provisions as the Committee (or the Board with respect

         to Awards granted to Directors) shall determine.

 

                  8.3      TRANSFERABILITY. Except as provided in this Article

         8, the Shares of Restricted Stock or Restricted Stock Units granted

         herein may not be sold, transferred, pledged, assigned or otherwise

         alienated or hypothecated until the end of the applicable Period of

         Restriction established by the Committee (or the Board with respect to

         Awards granted to Directors) and specified in the Award Agreement, or

         upon earlier satisfaction of any other conditions, as specified by the

         Committee (or the Board with respect to Awards granted to Directors) in

         its sole discretion and set forth in the Award Agreement. All rights

         with respect to the Restricted Stock or Restricted Stock Units granted

         to a Participant under this Plan shall be available during his or her

         lifetime only to the Participant, and after that time, to the

         Participant's heirs or estate. Any attempted assignment of Restricted

         Stock or Restricted Stock Units in violation of this Section 8.3 shall

         be null and void.

 

                  8.4      OTHER RESTRICTIONS. The Committee (or the Board with

         respect to Awards granted to Directors) shall impose other conditions

         or restrictions on any Shares of Restricted Stock or Restricted Stock

         Units granted pursuant to this Plan as it may deem advisable, including

         a requirement that Participants pay a stipulated purchase price for

         each Share of Restricted Stock or each Restricted Stock Unit,

         restrictions based upon the achievement of specific performance goals,

         time-based restrictions on vesting following the attainment of the

         performance goals, time-based restrictions or restrictions under

         applicable federal or state securities laws.

 

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March 6, 2002

 

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                           To the extent deemed appropriate by the Committee (or

         the Board with respect to Awards granted to Directors), the designated

         third-party administrator may retain the certificates representing

         Shares of Restricted Stock in its possession until such time as all

         conditions and restrictions applicable to such Shares have been

         satisfied or lapse.

 

                           Except as otherwise provided in this Article 8,

         Shares of Restricted Stock covered by each Restricted Stock Award shall

         become freely transferable by the Participant after all conditions and

         restrictions applicable to such Shares have been satisfied or lapse.

 

                  8.5      VOTING RIGHTS. To the extent permitted by the

         Committee (or the Board with respect to Awards granted to Directors) or

         required by law, Participants holding Shares of Restricted Stock

         granted hereunder may be granted the right to exercise full voting

         rights with respect to those Shares during the Period of Restriction. A

         Participant shall have no voting rights with respect to any Restricted

         Stock Units granted hereunder.

 

                  8.6      DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period

         of Restriction, Participants holding Shares of Restricted Stock or

         Restricted Stock Units granted hereunder may, if the Committee (or the

         Board with respect to Awards granted to Directors) so determines, be

         credited with dividends paid with respect to the underlying Shares

         while they are so held in a manner determined by the Committee (or the

         Board with respect to Awards granted to Directors) in its sole

         discretion. The Committee (or the Board with respect to Awards granted

         to Directors) may apply any restrictions to the dividends that it deems

         appropriate.

 

                  8.7      TERMINATION OF EMPLOYMENT/DIRECTORSHIP. Each Award

         Agreement shall set forth the extent to which the Participant shall

         have the right to receive unvested Restricted Stock and/or Restricted

         Stock Units following termination of the Participant's employment or

         directorship with the Company or its Affiliates. Such provisions shall

         be determined in the sole discretion of the Committee (or the Board

         with respect to Awards granted to Directors), shall be included in the

         Award Agreement entered into with each Participant, need not be uniform

         among all Shares of Restricted Stock or Restricted Stock Units issued

         pursuant to this Plan and may reflect distinctions based on the reasons

         for termination.

 

ARTICLE 9.        PERFORMANCE UNITS, PERFORMANCE SHARES AND CASH-BASED AWARDS;

                  STOCK AWARDS.

 

                  9.1      GRANT OF PERFORMANCE UNITS/SHARES AND CASH-BASED

         AWARDS. Subject to the terms of this Plan, Performance Units,

         Performance Shares and/or Cash-Based Awards may be granted to Employees

         in such amounts and upon such terms, and at any time and from time to

         time, as the Committee shall determine.

 

                  9.2      VALUE OF PERFORMANCE UNITS/SHARES AND CASH-BASED

         AWARDS. Each Performance Unit shall have an initial value that the

         Committee shall establish at the time of grant. Each Performance Share

         shall have an initial value equal to the Fair Market

 

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March 6, 2002

 

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<PAGE>

 

         Value of a Share on the date of grant. Each Cash-Based Award shall have

         a value as the Committee may determine. The Committee shall set

         performance goals in its discretion that, depending on the extent to

         which they are met, shall determine the number and value of Performance

         Units/Shares and Cash-Based Awards which shall be paid out to the

         Employee.

 

                  9.3      EARNING OF PERFORMANCE UNITS/SHARES AND CASH-BASED

         AWARDS. Subject to the terms of this Plan, after the applicable

         Performance Period has ended, the holder of Performance Units/Shares

         and Cash-Based Awards shall be entitled to receive payout on the number

         and value of Performance Units/Shares and Cash-Based Awards the

         Employee earned over the Performance Period, to be determined as a

         function of the extent to which the corresponding performance goals

         have been achieved.

 

                  9.4      FORM AND TIMING OF PAYMENT OF PERFORMANCE

         UNITS/SHARES AND CASH-BASED AWARDS. Payment of earned Performance

         Units/Shares and Cash-Based Awards shall be as the Committee determines

         and as set forth in the Award Agreement. Subject to the terms of this

         Plan, the Committee, in its sole discretion, may pay earned Performance

         Units/Shares and Cash-Based Awards in the form of cash or in Shares (or

         in a combination thereof) that have an aggregate Fair Market Value

         equal to the value of the earned Performance Units/Shares and

         Cash-Based Awards at the close of the applicable Performance Period.

         Such Shares may be granted subject to any restrictions deemed

         appropriate by the Committee.

 

                           At the discretion of the Committee, Employees holding

         Performance Units/Shares may be entitled to receive dividend units with

         respect to dividends declared with respect to the Shares. Such

         dividends may be subject to the same accrual, forfeiture and payout

         restrictions as apply to dividends earned with respect to Shares of

         Restricted Stock, as set forth in Section 8.6, as determined by the

         Committee.

 

                  9.5      NONTRANSFERABILITY. Except as otherwise provided in

         an Employee's Award Agreement, Performance Units/Shares and Cash-Based

         Awards may not be sold, transferred, pledged, assigned or otherwise

         alienated or hypothecated, other than by will or by the laws of descent

         and distribution. Further, except as otherwise provided in an

         Employee's Award Agreement, an Employee's rights under this Plan shall

         be exercisable during the Employee's lifetime only by the Employee, and

         after that time, by the Employee's heirs or estate. Any attempted

         assignment of Performance Units/Shares or Cash-Based Awards in

         violation of this Section 9.5 shall be null and void.

 

                  9.6      STOCK AWARDS. Employees or Directors may be granted

         Stock Awards. The Committee (or the Board with respect to Awards

         granted to Directors) may grant other types of equity-based or

         equity-related Awards (including the grant or offer for sale of

         unrestricted Shares) in such amounts and subject to such terms and

         conditions, as the Committee (or the Board with respect to Awards

         granted to Directors) shall determine. Such Awards may entail the

         transfer of actual Shares to Participants or payment in cash or

         otherwise of amounts based on the value of Shares and may include

         Awards designed to comply with or take advantage of the applicable

         local laws of jurisdictions other than the United States.

 

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March 6, 2002

 

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ARTICLE 10.       PERFORMANCE MEASURES.

 

                  Performance measures, the attainment of which may determine

the degree of payout or vesting with respect to certain Performance-Based

Awards, shall be chosen from among:

 

                  (a)      Net earnings;

 

                  (b)      Earnings per share;

 

                  (c)      Net sales growth;

 

                  (d)      Net income (before or after taxes);

 

                  (e)      Net operating profit;

 

                  (f)      Return measures (including return on assets, equity,

                           net capital employed or sales);

 

                  (g)      Cash flow (including operating cash flow and free

                           cash flow);

 

                  (h)      Cash flow return on investments, which equals net

                           cash flows divided by owner's equity;

 

                  (i)      Earnings before or after taxes, interest,

                           depreciation and/or amortization;

 

                  (j)      Internal rate of return or increase in net present

                           value;

 

                  (k)      Dividend payments to parent;

 

                  (l)      Gross revenues;

 

                  (m)      Gross margins;

 

                  (n)      Operating margin;

 

                  (o)      Share price (including growth measures and total

                           shareholder return);

 

                  (p)      Expense targets;

 

                  (q)      Working capital targets relating to inventory or

                           accounts receivable;

 

                  (r)      Planning accuracy (as measured by comparing planned

                           results to actual results);

 

                  (s)      Comparisons to various stock market indices;

 

                  (t)      Comparisons to the performance of other companies;

                           and

 

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                  (u)      Baker Value Added.

 

                  The Committee may, in its sole discretion, adopt other

performance measures including any combination of the foregoing.

 

                  The Committee may provide in any such Performance-Based Award

that any evaluation of performance may exclude any of the following events that

occurs during a Performance Period: (a) asset write-downs; (b) litigation or

claim judgments or settlements; (c) the effect of changes in tax laws,

accounting principles or other laws or provisions affecting reported results;

(d) accruals for reorganization and restructuring programs; (e) extraordinary

nonrecurring items as described in Accounting Principles Board Opinion No. 30 or

in management's discussion and analysis of financial condition and results of

operations appearing in the Company's annual report to stockholders for the

applicable year; (f) acquisitions or divestitures and (g) foreign exchange gains

and losses.

 

ARTICLE 11.       BENEFICIARY DESIGNATION.

 

                  Each Participant under this Plan may, from time to time, name

any beneficiary or beneficiaries (who may be named contingently or successively)

to whom any benefit under this Plan is to be paid in case of his or her death

before he or she receives any or all of such benefit. Each such designation

shall revoke all prior designations by the same Participant, shall be in a form

prescribed by the Company and shall be effective only when filed by the

Participant in writing with the Company during the Participant's lifetime. In

the absence of any such designation, benefits remaining unpaid at the

Participant's death shall be paid to the Participant's estate.

 

ARTICLE 12.       DEFERRALS.

 

                  The Committee (or the Board with respect to Awards granted to

Directors) may permit or require a Participant to defer such Participant's

receipt of the payment of cash or the delivery of Shares that would otherwise be

due to such Participant by virtue of the exercise of an Option or SAR, the lapse

or waiver of restrictions with respect to Restricted Stock/Units or the

satisfaction of any requirements or goals with respect to Performance

Units/Shares, Cash-Based Awards and Stock Awards. If any such deferral election

is required or permitted, the Committee (or the Board with respect to Awards

granted to Directors) shall, in its sole discretion, establish rules and

procedures for such payment deferrals.

 

ARTICLE 13.       RIGHTS OF EMPLOYEES/DIRECTORS.

 

                  13.1 EMPLOYMENT. Nothing in this Plan shall interfere with or

         limit in any way the right of the Company to terminate any

         Participant's employment at any time, nor confer upon any Participant

         any right to continue in the employ of the Company.

 

                       Except as specifically provided otherwise in a written

         agreement with the Company, neither the Award nor any benefits arising

         under this Plan shall constitute part of a Participant's employment

         contract with the Company or any Affiliate. Any termination of this

         Plan pursuant to Section 15.1 shall not give rise to liability on the

         part of the Company or any Affiliate for severance payments.

 

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                  13.2 PARTICIPATION. No Employee or Director shall have the

         right to be selected to receive an Award under this Plan or, having

         been so selected, to be selected to receive a future Award.

 

                  13.3 RIGHTS AS A STOCKHOLDER. A Participant shall have none of

         the rights of a stockholder with respect to Shares covered by any Award

         until the Participant becomes the record holder of such shares.

 

ARTICLE 14.       ACCELERATION.

 

                  14.1 CHANGE IN CONTROL. Notwithstanding any provision of this

         Plan to the contrary, in the event of an occurrence of a Change in

         Control other than an event described only in Section (c) of the

         definition of Change in Control, (a) all Awards granted pursuant to

         this Plan shall become fully vested, (b) if either an Option or SAR or

         similar Award, the Award shall become immediately exercisable and (c)

         all conditions or restrictions applicable to an Award shall be deemed

         satisfied or shall lapse.

 

                  14.2 TERMINATION. Notwithstanding any provision of this Plan

         to the contrary, all conditions or restrictions on outstanding Awards

         held by an Employee shall be deemed satisfied or shall lapse, all

         outstanding Awards held by an Employee shall become fully vested and,

         if either an Option or SAR or similar Award, immediately exercisable as

         of the effective date of termination of such Employee's employment if

         (a) such Employee'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) such

         Employee terminates his or her 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 the Person described in clause (a), (c) such

         Employee's employment is terminated by the Company without Cause or by

         the Employee 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) or (d) such Employee's employment is terminated by

         the Company without Cause or by the Employee for Good Reason, in either

         case within 2 years following the occurrence of a Change in Control

         described in Section (c) of the definition of Change in Control.

 

ARTICLE 15.       AMENDMENT, MODIFICATION, SUSPENSION AND TERMINATION.

 

                  15.1 AMENDMENT, MODIFICATION, SUSPENSION AND TERMINATION.

         Subject to the terms of this Plan, the Board may at any time and from

         time to time alter, amend, modify, suspend or terminate this Plan in

         whole or in part, except that no amendment, modification, suspension or

         termination that would adversely affect in any material way the rights

         of any Participant under any Award previously granted to such

         Participant under this Plan shall be made without the written consent

         of such Participant or to the extent stockholder approval is otherwise

         required by applicable legal requirements. Without the prior approval

         of the Company's stockholders, Options issued under this

 

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March 6, 2002

 

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<PAGE>

 

         Plan will not be repriced, replaced, or regranted through cancellation,

         or by lowering the Option Price of a previously granted Award.

 

                  15.2 ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN

         UNUSUAL OR NONRECURRING EVENTS. The Board may make adjustments in the

         terms and conditions of, and the criteria included in, Awards in

         recognition of unusual or nonrecurring events (including the events

         described in Section 4.2) affecting the Company or the financial

         statements of the Company or of changes in applicable laws, regulations

         or accounting principles, whenever the Board determines that such

         adjustments are appropriate to prevent unintended dilution or

         enlargement of the benefits or potential benefits intended to be made

         available under this Plan.

 

ARTICLE 16.       WITHHOLDING.

 

                  16.1 TAX WITHHOLDING. The Company shall have the power and the

         right to deduct or withhold, or require a Participant to remit to the

         Company, the minimum statutory amount to satisfy federal, state and

         local taxes, domestic or foreign, required by law or regulation to be

         withheld with respect to any taxable event arising as a result of this

         Plan.

 

                  16.2 SHARE WITHHOLDING. With respect to withholding required

         upon the exercise of Options or SARs, upon the lapse of restrictions on

         Restricted Stock and Restricted Stock Units, or upon any other taxable

         event arising as a result of Awards granted hereunder, Participants may

         elect to satisfy the withholding requirement, in whole or in part, by

         having the Company withhold Shares having a Fair Market Value on the

         date the tax is to be determined equal to the minimum statutory total

         tax that could be imposed on the transaction. All such elections shall

         be irrevocable, made in writing and signed by the Participant and shall

         be subject to any restrictions or limitations that the Committee (or

         the Board with respect to Awards granted to Directors), in its sole

         discretion, deems appropriate.

 

ARTICLE 17.       SUCCESSORS.

 

                  All obligations of the Company under this Plan with respect to

Awards granted hereunder shall be binding on any successor to the Company,

whether the existence of such successor is the result of a direct or indirect

merger, consolidation or otherwise, of all or substantially all of the business

and/or assets of the Company.

 

ARTICLE 18.       GENERAL PROVISIONS.

 

                  18.1 RESTRICTIONS AND LEGEND. No Shares or other form of

         payment shall be issued with respect to any Award unless the Company

         shall be satisfied based on the advice of its counsel that such

         issuance will be in compliance with applicable federal and state

         securities laws. Certificates evidencing Shares delivered under this

         Plan (to the extent that such shares are so evidenced) may be subject

         to such restrictions as the Committee (or the Board with respect to

         Awards granted to Directors) may deem advisable under the rules,

         regulations and other requirements of the Securities and Exchange

         Commission, any securities exchange or transaction reporting system

         upon

 

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March 6, 2002

 

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         which the Shares are then listed or to which they are admitted for

         quotation and any applicable federal or state securities law. The

         Committee (or the Board with respect to Awards granted to Directors)

         may cause a legend or legends to be placed upon such certificates (if

         any) to make appropriate reference to such restrictions.

 

                       The Committee (or the Board with respect to Awards

         granted to Directors) may require each person receiving Shares pursuant

         to an Award under this Plan to represent to and agree with the Company

         in writing that the Participant is acquiring the Shares without a view

         to distribution thereof. In addition to any other legend required by

         this Plan, the certificates for such Shares may include any legend

         which the Committee (or the Board with respect to Awards granted to

         Directors) deems appropriate to reflect any restrictions on transfer of

         such Shares.

 

                  18.2 SEVERABILITY. If any provision of this Plan shall be held

         illegal or invalid for any reason, the illegality or invalidity shall

         not affect the remaining parts of this Plan, and this Plan shall be

         construed and enforced as if the illegal or invalid provision had not

         been included.

 

                  18.3 REQUIREMENTS OF LAW. The granting of Awards and the

         issuance of Shares under this Plan shall be subject to all applicable

         laws, rules and regulations and to such approvals by any governmental

         agencies or national securities exchanges as may be required. The

         Company shall receive the consideration required by law for the

         issuance of Awards under this Plan.

 

                  18.4 SECURITIES LAW COMPLIANCE. All transactions under this

         Plan are intended to comply with all applicable conditions of Rule

         16b-3 or its successor under the Exchange Act, unless determined

         otherwise by the Board. To the extent any provision of this Plan or

         action by the Board fails to so comply, it shall be deemed null and

         void, to the extent permitted by law and deemed advisable by the Board.

 

                  18.5 LISTING. The Company may use reasonable endeavors to

         register Shares allotted pursuant to the exercise of an Award with the

         Securities and Exchange Commission or to effect compliance with the

         registration, qualification and listing requirements of any national

         securities laws, stock exchange or automated quotation system.

 

                  18.6 DELIVERY OF TITLE. The Company shall have no obligation

         to issue or deliver evidence of title for Shares under this Plan prior

         to:

 

                       (a) Obtaining any approvals from governmental agencies

                  that the Company determines are necessary or advisable; and

 

                       (b) Completion of any registration or other qualification

                  of the Shares under any applicable national or foreign law or

                  ruling of any governmental body that the Company determines to

                  be necessary or advisable.

 

                  18.7 INABILITY TO OBTAIN AUTHORITY. The inability of the

         Company to obtain authority from any regulatory body having

         jurisdiction, which authority is deemed by the

 

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March 6, 2002

 

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         Company's counsel to be necessary to the lawful issuance and sale of

         any Shares hereunder, shall relieve the Company of any liability in

         respect of the failure to issue or sell such Shares as to which such

         requisite authority shall not have been obtained.

 

                  18.8 INVESTMENT REPRESENTATIONS. As a condition to the

         exercise of an Award, the Company may require the person exercising

         such Award to represent and warrant at the time of any such exercise

         that the Shares are being purchased only for investment and without any

         present intention to sell or distribute such Shares if, in the opinion

         of counsel for the Company, such a representation is required.

 

                  18.9 EMPLOYEES BASED OUTSIDE OF THE UNITED STATES.

         Notwithstanding any provision of this Plan to the contrary, in order to

         comply with the laws in other countries in which the Company and its

         Affiliates operate or have Employees, the Committee, in its sole

         discretion, shall have the power and authority to:

 

                       (a) Determine which Affiliates shall be covered by this

                  Plan;

 

                       (b) Determine which Employees employed outside the United

                  States are eligible to participate in this Plan;

 

                       (c) Modify the terms and conditions of any Award granted

                  to Employees who are employed outside the United States to

                  comply with applicable foreign laws;

 

                       (d) Establish subplans and modify exercise procedures and

                  other terms and procedures to the extent such actions may be

                  necessary or advisable. Any subplans and modifications to Plan

                  terms and procedures established under this Section 18.9 by

                  the Committee shall be attached to this Plan document as

                  Appendices; and

 

                       (e) Take any action, before or after an Award is made,

                  that it deems advisable to obtain approval or comply with any

                  necessary local government regulatory exemptions or approvals.

 

                  Notwithstanding the above, the Committee may not take any

         actions hereunder, and no Awards shall be granted, that would violate

         the Exchange Act, the Code, any securities law or governing statute or

         any other applicable law.

 

                  18.10 UNCERTIFICATED SHARES. To the extent that this Plan

         provides for issuance of certificates to reflect the transfer of

         Shares, the transfer of such Shares may be effected on a

         noncertificated basis, to the extent not prohibited by applicable law

         or the rules of any stock exchange.

 

                  18.11 UNFUNDED PLAN. Participants shall have no right, title

         or interest whatsoever in or to any investments that the Company may

         make to aid it in meeting its obligations under this Plan. Nothing

         contained in this Plan, and no action taken pursuant to its provisions,

         shall create or be construed to create a trust of any kind, or a

         fiduciary relationship between the Company and any Participant,

         beneficiary, legal representative

 

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March 6, 2002

 

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         or any other person. To the extent that any Person acquires a right to

         receive payments from the Company under this Plan, such right shall be

         no greater than the right of an unsecured general creditor of the

         Company. All payments to be made hereunder shall be paid from the

         general funds of the Company and no special or separate fund shall be

         established and no segregation of assets shall be made to assure

         payment of such amounts, except as expressly set forth in this Plan.

         This Plan is not intended to be subject to ERISA.

 

                  18.12 NO FRACTIONAL SHARES. No fractional Shares shall be

         issued or delivered pursuant to this Plan or any Award. The Committee

         (or the Board with respect to Awards granted to Directors) shall

         determine whether cash, Awards or other property shall be issued or

         paid in lieu of fractional Shares or whether such fractional Shares or

         any rights thereto shall be forfeited or otherwise eliminated.

 

                  18.13 GOVERNING LAW. This Plan and each Award Agreement shall

         be governed by the laws of the State of Texas, excluding any conflicts

         or choice of law rule or principle that might otherwise refer

         construction or interpretation of this Plan to the substantive law of

         another jurisdiction. Unless otherwise provided in the Award Agreement,

         recipients of an Award under this Plan are deemed to submit to the

         exclusive jurisdiction and venue of the federal or state courts of

         Harris County, Texas to resolve any and all issues that may arise out

         of or relate to this Plan or any related Award Agreement.

 

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March 6, 2002

 

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</TEXT>

</DOCUMENT>