Employee Stock Purchase Plan, As Amended

BAKER HUGHES INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN,
(AS AMENDED AND RESTATED MARCH 5, 2003)


BAKER HUGHES INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN,
AS AMENDED AND RESTATED EFFECTIVE AS OF MARCH 5, 2003


TABLE OF CONTENTS
PAGE


ARTICLE 1 PURPOSE............................................. 1 1.1 Purpose .................................................... 1


ARTICLE 2 DEFINITIONS......................................... 1 2.1 Definitions.................................................... 1 2.2 Number and Gender.............................................. 3 2.3 Headings .................................................... 3


ARTICLE 3 ELIGIBILITY AND PARTICIPATION....................... 3 3.1 Eligibility.................................................... 3 3.2 Participation.................................................. 3 3.3 Termination of Participation................................... 4


ARTICLE 4 GRANT OF OPTIONS AND EXERCISE OF OPTIONS............ 5 4.1 Grant of Options............................................... 5 4.2 Limitations on the Grant of Options............................ 5 4.3 Insufficient Number of Shares.................................. 5 4.4 Restriction Upon Assignment.................................... 6 4.5 Exercise of Options; ESPP Accounts............................. 6 4.6 Withholding Obligations........................................ 6 4.7 Notice of Disposition.......................................... 6 4.8 Dispositions in Compliance with Securities Laws................ 6


ARTICLE 5 PROVISIONS RELATED TO COMMON STOCK.................. 6 5.1 Shares Reserved................................................ 6 5.2 No Rights of Stockholder Until Exercise........................ 7 5.3 Registration of Shares of Common Stock......................... 7 5.4 Certificates for Shares........................................ 7 5.5 Changes in Common Stock and Adjustments........................ 7


ARTICLE 6 ADMINISTRATION OF PLAN.............................. 8 6.1 Plan Administrator............................................. 8 6.2 Resignation and Removal........................................ 8 6.3 Records and Procedures......................................... 8 6.4 Self-Interest of Plan Administrator............................ 8 6.5 Compensation and Bonding....................................... 8 6.6 Plan Administrator Powers and Duties........................... 8 6.7 Reliance on Documents, Instruments, etc........................ 9


ARTICLE 7 EXTENSION OF PLAN TO EMPLOYERS...................... 9 7.1 Adoption by Employers.......................................... 9 7.2 Single Plan.................................................... 9 7.3 No Joint Venture Implied....................................... 9


ARTICLE 8 MISCELLANEOUS....................................... 9 8.1 Use of Funds; No Interest Paid................................. 9 8.2 Amendment to the Plan.......................................... 10 8.3 Plan Not an Employment Contract................................ 10 8.4 Beneficiary(ies)............................................... 10 8.5 Severability................................................... 10 8.6 Binding Effect................................................. 10 8.7 Limitation on Liability........................................ 10 8.8 Arbitration.................................................... 10 8.9 Governing Law.................................................. 10


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BAKER HUGHES INCORPORATED
EMPLOYEE STOCK PURCHASE PLAN,
AS AMENDED AND RESTATED EFFECTIVE AS OF MARCH 5, 2003


ARTICLE 1: PURPOSE


1.1 PURPOSE. The purpose of the EMPLOYEE STOCK PURCHASE PLAN (the "Plan") of BAKER HUGHES INCORPORATED (the "Company") is to encourage and enable Eligible Employees (defined below) to voluntarily acquire proprietary interests in the Company through the ownership of the Company's Common Stock (defined below) at a favorable price and upon favorable terms and to furnish to the Eligible Employees an incentive to advance the best interests of the Company for the mutual benefit of the Eligible Employees, the Company and the Company's stockholders. The Plan is intended to qualify as an "employee stock purchase plan" under section 423 of the Code (defined below). Accordingly, the provisions of the Plan shall be construed in a manner consistent with the requirements of that Code section.


Subject to approval by the Company's stockholders, the provisions of Section 5.1 of this Plan shall become effective as of March 5, 2003.


ARTICLE 2: DEFINITIONS


2.1 DEFINITIONS.


"AFFILIATE" means any entity which is a member of (i) of the same
controlled group of corporations within the meaning of section 414(b)
of the Code, (ii) a trade or business (whether or not incorporated)
which is under common control (within the meaning of section 414(c) of
the Code), or (iii) an affiliated service group (within the meaning of
section 414(m) of the Code) with the Company.


"BENEFICIARY" or "BENEFICIARIES" shall be as determined pursuant to the
provisions of Section 8.4.


"BOARD" means the Board of Directors of the Company.


"CODE" means the Internal Revenue Code of 1986, as amended. References
to sections of the Code shall include the regulations issued
thereunder.


"COMMITTEE" means the Administrative Committee that may be appointed by
the Compensation Committee of the Board as a Plan Administrator.


"COMMON STOCK" means the $1 par value common stock of the Company.


"COMPANY" means Baker Hughes Incorporated, a Delaware corporation.


"COMPENSATION COMMITTEE" means the Compensation Committee of the Board.


"DATE OF EXERCISE" means, for each Option Period, the last day that the
principal securities exchange on which the Common Stock is listed is
open for trading.


"DATE OF GRANT" means the date on which Options are granted, as such
date is determined by the Board or the Compensation Committee.


"ELIGIBLE COMPENSATION" means a Participant's base salary or wages
measured on an annual basis (as defined in section 3401(a) of the Code
for purposes of federal income tax withholding) from the Company,
modified by including any portion thereof that such Participant could
have received in cash in lieu of (i) any deferrals made by the
Participant pursuant to the Baker Hughes Incorporated Supplemental
Retirement Plan or (ii) elective contributions made on his behalf by
the Company pursuant to a qualified cash or deferred arrangement
described in section 401(k) of the Code and any elective contributions
under a cafeteria plan described in section 125, and modified further
by excluding any bonus, incentive compensation,


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commissions, expense reimbursements or other expense allowances, fringe
benefits (cash and noncash), moving expenses, deferred compensation
(other than elective contributions to the Company's qualified cash or
deferred arrangement described in section 401(k) of the Code), welfare
benefits as defined in ERISA, overtime pay, special performance
compensation amounts and severance compensation.


"ELIGIBLE EMPLOYEE" means each Employee who is scheduled to work at
least 20 hours per pay period during the Option Period and is an
Employee at the beginning of the Option Period; provided, that the
following Employees shall not be eligible to participate in the Plan:


(i) an Employee who is a citizen of a foreign country that
prohibits foreign corporations from granting stock options to
any of its citizens; and


(ii) an Employee if such Employee, immediately after the
Option is granted, owns stock (as defined by sections
423(b)(3) and 424(d) of the Code) possessing 5% or more of the
total combined voting power or value of all classes of stock
of the Company or of a subsidiary.


"EMPLOYEE" means each individual employed by an Employer.


"EMPLOYER" means the Company and each entity that has adopted the Plan
pursuant to the provisions of Article 7.


"ESPP ACCOUNT" means the individual account established by the ESPP
Administrator for each Participant in the Plan.


"ESPP ADMINISTRATOR" means the stock brokerage or other financial
services firm designated or approved by the Plan Administrator to hold
shares purchased under the Plan for the ESPP Accounts of Participants.


"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any successor act.


"FAIR MARKET VALUE" means the per share price of the last sale of the
Common Stock on the "composite tape" on the trading day prior to the
date on which the value is being determined. The "composite tape" is
the composite transactions in the Common Stock as reported by The Wall
Street Journal.


"OPTION" means an option to purchase shares of Common Stock under the
terms and provisions of the Plan.


"OPTION PERIOD" means the 12-month period commencing on January 1 of
each calendar year, unless the Board or the Compensation Committee
changes the duration of the Option Period with respect to future
Options, and except as modified by Sections 3.3(c)(2) and 3.3(c)(4). An
Option Period may not exceed 27 months.


"OPTION PRICE" means the price per share to be paid by each Participant
on each exercise of his Option and shall be a sum equal to 85% of the
Fair Market Value of a share of Common Stock on the Date of Exercise or
on the Date of Grant, whichever amount is lesser, unless the Board or
the Compensation Committee changes the Option Price with respect to
future Options. Prior to the commencement of any future Option Period,
the Board or the Compensation Committee may, in lieu of the Option
Price specified in the preceding sentence, establish an Option Price
that is a sum equal to 85% (or any higher percentage) of the Fair
Market Value of a share of Common Stock on the Date of Exercise.


"PARTICIPANT" means each Eligible Employee who elects to participate in
the Plan.


"PLAN" means the Baker Hughes Incorporated Employee Stock Purchase
Plan, as amended from time to time.


"PLAN ADMINISTRATOR" means the Company, acting through its delegates.
Such delegates shall include the Administrative Committee and any
individual Plan Administrator appointed by the Board with respect to
the


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employee benefit plans of the Company and its Affiliates, each of which
shall have the duties and responsibilities assigned to it from time to
time by the Board. As used in the Plan, the term "Plan Administrator"
shall refer to the applicable delegate of the Company as determined
pursuant to the actions of the Board.


"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor statute.


2.2 NUMBER AND GENDER. Wherever appropriate herein, words used in the singular shall be considered to include the plural and words used in the plural shall be considered to include the singular. The masculine gender, where appearing in this Plan, shall be deemed to include the feminine gender.


2.3 HEADINGS. The headings of Articles and Sections herein are included solely for convenience and if there is any conflict between such headings and the text of the Plan, the text shall control.


ARTICLE 3: ELIGIBILITY AND PARTICIPATION


3.1 ELIGIBILITY. All Eligible Employees shall be eligible to participate in the Plan for an Option Period, provided that the Eligible Employee's employment with an Employer continues uninterrupted throughout the Option Period. A transfer between or among Employers shall not be treated as an interruption of the Eligible Employee's employment.


3.2 PARTICIPATION.


(a) ELECTION TO PARTICIPATE. An Eligible Employee shall become a
Participant after satisfying the eligibility requirements and
delivering to the Plan Administrator during the enrollment period
established by the Plan Administrator an enrollment form that (1)
indicates the Eligible Employee's election to participate in the Plan
as of the next following Date of Grant; (2) authorizes the payroll
deduction and states the amount to be deducted regularly from the
Participant's Eligible Compensation and to be accrued under the Plan
for his benefit; and (3) authorizes the purchase of the Common Stock at
the end of the Option Period. The effective date of a Participant's
participation shall be the Date of Grant following the Plan
Administrator's receipt of the Participant's authorization. The
procedure established by the Plan Administrator for an Eligible
Employee to enroll in the Plan may be through any written form or any
telephonic, electronic mail, intranet, internet or any other electronic
process established by the Plan Administrator from time to time.


(b) CONTINUING ELECTION. A Participant's election to participate in the
Plan with respect to an Option Period shall continue for each
successive Option Period at the same payroll deduction percentage as in
effect at the termination of the prior Option Period unless the
Participant amends or cancels his participation pursuant to Section
3.2(d).


(c) PAYROLL DEDUCTIONS. Each Participant will designate in his
participation election the stated amount to be deducted from his
Eligible Compensation on each payday. A Participant may elect to have
deducted from 1% to 10% of his Eligible Compensation, or such other
percentages as the Committee may from time to time determine. A
Participant's percentage deduction election must be in whole
percentages, and a Participant's payroll deductions for the entire
Option Period are based on his Eligible Compensation at the beginning
of the Option Period. The stated amount may not be less than a sum that
will result in the payment into the Plan of at least $5.00 each payday.
The stated amount may not exceed either of (1) 10% of the amount of
Eligible Compensation (or such other maximum percentage as determined
by the Committee), or (2) an amount which will result in noncompliance
with the $25,000 statutory limitation described in Section 4.2.


Participant payroll deductions are maintained by the Company
as an accrual for the benefit of the Participant until the Date of
Exercise.


(d) CHANGES IN PAYROLL DEDUCTIONS. By delivering to the Plan
Administrator a new written payroll deduction authorization form, a
Participant may amend the stated amount of his payroll deduction to
reduce the rate of his payroll deductions at any time during an Option
Period. A Participant's payroll deduction designation rate may not be
increased during an Option Period. The new payroll deduction rate will
become


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effective for the next payroll period, pr ...