<SUBMISSION>
<ACCESSION-NUMBER>0000950129-06-004763
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>10
<PERIOD>20060331
<FILING-DATE>20060502
<DATE-OF-FILING-DATE-CHANGE>20060502
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>BAKER HUGHES INC
<CIK>0000808362
<ASSIGNED-SIC>3533
<IRS-NUMBER>760207995
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-09397
<FILM-NUMBER>06800451
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>3900 ESSEX LANE
<CITY>HOUSTON
<STATE>TX
<ZIP>77027
<PHONE>7134398600
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>3900 ESSEX LAND
<CITY>HOUSTON
<STATE>TX
<ZIP>77210
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>h35481e10vq.htm
<DESCRIPTION>BAKER HUGHES INCORPORATED - 3/31/2006
<TEXT>
<HTML>
<HEAD>
<TITLE>e10vq</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>Form&nbsp;10-Q</B>
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD align="Center"></TD>
    <TD align="center"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD align="center"><B>QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt; margin-center: 12%"><B>For the quarterly period ended March&nbsp;31, 2006
</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">OR
</DIV>

<DIV align="center">
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%" style="font-size: 12pt">
<TR style="font-size: 6pt">
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="95%">&nbsp;</TD>
</TR>
<TR valign="top">
    <TD></TD>
    <TD align="center"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD align="center"><B>TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934</B></TD>
</TR>
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Commission
File Number 1-9397</B></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>Baker Hughes Incorporated</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact name of registrant as specified in its charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><b>Delaware</B><BR>
(State or other jurisdiction<BR>
of incorporation or organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>76-0207995</B><BR>
(I.R.S. Employer Identification No.)</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>3900 Essex Lane, Suite&nbsp;1200, Houston, Texas</B><BR>
(Address of principal executive offices)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>77027-5177</B><BR>
(Zip Code)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Registrant&#146;s
telephone number, including area code: <B>(713)&nbsp;439-8600</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Indicate by check mark whether the registrant (1)&nbsp;has filed all reports required to be filed by Section&nbsp;13 or 15(d) of the Securities<BR>
Exchange Act of 1934 during the preceding 12&nbsp;months (or for such shorter period that the registrant was required to file such reports), and (2)<BR>
has been subject to such filing requirements for the past 90&nbsp;days. YES <FONT face="Wingdings">&#254;</FONT> NO <FONT face="Wingdings">&#111;</FONT>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Large accelerated filer <FONT face="Wingdings">&#254;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accelerated filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Non-accelerated filer <FONT face="Wingdings">&#111;</FONT></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate
by check mark whether the registrant is a shell company (as defined in Rule&nbsp;12b-2 of
the Exchange Act). YES <FONT style="font-family: wingdings">&#111;</FONT> NO <FONT style="font-family: wingdings">&#254;</FONT>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">As of
April&nbsp;28, 2006, the registrant has outstanding 340,762,226 shares of Common Stock, $1 par value per share.
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">







<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">INDEX
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Page No.</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">PART I &#151; FINANCIAL INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">Item&nbsp;1. Financial Statements (unaudited)</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#103">Consolidated Condensed Statements of Operations &#151; Three months ended March&nbsp;31, 2006 and 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#104">Consolidated Condensed Balance Sheets &#151; March&nbsp;31, 2006 and December&nbsp;31, 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#105">Consolidated Condensed Statements of Cash Flows &#151; Three months ended March&nbsp;31, 2006 and 2005</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#106">Notes to Consolidated Condensed Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">Item&nbsp;2. Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">Item&nbsp;3. Quantitative and Qualitative Disclosures About Market Risk</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">Item&nbsp;4. Controls and Procedures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">PART II &#151; OTHER INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">Item&nbsp;1. Legal Proceedings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">Item&nbsp;1A. Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">Item&nbsp;2. Unregistered Sales of Equity Securities and Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">Item&nbsp;3. Defaults Upon Senior Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">Item&nbsp;4. Submission of Matters to a Vote of Security Holders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">Item&nbsp;5. Other Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117">Item&nbsp;6. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#118">Signatures</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h35481exv2w1.htm">Master Sales Agreement</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h35481exv3w2.htm">Bylaws</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h35481exv10w1.htm">Annual Incentive Compensation Plan</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h35481exv31w1.htm">Certification of CEO pursuant to Rule 13a-14a</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h35481exv31w2.htm">Certification of CFO pursuant to Rule 13a-14a</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h35481exv32.htm">Statement of CEO and CFO pursuant to Rule 13a-14b</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h35481exv99w1.htm">Press Release dated April 28, 2006</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="h35481exv99w2.htm">Press Release dated April 27, 2006</A></FONT></TD></TR>
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">1
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<!-- /TOC -->
</DIV>
<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>PART I &#151; FINANCIAL INFORMATION</B>
</DIV>

<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1. FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated</B>
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Consolidated Condensed Statements of Operations</B></DIV>


<DIV align="center" style="font-size: 10pt"><I>(In millions, except per share amounts)</I></DIV>


<DIV align="center" style="font-size: 10pt"><I>(Unaudited)</I></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,062.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,642.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Costs and expenses:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cost of revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,349.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,155.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">272.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total costs and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,621.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,376.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">440.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">266.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity in income of affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">48.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(18.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from continuing operations before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">479.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(160.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(91.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">178.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from discontinued operations, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">339.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">179.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.06</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash dividends per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.13</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.115</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to consolidated condensed financial statements.
</DIV>



<P align="center" style="font-size: 10pt">2
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated</B>
</DIV>

<DIV align="left">
<A name="104"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Consolidated Condensed Balance Sheets</B></DIV>


<DIV align="center" style="font-size: 10pt"><I>(In millions)</I></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Audited)</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">ASSETS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current Assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">558.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">697.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short&#151;term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts receivable, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,789.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,673.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,214.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,126.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">181.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assets of discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,901.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,840.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investments in affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">720.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">678.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,412.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,355.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,335.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,315.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Intangible assets, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">193.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">463.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">453.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,026.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,807.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px">LIABILITIES AND STOCKHOLDERS&#146; EQUITY</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current Liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">580.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">558.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short&#151;term borrowings and current portion of long&#151;term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued employee compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">424.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">141.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Liabilities of discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,302.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,360.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long&#151;term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,077.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,078.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred income taxes and other tax liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">258.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">228.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pensions and postretirement benefit obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">336.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; Equity:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital in excess of par value</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,242.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,293.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Retained earnings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,558.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,263.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(188.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(188.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unearned compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,953.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,697.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,026.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,807.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to consolidated condensed financial statements.
</DIV>



<P align="center" style="font-size: 10pt">3
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated</B>
</DIV>

<DIV align="left">
<A name="105"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Consolidated Condensed Statements of Cash Flows</B></DIV>


<DIV align="center" style="font-size: 10pt"><I>(In millions)</I></DIV>


<DIV align="center" style="font-size: 10pt"><I>(Unaudited)</I></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">318.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">178.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile income from continuing operations to
net cash flows from operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">92.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of net deferred gains on derivatives</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock&#151;based compensation costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Acquired in&#151;process research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Provision for deferred income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain on disposal of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(11.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Equity in income of affiliates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(48.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(20.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Changes in operating assets and liabilities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(77.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(65.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Inventories</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(79.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(36.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(8.3</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Accrued employee compensation and other current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(151.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(102.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash flows from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash flows from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash flows from operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from investing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expenditures for capital assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(159.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(85.6</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition of businesses, net of cash acquired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(55.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of short&#151;term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(78.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from maturities of short&#151;term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">71.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of business</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from disposal of assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash flows from investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(146.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(65.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from financing activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net repayments of short&#151;term debt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(50.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repurchase of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(90.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(44.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(38.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Excess tax benefits from stock&#151;based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net cash flows from financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(102.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(28.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of foreign exchange rate changes on cash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Decrease in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(138.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(32.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">697.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">319.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents, end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">558.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">286.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">80.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">52.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35.1</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">See accompanying notes to consolidated condensed financial statements.
</DIV>



<P align="center" style="font-size: 10pt">4
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated</B></DIV>

<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Notes to Consolidated Condensed Financial Statements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 1. GENERAL</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Nature of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Baker Hughes Incorporated (&#147;we,&#148; &#147;our&#148; or &#147;us&#148;) is engaged in the oilfield services industry.
We are a major supplier of wellbore related products and technology services and systems to the
worldwide oil and natural gas industry and provide products and services for drilling, formation
evaluation, completion and production of oil and natural gas wells.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Basis of Presentation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our unaudited consolidated condensed financial statements included herein have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly,
certain information and disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or omitted. We
believe that the presentations and disclosures herein are adequate to make the information not
misleading. The unaudited consolidated condensed financial statements reflect all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation of the interim
periods. These unaudited consolidated condensed financial statements should be read in conjunction
with our audited consolidated financial statements included in our Annual Report on Form&nbsp;10&#151;K for
the year ended December&nbsp;31, 2005. The results of operations for the interim periods are not
necessarily indicative of the results of operations to be expected for the full year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the notes to the unaudited consolidated condensed financial statements, all dollar and
share amounts in tabulations are in millions of dollars and shares, respectively, unless otherwise
indicated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2. STOCK&#151;BASED COMPENSATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On January&nbsp;1, 2006, we adopted Statement of Financial Accounting Standards (&#147;SFAS&#148;) No.&nbsp;123 &#151;
Revised 2004,<I> Share&#151;Based Payment</I> (&#147;SFAS 123(R)&#148;), which establishes accounting for equity
instruments exchanged for employee services. SFAS 123(R) is a
revision of SFAS No.&nbsp;123, <I>Accounting
for Stock-Based Compensation</I> (&#147;SFAS 123&#148;), and
supersedes APB No.&nbsp;25, <I>Accounting for Stock Issued
to Employees</I> (&#147;APB 25&#148;). Under the provisions of SFAS 123(R), stock-based compensation cost is
measured at the date of grant, based on the calculated fair value of the award, and is recognized
as expense over the employee&#146;s service period, which is generally the vesting period of the equity
grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prior to January&nbsp;1, 2006, we accounted for stock-based compensation to employees under the
intrinsic value method in accordance with APB 25, as permitted under SFAS 123. Under this method,
compensation cost was recognized for the difference between the quoted market price on the date of
grant, less the amount, if any, the employee was required to pay for the common stock.
Accordingly, we did not recognize compensation cost for our stock option awards or our employee
stock purchase plan because we issue options at exercise prices equal to the market value of our
stock on the date of grant and because our employee stock purchase plan was noncompensatory. We
did record compensation cost for our restricted stock awards and restricted stock units.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SFAS 123(R) also clarified the accounting in SFAS 123 related to estimating the service period
for employees that are or become retirement eligible during the vesting period, requiring that the
recognition of compensation expense for these employees be accelerated. This impacts the timing of
expense recognition, but not the total expense to be recognized over the vesting period. In the
first quarter of 2005, we adopted this new methodology on a prospective basis. The cumulative
effect of this clarification was $11.8&nbsp;million, net of tax, and related only to stock option
awards. We have included this amount in our pro forma disclosure for stock-based compensation
costs for the three months ended March&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
adopted SFAS 123(R) using the modified prospective application method and, accordingly, no
prior periods have been restated. Under this method, compensation cost recognized during the three
months ended March&nbsp;31, 2006 include: (a)&nbsp;compensation cost for all stock-based payments granted
prior to, but not yet vested as of January&nbsp;1, 2006, based on the grant-date fair value estimated in
accordance with the original provisions of SFAS 123, and (b)&nbsp;compensation cost for all stock-based
payments granted after January&nbsp;1, 2006, based on the grant-date fair value estimated in accordance
with SFAS 123(R). Additionally, compensation cost is recognized based on awards ultimately
expected to vest, therefore, we have reduced the cost for estimated forfeitures based on historical
forfeiture rates. SFAS 123(R) requires forfeitures to be estimated at the time of grant and
revised, if necessary, in subsequent periods to reflect actual forfeitures. As a result of the
adoption of SFAS 123(R), the balance in unearned compensation recorded in stockholders&#146; equity as
of January&nbsp;1, 2006, of $12.4&nbsp;million, net of tax, was reclassified to and reduced the balance of
additional paid in capital.
</DIV>

<P align="center" style="font-size: 10pt">5
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated<BR>
Notes to Consolidated Condensed Financial Statements (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes stock&#151;based compensation costs recognized under SFAS 123(R)
for the three months ended March&nbsp;31, 2006 and under APB 25 for three months ended March&nbsp;31, 2005.
There were no stock&#151;based compensation costs capitalized as the amounts were not material.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of sales</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock&#151;based compensation costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock&#151;based compensation costs, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The application of SFAS 123(R) had the following effect on the as reported amounts for the
three months ended March&nbsp;31, 2006 compared to amounts that would have been reported using the
intrinsic value method pursuant to our previous accounting:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Intrinsic</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Value</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>SFAS 123(R)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Method</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As Reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Effect</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(APB 25)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from continuing operations before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">479.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">486.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">324.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.95</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.01</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted earnings per share:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income from continuing operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.95</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.01</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">109.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">115.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(102.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(108.7</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">6
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated<BR>
Notes to Consolidated Condensed Financial Statements (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we had recognized compensation expense during the three months ended March&nbsp;31, 2005 by
applying the fair value based method to all awards as provided for under SFAS&nbsp;123, our pro
forma net income, earnings per share (&#147;EPS&#148;) and stock&#151;based compensation costs would have been as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Three Months</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31, 2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income, as reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">179.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Add: Stock&#151;based compensation for restricted stock awards and units
included in reported net income, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deduct: Stock&#151;based compensation determined under SFAS 123, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(17.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">163.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic EPS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.48</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Diluted EPS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">As reported</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.53</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Pro forma</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.48</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For our stock options and restricted stock awards and units, we currently have 39.0&nbsp;million
shares authorized for issuance and as of March&nbsp;31, 2006, approximately 10.9&nbsp;million shares were
available for future grants. Our policy is to issue new shares for exercises of stock options;
vesting of restricted stock awards and units; and issuances under the employee stock purchase plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Stock Options</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our stock option plans provide for the issuance of incentive and non&#151;qualified stock options
to directors, officers and other key employees at an exercise price equal to the fair market value
of the stock at the date of grant. Substantially all of the stock options become exercisable in
three equal annual installments, beginning a year from the date of grant, and generally expire ten years
from the date of grant. The stock option plans provide for the acceleration of vesting upon the
employee&#146;s retirement. Therefore, we reduced the service period for employees that are or will
become retirement eligible during the vesting period and, accordingly, the recognition of
compensation expense for these employees will be accelerated. Compensation cost related to stock
options is recognized on a straight-line basis over the vesting or service period and is net of
forfeitures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fair value of each stock option granted is estimated on the date of grant using a
Black-Scholes option pricing model. The following table presents the weighted-average assumptions
used in the option pricing model for the three months ended March&nbsp;31, 2006 and 2005. The expected
life of the options represents the period of time the options are expected to be outstanding. For
the three months ended March&nbsp;31, 2005, the expected life was based on historical trends. For the
three months ended March&nbsp;31, 2006, the expected life is based on
our historical exercise trends and
post-vest termination data incorporated into a forward looking stock price model. For the three
months ended March&nbsp;31, 2005, our expected volatility is based on the historical volatility of our
stock for a period approximating the expected life. For the three months ended March&nbsp;31, 2006, as
allowed under Staff Accounting Bulletin 107 (&#147;SAB 107&#148;), the expected volatility is based on our
implied volatility, which is the volatility forecast that is implied by the prices of our actively
traded options to purchase our stock observed in the market. The risk-free interest rate is based
on the observed U.S. Treasury yield curve in effect at the time the options were granted. The
dividend yield is based on our history of dividend payouts.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Actual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Pro forma</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected life (years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>.5</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk&#151;free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4</TD>
    <TD nowrap>.5%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3</TD>
    <TD nowrap>.5%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">29</TD>
    <TD nowrap>.4%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">35</TD>
    <TD nowrap>.3%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>.7%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1</TD>
    <TD nowrap>.1%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted&#151;average fair value per share at grant date</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">23</TD>
    <TD>.78</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11</TD>
    <TD>.95</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">7
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated<BR>
Notes to Consolidated Condensed Financial Statements (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A summary of our stock option activity and related information is presented below (in
thousands, except per option prices):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted&#151;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise Price</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per Option</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,575</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">38.84</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">303</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(888</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.50</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(147</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41.96</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">42.02</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the three months ended March&nbsp;31, 2006, the total intrinsic value of stock options (defined
as the amount by which the market price of the underlying stock on the date of exercise exceeds the
exercise price of the option) exercised was $33.1&nbsp;million and the income tax benefit realized from
stock options exercised was $7.5&nbsp;million. As of March&nbsp;31, 2006, there was $14.1&nbsp;million of total
unrecognized compensation cost related to nonvested stock options. That cost is expected to be
recognized over a weighted&#151;average period of 1.4&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table summarizes information about stock options outstanding as of March&nbsp;31,
2006 (in thousands, except per option prices and remaining life):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Exercisable</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted&#151;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Contractual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Life</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise Price</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Range of Exercise Prices</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(In years)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per Option</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per Option</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">

<TD><DIV style="margin-left:30px; text-indent:-15px">$&nbsp;&nbsp;8.80
&#151;  $19.13</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15.73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15.73</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;&nbsp;20.41  &#151;  &nbsp;&nbsp;29.25</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.17</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">644</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26.17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;&nbsp;30.25  &#151;  &nbsp;&nbsp;35.88</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,217</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33.91</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;&nbsp;36.00  &#151;  &nbsp;&nbsp;47.81</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">993</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44.16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;&nbsp;56.21  &#151;  &nbsp;&nbsp;75.06</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">949</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,843</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">42.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">35.95</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate intrinsic value of stock options outstanding at March&nbsp;31, 2006 was $127.8
million, of which $80.3&nbsp;million relates to awards vested and exercisable and $47.5&nbsp;million relates
to awards expected to vest. The intrinsic value for stock options
outstanding is calculated as the amount by which the quoted price of our common stock as of
March&nbsp;31, 2006 exceeds the exercise price of the option.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Restricted Stock Awards and Units</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to stock options, officers, directors and key employees may be granted restricted
stock awards (&#147;RSA&#148;), which is an award of common stock with no exercise price or restricted stock
units (&#147;RSU&#148;), where each unit represents the right to receive at the end of a stipulated period
one unrestricted share of stock with no exercise price. RSAs and RSUs are subject to cliff or
graded vesting, generally ranging over a three to five year period. We determine the fair value of
restricted stock awards and restricted stock units based on the market price of our common stock on
the date of grant. Compensation cost for RSAs and RSUs is recognized on a straight-line basis over
the vesting or service period and is net of forfeitures.
</DIV>

<P align="center" style="font-size: 10pt">8
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated<BR>
Notes to Consolidated Condensed Financial Statements (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A summary of our RSA and RSU activity and related information is presented below (in
thousands, except per share/unit prices):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted&#151;</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>RSA</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>RSU</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair Value</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fair Value</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per Share</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Units</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per Unit</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested balance at December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">42.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">42.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">73</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75.06</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(188</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39.70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(26</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nonvested balance at March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">54.25</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">61.90</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The total grant&#151;date fair value of RSA&#146;s and RSU&#146;s vested during the three months ended March
31, 2006 was $8.6&nbsp;million. As of March&nbsp;31, 2006, there was $33.4&nbsp;million and $6.8&nbsp;million of total
unrecognized compensation cost related to nonvested RSAs and RSUs, respectively. That cost is
expected to be recognized over a weighted&#151;average period of 2.6&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Employee
Stock Purchase Plan</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Employee Stock Purchase Plan (&#147;ESPP&#148;) allows eligible employees to purchase shares of our
stock at 85% of market value on the first or last business day, whichever is lower, of the 2006
calendar year. Purchases are limited to 10% of an employee&#146;s regular salary. We currently have
14.5&nbsp;million shares authorized for issuance under the ESPP and at March&nbsp;31, 2006, there were 3.4
million shares reserved for future issuance under the ESPP. Compensation expense determined under
SFAS 123(R) for the three months ended March&nbsp;31, 2006 was calculated using the Black-Scholes option
pricing model with the following assumptions:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Actual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Pro forma</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected life (years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>.0</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4</TD>
    <TD nowrap>.4%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2</TD>
    <TD nowrap>.7%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">28</TD>
    <TD nowrap>.0%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">26</TD>
    <TD nowrap>.6%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0</TD>
    <TD nowrap>.9%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1</TD>
    <TD nowrap>.1%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted&#151;average fair value per share at grant date</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7</TD>
    <TD>.68</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4</TD>
    <TD>.76</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We calculated estimated volatility using historical daily prices based on the expected life of
the stock purchase plan. The risk-free interest rate is based on the observed U.S. Treasury yield
curve in effect at the time the ESPP shares were granted. The dividend yield is based on our
history of dividend payouts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 3. DISCONTINUED OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the fourth quarter of 2005, our management initiated and our Board of Directors approved a
plan to sell the Baker Supply Products Division (&#147;Baker SPD&#148;), a product line group within the
Completion and Production segment, which distributes basic supplies, products and small tools to
the drilling industry. In March&nbsp;2006, we completed the sale of Baker SPD and received cash
proceeds of $42.5&nbsp;million. We recorded a gain on the sale of $19.2&nbsp;million, net of tax of $11.0
million, which consisted of an after-tax gain on the disposal of
$16.9&nbsp;million and
$2.3&nbsp;million related to the recognition of the cumulative foreign currency translation adjustments.
We have reclassified our consolidated condensed financial statements for all prior periods
presented to reflect Baker SPD as a discontinued operation.
</DIV>

<P align="center" style="font-size: 10pt">9
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated<BR>
Notes to Consolidated Condensed Financial Statements (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Summarized financial information for Baker SPD is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.8</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income before gain on sale</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gain on sale, net of tax</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Income from discontinued operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">20.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 4. ACQUISITION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2006, we acquired Nova Technology Corporation (&#147;Nova&#148;) for $58.4&nbsp;million in cash
plus assumed debt. Nova is a leading supplier of permanent monitoring, chemical injection systems,
and multi&#151;line services for deepwater and subsea oil and gas well applications and is included in
the Production Optimization business unit of the Completion and Production segment. As a result of
the acquisition, we recorded $29.7&nbsp;million of goodwill and $24.3&nbsp;million of intangibles. We also
assigned $2.6&nbsp;million to in&#151;process research and development that was written off at the date of
acquisition. This write&#151;off is included in research and development expenses, which are included
in cost of revenues in the consolidated condensed statement of operations. The purchase price was
allocated based on the fair value of the assets acquired and liabilities assumed of Nova. The fair
values were determined using a discounted cash flow approach. Pro forma results of operations have
not been presented because the effect of this acquisition was not material to our consolidated
condensed financial statements. Under the terms of the purchase agreement, the former owners of
Nova are entitled to additional purchase price consideration of up to $3.0&nbsp;million based on certain
post closing events.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 5. COMPREHENSIVE INCOME (LOSS)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Comprehensive income (loss)&nbsp;includes all changes in equity during a period except those
resulting from investments by and distributions to owners. The components of our comprehensive
income (loss), net of related tax, are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">339.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">179.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other comprehensive income (loss):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Foreign currency translation adjustments:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Translation adjustments during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.9</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Reclassifications included in net income due to sale of Baker SPD</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(2.3</TD>
    <TD>)&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total comprehensive income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">338.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">161.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total accumulated other comprehensive loss consisted of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Foreign currency translation adjustments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(117.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(117.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pension adjustment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(69.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(69.5</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(1.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total accumulated other comprehensive loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(188.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(188.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">10
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated<BR>
Notes to Consolidated Condensed Financial Statements (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 6. EARNINGS PER SHARE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A reconciliation of the number of shares used for the basic and diluted EPS calculation is as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted average common shares outstanding for basic EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">341.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">337.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of dilutive securities &#151; stock plans</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjusted weighted average common shares outstanding for diluted EPS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">342.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">339.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Future potentially dilutive shares excluded from diluted EPS:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Options with an exercise price greater than average market price
for the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 7. INVENTORIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories are comprised of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Finished goods</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">969.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">914.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Work in process</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Raw materials</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">77.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,214.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,126.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 8. PROPERTY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Property is comprised of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Land</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">39.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">39.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Buildings and improvements</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">623.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">611.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Machinery and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,084.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,022.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Rental tools and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,209.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,157.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total property</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,956.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,831.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,544.0</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,475.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Property &#151; net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,412.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,355.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 9. GOODWILL AND INTANGIBLE ASSETS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The changes in the carrying amount of goodwill are detailed below by segment:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Drilling</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Completion</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Evaluation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Production</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">904.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">411.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,315.8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Goodwill from acquisitions during the period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Adjustments to final purchase price of previous acquisition</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Translation adjustments and other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">904.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">430.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,335.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="13" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">11
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated<BR>
Notes to Consolidated Condensed Financial Statements (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets are comprised of the following:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>March 31, 2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>December 31, 2005</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Gross</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortization</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amortization</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Net</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Technology based</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">227.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(75.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">151.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">204.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(71.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">133.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contract based</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Marketing related</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5.6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Customer based</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.8</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total amortizable intangible assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">261.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(88.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(84.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">145.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Marketing related intangible assets
with an indefinite useful life</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">281.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(88.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">193.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">247.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(84.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">163.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Intangible assets are amortized either on a straight&#151;line basis with estimated useful lives
ranging from 1 to 20&nbsp;years, or on a basis that reflects the pattern in which the economic benefits
of the intangible assets are consumed, which range from 15 to 30&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization expense for intangible assets included in net income for the three months ended
March&nbsp;31, 2006 was $5.4&nbsp;million and is estimated to be $20.3&nbsp;million for 2006. Estimated
amortization expense for each of the subsequent five fiscal years is expected to be within the
range of $12.0&nbsp;million to $18.4&nbsp;million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 10. FINANCIAL INSTRUMENTS</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Foreign Currency Forward Contracts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2006, we had entered into several foreign currency forward contracts with
notional amounts aggregating $55.0&nbsp;million to hedge exposure to currency fluctuations in various
foreign currencies, including the British Pound Sterling, the Norwegian Krone and the Euro. These
contracts are designated and qualify as fair value hedging instruments. Based on quoted market
prices as of March&nbsp;31, 2006 for contracts with similar terms and maturity dates, we recorded a gain
of $0.3&nbsp;million to adjust these foreign currency forward contracts to their fair market value.
This gain offsets designated foreign exchange losses resulting from the underlying exposures and is
included in selling, general and administrative expense in our consolidated condensed statement of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Commodity Swaps</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2006, we had entered into swap agreements for 4.5&nbsp;million pounds of copper to
reduce our exposure to fluctuations in the price of copper. These contracts mature over the
remainder of 2006. The swap agreements were not designated as hedging instruments for accounting
purposes. Based on quoted market prices as of March&nbsp;31, 2006 for contracts with similar terms and
maturity dates, we recorded a gain of $1.0&nbsp;million to adjust these contracts to their fair market
value. This gain is included in cost of revenues in our consolidated condensed statement of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 11. SEGMENT AND RELATED INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have organized our seven product-line focused divisions into two segments: the Drilling and
Evaluation segment, which consists of the Baker Atlas, Baker Hughes Drilling Fluids, Hughes
Christensen and INTEQ divisions, and the Completion and Production segment, which consists of the
Baker Oil Tools, Baker Petrolite and Centrilift divisions. The Completion and Production segment
also includes our Production Optimization business unit. Our segments are aligned based on the
types of products and services provided to our customers, to provide additional focus on our
product lines and technology and to be able to more effectively serve our customers.
</DIV>

<P align="center" style="font-size: 10pt">12
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated<BR>
Notes to Consolidated Condensed Financial Statements (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accordingly, we are reporting our results under three segments; Drilling and Evaluation,
Completion and Production and WesternGeco, a seismic venture in which, as of March&nbsp;31, 2006, we
owned 30% and Schlumberger Limited (&#147;Schlumberger&#148;) owned 70%, which is accounted for using the
equity method of accounting. Divisions in the Drilling and Evaluation segment generally provide
services and products used directly in the drilling and formation evaluation of oil and natural gas
wells. Divisions in the Completion and Production segment provide services and products used to
complete wells, rework existing wells and enhance or initiate production from new wells. We have
aggregated the divisions within each segment because they have similar economic characteristics and
because the long-term financial performance of these divisions is affected by similar economic
conditions. They also operate in the same markets, which includes all of the major oil and natural
gas producing regions of the world. The results of each segment are evaluated regularly by our
chief operating decision maker in deciding how to allocate resources and in assessing performance.
We sold our 30% minority interest in WesternGeco on April&nbsp;28, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The performance of our segments is evaluated based on segment profit (loss), which is defined
as income from continuing operations before income taxes and interest income and expense.
Summarized financial information is shown in the following table. The &#147;Corporate and Other&#148; column
includes corporate&#151;related items, results of insignificant operations and, as it relates to
segment profit (loss), income and expense not allocated to the segments. The &#147;Corporate and Other&#148;
column also includes assets of discontinued operations as of December&nbsp;31, 2005.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Drilling</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Completion</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Corporate</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Evaluation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Production</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>WesternGeco</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Oilfield</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>and Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Revenues</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three months ended
March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,084.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">977.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,062.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,062.0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three months ended
March&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">839.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">803.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,642.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,642.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Segment profit (loss)</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three months ended
March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">280.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">207.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">47.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">535.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(56.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">479.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Three months ended
March&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">158.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">151.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">329.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(59.1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">270.2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="25" align="left" style="border-top: 0px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>Total assets</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As of March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,403.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,120.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">729.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,253.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">772.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,026.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">As of December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,221.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,882.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">688.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,792.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,014.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,807.4</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents the details of &#147;Corporate and Other&#148; segment loss:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Corporate and other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(47.3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(42.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(9.2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(16.7</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(56.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(59.1</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 12. EMPLOYEE BENEFIT PLANS</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Defined Benefit Pension Plans</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have noncontributory defined benefit pension plans (&#147;Pension Benefits&#148;) covering employees
primarily in the U.S., the United Kingdom and Germany. The components of net periodic benefit cost
are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>U.S. Pension Benefits</B></TD>
    <TD>&nbsp;</TD>

    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Non-U.S. Pension Benefits</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected return on plan assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7.9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3.4</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recognized actuarial loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic benefit cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">13
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated<BR>
Notes to Consolidated Condensed Financial Statements (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Postretirement Welfare Benefits</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We provide certain postretirement health care and life insurance benefits to substantially all
U.S. employees who retire and have met certain age and service requirements. The components of net
periodic benefit cost are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Interest cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of prior service cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Recognized actuarial loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net periodic benefit cost</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 13. GUARANTEES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the normal course of business with customers, vendors and others, we have entered into
off&#151;balance sheet arrangements, such as letters of credit and other bank issued guarantees, which
totaled approximately $334.9&nbsp;million at March&nbsp;31, 2006. None of the off&#151;balance sheet
arrangements either has, or is likely to have, a material effect on our consolidated condensed
financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We sell certain products with a product warranty that provides that customers can return a
defective product during a specified warranty period following the purchase in exchange for a
replacement product, repair at no cost to the customer or the issuance of a credit to the customer.
We accrue amounts for estimated warranty claims based upon current and historical product sales
data, warranty costs incurred and any other related information known to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The changes in the aggregate product warranty liabilities are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of December&nbsp;31, 2005</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13.4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Claims paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.9</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional warranties issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(0.2</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balance as of March&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">13.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="5" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 14. NEW ACCOUNTING STANDARDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2006, the FASB issued SFAS No.&nbsp;155, <I>Accounting for Certain Hybrid Financial
Instruments&#151;an amendment of FASB Statements No.&nbsp;133 and No.&nbsp;140 (&#147;SFAS 155&#148;)</I>. SFAS 155 amends
SFAS 133, which required that a derivative embedded in a host contract that does not meet the
definition of a derivative be accounted for separately under certain conditions. SFAS 155 amends
SFAS 133 to narrow the scope exception to strips that represent rights to receive only a portion of
the contractual interest cash flows or of the contractual principal cash flows of a specific debt
instrument. In addition, SFAS 155 amends SFAS 140, which permitted a qualifying special-purpose
entity to hold only a passive derivative financial instrument pertaining to beneficial interests
issued or sold to parties other than the transferor. SFAS 155 amends SFAS 140 to allow a
qualifying special purpose entity to hold a derivative instrument pertaining to beneficial
interests that itself is a derivative financial instrument. SFAS 155 is effective for all
financial instruments acquired or issued (or subject to a remeasurement event) following the start
of an entity&#146;s first fiscal year beginning after September&nbsp;15, 2006. We will adopt SFAS 155 on
January&nbsp;1, 2007, and we do not expect this standard to have a material impact, if any, on our
consolidated condensed financial statements.
</DIV>


<P align="center" style="font-size: 10pt">14
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Baker Hughes Incorporated<BR>
Notes to Consolidated Condensed Financial Statements (continued)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 15. INVESTMENTS IN AFFILIATES AND SUBSEQUENT EVENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have investments in affiliates that are accounted for using the equity method of
accounting. The most significant of these affiliates is WesternGeco. Summarized unaudited
operating results for WesternGeco are as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">529.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">378.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">157.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56.3</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The summarized unaudited financial position of WesternGeco is as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,195.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,083.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noncurrent assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,092.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,047.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,287.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,131.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">528.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">514.5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Noncurrent liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">88.4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84.7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,670.8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,531.9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,287.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,131.1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2004, we completed the sale of our minority interest in Petreco International, a
venture we entered into in 2001, for $35.8&nbsp;million, of which $7.4&nbsp;million was placed in escrow
pending the outcome of potential indemnification obligations pursuant to the sales agreement. We
received $3.7&nbsp;million in May&nbsp;2005 and $3.8&nbsp;million in March&nbsp;2006 from the release of the amount
held in escrow plus interest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2006, we signed an agreement to sell to Schlumberger for $2.4&nbsp;billion in cash our 30%
minority interest in WesternGeco, a seismic venture jointly owned with Schlumberger. The sale was
completed on April&nbsp;28, 2006. We expect to record a pre&#151;tax gain of approximately $1.74&nbsp;billion
(approximately $1.05&nbsp;billion, net of tax). Cash proceeds are estimated to be approximately $1.8
billion, net of tax, and include a cash distribution of $59.6&nbsp;million made immediately prior to
closing. We plan to use the net after&#151;tax cash proceeds to repurchase stock; accordingly, in
April&nbsp;2006, our Board of Directors increased our stock repurchase authorization by an additional
$1.8&nbsp;billion.
</DIV>


<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 2. MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations (&#147;MD&#038;A&#148;)
should be read in conjunction with our consolidated condensed financial statements and the related
notes thereto, as well as our Annual Report on Form&nbsp;10&#151;K for the year ended December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>EXECUTIVE SUMMARY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a leading provider of drilling, formation evaluation, completion and production
products and services to the worldwide oil and natural gas industry. We compete as one of the
three largest diversified oilfield services companies. We report our product-line focused
divisions in two separate segments: the Drilling and Evaluation segment and the Completion and
Production segment. The segments are aligned by product line based on the types of products and
services provided to our customers and on the business characteristics of the divisions during
business cycles. Activity of the businesses under the Drilling and Evaluation segment is closely
correlated to rig counts and, therefore, is prone to cyclicality as drilling activity increases or
decreases. Activity of businesses in the Completion and Production segment is more dependent on
production volumes and, therefore, is less cyclical than the Drilling and Evaluation segment.
Prior to April&nbsp;28, 2006, we owned a 30% interest in WesternGeco, a seismic venture with
Schlumberger Limited (&#147;Schlumberger&#148;). Accordingly, we report our results under three segments -
Drilling and Evaluation, Completion and Production and WesternGeco. On April&nbsp;28, 2006, we
completed the sale of our 30% minority interest in WesternGeco to Schlumberger.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Drilling and Evaluation segment consists of Baker Hughes Drilling Fluids (drilling
fluids), Hughes Christensen (oilfield drill bits), INTEQ (conventional and rotary
directional drilling, measurement-while-drilling and logging-while-drilling) and Baker
Atlas (wireline formation evaluation and wireline completion services). The Drilling and
Evaluation segment provides products and services used to drill and evaluate oil and
natural gas wells.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Completion and Production segment consists of Baker Oil Tools (workover, fishing and
completion equipment), Baker Petrolite (oilfield specialty chemicals) and Centrilift
(electric submersible pumps and progressing cavity pumps). The Completion and Production
segment also includes our Production Optimization business unit (permanent downhole
monitoring). The Completion and Production segment provides equipment and services used
from the completion phase through the productive life of oil and natural gas wells.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The WesternGeco segment consisted of our equity interest in WesternGeco.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The business operations of our divisions are organized around four primary geographic regions:
North America; Latin America; Middle East and Asia Pacific; and Europe, Africa, Russia and the
Caspian. Each region has a council comprised of regional vice presidents from each division as
well as representatives from various functions such as human resources, legal, marketing and
health, safety and environmental. The regional vice presidents report directly to each division
president. Through this structure, we have placed our management closer to the customer, improving
our customer relationships and allowing us to react more quickly to local market conditions and
needs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our headquarters are in Houston, Texas, and we have significant manufacturing operations in
various countries, including, but not limited to, the United States (Texas, Oklahoma and
Louisiana), Scotland (Aberdeen and East Kilbride), Germany (Celle), Northern Ireland (Belfast) and
Venezuela (Maracaibo). We operate in over 90 countries around the world and employ approximately
30,300 employees &#151; about one&#151;half of which work outside
the&nbsp;U.S.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter of 2006, we reported revenues of $2,062.0&nbsp;million, a 25.5 % increase
compared with the first quarter of 2005 outpacing the 17.7% increase in the worldwide average rig
count. Income from continuing operations for the first quarter of 2006 was $318.8&nbsp;million, a 78.7%
increase compared with $178.4&nbsp;million in the first quarter of 2005. The Baker Hughes worldwide rig
count continued to increase, as oil and natural gas companies around the world recognized the need
to build productive capacity to meet the growing demand for hydrocarbons and to offset depletion of
existing developed reserves. In addition to the growth in our revenues from increased activity,
our revenues and net income were impacted by pricing improvements and changes in market share in
certain product lines.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>North American revenues increased 31.1% in the first quarter of 2006 compared with the
first quarter of 2005, while the rig count increased 21.3% for the first quarter of 2006
compared with the first quarter of 2005, driven primarily by land-based drilling for
natural gas.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">16
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Latin American revenues increased 18.6% in the first quarter of 2006 compared with the
first quarter of 2005, while the Latin American rig count was flat.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Europe, Africa, Russia and the Caspian revenues increased 21.4% in the first quarter of
2006 compared with the first quarter of 2005, while the rig count increased 18.8%.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Middle East and Asia Pacific revenues were up 22.1% in the first quarter of 2006
compared with the first quarter of 2005. Revenue from the Middle East was up 17.5%
compared to a rig count, as restated below, which increased 18.9% and Asia Pacific revenue was up 27.0%
compared to a rig count which increased 11.9%.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The execution of our 2006 business plan and the ability to meet our 2006 financial objectives
are dependent on a number of factors. These factors include, but are not limited to, our ability
to: recruit, train and retain the skilled and diverse workforce necessary to meet our business
needs; realize price increases commensurate with the value we provide to our customers and in
excess of the increase in raw material and labor costs; expand our business in areas that are
growing rapidly with customers whose spending is expected to increase substantially, such as
state&#151;owned national oil companies (&#147;NOCs&#148;), and in areas where we have market share opportunities
(such as the Middle East, Russia and the Caspian region); manage increasing raw material and
component costs (especially steel alloys, copper, carbide, chemicals and electronic components);
continue to make ongoing improvements in the productivity of our manufacturing organization.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
a full discussion of risk factors and forward-looking statements,
please see &#147;Part II, Item&nbsp;1A.
Risk Factors&#148; and &#147;Forward-Looking Statements&#148; sections, both contained herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>BUSINESS ENVIRONMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business environment and its corresponding operating results are significantly affected by
the level of energy industry spending for the exploration and production (&#147;E&#038;P&#148;) of oil and natural
gas reserves. An indicator for this spending is the rig count, because when drilling and workover
rigs are active, many of the products and services provided by the oilfield services industry are
required. Our products and services are used during the drilling and workover phases, during the
completion of oil and natural gas wells and during actual production of the hydrocarbons. This E&#038;P
spending by oil and natural gas companies is, in turn, influenced strongly by expectations about
the supply and demand for oil and natural gas products and by current and expected prices for both
oil and natural gas. Rig counts, therefore, generally reflect the relative strength and stability
of energy prices.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Rig Counts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have been providing rig counts to the public since 1944. We gather all relevant data
through our field service personnel, who obtain the necessary data from routine visits to the
various rigs, customers, contractors or other outside sources. This data is then compiled and
distributed to various wire services and trade associations and is published on our website. Rig
counts are compiled weekly for the U.S. and Canada and monthly for all international and U.S.
workover rigs. Published international rig counts do not include rigs drilling in certain
locations, such as Russia, onshore China and other countries, because this information is extremely
difficult to obtain or we do not have local resources to make an accurate count.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rigs in the U.S. are counted as active if, on the day the count is taken, the well being
drilled has been started, drilling has not been completed and the well is anticipated to be of
sufficient depth, which may change from time to time and may vary from region to region, and is
expected to be a potential consumer of our drill bits. In general, rigs are counted as active if
the well has been started but has not reached its target depth, even if there are extensive delays
due to weather or other reasons. If the well has been started but not completed and the rig is
expected to resume work in two weeks or less, the rig is counted as active during a weather delay.
Rigs are not typically counted as active if the rig is lost or damaged or if drilling operations
are expected to be suspended for more than two weeks.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Rigs in Canada are counted as active if data obtained by the Canadian Association of Oilwell
Drillers and Contractors indicates that drilling operations have occurred during the week and we
are able to verify this information. In most other international areas, rigs are counted as active
if drilling operations have taken place for at least 15&nbsp;days during the month. In some active
international areas where better data is available, a weekly or daily average of active rigs is
taken. In those international areas where there is poor availability of data, the rig counts are
estimated or quoted from third party data.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The rig count does not include rigs that are in transit from one location to another, are
rigging up, are being used in non-drilling activities, including production testing, completion and
workover, or are not, in our opinion, deemed to be a potential user of our drill bits.
</DIV>

<P align="center" style="font-size: 10pt">17
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our rig counts are summarized in the table below as averages for each of the periods
indicated.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005 </B><SUP style="font-size: 85%; vertical-align: text-top"><B>1</B></SUP></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. &#151; land and inland waters</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,178</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. &#151; offshore</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">81</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Canada</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">521</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">North America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Latin America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">North Sea</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other Europe</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Africa</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Middle East</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">180</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Asia Pacific</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">211</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Outside North America</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">896</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">816</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Worldwide</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,079</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,616</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">U.S. Workover Rigs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,261</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 8pt">
<TR>
    <TD width="1%">&nbsp;</TD>
    <TD width="98">&nbsp;</TD>
</TR>

<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top"><B>1</B></SUP></TD>
    <TD>We discontinued the rig count for Iran and Sudan
effective December&nbsp;31, 2005 and have restated the Middle East rig
count for the three months ended March&nbsp;31, 2005, accordingly.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The U.S. land and inland waters rig count increased 22.3% in the first quarter of 2006
compared with the first quarter of 2005, due primarily to the increase in drilling for natural gas.
The U.S. offshore rig count decreased 19.8% in the first quarter of 2006 compared with the first
quarter of 2005, reflecting the activity disruptions caused by hurricanes in the Gulf of Mexico in
the third quarter of 2005 and the migration of mobile rigs out of the Gulf of Mexico to other
regions offering more attractive day rates. The Canadian rig count increased 26.9% due to the
increase in drilling for natural gas.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outside North America, the rig count increased 9.8% in the first quarter of 2006 compared with
the first quarter of 2005. The rig count in Latin America was flat in the first quarter of 2006
compared with the first quarter of 2005, with activity increases in Venezuela, Colombia and Brazil
offsetting decreases in Mexico. The North Sea rig count increased 55.9% in the first quarter of
2006 compared with the first quarter of 2005 with increases in all sectors, especially the UK
sector. The rig count in Africa was flat in the first quarter of 2006 compared with the first
quarter of 2005. Activity in the Middle East continued to rise with an 18.9% increase in the rig
count in the first quarter of 2006 compared with the first quarter of 2005, driven primarily by
activity increases in Saudi Arabia. The rig count in the Asia Pacific region was up 11.9% in the
first quarter of 2006 compared with the first quarter of 2005, primarily due to activity increases
in India, offshore China, Malaysia, Thailand and New Zealand.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Oil and Natural Gas Prices</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, changes in the current price and expected future prices of oil or natural gas drive
both customers&#146; expectations about their prospects from oil and natural gas sales and their
expenditures to explore for or produce oil and natural gas. Accordingly, changes in these
expenditures will normally result in increased or decreased demand for our products and services.
Oil (Bloomberg West Texas Intermediate (WTI)&nbsp;Cushing Crude Oil Spot Price) and natural gas
(Bloomberg Henry Hub Natural Gas Spot Price) prices are summarized in the table below as averages
of the daily closing prices during each of the periods indicated.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Three Months Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>March 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Oil prices ($/Bbl)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">63.34</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">49.83</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Natural gas prices ($/mmBtu)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.66</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.44</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Oil prices averaged $63.34/Bbl in the first quarter of 2006. Prices increased from $63/Bbl to
a quarter high of $68/Bbl during January. Increasing inventories resulted in a $10/Bbl decrease in
oil prices to just under $57/Bbl in mid-February, however, rising geo&#151;political tensions,
particular in regards to civil unrest in Nigeria and Iran&#146;s nuclear program, resulted in prices
rising to almost $67/Bbl by the end of the quarter. Worldwide excess productive capacity remained
at historically low levels throughout the quarter. Worldwide demand for hydrocarbons was driven by
strong worldwide economic growth, which was particularly strong in China and developing Asia.
</DIV>

<P align="center" style="font-size: 10pt">18
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the first quarter of 2006, natural gas prices averaged $7.66/mmBtu. Prices fell from
just under $10/mmBtu at the beginning of the quarter to just over $6/mmBtu in early March before
increasing to $7/mmBtu by the end of the quarter, primarily on the increase in oil prices. Winter
weather in North America was more than 10% warmer than normal (measured in population-weighted
heating-degree days) resulting in high inventories. Natural gas traded at a discount to oil
throughout the quarter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Worldwide Oil and Natural Gas Industry Outlook</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This section should be read in conjunction with the factors described in the &#147;Risk Factors
Related to the Worldwide Oil and Natural Gas Industry&#148;, &#147;Risk Factors Related to Our
Business&#148; and &#147;Forward-Looking Statements&#148; sections
contained in this Part&nbsp;I, Item&nbsp;2 and in Part&nbsp;II, Item&nbsp;1A. Risk Factors, both
contained herein. These factors could impact, either positively or negatively, our expectation for
oil and natural gas demand, oil and natural gas prices and drilling activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Oil </I>&#151; Oil prices in 2006 are expected to average between $60/Bbl and $70/Bbl and trade
between $50/Bbl and $75/Bbl. Strong worldwide economic growth and the lack of excess productive
capacity and heightened geo-political tensions are expected to support prices within this range.
Growth in oil demand is expected to increase in 2006 compared with 2005, as worldwide economic
growth and, in particular, the economy in China is expected to continue to grow in 2006. At the
beginning of March&nbsp;2006, the International Energy Agency estimated that excess productive capacity
was less than 4% of demand and that more than 60% of the excess capacity was in Saudi Arabia and
Iraq. The ongoing lack of excess productive capacity will leave the energy markets susceptible to
price volatility and the Organization of Petroleum Exporting Countries (&#147;OPEC&#148;) is unlikely to be
able to rapidly increase production should there be any significant disruptions or threat of
disruptions in oil supplies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Factors that could lead to prices at the lower end of this range include, but are not limited
to: (1)&nbsp;a significant slowing of worldwide economic growth, particularly economic growth in China;
(2)&nbsp;increases in Russian oil exports; (3)&nbsp;any significant disruption to demand; (4)&nbsp;reduced
geo&#151;political tensions or (5)&nbsp;other factors that result in excess productive capacity and higher
oil inventory levels or decreased demand. Factors that could lead to prices at the higher end of
this range include, but are not limited to: (1)&nbsp;more rapid than planned expansion of the worldwide
economy, particularly the economy in China; (2)&nbsp;a significant slowing of exports from Russia and
the inability of key exporting countries to produce additional crude; (3)&nbsp;heightened geo-political
tensions, particularly concerning Iran&#146;s nuclear program or (4)&nbsp;other factors that result in excess
productive capacity remaining at low levels. Higher inventories are expected to have significantly
less impact on oil prices than the lack of excess productive capacity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Factors that could lead to disruptions or the threat of disruptions in oil supply and
volatility in oil prices include, but are not limited to: (1)&nbsp;terrorist attacks targeting oil
production from Saudi Arabia or other key producers; (2)&nbsp;labor strikes in key oil producing areas
such as Nigeria; (3)&nbsp;the potential for other military actions in the Middle East; or (4)&nbsp;adverse
weather conditions, especially in the Gulf of Mexico. The potential for these and other events to
cause volatility will be mitigated by the degree to which OPEC and, in particular, Saudi Arabia are
able to increase excess productive capacity as well as the capability of the markets to refine and
market products refined from crude oil.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Natural Gas &#151; </I>Natural gas prices in 2006 are expected to remain volatile, averaging between
$7/mmBtu and $10/mmBtu and trade between $6/mmBtu and $15/mmBtu. Natural gas inventories were at
record high levels for the month of April&nbsp;2006. Accordingly, less natural gas will be required to
be injected to fill natural gas storage before the beginning of the 2006&#151;2007 winter heating
season. Significant factors that will impact natural gas markets during the summer injection
season include the pace of recovery of Gulf of Mexico natural gas production following 2005&#146;s
hurricanes, the possibility of additional disruptions from 2006 hurricanes and variation in summer
weather.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Natural gas prices could trade at the top, or beyond the top, of this range if: (1)&nbsp;storage
levels are relatively low at the beginning of the winter heating season; (2)&nbsp;winter weather is
colder than normal or summer weather is warmer than normal; (3)&nbsp;we experience slower than expected
restoration of hurricane damaged production facilities; or (4)&nbsp;the U.S. economy, particularly the
industrial sector, exhibits greater than expected growth and continued levels of customer spending
are not sufficient to support the production growth required to meet the growth of natural gas
demand. Natural gas prices could move to the bottom, or below the bottom, of this range if: (1)
storage levels are relatively high at the beginning of the injection season; (2)&nbsp;U.S. economic
growth is weaker than expected; or (3)&nbsp;weather is milder than expected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Customer Spending </I>- Based upon our discussions with major customers, review of published
industry reports and our outlook for oil and natural gas prices described above, anticipated
customer spending trends are as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>North America &#151; Customer spending in North America, primarily towards developing natural
gas supplies, is expected to increase approximately 21% to 25% in 2006 compared with 2005.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Outside North America &#151; Customer spending, primarily directed at developing oil supplies,
is expected to increase approximately 19% to 23% in 2006 compared with 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Total spending is expected to increase approximately 20% to 24% in 2006 compared with
2005.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Drilling Activity </I>- Based upon our outlook for oil and natural gas prices and customer
spending described above, our outlook for drilling activity, as measured by the Baker Hughes rig
count, is as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Drilling activity in North America is expected to increase approximately 15% to 17% in
2006 compared with 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Drilling activity outside of North America is expected to increase approximately 9% to
11% in 2006 compared with 2005, excluding Iran and Sudan.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risk Factors Related to the Worldwide Oil and Natural Gas Industry</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
discussion of our risk factors, see &#147;Part&nbsp;II, Item&nbsp;1A. Risk Factors&#148; section contained herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>BUSINESS OUTLOOK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This section should be read in conjunction with the factors described in the &#147;Risk Factors
Related to Our Business&#148;, &#147;Risk Factors Related to the
Worldwide Oil and Natural Gas Industry&#148; and
&#147;Forward-Looking Statements&#148; sections contained in this
Part&nbsp;I, Item&nbsp;2 and in Part&nbsp;II, Item&nbsp;1A. Risk Factors, both contained herein. These factors could impact, either
positively or negatively, our expectation for oil and natural gas demand, oil and natural gas
prices and drilling activity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our outlook for 2006, we took into account the factors described herein. Revenues in 2006
are expected to increase by approximately 23% to 25%, in line with the expected increase in
customer spending. We expect the growth in our revenues will primarily be due to increased
activity and pricing improvement. Our assumptions regarding overall growth in customer spending
assume strong economic growth in the U.S. and China, resulting in an average oil price exceeding
$50/Bbl. Our assumptions regarding customer spending in North America assume strong economic
growth in the U.S. and natural gas prices exceeding an average of $7/mmBtu.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In North America, we expect revenues to increase approximately 23% to 26% in 2006 compared
with 2005. We expect spending on land&#151;based projects to continue to increase in 2006 driven by
demand for natural gas, following the trend evident in 2005. We also expect offshore spending in
the Gulf of Mexico to increase modestly in 2006 compared with 2005. The normal weather-driven
seasonal decline in U.S. and Canadian spending in the first half of the year should result in
sequentially softer revenues in the second quarter of 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2005, 2004 and 2003, revenues outside North America were 57.6%, 58.5% and 57.9% of total
revenues, respectively. In 2006, we expect revenues outside North America to continue to be
between 55% and 60% of total revenues, and we expect these revenues to increase approximately 21%
to 24% in 2006 compared with 2005, continuing the multi-year trend of growth in customer spending.
Spending on large projects by NOCs is expected to reflect established seasonality trends, resulting
in softer revenues in the first half of the year and stronger revenues in the second half. In
addition, customer spending should be affected by weather-related reductions in the North Sea in
the second quarter of 2006. The Middle East, Africa and Latin America regions are expected to grow
modestly in 2006 compared with 2005. Our expectations for spending and revenue growth could
decrease if there are disruptions in key oil and natural gas production markets, such as Venezuela
or Nigeria.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the first quarter of 2006, WesternGeco contributed $47.9&nbsp;million of equity in income of
affiliates compared with $19.3&nbsp;million of equity in income of affiliates in the first quarter of
2005. On April&nbsp;28, 2006, we completed the sale of our 30% minority interest in WesternGeco to
Schlumberger. We expect WesternGeco will contribute an additional $9.0&nbsp;million to $13.0&nbsp;million of
equity income through the date of sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the above forecasts, we believe income from continuing operations per diluted share
in 2006 will be in the range of $7.00 to $7.39, which includes the impact of the $1.05&nbsp;billion
estimated gain, net of tax, on the sale of our interest in WesternGeco, expected stock repurchases
and expensing stock option awards and stock issued under the employee stock purchase plan of
between $18.0&nbsp;million and $20.0&nbsp;million, net of tax. Significant price increases, lower than
expected raw material and labor costs, and/or higher than planned activity could cause earnings per
share to reach the upper end of this range. Conversely, less than expected price increases, higher
than expected raw material and labor costs, and/or lower than expected activity could result in
earnings per share being at or below the bottom of this range. Our ability to improve pricing is
dependent on demand for our products and services and our
</DIV>

<P align="center" style="font-size: 10pt">20
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">competitors strategies of managing capacity. While the commercial introduction of new
technology is an important factor in realizing pricing improvement, without pricing discipline
throughout the industry as a whole, meaningful improvements in our prices are not likely to be
realized. Additionally, significant changes in drilling activity outside our expectations could
impact operating results positively or negatively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do business in approximately 90 countries including over one-half of the 35 countries
having the lowest scores, which indicates high levels of corruption, in Transparency
International&#146;s Corruption Perception Index (&#147;CPI&#148;) survey for 2005. We devote significant
resources to the development, maintenance and enforcement of our Business Code of Conduct policy,
our Foreign Corrupt Practices Act (the &#147;FCPA&#148;) policy, our internal control processes and
procedures and other compliance related policies. Notwithstanding the devotion of such resources,
and in part as a consequence thereof, from time to time we discover or receive information alleging
potential violations of laws and regulations, including the FCPA and our policies, processes and
procedures. We conduct internal investigations of these potential violations and take appropriate
action depending upon the outcome of the investigation. In addition, U.S. government agencies and
authorities are conducting investigations into allegations of potential violations of laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We anticipate that the devotion of significant resources to compliance related issues,
including the necessity for investigations, will continue to be an aspect of doing business in a
number of the countries in which oil and natural gas exploration, development and production take
place and in which we are requested to conduct operations. Compliance related issues could limit
our ability to do business in these countries. In order to provide products and services in some
of these countries, we may in the future utilize ventures with third parties, sell products to
distributors or otherwise modify our business approach in order to improve our ability to conduct
our business in accordance with laws and regulations and our Business Code of Conduct. In the
third quarter of 2005, our independent foreign subsidiaries initiated a process to prohibit any
business activity that directly or indirectly involves or facilitates transactions in Iran, Sudan
or with their governments, including government-controlled companies operating outside of these
countries. Implementation of this process should be substantially complete by the end of 2006 and
is not expected to have a material impact on our consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risk Factors Related to Our Business</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For discussion of our
risk factors, see &#147;Part&nbsp;II, Item&nbsp;1A. Risk Factors&#148; section contained herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>DISCONTINUED OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the fourth quarter of 2005, our management initiated and our Board of Directors approved a
plan to sell the Baker Supply Products Division (&#147;Baker SPD&#148;), a product line group within the
Completion and Production segment, which distributes basic supplies, products and small tools to
the drilling industry. In March&nbsp;2006, we completed the sale of Baker SPD and received cash
proceeds of $42.5&nbsp;million. We recorded a gain on the sale of $19.2&nbsp;million, net of tax of $11.0
million, which consisted of an after-tax gain on the disposal of $16.9&nbsp;million and $2.3&nbsp;million
related to the recognition of the cumulative foreign currency translation adjustments. We
have reclassified the consolidated condensed financial statements for all prior periods
presented to reflect Baker SPD as a discontinued operation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>RESULTS OF OPERATIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The discussions below relating to significant line items from our consolidated condensed
statements of operations are based on available information and represent our analysis of
significant changes or events that impact the comparability of reported amounts. Where
appropriate, we have identified specific events and changes that affect comparability or trends
and, where possible and practical, have quantified the impact of such items. The discussions are
based on our consolidated condensed financial results, as individual segments do not contribute
disproportionately to our revenues, profitability or cash requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table below details certain consolidated condensed statement of operations data and their
percentage of revenues for the three months ended March&nbsp;31, 2006 and 2005, respectively.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>Three Months Ended March 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="17" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,062.0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,642.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100.0</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cost of revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,349.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">65.4</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,155.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">70.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">272.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">13.2</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">220.9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">13.4</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Revenues</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenues for the three months ended March&nbsp;31, 2006 increased 25.5% compared with the three
months ended March&nbsp;31, 2005, primarily due to increases in activity, as evidenced by a 17.7%
increase in the worldwide rig count, significant pricing improvements of between seven and eight
percent and increases in market share in selected product lines and geographic areas. Revenues in
North America, which accounted for 45.6% of total revenues, increased 31.1% for the three months
ended March&nbsp;31, 2006 compared with the three months ended March&nbsp;31, 2005. This increase reflects a
continued broad based increase in drilling activity in the U.S., as evidenced by the 21.3% increase
in the North American rig count and price increases. Revenues outside North America, which
accounted for 54.4% of total revenues, increased 21.2% for the three months ended March&nbsp;31, 2006
compared with the three months ended March&nbsp;31, 2005. This increase reflects the improvement in
international drilling activity, as evidenced by the 9.8% increase in the rig count outside North
America, particularly in Latin America, the Middle East and Asia Pacific, coupled with price
increases in certain markets and product lines.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cost of Revenues</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cost of revenues for the three months ended March&nbsp;31, 2006 increased 16.8% compared with the
three months ended March&nbsp;31, 2005. Cost of revenues as a percentage of revenues was 65.4% and
70.3% for the three months ended March&nbsp;31, 2006 and 2005, respectively. The decrease in cost of
revenues as a percentage of revenue is primarily the result of overall price increases of between
seven and eight percent and continued high utilization of our rental tool fleet and personnel.
These increases were partially offset by higher raw material costs and employee compensation
expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Selling, General and Administrative</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Selling, general and administrative (&#147;SG&#038;A&#148;) expenses increased 23.2% for the three months
ended March&nbsp;31, 2006 compared with the three months ended March&nbsp;31, 2005. The increase corresponds
with increased activity and resulted primarily from higher marketing and employee compensation
costs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Equity in Income of Affiliates</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Equity in income of affiliates increased $27.7&nbsp;million for the three months ended March&nbsp;31,
2006 compared with the three months ended March&nbsp;31, 2005. The increase is almost entirely due to
the increase in equity in income of WesternGeco, our most significant
equity method investment, which we sold on April&nbsp;28, 2006.
WesternGeco&#146;s revenue and profitability continued to improve as a result of ongoing favorable
market conditions in the seismic industry.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Interest Income</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest income increased $5.4&nbsp;million for the three months ended March&nbsp;31, 2006 compared with
the three months ended March&nbsp;31, 2005, due to significantly higher cash balances and short&#151;term
investments during the three months ended March&nbsp;31, 2006 resulting primarily from higher cash flows
from operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Income Taxes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our effective tax rates differ from the U.S. statutory income tax rate of 35% due to state
income taxes, differing rates of tax on international operations and lower taxes within the
WesternGeco venture.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our tax filings for various periods are subjected to audit by tax authorities in most
jurisdictions where we conduct business. These audits may result in assessments of additional
taxes that are resolved with the authorities or potentially through the courts. We believe that
these assessments may occasionally be based on erroneous and even arbitrary interpretations of
local tax law. We have received tax assessments from various taxing authorities and are currently
at varying stages of appeals and/or litigation regarding these matters. We have provided for the
amounts we believe will ultimately result from these proceedings. We believe we have substantial
defenses to the questions being raised and will pursue all legal remedies should an unfavorable
outcome result. However, resolution of these matters involves uncertainties and there are no
assurances that the outcomes will be favorable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>LIQUIDITY AND CAPITAL RESOURCES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our objective in financing our business is to maintain adequate financial resources and access
to additional liquidity. During the three months ended March&nbsp;31, 2006, cash flows from operations
and proceeds from the issuance of common stock resulting from the exercise of stock options were the principal sources of funding. We anticipate that cash
flows from operations will be sufficient to
</DIV>

<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">fund our liquidity needs in 2006. We also have a
$500.0&nbsp;million committed revolving credit facility that provides back&#151;up liquidity in the event an
unanticipated and significant demand on cash flows could not be funded by operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our capital planning process is focused on utilizing cash flows generated from operations in
ways that enhance the value of our company. During the three months ending March&nbsp;31, 2006, we used
cash for a variety of activities including working capital needs, payment of dividends, repurchase
of common stock, repayments of borrowings and capital expenditures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cash Flows</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash flows provided (used)&nbsp;by continuing operations by type of activity were as follows for
the three months ended March&nbsp;31:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>2005</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">109.3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">59.6</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(146.4</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(65.0</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Financing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(102.5</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(28.9</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Statements of cash flows for entities with international operations that are local currency
functional exclude the effects of the changes in foreign currency exchange rates that occur during
any given year, as these are noncash changes. As a result, changes reflected in certain accounts
on the consolidated condensed statements of cash flows may not reflect the changes in corresponding
accounts on the consolidated condensed balance sheets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Operating Activities</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash flows from operating activities have been steadily increasing over the last three years
and we expect this trend to continue in 2006. We attribute the increases in our cash flows to the
increasing levels of income from continuing operations adjusted for noncash items.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash flows from operating activities of continuing operations provided $109.3&nbsp;million in the
three months ended March&nbsp;31, 2006 compared with $59.6&nbsp;million in the three months ended March&nbsp;31,
2005. This increase in cash flows of $49.7&nbsp;million was primarily due to an increase in income from
continuing operations of $140.4&nbsp;million partially offset by a change in net operating assets and
liabilities that used $80.1&nbsp;million more in cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
underlying drivers of the changes in net operating assets and liabilities are as follows:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An increase in accounts receivable in the first quarter of 2006 used $77.1&nbsp;million in
cash compared with using $65.7&nbsp;million in cash in the first quarter of 2005. This was due
to the increase in revenues and an increase in days sales outstanding (defined as the
average number of days our accounts receivable are outstanding) of approximately one day.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A build up of inventory in anticipation of and related to increased activity used $79.9
million in cash in the first quarter of 2006 compared with using $36.0&nbsp;million in cash in
the first quarter of 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>An increase in accounts payable provided $15.9&nbsp;million in cash in the first quarter of
2006 compared with using $8.3&nbsp;million in cash in the first quarter of 2005 primarily due to
increased activity.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A decrease in accrued employee compensation and other current liabilities used $151.1
million in cash in the first quarter of 2006 compared with using $102.1&nbsp;million in cash in
the first quarter of 2005. This was primarily due to employee bonus and benefit payments made in the
first quarter of 2006 that were greater than employee bonus and benefit payments made in the first quarter of
2005.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Investing Activities</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our principal recurring investing activity is the funding of capital expenditures to ensure
that we have the appropriate levels and types of rental tools in place to generate revenues from
operations. Expenditures for capital assets totaled $159.1&nbsp;million and $85.6&nbsp;million for the three
months ended March&nbsp;31, 2006 and 2005, respectively. The majority of these expenditures were for
rental tools and machinery and equipment, including wireline equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2006, we acquired Nova Technology Corporation (&#147;Nova&#148;) for $55.4&nbsp;million in cash,
net of cash acquired of $3.0&nbsp;million, plus assumed debt. Nova is a leading supplier of permanent
monitoring, chemical injection systems, and multi&#151;line services
</DIV>

<P align="center" style="font-size: 10pt">23
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">for deepwater and subsea oil and gas well applications and is included in the Production
Optimization business unit of the Completion and Production segment. As a result of the
acquisition, we recorded $29.7&nbsp;million of goodwill and $24.3&nbsp;million of intangibles. We also
assigned $2.6&nbsp;million to in&#151;process research and development that was written off at the date of
acquisition. Under the terms of the purchase agreement, the former owners of Nova are entitled to
additional purchase price consideration of up to $3.0&nbsp;million based on certain post closing events.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the
three months ended March&nbsp;31, 2006, we purchased $78.1&nbsp;million of and received
proceeds of $71.2&nbsp;million from maturing auction rate securities, which are highly liquid,
variable&#151;rate debt securities. While the underlying security has a long&#151;term maturity, the
interest rate is reset through Dutch auctions that are typically held every 7, 28 or 35&nbsp;days,
creating short&#151;term liquidity. These short&#151;term investments are classified as
available&#151;for&#151;sale and are recorded at cost, which approximates market value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2006, we completed
the sale of Baker SPD and received $42.5&nbsp;million in proceeds, and we received $3.8&nbsp;million from the release of the remaining amount held in escrow
related to our sale of Petreco International.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Proceeds from the
disposal of assets were $28.7&nbsp;million and $20.6&nbsp;million for the three months
ended March&nbsp;31, 2006 and 2005, respectively. These disposals relate to rental tools that were
lost&#151;in&#151;hole, as well as machinery, rental tools and equipment no longer used in operations that
were sold throughout the period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Financing Activities</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had net repayments of short&#151;term debt of $3.0&nbsp;million and $50.8&nbsp;million in the three
months ended March&nbsp;31, 2006 and 2005, respectively. Total debt outstanding at March&nbsp;31, 2006 was
$1,083.4&nbsp;million, a decrease of $4.5&nbsp;million compared with December&nbsp;31, 2005. The total debt to
total capitalization (defined as total debt plus stockholders&#146; equity) ratios were 0.18 at March
31, 2006 and 0.19 at December&nbsp;31, 2005.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We received proceeds of $29.4&nbsp;million and $60.6&nbsp;million in the three months ended March&nbsp;31,
2006 and 2005, respectively, from the issuance of common stock from the exercise of stock options
and the employee stock purchase plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;27, 2005, the Board of Directors authorized us to repurchase up to $455.5&nbsp;million
of common stock, which was in addition to the balance of $44.5&nbsp;million remaining from the Board of
Directors&#146; September&nbsp;2002 authorization, resulting in the authorization to repurchase up to a total
of $500.0&nbsp;million of common stock. On November&nbsp;3, 2005, we entered into a Stock Purchase Plan with
an agent for the purchase of shares of our common stock that complies with the requirements of Rule
10b5&#151;1 promulgated by the Securities Exchange Act of 1934. The term of the November Plan ran from
November&nbsp;7, 2005 through April&nbsp;30, 2006. On February&nbsp;22, 2006, we entered into another Plan for a
term that ran from February&nbsp;23, 2006 through April&nbsp;30, 2006. Shares were repurchased by the agent
at the prevailing market prices, subject to limitations provided by us, in open market transactions
which complied with Rule&nbsp;10b&#151;18 of the Exchange Act. During the first quarter of 2006, we
repurchased 1.3&nbsp;million shares of our common stock at an average price of $67.41 per share, for a
total of $90.7&nbsp;million. In April&nbsp;2006, the Board of Directors authorized the repurchase of an
additional $1.8&nbsp;billion of common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We paid dividends of $44.4&nbsp;million and $38.7&nbsp;million in the three months ended March&nbsp;31, 2006
and 2005, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Available Credit Facilities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2006, we had $947.6&nbsp;million of credit facilities with commercial banks, of which
$500.0&nbsp;million is a committed revolving credit facility (the &#147;facility&#148;) that expires in July&nbsp;2010.
The facility provides for up to three one&#151;year extensions, subject to the approval and acceptance
by the lenders, among other conditions. In addition, the facility contains a provision to allow
for an increase in the facility amount of an additional $500.0&nbsp;million, subject to the approval and
acceptance by the lenders, among other conditions. The facility contains certain covenants which,
among other things, require the maintenance of a funded indebtedness to total capitalization ratio
(a defined formula per the facility) of less than or equal to 0.60, restrict certain merger
transactions or the sale of all or substantially all of the assets of the company or a significant
subsidiary and limit the amount of subsidiary indebtedness. Upon the occurrence of certain events
of default, our obligations under the facility may be accelerated. Such events of default include
payment defaults to lenders under the facility, covenant defaults and other customary defaults. At
March&nbsp;31, 2006, we were in compliance with all of the facility covenants. There were no direct
borrowings under the facility during the quarter ended March&nbsp;31, 2006; however, to the extent we
have outstanding commercial paper, our ability to borrow under the facility is reduced. At March
31, 2006, we had no outstanding commercial paper.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If market conditions were to change and revenues were to be significantly reduced or operating
costs were to increase, our cash flows and liquidity could be reduced. Additionally, it could
cause the rating agencies to lower our credit rating. We do not have any
</DIV>

<P align="center" style="font-size: 10pt">24
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">ratings triggers in the facility that would accelerate the maturity of any borrowings under
the facility. However, a downgrade in our credit ratings could increase the cost of borrowings
under the facility and could also limit or preclude our ability to issue commercial paper. Should
this occur, we would seek alternative sources of funding, including borrowing under the facility.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe our credit ratings and relationships with major commercial and investment banks
would allow us to obtain interim financing over and above our existing credit facilities for any
currently unforeseen significant needs or growth opportunities. We also believe that such interim
financings could be funded with subsequent issuances of long&#151;term debt or equity, if necessary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cash Requirements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
2006, we believe operating cash flows and the proceeds from the sale
of our interest in WesternGeco will provide us with sufficient capital resources and
liquidity to manage our working capital needs, meet contractual obligations, fund capital
expenditures, pay dividends, repurchase common stock and support the development of our short&#151;term
and long&#151;term operating strategies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2006, we expect capital expenditures to be between $750.0&nbsp;million and $780.0&nbsp;million,
excluding acquisitions. The expenditures are expected to be used primarily for normal, recurring
items necessary to support the growth of our business and operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2006, we expect to make interest payments of between $72.0&nbsp;million and $77.0&nbsp;million. This
is based on our current expectations of debt levels during 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the first quarter of 2006, we revised our estimate for income tax payments for 2006 and
now anticipate making income tax payments of between
$1,125.0&nbsp;million and $1,215.0&nbsp;million, which
includes payments in the range of $575.0&nbsp;million to $625.0&nbsp;million related to the sale of our
interest in WesternGeco.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We anticipate paying dividends of between $170.0&nbsp;million and $180.0&nbsp;million in 2006; however,
the Board of Directors can change the dividend policy at anytime. As of March&nbsp;31, 2006, we had
authorization remaining to repurchase up to $310.8&nbsp;million in common stock. On April&nbsp;28, 2006, we
completed the sale of our 30% minority interest in WesternGeco to Schlumberger for $2.4&nbsp;billion in
cash. The net after&#151;tax cash proceeds of approximately $1.8&nbsp;billion, which include a cash
distribution of $59.6&nbsp;million made immediately prior to closing, are expected to be
used to repurchase stock. Accordingly, in April&nbsp;2006, our Board of Directors increased our stock
repurchase authorization by an additional $1.8&nbsp;billion. We may repurchase our common stock
depending on market conditions, applicable legal requirements, our liquidity and other
considerations. We may discontinue stock repurchases at any time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2006, we estimate we will contribute between $18.0&nbsp;million and $23.0&nbsp;million to our defined
benefit pension plans and make benefit payments related to postretirement welfare plans of between
$15.0&nbsp;million and $17.0&nbsp;million. We also estimate we will contribute between $85.0&nbsp;million and
$95.0&nbsp;million to our defined contribution plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not believe there are any other material trends, demands, commitments, events or
uncertainties that would have, or are reasonably likely to have, a material impact on our financial
condition and liquidity. Other than previously discussed, we currently have no information that
would create a reasonable likelihood that the reported levels of revenues and cash flows from
operations in 2005 are not indicative of what we can expect in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>RELATED PARTY TRANSACTIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2006, we signed an agreement to sell to Schlumberger for $2.4&nbsp;billion in cash our 30%
minority interest in WesternGeco, a seismic venture jointly owned with Schlumberger. The sale was
completed on April&nbsp;28, 2006. We expect to record a pre&#151;tax gain of approximately $1.74&nbsp;billion
(approximately $1.05&nbsp;billion, net of tax). Cash proceeds are estimated to be approximately $1.8
billion, net of tax, and include a cash distribution of $59.6&nbsp;million made immediately prior to
closing. We plan to use the net after&#151;tax cash proceeds to repurchase stock; accordingly, in
April&nbsp;2006, our Board of Directors increased our stock repurchase authorization by an additional
$1.8&nbsp;billion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NEW ACCOUNTING STANDARDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2006, the FASB issued SFAS No.&nbsp;155, <I>Accounting for Certain Hybrid Financial
Instruments&#151;an amendment of FASB Statements No.&nbsp;133 and No.&nbsp;140 (&#147;SFAS 155&#148;)</I>. SFAS 155 amends
SFAS 133, which required that a derivative embedded in a host contract that does not meet the
definition of a derivative be accounted for separately under certain conditions. SFAS 155 amends
SFAS 133 to narrow the scope exception to strips that represent rights to receive only a portion of
the contractual interest cash flows
</DIV>

<P align="center" style="font-size: 10pt">25
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">or of the contractual principal cash flows of a specific debt instrument. In addition, SFAS
155 amends SFAS 140, which permitted a qualifying special-purpose entity to hold only a passive
derivative financial instrument pertaining to beneficial interests issued or sold to parties other
than the transferor. SFAS 155 amends SFAS 140 to allow a qualifying special purpose entity to hold
a derivative instrument pertaining to beneficial interests that itself is a derivative financial
instrument. SFAS 155 is effective for all financial instruments acquired or issued (or subject to
a remeasurement event) following the start of an entity&#146;s first fiscal year beginning after
September&nbsp;15, 2006. We will adopt SFAS 155 on January&nbsp;1, 2007, and we do not expect this standard
to have a material impact, if any, on our consolidated condensed financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>FORWARD&#151;LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MD&#038;A and certain statements in the Notes to Consolidated Condensed Financial Statements
include forward&#151;looking statements within the meaning of Section&nbsp;27A of the Securities Act of
1933, as amended, and Section&nbsp;21E of the Securities Exchange Act of 1934, as amended, (each a
&#147;forward&#151;looking statement&#148;). The words &#147;anticipate,&#148; &#147;believe,&#148; &#147;ensure,&#148; &#147;expect,&#148; &#147;if,&#148;
&#147;intend,&#148; &#147;estimate,&#148; &#147;project,&#148; &#147;forecasts,&#148; &#147;predict,&#148; &#147;outlook,&#148; &#147;aim,&#148; &#147;will,&#148; &#147;could,&#148;
&#147;should,&#148; &#147;would,&#148; &#147;may,&#148; &#147;likely&#148; and similar expressions, and the negative thereof, are intended
to identify forward&#151;looking statements. Our forward&#151;looking statements are based on assumptions
that we believe to be reasonable but that may not prove to be accurate. The statements do not
include the potential impact of future transactions, such as an acquisition,
disposition, merger, joint venture or other transaction that could occur. We undertake no
obligation to publicly update or revise any forward&#151;looking statement. Our expectations regarding
our business outlook, including changes in revenue, pricing, capital spending, profitability,
strategies for our operations, impact of our common stock repurchases, oil and natural gas market
conditions, market share and contract terms, costs and availability of resources, economic and
regulatory conditions, and environmental matters are only our forecasts regarding these matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of our forward&#151;looking information is subject to risks and uncertainties that could cause
actual results to differ materially from the results expected. Although it is not possible to
identify all factors, these risks and uncertainties include the risk factors and the timing of any
of those risk factors identified in the &#147;Risk Factors Related to the Worldwide Oil and Natural Gas
Industry&#148;, &#147;Risk Factors Related to Our Business&#148; and
Item 1A. Risk Factors sections contained herein, as well as the risk
factors described in the Company&#146;s Annual Report on Form&nbsp;10K for the year ended December&nbsp;31, 2005,
this filing and those set forth from time to time in our filings with the Securities and Exchange
Commission (&#147;SEC&#148;). These documents are available through our web site or through the SEC&#146;s
Electronic Data Gathering and Analysis Retrieval System (&#147;EDGAR&#148;) at <U>http://www.sec.gov</U>.
</DIV>
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We conduct operations around the world in a number of different currencies. The majority of
our significant foreign subsidiaries have designated the local currency as their functional
currency. As such, future earnings are subject to change due to changes in foreign currency
exchange rates when transactions are denominated in currencies other than our functional
currencies. To minimize the need for foreign currency forward contracts to hedge this exposure,
our objective is to manage foreign currency exposure by maintaining a minimal consolidated net
asset or net liability position in a currency other than the functional currency.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Foreign Currency Forward Contracts</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2006, we had entered into several foreign currency forward contracts with
notional amounts aggregating $55.0&nbsp;million to hedge exposure to currency fluctuations in various
foreign currencies, including the British Pound Sterling, the Norwegian Krone and the Euro. These
contracts are designated and qualify as fair value hedging instruments. Based on quoted market
prices as of March&nbsp;31, 2006 for contracts with similar terms and maturity dates, we recorded a gain
of $0.3&nbsp;million to adjust these foreign currency forward contracts to their fair market value.
This gain offsets designated foreign exchange losses resulting from the underlying exposures and is
included in selling, general and administrative expense in our consolidated condensed statement of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Commodity Swaps</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At March&nbsp;31, 2006 we had entered into swap agreements for 4.5&nbsp;million pounds of copper to
reduce our exposure to fluctuations in the price of copper. These contracts mature over the
remainder of 2006. The swap agreements were not designated as hedging instruments for accounting
purposes. Based on quoted market prices as of March&nbsp;31, 2006 for contracts with similar terms and
maturity dates, we recorded a gain of $1.0&nbsp;million to adjust these contracts to their fair market
value. This gain is included in cost of revenues in our consolidated condensed statement of
operations.
</DIV>

<P align="center" style="font-size: 10pt">26
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The counterparties to the forward contracts are major financial institutions. The credit
ratings and concentration of risk of these financial institutions are monitored on a continuing
basis. In the unlikely event that the counterparties fail to meet the terms of a foreign currency
contract, our exposure is limited to the foreign currency rate differential.
</DIV>
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 4. CONTROLS AND PROCEDURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Evaluation of Disclosure Controls and Procedures</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the end of the period covered by this quarterly report, we have evaluated the
effectiveness of the design and operation of our disclosure controls and procedures pursuant to
Rule&nbsp;13a&#151;15 of the Securities Exchange Act of 1934, as amended (the &#147;Exchange Act&#148;). This
evaluation was carried out under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer. Based on this
evaluation, these officers have concluded that, as of March&nbsp;31, 2006, our disclosure controls and
procedures are effective at a reasonable assurance level in ensuring that the information required
to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange Commission (&#147;SEC&#148;)
rules and forms. There has been no change in our internal controls over financial reporting during
the quarter ended March&nbsp;31, 2006 that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Disclosure controls and procedures are our controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports that we file or submit under
the Exchange Act, such as this quarterly report, is recorded, processed, summarized and reported
within the time periods specified in the SEC&#146;s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that information required
to be disclosed by us in the reports that we file under the Exchange Act is accumulated and
communicated to our management, including our principal executive officer and principal financial
officer, as appropriate, to allow timely decisions regarding required disclosure.
</DIV>
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>PART II. OTHER INFORMATION</B>
</DIV>

<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1. LEGAL PROCEEDINGS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;29, 2002, we announced that we had been advised that the Securities and Exchange
Commission (&#147;SEC&#148;) and the Department of Justice (&#147;DOJ&#148;) are conducting investigations into
allegations of violations of law relating to Nigeria and other related matters. The SEC has issued
a formal order of investigation into possible violations of provisions under the Foreign Corrupt
Practices Act (&#147;FCPA&#148;) regarding anti&#151;bribery, books and records and internal controls. The SEC
has issued subpoenas seeking information about our operations in Angola (subpoena dated August&nbsp;6,
2003) and Kazakhstan (subpoenas dated August&nbsp;6, 2003 and April&nbsp;22, 2005) as part of its ongoing
investigation. We are providing documents to and cooperating fully with the SEC and DOJ. The DOJ
and the SEC have issued subpoenas to, or otherwise asked for interviews with, current and former
employees in connection with the investigations regarding Nigeria, Angola and Kazakhstan. In
addition, we have conducted internal investigations into these matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our internal investigations have identified issues regarding the propriety of certain payments
and apparent deficiencies in our books and records and internal controls with respect to certain
operations in Nigeria, Angola and Kazakhstan, as well as potential liabilities to governmental
authorities in Nigeria. The investigation in Nigeria was substantially completed during the first
quarter of 2003 and, based upon current information, we do not expect that any such potential
liabilities will have a material adverse effect on our consolidated condensed financial statements.
The internal investigations in Angola and Kazakhstan were substantially completed in the third
quarter of 2004. Evidence obtained during the course of the investigations has been provided to
the SEC and DOJ.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Department of Commerce, Department of the Navy and DOJ (the &#147;U.S. agencies&#148;) are
investigating compliance with certain export licenses issued to Western Geophysical from 1994
through 2000 for export of seismic equipment leased by the People&#146;s Republic of China. We acquired
Western Geophysical in August&nbsp;1998 and subsequently transferred related assets to WesternGeco in
December&nbsp;2000. WesternGeco continued to use the licenses until 2001. Under the WesternGeco
formation agreement, we owe indemnity to WesternGeco for certain matters and , accordingly, we have
agreed to indemnify WesternGeco with certain limitations in connection with the matter. We are
cooperating fully with the U.S. agencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have received a subpoena from a grand jury in the Southern District of New York regarding
goods and services we delivered to Iraq from 1995 through 2003 during the United Nations
Oil-for-Food Program. We have also received a request from the SEC to provide a written statement
and certain information regarding our participation in that program. We have responded to both the
subpoena and the request and may provide additional information and documents in the future. Other
companies in the energy industry are believed to have received similar subpoenas and requests.
</DIV>

<P align="center" style="font-size: 10pt">27
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The U.S. agencies, the SEC and other authorities have a broad range of civil and criminal
sanctions they may seek to impose against corporations and individuals in appropriate circumstances
including, but not limited to, injunctive relief, disgorgement, fines, penalties and modifications
to business practices and compliance programs. Such agencies and
authorities have entered
into agreements with, and obtained a range of sanctions against, several public corporations and
individuals arising from allegations of improper payments and deficiencies in books and records and
internal controls, whereby civil and criminal penalties were imposed, including in some cases
multi&#151;million dollar fines and other sanctions. It is not possible to accurately predict at this
time when any of the investigations related to the Company will be completed. Based on current
information, we cannot predict the outcome of such investigations or what, if any, actions may be
taken by the U.S. agencies, the SEC or other authorities or the effect it may have on our
consolidated condensed financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On May&nbsp;10, 2004, the District Court of Andrews County, Texas entered a judgment in favor of
LOTUS, LLC and against INTEQ in the amount of $14.8&nbsp;million for lost profits resulting from a
breach of contract in drilling a well to create a salt cavern for disposing of naturally occurring
radioactive waste. We have filed an appeal and taken other actions. We believe that any liability
that we may incur as a result of this litigation would not have a material adverse financial effect
on our consolidated condensed financial statements.
</DIV>
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 1A. RISK FACTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the date of this filing, except as noted below, there have been no material changes from
the risk factors previously disclosed in our &#147;Risk Factors&#148; in the Annual Report on Form 10-K for
the year ended December&nbsp;31, 2005 (&#147;2005 Annual Report&#148;). An investment in our common stock
involves various risks. When considering an investment in our company, you should consider
carefully all of the risk factors described in our 2005 Annual Report. These risks and
uncertainties are not the only ones facing us and there may be additional matters that we are
unaware of or that we currently consider immaterial. All of these could adversely affect our
business, financial condition, results of operations and cash flows and, thus, the value of an
investment in our company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following are new or modified risk factors that should be read in conjunction with the
risk factors disclosed in our 2005 Annual Report:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our expectations regarding stock repurchases are subject to market conditions, such as the
trading prices for our stock. Changes in the trading prices of our stock could cause us to change
the rate at which we repurchase stock. Management in its discretion may discontinue stock
repurchases at any time.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
forecast regarding earnings includes interest on short-term
investments acquired with the proceeds from the sale of our minority
interest in WesternGeco. Changes in short-term interest rates may
impact our forecasted earnings.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table contains information about our purchases of equity securities during the
first quarter of 2006.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Issuer Purchases of Equity Securities</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Maximum Number</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(or Approximate</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Dollar Value) of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Purchased as</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares that May Yet</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price Paid</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Part of a Publicly</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price Paid</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Be Purchased Under</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Period</B></TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="3"><B>Purchased </B><SUP style="font-size: 85%; vertical-align: text-top"><B>1</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per Share</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Announced Plan </B><SUP style="font-size: 85%; vertical-align: text-top"><B>2</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per Share </B><SUP style="font-size: 85%; vertical-align: text-top"><B>3</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>the Plan </B><SUP style="font-size: 85%; vertical-align: text-top"><B>2</B></SUP></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">January 1&#151;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40,326</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">72.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">61.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">February 1&#151;28, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72.96</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">139,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.71</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">March 1&#151;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,789</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">69.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,203,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,190</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">72.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,345,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">67.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top"><B>1</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Represents shares purchased from employees to satisfy the tax
withholding obligations in connection with the vesting of restricted
stock awards and restricted stock units.</TD>
<TR valign="top">

<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top"><B>2</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD>On September&nbsp;10, 2002, we announced a plan to repurchase from time to time up
to $275&nbsp;million of our outstanding common stock. On October&nbsp;27, 2005, the Board of Directors
authorized us to repurchase up to $455.5&nbsp;million of common stock, which was in addition to the
balance of $44.5&nbsp;million remaining from the Board of Directors&#146; September&nbsp;2002 authorization,
resulting in the authorization to repurchase up to a total of $500.0&nbsp;million of common stock. On
November&nbsp;3, 2005, we entered into a Stock Purchase Plan with an agent for the purchase of shares of
our common stock that complies with the requirements of Rule&nbsp;10b5&#151;1 promulgated by the Securities
Exchange Act of 1934. The term of the November Plan ran from November&nbsp;7, 2005 through April&nbsp;30,
2006. On February&nbsp;22, 2006, we entered into another Plan for a term that ran from February&nbsp;23,
2006 through April&nbsp;30, 2006. Shares were repurchased by the agent at the prevailing market prices,
subject to limitations provided by us, in open market transactions which complied with Rule&nbsp;10b&#151;18
of the Exchange Act. During the first quarter of 2006, we repurchased</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt">28
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>
<TR>
<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top"><B>&nbsp;</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD>1.3&nbsp;million shares of our
common stock at an average price of $67.41 per share, for a total of
$90.7&nbsp;million. At March&nbsp;31, 2006, we had authorization
remaining to repurchase up to a total of $310.8&nbsp;million of our
common stock. In April&nbsp;2006,
the Board of Directors authorized the repurchase of an additional $1.8&nbsp;billion of common stock.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">

<TD nowrap align="left"><SUP style="font-size: 85%; vertical-align: text-top"><B>3</B></SUP></TD>
    <TD>&nbsp;</TD>
    <TD>Average price paid includes commissions.</TD>
</TR>

</TABLE>





<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 3. DEFAULTS UPON SENIOR SECURITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
</DIV>
<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our Annual Meeting of Stockholders was held on April&nbsp;27, 2006 (i)&nbsp;to elect eleven members of
the Board of Directors to serve for one&#151;year terms, (ii)&nbsp;to ratify Deloitte &#038; Touche LLP as our
Independent Auditor for 2006, (iii)&nbsp;to consider a proposal to approve the performance criteria for
awards under our annual incentive compensation plan and (iv)&nbsp;to consider a stockholder proposal
regarding voting under the company&#146;s Delaware Charter. Following are the final results of the
Annual Meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The directors who were so elected are Larry D. Brady, Clarence P. Cazalot, Jr., Chad C.
Deaton, Edward P. Djerejian , Anthony G. Fernandes, Claire W. Gargalli, James A. Lash, James F.
McCall, J. Larry Nichols, H. John Riley, Jr., and Charles L. Watson.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Affirmative</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Votes</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Names</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Votes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Withheld</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="9" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Larry D. Brady</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,463,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,352,312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Clarence P. Cazalot, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,489,441</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,326,233</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chad C. Deaton</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">302,762,744</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,052,930</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Edward P. Djerejian</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,438,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,377,624</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Anthony G. Fernandes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,474,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,341,597</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Claire W. Gargalli</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,420,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,394,933</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">James A. Lash</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,534,116</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,281,558</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">James F. McCall</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,493,053</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,322,621</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">J. Larry Nichols</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,510,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,305,402</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">H. John Riley, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,522,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,292,938</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Charles L. Watson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">306,514,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,300,874</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of affirmative votes, the number of negative votes and the number of abstentions
with respect to the ratification of Deloitte &#038; Touche LLP as Independent Auditor for 2006 was as
follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Affirmative</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Negative</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Votes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Votes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Abstentions</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">302,266,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,601,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,947,877</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of affirmative votes, the number of negative votes and the number of abstentions
with respect to the proposal to consider a proposal to approve the performance criteria for awards
under our annual incentive compensation plan was as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Affirmative</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Negative</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Votes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Votes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Abstentions</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">298,951,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,667,927</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,196,110</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The number of affirmative votes, the number of negative votes, the number of abstentions and
the number of broker non&#151;votes with respect to the approval of the stockholder proposal regarding
simple majority voting under the Company&#146;s Delaware charter was as follows:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Affirmative</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Negative</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Broker</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Votes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Votes</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Abstentions</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Non-Votes</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">247,423,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,150,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,777,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,464,240</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">29
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 5. OTHER INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following events occurred subsequent to the quarterly period covered
by this Form&nbsp;10-Q
and are reportable under Form&nbsp;8-K:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item&nbsp;1.01 Entry into a Material Definitive Agreement.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The consummation of the transaction described in Item&nbsp;2.01, the Master Sales Agreement dated
April&nbsp;20, 2006 by and among Baker Hughes Incorporated (&#147;Baker Hughes&#148; or the &#147;Company&#148;),
Schlumberger Limited (&#147;Schlumberger&#148;) and the other parties thereto (the &#147;Master Sales Agreement&#148;)
modified or terminated certain of the obligations of the parties under the Master Formation
Agreement dated September&nbsp;6, 2000, as amended, by and among Baker Hughes, Schlumberger and the
other parties thereto. A copy of the Master Sales Agreement is attached hereto as Exhibit&nbsp;10.2 and
incorporated herein by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item&nbsp;2.01 Completion of Acquisition or Disposition of Assets.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;28, 2006, Baker Hughes completed the sale of its 30% minority interest in
WesternGeco, a seismic venture jointly owned with Schlumberger Limited, to Schlumberger. The
purchase price for the venture interests was $2.4&nbsp;billion in cash. The terms of the Master Sales
Agreement include a covenant by the Company to not compete with the seismic business of WesternGeco
for a period of 18&nbsp;months from the closing of the sale. A copy of the Master Sales Agreement is
attached hereto as Exhibit&nbsp;2.1 and a copy of the news release is attached hereto as Exhibit&nbsp;99.1
each of which is hereby incorporated by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item&nbsp;5.02 Department of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;27, 2006, the Board of Directors appointed Pierre H. Jungels to serve on its Board of
Directors as an independent non-employee director. Dr.&nbsp;Jungels will serve as a member of the
Compensation and Finance Committees of the Board of Directors. Dr.&nbsp;Jungels received 949 shares of
restricted stock on April&nbsp;27, 2006, which will vest one-third on each of April&nbsp;27, 2007, 2008 and
2009. He will also receive an annual retainer and stock options as outlined in the Compensation
Table for Named Executive Officers and Directors, filed as Exhibit&nbsp;10.44 to the Company&#146;s Form 10-K
for the year ended December&nbsp;31, 2005. The Company and Dr.&nbsp;Jungels entered into an Indemnification
Agreement dated as of April&nbsp;27, 2006, which form of agreement was filed as Exhibit&nbsp;10.4 and
incorporated herein by reference to the Company&#146;s Form 10-K for the year ended December&nbsp;31, 2003.
A copy of the news release, which contains Mr.&nbsp;Jungel&#146;s biographical information, is attached
hereto as Exhibit&nbsp;99.2 and incorporated herein by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item&nbsp;5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On April&nbsp;27, 2006, the Board of Directors of the Company amended and restated its Bylaws to
increase the number of directors to twelve (12). The Bylaws previously provided for eleven (11)
directors. A copy of the Restated Bylaws is attached hereto as Exhibit&nbsp;3.2.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Item&nbsp;8.01 Other Events.</U>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Following our Annual Meeting of Stockholders held on April&nbsp;27, 2006, our Board of
Directors held a meeting at which it appointed the members and chairmen for the Board&#146;s
five standing committees. The composition of each committee is as follows:</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">Executive Committee &#151; Messrs.&nbsp;Deaton (Chairman), Cazalot, Riley and Watson.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">Audit/Ethics Committee &#151; Messrs.&nbsp;McCall (Chairman), Brady, Cazalot, Fernandes, Lash and
Nichols.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">Governance Committee &#151; Messrs.&nbsp;Cazalot (Chairman), Djerejian, McCall, Riley and Watson.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">Finance Committee &#151; Messrs.&nbsp;Fernandes (Chairman), Jungels, Lash and Watson and Ms.
Gargalli.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">Compensation Committee &#151; Messrs.&nbsp;Riley (Chairman), Djerejian, Jungels and Nichols and Ms.
Gargalli.
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On May&nbsp;1, 2006, as part of a previously announced stock repurchase program, the
Company entered into a Stock Purchase Plan (the &#147;Plan&#148;)
with an agent for the purchase of shares of the Company&#146;s common stock
that complies with the requirements of Rule&nbsp;10b5-1
promulgated by the Securities Exchange Act of 1934. The term of the Plan will run from
May&nbsp;1, 2006 until May&nbsp;31, 2006, unless earlier terminated. During that term, the agent
will use its best efforts to repurchase a fixed dollar amount of the Company&#146;s common
stock each trading day, subject to applicable trading rules, until the</TD>
</TR>

</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">30
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>cumulative amount
purchased under the Plan equals $550&nbsp;million, inclusive of all commissions and fees paid
to the agent by the Company related to such repurchases. Shares will be repurchased by
the agent at the prevailing market prices, in open market transactions intended to comply
with Rule&nbsp;10b-18 of the Exchange Act. Either the Company or the agent may terminate the
Plan.</TD>
</TR>

</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">In addition to the Stock Purchase Plan, the Company may purchase additional shares through
discretionary repurchases in a program with the agent intended to comply with Rule&nbsp;10b-18
under the Exchange Act, privately negotiated transactions or additional Rule&nbsp;10b5-1 stock
repurchase plans up to the total outstanding authorization.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">Depending upon prevailing market conditions and other factors, there can be no assurance
that any or all authorized shares will be purchased pursuant to the Plan, program or
otherwise.
</DIV>






<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 6. EXHIBITS</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Master Sales Agreement, dated April&nbsp;20, 2006, by and among Schlumberger Limited, Baker
Hughes Incorporated and the other parties listed on the signature pages thereto.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bylaws of Baker Hughes Incorporated restated as of April&nbsp;27, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">10.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Baker Hughes Incorporated &#151; Annual Incentive Compensation Plan as amended and restated
effective January&nbsp;1, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">10.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Master Sales Agreement, dated April&nbsp;20, 2006, by and among Schlumberger Limited, Baker
Hughes Incorporated and the other parties listed on the signature pages thereto (filed as
Exhibit&nbsp;2.1 to this Form&nbsp;10&#151;Q) as an amendment to the Master Formation Agreement, dated as
of September&nbsp;6, 2000, by and among Schlumberger Limited, Baker Hughes Incorporated and
certain wholly owned subsidiaries of Schlumberger Limited (filed as Exhibit&nbsp;2.1 to Current
Report of Baker Hughes Incorporated on Form&nbsp;8&#151;K dated September&nbsp;7, 2000).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">31.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certification of Chad C. Deaton, Chief Executive Officer, dated May&nbsp;2, 2006, pursuant to
Rule&nbsp;13a&#151;14(a) of the Securities Exchange Act of 1934, as amended.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">31.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certification of Peter A. Ragauss, Chief Financial Officer, dated May&nbsp;2, 2006, pursuant
to Rule&nbsp;13a&#151;14(a) of the Securities Exchange Act of 1934, as amended.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">32</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Statement of Chad C. Deaton, Chief Executive Officer, and Peter A. Ragauss, dated May&nbsp;2,
2006, furnished pursuant to Rule&nbsp;13a&#151;14(b) of the Securities Exchange Act of 1934, as
amended.</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">99.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>News Release dated April&nbsp;28, 2006.</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">99.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>News Release dated April 27, 2006.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt">31
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>BAKER HUGHES INCORPORATED<BR><BR>
(Registrant)</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:  May 2, 2006&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/PETER A. RAGAUSS
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Peter A. Ragauss&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Sr. Vice President and Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">Date:  May 2, 2006&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ALAN J. KEIFER
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Alan J. Keifer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Vice President and Controller&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<P align="center" style="font-size: 10pt">32
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>

</TABLE>
<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Exhibit&nbsp;Index</B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Master Sales Agreement, dated April&nbsp;20, 2006, by and among Schlumberger Limited, Baker
Hughes Incorporated and the other parties listed on the signature pages thereto.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Bylaws of Baker Hughes Incorporated restated as of April&nbsp;27, 2006.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">10.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Baker Hughes Incorporated &#151; Annual Incentive Compensation Plan as amended and restated
effective January&nbsp;1, 2005.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">10.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Master Sales Agreement, dated April&nbsp;20, 2006, by and among Schlumberger Limited, Baker
Hughes Incorporated and the other parties listed on the signature pages thereto (filed as
Exhibit&nbsp;2.1 to this Form&nbsp;10&#151;Q) as an amendment to the Master Formation Agreement, dated as
of September&nbsp;6, 2000, by and among Schlumberger Limited, Baker Hughes Incorporated and
certain wholly owned subsidiaries of Schlumberger Limited (filed as Exhibit&nbsp;2.1 to Current
Report of Baker Hughes Incorporated on Form&nbsp;8&#151;K dated September&nbsp;7, 2000).</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">31.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certification of Chad C. Deaton, Chief Executive Officer, dated May&nbsp;2, 2006, pursuant to
Rule&nbsp;13a&#151;14(a) of the Securities Exchange Act of 1934, as amended.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">31.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Certification of Peter A. Ragauss, Chief Financial Officer, dated May&nbsp;2, 2006, pursuant
to Rule&nbsp;13a&#151;14(a) of the Securities Exchange Act of 1934, as amended.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">32</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Statement of Chad C. Deaton, Chief Executive Officer, and Peter A. Ragauss, dated May&nbsp;2,
2006, furnished pursuant to Rule&nbsp;13a&#151;14(b) of the Securities Exchange Act of 1934, as
amended.</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">99.1</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>News Release dated April 28, 2006.</TD>
</TR>
<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">99.2</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>News Release dated April 27, 2006.</TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-2.1
<SEQUENCE>2
<FILENAME>h35481exv2w1.htm
<DESCRIPTION>MASTER SALES AGREEMENT
<TEXT>
<HTML>
<HEAD>
<TITLE>exv2w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">EXHIBIT 2.1<BR>
EXECUTION COPY
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>SALES AGREEMENT</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>BY AND AMONG</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>SCHLUMBERGER LIMITED,</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>BAKER HUGHES INCORPORATED</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>AND</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>THE OTHER PARTIES LISTED ON</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>THE SIGNATURES PAGES HERETO</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>APRIL 20, 2006</B>

</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" align="left">ARTICLE 1 DEFINITIONS AND GENERAL</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Definitions</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Construction</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">References</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Headings</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">1.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Calculations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" align="left">ARTICLE 2 PURCHASE AND SALE OF VENTURE INTERESTS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Purchase and Sale of Venture Interests</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Aggregate Purchase Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">The Closing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Deliveries at the Closing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">2.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Allocations of Purchase Price for Flowthrough Venture Entities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" align="left">ARTICLE 3 THE CLOSING</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Conditions to Each Party's Closing Obligation</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Conditions to the Closing Obligations of Buyer Parent, STC and the Non-US Buyer Owners</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">3.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Conditions to the Closing Obligation of Seller Parent and Seller Owners</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" align="left">ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER PARENT AND EACH BUYER OWNER</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Due Organization, Good Standing and Power</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authorization and Validity of Agreements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lack of Conflicts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Consents</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certain Fees</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pending Claims</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">4.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Matters</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" align="left">ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SELLER PARENT AND SELLER OWNERS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Due Organization, Good Standing and Power</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Authorization and Validity of Agreements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ownership of Venture Interests</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lack of Conflicts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Consents</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certain Fees</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">5.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pending Claims</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" align="left">ARTICLE 6 COVENANTS PRIOR TO CLOSING</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Conduct of the Business Prior to Closing</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Commercial Efforts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Other Agreements</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">i
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="0%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">6.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Use of Trade Names</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" align="left">ARTICLE 7 OTHER COVENANTS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Expenses</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Access to Venture Entity Records</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment of Dutch Venture Entity's Articles of Association</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">7.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Further Assurances</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" align="left">ARTICLE 8 LIABILITIES AND INDEMNIFICATION</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Venture Entity Indemnification</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Tax Matters</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Partner Cross-Indemnities</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">8.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Waiver of Consequential Damages</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" align="left">ARTICLE 9 INTELLECTUAL PROPERTY</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Continuing Intellectual Property Rights and Obligations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Covenant Not to Sue</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Licenses to Seismic Processing Software Platform and GEOFRAME</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">9.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Future Developments</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" align="left">ARTICLE 10 TERMINATION, AMENDMENT, WAIVER AND MODIFICATION</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">10.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Termination</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">10.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Effect of Termination</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">10.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">10.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Extension/Waiver</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" align="left">ARTICLE 11 GENERAL PROVISIONS</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Survival of Indemnification Obligations</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Governing Law</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Parties in Interest; Assignment</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Counterparts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Notices</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Non-Competition, Non-Solicitation and Confidentiality</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Entire Agreement; Conflicts</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consents and Approval</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Obligations of Buyer Parent, STC and Seller Parent; Buyer Parent Guarantee</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Publicity</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.11</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Severability</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.12</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">No Strict Construction</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">11.13</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Jurisdiction and Venue</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;A:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Venture Entity Purchase Agreement</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;B:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sublease Amendment</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;C:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Officer&#146;s Certificate of Seller Parent/Buyer Parent</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;D:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Secretary&#146;s Certificate of Seller Parent/Buyer Parent</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">ii
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;E:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Officer&#146;s Certificate of STC</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Exhibit&nbsp;F:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Secretary&#146;s Certificate of STC</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">iii
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MASTER SALES AGREEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This Master Sales Agreement (as it may be supplemented or amended in accordance with the
provisions hereof, this &#147;<B><I>Agreement</I></B>&#148;), dated as of April&nbsp;20, 2006, is by and among Schlumberger
Limited, a Netherlands Antilles corporation (&#147;<B><I>Buyer Parent</I></B>&#148;), Schlumberger Technology Corporation,
a Texas corporation and wholly owned subsidiary of Buyer Parent (&#147;<B><I>STC</I></B>&#148;), Schlumberger B.V., a
Netherlands limited liability company and wholly owned subsidiary of Buyer Parent (&#147;<B><I>SLBV</I></B>&#148;),
Schlumberger Oilfield Holdings Limited, a British Virgin Islands company and wholly owned
subsidiary of Buyer Parent (&#147;<B><I>SOHL</I></B>&#148;), Schlumberger PLC, a United Kingdom limited liability company
and wholly owned subsidiary of Buyer Parent (&#147;<B><I>SPLC</I></B>&#148;), and Schlumberger Canada Limited, an Ontario
corporation and wholly owned subsidiary of Buyer Parent (&#147;<B><I>SCL</I></B>&#148; and, together with SLBV, SOHL and
SPLC, the &#147;<B><I>Non-US Buyer Owners</I></B>&#148;), and Baker Hughes Incorporated, a Delaware corporation (&#147;<B><I>Seller
Parent</I></B>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Seller Parent owns, through its subsidiaries, 30% of the outstanding equity interests (i)&nbsp;in
each of WesternGeco L.L.C., a Delaware limited liability company (&#147;<B><I>WGLLC</I></B>&#148;), and WesternGeco
Resources, Inc., a Delaware corporation (&#147;<B><I>WGRI</I></B>&#148; and, together with WGLLC, the &#147;<B><I>US Venture
Entities</I></B>&#148;) (such equity interests in the US Venture Entities being hereinafter referred to,
collectively, as the &#147;<B><I>US Venture Interests</I></B>&#148;), and (ii)&nbsp;in each of WesternGeco B.V., a Netherlands
corporation (&#147;<B><I>Dutch Venture Entity</I></B>&#148;), WesternGeco Limited, a United Kingdom corporation (&#147;<B><I>UK
Venture Entity</I></B>&#148;), WesternGeco Seismic Holdings Limited, a British Virgin Islands corporation (&#147;<B><I>BVI
Venture Entity</I></B>&#148;), and WesternGeco Canada Limited, a Canadian partnership (&#147;<B><I>Canadian Venture Entity</I></B>&#148;
and, together with the Dutch Venture Entity, UK Venture Entity and BVI Venture Entity, the &#147;<B><I>Non-US
Venture Entities</I></B>&#148;) (such equity interests in the Non-US Venture Entities being hereinafter referred
to, collectively, as the &#147;<B><I>Non-US Venture Interests</I></B>&#148;).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;STC desires to cause US Purchaser (as defined below) to purchase from Seller Parent and its
subsidiaries, and Seller Parent desires to cause its subsidiaries to sell to US Purchaser, all of
the US Venture Interests in accordance with this Agreement&#146;s terms and conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Non-US Buyer Owners desire to purchase from Seller Parent and its subsidiaries, and Seller
Parent desires to cause its subsidiaries to sell to the Non-US Buyer Owners, all of the Non-US
Venture Interests in accordance with this Agreement&#146;s terms and conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accordingly, in consideration of the premises and the mutual covenants of the Parties set
forth herein and upon the terms and subject to the conditions set forth herein, the Parties hereto,
intending to be legally bound, hereby agree as follows:
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 1</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>DEFINITIONS AND GENERAL</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.1 </B><U><B>Definitions</B></U>. The capitalized terms defined in this <U>Section&nbsp;1.1</U>, whenever used
in this Agreement, shall have the following meanings for all purposes of this Agreement:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Affiliate</I></B>&#148; means, with respect to any Person, any other Person that directly or indirectly
through one or more intermediaries controls, is controlled by or is under common control with the
Person in question. For purposes of this definition, &#147;<B><I>Control</I></B>&#148; means the possession, direct or
</DIV>

<P align="center" style="font-size: 10pt">1
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">indirect, of the power to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities or general partnership or managing member interests,
by contract or otherwise. Without limiting the generality of the foregoing, a Person shall be
deemed to control any other Person in which it owns, directly or indirectly, a majority of the
ownership interests. For the purposes of this definition, the Venture Entities are deemed to be
Affiliates of the Buyer Parent and deemed not to be Affiliates of Seller Parent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Aggregate Purchase Price</I></B>&#148; has the meaning given such term in <U>Section&nbsp;2.2</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Agreement</I></B>&#148; has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Applicable Law</I></B>&#148; means any applicable statute, law, regulation, ordinance, rule, judgment,
order, decree, permit, approval, concession, grant, franchise, license, agreement or requirement of
any Governmental Authority having jurisdiction over the matter or matters in question, and in each
case as existing (including all of the terms and provisions of applicable common law) at the time
in question.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Atlas</I></B>&#148; means Western Atlas International, Inc., a Delaware corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Baker Hughes Canada</I></B>&#148; means Baker Hughes Canada Company, a Nova Scotia company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Baker Hughes Indemnified Persons</I></B>&#148; means Seller Parent and its Affiliates and their respective
officers, directors, managers and employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Baker Hughes Transferred IP&#148; </I></B>has the meaning given such term in the MFA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Baker Hughes (UK)&#148; </I></B>means Baker Hughes (UK)&nbsp;Limited, a United Kingdom corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>BHI Branches</I></B>&#148; means Baker Hughes International Branches, Inc., a Delaware corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Buyer Disclosure Letter</I></B>&#148; means the disclosure letter from STC, with respect to itself and the
US Venture Entities, Buyer Parent, with respect to itself, and the Non-US Buyer Owners, with
respect to themselves and the Non-US Venture Entities, to Seller Parent dated and delivered the
date of this Agreement and containing exceptions to the representations, warranties and covenants
hereof and certain other information called for hereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Buyer Owner</I></B>&#148; means each of STC and the Non-US Buyer Owners, each of which is a subsidiary of
Buyer Parent and each of which owns 70% of a Venture Entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Buyer Parent&#148; </I></B>has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Buyer Party&#148; </I></B>means Buyer Parent, STC and each Non-US Buyer Owner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>BVI Venture Entity</I></B>&#148; has the meaning given such term in the preamble to this Agreement.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>BVI Venture Interests</I></B>&#148; means all of the equity interests of the BVI Venture Entity held by
Seller Parent and its Affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>BVI Venture Purchase Agreement</I></B>&#148; means a purchase agreement between Western Sea and SOHL,
pursuant to which Western Sea sells and SOHL purchases all of Western Sea&#146;s equity interests in the
BVI Venture Entity substantially in the form attached hereto as <U>Exhibit&nbsp;A</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Canadian Venture Entity</I></B>&#148; has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Canadian Venture Interests</I></B>&#148; means all of the equity interests of the Canadian Venture Entity
held by Seller Parent and its Affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Canadian Venture Purchase Agreement</I></B>&#148; means a purchase agreement between Baker Hughes Canada
and SCL, pursuant to which Baker Hughes Canada sells and SCL purchases all of Baker Hughes Canada&#146;s
equity interests in the Canada Venture Entity substantially in the form attached hereto as
<U>Exhibit&nbsp;A</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Cash Distribution</I></B>&#148; has the meaning given such term in <U>Section&nbsp;2.4(d)</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Charter Documents</I></B>&#148; means, with respect to any entity, (a)&nbsp;the articles or certificate of
formation, incorporation or organization (or the equivalent organizational documents) of that
entity, (b)&nbsp;the bylaws, limited liability company agreement or regulations or partnership
agreements (or the equivalent governing documents) of that entity and (c)&nbsp;each document setting
forth the designation, amount and relative rights, limitations and preferences of any class or
series of equity ownership in that entity or any rights in respect of that entity&#146;s equity
ownership interests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Claim</I></B>&#148; means any claim, demand, suit, action, investigation, proceeding, governmental action
or cause of action of any kind or character (in each case, whether civil, criminal, investigative
or administrative), known or unknown, under any theory, including those based on theories of
contract, tort, statutory liability, strict liability, employer liability, premises liability,
products liability or breach of warranty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Closing</I></B>&#148; means the closing of the transactions contemplated by this Agreement to occur on the
Closing Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Closing Date</I></B>&#148; has the meaning given such term in <U>Section&nbsp;2.3</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Code</I></B>&#148; means the United States Internal Revenue Code of 1986, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Covered Employee</I></B>&#148; means (i)&nbsp;any employee (excluding secretarial or other administrative
positions) of a Venture Entity, which employee is engaged in the Seismic Business, and (ii)&nbsp;any
employee of Seller Parent or any Affiliate thereof or Buyer Parent or any Affiliate thereof that,
in the case of this clause (ii), is engaged in the following activities
excluded from the Seismic Business: borehole seismic, seismic while drilling, permanent
seismic monitoring and passive seismic.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Dutch Venture Entity</I></B>&#148; has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Dutch Venture Interests</I></B>&#148; means all of the equity interests of the Dutch Venture Entity held
by Seller Parent and its Affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Dutch Venture Purchase Agreement</I></B>&#148; means a purchase agreement between BHI Branches and SLBV,
pursuant to which BHI Branches sells and SLBV purchases all of BHI Branch&#146;s equity interests in the
Dutch Venture Entity substantially in the form attached hereto as <U>Exhibit&nbsp;A</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Exchange Act&#148; </I></B>means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Flowthrough Venture Entities&#148; </I></B>means, collectively, WGLLC, Canadian Venture Entity, and their
respective subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Future Developments</I></B>&#148; has the meaning given such term in the MFA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Governmental Approval</I></B>&#148; means any permit, license, franchise, approval, consent, waiver,
certification, qualification or other authorization issued, granted, given or otherwise made
available or the expiration or termination of any applicable waiting period by or under the
authority of any Governmental Authority or pursuant to any Applicable Law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Governmental Authority</I></B>&#148; means any federal, state, local or foreign government or any
provincial, departmental or other political subdivision thereof, or any entity, body or authority
exercising executive, legislative, judicial, regulatory, administrative or other governmental
functions, including any court, department, commission, board, bureau, agency, instrumentality or
administrative body.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Intellectual Property</I></B>&#148; has the meaning given such term in the MFA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Lien</I></B>&#148; means, with respect to any property or other asset of any Person (or any revenues,
income or profits of that Person therefrom) (in each case whether the same is consensual or
nonconsensual or arises by contract, operation of law, legal process or otherwise), (i)&nbsp;any
mortgage, lien, security interest, pledge, attachment, levy or other charge or encumbrance of any
kind thereupon or in respect thereof or (ii)&nbsp;any other arrangement under which the same is
transferred, sequestered or otherwise identified with the intention of subjecting the same to, or
making the same available for, the payment or performance of any liability in priority to the
payment of the ordinary, unsecured creditors of that Person. For purposes of this Agreement, a
Person will be deemed to own subject to a Lien any asset that it has acquired or holds subject to
the interest of a vendor or lessor under any conditional sale agreement, capital lease, synthetic
lease or other title retention agreement relating to that asset.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Loss</I></B>&#148; shall mean any loss, cost, liability or expense, settlement, damage of any kind,
judgment, obligation, charge, fee, fine, penalty, interest, court cost and/or administrative and
reasonable attorneys&#146; fees or disbursements (at all levels, including appellate), but excluding a
party&#146;s indirect corporate and administrative overhead costs.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>MFA</I></B>&#148; means that certain Master Formation Agreement dated September&nbsp;6, 2000, as amended by the
First Amendment dated March&nbsp;16, 2001, the Closing Agreement dated November&nbsp;30, 2000, each by and
among Buyer Parent, Seller Parent and the other parties listed on the signature pages thereto as
well as amended by any Venture Entity or WGRI supplement executed pursuant to <U>Section
3.11(b)</U> of the MFA.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Non-US Buyer Owners&#148; </I></B>has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Non-US Seller Owners&#148; </I></B>means BHI Branches, Baker Hughes (UK), Western Sea and Baker Hughes
Canada, each of which owns a 30% equity interest in a Non-US Venture Entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Non-US Venture Entities&#148; </I></B>has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Non-US Venture Interests&#148; </I></B>has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Party&#148; </I></B>or <B><I>&#147;Parties&#148; </I></B>shall have the meaning given such terms in <U>Section&nbsp;1.3</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Person</I></B>&#148; means any corporation, limited liability company, individual, joint stock company,
joint venture, partnership, unincorporated association, Governmental Authority or other entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>SCL</I></B>&#148; has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;</B><B><I>Seismic Business</I></B><I>&#148; </I>means, as carried on by the Venture Entities as of the Closing Date, the
business of surface seismic acquisition and/or surface seismic data processing for the purpose of
providing seismic images of the subsurface of the earth, including the following activities and
services: (i)&nbsp;all forms of surface land, marine, ocean bottom cable and transition zone seismic
data acquisition; (ii)&nbsp;all forms of surface seismic data processing, including the processing of 3D
Vertical Seismic Profiling; (iii)&nbsp;recording of data from wellbore seismic arrays performed during
simultaneous acquisition of surface 3D data; (iv)&nbsp;trenched in, buried near surface or seabed
permanent array installation and acquisition; (v)&nbsp;surface seismic acquisition, processing and
sales, in each case, of multiclient surveys; (vi)&nbsp;maintenance of surface seismic data processing
centers, including licensing and support of surface seismic processing software; (vii)&nbsp;equipment
design and manufacture for surface seismic acquisition and processing; (viii)&nbsp;research and
development programs for any of the items in this paragraph and seismically-assisted reservoir
solutions, including software relating thereto; and (ix)&nbsp;surface seismic data management services
as necessary or desirable to perform the foregoing. The Seismic Business excludes any activity not
specifically included, such as the following: interpretation activities other than those necessary
to support acquisition and processing activities described above, borehole seismic acquisition,
installation and acquisition of data from wellbore seismic arrays except as noted in
clause (iii)&nbsp;above, reservoir management, commercial seismically-assisted reservoir solutions,
non-seismic data management and non-seismic dynamic reservoir characterization and performance
prediction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>&#147;</I><B><I>Seismic Processing Software Platform</I></B><I>&#148; </I>has the meaning given such term in the MFA.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Seller Disclosure Letter</I></B>&#148; means the disclosure letter from Seller Parent to Buyer Parent, STC
and the Non-US Buyer Owners and dated and delivered the date of this Agreement and containing
exceptions to the representations, warranties and covenants hereof and certain other information
called for hereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Seller Parent&#148; </I></B>has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Seller Party&#148; </I></B>means Seller Parent and each Seller Owner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Seller Owner</I></B>&#148; means each of Atlas, BHI Branches, Baker Hughes (UK), Western Sea and Baker
Hughes Canada and their successors and assigns, each of which is a subsidiary of Seller Parent and
each of which owns 30% of a Venture Entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Shareholders&#146; Agreement</I></B>&#148; means the agreement dated November&nbsp;30, 2000 among Buyer Parent,
Seller Parent and the other parties listed on the signature pages thereto relating to certain
governance and other matters regarding the Venture Entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Sublease Amendment</I></B>&#148; has the meaning given such term in <U>Section&nbsp;2.4(c)(v)</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>SLBV</I></B>&#148; has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>SOHL</I></B>&#148; has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>SPLC</I></B>&#148; has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>STC</I></B>&#148; has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Taxes</I></B>&#148; means all income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, windfall profits, environmental (including taxes under Section&nbsp;59A of
the Code), customs&#146; duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated or other taxes of any kind
whatsoever, imposed by any Governmental Authority, including any interest, penalties or other
additions thereto.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Transaction Documents</I></B>&#148; means this Agreement, each of the Venture Purchase Agreements and the
Sublease Amendment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Transition Services Agreement</I></B>&#148; means the Transition Services Agreement dated November&nbsp;30,
2000 among Seller Parent and the Venture Entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>UK Venture Entity</I></B>&#148; has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>UK Venture Interests</I></B>&#148; means all of the equity interests of the UK Venture Entity held by
Seller Parent and its Affiliates.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>UK Venture Purchase Agreement</I></B>&#148; means a purchase agreement between Baker Hughes (UK)&nbsp;and SPLC,
pursuant to which Baker Hughes (UK)&nbsp;sells and SPLC purchases all of Baker Hughes (UK)&#146;s equity
interests in the UK Venture Entity substantially in the form attached hereto as <U>Exhibit&nbsp;A</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>US</I></B>&#148; means the United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>US Purchaser</I></B>&#148; has the meaning given such term in <U>Section&nbsp;2.1(a)</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>US Venture Entities</I></B>&#148; has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>US Venture Interests</I></B>&#148; has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>US Venture Purchase Agreements</I></B>&#148; means (i)&nbsp;the purchase agreement between Atlas and US
Purchaser pursuant to which Atlas sells and US Purchaser purchases all of Atlas&#146;s equity interests
in WGLLC and (ii)&nbsp;the purchase agreement between Atlas and US Purchaser pursuant to which Atlas
sells and US Purchaser purchases all of Atlas&#146;s equity interest in WGRI, each substantially in the
form attached hereto as <U>Exhibit&nbsp;A</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Venture Entities</I></B>&#148; means, collectively, US Venture Entities, UK Venture Entity, BVI Venture
Entity, Dutch Venture Entity, Canadian Venture Entity and their respective subsidiaries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Venture Interests</I></B>&#148; means, collectively, the US Venture Interests and the Non-US Venture
Interests.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Venture Purchase Agreements</I></B>&#148; mean the US Venture Purchase Agreements, Dutch Venture Purchase
Agreement, UK Venture Purchase Agreement, BVI Venture Purchase Agreement and Canadian Venture
Purchase Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;<B><I>Western Sea</I></B>&#148; means Western Sea Holdings Limited, a Cayman Islands corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;WGLLC&#148; </I></B>has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;WGRI&#148; </I></B>has the meaning given such term in the preamble to this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.2 </B><U><B>Construction</B></U>. Words used in this Agreement, regardless of the number or gender
specifically used, shall be deemed and construed to include any other number, singular or plural,
and any other gender, masculine, feminine or neuter, as the context shall require.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.3 </B><U><B>References</B></U>. As used in this Agreement, unless expressly stated otherwise, references to
(a) &#147;include&#148; or &#147;including&#148; mean &#147;including, without limitation,&#148; (b)&nbsp;a &#147;<B><I>Party</I></B>&#148; mean Buyer Parent,
Seller Parent, STC and each Non-US Buyer Owner, and to the &#147;<B><I>Parties</I></B>&#148; mean all of them, and (c)
&#147;<B><I>Days</I></B>&#148; means calendar days unless otherwise indicated. Unless otherwise specified, all references
in this Agreement to Articles, Sections, Schedules and Exhibits
are deemed references to the
corresponding Articles, Sections, Schedules and Exhibits
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">in, to and of this Agreement, each of such
Schedules and Exhibits being made a part hereof for all purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.4 </B><U><B>Headings</B></U>. The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>1.5 </B><U><B>Calculations</B></U>. Whenever a calculation is called for in any Transaction Document, each
calculation or part of a calculation shall be rounded to six decimal places. Percentages shall be
converted to a decimal and that decimal shall be rounded to six decimal places.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 2</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>PURCHASE AND SALE OF VENTURE INTERESTS</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.1 </B><U><B>Purchase and Sale of Venture Interests</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) On the terms and subject to the conditions of this Agreement, (i)&nbsp;STC will cause a
non-Texas Affiliate of STC (the &#147;<B>US Purchaser</B>&#148;) to purchase from Atlas, and Seller Parent
will cause Atlas to sell to US Purchaser, all of the US Venture Interests for the
consideration specified in <U>Section&nbsp;2.1(b)</U>, and (ii)&nbsp;each of the Non-US Buyer Owners
will purchase from the applicable Non-US Seller Owners, and Seller Parent shall cause the
applicable Non-US Seller Owners to sell to the applicable Non-US Buyer Owners, all of the
Non-US Venture Interests for the consideration specified in <U>Section&nbsp;2.1(b)</U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The purchase and sale of the Venture Interests shall be accomplished as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the purchase by US Purchaser and the sale by Atlas of the US Venture
Interests
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) in exchange for $1,137.9&nbsp;million in cash pursuant to the US Venture
Purchase Agreement relating to 30% of the outstanding equity interests in
WGLLC; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 9%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) in exchange for $2.9&nbsp;million in cash pursuant to the US Venture
Purchase Agreement relating to 30% of the outstanding equity interests in
WGRI;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the purchase by SLBV and the sale by BHI Branches of the Dutch Venture
Interests in exchange for $219.7&nbsp;million in cash pursuant to the Dutch Venture
Purchase Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the purchase by SPLC and the sale by Baker Hughes (UK)&nbsp;of the UK Venture
Interests in exchange for $125.9&nbsp;million in cash pursuant to the UK Venture Purchase
Agreement;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the purchase by SOHL and the sale by Western Sea of the BVI Venture
Interests in exchange for $726.6&nbsp;million in cash pursuant to the BVI Venture
Purchase Agreement; and
</DIV>

<P align="center" style="font-size: 10pt">8
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) the purchase by SCL and the sale by Baker Hughes Canada of the Canadian
Venture Interests in exchange for $187.0&nbsp;million in cash pursuant to the Canadian
Venture Purchase Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.2 </B><U><B>Aggregate Purchase Price</B></U>. The aggregate purchase price for the Venture Interests shall
be an amount equal to US$2,400,000,000.00, which shall be divided among the Venture Interests as
set forth in <U>Section&nbsp;2.1</U> (the &#147;<B><I>Aggregate Purchase Price</I></B>&#148;). Each applicable Buyer Owner
shall pay to the applicable Seller Owner at the Closing pursuant to this Agreement and the Venture
Purchase Agreements the applicable amount set forth in <U>Section&nbsp;2.1</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.3 </B><U><B>The Closing</B></U>. The Closing will take place simultaneously (i)&nbsp;with respect to the
purchase and sale of the US Venture Interests, at the offices of Akin Gump Strauss Hauer &#038; Feld LLP
at 1111 Louisiana Street, 44<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Floor, Houston, Texas 77002, and (ii)&nbsp;with respect to the
Non-US Venture Interests, at such location or locations outside the U.S. as the Parties may
mutually agree, in each case, commencing at 9:00 a.m., local time, on April&nbsp;28, 2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.4 </B><U><B>Deliveries at the Closing</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) At the Closing, Seller Parent shall (or shall cause each Seller Owner to) deliver
to Buyer Parent and to US Purchaser or the applicable Buyer Owner to the extent required
under the Venture Purchase Agreement:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Each of the Venture Purchase Agreements, duly executed by the applicable
Seller Owners.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) An Officers&#146; certificate, substantially in the form of <U>Exhibit&nbsp;C</U>,
duly executed on behalf of Seller Parent and the Seller Owners, as to whether each
condition specified in <U>Sections&nbsp;3.2(a)</U> and <U>3.2(b)</U> has been satisfied
in all respects.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) A Secretary&#146;s certificate, substantially in the form of <U>Exhibit
D</U>, duly executed on behalf of Seller Parent and the Seller Owners.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) At the Closing, Buyer Parent and each Non-US Buyer Owner shall deliver to Seller
Parent and to the applicable Non-US Seller Owner to the extent required under the Venture
Purchase Agreements:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) Each of the applicable Venture Purchase Agreements, duly executed by the
applicable Non-US Buyer Owners.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) An Officers&#146; certificate, substantially in the form of <U>Exhibit&nbsp;C</U>,
duly executed on behalf of Buyer Parent and the Non-US Buyer Owners, as to whether
each condition specified in <U>Sections&nbsp;3.3(a)</U> and <U>3.3(b)</U> has been
satisfied in all respects (solely with respect to Buyer Parent and the Non-US Buyer
Owners).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) A Secretary&#146;s certificate, substantially in the form of <U>Exhibit
D</U>, duly executed on behalf of Buyer Parent and the Non-US Buyer Owners.
</DIV>

<P align="center" style="font-size: 10pt">9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) The cash consideration payable to the Non-US Seller Owners as set forth in
<U>Section&nbsp;2.1(b)</U>, via the SWIFT System, which will be paid to the account for
the Non-US Seller Owners set forth in instructions delivered by Seller Parent to the
Buyer Owners.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) At the Closing, STC shall, or shall cause US Purchaser to, deliver to Atlas:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The US Venture Purchase Agreements, duly executed by US Purchaser.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) An Officers&#146; certificate, substantially in the form of <U>Exhibit&nbsp;E</U>,
duly executed on behalf of STC by its President or any Vice President and dated as
of the Closing Date, as to whether each condition specified in <U>Sections
3.3(a)</U> and <U>3.3(b)</U>, has been satisfied in all respects (solely with
respect to STC).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) A Secretary&#146;s certificate, substantially in the form of <U>Exhibit
F</U>, duly executed on behalf of STC (solely as to STC).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) The cash consideration payable to Atlas by US Purchaser as set forth in
<U>Section&nbsp;2.1(b)(i)</U>, via U.S. Fedwire, which will be paid to the account for
Atlas set forth in instructions delivered by Seller Parent to the Buyer Owners.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) The Sublease Amendment substantially in the form attached hereto as
<U>Exhibit&nbsp;B</U> (the &#147;<B><I>Sublease Amendment</I></B>&#148;), regarding the extension of the
Richmond Campus Lease by WGLLC for the remaining 5&nbsp;year option period at a
rental rate equal to the fair market rent determined in 2010.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) At or prior to the Closing, STC shall cause WGLLC to distribute to Atlas and to STC
cash in the aggregate amount of $198,824,000.00 in proportion to their respective 30%/70%
ownership interests in WGLLC prior to the Closing (the <Font style="white-space: nowrap">&#147;<B>Cash Distribution</B>&#148;).</FONT></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>2.5 </B><U><B>Allocations of Purchase Price for Flowthrough Venture Entities</B></U>. As soon as possible
after the execution of this Agreement, STC and SCL shall cause to be prepared independent
valuations of the assets which are attributable to the Venture Interests in each of the Flowthrough
Venture Entities. STC and SCL shall furnish these valuations to Seller Parent promptly after
receipt of the valuations. In the case of each Flowthrough Venture Entity, the total amount of the
valuation shall be the purchase price for the Venture Interests of that Flowthrough Venture Entity,
as set forth in Section&nbsp;2.1(b). The allocation of the purchase price among the assets which are
attributable to such Venture Interests shall be consistent with such valuations and shall be used
in all related Tax filings and reporting.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 3</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>THE CLOSING</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.1 </B><U><B>Conditions to Each Party&#146;s Closing Obligation</B></U>. The respective obligations of each party
to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment
at or prior to the Closing Date of the following conditions:
</DIV>

<P align="center" style="font-size: 10pt">10
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) that no Claim is pending or, to each party&#146;s knowledge, threatened by any
Governmental Authority to restrain, enjoin or prohibit the consummation of the transactions
contemplated by this Agreement or the other Transaction Documents;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the applicable parties shall have finalized, executed and delivered each of the
Venture Purchase Agreements; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the Governmental Approvals listed by the Parties in <U>Schedule&nbsp;3.1 (c)</U> shall
have been obtained or otherwise satisfied or waived by all parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.2 </B><U><B>Conditions to the Closing Obligations of Buyer Parent, STC and the Non-US Buyer Owners</B></U>.
The applicable obligations of Buyer Parent, STC and the Non-US Buyer Owners to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the
Closing Date of the following additional conditions:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Seller Parent and the Seller Owners shall each have performed in all material
respects their respective obligations under this Agreement required to be performed by them
and shall have obtained all necessary material consents (absent some legal reason
prohibiting the same) at or prior to the Closing Date;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the representations and warranties of Seller Parent and the Seller Owners set forth
in this Agreement and each Venture Purchase Agreement shall have been true and correct in
all material respects when made and shall be true and correct in all material respects at
and as of the Closing Date as if made at and as of the Closing Date, except as affected by
transactions contemplated or permitted by this Agreement; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Buyer Parent, STC and the Non-US Buyer Owners shall have received the certificate
required by <U>Section&nbsp;2.4(a)</U> to the effect that the conditions set forth in
<U>Sections&nbsp;3.2(a)</U> and <U> 3.2(b)</U> have been satisfied.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>3.3 </B><U><B>Conditions to the Closing Obligation of Seller Parent and Seller Owners</B></U>. The obligation
of Seller Parent and the Seller Owners to consummate the transactions contemplated by this
Agreement shall be subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Buyer Parent, STC and the Non-US Buyer Owners shall each have performed in all
material respects their respective obligations under this Agreement required to be performed
by them and shall have obtained all necessary material consents (absent some legal reason
prohibiting the same) at or prior to the Closing Date;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the representations and warranties of Buyer Parent, STC and the Non-US Buyer Owners
set forth in this Agreement and, as applicable, each Venture Purchase Agreement shall have
been true and correct in all material respects when made and shall be true and correct in
all material respects at and as of the Closing Date as if made at and as of the Closing
Date, except as affected by transactions contemplated or permitted by this Agreement; and
</DIV>

<P align="center" style="font-size: 10pt">11
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Seller Parent and the Seller Owners shall have received the certificates required
by <U>Sections&nbsp;2.4(b)</U> and <U>2.4(c)</U> to the effect that the conditions set forth in
<U>Sections&nbsp;3.3(a)</U> and <U> 3.3(b)</U> have been satisfied.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) WGLLC shall have paid the Cash Distribution.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 4</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>REPRESENTATIONS AND WARRANTIES OF BUYER PARENT AND EACH BUYER OWNER</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as set forth in the Buyer Disclosure Letter, STC, with respect to itself and the US
Venture Entities, Buyer Parent, with respect to itself, and each Non-US Buyer Owner, with respect
to itself and the Non-US Venture Entity in which it owns an interest, represents, warrants and
covenants to Seller Parent, severally and not jointly, as of the date of this Agreement, that the
following are true and correct:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.1 </B><U><B>Due Organization, Good Standing and Power</B></U>. Each Buyer Party and Venture Entity is a
corporation, partnership or limited liability company, as applicable, duly formed, validly existing
and in good standing under the laws of such entity&#146;s
jurisdiction of formation. Each Buyer Owner and Venture Entity is duly authorized, qualified or
licensed to do business as a foreign corporation or other organization in good standing in each of
the jurisdictions in which it is required to be so authorized, qualified or licensed, except where
the failure to be so qualified would not have a material adverse effect on the entity or its
owners. Each Buyer Party has all requisite corporate or other power and authority under Applicable
Law and its Charter Documents to enter into this Agreement and the other Transaction Documents to
which it is or will be a party and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.2 </B><U><B>Authorization and Validity of Agreements</B></U>. The execution and delivery by each Buyer
Party of this Agreement, the execution and delivery by such Buyer Party of the other Transaction
Documents to which such Buyer Party is or will be a party and the consummation by it or any Venture
Entity of the transactions contemplated hereby and thereby have been duly authorized and approved
by all necessary corporate or other action under Applicable Law and the relevant Charter Documents.
This Agreement has been duly executed and delivered by each Buyer Party. This Agreement is a
legal, valid and binding obligation of each Buyer Party, enforceable against it in accordance with
its terms, except as such enforceability may be (i)&nbsp;limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors&#146;
rights generally and (ii)&nbsp;subject to general principles of equity (regardless of whether that
enforceability is considered in a proceeding in equity or at law). At the Closing, each other
Transaction Document to which each Buyer Party is a party shall be a legal, valid and binding
obligation of such Buyer Party, in each case enforceable against such Buyer Party in accordance
with its terms, except as such enforceability may be (i)&nbsp;limited by any applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors&#146;
rights generally and (ii)&nbsp;subject to general principles of equity (regardless of whether that
enforceability is considered in a proceeding in equity or at law).
</DIV>

<P align="center" style="font-size: 10pt">12
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.3 </B><U><B>Lack of Conflicts</B></U>. Neither the execution and delivery by any Buyer Party of this
Agreement nor the execution and delivery by any Buyer Party of any other Transaction Document to
which such Buyer Party is or will be a party, nor the consummation by it of the transactions
contemplated hereby and thereby, does or will (i)&nbsp;conflict with, or result in the breach of any
provision of, the Charter Documents of the Venture Entity or Buyer Party, or (ii)&nbsp;violate any
Applicable Law or any permit, order, award, injunction, decree or judgment of any Governmental
Authority applicable to or binding upon the Venture Entity or Buyer Party or to which any of its
properties or assets is subject.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.4 </B><U><B>No Consents</B></U>. No Governmental Approvals or other consents are required for the execution
and delivery by any Buyer Party of this Agreement or the other Transaction Documents or the
consummation of the transactions contemplated hereby or thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.5 </B><U><B>Certain Fees</B></U>. No Buyer Party nor any Affiliates of any Buyer Party nor any of their respective officers,
directors or employees has employed any broker or finder or incurred any other liability for any
brokerage fees, commissions or finders&#146; fees in connection with the transactions contemplated
hereby, other than the engagement of Deutsche Bank.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.6 </B><U><B>Pending Claims</B></U>. Buyer Parties do not have knowledge of the basis for a Claim for
indemnity from Seller Parent or any Affiliate thereof under Article&nbsp;8 of the MFA that has not been
previously disclosed in writing to Seller Parent or a Seller Owner. For purposes of this
Agreement, knowledge of Buyer Parties means the actual conscious awareness of facts by an executive
officer of Buyer Parent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.7 </B><U><B>Financing</B></U>. Each Buyer Party has, and will have at the Closing, sufficient cash,
available lines of credit or other sources of immediately available funds to enable it to pay its
portion of the Aggregate Purchase Price at the Closing and to pay any other amounts to be paid by
it hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>4.8 </B><U><B>Securities Matters</B></U>. Each Buyer Owner (i)&nbsp;understands that the interests in the Venture
Entities have not been, and will not be, registered under foreign, federal or state securities
laws, and are being offered and sold in reliance upon specific exemptions for transactions not
involving any public offering, (ii)&nbsp;is acquiring the interests in the Venture Entities solely for
such Buyer Party&#146;s own account, and not with a view to the distribution or disposition thereof, and
(iii)&nbsp;is an &#147;accredited investor&#148; as defined under federal securities laws.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 5</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>REPRESENTATIONS AND WARRANTIES OF SELLER PARENT AND SELLER OWNERS</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as set forth in the Seller Disclosure Letter, Seller Parent, on behalf of itself and
the Seller Owners, represents and warrants to Buyer Parent, STC and the Non-US Buyer Owners, as of
the date of this Agreement, that the following are true and correct:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.1 </B><U><B>Due Organization, Good Standing and Power</B></U>. Seller Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of the State of Delaware and
each Seller Owner is a corporation, partnership or limited liability company, as applicable, duly
formed, validly existing and in good standing under the laws of such Seller Owner&#146;s
</DIV>

<P align="center" style="font-size: 10pt">13
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">jurisdiction of
formation. Seller Parent and each Seller Owner is duly authorized, qualified or licensed to do
business as a foreign corporation or other organization in good standing in each of the
jurisdictions in which it is required to be so authorized, qualified or licensed, except where the
failure to be so qualified would not have a material adverse effect on the entity or its owners.
Seller Parent and each Seller Owner has all requisite corporate power and authority under
Applicable Law and its Charter Documents to enter into this Agreement and the other Transaction
Documents to which it is or will be a party
and to perform its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.2 </B><U><B>Authorization and Validity of Agreements</B></U>. The execution and delivery by Seller Parent
and each Seller Owner of this Agreement and the other Transaction Documents to which it is or will
be a party, as applicable, and the consummation by it of the transactions contemplated hereby and
thereby have been duly authorized and approved by all necessary corporate or other action under
Applicable Law and the relevant Charter Documents, and do not and will not require the approval of
the stockholders of Seller Parent or any Seller Owner. This Agreement has been duly executed and
delivered by Seller Parent. This Agreement is a legal, valid and binding obligation of Seller
Parent, enforceable against it in accordance with its terms, except as such enforceability may be
(i)&nbsp;limited by any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors&#146; rights generally and (ii)&nbsp;subject to general principles of
equity (regardless of whether that enforceability is considered in a proceeding in equity or at
law). At the Closing, each other Transaction Document to which Seller Parent and any Seller Owner
is a party shall be a legal, valid and binding obligation of Seller Parent and such Seller Owner,
as the case may be, in each case enforceable against Seller Parent or such Seller Owner in
accordance with its terms, except as such enforceability may be (i)&nbsp;limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of
creditors&#146; rights generally and (ii)&nbsp;subject to general principles of equity (regardless of whether
that enforceability is considered in a proceeding in equity or at law).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.3 </B><U><B>Ownership of Venture Interests</B></U>. Each Seller Owner is the sole record and beneficial
owner of the Venture Interests set forth on Schedule&nbsp;5.3. At Closing, each Buyer Owner will
acquire record and beneficial ownership of each Seller Owner&#146;s Venture Interests free and clear of
all Liens created by Seller Parent or its Affiliates, other than transfer restrictions imposed by
securities laws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.4 </B><U><B>Lack of Conflicts</B></U>. Neither the execution and delivery by Seller Parent of this
Agreement, nor the execution and delivery by Seller Parent or any Seller Owner of any other
Transaction Document to which it is or will be a party, nor the consummation by Seller Parent or
any Seller Owner of the transactions contemplated hereby and thereby, does or will (i)&nbsp;conflict
with, or result in the breach of any provision of, the Charter Documents of Seller Parent or any
Seller Owner, (ii)&nbsp;violate any Applicable Law or any permit, order, award, injunction, decree or
judgment of any Governmental Authority applicable to or binding upon Seller Parent or any Seller
Owner or to which any of its respective properties or assets is subject or (iii)&nbsp;result in the
creation of any Lien upon the assets of any Venture Entity.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.5 </B><U><B>No Consents</B></U>. No Governmental Approvals or other consents are required for the
execution and delivery by Seller Parent or the Seller Owners of this Agreement or the other
Transaction Documents or the consummation of the transactions contemplated hereby or thereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.6 </B><U><B>Certain Fees</B></U>. Neither Seller Parent nor any of its Affiliates nor any of their
respective officers, directors or employees, on behalf of Seller Parent or such Affiliates, has
employed any broker or finder or incurred any other liability for any brokerage fees, commissions
or finders&#146; fees in connection with the transactions contemplated hereby, other than the engagement
of Goldman Sachs &#038; Co.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>5.7 </B><U><B>Pending Claims</B></U>. Seller Parties do not have knowledge of the basis for a Claim for
indemnity from Buyer Parent, STC or any Affiliate thereof under Article&nbsp;8 of the MFA that has not
been previously disclosed in writing to Buyer Parent or a Buyer Owner. For purposes of this
Agreement, knowledge of Seller Parties means the actual conscious awareness of facts by an
executive officer of Seller Parent.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 6</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>COVENANTS PRIOR TO CLOSING</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.1 </B><U><B>Conduct of the Business Prior to Closing</B></U>. Each of STC, with respect to the US
Venture Entities, and the Non-US Buyer Owners, with respect to the Non-US Venture Entities, agrees
that during the period between the date of this Agreement and the Closing Date, except as expressly
provided otherwise in this Agreement, it shall cause the applicable Venture Entity to conduct the
Seismic Business in the ordinary course consistent with the Shareholders&#146; Agreement, the MFA and
its past practice.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.2 </B><U><B>Commercial Efforts</B></U>. Subject to the rights of the Parties hereunder, each of the Parties
hereto shall use its commercially reasonable efforts to take all actions and to do all things
(including obtaining necessary consents and Governmental Approvals) necessary in order to
consummate the transactions contemplated by this Agreement (including satisfaction, but not waiver,
of the Closing conditions set forth in <U>Section&nbsp;3.1</U>, <U>Section&nbsp;3.2</U> or <U>Section
3.3</U>, as applicable). The Parties agree to cooperate with each other in connection with making
any filing with or providing any notice to Governmental Authorities and obtaining any Governmental
Approvals and consents deemed necessary to consummate the transactions contemplated hereby or any
licenses, permits or other Governmental Approvals necessary to operate the Seismic Business after
the Closing. Except with the prior written consent of Buyer Parent (in the case of action by Seller
Parent or the Seller Owners) or Seller Parent (in the case of action by Buyer Parent or the Buyer
Owners), each of the Parties hereunder shall use its commercially reasonable efforts to refrain
from doing or omitting to do any act that would cause any of its representations or warranties made
in this Agreement or any other Transaction Document not to be true and correct as if such
representations and warranties were made immediately after such act or omission to act; provided,
however, that nothing in this <U>Section&nbsp;6.2</U> shall be deemed for any purpose to require Buyer
Parent or Seller Parent to refrain from taking or omitting to take any action necessary to comply
with Applicable Law. The Parties agree that using their commercially reasonable best efforts shall
not include initiating litigation, licensing any assets or divesting of assets other than cash in
order to obtain any consents or Governmental Approvals. Buyer Parent
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">shall pay all
expenses incurred by Seller Parent or its Affiliates in connection with obtaining such Governmental
Approvals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.3 </B><U><B>Other Agreements</B></U>. The Parties agree that, upon the Closing:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Shareholders&#146; Agreement shall automatically terminate and be of no further
force and effect except for indemnification obligations therein;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Transition Services Agreement shall automatically terminate and be of no
further force and effect except for indemnification obligations therein;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the letter agreement dated December&nbsp;6, 2005 between Seller Parent and Buyer Parent
regarding certain indemnity demands shall remain in full force and effect;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the Employee Matters Agreement, including, without limitation, <U>Sections&nbsp;2.8</U>
and <U>2.10</U> thereof, will continue in full force and effect after the Closing Date;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the following provisions of the MFA shall cease to have any further effect:
Sections&nbsp;7.1, 7.4(a)(iv), 7.5, 7.6, 7.7 with respect to periods after December&nbsp;31, 2005,
7.8, 7.9, 7.10 with respect to actions taken after the Closing, 7.11 with respect to actions
taken after the Closing, 7.12, 7.13, 7.14, 7.15, 7.16, 7.18 with respect to periods after
the Closing, 7.19, 7.21, 7.22, 7.23 only with respect to Prohibited Payments (as defined in
the MFA) made after Closing, 8.4(e), 8.4(f), 8.5, 12.6 and 12.12 and Article&nbsp;11; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) the Parties acknowledge and agree that, except as expressly set forth herein, the
terms of the MFA shall continue in full force and effect from and after the Closing. The
listing in this Agreement of certain provisions of the MFA as continuing after Closing is
for clarity and shall not affect whether provisions that are not described herein continue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>6.4 </B><U><B>Use of Trade Names</B></U>. As promptly as practicable after Closing and in any event within
180&nbsp;days after Closing, (a)&nbsp;all rights of Buyer Parent or its Affiliates to use the name &#147;Baker
Hughes,&#148; &#147;Baker&#148; or &#147;BHI&#148; and any associated logos and trademarks or service marks shall
automatically terminate and Buyer Parent and its Affiliates shall cease to use such trade names,
and (b)&nbsp;all rights of Seller Parent or its Affiliates to use the name &#147;Schlumberger&#148;, &#147;WesternGeco&#148;
and any associated logos and trademarks or service marks shall automatically terminate and Buyer
Parent and its Affiliates shall cease to use such trade names.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 7</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>OTHER COVENANTS</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.1 </B><U><B>Expenses</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Except as otherwise specifically provided in this Agreement and whether or not the
Closing occurs, the Buyer Parties or their respective Affiliates shall pay (i)&nbsp;all expenses
incurred by or on behalf of the Buyer Parties or any of their respective Affiliates in
connection with the preparation, authorization and execution of this Agreement and the other
Transaction Documents, including all fees and expenses of
</DIV>

<P align="center" style="font-size: 10pt">16
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">agents, representatives, counsel
and accountants, (ii)&nbsp;all amounts payable with respect to any claim for brokerage or
finders&#146; fees or other commissions with respect to the transactions contemplated by this
Agreement based in any way on any agreement, arrangement or understanding made by Buyer
Parties or any of their respective Affiliates and (iii)&nbsp;all expenses incurred by or on
behalf of Seller Parties, Buyer Parties or their respective Affiliates in obtaining
Governmental Approvals for the transaction contemplated by this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Except as otherwise specifically provided in this Agreement and whether or not the
Closing occurs, Seller Parties or their respective Affiliates shall pay (i)&nbsp;all expenses
incurred by or on behalf of the Seller Parties or any of their respective Affiliates in
connection with the preparation, authorization and execution of this Agreement and the other
Transaction Documents, including all fees and expenses of agents, representatives, counsel
and accountants and (ii)&nbsp;all amounts payable with respect to any claim for brokerage or
finders&#146; fees or other commissions with respect to the transactions contemplated by this
Agreement based in any way on any agreement, arrangement or understanding made by Seller
Parties or any of their respective Affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.2 </B><U><B>Access to Venture Entity Records</B></U>. For a period of six years after the Closing Date,
Buyer Parent and each Buyer Owner shall, and each Buyer Owner shall cause the Venture Entity in
which it owns an interest to, make available and provide Seller Parent and its representatives with
reasonable access, during normal business hours and upon reasonable notice, to the books and
records of the Venture Entities for the period from November&nbsp;30, 2000 to and including the Closing
Date to the extent such access is reasonably required (a)&nbsp;for the preparation of Seller Parent&#146;s
financial statements to be filed under the Exchange Act, (b)&nbsp;to address any comments from the
Securities and Exchange Commission, (c)&nbsp;to defend itself in any dispute by a third party related to
the Seismic Business or (d)&nbsp;for any purpose Buyer Parent determines is a reasonable, legitimate
business purpose related to the Seller Owners&#146; ownership in the Venture Entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.3 </B><U><B>Amendment of Dutch Venture Entity&#146;s Articles of Association</B></U>. SLBV shall waive in
writing the relevant provisions contained in the Dutch Venture Entity&#146;s Articles of Association
necessary to permit Seller Parent and its Affiliates to effect a transfer of the Dutch Venture
Interests as contemplated by this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>7.4 </B><U><B>Further Assurances</B></U>. The Parties agree from time to time to take such actions as the
Parties shall agree are necessary or appropriate to accomplish the transactions contemplated
hereby. The Parties expressly agree that any expenses incurred by a party in connection with this
<U>Section&nbsp;7.4</U> shall be paid by the Buyer Parent or its Affiliates.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 8</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>LIABILITIES AND INDEMNIFICATION</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.1 </B><U><B>Venture Entity Indemnification</B></U>. Except as expressly set forth in this Agreement, on
and after the Closing Date the indemnification obligations of each Venture Entity and its
subsidiaries, Seller Parent and Buyer Parent set forth in <U>Sections&nbsp;8.1</U>, <U>8.2</U> and
<U>8.3</U> of the MFA, respectively, shall continue in full force and effect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.2 </B><U><B>Tax Matters</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U>Tax Indemnities</U>. All Tax indemnities contained in <U>Section&nbsp;8.4(a),
(b)</U> and <U>(c)</U> of the MFA shall continue in full force and effect. For the
avoidance of doubt, the Venture Entities shall not be liable for, nor be required to
indemnify or hold the Baker Hughes Indemnified Persons harmless from and against, any Taxes
imposed on a Seller Owner or its Affiliates with respect to the Seller Owner&#146;s allocable
share of income of a Flowthrough Venture Entity, its subsidiaries or joint ventures.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U>Tax Cooperation</U>. Unless Buyer Parent and Seller Parent otherwise agree,
Buyer Parent, Seller Parent, their respective Affiliates and the Venture Entities shall
cooperate as set forth below with respect to Tax matters for Tax periods or portions thereof
ending on or before the Closing Date.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <U>Tax Cooperation in General</U>. The Buyer Owners, Seller Parent, their
respective Affiliates and the Venture Entities shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the filing of Tax
returns and any audit, litigation or other proceeding with respect to Taxes;
including, without limitation, any audit, litigation or proceeding involving Buyer
Parent, Seller Parent, or any of their Affiliates related to their ownership or
participation in any of the Venture Entities. Such cooperation shall include (upon
any Party&#146;s request) the provision of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <U>Retention of Books and Records</U>. Each Party and each Venture Entity
shall retain all books and records with respect to Tax matters pertinent to
another Party&#146;s Tax liability until the expiration of the applicable statute of
limitations (and, to the extent notified by another Party, any extensions thereof).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) <U>Cooperation Costs</U>. The Parties agree that any expenses incurred
by a Party or a Venture Entity in connection with the cooperation described in this
<U>Section&nbsp;8.2(b)</U> shall be the responsibility of the Party or Venture Entity
incurring the cost and no reimbursement shall be sought from the requesting Party.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <U>Tax Reporting</U>. With respect to any Tax period beginning before the Closing
Date, each of the Venture Entities shall duly and timely file all Tax returns required to be
filed by it under Applicable Law, and shall pay all Taxes owed by it (whether or not
reflected on such Tax returns, but, for the avoidance of doubt, not
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">including Taxes
described in the second sentence of <U>Section&nbsp;8.2(a)</U>). Each Flowthrough Venture
Entity (i)&nbsp;shall prepare each such Tax return in a manner consistent with past practices,
(ii)&nbsp;shall not make or revoke any Tax election for any Tax period (or any portion thereof)
ending on or before the Closing Date and (iii)&nbsp;shall not file any amended Tax return for any
Tax period (or any portion thereof) ending on or before the Closing Date, without the
express written consent of Seller Parent, to the extent any of the foregoing would
materially affect the Tax liability of Seller Parent or any of its Affiliates. With respect
to any Tax period (or any portion thereof) ending on or before the Closing Date, Seller
Parent shall be entitled to participate in, but not control, any settlement, compromise or
agreement to settle or compromise any tax dispute of a Flowthrough Venture Entity if it is
reasonably anticipated that the resolution of such dispute could increase any Tax liability
imposed on a Seller Owner or its Affiliates as a result of its ownership of an equity
interest in a Flowthrough Venture Entity. For purposes of clarification, it is intended
that the provisions of this Section&nbsp;8.2(c) shall apply to that portion of a Flowthrough
Venture Entity&#146;s 2006 Tax period ending on the Closing Date. Each Venture Entity shall
provide to Seller Parent or a designated Affiliate, in a timely manner, all such financial
information as will enable Seller Parent and its Affiliates (i)&nbsp;to make all calculations of
Taxes or Tax credits that are incident to their ownership of the Venture Entities through
the Closing Date, and (ii)&nbsp;to comply with all applicable reporting requirements of any
Governmental Authority with jurisdiction over Seller Parent or any of its Affiliates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <U>Tax Settlement Agreement</U>. Notwithstanding anything in this Agreement to the
contrary, the Tax Settlement Agreement dated December&nbsp;30, 2003, by and among BVI Venture
Entity, and Baker Hughes GmbH shall remain in full force and effect until the expiration of
the applicable statute of limitations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <U>Transfer Taxes</U>. All transfer, documentary, sales, use, stamp, registration
and other such Taxes, and any conveyance fees, recording charges and other fees and charges
incurred in connection with the consummation of the transactions contemplated by this
Agreement shall, with respect to the transfer of the US Venture Entities, be borne equally
by STC and Seller Parent and, with respect to the transfer of the Non-US Venture Entities,
be borne by the Party on which the Taxes are imposed by Applicable Law. Buyer Parent shall,
at its own expense, file all necessary Tax returns and other such documentation with respect
to all such Taxes, fees and charges.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <U>Venture Entity Actions</U>. Buyer Parent agrees to cause each of the Non-US
Venture Entities, and STC agrees to cause each of the US Venture Entities, to take, or
refrain from taking, as the case may be, the actions of such Venture Entity described in
this <U>Section&nbsp;8.2</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.3 </B><U><B>Partner Cross-Indemnities</B></U>. On and after the Closing Date, in the event that the
Venture Entities are unable to fulfill their indemnity obligations under <U>Section&nbsp;8.1</U> of
the MFA with respect to a Loss of any of the Baker Hughes Indemnified Persons properly brought
under <U>Section&nbsp;8.1</U> of the MFA, (i)&nbsp;STC shall and hereby agrees to indemnify and hold
harmless such Baker Hughes Indemnified Person for 100% of the unsatisfied Loss relating to the US
Venture Entities and (ii)&nbsp;the Non-US Buyer Owners shall and hereby agree to indemnify and hold
</DIV>

<P align="center" style="font-size: 10pt">19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">harmless such Baker Hughes Indemnified Person for 100% of the unsatisfied Loss relating to the
Non-US Venture Entities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>8.4 </B><U><B>Waiver of Consequential Damages</B></U>. EXCEPT AS PROVIDED IN SECTION 8.1 OF THE MFA, NO PARTY
SHALL BE REQUIRED TO INDEMNIFY OR PAY THE AMOUNT OF ANY LOSS TO ANY OTHER PARTY IN CONNECTION WITH
THIS AGREEMENT ARISING FROM INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES, EXCEPT
FOR INDIRECT, CONSEQUENTIAL, SPECIAL, EXEMPLARY OR PUNITIVE DAMAGES ACTUALLY PAID TO ANY THIRD
PARTY BY THE PARTY SEEKING INDEMNIFICATION HEREUNDER.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 9</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>INTELLECTUAL PROPERTY</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.1 </B><U><B>Continuing Intellectual Property Rights and Obligations</B></U>. All rights and licenses to
Intellectual Property granted to the Parties and their Affiliates under the terms of Article&nbsp;9 of
the MFA (including all restrictions contained therein) that exist or are in effect on or before the
Closing (as defined in this Agreement) shall continue in full force and effect after Closing. For
the avoidance of doubt, Seller Parent acknowledges and agrees that the licenses to Seller Parent
and its Affiliates to use Baker Hughes Transferred IP under Sections&nbsp;9.4(a) and 9.4(b) of the MFA
and Future Developments under Sections&nbsp;9.5(a) and 9.5(b) of the MFA will continue to be limited to
uses outside the scope of the Seismic Business (as defined in the MFA) after the Closing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.2 </B><U><B>Covenant Not to Sue</B></U>. Each Party covenants that it and its Affiliates will not take any
action against the other Party, its Affiliates and customers, with respect to the use of
Intellectual Property that has been licensed to a Party under the terms of Article&nbsp;9 of the MFA so
long as such use is in accordance with the licenses so granted under the MFA. For the avoidance of
doubt, it is agreed and understood that this covenant not to sue shall apply: (i)&nbsp;with respect to
Seller Parent and its Affiliates, to uses of Baker Transferred IP and to Future Developments
falling within the scope of Sections&nbsp;9.5(a) and (b)&nbsp;of the MFA that exist or are in effect on or
before the Closing; and (ii)&nbsp;with respect to Buyer
Parent and its Affiliates, to uses of Baker Hughes Retained IP falling within the scope of Sections
9.7(a) and (b)&nbsp;of the MFA. Seller Parent agrees and understands that it and its Affiliates obtain
no rights or licenses to Future Developments created or developed by the Venture Entities after
Closing, and that this covenant not to sue shall not apply to such Future Developments created or
developed by the Venture Entities after Closing. This covenant may be transferred to a third party
if activities covered under this covenant will be used by an ongoing business divested to that
third party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.3 </B><U><B>Licenses to Seismic Processing Software Platform and GEOFRAME</B></U> . Seller Parent and its
Affiliates agree and understand that the right to licenses in the Seismic Processing Software
Platform and GEOFRAME software set forth in Sections&nbsp;9.5(a), (b)&nbsp;and (c)&nbsp;of the MFA shall survive
the Closing, including all restrictions on use set forth therein. Buyer Owners shall provide (or
cause the appropriate Venture Entities to provide) to Seller Parent a copy of the Seismic
Processing Software Platform in both source and object code no later than 30&nbsp;days following
Closing.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>9.4 </B><U><B>Future Developments</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Buyer Owners shall provide (or cause the applicable Venture Entities to provide) to
Seller Parent at Closing a list of all Future Developments falling within the scope of
<U>Sections&nbsp;9.5(a)</U> and <U>(b)</U> of the MFA that exist or are in effect on or before
the Closing. This list will include, but is not limited to, a list of all current patent
disclosures, patent applications and patents, technology and research and development
projects begun since November&nbsp;30, 2000 and falling within the scope of <U>Sections
9.5(a)</U> and <U>(b)</U> of the MFA that exist or are in effect on or before the Closing,
and their current status.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) No later than six (6)&nbsp;months following Closing, Buyer Owners shall provide (or
cause the applicable Venture Entities to provide) Seller Parent and its Affiliates copies of
all technical information, reports and other documents including software code (object code
and source code) (hereinafter collectively &#147;Technical Information&#148;) in usable and legible
form for all Future Developments licensed to Seller Parent pursuant to <U>Sections
9.5(a)</U> and <U>(b)</U> of the MFA that exist or are in effect on or before the Closing
(as identified pursuant to <U>Section&nbsp;9.4(a)</U> above) and have been created, conceived or
first reduced to practice since November&nbsp;30, 2000. Buyer Owners shall certify in writing
completion of the provision of the Technical Information under this Section&nbsp;9.4(b).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Seller Parent and its Affiliates shall then have a period of six (6)&nbsp;months
following the time of certification of completion set forth in <U>Section&nbsp;9.4(b)</U> to
review and analyze all Technical Information provided. During this six month period Seller
Parent shall also be entitled, at no cost to Seller Parent and its Affiliates to meet no
more than twice, for up to one-half day for each meeting, with Venture Entity employees as
designated by the Venture Entities who can provide direction, guidance, and education with
respect to the details and applicability of the Future Developments. Buyer Owners
shall cause the applicable Venture Entities to cooperate in good faith with the
provisions of this Section&nbsp;9.4(c).
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Seller Parent may request periodically, but no more than twice a calendar year,
during the first three years following Closing and no more than once a calendar year for two
years thereafter, updates to the list of patents, applications and disclosures that are
based on Future Developments conceived and reduced to a tangible form of expression by the
Venture Entities before Closing and falling within the scope of <U>Sections&nbsp;9.5(a)</U> and
<U>(b)</U> of the MFA. Such updates shall be provided by Buyer Owners (or Buyer Owners
shall cause the applicable Venture Entities to provide them) within ten business days of
Seller Parent&#146;s request.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Seller Parent shall have the right to audit the Venture Entities one time by giving
Buyer Parent and STC written notice during the time period set forth in <U>9.4(c)</U> to
ensure that all Future Developments falling within the scope of <U>Sections&nbsp;9.5(a)</U> and
<U>(b)</U> of the MFA that existed or were in effect on or before the Closing have been
identified and all Technical Information with respect thereto have been produced to Seller
Parent. The audit will be completed as soon as reasonably practicable but no later than
three (3)&nbsp;months after the written notice initiating the audit. The audit shall be conducted
by an
</DIV>

<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">independent third party chosen by Seller Parent and reasonably acceptable to Buyer
Parent and STC. The Buyer Parent and STC shall cause the Venture Entities to cooperate in
good faith with said audit. The auditor shall make a written report to Seller Parent, Buyer
Parent and STC identifying any Future Developments falling within the scope of <U>Sections
9.5(a)</U> and <U>(b)</U> of the MFA that existed or were in effect on or before the
Closing and that have not been previously disclosed to Seller Parent. Buyer Parent and STC
shall then provide (or cause the applicable Venture Entities to provide) copies of all
requested Technical Information relating to such identified Future Developments no later
than thirty days following the issuance of the auditor&#146;s written report.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) In the event of any dispute or disagreement by the Parties in connection with
whether a particular item of Intellectual Property constitutes a Future Development falling
within the scope of <U>Sections&nbsp;9.5(a)</U> and <U>(b)</U> of the MFA that exist or are in
effect on or before the Closing, the Parties agree to attempt to resolve such dispute or
disagreement through good-faith discussions between senior executives appointed by each
party.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) In the event the dispute or disagreement in <U>Section&nbsp;9.4 (f)</U> cannot be
resolved by the Parties within fifteen days:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The dispute or disagreement shall be finally settled by binding arbitration
conducted expeditiously in accordance the Rules of Arbitration of the American
Arbitration Association, as well as the Federal Rules of Civil Procedure and the
Federal Rules of Evidence. If the Parties are not able to decide upon a neutral
third party arbitrator within thirty (30)&nbsp;days of the request for arbitration, then
the American Arbitration Association shall select an arbitrator having at least five
(5)&nbsp;years of experience in intellectual property arbitration. The Parties agree
that any arbitration award shall be enforced in any court having jurisdiction over
the Parties. The Parties shall bear their own costs in arbitration, provided,
however, that the arbitrator has the discretion to award costs to the prevailing
party based upon the merits of the dispute.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) All proceedings will be conducted in English and shall be confidential.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The Parties agree to Houston, Texas as the venue for conducting any and
all negotiation and/or arbitration pursuant to this Article.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Notwithstanding anything to the contrary provided in this <U>Section
9.4(g)</U> and without prejudice to the above procedures, either Party may apply to
any court of competent jurisdiction for temporary injunctive or other provisional
judicial relief or to specifically enforce the terms of this <U>Section&nbsp;9.4</U> if
such action is necessary to avoid irreparable damage or to preserve the status quo
until such time as the arbitrator is selected and available to hear such Party&#146;s
request for temporary relief.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 10</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>TERMINATION, AMENDMENT, WAIVER AND MODIFICATION</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.1 </B><U><B>Termination</B></U>. This Agreement may be terminated prior to the Closing Date (a)&nbsp;by mutual
written agreement of Buyer Parent, Seller Parent and STC duly approved by their respective Boards
of Directors or (b)&nbsp;by either Buyer Parent, Seller Parent or STC if the Closing shall not have
occurred on or before June&nbsp;15, 2006, unless the absence of such occurrence shall be due to the
failure of the party seeking to terminate this Agreement to perform each of its obligations under
this Agreement required to be performed by it at or prior to the Closing Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.2 </B><U><B>Effect of Termination</B></U>. In the event of the termination of this Agreement as provided
above, except as set forth in <U>Section&nbsp;7.1</U>, there shall be no further liability or
obligation on the part of any of the Parties, except and to the extent such termination results
from the material breach by a Party of any of its covenants or agreements hereunder, and that, as
soon as practicable following termination, the Parties shall mutually agree on and release a joint
public announcement of the termination of this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.3 </B><U><B>Amendment</B></U>. This Agreement may not be amended except by an instrument in writing signed
by or on behalf of Buyer Parent, STC, the Non-US Buyer Owners and Seller Parent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>10.4 </B><U><B>Extension/Waiver</B></U>. At any time, a Party solely with respect to itself, may: (a)&nbsp;with
respect to obligations owed to it or the performance of other acts for its benefit, extend the time
for the performance of such
obligations or such other acts to be performed hereunder by another Party; (b)&nbsp;waive any
inaccuracies in the representations and warranties of another Party contained herein or in any
document delivered pursuant hereto; and (c)&nbsp;waive compliance with any of the conditions to the
obligations of a Party contained herein. Any agreement on the part of a Party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such
Party. No such waiver shall be operative as a waiver of any other or subsequent requirement of this
Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE 11</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>GENERAL PROVISIONS</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.1 </B><U><B>Survival of Indemnification Obligations</B></U>. The indemnification obligations under this
Agreement shall extend for the period of the applicable statute of limitations related to Claims
subject to indemnification.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.2 </B><U><B>Governing Law</B></U>. This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas applicable to contracts made and to be performed therein, without
giving effect to the principles of conflicts of law thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.3 </B><U><B>Parties in Interest; Assignment</B></U>. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the Parties hereto and their respective successors and
assigns, and it is not intended to confer upon any other Person any rights or remedies hereunder,
except that each of the Seller Owners shall be considered to be a third-party beneficiary of the
provisions of this Agreement. Neither this Agreement nor any of the rights,
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">interests or
obligations hereunder may be assigned by any of the Parties without the prior written consent of
the other Parties.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.4 </B><U><B>Counterparts</B></U>. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, and all of which together shall be deemed to be one and
the same instrument.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.5 </B><U><B>Notices</B></U>. All notices, requests, demands and other communications made in connection
with this Agreement shall be in writing and shall be deemed to have been duly given on the date
delivered, if delivered personally, by reputable overnight delivery service that requires a
signature on delivery or sent by facsimile machine with telephonic confirmation of receipt to the
Persons identified below, or three days after mailing in the U.S. Mail if mailed by certified or
registered mail, postage prepaid, return receipt requested, addressed as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) if to Buyer Parent: Schlumberger Limited, 153 East 53 Street, 57th Floor, New York,
New York 10022-4624, Facsimile: 212.350.8127, Attn.: General Counsel
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) if to Seller Parent: Baker Hughes Incorporated, 3900 Essex Lane, Houston, Texas
77027, Facsimile: 713.439.8472, Attn.: General Counsel
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Such addresses may be changed, from time to time, by means of a notice given in the manner
provided in this <U>Section&nbsp;11.5</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.6 </B><U><B>Non-Competition, Non-Solicitation and Confidentiality</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Each Seller Party agrees that for a period of eighteen months after Closing, it and
its Affiliates shall not directly or indirectly engage or invest in any business in the
Seismic Business in direct competition with the business of any of the Venture Entities as
conducted immediately prior to the Closing. It is understood and agreed that (i)&nbsp;no Seller
Party shall be deemed to be in violation of this <U>Section&nbsp;11.6(a)</U> as a result of any
acquisition it may make of not more than five percent of the outstanding shares or other
units of any security of any entity subject to the requirements of Section&nbsp;13 or 15(d) of
the Exchange Act, (ii)&nbsp;the provisions of this <U>Section&nbsp;11.6(a)</U> shall not apply to
any business activities of a Seller Party, or any of its Affiliates, actually being
conducted as of the date hereof, other than the Seismic Business, (iii)&nbsp;each Seller Party
shall be permitted to process Vertical Seismic Profiling within the Seismic Business by
using Baker Hughes Transferred IP and without access to Future Developments and (iv)&nbsp;this
<U>Section&nbsp;11.6(a)</U> shall not be construed to prohibit a Seller Party, directly or
through any of its Affiliates, from hereafter acquiring and continuing to own and operate
any entity that has operations in the Seismic Business that compete with the business of any
of the Venture Entities as conducted immediately following the Closing, so long as, in the
case of this clause (iv), each of the Seller Parties and its Affiliates comply with the last
sentence of this <U>Section&nbsp;11.6(a)</U>. In the event that a Seller Party or its
Affiliate acquires within eighteen months after Closing an entity that has operations
competing directly with any of the Venture Entities, the Seller Party or its Affiliate shall
divest itself of or discontinue the competing operations no later than the date that is six
months after the date of acquisition of the competing business.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Each Seller Party and each Buyer Party agrees that for a period of eighteen months
after Closing it will not, directly or indirectly, (A)&nbsp;induce or attempt to induce any
Covered Employee to leave the employment of his employer, (B)&nbsp;in any way interfere with the
relationship between any Covered Employee and his employer or (C)&nbsp;solicit for employment,
employ, or otherwise engage as an employee, independent contractor, or otherwise, any
Covered Employee; provided, however, that each Party may (i) (A)&nbsp;engage in general
solicitations to the public for employees and independent contractors in the ordinary course
of business and consistent with past practice and (B)&nbsp;employ or otherwise engage as an
employee, independent contractor or otherwise any person who responds to such general
solicitation and (ii)&nbsp;employ or otherwise engage as an employee, independent contractor or
otherwise any person who was, at the time of the initial contact regarding employment, no
longer a Covered Employee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In the event that the covenants contained in <U>Sections&nbsp;11.6(a)</U> and
<U>11.6(b) </U>are more restrictive than permitted by Applicable Law, the Parties agree
that the covenants contained in <U>Sections&nbsp;11.6(a)</U> and <U>11.6(b)</U> shall be
enforceable and enforced to the extent permitted by Applicable Law.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Until the third anniversary of the Closing Date, the Seller Parties, the Buyer
Parties and their respective Affiliates shall abide by the confidentiality provisions of
<U>Exhibit&nbsp;12.6</U> to the MFA, but only with respect to information regarding periods
prior to the Closing Date. Upon the third anniversary of the Closing Date, all obligations
of the Parties to abide by the confidentiality provisions of <U>Exhibit&nbsp;12.6</U> to the MFA
will cease to have any further effect.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Each party acknowledges and agrees that the remedy at law for any breach of the
requirements of this <U>Section&nbsp;11.6</U> would be inadequate, and agrees and consents
that, without intending to limit any additional remedies that may be available, temporary
and permanent injunctive and other equitable relief may be granted without proof of actual
damage or inadequacy of legal remedy in any proceeding that may be brought to enforce any of
the provisions of this <U>Section&nbsp;11.6</U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.7 </B><U><B>Entire Agreement; Conflicts</B></U>. This Agreement, together with each of the exhibits and
disclosure letters hereto, and the other Transaction Documents (including any exhibits or schedules
thereto) constitute the entire agreement among the Parties hereto with respect to the matters
covered hereby and thereby and supersedes all prior agreements and understandings among the Parties
(excluding the MFA and the Letter from Buyer Parent to Seller Parent dated December&nbsp;6, 2005
regarding certain indemnity demands) with respect to the matters discussed herein or in the other
Transaction Documents. If there is any conflict between this Agreement and any other Transaction
Document or the MFA, the provisions of this Agreement shall govern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.8 </B><U><B>Consents and Approval</B></U>. In the case of any consent or approval required or contemplated
hereby, no Party shall unreasonably withhold or delay consent or approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.9 </B><U><B>Obligations of Buyer Parent, STC and Seller Parent; Buyer Parent Guarantee</B></U>. Whenever
this Agreement requires Buyer Parent, STC or Seller Parent to take any action, such requirement
shall be deemed to be a requirement of the applicable subsidiary or
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">subsidiaries of Buyer Parent,
STC or Seller Parent which holds the interests in the Venture Entity or Venture Entities in the
country in which the action is required to be taken and a guarantee of such performance by Buyer
Parent, STC or Seller Parent, as applicable. For purposes of the prior sentence, STC and its
subsidiaries shall not be treated as subsidiaries of Buyer Parent. Buyer Parent guarantees the
obligations with respect to the representations of, and performance of all obligations of, the
Non-US Buyer Owners under this Agreement. Buyer Parent will not permit the dissolution or winding
up of any Buyer Owner or Venture Entity without providing for the assumption of such Buyer Owner&#146;s
or Venture Entity&#146;s obligations under this Agreement, the
MFA and the Sublease Amendment. If STC&#146;s principal business, operations or a majority of its
assets are assigned, conveyed or otherwise transferred, including, by sale, merger, consolidation,
amalgamation, conversion or similar transactions, the Person or Persons receiving such assets will
become bound by and subject to the provisions of this Agreement, and STC will cause such receiving
Person or Persons to expressly assume its obligations hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.10 </B><U><B>Publicity</B></U>.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) No party shall make any press release or other public statement or disclosure
(including communications to employees, customers and suppliers) regarding this Agreement,
its contents or the transactions contemplated hereby without giving the other Parties
reasonable prior notice thereof and the opportunity to review and comment upon such release,
statement or disclosure unless and only to the extent that disclosure is required under
Applicable Law. Seller Parent and Buyer Parent shall, to the extent practicable, coordinate
any material public disclosures regarding the transactions contemplated by this Agreement.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Seller Parent and Buyer Parent shall, to the extent practicable, each circulate to
each other proposed drafts of relevant portions of (i)&nbsp;any press release that is intended to
be released nationally in the U.S. or internationally or (ii)&nbsp;any public filing with the
U.S. Securities and Exchange Commission that, in either case, contains disclosures that are
(A)&nbsp;material to Seller Parent or Buyer Parent, as applicable, (B)&nbsp;not already publicly known
or been previously disclosed to the public and (C)&nbsp;related to the transactions contemplated
by this Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.11 </B><U><B>Severability</B></U>. If any term, provision, covenant or restriction of this Agreement or
the application thereof to any Person or circumstance, at any time or to any extent, is held by a
court of competent jurisdiction or other Governmental Authority to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement
(or the application of such provision in other jurisdictions or to Persons or circumstances other
than those to which it was held invalid or unenforceable) shall in no way be affected, impaired or
invalidated, and to the extent permitted by Applicable Law, any such term, provision, covenant or
restriction shall be restricted in applicability or reformed to the minimum extent required for
such to be enforceable. This provision shall be interpreted and enforced to give effect to the
original written intent of the Parties hereto prior to the determination of such invalidity or
unenforceability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.12 </B><U><B>No Strict Construction</B></U>. The language this Agreement uses shall be deemed to be the
language the Parties have chosen to reflect their mutual intent, and no rule of strict
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">construction
or presumption based upon the party that has drafted this Agreement shall be applied against any
Party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>11.13 </B><U><B>Jurisdiction and Venue</B></U>. Except for disputes arising under <U>Section&nbsp;9.4</U> of this Agreement, each of the Parties
irrevocably agrees that if any dispute between the Parties relating to this Agreement cannot be
resolved amicably by the Parties, any action or proceeding with respect to this Agreement or for
recognition and enforcement of any judgment in respect thereof brought by the other party hereto or
its successors or assigns, shall be brought and determined in a Texas state court or U.S. federal
district court in Texas, and each of the Parties hereby irrevocably submits with regard to any such
action or proceeding for itself, generally and unconditionally, to the exclusive jurisdiction of
the aforesaid courts; provided, however, that such consent to jurisdiction is solely for the
purpose referred to in this <U>Section&nbsp;11.13</U> and shall not be deemed to be general submission
to the jurisdiction of said courts or in the State of Texas other than for such purpose.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;IN WITNESS WHEREOF, the undersigned have duly executed and delivered this Agreement as of the
date first above written.
</DIV>

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<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>SCHLUMBERGER LIMITED</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/Simon Ayat
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Name&#093;  </B>Simon Ayat&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Title&#093;    </B>Treasurer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left" nowrap><B>SCHLUMBERGER TECHNOLOGY CORPORATION</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/Rex Ross
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Name&#093;  </B>Rex Ross&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Title&#093;    </B>Chairman&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>SCHLUMBERGER B.V.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/Abraham Rutger Verburg
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Name&#093;  </B>Abraham Rutger Verburg&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Title&#093;    </B>Director&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left" nowrap><B>SCHLUMBERGER OILFIELD HOLDINGS LIMITED</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/Eileen Hardell
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Name&#093;   </B>Eileen Hardell&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Title&#093;     </B>Attorney-in-Fact&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>SCHLUMBERGER PLC</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/Eileen Hardell
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Name&#093;   </B>Eileen Hardell&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Title&#093;     </B>Attorney-in-Fact&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>SCHLUMBERGER CANADA LIMITED</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/Abraham Rutger Verburg
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Name&#093;  </B>Abraham Rutger Verburg&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Title&#093;    </B>Attorney-in-Fact&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>BAKER HUGHES INCORPORATED</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/Chad C. Deaton
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Name&#093;  </B>Chad C. Deaton<BR>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left"><B>&#091;Title&#093;    </B>Chairman and Chief Executive Office&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.2
<SEQUENCE>3
<FILENAME>h35481exv3w2.htm
<DESCRIPTION>BYLAWS
<TEXT>
<HTML>
<HEAD>
<TITLE>exv3w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;3.2
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>BYLAWS<BR>
OF<BR>
BAKER HUGHES INCORPORATED</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Restated as of<BR>
April&nbsp;27, 2006
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Table of Contents
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Page No.</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><B>ARTICLE I &#151; Offices</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>1</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 1. Registered Office
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 2. Other Offices
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><B>ARTICLE II &#151; Meetings of Stockholders</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>1</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 1. Place of Meetings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 2. Annual Meeting of Stockholders
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 3. Quorum; Adjourned Meetings and Notice Thereof
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 4. Proxies
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 5. Special Meetings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 6. Notice of Stockholders&#146; Meetings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 7. Waiver of Notice
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 8. Maintenance and Inspection of Stockholder List
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 9. Stockholder Action by Written Consent Without a Meeting
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;10. Inspectors of Election
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;11. Procedure for Stockholders&#146; Meetings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;12. Order of Business
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;13. Procedures for Bringing Business before an Annual Meeting
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;14. Procedures for Nominating Directors
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><B>ARTICLE III &#151; Directors</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>6</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 1. Number and Qualification of Directors
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 2. Election and Term of Office
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 3. Resignation and Removal of Directors
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 4. Vacancies
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 5. Powers
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 6. Place of Directors&#146; Meetings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 7. Regular Meetings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 8. Special Meetings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 9. Quorum
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;10. Action Without Meeting
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;11. Telephonic Meetings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;12. Meetings and Action of Committees
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;13. Special Meetings of Committees
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;14. Minutes of Committee Meetings
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;15. Compensation of Directors
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;16. Indemnification
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">9</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">- &nbsp;i&nbsp; -
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><B>ARTICLE IV &#151; Officers</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>12</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 1. Officers
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 2. Election of Officers
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 3. Subordinate Officers
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 4. Removal and Resignation of Officers
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 5. Vacancies in Offices
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 6. Chairman of the Board
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 7. Chief Executive Officer
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 8. President
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 9. Chief Operating Officer
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;10. Vice Presidents
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;11. Secretary
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;12. Chief Financial Officer
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">14</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;13. Treasurer and Controller
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section&nbsp;14. Delegation of Authority
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><B>ARTICLE V &#151; Certificate of Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>15</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 1. Certificates
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 2. Signatures on Certificates
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 3. Statement of Stock Rights, Preferences, Privileges
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 4. Lost, Stolen or Destroyed Certificates
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">15</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 5. Transfers of Stock
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 6. Fixing Record Date
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 7. Registered Stockholders
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><B>ARTICLE VI &#151; General Provisions</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>16</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 1. Dividends
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 2. Payment of Dividends
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">16</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 3. Checks
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 4. Corporate Contracts and Instruments
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 5. Fiscal Year
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 6. Manner of Giving Notice
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 7. Waiver of Notice
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">17</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD colspan="3" valign="top" align="left"><B>ARTICLE VII &#151; Amendments</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top"><B>18</B></TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 1. Amendment by Directors
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Section 2. Amendment by Stockholders
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">18</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">- &nbsp; ii &nbsp; -
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;3.2
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>BYLAWS<BR>
OF<BR>
BAKER HUGHES INCORPORATED</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ARTICLE I</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Offices</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1. <U>Registered Office</U>. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2. <U>Other Offices</U>. The Corporation may also have offices at such other places
both within and without the State of Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE II</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Meetings of Stockholders</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1. <U>Place of Meetings</U>. All meetings of the stockholders shall be held at such
place, if any, either within or without the State of Delaware as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2. <U>Annual Meetings of Stockholders</U>. An annual meeting of stockholders shall
be held at such date and time as may be determined from time to time by resolution adopted by the
Board of Directors, for the purpose of electing the directors of the Corporation, and transacting
such other business as may properly be brought before the meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3. <U>Quorum; Adjourned Meetings and Notice Thereof</U>. A majority of the stock
issued and outstanding and entitled to vote at any meeting of stockholders, the holders of which
are present in person or represented by proxy, without regard to class or series, shall constitute
a quorum for the transaction of business except as otherwise provided by law, by the Certificate of
Incorporation, or by these Bylaws. If a separate vote by a class or classes or series is required,
a majority of the outstanding shares of such class or classes or series present in person or
represented by proxy shall constitute a quorum entitled to take action with respect to that vote on
that matter. A quorum, once established, shall not be broken by the withdrawal of enough votes to
leave less than a quorum and the votes present may continue to transact business until adjournment.
If, however, such quorum shall not be present or represented at any meeting of the stockholders, a
majority of the voting stock represented in person or by proxy may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as originally noticed.
If the adjournment is for more than 30&nbsp;days, or if after the

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting
shall be given to each stockholder of record entitled to vote thereat.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4. <U>Proxies</U>. At each meeting of the stockholders, each stockholder having the
right to vote may vote in person or may authorize another person or persons to act for him by proxy
authorized by an instrument in writing or by a transmission, including by telephone and electronic
transmission, permitted by law filed in accordance with the procedure established for the meeting.
Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission
created pursuant to this Section may be substituted or used in lieu of the original writing or
transmission for any and all purposes for which the original writing or transmission could be used,
provided that such copy, facsimile telecommunication or other reproduction shall be a complete
reproduction of the entire original writing or transmission. Each stockholder shall have one vote
for each share of stock having voting power, registered in his name on the books of the Corporation
on the record date set by the Board of Directors as provided in Article&nbsp;V, Section&nbsp;6 hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5. <U>Special Meetings</U>. Special meetings of the stockholders, for any purpose,
or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be
called at any time by the Board of Directors or by a committee of the Board of Directors which has
been duly designated by the Board of Directors and whose powers and authority, as provided in a
resolution of the Board of Directors or in these Bylaws, include the power to call such meetings.
Special meetings of stockholders of the Corporation may not be called by any other person or
persons. Business transacted at any special meeting of stockholders shall be limited to the
purposes stated in the notice.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6. <U>Notice of Stockholders&#146; Meetings</U>. If mailed, notice to stockholders shall
be deemed given when deposited in the mail, postage prepaid, directed to the stockholder at such
stockholder&#146;s address as it appears on the records of the corporation. Without limiting the manner
by which notice otherwise may be given effectively to stockholders, any notice to stockholders may
be given by electronic transmission in the manner provided in, and subject to the provisions of,
Section&nbsp;232 of the Delaware General Corporation Law, as amended.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7. <U>Waiver of Notice</U>. Attendance of a person at a meeting shall constitute a
waiver of notice to such person of such meeting, except when the person objects at the beginning of
the meeting to the transaction of any business because the meeting is not lawfully called or
convened.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8. <U>Maintenance and Inspection of Stockholder List</U>. The officer or agent who
has charge of the stock ledger of the Corporation shall prepare and make, at least 10&nbsp;days before
every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order, and showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, in the manner provided by law. The list shall
also be produced and kept open at the time and place of the meeting during the whole time thereof,
and may be inspected by any stockholder who is present. The stock ledger of
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the Corporation shall be the only evidence as to who are the stockholders entitled to examine such
list or to vote at any meetings of stockholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;9. <U>Stockholder Action by Written Consent Without a Meeting</U>. No action shall
be taken by stockholders except at an annual or special meeting of stockholders, and stockholders
may not act by written consent.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10. <U>Inspectors of Election</U>. Before any meeting of stockholders, the Board of
Directors may appoint any persons other than nominees for office to act as inspectors of election
at the meeting or its adjournment. If no inspectors of election are so appointed, the chairman of
the meeting may, and on the request of any stockholder or a stockholder&#146;s proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either one or three. If
inspectors are appointed at a meeting on the request of one or more stockholders or proxies, the
holders of a majority of shares or their proxies present at the meeting shall determine whether one
or three inspectors are to be appointed. If any person appointed as inspector fails to appear or
fails or refuses to act, the chairman of the meeting may, and upon the request of any stockholder
or a stockholder&#146;s proxy shall, appoint a person to fill such vacancy.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 5%">The duties of these inspectors shall be as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 5%">(a)&nbsp;To ascertain the number of shares outstanding and the voting power of each;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 5%">(b)&nbsp;To determine the shares represented at a meeting and the validity of proxies and
ballots;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 5%">(c)&nbsp;To count all votes and ballots;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 5%">(d)&nbsp;To determine and retain for a reasonable period a record of the disposition of
any challenges made to any determination by the inspectors; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 5%">(e)&nbsp;To certify their determination of the number of shares represented at the
meeting and their count of all votes and ballots.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;11. <U>Procedure for Stockholders&#146; Meetings</U>. Meetings of the stockholders shall
be presided over by the Chairman of the Board of Directors, or in his absence, by the Chief
Executive Officer, the President or by any Vice President, or, in the absence of any of such
officers, by a chairman to be chosen by a majority of the stockholders entitled to vote at the
meeting who are present in person or by proxy. The Secretary, or, in his absence, any person
appointed by the chairman, shall act as secretary of all meetings of the stockholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;12. <U>Order of Business</U>. The order of business at all meetings of stockholders
shall be as determined by the chairman of the meeting. The chairman shall also determine the
procedure at the meeting, including such regulation of the manner of voting and the conduct of
discussion as seem to him or her in order. The chairman of the meeting shall have the power to
adjourn the meeting to another place, if any, date and time. The date and time of

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<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the opening and closing of the polls for each matter upon which the stockholders will vote at the
meeting shall be announced at the meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;13. <U>Procedures for Bringing Business before an Annual Meeting</U>.
Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an
annual meeting of the stockholders except in accordance with the procedures set forth in this
Section&nbsp;13; provided, however, that nothing in this Section&nbsp;13 shall be deemed to preclude
discussion by any stockholder of any business properly brought before the annual meeting in
accordance with such procedures.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;At an annual meeting of the stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before an annual meeting, business
must be (1)&nbsp;specified in the notice of meeting (or any supplement thereto) given by or at the
direction of the Board, (2)&nbsp;otherwise properly brought before the meeting by or at the direction of
the Board, or (3)&nbsp;otherwise properly brought before the meeting by a stockholder. In addition to
any other applicable requirements, for business to be properly brought before an annual meeting by
a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder&#146;s notice must be delivered to or mailed and received
at the principal executive offices of the Corporation not less than 120&nbsp;days in advance of the
first annual anniversary of the date of the Corporation&#146;s proxy statement released to stockholders
in connection with the previous year&#146;s annual meeting of stockholders, except that if no annual
meeting was held in the previous year or the date of the annual meeting has been changed by more
than 30 calendar days from the date contemplated at the time of the previous year&#146;s proxy
statement, notice by the stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on which such notice of the date of the annual meeting
was mailed or such public disclosure was made. Any adjournment(s) or postponement(s) of the
original meeting whereby the meeting will convene or reconvene within 30&nbsp;days from the original
date shall be deemed for purposes of notice to be a continuation of the original meeting and no
business may be brought before any such meeting unless timely notice of such business was given to
the Secretary of the Corporation for the meeting as originally scheduled. A stockholder&#146;s notice to
the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual
meeting (i)&nbsp;a brief description of the business desired to be brought before the annual meeting and
their reasons for conducting such business at the annual meeting, (ii)&nbsp;the name and record address
of the stockholder proposing such business, (iii)&nbsp;the class and number of shares of the Corporation
which are beneficially owned by the stockholders, and (iv)&nbsp;any material interest of the stockholder
in such business.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The chairman of an annual meeting shall, if the facts warrant, determine and declare to the
meeting that business was not properly brought before the meeting in accordance with the provisions
of this Section&nbsp;14, and if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;14. <U>Procedures for Nominating Directors</U>. Notwithstanding anything in these
Bylaws to the contrary, only persons who are nominated in accordance with the procedures
hereinafter set forth in this Section&nbsp;14 shall be eligible for election as directors of the
Corporation.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nominations of persons for election to the Board of Directors of the Corporation may be made
at the annual meeting of stockholders only (1)&nbsp;by or at the direction of the Board of Directors or
(2)&nbsp;by any stockholder of the Corporation entitled to vote for the election of directors at the
meeting who complies with the notice procedures set forth in this Section&nbsp;14. Such nominations,
other than those made by or at the direction of the Board of Directors, shall be made pursuant to
timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder&#146;s notice
shall be delivered to or mailed and received at the principal executive offices of the Corporation
not less than 120&nbsp;days, nor more than 150&nbsp;days, in advance of the first annual anniversary of the
date of the Corporation&#146;s proxy statement released to stockholders in connection with the previous
year&#146;s annual meeting of stockholders, except that if no annual meeting was held in the previous
year or the date of the annual meeting has been changed by more than 30 calendar days from the date
contemplated at the time of the previous year&#146;s proxy statement, notice by the stockholder to be
timely must be so received not later than the close of business on the tenth day following the day
on which such notice of the date of the annual meeting was mailed or such public disclosure was
made. Any adjournment(s) or postponement(s) of the original meeting whereby the meeting will
convene or reconvene within 30&nbsp;days from the original date shall be deemed for purposes of notice
to be a continuation of the original meeting and no nominations by a stockholder of persons to be
elected directors of the Corporation may be made at any such meeting other than pursuant to a
notice that was timely for the meeting on the date originally scheduled. Such stockholder&#146;s notice
shall set forth: (i)&nbsp;as to each person whom the stockholder proposes to nominate for election or
re-election as a director, all information relating to such person that is required to be disclosed
in solicitations of proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation&nbsp;14A under the Securities Exchange Act of 1934, as amended, or any successor
regulation thereto (including such person&#146;s written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); and (ii)&nbsp;as to the stockholder giving notice
(A)&nbsp;the name and address, as they appear on the Corporation&#146;s books, of such stockholder, and (B)
the class and number of shares of the Corporation which are beneficially owned by such stockholder.
At the request of the Board of Directors, any person nominated by the Board of Directors for
election as a director shall furnish to the Secretary of the Corporation that information required
to be set forth in a stockholder&#146;s notice of nomination that pertains to the nominee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Nominations of persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected pursuant to the Corporation&#146;s notice of
meeting (i)&nbsp;by or at the direction of the Board of Directors or (ii)&nbsp;by any stockholder of record
of the Corporation who is a stockholder of record at the time of giving of notice provided for in
this paragraph, who shall be entitled to vote at the meeting and who complies with the notice
procedures set forth in this Section&nbsp;14 of this Article&nbsp;II. Nominations by stockholders of persons
for election to the Board of Directors may be made at such a special meeting of stockholders if the
stockholder&#146;s notice required by the second paragraph of Section&nbsp;14 of this Article&nbsp;II shall be
delivered to the Secretary of the Corporation at the principal executive offices of the Corporation
not later than the close of business on the later of the 90th day prior to such special meeting or
the 10th day following the day on which public disclosure is first made of the date of the special
meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The chairman of the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by this Section&nbsp;15, and
if he should so determine, he shall so declare to the meeting and the defective nomination shall be
disregarded.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE III</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Directors</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1. <U>Number and Qualification of Directors</U>. The Board of Directors shall
consist of 12 directors. No officer of the Corporation may serve on a board of directors of any
company having a present or retired employee on the Corporation&#146;s Board of Directors. No person
associated with an organization whose services are contracted by the Corporation shall serve on the
Corporation&#146;s Board of Directors; provided, however, that a majority of the members of the whole
Board may waive this prohibition if the Board in its judgment determines that such waiver would be
in the best interest of the Corporation. The term &#147;Whole Board&#148;, where used in these Bylaws,
refers to the 12 directors constituting the Board of Directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2. <U>Election and Term of Office</U>. Each Director shall be elected for a term of
one year and shall hold office until such director&#146;s successor is elected and qualified or until
his earlier death, retirement, resignation or removal.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3. <U>Resignation and Removal of Directors</U>. No person who is concurrently a
director and an employee of the Corporation shall be qualified to serve as a director of the
Corporation from and after the time of any diminution in such person&#146;s duties or responsibilities
as an officer, the time they leave the employ of the Corporation for any reason or their 72nd
birthday; provided, however, that if any such person resigns from the Board of Directors upon such
event, such person shall thereafter be deemed qualified to serve as a director of the Corporation
for so long as such person is otherwise qualified to so serve pursuant to the following sentence.
No person shall be qualified to serve as a director of the corporation on or after the date of the
annual meeting of stockholders following: (i)&nbsp;his 72nd birthday or (ii)&nbsp;any fiscal year in which he
has failed to attend at least 66% of the meetings of the Board of Directors and any committees of
the Board of Directors on which such director serves, provided that such a person shall be deemed
to be qualified to serve as a director if so determined by a majority of the members of the Whole
Board (excluding the director whose resignation would otherwise be required) if the Board in its
judgment determines that such waiver would be in the best interest of the Corporation. Any director
may be removed with or without cause by the holders of a majority of the shares of the Corporation
entitled to vote in the election of directors. The Board of Directors may not remove any director
with or without cause, and no recommendation by the Board of Directors that a director be removed
with or without cause may be made to the stockholders except by the affirmative vote of not less
than 75% of the members of the Whole Board.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4. <U>Vacancies</U>. Except as otherwise provided by statute or the Certificate of
Incorporation, (i)&nbsp;in the case of any increase in the number of directors, such additional director
or directors shall be elected by a majority vote of the directors then in office, although less
than a quorum, or by a sole remaining director, or (ii)&nbsp;in the case of any vacancy in the Board of
Directors, however created, the vacancy or vacancies shall be filled by a majority vote of the
directors then in office, although less than a quorum, or by a sole remaining director.
Notwithstanding the preceding sentence of this Article&nbsp;III, Section&nbsp;4, if, by the affirmative vote
of a majority of the directors then in office the Board determines that a newly created
directorship or vacancy should be filled by the stockholders, the stockholders shall elect a
nominee to fill such newly created directorship or vacancy. In the event one or more directors
shall resign, effective at a future date, such vacancy or vacancies shall be filled as provided
herein. Directors so chosen or elected shall hold office until the annual meeting next following
his election or until his successor is elected and qualified or until his earlier death,
retirement, resignation or removal.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the event of any decrease in the authorized number of directors, each director then serving
as such shall nevertheless continue as a director until the expiration of his current term, or his
prior death, retirement, resignation or removal.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5. <U>Powers</U>. The property and business of the Corporation shall be managed by
or under the direction of its Board of Directors. In addition to the powers and authorities by
these Bylaws expressly conferred upon them, the Board may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute, by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6. <U>Place of Directors&#146; Meetings</U>. The directors may hold their meetings and
have one or more offices, and keep the books of the Corporation outside the State of Delaware.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7. <U>Regular Meetings</U>. Regular meetings of the Board of Directors may be held
without notice at such time and place as shall from time to time be determined by the Board. Except
as otherwise provided by statute, any business may be transacted at any regular meeting of the
Board of Directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8. <U>Special Meetings</U>. Special meetings of the Board of Directors may be called
by the Chairman of the Board or the Chief Executive Officer on at least 24 hours&#146; notice, or such
shorter period as the person calling deems appropriate, to each director. Special meetings shall
be called by the Chairman of the Board, the Chief Executive Officer or the Secretary in like manner
and on like notice on the written request of a majority of the total number of directors.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;9. <U>Quorum</U>. At all meetings of the Board of Directors a majority of the
authorized number of directors shall be necessary and sufficient to constitute a quorum for the
transaction of business, and the vote of a majority of the directors present at any meeting at
which there is a quorum, shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by these Bylaws. If a
quorum shall not be present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than announcement at the meeting,
until a quorum shall be present. If only one director is authorized, such sole director shall
constitute a quorum. A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action is approved by at least a
majority of the required quorum for such meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10. <U>Action Without Meeting</U>. Unless otherwise restricted by statute, the
Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if
all members of the Board or committee, as the case may be, consent thereto in writing or by
electronic transmission, and the writing or writings or electronic transmission or transmissions
are filed with the minutes of proceedings of the Board or committee. Such filing shall be in paper
form if the minutes are maintained in paper form and shall be in electronic form if the minutes are
maintained in electronic form.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;11. <U>Telephonic Meetings</U>. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors, or any committee,
by means of conference telephone or similar communications equipment by means of which all persons
participating in a meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;12. <U>Meetings and Action of Committees</U>. The Board of Directors may from time
to time designate committees of the Board of Directors, with such lawfully delegable powers and
duties as it thereby confers, to serve at the pleasure of the Board of Directors and shall, for
those committees and any others provided for herein, elect a director or directors to serve as the
member or members, designating, if it desires, other directors as alternate members who may replace
any absent or disqualified member at any meeting of the committee. In the absence or
disqualification of any member of any committee and any alternate member in his or her place, the
member or members of the committee present at the meeting and not disqualified from voting, whether
or not he or she or they constitute a quorum, may by unanimous vote appoint another member of the
Board of Directors to act at the meeting in the place of the absent or disqualified member. The
Board of Directors shall, by resolution passed by a majority of the Whole Board, designate one
member of each committee as chairman of such committee. Each such chairman shall hold such office
for a period not in excess of five years, and shall upon surrender of such chairmanship resign from
membership on such committee. Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the Corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no such committee
shall have the power or authority in reference to the following

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<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">matters: (i)&nbsp;approving or adopting, or recommending to the stockholders, any action or matter
expressly required by the Delaware General Corporation Law (other than the election of directors)
to be submitted to stockholders for approval or (ii)&nbsp;adopting, amending or repealing any bylaw of
the Corporation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;13. <U>Special Meetings of Committees</U>. Special meetings of committees may be
called by the Chairman of such committee, the Chairman of the Board or the Chief Executive Officer,
on at least 24 hours&#146; notice, or such shorter period as the person calling deems appropriate, to
each member. Alternate members shall have the right to attend all meetings of the committee. The
Board of Directors may adopt rules of the government of any committee not inconsistent with the
provisions of these Bylaws. If a committee is comprised of an odd number of members, a quorum shall
consist of a majority of that number. If the committee is comprised of an even number of members, a
quorum shall consist of 1/2 of that number. If a committee is comprised of two members, a quorum
shall consist of both members; all matters shall be determined by a majority vote of the members
present. Action may be taken by any committee without a meeting if all the members thereof consent
thereto in writing or by electronic transmission, and the writing or writings or electronic
transmission or transmissions are filed with the minutes of the proceedings of such committee.
Such filing shall be in paper form if the minutes are maintained in paper form and shall be
electronic form if the minutes are maintained in electronic form.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;14. <U>Minutes of Committee Meetings</U>. Each Committee shall keep regular minutes
of its meetings and report the same to the Board of Directors when requested.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;15. <U>Compensation of Directors</U>. Unless otherwise restricted by the Certificate
of Incorporation or these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. The directors may be paid their expenses, if any, of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation therefor. Members of
special or standing committees may be allowed like compensation for attending committee meetings.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;16. <U>Indemnification</U>. (a)&nbsp;The Corporation shall indemnify every person who is
or was a party or is or was threatened to be made a party to any threatened, pending or completed
action, suit, or proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation), by reason of the fact that he is or was a
director, officer or employee of the Corporation or any of its direct or indirect wholly owned
subsidiaries or, while a director, officer or employee of the Corporation or any of its direct or
indirect wholly owned subsidiaries, is or was serving at the request of the Corporation or any of
its direct or indirect wholly owned subsidiaries, as a director, officer or employee, of another
corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against
expenses (including counsel fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding, to the full extent
permitted by applicable law; provided that the Corporation shall not be obligated to indemnify any
such person against any such action, suit or proceeding which is brought by such person

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<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">against the Corporation or any of its direct or indirect wholly owned subsidiaries or the directors
of the Corporation or any of its direct or indirect wholly owned subsidiaries, other than an action
brought by such person to enforce his rights to indemnification hereunder, unless a majority of the
Board of Directors of the Corporation shall have previously approved the bringing of such action,
suit or proceeding, and provided further that the Corporation shall not be obligated to indemnify
any such person against any action, suit or proceeding arising out of any adjudicated criminal,
dishonest or fraudulent acts, errors or omissions of such person or any adjudicated willful,
intentional or malicious acts, errors or omissions of such person.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The Corporation shall indemnify every person who is or was a party or is or was threatened
to be made a party to any threatened, pending or completed action, suit, or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he is or was licensed
to practice law and an employee (including an employee who is or was an officer) of the Corporation
or any of its direct or indirect wholly owned subsidiaries and, while acting in the course of such
employment committed or is alleged to have committed any negligent acts, errors or omissions in
rendering professional legal services at the request of the Corporation or pursuant to his
employment (including, without limitation, rendering written or oral legal opinions to third
parties) against expenses (including counsel fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with such action, suit or
proceeding, to the full extent permitted by applicable law; provided that the Corporation shall not
be obligated to indemnify any such person against any action, suit or proceeding arising out of any
adjudicated criminal, dishonest or fraudulent acts, errors or omissions of such person or any
adjudicated willful, intentional or malicious acts, errors or omissions of such person.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;The Corporation shall indemnify every person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is or was a director,
officer, or employee of the Corporation, or any of its direct or indirect wholly owned subsidiaries
or, while a director, officer, or employee of the Corporation or any of its direct or indirect
wholly owned subsidiaries, is or was serving at the request of the Corporation or any of its direct
or indirect wholly owned subsidiaries, as a director, officer, or employee of another corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise against expenses
(including attorneys&#146; fees) actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court
of Chancery or such other court shall deem proper.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;To the extent that a director, officer, or employee of the Corporation, or any of its
direct or indirect wholly owned subsidiaries, has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in subsections (a), (b)&nbsp;and (c)&nbsp;of this

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<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">section, or in defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys&#146; fees) actually and reasonably incurred by him in connection
therewith.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;Any indemnification under subsections (a), (b)&nbsp;and (c)&nbsp;of this section (unless ordered by
a court) shall be made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, or employee is proper in the
circumstances because he has met the applicable standard of conduct set forth in subsections (a),
(b)&nbsp;and (c)&nbsp;of this section. Such determination shall be made (1)&nbsp;by a majority vote of the
directors who were not parties to such action, suit or proceeding, (2)&nbsp;by a committee or such
directors designated by majority vote of such directors even though less than a quorum, or (3)&nbsp;if
there are no such directors, or if such directors so direct, by independent legal counsel in a
written opinion, or (4)&nbsp;by the stockholders. If a claim under this Section&nbsp;16 is not paid in full
by the Corporation within 60&nbsp;days after a written claim has been received by the Corporation,
except in the case of a claim for an advancement of expenses, in which case the applicable period
shall be 20&nbsp;days, the indemnitee may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim. If successful in whole or in part in any such suit, or in
a suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such suit. In (i)&nbsp;any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii)&nbsp;in any suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final adjudication that, the
indemnitee has not met any applicable standard for indemnification set forth in the Delaware
General Corporation Law. Neither the failure of the Corporation (including its directors who are
not parties to such action, a committee of such directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such suit that
indemnification of the indemnitee is proper in the circumstances because the indemnitee has met the
applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its directors who are not parties to such action, a
committee of such directors, independent legal counsel, or its stockholders) that the indemnitee
has not met such applicable standard of conduct, shall create a presumption that the indemnitee has
not met the applicable standard of conduct or, in the case of such a suit brought by the
indemnitee, be a defense to such suit. In any suit brought by the indemnitee to enforce a right to
indemnification or to an advancement of expenses hereunder, or brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the burden of proving
that the indemnitee is not entitled to be indemnified, or to such advancement of expenses, under
this Section&nbsp;16 or otherwise shall be on the Corporation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;Expenses (including attorneys&#146; fees) incurred by an present or former officer or director
of the Corporation or any of its direct or indirect wholly owned subsidiaries in defending a civil,
criminal, administrative or investigative action, suit or proceeding shall be paid by the
Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the Corporation as

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<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">authorized in this Section&nbsp;16. Such expenses incurred by other employees and agents may be so paid
upon such terms and conditions, if any, as the Board of Directors deems appropriate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;The indemnification and advancement of expenses provided by, or granted pursuant to, this
Section&nbsp;16 shall not be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any provision of law, the Corporation&#146;s
Certificate of Incorporation, the Certificate of Incorporation or Bylaws or other governing
documents of any direct or indirect wholly owned subsidiary of the Corporation, or any agreement,
vote of stockholders or disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding any of the positions or having any of
the relationships referred to in this Section&nbsp;16.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;The indemnification and advancement of expenses provided by, or granted pursuant to, this
Section&nbsp;16 shall, unless otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director, officer or employee and shall inure to the benefit of the heirs,
executors and administrators of such a person.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE IV</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Officers</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1. <U>Officers</U>. The officers of the Corporation shall be a Chairman of the
Board, a Chief Executive Officer, a President, a Chief Financial Officer, a Vice President, a
Secretary, a Treasurer and a Controller. The Corporation may also have, at the discretion of the
Board of Directors, a Chief Operating Officer, one or more additional Vice Presidents, and such
other officers as may be appointed in accordance with the provisions of Section&nbsp;3 of this Article.
Any two (2)&nbsp;or more offices may be held by the same person.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2. <U>Election of Officers</U>. The officers of the Corporation, except such
officers as may be appointed in accordance with the provisions of Section&nbsp;3 or Section&nbsp;5 of this
Article, shall be chosen by the Board of Directors, and each shall serve at the pleasure of the
Board, subject to the rights, if any, of any officer under any contract of employment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3. <U>Subordinate Officers</U>. The Board of Directors may appoint, and may empower
the Chief Executive Officer to appoint, such other officers as the business of the Corporation may
require, each of whom shall hold office for such period, have such authority and perform such
duties as are provided in the Bylaws or as the Board of Directors may from time to time determine.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4. <U>Removal and Resignation of Officers</U>. Any officer may be removed, either
with or without cause, by the Board of Directors, at any regular or special meeting thereof, or
except in case of an officer chosen by the Board of Directors, by any officer upon whom such power
of removal may be conferred by the Board of Directors, provided that such removal shall not
prejudice the remedy of such officer for breach of any contract of employment.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any officer may resign at any time by giving written notice to the Corporation. Any such
resignation shall take effect on receipt of such notice or at any later time specified therein.
Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to
make it effective. Any such resignation is without prejudice to the rights, if any, of the
Corporation under any contract to which the officer is a party.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5. <U>Vacancies in Offices</U>. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the manner prescribed
in these Bylaws for regular appointments to such office.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6. <U>Chairman of the Board</U>. The Chairman of the Board shall, if present,
preside at all meetings of the Board of Directors and of the stockholders, and shall exercise and
perform such other powers and duties as may be from time to time assigned to him by the Board of
Directors or prescribed by the Bylaws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7. <U>Chief Executive Officer</U>. The Chief Executive Officer shall, subject to the
control of the Board of Directors, have general supervision, direction and control of the business
and officers, other than the Chairman of the Board of the Corporation with all such powers as may
be reasonably incident to such responsibilities. He shall perform all other duties normally
incident to the office of Chief Executive Officer, and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or the Bylaws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;8. <U>President</U>. The President shall be the Chief Operating Officer of the
Corporation and shall, subject to the control of the Chief Executive Officer and the Board of
Directors, have general supervision, direction and control of the business and the officers, other
than the Chairman of the Board, of the Corporation. In the absence of the Chairman of the Board,
the Chief Executive Officer, the President shall preside at all meetings of the stockholders and
the Board of Directors. He shall have the general powers and duties of management usually vested in
the office of President of a corporation, and shall have such other powers and duties as may be
prescribed by the Chief Executive Officer, the Board of Directors or the Bylaws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Unless otherwise directed by the Board of Directors, the President or any officer of the
Corporation authorized by the President shall have power to vote and otherwise act on behalf of the
Corporation, in person or by proxy, at any meeting of stockholders of or with respect to any action
of stockholders of any other corporation in which this Corporation may hold securities and
otherwise to exercise any and all rights and powers which this Corporation may possess by reason of
its ownership of securities in such other corporation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;9. <U>Chief Operating Officer</U>. The Chief Operating Officer of the Corporation
shall have general management of the business unit operations of the Corporation, subject to the
direction and control of the Chief Executive Officer and the Board of Directors. The Chief
Operating Officer shall sign all papers and documents to which such officer&#146;s signature may be
necessary or appropriate in connection with the operations of the Corporation, make reports to the
Board of Directors or the Chief Executive Officer and have such further powers and duties as may,
from time to time, be prescribed by the Board of Directors or the Chief Executive Officer.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;10. <U>Vice Presidents</U>. If there be more than one Vice President, the Board of
Directors may designate one or more of them as Executive Vice President or Senior Vice President
among the Vice Presidents and may also grant to such officers and other Vice Presidents such titles
as shall be descriptive of their respective functions or indicative of their relative seniority.
In the absence or disability of the President, the Vice Presidents, if any, in order of their rank
as fixed by the Board of Directors, or if not ranked, the Vice President designated by the
President, shall perform all the duties of the President, and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the President. The Vice Presidents shall
have such other powers and perform such other duties as from time to time may be prescribed for
them respectively by the Board of Directors, these Bylaws or the President.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;11. <U>Secretary</U>. The Secretary shall keep or cause to be kept, at the principal
office or such other place as the Board of Directors may order, a book of minutes of all meetings
and actions of directors, committees of directors and stockholders, with the time and place of
holding, whether regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at directors&#146; and committee meetings, the number of shares
present or represented at stockholders&#146; meetings, and the proceedings thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Secretary shall keep, or cause to be kept, at the principal office or at the office of the
Corporation&#146;s transfer agent or registrar, a share register, or a duplicate share register, showing
the names of all stockholders and their addresses, the number and classes of shares held by each,
the number and date of certificates issued for the same, and the number and date of cancellation of
every certificate surrendered for cancellation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and
of the Board of Directors required by these Bylaws or by law to be given, and he shall keep the
seal of the Corporation, if one be adopted, in safe custody, and shall have such other powers and
perform such other duties as may be prescribed by the Board of Directors or by the Bylaws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;12. <U>Chief Financial Officer</U>. The Chief Financial Officer shall keep and
maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of
the properties and business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The
books of account shall be open at all times to inspection by any director.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Chief Financial Officer shall deposit all moneys and other valuables in the name and to
the credit of the Corporation with such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of
Directors, shall render to the Chief Executive Officer, President and Directors, whenever they
request it, an account of all of his transactions as Chief Financial Officer and of the financial
condition of the Corporation, and shall have other powers and perform such other duties as may be
prescribed by the Board of Directors or the Bylaws.
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;13. <U>Treasurer and Controller</U>. The Treasurer and the Controller shall each
have such powers and perform such duties as from time to time may be prescribed for him by the
Board of Directors, the President or these Bylaws.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;14. D<U>elegation of Authority</U>. The Board of Directors may from time to time<U>
</U>delegate the powers or duties of any officer to any other officers or agents, notwithstanding
any provision hereof.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE V</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Certificate of Stock</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1. <U>Certificates</U>. Shares of the stock of the Corporation may be represented by
certificates or uncertificated. Owners of shares of the stock of the Corporation shall be recorded
in the share register of the Corporation, and ownership of such shares shall be evidenced by a
certificate or book-entry notation in the share register of the Corporation. Any certificates
representing such shares shall be signed by, or in the name of the Corporation by, the Chairman of
the Board of Directors, or the President or a Vice President, and by the Secretary or any Assistant
Secretary, if one be appointed, or the Treasurer or an Assistant Treasurer of the Corporation,
certifying the number of shares represented by the certificate owned by such stockholder in the
Corporation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2. <U>Signature on Certificates</U>. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3. <U>Statement of Stock Rights, Preferences, Privileges</U>. If the Corporation
shall be authorized to issue more than one class of stock or more than one series of any class, the
powers, designations, preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face or back of the
certificate which the Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided by statute, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4. <U>Lost, Stolen or Destroyed Certificates</U>. The Board of Directors, the
Secretary and the Treasurer each may direct a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the owner of such certificate,

<P align="center" style="font-size: 10pt">-  15  -
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">or his legal representative. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require and/or to furnish the
Corporation a bond in such form and substance and with such surety as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5. <U>Transfers of Stock</U>. Upon surrender to the Corporation, or the transfer
agent of the Corporation, of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate or other evidence of such new shares to the person entitled
thereto, cancel the old certificate and record the transaction upon its books. Uncertificated
shares shall be transferred in the share register of the Corporation upon the written instruction
originated by the appropriate person to transfer the shares.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6. <U>Fixing Record Date</U>. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of the stockholders, or any
adjournment thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than 60 nor less than 10&nbsp;days before the date of such meeting,
nor more than 60&nbsp;days prior to any other action. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7. <U>Registered Stockholders</U>. The Corporation shall be entitled to treat the
holder of record of any share or shares of stock as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim or interest in such share on the part
of any other person, whether or not it shall have express or other notice thereof, save as
expressly provided by the laws of the State of Delaware.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VI</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>General Provisions</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1. <U>Dividends</U>. Dividends upon the capital stock of the Corporation, subject to
the provisions of the Certificate of Incorporation, if any, may be declared by the Board of
Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in
property or in shares of the Corporation&#146;s capital stock, subject to the provisions of the
Certificate of Incorporation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2. <U>Payment of Dividends</U>. Before declaration of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or sums as

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<DIV style="font-family: 'Times New Roman',Times,serif">

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve
fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the Corporation, and the Board of Directors may thereafter abolish
any such reserve in its absolute discretion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;3. <U>Checks</U>. All checks, drafts or other orders for payment of money, notes or
other evidences of indebtedness, issued in the name of or payable to the Corporation shall be
signed by such officer or officers as the Board of Directors or the President or any Vice
President, acting jointly, may from time to time designate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;4. <U>Corporate Contracts and Instruments</U>. The Chief Executive Officer, the
President, any Vice President, the Secretary or the Treasurer may enter into contracts and execute
instruments on behalf of the Corporation. The Board of Directors, the President or any Vice
President may authorize any officer or officers, and any employee or employees or agent or agents
of the Corporation or any of its subsidiaries, to enter into any contract or execute any instrument
in the name of and on behalf of the Corporation, and such authority may be general or confined to
specific instances.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;5. <U>Fiscal Year</U>. The fiscal year of the Corporation shall be January 1 through
December&nbsp;31, unless otherwise fixed by resolution of the Board of Directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;6. <U>Manner of Giving Notice</U>. Whenever, under the provisions of the statutes,
the Certificate of Incorporation or these Bylaws, notice is required to be given to any director,
it shall not be construed to require personal notice, but such notice may be given in writing, by
mail, addressed to such director, at his address as it appears on the records of the Corporation
(unless prior to mailing of such notice he shall have filed with the Secretary a written request
that notices intended for him be mailed to some other address, in which case such notice shall be
mailed to the address designated in the request) with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the United States mail;
provided, however, that, in the case of notice of a special meeting of the Board of Directors, if
such meeting is to be held within seven calendar days after the date of such notice, notice shall
be deemed given as of the date such notice shall be accepted for delivery by a courier service that
provides &#147;opening of business next day&#148; delivery, so long as at least one attempt shall have been
made, on or before the date such notice is accepted for delivery by such courier service, to
provide notice by telephone to each director at his principal place of business and at his
principal residence. Notice to directors may also be given by telegram, by personal delivery, by
telephone, by facsimile or by other electronic transmission.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;7. <U>Waiver of Notice</U>. Whenever any notice is required to be given under the
provisions of the statutes, the Certificate of Incorporation or these Bylaws, a waiver thereof in
writing, signed by the person or persons entitled to said notice, or waiver by electronic
transmission by such person, whether before or after the time stated therein, shall be deemed
equivalent thereto.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VII</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Amendments</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;1. <U>Amendment by Directors</U>. Except any amendment to this Article&nbsp;VII and to
Article&nbsp;II, Section&nbsp;5, Article&nbsp;II, Section&nbsp;9, Article&nbsp;III, Section&nbsp;1 (as it relates to changes in
the number of directors), Article&nbsp;III, Section&nbsp;2, the last sentence of Article&nbsp;III, Section&nbsp;3 (as
it relates to removal of directors), Article&nbsp;III, Section&nbsp;4, Article&nbsp;III, Section&nbsp;16 and Article
VI, Section&nbsp;6 of these Bylaws, or any of such provisions, which shall require approval by the
affirmative vote of directors representing at least 75% of the number of directors provided for in
accordance with Article&nbsp;III, Section&nbsp;1, the directors, by the affirmative vote of a majority of the
Whole Board and without the assent or vote of the stockholders, may at any meeting, make, repeal,
alter, amend or rescind any of these Bylaws, provided the substance of the proposed amendment or
other action shall have been stated in a notice of the meeting.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;2. <U>Amendment by Stockholders</U>. These Bylaws may not be altered, amended or
rescinded, and new Bylaws may not be adopted, by the stockholders of the Corporation except by the
vote of the holders of not less than 75% of the total voting power of all shares of stock of the
Corporation entitled to vote in the election of directors, considered for such purpose as one
class.
</DIV>



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</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>4
<FILENAME>h35481exv10w1.htm
<DESCRIPTION>ANNUAL INCENTIVE COMPENSATION PLAN
<TEXT>
<HTML>
<HEAD>
<TITLE>exv10w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;10.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>BAKER HUGHES INCORPORATED<BR>
ANNUAL INCENTIVE COMPENSATION PLAN</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>(</B><B><I>Amendment and Restatement<BR>
Adopted by the Board of<BR>
Directors on January&nbsp;26, 2006)</I></B>

</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;10.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>BAKER HUGHES INCORPORATED<BR>
ANNUAL INCENTIVE COMPENSATION PLAN</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B><I>(Amendment and Restatement<BR>
Adopted by the Board of<BR>
Directors on January&nbsp;26, 2006 )</I></B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>WITNESSETH</B>:

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS</B>, effective October&nbsp;1, 1994, Baker Hughes Incorporated (&#147;<I>Baker Hughes&#148;)</I>
previously adopted the Baker Hughes Incorporated 1995 Employee Annual Incentive Compensation
Plan (the &#147;<I>Plan</I>&#148;) for the benefit of certain employees of Baker Hughes and affiliates of Baker
Hughes;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS</B>, the Plan is a bonus program exempt from coverage under the Employee Retirement Income
Security Act of 1974, as amended pursuant to Department of Labor regulation section 2510.3-2(c);
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>WHEREAS</B>, Baker Hughes desires to amend and restate the Plan on behalf of itself and on behalf
of the other adopting entities; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>WHEREAS, </B>Baker Hughes desires to change the name of the Plan;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>NOW THEREFORE</B>, the name of the Plan is changed to the &#147;Baker Hughes Incorporated Annual
Incentive Compensation Plan&#148; and the Plan is hereby amended and restated in its entirety as
follows, effective as of January&nbsp;1, 2005 except insofar as a later effective date is expressly
specified.
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Table of Contents</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE I DEFINITIONS AND CONSTRUCTION</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.01 Definitions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.02 Number and Gender</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">1.03 Headings</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE II PARTICIPATION</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.01 Eligibility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.02 Participation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.03 Partial Plan Year Participation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2.04 Termination of Approval</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE III AWARD OPPORTUNITIES AND PERFORMANCE GOALS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.01 Award Opportunities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.02 Performance Goals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.03 Time of Establishment of Award Opportunities and Performance Goals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.04 Adjustment of Performance Goals</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">3.05 Individual Award Cap</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE IV FINAL AWARD DETERMINATIONS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.01 Final Award Determinations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.02 Separation From Service Due to Death, Disability, or Retirement</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.03 Employment Transfers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.04 Disposition of Business</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">4.05 Separation From Service for Other Reasons</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE V BANKING OF AWARDS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.01 General Banking Procedures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">5.02 Exceptions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE VI DEEMED INVESTMENT OF FUNDS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE VII PAYMENT OF BENEFITS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.01 Time of Payment of Unbanked Final Award</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.02 Time of Payment of Banked Final Award</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.03 Form of Payment of Benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.04 Account Debits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.05 Unclaimed Benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.06 Statutory Benefits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">7.07 Payment to Alternate Payee Under Domestic Relations Order</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&nbsp;-i-
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Table of Contents</B><BR>
(continued)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE VIII FORFEITURE OF BENEFITS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE IX DEATH</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.01 Payment of Unbanked Amounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.02 Payment of Banked Amounts</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">9.03 Designation of Beneficiaries</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE X CHANGE IN CONTROL</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.01 General</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.02 CIC Committee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.03 Change in Control During a Performance Period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.04 Termination of Employment Prior to Change in Control or Following Certain
Changes in Control</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.05 Payment of Expected Value Awards and Tax-Gross Up for Delayed Payment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">10.06 Forfeiture Restrictions</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE XI ADMINISTRATION OF THE PLAN</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.01 Resignation and Removal</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.02 Records and Procedures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.03 Self-Interest of Plan Administrator</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.04 Compensation and Bonding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.05 Plan Administrator Powers and Duties</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.06 Reliance on Documents, Instruments, etc</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.07 Claims Review Procedures; Claims Appeals Procedures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.08 Employer to Supply Information</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">11.09 Indemnity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE XII ADOPTION OF PLAN BY AFFILIATES</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.01 Adoption Procedure</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">12.02 No Joint Venture Implied</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>ARTICLE XIII MISCELLANEOUS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">13.01 Plan Not Contract of Employment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">13.02 Funding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">13.03 Alienation of Interest Forbidden</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">13.04 Withholding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">13.05 Amendment and Termination</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">13.06 Severability</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">13.07 Arbitration</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&nbsp;-ii-
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Table of Contents</B><BR>
(continued)
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Page</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">13.08 Stockholder Approval</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">13.09 Compliance With Section&nbsp;409A</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">13.10 Governing Law</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">&nbsp;-iii-
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>BAKER HUGHES INCORPORATED<BR>
ANNUAL INCENTIVE COMPENSATION PLAN</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>(As Amended and Restated<BR>
Effective January&nbsp;1, 2005)</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ARTICLE I<BR>
DEFINITIONS AND CONSTRUCTION</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.01 <B>Definitions. </B>The words and phrases defined in this Article shall have the meaning set
out in the definition unless the context in which the word or phrase appears reasonably requires a
broader, narrower or different meaning.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Account(s)&#148; </I></B>means all ledger accounts pertaining to a Participant or former Participant which
are maintained by the Plan Administrator to reflect the Employer&#146;s obligation to the Participant or
former Participant under the Plan. The Plan Administrator shall establish the following
subaccounts and any additional subaccounts that the Plan Administrator considers necessary to
reflect the entire interest of the Participant or former Participant under the Plan. Each of the
subaccounts listed below and any additional subaccounts established by the Plan Administrator shall
reflect credits and debits made to such subaccounts for earnings, distributions and forfeitures:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <I>Banked Account </I>&#150; the Participant&#146;s or former Participant&#146;s banked Final Award for a
given Performance Period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <I>Unbanked Account </I>&#150;the Participant&#146;s or former Participant&#146;s Final Award for a given
Performance Period that is not banked pursuant to Article&nbsp;V.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Affiliate&#148; </I></B>means any entity which is a member of the same controlled group of corporations
within the meaning of section 414(b) of the Code or which is a trade or business (whether or not
incorporated) which is under common control (within the meaning of section 414(c) of the Code),
which is a member of an affiliated service group (within the meaning of section 414(m) of the Code)
with Baker Hughes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Applicable Interest Rate&#148; </I></B>means the 10-year U.S. Treasury rate plus 25 basis points (0.25%).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Award Opportunity&#148; </I></B>has the meaning specified in Section&nbsp;3.01 of the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Baker Hughes&#148; </I></B>means Baker Hughes Incorporated, a Delaware corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Baker Value Added&#148; </I></B>and <B><I>&#147;BVA&#148; </I></B>mean, with respect to a Performance Period, the amount
calculated under the following formula:
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">&#091;&#091;(a) &#043; (b) &#043; (c)&#093; x (1 &#150; (d))&#093; &#150; (e)

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">where (a)&nbsp;is the Operating Profit Before Tax of the Company for the Performance Period, (b)&nbsp;is the
net interest expense of the Company for the Performance Period, (c)&nbsp;is the goodwill and non-
</DIV>


<P align="center" style="font-size: 10pt">1
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">compete amortization of the Company for the Performance Period, (d)&nbsp;is the Tax Rate for the
Performance Period and (e)&nbsp;is the Capital Charge determined for the Company for the Performance
Period. For this purpose, &#147;<I>Adjusted Net Capital Employed</I>&#148; means the Average Monthly Net Capital
Employed for the Performance Period plus accumulated goodwill amortization plus the value of
significant operating leases; &#147;<I>Average Monthly Net Capital Employed</I>&#148; means the sum of the capital
employed by the Company during each month of the Performance Period to operate the business of the
Company divided by 12; &#147;<I>Capital Charge</I>&#148; means Adjusted Net Capital Employed multiplied by the Cost
of Capital; &#147;<I>Company</I>&#148; means Baker Hughes and all of its Affiliates in which Baker Hughes directly
or indirectly has a capital investment, or one or more business units of Baker Hughes and its
Affiliates, as specified in the written Award Opportunities; &#147;<I>Cost of Capital</I>&#148; means the weighted
average after-tax cost of debt and cost of equity for the Company for the Performance Period; &#147;<I>Cost
of Sales</I>&#148; means the cost of products sold and the cost of providing services, including personnel
costs, repair and maintenance costs, freight/custom, depreciation, and other costs (<I>e.g.</I>,
commission and royalty) directly relating to the service provided; &#147;<I>Operating Expenses</I>&#148; means costs
incurred in non-manufacturing areas to provide products and services to customers (<I>e.g.</I>, finance
and administrative support) during the Performance Period; &#147;<I>Operating Profit Before Tax</I>&#148; means the
revenue of the Company for the Performance Period minus the Cost of Sales of the Company for the
Performance Period minus the Operating Expenses of the Company for the Performance Period; and &#147;<I>Tax
Rate</I>&#148; means the effective tax rate for the Company determined in a manner consistent with Baker
Hughes tax policies and practices in effect on the date hereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;</B><B><I>Beneficial Owner</I></B><B>&#148; </B>or <B>&#147;</B><B><I>Beneficial Ownership</I></B><B>&#148; </B>shall have the meaning ascribed to the term in
Rule&nbsp;13d-3 of the General Rules and Regulations under the Exchange Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Beneficiary&#148; </I></B>means the person or persons, or the trust or trusts created for the benefit of a
natural person or persons or the Participant&#146;s estate, designated by the Participant to receive the
benefits payable under the Plan upon his death in accordance with the beneficiary designation
procedures specified in Section&nbsp;9.03.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;</B><B><I>Board</I></B><B>&#148; </B>means the Board of Directors of Baker Hughes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Cause&#148; </I></B>means (i)&nbsp;the willful and continued failure by the Participant to substantially
perform the Participant&#146;s duties with the Employer (other than any such failure resulting from the
Participant&#146;s incapacity due to physical or mental illness) after a written demand for substantial
performance is delivered to the Participant by the Committee, which demand specifically identifies
the manner in which the Committee believes that the Participant has not substantially performed the
Participant&#146;s duties, or (ii)&nbsp;the willful engaging by the Participant in conduct which is
demonstrably and materially injurious to Baker Hughes or any of the Affiliates, monetarily or
otherwise. For purposes of clauses (i)&nbsp;and (ii)&nbsp;of this definition, (A)&nbsp;no act, or failure to act,
on the Participant&#146;s part shall be deemed &#147;willful&#148; if done, or omitted to be done, by the
Participant in good faith and with reasonable belief that the act, or failure to act, was in the
best interest of the Employer and (B)&nbsp;in the event of a dispute concerning the application of this
provision, no claim by the Employer that Cause exists shall be given effect unless the Employer
establishes to the Committee by clear and convincing evidence that Cause exists. The Committee&#146;s
determination regarding the existence of Cause shall be conclusive and binding upon all parties.
</DIV>

<P align="center" style="font-size: 10pt">2
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Change in Control&#148; </I></B>means the occurrence of any of the following events:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;the individuals who are Incumbent Directors cease for any reason to constitute a
majority of the members of the Board;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;the consummation of a Merger of Baker Hughes or an Affiliate with another Entity,
unless the individuals and Entities who were the Beneficial Owners of the Voting Securities
of Baker Hughes outstanding immediately prior to such Merger own, directly or indirectly, at
least 50&nbsp;percent of the combined voting power of the Voting Securities of any of Baker
Hughes, the surviving Entity or the parent of the surviving Entity outstanding immediately
after such Merger;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;any Person, other than a Specified Owner, becomes a Beneficial Owner, directly or
indirectly, of securities of Baker Hughes representing 30&nbsp;percent or more of the combined
voting power of Baker Hughes&#146; then outstanding Voting Securities;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;a sale, transfer, lease or other disposition of all or substantially all of Baker
Hughes&#146; Assets is consummated (an &#147;<I>Asset Sale</I>&#148;), <I>unless</I>:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">(1)&nbsp;the individuals and Entities who were the Beneficial Owners of the Voting
Securities of Baker Hughes immediately prior to such Asset Sale own, directly or
indirectly, 50&nbsp;percent or more of the combined voting power of the Voting
Securities of the Entity that acquires such Assets in such Asset Sale or its parent
immediately after such Asset Sale in substantially the same proportions as their
ownership of Baker Hughes&#146; Voting Securities immediately prior to such Asset Sale;
or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">(2)&nbsp;the individuals who comprise the Board immediately prior to such Asset Sale
constitute a majority of the board of directors or other governing body of either
the Entity that acquired such Assets in such Asset Sale or its parent (or a
majority plus one member where such board or other governing body is comprised of
an odd number of directors); or
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;The stockholders of Baker Hughes approve a plan of complete liquidation or
dissolution of Baker Hughes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;CIC Committee&#148; </I></B>means (i)&nbsp;the individuals (not fewer than three in number) who, on the date
six months before a Change in Control or a Potential Change in Control, constitute the Committee,
plus (ii)&nbsp;in the event that fewer than three individuals are available from the group specified in
clause (i)&nbsp;above for any reason, such individuals as may be appointed by the individual or
individuals so available (including for this purpose any individual or individuals previously so
appointed under this clause (ii)); provided, however, that the maximum number of individuals
constituting the CIC Committee shall not exceed six (6).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Code&#148; </I></B>means the Internal Revenue Code of 1986, as amended from time to time<B><I>.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Committee&#148; </I></B>means the Compensation Committee of the Board.
</DIV>

<P align="center" style="font-size: 10pt">3
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Covered Employee&#148; </I></B>has the meaning ascribed to that term in Section&nbsp;162(m).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Disability</I></B><I>&#148; </I>means the inability of a Participant to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period of not less than 12
months. The Committee&#146;s determination regarding the existence of Disability shall be conclusive
and binding upon all parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Domestic Relations Order&#148; </I></B>has the meaning ascribed to that term in section 414(p) of the
Code.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Employer&#148; </I></B>means Baker Hughes and any Affiliate that adopts the Plan pursuant to the
provisions of Article&nbsp;XII.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Entity&#148; </I></B>means any corporation, partnership, association, joint-stock company, limited
liability company, trust, unincorporated organization or other business entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Exchange Act&#148; </I></B>means the Securities Exchange Act of 1934, as amended from time to time, or any
successor act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Final Award&#148; </I></B>means the actual award earned for a Plan Year by a Participant as determined by
the Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Good Reason&#148; </I></B>for termination by the Participant of his employment means the occurrence
(without the Participant&#146;s express written consent) after any Change in Control, or prior to a
Change in Control under the circumstances described in clauses (ii)&nbsp;and (iii)&nbsp;of Section&nbsp;10.04
(treating all references to &#147;<I>Change in Control</I>&#148; in paragraphs (a)&nbsp;through (f)&nbsp;below as references
to a &#147;<I>Potential Change in Control</I>&#148;), of any one of the following acts by the Employer, or failures
by the Employer to act, unless, in the case of any act or failure to act described in paragraph
(a), (e), (f)&nbsp;or (g)&nbsp;below, such act or failure to act is corrected prior to the effective date of
the Participant&#146;s termination for Good Reason:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the assignment to the Participant of any duties or responsibilities which are
substantially diminished as compared to the Participant&#146;s duties and responsibilities
immediately prior to the Change in Control;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) a reduction by the Employer in the Participant&#146;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 Employer and all individuals having a similar
level of authority and responsibility with any Person in control of the Employer;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the relocation of the Participant&#146;s principal place of employment to a location
outside of a 50-mile radius from the Participant&#146;s principal place of employment immediately
prior to the Change in Control or the Employer&#146;s requiring the Participant to be based
anywhere other than such principal place of employment (or permitted relocation thereof)
except for required travel on the Employer&#146;s business to an extent
</DIV>

<P align="center" style="font-size: 10pt">4
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">substantially consistent with the Participant&#146;s business travel obligations immediately
prior to the Change in Control;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the failure by the Employer to pay to the Participant any portion of the
Participant&#146;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 Employer and all individuals having a similar level of authority and
responsibility with any Person in control of the Employer, or to pay to the Participant any
portion of an installment of deferred compensation under any deferred compensation program
of the Employer, within seven (7)&nbsp;days of the date such compensation is due;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the failure by the Employer to continue in effect any compensation plan in which
the Participant participates immediately prior to the Change in Control which is material to
the Participant&#146;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 Employer to continue the Participant&#146;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 Participant&#146;s
participation relative to other Baker Hughes Participants, as existed immediately prior to
the Change in Control;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) the failure by the Employer to continue to provide the Participant with benefits
substantially similar to those enjoyed by the Participant under any of the Employer&#146;s
pension, savings, life insurance, medical, health and accident, or disability plans in which
the Participant 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 Employer and all individuals having a similar level of
authority and responsibility with any Person in control of the Employer), the taking of any
other action by the Employer which would directly or indirectly materially reduce any of
such benefits or deprive the Participant of any material fringe benefit or perquisite
enjoyed by the Participant at the time of the Change in Control, or the failure by the
Employer to provide the Participant with the number of paid vacation days to which the
Participant is entitled on the basis of years of service with the Employer in accordance
with the Employer&#146;s normal vacation policy in effect immediately prior to the time of the
Change in Control; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) if the Participant is party to an individual employment, severance or other similar
agreement with the Employer, any purported termination of the Participant&#146;s employment which
is not effected pursuant to the notice of termination or other procedures specified therein.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Participant shall have the right to terminate his employment for Good Reason even
if he becomes incapacitated due to physical or mental illness. The Participant&#146;s continued
employment shall not constitute consent to, or a waiver of any rights with respect to, any
act or failure to act constituting Good Reason hereunder.
</DIV>

<P align="center" style="font-size: 10pt">5
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of any determination regarding the existence of Good Reason, any claim by
the Participant that Good Reason exists shall be presumed to be correct unless the Employer
establishes to the Committee by clear and convincing evidence that Good Reason does not
exist. The Committee&#146;s determination regarding the existence of Good Reason shall be
conclusive and binding upon all parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Incumbent Director&#148; </I></B>means &#150;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;a member of the Board on January&nbsp;25, 2006 or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;an individual-
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) who becomes a member of the Board after January&nbsp;25, 2006;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) whose appointment or election by the Board or nomination for election by Baker
Hughes&#146; stockholders is approved or recommended by a vote of at least two-thirds of the then
serving <I>Incumbent Directors </I>(as defined herein); and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) whose initial assumption of service on the Board is not in connection with an
actual or threatened election contest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Initial Payment Date&#148; </I></B>has the meaning ascribed to that term in Section&nbsp;7.01.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Involuntary Separation From Service&#148; </I></B>means a Participant&#146;s Separation From Service as a
result of the elimination of his job or a reduction in force.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Key Employee&#148; </I></B>means a key employee of Baker Hughes or an Affiliate who, in the opinion of the
Chief Executive Officer of Baker Hughes, is in a position to significantly contribute to the growth
and profitability of Baker Hughes and the Affiliates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Merger&#148; </I></B>means a merger, consolidation or similar transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;</B><B><I>OA Level</I></B><B>&#148; </B>means the over achievement level of performance applicable to the Award.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Participant&#148; </I></B>means an individual who is or was a Key Employee who has been granted an Award
Opportunity or who has unpaid Accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Performance Goals&#148; </I></B>means one or more of the criteria described in Section&nbsp;3.02 on which the
performance goals applicable to an Award Opportunity are based.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#147;</B><B><I>Performance Period</I></B><B>&#148; </B>means the 12-month period to which the Performance Goals apply. A
Performance Period shall coincide with a Plan Year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Person&#148; </I></B>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 &#147;group&#148; as defined in section 13(d)
thereof, except that the term shall not include (a)&nbsp;Baker Hughes or any of the Affiliates, (b)&nbsp;a
trustee or other fiduciary holding Baker Hughes securities under an employee benefit plan of Baker
Hughes or any of the Affiliates, (c)&nbsp;an underwriter temporarily holding securities pursuant
</DIV>

<P align="center" style="font-size: 10pt">6
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">to an offering of those securities or (d)&nbsp;a corporation owned, directly or indirectly, by the
stockholders of Baker Hughes in substantially the same proportions as their ownership of stock of
Baker Hughes.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Plan&#148; </I></B>means the Baker Hughes Incorporated Annual Incentive Compensation Plan, as amended from
time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Plan Administrator</I></B><B>&#148; </B>means Baker Hughes, acting through its delegates. Such delegates shall
include the Administrative Committee, the Investment Committee and any individual Plan
Administrator appointed by the Board with respect to the employee benefit plans of Baker Hughes 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 &#147;<I>Plan Administrator</I>&#148; shall refer to the
applicable delegate of Baker Hughes as determined pursuant to the actions of the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Plan Year&#148; </I></B>means the twelve-consecutive month period commencing January 1 of each year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Potential Change in Control&#148; </I></B>means the occurrence of any of the following events:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the Employer enters into an agreement, the consummation of which would result in
the occurrence of a Change in Control;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the Employer or any Person publicly announces an intention to take or to consider
taking actions which, if consummated, would constitute a Change in Control;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) any Person becomes the Beneficial Owner, directly or indirectly, of securities of
Baker Hughes representing 15&nbsp;percent or more of either the then outstanding shares of common
stock of Baker Hughes&#146; or the combined voting power of Baker Hughes&#146; then outstanding
securities (not including in the securities beneficially owned by such Person any securities
acquired directly from Baker Hughes or the Affiliates); or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the Board adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Profit After Tax&#148; </I></B>means revenues minus cost of sales (the cost of products sold and the cost
of providing services, including personnel costs, repair and maintenance costs, freight/custom,
depreciation, and other costs (<I>e.g.</I>, commission and royalty) directly relating to the service
provided) minus operating expenses (costs incurred in non-manufacturing areas to provide products
and services to customers (<I>e.g.</I>, finance and administrative support)) minus income taxes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Retirement&#148; </I></B>means a Participant&#146;s voluntary Separation From Service when he has attained at
least 55&nbsp;years of age and has at least ten (10)&nbsp;years of service with Baker Hughes and the
Affiliates. For this purpose, &#147;year of service&#148; means a year of service for vesting purposes under
the Baker Hughes Incorporated Thrift Plan, whether or not the Participant is a participant in such
plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Section&nbsp;</I></B><B><I>162(m)</I></B><B><I>&#148; </I></B>means section 162(m) of the Code and the Department of Treasury
</DIV>

<P align="center" style="font-size: 10pt">7
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">rules and regulations issued thereunder.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Section&nbsp;409A&#148; </I></B>means section 409A of the Code and the Department of Treasury rules and
regulations issued thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Separation From Service&#148; </I></B>has the meaning ascribed to that term in Section&nbsp;409A.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Specified Employee&#148; </I></B>means as of any date, a person who is a &#147;specified employee&#148; within the
meaning of Section&nbsp;409A.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Specified Owner&#148; </I></B>means any of the following:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Baker Hughes;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) an Affiliate of Baker Hughes;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) an employee benefit plan (or related trust) sponsored or maintained by Baker Hughes
or any Affiliate of Baker Hughes;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) a Person that becomes a Beneficial Owner of Baker Hughes&#146; outstanding Voting
Securities representing 30&nbsp;percent or more of the combined voting power of Baker Hughes&#146;
then outstanding Voting Securities as a result of the acquisition of securities directly
from Baker Hughes and/or its Affiliates; or
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) a Person that becomes a Beneficial Owner of Baker Hughes&#146; outstanding Voting
Securities representing 30&nbsp;percent or more of the combined voting power of Baker Hughes&#146;
then outstanding Voting Securities as a result of a Merger if the individuals and Entities
who were the Beneficial Owners of the Voting Securities of Baker Hughes outstanding
immediately prior to such Merger own, directly or indirectly, at least 50&nbsp;percent of the
combined voting power of the Voting Securities of any of Baker Hughes, the surviving Entity
or the parent of the surviving Entity outstanding immediately after such Merger in
substantially the same proportions as their ownership of the Voting Securities of Baker
Hughes outstanding immediately prior to such Merger.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#147;Voting Securities&#148; </I></B>means the outstanding securities entitled to vote generally in the
election of directors or other governing body.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.02 <B>Number and Gender. </B>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 the Plan, shall be deemed to include the
feminine gender.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.03 <B>Headings. </B>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.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE II<BR>
PARTICIPATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.01 <B>Eligibility. </B>Eligibility for participation in the Plan shall be limited to those Key
Employees who, by the nature and scope of their position, contribute to the overall results or
success of the Employers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.02 <B>Participation. </B>Participation in the Plan shall be determined annually based upon the
recommendation of the Chief Executive Officer of Baker Hughes and the approval of the Committee.
Employees approved for participation shall be notified in writing of their selection, and of their
Performance Goals and related Award Opportunities, as soon after approval as is practicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.03 <B>Partial Plan Year Participation. </B>The Committee may, upon recommendation of the Chief
Executive Officer of Baker Hughes, allow an individual who becomes eligible after the beginning of
a Plan Year to participate in the Plan for that year. In such case, the Participant&#146;s Final Award
normally shall be prorated based on the number of full months of participation. However, the
Committee may, based upon the recommendation of the Chief Executive Officer of Baker Hughes,
authorize an unreduced Final Award.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.04 <B>Termination of Approval. </B>The Committee may withdraw its approval for participation in
the Plan for a Participant at any time. In the event of such withdrawal, the individual concerned
shall cease to be a Participant as of the date designated by the Committee and he shall be notified
of such withdrawal as soon as practicable following such action. Further, such individual shall
cease to have any right to a Final Award for the Plan Year in which such withdrawal is effective;
provided, however, that the Committee may, in its sole discretion, authorize a prorated award based
on the number of full months of participation prior to the effective date of such withdrawal.
Notwithstanding the foregoing, the Committee may not withdraw its approval for participation in the
Plan during the pendency of a Potential Change in Control and for a period of six (6)&nbsp;months after
the cessation thereof.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ARTICLE III<BR>
AWARD OPPORTUNITIES AND<BR>
PERFORMANCE GOALS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.01 <B>Award Opportunities. </B>The Committee shall establish, in writing, over achievement,
expected value, and entry value incentive award levels (the &#147;<I>Award Opportunities</I>&#148;) for each
Participant who is eligible to participate in the Plan for the Performance Period. The established
Award Opportunities may vary in relation to the responsibility level of the Participant. Except in
the case of a Covered Employee, if a Participant changes job levels or salary grades during the
Plan Year, the Award Opportunities may be adjusted by the Committee, in its sole discretion, to
reflect the amount of time at each job level and/or in each salary grade.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.02 <B>Performance Goals. </B>The Committee shall establish, in writing, Performance Goals for each
Participant for a Plan Year. A Performance Goal may be based on one or more business criteria that
apply to the Participant, one or more business units of Baker Hughes and the Affiliates, or Baker
Hughes and the Affiliates as a whole, with reference to one or more of
</DIV>

<P align="center" style="font-size: 10pt">9
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the following: earnings per share, total shareholder return, cash return on capitalization,
increased revenue, revenue ratios, net income, stock price, market share, return on equity, return
on assets, return on capital, return on capital compared to cost of capital, return on capital
employed, return on invested capital, shareholder value, net cash flow, operating income, earnings
before interest and taxes, cash flow, cash flow from operations, cost reductions, cost ratios,
Profit After Tax and Baker Value Added. Performance Goals may also be based on performance
relative to a peer group of companies. Unless otherwise stated, a Performance Goal need not be
based upon an increase or positive result under a particular business criterion and could include,
for example, maintaining the status quo or limiting economic losses (measured, in each case, by
reference to specific business criteria). All items of gain, loss or expense for the Performance
Period determined to be extraordinary, unusual in nature, infrequent in occurrence, related to the
acquisition or disposal of a segment of a business, or related to a change in accounting principle,
all as determined in accordance with standards established by Opinion No.&nbsp;30 of the Accounting
Principles Board (APB Opinion No.&nbsp;30), other applicable accounting rules, or consistent with Baker
Hughes accounting policies and practices on the date the Committee establishes the Performance
Goals may be included or excluded in calculating whether a Performance Goal has been achieved. In
the case of a Participant other than a Participant who is or during the Performance Period may
become a Covered Employee, nonfinancial objectives may also be included in a Participant&#146;s
Performance Goals but may not represent more than 20&nbsp;percent of the Participant&#146;s expected value
Award Opportunity. No Participant who is a Covered Employee, or who the Committee expects may
become a Covered Employee during the next three Plan Years, may have any portion of his Final Award
based on nonfinancial, subjective Performance Goals.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.03 <B>Time of Establishment of Award Opportunities and Performance Goals. </B>Performance Goals
and Award Opportunities for a Participant for a Plan Year must be established by the Committee
prior to the earlier to occur of (a)&nbsp;90&nbsp;days after the commencement of the period of service to
which the Performance Goal relates or (b)&nbsp;the lapse of 25&nbsp;percent of the period of service, and in
any event while the outcome is substantially uncertain.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.04 <B>Adjustment of Performance Goals. </B>The Committee shall have the right to adjust the
Performance Goals (either up or down) during the Plan Year if it determines that external changes
or other unanticipated business conditions have materially affected the fairness of the goals and
unduly influenced the ability to meet them. Notwithstanding the foregoing, no such adjustment shall
be made with respect to an individual who is a Covered Employee to the extent the same is
considered an upward discretionary increase in the amount of the Final Award for such individual
(within the meaning of Section&nbsp;162(m)).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.05 <B>Individual Award Cap. </B>Effective for Final Awards earned for Performance Periods
commencing on and after January&nbsp;1, 2006, the maximum annual Final Award any individual may receive
under the Plan is $4,000,000.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ARTICLE IV<BR>
FINAL AWARD DETERMINATIONS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.01 <B>Final Award Determinations. </B>As soon as practicable after the end of each Plan Year,
Final Awards shall be computed for each Participant as determined by the Committee. The
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Committee shall certify in writing the extent to which the Performance Goals established
pursuant to Section&nbsp;3.02 and any other material terms of an award were in fact satisfied.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In determining the Final Award, the Committee, in its sole discretion, may increase or
decrease calculated amounts to reflect factors regarding performance during the Plan Year which
were not, in the sole opinion of the Committee, appropriately reflected in the Final Award
calculation. Notwithstanding the foregoing, the Final Award to an individual who is a Covered
Employee will not be subject to upward discretionary adjustment by the Committee. Downward
discretionary adjustment for Covered Employees will be permitted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.02 <B>Separation From Service Due to Death, Disability, or Retirement. </B>If a Participant incurs
a Separation From Service by reason of death, Disability, or Retirement, the Final Award,
determined in accordance with Section&nbsp;4.01, shall be reduced so that it reflects only participation
prior to the Separation From Service. This reduction shall be determined by multiplying the Final
Award by a fraction, the numerator of which is the months of participation through the date of the
Separation From Service rounded up to whole months, and the denominator of which is twelve (12).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.03 <B>Employment Transfers</B>. If a Participant transfers from one division to another division
within Baker Hughes and the Affiliates, the Final Award for the Participant&#146;s time at the
Participant&#146;s former division will be prorated for the number of whole months rounded to the
nearest whole month of the Plan Year the Participant was at that division. The Final Award will be
determined as soon as practicable after the end of the Plan Year and will be based on the financial
results at the close of the Plan Year. The Final Award will be paid at the same time the other
Final Awards for that division are paid. If a Participant is eligible for a Final Award in his new
position, the Final Award will be based on the months left in the Plan Year, on his new base salary
level and Award Opportunities, as determined by the Committee based upon the recommendation of the
Chief Executive Officer of Baker Hughes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.04 <B>Disposition of Business. </B>If the Participant&#146;s Employer or division is disposed of during
the Plan Year and such disposition does not qualify as a Change in Control, payment of the
Participant&#146;s Final Award shall be determined in accordance with the following alternatives:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) If the acquirer offers employment to the Participant and assumes the obligations
under the Plan, either directly or indirectly, and the Participant accepts such offer of
employment, the Participant&#146;s Final Award will not be forfeited but the Employer shall not
be obligated to pay the Final Award and such obligation shall be that of the acquiring party
in accordance with the Final Award parameters.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If the acquirer does not assume the obligations under the Plan, whether or not the
Participant is offered and accepts employment, then the Participant&#146;s Final Award will not
be forfeited and the Participant will receive a prorated Final Award for the portion of the
Plan Year that the Participant was employed by the Employer prior to the date of the
consummation of the sale of the Employer or division, to be paid at the same time other
Final Awards are paid under the Plan. The computation shall be made on the basis of the
number of whole months rounded to the nearest whole month of the Plan Year that the
Participant was in active service with the Employer.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If the acquirer offers employment to the Participant and assumes the obligations
under the Plan, either directly or indirectly, and the Participant rejects such employment,
the Participant shall forfeit his Final Award for the Performance Period then in progress
pursuant to Section&nbsp;4.05.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.05 <B>Separation From Service for Other Reasons. </B>Except as specified in Article&nbsp;X or Section
4.04, if a Participant incurs a Separation From Service for any reason other than Retirement,
Disability or death, all of the Participant&#146;s rights to any unpaid Final Award shall be forfeited.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE V<BR>
BANKING OF AWARDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.01 <B>General Banking Procedures</B>. Except as specified in Section&nbsp;5.02, if Performance Goals
applicable to a Final Award that are designated by the Committee as company Performance Goals are
achieved at a level in excess of the OA Level, the amount of the Final Award that is attributable
to exceeding the OA Level will be banked and paid at the times specified in Section&nbsp;7.02. To the
extent that a Final Award for a Performance Period is banked, it shall be credited to the
Participant&#146;s Banked Account for the Performance Period effective as of the Initial Payment Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.02 <B>Exceptions</B>. No portion of a Final Award will be banked pursuant to Section&nbsp;5.01 if (a)
the amount that would be banked is $2,000 or less, (b)&nbsp;the Participant incurs a Separation From
Service and the Participant is described in clause (b)&nbsp;of Section&nbsp;4.04, (c)&nbsp;a Change in Control
occurs during the Performance Period, (c)&nbsp;applicable local laws prohibit banking of the Final Award
or (d)&nbsp;written procedures adopted by the Committee prior to the Performance Period specify that the
Final Award will not be banked.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ARTICLE VI<BR>
DEEMED INVESTMENT OF FUNDS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amounts deemed credited to a Participant&#146;s Banked Account for a Performance Period shall be
deemed to be credited with interest at the annual rate equal to the Applicable Interest Rate
commencing as of the Initial Payment Date. For the period commencing on the Initial Payment Date
and ending on the day before the first anniversary of the Initial Payment Date the Applicable
Interest Rate will be based on the rate in effect as of the Initial Payment Date. For the period
commencing on the first anniversary of the Initial Payment Date and ending on the second
anniversary of the Initial Payment Date the Applicable Interest rate will be based on the rate in
effect as of the first anniversary of the Initial Payment Date.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ARTICLE VII<BR>
PAYMENT OF BENEFITS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.01 <B>Time of Payment of Unbanked Final Award. </B>Except to the extent that a Final Award is
banked pursuant to Article&nbsp;V, or except as specified in Article&nbsp;X, a Participant&#146;s Final Award, to
the extent not forfeited pursuant to Article&nbsp;VIII, shall be paid to him on March&nbsp;15 following the
Performance Period (the &#147;<I>Initial Payment Date&#148;).</I>
</DIV>

<P align="center" style="font-size: 10pt">12
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.02 <B>Time of Payment of Banked Final Award. </B>To the extent that a Participant&#146;s Final Award is
banked pursuant to this Article&nbsp;V, fifty percent (50%) of the amount then credited to the
Participant&#146;s Banked Account for the Performance Period, to the extent not forfeited pursuant to
Article&nbsp;VIII, shall be distributed to the Participant on the first anniversary of the Initial
Payment Date of the Final Award. The remaining portion of the amount credited to the Participant&#146;s
Banked Account for the Performance Period, to the extent not forfeited pursuant to Article&nbsp;VIII,
shall be distributed to the Participant on the second anniversary of the Initial Payment Date.
Notwithstanding the foregoing, (a)&nbsp;if a Participant incurs an Involuntary Separation From Service
or if he incurs a Separation From Service due to Retirement, any amounts credited to his Banked
Account(s) shall be paid to him on the earlier of (1)&nbsp;the date of the Participant&#146;s Separation From
Service if the Participant is not a Specified Employee or the date that is six months following his
Separation From Service if the Participant is a Specified Employee, or (2)&nbsp;the date the amount
would otherwise be paid under this Section&nbsp;7.02; (b)&nbsp;if the Participant incurs a Disability, any
amounts credited to his Banked Accounts will be paid to him on the date the date of the
Participant&#146;s Disability; or (c)&nbsp;if the Participant dies, any amounts credited to his Banked
Accounts will be paid as specified in Section&nbsp;9.02. Further, notwithstanding the foregoing, (a)
upon the occurrence of a Change in Control all amounts that are credited to the Participant&#146;s
Banked Accounts that are not deferred compensation within the meaning of Section&nbsp;409A shall be paid
to the Participant; (b)&nbsp;upon the occurrence of a Change in control that constitutes a &#147;Change in
Control&#148; within the meaning of Section&nbsp;409A all amounts that are credited to the Participant&#146;
Banked Accounts shall be paid to the Participant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.03 <B>Form of Payment of Benefits. </B>All benefit payments shall be made in cash.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.04 <B>Account Debits. </B>Any benefit payments made to a Participant, or former Participant, or
for his benefit pursuant to any provision of the Plan shall be debited to such Participant&#146;s or
former Participant&#146;s Accounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.05 <B>Unclaimed Benefits. </B>In the case of a benefit payable on behalf of a Participant or
former Participant, if the Plan Administrator is unable, after reasonable efforts, to locate the
Participant, the former Participant or the beneficiary to whom such benefit is payable, upon the
Plan Administrator&#146;s determination thereof, such benefit shall be forfeited to the Employer.
Notwithstanding the foregoing, if subsequent to any such forfeiture the Participant, the former
Participant or beneficiary to whom such benefit is payable makes a valid claim for such benefit,
such forfeited benefit (without any adjustment for earnings or loss) shall be restored to the Plan
by the Employer and paid in accordance with the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.06 <B>Statutory Benefits. </B>If any benefit obligations are required to be paid under the Plan to
a Participant or former Participant in conjunction with severance of employment under the laws of
the country where the Participant or former Participant is employed or under federal, state or
local law, the benefits paid to a Participant or former Participant pursuant to the provisions of
the Plan will be deemed to be in satisfaction of any statutorily required benefit obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.07 <B>Payment to Alternate Payee Under Domestic Relations Order. </B>Plan benefits that are
awarded to an Alternate Payee in a Domestic Relations Order shall be paid to the Alternate Payee at
the time and in the form directed in the Domestic Relations Order. The
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Domestic Relations Order may provide for an immediate lump sum payment to an Alternate Payee.
A Domestic Relations Order may not otherwise provide for a time or form of payment that is not
permitted under the Plan. A Domestic Relations Order will be disregarded to the extent it awards
an Alternate Payee benefits in excess of the applicable Participant&#146;s or former Participant&#146;s
Account balance under the Plan.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE VIII<BR>
FORFEITURE OF BENEFITS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as specified in Section&nbsp;4.04 or Article&nbsp;X, if a Participant incurs a Separation From
Service for any reason other than Retirement, death, Disability or Involuntary Separation from
Service before the time a payment to him is to be made under Article&nbsp;VII, he shall forfeit the
payment and all amounts then deemed credited to his Accounts.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ARTICLE IX<BR>
DEATH</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.01 <B>Payment of Unbanked Amounts. </B>In the event of a death of a Participant prior to the
Initial Payment Date of a Final Award, the Participant&#146;s Final Award will be paid to the
Participant&#146;s Beneficiary on the Initial Payment Date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.02 <B>Payment of Banked Amounts. </B>Upon the death of a Participant any amounts deemed credited
to the Participant&#146;s Banked Accounts will be paid to his Beneficiary as soon as administratively
practicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.03 <B>Designation of Beneficiaries.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Each Participant or former Participant shall have the right to designate the
beneficiary or beneficiaries to receive payment of his benefit in the event of his death.
Each such designation shall be made by executing the beneficiary designation form prescribed
by the Plan Administrator and filing same with the Plan Administrator. Any such designation
may be changed at any time by execution of a new designation in accordance with this Section
9.03.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If no such designation is on file with the Plan Administrator at the time of the
death of the Participant or former Participant or such designation is not effective for any
reason as determined by the Plan Administrator, then the designated beneficiary or
beneficiaries to receive such benefit shall be as follows:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) If a Participant or former Participant leaves a surviving spouse, his
benefit shall be paid to such surviving spouse;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If a Participant or former Participant leaves no surviving spouse, his
benefit shall be paid to such Participant&#146;s or former Participant&#146;s executor or
administrator, or to his heirs at law if there is no administration of such
Participant&#146;s or former Participant&#146;s estate.
</DIV>

<P align="center" style="font-size: 10pt">14
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE X<BR>
CHANGE IN CONTROL</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.01 <B>General. </B>The provisions of this Article&nbsp;X shall apply and supersede any contrary
provisions of the Plan in the event of a Change in Control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.02 <B>CIC Committee. </B>If a Change in Control or Potential Change in Control occurs, all
references in the Plan to &#147;<I>Committee</I>&#148; shall at that point be deemed to be references to the CIC
Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.03 <B>Change in Control During a Performance Period</B>. Notwithstanding any provision of the
Plan to the contrary, upon the occurrence of a Change in Control during a Performance Period, (i)
Final Awards for the Performance Period shall be computed for each Participant pursuant to Section
4.01 (assuming for this purpose that the Performance Goals established pursuant to Section&nbsp;3.02
herein have been achieved to the extent required to earn the expected value Award Opportunity), and
(ii)&nbsp;the Employer shall pay to each Participant an amount equal to the Final Award so determined
multiplied by a fraction, the numerator of which is the number of the Participant&#146;s months of
participation during the Performance Period through the date of Change of Control (rounded up to
the nearest whole month), and the denominator of which is twelve (12).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.04 <B>Termination of Employment Prior to Change in Control or Following Certain Changes in
Control</B>. Notwithstanding any provision of the Plan to the contrary, a Participant shall be
entitled to receive the payment described in Section&nbsp;10.03 for a Performance Period if (i)&nbsp;such
Participant&#146;s employment is terminated by Baker Hughes or an Affiliate during the Performance
Period 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 Baker Hughes or an Affiliate the consummation of which would constitute a Change in Control,
(ii)&nbsp;such Participant resigns during the Performance Period 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 (i),
or (iii)&nbsp;such Participant&#146;s employment is terminated by Baker Hughes or an Affiliate during the
Performance Period without Cause or by the Participant 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).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.05 <B>Payment of Expected Value Awards and Tax-Gross Up for Delayed Payment. </B>If a Participant
is entitled to a Final Award payment pursuant to Section&nbsp;10.03, the Employer shall pay the
Participant such Final Award within five days following the date of the Change in Control. If a
Participant is entitled to a Final Award payment pursuant to Section&nbsp;10.04, the Employer shall pay
the Participant such Final Award within five days following the date of the Participant&#146;s
termination of employment. If for any reason the Employer fails to timely pay a Participant the
amounts due him pursuant to this Article&nbsp;X, the Employer shall pay the Participant additional
compensation in such amount as is necessary to put the Participant in the same federal income tax
position he would have been in had the payment not been subject to
</DIV>

<P align="center" style="font-size: 10pt">15
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Section&nbsp;409A. Such additional compensation shall be paid to the Participant at the same time
as the delinquent Final Award payment is paid to the Participant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.06 <B>Forfeiture Restrictions. </B>Notwithstanding any other provision of the Plan, upon the
occurrence of a Change in Control during a Performance Period or upon a Participant&#146;s termination
of employment during a Performance Period in a circumstance described in Section&nbsp;10.04, the amount
of the Participant&#146;s Final Award for the Performance Period, calculated in accordance with Section
10.03, shall not be forfeited, and any amounts then credited to the Participant&#146;s Accounts shall
not be forfeited.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE XI<BR>
ADMINISTRATION OF THE PLAN</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.01 <B>Resignation and Removal. </B>The members of a Committee serving as Plan Administrator shall
serve at the pleasure of the Board; they may be officers, directors, or employees or any other
individuals. At any time during his term of office, any member of a Committee or any individual
serving as Plan Administrator may resign by giving written notice to the Board, such resignation to
become effective upon the appointment of a substitute or, if earlier, the lapse of thirty days
after such notice is given as herein provided. At any time during its term of office, and for any
reason, any member of a Committee or any individual serving as Plan Administrator may be removed by
the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.02 <B>Records and Procedures. </B>The Plan Administrator shall keep appropriate records of its
proceedings and the administration of the Plan and shall make available for examination during
business hours to any Participant, former Participant or the beneficiary of any Participant or
former Participant such records as pertain to that individual&#146;s interest in the Plan. If a
Committee is performing duties as the Plan Administrator, the Committee shall designate the
individual or individuals who shall be authorized to sign for the Plan Administrator and, upon such
designation, the signature of such individual or individuals shall bind the Plan Administrator.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.03 <B>Self-Interest of Plan Administrator. </B>Neither the members of a Committee nor any
individual Plan Administrator shall have any right to vote or decide upon any matter relating
solely to himself under the Plan or to vote in any case in which his individual right to claim any
benefit under the Plan is particularly involved. In any case in which any Committee member or
individual Plan Administrator is so disqualified to act, the other members of the Committee shall
decide the matter in which the Committee member or individual Plan Administrator is disqualified.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.04 <B>Compensation and Bonding. </B>Neither the members of a Committee nor any individual Plan
Administrator shall receive compensation with respect to their services on the Committee or as Plan
Administrator. To the extent permitted by applicable law, neither the members of a Committee nor
any individual Plan Administrator shall furnish bond or security for the performance of their
duties hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.05 <B>Plan Administrator Powers and Duties. </B>The Plan Administrator shall supervise the
administration and enforcement of the Plan according to the terms and provisions hereof and
</DIV>

<P align="center" style="font-size: 10pt">16
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">shall have all powers necessary to accomplish these purposes, including, but not by way of
limitation, the right, power, and authority:
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) to make rules, regulations, and bylaws for the administration of the Plan that are
not inconsistent with the terms and provisions hereof, and to enforce the terms of the Plan
and the rules and regulations promulgated thereunder by the Plan Administrator;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) to construe in its discretion all terms, provisions, conditions, and limitations of
the Plan;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) to correct any defect or to supply any omission or to reconcile any inconsistency
that may appear in the Plan in such manner and to such extent as it shall deem in its
discretion expedient to effectuate the purposes of the Plan;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) to employ and compensate such accountants, attorneys, investment advisors, and
other agents, employees, and independent contractors as the Plan Administrator may deem
necessary or advisable for the proper and efficient administration of the Plan;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) to determine in its discretion all questions relating to eligibility;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) to determine whether and when a Participant has incurred a Separation From Service,
and the reason for such termination; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) to make a determination in its discretion as to the right of any individual to a
benefit under the Plan and to prescribe procedures to be followed by distributees in
obtaining benefits hereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.06 <B>Reliance on Documents, Instruments, etc. </B>The Plan Administrator may rely on any
certificate statement or other representation made on behalf of the Employer or any Participant,
which the Plan Administrator in good faith believes to be genuine, and on any certificate,
statement, report or other representation made to it by any agent or any attorney, accountant or
other expert retained by it or Baker Hughes in connection with the operation and administration of
the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.07 <B>Claims Review Procedures; Claims Appeals Procedures.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <U><I>Claims Review Procedures</I></U><I>. </I>When a benefit is due, the Participant, or the
person entitled to benefits under the Plan, should submit a claim to the office designated
by the Plan Administrator to receive claims. Under normal circumstances, the Plan
Administrator will make a final decision as to a claim within 90&nbsp;days after receipt of the
claim. If the Plan Administrator notifies the claimant in writing during the initial 90-day
period, it may extend the period up to 180&nbsp;days after the initial receipt of the claim. The
written notice must contain the circumstances necessitating the extension and the
anticipated date for the final decision. If a claim is denied during the claims period, the
Plan Administrator must notify the claimant in writing, and the written notice must set
forth in a manner calculated to be understood by the claimant:
</DIV>

<P align="center" style="font-size: 10pt">17
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) the specific reason or reasons for the denial;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) specific reference to the Plan provisions on which the denial is based; and
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 6%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) a description of any additional material or information necessary for the
claimant to perfect the claim and an explanation of why such material or information
is necessary.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If a decision is not given to the Participant within the claims review period, the claim is treated
as if it were denied on the last day of the claims review period.
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <U><I>Claims Appeals Procedures</I></U>. For purposes of this Section&nbsp;11.07 the
Participant or the person entitled to benefits under the Plan is referred to as the
&#147;claimant.&#148; If a claimant&#146;s claim made pursuant to Section&nbsp;11.07(a) is denied and he wants
a review, he must apply to the Plan Administrator in writing. That application can include
any arguments, written comments, documents, records, and other information relating to the
claim for benefits. In addition, the claimant is entitled to receive on request and free of
charge reasonable access to and copies of all information relevant to the claim. For this
purpose, &#147;relevant&#148; means information that was relied on in making the benefit determination
or that was submitted, considered or generated in the course of making the determination,
without regard to whether it was relied on, and information that demonstrates compliance
with the Plan&#146;s administrative procedures and safeguards for assuring and verifying that
Plan provisions are applied consistently in making benefit determinations. The Plan
Administrator must take into account all comments, documents, records, and other information
submitted by the claimant relating to the claim, without regard to whether the information
was submitted or considered in the initial benefit determination. The claimant may either
represent himself or appoint a representative, either of whom has the right to inspect all
documents pertaining to the claim and its denial. The Plan Administrator can schedule any
meeting with the claimant or his representative that it finds necessary or appropriate to
complete its review.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The request for review must be filed within 90&nbsp;days after the denial. If it is not, the
denial becomes final. If a timely request is made, the Plan Administrator must make its
decision, under normal circumstances, within 60&nbsp;days of the receipt of the request for
review. However, if the Plan Administrator notifies the claimant prior to the expiration of
the initial review period, it may extend the period of review up to 120&nbsp;days following the
initial receipt of the request for a review. All decisions of the Plan Administrator must be
in writing and must include the specific reasons for its action, the Plan provisions on
which its decision is based, and a statement that the claimant is entitled to receive, upon
request and free of charge, reasonable access to, and copies of, all documents, records, and
other information relevant to the claimant&#146;s claim for benefits. If a decision is not given
to the claimant within the review period, the claim is treated as if it were denied on the
last day of the review period.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Within 60&nbsp;days of receipt by a claimant of a notice denying a claim under the preceding
paragraph, the claimant or his or her duly authorized representative may request in writing
a full and fair review of the claim by the Plan Administrator. The Plan
</DIV>

<P align="center" style="font-size: 10pt">18
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">Administrator may extend the 60-day period where the nature of the benefit involved or
other attendant circumstances make such extension appropriate. In connection with such
review, the claimant or his or her duly authorized representative may review pertinent
documents and may submit issues and comments in writing. The Plan Administrator shall make
a decision promptly, and not later than 60&nbsp;days after the Plan&#146;s receipt of a request for
review, unless special circumstances (such as the need to hold a hearing) require an
extension of time for processing, in which case a decision shall be rendered as soon as
possible, but not later than 120&nbsp;days after receipt of a request for review. The decision
on review shall be in writing and shall include specific reasons for the decision, written
in a manner calculated to be understood by the claimant, and specific references to the
pertinent Plan provisions on which the decision is based.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.08 <B>Employer to Supply Information</B>. The Employer shall supply full and timely information
to the Plan Administrator, including, but not limited to, information relating to each
Participant&#146;s base salary, age, Retirement, death, or other cause of Separation From Service and
such other pertinent facts as the Plan Administrator may require. When making a determination in
connection with the Plan, the Plan Administrator shall be entitled to rely upon the aforesaid
information furnished by the Employer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.09 <B>Indemnity. </B>To the extent permitted by applicable law, Baker Hughes shall indemnify and
save harmless the Board, each member of the Committee, each delegate of the Committee or the Board
and the Plan Administrator against any and all expenses, liabilities and claims (including legal
fees incurred to investigate or defend against such liabilities and claims) arising out of their
discharge in good faith of responsibilities under or incident to the Plan. Expenses and
liabilities arising out of willful misconduct shall not be covered under this indemnity. This
indemnity shall not preclude such further indemnities as may be available under insurance purchased
by Baker Hughes or provided by Baker Hughes under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, as such indemnities are permitted under applicable law.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE XII<BR>
ADOPTION OF PLAN BY AFFILIATES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.01 <B>Adoption Procedure.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) With the written approval of the Plan Administrator, any entity that is an
Affiliate may adopt the Plan by appropriate action of its board of directors or noncorporate
counterpart, as evidenced by a written instrument executed by an authorized officer of such
entity or an executed adoption agreement (approved by the board of directors or noncorporate
counterpart of the Affiliate), agreeing to be bound by all the terms, conditions and
limitations of the Plan except those, if any, specifically described in the adoption
instrument, and providing all information required by the Plan Administrator. The Plan
Administrator and the adopting Affiliate may agree to incorporate specific provisions
relating to the operation of the Plan that apply to the adopting Affiliate only and shall
become, as to such adopting Affiliate and its employees, a part of the Plan.
</DIV>

<P align="center" style="font-size: 10pt">19
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The provisions of the Plan may be modified so as to increase the obligations of an
adopting Affiliate <I>only </I>with the consent of such Affiliate, which consent shall be
conclusively presumed to have been given by such Affiliate unless the Affiliate gives Baker
Hughes written notice of its rejection of the amendment within 30&nbsp;days after the adoption of
the amendment.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The provisions of the Plan shall apply separately and equally to each adopting
Affiliate and its employees in the same manner as is expressly provided for Baker Hughes and
its employees, except that the power to appoint or otherwise affect the Plan Administrator
and the power to amend or terminate the Plan shall be exercised by Baker Hughes. The Plan
Administrator shall act as the agent for each Affiliate that adopts the Plan for all
purposes of administration thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Any adopting Affiliate may, by appropriate action of its board of directors or
noncorporate counterpart, terminate its participation in the Plan. Moreover, the Plan
Administrator may, in its discretion, terminate an Affiliate&#146;s participation in the Plan at
any time.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The Plan will terminate with respect to any Affiliate that has adopted the Plan
pursuant to this Section&nbsp;12.01 if the Affiliate ceases to be an Affiliate or revokes its
adoption of the Plan by resolution of its board of directors or noncorporate counterpart
evidenced by a written instrument executed by an authorized officer of the Affiliate. If
the Plan terminates with respect to any Affiliate, the employees of that Affiliate will no
longer be eligible to be Participants in the Plan.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 3%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The Plan as adopted by the Affiliates shall constitute a single plan rather than a
separate plan of each Affiliate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.02 <B>No Joint Venture Implied</B>. The document which evidences the adoption of the Plan by an
Affiliate shall become a part of the Plan. However, neither the adoption of the Plan by an
Affiliate nor any act performed by it in relation to the Plan shall ever create a joint venture or
partnership relation between it and any other Affiliate.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ARTICLE XIII<BR>
MISCELLANEOUS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.01 <B>Plan Not Contract of Employment. </B>The adoption and maintenance of the Plan shall not be
deemed to be a contract between the Employer and any individual or to be consideration for the
employment of any individual. Nothing herein contained shall be deemed to (a)&nbsp;give any individual
the right to be retained in the employ of the Employer, (b)&nbsp;restrict the right of the Employer to
discharge any individual at any time, (c)&nbsp;give the Employer the right to require any individual to
remain in the employ of the Employer, or (d)&nbsp;restrict any individual&#146;s right to terminate his
employment at any time.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.02 <B>Funding. </B>Plan benefits are a contractual obligation of the Employers which shall be
paid out of the Employers&#146; general assets. The Plan is unfunded and Participants are merely
unsecured creditors of the Employers with respect to their benefits under the Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.03 <B>Alienation of Interest Forbidden. </B>The interest of a Participant, former Participant or
his beneficiary or beneficiaries hereunder may not be sold, transferred, assigned, or encumbered in
any manner, either voluntarily or involuntarily, and any attempt so to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge the same shall be null and void; neither shall the
benefits hereunder be liable for or subject to the debts, contracts, liabilities, engagements or
torts of any individual to whom such benefits or funds are payable, nor shall they be an asset in
bankruptcy or subject to garnishment, attachment or other legal or equitable proceedings. The
provisions of this Section&nbsp;13.03 shall not apply to a Domestic Relations Order.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.04 <B>Withholding. </B>All credits to a Participant&#146;s or former Participant&#146;s Accounts and
payments provided for hereunder shall be subject to applicable withholding and other deductions as
shall be required of the Employer under any applicable local, state or federal law.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.05 <B>Amendment and Termination. </B>The Board, may from time to time, in its discretion, amend,
in whole or in part, any or all of the provisions of the Plan on behalf of any Employer; <I>provided,
however</I>, that no amendment may be made that would impair the rights of a Participant or former
Participant with respect to amounts already credited to his Accounts. The Board may terminate the
Plan at any time. If the Plan is terminated, the amounts credited to a Participant&#146;s or former
Participant&#146;s Account shall be paid to such Participant, or former Participant, or his designated
beneficiary at the time(s) specified in Articles VII, IX and X, as applicable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.06 <B>Severability. </B>If any provision of the Plan shall be held illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining provisions hereof; instead,
each provision shall be fully severable and the Plan shall be construed and enforced as if said
illegal or invalid provision had never been included herein.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.07 <B>Arbitration. </B>Any controversy arising out of or relating to the Plan, including without
limitation, any and all disputes, claims (whether in tort, contract, statutory or otherwise) or
disagreements concerning the interpretation or application of the provisions of the Plan, the
Employer&#146;s employment of the Participant, or former Participant, and the termination of that
employment, shall be resolved by arbitration in accordance with the Employee Benefit Plan Claims
Arbitration Rules of the American Arbitration Association (the &#147;<I>AAA</I>&#148;) then in effect. No
arbitration proceeding relating to the Plan may be initiated by either the Employer or the
Participant, or former Participant, unless the claims review and appeals procedures specified in
Section&nbsp;11.07 have been exhausted. Within ten (10)&nbsp;business days of the initiation of an
arbitration hereunder, the Employer and the Participant, or former Participant, will each
separately designate an arbitrator, and within twenty (20)&nbsp;business days of selection, the
appointed arbitrators will appoint a neutral arbitrator from the panel of AAA National Panel of
Employee Benefit Plan Claims Arbitrators. The arbitrators shall issue their written decision
(including a statement of finding of facts) within thirty (30)&nbsp;days from the date of the close of
the arbitration hearing. The decision of the arbitrators selected hereunder will be final and
binding on both parties. This arbitration provision is expressly made pursuant to and shall be
governed
</DIV>

<P align="center" style="font-size: 10pt">21
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">by the Federal Arbitration Act, 9 U.S.C. Sections&nbsp;1-16 (or replacement or successor statute).
Pursuant to Section&nbsp;9 of the Federal Arbitration Act, the Employer and any Participant agrees that
any judgment of the United States District Court for the District in which the headquarters of
Baker Hughes is located at the time of initiation of an arbitration hereunder shall be entered upon
the award made pursuant to the arbitration. Nothing in this Section&nbsp;13.07 shall be construed to,
in any way, limit the scope and effect of Article&nbsp;XI. In any arbitration proceeding full effect
shall be given to the rights, powers, and authorities of the Plan Administrator under Article&nbsp;XI.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.08 <B>Stockholder Approval. </B>Notwithstanding any other provision of the Plan, no payments
shall be made under the Plan with respect to Performance Periods commencing on or after January&nbsp;1,
2006 unless, prior to the payments, the stockholders of Baker Hughes approve the material terms of
the performance goals under which the compensation is to be paid (within the meaning of Section
162(m)).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.09 <B>Compliance With Section&nbsp;409A. </B>To the extent applicable, the Plan shall be operated in
compliance with Section&nbsp;409A and the provisions of Section&nbsp;409A shall override any provisions of
the Plan to the extent that they are inconsistent with Section&nbsp;409A.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.10 <B>Governing Law. </B>All provisions of the Plan shall be construed in accordance with the
laws of Texas, except to the extent preempted by federal law and except to the extent that the
conflicts of laws provisions of the State of Texas would require the application of the relevant
law of another jurisdiction, in which event the relevant law of the State of Texas will nonetheless
apply, with venue for litigation being in Houston, Texas.
</DIV>

<P align="center" style="font-size: 10pt">22
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>IN WITNESS WHEREOF</B>, Baker Hughes has caused this instrument to be executed by its duly
authorized officer this 26th day of January, 2006, effective as of January&nbsp;1, 2005, except insofar
as a later effective date is expressly specified in this instrument.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="90%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>BAKER HUGHES INCORPORATED</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ GREG NAKANISHI&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Greg Nakanishi, Vice President, Human Resources</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>5
<FILENAME>h35481exv31w1.htm
<DESCRIPTION>CERTIFICATION OF CEO PURSUANT TO RULE 13A-14A
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;31.1
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Chad C. Deaton, certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this quarterly report on Form 10-Q of Baker Hughes Incorporated;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and
15d-15(f)) for the registrant and have:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(c)&nbsp;Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(d)&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over financial
reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant&#146;s internal control over financial reporting; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. The registrant&#146;s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit
committee of the registrant&#146;s board of directors (or persons performing the equivalent functions):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant&#146;s
ability to record, process, summarize and report financial information; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant&#146;s internal control over financial reporting.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:  May 2, 2006&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Chad C. Deaton
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chad C. Deaton&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" nowrap>Chairman of the Board and
Chief Executive Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>6
<FILENAME>h35481exv31w2.htm
<DESCRIPTION>CERTIFICATION OF CFO PURSUANT TO RULE 13A-14A
<TEXT>
<HTML>
<HEAD>
<TITLE>exv31w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;31.2
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">I, Peter A. Ragauss, certify that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">1. I have reviewed this quarterly report on Form 10-Q of Baker Hughes Incorporated;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2. Based on my knowledge, this report does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">4. The registrant&#146;s other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules&nbsp;13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules&nbsp;13a-15(f) and
15d-15(f)) for the registrant and have:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(c)&nbsp;Evaluated the effectiveness of the registrant&#146;s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(d)&nbsp;Disclosed in this report any change in the registrant&#146;s internal control over financial
reporting that occurred during the registrant&#146;s most recent fiscal quarter (the registrant&#146;s fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant&#146;s internal control over financial reporting; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">5. The registrant&#146;s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant&#146;s auditors and the audit
committee of the registrant&#146;s board of directors (or persons performing the equivalent functions):
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(a)&nbsp;All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the registrant&#146;s
ability to record, process, summarize and report financial information; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">(b)&nbsp;Any fraud, whether or not material, that involves management or other employees who have a
significant role in the registrant&#146;s internal control over financial reporting.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">Date:  May 2, 2006&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/Peter A. Ragauss
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Peter A. Ragauss&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left" nowrap>Senior Vice President
and Chief Financial Officer&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>7
<FILENAME>h35481exv32.htm
<DESCRIPTION>STATEMENT OF CEO AND CFO PURSUANT TO RULE 13A-14B
<TEXT>
<HTML>
<HEAD>
<TITLE>exv32</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;32
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTIFICATION PURSUANT TO<BR>
18 U.S.C. SECTION 1350<BR>
AS ADOPTED PURSUANT TO<BR>
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the Quarterly Report of Baker Hughes Incorporated (the &#147;Company&#148;) on Form 10-Q
for the period ended March&nbsp;31, 2006, as filed with the Securities and Exchange Commission on the
date hereof (the &#147;Report&#148;), the undersigned, Chad C. Deaton, Chief Executive Officer of the
Company, and G. Stephen Finley, the Chief Financial Officer of the Company, each of the undersigned
hereby certifies, pursuant to 18 U.S.C. Section&nbsp;1350, as adopted pursuant to Section&nbsp;906 of the
Sarbanes-Oxley Act of 2002, that:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company as of the
dates and for the periods expressed in the Report.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The certification is given to the knowledge of the undersigned.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                     /s/Chad C. Deaton
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">Chad C. Deaton&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Date:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">May 2, 2006
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

</TABLE>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">                    /s/Peter A. Ragauss
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Name:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">Peter A. Ragauss&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">May 2, 2006&nbsp;</TD>
    <TD valign="top">Title:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">Chief Financial Officer
Date:&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">Date:&nbsp;&nbsp;</TD>
    <TD colspan="2" align="left">May 2, 2006
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>8
<FILENAME>h35481exv99w1.htm
<DESCRIPTION>PRESS RELEASE DATED APRIL 28, 2006
<TEXT>
<HTML>
<HEAD>
<TITLE>exv99w1</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;99.1
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><IMG src="h35481h3548100.gif" alt="(BAKER HUGHES LOGO)">
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>News Release</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Contact:
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Baker Hughes Incorporated</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Gary R. Flaharty (713)&nbsp;439-8039
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">P.O. Box 4740</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">H. Gene Shiels (713)&nbsp;439-8822
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Houston, Texas 77210-4740</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Baker Hughes Completes Sale of Interest in WesternGeco</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">HOUSTON, April&nbsp;28, 2006. Baker Hughes Incorporated (NYSE: BHI; EBS) today announced that it
has completed the sale of its 30% minority interest in WesternGeco, a seismic venture created
November&nbsp;30, 2000 with Schlumberger Limited, to Schlumberger for $2.4&nbsp;billion in cash. Baker
Hughes expects to record a pre-tax gain of approximately $1.74&nbsp;billion (approximately $1.05
billion, net of tax). Cash proceeds, net of tax, were approximately $1.8&nbsp;billion.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Baker Hughes is a leading provider of<BR>
drilling, formation evaluation, completion and production<BR>
products and services to the worldwide oil and gas industry.
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">****<BR>
NOT INTENDED FOR BENEFICIAL HOLDERS

</DIV>

<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

</BODY>
</HTML>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>9
<FILENAME>h35481exv99w2.htm
<DESCRIPTION>PRESS RELEASE DATED APRIL 27, 2006
<TEXT>
<HTML>
<HEAD>
<TITLE>exv99w2</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="right" style="font-size: 10pt; margin-top: 12pt">Exhibit&nbsp;99.2
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 12pt"><IMG src="h35481h3548100.gif" alt="(BAKER HUGHES LOGO)">
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>News Release</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%"></TD>
    <TD width="5%"></TD>
    <TD width="47%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Contact:
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Baker Hughes Incorporated</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Gary R. Flaharty (713)&nbsp;439-8039
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">P.O. Box 4740</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">H. Gene Shiels (713)&nbsp;439-8822
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Houston, Texas 77210-4740</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Baker Hughes Appoints Pierre H. Jungels, CBE, to Board of Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">HOUSTON, Texas &#151; April&nbsp;27, 2006. Baker Hughes Incorporated (BHI &#151; NYSE, EBS) announced today
that Pierre H. Jungels, CBE, former chief executive officer of Enterprise Oil, plc, has been
appointed a director of Baker Hughes and will serve on the Compensation and Finance committees.
With his appointment the board now has 12 directors, including 11 independent non-employee
directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Biographical Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pierre H. Jungels, CBE, 62, a Chartered Engineer and a PhD from the California Institute of
Technology, served as president of the Institute of Petroleum until December&nbsp;2003. From 1996
through 2001 he served as a director and chief executive officer of Enterprise Oil, plc, one of the
largest independent European oil companies at the time. In 1996, Dr.&nbsp;Jungels served as the
managing director of exploration and production at British Gas plc. From 1975 through 1995 he
served in a variety of capacities at Petrofina S.A. and its predecessors, including serving as a
main board director for 7&nbsp;years, as a director of FINA, Inc., as managing director and chief
executive officer of FINA, plc (U.K.) and chief executive officer of FINA Angola. Dr.&nbsp;Jungels is
also a director of Woodside Petroleum Ltd., and a director of Imperial Tobacco Group plc. Dr.
Jungels resides in Newbury, England.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">Baker Hughes is a leading provider of<BR>
drilling, formation evaluation, completion and production<BR>
products and services to the worldwide oil and gas industry.<BR>
****<BR>
NOT INTENDED FOR BENEFICIAL HOLDERS
</DIV>



<P align="center" style="font-size: 10pt">&nbsp;
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