2010 Ar

Transforming
Executing
Performing
2 0 1 0 a n n u a l re p o r t t o s t o c k holders
Trans fo r ming... E xe cuting... Per fo r ming
We have embarked on a multi-year strategy to transform Baker Hughes into a stronger oilfield
service company. As a result, we believe we have the most promising opportunities for improved
financial performance of any major oil service company.
• Beginning in 2008, we acquired several reservoir-consulting firms and have consolidated

them into Baker Hughes Reservoir Development Services including Gaffney, Cline &
Associates. With the 2010 acquisitions of Meyer and Associates and JewelSuite,™ we can
now offer our customers reservoir consulting and software for the life of the reservoir.
• In 2009, we reorganized around geographies to build stronger relationships with our
customers, improve operational effectiveness and optimize our product lines.
• Also in 2009, we began a multi-year initiative to optimize our supply chain to reduce costs,
improve performance and move closer to our customers.
• And, in 2010, we acquired BJ Services, adding pressure pumping, coiled tubing and
cementing as our newest, and largest, product line. We undertook this transformation
to increase market share and realize long-term profitable growth.
In 2011, our focus is on moving beyond transformation to execution and delivering on the
promise of our new capabilities.
• We are leveraging our product lines to provide customers with a full suite of services
from reservoir analysis to advanced directional drilling to advanced completions to pressure
pumping and real time microseismic and reservoir monitoring.
• Our geomarket managers are building stronger relationships with their customers,
developing more holistic views of the market, communicating priorities to the Products
and Technology organization that reflect new insight, and maintaining excellent rig site
performance and a strong safety record.
• Our Products and Technology organization is centralized, more efficient and focused
on commercializing innovative technology and services.
• And our enterprise functions are organized to efficiently support our new
global organization.
We have made specific commitments to improve top- and bottom-line performance. We have
developed detailed plans to meet these goals and are executing our plans one quarter at a time.
As an organization we understand that execution is the key to performance.
This Annual Report to Stockholders, including the letter to stockholders from Chairman Chad C. Deaton, contains
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Sec-
tion 21E of the Securities Exchange Act of 1934, as amended. The words “will,” “expect,” “should,” “scheduled,”
“plan,” “aim,” “ensure,” “believe,” “promise,” “anticipate,” “could” and similar expressions are intended to identify
forward-looking statements. Baker Hughes’ expectations regarding these matters are only its forecasts. These
forecasts may be substantially different from actual results, which are affected by many factors, including those
listed in ”Risk Factors“ and “Management’s Discussion and Analysis of Financial Condition and Results of Opera-
tions” contained in Items 1A and 7 of the Annual Report on Form 10-K of Baker Hughes Incorporated for its year
ended December 31, 2010. The use of “Baker Hughes,” “our,” “we” and similar terms are not intended to describe Additional information about the company is available on our
or imply particular corporate organizations or relationships. website at http://investor.bakerhughes.com/annuals.cfm
Sele cte d Financial Highlight s
Year Ended December 31,
(In millions, except per share amounts) 2010 (1) 2009 2008 2007 2006
As Reported:
Revenues $ 14,414 $ 9,664 $ 11,864 $ 10,428 $ 9,027
Operating income 1,417 732 2,376 2,278 1,934
Income from continuing operations 819 421 1,635 1,514 2,399
Income before cumulative effect
of accounting change 819 421 1,635 1,514 2,419
Net Income 819 421 1,635 1,514 2,419
Net Income attributable to Baker Hughes 812 421 1,635 1,514 2,419
Per share of common stock:
Income from continuing operations:
Basic $ 2.07 $ 1.36 $ 5.32 $ 4.76 $ 7.26
Diluted 2.07 1.36 5.30 4.73 7.21
Net Income:
Basic $ 2.06 $ 1.36 $ 5.32 $ 4.76 $ 7.32
Diluted 2.06 1.36 5.30 4.73 7.27
Dividends $ 0.60 $ 0.60 $ 0.56 $ 0.52 $ 0.52
Number of shares:
Weighted average common shares diluted 395 311 309 320 333
Reconciliation from As Reported to
operating profit:
Net income attributable to Baker Hughes 812 421 1,635 1,514 2,419
Non-operational items, net of tax (2) – – – – (1,035)
Discontinued operations, net of tax (3) – – – – (20)
Operating profit after tax (4) $ 812 $ 421 $ 1,635 $ 1,514 $ 1,364
Operating profit after tax:
Basic $ 2.06 $ 1.36 $ 5.32 $ 4.76 $ 4.12
Diluted 2.06 1.36 5.30 4.73 4.10
Cash, cash equivalents and
short-term investments $ 1,706 $ 1,595 $ 1,955 $ 1,054 $ 1,104
Working capital 5,568 4,612 4,634 3,837 3,346
Total assets
Baker Hughes
22,986 11,439 11,861 9,857 8,706
Baker Hughes Baker Hughes
Total debt Light Blue 3,885 1,800 2,333 1,084 1,075
Gold Orange
Stockholders’ equity PMS® 299 14,286 7,284 6,807 6,306 5,243
PMS® 124
Total debt/capitalization 21% 20% 26% PMS®15%
179 17%
CMYK equiva-
CMYK(thousands)
Number of employees equivalent 53.1 Baker Hughes Green
34.4 39.8 CMYK 35.8 equivalent
34.6
lent
Cyan: 0% PMS® 355 Cyan: 0%
(1) We acquired BJ Services Company on April 28, 2010, and their Cyan: 86%
financial results from the date of acquisition through the end of 2010 are included in our results.
2010 and 2009 Magenta: 27% operations also includes costs incurred by Baker HughesCMYK
income from continuing related toequivalent
the acquisition and integrationMagenta:
of BJ Services. 88%
Magenta:8%
(2) On April 28, 2006, we sold our 30% interest in WesternGeco, a seismic venture we formed with
Yellow: 100% Cyan: 95%
Schlumberger in 2000, and recorded an after tax gain of
Yellow: 84%
$1,035 million. Yellow: 0%
(3) Black:
The selected financial data0% Magenta:
in 2006 includes reclassifications to reflect Baker Supply Products Division 0% operations.
as discontinued Black: 0%
Black: 0%
(4) Operating profit after tax is a non-GAAP measure comprised of income from continuing operations Yellow: 98%
excluding the impact of certain non-operational items.
We believe that operating profit after tax is useful to investors because it is a consistent measure of the underlying results of our business. Furthermore,
management uses operating profit internally as a measure of the performance of our operations. Black: 0%
2010 Revenues by Segment Total Revenues Total Operating Profit Total Debt
2008–2010, by Quarter After Tax Per Share (Diluted) 2008–2010, by Quarter
(In millions) 2008–2010, by Quarter (In millions)
$5,000 $1.50 $5,000

North America, 46%
Industrial Services $4,000 $1.25 $4,000
and Other, 7%
Middle East/ $1.00
$3,000 $3,000
Asia Pacific, 16%
$0.75
Europe/Africa/
$2,000 $2,000
Russia Caspian, 21% $0.50
Latin America, 11%
$1,000 $1,000
$0.25
$0 $0 $0
2008 2009 2010 2008 2009 2010 2008 2009 2010
2010 Annual Report 1

The accomplishments of 2010 marked a significant milestone in our
multi-year efforts to transform Baker Hughes and position the company
for growth and long-term profitability.
I
To O ur Sto ckho ld er s n 2010, after a year-long effort to obtain full government approval, we completed the
acquisition of BJ Services and integrated pressure pumping, coiled tubing and cementing
capabilities into our global service offering. We also further reinforced our reservoir capa-
bilities through acquisition and realignment of our consulting services; our geographic and
business segment organization became fully functional; and, our enterprise-level supply
chain effort began to deliver significant cost savings.
In North America, the “unconventional” gas and oil plays became the foundation of our
land business, driving demand for directional drilling, advanced completion systems and
pressure pumping.
In April 2010, the industry mourned the loss of 11 men working on the Deepwater Horizon.
Although we were not involved in the accident, we did provide products and services to help with
the capping, relief well and clean-up efforts following the blowout. The accident and associated
spill negatively impacted our business in the Gulf of Mexico, as the drilling moratorium, the cre-
ation of new regulations, and the pace of permit approval impeded all new drilling activity from
late April through the end of the year. Given the difficulty of permitting new wells both in deep
water and on the shelf, we saw increased demand for our workover and stimulation services to
battle production declines, but not enough to offset the revenue we would have generated from
the 33 deepwater rigs that were idled.
The international market entered what we believe to be a multi-year trend of increasing
spending as the global industry battles decline curves and invests to satisfy expanding global
demand for oil and natural gas.
Financial Results
In 2010, Baker Hughes recorded its highest annual revenue to date, with top-line growth
driven by our acquisition of BJ Services. Baker Hughes results for the year include results of
BJ Services starting from May 2010.
Revenue for 2010 was $14.41 billion, up 49% compared to $9.66 billion in 2009. Net income
attributable to Baker Hughes for 2010 was $812 million or $2.06 per diluted share, compared to
$421 million or $1.36 per diluted share for 2009.
Earnings before interest, taxes, depreciation and amortization, or “EBITDA,” for 2010 were
$6.63 per diluted share, up 41% from $4.70 for 2009.
Capital expenditures were $1.49 billion, depreciation and amortization expense was $1.07 bil-
lion and dividend payments were $241 million in the year 2010.
At the end of 2010, Baker Hughes had $3.88 billion in debt, and cash and short-term invest-
ments of $1.71 billion. We also had $1.7 billion undrawn and available under committed credit
facilities. Our debt to capital ratio was 21%. Our net debt was $2.2 billion and our net debt to
capital ratio was 13%.
Transformation Complete
For the past several years, Baker Hughes has invested in building a diverse global workforce,
expanding our infrastructure to support growing markets in North America and internationally, to
develop new technology and expand our capabilities to do so, and to deliver products and equip-
ment to serve our clients. This investment set the stage for further changes to make us stronger
and more competitive.
In May 2009, we announced a fundamental change in Baker Hughes’ organizational struc-
ture, moving from a product line organization managed through divisions to a geographic organi-
zation managed through geomarkets. The geographic organization has met our objectives of
building closer relationships with our customers and developing a more holistic view of
the market while maintaining excellence in rig site execution and safety.
2 Baker Hughes Incorporated

$14.4B April 28 109%
our revenue in 2010 – date BJ Services growth of North Amer-
the highest in Baker acquired following ica revenue in 2010
Hughes history DOJ approval compared to 2009
In 2010, we also improved our reservoir consulting and engineering capabilities by forming
the Reservoir Development Services group that combines several consulting and software firms
acquired since 2008 and other Baker Hughes geotechnical professionals.
On April 28, we received approval from the U.S. Department of Justice to complete our
acquisition of BJ Services. And on August 28, following the divestiture of certain Gulf of Mexico
businesses and assets, the Department of Justice agreed to the lifting of a Hold Separate Order,
allowing the full combination of the U.S. businesses of Baker Hughes and BJ Services. Interna-
tional integration was well under way when the divestiture was completed in August, and we
were finally able to leverage the full synergies across all product lines globally.
Capital Expenditures
Geographic Highlights 2008–2010, by Quarter
North America (In millions)
North America revenues were $6.62 billion in 2010, up 109% from $3.17 billion in 2009. $600 $2,500
Success in our North America land business centers on the unconventional reservoirs and the $500
$2,000
use of horizontal drilling, advanced completions and pressure pumping to access the reserves.
$400
Baker Hughes is a leader in these products and services. $1,500
$300
Beginning in September 2010, when BJ Services’ U.S. operations were formally merged into
$1,000
Baker Hughes, we moved with agility to leverage the strengths of the legacy Baker Hughes prod- $200
uct lines with the newly acquired capabilities of BJ Services. We continue to expand our service $100 $500
capabilities. We opened a new service facility in Westmoreland County, Pennsylvania, and we plan $0 $0
to invest in enough facilities, equipment and personnel to add one additional pumping spread in 2008 2009 2010
North America every six weeks.

Service intensity continues to increase as customers are planning longer horizontal wells
and tighter spacing between frac stages, resulting in more stages and higher demand for
hydraulic fracturing.
Depending on the basin, pressure pumping capacity remains tight with backlogs stable at
90–180 days. The supply chain for new equipment is stretched, and we believe that it is unlikely
that the industry can increase pressure pumping capacity faster than demand in 2011.
In Canada, in addition to delivering drilling and hydraulic fracturing services for unconven-
Capital Expenditures North American Revenue Intern
tional oil, Baker Hughes is active in the oil sands where we provide drilling services,
2008–2010, by Quartercompletion 2008–2010, by Quarter 2008–
chemicals and artificial lift. Our experience in heavy oil treatment, our(Inadvanced
millions)
drilling systems, (In millions) (In mi
$600 have enabled us to be an $2,500 $2,500

and our high temperature electric submersible pump (ESP) technology
important supplier for steam assisted gravity drainage (SAGD) wells. $500
$2,000 $2,000
$400
Latin America $1,500 $1,500
Revenue in Latin America was up 43% in 2010, reaching $1.57 billion compared to $1.09 bil-
$300
$1,000 $1,000
lion in 2009, led by strong performance in our Brazil and Andean$200 geomarkets.
In Brazil, in a little more than four years, Baker Hughes has grown
$100
from supporting two simul- $500 $500
taneous offshore directional drilling jobs to servicing 22 simultaneous jobs today. Baker Hughes
$0 $0 $0
also provides complete drill cuttings handling and drying systems on 34 rigs.2008
With2009
the combi
2010 2008 2009 2010
nation of drilling, evaluation and completion technology and the three pumping vessels from
BJ Services currently operating in Brazil, Baker Hughes is positioned to be a leading supplier
to Petrobras.
Europe/Africa/Russia Caspian
Revenue in the Europe/Africa/Russia Caspian segment was $3.01 billion in 2010, up 8% from
$2.77 billion in 2009.
In Europe, Baker Hughes maintained strong positions in the UK and Norway. We opened our
EcoCentre in Peterhead, Scotland, which provides comprehensive, environmentally compliant drill-
ing waste management services. A Baker Hughes conducted reservoir study helped the Norway

$430M 32,136' 75
investment in research the length of the longest number of separate
and engineering in 2010 extended reach well hydraulic stimulations
drilled in Saudi Arabia recorded in a 13 well-
bore/30 day micro-
seismic fracture
monitoring survey
geomarket win the drilling and formation evaluation contract for the Trym and Olsevar fields.
The geomarket also won a large integrated contract for the Borgland Dolphin Consortium. Coiled
tubing services from BJ Services have been successfully introduced to traditional Baker Hughes
customers in Norway. In Continental Europe, Baker Hughes has become a major supplier in the
growing geothermal and natural gas storage well markets.
Baker Hughes built a stronger presence in the Russia Caspian region with the introduction of
new technology; the acquisition of the second largest ESP service company in Western Siberia,
Oilpump Services; and through collaboration with local drilling contractors.
e International Revenue Industrial and Other Segment Net Income
2008–2010, by Quarter Our Africa
2008–2010, business suffered from project delays
by Quarter in Algeria
2008–2010, by Quarterand Libya and contract losses
(In millions)
in Angola. Bright spots included startup of operations in Ghana and Uganda, strong activity in
(In millions) (In millions)
$2,500 $300
Nigeria, a 22-well directional drilling contract $500
in Libya, and a 10-year chemical services agreement
$2,000 in Angola.
$250 $400
$200
Middle East/Asia Pacific
$1,500 $300
$150 Revenue in the Middle East/Asia Pacific segment of $2.25 billion was up 16% compared to
$1,000 $200 Arabia, start up of operations in Iraq, and modest
$1.94 billion in 2009, paced by activity in Saudi
$100
$500 but steady growth in the Asia Pacific region.$100
$50
In Saudi Arabia, operations are under way on a two-rig, coiled tubing drilling integrated
$0 $0
operations project that is setting new records $0
for horizontal drilling on coil. In addition, we intro-
2010 2008 2009 2010 2008 2009 2010 2008 2009 2010
duced an ultra-slim EQUALIZER™ system to complete a 10,000-foot horizontal well drilled on
coiled tubing. The Baker Hughes 4¾-inch MagTrak™ magnetic resonance system is being used
for precise well placement while drilling water injection wells in the Manifa field where we drilled
the longest extended reach well in Saudi Arabia. In 2010, Baker Hughes installed the FracPoint™
system on our first multi-stage completion in the kingdom.
Our operations in Iraq began during the year with workover projects and ESP installations.
Industrial and Other Segment Net Income
2008–2010, by Quarter We opened
2008–2010,our new base in Ramallah in June 2010. Early business development successes include
by Quarter
(In millions) (In millions)
a contract for 162 ESP systems for the Rumailah field, and a three-year technical agreement with
$300 $500 Oil Company to provide wireline data acquisition and logging services.
South
$250 $400Our Asia Pacific operations leveraged leading technology to make gains throughout the
$200 region. For example, in China our North Asia geomarket won a 77-well FracPoint™ contract to
$300
perform multi-stage, open hole completions in China’s emerging shale gas basins. Baker Hughes
$150
also
$200won a critical well contract for PetroChina’s Tarim Oilfield Company for formation evaluation,
$100
completion, and artificial lift in deep, high pressure/high temperature wells.
$50 $100
Focus on Profitability
$0 $0
2010 2008 2009 2010
One 2008
of the challenges
2009
of the global reorganization was optimizing the new operating struc-
2010
ture to control cost and deliver acceptable margins, especially in regions outside North America.
During 2010, we consolidated geomarkets to match market activity in the Africa, Latin America
and Russia Caspian areas, reducing expatriate staff and taking a variety of cost-cutting measures.
By the fourth quarter, our Eastern Hemisphere operations had achieved substantial margin
improvement. International profit improvement and cost control will be primary areas of focus
over the next several quarters.
Our supply chain strategy is paying off, as we achieve efficiencies in manufacturing downhole
tools and chemicals while leveraging our combined buying power to control procurement costs.
We also are investing in manufacturing capacity in the Eastern Hemisphere to produce products
in Asia and the Middle East, closer to our customers. Taken together, supply chain improvements
are delivering recurring savings of $100 million per year.
In addition, we are on target to achieve the expected cost efficiencies of $150 million per year
from the combination with BJ Services.

I want to recognize the contributions of our 53,100 employees who so
professionally serve our customers. Through their dedication we con-
tinue to lead our industry segment in safety and have been recognized
as leaders in innovation.
Leveraging Opportunities
The interest in unconventional gas development has spread from North America, and
operators in Europe, China, Australia and Latin America have asked us to present our reservoir
engineering, horizontal drilling and fracturing technology as they consider accessing shale
gas resources.
Offshore drilling, including deepwater activity, continues to increase, and Baker Hughes
remains a leader in this market segment. Despite a slowdown in the Gulf of Mexico, demand for
stimulation vessels has been strong. Our new Blue Dolphin and Blue Tarpon vessels bring state-of-
the-art technology and the industry’s highest capacity to the market. As a result of the merger
we now provide cementing services on 25% of the world’s offshore rigs.
New Technology
Baker Hughes continues to invest more than $430 million per year in research and
North American Revenue International Revenue Industrial and Other Segment Net Income
engineering, producing an array
2008–2010, by Quarter 2008–2010,of by
new and improved technologies that
Quarter makebythe
2008–2010, company
Quarter 2008–2010, by Quarter
(In millions) (In millions) (In millions) (In millions)
more competitive.
00 $2,500 $300 $500
For example, our new Kymera™ hybrid drill bit combines diamond and roller cone bit technol-
00 ogies to drill difficult, $2,000
variable formations. We have extended our $250 AutoTrak™ line of automated $400
drilling systems with versions for vertical wells and land-based applications $200 with AutoTrak Curve.
00 $1,500 $300
We continue to extend the range of coiled tubing drilling. Our Nautilus™ Ultra logging suite can
$150
00 acquire petrophysical $1,000
data in wells with temperatures as high as 500°F. Our completion systems $200
innovations include the slimhole EQUALIZER system, GeoForm – a$100 newly commercialized well
00 $500 $100
screen that conforms to the wellbore to improve sand control efficiency, $50 and the FracPoint
$0 Premium multi-stage frac$0completion system. Our ESP systems are installed $0 on the seabed in $0
2008 20098,000 feet of water in the Gulf2008
2010 of Mexico,
2009 boosting
2010 oil production in the 2008
Perdido 2009
field. 2010 2008 2009 2010
Baker Hughes also has focused on green technology. Using our BJ SmartCare™ program, our
experts design and implement frac-fluid programs that minimize environmental impact during
hydraulic fracturing.
Outlook
Looking ahead, we expect the economic recovery to create increased oil demand, which
should support high oil prices and a sustained multi-year expansion of international spending.
We expect North America land activity to remain strong as horizontal drilling and hydraulic
fracturing activity continues to grow. While operators are shifting to liquid and oil reserves, we
expect continued significant shale gas drilling, but we are carefully watching natural gas prices
and their effect on rig activity.
To help drive growth in 2011, we are planning annual capital expenditures of $2.3 to $2.7 bil-
lion, compared to $1.5 billion in 2010. Much of the increase reflects the capital requirements of
expanding our pressure pumping business.
In closing, I want to recognize the contributions of our 53,100 employees who so profession-
ally serve our customers. Through their dedication we continue to lead our industry segment in
safety and have been recognized as leaders in innovation. With the reorganization now in place,
the addition of BJ Services, and the slow but steady improvement in global economic conditions,
2011 is off to a good start.
Chad C. Deaton
Chairman and Chief Executive Officer

Supply Chain
The Global Supply Chain (GSC) was critical to Baker Hughes’ success
in 2010. By combining seven supply chain functions and improving
processes, the GSC team has driven substantial cost savings.
Art Soucy,
F
Vice President,
Global Supply Chain
ollowing the shift to a geographic operations structure, the seven divisional
manufacturing functions were combined into a single Global Supply Chain (GSC)
organization, with equipment manufacturing facilities grouped by hemisphere
and the chemicals and fluids plants placed in a single unit.
In addition, global procurement and transportation and logistics functions were
established to leverage scale, drive process efficiencies and assure legal compliance.
The GSC group also established an enterprise Sales and Operations Planning process to anticipate
and meet the need for products on a global basis.
During 2010, the GSC group broadened the geographic footprint of Baker Hughes’ supply
chain with investments in manufacturing capability in Saudi Arabia, Dubai, Malaysia and Mexico,
and the acquisition of lower-cost manufacturing companies in Thailand and China. In addition
to adding in-house production capacity, the GSC group developed new suppliers in India, China,
Malaysia, Russia, Thailand, Mexico and Singapore.
Many of the “go forward” plants underwent a significant makeover as the GSC launched a
major lean initiative to drive out waste and shorten lead times. For example, the large-diameter
Tricone™ drill bit production line was moved from Belfast, Northern Ireland, to The Woodlands,
Texas plant to increase bit manufacturing efficiency, while simultaneously reducing cost and
lead times.
Also during the year, the GSC strategic sourcing team reduced the number of suppliers across
product lines to leverage purchasing power and achieve cost savings. This team continues to add
value by standardizing and streamlining procurement practices.
To reduce freight costs and transit times, the transportation and logistics team established
a “hub and spoke” model. Working in coordination with each other, five strategically located
hubs manage shipping of Baker Hughes materials and products to receiving locations (“spokes”)
in their regions and have achieved substantial savings.
More recently, the hub and spoke model also has been implemented for the worldwide repair
and maintenance (R&M) organization. Five R&M hubs will become R&M centers of excellence for
their territories and are expected to improve efficiency, enhance reliability, and increase field asset
utilization around the world.
During 2010, the GSC’s chemicals and fluids group began integrating the chemical portion of
BJ Services’ supply chain into its global operation. The procurement and manufacturing functions
for the remaining BJ Services product lines will be integrated into the GSC organization in 2011.
Looking ahead, the GSC group will continue to optimize Baker Hughes’ global supply chain
to deliver further cost savings and improve Baker Hughes’ competitive position.
$100M
annual savings expected
from our Global Supply
Chain in 2010, 2011
and 2012

Reservoir
The Reservoir Development Services group’s multi-disciplined expertise

enables Baker Hughes to provide clients with reservoir advice and
complete field development solutions.
John Harris,
M
President, Reservoir
Development Services
aking reservoir expertise a recognized strength at Baker Hughes was an
important step in transforming the company for long-term growth. While
Baker Hughes has long been a leader in wellbore-related technologies, our
customers – especially national oil companies – also now expect us to provide
reservoir advice along with products and services for field development.
Beginning in 2008, Baker Hughes assembled a group of industry-leading
consultancies and software firms to build broad reservoir competencies to meet this requirement.
In 2010 these firms were more closely aligned with each other and with the Baker Hughes service
organization through the formation of the Reservoir Development Services (RDS) group.
Consultancies incorporated into the RDS group include: Gaffney, Cline & Associates (GCA),
the oil & gas industry’s preeminent technical, commercial and management consulting firm;
GeoMechanics International (GMI), the leading innovator in understanding the geomechanics of
oil and gas reservoirs; RDS, a global subsurface, wells and field development consulting company;
and Epic Consulting Services, a dynamic reservoir engineering firm with significant experience in
heavy oil developments. In addition, the RDS group’s reservoir analysis capabilities are enhanced
by commercial software offerings from Meyer & Associates, a well established developer of soft-
ware for the hydraulic fracturing process; and JOA Oil & Gas, developer of JewelSuite™ software,
an integrated reservoir modeling tool. With hundreds of experienced technical professionals, the
RDS group’s services cover all aspects of the hydrocarbon life cycle including exploration, reservoir
characterization, well engineering and operations, production technology, mid-stream facilities,
refining, and reservoir evaluation, as well as commercial and strategic advice.
With these capabilities, the RDS group is working with Baker Hughes geomarkets and product
lines to develop reservoir-driven solutions to address major industry challenges like integrated field
development, mature field redevelopment, production optimization, sand management, sub-salt
reservoirs and unconventional oil and gas development.
During 2010, RDS consultants provided reservoir support to Baker Hughes geomarkets and
our integrated operations team, helping to obtain business, including projects in Canada, Mexico,
Argentina, Russia, Turkmenistan, Africa and the Middle East. RDS experts also conducted joint
workshops with Baker Hughes product line specialists to present Baker Hughes’ reservoir capabili-
ties to key customers around the world.
At the same time, the RDS group maintains its focus on external consulting and continues
to provide broad-based technical, commercial and strategic advisory services to clients through
RDS including Gaffney, Cline & Associates. This activity builds customer relationships and, where
appropriate, it enables the Baker Hughes product lines to present technical solutions to asset
managers early in the project cycle.
408
number of geoscientists,
petroleum engineers and
consulting professionals
in RDS

Pressure Pumping
The acquisition of BJ Services filled a strategic gap in Baker Hughes’

product portfolio. With the addition of BJ Services pressure
pumping and coiled tubing services product lines, Baker
Hughes can provide comprehensive solutions for wellbore
construction and stimulation.
Fred Toney,
T
Vice President,
Pressure Pumping
he combination of Baker Hughes and BJ Services coincides with a high volume US Land
of drilling activity directed at producing unconventional oil and gas in numerous
basins in the United States and Canada. Horizontal drilling and hydraulic fracturing
are typically used to develop unconventional shale resources, and the combined
company is a leading provider of both technologies. Since the full combination
of the two companies in September 2010, Baker Hughes has provided compre-
hensive packages to drill, complete and fracture wells, and both legacy BJ Services and
Baker Hughes product lines have gained business because of their integration.
More than half of the rigs in North America are drilling horizontal wells, and nearly all of these
wells will be stimulated using staged hydraulic fracturing. To maximize production, customers are
requesting longer horizontal wells with closer stage spacing, which require more complex direc-
tional drilling services, longer completion strings, and more hydraulic fracturing. Baker Hughes
stands to benefit from this increased service intensity.
Hydraulic fracturing has become an issue of concern, particularly in areas new to oil and gas
exploration, and largely due to misinformation about the effects of this process. In fact, during
the past 60 years, the industry has performed more than one million fracturing jobs in the U.S.
without damaging a single aquifer through the fracturing process. We welcome responsible regu-
lation, based on science, to ensure that shale gas development can continue. Operators also must
act responsibly and adhere to industry standards for casing programs, cement isolation practices,
and fluids handling to avoid contamination on or near the surface.
Baker Hughes is investing in research to develop environmentally friendly stimulation fluids.
A result of this research, the BJ SmartCare™ program, takes a comprehensive approach to design
frac fluids systems that maximize production results while minimizing environmental impact
during hydraulic fracturing. Our experts also are working with regulators on ways to disclose the
chemical makeup of frac fluids while protecting trade secrets and intellectual property.
Pressure pumping also has wide application in offshore and deepwater wells, both to maxi-
mize production from existing wells and to stimulate flow from new ones. Virtually every deep
water well requires fracturing to achieve economic production rates. Our combined stimulation
vessel fleet in the Gulf of Mexico, Brazil and the Asia Pacific region gives the company broad
coverage of the world’s deepwater fields. We also have more than 100 cementing units installed
on offshore rigs, and we expect our new Seahawk™ cementing unit to be a strong contender for
inclusion on new build rigs.
817 rigs
the average number of
rigs drilling horizontal
wells in the U.S. in 2010

Baker Hughes Incorporated
Notice Of Annual Meeting Of Stockholders
April 28, 2011
To the Stockholders of Baker Hughes Incorporated:

The Annual Meeting of the Stockholders of Baker Hughes Incorporated (“Company,” “Baker Hughes,” “we,” “us” or “our”)
will be held in the Wortham Meeting Room No. 2 located at 2727 Allen Parkway, Houston, Texas on Thursday, April 28, 2011, at
9:00 a.m., Central Daylight Time, for the purpose of considering and voting on:
1. The election of directors;
2. The ratification of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal year 2011;
3. The reapproval of the performance criteria for awards under the Annual Incentive Compensation Plan, as required by
Section 162(m) of the Internal Revenue Code;
4. An advisory vote related to the Company’s executive compensation program;
5. An advisory vote on the frequency of holding an advisory vote related to the Company’s executive compensation program;
6. Stockholder Proposal regarding majority vote standard for director elections; and
7. Such other business as may properly come before the meeting and any reconvened meeting after an adjournment thereof.
The Board of Directors has fixed March 1, 2011 as the record date for determining the stockholders of the Company entitled
to notice of, and to vote at, the meeting and any reconvened meeting after an adjournment thereof, and only holders of Common
Stock of the Company of record at the close of business on that date will be entitled to notice of, and to vote at, that meeting or
a reconvened meeting after an adjournment.
You are invited to attend the meeting in person. Whether or not you plan to attend in person, we urge you to promptly vote
your shares by telephone, by the Internet or, if this Proxy Statement was mailed to you, by completing, signing, dating and returning
it as soon as possible in the enclosed postage prepaid envelope in order that your vote may be cast at the Annual Meeting. You may
revoke your proxy any time prior to its exercise, and you may attend the meeting and vote in person, even if you have previously
returned your proxy.
By order of the Board of Directors,
Sandra E. Alford
Corporate Secretary
Houston, Texas
March 14, 2011
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE (i) VOTE YOUR SHARES BY TELEPHONE OR
THE INTERNET, OR (ii) IF YOU RECEIVED A PAPER COPY, THEN SIGN, DATE AND RETURN YOUR PROXY AS
PROMPTLY AS POSSIBLE. AN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES,
IS ENCLOSED FOR THIS PURPOSE.
PROXY STATEMENT
TABLE OF CONTENTS
Proxy Statement.....................................................................................................................................................................1
Voting Securities.....................................................................................................................................................................2
Proposal No. 1 Election of Directors........................................................................................................................................3
Corporate Governance...........................................................................................................................................................6
Security Ownership of Management.....................................................................................................................................10
Charitable Contributions.......................................................................................................................................................10
Section 16(a) Beneficial Ownership Reporting Compliance....................................................................................................10
Certain Relationships and Related Transactions.....................................................................................................................10
Compensation Discussion and Analysis.................................................................................................................................11
Summary Compensation Table........................................................................................................................................25
Grants of Plan-Based Awards..........................................................................................................................................26
Outstanding Equity Awards at Fiscal Year-End.................................................................................................................27
Option Exercises and Stock Vested..................................................................................................................................28
Pension Benefits.............................................................................................................................................................29
Nonqualified Deferred Compensation.............................................................................................................................29
Potential Payments Upon Termination or Change in Control...........................................................................................30
Compensation Committee Report.........................................................................................................................................34
Compensation Committee Interlocks and Insider Participation..............................................................................................34
Director Compensation.........................................................................................................................................................35
Audit/Ethics Committee Report.............................................................................................................................................36
Proposal No. 2 Ratification of the Company’s Independent Registered Public Accounting Firm.............................................36
Fees Paid to Deloitte & Touche LLP........................................................................................................................................37
Proposal No. 3 The Reapproval of the Performance Criteria for Awards under the
Annual Incentive Compensation Plan, as required by Section 162(m) of the Internal Revenue Code...............................37
Proposal No. 4 Advisory Vote on Executive Compensation....................................................................................................39
Proposal No. 5 Advisory Vote on the Frequency of the Holding of an Advisory Vote on Executive Compensation.................39
Proposal No. 6 Stockholder Proposal Majority Vote Standard for Director Elections...............................................................40
Annual Report......................................................................................................................................................................41
Incorporation by Reference...................................................................................................................................................41
Stockholder Proposals...........................................................................................................................................................41
Other Matters.......................................................................................................................................................................41
Annex A – Baker Hughes Incorporated Corporate Governance Guidelines............................................................................42
Annex B – Baker Hughes Incorporated Charter of the Audit/Ethics Committee of the Board of Directors..............................51
Annex C – Baker Hughes Incorporated Amended and Restated Annual Incentive Compensation Plan..................................55
Proxy Statement that accompanies this Proxy Statement. If your shares are held
This Proxy Statement is furnished in connection with in an account at a bank or brokerage firm that participates in
the solicitation of proxies by the Board of Directors of Baker such a program, you may direct the vote of these shares by
Hughes Incorporated, a Delaware corporation (“Company,” the Internet or telephone by following the instructions on the
“Baker Hughes,” “we,” “us” and “our”), to be voted at voting form enclosed with the proxy from the bank or broker-
the Annual Meeting of Stockholders scheduled to be held age firm. Votes directed by the Internet or telephone through
on Thursday, April 28, 2011 and at any and all reconvened such a program must be received by BNY Mellon Shareowner
meetings after adjournments thereof. Services LLC by 11:59 p.m. Eastern time (10:59 p.m. Central
time) on April 27, 2011. Directing the voting of your shares
Information About the Notice of will not affect your right to vote in person if you decide to
Internet Availability of Proxy Materials attend the meeting; however, you must first request a proxy
In accordance with rules and regulations of the Securities either on the Internet or use the voting form that accompanies
and Exchange Commission (the “SEC”), we now furnish to this Proxy Statement. Requesting a proxy prior to the deadlines
our stockholders proxy materials, including our Annual Report described above will automatically cancel any voting directions
to Stockholders, on the Internet. On or about March 14, 2011, you have previously given by the Internet or by telephone with
we will send electronically an annual meeting package person- respect to your shares.
alized with profile and voting information (“Electronic Delivery”) The Internet and telephone proxy procedures are designed
to those stockholders that have previously signed up to receive to authenticate stockholders’ identities, to allow stockholders
their proxy materials via the Internet. On or about March 14, to give their proxy instructions and to confirm that those
2011, we will begin mailing a Notice of Internet Availability of instructions have been properly recorded. Stockholders autho-
proxy materials (the “E-Proxy Notice”) to those stockholders rizing proxies or directing the voting of shares by the Internet
that previously have not signed up to receive their proxy mate- should understand that there may be costs associated with
rials on the Internet. If you received the E-Proxy Notice by mail, electronic access, such as usage charges from access providers
you will not automatically receive a printed copy of the proxy and telephone companies, and those costs must be borne by
materials or the Annual Report to Stockholders. If you received the stockholder.
the E-Proxy Notice by mail and would like to receive a printed We will only deliver one Proxy Statement to multiple
copy of our proxy materials, you should follow the instructions stockholders sharing an address unless we have received
for requesting such materials included in the E-Proxy Notice. contrary instructions from one or more of the stockholders.
Registered stockholders may also sign up to receive future We will promptly deliver a separate copy of this Proxy Statement
proxy materials and other stockholder communications elec- to a stockholder at a shared address to which a single copy
tronically instead of by mail. In order to receive the communi- of the document was delivered upon oral or written request
cations electronically, you must have an e-mail account, access to: Baker Hughes Incorporated, Attn: Corporate Secretary,
to the Internet through an Internet service provider and a web 2929 Allen Parkway, Suite 2100, Houston, Texas 77019,
browser that supports secure connections. Visit http://www. +1 (713)-439-8600. Stockholders may also address future
bnymellon.com/shareowner/isd for additional information requests for separate delivery of the Proxy Statement by
regarding electronic delivery enrollment. Stockholders with contacting us at the address listed above.
shares registered in their names with BNY Mellon Shareowner Shares for which proxies have been executed will
Services LLC may authorize a proxy by the Internet at the fol- be voted as specified in the proxies. If no specification
lowing Internet address: http://www.proxyvoting.com/bhi, or is made, the shares will be voted FOR the election of
telephonically by calling BNY Mellon Shareowner Services LLC nominees listed herein as directors, FOR the ratification
at 1-866-540-5760. Proxies submitted through BNY Mellon of Deloitte & Touche LLP as the Company’s independent
Shareowner Services LLC by the Internet or telephone must be registered public accounting firm for fiscal year 2011,
received by 11:59 p.m. Eastern time (10:59 p.m. Central time) FOR the reapproval of the performance criteria for
on April 27, 2011. The giving of a proxy will not affect your awards under the Annual Incentive Compensation Plan,
right to vote in person if you decide to attend the meeting. FOR the advisory vote related to the Company’s exec
The Company will bear the cost of any solicitation of prox- utive compensation program and AGAINST the stock
ies, whether by Internet or mail. In addition to solicitation, cer- holder proposal regarding majority vote standard
tain of the directors, officers and regular employees of the for director elections. If no specification is made, the
Company may, without extra compensation, solicit proxies by Company will abstain from voting on the frequency of
telephone, facsimile and personal interview. The Company has holding of an advisory vote related to the Company’s
retained Phoenix Advisory Partners to assist in the solicitation executive compensation program.
of proxies from stockholders of the Company for an antici- Proxies may be revoked at any time prior to the exercise
pated fee of $8,500, plus out-of-pocket expenses. thereof by filing with the Company’s Corporate Secretary, at
A number of banks and brokerage firms participate in a the Company’s executive offices, a written revocation or a duly
program that also permits stockholders to direct their vote by executed proxy bearing a later date. The executive offices of
the Internet or telephone. This option is separate from that the Company are located at 2929 Allen Parkway, Suite 2100,
offered by BNY Mellon Shareowner Services LLC and should Houston, Texas 77019. For a period of at least ten days prior
be reflected on the voting form from a bank or brokerage firm to the Annual Meeting of Stockholders, a complete list of
2 0 11 P r o x y S t a t e m e n t 1
stockholders entitled to vote at the Annual Meeting will be are permitted to vote the beneficial owner’s proxy in their own
available for inspection during ordinary business hours at the discretion as to certain “routine” proposals when they have
Company’s executive offices by stockholders of record for not received instructions from the beneficial owners, such as
proper purposes. the ratification of the appointment of Deloitte & Touche LLP
Important Notice Regarding the Availability of Proxy as our independent registered public accounting firm for the
Materials for the Annual Meeting of Stockholders to be fiscal year 2011. If a broker, bank or other nominee votes such
Held on April 28, 2011. This Proxy Statement and the Annual “uninstructed” shares for or against a “routine” proposal,
Report to Stockholders and the means to vote by Internet are those shares will be counted towards determining whether
available at http://bnymellon.mobular.net/bnymellon/bhi. or not a quorum is present and are considered entitled to
vote on the “routine” proposals. However, where a proposal
Voting Securities is not “routine,” a broker, bank or other nominee is not
The securities of the Company entitled to vote at the permitted to exercise its voting discretion on that proposal
Annual Meeting consist of shares of its Common Stock, without specific instructions from the beneficial owner. These
par value $1.00 per share (“Common Stock”), of which non-voted shares are referred to as “broker non-votes” when
434,318,886 shares were issued and outstanding at the close the nominee has voted on other non-routine matters with
of business on March 1, 2011. Only stockholders of record at authorization or voted on routine matters. These shares will
the close of business on that date will be entitled to vote at be counted towards determining whether or not a quorum is
the meeting. Each share of Common Stock entitles the holder present, but will not be considered entitled to vote on the
thereof to one vote on each matter to be considered at the “non-routine” proposals.
meeting. The presence in person or by proxy of the holders Broker non-votes will not affect the outcome of any matter
of a majority of our Common Stock issued and outstanding being voted on at the meeting, assuming that a quorum is
and entitled to vote at the Annual Meeting will constitute obtained. Abstentions, on the other hand, have the same
a quorum to transact business at the Annual Meeting. effect as votes against the matter, although abstentions will
Assuming a quorum is present at the Annual Meeting, have no effect on the election of directors, the advisory vote
either in person or represented by proxy, with respect to the related to the executive compensation program or the advisory
election of directors, the director nominees who receive the vote on the frequency of holding an advisory vote on execu-
greatest number of votes cast in their favor (up to the number tive compensation.
of director seats available for election) will be elected. The The following table sets forth information about the
affirmative vote of the holders of a majority of the shares of holders of the Common Stock known to the Company on
Common Stock present in person or represented by proxy at March 1, 2011 to own beneficially 5% or more of the Common
the Annual Meeting and entitled to vote on the matter is Stock, based on filings by the holders with the SEC. For the
required for the approval of the ratification of Deloitte & Tou- purposes of this Proxy Statement, beneficial ownership of
che LLP as the Company’s independent registered public securities is defined in accordance with the rules of the SEC
accounting firm for fiscal year 2011, for the reapproval of the to mean generally the power to vote or dispose of securities
performance criteria for awards under the Annual Incentive regardless of any economic interest therein.
Compensation Plan, for the approval of the advisory vote
related to the Company’s executive compensation program Name and Address Shares Percent of Class
and for the approval of the stockholder proposal regarding 1. Capital Research Global Investors (1)
majority vote standard for director elections. The Company will 333 South Hope Street
treat the selection of every one year, every two years or every Los Angeles, CA 90071 35,955,254 8.3%
three years that receives the greatest number of votes on the
frequency of holding an advisory vote on our executive com- 2. Wellington Management (2)
pensation program as the option that is approved by the Company, LLP
stockholders. There will be no cumulative voting in the elec- 75 State Street
tion of directors. Boston, MA 02109 22,680,958 5.26%
Brokers, banks or other nominees that hold shares of
(1) Capital Research Global Investors has sole investment power and voting
Common Stock in “street name” for a beneficial owner of
power over 35,955,254 shares.
those shares typically have the authority to vote in their discre-
(2) Wellington Management Company, LLP does not have sole investment power
tion if permitted by the stock exchange or other organization
or sole voting power over the shares.
of which they are members. Brokers, banks and other nominees

Proposal No. 1 company as well as his 38 successful years of experience in
Election of Directors the global energy business; Mr. Fernandes’ leadership roles
In analyzing director nominations and director vacancies, in several public companies in the energy and manufacturing
the Governance Committee strives to recommend candidates sectors, including his service as a director of other public
for director positions who will create a collective membership companies and his extensive financial expertise; Ms. Gargalli’s
on the Board with varied experience and perspective and who leadership and consulting experience, extensive public board
maintain a Board that reflects diversity, including but not lim- service and her financial expertise; Dr. Jungels’ technical
ited to gender, ethnicity, background, country of citizenship knowledge, executive roles, 39 successful years of experience
and experience. The Governance Committee strives to recom- in the international energy industry and service as a member
mend candidates who demonstrate leadership and significant of public company boards; Mr. Lash’s engineering and high
experience in a specific area of endeavor, comprehend the role technology knowledge and skills, his private equity leadership,
of a public company director, exemplify relevant expertise, manufacturing background, public service and financial exper-
experience and a substantive understanding of domestic con- tise; Mr. Nichols’ position as the executive chairman of the
siderations and geopolitics, especially those pertaining to the board and former chief executive officer of a publicly traded
service sector of the oil and gas and energy-related industries. energy company, successful career building a major oil and
When analyzing whether directors and nominees have the gas company and his leadership in related trade associations;
experience, qualifications, attributes and skills, taken as a Mr. Riley’s 39 years of senior executive experience with a pub-
whole, to enable the Board of Directors to satisfy its oversight licly traded diversified manufacturer, service as a director of
responsibilities effectively in light of the Company’s business other public companies and a national corporate governance
and structure, the Governance Committee and the Board of organization; Mr. Stewart’s many years as chairman of the
Directors focus on the information as summarized in each of board, president and chief executive officer of BJ Services;
the Directors’ individual biographies set forth on pages 4–5. Mr. Watson’s extensive executive leadership roles and active
In particular, the Board considered Mr. Deaton’s senior execu- involvement in a number of energy-related companies and
tive experience for over 13 years in the oilfield services industry businesses and service as a director of other public companies.
combined with extensive knowledge in his successful energy All directors that are elected at the Annual Meeting of
business career for over 31 years as well as active participation Stockholders will serve for a one-year term expiring at the
in energy-related professional organizations. His knowledge, Annual Meeting of Stockholders expected to be held in April
expertise and management leadership regarding the issues 2012. The proxyholders will vote FOR the eleven persons listed
affecting our business and the Company have been invaluable below under the section “Company Nominees for Director,”
to the Board of Directors in overseeing the business and affairs unless contrary instructions are given.
of our Company. Similarly the Board has considered the exten- If you sign your proxy card but do not give instructions
sive backgrounds and skills of each of the non-management with respect to the voting of directors, your shares will be
directors. Some of the characteristics and background that voted for the eleven persons recommended by the Board of
were considered include Mr. Brady’s experience and leadership Directors. If you wish to give specific instructions with respect
of public companies in the energy services sector and manufac- to the voting of directors, you must do so with respect to the
turing sector together with his financial expertise; Mr. Cazalot’s individual nominee.
role as chief executive and director of a publicly traded energy
2 0 11 P r o x y S t a t e m e n t 3
Company Nominees for Director
The following table sets forth each nominee director’s name, all positions with the Company held by the nominee, the nomi-
nee’s principal occupation, age and year in which the nominee first became a director of the Company. Each nominee director has
agreed to serve if elected. In accordance with the Company’s Bylaws, Messrs. Djerejian and Payne will not stand for re-election and
are retiring from the Board of Directors and the size of the Board will be reduced from 13 to 11 members.
Nominees Principal Occupation Age Director Since
Larry D. Brady Former Chairman of the Board and Chief Executive Officer of Intermec, Inc. 68 2004
(industrial technologies). Mr. Brady served as Chairman of Intermec from 2001
to 2007 and as Chief Executive Officer from 2000 to 2007. He served as President
of Intermec from 1999 to 2001 and as Chief Operating Officer from 1999 to 2000.
Mr. Brady served as President of FMC Corporation from 1993 to 1999. He served
as a Vice President of FMC from 1984 to 1989, as Executive Vice President from
1989 to 1993 and was a director from 1989 to 1999. Mr. Brady is a member of
the Advisory Board of Northwestern University’s Kellogg School of Management.
Within the past five years, Mr. Brady served as a director of Pactiv Corporation.
Clarence P. Cazalot, Jr. President and Chief Executive Officer and Director since 2002 of Marathon Oil 60 2002
Corporation, formerly known as USX Corporation (diversified petroleum). He
served as Vice Chairman of USX Corporation and President of Marathon Oil
Company from 2000 to 2001. Mr. Cazalot was with Texaco Inc. from 1972 to
2000, and while at Texaco served in the following executive positions: President
of Worldwide Production Operations of Texaco Inc. from 1999 to 2000; President
of International Production and Chairman of London-based Texaco Ltd. from 1998
to 1999; President of International Marketing and Manufacturing from 1997 to
1998; President of Texaco Exploration and Production Inc. from 1994 to 1996;
and President of Texaco’s Latin America/West Africa Division from 1992 to 1994.
In 1992, he was named Vice President, Texaco. He is a director and Executive
Committee member of the American Petroleum Institute. Additionally, he is a
director of the Greater Houston Partnership, is a member of the Business Council
and serves on the Advisory Board of the World Affairs Council of Houston.
Chad C. Deaton Chairman of the Board and Chief Executive Officer of Baker Hughes 58 2004
Incorporated since October 2004; Chairman of the Board, Chief Executive
Officer and President of Baker Hughes Incorporated from February 1, 2008
to July 28, 2010. Mr. Deaton was President and Chief Executive Officer of
Hanover Compressor Company (compression services) from 2002 through
October 2004. He was a Senior Advisor to Schlumberger Oilfield Services
(oilfield services) from 1999 to September 2001 and was an Executive Vice
President from 1998 to 1999. Mr. Deaton is a director of Ariel Corporation.
He is also a director of Junior Achievement of Southeast Texas, Houston
Achievement Place, Greater Houston Partnership and a member of the Society
of Petroleum Engineers Industry Advisory Council. Mr. Deaton was a director
of CARBO Ceramics, Inc. from 2005 to 2009 and has been a director of
Air Products and Chemicals, Inc. since 2010.
Anthony G. Fernandes Former Chairman, President and Chief Executive Officer of Phillip Services 65 2001
Corporation (diversified industrial services provider) from August 1999 to
April 2002. He was Executive Vice President of ARCO (Atlantic Richfield
Company) from 1994 to 1999, President of ARCO Coal, a subsidiary of ARCO,
from 1990 to 1994 and Corporate Controller of ARCO from 1987 to 1990.
Mr. Fernandes serves on the Boards of Black & Veatch, Cytec Industries and
ABM Industries, Inc.

Nominees Principal Occupation Age Director Since
Claire W. Gargalli Former Vice Chairman, Diversified Search and Diversified Health Search Companies 68 1998
(executive search consultants) from 1990 to 1998. Ms. Gargalli served as President
and Chief Operating Officer of Equimark from 1984 to 1990. During that period,
she also served as Chairman and Chief Executive Officer of Equimark’s two principal
subsidiaries, Equibank and Liberty Bank. Ms. Gargalli is a director of Praxair, Inc.,
Virginia National Bank and BioMotion Analytics. She is also a trustee emeritus of
Carnegie Mellon University and Middlebury College. Within the past five years,
Ms. Gargalli served as a director of Intermec, Inc. (industrial technologies).
Pierre H. Jungels President of the Institute of Petroleum until June 2003. From 1997 through 2001 67 2006
Dr. Jungels served as a Director and Chief Executive Officer of Enterprise Oil, plc.
In 1996, Dr. Jungels served as the Managing Director of Exploration and Production
at British Gas plc. Dr. Jungels is Chairman of Rockhopper Exploration plc and Oxford
Catalysts plc. He is also a director of Woodside Petroleum Ltd. and Imperial Tobacco
Group plc. Various positions from 1974 to 1995 at PetroFina SA, including Executive
Director from 1989 to 1995.
James A. Lash Chairman of Manchester Principal LLC and its predecessor company (high 66 2002
technology venture capital firm) since 1976. Former First Selectman, Greenwich,
Connecticut (city government) from 2003 to 2007. Mr. Lash also served as Chairman
and Chief Executive Officer of Reading Tube Corporation from 1982 to 1996.
Mr. Lash is a director of the East West Institute and a trustee of the Massachusetts
Institute of Technology.
J. Larry Nichols Executive Chairman of Devon Energy Corporation (independent energy company). 68 2001
Mr. Nichols served as Chairman of the Board from 2000 to 2010 and as Chief
Executive Officer from 1980 to 2010. Mr. Nichols serves as a director of SONIC Corp.
as well as several trade associations relevant to the oil and gas exploration and
production business.
H. John Riley, Jr. Former Chairman of the Board of Cooper Industries, Ltd. (diversified manufacturer) 70 1997
from May 1996 to February 2006. He was Chief Executive Officer of Cooper
Industries from 1995 to 2005. He was Executive Vice President, Operations of
Cooper Industries from 1982 to 1992, Chief Operating Officer from 1992 to 1995
and President from 1992 to 2004. Mr. Riley is a director of The Allstate Corporation,
Westlake Chemical Corporation, and Post Oak Bank, N.A. Mr. Riley also serves as a
trustee of the Museum of Fine Arts, Houston and Syracuse University.
J.W. Stewart Chairman of the Board of Directors, President and Chief Executive Officer of 67 2010
BJ Services Company (pressure pumping services) from 1990 until its acquisition
by the Company in 2010. Prior to 1990, Mr. Stewart held various management
and staff positions with BJ Services Company and its predecessor company.
Charles L. Watson Chairman of Twin Eagle Management Resources (energy marketing) since 2010, 61 1998
Chairman CLW Investments, Inc. since 2009 (private investments), Chairman of
Eagle Energy Partners from 2003 to 2009, Chairman of Wincrest Ventures, L.P.
(private investments) since January 1994, Chairman of Collegiate Zone LP since
2004 and Chairman of Sigma Chi Foundation since 2005. Senior Advisor to
EDF Trading North America LLC and Electricite de France during 2008 (energy
marketing), Managing Director of Lehman Brothers from 2007 to 2008. Founder,
Chairman and Chief Executive Officer of Dynegy Inc. (diversified energy) and its
predecessor companies from 1985 to 2002. Mr. Watson is also a board member
of Mainstream Renewable Power, Shona Energy Company, Inc., Baylor College of
Medicine and Angeleno Investors, L.P.
2 0 11 P r o x y S t a t e m e n t 5
Election Policy Common Stock with a value of $140,000 issued in January of
It is the policy of the Board of Directors that any nominee each year that generally will vest one-third on the annual anni-
for director who receives a “withhold” vote representing a versary date of the award (however, the restricted shares, to
majority of the votes cast for his or her election would be the extent not previously vested or forfeited, will become fully
required to submit a letter of resignation to the Board’s Gov vested upon retirement or on the annual meeting of stock-
ernance Committee. The Governance Committee would rec- holders next following the date the non-management director
ommend to the Board whether or not the resignation should attains the age of 72); and (ii) options to acquire the Company’s
be accepted. Pursuant to the Company’s Bylaws, in case of Common Stock with a value of $30,000 issued in each of Jan-
a vacancy on the Board of Directors, a majority of the remain- uary and July. The options will vest one-third each year begin-
ing directors will appoint a successor, and the director so ning on the first anniversary date of the grant of the option
appointed will hold office until the next annual meeting or award (however, the options, to the extent not previously
until his or her successor is elected and qualified or until his vested or forfeited, will become fully vested upon retirement
or her earlier death, retirement, resignation or removal. or on the annual meeting of stockholders next following the
date the non-management director attains the age of 72).
Corporate Governance Pursuant to the Company’s acquisition of BJ Services Company,
The Company’s Board of Directors believes the purpose the Board of Directors appointed Messrs. Stewart and Payne
of corporate governance is to maximize stockholder value in as members of the Board, effective April 28, 2010. During the
a manner consistent with legal requirements and the highest fiscal year ended December 31, 2010, Messrs. Stewart and
standards of integrity. The Board has adopted and adheres to Payne received the annual retainer of $75,000 on a pro-rata
corporate governance practice, which the Board and manage- basis, with Mr. Stewart receiving an additional annual retainer
ment believe promote this purpose, are sound and represent of $5,000 on a pro-rata basis as a member of the Finance
best practices. The Board periodically reviews these governance Committee. Messrs. Stewart and Payne received non-retainer
practices, Delaware law (the state in which the Company is equity in the form of options to acquire the Company’s Com-
incorporated), the rules and listing standards of the NYSE and mon Stock with a value of $30,000 on July 21, 2010 and
SEC regulations, as well as best practices suggested by recog- $4,826 on July 22, 2010. The Company previously provided
nized governance authorities. The Board has established the benefits under a Directors Retirement Plan, which Plan remains
Company’s Corporate Governance Guidelines as the principles in effect until all benefits accrued thereunder are paid in
of conduct of the Company’s business affairs to benefit its accordance with the current terms and conditions of that Plan.
stockholders, which Guidelines conform to the NYSE corporate No additional benefits have been accrued under the Plan since
governance listing standards and SEC rules. The Corporate December 31, 2001. Messrs. Djerejian, Fernandes, Nichols,
Governance Guidelines are attached as Annex A to this Proxy Riley, Watson and Ms. Gargalli have accrued benefits under
Statement, posted under the “Corporate Governance” section the Plan.
of the Company’s website at www.bakerhughes.com/investor
and are also available upon request to the Company’s Corpo- Director Independence
rate Secretary. All members of the Board of Directors, other than
Mr. Deaton, the Company’s Chairman and Chief Executive
Board of Directors Officer, Mr. Stewart, the former chairman, president and
During the fiscal year ended December 31, 2010, the Board chief executive officer of BJ Services, Mr. Payne, a former
of Directors held five meetings, the Audit/Ethics Committee director of BJ Services who is not a nominee for the 2011
held thirteen meetings, the Compensation Committee held Board of Directors, and Mr. Nichols satisfy the independence
four meetings, the Governance Committee held four meetings requirements of the NYSE. During fiscal year 2010, sales from
and the Finance Committee held four meetings. Each director the Company to Devon Energy Corporation exceeded the two
attended more than 92% of the total number of meetings percent test under Section 303A.02(b)(v) of the NYSE’s Listed
of the Company’s Board of Directors and of the respective Company Manual. Therefore, the Board of Directors deter-
Committees on which he or she served. Six of the Company’s mined that Mr. Nichols no longer satisfied the independence
eleven directors attended the Company’s 2010 Annual Meet- requirements of the NYSE and accepted his resignation from
ing. During fiscal year 2010, each non-management director the Compensation Committee and the Audit/Ethics Committee
was paid an annual retainer of $75,000. The Lead Director effective as of February 23, 2011. In addition, the Board has
received an additional annual retainer of $15,000. The Audit/ adopted a “Policy for Director Independence, Audit/Ethics
Ethics Committee Chair received an additional annual retainer Committee Members and Audit Committee Financial Expert”
of $20,000. Each of the other non-management Committee (“Policy for Director Independence”) included as Exhibit C to
Chairs received an additional annual retainer of $15,000. Each the Corporate Governance Guidelines, which are attached as
of the members of the Audit/Ethics Committee, excluding the Annex A to this Proxy Statement. Such Policy supplements the
Chair, received an additional annual retainer of $10,000. Each NYSE independence requirements. Directors who meet these
of the members, excluding the Chair, of the Compensation, independence standards are considered to be “independent”
Finance and Governance Committees received an additional as defined therein. The Board has determined that all the
annual retainer of $5,000. Each non-management director nominees for election at this Annual Meeting, other than
also received annual non-retainer equity in a total amount of Messrs. Deaton, Nichols and Stewart, meet these standards.
$200,000, in the form of (i) restricted shares of the Company’s

Regularly Scheduled Executive Sessions of Committees of the Board
Non-Management Directors The Board of Directors has, in addition to other commit-
Pursuant to the Corporate Governance Guidelines, exec tees, an Audit/Ethics Committee, a Compensation Committee
utive sessions of non-management directors are held at every and a Governance Committee. The Audit/Ethics, Compensa-
regularly scheduled meeting of the Board of Directors and at tion and Governance Committees are comprised solely of
such other times as the Board deems appropriate. The Gover- independent non-management directors in accordance with
nance Committee reviews and recommends to the Board a NYSE corporate governance listing standards. The Board of
director to serve as Lead Director during executive sessions. Directors adopted charters for the Audit/Ethics, Compensation
Currently, Mr. Riley serves as the Lead Director during the and Governance Committees that comply with the requirements
executive sessions of non-management directors. of the NYSE standards, applicable provisions of the Sarbanes-
Oxley Act of 2002 (“SOX”) and SEC rules. Each of the charters
has been posted and is available for public viewing under the
“Corporate Governance” section of the Company’s website at
www.bakerhughes.com/investor and are also available upon
request to the Company’s Corporate Secretary.
Committee Memberships 2010
Audit/Ethics Compensation Executive Finance Governance
Anthony G. Fernandes Claire W. Gargalli

(C)
Chad C. Deaton
(C) (C)
Larry D. Brady (C)
James A. Lash(C)
Larry D. Brady Clarence P. Cazalot, Jr. Clarence P. Cazalot, Jr. Claire W. Gargalli Edward P. Djerejian
Clarence P. Cazalot, Jr. Edward P. Djerejian James L. Payne Pierre H. Jungels Anthony G. Fernandes
James A. Lash Pierre H. Jungels H. John Riley, Jr. H. John Riley, Jr. H. John Riley, Jr.
J. Larry Nichols J. Larry Nichols James W. Stewart James W. Stewart Charles L. Watson
Charles L. Watson Charles L. Watson
(C) Chair of the referenced Committee.
Audit/Ethics Committee The Audit/Ethics Committee also is responsible for the

The Audit/Ethics Committee held thirteen meetings during selection and hiring of the Company’s Independent Registered
fiscal year 2010. The Board of Directors has determined that Public Accounting Firm. To promote independence of the
each of the Audit/Ethics Committee members meet the NYSE audit, the Audit/Ethics Committee consults separately and
standards for independence as well as those contained in the jointly with the Company’s Independent Registered Public
Company’s “Policy for Director Independence.” The Audit/ Accounting Firm, the internal auditors and management.
Ethics Committee Charter is attached as Annex B to this The Board has reviewed the experience of the members
Proxy Statement and can be accessed electronically under the of the Audit/Ethics Committee and has found that each
“Corporate Governance” section of the Company’s website member of the Committee meets the qualifications to be an
at www.bakerhughes.com/investor. The Vice President Internal “audit committee financial expert” under the SEC rules issued
Audit and the Corporate internal audit function report directly pursuant to SOX. The Board has designated Anthony G.
to the Audit/Ethics Committee. The Company’s Corporate Fernandes as the member of the Committee who serves as
Internal Audit Department sends written reports quarterly to the “audit committee financial expert” of the Company’s
the Audit/Ethics Committee on its audit findings and the status Audit/Ethics Committee.
of its internal audit projects. The Audit/Ethics Committee pro-
vides assistance to the Board of Directors in overseeing matters Compensation Committee
relating to the accounting and reporting practices of the Com- The Compensation Committee held four meetings during
pany, the adequacy of the Company’s disclosure controls and fiscal year 2010. The Board of Directors has determined that
internal controls, the quality and integrity of the quarterly and the Compensation Committee members meet the NYSE stan-
annual financial statements of the Company, the performance dards for independence as well as those contained in the
of the Company’s internal audit function, the review and pre- Company’s “Policy for Director Independence.” The Compensa-
approval of the current year audit and non-audit fees and the tion Committee Charter can be accessed electronically under the
Company’s risk analysis and risk management procedures. In “Corporate Governance” section of the Company’s website at
addition, the Audit/Ethics Committee oversees the Company’s www.bakerhughes.com/investor. The Compensation Commit-
compliance programs relating to legal and regulatory require- tee oversees our compensation programs and is charged with
ments. The Audit/Ethics Committee has developed “Procedures the review and approval of the Company’s general compensa-
for the Receipt, Retention and Treatment of Complaints” tion strategies and objectives and the annual compensation
to address complaints received by the Company regarding decisions relating to our executives and to the broad base
accounting, internal controls or auditing matters. Such proce- of Company employees. Their responsibilities also include
dures are included as Exhibit F to the Corporate Governance reviewing management succession; making recommendations
Guidelines. The Corporate Governance Guidelines are attached to the Board regarding all employment agreements, severance
as Annex A to this Proxy Statement.
2 0 11 P r o x y S t a t e m e n t 7
agreements, change in control agreements and any special for the Board of Directors, proposes candidates to fill vacancies
supplemental benefits applicable to executives; assuring that on the Board, reviews the structure and composition of the
the Company’s incentive compensation program, including Board, considers the qualifications required for continuing
the annual and long-term incentive plans, is administered in a Board service and recommends directors’ compensation. The
manner consistent with the Company’s compensation strategy; Governance Committee annually reviews the Company’s Policy
approving and/or recommending to the Board new incentive Statement on Shareholders’ Rights Plans and reports any
compensation plans and equity-based compensation plans; recommendations to the Board of Directors.
reviewing the Company’s employee benefit programs; and rec- The Governance Committee has implemented policies
ommending for approval all committee administrative changes regarding Board membership. The Governance Committee
that may be subject to the approval of the stockholders or the will consider candidates based upon the size and existing com-
Board, reviewing and reporting to the Board of Directors the position of the Board, the number and qualifications of candi-
levels of stock ownership by the senior executives in accordance dates, the benefit of continuity on the Board and the relevance
with the Stock Ownership Policy. The Compensation Committee of the candidate’s background and experience with issues fac-
is also responsible for reviewing the outcome of the stock- ing the Company. The Governance Committee also strives to
holder advisory vote on senior executive compensation. maintain a Board that reflects diversity, including but not lim-
The Compensation Committee may delegate its authority ited to, gender, ethnicity, background, country of citizenship
to subcommittees. and experience. The criteria used for selecting directors are
The Compensation Committee is responsible for determin- described in the Company’s “Guidelines for Membership on
ing if there are any inherent potential risks in the compensation the Board of Directors,” included as Exhibit A to the Corporate
programs. The Committee exercises risk oversight with respect Governance Guidelines attached as Annex A to this Proxy State-
to risks relating to the compensation of the senior executives ment. In addition, the Company has established a formal
as well as the employees of the Company generally. The Com- process for the selection of candidates, as described in the
pensation Committee seeks to structure compensation pack- Company’s “Selection Process for New Board of Directors Can-
ages and performance goals for compensation in a manner didates” included as Exhibit B to the Corporate Governance
that does not incent employees to take risks that are reason- Guidelines, and candidates are evaluated based on their back-
ably likely to have a material adverse effect on the Company. ground, experience and other relevant factors as described
The Compensation Committee designs long-term incentive in the Guidelines for Membership on the Board of Directors.
compensation, including restricted stock, performance units The Board and the Governance Committee will evaluate candi-
and stock options in such a manner that employees will forfeit dates properly proposed by stockholders in the same manner
their awards if their employment is terminated for cause. The as all other candidates.
Committee also retains the discretionary authority to reduce The Governance Committee has established, in accordance
Annual Incentive Compensation Plan bonuses and discretionary with the Company’s Bylaws regarding stockholder nominees,
bonuses to reflect factors regarding individual performance a policy that it will consider director candidates proposed by
that are not otherwise taken into account under the perfor- stockholders in the same manner as all other candidates. Rec-
mance goal guidelines established by the Compensation ommendations that stockholders desire to make for the 2012
Committee. The Company’s stock ownership guidelines estab- Annual Meeting should be submitted between October 13,
lished by the Board of Directors also mitigates compensation 2011 and November 14, 2011 in accordance with the Compa-
risks. During fiscal year 2010, the Compensation Committee ny’s Bylaws and “Policy and Submission Procedures for Stock-
determined the Company’s compensation policies and prac- holder Recommended Director Candidates” included as
tices for employees were not reasonably likely to have a Exhibit D to the Corporate Governance Guidelines, which are
material adverse effect on the Company. For more information attached as Annex A to this Proxy Statement, posted under
pertaining to the Company’s compensation policies and prac- the “Corporate Governance” section of the Company’s web-
tices, please read the “Compensation Discussion and Analysis” site at www.bakerhughes.com/investor and are also available
section of this Proxy Statement. upon request to: Chair, Governance Committee of the Board
of Directors, P.O. Box 4740, Houston, Texas, 77210, or to the
Governance Committee Corporate Secretary, c/o Baker Hughes Incorporated, 2929
The Governance Committee held four meetings during fis- Allen Parkway, Suite 2100, Houston, Texas, 77019. Such
cal year 2010. The Board of Directors has determined that the recommendations should be accompanied by the informa-
Governance Committee members meet the NYSE standards for tion required under the Company’s Bylaws for stockholder
independence as well as those contained in the Company’s nominees and in accordance with the Company’s Policy
“Policy for Director Independence.” A current copy of the Gov- and Submission Procedures for Stockholder Recommended
ernance Committee Charter can be accessed electronically under Director Candidates.
the “Corporate Governance” section of the Company’s website In connection with the 2011 election of directors, the
at www.bakerhughes.com/investor. The functions performed Company has not paid any fee during 2010 or 2011 to a third
by the Governance Committee include overseeing the Company’s party to identify or evaluate or to assist in identifying or eval
corporate governance affairs, health, safety and environmental uating such nominees. In connection with the 2011 Annual
compliance functions, government relations and monitoring Meeting, the Governance Committee did not receive any rec-
compliance with the Corporate Governance Guidelines. In ommendation for a nominee proposed from any stockholder
addition, the Governance Committee proposes candidates or group of stockholders.

Stock Ownership by Directors The Board’s Leadership Structure and
Each non-management director is expected to own Role in Risk Oversight
at least four times his or her annual retainer in Company The Board has five standing committees: Audit/Ethics,
Common Stock. Such ownership level should be obtained Compensation, Governance, Finance and Executive. Other
within a reasonable period of time following the director’s than the Executive Committee and the Finance Committee, all
election to the Board. All non-management directors have of the Board committees are comprised solely of independent
met this ownership requirement. non-management directors. Each of the five committees has
a different Chairperson. The Chairperson of the Audit/Ethics
Stockholder Communications with the Board of Directors Committee, the Compensation Committee, the Finance Com-
To provide the Company’s stockholders and other inter- mittee and the Governance Committee are each independent
ested parties with a direct and open line of communication non-management directors. Our Corporate Governance Guide-
to the Company’s Board of Directors, a process has been lines require the election, by the independent non-management
established for communications with any member of the directors, of a Lead Director who (i) presides at all meetings
Board of Directors, including the Company’s Lead Director, of the Board of Directors at which the Chair is not present,
the Chair of any of the Company’s Governance Committee, including executive sessions of independent non-management
Audit/Ethics Committee, Compensation Committee, or Finance directors; (ii) serves as liaison between the Chairperson and the
Committee or with the non-management directors as a group. independent non-management directors; (iii) has the authority
Stockholders may communicate with any member of the to call meetings of the independent non-management direc-
Board, including the Company’s Lead Director, the Chair of tors; and (iv) consults with the Chairperson on agendas for
any of the Company’s Governance Committee, Audit/Ethics Board meetings and other matters pertinent to the Company
Committee, Compensation Committee, or Finance Committee and the Board. The Governance Committee reviews and rec-
or with the non-management directors of the Company as ommends to the Board a director to serve as Lead Director.
a group, by sending such written communication to the Com- John Riley is the current Lead Director. The independent non-
pany’s Corporate Secretary, c/o Baker Hughes Incorporated, management directors hold executive sessions at every regu-
2929 Allen Parkway, Suite 2100, Houston, Texas, 77019. The larly scheduled Board meeting and at such other times as the
procedures for “Stockholder Communications with the Board Board deems appropriate. Our Board leadership structure is
of Directors” are also included as Exhibit E to the Corporate utilized by numerous public companies in the United States,
Governance Guidelines, which are attached as Annex A to this and we believe that it provides the optimal balance and is an
Proxy Statement, and can be accessed electronically under the effective leadership structure for the Company.
“Corporate Governance” section of the Company’s website at Since joining the Company in October 2004, Chad Deaton
www.bakerhughes.com/investor and are also available upon has served as Chairman of the Board and Chief Executive Offi-
request to the Company’s Corporate Secretary. In addition, cer. The Board believes that having Mr. Deaton act in both
pursuant to the Company’s policy to request and encourage these roles provides the Company with consistent leadership,
attendance at the Annual Meeting, such meeting provides an both with respect to the Company’s operations and the lead-
opportunity for stockholders to communicate with members ership of the Board. In particular, having Mr. Deaton act in
of the Company’s Board of Directors in attendance. Six of the both these roles increases the timeliness and effectiveness of
Company’s eleven directors attended the Company’s 2010 the Board’s deliberations, increases the Board’s visibility into
Annual Meeting. the day-to-day operations of the Company, and ensures the
consistent implementation of the Company’s strategies.
Business Code of Conduct In accordance with NYSE requirements, our Audit/Ethics
The Company has a Business Code of Conduct (the “Code”) Committee is responsible for overseeing risk analysis and risk
that applies to all officers, directors and employees, which management procedures. The Audit/Ethics Committee reviews
includes the code of ethics for the Company’s chief executive guidelines and policies on enterprise risk management,
officer, chief financial officer, and chief accounting officer and including risk assessment and risk management related to
all other persons performing similar functions within the mean- the Company’s major financial risk exposures and the steps
ing of the securities laws and regulations. The Code prohibits management has taken to monitor and control such expo-
individuals from engaging in, or giving the appearance of sures. At each meeting of the Audit/Ethics Committee, the
engaging in any activity involving a conflict, or reasonably officers of the Company provide information to the Audit/Eth-
foreseeable conflict, between personal interests and those of ics Committee addressing issues related to risk analysis and
the Company. Every year, each of these Company officers cer- risk management. At every regularly scheduled meeting of the
tify compliance with the Company’s Code and the applicable Audit/Ethics Committee the Company’s Chief Compliance Offi-
NYSE and SOX provisions. The Audit/Ethics Committee of the cer provides a report to the Committee regarding the Compa-
Board of Directors of the Company oversees the administration ny’s Business Code of Conduct, including updates pertaining
of the Code and responsibility for the corporate compliance to the status of the Company’s compliance with its standards,
effort with the Company. The Company’s Business Code of policies, procedures and processes. The Company maintains
Conduct and Code of Ethical Conduct Certification are posted an Enterprise Risk Management (“ERM”) process under which
under the “Corporate Governance” section of the Company’s it reviews its business risk framework including an assessment
website at www.bakerhughes.com/investor and are also avail- of external and internal risks and appropriate mitigation activ
able upon request to the Company’s Corporate Secretary. ities. The Company’s annual ERM report is provided to the
2 0 11 P r o x y S t a t e m e n t 9
Audit/Ethics Committee and in addition a comprehensive in what risks, if any, could arise from the Company’s compensa-
person presentation is made to the entire Board. In addition tion policies and practices, while the Finance Committee con-
to the risk oversight which is exercised by the Audit/Ethics sistently reviews risks related to the financial structure and
Committee of the Board of Directors, the Compensation activities of the Company and the Governance Committee
Committee, the Finance Committee and the Governance periodically provides oversight respecting risks associated with
Committee each regularly exercises oversight related to risks the Company’s health, safety and environmental policies and
associated with responsibilities of the respective Committee. practices. The Board of Directors believes that the risk man-
For example, the Compensation Committee has reviewed agement processes in place for the Company are appropriate.
Security Ownership of Management

Set forth below is certain information with respect to beneficial ownership of the Common Stock as of March 1, 2011 by each
director, the persons named in the Summary Compensation Table below and the directors and executive officers as a group. The
table includes transactions effected prior to the close of business on March 1, 2011.
Shares Beneficially Owned
Shares Subject to Options

Which Are or Will Become Total Beneficial
Shares Owned Exercisable Prior to Ownership as of % of
Name as of March 1, 2011 April 30, 2011 April 30, 2011 Class (1)
Larry D. Brady 17,051 3,283 20,334 –

Clarence P. Cazalot, Jr. 18,642 5,010 23,652 –
Edward P. Djerejian(2) 18,642 6,642 25,284 –
Anthony G. Fernandes 26,706 8,323 35,029 –
Claire W. Gargalli 22,497 5,010 27,507 –
Pierre H. Jungels 13,842 2,696 16,538 –
James A. Lash 18,642 5,010 23,652 –
J. Larry Nichols 20,642 5,010 25,652 –
James L. Payne (2) 28,817 36,360 65,177 –
H. John Riley, Jr. 31,702 5,010 36,712 –
J.W. Stewart 460,152(3) 680,163 1,140,315 –
Charles L. Watson 29,871 5,010 34,881 –
Chad C. Deaton 327,152 651,878 979,030 –
Peter A. Ragauss 94,908 153,115 248,023 –
Martin S. Craighead 82,640 101,622 184,262 –
Alan R. Crain 54,561 70,831 125,392 –
John A. O’Donnell 63,217 38,951 102,168 –
All directors and executive officers as a group (25 persons) 1,476,399 1,915,125 3,391,524 –
(1) No percent of class is shown for holdings of less than 1%.

(2) Upon their retirement on April 28, 2011, Messrs. Djerejian’s and Payne’s outstanding options will become fully vested.
(3) Mr. Stewart holds 18,985 shares indirectly as the trustee of trusts established for the benefit of his children. An additional 75,000 shares are held by a
Grantor Retained Annuity Trust and another 75,000 shares are held by a Grantor Retained Annuity Trust with his spouse as the trustee.
Charitable Contributions regulations require executive officers, directors, and greater

During the fiscal year ended December 31, 2010, the than 10% beneficial owners to furnish the Company with
Company did not make any contributions to any charitable copies of all Section 16(a) forms they file.
organization in which any director served as an executive Based solely on a review of the copies of those forms
officer, that exceeded the greater of $1 million or 2% of the furnished to the Company and written representations from
charitable organization’s consolidated gross revenues. the executive officers and directors, the Company believes its
executive officers and directors complied with all applicable
Section 16(a) Beneficial Ownership Section 16(a) filing requirements during the fiscal year ended
Reporting Compliance December 31, 2010 with the exception of one inadvertent
Section 16(a) of the Securities Exchange Act of 1934, as late filing on an amended Form 4 relating to one exempt
amended (“Exchange Act”), requires executive officers, direc- transaction for Mr. Riley.
tors and persons who beneficially own more than 10% of the
Common Stock to file initial reports of ownership and reports Certain Relationships and Related Transactions
of changes in ownership with the SEC and the NYSE. SEC The Company has, and strictly follows, formalized policies
and procedures for identifying potential related party transactions
and ensuring those policies are reviewed by the Board of
10 B a k e r H u g h e s I n c o r p o r a t e d
Directors and the Audit/Ethics Committee. We subject the Officer (“PEO”) who is the Chairman and Chief Executive Offi-
following related persons to these procedures: directors, direc- cer and other named executive officers (the “NEOs”) which
tor nominees, executive officers, individual 5% stockholders include the chief financial officer and the three other most
and any immediate family members of these persons. highly compensated executive officers and (2) employees who
As outlined in Exhibit C to our Corporate Governance are designated as executives of the Company (“Executives”),
Guidelines, attached as Annex A to this Proxy Statement, the which includes the Senior Executives and (3) a broad base
Board annually re-evaluates the independence of any “related of Company employees. The Senior Executives are:
person” for any transactions, arrangements or relationships, or • Chad C. Deaton – Chairman & Chief Executive Officer
any series of similar transactions, arrangements or relationships • Peter A. Ragauss – Senior Vice President &
in which any director, director nominee, executive officer, or Chief Financial Officer
any immediate family member of those persons could be a • Martin S. Craighead – President & Chief Operating Officer
participant, the amount involved exceeds $120,000, and in • Alan R. Crain – Senior Vice President & General Counsel
which any related person had or will have a direct or indirect • John A. O’Donnell – Vice President and President,
material interest. Western Hemisphere Operations
The Company does not have a formal set of standards to The total compensation and benefits program for Senior
be substantively applied to each transaction reviewed by the Executives consists of the following:
Audit/Ethics Committee and then the Board. However, the • Total Direct Compensation:
standards utilized in its annual Director & Officer Questionnaire – base salaries
to determine if a related party transaction exists are modeled – short-term incentive compensation
after Section 303A.02 of the New York Stock Exchange’s – long-term incentive compensation
Listed Company Manual. Instead of a formalized standard, • Total Indirect Compensation:
potential related party transactions are reviewed and judgment – retirement, health and welfare benefits
is applied by the Board of Directors in accordance with its – perquisites and perquisite allowance payments
duties under Delaware and other applicable law to determine
whether such transactions are in the best interests of the 2010 Compensation Highlights
Company and its stockholders. In addition to the discussion Compensation administration is best understood in the
under the “Business Code of Conduct” in this Proxy State- context of certain internal initiatives and external influences,
ment, the “Baker Hughes Incorporated Policy for Director such as:
Independence, Audit/Ethics Committee Members and Audit • The reorganization of the Company from product lines
Committee Financial Expert” are included as Exhibit C of the to geomarkets to better address world demand for
Corporate Governance Guidelines, which are attached as oilfield services;
Annex A to this Proxy Statement. The Company utilizes stan- • The acquisition of BJ Services to enhance our position as
dard accounting procedures to monitor its financial records one of the leading oilfield service companies in the world;
and determine whether a related person is involved in a busi- • The unprecedented volatility in world financial and energy
ness relationship or transaction with the Company for which markets; and
disclosure is required. • The focus on fundamentals of profit margin, controllable
costs and balance sheet management in response to
Compensation Discussion and Analysis extreme volatility in the market
The Compensation Committee reviewed all compensation
Executive Summary, Compensation Highlights programs. The following are the highlights of this review:
and Program Objectives • Responded to changes in the oilfield services market
brought about by mergers and acquisitions in order
Executive Summary to enhance comparability of compensation and perfor-
The purpose of our compensation program is to motivate mance data;
exceptional individual and organizational performance that is • Performed a compensation related risk assessment to ensure
in the long-term best interests of our stockholders. We use appropriate risk tolerance of compensation arrangements
traditional compensation elements of base salary, annual in the Company;
incentives, long-term incentives, and employee benefits to • Enhanced the linkage between financial performance
deliver attractive and competitive compensation. We bench- measures in the Annual Incentive Compensation Plan and
mark both compensation and company performance in eval the Company’s current business strategy by changes to the
uating the appropriateness of pay. All of our executive pay Annual Incentive Compensation Plan;
programs are administered by an independent compensation • Increased the emphasis on the objective formula based
committee, with assistance from an independent consultant. portion of the short-term annual incentive program over the
We target the market median for fixed compensation, while non-formula based portion (thereby increasing tax deduct-
providing the opportunity for executives to earn upper quartile ibility) as the business environment has normalized; and
incentive pay based on Company performance. • Implemented plan design changes to the non-qualified
Our compensation programs include programs that are retirement program to enhance the retentive value of the
designed specifically for (1) our most senior executive officers plan and enhance its cost effectiveness.
(“Senior Executives”), which include the Principal Executive
2 0 11 P r o x y S t a t e m e n t 11
Compensation Objectives
To reward both short and long-term performance in the compensation program and to further our compensation objectives, our
executive compensation program seeks to:
Objective How We Meet Our Objectives
Attract and retain knowledgeable, • Provide a competitive total pay package, taking into account the base salary, incentives,
experienced, and high performing benefits and perquisites.
Senior Executives • Regularly benchmark our pay programs against the competitive market, comparing both
fixed and variable, at-risk compensation that is tied to short and long-term performance.
We use the results of this analysis as context in making pay adjustments.
• Administer plans to include three-year performance cycles on long-term incentive plan
awards, three-year vesting schedules on equity incentives, and competitive total benefit
programs, including retirement benefits.
Reward the creation of long-term • The long-term incentive plan consists of a combination of stock options, restricted stock
shareholder value awards, and performance units.
• The incentive programs include specific financial performance measures that are fundamental
to long-term shareholder value creation:
– The Annual Incentive Compensation Plan uses earnings per share/operating profit before
interest and tax; and
– The long-term incentive plan uses revenue growth, profit before taxes margin, and return
on net capital employed compared to our peers.
Address the complexities in • The annual incentive program provides for formulaic and non-formulaic goals, and rewards
managing a cyclical business that managers for the achievement of annual performance imperatives.
is subject to world demand for • The long-term incentive plan utilizes a combination of share growth and full-value awards,
oil and gas balancing retention and appreciation through the business cycles.
• The performance unit component of the long-term incentive plan measures Company per
formance relative to industry peers, mitigating the difficulty in goal setting over long periods.
Drive and reward performance • Success in the promotion of core values is considered in the base salary review process
that supports the Company’s core and when determining annual award values for long-term incentive compensation awards.
values of integrity, teamwork, • Short-term incentive program allows for the reduction or elimination of bonus payout if
performance and learning standards are not upheld.
Provide a significant percentage • Annual and long-term incentive compensation comprises, on average, more than two-thirds
of total compensation that is of total direct compensation.
variable and at risk
Reinforce adherence to high • The discretionary bonus component includes individual business goals which may include
ethical and environment, health specific targets related to health, safety and the environment.
and safety standards • Short-term incentive program allows for reduction or elimination of bonus payout if
standards not upheld.
Motivate management to take • Pay programs emphasize long-term incentive compensation with year over year
prudent but not excessive risks vesting schedules.
• Share ownership guidelines motivate alignment between long-term shareholder
value and management decisions.
• Utilize multiple performance measures for short-term and long-term incentives,
and well as peer comparisons.
Align executive and • Emphasizing long-term shareholder returns, we encourage significant Company
shareholder interests stock ownership among executives through our stock ownership guidelines.
• The ultimate value of two-thirds of our annual equity grants is driven by stock
price performance.
Compensation Consultant Cogent periodically provides consulting services to the
The Compensation Committee has retained Cogent Governance Committee, as follows:
Compensation Partners, Inc. since 2008 as its independent • advises on policy covering the payment of director’s fees;
compensation consultant. Cogent advises the Compensation • advises on equity and non-equity compensation awards
Committee on matters related to the Senior Executives’ com- to directors
pensation and general compensation programs, including
industry best practices. It is planned that this relationship will Benchmarking
continue during 2011. We compete primarily with oilfield service companies.
Cogent provides the following consulting services to the Because of the technical nature of the industry, cyclicality of
Compensation Committee: the markets, people intensity and capital requirements, these
• assists in the annual review and approval of the comparator companies provide the best competitive benchmarks. However,
groups used to benchmark executive compensation levels; due to market consolidation the number of similarly sized
• provides comparative market data on compensation prac- oilfield service companies with which we compete for talent
tices and programs; and has declined.
• advises in: On April 28, 2010, we finalized our acquisition of BJ Services
– determining base salaries for Senior Executives; Company and on August 27, 2010, Schlumberger Limited
– setting individual performance goals and award levels completed the acquisition of Smith International, Inc. Both
for Senior Executives for the long-term incentive plan BJ Services Company and Smith International, Inc. were direct
performance cycle; peers used for competitive benchmarking. The following chart
– compensation trends and regulatory matters affecting reflects changes made to the competitive benchmarking follow-
compensation; and ing these transactions and how we use competitive information
– designing and determining individual grant levels for to compare performance and compensation.
Senior Executive long-term incentive awards.
Reference Group
• 20 companies – oilfield services, exploration & production, offshore drilling, oil and gas, and general industry:
• 3M Company • Eaton Corp. • National Oilwell Varco

• Anadarko Petroleum Corp. • Emersson Electric Co. • Raytheon Co.
• Apache Corp. • Halliburton Co. • Schlumberger Ltd.
Compensation • Danaher Corp. • Hess Corp. • Textron Inc.
• Deere & Co. • Honeywell Intl. Inc. • Transocean Ltd.
• Devon Energy Corp. • Illinois Tool Works • Weatherford Intl. Ltd.
• Johnson Controls Inc. • Williams Cos. Inc.
Determine the market

value of jobs • Changed from 10 companies in 2009: added oil and gas companies and similarly-situated general industry companies
for statistical validity
• Used to identify and compare executive pay practices such as pay mix and magnitude, competitiveness, prevalence of
long-term incentive vehicles, etc.
Peer Group
• 4 companies – oilfield services only:

Performance
• Halliburton Co. • Schlumberger Ltd.
• National Oilwell Varco Inc. • Weatherford Intl. Ltd.
• Changed from 6 companies in 2009: removed BJ Services and Smith Intl. Inc. due to tranasactions
Evaluate relative • Used to compare performance in order to determine the value of performance units and for general performance assessment
performance
Using the Reference Group as well as the Peer Group data test the compensation strategy, observe trends and provide a
(collectively, the “Survey Data”) addresses the need for both general competitive backdrop for decision making. The Peer
statistical validity and industry influence in the data. Group is comprised of four direct industry peers and the data
The Reference Group is comprised of industry peers and is used to provide a general, high level review, compare com-
companies in broader energy and general industry with similar pany performance in our industry, understand pay practices
business characteristics, size, margins, competition for talent, and trends, compare plan design specifics, evaluate the effects
and other key compensable factors and is statistically mean- of the industry cycle on compensation and validate compensa-
ingful. The data is used to assess the competitive market value tion targets.
for executive jobs, pay practices, validate targets for pay plans,
2 0 11 P r o x y S t a t e m e n t 13
Pay Mix compensation elements is similar to the compensation practices
The charts below demonstrate the mix of compensation against our Reference Group, with slightly more weight to
elements of our executive officers for fiscal 2010 compared long-term incentives. This is aligned with one of our compen-
to the mix of compensation elements of the market median. sation objectives to provide a significant percentage of total
This comparison demonstrates that the allocation of our compensation that is variable and at risk.
PEO Market Median – PEO
Benefits and Severance, 4% Benefits and Severance, 5%

Short-Term Incentives, 12% Short-Term Incentives, 11%
Base Salary, 10% Base Salary, 12%
Long-Term Incentives, 74% Long-Term Incentives, 72%
Other NEOs Combined Market Median – Other NEOs Combined
Benefits, 5% Benefits, 6%
Short-Term Incentives, 12% Short-Term Incentives, 13%
Base Salary, 15% Base Salary, 18%
Long-Term Incentives, 68% Long-Term Incentives, 63%
Components of the Executive Compensation Program Survey Data and evaluates the Senior Executive’s position
The Compensation Committee reviews, on an annual basis, relative to the market, his level of responsibility and experience
each compensation element for each of the Senior Executives. as well as overall Company performance. The Compensation
The Compensation Committee takes into account the executive’s Committee also considers the Senior Executive’s success in
scope of responsibilities and experience and balances these achieving business results, promoting our core values and
against competitive compensation levels. The Compensation keys to success, improving health and safety and demonstrat-
Committee is responsible for reviewing and approving the Com- ing leadership.
pany’s goals and objectives relevant to the PEO’s compensation, In determining base salaries, the Compensation Committee
evaluating also the PEO’s performance in light of such goals also considers the Company’s continuing achievement of its
and objectives; and determining the PEO’s compensation level short- and long-term goals including:
based on this evaluation and other relevant information. • the financial performance of the Company;
In addition, each year, the PEO presents to the Compen • the effective execution of the strategy approved by its
sation Committee his evaluation of each of the other Senior Board of Directors; and
Executives, which includes a review of contribution and perfor- • the development of human resource capability.
mance over the past year, strengths, development needs and In 2010, the Compensation Committee approved base
succession potential. The PEO makes no recommendations to salary increases for Senior Executives as detailed in the chart
the Compensation Committee regarding his own compensa- below. The new salaries were effective April 1, 2010.
tion. Following this presentation and a review of the Survey
Data, the Compensation Committee makes its own assess- New Salary
% Increase Effective
ments and approves compensation for each Senior Executive. Senior Executives Awarded in 2010 April 1, 2010
C. Deaton 10% $ 1,270,000

Base Salaries
P. Ragauss 3% $ 670,000
The Compensation Committee targets the market median
M. Craighead 8% $ 700,000
of the Reference Group for the base salaries of our Senior
A. Crain 3% $ 488,000
Executives. When considering an adjustment to a Senior
J. O’Donnell 3% $ 412,000
Executive’s base salary, the Compensation Committee reviews
In addition to the considerations detailed above, the deci- Annual Incentive Compensation Plan
sion to increase the salaries for Senior Executives was based The Annual Incentive Compensation Plan is designed so
on a review of the Survey Data, individual performance related that in years in which our financial performance significantly
to the merger with BJ Services and specific individual perfor- exceeds our financial performance targets, the payouts for the
mance as further described in the “Discretionary Bonuses” Annual Incentive Compensation Plan could exceed the market
section on page 16. The Survey Data indicated that the salaries median of the Survey Data, and correspondingly, the payouts
for the Senior Executive group averaged 94% of the market could be lower than the market median of the Survey Data
median. In 2009, Messrs. Ragauss, Craighead and O’Donnell in years in which our performance falls meaningfully short of
received salary increases based on the Survey Data and an expected results.
increased level of responsibility. When approving base salary In 2010, the financial metric for the Annual Incentive
increases for 2010, the Compensation Committee also took Compensation Plan changed to operating profit before interest
into account the fact that the other Senior Executives did and taxes from earnings per share. We continue to manage
not receive a base salary increase in 2009 as annual salary the Company’s profitability as measured by earnings per share,
increases were postponed indefinitely for the overall organiza- however, we believe that in 2010, using operating profit
tion due to the uncertain financial environment at that time. before interest and taxes as the financial metric allowed
us to more accurately set profitability goals throughout the
Short-Term Incentive Compensation organization. Such goals were set prior to the merger with
The short-term incentive compensation program provides BJ Services and exclude the effects of such merger.
Senior Executives with the opportunity to earn cash bonuses The Compensation Committee approves three perfor-
based on the achievement of specific Company-wide, business mance levels with respect to achievement of the established
unit, functional and individual performance goals. The Compen- financial metric: entry level, expected value, and over achieve-
sation Committee designs the short-term incentive program ment. Performance targets are established at levels that chal-
to incentivize Senior Executives to attain certain short-term lenge the individual Senior Executive to perform at a high
performance goals. As previously described, the payouts for level. Targets are set such that only exceptional performance
Senior Executives under the short-term incentive compensation will result in payouts above the target incentive and poor
program are targeted to provide compensation at the market performance will result in no incentive payment.
median (50th percentile) of the Survey Data in years when we As detailed in the chart below, entry level is the minimum
reach expected performance levels. Incentive bonuses are gen- level of financial performance for which the Compensation
erally paid in cash in March of each year for the prior fiscal Committee approves any annual incentive payout and the pay-
year’s performance. out is 25% of target incentive compensation. If our financial
The short-term incentive opportunity for Senior Executives performance is less than the entry level threshold, there is no
is based on formulaic and non-formulaic performance goals. payout for that fiscal year. If our financial performance reaches
Greater weight is placed on the formula based component the expected value level, the payout equals 100% of target
of the short-term incentive to reflect the Company’s goal incentive compensation. If our financial performance reaches
of providing a meaningful link between compensation and the over achievement level, the payout equals 200% or above.
Company performance. Achievement between any level results in a payout that is
determined by interpolation between payout levels or extrap
olation for exceeding the over achievement level.
Performance Level Definition Payout Level % of Target 2010 Operating Profit Before Interest and Tax Targets
Entry level Minimum achievement level for payout 25% Payout $ 923,000,000
Expected value Performance meets expected value 100% Payout $ 1,120,000,000
Over achievement Performance exceeds expected value 200% Payout or above $ 1,318,000,000
Our 2010 operating profit before interest and tax was 2010 Annual Incentive Compensation Plan Targets
$1,107,000,000 resulting in a payout of 95 percent of for Senior Executives
target, which is received in 2011 and reflected for each
Senior Executive in the Summary Compensation Table on Senior Executives Target Incentive Compensation % of Base Salary
page 25. The following table shows the 2010 annual incen- C. Deaton 84%
tive target compensation for each of the Senior Executives. P. Ragauss 63%
The bonus target for each Senior Executive is reviewed M. Craighead 63%
by the Compensation Committee each year and is set at A. Crain 52.5%
market median in light of the Survey Data. J. O’Donnell 42%
2 0 11 P r o x y S t a t e m e n t 15
Discretionary Bonuses The Compensation Committee assesses the PEO’s perfor-
Discretionary bonuses provide flexibility to the Compensa- mance relative to the established performance goals and
tion Committee to, in its discretion, reward Senior Executives determines whether or not a payout will be made. The same
for the achievement of specific, short-term performance goals. process is conducted for the other Senior Executives taking
For 2010, the performance goals for each of our Senior Execu- into account the recommendations of the PEO. No Senior
tives were primarily related to the acquisition and integration Executive has any guaranteed right to any discretionary bonus.
of BJ Services, the consolidation of the new business model In determining discretionary bonus amounts the achievement
and organization implemented in 2009 as well as individual of (or failure to achieve) the performance goals under the
performance goals. The measures for evaluating the success Annual Incentive Compensation Plan is not a factor that is
of the implementation of the reorganization and individual considered by the Compensation Committee.
performance were subjective. The Compensation Committee has determined to award
At the beginning of 2010, the PEO set specific individual Messrs. Deaton, Ragauss, Craighead, Crain, and O’Donnell
performance goals for each Senior Executive other than him- cash awards in the amounts of $915,000, $380,000,
self and the Compensation Committee established perfor- $400,000, $320,000 and $150,000, respectively, based
mance goals for the PEO. upon their performance as compared to the established
Mr. Deaton’s 2010 individual performance goals pertained performance goals described above.
to the successful integration of BJ Services, achievement of The following table shows the discretionary bonus targets
supply chain and manufacturing cost reduction targets, for each of the Senior Executives. The bonus target for each
achievement of goals related to diversity and safety and the Senior Executive is reviewed by the Compensation Committee
implementation of the monitor’s recommendations. each year and is set at market median in light of the Survey Data.
Mr. Ragauss’ 2010 individual performance goals related to
gaining efficiencies and maximizing administration and opera- 2010 Discretionary Bonus Targets for Senior Executives
tional synergies from the BJ Services integration, completion of
the financial shared services outsourcing, achievement of days Target Discretionary Incentive Compensation
Senior Executives % of Base Salary
sales outstanding goals and fully implementing the monitor’s
recommendations. C. Deaton 36%
Mr. Craighead’s 2010 individual performance goals per- P. Ragauss 27%
tained to the successful integration of BJ Services, achievement M. Craighead 27%
of supply chain cost reduction targets, efficiencies in the tech- A. Crain 22.5%
nology delivery program, establishment of a reservoir business J. O’Donnell 18%
segment and the achievement of health, safety and environ-
ment targets. Long-Term Incentive Compensation
Mr. Crain’s 2010 individual performance goals related to The long-term incentive program allows Senior Executives
the successful close of the BJ Services acquisition including to earn compensation over a number of years as a result of
obtaining appropriate government approvals and agreement stock price performance and/or sustained financial performance
with the monitor on compliance integration requirements, over multiple years. Long-term incentives comprise the largest
achievement of BJ Services integration synergies, application of portion of a Senior Executive’s compensation package and are
risk reduction strategies as well as the achievement of diversity consistent with our at-risk pay philosophy.
goals within the legal function. A primary objective of the long-term incentive plan is to
Mr. O’Donnell’s 2010 individual performance goals per- align the interests of Senior Executives with our stockholders
tained to the successful integration of BJ Services, new prod- and to provide a balanced long-term compensation program.
uct revenue, market share, administrative cost reduction, days The Compensation Committee determines the total stock
sales outstanding, human capital goals pertaining to diversity, options, restricted stock, and cash-based performance units
attrition, recruitment and training as well as goals related to granted to Senior Executives as well as the size of individual
heath, safety and environment. grants for each Senior Executive. The amounts granted to
The 2010 health and safety goals for Messrs. Deaton, Senior Executives by the Compensation Committee vary each
Craighead and O’Donnell were a motor vehicle accident rate year and are based on Survey Data, the Senior Executive’s
of less than or equal to 0.98. The rate is determined by multi- performance and the Senior Executive’s total compensation
plying the number of motor vehicles accidents by one million package. Previous awards and grants, whether vested or
hours, divided by the total kilometers driven. The actual motor unvested, have no impact on the current year’s awards and
vehicle accident rate during 2010 was 0.97. grants. Currently, long-term incentives are generally allocated
to Senior Executives as detailed in the chart below.
2010 Allocation Company Goals Future Value Dependent On
Performance Units: 30% Motivate differential financial performance Financial performance against peers
Stock Options: 40% Drive stock price Stock price appreciation
Restricted Stock Awards: 30% Retain executives Stock price appreciation
The chart below illustrates the target multiple for the PEO Performance Units
and each NEO and the position of the long-term incentive Performance units represent a significant portion of our
multiple as it relates to meeting the target percentile. These long-term incentive compensation program. Performance units
target award levels are set based on competitive compensation are certificates of potential value that are payable in cash after
information including the Survey Data. However, the Compen- the end of a specified performance period. The performance
sation Committee does not make adjustments to the target units are designed in a manner to incent the Senior Executives
award levels based solely on the competitive information. It to strive to achieve certain specific Company long-term perfor-
also takes into account the vitality of the industry, the demand mance goals during specific performance periods. While the
for talent, cost considerations, and performance of the Com- values of stock options and restricted stock awards tie directly
pany and executives. While the Compensation Committee to our stock price, performance units reward contributions
reviews each NEOs historical awards, it does not systematically to our financial performance and mitigate the impact of
consider these when making individual awards. the volatility of the stock market on our long-term incentive
compensation program.
Grant Date Value of 2010 Each of the Senior Executives was granted performance
Target Multiple Actual Long-Term
Senior Executives % of Base salary Incentive Award
unit awards during 2008, 2009 and 2010. Performance units
are generally awarded once each year (typically in January) to
C. Deaton 725% $ 8,370,000
Senior Executives at the same time as grants are made to the
P. Ragauss 450% $ 2,928,000
general eligible employee population. The performance unit
M. Craighead 550% $ 3,571,000
program operates in overlapping three-year periods with a
A. Crain 400% $ 1,896,000
payout determined at the end of each three‑year period. The
J. O’Donnell 300% $ 1,567,000
actual value our Senior Executives may realize under the per-
formance unit program depends on how well we perform
against our Peer Group (identified below) with respect to
Stock Options
specified performance metrics which are established by the
An important objective of the long-term incentives is to
Compensation Committee with assistance from the Compen-
strengthen the relationship between the long-term value of
sation Committee’s independent compensation consultant.
our stock price and the potential financial gain for employees.
Stock options provide Senior Executives with the opportunity
Performance Measurement Periods
to purchase our Common Stock at a price fixed on the grant
Under the terms of the performance unit program that
date regardless of future market price. Stock options generally
has been in place since 2009, the amounts payable under
vest and become exercisable in one-third increments annually
performance unit awards are based upon our performance
after the original award date.
during four performance measurement intervals, one three-
Our practice is that the exercise price for each stock option
year performance measurement interval and three one‑year
is the closing market price of a share of our Common Stock
performance measurement intervals within that three-year
on the NYSE on the last trading day prior to the grant date.
period. As of the end of each measurement interval, our per-
The exercise prices of the stock options granted to the NEOs
formance is measured against the performance of our Peer
during fiscal year 2010 are shown in the Grants of Plan-Based
Group members and 25 percent of the performance unit
Awards Table on page 26. Additional information on these
award value is determined. The payout, if any, will be made
grants, including the number of shares subject to each grant,
after the close of the three-year performance period in March
also is shown in the Grants of Plan-Based Awards Table.
2012 and March 2013 for performance unit awards granted
in 2009 and 2010, respectively.
Restricted Stock Awards
As detailed in the charts below, the 2009 and 2010 per-
Restricted stock awards provide Senior Executives the
formance units involve multiple performance measurement
opportunity for capital accumulation and a more predictable
periods. Our performance relative to the performance of
long-term incentive value than is provided by stock options
our Peer Group will be determined over four distinct periods
or performance units. This is a performance based award since
and each period will make up 25 percent of the final value
as stock price increases, the Senior Executive’s reward increases
of the units.
as does the stockholders reward. Additionally, restricted stock
awards are intended to aid in the retention of Senior Execu- 2009 Performance Units 2010 Performance Units
tives through the use of a vesting schedule (generally one-third
• One-Year Period (2009) • One-Year Period (2010)
increments annually after the original award date). Restricted
stock awards are generally awarded to Senior Executives once
a year in January, at the same time as awards are made to the
• Three-Year Period • Three-Year Period
general eligible employee population.
(2009 to 2011) (2010 to 2012)
2 0 11 P r o x y S t a t e m e n t 17
In the case of the performance units granted by us in For the performance units granted by us in 2010, 25 per-
2009, 25 percent of the performance unit value is determined cent of the performance unit value is determined based upon
based upon one-year performance relative to certain specified one-year performance relative to certain specified performance
performance criteria (discussed below) at the end of 2009, criteria (discussed below) at the end of each of 2010, 2011,
2010, and 2011. The final 25 percent of the performance and 2012. The final 25 percent of the performance unit value
unit value is calculated at the end of 2011 based upon the is calculated at the end of 2012 based upon the cumulative
cumulative performance of the Company over the three-year performance of the Company over the three-year performance
performance period 2009 through 2011. Any payouts under period 2010 through 2012. Any payouts under the 2010 per-
the 2009 performance units will be made in March 2012. formance units will be made in March 2013.
Fixed Number
of Units
Granted at
Beginning of Term
End of Year 1 End of Year 2 End of Year 3
• 25% of Unit • 25% of Unit • 25% of Unit

Value Determined Value Determined Value Determined
• BHI Compared to • BHI Compared to • BHI Compared to
Peer Group Peer Group Peer Group
Total
Unit Value
Calculated
and Paid at
3-Year Total End of Term
• 25% of Unit
Value Determined
• BHI Compared to
Peer Group
Performance Unit Metrics Revenue growth for a three‑year performance period is the
There are three basic performance metrics that apply to result of (a) minus (b), divided by (c), where (a) is the revenue
the 2009 and 2010 performance units. The potential amounts of the relevant company for the fiscal year of the relevant com-
payable under the 2009 and 2010 performance units are pany that coincides with or ends within the final calendar year
based upon our (1) revenue growth, (2) pre-tax operating mar- of the three‑year performance period, and (b) and (c) are the
gin, and (3) return on net capital employed for the applicable revenue of the relevant company for the fiscal year of the rele-
performance periods compared to our Peer Group. vant company that coincides with or ends within the calendar
Revenue growth is the percentage increase of the revenue year immediately preceding the three‑year performance period.
of the relevant company for the relevant one-year or three-year Pre-tax operating margin is the quotient of earnings
performance period. Revenue growth for a one‑year performance before interest and taxes adjusted for non-operating income
period is the result of (a) minus (b), divided by (c), where (a) (or expenses) for the fiscal year(s) of the relevant company
is the revenue of the relevant company for the fiscal year of that coincides with or ends within the relevant one-year or
the relevant company that coincides with or ends within the three-year performance period, divided by the relevant com
one‑year performance period and (b) and (c) are the revenue pany’s total revenue during that period of time.
of the relevant company for the fiscal year of the relevant Return on net capital employed is the relevant company’s
company that coincides with or ends within the calendar year earnings before interest and taxes adjusted for non-operating
immediately preceding the one‑year performance period. income (or expenses) for the fiscal year(s) of the relevant
company that coincides with or ends within the relevant
one-year or three-year performance period, divided by the
relevant company’s capital employed for that period of time.
Current Period Revenue – Previous Period Revenue

1-Year Interval
Previous Period Revenue
1 Revenue Growth
Final Year Revenue – Revenue in Year Prior to Grant

3-Year Interval
Revenue in Year Prior to Grant
2 Pre-Tax Operating Margin

Earnings Before Interest and Taxes for Period
Total Revenue for Period
Earnings Before Interest and Taxes for Period
End of Period Net Capital Employed (NCE)

3 Return on Net Capital Employed
(RONCE)
Note: For 3-Year Interval Use the Sum of 3-Year PBT
in Numerator and Sum of 3 Years NCE in Denominator
Peer Group Amounts Payable Under 2009 Performance Units

The Peer Group consists of a group of four companies for the One-Year Performance Period Starting in 2009
identified by the Compensation Committee (as listed below): In the case of the performance measurement period start-
ing on January 1, 2009 under the 2009 performance unit
Peer Group awards, the unit value earned during the 2009 one‑year per-
Halliburton Company formance measurement period for each of the three revenue
National Oilwell Varco, Inc. growth, pre-tax operating margin and return on net capital
Schlumberger Limited employed performance goals applicable to the performance
Weatherford International Ltd. measurement period is one‑third of 25 percent of the unit
value amount listed below:
2009 Performance Period
Peer Group Rank 7th 6th 5th 4th 3rd 2nd 1st
Unit Value $ 0 $ 25 $ 50 $ 75 $ 100 $ 150 $ 200
2 0 11 P r o x y S t a t e m e n t 19
Prior to certain corporate mergers consummated in 2010, Amounts Payable Under 2009 and 2010 Performance Units
the Peer Group that applied for the 2009 one‑year perfor- for One‑Year Performance Periods Starting After 2009 and
mance measurement period under the 2009 performance for the Three‑Year Performance Period
units was the current Peer Group (listed above) plus Smith Each performance unit award agreement specifies the
International, Inc. and BJ Services Company. Our relative number of units granted to the Senior Executive. In the case
ranking for the 2009 one‑year performance measurement of the one-year performance measurement periods starting
period was 4th, 4th, and 4th for the revenue growth, pre-tax on or after January 1, 2010 and the three-year performance
operating margin and return on net capital employed perfor- measurement periods under both the 2009 and 2010 perfor-
mance goals, respectively, resulting in a total per unit value mance unit awards, the unit value earned during an applicable
of $18.75 earned during 2009 with respect to the 2009 performance measurement period (a one-year or three-year
performance units that will be paid in March 2012. performance measurement interval, as applicable) for each of
the three revenue growth, pre-tax operating margin and return
on net capital employed performance goals applicable to the
performance measurement period is one-third of 25 percent
of the unit value amount listed below:
2010, 2011 and Three-Year Performance Period
Peer Group Rank 5th 4th 3rd 2nd 1st

Unit Value $ 0 $ 45 $ 90 $ 135 $ 200
Our relative ranking for the 2010 one‑year performance Example of Performance Unit Payout Calculation
measurement period was 1st, 4th, and 4th for the revenue The table below illustrates in tabular format the manner in
growth, pre-tax operating margin and return on net capital which the amount payable under the 2010 performance unit
employed performance goals, respectively, resulting in a total awards may be calculated.
per unit value of $24.17 earned during 2010 with respect to Note that levels of achievement contained in the table
the 2010 performance units that will be paid in March 2013. below are not forecasts by us of our expected levels of
achievement. Rather, the levels of achievement for purposes
of the illustrative example were selected at random.
Relative Rank of Performance Periodic Unit Value Added
Revenue Pre-Tax Revenue Pre-Tax Period

Growth Operating RONCE Growth Operating RONCE
Period Unit
Rank Margin Rank Rank Value Margin Value Value
Value
Year 1 5th 2nd 1st $0 $33.75 $50.00 $27.92

Total Unit
Value
Year 2 2nd 3rd 2nd $33.75 $22.50 $33.75 $30.00

$112.09
Year 3 1st 4th 3rd $50.00 $11.25 $22.50 $27.92
3-Year
3rd 3rd 2nd $22.50 $22.50 $33.75 $26.25
Total
Under the current formula for determining amounts pay- period, the performance unit value achieved for the 2010 per-
able under the 2010 performance units, there are multiple unit formance period would be $27.92 in the aggregate (average
value amounts that may be earned based upon the relative of 25% of $0, 25% of $135 and 25% of $200, respectively).
ranking of our performance versus the performance of the Unit values for 2011, 2012 and for the three-year period
Peer Group. would be calculated in the same manner.
For each measurement period, our performance will be At the end of the three-year performance period, the total
compared to the performance of the companies in the Peer amount that would be paid to the Senior Executive under his
Group, and assigned a rank of 1st, 2nd, 3rd, 4th or 5th. 2010 performance units would be $112.09 per unit (calcu-
Values for each rank are assigned based on the table above. lated as the sum of $27.92, $30.00, $27.92 and $26.25).
Assuming solely for illustrative purposes that we achieve Note that levels of achievement contained in the foregoing
the ranks of 5th, 2nd and 1st with respect to the three per example are not forecasts by us of our expected levels of
formance metrics; revenue growth, pre-tax operating margin achievement. Rather, the levels of achievement for purposes
and return on net capital employed for the 2010 performance of the illustrative example were selected at random.
Performance Units and Terminations of Employment Tax Implications of Short-Term Incentives and
Performance units are generally forfeited if a Senior Exec Long-Term Incentives
utive voluntarily leaves employment with us before the end Section 162(m) of the Internal Revenue Code of 1986,
of the performance cycle. Performance units pay out on a pro as amended (the “Code”) places a limit of $1,000,000 on
rata basis (based upon the actual performance levels achieved) the amount of compensation that may be deducted by the
if a Senior Executive retires at a time when the sum of his age Company in any year with respect to the PEO and the other
and years of service equals at least 65. NEOs other than Mr. Ragauss unless the compensation is
performance-based compensation as described in Section 162(m)
Performance Units Granted in Prior Years and the related regulations. We intend that certain compen
For awards granted prior to 2009, a three-year cumulative sation paid to Senior Executives qualifies for deductibility
Baker Value Added (“BVA”) goal was the financial metric used as performance-based compensation under Section 162(m),
to determine payouts, if any, for performance units. BVA mea- including (i) certain amounts paid under our Annual Incentive
sures operating profit after-tax less the cost of capital employed. Compensation Plan and (ii) certain options and certain other
BVA is a non-GAAP measure that supplements traditional long-term performance-based stock or cash awards granted
accounting measures to evaluate the return on capital invested pursuant to the 1998 Long-Term Incentive Plan and the 2002
in the business. BVA is calculated as our financial return in a D&O Plan. We may from time to time pay compensation to
given period less our capital charge for that period. Our finan- our Senior Executives that may not be deductible, including
cial return is defined as (i) profit before tax (as defined below) discretionary bonuses or other types of compensation.
plus interest expense, multiplied by (ii) one minus the applica- Although the Compensation Committee has generally
ble tax rate. Our capital charge is defined as (i) the weighted attempted to structure executive compensation so as to pre-
average cost of capital determined for the Company for the serve deductibility, it also believes that there are circumstances
period multiplied by (ii) the average capital employed. Profit where the Company’s interests are best served by maintaining
before tax is calculated as total revenues (including interest flexibility in the way compensation is provided, even if it might
and dividend income) minus total costs and expenses (including result in the non-deductibility of certain compensation under
interest expense). At this time the Compensation Committee the Code.
does not intend to use the BVA metric for future performance Although equity awards may be deductible for tax pur-
unit awards. poses by the Company, the accounting rules pursuant to FASB
We did not achieve the threshold level of BVA performance ASC Topic 718 require that the portion of the tax benefit in
for performance unit awards granted in 2007 and, accordingly, excess of the financial compensation cost be recorded to addi-
no payout was made in March 2010. The amounts of the tional paid-in capital.
performance unit award payments for each of the Senior
Executives for the three-year performance period ending on Benefits and Severance
December 31, 2009 were $0 and are shown in the Summary We offer a variety of health and welfare and retirement
Compensation Table on page 25. programs to all eligible employees. The Senior Executives gen-
We did not achieve the threshold level of BVA perfor- erally are eligible for the same benefit programs on the same
mance for performance unit awards granted in 2008 and, basis as the rest of the broad-based employees who are work-
accordingly, a payout of $0 will be made in March 2011. ing in the United States. Programs which provide a different
level of benefits for Senior Executives are detailed in the chart
below but generally include the executive physical program,
long-term disability, life insurance, the Executive Severance
Plan and the Supplemental Retirement Plan.
Additionally, upon certain types of terminations of employ-
ment (other than a termination following a change in control
of the Company), severance benefits may be paid to the
Senior Executives.
2 0 11 P r o x y S t a t e m e n t 21
Descriptions of these programs and policies are as follows:
Medical, Dental and Vision Provides medical, prescription drug, dental and vision coverage for executive and eligible
covered dependents
Flexible Spending Accounts Allows executive to save pre-tax dollars for eligible health care and/or dependent day
care expenses
Executive Physical Program Complete and professional personal physical exam to be conducted on an annual basis,
up to $1,800
Retiree Medical Provides executive with access to continued medical coverage in retirement
• Eligibility: retire at age 55 with at least 10 years of service
• Retiree pays 100% of cost
• $1,500 annual company contribution from age 45; used to off-set contributions
• Pre- and Post-65 Medical Plan Options (include pharmacy program)
Short-Term Disability Provides continuation of executive benefits base pay (for weeks 1–6) and 75%
(for weeks 7–26) if out due to injury, illness, or pregnancy and unable to work
Long-Term Disability Provides continuation of a percentage of executive benefits base pay up to age 65 if
employee has disability lasting longer than 26 weeks
• Company paid core coverage: 50% income replacement up to age 65 or recovery
• Optional buy-up coverage: 60% income replacement up to age 65 or recovery
(company paid for executives)
Life Insurance and Accidental Provides financial protection for executive or beneficiaries in the event of death
Death and Dismemberment • Company paid basic life insurance and basic accidental death & dismemberment:
2 times pay, up to $3M (1 times pay for non-executives)
• Perquisite life insurance and accidental death & dismemberment: 1–3 times pay,
up to $3M (offered to executives)
• Supplemental life insurance: 1–6 times pay up to $2.5M
• Spouse and child life insurance: $25,000–$250,000 for spouse and $10,000 per child
• Voluntary accidental death & dismemberment: $25,000–$250,000
Business Travel Accident Insurance Provides financial protection to executive or beneficiaries in the event of accidental death,
dismemberment, or paralysis while traveling on Company business
• Five times pay up to $500,000
Thrift Plan Provides opportunity to save for retirement through a 401(k) retirement savings plan, which
includes before-tax and after-tax employee contributions. The Company makes additional
contributions by application of the following rates to eligible pay:
• Employee contributions equal to 0–60% of eligible compensation
• Match $1 for each $1 of employee contribution up to 5% of eligible compensation
• 2–5% (of eligible compensation) age-based contribution
• Eligible compensation generally means all current cash wages, salaries and fees for services
from the Company
• Immediate vesting in employee deferrals and company matching contributions;
full vesting of age-based contributions after three years of service
Pension Plan Provides income through a cash balance retirement plan funded through contributions made
by the Company to supplement the Thrift Plan benefit, Social Security, and personal savings
• Notional account balance established for each participant
• 2–4% (of eligible compensation) age-based pay credit
• Eligible compensation generally means all current cash wages, salaries and fees for services
from the Company not in excess of applicable legal limitations ($245,000 in 2010)
• Quarterly interest credits on account balance using certain annual rate of interest on
30-year Treasury securities (the interest rate for 2010 was 4.37%)
• Forms of payment for benefits in excess of $1,000:
– Joint and 75% survivor annuity for married individuals or subject to spousal consent
– Single lump sum or single life annuity if unmarried
• Full vesting after three years of service
• The Company does not make any special grants of extra years of credited service under
the Pension Plan for Senior Officers
Supplemental Retirement Plan Provides additional deferral and retirement benefit accumulation opportunity for Senior
Executives to mitigate the effects of legal limitations on retirement benefit accruals applicable
to U.S. tax-qualified retirement plans
• Opportunity to defer 1–60% of base salary and 1–100% of bonus
• Company makes additional contributions by applications of the following rates to
eligible pay:
– Basic Contribution: 5% of base salary plus bonus deferred under the plan plus 5% of base
salary plus bonus (whether or not deferred) over compensation limit ($245,000 in 2010)
– Age-Based Contributions: 2–5% of eligible pay over compensation limit ($245,000 in 2010)
– Pension Contributions: 2–4% of eligible pay over compensation limit ($245,000 in 2010)
– Eligible pay generally means all current cash wages, salaries and fees for services for
the Company
• Distribution payments made upon some specified period after separation from service in
accordance with Section 409A of the Code
• Forms of payment (elected prior to deferral):
– Single lump-sum cash payment
– Annual installments for 2–20 years
• Immediate vesting in employee deferrals and company matching contributions; full vesting
of age-based and pension contributions after three years of service
• Plan benefits are an unfunded obligation of the Company but are informally funded by
a rabbi trust
• Notional accounts also deemed credited with interest credits based on certain investment
sections of the participants (although there is no requirement that any of our assets actually
be invested in accordance with these investment selections)
Employee Stock Purchase Plan Encourages and enables eligible employees to voluntarily acquire proprietary interests in the
Company through the ownership of the Company’s Common Stock at a favorable price thereby
aligning the interests of the eligible employees with the interests of the Company’s stockholders
• Employees contribute 1–10% of base salary after tax up to a cap of $10,000 per year
• Two Offering Periods: January 1–June 30 and July 1–December 31
• Six-month look-back – Employees purchase Common Stock at 85% of Fair Market Value
of the stock at the beginning or the end of the offering period, whichever is lower
Executive Severance Plan Provides assistance to executives while they seek other employment following involuntary
separations from service
• 18 months of base compensation
• Outplacement services are provided for the greater of 12 months or until the value of the
outplacement services reaches the maximum of $10,000
2 0 11 P r o x y S t a t e m e n t 23
Employment Agreement economic stake in the Company. The Policy is designed to
We have an employment agreement with our PEO, dated satisfy an individual Senior Executive’s need for portfolio diver-
as of October 25, 2004 and amended and restated on Decem- sification, while maintaining management stock ownership
ber 16, 2008, effective January 1, 2009. The term of the at levels high enough to assure our stockholders of manage-
employment agreement is until October 25, 2012, with auto- ment’s commitment to value creation. Senior executives are
matic one-year renewals unless either party provides a notice required to hold the number of shares valued at a multiple
not to extend the employment agreement at least 13 months of their current base salary, in the amounts listed below:
prior to the then current expiration date. The Compensation
Committee did not provide notice not to extend the PEO’s
Chief Executive Officer 5X Base Salary
employment agreement for 2010 so the agreement was
President/Chief Operating
automatically renewed.
Officer/Chief Financial Officer/
Upon termination of the PEO’s employment and if such
Senior Vice Presidents 3X Base Salary
termination is by him for good reason or by us without cause,
Corporate Vice Presidents reporting
we pay the following severance benefits:
to CEO or COO 2X Base Salary
Lump Sum
Hemisphere Presidents 2X Base Salary
• 2 times annual base salary
• Pro rata earned highest bonus amount
A Senior Executive has five years to comply with the own-
• Amount equal to employer contributions to
ership requirement starting from the date of appointment to
Supplemental Retirement Plan for term remainder
a position noted above. If a Senior Executive is promoted to
• Amount equal to life insurance premium for
a position with a higher ownership salary multiple, the Senior
term remainder
Executive will have five years from the date of the change in
• Interest amount for any of the foregoing payments
position to reach the higher expected stock ownership level
delayed due to Section 409A
but still must meet the prior expected stock ownership level
• Accident and health coverage for term remainder
within the original five years of the date first appointed to
• Perquisites for term remainder
such prior position. For those Senior Executives with the own-
ership requirements reflected in hiring letters, the date of hire
Change in Control Agreements
marks the start of the five-year period.
In addition to this employment agreement, we have
Until a Senior Executive achieves the applicable stock own-
entered into change in control agreements (“Change in
ership level, the following requirements assist the executive in
Control Agreements”) with the Senior Executives, as well as
achieving his required ownership level:
certain other Executives. The Change in Control Agreements
• Net profit shares from restricted stock vests must be held.
are described in the Payments Upon a Change in Control
After the payment of taxes due as a result of the vesting,
section on page 30.
the Senior Executive is required to hold the remaining
shares.
Indemnification Agreements
• After the exercise of a stock option, 50% of the net profit
We have entered into an indemnification agreement with
shares remaining after the payment of applicable taxes must
each of our directors and Senior Executives. The form of such
be held.
agreement has been filed with the SEC. These agreements
provide that we indemnify such persons against certain liabili-
Certification of Stock Ownership Levels
ties that may arise by reason of their status or service as direc-
The Compensation Committee annually reviews each
tors or officers, to advance their expenses incurred as a result
Senior Executive’s compensation and stock ownership levels
of a proceeding as to which they may be indemnified and to
to determine whether they are appropriate. In 2010, the PEO
cover such person under any directors’ and officers’ liability
and the NEO’s were in compliance with the Compensation
insurance policy we choose, in our discretion, to maintain.
Committee’s required levels of stock ownership.
These indemnification agreements are intended to provide
Deviations from the Stock Ownership Policy can only be
indemnification rights to the fullest extent permitted under
approved by the Compensation Committee or the PEO, and
applicable indemnification rights statutes in the State of Dela-
then only because of a personal hardship.
ware and shall be in addition to any other rights the indemni-
tee may have under the Company’s Restated Certificate of
Tally Sheets
Incorporation, Bylaws and applicable law. We believe these
The Company prepares a detailed summary for each
indemnification agreements enhance our ability to attract and
named executive officer that includes their current program
retain knowledgeable and experienced Senior Executives and
participation and levels, historical compensation levels, in the
independent, non-management directors.
money value of incentives and equity, value of perquisites,
retirement benefits and other forms of indirect compensation,
Stock Ownership Policy
severance and change in control benefits. These summary
The Board of Directors, upon the Compensation Commit-
sheets are presented to the Compensation Committee for
tee’s recommendation, adopted a Stock Ownership Policy for
their information so as to facilitate a holistic view of our
our Senior Executives to ensure that they have a meaningful
compensation programs.
Summary Compensation Table
The following table sets forth the compensation earned by the PEO and other NEOs for services rendered to the Company and
its subsidiaries for the fiscal years ended December 31, 2010, 2009 and 2008. Bonuses are paid under the Company’s applicable
incentive compensation guidelines and are generally paid in the year following the year in which the bonus is earned.
Change in Pension
Value and
Non-Qualified
Non-Equity Deferred
Stock Option Incentive Plan Compensation (4) All Other
Name and Salary Bonus Awards (1) Awards (1) Compensation (2) (3) Earnings Compensation (5) Total
Principal Position Year ($) ($) ($) ($) ($) ($) ($) ($)
(6)
Chad C. Deaton – 2010 1,283,461 0 2,510,568 2,172,269 3,126,755 12,654 338,256 9,443,963
Principal Executive Officer 2009 1,155,000 0 2,490,485 2,692,629 1,996,087 12,185 431,127 8,777,513
2008 1,142,308 0 3,151,769 2,123,830 6,383,399 11,200 332,834 13,145,340
(7)
Peter A. Ragauss – 2010 689,615 0 879,408 757,656 1,192,288 11,788 149,664 3,680,420
Principal Financial Officer 2009 618,622 0 808,814 871,791 741,712 11,332 180,261 3,232,532
2008 562,800 0 1,120,526 617,983 2,091,601 10,300 121,470 4,524,680
(8) (9)
Martin S. Craighead – 2010 711,539 0 1,073,256 926,024 1,254,413 13,188 154,966 4,133,385
President and 2009 573,077 0 752,421 805,561 678,410 11,498 147,320 2,968,287
Chief Operating Officer 2008 450,000 0 836,005 479,350 732,264 10,600 90,074 2,598,293
(8) (10)
Alan R. Crain – 2010 502,154 0 567,360 491,892 836,334 13,834 115,221 2,526,795
Senior Vice President 2009 473,000 0 554,379 599,342 494,353 13,345 140,716 2,275,135
and General Counsel 2008 469,000 0 840,969 484,685 1,503,595 12,400 112,152 3,422,801
(8) (11)
John A. O’Donnell – 2010 424,154 100,000 359,328 545,712 479,872 13,799 93,040 2,015,905
Vice President 2009 374,173 0 316,891 340,767 291,335 13,340 107,920 1,444,426
and President, 2008 329,192 0 533,531 163,266 611,743 12,418 78,901 1,729,051
Western Hemisphere
Operations
(1) Restricted stock awards were granted on January 19, 2010. Stock option awards were granted on January 19, 2010 at an exercise price of $47.28 and on July 21,
2010 at an exercise price of $49.17. The amounts included in the Stock Awards and Option Awards columns represent the aggregate grant date fair value of the
awards made to NEOs computed in accordance with FASB ASC Topic 718. The value ultimately realized by the executive upon the actual vesting of the award(s) or
the exercise of the stock option(s) may or may not be equal to the FASB ASC Topic 718 determined value. For a discussion of valuation assumptions, see “Note 5 –
Stock-Based Compensation” of the Notes to Consolidated Financial Statements included in our annual report under Item 8 of the Form 10-K for the year ended
December 31, 2010.
(2) The amounts for the 2010 fiscal year include annual performance bonuses earned under the Annual Incentive Compensation Plan by Messrs. Deaton, Ragauss,
Craighead, Crain, and O’Donnell in the amounts of $988,753, $397,772, $410,893, $241,376 and $163,099, respectively, as well as cash-based awards under the
2002 D&O Plan to Messrs. Deaton, Ragauss, Craighead, Crain, and O’Donnell in the amounts of $915,000, $380,000, $400,000, $320,000 and $150,000, respec-
tively. In addition, these amounts include the payouts earned under the performance units granted in 2009 and 2010 to Messrs. Deaton, Ragauss, Craighead, Crain,
and O’Donnell in the amounts of $606,667, $212,696, $258,619, $137,769, and $87,012, respectively, for the 2010 grant and $616,335, $201,820, $184,901,
$137,189, and $79,761, respectively, for the 2009 grant. These amounts are not payable until the close of the three-year performance period in March of 2012
and March 2013 for the performance units granted in 2009 and 2010, respectively, and are generally subject to the NEO’s continued employment through the
end of the three-year performance periods.
(3) Amounts for fiscal year 2009 have been adjusted to include the payout earned for the performance units granted in 2009 to Messrs. Deaton, Ragauss, Craighead,
Crain, and O’Donnell in the amounts of $478,125, $156,563, $143,438, $106,425, and $61,875, respectively. These amounts are not payable until the close of the
three-year performance period in March of 2012.
(4) This amount represents the change in value under the Baker Hughes Incorporated Pension Plan. There are no deferred compensation earnings reported in this column
because the Company’s non-qualified deferred compensation plans do not provide above-market or preferential earnings.
(5) Amounts for fiscal years 2009 and 2008 have been adjusted to reflect a change in the amounts disclosed for payments made by the Company on behalf of the
NEOs for life insurance premiums. The Company paid life insurance premiums on behalf of Messrs. Deaton, Ragauss, Craighead, Crain, and O’Donnell in the amounts
of $4,602, $2,263, $1,793, $1,886, and $1,327, respectively, for 2009 and of $4,382, $2,175, $1,793, $1,813, and $1,263, respectively, for 2008.
(6) Amount for 2010 includes (i) $221,583 that the Company contributed to Mr. Deaton’s SRP account, (ii) an annual perquisite allowance of $25,000, (iii) $68,603 in
dividends earned on holding of Company common stock, (iv) $3,160 in life insurance premiums paid by the Company on behalf of Mr. Deaton and (v) $19,910 in
employer matching and employer base contributions that the Company contributed to the Thrift Plan on behalf of Mr. Deaton.
(7) Amount for 2010 includes (i) $80,562 that the Company contributed to Mr. Ragauss’ SRP account, (ii) an annual perquisite allowance of $20,000, (iii) $25,274 in
dividends earned on holdings of Company common stock, (iv) $1,778 in life insurance premiums paid by the Company on behalf of Mr. Ragauss and (v) $22,050
in employer matching and employer base contributions that the Company contributed to the Thrift Plan on behalf of Mr. Ragauss.
(8) Because Messrs. Crain, Craighead and O’Donnell are eligible for retirement based upon their ages and years of service with the Company and, accordingly, their
options will automatically vest upon retirement, the Company expenses the full value of their options upon grant for purposes of FASB ASC Topic 718.
(9) Amount for 2010 includes (i) $88,959 that the Company contributed to Mr. Craighead’s SRP account, (ii) an annual perquisite allowance of $20,000, (iii) $24,104
in dividends earned on holdings of Company common stock, (iv) $1,778 in life insurance premiums paid by the Company on behalf of Mr. Craighead and (v) $20,125
in employer matching and employer base contributions that the Company contributed to the Thrift Plan on behalf of Mr. Craighead.
(10) Amount for 2010 includes (i) $59,532 that the Company contributed to Mr. Crain’s SRP account, (ii) an annual perquisite allowance of $20,000, (iii) $15,966 in
dividends earned on holdings of Company common stock, (iv) $1,294 in life insurance premiums paid by the Company on behalf of Mr. Crain and (v) $18,429
in employer matching and employer base contributions that the Company contributed to the Thrift Plan on behalf of Mr. Crain.
(11) Amount for 2010 includes (i) $41,536 that the Company contributed to Mr. O’Donnell’s SRP account, (ii) an annual perquisite allowance of $20,000, (iii) $9,840 in
dividends earned on holdings of Company common stock, (iv) $1,094 in life insurance premiums paid by the Company on behalf of Mr. O’Donnell and (v) $20,570
in employer matching and employer base contributions that the Company contributed to the Thrift Plan on behalf of Mr. O’Donnell.
2 0 11 P r o x y S t a t e m e n t 25
Grants of Plan-Based Awards
This table discloses the number of stock options and restricted stock awards granted during 2010 and the grant date fair value
of these awards. It also captures potential future payouts under the Company’s non-equity incentive plans.
All Other
All Other Option Awards: Exercise Grant Date
Estimated Future Payouts Under Non-Equity Stock Awards: Number of or Base Closing Fair Value
Incentive Plan Awards Number of Securities Price of Market Price of Stock
Shares of Stock Underlying Option on Date and Option
Threshold Target Maximum or Units (1) Options (2) Awards (3) of Grant Awards
Name Grant Date ($) ($) ($) (#) (#) ($/Sh) ($/Sh) ($)
Chad C. Deaton 7/21/2010 64,500 49.17 48.26 1,092,630

1/19/2010 67,100 47.28 48.05 1,079,639
1/19/2010 53,100 2,510,568
N/A 266,700 (4) 1,524,000 (4) _ (4)
N/A 627,500 (5) 2,510,000 (5) 5,020,000 (5)
Peter A. Ragauss 7/21/2010 22,500 49.17 48.26 381,150

1/19/2010 23,400 47.28 48.05 376,506
1/19/2010 18,600 879,408
N/A 105,525 (4) 603,000 (4) _ (4)
N/A 220,000 (5) 880,000 (5) 1,760,000 (5)
Martin S. Craighead 7/21/2010 27,500 49.17 48.26 465,850

1/19/2010 28,600 47.28 48.05 460,174
1/19/2010 22,700 1,073,256
N/A 110,250 (4) 630,000 (4) _ (4)
N/A 267,500 1,070,000 2,140,000 (5)
(5) (5)
Alan R. Crain 7/21/2010 14,600 49.17 48.26 247,324

1/19/2010 15,200 47.28 48.05 244,568
1/19/2010 12,000 567,360
N/A 64,050 (4) 366,000 (4) _ (4)
N/A 142,500 (5) 570,000 (5) 1,140,000 (5)
John A. O’Donnell 10/21/2010 5,000 45.19 45.10 74,500

7/21/2010 9,200 49.17 48.26 155,848
1/19/2010 19,600 47.28 48.05 315,364
1/19/2010 7,600 359,328
N/A 43,260 (4) 247,200 (4) _ (4)
(5)
N/A 90,000 360,000 720,000 (5)
(5)
(1) Amounts shown represent the number of shares granted under the 2002 D&O Plan in 2010 for restricted stock awards. Awards vest ratably one-third per year
beginning on the first anniversary of the grant date. The NEOs have the right to receive and retain all regular cash dividends on the restricted stock awards before
the awards vest. The dividend rate is determined by the Board of Directors on a quarterly basis.
(2) Amounts represent options granted in 2010 under the 2002 D&O Plan. Awards vest ratably over a three-year period beginning on the first anniversary of the
grant date.
(3) Our practice is that the exercise price for each stock option is the closing stock price of a share of our Common Stock on the last trading day before the date of grant.
(4) Amounts represent potential payouts for the fiscal 2010 performance year under the Annual Incentive Compensation Plan as well as potential payouts for discretionary
bonuses at the expected value threshold. If threshold levels of performance are not met, then the payout can be zero. There is no maximum amount that may be
earned under an Annual Incentive Compensation Plan award other than the stockholder approved maximum dollar limitation of $4,000,000 per award.
(5) Amounts represent the potential payouts for the Long-Term Performance Unit Awards granted in fiscal 2010 which are paid in cash. These awards cliff vest after
three years if the performance criteria are met.
Outstanding Equity Awards at Fiscal Year-End
The following table shows outstanding stock option awards classified as exercisable and unexercisable as of December 31, 2010
for the PEO and each NEO. The table also shows unvested and unearned stock awards assuming a market value of $57.17 a share
(the closing market price of the Company’s stock on December 31, 2010).
Option Awards Stock Awards
Number of Number of
Securities Securities
Underlying Underlying Market Value of
Unexercised Unexercised Option Number of Shares Shares or Units of
Options Options Exercise Option or Units of Stock that Stock that Have
Exercisable Unexercisable Price (1) Expiration Have Not Vested (3) Not Vested
Name (#) (#) ($) Date (2) (#) ($)
Chad C. Deaton 0 64,500 49.17 7/21/2020 122,323 6,993,206

0 67,100 47.28 1/19/2020
35,861 71,722 39.52 7/22/2019
36,647 73,294 29.18 1/21/2019
28,698 14,350 77.20 8/11/2018
31,528 15,765 69.92 1/23/2018
55,000 0 82.28 7/25/2017
42,592 0 68.54 1/24/2017
45,887 0 80.73 7/27/2016
45,887 0 75.06 1/25/2016
90,000 0 56.21 7/27/2015
90,000 0 42.60 1/26/2015
75,000 0 43.39 10/25/2014
Peter A. Ragauss 0 22,500 49.17 7/21/2020 41,081 2,348,601

0 23,400 47.28 1/19/2020
12,398 24,796 39.52 7/22/2019
10,778 21,558 29.18 1/21/2019
8,350 4,176 77.20 8/11/2018
9,173 4,588 69.92 1/23/2018
13,245 0 82.28 7/25/2017
13,245 0 68.54 1/24/2017
15,025 0 80.73 7/27/2016
47,734 0 75.93 4/26/2016
Martin S. Craighead 0 27,500 49.17 7/21/2020 41,897 2,395,251

0 28,600 47.28 1/19/2020
13,049 26,100 39.52 7/22/2019
7,760 15,522 29.18 1/21/2019
6,477 3,239 77.20 8/11/2018
7,115 3,559 69.92 1/23/2018
9,801 0 82.28 7/25/2017
3,400 0 67.16 3/30/2017
4,391 0 68.54 1/24/2017
4,133 0 80.73 7/27/2016
3,543 0 75.06 1/25/2016
7,500 0 56.21 7/27/2015
4,800 0 42.60 1/26/2015
8,800 0 39.23 7/28/2014
2 0 11 P r o x y S t a t e m e n t 27
Number of Number of
Securities Securities
Underlying Underlying Market Value of
Unexercised Unexercised Option Number of Shares Shares or Units of
Options Options Exercise Option or Units of Stock that Stock that Have
Exercisable Unexercisable Price (1) Expiration Have Not Vested (3) Not Vested
Name (#) (#) ($) Date (2) (#) ($)
Alan R. Crain 0 14,600 49.17 7/21/2020 28,017 1,601,732

0 15,200 47.28 1/19/2020
0 15,964 39.52 7/22/2019
0 16,315 29.18 1/21/2019
6,549 3,275 77.20 8/11/2018
7,195 3,598 69.92 1/23/2018
11,471 0 82.28 7/25/2017
9,461 0 68.54 1/24/2017
13,500 0 80.73 7/27/2016
10,500 0 75.06 1/25/2016
5,500 0 56.21 7/27/2015
5,500 0 42.60 1/26/2015

2,792 0 35.81 1/28/2014
3,418 0 29.25 1/29/2013
John A. O’Donnell 0 5,000 45.19 10/21/2020 16,662 952,567

0 9,200 49.17 7/21/2020
0 19,600 47.28 1/19/2020
0 10,175 39.52 7/22/2019
0 7,761 29.18 1/21/2019
2,281 1,141 77.20 8/11/2018
2,332 1,167 69.92 1/23/2018
4,240 0 82.28 7/25/2017
4,232 0 68.54 1/24/2017
3,543 0 80.73 7/27/2016
3,543 0 75.06 1/25/2016
5,000 0 56.21 7/27/2015
2,200 0 42.60 1/26/2015
(1) The exercise price is equal to the closing market price of a share of our Common Stock on the last trading day prior to the grant date.
(2) Each option grant has a ten-year term. Each option vests pro rata as to one-third of the option grant beginning on the first anniversary of grant date.
(3) Each restricted stock award vests pro rata as to one-third of the grant beginning on the first anniversary of grant date.
Option Exercises and Stock Vested

The following table sets forth certain information regarding options and stock awards exercised and vested, respectively, during
2010 for the persons named in the Summary Compensation Table above.
Number of Shares Value Realized Number of Shares Value Realized

Acquired on Exercise on Exercise (1) Acquired on Vesting on Vesting (2)
Name (#) ($) (#) ($)
Chad C. Deaton 0 0 50,674 2,309,202

Peter A. Ragauss 0 0 29,201 1,437,469
Martin S. Craighead 0 0 18,115 829,381
Alan R. Crain 16,139 293,390 16,883 760,286
John A. O’Donnell 12,634 215,306 6,591 296,884
(1) The value realized upon the exercise of the option award is determined by multiplying the number of shares acquired on exercise by the difference between the
market price of the stock at exercise and the exercise price of the option.
(2) The value realized upon the vesting of the stock awards is determined by multiplying the number of shares of stock by the market value of the stock on the
vesting date.
Pension Benefits
The following table discloses the years of credited service of, present single-sum value of the accrued benefits for, and payments
during the last fiscal year to each of the PEO and other NEOs under the Pension Plan. See “Compensation Discussion & Analysis,
Benefits and Severance, Pension Plan” for a detailed description of the benefits provided under the Pension Plan.
Number of Years Present Value of Payments During

Credited Service (1) Accumulated Benefit (2) Last Fiscal Year
Name Plan Name (#) ($) ($)
Chad C. Deaton Pension Plan 6 (3) 65,852 0

Peter A. Ragauss Pension Plan 4 44,423 0
Martin S. Craighead Pension Plan 9 72,609 0
Alan R. Crain Pension Plan 9 (3) 93,384 0
John A. O’Donnell Pension Plan 9 (3) 96,154 0
(1) The number of years of credited service is less than the actual years of service for Messrs. Craighead, Crain and O’Donnell because the Pension Plan was not adopted
until 2002.
(2) For a discussion of valuation assumptions, see “Note 13 – Employee Benefit Plans” of the Notes to Consolidated Financial Statements included in our Annual Report
under Item 8 of the Form 10-K for the year ended December 31, 2010.
(3) Messrs. Deaton, Crain and O’Donnell are eligible for early retirement under the Pension Plan which allows them to receive their plan benefits on that early retirement
date rather than waiting until the normal retirement age of 65.
Nonqualified Deferred Compensation

The following table discloses contributions, earnings and balances to each of the PEO and other NEOs under the SRP that
provides for compensation deferral on a non-tax-qualified basis. See “Compensation Discussion & Analysis, Benefits and Severance,
Supplemental Retirement Plan” for a detailed description of the deferred compensation benefits.
Executive Contributions Registrant Contribution Aggregate Earnings Aggregate Withdrawals/ Aggregate Balance
in Last FY (1) In Last FY (2) In Last FY Distributions at Last FYE (3)
Name ($) ($) ($) ($) ($)
Chad C. Deaton 227,439 221,583 204,830 0 4,346,554

Peter A. Ragauss 37,773 80,562 98,057 0 759,264
Martin S. Craighead 119,669 88,959 80,980 0 1,246,023
Alan R. Crain 58,950 59,532 102,493 0 1,431,152
John A. O’Donnell 81,087 41,536 33,865 0 677,722
(1) Amounts shown in the “Executive Contributions in Last FY” column are also included in the “Salary” and “Non-Equity Incentive Plan Compensation” columns of the
Summary Compensation Table.
(2) Amounts shown in the “Registrant Contribution in Last FY” column are also included in the “All Other Compensation” column of the Summary Compensation Table.
(3) Of the totals in this column, the following amounts, which represent executive and registrant contributions attributable to 2010, are also reported in the Summary
Compensation Table: Mr. Deaton, $449,022; Mr. Ragauss, $118,335; Mr. Craighead, $208,628; Mr. Crain, $118,482; and Mr. O’Donnell, $112,623. In addition, the
executive and registrant contributions for years prior to 2010 made on behalf of each NEO were previously reported in the Summary Compensation Tables for prior
years to the extent the NEO’s were named executive officers in prior years.
2 0 11 P r o x y S t a t e m e n t 29
Potential Payments Upon Termination or The foregoing benefits are not payable if Mr. Deaton is
Change in Control entitled to benefits under his Change in Control Agreement
as discussed in more detail below.
Employment Agreement with Chad C. Deaton If Mr. Deaton’s employment with us is terminated for
We have an employment agreement with Mr. Chad C. any reason, including a termination by him without good
Deaton, dated as of October 25, 2004 and amended and reason or a termination by us for cause, he is to receive those
restated effective January 1, 2009. The term of the employ- vested benefits to which he is entitled under the terms of
ment agreement expires on October 25, 2012, with automatic the employee benefit plans in which he is a participant as
one-year renewals unless we or Mr. Deaton provide a notice of the date of termination and any accrued vacation pay
not to extend the employment agreement at least thirteen to the extent not theretofore paid.
months prior to the then current expiration date. During the
term of Mr. Deaton’s employment with us, and for a period of Payments Upon a Change in Control
two years thereafter, Mr. Deaton is prohibited from engaging We have entered into Change in Control Agreements
in competition (as defined in the employment agreement) with with each of the Senior Executives. The agreements are
us and soliciting our customers, employees and consultants. intended to provide for continuity of management in the event
of a change of control. The term of each agreement is for a
Termination of Employment Due to Death or Disability three-year period and automatically extends for an additional
Upon the termination of Mr. Deaton’s employment due two years from the effective date of the agreement unless we
to his disability (his incapacity due to physical or mental illness) have given eighteen months prior notice that the agreement
or death, we will pay him or his beneficiary: will not be extended.
• a lump-sum cash payment equal to one-half his then base
salary for each year (prorated for partial years) during the Payments in the Event of a Change in Control
remaining term of the employment agreement; and If a Change in Control were to have occurred on Decem-
• a lump-sum cash payment equal to his expected value ber 31, 2010, whether or not the Senior Executive incurred a
incentive bonus for the year of termination. termination of employment in connection with the Change in
Control, the Senior Executive would have become entitled to
Termination of Employment by Mr. Deaton receive the following under the terms of the Change in Con-
for Good Reason or by Us Without Cause trol Agreements, the SRP, the Annual Incentive Compensation
Upon the termination of Mr. Deaton’s employment by Plan and awards under the 2002 D&O Plan:
him for good reason (generally, a material breach by us of • all outstanding options to acquire our stock would have
the employment agreement) or by us without cause, we will become fully vested and immediately exercisable;
pay him: • all outstanding restricted stock awards would have become
• a lump-sum cash payment in an amount equal to two times fully vested and nonforfeitable;
his then base salary; • a lump-sum cash payment in an amount equal to $100 mul-
• a lump-sum cash payment equal to Mr. Deaton’s highest tiplied by the number of performance units specified in the
bonus amount (as defined in his employment agreement), Senior Executive’s performance unit award agreement, mul-
prorated to the date of termination; tiplied by the number of days during the performance
• for the remainder of the term of the employment agree- period through December 30, 2010 divided by the number
ment, continuation of executive perquisites (other than of days during the performance period;
executive life insurance); • a lump-sum cash payment (a “gross-up” payment) in an
• for the remainder of the term of the employment agree- amount equal to the excise taxes that may be imposed
ment, continuation of medical insurance benefits at active under the “golden parachute” rules on payments and bene-
employee premium rates; fits received in connection with the Change in Control. The
• a lump-sum cash payment equivalent to the monthly basic gross-up payment would make the Senior Executive whole
life insurance premium applicable to Mr. Deaton’s basic life for excise taxes (and for all taxes on the gross-up payment)
insurance coverage on the date of termination multiplied in respect of payments and benefits received pursuant to all
by the number of months remaining in the term of the the Company’s plans, agreements and arrangements (includ-
employment agreement; ing for example, acceleration of vesting of equity awards);
• a lump-sum cash payment equal to continued employer • accelerated vesting of all the Senior Executive’s accounts
contributions to the SRP for the remainder of the term of under the SRP, to the extent not already vested;
the employment agreement; and • reimbursement for any legal fees and expenses incurred by
• a lump-sum cash payment equal to the amount of interest the Senior Executive in seeking in good faith to enforce the
that would be earned on any of the foregoing payments Change in Control Agreement or in connection with any tax
subject to a six-month payment delay under Section 409A audit or proceeding relating to the application of parachute
using the six-month London Interbank Offered Rate plus payment excise taxes to any payment or benefit under the
two percentage points. Change in Control Agreement; and
• an amount equal to his Annual Incentive Compensation Plan If a Senior Executive meets the criteria for payment of
bonus computed as if the target level of performance had severance benefits due to termination of employment follow-
been achieved, multiplied by a fraction, the numerator of ing a Change of Control, he will receive the following benefits
which is the number of the Senior Executive’s months of in addition to the benefits described above under “Payments
participation during the calendar year through the date of in the Event of a Change in Control”:
Change in Control and the denominator of which is 12. • a lump-sum payment equal to three times the Senior
In general, “Change in Control” means Executive’s highest base salary (as defined in the Change
• the individuals who are incumbent directors cease for any of Control Agreement);
reason to constitute a majority of the members of our Board • a lump-sum payment equal to the Senior Executive’s earned
of Directors; highest bonus amount (as defined in the Change of Control
• the consummation of a merger of us or our affiliate with Agreement), prorated based upon the number of days of his
another entity, unless the individuals and entities who were service during the performance period (reduced by any pay-
the beneficial owners of our voting securities outstanding ments received by the Senior Executive under the Company’s
immediately prior to such merger own, directly or indirectly, Annual Incentive Compensation Plan, in connection with the
at least 50% of the combined voting power of our voting Change in Control if the Senior Executive’s termination of
securities, the surviving entity or the parent of the surviving employment occurs during the same calendar year in which
entity outstanding immediately after such merger; the Change in Control occurs);
• any person, other than us, our affiliate or another specified • a lump-sum payment equal to three times the greater of
owner (as defined in the Change in Control Agreements), (i) the Senior Executive’s earned highest bonus amount
becomes a beneficial owner, directly or indirectly, of our or (ii) the Senior Executive’s highest base salary multiplied
securities representing 30% or more of the combined voting by the Senior Executive’s applicable multiple, which is 1.20;
power of our then outstanding voting securities; 0.80; 0.70; 0.75; and 0.70 for Messrs. Deaton, Ragauss;
• a sale, transfer, lease or other disposition of all or substan- Craighead; Crain and O’Donnell, respectively;
tially all of our assets (as defined in the Change in Control • continuation of accident and health insurance benefits for
Agreements) is consummated (an “asset sale”), unless (i) the an additional three years;
individuals and entities who were the beneficial owners of • a lump-sum payment equal to the sum of (i) the cost of the
our voting securities immediately prior to such asset sale Senior Executive’s perquisites in effect prior to his termina-
own, directly or indirectly, 50% or more of the combined tion of employment for the remainder of the calendar year
voting power of the voting securities of the entity that and (ii) the cost of the Senior Executive’s perquisites in effect
acquires such assets in such asset sale or its parent immedi- prior to his termination of employment for an additional
ately after such asset sale in substantially the same propor- three years;
tions as their ownership of our voting securities immediately • a lump-sum payment equal to the undiscounted value of
prior to such asset sale or (ii) the individuals who comprise the benefits the Senior Executive would have received had
our Board of Directors immediately prior to such asset sale he continued to participate in the Thrift Plan, the Pension
constitute a majority of the board of directors or other gov- Plan and the SRP for an additional three years, assuming
erning body of either the entity that acquired such assets in for this purpose that:
such asset sale or its parent (or a majority plus one member (1) the Senior Executive’s compensation during that three-
where such board or other governing body is comprised of year period were his highest base salary and earned
an odd number of directors); or highest bonus amount, and
• our stockholders approve a plan of complete liquidation or (2) the Senior Executive’s contributions to and accruals
dissolution of us. under those plans remained at the levels in effect as of
the date of the Change in Control or the date of termi-
Payments in the Event of a Change in Control and Termination nation, whichever is greater;
of Employment by the Senior Executive for Good Reason or by • eligibility for our retiree medical program if the Senior
the Company or its Successor Without Cause Executive would have become entitled to participate in
Pursuant to the Change in Control Agreements, the Com- that program had he remained employed for an additional
pany (or its successor) will pay severance benefits to a Senior three years; (1)
Executive if the Senior Executive’s employment is terminated • a lump-sum payment equivalent to 36 multiplied by the
following, or in connection with, a Change in Control, unless: monthly basic life insurance premium applicable to the
(i) the Senior Executive resigns without good reason; (ii) the Senior Executive’s basic life insurance coverage on the date
Company terminated the employment of the Senior Executive of termination;
for cause; or (iii) the employment of the Senior Executive is
terminated by reason of death or disability. (1) The value of this benefit is the aggregate value of the medical coverage
utilizing the assumptions applied under FASB ASC Topic 715, Compensation-
Retirement Benefits.
2 0 11 P r o x y S t a t e m e n t 31
• a lump-sum payment of $30,000 for outplacement services; • all outstanding stock options granted by us would have
and become fully vested and exercisable;
• a lump-sum payment equal to the amount of interest that • a lump-sum cash payment in an amount equal to the
would be earned on any of the foregoing payments subject applicable performance unit value multiplied by the number
to a six-month payment delay under Section 409A using the of performance units specified in the Senior Executive’s per-
six-month London Interbank Offered Rate plus two percent- formance unit award agreement, multiplied by the number
age points. of days during the performance period through December
30, 2010, divided by the number of days during the perfor-
Payments Upon Termination of Employment mance period;
in Connection With the Sale of a Business Unit • accelerated vesting of all the Executive’s accounts under the
If (i) on December 31, 2010 we or one of our affiliates SRP, to the extent not already vested; and
sold a business unit, (ii) on December 31, 2010 the Senior • an amount equal to his earned Annual Incentive Compen
Executive’s employment with us terminated in connection with sation Plan bonus, prorated based upon the number of
the sale, and (iii) the sale did not constitute a Change in Con- months of the Senior Executive’s participation in the Annual
trol, he would receive the following: Incentive Compensation Plan during the calendar year.
• a pro rata portion of the Senior Executive’s then outstanding
restricted stock awards granted by us would have become Payments Upon Involuntary Termination of Employment
vested and nonforfeitable. The forfeiture restrictions would Not In Connection With a Change in Control
have lapsed as to that number of shares of restricted stock The Baker Hughes Executive Severance Plan provides for
that were subject to forfeiture restrictions on December 31, payment of certain benefits to the Senior Executives as a result
2010, multiplied by the applicable reduction factor, the of an involuntary termination of employment provided that
number of days during the period commencing on the date (i) the executive signs a release agreement substantially similar
of grant of the award and ending on December 31, 2010, to the form of release agreement set forth in the Executive
divided by the number of days the Senior Executive would Severance Plan, (ii) during the two-year period commencing
be required to work to achieve full vesting under the normal on the date of termination of employment he complies with
vesting provisions of the award; the noncompetition and non-solicitation agreements contained
• all outstanding stock options would have become fully in the Executive Severance Plan and (iii) the executive does
vested and exercisable; and not disclose our confidential information. Any amounts pay-
• an amount equal to his earned Annual Incentive Compen able under the Executive Severance Plan are reduced by the
sation Plan bonus, prorated based upon the number of amount of any severance payments payable to the Senior
months of the Senior Executive’s participation in the Annual Executive by us under any other plan, program or individual
Incentive Compensation Plan during the calendar year. contractual arrangement.
If the Senior Executive meets the criteria for payment of
Payments Upon Death or Disability severance benefits due to an involuntary termination, we will
If the Senior Executive had terminated employment with pay him the following benefits:
us on December 31, 2010 due to death or disability, he would • a lump-sum cash payment equal to one and one-half times
receive the following: the Senior Executive’s annual base salary in effect immedi-
• all outstanding restricted stock awards granted by us would ately prior to his termination of employment; and
have become fully vested and nonforfeitable; • outplacement services for a period of 12 months, but not
• all outstanding stock options granted by us would have in excess of $10,000; and
become fully vested and exercisable; • if the Senior Executive’s termination of employment results
• a lump-sum cash payment in an amount equal to $100 from a reduction of employment or the elimination of his
multiplied by the number of performance units specified in job, an amount equal to his earned Annual Incentive Com-
the Senior Executive’s performance unit award agreement, pensation Plan bonus, prorated based upon the number of
multiplied by the number of days during the performance months of the Senior Executive’s participation in the Annual
period through December 31, 2010, divided by the number Incentive Compensation Plan during the calendar year.
of days during the performance period;
• accelerated vesting of all the Senior Executive’s accounts Termination of Employment for Any Reason
under the SRP, to the extent not already vested; and If the Senior Executive had terminated employment with
• an amount equal to his earned Annual Incentive Compen us on December 31, 2010 for any reason, including his resig-
sation Plan bonus, prorated based upon the number of nation or his involuntary termination of employment for cause,
months of the Senior Executive’s participation in the Annual he would have been entitled to receive those vested benefits
Incentive Compensation Plan during the calendar year. to which he is entitled under the terms of the employee ben
efit plans in which he is a participant as of the date of termi-
Payments Upon Retirement nation of employment. Unless the Senior Executive were to
If the Senior Executive had terminated employment on have incurred a termination of employment by us for cause
December 31, 2010 and meets the eligibility requirements he would also have been entitled to any vested outstanding
for retirement, he would receive the following benefits: stock options.
The table below assumes a termination date or change in control date of December 31, 2010, the last business day of the fiscal
year. The value of equity compensation awards (accelerated vesting of stock options and restricted stock awards) is based on the
closing price of our common stock of $57.17 on the New York Stock Exchange on December 31, 2010.
Chad C. Deaton Peter A. Ragauss Martin S. Craighead Alan R. Crain John A. O’Donnell
($) ($) ($) ($) ($)
Payments Upon a Change in Control

Without Termination of Employment
Accelerated Vesting of Option Awards 4,497,011 1,452,484 1,397,980 1,005,549 724,163
Accelerated Vesting of Restricted
Stock Awards 6,993,206 2,348,601 2,395,251 1,601,732 952,567
Payment in Settlement of Performance
Unit Awards 5,716,700 1,775,055 1,583,577 1,294,143 574,860
Excise Tax Gross-Up – – – – –
Annual Incentive Bonus 1,524,000 603,000 630,000 366,000 247,200
TOTAL 18,730,917 6,179,140 6,006,808 4,267,424 2,498,790
Payments in the Event of a Change

in Control and Termination of
Employment With Good Reason
or by the Company Without Cause
Stock Awards 6,993,206 2,348,601 2,395,251 1,601,732 952,567
Payment in Settlement of Performance
Unit Awards 5,716,700 1,775,055 1,583,577 1,294,143 574,860
Excise Tax Gross-Up 6,548,454 2,657,846 2,885,500 – –
Severance Payment 9,335,652 3,819,000 3,990,000 2,964,926 1,978,346
Earned Highest Bonus Amount Prorated 1,841,884 603,000 630,000 500,309 247,449
Continuation of Accident and Health
Insurance Benefits 64,723 75,464 75,615 73,309 43,474
Perquisite Payment 75,000 60,000 60,000 60,000 60,000
Payment for Loss of Thrift Plan,
SRP and Pension Plan Accruals 1,277,667 496,829 437,385 412,809 276,968
Life Insurance Premium Payment 9,480 5,335 5,335 3,882 3,283
Outplacement Services 30,000 30,000 30,000 30,000 30,000
Interest Paid For Section 409A
Six-Month Delay 292,856 116,769 119,962 93,679 61,143
TOTAL 36,682,633 13,440,383 13,610,605 8,040,338 4,952,253
Payments upon Termination

of Employment in Connection
With the Sale of a Business Unit
Stock Awards (1) 3,684,766 1,210,617 1,126,560 851,713 485,376
Annual Incentive Bonus 1,524,000 603,000 630,000 366,000 247,200
TOTAL 9,705,777 3,266,101 3,154,540 2,223,262 1,456,739
Payments upon Death or Disability

Stock Awards 6,993,206 2,348,601 2,395,251 1,601,732 952,567
Payment in Settlement of
Performance Units 5,716,700 1,775,055 1,583,577 1,294,143 574,860
One-Half Base Salary Payment 1,153,757 (2) – – – –
Annual Incentive Bonus (3) 1,524,000 603,000 630,000 366,000 247,200
TOTAL 19,884,674 6,179,140 6,006,808 4,267,424 2,498,790
2 0 11 P r o x y S t a t e m e n t 33
Chad C. Deaton Peter A. Ragauss Martin S. Craighead Alan R. Crain John A. O’Donnell
($) ($) ($) ($) ($)
Payments upon Retirement

Accelerated Vesting of Option Awards – – 1,397,980 1,005,549 724,163
Payment in Settlement of
Performance Units – – 1,583,577 1,294,143 574,860
Annual Incentive Bonus – – – 366,000 247,200
TOTAL – – 2,981,557 2,665,692 1,546,223
Payments Upon Termination of

Employment for Good Reason
or by the Company Without Cause (4)
2x Base Salary 2,540,000 – – – –
Earned Highest Bonus Amount 1,841,884 – – – –
Continuation of Perquisites 45,833 – – – –
Continuation of Medical Insurance 19,871 – – – –
Life Insurance Premium Payment 5,793 – – – –
Lump-Sum Payment Equal to Continued
Company Contributions to SRP 703,209 – – – –
Interest Paid For Section 409A
Six-Month Delay 126,155 – – – –
TOTAL 5,282,746 – – – –
Payments Upon Involuntary

Termination of Employment
Not in Connection with a
Change of Control
1½x Base Salary (5)
1,005,000 1,050,000 732,000 618,000
Outplacement Services (5)
10,000 10,000 10,000 10,000
Annual Incentive Bonus (5)
603,000 630,000 366,000 247,200
TOTAL (5)
1,618,000 1,690,000 1,108,000 875,200
(1) Upon sale of a business unit unvested Restricted Stock Awards are accelerated on a Pro Rata basis pursuant to the Terms and Conditions of the awards.
(2) Pursuant to his employment agreement, upon death or disability, Mr. Deaton or his estate receives a lump-sum cash payment equal to one-half his then base salary
for each year (prorated for partial years) during the remaining term of the employment agreement. The remaining NEOs are not eligible for any base salary payment
upon death or disability.
(3) Under his employment agreement, upon death or disability, Mr. Deaton receives a lump-sum cash payment equal to his expected value incentive bonus for the year of
termination and any other bonus programs for the fiscal year in which the termination occurs. The other NEOs receive an amount equal to his earned Annual Incentive
Compensation Plan bonus, prorated based upon the number of months of the NEO’s participation in the Annual Incentive Compensation Plan during the calendar year.
(4) The following payment types related to termination of employment for good reason or by the Company without cause only apply to Mr. Deaton under his
employment agreement.
(5) See “Payments Upon Termination of Employment for Good Reason or by the Company Without Cause” for payments related to involuntary termination not in
connection with a change of control for Mr. Deaton.
Compensation Committee Report Compensation Committee Interlocks

The Compensation Committee held four meetings during and Insider Participation
fiscal year 2010. The Compensation Committee has reviewed During the year ended December 31, 2010, the Compen-
and discussed the Compensation Discussion and Analysis with sation Committee consisted of Ms. Gargalli (Chair), Messrs.
management. Based upon such review, the related discussions Cazalot, Jr., Djerejian, Jungels, and Nichols, all of whom were
and such other matters deemed relevant and appropriate by independent non-management directors. None of the Com-
the Compensation Committee, the Compensation Committee pensation Committee members has served as an officer or
has recommended to the Board of Directors that the Compen- employee of the Company, and none of the Company’s exec
sation Discussion and Analysis be included in this Proxy State- utive officers has served as a member of a compensation
ment to be delivered to stockholders. committee or board of directors of any other entity which has
Claire W. Gargalli (Chair) an executive officer serving as a member of the Company’s
Clarence P. Cazalot, Jr. Board of Directors.
Edward P. Djerejian
Pierre H. Jungels
J. Larry Nichols
director compensation
The following table discloses the cash, equity awards and other compensation earned, paid or awarded, as the case may be, to
each of the Company’s non-management directors during the fiscal year ended 2010. For a description of the fees and other awards
payable to the Company’s directors, please refer to the section titled “Corporate Governance – Board of Directors” contained else-
where in this Proxy Statement.
All Other
Fees Earned or Stock Awards Option Awards Compensation Total
Name Paid in Cash ($) ($) (1,2) ($) (1,2) ($) ($)
Larry D. Brady 87,500 139,996 29,767 0 257,263

Clarence P. Cazalot, Jr. 93,104 139,996 29,767 0 262,867
Edward P. Djerejian 85,000 139,996 29,767 0 254,763
Anthony G. Fernandes 100,000(3) 139,996 29,767 0 269,763
Claire W. Gargalli 83,146 139,996 29,767 0 252,909
Pierre H. Jungels 85,000 139,996 29,767 0 254,763
James A. Lash 96,896 139,996 29,767 0 266,659
J. Larry Nichols 80,000 139,996 29,767 0 249,763
James L. Payne 50,625 0 (4) 36,126 1,199,380 (5) 1,286,131
H. John Riley, Jr. 103,104 139,996
(3)
29,767 0 272,867
James W. Stewart 54,004 0 (4) 36,126 0 90,130
Charles L. Watson 85,000 139,996 29,767 0 254,763
(1) A restricted stock award was made on January 19, 2010. Stock option awards were made on January 19, 2010 and July 21, 2010 at an exercise price of $47.28 and
$49.17, respectively. The amounts included in the Stock Awards and Option Awards columns represent the aggregate grant date fair value of the awards made to
non-management directors computed in accordance with FASB ASC Topic 718. The value ultimately realized by the director upon the actual vesting of the award(s)
or the exercise of the stock option(s) may or may not be equal to the FASB ASC Topic 718 determined value. For a discussion of valuation assumptions, see “Note 5 –
Stock-Based Compensation” of the Notes to Consolidated Financial Statements included in our annual report under Item 8 of the Form 10-K for the year ended
December 31, 2010.
(2) The following table shows the aggregate number of stock awards and options awards outstanding for each non-management director as of December 31, 2010
as well as the grant date fair value of stock awards and option grants made during 2010:
Aggregate Stock Awards Aggregate Option Awards Grant Date Fair Value of Stock
Outstanding as of December 31 Outstanding as of December 31 and Option Awards made during 2010
Name (#) (#) ($)
Larry D. Brady 6,637 5,819 169,763

Clarence P. Cazalot, Jr. 6,637 7,546 169,763
Edward P. Djerejian 6,637 5,565 169,763
Anthony G. Fernandes 6,637 10,859 169,763
Claire W. Gargalli 6,637 7,546 169,763
Pierre H. Jungels 6,637 5,232 169,763
James A. Lash 6,637 7,546 169,763
J. Larry Nichols 6,637 7,546 169,763
James L. Payne 0 38,515 (6) 36,126 (4)
H. John Riley, Jr. 6,637 7,546 169,763
James W. Stewart 0 828,948 (6) 36,126 (4)
Charles L. Watson 6,637 7,546 169,763
(3) Messrs. Fernandes and Riley previously elected to have their fees deferred and thus the amounts shown above were paid to their deferred compensation accounts
pursuant to the Director Compensation Deferral Plan (discussed below).
(4) Messrs. Payne and Stewart were not directors at the time of the option and restricted stock award grant in January 2010 as the merger with BJ Services had not closed
yet, but each received an award of 1,155 options to purchase shares of the Company on July 21, 2010 and an additional award of 1,000 options to purchase shares of
the Company on July 22, 2010.
(5) Mr. Payne received a lump-sum payout on October 1, 2010 pursuant to the termination of the BJ Services Company Directors’ Benefit Plan.
(6) This amount includes outstanding options that were granted by BJ Services and were converted into options to purchase shares of Baker Hughes upon the closing of
the merger.
The Baker Hughes Incorporated Director Compensation Deferral Plan, as amended and restated effective January 1, 2009
(the “Deferral Plan”), is intended to provide a means for members of our Board of Directors to defer compensation otherwise
payable and provide flexibility with respect to our compensation policies. Under the provisions of the Deferral Plan, directors may
elect to defer income with respect to each calendar year. The compensation deferrals may be stock option-related deferrals or
cash-based deferrals.
2 0 11 P r o x y S t a t e m e n t 35
Audit/Ethics Committee Report Touche informed the Audit/Ethics Committee that the Com
The Audit/Ethics Committee is comprised of four members, pany’s audited financial statements are presented fairly, in all
each of whom is independent, as defined by the standards material respects, in conformity with accounting principles
of the NYSE, the rules of the SEC, and under the Company’s generally accepted in the United States of America. The Audit/
policy for director independence (“Policy for Director Indepen- Ethics Committee also monitored and reviewed the Company’s
dence”). Under the Charter of the Audit/Ethics Committee procedures and policies relating to the requirements of Section
(attached as Annex B to this Proxy Statement), the Audit/Ethics 404 of the Sarbanes-Oxley Act and related regulations.
Committee assists the Board of Directors in overseeing matters The Audit/Ethics Committee has discussed with Deloitte &
relating to the accounting and reporting practices of the Touche the matters required to be discussed by the statement
Company, the adequacy of the Company’s disclosure controls on Auditing Standards No. 61, as amended (AICPA, Professional
and internal controls, the quality and integrity of the quarterly Standards, Vol. 1. AU section 380), as adopted by the Public
and annual financial statements of the Company, the per Company Accounting Oversight Board in Rule 3200T.
formance of the Company’s internal audit function and the Based on the review and discussions referred to above,
review and pre-approval of the current year audit and non- and such other matters deemed relevant and appropriate
audit fees with the Company’s Independent Registered Public by the Audit/Ethics Committee, the Audit/Ethics Committee
Accounting Firm. The Audit/Ethics Committee also oversees recommended to the Board of Directors, and the Board has
the Company’s policies with respect to risk assessment and approved, that the financial statements be included in the
risk management and compliance programs relating to legal Company’s Annual Report on Form 10-K for the year ended
and regulatory requirements. December 31, 2010.
During the year ended December 31, 2010, the Audit/Ethics Anthony G. Fernandes (Chairman)
Committee held thirteen meetings and otherwise met and Larry D. Brady
communicated with management and with Deloitte & Touche Clarence P. Cazalot, Jr.
LLP (“Deloitte & Touche”), the Company’s Independent Reg James A. Lash
istered Public Accounting Firm for 2010. Deloitte & Touche J. Larry Nichols
discussed with the Audit/Ethics Committee various matters
under applicable auditing standards, including information Proposal No. 2
regarding the scope and results of the audit and other matters Ratification of the Company’s Independent
required to be discussed by the Statement on Auditing Stan- Registered Public Accounting Firm
dards No. 114, “The Auditor’s Communication with Those The Audit/Ethics Committee has selected the firm of
Charged with Governance.” The Audit/Ethics Committee also Deloitte & Touche LLP (“Deloitte & Touche”) as our Independent
discussed with Deloitte & Touche its independence from the Registered Public Accounting Firm to audit the Company’s
Company and received the written disclosures and the letter books and accounts for the year ending December 31, 2011.
from Deloitte & Touche concerning independence as required Deloitte & Touche served as our Independent Registered Public
by the Public Company Accounting Oversight Board Ethics Accounting Firm for fiscal year 2010. While the Audit/Ethics
and Independence Rule 3526, “Communication with Audit Committee is responsible for the appointment, compensation,
Committees Concerning Independence.” The Audit/Ethics retention, termination and oversight of the Independent Reg
Committee also reviewed the provision of services by Deloitte istered Public Accounting Firm, we are requesting, as a matter
& Touche not related to the audit of the Company’s financial of good corporate governance, that the stockholders ratify the
statements and not related to the review of the Company’s appointment of Deloitte & Touche as our principal Independent
interim financial statements as it pertains to the independence Registered Public Accounting Firm. If the stockholders fail to
of Deloitte & Touche. Deloitte & Touche also periodically ratify the selection, the Audit/Ethics Committee will reconsider
reported the progress of its audit of the effectiveness of whether to retain Deloitte & Touche and may retain that firm
the Company’s internal control over financial reporting. or another without re-submitting the matter to our stockholders.
The Audit/Ethics Committee reviewed and discussed Even if the appointment is ratified, the Audit/Ethics Committee
with management the Company’s financial results prior to the may, in its discretion, direct the appointment of a different
release of earnings. In addition, the Audit/Ethics Committee Independent Registered Public Accounting Firm at anytime
reviewed and discussed with management, the Company’s during the year if it determines that such change would be
internal auditors and Deloitte & Touche the interim financial in the Company’s best interests and in the best interests of
information included in the March 31, 2010, June 30, 2010 our stockholders.
and September 30, 2010 Form 10-Qs prior to their being filed Deloitte & Touche’s representatives will be present at the
with the SEC. The Audit/Ethics Committee also reviewed and Annual Meeting and will have an opportunity to make a state-
discussed the Company’s audited financial statements for ment, if they so desire, as well as to respond to appropriate
the year ended December 31, 2010 with management, the questions asked by our stockholders.
Company’s internal auditors and Deloitte & Touche. Deloitte &
Recommendation of the Board of Directors Pre-Approval Policies and Procedures
The Audit/Ethics Committee has adopted guidelines for
Your Board of Directors recommends a vote FOR the pre-approval of audit and permitted non-audit services
ratification of the selection of Deloitte & Touche LLP by the Company’s Independent Registered Public Accounting
as the Company’s Independent Registered Public Firm. The Audit/Ethics Committee will consider annually and,
Accounting Firm for 2011. if appropriate, approve the provision of audit services by its
Independent Registered Public Accounting Firm and consider
Fees Paid to Deloitte & Touche LLP and, if appropriate, pre-approve the provision of certain defined
Deloitte & Touche LLP, the member firms of Deloitte Touche audit and non-audit services. The Audit/Ethics Committee will
Tohmatsu and their respective affiliates (collectively, “Deloitte also consider on a case-by-case basis and, if appropriate, approve
Entities”) billed or will bill the Company or its subsidiaries for specific engagements that are not otherwise pre-approved.
the aggregate fees set forth in the table below for services Any proposed engagement with estimated non-audit fees of
provided during 2010 and 2009. These amounts include fees $15,000 or more that does not fit within the definition of a
paid or to be paid by the Company for (i) professional services pre-approved service are presented to the Chairman of the
rendered for the audit of the Company’s annual financial Audit/Ethics Committee for pre-approval. The Chairman of the
statements, review of quarterly financial statements and audit Audit/Ethics Committee will report any specific approval of ser-
services related to the effectiveness of the Company’s internal vices at its next regular meeting. The Audit/Ethics Committee
control over financial reporting, (ii) assurance and related will review a summary report detailing all services being pro-
services that are reasonably related to the performance of vided to the Company by its Independent Registered Public
the audit or review of the Company’s financial statements Accounting Firm. All of the fees and services described above
and (iii) professional services rendered for tax compliance, under “audit fees,” “audit-related fees” and “tax fees” were
tax advice, and tax planning. approved under the Guidelines for Pre-Approval of Audit and
2010 2009 Non-Audit Fees of the Independent Registered Public Account-
(In millions) $ $
ing Firm and pursuant to Section 202 of SOX.
Audit fees 15.8 12.4
Audit-related fees 0.6 0.3 Proposal No. 3
Tax fees 1.5 1.3 the REApproval of THE PERFORMANCE CRITERIA
Total 17.9 14.0 FOR AWARDS UNDER THE ANNUAL INCENTIVE
COMPENSATION PLAN, AS REQUIREd BY SECTION 162(m)
Audit fees include fees related to the audit of the Com of the internal revenue code
pany’s annual financial statements, review of quarterly finan-
cial statements and audit services related to the effectiveness Background
of the Company’s internal control over financial reporting. The Company’s stockholders are being asked to reapprove
Audit-related fees are primarily for assistance in connection the performance criteria that may apply to annual performance
with various registration statements, proxy statements and bonuses granted under the Annual Incentive Compensation
related matters involving our merger with BJ Services, debt Plan. Stockholder approval of the performance-based compen-
offerings and business restructurings. sation measures under the Annual Incentive Compensation
Tax fees are primarily for the preparation of income, Plan is required every five years in order to qualify compensa-
payroll, value added and various other miscellaneous tax tion under the Annual Incentive Compensation Plan as exempt
returns in 22 of the more than 90 countries where the Com- from Section 162(m) of the Internal Revenue Code of 1986
pany operates. The Company also incurs local country tax as amended (the “Code”), thereby allowing the Company to
advisory services in these countries. Examples of these kinds deduct for federal income tax purposes compensation paid
of services are assistance with audits by the local country tax under the Annual Incentive Compensation Plan. If stockholders
authorities, acquisition and disposition advice, consultation do not reapprove the performance criteria, the Company will
regarding changes in legislation or rulings and advice on the not be able to grant awards under the Annual Incentive Com-
tax effect of other structuring and operational matters. pensation Plan that are intended to be performance-based com-
All other fees include fees for audit and other services pensation under Section 162(m) of the Code. If that happens,
to various Company sponsored employee benefit plans which we may not be entitled to a tax deduction for some or all of
fees are incurred by and paid by the respective plans. the short-term incentives provided to our chief executive offi-
In addition to the above services and fees, Deloitte Entities cer and our other most highly compensated executive officers.
provide audit and other services to various Company sponsored In 1995 the Board of Directors adopted, and the stock-
benefit plans which fees are incurred by and paid by the respec- holders approved, the Annual Incentive Compensation Plan,
tive plans. Fees paid to Deloitte Entities for these services totaled which provides for cash bonuses for officers and key employees
approximately $0.2 million in 2010 and $0.3 million in 2009. of the Company and its affiliates based upon the achievement
of performance goals for the year. The performance criteria for
bonuses under the Annual Incentive Compensation Plan were
2 0 11 P r o x y S t a t e m e n t 37
subsequently approved at the 2001 and 2006 stockholders Plan), Baker Value Added (as defined in the Annual Incentive
meetings in order to continue the qualification of the Annual Compensation Plan), earnings per share, total shareholder
Incentive Compensation Plan under Section 162(m) of the Code. return, cash return on capitalization, increased revenue, reve-
The Annual Incentive Compensation Plan provides officers nue ratios, net income, stock price, market share, return on
of the Company with performance incentives that are designed equity, return on assets, return on capital, return on capital
to align the interests of the officers with those of the Company’s compared to cost of capital, return on capital employed,
stockholders. The Board of Directors believes that the Com- return on invested capital, shareholder value, net cash flow,
pany must offer a competitive equity incentive program if it is operating income, earnings before interest and taxes, cash
to continue to successfully attract and retain the best possible flow, cash flow from operations, cost reductions, and cost
candidates for positions of responsibility within the Company. ratios. Profit After Tax means revenues minus cost of sales
The Annual Incentive Compensation Plan is administered (the cost of products sold and the cost of providing services,
by the Compensation Committee. The Compensation Commit- including personnel costs, repair and maintenance costs,
tee has exclusive authority to (i) select the participants each freight/custom, depreciation and other costs (e.g., commission
year, (ii) establish award opportunities for each participant, and royalty directly relating to the service provided) minus
(iii) establish the performance goals for each participant, and operating expenses (costs incurred in non-manufacturing areas
(iv) determine the extent to which the performance goals to provide products and services to customers) (e.g., finance
have been attained. and administrative support), minus income taxes.) In the case
of a participant other than a covered employee (within the
Section 162(m) of the Code meaning of Section 162(m) of the Code), up to 25 percent
Section 162(m) of the Code imposes a $1,000,000 annual of his expected value bonus opportunity under the Annual
limitation on the deduction for compensation paid to each of Incentive Compensation Plan may be based on nonfinancial,
the principal executive officer and our next three highest-paid subjective performance goals.
officers other than the principal financial officer. The deduction Achievement of the goals may be based on one or more
limitation does not apply to performance-based compensation business criteria that apply to the participant, one or more
that satisfies certain requirements of Section 162(m) of the business units or the Company as a whole. They may also be
Code. One such requirement is that the material terms of based on performance relative to a peer group, to results in
the performance goals must be approved by the stockholders other periods, or to other external measures. Items that are
before the performance-based compensation is paid. The utilized in measuring the achievement of performance goals
material terms include the following: (1) the eligibility of may be included or excluded if they are determined to be
employees to receive compensation upon attainment of the extraordinary, unusual in nature, infrequent in occurrence,
goal, (2) the business criteria on which the goals may be related to the acquisition or disposal of a business, or related
based, and (3) the maximum amount payable to an employee to a change in accounting principle, in each case based on
upon attainment of a goal. The stockholder approval of the Financial Accounting Standards Board (FASB) Accounting
performance criteria under the Annual Incentive Compensa- Standards Codification (ASC) 225-20, Income Statement,
tion Plan serves the purpose of facilitating the tax deductibility Extraordinary and Unusual Items, and FASB ASC 830-10,
of awards under the Annual Incentive Compensation Plan. Foreign Currency Matters, Overall, or other applicable account-
ing rules, or consistent with the Company’s policies and
Performance Criteria practices for measuring the achievement of performance
The following summary of the material features of the goals on the date the Committee establishes the goals.
performance criteria for awards under the Annual Incentive The Compensation Committee may, in its discretion,
Compensation Plan is qualified by reference to the copy of decrease the amount payable under any award. The Compen-
the Annual Incentive Compensation Plan which is attached sation Committee may, in its discretion, increase the amount
as Annex C to this Proxy Statement. payable under an award to a participant who is not a covered
Performance bonuses may be granted under the Annual employee (as defined in Section 162(m) of the Code), but is
Incentive Compensation Plan to officers and key employees not permitted to increase the amount payable under an award
of the Company and its affiliates who are in a position to to a participant who is a covered employee. Under the Annual
significantly contribute to the growth and profitability of the Incentive Compensation Plan, the maximum annual perfor-
Company and/or its affiliates. mance bonus that may be granted under the Annual Incentive
Under the Annual Incentive Compensation Plan, perfor- Compensation Plan is $4,000,000.
mance bonuses are subject to the satisfaction of one or more No compensation will be paid under the Annual Incentive
performance goals during the applicable calendar year per Compensation Plan to Section 162(m) covered employees in
formance period. Performance goals for awards will be deter- respect of performance periods commencing after 2010 unless
mined by the Compensation Committee and will be designed the Company’s stockholders reapprove the performance crite-
to support the Company’s business strategy and align partici- ria for awards under the Annual Incentive Compensation Plan.
pants’ interests with stockholder interests. Performance goals The affirmative vote of the majority of shares present in
will be based on one or more of the following business criteria: person or represented by proxy at the meeting and entitled to
Profit After Tax (as defined in the Annual Incentive Compensation vote on the matter is required for the approval of this proposal.
Recommendation of the Board of Directors The affirmative vote of the majority of shares present in
person or represented by proxy at the annual meeting and
Your Board of Directors recommends a vote FOR entitled to vote is required for the approval of this proposal.
reapproval of the performance criteria for awards
under the Annual Incentive Compensation Plan. Recommendation of the Board of Directors
Proposal No. 4 Your Board of Directors recommends a vote FOR

Advisory Vote on Executive Compensation approval, on an advisory basis, of the compensation
The recently enacted Dodd-Frank Wall Street Reform and programs of our named executive officers, pursuant to
Consumer Protection Act of 2010, or the Dodd-Frank Act, Item 402 of Regulation S-K, including the Compensation
enables our stockholders to approve, on an advisory basis, the Discussion and Analysis and the related tabular and
compensation of our named executive officers as disclosed in narrative disclosures.
this Proxy Statement in accordance with the SEC’s rules. The
proposal, commonly known as a “say on pay” proposal, gives Proposal No. 5
our stockholders the opportunity to express their views on the ADVISORY VOTE ON THE fREQUENCY OF THE HOLDING
Company’s executive compensation. Because this is an advisory OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
vote, this proposal is not binding upon the Company; however, The Company is presenting the following proposal, which
the Compensation Committee, which is responsible for design- gives you as a stockholder the opportunity to inform the
ing and administering the Company’s executive compensation Company as to how often you wish the Company to include
program, values the opinions expressed by stockholders in a proposal, similar to Proposal No. 4 above, in our Proxy State-
their vote on this proposal. ment. This resolution is required pursuant to Section 14A of
As discussed previously in the Compensation Discussion the Securities Exchange Act.
and Analysis section beginning on page 11, we believe that Section 14A requires that the Company include a non-
our compensation policies and decisions are focused on pay binding advisory vote on executive compensation every one,
for performance principles, as well as being strongly aligned two or three years. After careful consideration of this proposal,
with the long-term interests of our stockholders and being our Board of Directors has decided not to make a recommen-
competitive in the marketplace. The Company’s principal dation as to whether the advisory vote on executive compen-
compensation policies, which enable the Company to attract sation should occur every one, two or three years.
and retain strong and experienced senior executives to lead You may cast your vote on your preferred voting frequency
the Company successfully in a volatile industry and economic by choosing the option of one year, two years or three years
environment, include: when you vote in response to the resolution set forth below.
• reward performance that supports the Company’s core “RESOLVED, that a non-binding advisory vote of the stock-
values of integrity, teamwork, performance and learning; holders to approve, on an advisory basis, the compensation
• provide a significant percentage of total compensation that of the Company’s executive officers, be held at an Annual
is variable because it is at risk, based on predetermined Meeting of the Stockholders, beginning with the 2011 Annual
performance criteria; Meeting of the Stockholders, (1) every one year, (2) every
• require significant stock holdings to align the interests two years or (3) every three years.”
of senior executives with those of stockholders; The option of one year, two years, or three years that
• design competitive total compensation and rewards receives the highest number of votes cast by stockholders will
programs to enhance our ability to attract and retain be considered as the frequency for the non-binding advisory
knowledgeable and experienced senior executives; and vote on executive compensation that has been selected by
• set compensation and incentive levels that reflect com stockholders. However, because the vote is advisory and not
petitive market practices. binding on the Board of Directors or the Company in any way,
We are asking our stockholders to indicate their support the Board may decide that it is in the best interests of the
for our named executive officer compensation program as stockholders and the Company to hold an advisory vote on
described in this Proxy Statement. This vote is not intended executive compensation more or less frequently than the option
to address any specific item of compensation, but rather the that receives the highest number of votes by our stockholders.
overall compensation of our named executive officers and
the philosophy, policies and practices described in this Proxy
Statement. Accordingly, we ask our stockholders to vote
“FOR” the following resolution at the Annual Meeting:
“RESOLVED, that the Company’s stockholders approve, on
an advisory basis, the named executive officer compensation,
as disclosed pursuant to Item 402 of Regulation S-K, including
the Compensation Discussion and Analysis and the related
tabular and narrative disclosures.”
2 0 11 P r o x y S t a t e m e n t 39
PROPOSAL NO. 6 to refashion its director resignation policy to address the status
STOCKHOLDER PROPOSAL of unelected directors. A majority vote standard combined
MAJORITY VOTE STANDARD FOR DIRECTOR ELECTIONS with a post-election director resignation policy would estab-
The following proposal was submitted to Baker Hughes lish a meaningful right for shareholders to elect directors at
by the United Brotherhood of Carpenters Pension Fund (with Baker Hughes, while reserving for the Board an important
an address of 101 Constitution Avenue, N.W., Washington post-election role in determining the continued status of an
D.C. 20001) who is the owner of 6,531 shares of the Com unelected director. We urge the Board to join the mainstream
pany’s Common Stock, and is included in this Proxy Statement of major U.S. companies and establish a majority vote standard.
in compliance with SEC rules and regulations. The proposed
resolution and supporting statement, for which the Board of Recommendation of the Board of Directors
Directors and the Company accept no responsibility, are set
forth below. The Board of Directors recommends a vote AGAINST the
approval of the stockholder proposal regarding a direc
Director Election Majority Vote Standard Proposal tor election majority vote standard for these reasons:
Resolved: That the shareholders of Baker Hughes Corpo-
ration (“Company”) hereby request that the Board of Directors Opposition Statement of the Company: The Board of
initiate the appropriate process to amend the Company’s gov- Directors is committed to strong corporate governance and it
ernance documents (certificate of incorporation or bylaws) is its fiduciary duty to act in the best interests of the Company’s
to provide that director nominees shall be elected by the affir stockholders. The Board has consistently and continuously
mative vote of the majority of votes cast at an annual meeting demonstrated its commitment to good governance, including
of shareholders, with a plurality vote standard retained for the adoption of the Director Resignation Policy described
contested director elections, that is, when the number of below and taking the action necessary to declassify the Board.
director nominees exceeds the number of board seats. The proposal at issue would not further enhance the ability
Supporting Statement: Baker Hughes’ Board of Directors of stockholders to impact the outcome of director elections.
should establish a majority vote standard in director elections In addition, our stockholders decided against this proposal at
in order to provide shareholders a meaningful role in these the 2010 Annual Meeting. This same proposal received 37%
important elections. The proposed majority vote standard support at the 2010 Annual Meeting while 55% of the votes
requires that a director nominee receive a majority of the votes cast were against the proposal and 8% either abstained or
cast in an election in order to be formally elected. Under the were broker non-votes.
Company’s current plurality standard, a board nominee for the Baker Hughes is incorporated under the laws of Delaware,
board can be elected with as little as a single affirmative vote, and stockholders currently elect its directors by plurality voting.
even if a substantial majority of the votes cast are “withheld” Plurality voting is the normal standard under Delaware law and
from the nominee. We believe that a majority vote standard has long been the accepted standard among most public com-
in board elections establishes a challenging vote standard for panies. Consequently, the rules governing plurality voting are
board nominees, enhances board accountability, and improves well established and understood.
the performance of boards and individual directors. The Board is proactive in ensuring that it remains familiar
Over the past five years, a significant majority of companies with corporate governance developments including those
in the S&P 500 Index has adopted a majority vote standard in pertaining to majority voting in the election of directors. As a
company bylaws, articles of incorporation, or charter. These result, the Board has already addressed the concerns expressed
companies have also adopted a director resignation policy that in the proposal at issue. In particular, during 2005 the Board
establishes a board-centered post-election process to determine adopted a policy (Director Resignation Policy) which is set
the status of any director nominee that is not elected. This forth in the Company’s Corporate Governance Guidelines at
dramatic move to a majority vote standard is in direct response www.bakerhughes.com/investor. Under the Director Resigna-
to strong shareholder demand for a meaningful role in director tion Policy any director nominee who receives a greater num-
elections. However, Baker Hughes has responded only partially ber of votes “withheld” than votes “for” such election shall
to the call for change, simply adopting a post-election director submit his or her offer of resignation. The Governance Com-
resignation policy that sets procedures for addressing the status mittee will then consider all of the relevant facts and circum-
of director nominees that receive more “withhold” votes than stances and recommend to the Board the action to be taken
“for” votes. The plurality vote standard remains in place. with respect to such offer of resignation. The Board has also
Baker Hughes’ Board of Directors has not acted to establish amended the Company’s Bylaws to incorporate this policy.
a majority vote standard, retaining its plurality vote standard, We believe that this existing Director Resignation Policy
despite the fact that many of the self-identified peer compa- provides stockholders with a meaningful and significant voice
nies including Anadarko Petroleum Corporation, Apache in the election of directors, while preserving the Board’s ability
Corporation, Halliburton Corporation, National Oilwell Varco, to exercise its independent judgment in a way that best serves
Inc., Schlumberger Limited, and Smith International, Inc. have the interests of both the Company and the stockholders. It
adopted majority voting. The Board should take this critical provides for a detailed case-by-case analysis. By allowing stock-
first step in establishing a meaningful majority vote standard. holders to express their preferences regarding director nominees,
With a majority vote standard in place, the Board can then act the Director Resignation Policy already accomplishes the primary
objective of the proposal at issue, and therefore the adoption For the foregoing reasons, the Board of Directors
of a majority vote standard is unnecessary. In addition, stock- recommends a vote AGAINST the approval of the
holders of other public companies have rejected similar stock- Stockholder Proposal regarding a director election
holder proposals when those companies followed a policy majority vote standard.
similar to the Baker Hughes Director Resignation Policy.
The stockholder proposal’s characterization of our plural- Annual Report
ity voting standard, particularly the statement that a director The 2010 Annual Report on Form 10-K of the Company
could be elected with a single vote, is misleading as well as (the “Annual Report”), which includes audited financial state-
highly unrealistic. As an example, in the past 10 years, the ments for the fiscal year ended December 31, 2010, accom
average affirmative vote for directors has been close to 90% panies this Proxy Statement only if you have requested that
of the shares voted through the plurality voting process with a copy of this Proxy Statement be mailed to you. The Annual
no director receiving less than 84% of the votes cast. As a Report also is available electronically by following the instruc-
result, the adoption of a majority voting standard would not tions in the E-Proxy Notice, as described in the “Proxy State-
have affected the outcome of the elections in any of these ment – Information About the Notice of Internet Availability of
years. Not only have our directors historically received high Proxy Materials” section of this Proxy Statement. However, the
levels of support, but, we also maintain a comprehensive Annual Report is not part of the proxy soliciting information.
director nomination and election process. The nomination
and election process has been instrumental in the construction Incorporation by Reference
of a Board that is comprised of highly qualified directors from To the extent that this Proxy Statement is incorporated
diverse backgrounds. In addition, other than Messrs. Deaton, by reference into any other filing by Baker Hughes under the
Nichols and Stewart, all director nominees are independent Securities Act of 1933, as amended, or the Exchange Act,
as defined under the New York Stock Exchange listing stan- the sections of this Proxy Statement entitled “Compensation
dards. Because our stockholders have a history of electing Committee Report” and “Audit/Ethics Committee Report”
highly qualified and independent directors using a plurality (to the extent permitted by the rules of the SEC) as well as
voting system, a change in the director election process is the annexes to this Proxy Statement, will not be deemed
neither necessary nor appropriate in order to enhance the incorporated unless specifically provided otherwise in such
Company’s corporate governance. filing. Information contained on or connected to our website
In evaluating this proposal, the Board has determined that is not incorporated by reference into this Proxy Statement and
the Director Resignation Policy incorporated in the Company’s should not be considered part of this Proxy Statement or any
Bylaws and our Corporate Governance Guidelines allow the other filing that we make with the SEC.
Board to consider and address stockholder concerns without
creating undue uncertainty. In contrast, the stockholder pro- Stockholder Proposals
posal does not address what would occur if a candidate fails Proposals of stockholders intended to be presented at the
to receive the requisite majority vote. Under Delaware law and 2012 Annual Meeting must be received by the Company by
Baker Hughes’ Bylaws, the possible scenarios include an incum- November 14, 2011 to be properly brought before the 2012
bent director remaining in office until a successor is elected Annual Meeting and to be considered for inclusion in the
and qualified, the Board of Directors electing a director to fill a Proxy Statement and form of proxy relating to that meeting.
vacancy, or the position remaining vacant. All of these alterna- Such proposals should be mailed to the Company’s Corporate
tives, in the view of Baker Hughes’ Board of Directors are less Secretary, c/o Baker Hughes Incorporated, 2929 Allen Parkway,
desirable than the current system which allows for election of Suite 2100, Houston, Texas 77019. Nominations of directors
directors by plurality vote subject to the Director Resignation by stockholders must be received by the Chairperson of the
Policy. Notwithstanding these prior actions, the Board of Direc- Governance Committee of the Company’s Board of Directors,
tors will continue to monitor the majority vote issue and will P.O. Box 4740, Houston, Texas 77210-4740 or the Corporate
take additional necessary steps in the future consistent with Secretary, c/o Baker Hughes Incorporated, 2929 Allen Parkway,
the Company’s commitment to act in the best interests of Suite 2100, Houston, Texas 77019 between October 13, 2011
our stockholders. and November 14, 2011 to be properly nominated before the
The Board of Directors believes that adherence to sound 2012 Annual Meeting, although the Company is not required
corporate governance policies and practices is key to ensuring to include such nominees in its Proxy Statement.
that the Company is governed and managed with the highest
standards of responsibility, ethics and integrity and in the best Other Matters
interests of our stockholders. The existing director election The Board of Directors knows of no other matter to be
policies in place adhere to these standards as well as provide presented at the Annual Meeting. If any additional matter
stockholders with a meaningful and significant voice in the should be presented properly, it is intended that the enclosed
election of directors. Additionally, the proposal at issue was proxy will be voted in accordance with the discretion of the
soundly rejected at our 2010 Annual Meeting. For these rea- persons named in the proxy.
sons and the reasons presented above, the Board does not
believe that the proposal is in the best interests of the
Company or our stockholders.
2 0 11 P r o x y S t a t e m e n t 41
ANNEX A Independence – The Board will be comprised of a major-
ity of directors who qualify as independent directors under the
BAKER HUGHES INCORPORATED listing standards of the New York Stock Exchange (“NYSE”),
CORPORATE GOVERNANCE GUIDELINES as described in Exhibit C, “Policy for Director Independence,
(As Amended February 24, 2011) Audit/Ethics Committee Members and Audit Committee Finan-
cial Expert.” Annually, the Board will review the relationship
These Baker Hughes Incorporated Corporate Governance that each director has with the Company to determine that
Guidelines are established by the Board of Directors (“Board”) the director has no material relationship with the Company,
as the principles for conduct of the Company’s business affairs its affiliates or any member of the senior management of the
to benefit its stockholders. Company, subject to additional qualifications prescribed under
the listing standards of the New York Stock Exchange. The
Board Company will not make any personal loans or extensions of
The responsibility of the members of the Board is to credit to directors or executive officers.
exercise their business judgment to act in what they reason- Size and Term of the Board – In accordance with the
ably believe to be in the best interest of the Company and Company’s Bylaws, the Board determines the number of direc-
its stockholders. In addition to the Board’s general oversight tors on the Board, which currently will consist of not more
of management’s performance of its responsibilities, the prin than 11 directors. In accordance with the Company’s Restated
cipal functions of the Board acting directly or through its Com- Certificate of Incorporation, at each Annual Meeting of Stock-
mittees (as defined in “Committees of the Board”) include: holders, directors shall be elected for a term of one year
• Providing effective oversight of the governance of the affairs ending on the date of the Annual Meeting of Stockholders
of the Company in order to maximize long-term benefit to following the annual meeting at which the directors were
the stockholders elected and will serve until their successors are elected and
• Maintaining a viable succession plan for the office of the qualified or until his or her earlier death, retirement, resig
Chief Executive Officer (“CEO”) of the Company and other nation or removal. Stockholders may propose nominees for
members of senior management consideration by the Governance Committee, as described in
• Evaluating the performance of the Board and identifying Exhibit D, “Policy and Submission Procedures for Stockholder
and recruiting new members for the Board Recommended Director Candidates,” by submitting within
• Reviewing and approving long-term business plans the prescribed time period the name and supporting infor
• Appointing, approving the compensation and overseeing mation to: Chairman, Governance Committee of the Board
the work of the independent auditors of Directors, P.O. Box 4740, Houston, Texas 77210-4740 or
• Overseeing certain compliance related issues, including to the Corporate Secretary, c/o Baker Hughes Incorporated,
accounting, internal audit, disclosure controls and 2929 Allen Parkway, Suite 2100, Houston, Texas 77019-2118
internal controls, enterprise risk management and to be properly nominated before the next Annual Meeting of
environmental policies Stockholders, although the Company is not required to include
• Reviewing quarterly earnings release and quarterly and such nominees in its proxy statement. Between such annual
annual financial statements to be filed with the Securities meetings, the Board may elect directors to serve until the
and Exchange Commission (“SEC”) next annual meeting.
• Evaluating and setting the compensation of the CEO and Voting for Directors – Any nominee for director in an
other members of senior management uncontested election who receives a “withhold” vote repre-
• Adopting an appropriate governance policy senting a majority of the votes cast for his or her election
Selection and Qualification of Directors – The Gover- will be required to submit a letter of resignation to the Gover-
nance Committee will annually assess the needs of the Com- nance Committee of the Board of Directors. The Governance
pany and the Board in order to recommend to the Board the Committee will consider all of the relevant facts and circum-
director candidates who will further the goals of the Company stances and recommend to the Board of Directors whether or
in representing the long-term interests of the stockholders. In not the resignation should be accepted. For the purposes of
particular, the Governance Committee will assess the special this Section, an “uncontested election” shall mean an election
skills, expertise and backgrounds relevant to the Company’s in which the number of nominees as of the record date for
business to determine whether or not a candidate has the the meeting at which directors are to be elected does not
character traits and breadth of business knowledge to make exceed the number of directors to be elected at such meeting.
him or her an effective director, based on previously estab- Director Orientation and Continuing Education –
lished criteria, as described in Exhibit A, “Guidelines for The Governance Committee will periodically review and rec-
Membership on the Board of Directors .” The Governance ommend to the Board a director orientation program that
Committee will annually assess the contributions of the includes an initial and continuing orientations providing the
directors whose terms expire at the next Annual Meeting of director with comprehensive information about the Company’s
Stockholders and recommend to the Board if they should be business, one-on-one meetings with senior management and
nominated for re-election by stockholders. The Board will pro- other officers of the Company, an overview of the Director
pose a slate of nominees to the stockholders for election to Reference Manual and tours of the Company’s operations.
the Board at the next Annual Meeting, as described in Exhibit The directors will be provided with continuing education
B, “Selection Process for New Board of Directors Candidates.” materials covering upcoming seminars and conferences.
Independent Advisors – The Board and the Committees may serve on no more than one board of a publicly-held
of the Board have the right at any time to retain independent company or for profit company. Members of Audit/Ethics
outside financial, legal or other advisors. Committee of the Board may not simultaneously serve on
Executive Sessions – The Board will meet in executive the audit committees of more than three public companies.
session with the CEO after each Board meeting. In addition, If a non-management director serving on the Company’s Board
the independent directors of the Company will meet in execu- is asked to join another board of directors, prior notice shall
tive session following each regularly scheduled Board meeting be given to the Chairman of the Governance Committee
without any inside director or Company executives present. and the Corporate Secretary of the Company. If an actual
These executive session discussions may include any topic or potential conflict of interest arises for a director or senior
relevant to the business affairs of the Company as determined management, the individual shall promptly inform the CEO
by the independent directors. or the Board. Any waivers of the Company’s Business Code
Lead Director – The Governance Committee will review of Conduct for a director or senior management will be deter-
and recommend to the Board a director to serve as Lead Dir mined by the Board or its designated Committee and will be
ector during executive sessions of the independent members publicly disclosed.
of the Board. The Lead Director will be elected by the inde
pendent members of the Board; preside at all meeting of Board Compensation and Evaluation Procedures
the Board of Directors at which the Chairman is not present, Compensation – The Governance Committee will annually
including executive sessions of independent directors; serve as review compensation to determine director compensation and
liaison between the Chairman and the independent directors; recommend any changes to the Board.
have the authority to call meetings of the independent direc- Company Stock Ownership – Each non-management
tors; consult with the Chairman on agendas for Board meeting director is expected to own at least four times his or her
and other matters pertinent to the Company and the Board. annual retainer in Company Common Stock. Such ownership
Stockholder Communications – In order to provide level should be obtained within a reasonable period of time
the stockholders of the Company and other interested parties following the director’s election to the Board.
with a direct and open line of communication to the Com Evaluation – Any independent director may at any time
pany’s Board, procedures have been established, as described provide the Chairman of the Governance Committee an evalu-
in Exhibit E, “Stockholder Communications with the Board ation of another independent director. Questions and observa-
of Directors.” tions regarding the evaluation of an independent director will
Termination of Director Status – In accordance with be referred, as necessary, to the Lead Director. The indepen-
the Company’s Bylaws, a non-management director shall dent directors will perform an annual evaluation on the per
not stand for reelection as a director of the Company at the formance and effectiveness of the Audit/Ethics Committee
Annual Meeting following any of the occurrences set forth in accordance with the regulations of the Public Company
below. The following provisions may be waived by the Board Accounting Oversight Board.
(excluding the affected director) if the Board determines that
such waiver would be in the best interest of the Company Board Functions
and its stockholders. Board Meetings – The Board will hold five regular
Retirement – The director’s 72nd birthday. meetings per year to handle recurring business, with special
Attendance – Any fiscal year in which a director fails meetings called as appropriate. Directors are expected to
to attend at least 66% of the meetings attend all scheduled Board and Committee meetings.
of the Board and any Committees of Special Meetings – The number of scheduled Board
the Board on which the director serves. meetings will vary with circumstances and special meetings
Termination of Inside Director Status – In accordance will be called as necessary.
with the Company’s Bylaws, an inside director must resign Annual Meetings of Stockholders – The Company’s
from the Board (i) at the time of any diminution of his or her Annual Meeting of Stockholders provides an opportunity
responsibilities as an officer; (ii) at the time of termination of each year for stockholders to ask questions of or otherwise
employment by the Company for any reason; or (iii) on the communicate directly with members of the Company’s Board
director’s 72nd birthday. on matters relevant to the Company. It is the Company’s policy
Conflict of Interest – The Board expects each director, to request and encourage all of the Company’s directors and
as well as senior management and employees, to act ethically nominees for election as directors to attend in person the
at all times. Non-management directors may not serve on Annual Meeting of Stockholders.
more than four other boards of publicly listed companies in Agenda Items – The Chairman will be responsible for
addition to the Company’s Board of Directors. No officer of setting the agenda for and presiding over the Board meetings.
the Company may serve on a board of any company having a Individual directors are encouraged to contact the Chairman
present or retired employee on the company’s Board. Addition- with respect to any proposed agenda items that the director
ally, officers of the Company may not serve as directors of any believes should be on the agenda. The Corporate Secretary will
other publicly-held companies without the approval of the endeavor to timely provide to the directors all written Board
Governance Committee. The CEO may serve on no more than materials to be covered in regular meetings prior thereto.
three boards of publicly-held companies, while other officers
2 0 11 P r o x y S t a t e m e n t 43
Committees of the Board and reporting practices of the Company, the adequacy of the
The Board has constituted five standing Committees: Company’s internal controls over financial reporting and dis-
Governance Committee, Audit/Ethics Committee, Compensa- closure controls and procedures; and the quality and integrity
tion Committee, Finance Committee and Executive Committee. of the financial statements of the Company; and (ii) to oversee
The Governance, Audit/Ethics and Compensation Committees the Company’s compliance programs. The independent auditor
are comprised solely of independent directors. The Chairman is ultimately accountable to the Board and the Committee,
of the Board serves on the Executive Committee. Any non- as representatives of the Company’s stockholders, and shall
management member of the Board may attend any Commit- report directly to the Committee. The Committee has the
tee meeting with approval of its chairman as an observer. ultimate authority and direct responsibility to select, appoint,
The Governance Committee annually proposes Committee evaluate, compensate and oversee the work, and, if necessary,
assignments and chairmanships to the Board. Each Committee terminate and replace the independent auditor. The Committee
is elected by the Board, including the designation by the Board shall conduct or authorize investigations into any matters
of one person to serve as Chairman of each Committee. On within its scope of responsibilities.
an annual basis, each Committee shall perform an evaluation The Committee shall engage independent counsel and
of the Committee and its activities. other advisors, as the Committee deems necessary to carry
out its duties. The Committee has the sole authority to
Governance Committee approve the fees paid to any independent advisor retained
Purpose: The Committee’s purpose is to develop and rec- by the Committee, and the Company will provide funding for
ommend to the Board a set of corporate governance principles such payments. The Company shall provide funding for ordi-
applicable to the Company (“Corporate Governance Guide- nary administrative expenses of the Committee that are neces-
lines”) and to oversee compliance with, conduct reviews of sary or appropriate in carrying out its duties. The Committee
and recommend appropriate modifications to such Corporate will review the composition, expertise and availability of the
Governance Guidelines. Committee members on an annual basis. The Committee will
Principal Responsibilities: The Committee will have also perform a self-evaluation of the Committee and its activi-
the oversight responsibility for recruiting and recommending ties on an annual basis. The Committee will meet in executive
candidates for election to the Board, with advice of the Com- session at each regularly scheduled meeting, including sepa-
pany’s Chairman and CEO. The Committee will periodically rate, private meetings with the independent auditors, internal
conduct a review of criteria for Board membership against cur- auditors, general counsel and compliance officer. The Commit-
rent needs of the Board to ensure timeliness of the criteria. tee’s Charter shall be posted on the Company’s website.
The Committee will also be responsible for monitoring compli- The Committee’s compliance responsibilities will include
ance with these Corporate Governance Guidelines adopted the recommendation of and monitoring of compliance with
by the Board, and updating such guidelines when appropriate. the Company’s Business Code of Conduct and Foreign Corrupt
The Committee will also review and recommend to the Board Practices Act Policy, establishing formal procedures for (i) the
the annual retainer for members of the Board and Committees receipt, retention and treatment of complaints received by the
of the Board. The Committee’s Charter shall be posted on the Company regarding accounting, internal accounting controls
Company’s website. or audit matters, (ii) the confidential, anonymous submissions
Composition: The Committee will be comprised of not less by Company employees of concerns regarding questionable
than three nor more than six of its independent directors. All accounting or auditing matters, and (iii) the protection of
members of the Committee will be independent, as that term reporting employees from retaliation as described in Exhibit F,
is defined in the NYSE corporate governance listing standards. “Procedures for the Receipt, Retention and Treatment of Com-
Meetings: The Committee will meet at least two times plaints”; reviewing in conjunction with counsel (i) any legal
per year as determined by the Board with special meetings matters that could have significant impact on the organiza-
called by the Board or the Committee as necessary. tion’s financial statements; (ii) correspondence and material
inquiries received from regulators or governmental agencies;
Audit/Ethics Committee and (iii) all matters relating to the ethics of the Company and
Purpose: The Committee’s purpose is to assist the Board its subsidiaries; coordinate the Company’s compliance with
with oversight of: (i) the integrity of the Company’s financial inquiries from any government officials concerning legal com-
statements and reporting system, (ii) the Company’s compli- pliance in the areas covered by the Business Code of Conduct
ance with legal and regulatory requirements, (iii) the indepen- and the Foreign Corrupt Practices Act Policy; and review the
dent auditor’s qualifications and independence and (iv) the Company’s compliance with its environmental policy on an
performance of the Company’s internal audit function and annual basis. The Committee’s Charter shall be posted on
independent auditors. The Committee shall also prepare the the Company’s website.
Audit/Ethics Committee Report to be included in the Compa- Composition: The Committee will be comprised of not
ny’s proxy statement for the Annual Meeting of Stockholders, less than three independent directors who are (i) independent
conduct an annual self-evaluation and carry out the duties (as defined by Section 10A(m)(3) of the Securities Exchange
and responsibilities set forth in its Charter. Act of 1934 and the regulations thereunder and the NYSE)
Principal Responsibilities: The principal responsibilities and (ii) financially literate (as interpreted by the Board in
of the Committee are: (i) to provide assistance to the Board in its business judgment). Such Committee members may not
fulfilling its responsibility in matters relating to the accounting simultaneously serve on the audit committee of more than
three publicly-held companies. At least one member of the Composition: The Committee will be comprised of not
Committee will have accounting or related financial manage- less than three nor more than six of its independent directors.
ment expertise and at least one member of the Committee Such directors will meet the requirements for “independent”
will be an “audit committee financial expert,” as defined by pursuant to the listing standards of the NYSE and shall meet
the SEC. The audit committee financial expert must have: an the requirements for “disinterested independent directors”
understanding of GAAP and financial statements; experience pursuant to Rule 16b-3 of the Securities Exchange Act of
in the (a) preparation, auditing, analyzing or evaluating of finan- 1934, as amended.
cial statements of generally comparable issuers and (b) applica- Meetings: The Committee will meet at least three times
tion of such principles in connection with the accounting for per year as determined by the Board.
estimates, accruals and reserves; an understanding of internal
accounting controls and procedures for financial reporting; Finance Committee
and an understanding of audit committee functions. Purpose: The Committee’s purpose will be to review and
Meetings: The Committee meets at least five times per monitor the financial structure of the Company to determine
year as determined by the Board, with special meetings called that it is consistent with the Company’s requirements for
by the Board or the Committee as necessary. growth and fiscally sound operation.
Principal Responsibilities: The Committee will be
Compensation Committee responsible for the review and approval of (i) public offerings;
Purpose: The purpose of the Compensation Committee (ii) debt and other financings; (iii) dividend policy and changes
will be to discharge the Board’s responsibilities relating to com- in the rate of dividend; and (iv) budget and long-range plans.
pensation of the Company’s executives. The Committee will In addition the Committee will periodically review the Compa-
have overall responsibility for reviewing and evaluating and, ny’s activities with credit rating agencies, its policy governing
as applicable, approving the officer compensation plans of the approval levels for capital expenditures and funding thereof
Company. It is also the purpose of the Committee to produce and its insurance programs. The Committee’s Charter shall
an annual report on executive compensation for inclusion be posted on the Company’s website.
in the Company’s proxy statement for the Annual Meeting Composition: The Committee will be comprised of not
of Stockholders. less than three independent directors.
Principal Responsibilities: The principal responsibility of Meetings: The Committee will meet at least two times
the Committee will be to ensure that the senior executives of per year as determined by the Board with special meetings
the Company are compensated effectively in a manner consis- called by the Board or the Committee as necessary.
tent with the stated compensation strategy of the Company,
internal equity considerations and competitive practice. The Executive Committee
Committee will also communicate to the stockholders of the Principal Responsibilities: The Committee will act in the
Company, the Company’s compensation policies and the rea- stead of the Board during intervals between Board meetings
soning behind such policies as required by the rules and reg and may exercise all of the authority of the Board in the busi-
ulations of the SEC. These responsibilities include reviewing ness and affairs of the Company, except where action by the
from time to time and approving the Company’s stated com- full Board is specifically required. More specifically, the Com-
pensation strategy to ensure that management is rewarded mittee will be responsible for advising and aiding the officers
appropriately for its contributions to Company growth and of the Company in all matters concerning its interests and the
profitability and that the executive compensation strategy management of its business. When the Board is not in session,
supports organization objectives and stockholder interests; the Committee has and may exercise all the powers of the
reviewing compensation programs to determine if there are Board, so far as such may be delegated legally, with reference
potential risks in the programs; reviewing and approving cor- to the conduct of the business of the Company, except that
porate goals and objectives relevant to CEO compensation, the Committee will not take any action to amend the Restated
evaluating the CEO’s performance in light of those goals and Certificate of Incorporation or the Bylaws, to amend its Charter,
objectives, and determining the CEO’s compensation level to elect Directors to fill vacancies on the Board, to fix the com-
based on this evaluation; reviewing annually and determining pensation of Directors for service in any capacity, to fill vacancies
the individual elements of total compensation of the CEO, on the Committee or change its membership, to elect or remove
including annual salary, annual bonus and long-term incentive officers of the Company or to declare dividends. The Commit-
compensation, and reporting such determination to the Board, tee’s Charter shall be posted on the Company’s website.
provided, however, that the salary, bonus and other long-term Composition: The Committee will be comprised of not
incentive compensation will be subject to the approval of the less than three directors, a majority of which shall be indepen-
Board. The Committee also reviews the outcome of the stock- dent and one of which shall be the Chairman of the Board.
holder advisory vote on senior executive compensation when The Chairman of the Board shall serve as the Chairman of the
making future compensation decisions for executive officers. Committee unless the Board elects a different director to serve
The Committee reviews with the CEO matters relating to man- as Chairman. In the absence of the Chairman of the Commit-
agement succession. The Committee’s Charter shall be posted tee, the Lead Director of the Board will serve as Chairman of
on the Company’s website. the meeting.
Meetings: The Committee will meet from time to time
during the year, as needed.
2 0 11 P r o x y S t a t e m e n t 45
Interaction with Management Teamwork:
Evaluation of the CEO – The Compensation Committee We believe teamwork leverages our individual strengths.
with input from the Board will annually review and approve • We are committed to common goals.
corporate goals and objectives relevant to the CEO’s compensa- • We expect everyone to actively participate on the BHI team.
tion, evaluate the CEO’s performance in light of such goals and • We openly communicate up, down, and across
objectives, and determine the CEO’s compensation level based the organization.
on this evaluation and other relevant information. The Com- • We value the diversity of our workforce.
mittee shall also review annually and determine the individual • We willingly share our resources.
elements of total compensation of the CEO, including annual
salary, annual bonus and long-term incentive compensation Performance:
and report such determination to the Board, provided, however, We believe performance excellence will drive the results
that the annual salary, annual bonus and long-term incentive that differentiate us from our competitors.
compensation shall be subject to the approval of the Board. • We focus on what is important.
Succession Planning – The Board and the Compensation • We establish and communicate clear expectations.
Committee share the responsibility for succession planning. • We relentlessly pursue success.
The Committee shall maintain and review with the Board a list • We strive for flawless execution.
for the Board of potential successors to the CEO. The Chairman • We work hard, celebrate our successes and learn
shall review management succession planning with the Com- from our failures.
pensation Committee on an annual basis, and provide a report • We continuously look for new ways to improve our
to the Board. products, services and processes.
Attendance at Board & Committee Meetings – The
Chairman will routinely invite senior management to attend Learning:
Board meetings. The Board or any Committee may request the We believe a learning environment is the way to achieve
presence of any Company employee at any Board or Commit- the full potential of each individual and the company.
tee meeting. In addition, the Chairman will invite such other • We expect development throughout each individual’s career
managers and outside experts to the Board meetings in situa- by a combination of individual and company commitment.
tions where such persons can aid the Board in its deliberations. • We learn from sharing past decisions and actions, both
Access to Management – Directors will have complete good and bad, to continuously improve performance.
access to management and management will be available to the • We improve by benchmarking and adopting best practices.
Board with respect to any questions regarding Company issues.
Keys to Success
Interpretation of Guidelines
These Guidelines provide a framework for governance of People contributing at their full potential.
the Company and the Board. The Board recognizes that situ Everyone can make a difference.
ations may dictate variations from the Guidelines in order to • We understand our priorities and performance goals.
respond to business changes and the needs of the stockholders. • We drive to do our part every day.
In addition, the Guidelines shall be revised and updated from • We support new ideas and take appropriate risks.
time-to-time. Accordingly, the Guidelines do not constitute • We take action to find and correct problems.
invariable rules nor shall they preclude the Board from acting • We commend each other on a job well done.
in variance thereto at any time in the future.
Delivering unmatched value to our customers.
The Board endorses and supports the • We make it easy for customers to do business with us.
Company’s Core Values and Keys for Success: • We listen to our customers and understand their needs.
• We plan ahead to deliver innovative, cost-effective solutions.
Core Values • We are dedicated to safe, flawless execution and top
quality results.
Integrity:
We believe integrity is the foundation of our individual Being cost efficient in everything we do.
and corporate actions that drives an organization of which • We maintain a competitive cost structure for the long-term.
we are proud. • We utilize shared services to control cost for the enterprise.
• We are a responsible corporate citizen committed • We seek the best value for Baker Hughes in our relationships
to the health and safety of people, protection of the with suppliers.
environment, and compliance with laws, regulations, • We ruthlessly eliminate waste without compromising
and company policies. safety or quality.
• We are honest, trustworthy, respectful and ethical in
our actions.
• We honor our commitments.
• We are accountable for our actions, successes and failures.
Employing our resources effectively. x) Possess the ability to oversee, as a director, the affairs
• We assign our people where they can make the of the Company for the benefit of its stockholders
biggest contribution. while keeping in perspective the interests of the Com-
• We allocate our investments to leverage the best pany’s customers, employees and the public; and
opportunities for Baker Hughes. xi) Are able to exercise sound business judgment.
• We handle company assets as if they were our own. B) Maintain a Board that reflects diversity, including but
• We manage our balance sheet to enhance return not limited to gender, ethnicity, background, country of
on investment. citizenship and experience.
Exhibit A 2. Age & Attendance

The Board will not nominate any person to serve as a
BAKER HUGHES INCORPORATED director who has attained the age of 72. No director shall
GUIDELINES FOR MEMBERSHIP stand for re-election in any fiscal year in which a director fails
ON THE BOARD OF DIRECTORS to attend at least 66% of the meetings of the Board and any
(As Amended February 24, 2011) Committees of the Board on which the director serves. These
provisions may be waived by the Board (excluding the affected
These Guidelines set forth the policies of the Board of director) if the Board determines that such waiver would be in
Directors (“Board”) of Baker Hughes Incorporated (“Company”) the best interest of the Company and its stockholders.
regarding Board membership. These Guidelines shall be imple-
mented by the Governance Committee of the Board with such 3. Audit/Ethics Committee
modifications as it deems appropriate. The Governance Com- The Governance Committee believes that it is desirable
mittee will consider candidates based upon: that one or more members of the Company’s Audit/Ethics
• The size and existing composition of the Board Committee possess those qualities and skills such that they
• The number and qualifications of candidates qualify as an Audit Committee Financial Expert, as defined
• The benefit of continuity on the Board by SEC rules and regulations.
• The relevance of the candidate’s background and experience
to current and foreseeable business of the Company. 4. Significant Change in Occupation or Employment
A non-management director who has a significant change
1. Criteria for Selection in occupation or retires from his or her principal employment
In filling director vacancies on the Board, the Governance or position will promptly notify the Governance Committee.
Committee will strive to: The Governance Committee will consider such change in
A) Recommend candidates for director positions who will help determining if it is in the best interests of the Company to
create a collective membership on the Board with varied nominate such person to stand for reelection as a director
experience and perspective and who: at the Company’s next Annual Meeting of Stockholders.
i) Have demonstrated leadership, and significant experi-
ence in an area of endeavor such as business, finance, 5. Board Review and Assessments
law, public service, banking or academia; Each year the members of the Board will participate in a
ii) Comprehend the role of a public company director, review and assessment of the Board and of each committee.
particularly the fiduciary obligations owed to the In connection with such reviews, or at any other time, a direc-
Company and its stockholders; tor with concerns regarding the performance, attendance,
iii) Have relevant expertise and experience, and are able to potential conflicts of interest, or any other concern respecting
offer advice and guidance based upon that expertise; any other director shall report such concerns to the Chairman
iv) Have a substantive understanding of domestic consid- of the Governance Committee. The Chairman of the Gover-
erations and geopolitics, especially those pertaining nance Committee, in consultation with such other directors
to the service sector of the oil and gas and energy as he or she deems appropriate will determine how such con-
related industries; cerns should be investigated and reported to members of the
v) Will dedicate sufficient time to Company business; Governance Committee who are not the director in question
vi) Exhibit integrity, sound business judgment and support (“Independent Non-Management Committee Members”). If
for the Core Values of the Company; the Independent Non-Management Committee Members con-
vii) Understand financial statements; clude that the director is not fulfilling his or her duties, they
viii) Are independent as defined by the Securities and will determine what actions should be taken. Such actions
Exchange Commission (“SEC”) and the New York may include, without limitation, the Chairman of the Board,
Stock Exchange; the lead director or another Board member discussing the situ-
ix) Support the ideals of the Company’s Business Code of ation with the director in question, identifying what steps are
Conduct and are not engaged in any activity adverse required to improve performance, or, if appropriate, requesting
to, or do not serve on the board of another company that the director resign from the Board.
whose interests are adverse to, or in conflict with the
Company’s interests;
2 0 11 P r o x y S t a t e m e n t 47
Exhibit B Exhibit C
baker hughes incorporated BAKER HUGHES INCORPORATED

Selection Process for New POLICY FOR DIRECTOR INDEPENDENCE,
Board of Directors Candidates AUDIT/ETHICS COMMITTEE MEMBERS
Baker Hughes Incorporated (“Company”) has established AND AUDIT COMMITTEE FINANCIAL EXPERT
the following process for the selection of new candidates for (As Amended October 23, 2008)
the Company’s Board of Directors (“Board”). The Board or the
Company’s Governance Committee will evaluate candidates INDEPENDENCE
properly proposed by stockholders in the same manner as all
other candidates. I. Introduction
1. Chairman/CEO, the Governance Committee, or other Board A member of the Board of Directors (“Board”) of Baker
members identify a need to fill vacancies or add newly cre- Hughes Incorporated (“Company”) shall be deemed indepen-
ated directorships. dent pursuant to this Policy of the Board, only if the Board
2. Chairman of the Governance Committee initiates search, affirmatively determines that (1) such director meets the stan-
working with staff support and seeking input from the dards set forth in Section II below, and (2) the director has no
Board members and senior management, and hiring a material relationship with the Company (either directly or as
search firm or obtaining advice from legal or other advisors, a partner, shareholder or officer of an organization that has a
if necessary. relationship with the Company). In making its determination,
3. Candidates, including any candidates properly proposed by the Board shall broadly consider all relevant facts and circum-
stockholders in accordance with the Company’s Bylaws, that stances. Material relationships can include commercial, indus-
satisfy criteria as described in the Company’s “Guidelines For trial, banking, consulting, legal, accounting, charitable and
Membership on the Board of Directors” or otherwise qualify familial relationships, among others.
for membership on the Board, are identified and presented Each director of the Company’s Audit/Ethics Committee,
to the Governance Committee. Governance Committee and Compensation Committee must
4. Determine if the Governance Committee members, Board be independent. A director who is a member of the Com
members or senior management have a basis to initiate pany’s Audit/Ethics Committee is also required to meet the
contact with preferred candidates; or if appropriate, utilize criteria set forth below in Section III. These standards shall be
a search firm. implemented by the Governance Committee with such modifi-
5. Chairman/CEO and at least one member of the Governance cations as it deems appropriate.
Committee interviews prospective candidate(s).
6. Full Board to be kept informed of progress. II. Standards for Director Independence
7. The Governance Committee meets to consider and approve 1. A director who is an employee, or whose immediate family
final candidate(s) (conduct interviews as necessary). member is an executive officer, of the Company is not inde-
8. The Governance Committee will propose to the full Board pendent until three years after the end of such employment
candidates for Board membership to fill vacancies, or to stand relationship. Employment as an interim Chairman or CEO
for election at the next Annual Meeting of Stockholders. shall not disqualify a director from being considered inde-
pendent following that employment.
2. A director who receives, or whose immediate family member
receives, more than $120,000 per year in direct compensa-
tion from the Company, other than director and committee
fees and pension or other forms of deferred compensation
for prior service (provided such compensation is not contin-
gent in any way on continued service), is not independent
until three years after he or she ceases to receive more than
$120,000 per year in such compensation. Compensation
received by a director for former service as an interim Chair-
man or CEO need not be considered in determining inde-
pendence under this test. Compensation received by an
immediate family member for service as a non-executive
employee of the Company need not be considered in
determining independence under this test.
3. A director who is affiliated with or employed by a present
or former internal or external auditor of the Company is not
“independent” until three years after the end of the affilia-
tion or the employment or auditing relationship. A director,
however, is still considered independent if the director’s
immediate family member currently works for the company’s
auditor, as long as the immediate family member is not a
partner of the company’s auditor or is not personally involved IV. Definitions
(and has not been personally involved for the past three An “immediate family member” includes a person’s spouse,
years) in the company’s audit. parents, children, siblings, mothers and fathers-in-law, sons
4. A director who is employed, or whose immediate family and daughters-in-law, brothers and sisters-in-law, and anyone
member is employed, as an executive officer of another (other than domestic employees) who shares such person’s
company where any of the Company’s present executives household. When considering the application of the three year
serve on that company’s compensation committee is not period referred to in each of paragraphs II.1 through II.5 above,
“independent” until three years after the end of such the Company need not consider individuals who are no longer
service or the employment relationship. immediate family members as a result of legal separation or
5. A director who is an executive officer or an employee, or divorce, or those who have died or become incapacitated.
whose immediate family member is an executive officer, of The “Company” includes any subsidiary in a consolidated
a company that makes payments to, or receives payments group with the Company.
from, the Company for property or services in an amount
which, in any single fiscal year, exceeds the greater of AUDIT/ETHICS COMMITTEE
$1 million, or 2% of the consolidated gross revenues of FINANCIAL EXPERT QUALIFICATIONS
such other company employing such executive officer or The Company believes that it is desirable that one or more
employee, is not “independent” until three years after members of the Audit/Ethics Committee possess such qualities
falling below such threshold.(1) and skills such that they qualify as an Audit Committee Finan-
cial Expert as defined by the Securities and Exchange Commis-
III. Standards for Audit/Ethics Committee Members sion (“SEC”).
1. A director who is a member of the Audit/Ethics Committee 1. The SEC rules define an Audit Committee Financial Expert
other than in his or her capacity as a member of the Audit/ as a director who has the following attributes:
Ethics Committee, the Board, or any other Board committee, (a) An understanding of generally accepted accounting
may not accept directly or indirectly any consulting, advisory, principles and financial statements;
or other compensatory fee from the Company or any sub- (b) The ability to assess the general application of such
sidiary thereof, provided that, unless the rules of the NYSE principles in connection with the accounting for
provide otherwise, compensatory fees do not include the estimates, accruals and reserves;
receipt of fixed amounts of compensation under a retirement (c) Experience preparing, auditing, analyzing or evaluating
plan (including deferred compensation) for prior service with financial statements that present a breadth and level of
the Company (provided that such compensation is not con- complexity of accounting issues that are generally com-
tingent in any way on continued service). parable to the breadth and complexity of issues that can
Indirect acceptance of compensatory payments includes: reasonably be expected to be raised by the registrant’s
(1) payments to spouses, minor children or stepchildren, or financial statements, or experience actively supervising
children or stepchildren sharing a household with the mem- one or more persons engaged in such activities;
ber; or (2) payments accepted by an entity in which such (d) An understanding of internal controls and procedures
member is a partner, member, officer such as a managing for financial reporting; and
director occupying a comparable position or executive officer, (e) An understanding of audit committee functions.
or occupies a similar position and which provides accounting, 2. Under SEC rules, a director must have acquired such
consulting, legal, investment banking or financial advisory attributes through any one or more of the following:
services to the Company. (a) Education and experience as a principal financial officer,
2. A director, who is a member of the Audit/Ethics Committee principal accounting officer, controller, public accountant
may not, other than in his or her capacity as a member of or auditor or experience in one or more positions that
the Audit/Ethics Committee, the Board, or any other Board involve the performance of similar functions;
committee, be an affiliated person of the Company or any (b) Experience actively supervising a principal financial officer,
subsidiary thereof. principal accounting officer, controller, public accountant,
3. A member of the Audit/Ethics Committee may not simul auditor or person performing similar functions;
taneously serve on the audit committees of more than (c) Experience overseeing or assessing the performance of
two other public companies in addition to the Company. companies or public accountants with respect to the prep
aration, auditing or evaluation of financial statements; or
(1)
In applying this test, both the payments and the consolidated gross revenues (d) Other relevant experience.
to be measured shall be those reported in the last completed fiscal year. The
look-back provision for this test applies solely to the financial relationship
between the Company and the director or immediate family member’s cur-
rent employer; the Company need not consider former employment of the
director or immediate family member. Charitable organizations shall not be
considered “companies” for purposes of this test, provided however that
the Company shall disclose in its annual proxy statement any charitable
contributions made by the Company to any charitable organization in which
a director serves as an executive officer if, within the preceding three years,
contributions in any single fiscal year exceeded the greater of $1 million, or
2% of such charitable organization’s consolidated gross revenues.
2 0 11 P r o x y S t a t e m e n t 49
Exhibit D Exhibit E
baker hughes incorporated baker hughes incorporated
POLICY AND Submission procedures for stock stockholder communications

holder recommended director candidates with the board of directors
(As Amended October 23, 2008) (As Amended October 23, 2008)
The Governance Committee of Baker Hughes Incorporated In order to provide the stockholders and other interested
(“Company”) has established a policy that it will consider direc- parties of Baker Hughes Incorporated (“Company”) with a
tor candidates recommended by stockholders. The Company’s direct and open line of communication to the Company’s
Board of Directors (“Board”) or the Governance Committee Board of Directors (“Board”), the following procedures have
will evaluate candidates properly proposed by stockholders in been established for communications to the Board.
the same manner as all other candidates. Any such recommen- Stockholders and other interested persons may communi-
dations should be communicated to the Chairman, Governance cate with any member of the Board, including the Company’s
Committee of the Board of Directors, P.O. Box 4740, Houston, Lead Director, the Chairman of any of the Company’s Gover-
Texas 77210-4740 or to the Corporate Secretary, c/o Baker nance Committee, Audit/Ethics Committee, Compensation
Hughes Incorporated, 2929 Allen Parkway, Suite 2100, Houston, Committee, Finance Committee or with the independent non-
Texas 77019-2118 and should be accompanied by the types of management directors of the Company as a group, by sending
information as are required under the Company’s Bylaws for such written communication to the following address:
stockholder nominees. Corporate Secretary
In summary, the Company’s Bylaws provide in substance that: c/o Baker Hughes Incorporated
1. Stockholder nominations shall be made pursuant to timely 2929 Allen Parkway, Suite 2100
written notice (“a Nomination Notice”). To be timely, a Houston, TX 77019-2118
Nomination Notice must be received by the Secretary not Stockholders desiring to make candidate recommendations for
less than 120 days, nor more than 150 days, before the one the Board may do so by submitting nominations to the Com-
year anniversary of the date on which the Company’s proxy pany’s Governance Committee, in accordance with the Com-
statement was released to stockholders in connection with pany’s Bylaws and “Policy and Submission Procedures For
the previous year’s annual meeting of the stockholders. Stockholder Recommended Director Candidates” addressed,
2. The Nomination Notice shall set forth (a) all information as above, to the Corporate Secretary, or to:
relating to the nominee as required to be disclosed in solici- Chairman, Governance Committee of the Board of Directors
tations of proxies for election of directors, or as otherwise P.O. Box 4740
required, in each case pursuant to Regulation 14A under the Houston, TX 77210-4740
Securities Exchange Act of 1934 or any successor regulation Any written communications received by the Corporate
thereto (including such person’s written consent to be named Secretary will be forwarded to the appropriate directors.
in the proxy statement as a nominee and to serve as a direc-
tor if elected), (b) the nominee’s independence, any voting
commitments and/or other obligations such person will
be bound by as a director, and any material relationships
between such person and (1) the nominating stockholder,
or (2) the beneficial owner, if any, on whose behalf the
nomination is made (each nominating party and each bene-
ficial owner, a “nominating party”), including compensation
and financial transactions, (c) the nominating party’s name
and record address, (d) the class, series, and number of shares
of the Company that are owned beneficially and of record,
directly or indirectly, by each nominating party, (e) all other
related ownership interests directly or indirectly owned ben-
eficially by each nominating party, and (f) any interest of each
nominating party in such nomination. At the request of the
Board, any person nominated by the Board for election as a
director shall furnish to the Corporate Secretary of the Com-
pany that information required to be set forth in a stock-
holder’s Nomination Notice that pertains to the nominee.
The foregoing is a generalized summary and the specific
requirements of the Bylaws shall control.
Exhibit F ANNEX B
BAKER HUGHES INCORPORATED BAKER HUGHES INCORPORATED

CHARTER OF THE AUDIT/ETHICS COMMITTEE
PROCEDURES FOR THE RECEIPT, RETENTION OF THE BOARD OF DIRECTORS
AND TREATMENT OF COMPLAINTS (As Amended and Restated October 21, 2009)
(As Amended October 22, 2009)
The Board of Directors of Baker Hughes Incorporated
Sarbanes-Oxley Act Section 301 Requirements (the “Company”) has heretofore constituted and established
The Sarbanes-Oxley Act of 2002 (“SOX”) Section 301 an Audit/Ethics Committee (the “Committee”) with authority,
requires that each audit committee establish procedures for responsibility and specific duties as described in this Charter.
the receipt, retention and treatment of complaints received by It is intended that this Charter and the composition of the
the Company regarding accounting, internal accounting con- Committee comply with the rules of the New York Stock
trols or auditing matters; and confidential, anonymous sub Exchange (the “NYSE”). This document replaces and super-
missions by employees of the Company of concerns regarding sedes in its entirety the previous Charter of the Committee
questionable accounting or auditing matters. adopted by the Board of Directors of the Company.
Guidelines for Reporting Purpose

Complaints or concerns regarding accounting, internal The Committee’s purpose is to assist the Board of Directors
accounting controls or auditing matters may be submitted by with oversight of: (i) the integrity of the Company’s financial
employees and/or third parties to the Business Help Line or the statements and financial reporting system, (ii) the Company’s
Chief Compliance Officer (“CCO”). Concerns received by the compliance with legal and regulatory requirements, (iii) the
Business Help Line, which accepts anonymous submissions, are independent auditor’s qualifications, independence and perfor-
forwarded to the CCO. All complaints received by the CCO are mance and (iv) the performance of the Company’s internal
reviewed and validated and a list of all such items will be pro- audit function. The Committee shall also prepare the report of
vided to the Chairman of the Audit/Ethics Committee. The the Committee to be included in the Company’s annual proxy
CCO has an affirmative duty to report all issues for which the statement, carry out the duties and responsibilities set forth in
CCO has credible evidence of a material or potential violation this Charter and conduct an annual self-evaluation.
of any applicable securities laws, fiduciary duty, or similar vio
lation to the Audit/Ethics Committee (“AEC”) in a timely man- Composition
ner. The CCO may bring any issue to the attention of the AEC The Committee and Chairman of the Committee shall
if, in the CCO’s opinion, it is necessary and appropriate to be elected annually by the Board of Directors and are subject
inform the AEC. to removal pursuant to the terms of the Company’s Bylaws.
When the CCO brings an issue to the AEC, the AEC The Committee shall be comprised of not less than three non-
and the CCO will collaboratively discuss the issue and agree employee Directors who are (i) independent (as defined by
to a course of action which may include an internal investiga- Section 10A(m)(3) of the Securities Exchange Act of 1934
tion involving one or more of the CCO, Corporate Security, and the rules and regulations thereunder and the NYSE) and
Human Resources department, Operations, Internal Audit (ii) financially literate (as interpreted by the Board of Directors
and outside counsel. in its business judgment). Such Committee members may not
The CCO will maintain appropriate records for all issues simultaneously serve on the audit committee of more than three
presented to the AEC and provide updates. The CCO will public companies. At least one member of the Committee shall
retain issue related documentation in accordance with the be an “audit committee financial expert,” as defined by the Secu-
Company’s record retention policy. rities and Exchange Commission (“SEC”). The audit committee
In the event that a complaint is received concerning the financial expert must have: (i) an understanding of GAAP and
CCO, the complaint will be sent directly to the Chairman of financial statements; (ii) experience in the (a) preparation, audit-
the AEC. The Chairman of the AEC will decide the appropriate ing, analyzing or evaluating of financial statements of generally
course of action. comparable issuers or supervising one or more persons engaged
Third party reporting procedures are posted on the Com- in such activities and (b) applying GAAP principles in connection
pany’s internet website in the Investor Relations-Compliance with the accounting for estimates, accruals and reserves; (iii) an
Section. The reporting protocol for employees is posted on understanding of internal control over financial reporting; and
the intranet within the Interchange-Legal Compliance site. (iv) an understanding of audit committee functions. The Commit-
In addition to the websites, the Company has a Business tee may, if appropriate, delegate its authority to subcommittees.
Help Line brochure. If a member of the Committee ceases to be independent
No employee shall suffer retaliation in any form for for reasons outside the member’s reasonable control, his or
reporting, in good faith, suspected violations of the Business her membership on the committee may, if so permitted under
Code of Conduct. then applicable NYSE rules, continue until the earlier of the
Company’s next annual meeting of stockholders or one year
from the occurrence of the event that caused the failure to
qualify as independent.
2 0 11 P r o x y S t a t e m e n t 51
Principal Responsibilities • On an annual basis, receive and review formal written
The principal responsibilities of the Committee are: (i) to reports from the independent registered public accounting
provide assistance to the Board of Directors in fulfilling its firm regarding the auditors’ independence required by the
responsibility in matters relating to the accounting and report- Public Company Accounting Oversight Board (“PCAOB”)
ing practices of the Company, the adequacy of the Company’s Ethics and Independence Rule 3526 “Communication with
internal controls over financial reporting and disclosure con- Audit Committees Concerning Independence,” giving
trols and procedures, and the quality and integrity of the consideration to the range of audit and non-audit services
financial statements of the Company; and (ii) to oversee the performed by them and all their relationships with the
Company’s compliance programs. The independent auditor is Company, as well as a report describing the (i) independent
ultimately accountable to the Board of Directors and the Com- registered public accounting firm’s internal quality-control
mittee, as representatives of the Company’s stockholders, and procedures; (ii) any material issues raised by the most recent
shall report directly to the Committee. The Committee has the internal quality-control review or peer review, of the inde-
ultimate authority and direct responsibility to select, appoint, pendent registered public accounting firm, or by any inquiry
evaluate, compensate and oversee the work, and, if necessary, or investigation by governmental or professional authorities;
terminate and replace the independent auditor (subject, if within the preceding five years with respect to one or more
applicable, to stockholder ratification). The Committee shall independent audits carried out by the auditors; and (iii) any
have authority to conduct or authorize investigations into any steps taken to deal with such issues. Conduct an active dis-
matters within its scope of responsibilities. cussion with the independent registered public accounting
The Committee shall have the authority to engage inde- firm with respect to any disclosed relationships or services
pendent counsel and other advisors, as the Committee deems that may impact the objectivity and independence of the
necessary to carry out its duties. The Committee shall have the auditors. Select the independent registered public account-
sole authority to approve the fees paid to any independent ing firm to be employed or discharged by the Company.
advisor retained by the Committee, and the Company shall Review and evaluate competence of partners and managers
provide funding for such payments. In addition, the Company of the independent registered public accounting firm who
must provide funding for ordinary administrative expenses of lead the audit. As required by law, ensure the rotation of
the Committee that are necessary or appropriate in carrying the lead audit partner having primary responsibility for
out its duties. the Company’s audit and the audit partner responsible for
The Committee shall review the composition, expertise reviewing the audit. Consider whether there should be a
and availability of the Committee members on an annual rotation of the independent registered public accounting
basis. The Committee shall also perform a self-evaluation firm. The Committee shall establish hiring policies for the
of the Committee and its activities on an annual basis. Company of employees or former employees of the inde-
The Committee shall meet in executive session at each pendent registered public accounting firm in accordance
regularly scheduled meeting, including separate, private meet- with the NYSE rules, SOX and as specified by the SEC and
ings with the independent registered public accounting firm, review and discuss with management and the independent
corporate auditors, general counsel and compliance officer. registered public accounting firm any proposals for hiring
The Committee shall also meet in executive session with such any key member of the independent registered public
other employees as it deems necessary and appropriate. accounting firm’s team.
This Charter is intended to be flexible so that the Commit- • Prior to commencement of the annual audit, review with
tee is able to meet changing conditions. The Committee is management, the corporate auditors and the independent
authorized to take such further actions as are consistent with registered public accounting firm the proposed scope of the
the following described responsibilities and to perform such audit plan and fees, including the areas of business to be
other actions as applicable law, the NYSE, the Company’s examined, the personnel to be assigned to the audit, the
charter documents and/or the Board of Directors may require. procedures to be followed, special areas to be investigated,
To that end, the Committee shall review and reassess the as well as the program for integration of the independent
adequacy of this Charter annually. Any proposed changes shall and internal audit efforts.
be put before the Board of Directors for its approval. • Review policies and procedures for the engagement of the
With regard to its audit responsibilities, the Committee shall: independent registered public accounting firm to provide
• Receive and review reports from the independent registered audit and non-audit services, giving due consideration to
public accounting firm pursuant to the Sarbanes-Oxley Act whether the independent auditor’s performance of non-
of 2002 (“SOX”) and Section 10(A)(k) of the Exchange Act audit services is compatible with the auditor’s independence
regarding: (i) all critical accounting policies and practices and review and pre-approve all audit and non-audit fees for
being used; (ii) all alternative treatments of financial informa- such services, subject to the de minimus exception under
tion within generally accepted accounting principles that have SOX. With the exception of the annual audit, the Committee
been discussed with management, and the treatment pre- may delegate to a member of the Committee the authority
ferred by the independent registered public accounting firm; to pre-approve all audit and non-audit services with any
and (iii) other material written communications between the such decision presented to the full Committee at the next
independent auditor and management, such as any manage- scheduled meeting.
ment letter or schedule of unrecorded audit adjustments.
• Review with management and independent registered and Independence Rule 3526, “Communication with Audit
public accounting firm the accounting and reporting policies Committees Concerning Independence” and has discussed
and procedures that may be viewed as critical accounting with the independent accountant the independent accoun-
estimates, any improvements, questions of choice and mate- tant’s independence; and (iv) based upon the review and
rial changes in accounting policies and procedures, including discussion of the audited financial statements with both
interim accounting, as well as significant accounting, audit- management and the independent registered public account-
ing and SEC pronouncements. ing firm, the Committee recommended to the Board of
• Review with management and the independent registered Directors that the audited financial statements be included
public accounting firm any financial reporting and disclosure in the Company’s Annual Report on Form 10-K for the last
issues, including material correcting adjustments and off- fiscal year for filing with the SEC.
balance sheet financings and relationships, if any. Discuss • Cause the Charter to be included periodically in the proxy
significant judgment matters made in connection with the statement as required by applicable rules.
preparation of the Company’s financial statements and • Review actions taken by management on the independent
ascertain that any significant disagreements among them registered public accounting firm and corporate auditors’
have been satisfactorily resolved. Ascertain that no restrictions recommendations relating to organization, internal controls
were placed by management on implementation of the and operations.
independent or corporate auditors’ examinations. Regularly • Meet separately and periodically with management, the
scheduled executive sessions will be held for this purpose. corporate auditors and the independent registered public
• Review with management, the corporate auditors and the accounting firm to review the responsibilities, budget and
independent registered public accounting firm the results of staffing of the Company’s internal audit function, the effec-
(i) the annual audit prior to release of the audited financial tiveness of the Company’s internal controls, including com-
statements in the Company’s annual report on Form 10-K puterized information systems controls, and security. Review
filed with the SEC, including a review of the MD&A section; the Company’s annual internal audit plan, staffing and bud-
and (ii) the quarterly financial statements prior to release in get, and receive regular reports on their activities, including
the Company’s quarterly report on Form 10-Q filed with the significant findings and management’s actions. Review
SEC, including a review of the MD&A section. Have manage- annually the audit of the travel and entertainment expenses
ment review the Company’s financial results with the Board of the Company’s senior management. Review annually the
of Directors. audit of the travel expenses of the members of the Com
• Review and discuss with management and the independent pany’s Board of Directors. At least every three years the
registered public accounting firm management’s report on Committee reviews the Corporate Audit Department
internal control prior to the filing of the Company’s annual Charter. At least every five years the Committee reviews
report on Form 10-K. the report received from a qualified, independent audit firm
• Establish guidelines with respect to earnings releases and regarding its quality assurance review of the Company’s
financial information and earnings guidance provided to internal audit function.
analysts and rating agencies. The Committee may request • Review membership of the Company’s Disclosure Control
a prior review of any annual or quarterly earnings release and Internal Control Committee (“DCIC”), the DCIC’s
or earnings guidance and delegate to the Chairman of scheduled activities and the DCIC’s quarterly report. Review
the Committee the authority to review any such earnings on an annual basis the DCIC Charter.
releases and guidance. • Receive reports from the CEO and CFO on any material
• Review with the Board of Directors any issues that arise with weaknesses and significant deficiencies in the design or
respect to the quality or integrity of the Company’s financial operation of certain internal controls over financial reporting
statements and financial reporting system, the Company’s and any fraud, whether or not material, that involves man-
compliance with legal or regulatory requirements, the per- agement or other employees who have a significant role in
formance and independence of the Company’s independent the Company’s internal controls.
registered public accounting firm or the performance of the • Review reports, media coverage and similar public informa-
internal audit function. tion provided to analysts and rating agencies, as the Com-
• Review guidelines and policies on enterprise risk management mittee deems appropriate.
including risk assessment and risk management related to the • Establish formal procedures for (i) the receipt, retention and
Company’s major financial risk exposures and the steps man- treatment of complaints received by the Company regarding
agement has taken to monitor and control such exposures. accounting, internal accounting controls or auditing matters,
• Annually prepare an audit committee report for inclusion in (ii) the confidential, anonymous submissions by Company
the Company’s proxy statement stating that the Committee employees of concerns regarding questionable accounting
has (i) reviewed and discussed the audited financial state- or auditing matters, and (iii) the protection of reporting
ments with management; (ii) discussed with the indepen- employees from retaliation.
dent registered public accounting firm the matters required • Annually review with the independent registered public
to be discussed by the Statement on Auditing Standards accounting firm any audit problems or difficulties and man-
No. 114; (iii) received a formal written report from the inde- agement’s response. The Committee must regularly review
pendent registered public accounting firm concerning the with the independent auditor any difficulties the auditor
auditors’ independence required by the PCAOB’s Ethics encountered in the course of the audit work, including
2 0 11 P r o x y S t a t e m e n t 53
any restrictions on the scope of the independent registered Meetings
public accounting firm’s activities or access to requested The Committee will meet at least five times per year as
information, and any significant disagreements with man- determined by the Board of Directors. Special meetings may
agement. Among the items the Committee may want to be called, as needed, by the Chairman of the Board of Direc-
review with the auditors are: any accounting adjustments tors or the Chairman of the Committee. The Committee may
that were noted or proposed by the auditor but were create subcommittees who shall report to the Committee. The
“passed” (as immaterial or otherwise); any communications Committee may ask employees, the independent registered
between the audit team and the audit firm’s national office public accounting firm, corporate auditors or others whose
respecting auditing or accounting issues presented by the advice and counsel the Committee deems relevant to attend
engagement; and any “management” or “internal control” meetings and provide information to the Committee. The
letter issued, or proposed to be issued, by the audit firm to Committee will be available to the independent registered
the Company. public accounting firm and the corporate auditors of the Com-
With regard to its compliance responsibilities, the Commit- pany. All meetings of the Committee will be held pursuant
tee shall: to the Bylaws of the Company and written minutes of each
• Review policies and procedures that the Company has meeting will be duly filed in the Company records. Reports
implemented regarding compliance with applicable federal, of meetings of the Committee shall be made to the Board of
state and local laws and regulations, including the Compa- Directors at its next regularly scheduled meeting following the
ny’s Business Code of Conduct and its Foreign Corrupt Prac- Committee meeting accompanied by any recommendations to
tices Act policies. Monitor the effectiveness of these policies the Board of Directors approved by the Committee.
and procedures for compliance with the U.S. Federal Sen-
tencing Guidelines, as amended, and institute any changes
or revisions to such policies and procedures that may be
deemed, warranted or necessary.
• Review in conjunction with counsel (i) any legal matters
that could have significant impact on the organization’s
financial statements; (ii) correspondence and material inqui-
ries received from regulators or governmental agencies; and
(iii) all matters relating to the ethics of the Company and
its subsidiaries.
• Coordinate the Company’s compliance with inquiries from
any government officials concerning legal compliance in
the areas covered by the Business Code of Conduct and
the Foreign Corrupt Practices Act policy.
• Review the Company’s compliance with its environmental
policy on an annual basis.
• Respond to such other duties as may be assigned to the
Committee, from time to time, by the Board of Directors.
While the Committee has the responsibilities and powers
set forth in this Charter, it is not the duty of the Committee
to plan or conduct audits; those are the responsibilities of the
independent registered public accounting firm. Further, it is
not the Committee’s responsibility to determine that the Com-
pany’s financial statements are complete and accurate and are
in accordance with generally accepted accounting principles;
those are the responsibilities of management. Nor is it the
duty of the Committee to conduct investigations, to resolve
disagreements, if any, between management and the indepen-
dent auditor or to assure compliance with laws and regulations
or with Company policies.
ANNEX c
BAKER HUGHES INCORPORATED

ANNUAL INCENTIVE COMPENSATION PLAN
(Amendment and Restatement Adopted by the Board of Directors on February 20, 2008
As Amended by the First Amendment Adopted on December 18, 2008)
WITNESSETH:
WHEREAS, effective October 1, 1994, Baker Hughes Incorporated (the “Company”) previously adopted the Baker Hughes Incor-
porated 1995 Employee Annual Incentive Compensation Plan (the “Plan”) for the benefit of certain employees of the Company and
affiliates of the Company;
WHEREAS, 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); and
WHEREAS, the Company desires to amend and restate the Plan on behalf of itself and on behalf of the other adopting entities;
NOW THEREFORE, the Plan is hereby amended and restated in its entirety as follows, effective as of January 1, 2005 except
insofar as a later effective date is expressly specified.
2 0 11 P r o x y S t a t e m e n t 55
ANNEX c
ANNUAL INCENTIVE COMPENSATION PLAN
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND CONSTRUCTION.................................................................................................................................57

1.01 Definitions...........................................................................................................................................................................57
1.02 Number and Gender............................................................................................................................................................60
1.03 Headings.............................................................................................................................................................................60
ARTICLE II PARTICIPATION..................................................................................................................................................................61
2.01 Eligibility..............................................................................................................................................................................61
2.02 Participation........................................................................................................................................................................61
2.03 Partial Plan Year Participation...............................................................................................................................................61
2.04 Termination of Approval......................................................................................................................................................61
ARTICLE III AWARD OPPORTUNITIES AND PERFORMANCE GOALS.................................................................................................61
3.01 Award Opportunities...........................................................................................................................................................61
3.02 Performance Goals..............................................................................................................................................................61
3.03 Time of Establishment of Award Opportunities and Performance Goals...............................................................................62
3.04 Adjustment of Performance Goals.......................................................................................................................................62
3.05 Individual Award Cap..........................................................................................................................................................62
ARTICLE IV FINAL AWARD DETERMINATIONS....................................................................................................................................62
4.01 Final Award Determinations.................................................................................................................................................62
4.02 Separation From Service Due to Death, Disability, or Retirement or Involuntary Termination of Employment........................62
4.03 Employment Transfers..........................................................................................................................................................62
4.04 Disposition of Business........................................................................................................................................................62
4.05 Separation From Service for Other Reasons..........................................................................................................................62
ARTICLE V BANKING OF AWARDS.....................................................................................................................................................63
5.01 General Banking Procedures................................................................................................................................................63
5.02 Exceptions...........................................................................................................................................................................63
ARTICLE VI DEEMED INVESTMENT OF FUNDS...................................................................................................................................63
ARTICLE VII PAYMENT OF BENEFITS.....................................................................................................................................................63
7.01 Time of Payment of Unbanked Final Award.........................................................................................................................63
7.02 Time of Payment of Banked Final Award.............................................................................................................................63
7.03 Form of Payment of Benefits...............................................................................................................................................63
7.04 Account Debits....................................................................................................................................................................63
7.05 Unclaimed Benefits..............................................................................................................................................................63
7.06 Statutory Benefits................................................................................................................................................................64
7.07 Payment to Alternate Payee Under Domestic Relations Order..............................................................................................64
ARTICLE VIII FORFEITURE OF BENEFITS.................................................................................................................................................64
ARTICLE IX DEATH................................................................................................................................................................................64
9.01 Payment of Unbanked Amounts..........................................................................................................................................64
9.02 Payment of Banked Amounts..............................................................................................................................................64
9.03 Designation of Beneficiaries.................................................................................................................................................64
ARTICLE X CHANGE IN CONTROL.......................................................................................................................................................64
10.01 General...............................................................................................................................................................................64
10.02 CIC Committee...................................................................................................................................................................64
10.03 Change in Control During a Performance Period.................................................................................................................64
10.04 Termination of Employment Prior to Change in Control or Following Certain Changes in Control.......................................64
10.05 Payment of Expected Value Awards and Tax-Gross Up for Delayed Payment........................................................................65
10.06 Forfeiture Restrictions..........................................................................................................................................................65
ARTICLE XI ADMINISTRATION OF THE PLAN......................................................................................................................................65
11.01 Resignation and Removal.....................................................................................................................................................65
11.02 Records and Procedures.......................................................................................................................................................65
11.03 Self-Interest of Plan Administrator.......................................................................................................................................65
11.04 Compensation and Bonding................................................................................................................................................65
11.05 Plan Administrator Powers and Duties.................................................................................................................................65
11.06 Reliance on Documents, Instruments, etc............................................................................................................................65
11.07 Claims Review Procedures; Claims Appeals Procedures........................................................................................................66
11.08 Company to Supply Information..........................................................................................................................................66
11.09 Indemnity............................................................................................................................................................................66
ARTICLE XII PARTICIPATION IN THE PLAN BY AFFILIATES...................................................................................................................67
12.01 Adoption Procedure.............................................................................................................................................................67
12.02 No Joint Venture Implied.....................................................................................................................................................67
ARTICLE XIII MISCELLANEOUS...............................................................................................................................................................67
13.01 Plan Not Contract of Employment.......................................................................................................................................67
13.02 Funding...............................................................................................................................................................................67
13.03 Alienation of Interest Forbidden...........................................................................................................................................67
13.04 Withholding........................................................................................................................................................................67
13.05 Amendment and Termination..............................................................................................................................................67
13.06 Severability..........................................................................................................................................................................67
13.07 Arbitration...........................................................................................................................................................................67
13.08 Compliance With Section 409A...........................................................................................................................................68
13.09 Governing Law....................................................................................................................................................................68
BAKER HUGHES INCORPORATED Employed” means the sum of the Monthly Adjusted Net Capi-
ANNUAL INCENTIVE COMPENSATION PLAN tal Employed during the Performance Period divided by 12;
(Amendment and Restatement Adopted by the Board of Directors “Capital Charge” means Average Adjusted Net Capital Employed
on February 20, 2008 As Amended by the First Amendment Adopted multiplied by the Cost of Capital; “Company” means Baker
on December 18, 2008)
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
ARTICLE I
written Award Opportunities; “Cost of Capital” means the
weighted average after-tax cost of debt and cost of equity for
DEFINITIONS AND CONSTRUCTION
the Company for the Performance Period; “Cost of Revenues”
1.01 Definitions. The words and phrases defined in this
means the cost of products sold and the cost of providing ser-
Article shall have the meaning set out in the definitions below
vices, including personnel costs, repair and maintenance costs,
unless the context in which the word or phrase appears rea-
freight/custom, depreciation, and other costs (e.g., commission
sonably requires a broader, narrower or different meaning.
and royalty) directly relating to the sale or service provided;
These definitions shall apply solely for purposes of this Plan.
“Monthly Adjusted Net Capital Employed” means the capital
“Account(s)” means all ledger accounts pertaining to a
employed by the Company during a month of the Performance
Participant or former Participant which are maintained by the
Period plus accumulated goodwill and non-compete amortiza-
Plan Administrator to reflect the Company’s obligation to the
tion plus the value of significant operating leases; “Operating
Participant or former Participant under the Plan. The Plan
Expenses” means costs incurred in non-manufacturing areas
Administrator shall establish the following subaccounts and
to provide products and services to customers (e.g., finance
any additional subaccounts that the Plan Administrator consid-
and administrative support) during the Performance Period;
ers necessary to reflect the entire interest of the Participant or
“Profit Before Tax” means the revenues of the Company
former Participant under the Plan. Each of the subaccounts
for the Performance Period minus the Cost of Revenues of
listed below and any additional subaccounts established by
the Company for the Performance Period minus the Operating
the Plan Administrator shall reflect credits and debits made to
Expenses of the Company for the Performance Period minus
such subaccounts for earnings, distributions and forfeitures:
net interest expense of the Company for the Performance
(a) Banked Account – the Participant’s or former Participant’s
Period; and “Tax Rate” means the effective tax rate for the
banked Final Award for a given Performance Period.
Company determined in a manner consistent with Baker Hughes
(b) Unbanked Account – the Participant’s or former Partici-
tax policies and practices in effect on the date hereof.
pant’s Final Award for a given Performance Period that
“Beneficial Owner” or “Beneficial Ownership” shall
is not banked pursuant to Article V.
have the meaning ascribed to the term in Rule 13d-3 of the
“Affiliate” means any entity which is a member of the
General Rules and Regulations under the Exchange Act.
same controlled group of corporations (within the meaning
“Beneficiary” means the person or persons who are
of section 414(b) of the Code) or which is a trade or business
eligible to receive a Participant’s benefits payable under the
(whether or not incorporated) which is under common control
Plan upon his death in accordance with the procedures spec
(within the meaning of section 414(c) of the Code), or which
ified in Section 9.03.
is a member of an affiliated service group (within the meaning
“Board” means the Board of Directors of Baker Hughes.
of section 414(m) of the Code) with Baker Hughes.
“Cause” means (i) the willful and continued failure by
“Applicable Interest Rate” means the 10-year U.S.
the Participant to substantially perform the Participant’s duties
Treasury rate plus 25 basis points (0.25%).
with the Company (other than any such failure resulting from
“Award Opportunity” has the meaning specified in
the Participant’s incapacity due to physical or mental illness)
Section 3.01 of the Plan.
after a written demand for substantial performance is deliv-
“Baker Hughes” means Baker Hughes Incorporated,
ered to the Participant by the Committee, which demand
a Delaware corporation.
specifically identifies the manner in which the Committee
“Baker Value Added” and “BVA” mean, with respect
believes that the Participant has not substantially performed
to a Performance Period, the amount calculated under the
the Participant’s duties, or (ii) the willful engaging by the Par-
following formula:
ticipant in conduct which is demonstrably and materially inju
[[(a) + (b) + (c)] x (1 - (d))] - (e)
rious to Baker Hughes or any of the Affiliates, monetarily or
where (a) is the Profit Before Tax of the Company for the Per-
otherwise. For purposes of clauses (i) and (ii) of this definition,
formance Period, (b) is the interest expense of the Company
(A) no act, or failure to act, on the Participant’s part shall be
for the Performance Period, (c) is the non-compete amortiza-
deemed “willful” if done, or omitted to be done, by the Par-
tion expense of the Company for the Performance Period,
ticipant in good faith and with reasonable belief that the act,
(d) is the Tax Rate for the Performance Period and (e) is the
or failure to act, was in the best interest of the Company and
Capital Charge determined for the Company for the Perfor-
(B) in the event of a dispute concerning the application of this
mance Period. For this purpose, “Average Adjusted Net Capital
provision, no claim by the Company that Cause exists shall be
2 0 11 P r o x y S t a t e m e n t 57
given effect unless the Company establishes to the Committee “Code” means the Internal Revenue Code of 1986, as
by clear and convincing evidence that Cause exists. The Com- amended from time to time.
mittee’s determination regarding the existence of Cause shall “Committee” means the Compensation Committee of
be conclusive and binding upon all parties. the Board.
“Change in Control” means the occurrence of any of the “Company” means Baker Hughes and any Affiliate that
following events: adopts the Plan pursuant to the provisions of Article XII.
(a) the individuals who are Incumbent Directors cease for any “Continuous Service” means a Participant’s service for
reason to constitute a majority of the members of the Board; the Company and Affiliates commencing on his most recent
(b) the consummation of a Merger of Baker Hughes or an date of hire by the Company or an Affiliate and ending on the
Affiliate with another Entity, unless the individuals and date of the complete severance of the Participant’s employ-
Entities who were the Beneficial Owners of the Voting ment relationship with the Company or an Affiliate without a
Securities of Baker Hughes outstanding immediately prior contemporaneous transfer to the employ of the Company or
to such Merger own, directly or indirectly, at least 50 per- any Affiliate. For this purpose, a Participant will not be treated
cent of the combined voting power of the Voting Securi- as having a new date of hire if he is directly transferred from
ties of any of Baker Hughes, the surviving Entity or the the employ of the Company or an Affiliate to the employ of
parent of the surviving Entity outstanding immediately an Affiliate or the Company.
after such Merger; “Covered Employee” has the meaning ascribed to that
(c) any Person, other than a Specified Owner, becomes a term in Section 162(m).
Beneficial Owner, directly or indirectly, of securities of “Disability” means the inability of a Participant to engage
Baker Hughes representing 30 percent or more of the in any substantial gainful activity by reason of any medically
combined voting power of Baker Hughes’ then outstand- determinable physical or mental impairment which can be
ing Voting Securities; expected to result in death or can be expected to last for a
(d) a sale, transfer, lease or other disposition of all or sub continuous period of not less than 12 months. The Plan
stantially all of Baker Hughes’ Assets is consummated Administrator’s determination regarding the existence of
(an “Asset Sale”), unless: Disability shall be conclusive and binding upon all parties.
(1) the individuals and Entities who were the Beneficial “Domestic Relations Order” has the meaning ascribed
Owners of the Voting Securities of Baker Hughes to that term in section 414(p) of the Code.
immediately prior to such Asset Sale own, directly “Entity” means any corporation, partnership, association,
or indirectly, 50 percent or more of the combined joint-stock company, limited liability company, trust, unincor-
voting power of the Voting Securities of the Entity that porated organization or other business entity.
acquires such Assets in such Asset Sale or its parent “Exchange Act” means the Securities Exchange Act of
immediately after such Asset Sale in substantially the 1934, as amended from time to time, or any successor act.
same proportions as their ownership of Baker Hughes’ “Final Award” means the actual award that may be
Voting Securities immediately prior to such Asset paid for a Plan Year to a Participant, if it is not forfeited
Sale; or pursuant to Article VIII, as determined by the Committee.
(2) the individuals who comprise the Board immediately “Good Reason” for termination by the Participant of his
prior to such Asset Sale constitute a majority of the employment means the occurrence (without the Participant’s
board of directors or other governing body of either express written consent) after any Change in Control, or prior
the Entity that acquired such Assets in such Asset Sale to a Change in Control under the circumstances described in
or its parent (or a majority plus one member where clauses (ii) and (iii) of Section 10.04 (treating all references to
such board or other governing body is comprised of “Change in Control” in paragraphs (a) through (f) below as
an odd number of directors); or references to a “Potential Change in Control”), of any one of
(e) The stockholders of Baker Hughes approve a plan of the following acts by the Company, or failures by the Com-
complete liquidation or dissolution of Baker Hughes. pany to act, unless, in the case of any act or failure to act
“CIC Committee” means (i) the individuals (not fewer described in paragraph (a), (e), (f) or (g) below, such act or
than three in number) who, on the date six months before a failure to act is corrected prior to the effective date of the
Change in Control or a Potential Change in Control, constitute Participant’s termination for Good Reason:
the Committee, plus (ii) in the event that fewer than three (a) the assignment to the Participant of any duties or respon-
individuals are available from the group specified in clause sibilities which are substantially diminished as compared
(i) above for any reason, such individuals as may be appointed to the Participant’s duties and responsibilities immediately
by the individual or individuals so available (including for this prior to the Change in Control;
purpose any individual or individuals previously so appointed (b) a reduction by the Company in the Participant’s annual base
under this clause (ii)); provided, however, that the maximum salary as in effect on the date hereof or as the same may
number of individuals constituting the CIC Committee shall be increased from time to time, except for across-the-board
not exceed six.
salary reductions similarly affecting all individuals having a (g) if the Participant is party to an individual employment,
similar level of authority and responsibility with the Com- severance or other similar agreement with the Company,
pany and all individuals having a similar level of authority any purported termination of the Participant’s employment
and responsibility with any Person in control of the Company; which is not effected pursuant to the notice of termination
(c) the relocation of the Participant’s principal place of or other procedures specified therein.
employment to a location outside of a 50-mile radius The Participant shall have the right to terminate his
from the Participant’s principal place of employment employment for Good Reason even if he becomes incapaci-
immediately prior to the Change in Control or the Com tated due to physical or mental illness. The Participant’s contin-
pany’s requiring the Participant to be based anywhere ued employment shall not constitute consent to, or a waiver
other than such principal place of employment (or permit- of any rights with respect to, any act or failure to act consti-
ted relocation thereof) except for required travel on the tuting Good Reason hereunder.
Company’s business to an extent substantially consistent For purposes of any determination regarding the existence
with the Participant’s business travel obligations immedi- of Good Reason, any claim by the Participant that Good Rea-
ately prior to the Change in Control; son exists shall be presumed to be correct unless the Company
(d) the failure by the Company to pay to the Participant any establishes to the Committee by clear and convincing evidence
portion of the Participant’s current compensation except that Good Reason does not exist. The Committee’s determina-
pursuant to an across-the-board compensation deferral tion regarding the existence of Good Reason shall be conclu-
similarly affecting all individuals having a similar level of sive and binding upon all parties.
authority and responsibility with the Company and all indi- “Incumbent Director” means –
viduals having a similar level of authority and responsibility (a) a member of the Board on January 25, 2006 or
with any Person in control of the Company, or to pay to (b) an individual –
the Participant any portion of an installment of deferred (1) who becomes a member of the Board after
compensation under any deferred compensation program January 25, 2006;
of the Company, within seven days of the date such com- (2) whose appointment or election by the Board or
pensation is due; nomination for election by Baker Hughes’ stockholders
(e) the failure by the Company to continue in effect any com- is approved or recommended by a vote of at least
pensation plan in which the Participant participates imme- two-thirds of the then serving Incumbent Directors
diately prior to the Change in Control which is material to (as defined herein); and
the Participant’s total compensation, unless an equitable (3) whose initial assumption of service on the Board
arrangement (embodied in an ongoing substitute or alter- is not in connection with an actual or threatened
native plan) has been made with respect to such plan, or election contest.
the failure by the Company to continue the Participant’s “Initial Payment Date” has the meaning ascribed to
participation therein (or in such substitute or alternative that term in Section 7.01.
plan) on a basis not materially less favorable, both in terms “Involuntary Termination of Employment” means a
of the amount or timing of payment of benefits provided Participant’s Separation From Service as a result of either the
and the level of the Participant’s participation relative to elimination of his job or a reduction in force. A Participant
other Baker Hughes Participants, as existed immediately whose employment is terminated by the Company for Cause
prior to the Change in Control; shall not be treated as having incurred an “Involuntary Termi-
(f) the failure by the Company to continue to provide the nation of Employment.”
Participant with benefits substantially similar to those “Key Employee” means a key employee of Baker Hughes
enjoyed by the Participant under any of the Company’s or an Affiliate who, in the opinion of the Chief Executive
pension, savings, life insurance, medical, health and acci- Officer of Baker Hughes, is in a position to significantly con-
dent, or disability plans in which the Participant was partic- tribute to the growth and profitability of Baker Hughes and
ipating immediately prior to the Change in Control (except the Affiliates.
for across the board changes similarly affecting all individu- “Merger” means a merger, consolidation or
als having a similar level of authority and responsibility with similar transaction.
the Company and all individuals having a similar level of “OA Level” means the over achievement level of
authority and responsibility with any Person in control of performance applicable to the Award.
the Company), the taking of any other action by the Com- “Participant” means an individual who is or was a Key
pany which would directly or indirectly materially reduce Employee who has been granted an Award Opportunity or
any of such benefits or deprive the Participant of any mate- who has unpaid Accounts.
rial fringe benefit or perquisite enjoyed by the Participant “Performance Goals” means one or more of the criteria
at the time of the Change in Control, or the failure by the described in Section 3.02 on which the performance goals
Company to provide the Participant with the number of applicable to an Award Opportunity are based.
paid vacation days to which the Participant is entitled on “Performance Period” means the 12-month period to
the basis of years of service with the Company in accor- which the Performance Goals apply. A Performance Period
dance with the Company’s normal vacation policy in effect shall coincide with a Plan Year.
immediately prior to the time of the Change in Control; or
2 0 11 P r o x y S t a t e m e n t 59
“Person” shall have the meaning ascribed to the term in “Section 162(m)” means section 162(m) of the Code
section 3(a)(9) of the Exchange Act and used in sections 13(d) and the Department of Treasury rules and regulations
and 14(d) thereof, including a “group” as defined in section issued thereunder.
13(d) thereof, except that the term shall not include (a) Baker “Section 409A” means section 409A of the Code
Hughes or any of the Affiliates, (b) a trustee or other fiduciary and the Department of Treasury rules and regulations
holding Baker Hughes securities under an employee benefit issued thereunder.
plan of Baker Hughes or any of the Affiliates, (c) an under- “Separation From Service” has the meaning ascribed
writer temporarily holding securities pursuant to an offering to that term in Section 409A.
of those securities or (d) a corporation owned, directly or indi- “Specified Employee” means a person who is, as of
rectly, by the stockholders of Baker Hughes in substantially the the date of the person’s Separation From Service, a “specified
same proportions as their ownership of stock of Baker Hughes. employee” within the meaning of Section 409A, taking into
“Plan” means the Baker Hughes Incorporated Annual account the elections made and procedures established in
Incentive Compensation Plan, as amended from time to time. resolutions adopted by the Administrative Committee of
“Plan Administrator” means Baker Hughes, acting Baker Hughes.
through its delegates. Such delegates shall include the Admin- “Specified Owner” means any of the following:
istrative Committee, and any individual Plan Administrator (a) Baker Hughes;
appointed by the Board with respect to the employee benefit (b) an Affiliate of Baker Hughes;
plans of Baker Hughes and its Affiliates, each of which shall (c) an employee benefit plan (or related trust) sponsored
have the duties and responsibilities assigned to it from time to or maintained by Baker Hughes or any Affiliate of
time by the Board. As used in the Plan, the term “Plan Admin- Baker Hughes;
istrator” shall refer to the applicable delegate of Baker Hughes (d) a Person that becomes a Beneficial Owner of Baker
as determined pursuant to the actions of the Board. Hughes’ outstanding Voting Securities representing 30 per-
“Plan Year” means the twelve-consecutive month period cent or more of the combined voting power of Baker
commencing January 1 of each year. Hughes’ then outstanding Voting Securities as a result of
“Potential Change in Control” means the occurrence of the acquisition of securities directly from Baker Hughes
any of the following events: and/or its Affiliates; or
(a) the Company enters into an agreement, the consumma- (e) a Person that becomes a Beneficial Owner of Baker
tion of which would result in the occurrence of a Change Hughes’ outstanding Voting Securities representing 30 per-
in Control; cent or more of the combined voting power of Baker
(b) the Company or any Person publicly announces an Hughes’ then outstanding Voting Securities as a result of a
intention to take or to consider taking actions which, if Merger if the individuals and Entities who were the Benefi-
consummated, would constitute a Change in Control; cial Owners of the Voting Securities of Baker Hughes out-
(c) any Person becomes the Beneficial Owner, directly or indi- standing immediately prior to such Merger own, directly
rectly, of securities of Baker Hughes representing 15 per- or indirectly, at least 50 percent of the combined voting
cent or more of either the then outstanding shares of power of the Voting Securities of any of Baker Hughes, the
common stock of Baker Hughes’ or the combined voting surviving Entity or the parent of the surviving Entity out-
power of Baker Hughes’ then outstanding securities (not standing immediately after such Merger in substantially
including in the securities beneficially owned by such Per- the same proportions as their ownership of the Voting
son any securities acquired directly from Baker Hughes or Securities of Baker Hughes outstanding immediately prior
the Affiliates); or to such Merger.
(d) the Board adopts a resolution to the effect that, for pur- “Supplemental Retirement Plan” means the Baker
poses of this Agreement, a Potential Change in Control Hughes Incorporated Supplemental Retirement Plan.
has occurred. “Voting Securities” means the outstanding securities
“Profit After Tax” means revenues minus cost of sales entitled to vote generally in the election of directors or other
(the cost of products sold and the cost of providing services, governing body.
including personnel costs, repair and maintenance costs, “Year of Service” means 365 days of Continuous Service.
freight/custom, depreciation, and other costs (e.g., commission 1.02 Number and Gender. Wherever appropriate herein,
and royalty) directly relating to the service provided) minus words used in the singular shall be considered to include the
operating expenses (costs incurred in non-manufacturing areas plural and words used in the plural shall be considered to
to provide products and services to customers (e.g., finance include the singular. The masculine gender, where appearing
and administrative support)) minus income taxes. in the Plan, shall be deemed to include the feminine gender.
“Retirement” means a Participant’s Separation From Ser- 1.03 Headings. The headings of Articles and Sections
vice when he has attained at least 55 years of age and has at herein are included solely for convenience, and if there is
least ten Years of Service. A Participant whose employment is any conflict between such headings and the text of the Plan,
terminated by the Company for Cause shall not be treated as the text shall control.
having incurred a “Retirement”.
ARTICLE II ARTICLE III
PARTICIPATION AWARD OPPORTUNITIES AND PERFORMANCE GOALS

2.01 Eligibility. Eligibility for participation in the Plan 3.01 Award Opportunities. The Committee shall estab-
shall be limited to those Key Employees who, by the nature lish, in writing, over achievement, expected value, and entry
and scope of their position, contribute to the overall results value incentive award levels (the “Award Opportunities”) for
or success of the Companies. each Participant who is eligible to participate in the Plan for
2.02 Participation. Participation in the Plan shall be the Performance Period. The established Award Opportunities
determined annually based upon the recommendation of the may vary in relation to the responsibility level of the Partici-
Chief Executive Officer of Baker Hughes and the approval of pant. Except in the case of a Covered Employee, if a Partici-
the Committee. Employees approved for participation shall be pant changes job levels or salary grades during the Plan Year,
notified in writing of their selection, and of their Performance the Award Opportunities may be adjusted by the Committee,
Goals and related Award Opportunities, as soon after approval in its sole discretion, to reflect the amount of time at each job
as is practicable. level and/or in each salary grade.
2.03 Partial Plan Year Participation. The Committee 3.02 Performance Goals. The Committee shall establish,
may, upon recommendation of the Chief Executive Officer of in writing, Performance Goals for each Participant for a Plan
Baker Hughes, allow an individual who becomes eligible after Year. A Performance Goal may be based on one or more busi-
the beginning of a Plan Year to participate in the Plan for that ness criteria that apply to the Participant, one or more busi-
Plan Year. In such a case, the Participant’s Final Award shall ness units of Baker Hughes and the Affiliates, or Baker Hughes
normally be reduced, in accordance with procedures estab- and the Affiliates as a whole, with reference to one or more of
lished by the Committee, to reflect the fact that the Partici- the following: earnings per share, total shareholder return,
pant has not been eligible to participate in the Plan for the cash return on capitalization, increased revenue, revenue
entire Plan Year. Until the Committee specifies otherwise, such ratios, net income, stock price, market share, return on equity,
procedures shall be as follows: Normally, the reduction shall be return on assets, return on capital, return on capital compared
effected by taking into account the Participant’s compensation to cost of capital, return on capital employed, return on
(within the meaning of his Award Opportunity) for only the invested capital, shareholder value, net cash flow, operating
portion of the Plan Year in which he is eligible to participate income, earnings before interest and taxes, cash flow, cash
in the Plan; provided, however, that if the Participant has an flow from operations, cost reductions, cost ratios, Profit After
Award Opportunity that is based upon annualized compensa- Tax and Baker Value Added. Performance Goals may also be
tion determined as of a particular date, his Final Award shall based on performance relative to a peer group of companies.
be prorated based upon the number of full months of partici- Unless otherwise stated, a Performance Goal need not be
pation. Notwithstanding the foregoing, the Committee may, based upon an increase or positive result under a particular
based upon the recommendation of the Chief Executive Offi- business criterion and could include, for example, maintaining
cer of Baker Hughes, authorize an unreduced Final Award. the status quo or limiting economic losses (measured, in each
Unless the Chief Executive Officer of Baker Hughes or the case, by reference to specific business criteria). All items of
Committee specifically determines otherwise, an individual gain, loss, or expense for the Performance Period, and such
who becomes a Key Employee on or after October 1 of a other items utilized in measuring the achievement of Perfor-
Plan Year shall not be eligible to participate in the Plan for mance Goals for the Performance Period, determined to be
such Plan Year. extraordinary, unusual in nature, infrequent in occurrence,
2.04 Termination of Approval. The Committee may related to the acquisition or disposal of a business, or related
withdraw its approval for participation in the Plan for a Partici- to a change in accounting principle, all as determined in accor-
pant at any time. In the event of such withdrawal, the individ- dance with standards established by Opinion No. 30 of the
ual concerned shall cease to be a Participant as of the date Accounting Principles Board (APB Opinion No. 30), other
designated by the Committee and he shall be notified of such applicable accounting rules, or consistent with Baker Hughes
withdrawal as soon as practicable following such action. Fur- policies and practices for measuring the achievement of Per-
ther, such individual shall cease to have any right to a Final formance Goals on the date the Committee establishes the
Award for the Plan Year in which such withdrawal is effective; Performance Goals may be included or excluded in calculating
provided, however, that the Committee may, in its sole discre- whether a Performance Goal has been achieved. In the case
tion, authorize a prorated award based on the number of full of a Participant other than a Participant who is or during
months of participation prior to the effective date of such the Performance Period may become a Covered Employee,
withdrawal. Notwithstanding the foregoing, the Committee nonfinancial objectives may also be included in a Participant’s
may not withdraw its approval for participation in the Plan Performance Goals but may not represent more than 25 percent
during the pendency of a Potential Change in Control and of the Participant’s expected value Award Opportunity. No Partic-
for a period of six months after the cessation thereof. ipant who is a Covered Employee, or who the Committee
2 0 11 P r o x y S t a t e m e n t 61
expects may become a Covered Employee during the next 4.03 Employment Transfers. If a Participant transfers
three Plan Years, may have any portion of his Final Award from one division to another division within Baker Hughes and
based on nonfinancial, subjective Performance Goals. the Affiliates, the Final Award for the Participant’s services per-
3.03 Time of Establishment of Award Opportunities formed for each division will be reduced in accordance with
and Performance Goals. Performance Goals and Award procedures established by the Committee. Normally, the reduc-
Opportunities for a Participant for a Plan Year must be estab- tion shall be effected by taking into account the Participant’s
lished by the Committee prior to the earlier to occur of (a) compensation (within the meaning of his Award Opportunity)
90 days after the commencement of the period of service to for only the portion of the Plan Year in which he performed
which the Performance Goal relates or (b) the lapse of 25 per- services for the applicable division. However, if the Participant
cent of the period of service, and in any event while the out- has an Award Opportunity that is based upon annualized com-
come is substantially uncertain. pensation determined as of a particular date, his Final Award
3.04 Adjustment of Performance Goals. The Commit- shall normally be prorated based upon the number of full
tee shall have the right to adjust the Performance Goals (either months of participation during which he performed services
up or down) during the Plan Year if it determines that external for the applicable division. The Final Award will be determined
changes or other unanticipated business conditions have as soon as practicable after the end of the Plan Year and will
materially affected the fairness of the goals and unduly influ- be based upon the financial results at the close of the Plan
enced the ability to meet them. Notwithstanding the forego- Year. The Final Award will be paid at the same time the other
ing, no such adjustment shall be made with respect to an Final Awards for the applicable division are paid. If a Partici-
individual who is a Covered Employee to the extent the same pant is eligible for a Final Award in his new position with a
is considered an upward discretionary increase in the amount different division, the Final Award for services performed for
of the Final Award for such individual (within the meaning of the new division will be based upon the Award Opportunities
Section 162(m)). established by the Committee based upon the recommenda-
3.05 Individual Award Cap. Effective for Final Awards tion of the Chief Executive Officer of Baker Hughes.
earned for Performance Periods commencing on and after 4.04 Disposition of Business. If the Participant’s
January 1, 2006, the maximum annual Final Award any employer or division is disposed of during the Plan Year and
individual may receive under the Plan is $4,000,000. such disposition does not qualify as a Change in Control, pay-
ment of the Participant’s Final Award shall be determined in
ARTICLE IV accordance with the following alternatives:
(a) If the acquirer offers employment to the Participant and
FINAL AWARD DETERMINATIONS assumes the obligations under the Plan, either directly
4.01 Final Award Determinations. As soon as practica- or indirectly, and the Participant accepts such offer of
ble after the end of each Plan Year, Final Awards shall be com- employment, the Participant’s Final Award will not be
puted for each Participant as determined by the Committee. forfeited but the Company shall not be obligated to
The Committee shall certify in writing the extent to which the pay the Final Award and such obligation shall be that
Performance Goals established pursuant to Section 3.02 and of the acquiring party in accordance with the Final
any other material terms of an award were in fact satisfied. Award parameters.
In determining the Final Award, the Committee, in its sole (b) If the acquirer does not assume the obligations under the
discretion, may increase or decrease calculated amounts to Plan, whether or not the Participant is offered and accepts
reflect factors regarding performance during the Plan Year employment, then the Participant’s Final Award will not be
which were not, in the sole opinion of the Committee, appro- forfeited and the Participant will receive a prorated Final
priately reflected in the Final Award calculation. Notwithstand- Award for the portion of the Plan Year that the Participant
ing the foregoing, the Final Award to an individual who is a was employed by the Company prior to the date of the
Covered Employee will not be subject to upward discretionary consummation of the sale of the Company or division,
adjustment by the Committee. Downward discretionary adjust- to be paid at the same time other Final Awards are paid
ment for Covered Employees will be permitted. under the Plan. The computation shall be made on the
4.02 Separation From Service Due to Death, basis of the number of whole months rounded to the
Disability, or Retirement or Involuntary Termination nearest whole month of the Plan Year that the Participant
of Employment. If a Participant incurs a Separation From was in active service with the Company.
Service by reason of death, Disability or Retirement, or he (c) If the acquirer offers employment to the Participant and
incurs an Involuntary Termination of Employment, the Final assumes the obligations under the Plan, either directly or
Award, determined in accordance with Section 4.01, shall indirectly, and the Participant rejects such employment, the
be reduced so that it reflects only participation prior to the Participant shall forfeit his Final Award for the Performance
Separation From Service. This reduction shall be determined Period then in progress pursuant to Section 4.05.
in a manner consistent with Section 2.03. 4.05 Separation From Service for Other Reasons.
Except as specified in Article X or Section 4.04, if a Participant
incurs a Separation From Service for any reason other than
Retirement, Disability, Involuntary Termination of Employment
or death, all of the Participant’s rights to any unpaid Final
Award shall be forfeited.
ARTICLE V 7.02 Time of Payment of Banked Final Award. To the
extent that a Participant’s Final Award is banked pursuant to
BANKING OF AWARDS Article V, 50 percent of the amount then credited to the Par-
5.01 General Banking Procedures. Except as specified in ticipant’s Banked Account for the Performance Period, to the
Section 5.02, if Performance Goals applicable to a Final Award extent not forfeited pursuant to Article VIII, shall be distributed
that are designated by the Committee as Company Perfor- to the Participant on the first anniversary of the Initial Payment
mance Goals are achieved at a level in excess of the OA Level, Date of the Final Award. The remaining portion of the amount
the amount of the Final Award that is attributable to exceed- credited to the Participant’s Banked Account for the Perfor-
ing the OA Level will be banked and paid at the times speci- mance Period, to the extent not forfeited pursuant to Article
fied in Section 7.02. To the extent that a Final Award for a VIII, shall be distributed to the Participant on the second anni-
Performance Period is banked, it shall be credited to the Partic- versary of the Initial Payment Date. Notwithstanding the fore-
ipant’s Banked Account for the Performance Period effective as going, except as specified below (a) if a Participant incurs a
of the Initial Payment Date. Separation From Service other than as a result of his death or
5.02 Exceptions. No portion of a Final Award will be Disability, any amounts credited to his Banked Account(s) that
banked pursuant to Section 5.01 if (a) the amount that would are not forfeited pursuant to Article VIII shall be paid to him
be banked is $2,000 or less, (b) the Participant incurs a Sepa- on the earlier of (1) the date of the Participant’s Separation
ration From Service and the Participant is described in clause From Service if the Participant is not a Specified Employee or
(b) of Section 4.04, (c) a Change in Control occurs during the the date that is six months following his Separation From Ser-
Performance Period, (d) applicable local laws prohibit banking vice if the Participant is a Specified Employee, or (2) the date
of the Final Award or (e) written procedures adopted by the the amount would otherwise be paid under this Section 7.02;
Committee prior to the Performance Period specify that the (b) if the Participant incurs a Disability, any amounts credited
Final Award will not be banked. Effective for amounts earned to his Banked Accounts will be paid to him on the date of the
during Performance Periods commencing on or after January Participant’s Disability; or (c) if the Participant dies, any
1, 2008, no portion of a Final Award will be banked pursuant amounts credited to his Banked Accounts will be paid as speci-
to Section 5.01. fied in Section 9.02. Further, notwithstanding the foregoing,
upon the occurrence of a Change in Control all amounts that
ARTICLE VI are credited to the Participant’s Banked Accounts that are not
deferred compensation within the meaning of Section 409A
DEEMED INVESTMENT OF FUNDS shall be paid to the Participant; and upon the occurrence of a
Amounts deemed credited to a Participant’s Banked Account Change in Control that constitutes a change in the ownership
for a Performance Period shall be deemed to be credited with or effective control of a corporation, or in the ownership of a
interest at the annual rate equal to the Applicable Interest substantial portion of the assets of a corporation within the
Rate commencing as of the Initial Payment Date. For the meaning of Section 409A, all amounts that are credited to the
period commencing on the Initial Payment Date and ending Participant’ Banked Accounts shall be paid to the Participant.
on the day before the first anniversary of the Initial Payment Notwithstanding the foregoing, to the extent that a Participant
Date the Applicable Interest Rate will be based on the rate in has elected to defer payment of his Final Award under the
effect as of the Initial Payment Date. For the period commenc- Supplemental Retirement Plan, such portion of his Final Award
ing on the first anniversary of the Initial Payment Date and shall not be paid earlier than the deferral date selected under
ending on the second anniversary of the Initial Payment Date the Supplemental Retirement Plan.
the Applicable Interest rate will be based on the rate in effect 7.03 Form of Payment of Benefits. All benefit payments
as of the first anniversary of the Initial Payment Date. shall be made in cash.
7.04 Account Debits. Any benefit payments made to a
ARTICLE VII Participant, or former Participant, or for his benefit pursuant to
any provision of the Plan shall be debited to such Participant’s
PAYMENT OF BENEFITS or former Participant’s Accounts.
7.01 Time of Payment of Unbanked Final Award. 7.05 Unclaimed Benefits. In the case of a benefit pay-
Except to the extent that a Final Award is banked pursuant to able on behalf of a Participant or former Participant, if the
Article V, or except as specified in Article X, a Participant’s Final Plan Administrator is unable, after reasonable efforts, to locate
Award, to the extent not forfeited pursuant to Article VIII, shall the Participant, the former Participant or the beneficiary to
be paid to him on March 15 following the Performance Period whom such benefit is payable, upon the Plan Administrator’s
(the “Initial Payment Date”). Notwithstanding the foregoing, to determination thereof, such benefit shall be forfeited to the
the extent that a Participant has elected to defer payment of Company. Notwithstanding the foregoing, if subsequent to
his Final Award under the Supplemental Retirement Plan, such any such forfeiture the Participant, the former Participant or
portion of his Final Award shall not be paid earlier than the beneficiary to whom such benefit is payable makes a valid
deferral date selected under the Supplemental Retirement Plan. claim for such benefit, such forfeited benefit (without any
adjustment for earnings or loss) shall be restored to the Plan
by the Company and paid in accordance with the Plan.
2 0 11 P r o x y S t a t e m e n t 63
7.06 Statutory Benefits. If any benefit obligations are ARTICLE X
required to be paid under the Plan to a Participant or former
Participant in conjunction with severance of employment CHANGE IN CONTROL
under the laws of the country where the Participant or former 10.01 General. The provisions of this Article X shall apply
Participant is employed or under federal, state or local law, the and supersede any contrary provisions of the Plan in the event
benefits paid to a Participant or former Participant pursuant to of a Change in Control.
the provisions of the Plan will be deemed to be in satisfaction 10.02 CIC Committee. If a Change in Control or Potential
of any statutorily required benefit obligations. Change in Control occurs, all references in the Plan to “Com-
7.07 Payment to Alternate Payee Under Domestic mittee” shall at that point be deemed to be references to the
Relations Order. Plan benefits that are awarded to an Alter- CIC Committee.
nate Payee in a Domestic Relations Order shall be paid to the 10.03 Change in Control During a Performance
Alternate Payee at the time and in the form directed in the Period. Notwithstanding any provision of the Plan to the
Domestic Relations Order. The Domestic Relations Order may contrary, upon the occurrence of a Change in Control during
provide for an immediate lump-sum payment to an Alternate a Performance Period, (i) Final Awards for the Performance
Payee. A Domestic Relations Order may not otherwise provide Period shall be computed for each Participant pursuant to
for a time or form of payment that is not permitted under the Section 4.01 (assuming for this purpose that the Performance
Plan. A Domestic Relations Order will be disregarded to the Goals established pursuant to Section 3.02 herein have been
extent it awards an Alternate Payee benefits in excess of the achieved to the extent required to earn the expected value
applicable Participant’s or former Participant’s Account balance Award Opportunity), and (ii) the Company shall pay to each
under the Plan. Participant an amount equal to the Final Award so determined
multiplied by a fraction, the numerator of which is the number
ARTICLE VIII of the Participant’s months of participation during the Perfor-
mance Period through the date of Change of Control (rounded
FORFEITURE OF BENEFITS up to the nearest whole month), and the denominator of
Except as specified in Section 4.04 or Article X, if a Partici- which is twelve.
pant incurs a Separation From Service for any reason other 10.04 Termination of Employment Prior to Change in
than Retirement, death, Disability or Involuntary Termination of Control or Following Certain Changes in Control. Not-
Employment before the time a payment to him is to be made withstanding any provision of the Plan to the contrary (other
under Article VII, he shall forfeit the payment and all amounts than the last sentence of this Section 10.04), a Participant shall
then deemed credited to his Accounts. be entitled to receive the payment described in Section 10.03
for a Performance Period if (i) such Participant’s employment is
ARTICLE IX terminated by Baker Hughes or an Affiliate during the Perfor-
mance Period without Cause prior to a Change in Control
DEATH (whether or not a Change in Control ever occurs) and such
9.01 Payment of Unbanked Amounts. In the event of termination was at the request or direction of a Person who
a death of a Participant prior to the Initial Payment Date of a has entered into an agreement with Baker Hughes or an Affili-
Final Award, the Participant’s Final Award will be paid to the ate the consummation of which would constitute a Change in
Participant’s Beneficiary on the Initial Payment Date. Control, (ii) such Participant resigns during the Performance
9.02 Payment of Banked Amounts. Upon the death of Period for Good Reason prior to a Change in Control (whether
a Participant any amounts deemed credited to the Participant’s or not a Change in Control ever occurs) and the circumstance
Banked Accounts will be paid to his Beneficiary as soon as or event which constitutes Good Reason occurs at the request
administratively practicable. or direction of the Person described in clause (i), or (iii) such
9.03 Designation of Beneficiaries. The beneficiary or Participant’s employment is terminated by Baker Hughes or an
beneficiaries who shall receive payment of a Participant’s Affiliate during the Performance Period without Cause or by
benefit in the event of his death shall be as follows: the Participant for Good Reason and such termination or the
(i) If a Participant or former Participant leaves a surviving circumstance or event which constitutes Good Reason is
spouse, his benefit shall be paid to such surviving otherwise in connection with or in anticipation of a Change
spouse; or in Control (whether or not a Change in Control ever occurs).
(ii) If a Participant or former Participant leaves no surviving Notwithstanding the foregoing, if a Participant has an individ-
spouse, his benefit shall be paid to such Participant’s or ual change of control agreement with the Company, he shall
former Participant’s executor or administrator, or to his be entitled to receive no payments pursuant to this Section
heirs at law if there is no administration of such Partici- 10.04 unless a Change in Control actually occurs during the
pant’s or former Participant’s estate. Performance Period.
10.05 Payment of Expected Value Awards and Tax- 11.03 Self-Interest of Plan Administrator. Neither the
Gross Up for Delayed Payment. If a Participant is entitled to members of a Committee nor any individual Plan Administra-
a Final Award payment pursuant to Section 10.03, the Com- tor shall have any right to vote or decide upon any matter
pany shall pay the Participant such Final Award within five relating solely to himself under the Plan or to vote in any case
days following the date of the Change in Control. If a Partici- in which his individual right to claim any benefit under the
pant is entitled to a Final Award payment pursuant to Section Plan is particularly involved. In any case in which any Commit-
10.04, the Company shall pay the Participant such Final Award tee member or individual Plan Administrator is so disqualified
within ten days following the date of the Participant’s termina- to act, the other members of the Committee shall decide the
tion of employment. If for any reason the Company fails to matter in which the Committee member or individual Plan
timely pay a Participant the amounts due him pursuant to this Administrator is disqualified.
Article X, the Company shall pay the Participant additional 11.04 Compensation and Bonding. Neither the mem-
compensation in such amount as is necessary to put the Par- bers of a Committee nor any individual Plan Administrator
ticipant in the same federal income tax position he would have shall receive compensation with respect to their services on the
been in had the payment not been subject to Section 409A. Committee or as Plan Administrator. To the extent permitted
Such additional compensation shall be paid to the Participant by applicable law, neither the members of a Committee nor
at the same time as the delinquent Final Award payment is any individual Plan Administrator shall furnish bond or security
paid to the Participant but in any event no later than the last for the performance of their duties hereunder.
day of the Participant’s taxable year following the taxable year 11.05 Plan Administrator Powers and Duties. The Plan
in which the Participant remits his federal income taxes to the Administrator shall supervise the administration and enforce-
Internal Revenue Service with respect to the Final Award. ment of the Plan according to the terms and provisions hereof
10.06 Forfeiture Restrictions. Notwithstanding any other and shall have all powers necessary to accomplish these pur-
provision of the Plan, upon the occurrence of a Change in poses, including, but not by way of limitation, the right,
Control during a Performance Period or upon a Participant’s power, and authority:
termination of employment during a Performance Period in a (a) to make rules, regulations, and bylaws for the administra-
circumstance described in Section 10.04, the amount of the tion of the Plan that are not inconsistent with the terms
Participant’s Final Award for the Performance Period, calcu- and provisions hereof, and to enforce the terms of the
lated in accordance with Section 10.03, shall not be forfeited, Plan and the rules and regulations promulgated thereun-
and any amounts then credited to the Participant’s Accounts der by the Plan Administrator;
shall not be forfeited. (b) to construe in its discretion all terms, provisions, condi-
tions, and limitations of the Plan;
ARTICLE XI (c) to correct any defect or to supply any omission or to
reconcile any inconsistency that may appear in the Plan
ADMINISTRATION OF THE PLAN in such manner and to such extent as it shall deem in its
11.01 Resignation and Removal. The members of a discretion expedient to effectuate the purposes of the Plan;
Committee serving as Plan Administrator shall serve at the (d) to employ and compensate such accountants, attorneys,
pleasure of the Board; they may be officers, directors, or investment advisors, and other agents, employees, and
employees or any other individuals. At any time during his independent contractors as the Plan Administrator may
term of office, any member of a Committee or any individual deem necessary or advisable for the proper and efficient
serving as Plan Administrator may resign by giving written administration of the Plan;
notice to the Board, such resignation to become effective (e) to determine in its discretion all questions relating
upon the appointment of a substitute or, if earlier, the lapse of to eligibility;
thirty days after such notice is given as herein provided. At any (f) to determine whether and when a Participant has incurred
time during its term of office, and for any reason, any member a Separation From Service, and the reason for such termi-
of a Committee or any individual serving as Plan Administrator nation; and
may be removed by the Board. (g) to make a determination in its discretion as to the right of
11.02 Records and Procedures. The Plan Administrator any individual to a benefit under the Plan and to prescribe
shall keep appropriate records of its proceedings and the procedures to be followed by distributees in obtaining
administration of the Plan and shall make available for exami- benefits hereunder.
nation during business hours to any Participant, former Partici- 11.06 Reliance on Documents, Instruments, etc. The
pant or the beneficiary of any Participant or former Participant Plan Administrator may rely on any certificate, statement or
such records as pertain to that individual’s interest in the Plan. other representation made on behalf of the Company or any
If a Committee is performing duties as the Plan Administrator, Participant, which the Plan Administrator in good faith believes
the Committee shall designate the individual or individuals to be genuine, and on any certificate, statement, report or
who shall be authorized to sign for the Plan Administrator other representation made to it by any agent or any attorney,
and, upon such designation, the signature of such individual accountant or other expert retained by it or Baker Hughes in
or individuals shall bind the Plan Administrator. connection with the operation and administration of the Plan.
2 0 11 P r o x y S t a t e m e n t 65
11.07 Claims Review Procedures; The request for review must be filed within 90 days
Claims Appeals Procedures. after the denial. If it is not, the denial becomes final. If a
(a) Claims Review Procedures. When a benefit is due, the Par- timely request is made, the Plan Administrator must make
ticipant, or the person entitled to benefits under the Plan, its decision, under normal circumstances, within 60 days
should submit a claim to the office designated by the Plan of the receipt of the request for review. However, if the Plan
Administrator to receive claims. Under normal circum- Administrator notifies the claimant prior to the expiration of
stances, the Plan Administrator will make a final decision the initial review period, it may extend the period of review
as to a claim within 90 days after receipt of the claim. If up to 120 days following the initial receipt of the request
the Plan Administrator notifies the claimant in writing dur- for a review. All decisions of the Plan Administrator must be
ing the initial 90-day period, it may extend the period up in writing and must include the specific reasons for its action,
to 180 days after the initial receipt of the claim. The writ- the Plan provisions on which its decision is based, and a
ten notice must contain the circumstances necessitating statement that the claimant is entitled to receive, upon
the extension and the anticipated date for the final deci- request and free of charge, reasonable access to, and copies
sion. If a claim is denied during the claims period, the Plan of, all documents, records, and other information relevant
Administrator must notify the claimant in writing, and the to the claimant’s claim for benefits. If a decision is not given
written notice must set forth in a manner calculated to be to the claimant within the review period, the claim is treated
understood by the claimant: as if it were denied on the last day of the review period.
(1) the specific reason or reasons for the denial; Within 60 days of receipt by a claimant of a notice deny-
(2) specific reference to the Plan provisions on which ing a claim under the preceding paragraph, the claimant or his
the denial is based; and or her duly authorized representative may request in writing a
(3) a description of any additional material or information full and fair review of the claim by the Plan Administrator. The
necessary for the claimant to perfect the claim and Plan Administrator may extend the 60-day period where the
an explanation of why such material or information nature of the benefit involved or other attendant circum-
is necessary. stances make such extension appropriate. In connection with
If a decision is not given to the Participant within the such review, the claimant or his or her duly authorized repre-
claims review period, the claim is treated as if it were denied sentative may review pertinent documents and may submit
on the last day of the claims review period. issues and comments in writing. The Plan Administrator shall
(b) Claims Appeals Procedures. For purposes of this Section make a decision promptly, and not later than 60 days after
11.07 the Participant or the person entitled to benefits the Plan’s receipt of a request for review, unless special circum-
under the Plan is referred to as the “claimant.” If a claim- stances (such as the need to hold a hearing) require an exten-
ant’s claim made pursuant to Section 11.07(a) is denied sion of time for processing, in which case a decision shall be
and he wants a review, he must apply to the Plan Adminis- rendered as soon as possible, but not later than 120 days after
trator in writing. That application can include any argu- receipt of a request for review. The decision on review shall be
ments, written comments, documents, records, and other in writing and shall include specific reasons for the decision,
information relating to the claim for benefits. In addition, written in a manner calculated to be understood by the claim-
the claimant is entitled to receive on request and free of ant, and specific references to the pertinent Plan provisions on
charge reasonable access to and copies of all information which the decision is based.
relevant to the claim. For this purpose, “relevant” means 11.08 Company to Supply Information. The Company
information that was relied on in making the benefit shall supply full and timely information to the Plan Administra-
determination or that was submitted, considered or gener- tor, including, but not limited to, information relating to each
ated in the course of making the determination, without Participant’s base salary, age, retirement, death, or other cause
regard to whether it was relied on, and information that of Separation From Service and such other pertinent facts as
demonstrates compliance with the Plan’s administrative the Plan Administrator may require. When making a determi-
procedures and safeguards for assuring and verifying that nation in connection with the Plan, the Plan Administrator
Plan provisions are applied consistently in making benefit shall be entitled to rely upon the aforesaid information
determinations. The Plan Administrator must take into furnished by the Company.
account all comments, documents, records, and other 11.09 Indemnity. To the extent permitted by applicable
information submitted by the claimant relating to the law, Baker Hughes shall indemnify and save harmless the
claim, without regard to whether the information was sub- Board, each member of the Committee, each delegate of the
mitted or considered in the initial benefit determination. Committee or the Board and the Plan Administrator against
The claimant may either represent himself or appoint a any and all expenses, liabilities and claims (including legal fees
representative, either of whom has the right to inspect all incurred to investigate or defend against such liabilities and
documents pertaining to the claim and its denial. The Plan claims) arising out of their discharge in good faith of responsi-
Administrator can schedule any meeting with the claimant bilities under or incident to the Plan. Expenses and liabilities
or his representative that it finds necessary or appropriate arising out of willful misconduct shall not be covered under
to complete its review. this indemnity. This indemnity shall not preclude such further
indemnities as may be available under insurance purchased ARTICLE XIII
by Baker Hughes or provided by Baker Hughes under any
bylaw, agreement, vote of stockholders or disinterested MISCELLANEOUS
directors or otherwise, as such indemnities are permitted 13.01 Plan Not Contract of Employment. The adoption
under applicable law. and maintenance of the Plan shall not be deemed to be a
contract between the Company and any individual or to be
ARTICLE XII consideration for the employment of any individual. Nothing
herein contained shall be deemed to (a) give any individual the
PARTICIPATION IN THE PLAN BY AFFILIATES right to be retained in the employ of the Company, (b) restrict
12.01 Adoption Procedure. the right of the Company to discharge any individual at any
(a) Except to the extent that an Affiliate specifically deter- time, (c) give the Company the right to require any individual
mines otherwise by appropriate action of its board of to remain in the employ of the Company, or (d) restrict any
directors or noncorporate counterpart, as evidenced by individual’s right to terminate his employment at any time.
a written instrument executed by an authorized officer 13.02 Funding. Plan benefits are a contractual obligation
of such entity (approved by the board of directors or of the Company which shall be paid out of the Company’s
noncorporate counterpart of the Affiliate), each Affiliate general assets. The Plan is unfunded and Participants are
shall participate in the Plan and shall be bound by all the merely unsecured creditors of the Company with respect
terms, conditions and limitations of the Plan. The Plan to their benefits under the Plan.
Administrator and the Affiliate may agree to incorporate 13.03 Alienation of Interest Forbidden. The interest
specific provisions relating to the operation of the Plan of a Participant, former Participant or his beneficiary or ben
that apply to the Affiliate. eficiaries hereunder may not be sold, transferred, assigned,
(b) The provisions of the Plan may be modified so as to or encumbered in any manner, either voluntarily or involun-
increase the obligations of an adopting Affiliate only tarily, and any attempt so to anticipate, alienate, sell, transfer,
with the consent of such Affiliate, which consent shall be assign, pledge, encumber, or charge the same shall be null
conclusively presumed to have been given by such Affiliate and void; neither shall the benefits hereunder be liable for or
unless the Affiliate gives Baker Hughes written notice of subject to the debts, contracts, liabilities, engagements or torts
its rejection of the amendment within 30 days after the of any individual to whom such benefits or funds are payable,
adoption of the amendment. nor shall they be an asset in bankruptcy or subject to garnish-
(c) The provisions of the Plan shall apply separately and ment, attachment or other legal or equitable proceedings. The
equally to each adopting Affiliate and its employees in provisions of this Section 13.03 shall not apply to a Domestic
the same manner as is expressly provided for Baker Relations Order.
Hughes and its employees, except that the power to 13.04 Withholding. All credits to a Participant’s or former
appoint or otherwise affect the Plan Administrator and Participant’s Accounts and payments provided for hereunder
the power to amend or terminate the Plan shall be exer- shall be subject to applicable withholding and other deduc-
cised by Baker Hughes. The Plan Administrator shall act tions as shall be required of the Company under any applica-
as the agent for each Affiliate that adopts the Plan for ble local, state or federal law.
all purposes of administration thereof. 13.05 Amendment and Termination. The Board, may
(d) Any Affiliate may, by appropriate action of its board of from time to time, in its discretion, amend, in whole or in part,
directors or noncorporate counterpart, terminate its partic- any or all of the provisions of the Plan on behalf of any Com-
ipation in the Plan. Moreover, the Plan Administrator may, pany; provided, however, that no amendment may be made
in its discretion, terminate an Affiliate’s participation in the that would impair the rights of a Participant or former Partici-
Plan at any time. pant with respect to amounts already credited to his Accounts.
(e) The Plan will terminate with respect to any Affiliate if the The Board may terminate the Plan at any time. If the Plan is
Affiliate ceases to be an Affiliate or revokes its adoption of terminated, the amounts credited to a Participant’s or former
the Plan by resolution of its board of directors or noncor- Participant’s Account shall be paid to such Participant, or for-
porate counterpart evidenced by a written instrument exe- mer Participant, or his designated beneficiary at the time(s)
cuted by an authorized officer of the Affiliate. If the Plan specified in Articles VII, IX and X, as applicable.
terminates with respect to any Affiliate, the employees of 13.06 Severability. If any provision of the Plan shall be
that Affiliate will no longer be eligible to be Participants held illegal or invalid for any reason, said illegality or invalidity
in the Plan. shall not affect the remaining provisions hereof; instead, each
(f) The Plan as maintained by the Affiliates shall constitute provision shall be fully severable and the Plan shall be con-
a single plan rather than a separate plan of each Affiliate. strued and enforced as if said illegal or invalid provision had
12.02 No Joint Venture Implied. The document which never been included herein.
evidences the adoption of the Plan by an Affiliate shall 13.07 Arbitration. Any controversy arising out of or relat-
become a part of the Plan. However, neither the adoption of ing to the Plan, including without limitation, any and all dis-
the Plan by an Affiliate nor any act performed by it in relation putes, claims (whether in tort, contract, statutory or otherwise)
to the Plan shall ever create a joint venture or partnership or disagreements concerning the interpretation or application
relation between it and any other Affiliate. of the provisions of the Plan, the Company’s employment of
2 0 11 P r o x y S t a t e m e n t 67
the Participant, or former Participant, and the termination
of that employment, shall be resolved by arbitration in accor-
dance with the Employee Benefit Plan Claims Arbitration Rules
of the American Arbitration Association (the “AAA”) then in
effect. No arbitration proceeding relating to the Plan may be
initiated by either the Company or the Participant, or former
Participant, unless the claims review and appeals procedures
specified in Section 11.07 have been exhausted. Within ten
business days of the initiation of an arbitration hereunder, the
Company and the Participant, or former Participant, will each
separately designate an arbitrator, and within 20 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 30 days from the date of the close of the arbitration
hearing. The decision of the arbitrators selected hereunder will
be final and binding on both parties. This arbitration provision
is expressly made pursuant to and shall be governed by the
Federal Arbitration Act, 9 U.S.C. Sections 1-16 (or replacement
or successor statute). Pursuant to Section 9 of the Federal
Arbitration Act, the Company and any Participant agrees that
any judgment of the United States District Court for the Dis-
trict 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 13.07 shall be construed to, in any
way, limit the scope and effect of Article XI. In any arbitration
proceeding full effect shall be given to the rights, powers, and
authorities of the Plan Administrator under Article XI.
13.08 Compliance With Section 409A. To the extent
applicable, the Plan shall be operated in compliance with Sec-
tion 409A and the provisions of the Plan shall be interpreted
by the Plan Administrator in a manner that is consistent with
this intention.
13.09 Governing Law. All provisions of the Plan shall be
construed in accordance with the laws of Texas, except to the
extent preempted by applicable 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.
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2010
OR
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-9397

(Exact name of registrant as specified in its charter)
Delaware 76-0207995
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

2929 Allen Parkway, Suite 2100, Houston, Texas 77019-2118
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (713) 439-8600
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered

Common Stock, $1 Par Value per Share New York Stock Exchange
SWX Swiss Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES x NO  
 
Indicate by check mark if the registrant is not required to file reports pursuant
to Section 13 or 15(d) of the Exchange Act. YES NO x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
 
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Inter-
 
active Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein,

and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”
   
and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x Accelerated filer Non-accelerated filer Smaller reporting company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  NO x
The aggregate market value of the voting and non-voting common stock held by non-affiliates as of the last business day of the
registrant’s most recently completed second fiscal quarter (based on the closing price on June 30, 2010 reported by the New York
Stock Exchange) was approximately $17,846,385,000.
As of February 18, 2011, the registrant has outstanding 434,260,224 shares of common stock, $1 par value per share.
DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant’s Definitive Proxy Statement for the 2011 Annual Meeting of Stockholders
are incorporated by reference into Part III of this Form 10-K.
INDEX
Part I
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 4. [Removed and Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Part II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . 15
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . 62
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Part III
Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . . . . . . . . 63
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Part IV
Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
PART I ABOUT BAKER HUGHES
Baker Hughes is a leading supplier of oilfield services, prod-
ITEM 1. BUSINESS ucts, technology and systems to the worldwide oil and natural
Baker Hughes Incorporated is a Delaware corporation gas industry. We also provide industrial and other products and
engaged in the oilfield services industry. As used herein, services to the downstream refining, and process and pipeline
“Baker Hughes,” “Company,” “we,” “our” and “us” may industries. Baker Hughes was formed in April 1987 in connec-
refer to Baker Hughes Incorporated and/or its subsidiaries. The tion with the combination of Baker International Corporation
use of these terms is not intended to connote any particular and Hughes Tool Company. We may conduct our operations
corporate status or relationships. through subsidiaries, affiliates, ventures and alliances. We oper-
ate in over 80 countries around the world and our corporate
AVAILABILITY OF INFORMATION FOR STOCKHOLDERS headquarters is in Houston, Texas. As of December 31, 2010,
Our annual reports on Form 10-K, quarterly reports on we had approximately 53,100 employees, of which approxi-
Form 10-Q, current reports on Form 8-K and amendments mately 58% work outside the United States.
to those reports filed or furnished pursuant to Section 13(a) Our global oilfield operations are organized into a number
or 15(d) of the Securities Exchange Act of 1934, as amended of geomarket organizations, which are combined into and
(the “Exchange Act”), are made available free of charge on report to nine region presidents, who in turn report to two
our Internet website at www.bakerhughes.com as soon as rea- hemisphere presidents. In addition, certain support operations
sonably practicable after these reports have been electronically are organized at the enterprise level and include product-line
filed with, or furnished to, the Securities and Exchange Com- marketing and technology, supply chain, enterprise marketing
mission (the “SEC”). Information contained on or connected and information technology.
to our website is not incorporated by reference into this Through the geographic organization, we have placed
annual report on Form 10-K and should not be considered our management close to our customers, facilitating stronger
part of this report or any other filing we make with the SEC. customer relationships and allowing us to react quickly to local
We have adopted a Business Code of Conduct to provide market conditions and customer needs. The geographic orga-
guidance to our directors, officers and employees on matters nization supports our oilfield operations and is responsible for
of business conduct and ethics, including compliance standards sales, field operations and well site execution. Western Hemi-
and procedures. We have also required our principal executive sphere operations consist of four regions – Canada, headquar-
officer, principal financial officer and principal accounting offi- tered in Calgary, Alberta and U.S. Land, Gulf of Mexico and
cer to sign a Code of Ethical Conduct Certification. Latin America regions which are all headquartered in Houston,
Our Business Code of Conduct and Code of Ethical Con- Texas. Eastern Hemisphere operations consist of five regions –
duct Certifications are available on the Investor Relations Europe, headquartered in London, England; Africa, headquar-
section of our website at www.bakerhughes.com. We will tered in Paris, France; Russia Caspian, headquartered in
disclose on a current report on Form 8-K or on our website Moscow, Russia; Middle East, headquartered in Dubai, United
information about any amendment or waiver of these codes Arab Emirates (“UAE”); and Asia Pacific, headquartered in
for our executive officers and directors. Waiver information Kuala Lumpur, Malaysia.
disclosed on our website will remain on the website for at The product-line marketing and technology organization
least 12 months after the initial disclosure of a waiver. Our is responsible for product development, technology, marketing
Corporate Governance Guidelines and the charters of our and delivery of innovative and reliable solutions for our cus-
Audit/Ethics Committee, Compensation Committee, Executive tomers to advance their reservoir performance. This enterprise
Committee, Finance Committee and Governance Committee organization facilitates cross-product-line technology develop-
are also available on the Investor Relations section of our web- ment, sales processes and integrated operations capabilities.
site at www.bakerhughes.com. In addition, a copy of our Busi- The supply chain organization is responsible for develop-
ness Code of Conduct, Code of Ethical Conduct Certifications, ment of cost-effective procurement and manufacturing of
Corporate Governance Guidelines and the charters of the our products and services. We have manufacturing operations
committees referenced above are available in print at no cost in various countries, including, but not limited to, the United
to any stockholder who requests them by writing or telephon- States (Texas, Oklahoma and Louisiana), Canada (Calgary),
ing us at the following address or telephone number: Europe (Scotland, England and Germany), Latin America
(Venezuela and Argentina), the Middle East (UAE and Saudi
Baker Hughes Incorporated Arabia) and Asia Pacific (Thailand, China and Singapore).
2929 Allen Parkway, Suite 2100 On April 28, 2010, we completed the acquisition of BJ Ser-
Houston, TX 77019-2118 vices Company (“BJ Services”), a leading provider of pressure
Attention: Investor Relations pumping and other oilfield services, for $6.9 billion in cash
Telephone: (713) 439-8039 and stock. This acquisition provides us with a proven leader in
the areas of pressure pumping, stimulation and fracturing and
complements our existing product portfolio, allowing us to
provide a full suite of products and services to meet the needs
2010 Form 10-K 1

of our customers. For 2010, our results are inclusive of BJ Ser- • Completion and Production consists of our well completion
vices results from the acquisition date through December 31, systems, wellbore intervention, intelligent production sys-
2010. The acquired business represented approximately 46% tems, artificial lift, upstream chemicals and pressure pump-
of our consolidated total assets at December 31, 2010 and ing services product lines.
approximately 36% of our consolidated net income attribut- – Completion systems – includes products and services
able to Baker Hughes for the year ended December 31, 2010. used to control the flow of hydrocarbons within a
We report financial results for five segments. Four of these wellbore including sand control systems; liner hangers;
segments represent our oilfield operations and their geo- wellbore isolation; expandable tubulars; multilaterals;
graphic organization as detailed below: safety systems; packers and flow control; and tubing
• North America (Combined results for U.S. – including Gulf conveyed perforating.
of Mexico, Canada, and Trinidad) – Wellbore intervention – includes products and services
• Latin America (Combined results for Central and South used in existing wellbores to improve their performance
America including Mexico and excluding Trinidad) including thru-tubing fishing; thru-tubing inflatables;
• Europe/Africa/Russia Caspian (“EARC”) (Combined results conventional fishing; casing exit systems; production
for Europe, Africa – excluding Egypt, and Russia Caspian) injection packers; remedial and stimulation tools; and
• Middle East/Asia Pacific (“MEAP”) (Combined results for wellbore cleanup.
Middle East – including Egypt, and Asia Pacific) – Intelligent production systems – includes products
In addition to the above, we report in our Industrial Ser- and services used to monitor and dynamically control the
vices and Other segment, the financial results for our down- production from individual wells or fields including pro-
stream chemicals business, process and pipeline services, and duction decisions services; chemical injection services;
reservoir and technology consulting group. well monitoring services; intelligent well systems; and
Further information about our segments is set forth in artificial lift monitoring.
“Item 7. Management’s Discussion and Analysis of Financial – Artificial lift – includes electric submersible pumps sys-
Condition and Results of Operations” and Note 4 of the Notes tems; progressing cavity pump systems; gas lift systems;
to Consolidated Financial Statements in Item 8 herein. and surface horizontal pumping systems used to lift large
volumes of oil and water when a reservoir is no longer
PRODUCTS AND SERVICES able to flow on its own.
– Upstream chemicals – includes chemicals and chemical
Oilfield Operations application systems to provide flow assurance, integrity
We offer a full suite of products and services to our cus- management and production management for upstream
tomers around the world. Our oilfield products and services hydrocarbon production.
generally fall into one of two categories – Drilling and Evalua- – Pressure pumping services – includes cementing, stimu-
tion or Completion and Production. lation and coil tubing services used in the completion of
• Drilling and Evaluation consists of drill bit systems, drilling new oil and natural gas wells and in remedial work on
systems, wireline systems and drilling fluids product lines. existing wells, both onshore and offshore.
– Drill bit systems – includes Tricone™ and PDC or
“diamond” drill bits used for performance drilling, Industrial Services and Other
hole enlargement and coring. Industrial Services and Other consists of our downstream
– Drilling systems – includes conventional and rotary chemicals; process and pipeline services; and stimulation chem
steerable systems used to drill wells directionally and icals. It also includes our reservoir technology and consulting
horizontally; measurement-while-drilling and logging- group, that provides consulting services and software prod-
while-drilling systems used to perform reservoir ucts, including the Gaffney, Cline & Associates reservoir
navigation services; drilling optimization services; tools consulting services.
for coil tubing drilling and wellbore re-entry systems;
coring drilling systems; and surface logging. MARKETING, CONTRACTING, COMPETITION
– Wireline systems – includes tools for both open hole AND ECONOMIC CONDITIONS
and cased hole well logging used to gather data to per- We market our products and services on a product line
form petrophysical and geophysical analysis; reservoir basis primarily through our own sales organizations. We ordi-
evaluation coring; casing perforation; fluid character narily provide technical and advisory services to assist in our
ization; production logging; well integrity testing; pipe customers’ use of our products and services. Stock points and
recovery; and seismic and microseismic services. service centers for our products and services are located in
– Drilling fluids – includes emulsion and water-based areas of drilling and production activity throughout the world.
drilling fluids systems; reservoir drill-in fluids and fluids Our customers include the large integrated major and
environmental services. super-major oil and natural gas companies, U.S. and interna-
tional independent oil and gas companies, and the national

oil companies. No single customer accounts for more than Because both Baker Hughes and our customers generally
10% of our business. In North America, most work is con- prefer to contract on the basis as we mutually agree, we
tracted and performed on a well-by-well basis. Outside North negotiate with our customers in the U.S. to include a choice
America, most work is contracted on a project-by-project basis of law provision adopting the law of a state that does not
or for an extended period of time, typically two to four years. have an anti-indemnity statute. When this does not occur,
Most contracts cover our pricing of the products and services, we will generally use Texas law. With the exclusions contained
but do not necessarily establish an obligation to use our prod- in the Texas anti-indemnity statute, we are usually able to
ucts and services. structure the contract such that the limitation on the indemni-
Our primary competitors include the major diversified fication obligations of the customer is limited and should not
oil service companies such as Schlumberger, Halliburton have a material impact on the terms of the contract.
and Weatherford, where the breadth of service capabilities State law, laws or public policy in countries outside the
as well as competitive position of each product line are the U.S., or the negotiated terms of our agreement with the cus-
keys to differentiation in the market. We also compete with tomer may also limit the customer’s indemnity obligations in
other companies who may participate in only a few product the event of the gross negligence or willful misconduct of a
lines, for example, National Oilwell Varco, Champion Technol Baker Hughes employee. The Company and the customer may
ogies, Inc., Nalco Holding Company, Newpark Resources, Inc., also agree to other limitations on the customer’s indemnity
and Frac Tech Services, LLC. obligations in the contract.
Our products and services are sold in highly competitive The Company maintains a commercial general liability
markets, and revenues and earnings can be affected by insurance policy program that covers against certain operating
changes in competitive prices, fluctuations in the level of hazards, including product liability claims and personal injury
drilling, workover and completion activity in major markets, claims, as well as certain limited environmental pollution
general economic conditions, foreign currency exchange fluc- claims for damage to a third party or its property arising out
tuations and governmental regulations. We believe that the of contact with pollution for which the Company is liable, but
principal competitive factors in our industries are product and clean up and well control costs are not covered by such pro-
service quality, availability and reliability, health, safety and gram. All of the insurance policies purchased by the Company
environmental standards, technical proficiency and price. are subject to self-insured retention amounts for which we are
We strive to negotiate the terms of our customer con- responsible for payment, specific terms, conditions, limitations
tracts consistent with what we consider to be best practices. and exclusions. There can be no assurance that the nature
The general industry practice is for oilfield service providers, and amount of Company insurance will be sufficient to fully
like us, to be responsible for their own products and services indemnify us against liabilities related to our business.
and for our customers to retain liability for drilling and related
operations. Consistent with this practice, we generally take RESEARCH AND DEVELOPMENT; PATENTS
responsibility for our own people and property and our cus- Our products and technology organization engages in
tomers, such as the operator of a well, take responsibility for research and development activities directed primarily toward
their own people, property and all liabilities related to the well the improvement of existing products and services, the design
and subsurface operations, regardless of either party’s negli- of specialized products to meet specific customer needs and
gence. In general, any material limitations on indemnifica- the development of new products, processes and services. Our
tions to us from our customers in support of this allocation primary technology centers are located in the U.S. (Blacksburg,
of responsibility arise only by applicable statutes. Certain states Virginia; Claremore, Oklahoma; several in Houston, Texas and
such as Texas, Louisiana, Wyoming, and New Mexico have surrounding areas); Germany (Celle), Brazil (Rio de Janeiro),
enacted oil and gas specific statutes that void any indemnity Russia (Novosibirsk), and Saudi Arabia (Dhahran). For informa-
agreement that attempts to relieve a party from liability result- tion regarding the amounts of research and development
ing from its own negligence (“anti-indemnity statutes”). These expense in each of the three years in the period ended Decem-
statutes can void the allocation of liability agreed to in a con- ber 31, 2010, see Note 1 of the Notes to Consolidated Finan-
tract; however, both the Texas and Louisiana anti-indemnity cial Statements in Item 8 herein.
statutes include important exclusions. The Louisiana statute We have followed a policy of seeking patent and trade-
does not apply to property damage, and the Texas statute mark protection in numerous countries and regions through-
allows mutual indemnity agreements that are supported by out the world for products and methods that appear to have
insurance and has exclusions, which include, among other commercial significance. We believe our patents and trade-
things, loss or liability for property damage that results from marks to be adequate for the conduct of our business, and
pollution and the cost of control of a wild well. aggressively pursue protection of our patents against patent
infringement worldwide. No single patent or trademark is
considered to be critical to our business.
2010 Form 10-K 3

SEASONALITY EXECUTIVE OFFICERS OF BAKER HUGHES INCORPORATED
Our operations can be affected by seasonal weather, The following table shows, as of February 23, 2011, the
which can temporarily affect the delivery and performance name of each of our executive officers, together with his age
of our products and services, as well as customers’ budgetary and all offices presently held.
cycles. The widespread geographic locations of our operations
and the timing of seasonal events serve to reduce the impact Name Age
of individual events. Examples of seasonal events which can Chad C. Deaton 58
impact our business include: Chairman of the Board and Chief Executive Officer of
• The severity and duration of both the summer and the the Company since 2004. President of the Company
winter in North America can have a significant impact on from 2008 to 2010. President and Chief Executive Offi-
gas storage levels and drilling activity for natural gas. cer of Hanover Compressor Company from 2002 to
• In Canada, the timing and duration of the spring thaw 2004. Senior Advisor to Schlumberger Oilfield Services
directly affects activity levels beginning late in the first from 1999 to 2001. Executive Vice President of Schlum-
quarter and most severely in the second quarter. berger from 1998 to 1999. Employed by the Company
• Hurricanes can disrupt coastal and offshore drilling and in 2004.
production operations.
• Severe weather during the winter months normally results Peter A. Ragauss 53
in reduced activity levels in the North Sea and Russia
Senior Vice President and Chief Financial Officer of
generally in the first quarter.
the Company since 2006. Segment Controller of
• Scheduled repair and maintenance of offshore facilities
Refining and Marketing for BP plc from 2003 to 2006.
in the North Sea can reduce activity in the second and
Mr. Ragauss joined BP plc in 1998 as Assistant to the
third quarters.
Group Chief Executive until 2000 when he became
• Our Industrial Services and Other segment records its stron-
Chief Executive Officer of Air BP. Vice President of
gest sales in the second and third quarters of the year and
Finance and Portfolio Management for Amoco Energy
weakest sales during the first and fourth quarters of the
International immediately prior to its merger with BP
year due to the Northern Hemisphere winter.
in 1998. Vice President of Finance for El Paso Energy
International from 1996 to 1998 and Vice President
RAW MATERIALS
of Corporate Development for Tenneco Energy in 1996.
We purchase various raw materials and component parts
Employed by the Company in 2006.
for use in manufacturing our products. The principal materials
we purchase are steel alloys (including chromium and nickel),
Alan R. Crain 59
titanium, beryllium, copper, lead, tungsten carbide, synthetic
and natural diamonds, guar, sand and other proppants, Senior Vice President and General Counsel of the Com-
printed circuit boards and other electronic components and pany since 2007. Vice President and General Counsel
hydrocarbon-based chemical feed stocks. These materials are from 2000 to 2007. Executive Vice President, General
generally available from multiple sources and may be subject Counsel and Secretary of Crown, Cork & Seal Company,
to price volatility. We have not experienced significant short- Inc. from 1999 to 2000. Vice President and General
ages of these materials and normally do not carry inventories Counsel from 1996 to 1999, and Assistant General
of such materials in excess of those reasonably required to Counsel from 1988 to 1996, of Union Texas Petroleum
meet our production schedules. We do not expect significant Holdings, Inc. Employed by the Company in 2000.
interruptions in supply, but there can be no assurance that
there will be no price or supply issues over the long term. Martin S. Craighead 51
President since 2010 and Chief Operating Officer since
EMPLOYEES 2009. Senior Vice President from 2009 to 2010. Group
On December 31, 2010, we had approximately 53,100 President of Drilling and Evaluation since 2007 and Vice
employees, of which the majority are outside the U.S. Less President of the Company from 2005 until 2009. Presi-
than 10% of these employees are represented under collective dent of INTEQ from 2005 to 2007. President of Baker
bargaining agreements or similar-type labor arrangements. Atlas from February 2005 to August 2005. Vice Presi-
Based upon the geographic diversification of these employees, dent of Worldwide Operations for Baker Atlas from
we believe any risk of loss from employee strikes or other col- 2003 to 2005 and Vice President, Marketing and Busi-
lective actions would not be material to the conduct of our ness Development for Baker Atlas from 2001 to 2003;
operations taken as a whole. Region Manager for Baker Atlas in Latin America and
Asia and Region Manager for E&P Solutions from 1995
to 2001. Employed by the Company in 1986.

Russell J. Cancilla 59 Derek Mathieson 40
Vice President, and Chief Security Officer, Health, Safety, Vice President of the Company since December 2008.
Environment and Security of the Company since 2009. President, Products and Technology since May 2009.
Chief Security Officer from June 2006 to January 2009. Chief Technology and Marketing Officer of the Com-
Vice President and Chief Security Officer of Innovene pany from December 2008 to May 2009. Chief Execu-
from 2005 to 2006; Vice President, Resources & Capa tive Officer of WellDynamics, Inc. from May 2007 to
bilities for HSSE for BP from 2003 to 2005 and Vice November 2008. Vice President Business Development,
President, Real Estate and Management Services for BP Technology and Marketing of WellDynamics, Inc. from
from 1998 to 2003. Employed by the Company in 2006. April 2006 to May 2007; Technology Director and Chief
Technology Officer from January 2004 to April 2006;
Belgacem Chariag 48 Research and Development Manager from August 2002
Vice President of the Company and President Eastern to January 2004 and Reliability Assurance Engineer from
Hemisphere Operations since 2009. Vice President HSE April 2001 to August 2002 of WellDynamics, Inc. Well
of Schlumberger Limited from May 2008 to May 2009. Engineer, Shell U.K. Exploration and Production 1997
President of Well Services, a Schlumberger product line, to 2001. Employed by the Company in 2008.
from 2006 to 2008. Vice President Marketing Oilfield
Services for Europe, Caspian and Africa of Schlumberger John A. O’Donnell 62
from 2004 to 2006. Various other operational and man- Vice President of the Company since 1998 and President
agement positions at Schlumberger from 1989 to 2008. Western Hemisphere Operations since May 2009. Presi-
Employed by the Company in 2009. dent of Baker Petrolite Corporation from 2005 to May
2009. President of Baker Hughes Drilling Fluids from
Didier Charreton 47 2004 to 2005. Vice President, Business Process Develop-
Vice President, Human Resources of the Company since ment of the Company from 1998 to 2002; Vice Presi-
2007. Group Human Resources Director of Coats Plc, dent, Manufacturing, of Baker Oil Tools from 1990 to
a global company engaged in the sewing thread and 1998 and Plant Manager of Hughes Tool Company from
needlecrafts industry, from 2002 to 2007. Business 1988 to 1990. Employed by the Company in 1975.
Development of ID Applications for Gemplus S.A.,
a global company in the Smart Card industry, from Arthur L. Soucy 48
2000 to 2001. Various human resources positions at Vice President Supply Chain of the Company since April
Schlumberger from 1989 to 2000. Employed by the 2009. Vice President, Global Supply Chain for Pratt and
Company in 2007. Whitney from 2007 to 2009. Sloan Fellows Program,
Innovation and Global Leadership at Massachusetts
Alan J. Keifer 56 Institute of Technology from 2006 to 2007. General
Vice President, Controller and Principal Accounting Offi- Manager, Combustors, Augmenters and Nozzles of Pratt
cer of the Company since 1999. Western Hemisphere and Whitney from 2005 to 2006. Various managerial
Controller of Baker Oil Tools from 1997 to 1999 and positions at Pratt and Whitney from 1995 to 2006.
Director of Corporate Audit for the Company from Employed by the Company in 2009.
1990 to 1996. Employed by the Company in 1990.
Clifton N.B. Triplett 52
Jay G. Martin 59 Vice President and Chief Information Officer of the
Vice President, Chief Compliance Officer and Senior Company since September 2008. Corporate Vice Presi-
Deputy General Counsel of the Company since 2004. dent, Motorola Global Services from 2007 to 2008 and
Shareholder at Winstead Sechrest & Minick P.C. from Corporate Vice President and Chief Information Officer
2001 to 2004. Partner, Phelps Dunbar from 2000 to of Motorola’s Network and Enterprise Group from 2006
2001 and Partner, Andrews & Kurth from 1996 to 2000. to 2007. Employed by General Motors from 1997 to
Employed by the Company in 2004. 2006 as Global Information Systems Officer for Comput-
ing and Telecommunications Services from 2003 to 2006
and Global Manufacturing and Quality Information
Systems Officer from 1997 to 2003. Employed by
the Company in 2008.
There are no family relationships among our executive officers.
2010 Form 10-K 5

ENVIRONMENTAL MATTERS because we have recorded adequate reserves to cover the esti-
We are committed to the health and safety of people, pro- mate we presently believe will be our ultimate liability in the
tection of the environment and compliance with laws, regula- matter. Further, other PRPs involved in the sites have substan-
tions and our policies. Our past and present operations include tial assets and may reasonably be expected to pay their share
activities that are subject to domestic (including U.S. federal, of the cost of remediation, and, in some circumstances, we
state and local) and international regulations with regard to have insurance coverage or contractual indemnities from third
air and water quality and other environmental matters. We parties to cover a portion of the ultimate liability.
believe we are in substantial compliance with these regula- Based upon current information, we believe that our over-
tions. Regulation in this area continues to evolve, and changes all compliance with environmental regulations including rou-
in standards of enforcement of existing regulations, as well tine environmental compliance costs and capital expenditures
as the enactment and enforcement of new legislation, may for environmental control equipment will not have a material
require us and our customers to modify, supplement or replace adverse effect upon our capital expenditures, earnings or com-
equipment or facilities or to change or discontinue present petitive position because we have either established adequate
methods of operation. reserves or our cost for that compliance is not expected to be
We are involved in voluntary remediation projects at some material to our consolidated financial statements. Our total
of our present and former manufacturing locations or other accrual for environmental remediation is $32 million and
facilities, the majority of which relate to properties obtained $18 million, which includes accruals of $7 million and $6 million
in acquisitions or to sites no longer actively used in operations. for the various Superfund sites, at December 31, 2010 and
On rare occasions, remediation activities are conducted as 2009, respectively. Approximately $11 million of our total envi-
specified by a government agency-issued consent decree or ronmental accrual at December 31, 2010 relates to properties or
agreed order. Estimated remediation costs are accrued using liabilities acquired in connection with the BJ Services acquisition.
currently available facts, existing environmental permits, tech- We are subject to various other governmental proceedings
nology and presently enacted laws and regulations. For sites and regulations, including foreign regulations, relating to envi-
where we are primarily responsible for the remediation, our ronmental matters, but we do not believe that any of these
cost estimates are developed based on internal evaluations matters is likely to have a material adverse effect on our con-
and are not discounted. We record accruals when it is proba- solidated financial statements. We continue to focus on reduc-
ble that we will be obligated to pay amounts for environmen- ing future environmental liabilities by maintaining appropriate
tal site evaluation, remediation or related activities, and such company standards and improving our assurance programs.
amounts can be reasonably estimated. In general, we seek to
accrue costs for the most likely scenario, where known. Accru- ITEM 1A. RISK FACTORS
als are recorded even if significant uncertainties exist over the An investment in our common stock involves various risks.
ultimate cost of the remediation. Ongoing environmental com- When considering an investment in our Company, one should
pliance costs, such as obtaining environmental permits, instal- consider carefully all of the risk factors described below, as well
lation of pollution control equipment and waste disposal, are as other information included and incorporated by reference in
expensed as incurred. this report. There may be additional risks, uncertainties and mat-
The Comprehensive Environmental Response, Compensa- ters not listed below, that we are unaware of, or that we cur-
tion and Liability Act (known as “Superfund” or “CERCLA”) rently consider immaterial. Any of these could adversely affect
imposes liability for the release of a “hazardous substance” our business, financial condition, results of operations and cash
into the environment. Superfund liability is imposed without flows and, thus, the value of an investment in our Company.
regard to fault, even if the waste disposal was in compliance
with laws and regulations. The United States Environmental Risk Factors Related to the Worldwide Oil and
Protection Agency (the “EPA”) and appropriate state agencies Natural Gas Industry
supervise investigative and cleanup activities at Superfund sites. Our business is focused on providing products and services
We have been identified as a potentially responsible party to the worldwide oil and natural gas industry; therefore, our
(“PRP”) in remedial activities related to various Superfund sites, risk factors include those factors that impact, either positively
and we accrue our share of the estimated remediation costs of or negatively, the markets for oil and natural gas. Expenditures
the site based on the ratio of the estimated volume of waste by our customers for exploration, development and production
we contributed to the site to the total volume of waste dis- of oil and natural gas are based on their expectations of future
posed at the site. PRPs in Superfund actions have joint and hydrocarbon demand, the risks associated with developing the
several liability for all costs of remediation. Accordingly, a PRP reserves, their ability to finance exploration for and develop-
may be required to pay more than its proportional share of ment of reserves, and the future value of the reserves. Their
such costs. For some projects, it is not possible to quantify our evaluation of the future value is based, in part, on their expec-
ultimate exposure because the projects are either in the inves- tations for global demand, global supply, excess production
tigative or early remediation stage, or allocation information capacity, inventory levels, and other factors that influence oil
is not yet available. However, based upon current information, and natural gas prices. The key risk factors we believe are cur-
we do not believe that probable or reasonably possible expen- rently influencing the worldwide oil and natural gas markets
ditures in connection with the sites are likely to have a mate- are discussed below.
rial adverse effect on our consolidated financial statements

Demand for oil and natural gas is subject to factors required investments and resulting returns. Limited access to
beyond our control, which may adversely affect our external sources of funding has and may continue to cause
operating results. Changes in the global economy or customers to reduce their capital spending plans to levels sup-
changes in the ability of our customers to access equity ported by internally-generated cash flow. In addition, a reduc-
or credit markets could impact our customers’ spending tion of cash flow resulting from declines in commodity prices,
levels and our revenues and operating results. a reduction in borrowing bases under reserve-based credit
Demand for oil and natural gas, as well as the demand for facilities or the lack of availability of debt or equity financing
our services, is highly correlated with global economic growth, may impact the ability of our customers to pay amounts
and in particular by the economic growth of countries such as owed to us.
the U.S., India, and China, as well as developing countries in
Asia and the Middle East who are either significant users of Supply of oil and natural gas is subject to factors
oil and natural gas or whose economies are experiencing the beyond our control, which may adversely affect
most rapid economic growth compared to the global average. our operating results.
The past slowdown in global economic growth and recession Productive capacity for oil and natural gas is dependent on
in the developed economies resulted in reduced demand for our customers’ decisions to develop and produce oil and natu-
oil and natural gas, increased spare productive capacity and ral gas reserves. The ability to produce oil and natural gas can
lower energy prices. Weakness or deterioration of the global be affected by the number and productivity of new wells drilled
economy or credit market could reduce our customers’ spend- and completed, as well as the rate of production and resulting
ing levels and reduce our revenues and operating results. depletion of existing wells. Advanced technologies, such as
Incremental weakness in global economic activity, particularly horizontal drilling and hydraulic fracturing, improve total
in China, India, the Middle East and developing countries in recovery but also result in a more rapid production decline.
Asia will reduce demand for oil and natural gas and result in Access to prospects is also important to our customers.
lower oil and natural gas prices. Incremental strength in global Access to prospects may be limited because host governments
economic activity in such areas will create more demand for oil do not allow access to the reserves or because another oil and
and natural gas and support higher oil and natural gas prices. natural gas exploration company owns the rights to develop
In addition, demand for oil and natural gas could be impacted the prospect. Government regulations and the costs incurred by
by environmental regulation, including “cap and trade” legis- oil and natural gas exploration companies to conform to and
lation, carbon taxes and the cost for carbon capture and comply with government regulations, may also limit the quan-
sequestration related regulations. tity of oil and natural gas that may be economically produced.
Supply can also be impacted by the degree to which indi-
Volatility of oil and natural gas prices can adversely vidual Organization of Petroleum Exporting Countries (“OPEC”)
affect demand for our products and services. nations and other large oil and natural gas producing coun-
Volatility in oil and natural gas prices can also impact our tries, including, but not limited to, Norway and Russia, are
customers’ activity levels and spending for our products and willing and able to control production and exports of oil, to
services. Current energy prices are important contributors to decrease or increase supply and to support their targeted oil
cash flow for our customers and their ability to fund explor price while meeting their market share objectives. Any of these
ation and development activities. Expectations about future factors could affect the supply of oil and natural gas and could
prices and price volatility are important for determining have a material adverse effect on our results of operations.
future spending levels.
Lower oil and gas prices generally lead to decreased Changes in spare productive capacity or inventory
spending by our customers. While higher oil and natural gas levels can be indicative of future customer spending to
prices generally lead to increased spending by our customers, explore for and develop oil and natural gas which in turn
sustained high energy prices can be an impediment to eco- influences the demand for our products and services.
nomic growth, and can therefore negatively impact spending Spare productive capacity and oil and natural gas storage
by our customers. Our customers also take into account the inventory levels are an indicator of the relative balance
volatility of energy prices and other risk factors by requiring between supply and demand. High or increasing storage or
higher returns for individual projects if there is higher per- inventories generally indicate that supply is exceeding demand
ceived risk. Any of these factors could affect the demand for and that energy prices are likely to soften. Low or decreasing
oil and natural gas and could have a material adverse effect storage or inventories are an indicator that demand is growing
on our results of operations. faster than supply and that energy prices are likely to rise.
Measures of maximum productive capacity compared to
Our customers’ activity levels and spending for our demand (“spare productive capacity”) are also an important
products and services and ability to pay amounts factor influencing energy prices and spending by oil and natu-
owed us could be impacted by economic conditions. ral gas exploration companies. When spare productive capacity
Access to capital is dependent on our customers’ ability to is low compared to demand, energy prices tend to be higher
access the funds necessary to develop economically attractive and more volatile reflecting the increased vulnerability of the
projects based upon their expectations of future energy prices, entire system to disruption.
2010 Form 10-K 7

Seasonal and adverse weather conditions adversely manage our manufacturing operations and meet these goals
affect demand for our services and operations. can have an impact on our business, including our ability to
Weather can also have a significant impact on demand meet our manufacturing plans and revenue goals, control
as consumption of energy is seasonal, and any variation from costs and avoid shortages of raw materials and component
normal weather patterns, cooler or warmer summers and parts. Raw materials and components of particular concern
winters, can have a significant impact on demand. Adverse include steel alloys (including chromium and nickel), titanium,
weather conditions, such as hurricanes in the Gulf of Mexico, beryllium, copper, lead, tungsten carbide, synthetic and natural
may interrupt or curtail our operations, or our customers’ diamonds, guar, sand and other proppants, printed circuit
operations, cause supply disruptions and result in a loss of boards and other electronic components and hydrocarbon-
revenue and damage to our equipment and facilities, which based chemical feed stocks. Our ability to repair or replace
may or may not be insured. Extreme winter conditions in equipment damaged or lost in the well can also impact our
Canada, Russia or the North Sea may interrupt or curtail ability to service our customers. A lack of manufacturing
our operations, or our customers’ operations, in those capacity could result in increased backlog, which may limit
areas and result in a loss of revenue. our ability to respond to short lead time orders.
People are a key resource to developing, manufacturing
Risk Factors Related to Our Business and delivering our products and services to our customers
Our expectations regarding our business are affected by the around the world. Our ability to manage the recruiting, train-
following risk factors and the timing of any of these risk factors: ing and retention of the highly skilled workforce required by
our plans and to manage the associated costs could impact
We operate in a highly competitive environment, our business. A well-trained, motivated work force has a posi-
which may adversely affect our ability to succeed. tive impact on our ability to attract and retain business. Peri-
We operate in a highly competitive environment for market- ods of rapid growth present a challenge to us and our industry
ing oilfield services and securing equipment and trained person- to recruit, train and retain our employees while managing the
nel. Our ability to continually provide competitive products and impact of wage inflation and potential lack of available quali-
services can impact our ability to defend, maintain or increase fied labor in the markets where we operate. Likewise, when
prices for our products and services, maintain market share there is a downturn in the economy or our markets, we may
and negotiate acceptable contract terms with our customers. have to adjust our workforce to control costs and yet not
In order to be competitive, we must provide new technologies lose our skilled and diverse workforce. Labor-related actions,
and reliable products and services that perform as expected including strikes, slowdowns and facility occupations can
and that create value for our customers. Our ability to defend, also have a negative impact on our business.
maintain or increase prices for our products and services is in
part dependent on the industry’s capacity relative to customer Our business is subject to geopolitical, terrorism risks
demand, and on our ability to differentiate the value delivered and other threats.
by our products and services from our competitors’ products Geopolitical and terrorism risks continue to grow in several
and services. In addition, our ability to negotiate acceptable key countries where we do business. Geopolitical and terror-
contract terms and conditions with our customers, especially ism risks could lead to, among other things, a loss of our
state-owned national oil companies, our ability to manage investment in the country, impair the safety of our employees
warranty claims and our ability to effectively manage our and impair our ability to conduct our operations.
commercial agents can also impact our results of operations. Our informational technology systems are subject to possible
Managing development of competitive technology and breaches and other threats that could threaten our intellectual
new product introductions on a forecasted schedule and at property, impair our ability to conduct our operations and
forecasted costs can impact our financial results. Development cause other damages or loss.
of competing technology that accelerates the obsolescence of
any of our products or services can have a detrimental impact Our failure to comply with the Foreign Corrupt
on our financial results. Practices Act (“FCPA”) would have a negative impact
We may be disadvantaged competitively and financially by on our ongoing operations.
a significant movement of exploration and production opera- We entered into settlements with the DOJ and SEC in April
tions to areas of the world in which we are not currently active. 2007 relating to violations of the FCPA by the Company. Our
ability to comply with the FCPA is dependent on the success of
The high cost or unavailability of infrastructure, our ongoing compliance program, including our ability to con-
materials, equipment, supplies and personnel, particu- tinue to manage our agents and business partners and super-
larly in periods of rapid growth, could adversely affect vise, train and retain competent employees and the efforts of
our ability to execute our operations on a timely basis. our employees to comply with applicable law and the Baker
Our manufacturing operations are dependent on having Hughes Business Code of Conduct. We would be subject to
sufficient raw materials, component parts and manufacturing severe sanctions and civil and criminal prosecution as well as
capacity available to meet our manufacturing plans at a reason- fines and penalties in the event of a finding of an additional
able cost while minimizing inventories. Our ability to effectively violation of the FCPA by us or any of our employees.

Compliance with and changes in laws or adverse Uninsured claims and litigation against us could
positions taken by taxing authorities could be costly adversely impact our operating results.
and could affect operating results. We could be impacted by the outcome of pending litiga-
We have operations in the U.S. and in over 80 countries tion as well as unexpected litigation or proceedings. We have
that can be impacted by expected and unexpected changes insurance coverage against operating hazards, including prod-
in the legal and business environments in which we operate. uct liability claims and personal injury claims related to our
Our ability to manage our compliance costs and compliance products, to the extent deemed prudent by our management
programs will impact our ability to meet our earnings goals. and to the extent insurance is available; however, no assurance
Compliance related issues could also limit our ability to do can be given that the nature and amount of that insurance
business in certain countries. Changes that could impact the will be sufficient to fully indemnify us against liabilities arising
legal environment include new legislation, new regulations, out of pending and future claims and litigation. This insurance
new policies, investigations and legal proceedings and new has deductibles or self-insured retentions and contains certain
interpretations of existing legal rules and regulations, in partic- coverage exclusions. The insurance does not cover damages
ular, changes in export control laws or exchange control laws, from breach of contract by us or based on alleged fraud
additional restrictions on doing business in countries subject to or deceptive trade practices. In addition, the following risks
sanctions, and changes in laws in countries where we operate apply with respect to our insurance coverage:
or intend to operate. Changes that impact the business envi- • we may not be able to continue to obtain insurance
ronment include changes in accounting standards, changes in on commercially reasonable terms;
environmental laws, changes in tax laws or tax rates, the reso- • we may be faced with types of liabilities that will not
lution of tax assessments or audits by various tax authorities, be covered by our insurance;
and the ability to fully utilize our tax loss carryforwards and tax • our insurance carriers may not be able to meet their
credits. In addition, we may periodically restructure our legal obligations under the policies; or
entity organization. If taxing authorities were to disagree with • the dollar amount of any liabilities may exceed our
our tax positions in connection with any such restructurings, policy limits.
our effective tax rate could be materially impacted. Whenever possible, we obtain agreements from customers
These changes could have a significant financial impact that limit our liability. However, state law, laws or public policy
on our future operations and the way we conduct, or if we in countries outside the U.S., or the negotiated terms of the
conduct, business in the affected countries. agreement with the customer may not recognize those limita-
tions of liability and/or limit the customer’s indemnity obliga-
The May 2010 moratorium on drilling offshore in the U.S., tions to the Company. In addition, insurance and customer
as well as changes in and compliance with restrictions agreements do not provide complete protection against losses
or regulations on offshore drilling in the U.S. Gulf of Mex- and risks from an event, like a well blow out that can lead to
ico and in other areas around the world, has and may property damage, personal injury, death or the discharge of
continue to adversely affect our business and operating hazardous materials into the environment. Our results of oper-
results and reduce the need for our services in those areas. ations could be adversely affected by unexpected claims not
While the moratorium on drilling offshore in the U.S. was covered by insurance.
lifted on October 12, 2010, there is a delay in resuming permit-
ting of operations related to drilling offshore in the U.S. and Compliance with and rulings and litigation in connection
there is no assurance that operations related to drilling offshore with environmental regulations may adversely affect our
in the U.S. will reach the same levels that existed prior to the business and operating results.
moratorium. The delay in resuming these activities or the failure Our business is impacted by unexpected outcomes or
of these activities to reach levels that existed prior to the mora- material changes in environmental regulations. Our expecta-
torium has and could continue to adversely impact our operat- tions regarding our compliance with environmental regulations
ing results. The April 2010 Deepwater Horizon accident in the and our expenditures to comply with environmental regulations,
Gulf of Mexico and its aftermath has resulted in new and pro- including (without limitation) our capital expenditures for envi-
posed legislation and regulation in the U.S. of the offshore oil ronmental control equipment, are only our forecasts regarding
and gas industry, which may result in substantial increases in these matters. These forecasts may be substantially different
costs or delays in drilling or other operations in the Gulf of Mex- from actual results, which may be affected by the following fac-
ico, oil and gas projects becoming potentially non-economic, tors: changes in environmental regulations; a material change
and a corresponding reduced demand for our services. We in our allocation or other unexpected, adverse outcomes with
cannot predict with any certainty the impact of the prior mor- respect to sites where we have been named as a PRP, including
atorium or the substance or effect of any new or additional (without limitation) Superfund sites; the discovery of new sites
regulations. If the U.S. or other countries where we operate, of which we are not aware and where additional expenditures
enact stricter restrictions on offshore drilling or further regulate may be required to comply with environmental regulations;
offshore drilling or contracting services operations, including an unexpected discharge of hazardous materials.
without limitation cementing, higher operating costs could
result and adversely affect our business and operating results.
2010 Form 10-K 9

International, national, and state governments and agen- Control of oil and gas reserves by state-owned oil
cies are currently evaluating and promulgating climate-related companies may impact the demand for our services
legislation and regulations that are focused on restricting and create additional risks in our operations.
greenhouse gas (“GHG”) emissions. In the U.S., the EPA has Much of the world’s oil and gas reserves are controlled
taken steps to regulate GHGs as pollutants under the Clean by state-owned oil companies. State-owned oil companies
Air Act (“CAA”). The EPA’s “Mandatory Reporting of Green- may require their contractors to meet local content require-
house Gases” rule established a comprehensive scheme of ments or other local standards, such as joint ventures, that
regulations that require monitoring and reporting of GHG could be difficult or undesirable for the Company to meet.
emissions that began in 2010. Furthermore, the EPA recently The failure to meet the local content requirements and other
proposed additional GHG reporting rules specifically for the oil local standards may adversely impact the Company’s opera-
and gas industry. The EPA has also published a final rule, the tions in those countries.
“Endangerment Finding,” indicating that GHGs in the atmo- In addition, many state-owned oil companies may require
sphere endanger public health and welfare, and that emissions integrated contracts or turn-key contracts that could require
of GHGs from mobile sources cause or contribute to the GHG the Company to provide services outside its core business.
pollution. Following issuance of the Endangerment Finding, Providing services on an integrated or turnkey basis generally
the EPA promulgated final motor vehicle GHG emission stan- requires the Company to assume additional risks.
dards on April 1, 2010. These developments may curtail pro-
duction and demand for fossil fuels such as oil and gas in Changes in economic conditions and currency
areas of the world where our customers operate and thus fluctuations may impact our operating results.
adversely affect future demand for our services, which may Fluctuations in foreign currencies relative to the U.S. Dollar
in turn adversely affect future results of operations. can impact our revenue and our costs of doing business. Most
International developments focused on restricting the of our products and services are sold through contracts denom-
emission of carbon dioxide and other GHGs include the inated in U.S. Dollars or local currency indexed to U.S. Dollars;
United Nations Framework Convention on Climate Change, however, some of our revenue, local expenses and manufac-
also known as the “Kyoto Protocol” (an internationally applied turing costs are incurred in local currencies and therefore
protocol, which has been ratified in Canada) and the European changes in the exchange rates between the U.S. Dollar and
Union’s Emission Trading System. The Carbon Reduction Com- foreign currencies, particularly the British Pound Sterling, Euro,
mitment in the U.K. is the first cap and trade scheme to affect Canadian Dollar, Norwegian Krone, Russian Ruble, Australian
Baker Hughes facilities. Domestic cap and trade programs Dollar, Brazilian Real and the Venezuelan Bolivar (which, for
include the Regional Greenhouse Gas Initiative or in the North- example, was devalued by the Venezuelan government in
eastern United States, and the Western Regional Climate Action January 2010), can increase or decrease our revenue and
Initiative in the Western United States. A federal cap and trade expenses reported in U.S. Dollars and may impact our results
regime may develop in the U.S. as well. These developments of operations.
may curtail production and demand for fossil fuels such as oil The condition of the capital markets and equity markets
and gas in areas of the world where our customers operate in general can affect the price of our common stock and our
and thus adversely affect future demand for our services, ability to obtain financing, if necessary. If the Company’s credit
which may in turn adversely affect future results of operations. rating is downgraded, this would increase borrowing costs
under our revolving credit agreements and commercial paper
Demand for pressure pumping services could be reduced program, as well as the cost of renewing or obtaining, or make
or eliminated by governmental regulation or a change it more difficult to renew or obtain or issue, new debt financing.
in the law.
The EPA plans to study hydraulic fracturing practices, and Changes in market conditions may impact
legislation may be introduced in the U.S. Congress that would any stock repurchases.
authorize the EPA to regulate hydraulic fracturing. In addition, To the extent the Company engages in stock repurchases,
a number of states are evaluating the adoption of legislation such activity is subject to market conditions, such as the
or regulations governing hydraulic fracturing. Such federal or trading prices for our stock, as well as the terms of any stock
state legislation and/or regulations could impair our operations purchase plans intended to comply with Rule 10b5-1 or
and/or greatly reduce or eliminate demand for the Company’s Rule 10b-18 of the Exchange Act. Management, in its
pressure pumping services. Such legislation and/or regulations, discretion, may engage in or discontinue stock repurchases
if enacted, could adversely affect future results of operations. at any time.
We are unable to predict whether the proposed legislation or
any other proposals will ultimately be enacted, and if so, the
impact on the Company’s business.
The merger with BJ Services may create additional ITEM 2. PROPERTIES
risks for the Company. We own or lease numerous facilities throughout the world.
The success of the merger will depend, in part, on our We consider our manufacturing plants, equipment repair and
ability to realize certain anticipated benefits from combining maintenance facilities, grinding plants, drilling fluids and chem-
the businesses of Baker Hughes and BJ Services. However, ical processing centers, and research and technology centers
to realize these anticipated benefits, we must successfully to be our principal properties. The locations of our principal
integrate the operations and personnel of BJ Services and properties include, but are not limited to, the following:
our existing business. If we are not able to achieve these (i) North America – Houston, Tomball and The Woodlands,
objectives, the anticipated benefits of the merger may not Texas; Broken Arrow, Barnsdall, Claremore, Sand Springs and
be realized fully or at all or may take longer to realize than Tulsa, Oklahoma; Lafayette and Broussard, Louisiana; Calgary,
expected. Failure to achieve the anticipated benefits could Canada; (ii) Latin America – Maracaibo, Venezuela; Mendoza,
result in increased costs or decreases in the amount of Argentina; (iii) Europe/Africa/Russia Caspian – Aberdeen,
expected revenues and could adversely affect our future Scotland; Liverpool and Hartlepool, England; Celle, Germany;
business, financial condition, operating results and prospects. (iv) Middle East/Asia Pacific – Dubai, United Arab Emirates;
During the year ended December 31, 2010, approximately Dhahran, Saudi Arabia; Singapore; and Chonburi, Thailand.
one-half of our revenue and approximately two-thirds of We own or lease numerous other facilities such as service
our profit before tax were attributable to North America. centers, shops and sales and administrative offices throughout
A decrease in demand for energy, natural gas exploration and the geographic regions in which we operate. We also have a sig-
production, or an increase in competition, in North America nificant investment in service vehicles, rental tools and manufac-
could result in a significant adverse effect on our operating turing and other equipment. We believe that our facilities are
results and the expected benefits of the merger. well maintained and suitable for their intended purposes. The
Prior to the merger, BJ Services voluntarily disclosed infor- table below shows the number of facilities by geographic region:
mation found in its internal investigations to the Department
of Justice (“DOJ”) and SEC and engaged in discussions with Europe/
Africa/ Middle
these authorities in connection with their review of possible North Latin Russia East/Asia
illegal payments. The Company cannot currently predict the America America Caspian Pacific Total
outcome of these investigations, when any of these matters Principal Properties 31 4 6 7 48
will be resolved, or what, if any, actions may be taken by the
DOJ, the SEC or other authorities or the effect the actions may ITEM 3. LEGAL PROCEEDINGS
have on the business or consolidated financial statements of The information with respect to Item 3. Legal Proceedings
the Company. If the DOJ or SEC were to take action for failure is contained in Note 14 of the Notes to Consolidated Financial
to comply with the FCPA, it could significantly affect our Statements in Item 8 herein.
results of operations.
In October of 2010, the Company made voluntary disclo- ITEM 4. [Removed and Reserved]
sures on behalf of BJ Services to the Department of Commerce
and the Department of State for potential export control viola-
tions that occurred prior to the merger. The Department of
State has issued a letter that notified the Company that they
will not be taking any further action or imposing any penalty
in relation to the disclosures that were filed with them. It is
not possible at this time to predict the final outcome or
penalty amounts that may be imposed by the Department
of Commerce.
ITEM 1B. UNRESOLVED STAFF COMMENTS

None.
2010 Form 10-K 11

PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock, $1.00 par value per share, is principally traded on the New York Stock Exchange. Our common stock is also
traded on the SWX Swiss Exchange. As of February 7, 2011, there were approximately 243,800 stockholders and approximately
14,400 stockholders of record.
For information regarding quarterly high and low sales prices on the New York Stock Exchange for our common stock during
the two years ended December 31, 2010, and information regarding dividends declared on our common stock during the two years
ended December 31, 2010, see Note 16 of the Notes to Consolidated Financial Statements in Item 8 herein.
The following table contains information about our purchases of equity securities during the fourth quarter of 2010.
Issuer Purchases of Equity Securities
Maximum Number
Total Total Number of Total Number (or Approximate Dollar
Number Average Shares Purchased Average of Shares Value) of Shares that
of Shares Price Paid as Part of a Publicly Price Paid Purchased in May Yet Be Purchased
Period Purchased (1) Per Share (1) Announced Program (2) Per Share (2) the Aggregate Under the Program (3)
October 1–31, 2010 1,827 $ 47.99 – $ – 1,827 $ –

November 1–30, 2010 95,448 49.89 – – 95,448 –
December 1–31, 2010 – – – – – –
Total 97,275 $ 49.85 – $ – 97,275 $ 1,197,127,803
(1) Represents shares purchased from employees to pay the option exercise price related to stock-for-stock exchanges in option exercises or to satisfy the tax withholding
obligations in connection with the vesting of restricted stock awards and restricted stock units.
(2) There were no share repurchases as part of a publicly announced program during the fourth quarter of 2010.
(3) Our Board of Directors has authorized a program to repurchase our common stock from time to time. During the fourth quarter of 2010, we did not repurchase any
shares of our common stock under the program. We had authorization remaining to repurchase up to a total of $1,197 million of our common stock.
Corporate Performance Graph
The following graph compares the yearly change in our cumulative total stockholder return on our common stock (assuming
reinvestment of dividends into common stock at the date of payment) with the cumulative total return on the published Standard &
Poor’s 500 Stock Index and the cumulative total return on Standard & Poor’s 500 Oil and Gas Equipment and Services Index over the
preceding five-year period.
Comparison of Five-Year Cumulative Total Return*

Baker Hughes Incorporated; S&P 500 Index and S&P 500 Oil and Gas Equipment and Services Index
$250
Baker Hughes
$200 S&P 500 Index
S&P Oil and Gas Equipment and Services Index
$150
$100
$50
$0
2005 2006 2007 2008 2009 2010
2005 2006 2007 2008 2009 2010
Baker Hughes $ 100.00 $ 123.68 $ 135.24 $ 54.01 $ 69.25 $ 99.07

S&P 500 Index 100.00 115.79 122.16 76.96 97.33 111.99
S&P 500 Oil and Gas Equipment and
Services Index 100.00 115.54 170.88 69.76 111.76 155.66
* Total return assumes reinvestment of dividends on a quarterly basis.
The comparison of total return on investment (change in year-end stock price plus reinvested dividends) assumes that $100 was
invested on December 31, 2005 in Baker Hughes common stock, the S&P 500 Index and the S&P 500 Oil and Gas Equipment and
Services Index.
The Corporate Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the
SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act,
except to the extent that Baker Hughes specifically incorporates it by reference into such filing.
2010 Form 10-K 13

ITEM 6. SELECTED FINANCIAL DATA
The Selected Financial Data should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data,” both contained herein.
(In millions, except per share amounts) 2010 2009 2008 2007 2006
Revenues $ 14,414 $ 9,664 $ 11,864 $ 10,428 $ 9,027

Costs and expenses:
Cost of revenues 11,184 7,397 7,954 6,845 5,876
Research and engineering 429 397 426 372 339
Marketing, general and administrative 1,250 1,120 1,046 933 878
Acquisition-related costs 134 18 – – –
Litigation settlement – – 62 – –
Total costs and expenses 12,997 8,932 9,488 8,150 7,093
Operating income 1,417 732 2,376 2,278 1,934
Equity in income of affiliates – – 2 1 60
Gain on sale of product line – – 28 – –
Gain on sale of interest in affiliate – – – – 1,744
Gain (loss) on investments 6 4 (25) – –
Interest expense, net (141) (125) (62) (22) (1)
Income from continuing operations before income taxes 1,282 611 2,319 2,257 3,737
Income taxes (463) (190) (684) (743) (1,338)
Income from continuing operations 819 421 1,635 1,514 2,399
Income from discontinued operations, net of tax – – – – 20
Net income 819 421 1,635 1,514 2,419
Net income attributable to noncontrolling interest (7) – – – –
Net income attributable to Baker Hughes $ 812 $ 421 $ 1,635 $ 1,514 $ 2,419

Net income attributable to Baker Hughes:
Basic $ 2.06 $ 1.36 $ 5.32 $ 4.76 $ 7.32
Diluted 2.06 1.36 5.30 4.73 7.27
Dividends 0.60 0.60 0.56 0.52 0.52
Balance Sheet Data:
Cash, cash equivalents and short-term investments $ 1,706 $ 1,595 $ 1,955 $ 1,054 $ 1,104
Working capital (current assets minus current liabilities) 5,568 4,612 4,634 3,837 3,346
Total assets 22,986 11,439 11,861 9,857 8,706
Long-term debt 3,554 1,785 1,775 1,069 1,074
Stockholders’ equity 14,286 7,284 6,807 6,306 5,243
Notes To Selected Financial Data

(1) Acquisition of BJ Services. We acquired BJ Services Company (“BJ Services”) on April 28, 2010, and their financial results from
the date of acquisition through the end of 2010 are included in our results. For further discussion, see Note 2 – Acquisitions of
the Notes to Consolidated Financial Statements in Item 8 herein. 2010 and 2009 income from continuing operations also
includes costs incurred by Baker Hughes related to the acquisition and integration of BJ Services.
(2) Litigation settlement. 2008 income from continuing operations includes a net charge of $62 million relating to the settlement
of litigation with ReedHycalog.
(3) Gain on sale of product line. 2008 income from continuing operations includes $28 million for the gain on the sale of the
Completion and Production segment’s Surface Safety Systems (“SSS”) product line.
(4) Equity in income of affiliates and gain on sale of interest in affiliate. On April 28, 2006, we sold our 30% interest in
WesternGeco, a seismic venture we formed with Schlumberger in 2000, and recorded a gain of $1,744 million on the sale.
(5) Discontinued operations. The selected financial data in 2006 includes reclassifications to reflect Baker Supply Products Division,
as discontinued operations.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF BUSINESS ENVIRONMENT
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Global economic growth and the resultant demand for
Management’s Discussion and Analysis of Financial Condi- oil and natural gas are the primary drivers of our customers’
tion and Results of Operations (“MD&A”) should be read in expenditures to develop and produce oil and gas. The expansion
conjunction with the consolidated financial statements of of the global economy following the recession of 2008/2009
“Item 8. Financial Statements and Supplementary Data” continued through 2010. Increasing economic activity, particu-
contained herein. larly in the emerging economies in Asia and the Middle East,
and expectations for continued economic growth supported
EXECUTIVE SUMMARY expectations for increasing demand for oil and natural gas.
Baker Hughes is a leading supplier of oilfield services, Spending by oil and natural gas exploration and production
products, technology and systems to the worldwide oil and companies, which is dependent upon their forecasts regarding
natural gas industry. We provide: the expected future supply and future demand for oil and nat-
• products and services for drilling and evaluation of oil and ural gas products and their estimates of costs to find, develop,
gas wells; and produce reserves, increased in 2010 compared to 2009.
• products and services for completion and production of oil Changes in oil and natural gas exploration and production
and gas wells; and spending result in increased or decreased demand for our
• industrial and other services including downstream refining, products and services, which will be reflected in the rig count
and process and pipeline industries, and reservoir technol- and other measures. At early February 2011 oil prices, many
ogy and consulting services. international projects have attractive economic returns.
The primary driver of our businesses is our customers’ In North America, customer spending increased for both
capital and operating expenditures dedicated to oil and oil and gas projects resulting in a 44% increase in the North
natural gas exploration, field development and production. America rig count in 2010 compared to 2009. The increase
Our business is cyclical and is dependent upon our customers’ in oil-directed drilling reflected the global price of oil, which is
expectations for future oil and natural gas prices, economic trading at a premium, on a Btu basis, relative to natural gas in
growth, hydrocarbon demand and estimates of current and North America. The increase in gas-directed drilling was driven
future oil and natural gas production. by activity in the unconventional shale gas plays, despite rela-
On April 28, 2010, we completed the acquisition of tively low prices for natural gas. Spending on gas-directed proj-
BJ Services, a leading provider of pressure pumping and ects in 2010 was supported by (1) hedges on production made
other oilfield services, for $6.9 billion in cash and stock. This in prior periods when future prices were higher, (2) the need
acquisition provides us with a proven leader in the areas of to drill and produce natural gas to hold leases acquired in ear-
pressure pumping, stimulation and fracturing and comple- lier periods, (3) the influx of equity from companies interested
ments our existing product portfolio, allowing us to provide in developing a position in the shale resource plays and (4)
a full suite of products and services to meet the needs of our associated production of natural gas liquids in certain basins.
customers. For 2010, our results are inclusive of BJ Services Outside of North America customer spending is most
results from the acquisition date through December 31, 2010. heavily influenced by oil prices, which increased 28% in 2010
The acquired business represented approximately 46% of our compared to 2009 as the economic recovery continued. In
consolidated total assets at December 31, 2010 and approxi- response to higher oil prices and expectations that the expand-
mately 36% of our consolidated net income attributable to ing economy would support prices in excess of $70/Bbl, our
Baker Hughes for the year ended December 31, 2010. customers’ spending increased. This was reflected in a 10%
For 2010, we generated revenues of $14.41 billion, an increase in the rig count outside North America.
increase of $4.75 billion or 49% compared to 2009. Our
North America oilfield revenues for 2010 were $6.62 billion, Oil and Natural Gas Prices
an increase of 109% compared to 2009. Oilfield revenues out- Oil (Bloomberg West Texas Intermediate (“WTI”) Cushing
side of North America were $6.82 billion, an increase of 18% Crude Oil Spot Price and Bloomberg Dated Brent (“Brent”))
compared to 2009. Industrial Services and Other revenues were and natural gas (Bloomberg Henry Hub Natural Gas Spot Price)
$971 million, an increase of 40% compared to 2009. These prices are summarized in the table below as averages of the
increases are primarily due to the acquisition of BJ Services on daily closing prices during each of the periods indicated.
April 28, 2010, which provided $3.69 billion of revenue in 2010,
and the strength of the North America segment driven by oil 2010 2009 2008
and gas-directed drilling primarily in unconventional reservoirs. WTI oil prices ($/Bbl) $ 79.51 $ 61.99 $ 99.92
Net income attributable to Baker Hughes was $812 million for Brent oil prices ($/Bbl) 79.73 62.04 97.69
2010 compared to $421 million for 2009. The increase is primarily Natural gas prices ($/mmBtu) 4.37 3.94 8.89
due to the acquisition of BJ Services, which provided $290 million
of net income in 2010, and improved profitability in our North WTI oil prices averaged $79.51/Bbl in 2010. Prices ranged
America segment partially offset by lower profits internationally. from a high of $91.49/Bbl in December 2010 to a low of
As of December 31, 2010, Baker Hughes had approximately $65.96/Bbl in May 2010. Oil prices strengthened from a low
53,100 employees compared to approximately 34,400 employ- in late May 2010 through the end of the year driven by expec-
ees as of December 31, 2009. The increase in employees is tations of worldwide economic recovery and energy demand
due primarily to the acquisition of BJ Services, who employed growth, particularly in Asia and the Middle East.
approximately 14,000 employees at the date of acquisition.
2010 Form 10-K 15
Natural gas prices averaged $4.37/mmBtu in 2010. Natural of drilling activity in the Gulf of Mexico as a result of the
gas prices traded during 2010 in a range between $3.18/mmBtu April 2010 Deepwater Horizon accident and related deepwater
and $7.51/mmBtu and have not traded above $5/mmBtu since drilling moratorium and the delay and decrease in approv-
late June 2010. At the end of 2010, working natural gas in ing drilling permits negatively impacted activity in the latter
storage was 3,097 Bcf, which was 0.8% or 26 Bcf below seven months of 2010 where the U.S. offshore rig count aver-
the corresponding week in 2009. aged only 20 rigs compared to 48 rigs in the first five months
of 2010 and 44 rigs for the year 2009. Outside North America
Rig Counts the rig count increased 10%. The rig count in Latin America
Baker Hughes has been providing rig counts to the public increased primarily due to higher activity in the Southern Cone
since 1944. We gather all relevant data through our field ser- geomarket (Argentina, Bolivia and Chile), the Andean geomar-
vice personnel, who obtain the necessary data from routine ket (Colombia, Peru and Ecuador), and Brazil, and was partially
visits to the various rigs, customers, contractors and/or other offset by lower activity in the Venezuela/Mexico geomarket.
outside sources. This data is then compiled and distributed to The increase in rig count in the Continental Europe geomarket
various wire services and trade associations and is published was led by Turkey, Italy and Romania. The rig count in Africa
on our website. Rig counts are compiled weekly for the U.S. increased primarily due to higher activity in the Nigeria and
and Canada and monthly for all international and U.S. rigs. Sub Saharan Africa geomarkets. The rig count increased in the
Published international rig counts do not include rigs drilling Middle East due to higher activity in Egypt and Kuwait, offset
in certain locations, such as Russia, the Caspian and onshore partially by declines in activity in Oman and Pakistan. In the
China, because this information is not readily available. Asia Pacific region, activity increased primarily in India, Vietnam,
Rigs in the U.S. are counted as active if, on the day the and Offshore China, offset partially by lower activity in
count is taken, the well being drilled has been started but drill- Indonesia and Australia.
ing has not been completed and the well is anticipated to be
of sufficient depth to be a potential consumer of our drill bits. RESULTS OF OPERATIONS
Rigs in Canada are counted as active if data obtained by the The discussions below relating to significant line items
Canadian Association of Oilwell Drillers and Contractors indi- from our consolidated statements of operations are based
cates that drilling operations have occurred during the week on available information and represent our analysis of sig
and we are able to verify this information. In most interna- nificant changes or events that impact the comparability of
tional areas, rigs are counted as active if drilling operations reported amounts. Where appropriate, we have identified
have taken place for at least 15 days during the month. In specific events and changes that affect comparability or trends
some active international areas where better data is available, and, where possible and practical, have quantified the impact
we compute a weekly or daily average of active rigs. In inter- of such items. We acquired BJ Services on April 28, 2010,
national areas where there is poor availability of data, the and the financial results of its operations from the acquisition
rig counts are estimated from third-party data. The rig count date through the end of 2010 are included in each of the
does not include rigs that are in transit from one location five reportable segments in a manner consistent with our
to another, rigging up, being used in non-drilling activities, reporting structure. In addition, the discussions below for rev
including production testing, completion and workover, and enues and cost of revenues are on a total basis as the business
are not expected to be significant consumers of drill bits. drivers for the individual components of product sales and
Our rig counts are summarized in the table below as services are similar. All dollar amounts in tabulations in this
averages for each of the periods indicated. section are in millions of dollars, unless otherwise stated.
2010 2009 2008 Segment Reporting Change

U.S. – land and inland waters 1,514 1,046 1,814 During 2010, we changed our internal reporting structure
U.S. – offshore 31 44 65 to align with our geographical organization which became
Canada 348 222 382 the primary vehicle for allocating resources and assessing per-
North America 1,893 1,312 2,261 formance. As a result, we report our results for the following
five segments:
Latin America 383 356 384
• North America (Canada, U.S., and Trinidad)
North Sea 43 43 45
• Latin America (Central and South America including Mexico
Continental Europe 51 41 53
and excluding Trinidad)
Africa 83 62 65
• Europe/Africa/Russia Caspian (“EARC”) (Europe, Africa –
Middle East 265 252 280
excluding Egypt, and Russia and the republics of the former
Asia Pacific 269 243 252
Soviet Union)
Outside North America 1,094 997 1,079 • Middle East/Asia Pacific (“MEAP”) (Middle East –
Worldwide 2,987 2,309 3,340 including Egypt)
• Industrial Services and Other (downstream chemicals,
2010 Compared to 2009 process and pipeline services, and reservoir and technology
The rig count in North America increased 44% reflecting consulting businesses)
a 19% increase in the gas-directed rig count and a 108% The four geographic segments represent our oilfield opera-
increase in the oil-directed rig count. Changes in regulation tions. All prior period segment disclosures have been recast to
reflect the new segments.
Revenues and Profit Before Tax
The performance of our segments is evaluated based on segment profit before tax, which is defined as income before income
taxes, interest expense, interest income, and certain gains and losses not allocated to the segments.
2010 Compared to 2009

Year Ended
December 31,
2010 2009 Increase (decrease) % Change
Segment Revenues:
North America $ 6,621 $ 3,165 $ 3,456 109 %
Latin America 1,569 1,094 475 43 %
Europe/Africa/Russia Caspian 3,006 2,774 232 8 %
Middle East/Asia Pacific 2,247 1,937 310 16 %
Industrial Services and Other 971 694 277 40 %
Segment revenues $ 14,414 $ 9,664 $ 4,750 49 %
Year Ended
December 31,
Segment Profit Before Tax:

North America $ 1,163 $ 201 $ 962 479 %
Latin America 74 78 (4) (5)%
Europe/Africa/Russia Caspian 260 458 (198) (43)%
Middle East/Asia Pacific 177 241 (64) (27)%
Industrial Services and Other 99 70 29 41 %
Segment profit before tax $ 1,773 $ 1,048 $ 725 69 %
Revenues for 2010 increased $4.75 billion or 49% com- North America
pared to 2009. Excluding BJ Services, revenues for 2010 were North America revenue increased 109% in 2010 compared
up 11%. The primary drivers of the change included increased to 2009. Excluding BJ Services, revenues for 2010 were up
activity and improved pricing in the U.S. Land and Canada 28%. Revenue and pricing increases were supported by a 45%
markets and to a lesser extent, increased activity in our inter- increase in the U.S. land and inland waters rig count and a 57%
national segments. increase in the Canada rig count. The unconventional reser-
Profit before tax for 2010 increased $725 million or 69% voirs are demanding our more advanced technology to deliver
compared to 2009. Excluding BJ Services, profit before tax was longer horizontals, complex completions, increasing hydraulic
up 18% primarily due to strong activity in the North America fracturing (“frac”) horsepower and more frac stages resulting
segment where increased activity has led to increased utiliza- in improved pricing and higher revenue. This improvement was
tion, improved absorption of manufacturing and other overhead partially offset by a decline in our U.S. Gulf of Mexico revenue
costs, and realized pricing improvement, partially offset by price resulting from the drilling moratorium in the Gulf of Mexico.
degradation and lower profits in our international segments. North America profit before tax was $1.16 billion in 2010,
an increase of $962 million compared to 2009. Excluding
BJ Services, profit before tax for 2010 was up $438 million.
In addition to higher revenue driven by increased activity, the
primary drivers of the increase in profitability included improved
tool utilization, improved absorption of manufacturing and
other overhead, and higher pricing. This improvement was
partially offset by a decline in our profitability in the U.S. Gulf
of Mexico due to the drilling moratorium in the Gulf of Mexico.
2010 Form 10-K 17

Latin America Russia and Nigeria geomarkets was more than offset by
Latin America revenue increased 43% in 2010 compared reduced profit before tax throughout the rest of the region
to 2009. Excluding BJ Services, revenue for 2010 was up 14%. primarily due to lower activity in the North Africa geomarket,
The primary drivers of the increase included increased activity higher overhead costs and lower realized pricing.
and commensurate revenue growth in the Andean, Brazil and
Southern Cone geomarkets driven by strong demand for artifi- Middle East/Asia Pacific
cial lift, directional drilling and drilling fluids products and ser- Middle East/Asia Pacific revenue increased 16% in 2010
vices, partially offset by reduced activity in the Venezuela/ compared to 2009. Excluding BJ Services, revenue for 2010
Mexico geomarket. was flat. Revenue increases occurred in the Saudi Arabia,
Latin America profit before tax decreased 5% in 2010 Egypt, Australasia and Southeast Asia geomarkets, driven by
compared to 2009. Excluding BJ Services, profit before tax higher activity benefiting our chemicals, artificial lift and com-
increased 17%. Improved profit before tax from the Andean pletion systems products and services. These increases were
and Southern Cone geomarkets was partially offset by offset by decreased revenue primarily in the Middle East Gulf
decreased profit before tax from the Brazil and Venezuela/ and India geomarkets.
Mexico geomarkets. Middle East/Asia Pacific profit before tax decreased 27%
in 2010 compared to 2009. Excluding BJ Services, profit before
Europe/Africa/Russia Caspian tax decreased 34% as improved profit before tax in the Egypt
Europe/Africa/Russia Caspian revenue increased 8% in and North Asia geomarkets was more than offset by lower
2010 compared to 2009. Excluding BJ Services, revenue for realized pricing and higher overhead costs throughout the
2010 decreased 1%. Reduced revenue from the North Africa rest of the region.
and Continental Europe geomarkets was partially offset by
higher revenue in the Russia, U.K., Nigeria and Norway Industrial Services and Other
geomarkets, where strong demand for directional drilling Industrial Services and Other revenue increased 40% in
and artificial lift products and services was experienced. 2010 compared to 2009. Excluding BJ Services, revenue for
Europe/Africa/Russia Caspian profit before tax decreased 2010 increased 10%. Industrial Services and Other profit
43% in 2010 compared to 2009. Excluding BJ Services, profit before tax increased 41% in 2010 compared to 2009.
before tax decreased 41%. Improved profit before tax in the Excluding BJ Services, profit before tax increased 14%.
2009 Compared to 2008

Year Ended
December 31,
Segment Revenues:
North America $ 3,165 $ 4,691 $ (1,526) (33)%
Latin America 1,094 1,089 5 –
Europe/Africa/Russia Caspian 2,774 3,209 (435) (14)%
Middle East/Asia Pacific 1,937 2,090 (153) (7)%
Industrial Services and Other 694 785 (91) (12)%
Segment revenues $ 9,664 $ 11,864 $ (2,200) (19)%
Year Ended
December 31,
Segment Profit Before Tax:

North America $ 201 $ 1,249 $ (1,048) (84)%
Latin America 78 196 (118) (60)%
Europe/Africa/Russia Caspian 458 629 (171) (27)%
Middle East/Asia Pacific 241 414 (173) (42)%
Industrial Services and Other 70 192 (122) (64)%
Segment profit before tax $ 1,048 $ 2,680 $ (1,632) (61)%
Revenues for 2009 decreased $2.20 billion or 19% com- Europe/Africa/Russia Caspian
pared to 2008 primarily due to a decrease in activity as evi- Europe/Africa/Russia Caspian revenue decreased 14% in
denced by a 31% decline in the worldwide rig count, and to 2009 compared to 2008 where the rig count decreased 10%.
a lesser extent, pricing pressure on our products and services. Revenue declined in the U.K. and Russia Caspian geomarkets
Profit before tax for 2009 decreased $1.63 billion or 61% and was partially offset by increased revenue in the Continen-
compared to 2008 primarily due to a decline in activity, addi- tal Europe geomarket despite a sharp decline in the rig count.
tional costs associated with reorganization, severance and The decline was most significant in the drilling and evaluation
acquisition activities, and an increase in our allowance for and completion product lines with more modest declines in
doubtful accounts. production-related oilfield chemicals.
Europe/Africa/Russia Caspian profit before tax decreased
North America 27% in 2009 compared to 2008 due to higher overhead costs
Revenues in North America, which accounted for 33% and lower realized pricing. Decrease in profit before tax in the
of total revenues, decreased 33% in 2009 compared to 2008 Russia Caspian, Sub Saharan Africa and North Africa geomar-
due to a sharp reduction in drilling and completion activity in kets was partially offset by an increase in profit before tax in
the U.S. and Canada, as evidenced by a 42% reduction in rig the Continental Europe geomarket.
count and lower realized pricing. The decline was most signifi-
cant in the drilling and evaluation and completion product Middle East/Asia Pacific
lines coupled with modest declines in production-related oil- Middle East/Asia Pacific revenue decreased 7% in 2009
field chemicals and artificial lift products and services. compared to 2008 where lower activity was evidenced by a
North America profit before tax was $201 million in 2009, 7% decline in rig count. Saudi Arabia and Egypt geomarkets
a decrease of 84% compared to 2008, as declining activity experienced the sharpest reduction in activity with a commen-
resulted in lower equipment utilization. surate decline in revenue, partially offset by an increase in rev-
enue in the Southeast Asia geomarket. The decline was most
Latin America significant in directional drilling, completion equipment and
Latin America revenue remained flat in 2009 compared drill bits offset partially by revenue increases in drilling fluids
to 2008 despite a reduction of 7% in the rig count over the and production-related artificial lift and oilfield chemicals.
same period. A sharp decline in activity and commensurate rev- Middle East/Asia Pacific profit before tax decreased 42%
enue decrease in the Southern Cone geomarket was offset by in 2009 compared to 2008 where lower utilization levels and
increased revenue in the Brazil geomarket. Increased directional price erosion was partly offset by cost management programs.
drilling and drilling fluids revenue in the Brazil geomarket and Profit before tax declined across all geomarkets except South-
directional drilling revenue in the Mexico/Venezuela geomarket east Asia where profit before tax increased slightly.
was offset by decreased wireline revenue in the Southern Cone
geomarket and artificial lift and completions revenue in the Industrial Services and Other
Mexico/Venezuela geomarket. Industrial Services and Other revenue decreased 12% in
Latin America profit before tax decreased 60% in 2009 2009 compared to 2008. Industrial Services and Other profit
compared to 2008 reflecting lower realized pricing and chal- before tax decreased 64% in 2009 compared to 2008.
lenging economics, particularly in the Venezuela/Mexico and
the Southern Cone geomarkets.
Costs and Expenses

The table below details certain consolidated statement of operations data and their percentage of revenues.
2010 2009 2008
$ % $ % $ %
Revenues $ 14,414 100% $ 9,664 100% $ 11,864 100%

Cost of revenues 11,184 78% 7,397 77% 7,954 67%
Research and engineering 429 3% 397 4% 426 4%
Marketing, general and administrative 1,250 9% 1,120 12% 1,046 9%
2010 Form 10-K 19

Cost of Revenues of $500 million of debt associated with the acquisition of
Cost of revenues as a percentage of revenues was 78% BJ Services, partially offset by gains on our interest rate swaps
and 77% for 2010 and 2009, respectively. The increase was of $16 million.
primarily due to pricing pressures and higher operating costs Net interest expense increased $63 million in 2009 compared
for our geomarket organization which we are mitigating to 2008 primarily due to the new long-term debt issuances of
through productivity improvements and cost cutting measures. $1.25 billion in October 2008 resulting in higher average debt
The additional depreciation and amortization expense for levels throughout 2009, and a reduction in the average interest
the eight months since the acquisition date of approximately rate earned and the average investment balance.
$93 million for tangible and intangible assets associated with
the BJ Services acquisition also contributed to the increase. Income Taxes
Cost of revenues as a percentage of revenues was 77% Our effective tax rates in 2010, 2009 and 2008 were
and 67% for 2009 and 2008, respectively. The increase was 36.1%, 31.1%, and 29.5% respectively. The current year
primarily due to significant declines in activity worldwide effective tax rate is higher than the U.S. statutory income tax
resulting in excess manufacturing capacity, lower utilization rate of 35% due to higher rates of tax on certain international
of our rental tools and price deterioration, primarily in North operations and state income taxes partially offset by tax bene-
America. Additional contributing factors to this increase include fits arising from the repatriation of foreign earnings. The prior
costs associated with employee severance of $73 million; an two years’ effective tax rates were lower than the U.S. statu-
increase in the net provision for doubtful accounts of $73 mil- tory income tax rate of 35% due to lower rates of tax on cer-
lion; and a change in the geographic and product mix from tain international operations offset by state income taxes.
the sale of our products and services as we continue to Our tax filings for various periods are subject to audit
emphasize productivity and cost improvements. by the tax authorities in most jurisdictions where we conduct
business. These audits may result in assessment of additional
Research and Engineering taxes that are resolved with the authorities or through the
Research and engineering expenses increased 8% in 2010 courts. We believe these assessments may occasionally be
compared to 2009. We continue to be committed to develop- based on erroneous and even arbitrary interpretations of local
ing and commercializing new technologies as well as investing tax law. We have received tax assessments from various taxing
in our core product offerings. Research and development costs authorities and are currently at varying stages of appeals and/
increased 23% in 2010 compared to 2009. or litigation regarding these matters. We believe we have sub-
Research and engineering expenses decreased 7% in 2009 stantial defenses to the questions being raised and will pursue
compared to 2008. The decrease was in line with the decrease all legal remedies should an unfavorable outcome result. How-
in activity. The decrease was offset by $5 million associated ever, resolution of these matters involves uncertainties and
with employee severance. Research and development costs there are no assurances that the outcomes will be favorable.
decreased 12% in 2009 compared to 2008.
OUTLOOK
Marketing, General and Administrative This section should be read in conjunction with the factors
Marketing, general and administrative (“MG&A”) expenses described in “Part I, Item 1A. Risk Factors” and in the “Forward-
increased 12% in 2010 compared to 2009. The increase Looking Statements” section in this Part II, Item 7, both con-
resulted primarily from costs associated with finance redesign tained herein. These factors could impact, either positively or
efforts, software implementation activities and the acquisition negatively, our expectation for: oil and natural gas demand; oil
of BJ Services. and natural gas prices; exploration and development spending
MG&A expenses increased 7% in 2009 compared to 2008. and drilling activity; and production spending.
This increase resulted primarily from an increase in costs associ- Our industry is cyclical, and past cycles have been driven
ated with enterprise-wide accounting system implementations primarily by alternating periods of ample supply or shortage of
and reorganization activities of $46 million, and employee sev- oil and natural gas relative to demand. As an oilfield services
erance of $14 million. These increases were partially offset by company, our revenue is dependent on spending by our cus-
lower marketing and compliance related expenses. tomers for oil and natural gas exploration, field development
and production. This spending is dependent on a number of
Acquisition-Related Costs factors, including our customers’ forecasts of future energy
Acquisition-related costs are being expensed as incurred. demand, their expectations for future energy prices, their
They include expenses directly related to acquiring BJ Services access to resources to develop and produce oil and gas, the
and integration expenses incurred in combining the compa- impact of new government regulations and their ability to
nies. During 2010 and 2009, we incurred $134 million and fund their capital programs.
$18 million, respectively, of total acquisition-related costs. The depth and pace of economic recovery from the global
economic recession, the negative impact of the moratorium
Interest Expense, net and new regulations following the Deepwater Horizon acci-
Net interest expense increased $16 million in 2010 com- dent in the Gulf of Mexico, and drilling in the U.S. oil-and-gas
pared to 2009. The increase was primarily due to the issuance shale plays are expected to be the primary drivers impacting
of $1.5 billion of debt in August 2010 and the assumption the 2011 business environment.
As the worldwide economy recovers, demand for hydrocar- Our outlook for exploration and development spending
bons is increasing. In its January 2011 World Economic Outlook is based upon our expectations for customer spending in the
Update, the International Monetary Fund (“IMF”) forecasted markets in which we operate, and is driven primarily by our
that global output would increase 4.4% in 2011 compared perception of industry expectations for oil and natural gas
to 2010. Advanced economies’ economic growth is expected prices and their likely impact on customer capital and operat-
to remain sluggish at 2.5% in 2011 compared to 2010 while ing budgets as well as other factors that could impact the eco-
emerging and developing economies are expected to grow nomic return oil and gas companies expect for developing oil
at 6.5% in 2011 compared to 2010. The IMF also noted that and gas reserves. Our forecasts are based on our analysis of
the downside risks to the recovery were elevated primarily information provided by our customers as well as market
due to sovereign and financial troubles with the Euro area research and analyst reports including the Short Term Energy
and policies to redress fiscal imbalances in the advance econo- Outlook (“STEO”) published by the Energy Information Admin-
mies in general. istration of the U.S. Department of Energy (“DOE”), the Oil
The International Energy Agency (“IEA”) estimated in Market Report published by the IEA and the Monthly Oil Mar-
its February 2011 Oil Market Report that worldwide demand ket Report published by Organization for Petroleum Exporting
would increase 1.5 million barrels per day or 1.7% to 89.3 mil- Countries (“OPEC”). Our outlook for economic growth is
lion barrels per day in 2011, up from 87.8 million barrels per based on our analysis of information published by a number
day in 2010. The largest incremental demands for oil are of sources including the IMF, the Organization for Economic
expected to be generated by the developing and emerging Cooperation and Development (“OECD”) and the World Bank.
economies in China, India and the Middle East. Increasing In North America, the outlook for 2011 will be significantly
oil demand is expected to support oil prices between $70/Bbl influenced by the outlook for the natural gas industry. How-
and $100/Bbl in 2011. ever, oil-directed rig activity has increased to levels not seen
In North America, the near-month futures prices for natu- since early 1991, and is expected to continue to increase with
ral gas, as quoted in February 2011 for March 2011, were oil prices greater than $70/Bbl, as many operators seek to
below $4.00/mmBtu, and the twelve month futures price diversify activity away from natural gas. The increase in gas-
was trading slightly below $4.40/mmBtu. Higher natural gas directed rig count from mid-2009 low levels and continued
futures prices in 2008 and early 2009 provided an opportunity advances in horizontal drilling and advanced fracturing and
for many of our customers to hedge natural gas production. completion technologies has led to increasing rates of initial
Cash flow of these customers benefited from the attractive production in the unconventional gas fields, resulting in high
prices received on hedged production allowing them to main- levels of gas production relative to demand.
tain exploration and development activity. However, the decline Expectations for Oil Prices – Due to expectations for the
in natural gas prices in 2010 and the roll-off of attractive hedge continued global economic expansion, the Energy Information
positions is placing increased emphasis on well economics, Administration (“EIA”) expects global demand for oil to increase
cash flow and capital budgets for many of our customers. In 1.5 million barrels per day in 2011 relative to 2010. Non-OPEC
the near-term, the impact of lower cash flows from sales and supply growth is expected to increase by 310 thousand barrels
hedging activity is being offset by investments by international per day in 2011 as forecasted by the EIA. In its December 2010
oil companies seeking exposure to the U.S. shale plays. Capital meeting in Quito, Ecuador, OPEC left its production policy
discipline on the part of our competitors, attrition of existing unchanged. OPEC spare productive capacity is expected to
rental fleets and rising demand are expected to result in an be essentially unchanged through 2011. In its February 2011
environment that supports continued price increases for our STEO report, the DOE forecasted WTI oil prices to average
products and services in some markets by late 2011. In addi- $93/Bbl for the year 2011. In early February 2011, WTI oil
tion, project economies will be favorably impacted if the pro- prices, which normally trade at a premium to Brent oil prices,
duction is expected to include a significant amount of natural were trading at a significant discount (approximately $14/Bbl).
gas liquids or condensates, which can be sold at a higher price The structural causes of this difference are expected to exist
per mmBtu. through the end of 2012.
The impact of changes in the regulation of offshore drilling Expectations for North America Natural Gas Prices –
in the U.S. Gulf of Mexico is negatively impacting U.S. offshore Increasing production and near record high storage levels are
drilling activity. The impact on offshore activity appears to be placing downward pressure on natural gas prices. Storage is
isolated to the Gulf of Mexico at this time. Equipment and expected to remain at or near historically high levels through-
people are being redeployed and reassigned to opportunities out the year. In its February 2011 STEO report, the DOE fore-
away from the Gulf coast. The negative impact is expected to casted Henry Hub natural gas prices to average $4.16/mmBtu
be partially offset by incremental spending in other regions as for 2011 compared to $4.37/mmBtu in 2010.
oil and gas companies adjust their spending plans, as well as Our capital expenditures, excluding acquisitions, are
increased spending on workovers on the shelf in the Gulf of expected to be approximately $2.3 billion to $2.7 billion for
Mexico as permitted by the Bureau of Ocean Energy Manage- 2011. A significant portion of our planned capital expendi-
ment Regulation and Enforcement. tures can be adjusted to reflect changes in our expectations
for future customer spending. We will manage our capital
expenditures to match market demand.
2010 Form 10-K 21

COMPLIANCE • We have comprehensive internal policies over such areas as
We do business in over 80 countries, including approxi- facilitating payments; travel, entertainment, gifts and chari-
mately 20 of the 40 countries having the lowest scores in the table donations connected to non-U.S. government officials;
Transparency International’s Corruption Perception Index survey payments to non-U.S. commercial sales representatives; and
for 2010, which indicates high levels of corruption. We devote the use of non-U.S. police or military organizations for secu-
significant resources to the development, maintenance and rity purposes. In addition, we have country-specific guidance
enforcement of our Business Code of Conduct policy, our anti- for customs standards, export and re-export controls, eco-
bribery compliance policies, our internal control processes and nomic sanctions and antiboycott laws.
procedures and other compliance related policies. Notwith- • We have a special compliance committee, which is made
standing the devotion of such resources, and in part as a con- up of senior officers, that meets no less than once a year
sequence thereof, from time to time we discover or receive to review the oversight reports for all active commercial
information alleging potential violations of laws and regula- sales representatives.
tions, including the FCPA and our policies, processes and pro- • We use technology to monitor and report on compliance
cedures. We conduct internal investigations of these potential matters, including a web-based antiboycott reporting tool
violations and take appropriate action depending upon the and a global trade management software tool.
outcome of the investigation. • We have a whistleblower program designed to encourage
We anticipate that the devotion of significant resources reporting of any ethics or compliance matter without fear of
to compliance-related issues, including the necessity for inves- retaliation including a worldwide Business Helpline operated
tigations, will continue to be an aspect of doing business in a by a third party and currently available toll-free in 150 lan-
number of the countries in which oil and natural gas explora- guages to ensure that our helpline is easily accessible to
tion, development and production take place and in which employees in their own language.
we are requested to conduct operations. Compliance-related • We have continued our reduction of the use of commercial
issues have limited our ability to do business and/or have sales representatives (“CSRs”) and processing agents, includ-
raised the cost of operating in these countries. In order to ing the reduction of customs agents.
provide products and services in some of these countries, • We have a due diligence procedure for processing and pro-
we may in the future utilize ventures with third parties, sell fessional agents, an enhanced process for classifying distrib-
products to distributors or otherwise modify our business utors and are creating a formal policy to guide business
approach in order to improve our ability to conduct our personnel in determining when subcontractors should be
business in accordance with applicable laws and regulations subjected to compliance due diligence.
and our Business Code of Conduct. • We have reviewed and expanded the use of our centralized
Our Best-in-Class Global Ethics and Compliance Program finance organization including further implementation
(“Compliance Program”) is based on (i) our Core Values of of our enterprise-wide accounting system and company-
Integrity, Performance, Teamwork and Learning; (ii) the stan- wide policies regarding expense reporting, petty cash, the
dards contained in our Business Code of Conduct; (iii) the laws approval of invoice payments and general ledger account
of the countries where we operate; and (iv) our commitments coding. Further, we have restructured our corporate audit
to the DOJ and the SEC. Our Compliance Program is refer- function and have incorporated additional anti-corruption
enced within the Company as “C2” or “Completely Compli- procedures into some of our audits, which are applied on
ant.” The Completely Compliant theme is intended to a country-wide basis. We are also continuing to refine and
establish the proper Tone-at-the-Top throughout the Company. enhance our procedures for FCPA risk assessments and legal
Employees are consistently reminded that they play a crucial audit procedures.
role in ensuring that the Company always conducts its busi- • We continue to work to ensure that we have adequate legal
ness ethically, legally and safely. compliance coverage around the world, including the coor-
In connection with our settlements with the DOJ and dination of compliance advice and training across all regions
SEC in April 2007, we retained an independent monitor (the and countries where we do business.
“Monitor”) to assess and make recommendations about our • We are continuing to centralize our human resources func-
compliance policies and procedures. The Monitor was retained tion, including creating consistent standards for pre-hire
for a term of three years. That term ended on July 1, 2010. screening of employees, the screening of existing employees
In June 2010, the Monitor issued his final report certifying prior to promoting them to positions where they may be
that “the anti-bribery compliance program of Baker Hughes, exposed to corruption-related risks, and creating a uniform
including its policies and procedures, is appropriately designed policy for on-boarding training.
and implemented to ensure compliance with the FCPA, U.S. We have analyzed the BJ Services’ compliance programs
commercial bribery laws and foreign bribery laws”. and since the closing of the acquisition have been integrating
Highlights of our Compliance Program, including enhance- our compliance programs within the operations of BJ Services,
ments or additions as a result of the independent monitor’s as appropriate.
recommendations, include the following:
• We have a comprehensive employee compliance training
program covering substantially all employees.
LIQUIDITY AND CAPITAL RESOURCES • Accrued employee compensation and other accrued liabilities
Our objective in financing our business is to maintain used $182 million in cash in 2010 and used $130 million in
adequate financial resources and access to sufficient liquidity. cash in 2009. The increase in the use of cash in 2010 was
At December 31, 2010, we had cash and cash equivalents due primarily to the payments of pre-existing change of con-
of $1.46 billion, short-term investments of $250 million, and trol and other contractual obligations to certain BJ Services
$1.7 billion available for borrowing under committed revolving employees partially offset by a decrease in payments related
credit facilities with commercial banks. to employee bonuses earned in 2009 but paid in 2010.
Our capital planning process is focused on utilizing cash • Income taxes payable provided $23 million in 2010 and used
flows generated from operations in ways that enhance the $169 million in cash 2009. The use of cash in 2009 was pri-
value of our Company. In 2010, we used cash to pay for a marily due to federal income tax payments made in 2009 of
variety of activities including working capital needs, dividends, $155 million for two quarterly installment payments related
debt maturities, acquisitions and capital expenditures. to 2008. The U.S. Internal Revenue Service allowed compa-
nies impacted by Hurricane Ike to defer the third and fourth
Cash Flows quarter installment payments for 2008 until January 2009.
Cash flows provided (used) by continuing operations Cash flows from operating activities provided $1,239 million
by type of activity were as follows for the years ended for the year ended December 31, 2009 and used $1,614 million
December 31: for the year ended December 31, 2008. This decrease in cash
flows of $375 million is primarily due to a decrease in net
(In millions) 2010 2009 2008 income offset by the change in net operating assets and
Operating activities $ 856 $ 1,239 $ 1,614 liabilities that provided more cash in 2009 compared to 2008.
Investing activities (2,376) (966) (1,170) The underlying drivers in 2009 compared to 2008 of the
Financing activities 1,366 (675) 541 changes in operating assets and liabilities are as follows:
• A decrease in accounts receivable provided $399 million in
Statements of cash flows for entities with international cash in 2009 and used $515 million in 2008. The decrease
operations that are local currency functional exclude the in accounts receivable was primarily due to the decrease in
effects of the changes in foreign currency exchange rates that activity partially offset by an increase in the days sales out-
occur during any given year, as these are noncash changes. standing (defined as the average number of days our net
As a result, changes reflected in certain accounts on the con- trade receivables are outstanding based on quarterly reve-
solidated statements of cash flows may not equal the changes nues) by approximately nine days, reflecting a slowdown in
in corresponding accounts on the consolidated balance sheets. customer payments.
• Inventory provided $240 million in cash in 2009 and used
Operating Activities $371 million in 2008 due to activity decreases in 2009 com-
Cash flows from operating activities provided $856 million pared to 2008.
for the year ended December 31, 2010 and provided $1,239 mil- • A decrease in accounts payable used $89 million in cash
lion for the year ended December 31, 2009. This decrease in in 2009 and provided $242 million in cash in 2008. This
cash flows of $383 million is primarily due to the change in decrease in accounts payable corresponds with the decrease
net operating assets and liabilities which used more cash in in operating assets to support decreased activity.
2010 compared to 2009. • Accrued employee compensation and other accrued
The underlying drivers in 2010 compared to 2009 of liabilities used $130 million in cash in 2009 and provided
the changes in operating assets and liabilities are as follows: $90 million in cash in 2008. The increase in the use of cash
• An increase in accounts receivable used $702 million in was primarily due to an increase in payments in 2009 com-
cash in 2010 and provided $399 million in 2009. The pared to 2008 primarily related to employee bonuses earned
change in accounts receivable was primarily due to an in 2008 but paid in 2009.
increase in activity partially offset by a decrease in the days • Our contributions to our defined benefit pension plans in
sales outstanding (defined as the average number of days 2009 and 2008 totaled $15 million in each year.
our net trade receivables are outstanding based on quarterly
revenues) by approximately 6 days.
• Inventory used $243 million in cash in 2010 and provided
$240 million in 2009 driven by activity increases.
• An increase in accounts payable in 2010 provided $292 mil-
lion in cash and used $89 million in cash in 2009. The
increase was primarily due to an increase in operating
assets to support increased activity.
2010 Form 10-K 23

Investing Activities Financing Activities
Our principal recurring investing activity is the funding of We had net borrowings of commercial paper and other
capital expenditures to support the appropriate levels and types short-term debt of $52 million in 2010, net repayments of
of rental tools we have in place to generate revenues from commercial paper and other short-term debt of $16 million
operations. Expenditures for capital assets totaled $1.49 bil- in 2009, and net borrowings of commercial paper and short-
lion, $1.09 billion and $1.30 billion for 2010, 2009 and 2008, term debt of $15 million in 2008. On August 24, 2010, we
respectively. While the majority of these expenditures were sold $1.5 billion of 5.125% Senior Notes that will mature
for rental tools, wireline tools, and machinery and equipment, September 15, 2040. Net proceeds from the offering were
we have also increased our spending on new facilities, expan- approximately $1.48 billion after deducting the underwriting
sions of existing facilities and other infrastructure projects. discounts and expenses of the offering. We used $511 million
Proceeds from disposal of assets were $208 million, $163 mil- of the net proceeds to repay our outstanding commercial
lion and $222 million for 2010, 2009 and 2008, respectively. paper. We used $250 million of the net proceeds to purchase
These disposals relate primarily to rental tools that were lost- U.S. Treasury Bills, which will be used to repay the BJ Services
in-hole, as well as machinery, rental tools and equipment no 5.75% notes maturing in June 2011. The remaining net
longer used in operations that were sold throughout the year. proceeds from the offering were used for general corporate
On August 30, 2010, we completed the sale of two stimu- purposes. In 2009, we repaid $525 million of maturing long-
lation vessels and certain other assets used to perform sand term debt. Total debt outstanding at December 31, 2010
control services in the U.S. Gulf of Mexico. We received cash was $3.89 billion, an increase of $2.09 billion compared to
of $55 million and incurred disposition costs of $16 million. December 31, 2009. This increase is primarily due to the sale
The divestiture was required by the DOJ in connection with of $1.5 billion of notes and the assumption of $500 million
the acquisition of BJ Services. The sale was not material to principal amount of long-term debt from the BJ Services acqui-
our business or our financial performance. sition. The total debt to total capitalization (defined as total
We routinely evaluate potential acquisitions of businesses debt plus stockholders’ equity) ratio was 0.21 at December 31,
of third parties that may enhance our current operations or 2010 and 0.20 at December 31, 2009.
expand our operations into new markets or product lines. On October 28, 2008, we sold $500 million of 6.50% Senior
We may also from time to time sell business operations that Notes that will mature November 15, 2013, and $750 million
are not considered part of our core business. During 2010, of 7.50% Senior Notes that will mature November 15, 2018.
we paid cash of $680 million, net of cash acquired of Net proceeds from the offering were $1.24 billion after
$113 million, related to the BJ Services acquisition, and we deducting the underwriting discounts and expenses of the
paid $208 million, net of cash acquired of $4 million, for offering. We used a portion of the net proceeds to repay out-
other acquisitions. In 2009, we paid $58 million, net of cash standing commercial paper, as well as to repay $325 million
acquired of $4 million, for acquisitions including additional aggregate principal amount of our outstanding 6.25% notes,
purchase price consideration for past acquisitions. In 2008, which matured on January 15, 2009, and $200 million aggre-
we paid $120 million for acquisitions, including $4 million of gate principal amount of our outstanding 6.00% notes, which
direct transaction costs and net of cash acquired of $5 million. matured on February 15, 2009. We used the remaining net
In 2008, we sold the assets associated with our Surface Safety proceeds from the offering for general corporate purposes.
Systems product line and received cash proceeds of $31 million. We received proceeds of $74 million, $51 million and
During 2010, we purchased $250 million of short-term $87 million in 2010, 2009 and 2008, respectively, from the
investments consisting of U.S. Treasury Bills, which will mature issuance of common stock through the exercise of stock
in May of 2011, the proceeds of which will be used to repay options and the employee stock purchase plan.
the BJ Services 5.75% notes maturing in June 2011. Our Board of Directors has authorized a program to repur-
chase our common stock from time to time. During 2008, we
repurchased 9 million shares of our common stock at an aver-
age price of $68.12 per share for a total of $627 million. During
2010 and 2009 we did not repurchase any shares of common
stock. We had authorization remaining to repurchase approxi-
mately $1.2 billion in common stock at the end of 2010.
We paid dividends of $241 million, $185 million and
$173 million in 2010, 2009 and 2008, respectively. The
increase in 2010 is primarily due to the 118 million shares
issued in the acquisition of BJ Services.
Available Credit Facilities Cash Requirements
On March 19, 2010, we entered into a credit agreement In 2011, we believe cash on hand and cash flows from
(the “2010 Credit Agreement”). The 2010 Credit Agreement is operating activities will provide us with sufficient capital
a three-year committed $1.2 billion revolving credit facility that resources and liquidity to manage our working capital needs,
expires on March 19, 2013; $800 million of the revolving credit meet contractual obligations, fund capital expenditures, and
facility was available immediately and the remaining $400 mil- support the development of our short-term and long-term
lion of such facility became available after consummation of operating strategies. We may issue commercial paper or other
the acquisition of BJ Services, which occurred on April 28, 2010. short-term debt to fund cash needs in the U.S. in excess of the
Also on March 19, 2010, we terminated our 364-day credit cash generated in the U.S.
agreement in the amount of $500 million, dated as of March 30, In 2011, we expect our capital expenditures to be between
2009 and expiring March 29, 2010. At December 31, 2010, approximately $2.3 billion to $2.7 billion, excluding any amount
we had $1.7 billion of committed revolving credit facilities related to acquisitions. The expenditures are expected to be
with commercial banks, consisting of the 2010 Credit used primarily for normal, recurring items necessary to support
Agreement ($1.2 billion) and a $500 million facility expiring our business and operations. A significant portion of our capi-
on July 7, 2012. Both facilities contain certain covenants tal expenditures can be adjusted based on future activity of
which, among other things, require the maintenance of a our customers. We will manage our capital expenditures to
funded indebtedness to total capitalization ratio (a defined match market demand. In 2011, we also expect to make
formula per the facility), restrict certain merger transactions or interest payments of between $215 million and $225 million,
the sale of all or substantially all of our assets or a significant based on debt levels as of December 31, 2010. We anticipate
subsidiary and limit the amount of subsidiary indebtedness. making income tax payments of between $975 million and
Upon the occurrence of certain events of default, our obliga- $1,025 million in 2011.
tions under the facilities may be accelerated. Such events of We may repurchase our common stock depending on
default include payment defaults to lenders under the facili- market conditions, applicable legal requirements, our liquidity
ties, covenant defaults and other customary defaults. and other considerations. We anticipate paying dividends of
At December 31, 2010, we were in compliance with all of between $260 million and $270 million in 2011; however, the
the facility covenants of both committed credit facilities. There Board of Directors can change the dividend policy at any time.
were no direct borrowings under the committed credit facilities For all pension plans, we make annual contributions to the
at the end of 2010. We also have an outstanding commercial plans in amounts equal to or greater than amounts necessary
paper program under which we may issue from time to time to meet minimum governmental funding requirements. In
up to $1.0 billion in commercial paper with maturity of no more 2011, we expect to contribute between $65 million and
than 270 days. To the extent we have outstanding commercial $85 million to our defined benefit pension plans. In 2011,
paper our ability to borrow under the committed credit facilities we also expect to make benefit payments related to postretire-
is reduced by a similar amount. At December 31, 2010, we ment welfare plans of between $16 million and $18 million,
had no commercial paper outstanding. and we estimate we will contribute between $185 million and
If market conditions were to change and revenues were $200 million to our defined contribution plans. See Note 13
to be significantly reduced or operating costs were to increase, of the Notes to Consolidated Financial Statements in Item 8
our cash flows and liquidity could be reduced. Additionally, herein for further discussion of our employee benefit plans.
it could cause the rating agencies to lower our credit rating.
There are no ratings triggers that would accelerate the matu-
rity of any borrowings under our committed credit facilities.
However, a downgrade in our credit ratings could increase
the cost of borrowings under the facilities 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 facilities.
We believe our current credit ratings 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-term debt or equity, if necessary.
2010 Form 10-K 25

Contractual Obligations
In the table below, we set forth our contractual cash obligations as of December 31, 2010. Certain amounts included in this
table are based on our estimates and assumptions about these obligations, including their duration, anticipated actions by third
parties and other factors. The contractual cash obligations we will actually pay in future periods may vary from those reflected in
the table because the estimates and assumptions are subjective.
Payments Due by Period
(In millions) Total Less Than 1 year 2 – 3 Years 4 – 5 Years More than 5 Years
Total debt (1)

$ 3,880 $ 330 $ 500 $ – $ 3,050
Estimated interest payments(2) 3,621 220 416 377 2,608
Operating leases(3) 681 186 228 116 151
Purchase obligations(4) 264 246 18 – –
Other long-term liabilities(5) 168 14 70 26 58
Income tax liabilities for uncertain tax positions(6) 438 279 76 34 49
Total $ 9,052 $ 1,275 $ 1,308 $ 553 $ 5,916
(1) Amounts represent the expected cash payments for our total debt and do not include any unamortized discounts, deferred issuance costs or net deferred gains on
terminated interest rate swap agreements.
(2) Amounts represent the expected cash payments for interest on our long-term debt.
(3) We enter into operating leases in the normal course of business. Some lease agreements provide us with the option to renew the lease. Our future operating lease
payments as reflected in the table above would change if we exercised these renewal options or if we entered into additional operating lease agreements.
(4) Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding and that specify all significant terms, including: fixed
or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. Purchase obligations exclude
agreements that are cancelable at anytime without penalty.
(5) Amounts represent other long-term liabilities, including the current portion, reflected in the consolidated balance sheet where both the timing and amount of payment
streams are known. Amounts include: payments for certain environmental remediation liabilities, payments for deferred compensation, payouts under acquisition
agreements and payments for certain asset retirement obligations. Amounts do not include: payments for pension contributions and payments for various postretire-
ment welfare benefit plans and postemployment benefit plans.
(6) The estimated income tax liabilities for uncertain tax positions will be settled as a result of expiring statutes, audit activity, competent authority proceedings related to
transfer pricing, or final decisions in matters that are the subject of litigation in various taxing jurisdictions in which we operate. The timing of any particular settlement
will depend on the length of the tax audit and related appeals process, if any, or an expiration of a statute. If a liability is settled due to a statute expiring or a favor-
able audit result, the settlement of the tax liability would not result in a cash payment.
Off-Balance Sheet Arrangements and assumptions about future events and their effects cannot
In the normal course of business with customers, vendors be perceived with certainty, and accordingly, these estimates
and others, we have entered into off-balance sheet arrange- may change as new events occur, as more experience is
ments, such as letters of credit and other bank issued guaran- acquired, as additional information is obtained and as the
tees, which totaled approximately $1.16 billion at December 31, business environment in which we operate changes.
2010. We also had commitments outstanding for purchase We have defined a critical accounting estimate as one that
obligations related to capital expenditures and inventory under is both important to the portrayal of either our financial condi-
purchase orders and contracts of approximately $264 million tion or results of operations and requires us to make difficult,
at December 31, 2010. It is not practicable to estimate the fair subjective or complex judgments or estimates about matters
value of these financial instruments. None of the off-balance that are uncertain. We have discussed the development and
sheet arrangements either has, or is likely to have, a material selection of our critical accounting estimates with the Audit/
effect on our consolidated financial statements. Ethics Committee of our Board of Directors and the Audit/
Other than normal operating leases, we do not have Ethics Committee has reviewed the disclosure presented
any off-balance sheet financing arrangements such as secu below. During the past three fiscal years, we have not made
ritization agreements, liquidity trust vehicles, synthetic leases any material changes in the methodology used to establish
or special purpose entities. As such, we are not materially the critical accounting estimates discussed below. We believe
exposed to any financing, liquidity, market or credit risk that that the following are the critical accounting estimates used
could arise if we had engaged in such financing arrangements. in the preparation of our consolidated financial statements.
In addition, there are other items within our consolidated
CRITICAL ACCOUNTING ESTIMATES financial statements that require estimation but are not
The preparation of our consolidated financial statements deemed critical as defined above.
requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses
and related disclosures and about contingent assets and liabili-
ties. We base these estimates and judgments on historical
experience and other assumptions and information that are
believed to be reasonable under the circumstances. Estimates
Allowance for Doubtful Accounts Goodwill and Other Long-Lived Assets
The determination of the collectability of amounts due Long-lived assets, which include property and equipment,
from our customers requires us to use estimates and make goodwill, intangible assets, and certain other assets, comprise
judgments regarding future events and trends, including moni- a significant amount of our total assets. We review the carry-
toring our customers’ payment history and current credit wor- ing values of these assets for impairment periodically, and at
thiness to determine that collectability is reasonably assured, least annually for goodwill, or whenever events or changes in
as well as consideration of the overall business climate in circumstances indicate that the carrying amounts may not be
which our customers operate. Inherently, these uncertainties recoverable. An impairment loss is recorded in the period in
require us to make frequent judgments and estimates regard- which it is determined that the carrying amount is not recover-
ing our customers’ ability to pay amounts due us in order to able. This requires us to make judgments regarding long-term
determine the appropriate amount of valuation allowances forecasts of future revenues and costs related to the assets
required for doubtful accounts. Provisions for doubtful accounts subject to review. In turn, these forecasts are uncertain in that
are recorded when it becomes evident that the customer will they require assumptions about demand for our products and
not make the required payments at either contractual due services, future market conditions and technological develop-
dates or in the future. At December 31, 2010 and 2009, the ments. We perform an annual impairment test of goodwill as
allowance for doubtful accounts totaled $162 million, or 4%, of October 1 of each year. In performing the test, we individu-
and $157 million, or 6%, of total gross accounts receivable, ally test each of our reporting units, which are generally based
respectively. We believe that our allowance for doubtful on our regional structure. These tests involve the use of differ-
accounts is adequate to cover potential bad debt losses ent valuation techniques, including a market approach, com-
under current conditions; however, uncertainties regarding parable transactions and discounted cash flow methodology,
changes in the financial condition of our customers, either all of which include, but are not limited to, assumptions
adverse or positive, could impact the amount and timing of regarding matters such as discount rates, anticipated growth
any additional provisions for doubtful accounts that may be rates and expected profitability rates and similar items. The
required. A five percent change in the allowance for doubtful results of the 2010 test indicated that there were no impair-
accounts would have had an impact on income before income ments of goodwill. Unanticipated changes, including even
taxes of approximately $8 million in 2010. small revisions, to these assumptions could require a provision
for impairment in a future period. Given the nature of these
Inventory Reserves evaluations and their application to specific assets and specific
Inventory is a significant component of current assets times, it is not possible to reasonably quantify the impact of
and is stated at the lower of cost or market. This requires us changes in these assumptions.
to record provisions and maintain reserves for excess, slow The purchase price of acquired businesses is allocated to
moving and obsolete inventory. To determine these reserve its identifiable assets and liabilities based upon estimated fair
amounts, we regularly review inventory quantities on hand values as of the acquisition date. The excess of the consider-
and compare them to estimates of future product demand, ation transferred over the amount allocated to the assets and
market conditions, production requirements and technological liabilities, if any, is recorded as goodwill. In determining esti-
developments. These estimates and forecasts inherently mated fair values, we use various sources and types of infor-
include uncertainties and require us to make judgments mation, including but not limited to quoted market prices,
regarding potential future outcomes. At December 31, 2010 replacement cost estimates, accepted valuation techniques
and 2009, inventory reserves totaled $322 million, or 11%, such as discounted cash flows, and existing carrying value of
and $297 million, or 14%, of gross inventory, respectively. We acquired assets. As necessary, we utilize third-party appraisal
believe that our reserves are adequate to properly value poten- firms to assist us in determining fair value of inventory, identi-
tial excess, slow moving and obsolete inventory under current fiable intangible assets, and any other significant assets or lia-
conditions. Significant or unanticipated changes to our esti- bilities. During the measurement period and as necessary, we
mates and forecasts could impact the amount and timing of adjust the preliminary purchase price allocation if we obtain
any additional provisions for excess or obsolete inventory more information regarding asset valuations and liabilities
that may be required. A five percent change in this inventory assumed. The judgments, assumptions and estimates used
reserve balance would have had an impact on income before or made in determining the estimated fair value assigned to
income taxes of approximately $16 million in 2010. assets acquired and liabilities assumed, as well as asset lives,
can materially impact our results of operations.
2010 Form 10-K 27

Income Taxes change in other countries. Our experience has been that the
The liability method is used for determining our income estimates and assumptions we have used to provide for future
taxes, under which current and deferred tax liabilities and tax assessments have proven to be appropriate. However, past
assets are recorded in accordance with enacted tax laws and experience is only a guide, and the potential exists that the tax
rates. Under this method, the amounts of deferred tax liabili- resulting from the resolution of current and potential future tax
ties and assets at the end of each period are determined using controversies may differ materially from the amount accrued.
the tax rate expected to be in effect when taxes are actually In addition to the aforementioned assessments that have
paid or recovered. Valuation allowances are established to been received from various tax authorities, we also provide for
reduce deferred tax assets when it is more likely than not that taxes for uncertain tax positions where formal assessments have
some portion or all of the deferred tax assets will not be real- not been received. The determination of these liabilities requires
ized. In determining the need for valuation allowances, we the use of estimates and assumptions regarding future events.
have considered and made judgments and estimates regarding Once established, we adjust these amounts only when more
estimated future taxable income and ongoing prudent and information is available or when a future event occurs necessi-
feasible tax planning strategies. These estimates and judg- tating a change to the reserves such as changes in the facts or
ments include some degree of uncertainty and changes in law, judicial decisions regarding the application of existing law
these estimates and assumptions could require us to adjust or a favorable audit outcome. We believe that the resolution of
the valuation allowances for our deferred tax assets. Histori- tax matters will not have a material effect on the consolidated
cally, changes to valuation allowances have been caused by financial condition of the Company, although a resolution
major changes in the business cycle in certain countries and could have a material impact on our consolidated statement
changes in local country law. The ultimate realization of the of operations for a particular period and on our effective tax
deferred tax assets depends on the generation of sufficient rate for any period in which such resolution occurs.
taxable income in the applicable taxing jurisdictions.
We operate in more than 80 countries under many legal Pensions and Postretirement Benefit Obligations
forms. As a result, we are subject to the jurisdiction of numer- Pensions and postretirement benefit obligations and the
ous domestic and foreign tax authorities, as well as to tax related expenses are calculated using actuarial models and
agreements and treaties among these governments. Our methods. This involves the use of two critical assumptions,
operations in these different jurisdictions are taxed on various the discount rate and the expected rate of return on assets,
bases: actual income before taxes, deemed profits (which both of which are important elements in determining pension
are generally determined using a percentage of revenues expense and in measuring plan assets and liabilities. We evalu-
rather than profits) and withholding taxes based on revenue. ate these critical assumptions at least annually. Although con-
Determination of taxable income in any jurisdiction requires sidered less critical, other assumptions used in determining
the interpretation of the related tax laws and regulations and benefit obligations and related expenses, such as demographic
the use of estimates and assumptions regarding significant factors like retirement age, mortality and turnover, are also
future events such as the amount, timing and character of evaluated periodically and are updated to reflect our actual
deductions, permissible revenue recognition methods under and expected experience.
the tax law and the sources and character of income and The discount rate enables us to state expected future cash
tax credits. Changes in tax laws, regulations, agreements and flows at a present value on the measurement date. The devel-
treaties, foreign currency exchange restrictions or our level of opment of the discount rate for our largest plans was based
operations or profitability in each taxing jurisdiction could have on a bond matching model whereby the cash flows underlying
an impact on the amount of income taxes that we provide the projected benefit obligation are matched against a yield
during any given year. curve constructed from a bond portfolio of high-quality, fixed-
Our tax filings for various periods are subjected to audit income securities. Use of a lower discount rate would increase
by the tax authorities in most jurisdictions where we conduct the present value of benefit obligations and increase pension
business. These audits may result in assessments of additional expense. We used a discount rate of 5.9% in 2010, 6.4%
taxes that are resolved with the authorities or through the in 2009 and 6.0% in 2008 to determine pension expense.
courts. We believe these assessments may occasionally be A 50 basis point reduction in the discount rate would have
based on erroneous and even arbitrary interpretations of local decreased income before income taxes by approximately
tax law. Resolution of these situations inevitably includes some $1 million in 2010.
degree of uncertainty; accordingly, we provide taxes only for To determine the expected rate of return on plan assets,
the amounts we believe will ultimately result from these pro- we consider the current and target asset allocations, as well
ceedings. The resulting change to our tax liability, if any, is as historical and expected future returns on various categories
dependent on numerous factors that are difficult to estimate. of plan assets. A lower rate of return increases plan expenses.
These include, among others, the amount and nature of addi- We assumed rates of return on our plan investments were
tional taxes potentially asserted by local tax authorities; the 7.1% in 2010 and 8.0% in 2009 and in 2008. A 50 basis
willingness of local tax authorities to negotiate a fair settle- point reduction in the expected rate of return on assets of our
ment through an administrative process; the impartiality of the principal plans would have decreased income before income
local courts; the sheer number of countries in which we do taxes by approximately $4 million in 2010.
business; and the potential for changes in the tax paid to one
country to either produce, or fail to produce, an offsetting tax
NEW ACCOUNTING STANDARDS AND Risk Factors
ACCOUNTING STANDARDS UPDATES For discussion of our risk factors and cautions regarding
In October 2009, the Financial Accounting Standards forward-looking statements, see Item 1A. Risk Factors and in
Board (“FASB”) issued an update to Accounting Standards the “Forward-Looking Statements” section in Item 7, both
Codification (“ASC”) 605, Revenue Recognition – Multiple contained herein.
Deliverable Revenue Arrangements. This Accounting Standards
Update (“ASU”) addresses accounting for multiple-deliverable ITEM 7A. QUANTITATIVE AND QUALITATIVE
arrangements to enable vendors to account for deliverables DISCLOSURES ABOUT MARKET RISK
separately. The provision establishes a selling price hierarchy We are exposed to certain market risks that are inherent
for determining the selling price of a deliverable. This update in our financial instruments and arise from changes in interest
requires expanded disclosures for multiple deliverable revenue rates and foreign currency exchange rates. We may enter
arrangements. The ASU was effective for us for revenue into derivative financial instrument transactions to manage
arrangements entered into or materially modified on or after or reduce market risk but do not enter into derivative financial
June 15, 2010. We adopted the provisions of this update with instrument transactions for speculative purposes. A discussion
no material impact on our consolidated financial statements. of our primary market risk exposure in financial instruments is
In December 2010, the FASB issued an update to ASC presented below.
805, Business Combinations. This ASU addresses the disclosure
of comparative financial statements and expands on the sup- INTEREST RATE RISK AND INDEBTEDNESS
plementary pro forma information for business combinations. We are subject to interest rate risk on our long-term fixed
We will adopt this ASU prospectively for business combina- interest rate debt. Commercial paper borrowings, other short-
tions occurring on or after December 15, 2010. term borrowings and variable rate long-term debt do not give
rise to significant interest rate risk because these borrowings
RELATED PARTY TRANSACTIONS either have maturities of less than three months or have vari-
There were no significant related party transactions during able interest rates similar to the interest rates we receive on
the three years ended December 31, 2010. our short-term investments. All other things being equal, the
fair market value of debt with a fixed interest rate will increase
FORWARD-LOOKING STATEMENTS as interest rates fall and will decrease as interest rates rise. This
MD&A and certain statements in the Notes to Consoli- exposure to interest rate risk can be managed by borrowing
dated Financial Statements include forward-looking statements money that has a variable interest rate or using interest rate
within the meaning of Section 27A of the Securities Act and swaps to change fixed interest rate borrowings to variable
Section 21E of the Exchange Act (each a “forward-looking interest rate borrowings.
statement”). The words “anticipate,” “believe,” “ensure,”
“expect,” “if,” “intend,” “estimate,” “probable,” “project,” Interest Rate Swap Agreements
“forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” In June 2009, we entered into two interest rate swap
“should,” “would,” “may,” “likely” and similar expressions, agreements (the “Swap Agreements”) for a notional amount
and the negative thereof, are intended to identify forward- of $250 million each in order to hedge changes in the fair
looking statements. Our forward-looking statements are based market value of our $500 million 6.5% senior notes maturing
on assumptions that we believe to be reasonable but that may on November 15, 2013. Under the Swap Agreements, we
not prove to be accurate. The statements do not include the receive interest at a fixed rate of 6.5% and pay interest at a
potential impact of future transactions, such as an acquisition, floating rate of one-month Libor plus a spread of 3.67% on
disposition, merger, joint venture or other transaction that one swap and three-month Libor plus a spread of 3.54% on
could occur. We undertake no obligation to publicly update or the second swap both through November 15, 2013. The Swap
revise any forward-looking statement. Our expectations regard- Agreements are designated, and each qualifies, as a fair value
ing our business outlook, including changes in revenue, pricing, hedging instrument. The fair value of the Swap Agreements at
capital spending, profitability, strategies for our operations, December 31, 2010, was a $24 million asset and was based
impact of any common stock repurchases, oil and natural gas on quoted market prices for contracts with similar terms and
market conditions, market share and contract terms, costs and maturity dates.
availability of resources, economic and regulatory conditions, The financial institutions that are counterparties to the
the on-going integration of BJ Services, and environmental Swap Agreements are primarily the lenders in our credit facili-
matters are only our forecasts regarding these matters. ties. Under the terms of the credit support documents govern-
All of our forward-looking information is subject to risks ing the Swap Agreements, the relevant party will have to post
and uncertainties that could cause actual results to differ collateral in the event such party’s long-term debt rating falls
materially from the results expected. Although it is not possi- below investment grade or is no longer rated.
ble to identify all factors, these risks and uncertainties include
the risk factors and the timing of any of those risk factors
identified in Item 1A. Risk Factors and those set forth from
time to time in our filings with the SEC. These documents are
available through our website or through the SEC’s Electronic
Data Gathering and Analysis Retrieval System (“EDGAR”) at
http://www.sec.gov.
2010 Form 10-K 29
Indebtedness
We had fixed rate debt aggregating $3,800 million at December 31, 2010 and $1,800 million at December 31, 2009. The follow-
ing table sets forth the required cash payments for our indebtedness, which bear a fixed rate of interest and are denominated in
U.S. Dollars, and the related weighted average effective interest rates by expected maturity dates as of December 31, 2010 and 2009.
(Dollar amounts in millions) 2010 2011 2012 2013 2014 2015 Thereafter Total
As of December 31, 2010

Long-term debt (1) (2) $ – $ 250 $ – $ 500 $ – $ – $ 3,050 $ 3,800
Weighted average effective interest rates 5.86% 6.73% 6.31% 6.34%
As of December 31, 2009
Long-term debt (1) (2) $ – $ – $ – $ 500 $ – $ – $ 1,300 $ 1,800
Weighted average effective interest rates 6.73% 7.58% 7.34%
(1) Amounts do not include any unamortized discounts, deferred issuance costs or net deferred gains on terminated interest rate swap agreements.
(2) Fair market value of fixed rate long-term debt was $4,218 million at December 31, 2010 and $2,111 million at December 31, 2009.
FOREIGN CURRENCY AND At December 31, 2009, we had outstanding foreign cur-
FOREIGN CURRENCY FORWARD CONTRACTS rency forward contracts with notional amounts aggregating
We conduct operations around the world in a number of $153 million to hedge exposure to currency fluctuations in
different currencies. Many of our significant foreign subsidiar- various foreign currencies. These contracts are designated and
ies have designated the local currency as their functional cur- qualify as fair value hedging instruments. Based on quoted mar-
rency. As such, future earnings are subject to change due to ket prices as of December 31, 2009 for contracts with similar
fluctuations in foreign currency exchange rates when transac- terms and maturity dates, we recorded a loss of $1 million to
tions are denominated in currencies other than our functional adjust these foreign currency forward contracts to their fair mar-
currencies. To minimize the need for foreign currency forward ket value. This loss offsets designated foreign currency exchange
contracts to hedge this exposure, our objective is to manage gains resulting from the underlying exposures and is included in
foreign currency exposure by maintaining a minimal consoli- MG&A expenses in the consolidated statement of operations.
dated net asset or net liability position in a currency other
than the functional currency.
Foreign Currency Forward Contracts

At December 31, 2010, we had outstanding foreign cur-
rency forward contracts with notional amounts aggregating
$156 million to hedge exposure to currency fluctuations in
various foreign currencies. These contracts are designated and
qualify as fair value hedging instruments. Based on quoted
market prices as of December 31, 2010 for contracts with sim-
ilar terms and maturity dates, we recorded a loss of $2 million
to adjust these foreign currency forward contracts to their fair
market value. This loss offsets designated foreign currency
exchange gains resulting from the underlying exposures and
is included in MG&A expenses in the consolidated statement
of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as such
term is defined in Exchange Act Rules 13a-15(f). Our internal control over financial reporting is a process designed to provide rea-
sonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Our control environment is the foundation for our system of internal con-
trol and is embodied in our Business Code of Conduct, which sets the tone of our Company and includes our Core Values of Integ-
rity, Teamwork, Performance and Learning. Included in our system of internal control are written policies, an organizational structure
providing division of responsibilities, the selection and training of qualified personnel and a program of financial and operations
reviews by a professional staff of internal auditors. Our internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of our financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that
could have a material effect on the financial statements.
Under the supervision and with the participation of our management, including our principal executive officer and principal
financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting. Our evaluation was
based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
Based on our evaluation under the framework in Internal Control – Integrated Framework, our principal executive officer and
principal financial officer concluded that our internal control over financial reporting was effective as of December 31, 2010. The
conclusion of our principal executive officer and principal financial officer is based on the recognition that there are inherent limita-
tions in all systems of internal control. Because of the inherent limitations of internal control over financial reporting, including the
possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be pre-
vented or detected on a timely basis. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
On April 28, 2010, the Company acquired BJ Services Company (“BJ Services”). For purposes of determining the effectiveness
of our internal control over financial reporting, management has excluded BJ Services from its evaluation of these matters. The
acquired business represented approximately 46% of our consolidated total assets at December 31, 2010 and approximately
36% of our consolidated net income attributable to Baker Hughes for the year ended December 31, 2010.
Deloitte & Touche LLP, the Company’s independent registered public accounting firm, has issued an attestation report on
the effectiveness of the Company’s internal control over financial reporting.
Chad C. Deaton Peter A. Ragauss Alan J. Keifer

Chairman and Senior Vice President and Vice President and
Chief Executive Officer Chief Financial Officer Controller
Houston, Texas
February 23, 2011
2010 Form 10-K 31

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Baker Hughes Incorporated

Houston, Texas
We have audited the internal control over financial reporting of Baker Hughes Incorporated and subsidiaries (the “Company”)
as of December 31, 2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective inter-
nal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included
in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effective-
ness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circum-
stances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal
executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors,
management, and other personnel 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. A company’s internal con-
trol over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper
management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis.
Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject
to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of Decem-
ber 31, 2010, based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
As described in Management’s Report on Internal Control Over Financial Reporting, the Company acquired BJ Services
Company (“BJ Services”) on April 28, 2010. For the purpose of assessing internal control over financial reporting, management
excluded BJ Services, whose financial statements constitute 46% of consolidated total assets and 36% of consolidated net income
attributable to Baker Hughes of the consolidated financial statements as of and for the year ended December 31, 2010. Our audit of
internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting
of BJ Services.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the consolidated financial statements and financial statement schedule II as of and for the year ended December 31, 2010 of the
Company and our report dated February 23, 2011 expressed an unqualified opinion on those consolidated financial statements
and financial statement schedule.
Houston, Texas
February 23, 2011
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Baker Hughes Incorporated

Houston, Texas
We have audited the accompanying consolidated balance sheets of Baker Hughes Incorporated and subsidiaries (the “Com-
pany”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders’ equity, and cash
flows for each of the three years in the period ended December 31, 2010. Our audits also included financial statement schedule II,
valuation and qualifying accounts, listed in the Index at Item 15. These consolidated financial statements and financial statement
schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on the consolidated
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by manage-
ment, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Baker
Hughes Incorporated and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted
in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the Company’s internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal
Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated February 23, 2011 expressed an unqualified opinion on the Company’s internal control over financial reporting.
Houston, Texas
February 23, 2011
2010 Form 10-K 33

Consolidated Statements of Operations
(In millions, except per share amounts) 2010 2009 2008
Revenues:
Sales $ 5,516 $ 4,809 $ 5,734
Services 8,898 4,855 6,130
Total revenues 14,414 9,664 11,864
Costs and expenses:

Cost of sales 4,359 3,858 4,081
Cost of services 6,825 3,539 3,873
Research and engineering 429 397 426
Marketing, general and administrative 1,250 1,120 1,046
Acquisition-related costs 134 18 –
Litigation settlement – – 62
Total costs and expenses 12,997 8,932 9,488
Operating income 1,417 732 2,376

Equity in income of affiliates – – 2
Gain on sale of product line – – 28
Gain (loss) on investments 6 4 (25)
Interest expense, net (141) (125) (62)
Income before income taxes 1,282 611 2,319
Income taxes (463) (190) (684)
Net income 819 421 1,635
Net income attributable to noncontrolling interests (7) – –
Net income attributable to Baker Hughes $ 812 $ 421 $ 1,635
Basic earnings per share attributable to Baker Hughes $ 2.06 $ 1.36 $ 5.32
Diluted earnings per share attributable to Baker Hughes $ 2.06 $ 1.36 $ 5.30
See Notes to Consolidated Financial Statements
Consolidated Balance Sheets
December 31,
(In millions, except par value) 2010 2009
ASSETS
Current Assets:
Cash and cash equivalents $ 1,456 $ 1,595
Short-term investments 250 –
Accounts receivable – less allowance for doubtful accounts
(2010 – $162; 2009 – $157) 3,942 2,331
Inventories, net 2,594 1,836
Deferred income taxes 234 268
Other current assets 231 195
Total current assets 8,707 6,225
Property, plant and equipment – less accumulated depreciation

(2010 – $4,367; 2009 – $3,668) 6,310 3,161
Goodwill 5,869 1,418
Intangible assets, net 1,569 195
Other assets 531 440
Total assets $ 22,986 $ 11,439
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
Accounts payable $ 1,496 $ 821
Short-term borrowings and current portion of long-term debt 331 15
Accrued employee compensation 589 448
Income taxes payable 219 95
Other accrued liabilities 504 234
Total current liabilities 3,139 1,613
Long-term debt 3,554 1,785

Deferred income taxes and other tax liabilities 1,360 309
Liabilities for pensions and other postretirement benefits 483 379
Other liabilities 164 69
Commitments and contingencies
Stockholders’ Equity:
Common stock, one dollar par value (shares authorized – 750;
issued and outstanding: 2010 – 432; 2009 – 312) 432 312
Capital in excess of par value 7,005 874
Retained earnings 7,083 6,512
Accumulated other comprehensive loss (420) (414)
Baker Hughes stockholders’ equity 14,100 7,284
Noncontrolling interest 186 –
Total stockholders’ equity 14,286 7,284
Total liabilities and stockholders’ equity $ 22,986 $ 11,439
2010 Form 10-K 35

Consolidated Statements of Stockholders’ Equity
Accumulated
Capital in Other
Common Excess of Retained Comprehensive Noncontrolling
(In millions, except per share amounts) Stock Par Value Earnings Loss Interest Total
Balance, December 31, 2007 $ 316 $ 1,216 $ 4,818 $ (44) $ – $ 6,306

Adoption of ASC 715, Compensation –
Retirement Benefits (4) (4)
Adjusted beginning balance January 1, 2008 316 1,216 4,814 (44) – 6,302
Comprehensive income:
Net income 1,635
Foreign currency translation adjustments (354)
Defined benefit pension plans, net of tax of $67 (125)
Total comprehensive income 1,156
Issuance of common stock, pursuant
to employee stock plans 2 76 78
Tax benefit on stock plans 11 11
Stock-based compensation 60 60
Repurchase and retirement of common stock (9) (618) (627)
Cash dividends ($0.56 per share) (173) (173)
Balance, December 31, 2008 309 745 6,276 (523) – 6,807
Net income 421
Foreign currency translation adjustments 122
Defined benefit pension plans, net of tax of $2 (13)
Total comprehensive income 530
Tax provision on stock plans (2) (2)
Balance, December 31, 2009 312 874 6,512 (414) – 7,284
Net income 812 7
Foreign currency translation adjustments (41)
Defined benefit pension plans, net of tax of $5 35
Total comprehensive income 813
Issuance of common stock, to acquire BJ Services 118 5,986 6,104
Tax provision on stock plans (2) (2)
Acquisition of noncontrolling interest 179 179
Balance, December 31, 2010 $ 432 $ 7,005 $ 7,083 $ (420) $ 186 $ 14,286
Consolidated Statements of cash flows
(In millions, except per share amounts) 2010 2009 2008
Cash flows from operating activities:

Net income $ 819 $ 421 $ 1,635
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization 1,069 711 637
(Gain) loss on investments (6) (4) 25
Stock-based compensation 87 88 60
Benefit for deferred income taxes (188) (256) (21)
Gain on sale of product line – – (28)
Gain on disposal of assets (113) (64) (101)
Provision for doubtful accounts 39 94 31
Changes in operating assets and liabilities:
Accounts receivable (702) 399 (515)
Inventories (243) 240 (371)
Accounts payable 292 (89) 242
Accrued employee compensation and other accrued liabilities (182) (130) 90
Income taxes payable 23 (169) 76
Liabilities for pensions and other postretirement benefits and other liabilities (16) 13 (38)
Other (23) (15) (108)
Net cash flows from operating activities 856 1,239 1,614
Cash flows from investing activities:

Expenditures for capital assets (1,491) (1,086) (1,303)
Proceeds from disposal of assets 208 163 222
Proceeds from sale of businesses, net of disposal costs, and interests in affiliates 39 – 31
Acquisition of businesses, net of cash acquired (888) (58) (120)
Proceeds from sale/settlement of investments 6 15 –
Purchase of short-term investments (250) – –
Net cash flows from investing activities (2,376) (966) (1,170)
Cash flows from financing activities:

Net proceeds (payments) of commercial paper and other short-term debt 52 (16) 15
Net proceeds from issuance of long-term debt 1,479 – 1,235
Repayment of long-term debt – (525) –
Proceeds from issuance of common stock 74 51 87
Repurchase of common stock – – (627)
Dividends (241) (185) (173)
Excess tax benefits from stock-based compensation 2 – 4
Net cash flows from financing activities 1,366 (675) 541
Effect of foreign exchange rate changes on cash 15 42 (84)

(Decrease) increase in cash and cash equivalents (139) (360) 901
Cash and cash equivalents, beginning of year 1,595 1,955 1,054
Cash and cash equivalents, end of year $ 1,456 $ 1,595 $ 1,955
Supplemental cash flows disclosures:

Income taxes paid $ 637 $ 604 $ 621
Interest paid $ 154 $ 154 $ 86
Supplemental disclosure of noncash investing activities:
Capital expenditures included in accounts payable $ 64 $ 29 $ 43
2010 Form 10-K 37

NOTE 1. SUMMARY OF SIGNIFICANT manufacturing operation, even if produced to our customer’s
ACCOUNTING POLICIES specifications, and are sold in the ordinary course of business
through our regular marketing channels. We recognize reve-
Nature of Operations nue for these products upon delivery, when title passes, when
Baker Hughes Incorporated (“Baker Hughes”) is engaged collectability is reasonably assured and there are no further sig-
in the oilfield services industry. We are a leading supplier of nificant obligations for future performance. Provisions for esti-
wellbore-related products and technology services and systems mated warranty returns or similar types of items are made at
and provide products and services for drilling, pressure pump- the time the related revenue is recognized. Revenue for ser-
ing, formation evaluation, completion and production, and vices is recognized as the services are rendered and when col-
reservoir technology and consulting to the worldwide oil and lectability is reasonably assured. Rates for services are typically
natural gas industry. We also provide products and services to priced on a per day, per meter, per man hour or similar basis.
the downstream refining, and process and pipeline industries. In certain situations, revenue is generated from transactions
that may include multiple products and services under one
Basis of Presentation contract or agreement and which may be delivered to the
The consolidated financial statements include the accounts customer over an extended period of time. Revenue from
of Baker Hughes and all majority owned subsidiaries (“Com- these arrangements is recognized in accordance with the
pany,” “we,” “our” or “us”). Investments over which we have above criteria and as each item or service is delivered based
the ability to exercise significant influence over operating and on their relative fair value.
financial policies, but do not hold a controlling interest, are
accounted for using the equity method of accounting. All sig- Research and Engineering
nificant intercompany accounts and transactions have been Research and engineering expenses include costs associ-
eliminated in consolidation. In the Notes to Consolidated ated with the research and development of new products and
Financial Statements, all dollar and share amounts in tabula- services and costs associated with sustaining engineering of
tions are in millions of dollars and shares, respectively, unless existing products and services. These costs are expensed as
otherwise indicated. incurred and include research and development costs for
new products and services of $283 million, $231 million
Use of Estimates and $263 million for the year ended December 31, 2010,
The preparation of financial statements in conformity with 2009 and 2008, respectively.
accounting principles generally accepted in the United States
of America requires management to make estimates and judg- Cash Equivalents
ments that affect the reported amounts of assets and liabili- All highly liquid investments with an original maturity of
ties, disclosure of contingent assets and liabilities at the date three months or less at the time of purchase are reported as
of the financial statements and the reported amounts of reve- cash equivalents.
nues and expenses during the reporting period. We base our
estimates and judgments on historical experience and on vari- Short-Term Investments
ous other assumptions and information that are believed to be Short-term investments have an original maturity of
reasonable under the circumstances. Estimates and assump- greater than three months. As of December 31, 2010, we
tions about future events and their effects cannot be perceived held $250 million of short-term investments consisting of U.S.
with certainty and, accordingly, these estimates may change Treasury Bills, which will mature in May of 2011. These invest-
as new events occur, as more experience is acquired, as addi- ments are classified as available-for-sale and are recorded at
tional information is obtained and as our operating environ- fair value, which approximates cost.
ment changes. While we believe that the estimates and
assumptions used in the preparation of the consolidated finan- Inventories
cial statements are appropriate, actual results could differ from Inventories are stated at the lower of cost or market. Cost is
those estimates. Estimates are used for, but are not limited to, determined using the first-in, first-out (“FIFO”) method or the
determining the following: allowance for doubtful accounts average cost method, which approximates FIFO, and includes
and inventory valuation reserves, recoverability of long-lived the cost of materials, labor and manufacturing overhead.
assets, useful lives used in depreciation and amortization,
income taxes and related valuation allowances and insurance, Property, Plant and Equipment and
environmental, legal, pensions and postretirement benefit obli- Accumulated Depreciation
gations, stock-based compensation and fair value of assets Property, plant and equipment (“PP&E”) is stated at cost
acquired and liabilities assumed in acquisitions. less accumulated depreciation, which is generally provided by
using the straight-line method over the estimated useful lives
Revenue Recognition of the individual assets. Significant improvements and better-
Our products and services are generally sold based upon ments are capitalized if they extend the useful life of the asset.
purchase orders or contracts with the customer that include We manufacture a substantial portion of our rental tools and
fixed or determinable prices and that do not include right equipment and the cost of these items, which includes direct
of return or other similar provisions or other significant post- and indirect manufacturing costs, are capitalized and carried in
delivery obligations. Our products are produced in a standard inventory until the tool is completed. Once the tool has been
completed, the cost of the tool is reflected in capital expendi- We operate in more than 80 countries under many legal
tures and the tool is classified as rental tools and equipment forms. As a result, we are subject to the jurisdiction of numer-
in PP&E. Maintenance and repairs are charged to expense as ous domestic and foreign tax authorities, as well as to tax
incurred. The capitalized costs of computer software devel- agreements and treaties among these governments. Our
oped or purchased for internal use are classified in machinery operations in these different jurisdictions are taxed on various
and equipment in PP&E. bases: actual income before taxes, deemed profits (which are
generally determined using a percentage of revenues rather
Goodwill, Intangible Assets and Amortization than profits) and withholding taxes based on revenue. Deter-
Goodwill and intangible assets with indefinite lives are mination of taxable income in any jurisdiction requires the
not amortized. Intangible assets with finite useful lives are interpretation of the related tax laws and regulations and the
amortized on a basis that reflects the pattern in which the use of estimates and assumptions regarding significant future
economic benefits of the intangible assets are realized, which events, such as the amount, timing and character of deduc-
is generally on a straight-line basis over the asset’s estimated tions, permissible revenue recognition methods under the tax
useful life. law and the sources and character of income and tax credits.
Changes in tax laws, regulations, agreements and treaties, for-
Impairment of Goodwill and Other Long-Lived Assets eign currency exchange restrictions or our level of operations
We review PP&E, intangible assets and certain other assets or profitability in each tax jurisdiction could have an impact
for impairment whenever events or changes in circumstances upon the amount of income taxes that we provide during
indicate that the carrying amount may not be recoverable. The any given year.
determination of recoverability is made based upon the esti- Our tax filings for various periods are subjected to audit
mated undiscounted future net cash flows, excluding interest by tax authorities in most jurisdictions where we conduct busi-
expense. The amount of impairment loss, if any, is determined ness. These audits may result in assessments of additional
by comparing the fair value, as determined by a discounted taxes that are resolved with the authorities or through the
cash flow analysis, with the carrying value of the related assets. courts. We believe that these assessments may occasionally be
We perform an annual impairment test of goodwill for based on erroneous and even arbitrary interpretations of local
each of our reporting units as of October 1, or more frequently tax law. We have received tax assessments from various tax
if circumstances indicate that an impairment may exist. Our authorities and are currently at varying stages of appeals and/
reporting units are based on our organizational and reporting or litigation regarding these matters. We have provided for the
structure. Corporate and other assets and liabilities are allo- amounts we believe will ultimately result from these proceed-
cated to the reporting units to the extent that they relate to ings. We believe we have substantial defenses to the questions
the operations of those reporting units in determining their being raised and will pursue all legal remedies should an unfa-
carrying amount. The determination of impairment is made vorable outcome result. However, resolution of these matters
by comparing the carrying amount with its fair value, which involves uncertainties and there are no assurances that the
is calculated using a combination of a market, comparable outcomes will be favorable.
transaction and discounted cash flow approach. In addition to the aforementioned assessments that have
been received from various tax authorities, we also provide
Income Taxes for taxes for uncertain tax positions where formal assessments
We use the liability method for determining our income have not been received. We believe such tax reserves are ade-
taxes, under which current and deferred tax liabilities and quate in relation to the potential for additional assessments.
assets are recorded in accordance with enacted tax laws and We classify interest and penalties related to uncertain tax posi-
rates. Under this method, the amounts of deferred tax liabili- tions as income taxes in our financial statements.
ties and assets at the end of each period are determined using
the tax rate expected to be in effect when taxes are actually Environmental Matters
paid or recovered. Future tax benefits are recognized to the Estimated remediation costs are accrued using currently
extent that realization of such benefits is more likely than not. available facts, existing environmental permits, technology and
Deferred income taxes are provided for the estimated enacted laws and regulations. For sites where we are primarily
income tax effect of temporary differences between financial responsible for the remediation, our cost estimates are devel-
and tax bases in assets and liabilities. Deferred tax assets are oped based on internal evaluations and are not discounted.
also provided for certain tax credit carryforwards. A valuation Accruals are recorded when it is probable that we will be obli-
allowance to reduce deferred tax assets is established when it gated to pay for environmental site evaluation, remediation or
is more likely than not that some portion or all of the deferred related activities, and such costs can be reasonably estimated.
tax assets will not be realized. Accruals are recorded even if significant uncertainties exist
We intend to indefinitely reinvest certain earnings of our over the ultimate cost of the remediation. As additional or
foreign subsidiaries in operations outside the U.S., and accord- more accurate information becomes available, accruals are
ingly, we have not provided for U.S. income taxes on such adjusted to reflect current cost estimates. Ongoing environ-
earnings. We do provide for the U.S. and additional non-U.S. mental compliance costs, such as obtaining environmental
taxes on earnings anticipated to be repatriated from our permits, installation of pollution control equipment and waste
non-U.S. subsidiaries. disposal, are expensed as incurred. Where we have been identi-
fied as a potentially responsible party in a United States federal
2010 Form 10-K 39

or state “Superfund” site, we accrue our share of the esti- In December 2010, the FASB issued an update to ASC 805,
mated remediation costs of the site. This share is based on Business Combinations. This ASU addresses the disclosure of
the ratio of the estimated volume of waste we contributed comparative financial statements and expands on the supple-
to the site to the total volume of waste disposed at the site. mentary pro forma information for business combinations.
We will adopt this ASU prospectively for business combina-
Foreign Currency tions occurring on or after December 15, 2010.
A number of our significant foreign subsidiaries have des-
ignated the local currency as their functional currency and, as NOTE 2. ACQUISITIONS
such, gains and losses resulting from balance sheet translation
of foreign operations are included as a separate component ACQUISITION OF BJ SERVICES
of accumulated other comprehensive loss within stockholders’ On April 28, 2010, we acquired 100% of the outstanding
equity. Gains and losses from foreign currency transactions, common stock of BJ Services Company (including its successor,
such as those resulting from the settlement of receivables or “BJ Services”) in a cash and stock transaction valued at
payables in the non-functional currency, are included in mar- $6,897 million. BJ Services is a leading provider of pressure
keting, general and administrative (“MG&A”) expenses in the pumping and other oilfield services and was acquired to
consolidated statements of operations as incurred. For those expand our suite of service and product offerings. Revenues
foreign subsidiaries that have designated the U.S. Dollar as and net income of BJ Services from the acquisition date
the functional currency, gains and losses resulting from bal- included in our consolidated statement of operations for
ance sheet remeasurement of foreign operations are also 2010 were $3,686 million and $290 million, respectively.
included in MG&A expense in the consolidated statements Pursuant to a final agreement with the Antitrust Division
of operations as incurred. of the U.S. Department of Justice (“DOJ”) in connection
with the governmental approval of the acquisition, we were
Derivative Financial Instruments required to divest two leased stimulation vessels (the HR
We monitor our exposure to various business risks including Hughes and Blue Ray) and certain other assets used to per-
commodity prices, foreign currency exchange rates and interest form sand control services in the U.S. Gulf of Mexico. Addi-
rates and occasionally use derivative financial instruments to tionally, pursuant to a Hold Separate Stipulation and Order,
manage these risks. Our policies do not permit the use of the operation of our U.S. business and the U.S. business of
derivative financial instruments for speculative purposes. We BJ Services were required to be operated separately until these
use foreign currency forward contracts to hedge certain firm assets were divested. On August 30, 2010, we completed the
commitments and transactions denominated in foreign curren- sale of such assets for approximately $55 million in cash. Upon
cies. We use interest rate swaps to manage interest rate risk. the completion of the sale, the Hold Separate Stipulation and
At the inception of any new derivative, we designate the Order terminated, and we commenced integration activities
derivative as a hedge or we determine the derivative to be on a global basis.
undesignated as a hedging instrument as the facts dictate.
We document all relationships between the hedging instru- Consideration
ments and the hedged items, as well as our risk management Under the terms of the acquisition agreement, BJ Services
objectives and strategy for undertaking various hedge transac- stockholders received $2.69 per share in cash and 0.40035
tions. We assess whether the derivatives that are used in hedg- Baker Hughes shares of common stock for each BJ Services
ing transactions are highly effective in offsetting changes in share of common stock they owned. In total, we paid
cash flows of the hedged item at both the inception of the $793 million in cash and issued 118 million shares valued
hedge and on an ongoing basis. at $6,048 million (based upon the closing price of our
common stock on the acquisition date of $51.24). We also
New Accounting Standards and assumed all outstanding stock options held by BJ Services
Accounting Standards Updates employees and directors.
In October 2009, the Financial Accounting Standards The BJ Services stock options outstanding at closing were
Board (“FASB”) issued an update to Accounting Standards converted into Baker Hughes options at the conversion ratio.
Codification (“ASC”) 605, Revenue Recognition – Multiple The estimated fair value associated with the Baker Hughes
Deliverable Revenue Arrangements. This Accounting Standards options issued in exchange for the BJ Services options was
Update (“ASU”) addresses accounting for multiple-deliverable $58 million based on a Black-Scholes valuation model. All
arrangements to enable vendors to account for deliverables BJ Services stock options became fully vested and exercisable
separately. The provision establishes a selling price hierarchy in accordance with pre-existing change-in-control provisions.
for determining the selling price of a deliverable. This update Accordingly, $56 million of the estimated fair value was
requires expanded disclosures for multiple deliverable revenue recorded as part of the consideration transferred, with the
arrangements. The ASU was effective for us for revenue remaining $2 million recorded as an expense as of the date
arrangements entered into or materially modified on or after of the acquisition when all options vested and no further
June 15, 2010. We adopted the provisions of this update with service was required.
no material impact on our consolidated financial statements.
Total consideration transferred in acquiring BJ Services is Intangible assets
summarized as follows: We identified intangible assets including trade names,
technology, in-process research and development (“IPR&D”),
Cash consideration paid: and customer relationships. We consider the BJ Services trade
295 million shares at $2.69 $ 793 name to be an indefinite life intangible asset, which will not
Equity consideration paid: be amortized and will be subject to an annual impairment test.
118 million shares valued $51.24 6,048 We account for IPR&D as an indefinite-lived intangible asset
Fair value of BJ Services options assumed 56 until completion or abandonment of the associated project.
Fair value of consideration transferred $ 6,897 Therefore, such assets would not be amortized but would be
tested for impairment. Once the research and development
activities are completed, the assets would be amortized over
Recording of Assets Acquired and Liabilities Assumed the related product’s useful life. If the project is abandoned,
The transaction has been accounted for using the acquisi- the assets would be written off if they have no alternative
tion method of accounting which requires that, among other future use.
things, assets acquired and liabilities assumed be recorded at The following table summarizes the fair values recorded for
their fair values as of the acquisition date. The excess of the the identifiable intangible assets and their estimated useful lives:
consideration transferred over those fair values is recorded as
Fair Value Estimated Useful Life
goodwill. While we have substantially completed the determi-
nation of the fair values of the assets acquired and liabilities Customer relationships $ 428 3–16 years
assumed, some of the estimated fair values set forth below Technology 451 5–15 years
are subject to adjustment once the valuations are completed. BJ Services trade name 360 Indefinite
We will finalize these items as we obtain the information nec- Other trade names 38 5–12 years
essary to complete the analysis, which we expect to be com- IPR&D 127 Indefinite
pleted during the first quarter of 2011. Under U.S. generally Total Identifiable
accepted accounting principles, companies have one year from Intangible Assets $ 1,404
the date of an acquisition to finalize the acquisition account-
ing. The following table summarizes the estimated amounts
recognized for assets acquired and liabilities assumed as of Deferred taxes
the acquisition date. We provided deferred taxes and other tax liabilities as part
of the acquisition accounting related to the fair market value
Estimated Fair Value adjustments for acquired intangible assets and PP&E, as well
Assets: as for uncertain tax positions taken in prior year tax returns.
Cash and cash equivalents $ 113 An adjustment of $1,283 million was recorded to present the
Accounts receivable 951 deferred taxes and other tax liabilities at fair value. Included
Inventories 419 in the adjustment is deferred taxes of $575 million for the
Other current assets 125 outside basis difference associated with shares in certain
Property, plant and equipment 2,757 BJ Services foreign subsidiaries for which no taxes have been
Intangible assets 1,404 previously provided. We expect to reverse the outside basis
Goodwill 4,336 difference primarily through repatriating earnings from those
Other long-term assets 109 subsidiaries in lieu of permanently reinvesting them and
Liabilities: through the reorganization of those subsidiaries. We are still
Liabilities for change in control and assessing certain factors that impact the outside basis differ-
transaction fees (210) ence related to the BJ Services foreign subsidiaries and uncer-
Current liabilities (759) tain tax positions. The deferred tax liabilities and other tax
Deferred income taxes and liabilities will be revised after the assessment is finalized, which
other tax liabilities (1,455) we expect to be completed during the first quarter of 2011.
Debt (531)
Pension and other postretirement liabilities (154) Debt
Other long-term liabilities (29) Our acquisition subsidiary assumed all of the obligations
Noncontrolling interests (179) of BJ Services in respect of $250 million principal amount of
Net Assets Acquired $ 6,897 5.75% senior notes due June 2011 and $250 million principal
amount of 6.00% senior notes due June 2018. A step-up
adjustment of $34 million was recorded to present these
Property, plant and equipment (“PP&E”) notes at fair value.
A step-up adjustment of $418 million was recorded to
present the PP&E acquired at its fair value. The weighted Liabilities for pensions and other postretirement benefits
average useful life used to calculate depreciation of the We assumed several defined benefit pension plans covering
step-up related to PPE is approximately six years. certain employees primarily in the U.K., Norway and Canada.
2010 Form 10-K 41

Additionally, we assumed a non-qualified supplemental execu- and liabilities assumed (See Note 10 – Goodwill and Intangible
tive retirement plan, as well as postretirement benefit plans that Assets). Goodwill in the amount of $43 million is deductible
provide certain health care and life insurance benefits for retired for tax purposes as a result of previous taxable acquisitions
employees, primarily in the U.S., who meet specified age and made by BJ Services.
service requirements. A step-up adjustment of $32 million was
recorded to present these liabilities at fair value. Acquisition-Related Costs
The following is a summary of the funded position of the Acquisition-related costs are being expensed as incurred.
assumed BJ Services plans as of the acquisition date, as well as They include expenses directly related to acquiring BJ Services
associated weighted-average assumptions used to determine and integration expenses incurred in combining the compa-
benefit obligations: nies. These costs are classified as acquisition-related costs
on our consolidated statements of operations.
Other
Pension Postretirement
Benefit Plans Benefit Plans
Pro Forma Impact of the Acquisition
The following unaudited supplemental pro forma results
Projected benefit obligation $ 287 $ 27
present consolidated information as if the acquisition had
Fair value of plan assets 160 –
been completed as of January 1, 2010 and January 1, 2009.
Net Unfunded Status $ 127 $ 27 The pro forma results include: (i) the amortization associated
with an estimate of the acquired intangible assets, (ii) interest
The following is a summary of the amounts recognized in expense associated with debt used to fund a portion of the
the Consolidated Balance Sheet: acquisition and reduced interest income associated with cash
used to fund a portion of the acquisition, (iii) the impact of
Liabilities for pensions and certain fair value adjustments such as additional depreciation
other postretirement benefits $ 127 $ 27 expense for adjustments to property, plant and equipment
and reduction to interest expense for adjustments to debt,
and (iv) costs directly related to acquiring BJ Services. The pro
Weighted average assumptions used to determine benefit
forma results do not include any potential synergies, cost sav-
obligations at the acquisition date and net periodic benefit
ings or other expected benefits of the acquisition. Accordingly,
cost from the acquisition date through December 31, 2010
the pro forma results should not be considered indicative of the
are as follows:
results that would have occurred if the acquisition and related
Other
borrowings had been consummated as of January 1, 2009 or
Pension Postretirement January 1, 2010, nor are they indicative of future results.
Benefit Plans Benefit Plans

Discount rate 5.24% 6.18%
Rate of compensation increase 4.30% n/a 2010 2009
Pro Forma Pro Forma
Revenues $ 15,903 $ 13,301

Noncontrolling Interests Net income attributable
In conjunction with our acquisition of BJ Services, we to Baker Hughes $ 828 $ 345
obtained certain entities which were not wholly owned by BJ Net income attributable
Services. A step-up adjustment of $134 million was recorded to Baker Hughes per share:
as a preliminary estimate to present the noncontrolling inter- Basic $ 1.92 $ 0.81
ests in these entities at fair value. This estimate represents the Diluted $ 1.91 $ 0.80
noncontrolling interest’s share in the fair value of the net
assets acquired, including its share of goodwill, and is subject
to change once we obtain the information necessary to com- OTHER ACQUISITIONS
plete the valuation during the first quarter of 2011. During 2010, we completed several other acquisitions hav-
ing an aggregate purchase price of approximately $208 mil-
Goodwill lion, net of cash acquired of $4 million. As a result of these
Goodwill of $4,336 million was recognized for this acquisi- acquisitions, we recorded $91 million of goodwill, which is
tion and is calculated as the excess of the consideration trans- subject to final acquisition accounting adjustments. Pro forma
ferred over the net assets recognized and represents the future results of operations for these acquisitions have not been pre-
economic benefits arising from other assets acquired that sented because the effect of these acquisitions was not mate-
could not be individually identified and separately recognized. rial to our consolidated financial statements.
It specifically includes the expected synergies and other bene-
fits that we believe will result from combining the operations NOTE 3. GAIN ON SALE OF PRODUCT LINE
of BJ Services with the operations of Baker Hughes and any In February 2008, we sold the assets associated with our
intangible assets that do not qualify for separate recognition Surface Safety Systems (“SSS”) product line for $31 million
such as the assembled workforce. We have allocated the and recorded a pre-tax gain of $28 million ($18 million after-
goodwill to our reporting units based on the provisional tax). The SSS assets sold included hydraulic and pneumatic
amounts recognized for the fair value of the assets acquired actuators, bonnet assemblies and control systems.
NOTE 4. SEGMENT INFORMATION During 2010, we changed our internal reporting structure
Baker Hughes operates under five reportable segments as to align with this new geographical and product line organiza-
detailed below. The four geographic segments represent our tion for which separate financial information is available and
oilfield operations. results are evaluated regularly by the Chief Operating Decision
• North America (Canada, U.S., and Trinidad) Makers (“CODM”). Accordingly, all prior period segment dis-
• Latin America (Central and South America including Mexico closures have been recast to reflect the new segments. The
and excluding Trinidad) financial results of BJ Services have been included in each of
• Europe/Africa/Russia Caspian (“EARC”) (Europe, Africa – the five reportable segments from the date of acquisition on
excluding Egypt, and Russia and the republics of the former April 28, 2010, through December 31, 2010, in a manner
Soviet Union) consistent with our internal reporting structure.
• Middle East/Asia Pacific (“MEAP”) (including Egypt) The performance of our segments is evaluated based
• Industrial Services and Other (downstream chemicals, pro- on segment profit (loss), which is defined as income before
cess and pipeline services, reservoir and technology consult- income taxes, interest expense, interest income, and certain
ing businesses) gains and losses not allocated to the segments.
Summarized financial information is shown in the following table:
2010 2009 2008
Segments Revenues Profit (Loss) Revenues Profit (Loss) Revenues Profit (Loss)
North America $ 6,621 $ 1,163 $ 3,165 $ 201 $ 4,691 $ 1,249

Latin America 1,569 74 1,094 78 1,089 196
Europe/Africa/Russia Caspian 3,006 260 2,774 458 3,209 629
Middle East/Asia Pacific 2,247 177 1,937 241 2,090 414
Industrial Services and Other 971 99 694 70 785 192
Total 14,414 1,773 9,664 1,048 11,864 2,680
Corporate and Other – (491) – (437) – (361)
Total $ 14,414 $ 1,282 $ 9,664 $ 611 $ 11,864 $ 2,319
For the years ended December 31, 2010, 2009 and 2008, there were no revenues attributable to one customer that accounted
for more than 10% of total revenues.
2010 2009 2008
Depreciation Depreciation Depreciation

Capital and Capital and Capital and
Segments Expenditures Amortization Expenditures Amortization Expenditures Amortization
North America $ 589 $ 432 $ 275 $ 255 $ 374 $ 246

Latin America 191 173 182 110 202 83
Europe/Africa/Russia Caspian 318 230 246 175 272 158
Middle East/Asia Pacific 208 187 185 143 168 112
Industrial Services and Other 179 44 196 17 285 15
Total 1,485 1,066 1,084 700 1,301 614
Corporate and Other 6 3 2 11 2 23
Total $ 1,491 $ 1,069 $ 1,086 $ 711 $ 1,303 $ 637
Total Assets at December 31, 2010 2009 2008
North America $ 8,187 $ 2,596 $ 3,212

Latin America 2,723 1,168 1,031
Europe/Africa/Russia Caspian 3,544 2,248 2,456
Middle East/Asia Pacific 3,130 1,731 1,835
Industrial Services and Other 3,642 2,127 1,452
Total 21,226 9,870 9,986
Corporate and Other 1,760 1,569 1,875
Total $ 22,986 $ 11,439 $ 11,861
Assets of our supply chain and products and technology enterprise organizations are included in the Industrial Services and
Other segment. Certain assets carried at the enterprise level that benefit the operating segments are allocated to the segments.
2010 Form 10-K 43

The following table presents the details of “Corporate The following table presents net property, plant and equip-
and Other” segment loss for the years ended December 31: ment by its geographic location at December 31:
2010 2009 2008 2010 2009 2008
Corporate and United States $ 3,023 $ 1,377 $ 1,356

other expenses $ (222) $ (298) $ (240) Canada and other 467 105 104
Interest expense (144) (131) (89) North America 3,490 1,482 1,460
Interest and Latin America 788 354 259
dividend income 3 6 27 Europe/Africa/
Gain (loss) on Russia Caspian 1,118 809 679
investments 6 4 (25) Middle East/Asia Pacific 914 516 435
Acquisition-related
Total $ 6,310 $ 3,161 $ 2,833
costs (134) (18) –
Gain on sale of
product line – – 28
NOTE 5. STOCK-BASED COMPENSATION
Litigation settlement – – (62)
Stock-based compensation cost is measured at the date
Total $ (491) $ (437) $ (361) of grant, based on the calculated fair value of the award, and
is recognized as expense over the employee’s service period,
The following table presents the details of “Corporate which is generally the vesting period of the equity grant. Addi-
and Other” total assets at December 31: tionally, compensation cost is recognized based on awards ulti-
mately expected to vest, therefore, we have reduced the cost
2010 2009 2008
for estimated forfeitures based on historical forfeiture rates.
Cash and other assets $ 1,391 $ 1,266 $ 1,684 Forfeitures are estimated at the time of grant and revised, if
Accounts receivable 28 17 20 necessary, in subsequent periods to reflect actual forfeitures.
Current deferred The following table summarizes stock-based compensation
tax asset – 1 2 costs for the years ended December 31, 2010, 2009 and 2008.
Property, plant There were no stock-based compensation costs capitalized as
and equipment 63 10 28 the amounts were not material.
Other noncurrent assets 278 275 141
Total $ 1,760 $ 1,569 $ 1,875 2010 2009 2008
Stock-based
The following table presents geographic consolidated compensation costs $ 87 $ 88 $ 60
revenues for the years ended December 31: Tax benefit (18) (15) (11)
Stock-based
2010 2009 2008
compensation costs,
United States $ 6,043 $ 3,091 $ 4,512 net of tax $ 69 $ 73 $ 49
Canada and other 1,186 493 666
North America 7,229 3,584 5,178 For our stock options and restricted stock awards and
Latin America 1,583 1,134 1,127 units, we currently have 25 million shares authorized for issu-
Europe/Africa/ ance and as of December 31, 2010, approximately 8.9 million
Russia Caspian 3,218 2,925 3,386 shares were available for future grants. Our policy is to issue
Middle East/Asia Pacific 2,384 2,021 2,173 new shares for exercises of stock options, when restricted
Total $ 14,414 $ 9,664 $ 11,864 stock awards are granted, at vesting of restricted stock units,
and issuances under the employee stock purchase plan.
The following table presents consolidated revenues for
each group of similar products and services for the years
ended December 31:
2010 2009 2008
Completion and
Production $ 8,547 $ 4,454 $ 5,094
Drilling and Evaluation 4,896 4,516 5,985
Industrial Services
and Other 971 694 785
Total $ 14,414 $ 9,664 $ 11,864
Stock Options The following table presents the changes in stock options
Our stock option plans provide for the issuance of incen- outstanding and related information (in thousands, except per
tive and non-qualified stock options to directors, officers and option prices):
other key employees at an exercise price equal to the fair mar-
ket value of the stock at the date of grant. Although subject Weighted Average
Number of Exercise Price
to the terms of the stock option agreement, substantially all Options Per Option
of the stock options become exercisable in three equal annual
Outstanding at
installments, beginning a year from the date of grant, and
December 31, 2009 5,676 $ 50.16
generally expire ten years from the date of grant. The stock
Granted 1,488 48.38
option plans provide for the acceleration of vesting upon the
Assumed on acquisition
employee’s retirement; therefore, the service period is reduced
of BJ Services 4,840 48.61
for employees that are or will become retirement eligible dur-
Exercised (962) 34.29
ing the vesting period and, accordingly, the recognition of
Forfeited (86) 43.74
compensation expense for these employees is accelerated.
Expired (54) 41.05
Compensation cost related to stock options is recognized on
a straight-line basis over the vesting or service period and is Outstanding at
net of forfeitures. December 31, 2010 10,902 $ 50.72
The fair value of each stock option granted is estimated
using the Black-Scholes option pricing model. The following The total intrinsic value of stock options (defined as the
table presents the weighted average assumptions used in the amount by which the market price of our common stock on
option pricing model for options granted. The expected life the date of exercise exceeds the exercise price of the option)
of the options represents the period of time the options are exercised in 2010, 2009 and 2008 was $18 million, $0.4 mil-
expected to be outstanding. The expected life is based on lion and $13 million, respectively. The income tax benefit real-
our historical exercise trends and post-vest termination data ized from stock options exercised was $0.9 million, $0.1 million
incorporated into a forward-looking stock price model. The and $7 million in 2010, 2009 and 2008, respectively.
expected volatility is based on our implied volatility, which is The total fair value of options vested in 2010, 2009 and
the volatility forecast that is implied by the prices of our actively 2008 was $20 million, $17 million and $17 million, respec-
traded options to purchase our stock observed in the market. tively. As of December 31, 2010, there was $15 million of
The risk-free interest rate is based on the observed U.S. Trea- total unrecognized compensation cost related to nonvested
sury yield curve in effect at the time the options were granted. stock options which is expected to be recognized over a
The dividend yield is based on our history of dividend payouts. weighted average period of two years.
2010 2009 2008
Expected life (years) 5.0 6.0 5.5

Risk-free interest rate 2.2% 2.6% 3.1%
Volatility 39.8% 41.2% 31.4%
Dividend yield 1.2% 1.8% 0.8%
Weighted average
fair value per share
at grant date $ 16.24 $ 12.66 $ 23.64
2010 Form 10-K 45

The following table summarizes information about stock options outstanding as of December 31, 2010 (in thousands, except
per option prices and remaining life):
Outstanding Exercisable
Weighted Average Weighted Weighted Average Weighted

Remaining Contractual Average Exercise Remaining Contractual Average Exercise
Range of Exercise Prices Number of Options Life (In years) Price Per Option Number of Options Life (In years) Price Per Option
$ 14.79 – $ 16.78 3 2.8 $ 15.84 3 2.8 $ 15.84

24.94 – 35.81 2,601 5.6 28.97 2,036 4.9 28.88
39.23 – 56.21 5,272 6.2 47.51 3,061 4.1 49.12
65.11 – 86.50 3,026 4.8 75.07 2,836 4.7 75.18
Total 10,902 5.7 $ 50.72 7,936 4.5 $ 53.22
The total intrinsic value of stock options outstanding at December 31, 2010 was $124 million, of which $82 million relates to
options vested and exercisable. The intrinsic value for stock options outstanding is calculated as the amount by which the quoted
price of $57.17 of our common stock as of the end of 2010 exceeds the exercise price of the options.
Restricted Stock Awards and Units

In addition to stock options, officers, directors and key employees may be granted restricted stock awards (“RSA”), which is an
award of common stock with no exercise price, or restricted stock units (“RSU”), 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 primarily
recognized on a straight-line basis over the vesting or service period and is net of forfeitures.
The following table presents the changes in RSAs and RSUs and related information (in thousands, except per share/unit prices):
RSA Number Weighted Average Grant RSU Number Weighted Average Grant
of Shares Date Fair Value Per Share of Units Date Fair Value Per Unit
Nonvested balance at December 31, 2009 1,516 $ 43.40 594 $ 46.01

Granted 539 47.68 784 47.30
Vested (577) 48.21 (217) 48.36
Forfeited (79) 43.78 (63) 43.74
Nonvested balance at December 31, 2010 1,399 $ 43.05 1,098 $ 46.60
The weighted average grant date fair value per share for RSAs in 2010, 2009 and 2008 was $47.68, $31.18 and $72.82,
respectively. The weighted average grant date fair value per unit for RSUs in 2010, 2009 and 2008 was $47.30, $31.54 and
$75.96, respectively.
The total fair value of RSAs and RSUs vested in 2010, 2009 and 2008 was $36 million, $18 million and $30 million, respectively.
As of December 31, 2010, there was $34 million and $33 million of total unrecognized compensation cost related to nonvested
RSAs and RSUs, respectively, which is expected to be recognized over a weighted average period of two years.
Employee Stock Purchase Plan The geographic sources of income before income taxes are
The Employee Stock Purchase Plan (“ESPP”) provides for as follows for the years ended December 31:
eligible employees to purchase shares on an after-tax basis:
(i) on June 30 of each year at a 15% discount of the fair 2010 2009 2008
market value of our common stock on January 1 or June 30, United States $ 534 $ (18) $ 795
whichever is lower, and (ii) on December 31 of each year at a Foreign 748 629 1,524
15% discount of fair market value of our common stock on Income before income taxes $ 1,282 $ 611 $ 2,319
July 1 or December 31, whichever is lower. An employee may
not purchase more than $5,000 in either of the six-month The provision for income taxes differs from the amount
measurement periods described above or $10,000 annually. computed by applying the U.S. statutory income tax rate to
We currently have 22.5 million shares authorized for issu- income before income taxes for the reasons set forth below
ance under the ESPP, and at December 31, 2010, there were for the years ended December 31:
5.6 million shares reserved for future issuance under the ESPP.
Compensation expense for the years ended December 31, was 2010 2009 2008
calculated using the Black-Scholes option pricing model with Statutory income tax at 35% $ 449 $ 214 $ 812
the following assumptions: Effect of foreign operations (54) (53) (80)
Net tax charge related
2010 2009 2008
to foreign losses 64 38 3
Expected life (years) 1.0 1.0 1.0 Adjustments of prior years
Risk-free interest rate 0.2% 0.3% 3.2% tax positions (35) (26) (50)
Volatility 44.2% 69.5% 32.8% State income taxes –
Dividend yield 1.5% 1.9% 0.6% net of U.S. tax benefit 19 6 19
Other – net 20 11 (20)
Fair value per share
of the 15% cash Provision for income taxes $ 463 $ 190 $ 684
discount $ 6.16 $ 4.81 $ 10.01
Fair value per share Deferred income taxes reflect the net tax effects of tempo-
of the look-back rary differences between the carrying amounts of assets and
provision 4.98 8.44 11.44 liabilities for financial reporting purposes and the amounts
used for income tax purposes, as well as operating loss and
Total weighted average
tax credit carryforwards. The tax effects of our temporary dif-
fair value per share
ferences and carryforwards are as follows at December 31:
at grant date $ 11.14 $ 13.25 $ 21.45
2010 2009
We calculated estimated volatility using historical daily prices
Deferred tax assets:
based on the expected life of the stock purchase plan. The risk-
Receivables $ 37 $ 29
free interest rate is based on the observed U.S. Treasury yield
Inventory 213 233
curve in effect at the time the ESPP shares were granted. The
Property – 51
dividend yield is based on our history of dividend payouts.
Employee benefits 120 131
Other accrued expenses 148 49
NOTE 6. INCOME TAXES
Operating loss carryforwards 186 76
The provision for income taxes is comprised of the follow-
Tax credit carryforwards 329 171
ing for the years ended December 31:
Capitalized research and
2010 2009 2008
development costs 4 8
Other 88 63
Current:
United States $ 179 $ 65 $ 292 Subtotal 1,125 811
Foreign 472 381 413 Valuation allowances (232) (142)
Total current 651 446 705 Total 893 669
Deferred:
Deferred tax liabilities:
United States (107) (210) (14)
Goodwill and other intangibles 578 142
Foreign (81) (46) (7)
Property 377 –
Total deferred (188) (256) (21) Undistributed earnings of
Provision for income taxes $ 463 $ 190 $ 684 foreign subsidiaries 583 64
Other 87 43
Total 1,625 249
Net deferred tax (liability) asset $ (732) $ 420
2010 Form 10-K 47

We record a valuation allowance when it is more likely to be permanently reinvested. These additional foreign earn-
than not that some portion or all of the deferred tax assets ings could become subject to additional tax if remitted, or
will not be realized. The ultimate realization of the deferred deemed remitted, as a dividend. Computation of the potential
tax assets depends on the ability to generate sufficient taxable deferred tax liability associated with these undistributed earn-
income of the appropriate character in the future and in the ings and any other basis differences is not practicable.
appropriate taxing jurisdictions. We have provided a valuation At December 31, 2010, we had approximately $64 million
allowance for operating loss and foreign tax credit carryfor- of foreign tax credits which may be carried forward indefinitely
wards in certain non-U.S. jurisdictions. The majority of the under applicable foreign law and $263 million of foreign tax
$90 million net increase in the valuation allowance in 2010, credits available to offset future payments of U.S. federal
represents net tax charges related to foreign losses. The oper- income taxes, primarily expiring in 2018 through 2020.
ating loss carryforwards without a valuation allowance will In addition, at December 31, 2010, we had approximately
expire in varying amounts over the next twenty years. $2 million of state tax credits expiring in varying amounts
We have provided for U.S. and additional foreign taxes for between 2016 and 2021.
the anticipated repatriation of certain earnings of our foreign As of December 31, 2010, we had $438 million of tax liabili-
subsidiaries. We consider the undistributed earnings of our ties for gross unrecognized tax benefits, which includes liabilities
foreign subsidiaries above the amount for which taxes have for interest and penalties of $96 million and $18 million, respec-
already been provided to be indefinitely reinvested, as we tively. If we were to prevail on all uncertain tax positions, the
have no current intention to repatriate these earnings. As net effect would be a benefit to our effective tax rate of approx-
such, deferred income taxes are not provided for temporary imately $383 million. The remaining approximately $55 million
differences of approximately $2.5 billion, $2.3 billion and is offset by deferred tax assets that represent tax benefits that
$2.2 billion as of December 31, 2010, 2009 and 2008, respec- would be received in different taxing jurisdictions in the event
tively, representing earnings of non-U.S. subsidiaries intended that we did not prevail on all uncertain tax positions.
The following table presents the changes in our unrecognized tax benefits and associated interest and penalties included in the
consolidated balance sheet.
Gross Unrecognized Tax Benefits, Interest and Total Gross

Excluding Interest and Penalties Penalties Unrecognized Tax Benefits
Balance at January 1, 2008 $ 363 $ 94 $ 457

Increase (decrease) in prior year tax positions (7) 10 3
Increase in current year tax positions 17 5 22
Decrease related to settlements with taxing authorities (24) (10) (34)
Decrease related to lapse of statute of limitations (20) (17) (37)
Decrease due to effects of foreign currency translation (6) (4) (10)
Balance at January 1, 2009 323 78 401
Increase (decrease) in prior year tax positions (75) 10 (65)
Increase due to effects of foreign currency translation 1 1 2
Balance at January 1, 2010 250 89 339
Acquisition of BJ Services 102 28 130
Increase (decrease) in prior year tax positions (16) 4 (12)
Increase due to effects of foreign currency translation (3) (4) (7)
Balance at December 31, 2010 $ 324 $ 114 $ 438
It is expected that the amount of unrecognized tax NOTE 8. INVENTORIES
benefits will change in the next twelve months due to Inventories, net of reserves of $322 million and $297 mil-
expiring statutes, audit activity, tax payments, competent lion in 2010 and 2009, respectively, are comprised of the fol-
authority proceedings related to transfer pricing, or final deci- lowing at December 31:
sions in matters that are the subject of litigation in various tax-
ing jurisdictions in which we operate. At December 31, 2010, 2010 2009
we had approximately $239 million of tax liabilities, net of Finished goods $ 2,283 $ 1,570
$40 million of tax assets, related to uncertain tax positions, Work in process 181 126
each of which are individually insignificant, and each of which Raw materials 130 140
are reasonably possible of being settled within the next twelve Total $ 2,594 $ 1,836
months primarily as the result of audit settlements or statute
expirations in several taxing jurisdictions.
At December 31, 2010, approximately $159 million NOTE 9. PROPERTY, PLANT AND EQUIPMENT
of gross unrecognized tax benefits were included in the Property, plant and equipment are comprised of the
non-current portion of our income tax liabilities, for which following at December 31:
the settlement period cannot be determined; however, it is
not expected to be within the next twelve months. Depreciation Period 2010 2009
We operate in over 80 countries and are subject to income Land $ 191 $ 81

taxes in most taxing jurisdictions in which we operate. The Buildings and
following table summarizes the earliest tax years that remain improvements 5–30 years 1,605 1,136
subject to examination by the major taxing jurisdictions in Machinery and
which we operate. These jurisdictions are those we project equipment 3–20 years 6,409 3,384
to have the highest tax liability for 2011. Rental tools and
equipment 1–15 years 2,472 2,228
Earliest Open Earliest Open
Jurisdiction Tax Period Jurisdiction Tax Period
Subtotal 10,677 6,829
Accumulated
Canada 1998 Norway 1999
depreciation (4,367) (3,668)
Germany 2003 United Kingdom 2004
Netherlands 1999 United States 2002 Total $ 6,310 $ 3,161
NOTE 7. EARNINGS PER SHARE

A reconciliation of the number of shares used for the basic
and diluted EPS computations is as follows for the years ended
December 31:
2010 2009 2008
Weighted average
common shares outstanding
for basic EPS 394 310 307
Effect of dilutive securities –
stock plans 1 1 2
Adjusted weighted average
common shares outstanding
for diluted EPS 395 311 309
Future potentially dilutive shares

excluded from diluted EPS:
Options with an exercise price
greater than the average
market price for the period 7 4 2
2010 Form 10-K 49

NOTE 10. GOODWILL AND INTANGIBLE ASSETS
In connection with the change in our reportable segments as discussed in Note 4 – Segment Information, we reallocated the
goodwill that existed as of March 31, 2010 to the new reportable segments on a relative fair value basis. Goodwill of $4,336 million
was recognized for the BJ Services acquisition (See Note 2 – Acquisitions) which has been allocated to our reporting units based on
the provisional amounts recognized for the fair value of the assets acquired and liabilities assumed.
The changes in the carrying amount of goodwill are detailed below by reportable segment.
Europe/ Middle Industrial

Drilling Completion Africa/ East/ Services
and and North Latin Russia Asia and
Evaluation Production America America Caspian Pacific Other Total
Balance as of
December 31, 2009 $ 979 $ 439 $ – $ – $ – $ – $ – $ 1,418
Reallocation for change
in segments (980) (439) 486 173 407 263 90 –
Acquisitions – – 2,229 706 531 629 332 4,427
Other adjustments 1 – 16 – (2) 3 6 24
Balance as of
December 31, 2010 $ – $ – $ 2,731 $ 879 $ 936 $ 895 $ 428 $ 5,869
We perform an annual impairment test of goodwill as of October 1 of every year. There were no impairments of goodwill in
2010, 2009 or 2008 related to the annual impairment test.
Intangible assets are comprised of the following at December 31:
2010 2009
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Net Amount Amortization Net
Definite lived intangibles:

Technology $ 760 $ (181) $ 579 $ 278 $ (141) $ 137
Contract-based 20 (11) 9 13 (9) 4
Trade names 84 (18) 66 36 (13) 23
Customer relationships 495 (39) 456 41 (10) 31
Subtotal 1,359 (249) 1,110 368 (173) 195
Indefinite lived intangibles:
Trade name 360 – 360 – – –
IPR&D 99 – 99 – – –
Total $ 1,818 $ (249) $ 1,569 $ 368 $ (173) $ 195
Intangible assets are amortized either on a straight-line practical. These foreign currency exposures typically arise from
basis with estimated useful lives ranging from 1 to 20 years, changes in the value of assets and liabilities which are denomi-
or on a basis that reflects the pattern in which the economic nated in currencies other than the functional currency. Our
benefits of the intangible assets are expected to be realized, foreign currency forward contracts generally settle within
which range from 15 to 30 years. As a result of the acquisition 90 days. We do not use these forward contracts for trading
of BJ Services, we recognized intangible assets of $1,404 mil- or speculative purposes. We designate these forward contracts
lion (See Note 2 – Acquisitions). as fair value hedging instruments and, accordingly, we record
Amortization expense included in net income for the years the fair value of these contracts as of the end of our reporting
ended December 31, 2010, 2009 and 2008 was $76 million, period to our consolidated balance sheet with changes in fair
$31 million and $20 million, respectively. Estimated amortiza- value recorded in our consolidated statement of operations
tion expense for each of the subsequent five fiscal years is along with the change in fair value of the hedged item.
expected to be as follows: 2011 – $100 million; 2012 – At December 31, 2010 and 2009, we had outstanding for-
$107 million; 2013 – $108 million; 2014 – $107 million; eign currency forward contracts with notional amounts aggre-
and 2015 – $99 million. gating $156 million and $153 million, respectively, to hedge
exposure to currency fluctuations in various foreign currencies.
NOTE 11. FINANCIAL INSTRUMENTS These contracts are designated and qualify as fair value hedg-
ing instruments. The fair value was determined using a model
Fair Value of Financial Instruments with Level 2 inputs including quoted market prices for con-
Our financial instruments include cash and short-term tracts with similar terms and maturity dates.
investments, accounts receivable, accounts payable, debt,
foreign currency forward contracts, foreign currency option Interest Rate Swaps
contracts and interest rate swaps. Except as described below, We are subject to interest rate risk on our debt and invest-
the estimated fair value of such financial instruments at ment of cash and cash equivalents arising in the normal course
December 31, 2010 and 2009 approximates their carrying of our business, as we do not engage in speculative trading
value as reflected in our consolidated balance sheets. The strategies. We maintain an interest rate management strategy,
fair value of our debt, foreign currency forward contracts and which primarily uses a mix of fixed and variable rate debt that
interest rate swaps has been estimated based on quoted year is intended to mitigate the exposure to changes in interest
end market prices. rates in the aggregate for our investment portfolio. In addi-
tion, we are currently using interest rate swaps to manage the
Short-Term Investments economic effect of fixed rate obligations associated with our
During the year ended December 31, 2010, we purchased senior notes so that the interest payable on the senior notes
$250 million of short-term investments consisting of U.S. Trea- effectively becomes linked to variable rates.
sury Bills, which will mature in May of 2011. In June 2009, we entered into two interest rate swap
agreements (“the Swap Agreements”) for a notional amount
Debt of $250 million each in order to hedge changes in the fair
The estimated fair value of total debt at December 31, market value of our $500 million 6.5% senior notes maturing
2010 and 2009 was $4,298 million and $2,126 million, on November 15, 2013. Under the Swap Agreements, we
respectively, which differs from the carrying amounts of receive interest at a fixed rate of 6.5% and pay interest at a
$3,885 million and $1,800 million, respectively, included floating rate of one-month Libor plus a spread of 3.67% on
in our consolidated balance sheets. one swap and three-month Libor plus a spread of 3.54% on
the second swap both through November 15, 2013. The coun-
Foreign Currency Forward Contracts terparties are primarily the lenders in our credit facilities. The
We conduct our business in over 80 countries around Swap Agreements are designated and each qualifies as a fair
the world, and we are exposed to market risks resulting from value hedging instrument. The swap to three-month Libor is
fluctuations in foreign currency exchange rates. A number of deemed to be 100 percent effective resulting in no gain or
our significant foreign subsidiaries have designated the local loss recorded in the consolidated statement of operations.
currency as their functional currency. We transact in various The effectiveness of the swap to one-month Libor, which is
foreign currencies and have established a program that primar- highly effective, is calculated as of each period end and any
ily utilizes foreign currency forward contracts to reduce the ineffective portion is recognized in the consolidated statement
risks associated with the effects of certain foreign currency of operations. The fair value of the Swap Agreements was
exposures. Under this program, our strategy is to have gains determined using a model with Level 2 inputs including
or losses on the foreign currency forward contracts mitigate quoted market prices for contracts with similar terms and
the foreign currency transaction gains or losses to the extent maturity dates.
2010 Form 10-K 51

Fair Value of Derivative Instruments
The fair value of derivative instruments included in our consolidated balance sheet was as follows as of December 31:
2010 2009
Derivative Balance Sheet Location Fair Value
Foreign Currency Forward Contracts Other accrued liabilities $ 2 $ 1

Interest Rate Swaps Other assets 24 7
The effects of derivative instruments in our consolidated statement of operations were as follows for the year ended December 31
(amounts exclude any income tax effects):
Amount of Gain (Loss) Recognized in Income
Derivative Statement of Operations Location 2010 2009
Foreign Currency Forward Contracts Marketing, general and administrative $ (7) $ 11

Interest Rate Swaps Interest expense $ 16 $ 6
Concentration of Credit Risk and generally do not require collateral for our accounts receiv-
We sell our products and services to numerous companies able. In some cases, we will require payment in advance or
in the oil and natural gas industry. Although this concentration security in the form of a letter of credit or bank guarantee.
could affect our overall exposure to credit risk, we believe that We maintain cash deposits with financial institutions that
our risk is minimized since the majority of our business is con- may exceed federally insured limits. We monitor the credit rat-
ducted with major companies within the industry. We perform ings and our concentration of risk with these financial institu-
periodic credit evaluations of our customers’ financial condition tions on a continuing basis to safeguard our cash deposits.
NOTE 12. INDEBTEDNESS

Total debt consisted of the following at December 31, net of unamortized discount and debt issuance costs:
2010 2009
5.75% Notes due June 2011 with an effective interest rate of 5.86% $ 254 $ –
6.50% Senior Notes due November 2013 with an effective interest rate of 6.73% 522 504
6.00% Notes due June 2018 with an effective interest rate of 6.29% 267 –
7.50% Senior Notes due November 2018 with an effective interest rate of 7.61% 742 741
8.55% Debentures due June 2024 with an effective interest rate of 8.76% 148 148
6.875% Notes due January 2029 with an effective interest rate of 7.08% 393 392
5.125% Notes due September 2040 with an effective interest rate of 5.22% 1,479 –
Other debt 80 15
Total debt 3,885 1,800
Less short-term debt and current maturities of long-term debt 331 15
Long-term debt $ 3,554 $ 1,785
On March 19, 2010, we entered into a credit agreement occurrence of certain events of default, our obligations
(the “2010 Credit Agreement”). The 2010 Credit Agreement under the facilities may be accelerated. Such events of default
is a three-year committed $1.2 billion revolving credit facility include payment defaults to lenders under the facilities, cove-
that expires on March 19, 2013. At December 31, 2010, we nant defaults and other customary defaults. At December 31,
had $1.7 billion of committed revolving credit facilities with 2010, we were in compliance with all of the covenants of
commercial banks, consisting of the 2010 Credit Agreement both committed credit facilities. There were no direct borrow-
($1.2 billion) and a $500 million facility expiring on July 7, ings under the committed credit facilities during 2010. We
2012. Both facilities contain certain covenants which, among also have an outstanding commercial paper program under
other things, require the maintenance of a funded indebted- which we may issue from time to time up to $1.0 billion in
ness to total capitalization ratio (a defined formula per each commercial paper with maturity of no more than 270 days. To
agreement), restrict certain merger transactions or the sale of the extent we have commercial paper outstanding, our ability
all or substantially all of our assets or a significant subsidiary to borrow under the facilities is reduced. At December 31,
and limit the amount of subsidiary indebtedness. Upon the 2010, we had no outstanding commercial paper.
Concurrent with the acquisition of BJ Services, our acquisi- NOTE 13. EMPLOYEE BENEFIT PLANS
tion subsidiary assumed and guaranteed the BJ Services out-
standing notes, namely its $250 million principal amount DEFINED BENEFIT PLANS
of 5.75% senior notes due June 2011 and its $250 million We have both funded and unfunded noncontributory
principal amount of 6.00% senior notes due June 2018. defined benefit pension plans (“Pension Benefits”) covering
On August 24, 2010, we sold $1,500 million of certain employees primarily in the U.S., Canada, the U.K., Ger-
5.125% Senior Notes that will mature September 15, 2040 many and several other countries in the Middle East and Asia
(the “Notes”) under our Indenture dated as of October 28, Pacific region. Under the provisions of the U.S. qualified pen-
2008. Net proceeds from the offering were approximately sion plan, a hypothetical cash balance account is established
$1,479 million after deducting the underwriting discounts and for each participant. Such accounts receive pay credits on a
expenses of the offering. We used $511 million of the net pro- quarterly basis. The quarterly pay credit is based on a percent-
ceeds to repay our outstanding commercial paper. We will use age according to the employee’s age on the last day of the
$250 million of the net proceeds to purchase U.S. Treasury quarter applied to quarterly eligible compensation. In addition
Bills, which will be used to repay the BJ Services 5.75% senior to quarterly pay credits, a cash balance account receives inter-
notes maturing June 2011. The remaining net proceeds from est credits based on the balance in the account on the last day
the offering were used for general corporate purposes. Interest of the quarter. The U.S. qualified pension plan also includes
on the Notes is payable March 15 and September 15 of each frozen accrued benefits for participants in legacy defined ben-
year. The first interest payment will be made on March 15, efit plans. The Canada pension plan was frozen as of Decem-
2011, and will consist of accrued interest from August 24, ber 31, 2010, and we no longer accrue on a defined benefit
2010. The Notes are senior unsecured obligations and rank basis. For the majority of the participants in the U.K. pension
equal in right of payment to all of our existing and future plans, we do not accrue benefits as the plans are frozen; how-
senior indebtedness; senior in right of payment to any future ever, there are a limited number of members who still accrue
subordinated indebtedness; and effectively junior to our future future benefits on a defined benefit basis. The Germany pen-
secured indebtedness, if any, and structurally subordinated to sion plan is an unfunded plan where benefits are based on
all existing and future indebtedness of our subsidiaries. We creditable years of service, creditable pay and accrual rates.
may redeem, at our option, all or part of the Notes at any We also provide certain postretirement health care benefits
time, at the applicable make-whole redemption prices plus (“other postretirement benefits”), through an unfunded plan,
accrued and unpaid interest to the date of redemption. to substantially all U.S. employees who retire and have met
Maturities of debt at December 31, 2010 are as certain age and service requirements.
follows: 2011 – $331 million; 2012 – $3 million; 2013 –
$522 million; 2014 – $0 million; 2015 – $0 Million; and
$3,029 million thereafter.
2010 Form 10-K 53

Funded Status
Below is the reconciliation of the beginning and ending balances of benefit obligations, fair value of plan assets and the funded
status of our plans. For our pension plans, the benefit obligation is the projected benefit obligation (“PBO”) and for our other post-
retirement benefit plan, the benefit obligation is the accumulated postretirement benefit obligation (“APBO”).
U.S. Pension Benefits Non-U.S. Pension Benefits Other Postretirement Benefits
2010 2009 2010 2009 2010 2009
Change in benefit obligation:

Benefit obligation at beginning of year $ 375 $ 303 $ 327 $ 227 $ 157 $ 158
Service cost 32 29 8 3 10 8
Interest cost 22 20 26 15 9 10
Actuarial loss (gain) 31 51 4 49 10 (1)
Benefits paid (47) (19) (12) (7) (15) (13)
Curtailment – (9) (1) (1) – (5)
Acquisitions of businesses 34 – 253 – 27 –
Plan amendments – – – – (32) –
Other (3) – 2 18 – –
Exchange rate adjustments – – (14) 23 – –
Benefit obligation at end of year 444 375 593 327 166 157
Change in plan assets:
Fair value of plan assets at beginning of year 346 290 248 197 – –
Actual return on plan assets 48 77 36 24 – –
Employer contributions 72 2 52 13 15 13
Benefits paid (47) (19) (12) (7) (15) (13)
Acquisitions of businesses – – 160 – – –
Other (3) (4) 1 (1) – –
Exchange rate adjustments – – (11) 22 – –
Fair value of plan assets at end of year 416 346 474 248 – –
Funded status – underfunded at end of year $ (28) $ (29) $ (119) $ (79) $ (166) $ (157)
Accumulated benefit obligation $ 421 $ 366 $ 553 $ 313 $ 166 $ 157
The amounts recognized in the consolidated balance sheet consist of the following as of December 31:
2010 2009 2010 2009 2010 2009
Noncurrent assets $ – $ – $ 10 $ – $ – $ –
Current liabilities (3) (2) (5) (4) (16) (18)
Noncurrent liabilities (25) (27) (124) (75) (150) (139)
Net amount recognized $ (28) $ (29) $ (119) $ (79) $ (166) $ (157)
The funded status position represents the difference between the benefit obligation and the plan assets. The PBO for pension
benefits represents the actuarial present value of benefits attributed to employee services and compensation and includes an
assumption about future compensation levels. The accumulated benefit obligation (“ABO”) is the actuarial present value of pension
benefits attributed to employee service to date and present compensation levels. The ABO differs from the PBO in that the ABO
does not include any assumptions about future compensation levels.
Information for the plans with ABOs in excess of plan assets is as follows at December 31:
2010 2009 2010 2009 2010 2009
Projected benefit obligation $ 20 $ 375 $ 331 $ 327 n/a n/a

Accumulated benefit obligation 20 366 294 313 $ 166 $ 157
Fair value of plan assets – 346 203 248 n/a n/a
Weighted average assumptions used to determine benefit obligations for these plans are as follows for the years ended December 31:
2010 2009 2010 2009 2010 2009
Discount rate 4.9% 5.9% 5.5% 5.6% 4.9% 5.9%

Rate of compensation increase 5.4% 4.0% 4.3% 4.1% n/a n/a
Social security increase 2.8% 3.5% 2.9% 3.1% n/a n/a
The development of the discount rate for our U.S. plans was based on a bond matching model whereby a hypothetical bond
portfolio of high-quality, fixed-income securities is selected that will match the cash flows underlying the projected benefit obliga-
tion. The discount rate assumption for our non-U.S. plans reflects the market rate for high-quality, fixed-income securities.
Accumulated Other Comprehensive Loss

The amounts recognized in accumulated other comprehensive loss consist of the following as of December 31:
2010 2009 2010 2009 2010 2009
Net loss $ 149 $ 150 $ 114 $ 132 $ 10 $ –

Net prior service cost (credit) 3 3 – – (31) 2
Total $ 152 $ 153 $ 114 $ 132 $ (21) $ 2
The estimated net loss and prior service cost for the defined benefit pension plans that will be amortized from accumulated
other comprehensive loss into net periodic benefit cost over the next fiscal year are $14 million and $1 million, respectively. The esti-
mated prior service credit for the other postretirement benefits that will be amortized from accumulated other comprehensive loss
into net periodic benefit cost over the next fiscal year is $2 million.
Net Periodic Benefit Costs

The components of net periodic cost (benefit) are as follows for the years ended December 31:
2010 2009 2008 2010 2009 2008 2010 2009 2008
Service cost $ 32 $ 29 $ 30 $ 8 $ 3 $ 2 $ 10 $ 8 $ 8
Interest cost 22 20 17 26 15 17 9 10 9
Expected return on plan assets (28) (25) (38) (23) (15) (20) – – –
Amortization of prior service cost – 1 – – – – 1 1 1
Amortization of net loss 11 14 1 4 2 1 – – –
Curtailment – 1 – (1) – – – – –
Other – 3 – – (1) (2) – – –
Net periodic cost (benefit) $ 37 $ 43 $ 10 $ 14 $ 4 $ (2) $ 20 $ 19 $ 18
Weighted average assumptions used to determine net periodic benefit costs for these plans are as follows for the years ended
December 31:
2010 2009 2008 2010 2009 2008 2010 2009 2008
Discount rate 5.9% 6.3% 6.3% 5.6% 6.4% 5.7% 5.9% 6.3% 6.3%
Expected long-term
return on plan assets 7.8% 8.5% 8.5% 6.6% 7.2% 7.2% n/a n/a n/a
Rate of compensation increase 4.0% 4.0% 4.0% 4.2% 4.0% 4.1% n/a n/a n/a
Social security increase 3.5% 3.5% 3.5% 3.2% 3.1% 3.1% n/a n/a n/a
In selecting the expected rate of return on plan assets, we consider the average rate of earnings expected on the funds invested
or to be invested to provide for the benefits of these plans. This includes considering the trusts’ asset allocation and the expected
returns likely to be earned over the life of the plans.
2010 Form 10-K 55

Health Care Cost Trend Rates Plan Assets – U.S. Pension Plan
Assumed health care cost trend rates have a significant We have investment committees that meet regularly to
effect on the amounts reported for other postretirement bene- review the portfolio returns and to determine asset-mix targets
fits. As of December 31, 2010, the health care cost trend rate based on asset/liability studies. Third-party investment consul-
was 8.0% for employees under age 65 and 6.5% for partici- tants assist us in developing asset allocation strategies to
pants over age 65, with each declining gradually each succes- determine our expected rates of return and expected risk for
sive year until it reaches 4.5% for both employees under age various investment portfolios. The investment committees con-
65 and over age 65 in 2021. A one percentage point change sidered these strategies in the formal establishment of the cur-
in assumed health care cost trend rates would have had the rent asset-mix targets based on the projected risk and return
following effects on 2010: levels for all major asset classes.
The investment policy of the U.S. pension plan (the “U.S.
One Percentage One Percentage Plan”) was developed after examining the historical relation-
Point Increase Point Decrease
ships of risk and return among asset classes and the relation-
Effect on total of service and ship between the expected behavior of the U.S. Plan’s assets
interest cost components $ 0.3 $ (0.3) and liabilities. The investment policy of the U.S. Plan is
Effect on postretirement welfare designed to provide the greatest probability of meeting or
benefit obligation 5.9 (5.6) exceeding the U.S. Plan’s objectives at the lowest possible risk.
In establishing its risk tolerance, the investment committee
for the U.S. Plan (“U.S. Committee”) considers its ability to
withstand short-term and intermediate-term volatility in mar-
ket conditions. The U.S. Committee also reviews the long-term
characteristics of various asset classes, focusing on balancing
risk with expected return. Accordingly, the U.S. Committee
selected the following four asset classes as allowable invest-
ments for the assets of the U.S. Plan: U.S. equities, Real Estate,
U.S. fixed-income securities, and non-U.S. equities.
The table below presents the fair values of the assets in the U.S. Plan by asset category and by levels of fair value as of December 31:
2010 2009
Total Total
Asset Category Asset Value Level One Level Two Level Three Asset Value Level One Level Two Level Three
Cash and Cash Equivalents $ 95 $ – $ 95 $ – $ – $ – $ – $ –

Fixed Income (a) 99 – 99 – 95 – 95 –
Non-U.S. Equity (b) 93 – 93 – 78 – 78 –
U.S. Small Cap Equity (c) 50 – 50 – 55 – 55 –
S&P 500 Index Fund (d) 1 – 1 – 48 – 48 –
U.S. Large Cap Growth Equity (e) 34 – 34 – 30 – 30 –
U.S. Large Cap Value Equity (f) 26 – 26 – 23 – 23 –
Real Estate Fund (g) 14 – – 14 13 – – 13
Real Estate Investment Trust Equity 4 – 4 – 4 – 4 –
Total $ 416 $ – $ 402 $ 14 $ 346 $ – $ 333 $ 13
(a) A pooled fund with a strategy of investing in fixed income securities. The current allocation includes: 35% in corporate bonds; 24% in government bonds;
16% in government agencies; 10% in asset-backed securities; 8% in government mortgage-backed securities; and 7% in cash.
(b) Multi-manager strategy investing in common stocks of non-U.S. listed companies using both value and growth approaches.
(c) Multi-manager strategy investing in common stocks of smaller U.S. listed companies using both value and growth approaches.
(d) A passively managed commingled fund investing in common stocks of the S&P 500 Index.
(e) Multi-manager growth strategy investing in common stocks of U.S. listed, large capitalization companies.
(f) Multi-manager value strategy investing in common stocks of U.S. listed, large capitalization companies.
(g) Commingled fund investing in a diversified portfolio of U.S. based properties. The current allocation includes: 30% Apartments, 27% Office, 24% Retail,
11% Industrial and 8% Hotel.
Plan Assets – Non-U.S. Pension Plans

The investment policies of our pension plans with plan assets, which are primarily in Canada and the U.K., (the “Non-U.S.
Plans”) cover the asset allocations that the governing boards believe are the most appropriate for these Non-U.S. Plans in the long
term, taking into account the nature of the liabilities they expect to incur. The suitability of asset allocations and investment policies
are reviewed periodically to ensure alignment with plan liabilities.
The table below presents the fair values of the assets in our Non-U.S. Plans by asset category and by levels of fair value as of
December 31:
2010 2009
Total Total
Asset Category Asset Value Level One Level Two Level Three Asset Value Level One Level Two Level Three
Cash and Cash Equivalents $ 31 $ – $ 31 $ – $ 10 $ – $ 10 $ –

Asset Allocation (a) 80 – 80 – – – – –
Bonds – U.K. – Corporate (b) 40 – 40 – 39 – 39 –
Bonds – U.K. – Government(c) 114 – 114 – 51 – 51 –
Equities (d) 174 – 174 – 122 – 122 –
Property – U.K.(e) 19 – – 19 19 – – 19
Insurance contracts 16 – – 16 7 – – 7
Total $ 474 $ – $ 439 $ 35 $ 248 $ – $ 222 $ 26
(a) Invests in mixes of global common stocks and bonds to achieve broad diversification.
(b) Invests passively in Sterling-denominated investment grade corporate bonds.
(c) Invests passively in Sterling-denominated government issued bonds.
(d) Invests in broad equity funds based on securities offered in various regions or countries. Equity funds are allocated by region as follows: 47% Global, 25% U.K.,
8% North America, 8% Asia Pacific, 7% Europe, excluding the U.K., 3% U.S., and 2% Canada Small Cap.
(e) Invests in a diversified range of property throughout the U.K., principally in the retail, office and industrial/warehouse sectors.
2010 Form 10-K 57

The following table presents the changes in the fair value of assets using Level 3 unobservable inputs:
Non-U.S. Non-U.S.
U.S. Property Fund Property Fund Insurance Contracts Total
Beginning balance at January 1, 2009 $ 19 $ 18 $ 7 $ 44

Unrealized gains (losses) (6) 1 1 (4)
Net sales – – (1) (1)
Ending balance at December 31, 2009 $ 13 $ 19 $ 7 $ 39
Unrealized gains 1 – – 1
Net purchases – – 9 9
Ending balance at December 31, 2010 $ 14 $ 19 $ 16 $ 49
Expected Cash Flows DEFINED CONTRIBUTION PLANS

For all pension plans, we make annual contributions to the During the periods reported, generally all of our U.S.
plans in amounts equal to or greater than amounts necessary employees were eligible to participate in our sponsored Thrift
to meet minimum governmental funding requirements. In Plans, which are 401(k) plans under the Internal Revenue Code
2011, we expect to contribute between $40 million and of 1986, as amended (“the Code”). The Thrift Plans allow eli-
$50 million to our U.S. pension plans and between $25 million gible employees to elect to contribute portions of their salaries
and $35 million to the non-U.S. pension plans. In 2011, we to an investment trust. Employee contributions are matched by
also expect to make benefit payments related to postretire- the Company in cash at the rate of $1.00 per $1.00 employee
ment welfare plans of between $16 million and $18 million. contribution for the first 5% to 6% of the employee’s salary
The following table presents the expected benefit pay- and such contributions vest immediately. In addition, we make
ments over the next ten years. The U.S. and non-U.S. pension cash contributions for all eligible employees between 2% and
benefit payments are made by the respective pension trust 5% of their salary depending on the employee’s age. Such
funds. The other postretirement benefits are net of expected contributions are fully vested to the employee after three years
Medicare subsidies of approximately $2 million per year and of employment. The Thrift Plans provide several investment
are payments that are expected to be made by us. options, for which the employee has sole investment discre-
tion. The Thrift Plans do not offer Baker Hughes common
U.S. Non-U.S. Other stock as an investment option. Our contributions to the Thrift
Pension Pension Postretirement
Year Benefits Benefits Benefits
Plans and several other non-U.S. defined contribution plans
amounted to $169 million, $129 million and $137 million in
2011 $ 24 $ 15 $ 17
2010, 2009 and 2008, respectively.
2012 27 15 16
For certain non-U.S. employees who are not eligible
2013 30 17 16
to participate in the Thrift Plan, we provide a non-qualified
2014 33 19 16
defined contribution plan that provides basically the same ben-
2015 36 21 17
efits as the Thrift Plan. In addition, we provide a non-qualified
2016–2020 220 121 90
supplemental retirement plan (“SRP”) for certain officers and
employees whose benefits under the Thrift Plan and/or the
U.S. defined benefit pension plan are limited by federal tax
law. The SRP also allows the eligible employees to defer a por-
tion of their eligible compensation and provides for employer
matching and base contributions pursuant to limitations. Both
non-qualified plans are invested through trusts, and the assets
and corresponding liabilities are included in our consolidated
balance sheet. Our contributions to these non-qualified plans
were $11 million, $11 million and $9 million for 2010, 2009
and 2008, respectively.
In 2011, we estimate we will contribute between
$185 million and $200 million to our defined contribution
plans, which is an increase from prior years due to the
acquisition of BJ Services.
POSTEMPLOYMENT BENEFITS BJ Services Acquisition Related Stockholder Lawsuits
We provide certain postemployment disability income, The stockholder lawsuits filed in connection with the BJ
medical and other benefits to substantially all qualifying Services acquisition have been settled. On July 15, 2010, the
former or inactive U.S. employees. Income benefits for long- Delaware Chancery Court certified the Class of BJ Services
term disability are provided through a fully-insured plan. The stockholders, approved the settlement terms, awarded $500,000
continuation of medical and other benefits while on disability in attorneys’ fees and $36,000 in costs to the Class counsel,
(“Continuation Benefits”) are provided through a qualified and entered a Final Judgment dismissing all of the Class claims
self-insured plan. The accrued postemployment liability for with prejudice, In re: BJ Services Company Shareholders Litiga-
Continuation Benefits at December 31, 2010 and 2009 was tion, C.A. No. 4851-VCN. On July 23, 2010, the 80th Judicial
$15 million and $13 million, respectively, and is included in District Court of Harris County, Texas, entered a Final Judgment
other liabilities in our consolidated balance sheet. dismissing the plaintiff’s claims with prejudice in the consolidated
actions styled as Garden City Employees’ Retirement System,
NOTE 14. COMMITMENTS AND CONTINGENCIES et al. v. BJ Services Company, et al., Cause No. 2009-57320,
80th Judicial District Court of Harris County, Texas.
Leases
At December 31, 2010, we had long-term non-cancelable Customer Claim
operating leases covering certain facilities and equipment. The On November 19, 2009, BJ Services received correspon-
minimum annual rental commitments, net of amounts due dence from a customer operating in the North Sea, claiming
under subleases, for each of the five years in the period ending that BJ Services’ decision to move a stimulation vessel out of
December 31, 2015 are $186 million, $135 million, $93 mil- the North Sea market constituted a breach of contract. The
lion, $67 million and $49 million, respectively, and $151 million customer alleges that it was forced to purchase well stimula-
in the aggregate thereafter. Rent expense, which generally tion services from other providers at a higher cost than in the
includes vessels, transportation equipment and warehouse original agreement between the customer and BJ Services.
facilities, was $355 million, $241 million and $227 million for The customer further alleges that it has incurred actual and
the years ended December 31, 2010, 2009 and 2008, respec- estimated future damages of $38 million. The customer has
tively. We have not entered into any significant capital leases initiated a request for arbitration and we are responding
during the three years ended December 31, 2010. accordingly. We believe that this claim is without merit, and
we intend to vigorously defend ourselves in this matter based
Litigation on the information available to us at this time. We do not
We are involved in litigation or proceedings that have expect the outcome of this matter to have a material adverse
arisen in our ordinary business activities. We insure against effect on our consolidated financial statements; however, there
these risks to the extent deemed prudent by our management can be no assurance as to the ultimate outcome of this matter.
and to the extent insurance is available, but no assurance can
be given that the nature and amount of that insurance will be Environmental Matters
sufficient to fully indemnify us against liabilities arising out of Our past and present operations include activities which
pending and future legal proceedings. Many of these insur- are subject to extensive domestic (including U.S. federal, state
ance policies contain deductibles or self-insured retentions in and local) and international environmental regulations with
amounts we deem prudent and for which we are responsible regard to air, land and water quality and other environmental
for payment. In determining the amount of self-insurance, it is matters. Our environmental procedures, policies and practices
our policy to self-insure those losses that are predictable, mea- are designed to ensure compliance with existing laws and reg-
surable and recurring in nature, such as claims for automobile ulations and to minimize the possibility of significant environ-
liability, general liability and workers compensation. The accru- mental damage.
als for losses are calculated by estimating losses for claims We are involved in voluntary remediation projects at some
using historical claim data, specific loss development factors of our present and former manufacturing locations or other
and other information as necessary. facilities, the majority of which relate to properties obtained
in acquisitions or to sites no longer actively used in operations.
On rare occasions, remediation activities are conducted as
specified by a government agency-issued consent decree or
agreed order. Remediation costs are accrued based on estimates
of probable exposure using currently available facts, existing
environmental permits, technology and presently enacted laws
and regulations. Remediation cost estimates include direct costs
related to the environmental investigation, external consulting
activities, governmental oversight fees, treatment equipment
and costs associated with long-term operation, maintenance
and monitoring of a remediation project.
2010 Form 10-K 59

We have also been identified as a potentially responsible Other
party (“PRP”) in remedial activities related to various Super- In connection with the settlement of litigation with
fund sites. We participate in the process set out in the Joint ReedHycalog, in June 2008, the Company paid ReedHycalog
Participation and Defense Agreement to negotiate with gov- $70 million in royalties for prior use of certain patented tech-
ernment agencies, identify other PRPs, determine each PRP’s nologies, and ReedHycalog paid the Company $8 million in
allocation and estimate remediation costs. We have accrued royalties for the license of certain Company patented technol-
what we believe to be our pro-rata share of the total esti- ogies. The net pre-tax charge of $62 million for the settlement
mated cost of remediation and associated management of of this litigation is reflected in the 2008 consolidated state-
these Superfund sites. This share is based upon the ratio that ment of operations.
the estimated volume of waste we contributed to the site In the normal course of business with customers, vendors
bears to the total estimated volume of waste disposed at the and others, we have entered into off-balance sheet arrange-
site. Applicable United States federal law imposes joint and ments, such as letters of credit and other bank issued guaran-
several liability on each PRP for the cleanup of these sites leav- tees, which totaled approximately $1.16 billion at December 31,
ing us with the uncertainty that we may be responsible for the 2010. We also had commitments outstanding for purchase
remediation cost attributable to other PRPs who are unable to obligations related to capital expenditures and inventory under
pay their share. No accrual has been made under the joint and purchase orders and contracts of approximately $264 million
several liability concept for those Superfund sites where our at December 31, 2010. It is not practicable to estimate the fair
participation is de minimis since we believe that the probability value of these financial instruments. None of the off-balance
that we will have to pay material costs above our volumetric sheet arrangements either has, or is likely to have, a material
share is remote. We believe there are other PRPs who have effect on our consolidated financial statements.
greater involvement on a volumetric calculation basis, who
have substantial assets and who may be reasonably expected
to pay their share of the cost of remediation. For those Super-
fund sites where we are a significant PRP, remediation costs
are estimated to include recalcitrant parties. In some cases,
we have insurance coverage or contractual indemnities from
third parties to cover a portion of the ultimate liability.
Our total accrual for environmental remediation is $32 mil-
lion and $18 million, which includes accruals of $7 million and
$6 million for the various Superfund sites, at December 31,
2010 and 2009, respectively. Approximately $11 million of our
total environmental accrual at December 31, 2010 relates to
properties or liabilities acquired in connection with the BJ Ser-
vices acquisition. The determination of the required accruals
for remediation costs is subject to uncertainty, including the
evolving nature of environmental regulations and the difficulty
in estimating the extent and type of remediation activity that is
necessary. We believe that the likelihood of material losses in
excess of the amounts accrued is remote.
NOTE 15. ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table presents the changes in accumulated other comprehensive loss, net of tax:
Pensions and Foreign Accumulated

Other Currency Other
Postretirement Translation Comprehensive
Benefits Adjustments Loss
Balance at December 31, 2008 $ (181) $ (342) $ (523)

Translation adjustments – 122 122
Amortization of prior service cost 1 – 1
Amortization of actuarial net loss 16 – 16
Actuarial net losses arising in the year (22) – (22)
Effect of exchange rate (10) – (10)
Deferred taxes 2 – 2
Balance at December 31, 2009 (194) (220) (414)
Translation adjustments – (41) (41)
Amortization of prior service cost 1 – 1
Amortization of actuarial net loss 14 – 14
Actuarial net gains arising in the year 20 – 20
Effect of exchange rate 5 – 5
Deferred taxes (5) – (5)
Balance at December 31, 2010 $ (159) $ (261) $ (420)
NOTE 16. QUARTERLY DATA (UNAUDITED)
First Quarter Second Quarter Third Quarter Fourth Quarter Total Year
2010
Revenues $ 2,539 $ 3,374 $ 4,078 $ 4,423 $ 14,414
Gross profit (1) 533 600 771 897 2,801
Net income attributable to Baker Hughes 129 93 255 335 812
Basic earnings per share of Baker Hughes 0.41 0.23 0.59 0.78 2.06
Diluted earnings per share of Baker Hughes 0.41 0.23 0.59 0.77 2.06
Dividends per share 0.15 0.15 0.15 0.15 0.60
Common stock market prices:
High 51.86 54.18 50.23 57.17
Low 41.24 35.87 37.58 42.82
2009
Revenues $ 2,668 $ 2,336 $ 2,232 $ 2,428 $ 9,664
Gross profit (1) 599 437 383 451 1,870
Net income attributable to Baker Hughes 195 87 55 84 421
Basic earnings per share of Baker Hughes 0.63 0.28 0.18 0.27 1.36
Diluted earnings per share of Baker Hughes 0.63 0.28 0.18 0.27 1.36
Dividends per share 0.15 0.15 0.15 0.15 0.60
Common stock market prices:
High 38.08 42.33 44.01 47.67
Low 26.58 29.22 33.41 38.04
(1) Represents revenues less cost of sales, cost of services and research and engineering.
2010 Form 10-K 61

ITEM 9. CHANGES IN AND DISAGREEMENTS Changes in Internal Control Over Financial Reporting
WITH ACCOUNTANTS ON ACCOUNTING AND There has been no change in our internal controls over
FINANCIAL DISCLOSURE financial reporting during the quarter ended December 31,
None. 2010 that has materially affected, or is reasonably likely to
materially affect, our internal controls over financial reporting.
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this annual report, Item 5.02(b). Departure of Directors or Certain Officers;
we have evaluated the effectiveness of the design and opera- Election of Directors; Appointment of Certain Officers;
tion of our disclosure controls and procedures pursuant to Compensatory Arrangements of Certain Officers.
Rule 13a-15 of the Exchange Act of 1934, as amended (the
“Exchange Act”). This evaluation was carried out under the Item 5.03(a). Amendments to Articles of Incorporation
supervision and with the participation of our management, or Bylaws; Changes in Fiscal Year.
including our principal executive officer and principal financial On February 24, 2011, the Board of Directors amended
officer. Based on this evaluation, these officers have concluded Article III, Section 1 of the Company’s Bylaws to decrease
that, as of December 31, 2010, our disclosure controls and the authorized number of directors from thirteen to eleven,
procedures, as defined by Rule 13a-15(e) of the Exchange effective April 28, 2011, which will eliminate the vacancies on
Act, are effective at a reasonable assurance level. the Board of Directors that will result from the retirement of
On April 28, 2010, the Company acquired BJ Services. Messrs. Edward P. Djerejian and James L. Payne as directors of
For purposes of determining the effectiveness of our disclosure the Company following the Company’s 2011 annual meeting
controls and procedures and any change in our internal con- of stockholders. Because this Annual Report on Form 10-K is
trol over financial reporting, management has excluded BJ being filed within four business days from February 24, 2011,
Services from its evaluation of these matters. The acquired the retirement of Messrs. Edward P. Djerejian and James L.
business represented approximately 46% of our consolidated Payne and the restatement of the Bylaws are being disclosed
total assets at December 31, 2010 and approximately 36% of hereunder rather than under Items 5.02(b) and 5.03(a) of
our consolidated net income attributable to Baker Hughes for Form 8-K. The restated Bylaws are attached hereto and
the year ended December 31, 2010. incorporated by reference as Exhibits 3.3 and 4.4.
Disclosure controls and procedures are our controls and
other procedures that are designed to ensure that information PART III
required to be disclosed by us in the reports that we file or
submit under the Exchange Act, such as this annual report, is ITEM 10. DIRECTORS, EXECUTIVE OFFICERS
recorded, processed, summarized and reported within the time AND CORPORATE GOVERNANCE
periods specified in the SEC’s rules and forms. Disclosure con- Information regarding the Business Code of Conduct and
trols and procedures include, without limitation, controls and Code of Ethical Conduct Certificates for our principal executive
procedures designed to ensure that information required to be officer, principal financial officer and principal accounting offi-
disclosed by us in the reports that we file under the Exchange cer are described in Item 1. Business of this Annual Report.
Act is accumulated and communicated to our management, Information concerning our directors is set forth in the sec-
including our principal executive officer and principal financial tions entitled “Proposal No. 1, Election of Directors,” and
officer, as appropriate, to allow timely decisions regarding “Corporate Governance – Committees of the Board – Audit/
required disclosure. Ethics Committee” in our Definitive Proxy Statement for the
2011 Annual Meeting of Stockholders to be filed with the SEC
Design and Evaluation of Internal Control Over pursuant to the Exchange Act within 120 days of the end of
Financial Reporting our fiscal year on December 31, 2010 (“Proxy Statement”),
Pursuant to Section 404 of the Sarbanes-Oxley Act of which sections are incorporated herein by reference. For infor-
2002, our management included a report of their assessment mation regarding our executive officers, see “Item 1. Business –
of the design and effectiveness of our internal controls over Executive Officers” in this Annual Report on Form 10-K.
financial reporting as part of this Annual Report on Form 10-K Additional information regarding compliance by directors and
for the fiscal year ended December 31, 2010. Deloitte & Tou- executive officers with Section 16(a) of the Exchange Act is set
che LLP, the Company’s independent registered public account- forth under the section entitled “Compliance with Section
ing firm, has issued an attestation report on the effectiveness 16(a) of the Securities Exchange Act of 1934” in our Proxy
of the Company’s internal control over financial reporting. Statement, which section is incorporated herein by reference.
Management’s report and the independent registered public For information concerning our Business Code of Conduct
accounting firm’s attestation report are included in Item 8 and Code of Ethical Conduct Certificates, see “Item 1. Busi-
under the caption entitled “Management’s Report on Internal ness” in this Annual Report on Form 10-K.
Control Over Financial Reporting” and “Report of Independent
Registered Public Accounting Firm” and are incorporated
herein by reference.
ITEM 11. EXECUTIVE COMPENSATION time when the individual is not in possession of material, non-
Information for this item is set forth in the following sec- public information. If an individual establishes a plan satisfying
tions of our Proxy Statement, which sections are incorporated the requirements of Rule 10b5-1, such individual’s subsequent
herein by reference: “Compensation Discussion and Analysis,” receipt of material, nonpublic information will not prevent
“Executive Compensation,” “Director Compensation,” “Com- transactions under the plan from being executed. Certain of
pensation Committee Interlocks and Insider Participation” and our officers have advised us that they have and may enter into
“Compensation Committee Report.” a stock sales plan for the sale of shares of our common stock
which are intended to comply with the requirements of Rule
ITEM 12. SECURITY OWNERSHIP OF CERTAIN 10b5-1 of the Exchange Act. In addition, the Company has
BENEFICIAL OWNERS AND MANAGEMENT AND and may in the future enter into repurchases of our common
RELATED STOCKHOLDER MATTERS stock under a plan that complies with Rule 10b5-1 or Rule
Information concerning security ownership of certain 10b-18 of the Exchange Act.
beneficial owners and our management is set forth in the
sections entitled “Voting Securities” and “Security Ownership Equity Compensation Plan Information
of Management” in our Proxy Statement, which sections are The information in the following table is presented as of
incorporated herein by reference. December 31, 2010 with respect to shares of our common
Our Board of Directors has approved procedures for use stock that may be issued under our existing equity compensa-
under our Securities Trading and Disclosure Policy to permit tion plans, including the Baker Hughes Incorporated 2002
our employees, officers and directors to enter into written Employee Long-Term Incentive Plan, the Baker Hughes Incor-
trading plans complying with Rule 10b5-1 under the Exchange porated 2002 Directors & Officers Long-Term Incentive Plan,
Act. Rule 10b5-1 provides criteria under which such an individ- the BJ Services 1995 Incentive Plan, the BJ Services 1997
ual may establish a prearranged plan to buy or sell a specified Incentive Plan, the BJ Services 2000 Incentive Plan and the BJ
number of shares of a company’s stock over a set period of Services 2003 Incentive Plan, all of which have been approved
time. Any such plan must be entered into in good faith at a by our stockholders (in millions, except per share prices).
Number of Securities
Number of Securities to be Issued Weighted Average Remaining Available for Future
Upon Exercise of Outstanding Exercise Price of Outstanding Issuance Under Equity Compensation Plans
Equity Compensation Plan Category Options, Warrants and Rights Options, Warrants and Rights (excluding securities reflected in the first column)
Stockholder-approved plans
(excluding Employee Stock Purchase Plan) 10.8 $ 50.84 8.4
Nonstockholder-approved plans (1) 0.1 34.21 0.5
Subtotal (except for weighted average
exercise price) 10.9 50.72 8.9
Employee Stock Purchase Plan (2) – – 5.6
Total 10.9 $ 50.72 14.5
(1) The table includes the following nonstockholder-approved plans: the 1998 Employee Stock Option Plan and the Director Compensation Deferral Plan. A description of
each of these plans is set forth below.
(2) The per share purchase price under the Baker Hughes Incorporate Employee Stock Purchase Plan is determined in accordance with section 423 of the Code as 85% of
the lower of the fair market value of a share of our common stock on the date of grant or the date of purchase.
2010 Form 10-K 63

Our nonstockholder-approved plans are described below: calendar quarter he or she will be granted a nonqualified stock
option. The number of shares subject to the stock option is
1998 Employee Stock Option Plan calculated by multiplying the amount of the deferred compen-
The Baker Hughes Incorporated 1998 Employee Stock sation that otherwise would have been paid to the director
Option Plan (the “1998 ESOP”) was adopted effective as of during the quarter by 4.4 and then dividing by the fair market
October 1, 1998. The number of shares authorized for issu- value of our common stock on the last day of the quarter. The
ance under the 1998 ESOP was 7.0 million shares. Nonquali- per share exercise price of the option will be the fair market
fied stock options may be granted under the 1998 ESOP to value of a share of our common stock on the date the option
our employees. The exercise price of the options will be equal is granted. Stock options granted under the Deferral Plan vest
to the fair market value per share of our common stock on the on the first anniversary of the date of grant and must be exer-
date of grant, and option terms may be up to ten years. Under cised within ten years of the date of grant. If a director’s direc-
the terms and conditions of the option award agreements for torship terminates for any reason, any options outstanding will
options issued under the 1998 ESOP, options generally vest expire three years after the termination of the directorship.
and become exercisable in installments over the optionee’s The maximum aggregate number of shares of our common
period of service, and the options vest on an accelerated basis stock that may be issued under the Deferral Plan is 0.5 million.
in the event of a change in control. As of December 31, 2010, As of December 31, 2010, options covering approximately
options covering approximately 68,000 shares of our common 3,000 shares of our common stock were outstanding under
stock were outstanding under the 1998 ESOP and options the Deferral Plan, there were no shares exercised during fiscal
covering approximately 47,000 shares were exercised during 2010 and approximately 0.5 million shares remained available
fiscal year 2010. There are no shares available for grants of for future options.
future options as the plan expired on October 1, 2008.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
Director Compensation Deferral Plan TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The Baker Hughes Incorporated Director Compensation Information for this item is set forth in the sections entitled
Deferral Plan, as amended and restated effective July 24, 2002 “Corporate Governance-Director Independence” and “Certain
(the “Deferral Plan”), is intended to provide a means for mem- Relationships and Related Transactions” in our Proxy State-
bers of our Board of Directors to defer compensation other- ment, which sections are incorporated herein by reference.
wise payable and provide flexibility with respect to our
compensation policies. Under the provisions of the Deferral ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Plan, directors may elect to defer income with respect to Information concerning principal accounting fees and ser-
each calendar year. The compensation deferrals may be stock vices is set forth in the section entitled “Fees Paid to Deloitte &
option-related deferrals or cash-based deferrals. If a director Touche LLP” in our Proxy Statement, which section is incorpo-
elects a stock option-related deferral, on the last day of each rated herein by reference.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) List of Documents filed as part of this Report.
(1) Financial Statements
All financial statements of the Registrant as set forth under Item 8 of this Annual Report on Form 10-K.
(2) Financial Statement Schedules
Schedule II – Valuation and Qualifying Accounts
(3) Exhibits
Each exhibit identified below is filed as a part of this report. Exhibits designated with an “*” are filed as an exhibit to this
Annual Report on Form 10-K. Exhibits designated with a “+” are identified as management contracts or compensatory plans or
arrangements. Exhibits previously filed as indicated below are incorporated by reference.
3.1 Certificate of Amendment dated April 22, 2010 and the Restated Certificate of Incorporation (filed as Exhibit 3.1
to Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended March 31, 2010).
3.2 Restated Bylaws of Baker Hughes Incorporated effective as of April 28, 2010 (filed as Exhibit 3.2 to Current Report
of Baker Hughes Incorporated on Form 8-K filed April 29, 2010).
3.3* Restated Bylaws of Baker Hughes Incorporated effective as of April 28, 2011.
4.1 Rights of Holders of the Company’s Long-Term Debt. The Company has no long-term debt instrument with regard
to which the securities authorized there under equal or exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. The Company agrees to furnish a copy of its long-term debt instruments to
the SEC upon request.
4.2 Certificate of Amendment dated April 22, 2010 and the Restated Certificate of Incorporation (filed as Exhibit 3.1
to Quarterly Report by Baker Hughes Incorporated on Form 10-Q for the quarter ended March 31, 2010).
4.3 Restated Bylaws of Baker Hughes Incorporated effective as of April 28, 2010 (filed as Exhibit 3.2 to Current Report
of Baker Hughes Incorporated on Form 8-K filed April 29, 2010).
4.4* Restated Bylaws of Baker Hughes Incorporated effective as of April 28, 2011 (filed as Exhibit 3.3 to this Annual
Report on Form 10-K).
4.5 Indenture dated as of May 15, 1994 between Western Atlas Inc. and The Bank of New York, Trustee, providing for
the issuance of securities in series (filed as Exhibit 4.4 to Annual Report of Baker Hughes Incorporated on Form
10-K for the year ended December 31, 2004).
4.6 Indenture dated October 28, 2008, between Baker Hughes Incorporated and The Bank of New York Mellon Trust
Company, N.A., as trustee (filed as Exhibit 4.1 to Current Report of Baker Hughes Incorporated on Form 8-K filed
October 29, 2008).
4.7 Officers’ Certificate of Baker Hughes Incorporated dated October 28 2008 establishing the 6.50% Senior Notes
due 2013 and the 7.50% Senior Notes due 2018 (filed as Exhibit 4.2 to Current Report of Baker Hughes Incorpo-
rated on Form 8-K filed October 29, 2008).
4.8 Form of 6.50% Senior Notes Due 2013 (filed as Exhibit 4.3 to Current Report of Baker Hughes Incorporated on
Form 8-K filed October 29, 2008).
4.9 Form of 7.50% Senior Notes Due 2018 (filed as Exhibit 4.4 to Current Report of Baker Hughes Incorporated on
Form 8-K filed October 29, 2008).
4.10 Officers’ Certificate of Baker Hughes Incorporated dated August 24, 2010 establishing the 5.125% Senior Notes
due 2040 (filed as Exhibit 4.2 to Current Report of Baker Hughes Incorporated on Form 8-K filed August 24, 2010).
4.11 Form of 5.125% Senior Notes due 2040 (filed as Exhibit 4.3 to Current Report of Baker Hughes Incorporated on
Form 8-K filed August 24, 2010).
4.12 Indenture, dated June 8, 2006, between BJ Services Company, as issuer, and Wells Fargo Bank, N.A., as trustee (incor-
porated by reference to Exhibit 4.1 to Current Report on BJ Services Company Form 8-K filed on June 12, 2006).
4.13 First Supplemental Indenture, dated June 8, 2006, between BJ Services Company, as issuer, and Wells Fargo Bank,
N.A., as trustee, with respect to the 5.75% Senior Notes due 2011 (incorporated by reference to Exhibit 4.2 to
Current Report on BJ Services Company Form 8-K filed on June 12, 2006).
4.14 Third Supplemental Indenture, dated May 19, 2008, between BJ Services Company, as issuer, and Wells Fargo
Bank, N.A., as trustee, with respect to the 6% Senior Notes due 2018 (incorporated by reference to Exhibit 4.2 to
Current Report on BJ Services Company Form 8-K filed on May 23, 2008).
4.15 Fourth Supplemental Indenture, dated April 28, 2010, between BJ Services Company, as issuer, BSA Acquisition
LLC, Baker Hughes Incorporated and Wells Fargo Bank, N.A., as trustee, with respect to the 5.75% Senior Notes
due 2011 and the 6% Senior Notes due 2018 (incorporated by reference to Exhibit 4.4 to Current Report on Baker
Hughes Incorporated Form 8-K filed on April 29, 2010).
2010 Form 10-K 65

4.16+ Form of Incentive Stock Option Assumption Agreement for BJ Services incentive plans (incorporated by reference
to Exhibit 4.5 to Current Report on Baker Hughes Incorporated Form 8-K filed on April 29, 2010).
4.17+ Form of Nonqualified Stock Option Assumption Agreement for BJ Services incentive plans (incorporated by refer-
ence to Exhibit 4.6 to Current Report on Baker Hughes Incorporated Form 8-K filed on April 29, 2010).
10.1+ Amendment and Restatement of Employment Agreement between Chad C. Deaton and Baker Hughes Incorpo-
rated dated as of January 1, 2009 (filed as Exhibit 10.1 to Current Report of Baker Hughes Incorporated on Form
8-K filed December 19, 2008).
10.2+ Form of Amended and Restated Change in Control Agreement between Baker Hughes Incorporated and each of
the executive officers effective as of January 1, 2009 (filed as Exhibit 10.2 to Annual Report of Baker Hughes Incor-
porated on Form 10-K for the year ended December 31, 2008).
10.3+ Letter Agreement between Peter A. Ragauss and Baker Hughes Incorporated dated as of March 27, 2006 (filed as
Exhibit 10.1 to Current Report of Baker Hughes Incorporated on Form 8-K filed March 31, 2006).
10.4+ Amendment and Restatement of the Baker Hughes Incorporated Change in Control Severance Plan effective as
of January 1, 2009 (filed as Exhibit 10.3 to Current Report of Baker Hughes Incorporated on Form 8-K filed
December 19, 2008).
10.5+ Form of Indemnification Agreement between Baker Hughes Incorporated and each of the directors and executive
officers (filed as Exhibit 10.4 to Annual Report of Baker Hughes Incorporated on Form 10-K for the year ended
December 31, 2003).
10.6+ Form of Amendment to the Indemnification Agreement between Baker Hughes Incorporated and each of the
directors and executive officers effective as of January 1, 2009 (filed as Exhibit 10.4 to Current Report of Baker
Hughes Incorporated on Form 8-K filed December 19, 2008).
10.7+ Baker Hughes Incorporated Director Retirement Policy for Certain Members of the Board of Directors (filed as Exhibit
10.10 to Annual Report of Baker Hughes Incorporated on Form 10-K for the year ended December 31, 2003).
10.8+ Baker Hughes Incorporated Director Compensation Deferral Plan, as amended and restated effective as of January
1, 2009 (filed as Exhibit 10.2 to Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter
ended June 30, 2008).
10.9+ Amendment to Baker Hughes Incorporated Director Compensation Deferral Plan effective as of January 1, 2009
(filed as Exhibit 10.5 to Current Report of Baker Hughes Incorporated on Form 8-K filed on December 19, 2008).
10.10+ Baker Hughes Incorporated Executive Severance Plan, as amended and restated on February 7, 2008 (filed as Exhibit
10.11+ Amendment to Exhibit A of Baker Hughes Incorporated Executive Severance Plan as of July 20, 2009 (filed as Exhibit
10.1 to Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended June 30, 2009).
10.12+ Baker Hughes Incorporated Annual Incentive Compensation Plan, as amended and restated on February 20, 2008 (filed
as Exhibit 10.18 to Annual Report of Baker Hughes Incorporated on Form 10-K for the year ended December 31, 2007).
10.13+ Amendment to the Baker Hughes Annual Incentive Compensation Plan effective as of January 1, 2009 (filed as
Exhibit 10.7 to Current Report of Baker Hughes Incorporated on Form 8-K filed on December 19, 2008).
10.14+ Baker Hughes Incorporated Supplemental Retirement Plan, as amended and restated effective as of January 1,
2011 (filed as Exhibit 10.2 to Current Report of Baker Hughes Incorporated on Form 8-K, filed on June 26, 2010).
10.15+ Amendment to the Baker Hughes Incorporated Supplemental Retirement Plan effective as of January 1, 2009 (filed
as Exhibit 10.6 to Current Report of Baker Hughes Incorporated on Form 8-K filed on December 19, 2008).
10.16+ Long-Term Incentive Plan, as amended by Amendment No. 1999-1 to Long-Term Incentive Plan (filed as Exhibit
10.17+ Baker Hughes Incorporated 1998 Employee Stock Option Plan, as amended by Amendment No. 1999-1 to 1998
Employee Stock Option Plan (filed as Exhibit 10.3 to Quarterly Report of Baker Hughes Incorporated on Form 10-Q
for the quarter ended June 30, 2003).
10.18 Baker Hughes Incorporated 2002 Employee Long-Term Incentive Plan (filed as Exhibit 4.4 to Registration Statement
No. 333-87372 of Baker Hughes Incorporated on Form S-8 filed May 1, 2002).
10.19+ Amendment to Baker Hughes Incorporated 2002 Employee Long-Term Incentive Plan, effective July 24, 2008 (filed as
Exhibit 10.4 to Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended June 30, 2008).
10.20+ Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan (filed as Exhibit 10.2 to Quarterly
Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended September 30, 2003).
10.21+ Amendment to 2002 Director & Officer Long-Term Incentive Plan, effective as of October 27, 2005 (filed as Exhibit
10.3 of Baker Hughes Incorporated to Quarterly Report on Form 10-Q for the quarter ended September 30, 2005).
10.22+ Amendment to Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan effective July 24,
2008 (filed as Exhibit 10.3 to Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended
June 30, 2008).
10.23 Baker Hughes Incorporated Employee Stock Purchase Plan, as amended and restated, effective as of January 1,
2010 (filed as Exhibit 10.25 to Annual Report of Baker Hughes Incorporated on Form 10-K for the year ended
December 31, 2009).
10.24+ Form of Stock Option Agreement for executive officers effective October 1, 1998 (filed as Exhibit 10.37 to Annual
Report of Baker Hughes Incorporated on Form 10-K for the year ended December 31, 2000).
10.25+ Form of Nonqualified Stock Option Agreement for directors effective October 25, 1998 (filed as Exhibit 10.39 to
Annual Report of Baker Hughes Incorporated on Form 10-K for the year ended December 31, 2000).
10.26+ Form of Baker Hughes Incorporated Nonqualified Stock Option Agreement for executive officers, dated January
24, 2001 (filed as Exhibit 10.41 to Annual Report of Baker Hughes Incorporated on Form 10-K for the year ended
December 31, 2001).
10.27+ Form of Baker Hughes Incorporated Nonqualified Stock Option Agreement for employees, dated January 30, 2002 (filed
10.28+ Form of Baker Hughes Incorporated Nonqualified Stock Option Agreement with Terms and Conditions for officers (filed
10.29+ Form of Baker Hughes Incorporated Incentive Stock Option Agreement for employees, dated January 30, 2002 (filed as
Exhibit 10.44 to Annual Report of Baker Hughes Incorporated on Form 10-K for the year ended December 31, 2001).
10.30+ Form of Baker Hughes Incorporated Stock Option Award Agreements, with Terms and Conditions (filed as Exhibit
10.31+ Form of Baker Hughes Incorporated Incentive Stock Option Agreement with Terms and Conditions for officers (filed as
10.32+ Form of Restricted Stock Award Resolution, including Terms and Conditions (filed as Exhibit 10.3 to Quarterly
Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended March 31, 2004).
10.33+ Form of Baker Hughes Incorporated Restricted Stock Award Agreement (filed as Exhibit 10.54 to Annual Report on
Form 10-K for the year ended December 31, 2004).
10.34+ Form of Baker Hughes Incorporated Restricted Stock Award Terms and Conditions (filed as Exhibit 10.54 of Baker
Hughes Incorporated to Annual Report on Form 10-K for the year ended December 31, 2004).
10.35+ Form of Baker Hughes Incorporated Restricted Stock Award with Terms and Conditions for officers (filed as Exhibit
10.36+ Form of Baker Hughes Incorporated Restricted Stock Unit Agreement, including Terms and Conditions (filed as Exhibit
10.37+ Form of Baker Hughes Incorporated Restricted Stock Unit Agreement (filed as Exhibit 10.54 of Baker Hughes Incor-
porated to Annual Report on Form 10-K for the year ended December 31, 2004).
10.38+ Form of Baker Hughes Incorporated Restricted Stock Unit Terms and Conditions (filed as Exhibit 10.54 of Baker
Hughes Incorporated to Annual Report on Form 10-K for the year ended December 31, 2004).
10.39+ Form of Baker Hughes Incorporated Restricted Stock Unit Award Agreement and Terms and Conditions for
officers (filed as Exhibit 10.41 to Annual Report of Baker Hughes Incorporated on Form 10-K for the year ended
December 31, 2009).
10.40+ Form of Baker Hughes Incorporated Restricted Stock Award, including Terms and Conditions for directors (filed as
Exhibit 10.40 of Baker Hughes Incorporated to Annual Report on Form 10-K for the year ended December 31, 2005).
10.41+ Form of Baker Hughes Incorporated Stock Option Award Agreement, including Terms and Conditions for directors (filed
as Exhibit 10.41 of Baker Hughes Incorporated to Annual Report on Form 10-K for the year ended December 31, 2005).
10.42+ Form of Baker Hughes Incorporated Performance Unit Award Agreement and Terms and Conditions for officers (filed as
10.43+ Form of Baker Hughes Incorporated Performance Unit Award Agreement, including Terms and Conditions (filed as
10.44+ Form of Baker Hughes Incorporated Performance Unit Award Agreement, including Terms and Conditions (filed as
Exhibit 10.42 of Baker Hughes Incorporated to Annual Report on Form 10-K for the year ended December 31, 2005).
10.45+ Form of 2009 Performance Unit Award Agreement, including Terms and Conditions (filed as Exhibit 10.2 to Cur-
rent Report of Baker Hughes Incorporated on Form 8-K filed March 31, 2009).
10.46+ Performance Goals adopted October 21, 2010 for the Performance Unit Awards Granted in 2009 under the Baker
Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan (filed as Exhibit 10.1 to Current Report of
Baker Hughes Incorporated on Form 8-K filed October 22, 2010).
10.47+ Performance Goals adopted October 21, 2010 for the Performance Unit Awards Granted in 2010 under the Baker
Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan (filed as Exhibit 10.2 to Current Report of
Baker Hughes Incorporated on Form 8-K filed October 22, 2010).
2010 Form 10-K 67

10.48 + Performance Goals adopted October 21, 2010 for the Performance Unit Awards to be granted in 2011 under the
Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan (filed as Exhibit 10.3 to Current
Report of Baker Hughes Incorporated on Form 8-K filed October 22, 2010).
10.49+ Amendment to Baker Hughes Incorporated Executive Severance Plan dated April 22, 2010 (filed as Exhibit 10.1 to
Current Report on Baker Hughes Incorporated Form 8-K filed on April 23, 2010).
10.50+ Amendment to Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan dated March 31,
2010 (filed as Annex G to the Registration Statement No. 333-162463 on Form S-4 filed on February 9, 2010).
10.51 Amendment to Baker Hughes Incorporated 2002 Employee Long-Term Incentive Plan dated March 31, 2010 (filed
as Annex H to the Registration Statement No. 333-162463 on Form S-4 filed on February 9, 2010).
10.52 Credit Agreement dated as of March 19, 2010, among Baker Hughes Incorporated, JP Morgan Chase Bank, N.A.,
as Administrative Agent and twenty-one lenders for $1.2 billion, in the aggregate for all banks (filed as Exhibit
10.1 to Current Report on Baker Hughes Incorporated Form 8-K filed on March 22, 2010).
10.53 BJ Services Company 1995 Incentive Plan (filed as Exhibit 4.5 to BJ Services Company’s Registration Statement on
Form S-8 (Reg. No. 33-58637) and incorporated herein by reference).
10.54 Amendments effective January 25, 1996, and December 12, 1996, to BJ Services Company 1995 Incentive Plan
(filed as Exhibit 10.9 to BJ Services Company’s Annual Report on Form 10-K for the year ended September 30,
1996 (file no. 1-10570), and incorporated herein by reference).
10.55 Amendment effective July 22, 1999 to BJ Services Company 1995 Incentive Plan (filed as Exhibit 10.25 to BJ Ser-
vices Company’s Annual Report on Form 10-K for the year ended September 30, 1999 (file no. 1-10570), and
incorporated herein by reference).
10.56 Amendment effective January 27, 2000 to BJ Services Company 1995 Incentive Plan (filed as Appendix B to BJ Ser-
vices Company’s Proxy Statement dated December 20, 1999 (file no. 1-10570) and incorporated herein by reference).
10.57 Amendment effective May 10, 2001 to BJ Services Company 1995 Incentive Plan (filed as Appendix B to BJ Ser-
vices Company’s Proxy Statement dated April 10, 2001 and (file no. 1-10570) incorporated herein by reference).
10.58 Eighth Amendment effective October 15, 2001 to BJ Services Company 1995 Incentive Plan (filed as Exhibit 10.12
to BJ Services Company’s Annual Report on Form 10-K for the year ended September 30, 2001 (file no. 1-10570)
and incorporated herein by reference).
10.59 Tenth Amendment effective December 5, 2008 to BJ Services Company 1995 Incentive Plan (filed as Exhibit 10.1
to BJ Services Company’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2008 (file
no. 1-10570) and incorporated herein by reference).
10.60 BJ Services Company 1997 Incentive Plan (filed as Appendix B to BJ Services Company’s Proxy Statement dated
December 22, 1997 (file no. 1-10570) and incorporated herein by reference).
10.61 Amendment effective July 22, 1999 to BJ Services Company 1997 Incentive Plan (filed as Exhibit 10.26 to BJ Ser-
vices Company’s Annual Report on Form 10-K for the year ended September 30, 1999 (file no. 1-10570) and
10.62 Amendment effective January 27, 2000 to BJ Services Company 1997 Incentive Plan (filed as Appendix C to BJ Ser-
vices Company’s Proxy Statement dated December 20, 1999 (file no. 1-10570) and incorporated herein by reference).
10.63 Amendment effective May 10, 2001 to BJ Services Company 1997 Incentive Plan (filed as Appendix C to BJ Ser-
vices Company’s Proxy Statement dated April 10, 2001 (file no. 1-10570) and incorporated herein by reference).
10.64 Fifth Amendment effective October 15, 2001 to BJ Services Company 1997 Incentive Plan (filed as Exhibit 10.17 to
BJ Services Company’s Annual Report on Form 10-K for the year ended September 30, 2001 (file no. 1-10570) and
10.65 Eighth Amendment effective November 15, 2006 to BJ Services Company 1997 Incentive Plan (filed as Exhibit 10.3 to
BJ Services Company’s Current Report on Form 8-K filed on December 13, 2006 and incorporated herein by reference).
10.66 Ninth Amendment effective October 13, 2008 to BJ Services Company 1997 Incentive Plan (filed as Exhibit 10.16
10.67 Tenth Amendment effective December 5, 2008 to BJ Services Company 1997 Incentive Plan (filed as Exhibit 10.2
to BJ Services Company’s Quarterly Report for the quarterly period ended December 31, 2008 (file no. 1-10570)
10.68+ BJ Services Company 2000 Incentive Plan (filed as Appendix B to BJ Services Company’s Proxy Statement dated
December 20, 2000 (file no. 1-10570) and incorporated herein by reference).
10.69+ First Amendment effective March 22, 2001 to BJ Services Company 2000 Incentive Plan (filed as Exhibit 10.2 to BJ
Services Company’s Registration Statement on Form S-8 (Reg. No. 333-73348) and incorporated herein by reference).
10.70+ Second Amendment effective May 10, 2001 to BJ Services Company 2000 Incentive Plan (filed as Appendix D to BJ
Services Company’s Proxy Statement dated April 10, 2001 (file no. 1-10570) and incorporated herein by reference).
10.71+ Third Amendment effective October 15, 2001 to BJ Services Company 2000 Incentive Plan (filed as Exhibit 10.24
10.72+ Fifth Amendment effective November 15, 2006 to BJ Services Company 2000 Incentive Plan (filed as Exhibit 10.4
to BJ Services Company’s Current Report on Form 8-K filed on December 13, 2006 (file no. 1-10570) and incorpo-
rated herein by reference).
10.73+ Sixth Amendment effective October 13, 2008 to BJ Services Company 2000 Incentive Plan (filed as Exhibit 10.22
10.74+ Seventh Amendment effective December 5, 2008 to BJ Services Company 2000 Incentive Plan (filed as Exhibit 10.3
to BJ Services Company’s Quarterly Report for the quarterly period ended December 31, 2008 (file no. 1-10570)
10.75+ Amended and Restated BJ Services Company 2003 Incentive Plan (filed as Appendix A to BJ Services Company’s
Proxy Statement dated December 15, 2008 (file no. 1-10570) and incorporated herein by reference).
10.76+ First Amendment to the Amended and Restated BJ Services Company 2003 Incentive Plan (filed as Exhibit 10.1 to
BJ Services Company’s Quarterly Report for the quarterly period ended March 31, 2008 (file no. 1-10570) and
10.77+* Compensation Table for Named Executive Officers and Directors.
10.78 Form of Credit Agreement, dated as of July 7, 2005, among Baker Hughes Incorporated, JPMorgan Chase Bank,
N.A., as Administrative Agent and fourteen lenders for $500 million, in the aggregate for all banks (filed as Exhibit
10.1 to Current Report of Baker Hughes Incorporated on Form 8-K filed July 11, 2005).
10.79 First Amendment to the Credit Agreement dated June 7, 2006, among Baker Hughes Incorporated and fifteen
banks for $500 million, in the aggregate for all banks (filed as Exhibit 10.1 to Current Report of Baker Hughes
Incorporated on Form 8-K filed on June 12, 2006).
10.80 Second Amendment to the Credit Agreement dated May 31, 2007, among Baker Hughes Incorporated and fifteen
banks for $500 million, in the aggregate for all banks (filed as Exhibit 10.1 to Current Report of Baker Hughes
Incorporated on Form 8-K filed June 4, 2007).
10.81 Third Amendment to Credit Agreement dated as of April 1, 2008, among Baker Hughes Incorporated, JP Morgan
Chase Bank, N.A., as Administrative Agent, and fifteen lenders for $500 million, in the aggregate for all banks
(filed as Exhibit 10.2 to Current Report of Baker Hughes Incorporated on Form 8-K filed April 2, 2008).
10.82 Credit Agreement dated as of March 30, 2009, among Baker Hughes Incorporated, JP Morgan Chase Bank, N.A.,
as Administrative Agent, and thirteen lenders for $500 million, in the aggregate for all banks (filed as Exhibit 10.1
to Current Report of Baker Hughes Incorporated on Form 8-K filed March 31, 2009).
10.83 Agreement of Resignation, Appointment and Acceptance by and among Baker Hughes Incorporated, Citibank, N.A.
and the Bank of New York Trust Company, N.A. dated as of April 26, 2007, effective May 1, 2007 (filed as Exhibit
10.1 to Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended March 31, 2007).
10.84 Agreement and Plan of Merger among Baker Hughes Incorporated, Baker Hughes Delaware I, Inc. and Western
Atlas Inc. dated as of May 10, 1998 (filed as Exhibit 10.30 to Annual Report of Baker Hughes Incorporated on
Form 10-K for the year ended December 31, 2003).
10.85+ Employee Benefits Agreement dated October 31, 1997, between Western Atlas Inc. and UNOVA Inc. (filed as Exhibit
10.86 Deferred Prosecution Agreement between Baker Hughes Incorporated and the United States Department of Justice
filed on April 26, 2007, with the United States District Court of Texas, Houston Division (filed as Exhibit 10.4 to
Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended March 31, 2007).
10.87 Plea Agreement between Baker Hughes Services International, Inc. and the United States Department of Justice
filed on April 26, 2007, with the United States District Court of Texas, Houston Division (filed as Exhibit 10.5 to
Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended March 31, 2007).
10.88 Agreement and Plan of Merger dated as of August 30, 2009, among Baker Hughes Incorporated, BSA Acquisition
LLC and BJ Services Company (filed as Exhibit 2.1 to Current Report of Baker Hughes Incorporated on Form 8-K
filed August 31, 2009).
21.1* Subsidiaries of Registrant.
23.1* Consent of Deloitte & Touche LLP.
31.1* Certification of Chad C. Deaton, Chief Executive Officer, dated February 24, 2011, pursuant to Rule 13a-14(a) of
the Securities Exchange Act of 1934, as amended.
31.2* Certification of Peter A. Ragauss, Chief Financial Officer, dated February 24, 2011, pursuant to Rule 13a-14(a) of
the Securities Exchange Act of 1934, as amended.
2010 Form 10-K 69

32* Statement of Chad C. Deaton, Chief Executive Officer, and Peter A. Ragauss, Chief Financial Officer, dated Febru-
ary 24, 2011, furnished pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended.
99.1 Baker Hughes Incorporated Information document filed on April 26, 2007, by the United States Attorney’s Office
for the Southern District of Texas and the United States Department of Justice (filed as Exhibit 99.1 to Quarterly
Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended March 31, 2007).
99.2 Baker Hughes Services International, Inc. Information document filed on April 26, 2007, by the United States
Attorney’s Office for the Southern District of Texas and the United States Department of Justice (filed as Exhibit
99.2 to Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended March 31, 2007).
99.3 Sentencing Memorandum and Motion for Waiver of Pre-Sentence Investigation of Baker Hughes Services Interna-
tional, Inc. (filed as Exhibit 99.3 to Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter
ended March 31, 2007).
99.4 Baker Hughes Services International, Inc. Sentencing Letter from the United States Department of Justice dated
April 24, 2007 (filed as Exhibit 99.4 to Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quar-
ter ended March 31, 2007).
99.5 The Complaint by the Securities and Exchange Commission vs. Baker Hughes Incorporated filed on April 26, 2007,
with the United States District Court of Texas, Houston Division (filed as Exhibit 99.5 to Quarterly Report of Baker
Hughes Incorporated on Form 10-Q for the quarter ended March 31, 2007).
99.6 Final Judgment by the Securities and Exchange Commission as to Defendant Baker Hughes Incorporated dated and
filed on May 1, 2007, with the United States District Court of Texas, Houston Division (filed as Exhibit 99.1 to
Quarterly Report of Baker Hughes Incorporated on Form 10-Q for the quarter ended June 30, 2007).
** 101.INS XBRL Instance Document
** 101.SCH XBRL Schema Document
** 101.CAL XBRL Calculation Linkbase Document
** 101.LAB XBRL Label Linkbase Document
** 101.PRE XBRL Presentation Linkbase Document
** 101.DEF XBRL Definition Linkbase Document
** Furnished with this Form 10-K, not filed.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
BAKER HUGHES INCORPORATED
Date: February 24, 2011 /s/CHAD C. DEATON

Chad C. Deaton
Chairman of the Board and Chief Executive Officer
KNOWN ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Chad C.
Deaton and Peter A. Ragauss, each of whom may act without joinder of the other, as their true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for such person and in his or her name, place and stead, in any and
all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date

/s/CHAD C. DEATON Chairman of the Board and Chief Executive Officer February 24, 2011
(Chad C. Deaton) (principal executive officer)
/s/PETER A. RAGAUSS Senior Vice President and Chief Financial Officer February 24, 2011
(Peter A. Ragauss) (principal financial officer)
/s/ALAN J. KEIFER Vice President and Controller February 24, 2011
(Alan J. Keifer) (principal accounting officer)
/s/LARRY D. BRADY Director February 24, 2011
(Larry D. Brady)
/s/CLARENCE P. CAZALOT, JR. Director February 24, 2011
(Clarence P. Cazalot, Jr.)
/s/EDWARD P. DJEREJIAN Director February 24, 2011
(Edward P. Djerejian)
/s/ANTHONY G. FERNANDES Director February 24, 2011
(Anthony G. Fernandes)
/s/CLAIRE W. GARGALLI Director February 24, 2011
(Claire W. Gargalli)
/s/PIERRE H. JUNGELS Director February 24, 2011
(Pierre H. Jungels)
/s/JAMES A. LASH Director February 24, 2011
(James A. Lash)
/s/J. LARRY NICHOLS Director February 24, 2011
(J. Larry Nichols)
Director February , 2011
(James L. Payne)
/s/H. JOHN RILEY, JR. Director February 24, 2011
(H. John Riley, Jr.)
/s/J. W. STEWART Director February 24, 2011
(J. W. Stewart)
Director February , 2011
(Charles L. Watson)
2010 Form 10-K 71

Schedule II – Valuation and Qualifying Accounts
Balance at Charged Balance at

Beginning to Cost and Other End of
(In millions) of Period Expenses Write-offs (1) Changes (2) Period
Year ended December 31, 2010

Reserve for doubtful accounts receivable $ 157 $ 39 $ (24) $ (10) $ 162
Reserve for inventories 297 33 (32) 24 322

Reserve for doubtful accounts receivable 74 94 (12) 1 157
Reserve for inventories 244 101 (53) 5 297

Reserve for doubtful accounts receivable 59 31 (15) (1) 74
Reserve for inventories 221 61 (30) (8) 244
(1) Represents the elimination of accounts receivable and inventory deemed uncollectible or worthless.
(2) Represents transfers, currency translation adjustments and divestitures.
GOVERNANCE AT BAKER HUGHES Committees of the Board
The board has five standing committees – Audit/Ethics,
Baker Hughes Corporate Governance Guidelines Compensation, Finance, Governance and Executive. The Audit/
Our board’s Corporate Governance Guidelines regulate its Ethics, Compensation and Governance Committees are com-
relationship with stockholders, the conduct of the company’s prised solely of independent non-management directors in
affairs and its relationship with our senior executive manage- accordance with NYSE corporate governance listing standards.
ment. The guidelines recognize that the board has a separate Additionally, the board has adopted charters for the Audit/Eth-
and unique role as the link in the chain of authority between ics, Compensation and Governance Committees that comply
the stockholders and senior executive management. The Cor- with the requirements of the NYSE standards, applicable provi-
porate Governance Guidelines can be accessed electronically sions of the Sarbanes-Oxley Act of 2002 (“SOX”) and SEC
at www.bakerhughes.com/investor in the “About Baker rules. Each of the charters has been posted and is available for
Hughes” section. public viewing in the “About Baker Hughes” section of our
The Baker Hughes board consists of 13 directors, including website at www.bakerhughes.com. The Audit/Ethics Commit-
10 independent non-management directors. Chad C. Deaton, tee met 13 times in 2010. The Compensation Committee met
Chairman of the Board and Chief Executive Officer, is the only four times in 2010. The Finance Committee met four times in
director employed by Baker Hughes. Director H. John Riley serves 2010. The Governance Committee met four times in 2010.
as the Lead Director. Directors are elected annually. Independent Independent non-management directors meet without the
non-management directors cannot stand for re-election at the CEO on a regular basis.
annual meeting of stockholders following their 72nd birthday, The Audit/Ethics Committee is comprised of five indepen-
and must resign if attendance at board and committee meet- dent non-management directors and is responsible for assist-
ings falls below 66%. ing the board with the oversight of the integrity of our
The board may waive these requirements if it believes financial statements, our compliance with legal and regulatory
retention of the board member is in the best interest of our requirements, the qualification and independence of our inde-
company. In addition, any nominee for director who receives a pendent registered public accounting firm and the perfor-
“withhold” vote representing a majority of the votes cast for mance of our internal audit function.
his or her election is required to submit a letter of resignation
to the Board’s Governance Committee. The Governance Com- The Committee:
mittee would recommend to the Board whether or not the • selects the independent registered public accounting firm
resignation should be accepted. used by the company and reviews their performance;
• reviews financial reporting and disclosure issues with
Baker Hughes Directors at A Glance management and the internal auditors;
• All 10 independent non-management directors serve on no • establishes guidelines with respect to earnings news releases
more than three other public boards. and the financial information and earnings guidance pro-
• The average age of the directors is 66. The average tenure vided to analysts;
on the board is approximately eight years. • meets periodically with management, the internal auditors
• The diversity of principal occupations represented on our and the independent registered public accounting firm to
board includes Diplomacy (Djerejian), Diversified Industrial and review the work of each. The independent registered public
Manufacturing (Fernandes and Riley), Energy (Cazalot, Jungels, accounting firm and internal auditors have full and free
Nichols, Payne and Watson), Executive Search (Gargalli), access to the Audit/Ethics Committee, without management
Finance (McCall), High Technology (Lash), Industrial Tech present, to discuss auditing and financial reporting matters;
nologies (Brady) and Oilfield Services (Deaton and Stewart). • reviews and pre-approves audit and non-audit fees;
• The board has five meetings scheduled in 2011. • provides assistance to the board in overseeing matters
• In 2010, the board held ten meetings and all directors related to risk analysis and risk management;
attended more than 92% of all committee and • annually reviews compliance with our Business Code of
board meetings. Conduct and Foreign Corrupt Practices Act policies. The
• All five members of the Audit/Ethics Committee meet the SEC Baker Hughes Business Code of Conduct and Code of
requirements of an “audit committee financial expert”. The Ethical Conduct Certifications are available on our website;
board has named Anthony G. Fernandes as its financial expert. • prepares an annual report to stockholders which is pub-
• The Audit/Ethics, Compensation, and Governance lished in our proxy statement (contained herein) and made
Committees are all comprised solely of independent available on our website.
non-management directors.
• The board conducts continuing director education and
director orientation.
2010 Annual Report

Committees in 2010*
Directors Age Executive Audit/Ethics Governance Finance Compensation Employee Independent Director Since
Chad C. Deaton 58 C X 2004

Larry D. Brady 68 M C X 2004
Clarence P. Cazalot, Jr. 60 M M M X 2002
Edward P. Djerejian** 72 M M X 2001
Anthony G. Fernandes 65 C M X 2001
Claire W. Gargalli 68 M C X 1998
Pierre H. Jungels 67 M M X 2006
James A. Lash 66 M C X 2002
J. Larry Nichols 68 M M X 2001
James L. Payne** 73 M 2010
H. John Riley, Jr. 70 M M M X 1997
J.W. Stewart 66 M M 2010
Charles L. Watson 61 M M M X 1998
* M=Member; C=Chairman
** Will retire at the Annual Meeting of Stockholders to be held April 28, 2011.
Resources
The following information is available at www.bakerhughes.com/investor
• Corporate Governance Guidelines • Executive Committee Charter

• Governance Committee Charter • Code of Ethical Conduct Certification
• Audit/Ethics Committee Charter • Policy Statement on Shareholder Rights Plans
• Audit/Ethics Committee Annual Report • Business Code of Conduct
• Finance Committee Charter • Environmental Policy
• Compensation Committee Charter • Biographies of Board Members
• Compensation Committee Annual Report • Biographies of Executive Officers
Ownership Structure
Investors Source Shares (millions) % of Total
Capital Research Global Investors (12/10, 13F) 36.0 8.3%

Wellington Management Company, LLP (12/10, 13F) 22.7 5.2%
Dodge & Cox (12/10, 13F) 21.2 4.9%
Fidelity Management & Research (12/10, 13F) 20.9 4.8%
State Street Global Advisors (US) (12/10, 13F) 18.0 4.2%
Vanguard Group, Inc. (12/10, 13F) 16.0 3.7%
BlackRock Institutional Trust Company, N.A. (12/10, 13F) 14.7 3.4%
Capital World Investors (12/10, 13F) 14.7 3.4%
T. Rowe Price Associates, Inc. (12/10, 13F) 13.8 3.2%
Templeton Investment Counsel, LLC (12/10, 13F) 8.6 2.0%
Top 10 investors 186.6 43.1%
Other holders 245.9 56.9%
Total 432.5 100.0%
Source: Thompson Financial
New York Stock Exchange Independent Registered Public Accounting Firm

Last year our Annual CEO Certification, without qualifica- In 2010, we paid our independent registered public
tions, was timely submitted to the NYSE. Also, we have filed our accounting firm, Deloitte & Touche LLP, the member firms
certifications required under SOX as exhibits to our Form 10-K. of Deloitte Touche Tohmatsu, and their respective affiliates,
audit fees of $15.8 million; audit-related fees of $0.6 million,
Important Stockholder Dates and tax fees of $1.5 million primarily for the preparation of
2010 Annual Meeting 4/28/11 income, payroll, value added and other tax returns.
Q111 Earnings News Release* 4/27/11
* Dates subject to change without notice

Co r p o rate O f ficer s B o ard of D ire c to r s
Larry D. Brady James A. Lash

Former Chairman and Chairman, Manchester
Chief Executive Officer, Principal LLC
Intermec, Inc.
J. Larry Nichols
Clarence P. Cazalot, Jr. Executive Chairman,
President and Chief Devon Energy Corporation
Executive Officer,
Marathon Oil Corporation James L. Payne*
Chairman and
Chad C. Deaton Martin S. Derek Peter A. Chad C. Deaton Chief Executive Officer,
Chairman and Craighead Mathieson Ragauss Chairman and Shona Energy Company, Inc.
Chief Executive President and Vice President Senior Vice Chief Executive Officer,
Officer Chief Operating and President, President and Baker Hughes Incorporated H. John Riley, Jr.
Officer Products and Chief Financial Former Chairman,
Technology Officer Edward P. Djerejian* Cooper Industries, Ltd.
Director, James A. Baker III
Institute for Public Policy, J. W. Stewart
Rice University Former Chairman, President
and Chief Executive Officer,
Anthony G. Fernandes BJ Services Company
Former Chairman, President
and Chief Executive Officer, Charles L. Watson
Phillip Services Corporation Chairman, Twin Eagle
Management Resources and
Claire W. Gargalli CLW Investments, Inc.
Former Vice Chairman,
Alan R. Crain Didier Russell J. Diversified Search and
Senior Vice Charreton Cancilla Diversified Health * W ill retire at the Annual
President and Vice President, Vice President, Search Companies Meeting of Stockholders
General Counsel Human Resources Health, Safety to be held April 28, 2011.
and Environment Pierre H. Jungels, CBE
and Security Former President of the
Institute of Petroleum
O ther Co r p o rate O f ficer s

Co r p o rate I nfo r mati o n
Belgacem Chariag Alan J. Keifer
Vice President and President, Vice President and Controller Stockholder Information Annual Meeting
Eastern Hemisphere Operations Transfer Agent and Registrar The Company’s Annual Meeting
John H. Lohman, Jr. BNY Mellon Shareowner of Stockholders will be held at
John A. O’Donnell Vice President, Tax Services LLC 9:00 a.m. Central Time on
Vice President and President, 480 Washington Boulevard April 28, 2011 at:
Western Hemisphere Ronald E. Martz
Vice President, Internal Audit Jersey City, New Jersey 07310 Wortham Meeting Room No. 2
Arthur Soucy (888) 216-8057 2727 Allen Parkway
Vice President, Supply Chain Jan Kees van Gaalen Houston, Texas 77019-2118
Vice President and Treasurer Stock Exchange Listings
Clifton Triplett Ticker Symbol “BHI” Corporate Office Location
Vice President and Sandra E. Alford New York Stock Exchange, Inc. and Mailing Address
Chief Information Officer Corporate Secretary SWX Swiss Exchange 2929 Allen Parkway, Suite 2100
Houston, Texas 77019-2118
David E. Emerson Jay G. Martin Investor Relations Office Telephone: (713) 439-8600
Vice President, Vice President, Chief Compliance Gary R. Flaharty P.O. Box 4740
Corporate Development Officer and Senior Deputy Vice President, Houston, Texas 77210-4740
General Counsel Investor Relations
Gary R. Flaharty Baker Hughes Incorporated Website
Vice President, Investor Relations P.O. Box 4740 www.bakerhughes.com
[email protected]
Form 10-K
Additional copies of the Company’s
Annual Report to the Securities and
Design: SAVAGE, Branding + Corporate Design, Houston, Texas
Exchange Commission (Form 10-K)

are available by writing to:
Baker Hughes Investor Relations
P.O. Box 4740
As a Baker Hughes stockholder, you are invited to take advantage of our convenient
stockholder services or request more information about Baker Hughes. BNY Mellon
Shareowner Services, our transfer agent, maintains the records for our registered
stockholders and can help you with a variety of stockholder related services at no
charge including:
• Change of name or • Additional administrative • Transfer of stock
address enrollment services to another person
• Duplicate mailings • Consolidation of accounts • Dividend reinvestment
• Lost stock certificates
Access your investor statements online 24 hours a day, 7 days a week with MLink.SM
For more information, go to www.melloninvestor.com/ISD.
2929 Allen Parkway, Suite 2100
P.O. Box 4740

(713) 439-8600
www.bakerhughes.com

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Transforming

• Beginning in 2008, we acquired several reservoir-consulting firms and have consolidated

Year Ended December 31,

$5,000 $1.50 $5,000

2010 Annual Report 1

2 Baker Hughes Incorporated

North America every six weeks.

$600 have enabled us to be an $2,500 $2,500

2010 Annual Report 3

4 Baker Hughes Incorporated

2010 Annual Report 5

6 Baker Hughes Incorporated

The Reservoir Development Services group’s multi-disciplined expertise

2010 Annual Report 7

The acquisition of BJ Services filled a strategic gap in Baker Hughes’

8 Baker Hughes Incorporated

To the Stockholders of Baker Hughes Incorporated:

1. The election of directors;

4. An advisory vote related to the Company’s executive compensation program;

By order of the Board of Directors,

2 Baker Hughes Incorporated

Nominees Principal Occupation Age Director Since

4 Baker Hughes Incorporated

6 Baker Hughes Incorporated

Committee Memberships 2010

Audit/Ethics Compensation Executive Finance Governance

Anthony G. Fernandes Claire W. Gargalli

(C) Chair of the referenced Committee.

Audit/Ethics Committee The Audit/Ethics Committee also is responsible for the

8 Baker Hughes Incorporated

Security Ownership of Management

Shares Beneficially Owned

Shares Subject to Options

Larry D. Brady 17,051 3,283 20,334 –

(1) No percent of class is shown for holdings of less than 1%.

Charitable Contributions regulations require executive officers, directors, and greater

Objective How We Meet Our Objectives

• 3M Company • Eaton Corp. • National Oilwell Varco

Determine the market

• 4 companies – oilfield services only:

PEO Market Median – PEO

Benefits and Severance, 4% Benefits and Severance, 5%

Other NEOs Combined Market Median – Other NEOs Combined

C. Deaton 10% $ 1,270,000

2010 Allocation Company Goals Future Value Dependent On

End of Year 1 End of Year 2 End of Year 3

• 25% of Unit • 25% of Unit • 25% of Unit

Current Period Revenue – Previous Period Revenue

Final Year Revenue – Revenue in Year Prior to Grant

2 Pre-Tax Operating Margin

Total Revenue for Period

Earnings Before Interest and Taxes for Period

End of Period Net Capital Employed (NCE)

Peer Group Amounts Payable Under 2009 Performance Units

2010, 2011 and Three-Year Performance Period

Peer Group Rank 5th 4th 3rd 2nd 1st

Relative Rank of Performance Periodic Unit Value Added

Revenue Pre-Tax Revenue Pre-Tax Period

Year 1 5th 2nd 1st $0 $33.75 $50.00 $27.92

• Beginning in 2008, we acquired several reservoir-consulting firms and have consolidated

POLICY AND Submission procedures for stock stockholder communications