Dividend Reinvestment Plan

The Dividend Reinvestment plan offers you, as a stockholder of Baker Hughes Incorporated (BHI) common stock, an opportunity for increasing your investment in BHI common stock. In addition, the Plan permits you to buy more BHI stock with monthly cash payments. In either case, all commissions and fees in connection with stock purchases are paid by Baker Hughes Incorporated. There are two convenient methods for increasing your investment in BHI common stock:

1. Full Dividend Reinvestment — Reinvestment all of the dividends on your BHI common stock and invest any voluntary cash payments you choose to make.
2. Partial Dividend Reinvestment — Reinvest only part of the dividends on your BHI common stock and invest any voluntary cash payments you elect to submit.

The Chase Manhattan Bank (the "Agent") administers the Plan. Certain administrative support will be provided to the Agent by Mellon Investor Services, L.L.C., a registered transfer agent. Any registered stockholder is eligible to participate in the Plan.

How to join
To join the Plan, simply print, complete and sign the enrollment form at the bottom of this page and mail it to the Agent. Please sign your name exactly as it appears on your stock certificate. If the stock is jointly owned, all joint owners must sign.

Your signed card authorizes the Agent to receive your cash dividends automatically, and to use them together with any cash payments you voluntarily make, for the purchase of BHI stock.

Each time shares are purchased you'll receive a statement showing the total shares credited to your account under the Plan, the dividend and any cash payment invested, the number of shares purchased and the price per share.

The price per share is the average price of all shares purchased by the Agent for that investment period.

Cash payments
Voluntary cash payments may be submitted upon enrollment or at any time thereafter from a minimum of $10 per month to a maximum of $350 per month for purchases of BHI stock.

Voluntary cash payments may be made by personal check or money order payable to The Chase Manhattan Bank.

Voluntary cash payments must be mailed to the Agent along with the cash investment form that will be attached to each statement of account which is sent to you. An initial cash contribution may be included with your authorization card. No interest may be included on funds pending investment.

It is entirely up to you whether you wish to buy additional shares of common stock with voluntary cash payments, and, if you do, you don't have to send in the same amount each time.

If you send a voluntary cash payment and then decide to seek a refund, you can receive one if a written request is received by the Agent more than 48 hours before the next monthly investment date.

Fractional shares
If you participate in the Dividend Reinvestment Plan, all or a portion of your dividend and any cash payment is invested. If the amount invested is not equal to an exact number of full shares, a fraction of a share will be credited to your account along with the full shares. A fractional share participates proportionately in all subsequent dividends.

Cost
For stockholders, there are no administrative costs or brokerage commissions connected with stock purchases. All such costs are paid for by BHI. The participant will pay all costs incurred in the withdrawal of shares from the Plan.

When to join
You can join the Plan at any time. If your signed card is received by the Agent before the record date for a dividend payment, the Plan will go into effect for you with that payment.

Taxes
Even though your dividends are automatically reinvested, they are subject to income taxes as if they were paid to you in cash.

Additionally, the IRS has ruled that the brokerage commissions and service charges paid by BHI are to be treated as dividend income to you. The IRS further ruled that the amounts paid to cover our service charges may be deductible if you itemize deductions on your federal income tax return. The amounts paid for brokerage commissions are includable in your cost basis of shares purchased. The information sent to you and the IRS at year-end will show each of the amounts paid on your behalf.

Certificates
Shares bought under the Plan will be held by the Agent for participants. Certificates for full shares ,however, will be issued to you upon written request.

As a participant in the Plan you may, if you wish, deposit any stock certificate now or hereafter registered in your name for credit as accrued shares under the Plan. There is no charge for this service, and by making the deposit you will be relieved of the responsibility for loss, theft or destruction of the certificates to the Agent. It is recommended that certificates be sent to the Agent by registered mail, return receipt requested, and properly insured. Certificates need not be endorsed. Whenever certificates are issued to you either upon request or upon termination of your participation, new, differently numbered certificates will be issued.

How to sell shares
You can sell shares in your Plan account, or any other eligible book entry shares, at any time by contacting the Agent. The Agent will record sales orders on the date of receipt and process them, when practicable, on the next business day the stock market is open, at least once each week. The Agent will send you by check the proceeds of sale, less applicable fees.

Voting
You can vote full shares acquired under the Plan whether the shares are held by your or the Agent. Fractional shares will not be voted.

To discontinue your participation
You may terminate your participation in the Plan by writing the Agent. To be effective on any given dividend payment date, the notice to discontinue must be received by the Agent before the record date for that payment. Upon discontinuing, you will receive a certificate for the number of shares credited to your Plan account and a check for any fraction of a share valued at the ten commissions. If you prefer, the agent will sell all or part of the shares that have been held for you under the Plan and send you a check for the net proceeds after deduction of any brokerage commissions, other costs of sale and any transfer taxes.

Questions
All questions or other communications concerning the Plan should be directed to:

Mellon Investor Services, L.L.C.
Dividend Reinvestment Services
P.O. Box 3338
South Hackensack, NJ 07606-1938
1-888-216-8057 (U.S. calls only)
1-201-329-8670 (outside of U.S.)

Terms and Conditions

1. The Chase Manhattan Bank, acting as agent for each participant in the Dividend Reinvestment Plan, will in accordance with each participant's authorization: (a) Apply all or part of the cash dividends on the shares of BHI common stock held by the participant and on any full shares or fractional interest in one share held by the participant under the Plan to the purchase of full and fractional shares of BHI common stock for such participant, and/or (b) Apply all cash payments ($10 minimum, $350 maximum, per month) received from the participant for such purpose as the participant may elect, together with cash dividends on shares held for such participant under the Plan, to the purchase of full and fractional shares of BHI common stock for the participant's account.
   
   The purchases, as described in (a) and (b) above, may be made on any securities exchange where such shares are traded, in the over-the-counter market, or by negotiated transactions and may be subject to such terms with respect to price, delivery, etc., The Chase Manhattan Bank may agree. Neither BHI nor any shareholder shall have any authority or power to direct the time or price at which shares may be purchased, or the selection of the broker or dealer through or from whom purchases are to be made. A voluntary cash payment will be refunded if the participant's written request for a refund is received by The Chase Manhattan Bank more than 48 hours before the next succeeding investment.

2. Voluntary cash payments received prior to the 20^th day of any month (or the next following business day if the 20^th day is not a business day) will be invested beginning on such day. In months in which dividends are paid, voluntary cash payments and dividends will be invested concurrently beginning on the dividend payment date. For the purpose of making our purchases, the Chase Manhattan Bank will commingle each participant's funds with those of all other holders of BHI common stock who are participants in the Plan. The Chase Manhattan Bank will make every effort to invest voluntary cash payments and any dividends it receives promptly, beginning on each investment date and in no event later than 30 days from such date except where necessary under any applicable federal securities laws.
   
   
3. A statement describing any voluntary cash payments and any dividends invested, the number of shares of common stock purchased, the price per share, and the total shares accumulated under the Plan will be mailed to each participant by the Agent as soon as practicable after completion of each investment for a participant's account.
   
   Dividends paid on the accumulated shares, and the amount of fees and brokerage commissions paid on your behalf by BHI will be included in the Form 1099 DIV information return to the Internal Revenue Service, and only one Form 1099 DIV will be sent to each participant.

4. At any time, by making a request in writing to the Agent, participants may obtain a certificate or certificates for all or part of the full shares of BHI stock credited to their accounts.

Participants who wish to do so may, at no charge, deposit certificates registered in their names for credit as accrued shares held under the Plan.

5. Participation in the Plan may be terminated by a participant at any time by written instructions to that effect to the Agent. To be effective on any given dividend payment date, the notice to discontinue must be received by the Agent before the record date for that dividend. If a notice to discontinue is received by the Agent on or after the record date for a dividend payment, such notice to discontinue may not become effective until such dividend has been reinvested and account under the Plan. The Agent may terminate, for whatever reason and at any time in its sole discretion, an individual's participation in the Plan upon mailing a notice to terminate to the participant at the address as it appears on the Agent's records.

Upon termination, by either participant or by the Agent, a participant will receive certificates for the full shares credited to such participant's account. Upon withdrawal of shares from the Plan (whether or not a participant has requested termination), a participant may instruct the Agent to sell all of such shares. Such sale may, but need not, be made by purchase of the shares for the account of other participants, and any such transaction shall be deemed to have been made at the then current market price less any brokerage commissions and any other cost of sale. Fractional shares credited to a terminating account will be paid for in cash at the then current market price, less any brokerage commissions.

6. A participant will have the sole right to vote full shares held by the Agent in that participant's account under the Plan on the record date for a vote. Proxies with respect to BHI stock sent to a participant by the Agent, as Transfer Agent, will include the number of full shares held for the participant under the Plan.
   
   
7. Any stock dividend or split shares of BHI common stock distributed on shares held by the Agent for the participant will be credited to the participant's account. In the event that BHI makes available to its holders of common stock rights to subscribe to additional shares, debentures, or other securities, the full shares held for a participant under the Plan will be added to other shares held by the participant in calculating the number rights to be issued to such participant.
   
   
8. The Agent shall not be liable under the Plan for any act done in good faith or for any good faith omission to act including, without limitation, any claims for liability (1) arising out of failure to terminate a participant's participation in the Plan upon the participant's death prior to receipt of notice in writing of such death, and (2) with respect to the prices at which shares are purchased or sold for participants' accounts and the time such purchases or sales are made.
   
   
9. The Tax Equity and Fiscal Responsibility Act of 1982 imposes certain reporting obligations upon brokers and other middlemen. As a result, the Agent will be required to report to the Internal Revenue Service and the participant any sales of stock by it on behalf of a participant.
   
   
10. The terms and conditions of the Plan and its operation shall be governed by the laws of the State of New York.

ENROLLMENT FORM (PDF - 65 kb)