Exhibit 10.1

(BAKER HUGHES LOGO) [h34652h3465200.gif]
March 20, 2006
Mr. Peter Ragauss
164 Oakwood Court
London, W14 8JT
United Kingdom
Dear Peter,
I am pleased to offer you the position of Senior Vice President and Chief
Financial Officer, Baker Hughes Incorporated (the “Company”), located in
Houston, Texas. You will report directly to me in your new position.
The elements of your compensation package will be effective April 26, 2006, and
are as follows:

1)   Your base salary will be $43,750.00 per month, paid biweekly as earned.

2)   The compensation package includes participation in the Company’s Annual
Incentive Compensation Plan. The Expected Value (“EV”) target for your salary
grade is 65%. Your 2006 ICP bonus will be based on your 2006 annual salary and
will not be prorated. Your 2006 bonus objectives will be weighted as follows:

90% Corporate Financial Goals (BVA/EPS)

10% Performance and Core Values (“PCV”)

    Your 2006 ICP award actual payout will be based on your performance level
and is contingent upon the Company achieving predetermined financial results and
approval by the Compensation Committee of the Board of Directors.

3)   Your compensation package includes eligibility for participation in the
Company’s 2002 Director & Officer Long-Term Incentive Plan (the “Long-Term
Incentive Plan”). Effective April 26, 2006, you will receive a grant
representing your annual long-term incentive award, including stock options,
restricted stock and performance units, under the Long-Term Incentive Plan at a
value equivalent to 375% of your annual salary. The grant will be allocated as
follows:

  i)   A Stock Option award in the amount of 15,025 shares, of which 1/3 will
vest on the 26th day of April in each year 2007, 2008 and 2009. An additional
Stock Option award in a similar amount is expected to be granted in July 2006
per the terms and conditions of the Long-Term Incentive Plan.     ii)   A
Restricted Stock award in the amount of 8,315 shares, of which 1/3 will vest on
the 26th day of April in each year 2007, 2008 and 2009.     iii)   A Performance
Unit award in the amount of 7,875 units, of which 100% will vest at the end of
the three-year performance period based on the achievement of specific
performance goals. Performance Units will only have value if the Company
achieves certain cumulative

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    operational Baker Value Added (BVA) targets measured over the three-year
performance period.       All grants are subject to approval by the Compensation
Committee of the Board of Directors and are subject to the Terms and Conditions
of the Award Agreements.

4)   Effective on your first date of employment, you will receive a Restricted
Stock Award of 25,344 shares of the Company’s common stock, of which 6,336
shares shall vest on the 26th day of April in each of the years 2008 and 2009
and the remaining 12,672 shares shall vest on the 26th day of April in 2010;
provided that you remain in the employment of the Company. If you are terminated
without cause, as defined in the Long-Term Incentive Plan, 50% of the total
grant (12,672 shares) will automatically vest. These shares will be entitled to
receive dividends prior to vesting. All grants are subject to approval by the
Compensation Committee of the Board of Directors.   5)   Effective on your first
date of employment, you will receive a Stock Option Award in the amount of
32,709 shares, of which 10,903 options will vest of the 26th day of April in
each year 2007, 2008 and 2009, subject to the Terms and Conditions of the
Company’s 2002 Director & Officer Long-Term Incentive Plan. The term of the
option will be ten years, at an option price equal to the fair market value on
the date of grant. All grants are subject to approval by the Compensation
Committee of the Board of Directors as outlined in the Long Term Incentive Plan.
  6)   In the event of retirement (defined as age plus years of service with the
Company equals or exceeds 65), all granted but unvested options shall
immediately vest. You shall have five years from the date of termination of
employment due to retirement to exercise the options (but not later than the
expiration date). All unvested restricted stock is forfeited upon retirement.  
    In the event of long-term disability (as defined in the Long-Term Incentive
Plan), all granted but unvested options and restricted stock shall immediately
vest. You shall have five years from the date of termination due to long-term
disability to exercise the options (but not later than the expiration date).    
  In the case of death, all granted but unvested options and restricted stock
shall immediately vest. The options shall be exercisable for a period of one
year in the case of death (but not later than the expiration date).

7)   You will be expected to attain and maintain a level of ownership of Baker
Hughes Incorporated stock equal to at least three times your base salary, within
five years of your initial appointment as Senior Vice President and Chief
Financial Officer.

8)   You will be covered by the Company’s Executive Severance Policy. The
purpose is to provide executives, who are terminated for specific reasons, an
income for a fixed period of time while actively looking for other employment.
In the event of your termination, under the current policy you will receive,
among other benefits, a payment equal to eighteen months of your base salary at
the time of your termination. This policy may change at the discretion of the
Company’s Board of Directors.

9)   You will also be eligible for participation in the executive perquisite
program, which entitles you to a perquisite award in the amount of $20,000 per
year for expenses incurred under the program. Award amounts are paid in
quarterly installments, and your quarterly award payments will begin in May,
2006. This policy may change at the discretion of the Company’s Board of
Directors.

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10)   You will be eligible to participate in Company-sponsored benefit programs,
including the Supplemental Retirement Plan (SRP), our health & welfare programs,
Thrift (401k) Plan, Pension Plan and Employee Stock Purchase Plan. You will have
a choice of coverage options that best suit you and your family’s needs.
Coverage options and contribution amounts are related to your benefit elections,
base salary level (as appropriate) and specific requirements of each of these
plans, as outlined in the benefit’s Summary Plan Description.

11)   You will receive relocation benefits in accordance with the Company’s
relocation policies, which have been provided to you separately. You will also
receive a lease cancellation allowance of $100,000. This allowance includes, but
is not limited to the cancellation of all leases related to vehicles, housing,
furnishings, and gym memberships in connection with your relocation to Houston.

12)   In connection with your employment with the Company, the Company will
enter into a Change in Control Severance Agreement and an Indemnification
Agreement with you in the form entered into with other senior executive officers
of the Company.

This offer is contingent upon approval from the Board of Directors and the
successful completion of an executive physical, background check, which includes
civil and criminal litigation history, credit check, verification of employment,
degrees, certifications and/or licenses, reference checks, and pre-employment
drug test.
This offer does not guarantee employment for a specified term and is not to be
construed as a contract limiting the prerogative of the Company to terminate the
employment relationship with or without cause and with or without notice.
Please acknowledge your acceptance of this offer by initialing and signing where
indicated one copy of this letter and returning it to me.
I look forward to working with you as we lead Baker Hughes Incorporated to a new
level of performance.
Sincerely,
 
/s/  Chad C. Deaton          
Chad Deaton
Chairman and Chief Executive Officer
Enclosures

          Agreed and Accepted:  
 
       
 
    /s/ Peter A. Ragauss  
27 March 2006
    Peter Ragauss  
Date
   

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