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                                                                   EXHIBIT 10.20












                            BAKER HUGHES INCORPORATED

                1995 EMPLOYEE ANNUAL INCENTIVE COMPENSATION PLAN
































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CONTENTS
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                                                                            PAGE
<S>             <C>                                                        <C>
ARTICLE 1.        ESTABLISHMENT AND PURPOSE                                   1

ARTICLE 2.        DEFINITIONS                                                 1

ARTICLE 3.        ADMINISTRATION                                              2

ARTICLE 4.        ELIGIBILITY AND PARTICIPATION                               3

ARTICLE 5.        AWARD DETERMINATION                                         4

ARTICLE 6.        PAYMENT OF FINAL AWARDS                                     5

ARTICLE 7.        TERMINATION OF EMPLOYMENT                                   5

ARTICLE 8.        RIGHTS OF PARTICIPANTS                                      6

ARTICLE 9.        BENEFICIARY DESIGNATION                                     7

ARTICLE 10.       AMENDMENT AND TERMINATION                                   7

ARTICLE 11.       GOVERNING LAW AND WITHHOLDING                               7
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BAKER HUGHES INCORPORATED
1995 EMPLOYEE ANNUAL INCENTIVE COMPENSATION PLAN

ARTICLE 1.  ESTABLISHMENT AND PURPOSE

     1.1 ESTABLISHMENT OF THE PLAN. Baker Hughes Incorporated (hereinafter
referred to as the "Company"), a Delaware corporation, hereby establishes an
annual incentive compensation plan to be known as the "Baker Hughes Incorporated
1995 Employee Annual Incentive Compensation Plan" (hereinafter referred to as
the "Plan") as set forth in this document. The Plan permits the awarding of
annual cash bonuses to key employees of the Company and its subsidiaries, based
on the achievement of preestablished performance goals. The Plan shall become
effective as of October 1, 1994, and shall remain in effect until terminated by
the Board of Directors of the Company. Notwithstanding any provision herein to
the contrary, no amounts shall be paid under the Plan unless and until the
stockholders of the Company approve the Plan prior to September 30, 1995.

     1.2 PURPOSE. The purpose of the Plan is to provide Key Employees with a
meaningful annual incentive opportunity geared toward the achievement of
specific corporate and/or individual goals.

ARTICLE 2.  DEFINITIONS

     2.1 DEFINITIONS. Whenever used in the Plan, the following terms shall have
the meanings set forth below and, when the defined meaning is intended, the term
is capitalized:

(a)  "Board" or "Board of Directors" means the Board of Directors of the
     Company.

(b)  "Cause" means the occurrence of any one of the following:

          (i)   The willful and continued failure by a Participant to
                substantially perform his/her duties (other than any such
                failure resulting from the Participant's disability), after a
                written demand for substantial performance is delivered to the
                Participant that specifically identifies the manner in which the
                Company believes that the Participant has not substantially
                performed his/her duties, and the Participant has failed to
                remedy the situation within ten (10) business days of receiving
                such notice; or

          (ii)  The Participant's conviction for an act of fraud, embezzlement,
                theft, or other criminal act constituting a felony; or

          (iii) The willful engaging by the Participant in gross misconduct or
                malfeasance. However, no act, or failure to act, on the
                Participant's part shall be considered "willful" unless done, or
                omitted to be done, by the Participant not in good faith and
                without reasonable belief that his/her action or omission was in
                the best interest of the Company; or

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          (iv)  The violation of the Company's Standards of Conduct, which
                violation is determined to be material by the Committee.

(c)  "Committee" means the Compensation Committee of the Board or any other
     committee appointed by the Board to administer the Plan. The membership of
     the Committee shall in all cases be comprised solely of two or more outside
     directors (within the meaning of Section 162(m)).

(d)  "Company" means Baker Hughes Incorporated, a Delaware corporation, and any
     successor thereto.

(e)  "Final Award" means the actual award earned for a Plan Year by a
     Participant as determined by the Committee (see Article 5.4 herein).

(f)  "Key Employee" means an employee of the Company, or any of its
     subsidiaries, who, in the opinion of the Chief Executive Officer of the
     Company, is in a position to significantly contribute to the growth and
     profitability of the Company (see Article 4 herein).

(g)  "Participant" means a Key Employee who is nominated for participation by
     the Chief Executive Officer of the Company and then is selected by the
     Committee to participate in the Plan (see Article 4 herein).

(h)  "Plan Year" means the Company's fiscal year commencing October 1 and ending
     September 30.

(i)  "Section 162(m)" means section 162(m) (or any successor provision) of the
     Internal Revenue Code of 1986, as amended, and applicable interpretive
     authority thereunder.

         2.2 GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.

         2.3 SEVERABILITY. In the event any provision of the Plan shall be held
to be illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.

ARTICLE 3.  ADMINISTRATION

         3.1 THE COMMITTEE. This Plan shall be administered by the Committee in
accordance with the rules that it may establish from time to time that are not
inconsistent with the provisions of the Plan.


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         The determination of the Committee as to any disputed question arising
under this Plan, including questions of construction and interpretation, shall
be final, binding, and conclusive upon all persons.

         3.2 INDEMNIFICATION. Each person who is or shall have been a member of
the Committee, or of the Board, shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting from
any claim, action, suit, or proceeding to which he may be a party or in which he
may be involved by reason of any action taken or failure to act under the Plan
and against and from any and all amounts paid by him in settlement thereof, with
the Company's approval, or paid by him in satisfaction of any judgment in any
such action, suit, or proceeding against him, provided he shall give the Company
an opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such persons may be entitled under the Company's Restated Certificate of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the
Company may have to indemnify them or hold them harmless.

ARTICLE 4.  ELIGIBILITY AND PARTICIPATION

         4.1 ELIGIBILITY. Eligibility for participation in the Plan shall be
limited to those Key Employees who, by the nature and scope of their position,
contribute to the overall results or success of the Company and its
subsidiaries.

         4.2 PARTICIPATION. Participation in the Plan shall be determined
annually based upon the recommendation of the Chief Executive Officer of the
Company and the approval of the Committee. Employees approved for participation
shall be notified in writing of their selection, and of their performance goals
and related Award Opportunities (as defined in Article 5.1), as soon after
approval as is practicable.

         4.3 PARTIAL PLAN YEAR PARTICIPATION. The Committee may, upon
recommendation of the Chief Executive Officer of the Company, allow an
individual who becomes eligible after the beginning of a Plan Year to
participate in the Plan for that year. In such case, the Participant's Final
Award normally shall be prorated based on the number of full months of
participation. However, the Committee may, based upon the recommendation of the
Chief Executive Officer of the Company, authorize an unreduced Final Award.

         4.4 TERMINATION OF APPROVAL. The Committee may withdraw its approval
for participation in the Plan for a Participant at any time. In the event of
such withdrawal, the employee concerned shall cease to be a Participant as of
the date designated by the Committee and the employee shall be notified of such
withdrawal as soon as practicable following such action. Further, such employee
shall cease to have any right to a Final Award for the Plan Year in which such
withdrawal is effective; provided, however, that the Committee may, in its sole
discretion, authorize a prorated award based on the number of full months of
participation prior to the effective date of such withdrawal.

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ARTICLE 5.  AWARD DETERMINATION

         5.1 AWARD OPPORTUNITIES. As soon as practicable (but in no event later
than ninety (90) days) after the beginning of each Plan Year, the Committee
shall establish, in writing, maximum, target, and minimum incentive award levels
(the "Award Opportunities") for each Participant. The established Award
Opportunities may vary in relation to the responsibility level of the
Participant. In the event a Participant changes job levels or salary grades
during the Plan Year, the Award Opportunities may be adjusted by the Committee,
in its sole discretion, to reflect the amount of time at each job level and/or
in each salary grade.

         5.2 PERFORMANCE GOALS. As soon as practicable (but in no event later
than ninety (90) days) after the beginning of each Plan Year, the Committee
shall establish, in writing, performance goals for each Participant for that
Plan Year. The goals will be based on one or more financial objectives of the
Company determined by and defined by the Committee, which objectives may include
profits before-tax, profits after-tax, earnings per share, and/or the ratio of
after-tax profits to net capital employed; provided, however, that as an
alternative to other goals, and in addition thereto, an Award Opportunity shall
provide an element based on a goal tied to total shareholder return ("TSR"), as
defined by the Committee and discussed in Article 5.4. Nonfinancial objectives
may also be included in a Participant's performance goals, and will not
represent more than 20 percent of target Award Opportunities, as discussed in
Article 5.1. Notwithstanding the foregoing, no covered employee (as such term is
defined in Section 162(m)) may have any portion of his Final Award based on
nonfinancial, subjective performance goals.

         5.3 ADJUSTMENT OF PERFORMANCE GOALS. The Committee shall have the right
to adjust the performance goals (either up or down) during the Plan Year if it
determines that external changes or other unanticipated business conditions have
materially affected the fairness of the goals and unduly influenced the
Company's ability to meet them. Further, in the event of a Plan Year of less
than twelve (12) months, the Committee shall have the right to adjust the
performance goals, at its discretion, to protect the purpose and intent of the
Plan. Notwithstanding the foregoing, no such adjustment shall be made with
respect to an individual who is a covered employee (within the meaning of
Section 162(m)) to the extent the same is considered an upward discretionary
increase in the amount of the Final Award for such individual (within the
meaning of Section 162(m)).

         5.4 FINAL AWARD DETERMINATIONS. As soon as practicable after the end of
each Plan Year, Final Awards shall be computed for each Participant as
determined by the Committee. The Committee shall certify to what extent the
performance goals established pursuant to Article 5.2 and any other material
terms of an award were in fact satisfied. Then, two (2) independent computations
will be made, as follows:

(a)  Achievement of financial goals (other than TSR goals), as discussed in
     Article 5.2, shall be assessed via a quantitative formula established by
     the Committee. Individuals' award calculations will be based on varying
     Award Opportunities, as discussed in Article 5.1. Adjustment will be made
     to reflect nonfinancial objectives for eligible Participants, as described
     in Article 5.2.

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(b)  Achievement of TSR goals, as discussed in Article 5.2, shall be assessed
     via a quantitative formula established by the Committee. Individuals' award
     calculations will be based on one-half of the target Award Opportunity, as
     discussed in Article 5.1.

The greater of the resulting two calculations will be used to determine the
Final Award paid for the Plan Year. In determining the Final Award, the
Committee, in its sole discretion, may increase or decrease calculated amounts
to reflect factors regarding performance during the Plan Year which were not, in
the sole opinion of the Committee, appropriately reflected in the Final Award
calculation. Notwithstanding the foregoing, the Final Award to an individual who
is a covered employee (within the meaning of Section 162(m)) will not be subject
to upward discretionary adjustment by the Committee. Downward discretionary
adjustment for these individuals will be permitted to the extent that such
downward adjustments do not prevent the Final Awards to those individuals from
being deductible by the Company for federal income tax purposes under Section
162(m).

         5.5 INDIVIDUAL AWARD CAP. The maximum annual Final Award any individual
may receive in connection with the Plan is $1,000,000.

ARTICLE 6.  PAYMENT OF FINAL AWARDS

         As soon as practicable following the end of each Plan Year, Final Award
payments shall be paid in cash.

ARTICLE 7.  TERMINATION OF EMPLOYMENT

         7.1 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT.
In the event a Participant's employment is terminated by reason of death, total
and permanent disability (as determined by the Committee), or retirement, the
Final Award, determined in accordance with Article 5.4 herein, shall be reduced
so that it reflects only participation prior to termination. This reduction
shall be determined by multiplying said Final Award by a fraction, the numerator
or which is the months of participation through the date of termination rounded
up to whole months, and the denominator of which is twelve (12). The Final Award
thus determined plus all unpaid amounts, if any, from previous years shall be
paid as soon as practicable following the Committee's determinations under
Article 5.4 hereof for that Plan Year.

         7.2 EMPLOYMENT TRANSFERS. If a Participant transfers from one division
to another division within the Company, the Final Award for the Participant's
time at the Participant's former division will be prorated for the number of
whole months rounded to the nearest whole month of the Plan Year the Participant
was at that division. The Final Award will be determined as soon as practicable
after the end of the Plan Year and will be based on the financial results at the
close of the Plan Year. The Final Award will be paid at the same time the other
Final Awards for that division are paid. If a Participant is eligible for a
Final Award in his new position, the Final Award will be based on the months
left in the Plan

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Year, on his new base salary level and Award Opportunities, as determined by the
Committee based upon the recommendation of the Chief Executive Officer of the
Company.

         7.3 DISPOSITION OF BUSINESS. If the Participant's division is disposed
of during the Plan Year, payment of the Participant's Final Award shall be
determined in accordance with the following alternatives:

(a)  If the acquiring party of the division offers employment to the Participant
     and assumes the obligations under the Plan, either directly or indirectly,
     and the Participant accepts such offer of employment, the Company shall not
     be obligated to pay the Final Award and such obligation shall be that of
     the acquiring party in accordance with the Final Award parameters; or

(b)  If the acquiring party does not assume the obligations under the Plan,
     whether or not the Participant is offered and accepts employment, then the
     Participant will receive a prorated Final Award for the portion of the Plan
     Year that the Participant was employed by the Company prior to the date of
     the consummation of the sale of the division, to be paid at the same time
     other Final Awards are paid under the Plan. The computation shall be made
     on the basis of the number of whole months rounded to the nearest whole
     month of the Plan Year that the Participant was in active service with the
     Company; or

(c)  If the acquiring party of the division offers employment to the Participant
     and assumes the obligations under the Plan, either directly or indirectly,
     and the Participant rejects such employment, the Participant shall be
     deemed to have voluntarily resigned as provided under Article 7.4 below.

         7.4 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event a
Participant's employment is terminated voluntarily by the employee or by the
Company for Cause, all of the Participant's rights to a Final Award for the Plan
Year then in progress shall be forfeited. If a Participant's termination is for
any reason other than as described in Article 7.3, death, disability,
retirement, voluntary resignation, or Cause, the Participant will receive a
prorated bonus award for the portion of the Plan Year that the Participant was
employed by the Company, computed as determined by the Committee, to be paid at
the same time other Final Awards are paid under the Plan.

ARTICLE 8.  RIGHTS OF PARTICIPANTS

         8.1 EMPLOYMENT. Nothing in this Plan shall interfere with or limit in
any way the right of the Company to terminate any Participant's employment at
any time for any reason, nor confer upon any Participant any right to continue
in the employ of the Company. For all purposes of the Plan, a Participant shall
be considered to be in the employment of the Company as long as he or she
remains employed on a full-time basis by the Company or any of its subsidiaries
or is on an authorized leave of absence approved by the Committee. Any question
as to whether and when there has been a termination of a Participant's
employment,

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and the reason for such termination, shall be determined solely by the
Committee, and its determination shall be final and conclusive.

         8.2 PARTICIPATION. No Participant or other employee shall at any time
have a right to be selected for participation in the Plan for any Plan Year,
despite having been selected for participation in a previous Plan Year.

         8.3 NONTRANSFERABILITY. No right or interest of any Participant in this
Plan shall be assigned or transferable, or subject to any lien, directly, by
operation of law, or otherwise, including execution, levy, garnishment,
attachment, pledge, and bankruptcy.

ARTICLE 9.  BENEFICIARY DESIGNATION

         Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or successively) to
whom any benefit under the Plan is to be paid in case of his death before he
receives any or all of such benefit. Each designation will revoke all prior
designations by the same Participant, shall be in a form prescribed by the
Committee, and will be effective only when filed by the Participant in writing
with the Committee during his lifetime. In the absence of any such designation,
benefits remaining unpaid at the Participant's death shall be paid to the
Participant's estate.

ARTICLE 10.  AMENDMENT AND TERMINATION

         The Board may modify or amend, in whole or in part, any or all of the
provisions of this Plan, or suspend or terminate it entirely; provided, that no
such modification, amendment, suspension, or termination may, without the
consent of a Participant (or his beneficiary in the case of the death of the
Participant), reduce the right of a Participant (or his beneficiary as the case
may be) to a payment or distribution hereunder to which he is entitled with
respect to a Plan Year that has ended prior to such modification, amendment,
suspension, or termination.

ARTICLE 11.  GOVERNING LAW AND WITHHOLDING

         11.1 GOVERNING LAW. THE PLAN, AND ALL AWARDS HEREUNDER, SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS.

         11.2 WITHHOLDING TAXES. The Company shall have the right to deduct from
all payments under this Plan any Federal, state, or local taxes required by law
to be withheld with respect to such payments.




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