Exhibit 10.42
BAKER HUGHES INCORPORATED
PERFORMANCE UNIT AWARD AGREEMENT
Name
Awardee

     
Date of Award:
   
 
   
Number of Performance Units Awarded:
   
 
   

AWARD OF PERFORMANCE UNITS
     The Compensation Committee (the “Committee”) of the Board of Directors of
Baker Hughes Incorporated, a Delaware corporation (the “Company”), pursuant to
the Baker Hughes Incorporated 2002 Director & Officer Long-Term Incentive Plan
(the “Plan”), hereby awards to you, the above-named awardee, effective as of the
Date of Award set forth above, that number of Performance Units set forth above
(each, a “Performance Unit”, and collectively, the “Performance Units”), on the
terms and conditions set forth in this Performance Unit Award Agreement (this
“Agreement”).
     Each Performance Unit provides you an opportunity to earn a cash payment
based upon the cumulative Baker Value Added (as that term has been defined by
the Committee) achieved by the Company for the three-year period beginning___,
and ending ___(the “Performance Period”) as compared with the Entry Level Baker
Value Added, Expected Value Baker Value Added and Over Achievement Baker Value
Added established by the Committee for the Performance Period. The Committee may
not increase the amount payable under this Agreement.
     If the cumulative Baker Value Added for the Performance Period is less than
the Entry Level Baker Value Added and a Change in Control of the Company has not
occurred on or before the last day of the Performance Period, then the award
pursuant to this Agreement shall lapse and be forfeited as of ___.
     The Committee’s determination of Baker Value Added and the cumulative Baker
Value Added for the Performance Period for purposes of this Agreement shall be
binding upon all persons.
     Any amount payable to you pursuant to this Agreement will be paid to you by
the Employer on March ___, unless otherwise provided under the Terms and
Conditions. Such payment will be made to you in exchange for the Performance
Units and thereafter you shall have no further rights with respect to such
Performance Units or the Agreement.

 

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     If a Change in Control of the Company occurs or your employment with the
Company and Affiliates terminates on or before the last day of the Performance
Period, your rights to the Performance Units and a payment under this Agreement
will be determined as provided in the attached Terms and Conditions of Award
Agreements (dated___) (the “Terms and Conditions”).
     The Performance Units that are awarded hereby to you shall be subject to
the prohibitions and restrictions set forth herein with respect to the sale or
other disposition of such Performance Units and the obligation to forfeit and
surrender such Performance Units.
     The Performance Units and your rights under this Agreement may not be sold,
assigned, pledged, exchanged, hypothecated or otherwise transferred, encumbered
or disposed of (other than by will or the applicable laws of descent and
distribution). Any such attempted sale, assignment, pledge, exchange,
hypothecation, transfer, encumbrance or disposition in violation of this
Agreement shall be void and the Company Group shall not be bound thereby.
     Capitalized terms that are not defined herein shall have the meaning
ascribed to such terms in the Plan or the Terms and Conditions.
     In accepting the award of Performance Units set forth in this Agreement you
accept and agree to be bound by all the terms and conditions of the Plan, this
Agreement and the Terms and Conditions.

     
 
  BAKER HUGHES INCORPORATED      
 
   
 
  Chad C. Deaton — Chairman & CEO

 

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BAKER HUGHES INCORPORATED
TERMS AND CONDITIONS
OF
AWARD AGREEMENTS
 
CHANGE IN CONTROL/TERMINATION OF EMPLOYMENT. The following provisions will apply
in the event a
Change in Control of the Company occurs, or your employment with the Company and
all Affiliates
(collectively, the “Company Group”) terminates, before the last day of the
Performance Period (as
that term is defined in the Performance Unit Agreement awarded to you (the
“Agreement”)).
1.1 Termination Generally. If your employment with the Company Group terminates
on or before the last day of the Performance Period for any reason other than
one of the reasons described in Sections 1.2 through 1.5 below, all of your
rights in the Agreement, including all rights to the Performance Units granted
to you, will lapse and be completely forfeited on the date your employment
terminates.
1.2 Potential or Actual Change in Control.
(i) Termination Without Cause or for Good Reason in Connection With a Potential
Change in Control on or Before the Last Day of the Performance Period. If (a)
the Company Group terminates your employment without Cause on or before the last
day of the Performance Period prior to a Change in Control of the Company
(whether or not a Change in Control ever occurs) and such termination is at the
request or direction of a Person who has entered into an agreement with the
Company the consummation of which would constitute a Change in Control of the
Company or is otherwise in connection with or in anticipation of a Change in
Control of the Company (whether or not a Change in Control ever occurs) or
(b) you terminate your employment with the Company Group for Good Reason on or
before the last day of the Performance Period prior to a Change in Control of
the Company (whether or not a Change in Control ever occurs) and such
termination or the circumstance or event which constitutes Good Reason occurs at
the request or direction of a Person who has entered into an agreement with the
Company the consummation of which would constitute a Change in Control of the
Company or is otherwise in connection with or in anticipation of a Change in
Control of the Employer (whether or not a Change in Control ever occurs), then
the Company will pay to you in cash an amount determined under the following
formula in lieu of any other amounts under the Agreement:
(1) multiplied by (2) multiplied by (3) divided by (4)
where (1) is the Target Value set forth in the Agreement of a Performance Unit,
(2) is the number of Performance Units that were awarded to you under the
Agreement, (3) is the number of days from (and including) the first day of the
Performance Period to (and including) the day before the date your employment

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relationship with the Company Group terminates as described in this
Section 1.2(i), and (4) is the number of days during the Performance Period. Any
amount payable to you pursuant to this Section 1.2(i) will be paid by the
Company to you ten (10) business days after the date your employment
relationship with the Company Group terminates. Such payment will be made to you
in exchange for the Performance Units and thereafter you shall have no further
rights with respect to such Performance Units or the Agreement and the Company
Group will have no further obligations to you pursuant to the Performance Units
or the Agreement.
(ii) Employment Not Terminated Before a Change in Control on or Before the Last
Day of the Performance Period. If a Change in Control of the Company occurs on
or before the last day of the Performance Period and your employment with the
Company Group does not terminate before the date the Change in Control of the
Company occurs, then the Company will pay to you in cash an amount determined
under the following formula in lieu of any other amounts under the Agreement:
(1) multiplied by (2) multiplied by (3) divided by (4)
where (1) is the Target Value set forth in the Agreement of a Performance Unit,
(2) is the number of Performance Units that were awarded to you under the
Agreement, (3) is the number of days from (and including) the first day of the
Performance Period to (and including) the day before the date the Change in
Control of the Company occurs, and (4) is the number of days during the
Performance Period. Any amount payable to you pursuant to this Section 1.2(ii)
will be paid by the Company to you ten (10) business days after the date the
Change in Control of the Company occurs. Such payment will be made to you in
exchange for the Performance Units and thereafter you shall have no further
rights with respect to such Performance Units or the Agreement and the Company
Group will have no further obligations to you pursuant to the Performance Units
or the Agreement.
1.3 Disability. Notwithstanding any other provision of the Agreement or these
Terms and Conditions to the contrary, if you become permanently disabled before
the last day of the Performance Period and while in the active employ of one or
more members of the Company Group, then the Employer will pay to you in cash an
amount determined under the following formula in lieu of any other amounts under
the Agreement:
(1) multiplied by (2) multiplied by (3) divided by (4)
where (1) is the Target Value set forth in the Agreement of a Performance Unit,
(2) is the number of Performance Units that were awarded to you under the
Agreement, (3) is the number of days from (and including) the first day of the
Performance Period to (and including) the day you become permanently disabled,
and (4) is the number of days during the Performance Period. Any amount payable
to you pursuant to this Section 1.3 will be paid by the Company to you ten
(10) business days after the date you become

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permanently disabled. Such payment will be made to you in exchange for the
Performance Units and thereafter you shall have no further rights with respect
to such Performance Units or the Agreement and the Company Group will have no
further obligations to you pursuant to the Performance Units or the Agreement.
For purposes of this Section 1.3, you will be “permanently disabled” if you
(a) are unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months, or (b) are, by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, receiving income
replacement benefits for a period of not less than three (3) months under an
accident and health plan covering employees of the Company Group.
1.4 Death. Notwithstanding any other provision of the Agreement or these Terms
and Conditions to the contrary, if you die before the last day of the
Performance Period and while in the active employ of one or more members of the
Company Group, then the Employer will pay to your estate in cash an amount
determined under the following formula in lieu of any other amounts under the
Agreement:
(1) multiplied by (2) multiplied by (3) divided by (4)
where (1) is the Target Value set forth in the Agreement of a Performance Unit,
(2) is the number of Performance Units that were awarded to you under the
Agreement, (3) is the number of days from (and including) the first day of the
Performance Period to (and including) the date of your death, and (4) is the
number of days during the Performance Period. Any amount payable to your estate
pursuant to this Section 1.4 will be paid to your estate by the Employer ten
(10) business days after the date of your death. Such payment will be made in
exchange for the Performance Units and thereafter your estate and heirs,
executors, administrators shall have no further rights with respect to such
Performance Units or the Agreement and the Company Group will have no further
obligations pursuant to the Performance Units or the Agreement.
1.5 Retirement. Notwithstanding any other provision of the Agreement or these
Terms and Conditions to the contrary, if your employment with the Company Group
terminates as a result of your Retirement before the last day of the Performance
Period, then the number of Performance Units issued to you under the Agreement
shall automatically be reduced (without further action by you and/or the
Company) on the date your employment relationship with the Company Group
terminates to that number of Performance Units determined under the following
formula (the “Retirement Adjusted Performance Units”):
(1) multiplied by (2) divided by (3)
where (1) is the number of Performance Units that were originally awarded to you
under the Agreement, (2) is the number of days from (and including) the first
day of the Performance Period to (and including) the day before the date your
employment relationship with the Company Group terminates due to Retirement, and
(3) is the

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number of days during the Performance Period. The excess of the Performance
Units that were originally awarded to you under the Agreement over the
Retirement Adjusted Performance Units shall be immediately forfeited on the date
of the termination of your employment relationship with the Company Group due to
Retirement. Any amount payable to you pursuant to this Section 1.5 will be paid
on March 13, 2009. For purposes of this Section 1.5, the term “Retirement” means
the voluntary termination of your employment relationship with the Company Group
on or after the date on which the sum of your age and years of service with the
Company Group equals 65.

2.   PROHIBITED ACTIVITY. Notwithstanding any other provision of these Terms and
Conditions or the Agreement, if you engage in a “Prohibited Activity,” as
described below, while employed by one or more members of the Company Group,
during the Performance Period or within two years after the date your employment
with the Company Group terminates, then your right to receive payment under the
Agreement, to the extent still outstanding at that time, shall be completely
forfeited. A “Prohibited Activity” shall be deemed to have occurred, as
determined by the Committee in its sole and absolute discretion, if you divulge
any non-public, confidential or proprietary information of the Company or of its
past, present or future affiliates (collectively, the “Baker Hughes Group”), but
excluding information that (a) becomes generally available to the public other
than as a result of your public use, disclosure, or fault, or (b) becomes
available to you on a non-confidential basis after your employment termination
date from a source other than a member of the Baker Hughes Group prior to the
public use or disclosure by you, provided that such source is not bound by a
confidentiality agreement or otherwise prohibited from transmitting the
information by a contractual, legal or fiduciary obligation.   3.   TAX
WITHHOLDING. To the extent that the receipt of the Performance Units or any
payment pursuant to the Agreement results in income, wages or other compensation
to you for any income, employment or other tax purposes with respect to which
the Company has a withholding obligation, you shall deliver to the Company at
the time of such receipt or payment, as the case may be, such amount of money as
the Company may require to meet its obligation under applicable tax laws or
regulations, and, if you fail to do so, the Company is authorized to withhold
from any payment under the Agreement or from any cash or stock remuneration or
other payment then or thereafter payable to you any tax required to be withheld
by reason of such taxable income, wages or compensation.   4.  
NONTRANSFERABILITY. The Agreement is not transferable by you otherwise than by
will or by the laws of descent and distribution.   5.   CAPITAL ADJUSTMENTS AND
REORGANIZATIONS. The existence of the Performance Units shall not affect in any
way the right or power of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in its capital structure or its
business, engage in any merger or consolidation, issue any debt or equity
securities, dissolve or liquidate, or sell, lease, exchange or otherwise dispose
of all or any part of its assets or business, or engage in any other corporate
act or proceeding.

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6.   PERFORMANCE UNITS DO NOT AWARD ANY RIGHTS OF A SHAREHOLDER. You shall not
have the voting rights or any of the other rights, powers or privileges of a
holder of the stock of the Company with respect to the Performance Units that
are awarded hereby.   7.   EMPLOYMENT RELATIONSHIP. For purposes of the
Agreement, you shall be considered to be in the employment of the Company Group
as long as you have an employment relationship with the Company Group. The
Committee shall determine any questions as to whether and when there has been a
termination of such employment relationship, and the cause of such termination,
under the Plan and the Committee’s determination shall be final and binding on
all persons.   8.   NOT AN EMPLOYMENT AGREEMENT. The Agreement is not an
employment agreement, and no provision of the Agreement shall be construed or
interpreted to create an employment relationship between you and the Company or
any Affiliate or guarantee the right to remain employed by the Company or any
Affiliate for any specified term.   9.   LIMIT OF LIABILITY. Under no
circumstances will the Company or an Affiliate be liable for any indirect,
incidental, consequential or special damages (including lost profits) of any
form incurred by any person, whether or not foreseeable and regardless of the
form of the act in which such a claim may be brought, with respect to the Plan.
  10.   EMPLOYER LIABLE FOR PAYMENT. Except as specified in Section 1.2, the
legal entity that is a member of the Company Group and that is classified by the
Company Group as your employer (the “Employer”) is liable for the payment of any
amounts that become due under the Agreement.   11.   MISCELLANEOUS. The
Agreement is awarded pursuant to and is subject to all of the provisions of the
Plan, including amendments to the Plan, if any. In the event of a conflict
between these Terms and Conditions and the Plan provisions, the Plan provisions
will control. The term “you” and “your” refer to the Awardee named in the
Agreement. Capitalized terms that are not defined herein shall have the meanings
ascribed to such terms in the Plan or the Agreement.

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