Exhibit 10.8
BAKER HUGHES INCORPORATED
TERMS AND CONDITIONS
OF
AWARD AGREEMENTS
(January 25, 2006)

1.   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 1.4 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 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 1.2 will be paid by the Company to you ten (10)
business days after the date you become 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 1.2, 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.

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1.3   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 1.3 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.       1.4
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 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 1.4 will be paid on March 13, 2009. For purposes of this Section 1.4,
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

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    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.   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.

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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. 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.   12.   409A
AMENDMENT. Effective January 25, 2006, the Compensation Committee of the Board
of Directors of the Company adopted this amendment to the Terms and Conditions
of Award Agreements (January 25, 2006) applicable to Performance Unit Awards
granted in 2006.

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