exv10w8





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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