BAKER HUGHES INCORPORATED PERFORMANCE UNIT AWARD AGREEMENT

Exhibit 10.42

BAKER HUGHES INCORPORATED

PERFORMANCE UNIT AWARD AGREEMENT

Name

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.

     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

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

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 C